SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 1-12942
VSI HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Georgia 22-2135522
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 North Woodward Avenue
West 201
Bloomfield Hills, Michigan 48304-2263
(Address of principal executive offices) (Zip Code)
(248) 644-0500
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value; American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark whether Registrant 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 Registrant was
required to file such reports), and 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 of the voting stock held by non-affiliates of the
Registrant (4,035,487 shares), as of December 19, 1997, was approximately
$27,240,000 (at closing price of $6.75).
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 14(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No .
The Registrant had 32,633,562 shares of Common Stock, $.01 par value,
outstanding on December 19, 1997, excluding 7,743,605 treasury shares.
DOCUMENTS INCORPORATED BY REFERENCE--None
PART I.
Item 1. Business
Since January, the Company acquired three subsidiaries in an exchange of
stock accounted for in a manner similar to a pooling of interest basis,
issuing a net of 28,048,792 shares, and now has 32,628,562 outstanding shares.
The Company's acquisitions were Advanced Animations, Inc. ("AA"), Vispac, Inc.
("Vispac") and Visual Services, Inc. ("VSI"). In April 1997, the Company
reincorporated in Georgia from Texas, changed its corporate name to "VSI
Holdings, Inc." from "The Banker's Note, Inc.", and placed its women's
apparel retailing business in an operating subsidiary, BKNT Retail Stores, Inc.
("RSI") d/b/a Dress Code.
The following information is presented in a manner similar to a pooling of
interest basis that includes the above operations on a consolidated basis for
the years ended September 30, 1997, 1996, and 1995.
VSI Holdings, Inc. presently consists of wholly owned subsidiaries/divisions
in the Marketing Services, Entertainment, and Retail sectors. The Marketing
Services sector consists of Visual Services, Inc., a broad based provider of
educational curriculums and product training, interactive technology based
Distance Learning Systems, product launches, web site development, direct
response and Site-based marketing, change process and cultural change
consulting; Vispac, Inc., integrated logistics and call center operations; and
the November 1997 acquisition, Performance Systems Group, in-field consulting
and change process sustainment services. The Entertainment sector consists of
Advanced Animations, manufacturer of product simulators, animatronic displays
for theme parks, retail, and casinos; Advanced Exhibits, a division of
Advanced Animations, provider of touring venues for museums and zoological
parks; Dress Code, retailer of women's apparel, constitutes the Retail sector.
VSI Holdings, Inc. employs approximately 1,250 persons in all operations, none
of which is covered by an employment contract nor is represented by a union.
The Company maintains various insurance and benefit programs including life,
medical, dental insurance, and 401(k) retirement plans.
The Marketing Services Sector: Visual Services, Inc., Vispac, Inc. and the
November 1997 acquisition The Performance Systems Group.
History and Background
Visual Services is one of the nation's leading full-service business
communications providers specializing in (1) Education and Training,
(2) Corporate Communications, and (3) Administrative Services primarily for
automotive OEMs and their dealership networks. These programs and services
focus on researching and assessing organizations and their customers and
applying this knowledge to help Visual Services' clients define their
corporate mission, strategic objectives, and the methods to achieve these
objectives.
Visual Services surrounds the customer with its six core competencies:
Motivation, Education and Training, Business Communications, Business Services,
Integrated and Direct Marketing, and Space-Based Media. These core competencies
provide the skills, flexibility and capabilities to meet and exceed customer
expectations. Any and all of these capabilities typically are combined to
create customized solutions.
History
Visual Services was founded in 1962 by Steve Toth, Jr. to design and sell
point-of-sale marketing materials for display in automotive dealer showrooms.
The showroom material was provided in creative formats, which not only supplied
customers with relevant product information but also assisted in training sales
personnel. This was easily transferable to the planning of product launches for
dealership networks, which led to a number of new business opportunities.
Product and service offerings were continuously broadened with a constant
focus on providing innovative communications related solutions.
For example, in 1976 Visual Services created, implemented, and administered
the first major cash-back rebate award program in history. This program was
highly effective with rebates and cash incentives becoming a standard
marketing practice for many automotive and consumer product OEMs. Since 1976,
Visual Services has enjoyed the fiduciary responsibility of administering over
$40 billion in cash rebates and incentive awards, and in the process, has
established a valuable telemarketing platform that it utilizes for a number of
applications. The ability to provide unique communications solutions and to
respond quickly to changing industry demands has resulted in the development
of fully integrated provider of communications related services with a diverse
and encompassing array of products.
As the automotive industry evolves and auto manufacturers increasingly rely on
vendors to provide services previously performed in-house, Visual Services
continues to expand its services and leverage off past experiences. New
engagements often result from outgrowths of previous projects. Visual Services'
range of services include short-term administrative functions, such as data
processing, to the intricate planning and implementing of national training
programs and product launches.
Products and Services Overview
Visual Services is a premier integrated provider of a wide range of business
communication services to the automotive industry. Visual Services' projects
range from simple short term engagements to highly complex assignments lasting
a number of years and involving many disciplines.
Management believes that the ability to offer premium full-service solutions
throughout all facets of an engagement is unique in the industry.
These services are delivered using an extensive array of media, such as
interactive technologies (including video and CD-ROM), video conferencing, film,
slides, theater, computer graphics and animation, print multimedia, and global
satellite.
Education and Training
Change Process
Visual Services has targeted the $59 billion education and training market as
an area with substantial growth potential. The consumer's purchase and
ownership experience have become critical to the purchasing decision in the
automotive industry. Manufacturers are making substantial financial commitments
to educate and promote best business practices and to change the culture of
the sale process. Visual Services is a primary facilitator of the cultural
change and education process in the automotive industry. Visual Services'
curriculum design experts apply contemporary learning theories and
state-of-the-art technology to create processes and materials that will
effectively educate course participants. Visual Services' training programs
use the latest interactive and technology driven hardware, such as Interactive
Distance Learning, designed to improve employee productivity, in the areas of
product knowledge, team building, sales skills, personal skills and behavioral
development.
Visual Services was responsible for the development, implementation and
operation of Ford's XL2000: Excellence in Leadership (XL2000). The goal of
XL2000 is to profoundly change the relationship of Ford with its dealerships,
the relationship of dealer management with dealer personnel and, ultimately,
the relationship between dealers and their customers. Visual Services designed
and built the 41,600 square foot, XL2000 Leadership Learning Center for this
project. Visual Services is beginning to transplant XL2000 to Europe in 1998.
Interactive Technology
PC Week ranked Visual Services 130th on its Fast Track 500 which lists the most
aggressive adopters of innovative PC, CD-ROM and related technology.
Visual Services is a leader in Interactive Distance Learning (IDL). Over the
last three years Visual Services has developed and broadcast more than 250
IDL course broadcasts.
Visual Services uses technology as part of a state-of-art customer interface
system that includes data-based call centers, claims processing, incentive
awards management, relationship marketing systems,and owner/prospect data-based
direct response management/fulfillment.
Visual Services is the agency of record for tactical marketing initiatives
relating to the General Motors credit card. Visual Services' trademarked
Comparator shellware, developed for The GM Card, lets cardmembers obtain
purchase or lease information about virtually any model in the GM lineup.
Utilized by Visual Services trained telephone response consultants, customers
are provided interpretive solutions from intelligent human beings not just
superficial telemarketing.
All of the Company's data processing systems are Year 2000 compliant and no
substantial capital expenditures are anticipated due to the date change.
Site-Based Marketing
Visual Services develops and executes trade shows and exhibits, as well as
comprehensive merchandising display systems. Visual Services produced the
automotive industry's first ride-and-drive learning experience for Porsche
sales consultants in 1981 which has continued to grow with hundreds of
thousands of dealership participants over the years. Visual Services also
develops innovative marketing tools on the World Wide Web.
Integrated Logistics
Vispac provides comprehensive marketing logistical support. With over 500,000
square feet of plant space, Vispac has the systems and personnel to provide
timely delivery of materials to tightly focused audiences worldwide. Vispac
has a complete distribution system, with data-based tracking and follow-up
systems.
Consulting Services
Visual Services consulting services provide a wide range of support, from 360
assessments to custom-tailored change process development. This includes
on-site evaluation, follow up, and sustainment systems all utilizing a variety
of analytical tools. Automotive consultants assist over 1,800 dealerships in
developing best-practice systems, and enhance dealership relationship marketing
and culture change initiatives.
Industry and Competition
Both Visual Services and Vispac operate primarily in the automotive industry.
The various divisions of Ford and General Motors account for 53%, 50% and 47%
of the revenues of the Company for fiscal years 1997, 1996, and 1995
respectively. Future revenues are dependent on such factors as new product
introductions, the industry's attention to process improvement within the
dealerships and the industry's focus on customer satisfaction and global
training. Within the automotive industry, much of the focus is on services
provided to dealerships which are paid for, at least in part, by the OEMs.
As the number of dealerships contracts, consumers demand that dealers are
versed on the attributes of their products. As a result, dealers are changing
the culture of the sales process by assisting customers in making informed
decisions without the undue pressure to buy. Services to the automotive
dealerships provide the dealers and their sales forces with the training and
knowledge critical to effective selling in this dynamic environment.
Although traditional dealerships may be diminishing, new means of distribution,
such as the Internet, are being utilized. These new methods of communication
and distribution command expertise that the Company can provide.
The number of Tier I automotive suppliers are dwindling. OEMs are demanding
systems from their suppliers rather than individual parts, which is causing
OEM suppliers to consolidate and streamline their operations. As one of the
predominant Tier I business communication providers to the automotive industry,
the Company is well positioned to continue to succeed in a highly competitive
environment.
The practice of turning essential but often non-core business processes over
to third-party venders is expected to continue. The Company expects to benefit
from the trend among major corporations toward increased corporate outsourcing
of marketing, communication, and training functions.
The Company is positioned to continue to expand in the $600 billion
telemarketing industry through integrated telemarketing, which is the
simultaneous provision of inbound and outbound service with real-time access
to customer databases. Its telemarketers are skilled in product specifications,
troubleshooting, and providing professional support.
The Company believes that its investments in distance learning technology will
continue to pay off as more and more corporations are using distance learning
as a means of training rather than costly trips to attend or conduct training
sessions.
The Company provides a broad range of services and products that compete
primarily with a variety of regional firms. The smaller firms generally
provide a limited range of services that compete only with a portion of the
company's services. No large firms provide the combination of full turn-key
services. Management believes that no single company or small group of
companies dominates the industry.
The Entertainment Sector: Advanced Animations, Inc. (AA) and Advanced Exhibits
Division (AE)
AA is the industry leader in commercial-based, cost-effective compliant-motion
technology for 3-D animatronic (robotic) figures for display in theme parks,
casinos, retail and other entertainment venues. AA uses hydraulic motion
technology to create lifelike movement. This technological breakthrough
attracts projects such as the Terminator 2 attraction at Universal Studios
in Florida and Atlantis at the Forum Shops at Caesars Palace in Las Vegas.
All manufacturing and design work occurs at AA's Stockbridge, Vermont,
facility.
Management expects the demand for animatronic figures to accelerate as AA
continues to expand in the U.S. and Asian markets.
AA's Drunk Driving Simulator is in its 10th year of touring the U.S. The tours,
sponsored by Chrysler Corporation and supported by Mothers Against Drunk
Driving, visit nearly 400 high schools a year.
AE, a division of AA, in partnership with United Exhibits Group of Denmark,
has developed Missing Links alive!, a touring exhibit that will debut in
spring of 1998. The presentation traces human evolution and includes animated
and video presentations by expert paleontologists, including the family of
Louis and Mary Leakey.
Museum tours, in addition to actual exhibit ticket revenue, offer licensed
cultural and educational merchandise opportunities. Management believes that
significant revenues will be realized over the next five years from this
project.
The Retail Sector: BKNT Retail Stores, Inc. (RSI), d/b/a Dress Code
RSI operates 23 women's apparel stores under the name Dress Code specializing
in affordable clothing for career women. The stores offer a merchandise mix
of branded dresses, suits, sportswear and accessories at 33% to 50% off
everyday prices. The stores, which average 4,500 square feet, are located
in suburban shopping centers in 6 Southeastern states, with a concentration
of 9 stores in Atlanta, Georgia.
Prior to launching the Dress Code concept in March 1997, RSI operated 35 stores
under several trade names, primarily Banker's Note. From November 1996 through
February 1997, RSI liquidated merchandise at the Banker's Note stores, revamped
its merchandise mix, closed 13 stores, and re-identified the remaining stores
as Dress Code.
Dress Code advertises by direct mail and newspapers, accepts major credit cards,
and offers layaway purchase options. Merchandise is purchased from about 40
vendors and shipped to the stores from RSI's 27,000 square foot distribution
center located in suburban Atlanta, Georgia. Inventory, sales and purchasing
information is maintained at RSI's distribution center.
All aspects of women's apparel retailing are highly competitive. RSI competes
with a large number of other retailers of women's apparel, most having
considerable financial and other resources.
Item 2. Properties.
The Company's headquarters is located in suburban Detroit, Michigan and consists
of 102,700 square feet. The current lease continues until February 2003 and has
a five-year renewal option. This facility is also the base for subsidiary Visual
Services, Inc., which also leases two training facilities/offices of 38,400
and 41,600 square feet and a storage facility near Detroit and a sales office
in California. Visual Services owns a 45,000 square foot call center in the
Detroit area, purchased in December 1997.
Vispac, Inc. is based in a 149,000 square foot building near suburban Detroit
that it leases from a partnership that is, directly or indirectly, owned by
Steve Toth, Jr. Vispac owns two warehouse facilities of 92,000 and 93,000
square feet that collateralize mortgages of $479,000 and $2,508,000; Vispac
also leases a 175,000 square foot warehouse nearby.
The Entertainment sector is based in a 26,900 square foot office/warehouse in
Stockbridge, Vermont. The property is owned by a subsidiary, Visual Services,
Inc., and is leased to Advanced Animations, Inc.
The Retail sector is based in a 27,000 square foot office/warehouse in
suburban Atlanta, Georgia. The property is owned by Balmoral Group, a Georgia
general partnership ("Balmoral"), consisting of subsidiary BKNT, Inc., with a
99% interest, and Martin S. Suchik, the Company's Executive Vice President.
The property collateralizes a 1986 industrial revenue bond that has $269,000
principal remaining. The retail stores utilize operating leases for its store
locations that expire at various dates through 2002.
Item 3. Legal Proceedings.
The Company has pending litigation with a former employee and stockholder who
is seeking damages for wrongful discharge and increased value for Company
stock sold under a previously determined formula. The plaintiff has not
indicated the dollar amount of damages being sought. At this time the case
is in preliminary stages at the outcome is not determinable. Management
believes that the case is without merit and plans to vigorously defend the
lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Common Stock trades on the American Stock Exchange under the "VIS"
symbol. Prior to the Company's name change in April 1997, the stock
traded under the symbol TBN. The table sets forth the trading prices
for the Common Stock by calendar quarter as reported for the last two
years. The range of closing prices for the Common Stock, as reported
by The Wall Street Journal, follows:
Calendar Quarters High Low
First Quarter, 1996 $ .50 $ .31
Second Quarter, 1996 1.63 .38
Third Quarter, 1996 1.50 .31
Fourth Quarter, 1996 1.18 .38
First Quarter, 1997 1.50 .81
Second Quarter, 1997 4.25 1.00
Third Quarter, 1997 6.00 2.88
Fourth Quarter, 1997 6.75 4.75
(Through December 19, 1997)
Based on past requests for proxy materials, the Company believes that it has
substantially more beneficial holders of its Common Stock than the
approximately 350 "of record" holders on December 19, 1997. The Company
currently reinvests all earnings rather than paying cash dividends. The
subsidiaries declared distributions of previously taxed undistributed income
to the stockholders of these entities.
Item 6. Selected Financial Data.
BALANCE SHEET DATA As of
(in thousands) Sep. 30 Sep. 30 Sep. 30 Jan. 28 Jan. 29
1997 1996 1995 1995 1994
Working Capital....... ($ 1,969) $ 9,105 $10,368 $1,857 $2,474
Total Assets.......... 77,069 66,856 67,103 6,757 5,856
Long-Term Debt........ 5,281 1,900 1,406 375 437
Total Liabilities..... 65,402 38,784 41,116 2,949 2,105
Stockholders' Equity.. 11,667 28,072 25,987 3,808 3,751
1 2 2
OPERATING DATA Year Ended
(in thousands) Sep. 30 Sep. 30 Sep. 30 Jan. 28 Jan. 29
except per share) 1997 1996 1995 1995 1994
Net Sales.......... $148,338 $150,299 $136,018 $21,879 $19,489
Net Earnings 9,142 6,835 2,946 57 1,398
Net Earnings
Per Share (4)....... 0.28 0.21 0.09 0.01 0.32
Return on Equity (3).. 32.6% 26.3% 12.3% 1.5% 63.0%
Weighted Average
Number of Shares..... 32,784 32,767 32,453 4,758 4,384
2 2
1. Selected Balance Sheet Data as of September 30, 1995 is unaudited.
2. Selected Balance Sheet Data and Operating Data presented for the years
ended January 28, 1995 and January 29, 1994 represent the audited
results of The Banker's Note, Inc. without giving effect to the
business combination.
3. Return on Equity is calculated by dividing the period's Net Earnings
by Stockholders' Equity at the period's beginning.
4. Pro Forma Earnings per Share Information:
1997 1996 1995
Historical income before Taxes $ 9,383 $ 5,605 $ 2,896
Pro forma income taxes 3,270 1,878 1,002
Pro forma net income 6,113 3,727 1,894
Pro forma net income Per share 0.19 0.11 0.06
Pro forma income taxes include historical income tax expense plus a provision
for income taxes at 34% of the income before income taxes of the subsidiaries
not subject to tax prior to the date of the mergers. (See Note 2 of the
Financial Statements)
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
OPERATING RESULTS
Marketing Services Sector:
Year Ended September 30, 1997
Revenues increased 3.8% to $124,110,000 for the year ended September 30, 1997
from $119,489,000 last year. Management attributed the increase to the
addition of new clients.
Income from operations increased 27.2% to $11,675,000 for the year ended
September 30, 1997 from $9,178,000 for the prior year. The increase resulted
from improved product mix and the completion of the start up phase within the
education and training segment of the business.
Year Ended September 30, 1996
Revenues increased 14.3% to $119,489,000 for the year ended September 30, 1996
from $104,536,000 for the prior year. This growth was primarily due to the
full year effects of a new education and training program and an end of lease
telemarketing campaign, both of which began last year. Additional new revenue
came from marketing services provided to General Motors related to the GM
credit card programs.
Income from operations increased to $9,178,000 for the year ended September 30,
1997 from $3,677,000 last year. The increase outpaced revenue growth
primarily due to operating efficiencies and increased expertise designing and
operating the education and training business, as well as continued focus on
controlling personnel cost.
Year Ended September 30, 1995
Revenue increased to $104,536,000 for the year ended September 30, 1995. The
increase was primarily due to the launch of a new education and training
program, the introduction of an interactive distance learning program and the
beginning of an end of lease telemarketing campaign. Fiscal year 1995 also
included a certification program for dealer sales personnel. Other new
revenue resulted from the beginning of a credit card program. The increase
was offset slightly by a decrease in revenue from the Vision Center due to a
changeover in training programs.
Operating income decreased to $3,677,000. Gross margins were strong, and the
decrease is attributable to large start-up costs for the education and training
program launch and the introduction of the interactive distance learning
programs.
Entertainment Sector:
Year Ended September 30, 1997
Revenues decreased to $6,506,000 for the year ended September 30,1997 from
$8,724,000 last year. The decline is primarily due to delays in installation
schedules of major projects.
Income from operations decreased to $1,002,000 for the year ended September
30, 1997 from $1,720,000 last year. The decrease is attributed to the decrease
in volume.
Year Ended September 30, 1996
Revenues increased 16% to $8,724,000 for the year ended September 30, 1996
from $7,523,000 for the prior year. The increase was due primarily to new
project work in Korea.
Income from operations increased to $1,720,000 for the year ended September 30,
1996 from $452,000 for the prior year. The increase resulted from favorable
project mix and cost containment.
Year Ended September 30, 1995
Revenues increased to $7,523,000 for the year ended September 30, 1995. The
increase was due to the completion of major projects with Universal Studios.
Income from operations increased to $452,000 for the year ended September 30,
1995. The improvement was due to increase in overall revenue.
Retail Sector:
Year Ended September 30, 1997
Revenues decreased 20% to $17,722,000 from $22,086,000 for the 12 months ended
September 30, 1997. From November 1996 through March 1997, 13 stores were
closed resulting in store closing costs of $360,000 including leasehold
write-offs and amounts paid to landlords for early lease termination. The
remaining 22 stores were re-merchandised and a new store identification program
was launched. Comparable store sales were inflated by the inventory liquidation
sales during this period.
Cost of sales and operating expenses declined proportionately with the store
closings and efforts to reduce general overhead costs. The loss from operations
was ($491,000) compared to a loss of ($3,329,000) the previous year. Management
expects the Dress Code operation to continue to improve.
Year Ended September 30, 1996
Revenues decreased 8% to $22,086,000 from $23,959,000 for the year ended
September 30, 1995. Comparable store sales were down 9% as a result of negative
trends in the women's apparel industry and the Summer Olympics that adversely
affected the Atlanta market. Cost of sales was higher due to an additional
charge of $592,000 to reduce inventory values. Store closing costs associated
with the closing of 8 stores totaled $754,000 including leasehold write-offs
and amounts paid to landlords for early lease termination.
The loss from operations was ($3,329,000) compared to a loss of ($53,000) for
the prior year. The loss is attributed to RSI's attempt to develop an outlet
center business in conjunction with several women's apparel manufacturers.
Year Ended September 30, 1995
Revenues increased to $23,959,000 for the year ended September 30, 1995. The
increase is attributed to a net of 6 new stores opened during the year though
comparable store sales declined. The loss was ($53,000) for the year.
Operating expenses increased faster than budgeted sales.
LIQUIDITY AND CAPITAL RESOURCES:
Operating Activities.
The Company's three market segments have contrasting operating capital needs.
The Marketing Services sector requires considerable operating capital to
support its accounts receivable and maintain its marketing infrastructure;
while billing is periodic with little risk of non-payment, client payment is
typically slow. The Entertainment sector requires relatively little capital
for operating purposes, because its clients typically pay sizable deposits
before projects begin, make progress payments during project fabrication, and
pay promptly upon project completion. The operating capital needs of the
Retail sector ebb and flowwith seasonal periodic investment in merchandise
inventory prior to, and its liquidation during and after back to school, holiday
and spring fashion seasons.
The Company has limited experience as a combined entity to determine whether
the smaller Entertainment and Retail sectors will materially affect the
relatively steady cash flow stream of the Marketing Services sector. Last year,
Company operations generated $10.4 million cash flow. Fiscal year 1998 cash
flow will be affected by the need to pay current taxes on income in excess of
available net operating loss carryforwards.
The Company presently expects operating income from the Marketing Services and
Entertainment sectors to increase in fiscal year 1998. Toward the middle of
fiscal year 1998, the Entertainment sector will begin to receive cash flow from
the first of the Missing Links exhibits. The amount will depend on attendance
at museums and will initially be offset by operating expenses associated with
installing the exhibits. It is expected that the operating loss of the Retail
sector will continue to decrease, with its operating capital needs declining
as store closings slow, and consignment goods replace merchandise inventory.
Investing Activities.
The Marketing Services sector acquired one building in fiscal year 1997, and
a second building in December 1997. However, capital expenditures for
furniture, fixtures and equipment, and leasehold improvements for the Marketing
Services sector will decline in fiscal year 1998. The Entertainment sector
requires no material capital improvements in fiscal year 1998 except for
incremental investment for Missing Links exhibits. The Retail sector has no
plans to relocate or open stores in fiscal year 1998, and has no other material
capital improvement planned.
See the discussion in Item 13 regarding related party notes receivable and
payable and advances, and declared distributions to stockholders.
Financing Activities.
The Company is in the last stages of negotiation of a new line of credit, the
amount of which is expected to be $27,000,000, and which will have traditional
terms, conditions and covenants. The new line of credit will unify four
existing lines of credit that supported the credit needs of the Marketing
Services and Retail sectors. At September 30, 1997, the outstanding balances
on the lines of credit were $23,493,000 (excluding stand-by letters of credit
of $478,000). The new line of credit will be collateralized with the assets
of the Company's subsidiaries.
Shortly before the end of fiscal year 1997, Vispac, Inc. acquired a warehouse
financed by a seven-year balloon mortgage of $2.5 million. Visual Services
acquired a building in December 1997 without long-term debt. No other long-term
debt financing for facilities, or any accelerated payment of existing long-term
debt, is expected in fiscal year 1998.
Capital Activities.
Several employees exercised expiring stock options for 125,700 shares in January
1997, and three directors exercised options for 30,000 shares between June and
September 1997. The Company also bonused 13,200 shares to employees of Advanced
Animations in May 1997. The Company does not expect the exercise of stock
options, or purchase of shares, by employees and directors to be a material
source of capital in fiscal year 1998.
In April 1997, Company stockholders authorized new incentive and non-qualified
stock plans of 500,000 shares each; the Company plans to register such shares
for future issuance. In November 1997, the Company granted incentive options
for 302,000 shares to 34 employees at $6.20 per share. The options are
exercisable two and three years from the date of grant in two equal parts, and
expire five years after the date of grant. In December 1997, the Company
implemented a restricted stock plan, for which 500,000 shares will be registered
in 1998. Awards of 426,375 shares were granted under the restricted stock
plan; the shares vest one, two and three years from the date of grant in three
equal parts.
In past years, Visual Services, Inc. made stock available for purchase by its
managers at book value, and redeemed such stock at book value. Such activity
accounts for most of the stock option exercises and stock redemptions reported
in the Company's statement of changes in stockholders' equity. Upon the
Company's acquisition of Visual Services, such managers exchanged their
interests for Company stock and no longer have the right to require the
Company repurchase its shares.
The Company believes that cash flows from operations will be sufficient to
finance the Company's activities in 1998. The Company has no current plans
to conduct an offering of its shares to the public in fiscal year 1998.
Purchase of Performance Systems Group. In November 1997, the Company announced
that it had entered into a definitive agreement to acquire the assets of
Performance Systems Group for approximately $5.1 million, consisting of
280,000 shares of the Company's common stock and $3.0 million in cash.
Additional contingent consideration of $900,000 may be due based on future
earnings of the purchased business. Performance Systems Group provides
in-field consulting and change process sustainment services primarily to
automobile dealerships. The acquisition will be accounted for under the
purchase method.
Item 8. Financial Statements and Supplementary Data.
The response to this Item is submitted as a separate section.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The registrant's former independent accountants, Deloitte & Touche LLP, with
principal offices located at 100 Peachtree Street, Suite 1700, Atlanta, Georgia
30303, were dismissed on July 22, 1997 as approved by the registrant's Board
of Directors. The registrant's decision to replace its former accountants
with Plante & Moran, LLP of Ann Arbor, Michigan was based solely on
considerations of cost containment and logistics. For further information,
see the Form 8-K filed by the registrant on July 23, 1997.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Steve Toth, Jr., age 73, became President and Chief Executive Officer of the
Company in April 1997 and has been a Board member since March 1994. Toth serves
as President of subsidiaries Visual Services, Inc., Vispac, Inc. and Advanced
Animations, Inc.
Martin S. Suchik, age 52, is Executive Vice President of the Company, and was
President from 1976 to 1997. Suchik serves as President of subsidiaries BKNT
Retail Stores, Inc. and BKNT, Inc. Suchik is the nephew of Toth.
Thomas W. Marquis, age 54, became Treasurer and Chief Financial and Accounting
Officer of the Company in April 1997 and has been a Board member since March
1994. Marquis serves as Senior Vice President, Secretary and Treasurer of
subsidiaries Visual Services, Inc., Vispac, Inc. and AdvancedAnimations, Inc.
Harold D. Cannon, age 46, has been Secretary and a director of the Company since
1983. Cannon serves as Vice President, Secretary and Treasurer of subsidiaries
BKNT Retail Stores, Inc. and BKNT,Inc.
Terry Sparks, age 43, was appointed a Board member in July 1997, and is General
Manager of subsidiary Advanced Animations, Inc.
Jerry L. Barton, age 60, is self-employed and has served as a Company director
since 1985. From January 1994 to May 1995, Barton served as President of Parts
Central, Inc., an automotive parts distribution and retail store company in
Macon, Georgia. Barton is presently a member of the Board of Directors of
Hillerich and Bradsby, the privately held maker of Louisville Slugger baseball
bats and Power-Bilt golf clubs.
Dr. Kenneth L. Bernhardt, age 54, has served as a Company director since 1988.
Bernhardt is a tenured Professor in the Department of Marketing at Georgia
State University where he has taught for the last 25 years. Bernhardt has
been on the faculty of the Harvard Business School and is a past President of
the American Marketing Association.
In the last year, the Board held six meetings (two by telephone), which all
directors attended except for one meeting by telephone for which Sparks was
absent. Suchik, Cannon and Barton comprise the Executive Committee; Barton,
Marquis and Bernhardt comprise the Audit Committee, which reviewed the report
of the Company's auditors about the results of last year's audit; Suchik,
Barton and Bernhardt comprise the Compensation and Stock Option Committee.
None of the Committees met last year.
Each non-executive officer director receives a $750 meeting fee, with no
additional payment for membership on or meetings of any committees, except
pursuant to the Independent Director Stock Option Plan (see stock ownership
table). Except for Toth and Suchik, no officer or director is related to
another by blood, marriage or adoption, not more remote than first cousin.
In the last year, Forms 4 were filed by Toth (2), Suchik (5), Marquis (2),
Cannon (1), Bernhardt (1) and Barton (1) and a Form 3 was filed by Sparks,
all on a timely basis except for Suchik's June 1997 Form 4 filed in September.
All directors are believed to have filed this year's annual Forms 5 on a
timely basis.
Item 11. Executive Compensation.
The compensation for the last three years paid the Company's executive officers
were:
Officer/Position Year Salary Bonus Other
Steve Toth, Jr., 1997 $ 642,000 -0- -0-
President 1996 638,000 -0- $ 1,800
1995 637,000 -0- 1,080
Martin S. Suchik, 1997 $ 165,000 -0- -0-
Executive V. President 1996 197,000 -0- -0-
1995 199,000 -0- $ 872
Thomas W. Marquis, 1997 $ 150,000 -0- -0-
Treasurer 1996 90,000 -0- $ 1,080
1995 90,000 -0- 648
Harold D. Cannon, 1997 $ 93,000 -0- -0-
Secretary 1996 101,000 -0- -0-
1995 98,000 -0- $ 84
None of the executive officers have contractual compensation agreements.
The "other" amounts listed are the Company's 401(k) contributions.
At September 30, 1997, Suchik was two-thirds vested in stock options for
40,000 and 60,000 shares under the 1986 Incentive and Non-Qualified Plans,
with respective exercise prices of $.55 and $.50 per share. Suchik's vested
and non-vested incentive options had intrinsic values of $143,700 and $71,850
given the $5.9375 value of the Common Stock on September 30, 1997. His vested
and non-vested non-qualified options had intrinsic values of $217,500 and
$108,750 at that date; Suchik has provisionally assigned 29,800 shares of his
vested non-qualified option to certain long-time employees and advisors to the
Company.
Officers may participate in the Company's 401(k) and stock option plans.
Such stock option plans provide that the price of any common stock issued to
officers, directors, employees and their affiliates pursuant to any stock
grant or exercise of any stock option shall be no less than the fair market
value of the Common Stock on the date of the stock or option grant.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Voting rights are held by the owners of the Common Stock, of which each share
is entitled to one vote on each matter coming before the shareholders. Only
one class of Common Stock is authorized; none of the authorized Preferred Stock
has been issued. On December 19, 1997, the Company had 32,628,562 shares of
Common Stock (net of 7,743,605 treasury shares) outstanding. Such shares, and
shares issuable under options exercisable within 60 days, were owned by:
Name and Address Shares Owned % Ownership
Steve Toth, Jr. (1)(2) 27,351,169 82.74%
2100 North Woodward West
Suite 201
Bloomfield Hills, Mich. 48304
Martin S. Suchik (2) 1,027,688 3.14%
4900 Highlands Parkway
Smyrna, Georgia 30082
Thomas W. Marquis (3) 520,431 1.59%
2100 North Woodward West
Suite 201
Bloomfield Hills, Mich. 48304
Harold D. Cannon (4) 76,274 .23%
4900 Highlands Parkway
Smyrna, Georgia 30082
Terry Sparks 88,213 .27%
2100 North Woodward West
Suite 201
Bloomfield Hills, Mich. 48304
Jerry L. Barton (5) 13,000 .04%
1660 Brandon Hall Drive
Dunwoody, Georgia 30350
Dr. Kenneth L. Bernhardt (5) 22,000 .07%
Georgia State University
University Plaza
Atlanta, Georgia 30303
All directors and officers 29,098,775 87.82%
as a group (7 persons) (1-5)
(1) Toth owns 1,000 shares, and is trustee of trusts benefiting him that
own 1,775,850, 11,826,323 and 3,476,635 shares. Toth's spouse is the trustee
of trusts benefiting Toth's daughter that owns 6,138,298 and 2,297,266 shares,
and of another trust benefiting her that owns 1,010,797 shares. Toth disclaims
beneficial interest in the shares held by trusts benefiting his daughter and
spouse, but such shares are included with his holdings. CLT, a Michigan
partnership affiliated with Toth ("CLT"), holds 400,000 shares, and may
purchase 425,000 shares pursuant to an exercisable option (at $.15625 per share)
expiring on May 5, 2000.
(2) Suchik owns 470,000 shares, while his IRA owns another 11,113 shares.
Trusts, with an independent trustee, for Suchik's three children own 151,751,
162,312, and 162,312 shares. Suchik disclaims beneficial interest in such
shares, held by an independent trustee but included with his holdings. In
January 1998, Suchik vests in the last third of two options for 40,000 and
60,000 shares under the 1986 Incentive and Non-Qualified Plans exercisable at
$.55 and $.50 per share, respectively. Because Suchik has assigned the vested
portion of the non-qualified option to his church and certain long-time
employees and advisors to the Company, 29.800 (1,560 exercised) of those 60,000
shares are not included with his holdings.
On January 18, 1994, Toth, one of his trusts, CLT and Suchik entered
into a Voting Agreement that also governs shares owned by his other trusts but
not the trusts benefiting Toth's daughter and spouse. Suchik agreed to vote
for Toth and his nominee for seats on the Board of Directors, and Toth, the
Toth trust and CLT agreed to vote for the directors nominated by the Board.
The Voting Agreement expires on the earlier of January 18, 2004, when Toth,
or any affiliate thereof, no longer holds at least 100,000 shares, or when
Suchik ceases to hold at least 100,000 shares. Although Toth is bound by the
Voting Agreement, its effectiveness is negligible because he personally controls
a majority of outstanding shares. Accordingly, the Suchik-affiliated shares
are not included with Toth's holdings, nor vice versa.
(3) Marquis is trustee of a trust benefiting him that owns 257,564 shares.
His spouse is trustee of a trust benefiting her that owns 252,864 shares.
Marquis disclaims beneficial ownership of his spouses shares.
(4) Cannon owns 74,000 shares, while his IRA owns 1,137 shares. Cannon
disclaims beneficial ownership of 1,137 shares held by his spouse's IRA that
are included with his holdings.
(5) Barton owns 10,000 shares and Bernhardt 19,500 shares, of which 5,000
are held in his Keogh plan, 1,000 in his IRA plan, and 3,500 jointly with his
spouse. Under the Independent Director Stock Option Plan, Barton and Bernhardt
were granted new 10,000 share options on August 1, 1997 exercisable for $3.125
per share. Such options vest at the rate of 500 shares for each Board meeting
attended and 1,000 shares annually; Barton is vested in 3,000 shares while
Bernhardt is vested in 2,500 shares.
Item 13. Certain Relationships and Related Transactions.
Steve Toth, Jr. (Toth), President of the Company, directly and indirectly owns
82.75% of the Company.
Loans to and from Toth Family. At September 30, 1997, the Company had advanced
Toth [$489,000],which amount is non-interest bearing and unsecured. The Company
also held an unsecured 7% note receivable of $171,000 from Toth's daughter, a
Company employee and beneficiary of trusts owning 25.85% of the Company
(included with Toth's holdings). Offsetting those amounts, the Company had
an unsecured 8.5% note payable of $2,181,000 to Toth at September 30, 1997.
In fiscal year 1997, the Company repaid an unsecured 8% note payable of
$357,000 to Toth's spouse, beneficiary of a trust owning 3.10% of the Company
(included with Toth's holdings), while Toth paid off a 8.5% note to the Company,
the balance of which was $223,000 at September 30, 1996.
VSI Consulting, L.L.C. Dissolved. Visual Services' 11% equity interest in VSI
Consulting, L.L.C. resulted in $1,181,000 and $335,000 losses for the years
ended September 30, 1997 and 1996. This entity will have no further adverse
effect on the Company's profitability. The 12% note receivable from VSI
Consulting, L.L.C., the balance of which was $5,050,000 at September 30, 1996
(apart from $716,000 accrued interest), as reduced by the above losses of
$1,516,000, was written off in fiscal year 1997.
CLT Note Receivable. Visual Services' write-off of the remaining balance of the
note from VSI Consulting, L.L.C. was wholly offset by the issuance of a 7% note
by CLT, a Michigan partnership affiliated with Toth (CLT). The CLT note had
a $9,628,000 balance at September 30, 1997 (apart from $1,256,000 accrued
interest). As explained below, the principal of the CLT note was reduced by
$1,572,000 in fiscal year 1997. During fiscal year 1997, CLT paid off a
pre-existing note to the Company, the balance of which was $930,000 at September
30, 1996.
Toth's Financing of Retail Sector. In November 1993, the Company, then
consisting only of the Retail sector, was discharged from court supervision
after its successful Chapter 11 reorganization. Toth had provided the Retail
sector's interim reorganization financing, refinanced its former bank line of
credit, and sponsored its post-reorganization financing. This sponsorship
included his personal guarantee of a line of credit. At September 30, 1997,
$850,000 of cash had been drawn and $478,000 of stand-by letters of credit
were issued.
Reduction in CLT Note Receivable. Toth's involvement in the Retail sector's
post-reorganization financing is further reflected in the September 30, 1996
balance sheet of the Company as an 11% note payable to CLT for $553,000 and a
line of credit, classified as long-term debt, of $1,152,000 also payable to CLT.
After scheduled principal reductions of $26,000 in fiscal year 1997, $1,572,000
of the then $1,679,000 was applied to reduce the amount of the CLT note
receivable that the Company received upon the dissolution of VSI Consulting,
L.L.C. The remaining $107,000 was memorialized by an unsecured 8.25% note
payable to CLT.
CLT Stock Option. The reorganization plan of the Retail sector provided that,
for the financing discussed above, Toth be issued stock options for 650,000,
125,000 and 825,000 shares. Toth has exercised the first two options and
assigned the 825,000 share option to CLT, which exercised 400,000 shares of
that option in 1995. The Company does not expect the remaining 425,000 shares
to be exercised, at $.15625 per share, until shortly before the option's
May 2000 expiration.
Declared Distributions to Stockholders. Prior to their acquisition by the
Company in February, July and September 1997, the income of each subsidiary
(Advanced Animations, Inc., Vispac, Inc. and Visual Services, Inc.) was taxed
to their respective stockholders and members. A portion of such income was
distributed to pay such taxes. At September 30, 1997, the Company had declared,
and currently owes, distributions of $20,659,000 to such stockholders and
members. Such distributions relate not only to income earned by such
subsidiaries from October 1, 1996 until their acquisition by the Company, but
also include income previously retained by such subsidiaries as necessary
working capital. Toth and his affiliates have agreed, as have all of the former
minority shareholders of such subsidiaries, to receive cash payment of only
amounts needed to pay currently due taxes. The consideration for the balance of
the declared distributions will be the payment of the note receivable from CLT
discussed above (September 30, 1997 balance of $9,628,000 plus $1,256,000
accrued interest).
Lease of Real Estate. Toth directly and indirectly owns the entire interest in
a partnership that owns the building in which Vispac, Inc. is based. The
lease for $551,000 per year expires in November 2001 and is renewable for 58
months thereafter.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
1. Consolidated Financial Statements of VSI Holdings, Inc. and subsidiaries
and Independent Auditors' Report are filed herewith as a separate section of
this report.
2. The financial statement schedule filed as part of this Report pursuant
to Article 12 of Regulation S-X and the Independent Auditors' Report in
connection therewith are contained in the Index of Financial Statement
Schedule on Page S-1 of this Report. All other schedules for which provision
is made in the applicable accounting regulations of the Securities and
Exchange Commission have been omitted because such schedules are not required
under the related instructions or are inapplicable or because the information
required is included in the Consolidated Financial Statements or notes thereon.
3. Exhibits: * signifies exhibit incorporated herein by reference
+ signifies exhibit filed herewith
+ 3.1 Articles of Incorporation of the Registrant dated April 21,
1997, together with Articles of Merger of Registrant and The
Banker's Note, Inc. dated April 21, 1997.
+ 3.2 By-Laws of the Registrant, amended and effective on September
12,1997.
+ 4.1 VSI Holdings, Inc. 1997 Incentive Stock Option Plan as approved
at the Annual Shareholders' Meeting held on April 21, 1997.
+ 4.2 VSI Holdings, Inc. 1997 Non-Qualified Stock Option Plan as
approved at the Annual Shareholders' Meeting held on April 21,
1997.
+ 4.3 The Banker's Note, Inc. Independent Director Stock Option Plan
as approved at the Annual Shareholders' Meeting held on June
23,1989.
* 4.4 The Banker's Note, Inc. 1986 Incentive Stock Option Plan as
approved at the Annual Shareholders' Meeting held on June 16,
1986, filed as Exhibit 4.1 to Form 10-K for fiscal year ended
September 30, 1996.
* 4.5 The Banker's Note, Inc. 1986 Non-Qualified Stock Option Plan as
approved at the Annual Shareholders' Meeting held on June 16,
1986, filed as Exhibit 4.2 to Form 10-K for fiscal year ended
September 30, 1996.
+ 9.1 Voting Agreement dated as of January 18, 1994, by and among
Martin S. Suchik, Steve Toth, Jr., the Steve Toth, Jr. Trust,
and CLT.
+ 10.4 Stock Option Agreement dated as of May 6, 1993 between the
Registrant, Steve Toth, Jr., and CLT.
+ 10.5 First Amendment to Stock Option Agreement dated as of December
30, 1993 between the Registrant, Steve Toth, Jr., the Steve
Toth, Jr. Trust, and CLT.
* 10.7 Credit Authorization to Make Loans and to Issue Standby and
Commercial Letters of Credit in the amount of $2,000,000
expiring December 31, 1996 between the Registrant and NBD Bank,
filed as Exhibit 10.9 to Form 10-Q for the quarter ended June
30, 1996.
+ 21.1 List of Subsidiaries of the Registrant.
+ 23.1 Consent of Plante & Moran LLP, Independent Auditors.
(b) Reports on Form 8-K:
Filed September 30, 1997 reporting the business combination of VSI
Holdings, Inc. and Visual Services, Inc.
Filed July 28, 1997 reporting the business combination of VSI
Holdings,Inc. and Vispac, Inc.
Filed July 23, 1997 reporting a change in Certifying Accountants.
Pursuant to the requirements of Section 13 or 15(d) 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.
VSI Holdings, Inc.
(Registrant)
By: /s/ Steve Toth, Jr.
Steve Toth, Jr., President
and Chief Executive Officer
Date: December 19, 1997
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 in the capacities and on the dates indicated.
/s/ Steve Toth, Jr. Director, President and December 19, 1997
Steve Toth, Jr. Chief Executive Officer
/s/ Martin S. Suchik Director and Executive December 19, 1997
Martin S. Suchik Vice President
/s/ Thomas W. Marquis Director, Treasurer, December 19, 1997
Thomas W. Marquis Chief Accounting Officer,
and Principal Financial Officer
/s/ Harold D. Cannon Director, Secretary December 19, 1997
Harold D. Cannon
/s/ Terry Sparks Director December 19, 1997
Terry Sparks
/s/ Jerry L. Barton Director December 19, 1997
Jerry L. Barton
/s/ Dr. Kenneth L. Bernhardt Director December 19, 1997
Dr. Kenneth L. Bernhardt
ITEM 14(A) 1. FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
VSI HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
SEPTEMBER 30, 1997
VSI HOLDINGS, INC. AND SUBSIDIARIES
Independent Auditor's Report
Board of Directors and Stockholders
VSI Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet
of VSI Holdings, Inc. and subsidiaries (formerly The
Banker's Note, Inc. and subsidiary) as of September 30,
1997 and 1996 and the related consolidated statements of
income, changes in stockholders' equity and cash flows
for each year in the three-year period ended September 30,
1997. These consolidated financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of VSI Holdings, Inc.
and subsidiaries at September 30, 1997 and 1996 and the
consolidated results of their operations and their cash
flows for each year in the three-year period ended September
30, 1997 in conformity with generally accepted accounting
principles.
Ann Arbor, Michigan
December 5, 1997
VSI HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1997
1997 1996
ASSETS
CURRENT ASSETS
Cash $ 235,000 $ 351,000
Cash in escrow (Note 2) 1,206,000 699,000
Trade accounts receivable:
Billed 29,706,000 27,681,000
Unbilled 6,987,000 6,298,000
Notes receivable and advances
(Note 4):
Related party 9,889,000 2,198,000
Other 103,000 130,000
Inventory (Note 2) 2,606,000 3,844,000
Accumulated costs of uncompleted
programs 2,665,000 3,863,000
Deferred tax asset (Note 9) 1,185,000 81,000
Other current assets 3,570,000 844,000
Total current assets 58,152,000 45,989,000
LONG-TERM PORTION OF NOTES
RECEIVABLE - Related parties (Note 4)
581,000 5,434,000
PROPERTY, PLANT AND EQUIPMENT(Note 5)16,766,000 12,330,000
DEFERRED TAX ASSET (Note 9) 589,000 1,934,000
OTHER ASSETS 981,000 1,169,000
Total assets $77,069,000 $66,856,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
(Note 7) $ 156,000 $ 104,000
Trade accounts payable 10,704,000 10,976,000
Notes payable to related parties
(Note 6) 107,000 910,000
Notes payable to bank (Note 6) 23,493,000 16,364,000
Accrued liabilities 2,728,000 3,720,000
Declared distributions to
stockholders 20,659,000 2,642,000
Advances from customers for
uncompleted projects 2,274,000 2,168,000
Total current liabilities 60,121,000 36,884,000
LONG-TERM LIABILITIES
Notes payable - Related parties
(Note 6) 2,181,000 -
Related parties (Note 7) - 1,152,000
Long-term debt - Other (Note 7) 3,100,000 748,000
Total long-term debt 5,281,000 1,900,000
STOCKHOLDERS' EQUITY (Notes 2 and 12)
Preferred stock - $1.00 par value per
share, 2,000,000 shares authorized,
no shares issued - -
Common stock - $.01 par value per
share, 60,000,000 shares authorized,
40,371,000 shares issued for 1997
and 40,483,000 for 1996 404,000 405,000
Additional paid-in capital 7,917,000 7,862,000
Retained earnings 6,253,000 22,712,000
Treasury stock, at cost -
7,744,000 shares (2,907,000) (2,907,000)
Total stockholders' equity 11,667,000 28,072,000
Total liabilities and
stockholders' equity $77,069,000 $66,856,000
See Notes to Consolidated Financial Statements
VSI HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended September 30
1997 1996 1995
REVENUE $148,338,000 $150,299,000 $136,018,000
EXPENSES
Cost of revenue 68,973,000 72,989,000 71,485,000
Operating expenses 68,238,000 70,674,000 60,827,000
Total expenses 137,211,000 143,663,000 132,312,000
OPERATING INCOME 11,127,000 6,636,000 3,706,000
OTHER EXPENSES
Equity in earnings
of unconsolidated
investee (Note 2) (1,465,000) (335,000) -
Gain (loss) on sale
of property, plant
and equipment (19,000) 158,000 5,000
Interest and other
income 1,078,000 775,000 365,000
Interest expense (1,338,000) (1,629,000) (1,180,000)
Total other expenses (1,744,000) (1,031,000) (810,000)
INCOME - Before
income taxes 9,383,000 5,605,000 2,896,000
PROVISION FOR INCOME
TAXES (Note 9) 241,000 (1,230,000) (50,000)
NET INCOME $9,142,000 $6,835,000 $2,946,000
PRO FORMA INFORMATION
(Note 2)
Historical income
before income taxes $9,383,000 $5,605,000 $2,896,000
Pro forma income taxes 3,270,000 1,878,000 1,002,000
Pro forma net income $6,113,000 $3,727,000 $1,894,000
Pro forma earnings
per share $ .19 $ .11 $ .06
Pro forma weighted
average number of
shares outstanding 32,784,000 32,767,000 32,453,000
VSI HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON STOCK ADDITIONAL STOCK
PAID IN SUBSCRIPTIONS
SHARES AMOUNT CAPITAL RECEIVABLE
BALANCE-September
30, 1994 40,098,000 $ 401,000 $ 7,753,000 $(373,000)
Net income - - - -
Exercise of stock
options 1,466,000 15,000 1,004,000 -
Redemption of
stock (987,000) (10,000) (873,000) -
Distributions to
stockholders - - - -
Receipts on stock
subscriptions - - - 348,000
BALANCE-September
30, 1995 40,577,000 406,000 7,884,000 (25,000)
Net income - - - -
Redemption of stock (94,000) (1,000) (22,000) 25,000
Distributions to
stockholders - - - -
BALANCE-September
30, 1996 40,483,000 405,000 7,862,000 -
Net income - - - -
Exercise of stock
options 156,000 2,000 86,000 -
Distributions to
stockholders - - (1,000) -
Redemption of stock (283,000) (3,000) (45,000) -
Issuance of stock 15,000 - 15,000 -
BALANCE-September
30, 1997 40,371,000 $ 404,000 $ 7,917,000 $ -
TOTAL
RETAINED TREASURY STOCKHOLDERS'
EARNINGS STOCK EQUITY
BALANCE-September
30, 1994 $19,887,000 $(2,907,000) $24,761,000
Net income 2,946,000 - 2,946,000
Exercise of stock
options - - 1,019,000
Redemption of
stock (467,000) - (1,350,000)
Distributions to
stockholders (1,737,000) - (1,737,000)
Receipts on stock
subscriptions - - 348,000
BALANCE-September
30, 1995 20,629,000 (2,907,000) 25,987,000
Net income 6,835,000 - 6,835,000
Redemption of stock (91,000) - (89,000)
Distributions to
stockholders (4,661,000) - (4,661,000)
BALANCE-September
30, 1996 22,712,000 (2,907,000) 28,072,000
Net income 9,142,000 - 9,142,000
Exercise of stock
options - - 88,000
Distributions to
stockholders (25,225,000) - (25,226,000)
Redemption of stock (376,000) - (424,000)
Issuance of stock - - 15,000
BALANCE-September
30, 1997 $6,253,000 $(2,907,000) $11,667,000
See Notes to Consolidated Financial Statements
VSI HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,142,000 $ 6,835,000 $ 2,946,000
Adjustments to reconcile net income
to net cash from operating
activities:
Depreciation and amortization 3,513,000 3,216,000 2,572,000
Equity in earnings of unconsolidated
investee 1,465,000 335,000 -
Deferred income taxes 241,000 (1,230,000) (50,000)
(Gain) loss on sale of property,
plant and equipment 19,000 (158,000) (5,000)
Write-off of leasehold improvements 405,000 312,000 -
Bad debt expense 151,000 100,000 158,000
(Increase) decrease in assets:
Trade accounts receivable (2,847,000) 891,000 (6,743,000)
Inventory 1,238,000 2,417,000 (1,711,000)
Accumulated costs of uncompleted
programs 1,198,000 1,756,000 (1,234,000)
Other current assets (2,859,000) 18,000 (233,000)
Other assets 397,000 390,000 (238,000)
Increase (decrease) in liabilities:
Trade accounts payable (272,000) (3,551,000) 7,611,000
Accrued liabilities (992,000) 1,498,000 (77,000)
Advances from customers for
uncompleted projects (401,000) 810,000 (282,000)
Net cash provided by operating
activities 10,398,000 13,639,000 2,714,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (8,373,000) (4,395,000) (4,899,000)
Proceeds from sale of property,
plant and equipment - 152,000 12,000
Additions to notes receivable and
advances (10,784,000) (7,676,000) (4,002,000)
Payments on notes receivable and
advances 5,416,000 3,951,000 1,028,000
Investment in unconsolidated
investee (1,139,000) - -
Increase in cash surrender value of
insurance policies - (49,000) (50,000)
Proceeds from surrender of insurance
policies 661,000 - -
Proceeds from store lease
construction allowances - 121,000 232,000
Net cash used in investing
activities (14,219,000) (7,896,000) (7,679,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in checks written in excess 3,782,000 3,177,000 546,000
of bank balance
Principal payments on long-term debt (104,000) (100,000) (134,000)
Proceeds from long-term debt 2,508,000 - 6,000
Principal payments on related party
debt (383,000) - -
Proceeds from related party debt 2,181,000 26,000 577,000
Net borrowings (payments) on notes
payable 3,347,000 (6,007,000) 7,780,000
Proceeds from exercise of stock
options 7,000 - 1,019,000
Distributions to stockholders (7,209,000) (2,656,000) (3,985,000)
Proceeds from payment on stock
subscriptions - - 348,000
Payment for redemption of stock (424,000) (89,000) (1,350,000)
Net cash provided by (used in)
financing activities 3,705,000 (5,649,000) 4,807,000
NET INCREASE (DECREASE) IN CASH (116,000) 94,000 (158,000)
CASH - Beginning of year 351,000 257,000 415,000
CASH - End of year $ 235,000 $ 351,000 $ 257,000
NOTE 1 - ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include
the accounts of VSI Holdings, Inc. (the "Company", formerly
The Banker's Note, Inc.) and its wholly owned subsidiaries,
consisting of Advanced Animations, Inc., Vispac, Inc.,
Visual Services, Inc., BKNT Retail Stores, Inc., J.D. Dash,
Inc. and BKNT, Inc. Intercompany balances and transactions
have been eliminated in consolidation.
During the year ended September 30, 1997, the Company
effected mergers with three affiliated companies by
exchanges of stock for stock held by affiliated
stockholders. Prior to the mergers, the Company and the
affiliated companies were all controlled by Mr. Steve Toth,
Jr. and his family. These transactions were treated as a
merger of affiliated entities under common control,
accounted for similar to a pooling of interests and have
been applied retroactively. The merger transactions are
summarized as follows:
- On February 1, 1997, the Company acquired all outstanding
shares of Advanced Animations, Inc. in exchange for
7,563,077 shares of the Company's common stock. Visual
Services, Inc. was the majority stockholder of Advanced
Animations, Inc.
- On March 1, 1997, the women's retail apparel operations
of the Company were transferred into BKNT Retail Stores,
Inc.
- On July 1, 1997, the Company, renamed VSI Holdings, Inc.,
acquired all outstanding shares of Vispac, Inc. in
exchange for 6,200,000 shares of the Company's common
stock.
- On September 30, 1997, VSI Holdings, Inc. exchanged
20,938,198 shares of its common stock for the outstanding
shares of Visual Services, Inc.; the 6,652,483 shares of
VSI Holdings, Inc. stock acquired by Visual Services,
Inc. in the Advanced Animations, Inc. merger were
returned to treasury stock.
Advanced Animations, Inc. designs and manufactures product
simulators and animatronic displays. Customers are
primarily from the retail and entertainment industry
located in North America.
Vispac, Inc. provides integrated logistics and call center
operations predominantly for North American automobile
manufacturers.
Visual Services, Inc. is a broad-based provider of
educational curriculums and product training, interactive
technology based Distance Learning Systems, product
launches, web site development, direct response and site-
based marketing, change process and cultural change
consulting. Customers are primarily North American
automobile manufacturers.
BKNT Retail Stores, Inc. operates a chain of 23 women's
apparel specialty stores under the name Dress Code
throughout the southeastern and midwestern United States.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Visual Services, Inc. and Vispac,
Inc. recognize revenue as jobs or individually identifiable
phases are completed. Amounts so recognized are
accumulated in unbilled accounts receivable and billed
periodically or at completion of the applicable job or
phase, depending upon the terms of the client's purchase
order. Program freight and transportation expenses
incurred by the subsidiaries are invoiced to clients and
are included in revenue and program costs.
Advanced Animations, Inc. records revenue on display
contracts on the basis of the Company's estimates of the
percentage of completion of individual contracts. A
percentage of completion of contract price determined by
the ratio of incurred costs to total estimated costs is
included in revenue and the incurred costs are charged
against this revenue. Revisions in cost and profit
estimates during the course of the work are reflected in
the accounting period in which the facts that require the
revision become known. At the time a loss on a contract
becomes known, the entire amount of the estimated ultimate
loss is accrued.
Cash in Escrow - Certain amounts received from clients in
advance are restricted and held in escrow until costs
related to a specific job are incurred by the Company.
Inventory - The inventory of BKNT Retail Stores, Inc.,
which consists primarily of lower-priced women=s apparel,
is stated at the lower of cost, determined on the first-in,
first-out basis, or market. Inventory of the other
companies, which consists of various raw materials and
supplies, is recorded at the lower of cost, determined on
the specific unit basis, or market.
The components of inventory are as follows:
1997 1996
Raw materials $ 439,000 $ 492,000
Finished goods 2,167,000 3,352,000
Total inventory $2,606,000 $3,844,000
Accumulated Costs of Uncompleted Programs - Accumulated
costs of uncompleted programs are recorded at cost,
determined on a specific job basis, and consist of
applicable labor, materials, recoverable costs and
overhead.
Property, Plant and Equipment - Property, plant and
equipment are recorded at cost. Depreciation is computed
using accelerated and straight-line methods over the
estimated useful lives of the assets. Amortization of
leasehold improvements is computed on the straight-line
method over the estimated useful lives of the assets or the
lease term. Costs of maintenance and repairs are charged
to expense when incurred.
Store Openings and Closings - Provision is made at the time
a retail store is closed to record the related store
closing costs, including estimated termination costs.
Costs associated with opening new stores are charged to
expense as incurred.
Income Taxes - Deferred tax assets and liabilities are
recognized based on the difference between financial
statement carrying amounts and income tax bases of assets
and liabilities using the currently enacted income tax
rates and laws. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the
change during the period in deferred tax assets and
liabilities.
Prior to the mergers, Visual Services, Inc. and Vispac,
Inc. were S Corporations and Advanced Animations, Inc. was
a limited liability company. All income prior to the
mergers was taxed to their stockholders and members.
Accordingly, no provision for income taxes has been made
for these subsidiaries through the date of the mergers. As
of the date of the mergers, these subsidiaries elected C
Corporation status and will be included in the consolidated
tax return of VSI Holdings, Inc. The subsidiaries declared
distributions of previously taxed undistributed income
totaling $25,360,000 to the stockholders of these entities.
Pro forma income taxes include historical income tax
expense plus a provision for income taxes at 34 percent of
the income before income taxes of the subsidiaries not
subject to tax prior to the date of the mergers.
Retirement Plan - The Company has a voluntary retirement
savings plan designed in accordance with Section 401(k) of
the Internal Revenue Code that covers all eligible
employees. Employer contributions are discretionary and
determined annually by management. Employer contributions
amounted to $369,000 and $358,000 for the years ended
September 30, 1996 and 1995, respectively. There was no
contribution made for the year ended September 30, 1997.
Equity Investments - During 1997 and 1996, the Company held
an 11 percent interest in VSI Consulting, L.L.C. The
majority stockholder of the Company, through indirect
ownership, held the remaining interest in VSI Consulting,
L.L.C. The investment in VSI Consulting, L.L.C. has been
accounted for under the equity method of accounting due to
the Company's ability to exercise significant influence
over its operating and financial activities. The Company
recorded losses of $1,181,000 and $335,000 for the years
ended September 30, 1997 and 1996, respectively, which have
been netted against a note receivable due from VSI
Consulting, L.L.C. (see Note 4). There was no gain or loss
for the year ended September 30, 1995. During 1997, VSI
Consulting, L.L.C. was dissolved.
The Company also held a 33 percent interest in Corporate
Eagle Six, L.L.C. The investment has been accounted for
under the equity method of accounting. The Company has
recorded a loss of $284,000 for the year ended September
30, 1997, which has been netted against the investment.
The investment has been included in other assets and
amounted to $909,000 at September 30, 1997.
Stockholders' Equity - During the year ended September 30,
1997, the Company increased the authorized number of shares
from 20,000,000. In addition, the shares outstanding
information has been restated to reflect the mergers.
Earnings per Share - Pro forma earnings per share in each
year is computed using the weighted average number of
shares outstanding, including common stock equivalents when
dilutive, as if the subsidiaries had been consolidated for
all years presented. Common stock equivalent shares result
from the stock options discussed in Note 12.
Statement of Financial Accounting Standards No. 128 (SFAS
128), Earnings per Share, establishes standards for
computing and presenting earnings per share. This
statement is effective for financial statements issued for
periods ending after December 15, 1997. Management does
not expect the statement will have a material impact.
Stock Options - The Company has several stock option plans
(see Note 12). Options granted to employees and directors
are accounted for using the intrinsic value method, under
which compensation expense is recorded at the amount by
which the market price of the underlying stock at the grant
date exceeds the exercise price of an option. Under the
Company's plans, the exercise price on all options granted
equals or exceeds the fair value of the stock at the grant
date. Accordingly, no compensation cost is recorded as a
result of stock option awards under the plans.
Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 3 - AFFILIATES AND RELATED PARTY TRANSACTIONS
At September 30, 1996, VSI Consulting, L.L.C., an
unconsolidated investee of the Company, held a 74 percent
interest in Seventh Medium, Inc. The Company had sales to
Seventh Medium, Inc. amounting to approximately $437,000,
$962,000 and $608,000 during the years ended September 30,
1997, 1996 and 1995, respectively. There were no
significant trade accounts receivable at September 30, 1997
and 1996. During 1997, Seventh Medium, Inc. was dissolved.
NOTE 4 - NOTES RECEIVABLE AND ADVANCES
Notes receivable and advances consist of the following:
1997 1996
Note receivable from a partnership
controlled by the controlling
stockholder of the Company,
unsecured, bearing interest at 7
percent. Included in other current
assets at September 30, 1997 is
accrued interest of $1,256,000
relating to this note. The
controlling stockholder has
represented that the note and
accrued interest will be repaid
within one year from the proceeds of
the declared distributions to
stockholders $9,628,000 $ -
Note receivable from a related
unconsolidated investee, unsecured,
bearing interest at 12 percent and
due on demand (net of the Companys
share of income and losses accounted
for under the equity method of
accounting). Included in other
current assets at September 30, 1996
is accrued interest of $716,000
relating to this note. During 1997,
approximately $1,516,000 was written
off as a loss on unconsolidated
investment upon dissolution of the
investee - 5,050,000
Note receivable from a stockholder,
unsecured, bearing interest at 7
percent and due on demand 171,000 174,000
Note receivable from a stockholder,
unsecured, payable upon demand and
bearing interest at the bank=s prime
rate (8.50 percent at September 30,
1997). The balance was repaid
during 1997 - 223,000
Note receivable from a partnership
related by common ownership,
unsecured, bearing interest at 8
percent. The balance was repaid
during 1997 - 930,000
Land contract receivable,
collateralized by land, bearing
interest at 11 percent per annum
with monthly interest- only payments
of $1,192 through July 1997. The
balance was repaid during 1997 - 130,000
Advances, noninterest-bearing,
unsecured, due on demand:
Stockholder 489,000 345,000
Officers - 711,000
Employees 182,000 199,000
Other 103,000 -
Total 10,573,000 7,762,000
Less current portion 9,992,000 2,328,000
Long-term portion $ 581,000 $5,434,000
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
1997 1996
Land and land improvements $ 1,088,000 $ 663,000
Building 5,712,000 3,172,000
Furniture, fixtures and equipment 26,380,000 25,973,000
Leasehold improvements 4,845,000 4,851,000
Production costs 1,564,000 -
Vehicles 305,000 293,000
Total 39,894,000 34,952,000
Less accumulated depreciation and
amortization 23,128,000 22,622,000
Net carrying amount $16,766,000 $12,330,000
Depreciation expense amounted to $3,513,000, $3,216,000 and
$2,572,000 for the years ended September 30, 1997, 1996 and
1995, respectively.
NOTE 6 - NOTES PAYABLE
The Company has several lines of credit. They are as
follows:
1997 1996
Bank line of credit, unsecured,
permitting borrowings up to
$6,000,000 with interest at prime
(8.5 percent at September 30, 1997).
Borrowings equal to or greater than
$500,000 can be made for fixed
periods of time at a fixed rate
equal to the London Interbank
Offered Rate (LIBOR) plus 1.75
percent (LIBOR at September 30, 1997
was 6.06 percent) $ 4,018,000 $ 3,480,000
Bank line of credit permitting
borrowings up to $21,000,000 at the
bank's prime rate (8.5 percent at
September 30, 1997). Borrowings
equal to or greater than $500,000
can be made for fixed periods of
time at a fixed rate equal to LIBOR
plus 1.75 percent. Collateralized
by all assets of Visual Services,
Inc. Standby letters of credit of
$375,000 further reduce available
borrowings on the line at September
30, 1997 10,372,000 6,636,000
Bank line of credit permitting
borrowings up to $3,000,000 at the
bank=s prime rate (8.5 percent at
September 30, 1997). Collateralized
by all assets of Visual Services, - 1,177,000
Inc.
Bank line of credit permitting
borrowings up to $2,000,000 at the
bank's prime rate (8.5 percent at
September 30, 1997). Guaranteed by
Mr. Toth. Standby letters of credit
of $478,000 further reduce the
available borrowings on the line at
September 30, 1997 850,000 600,000
Checks written in excess of bank
balance. Upon presentment of checks
for payment, additional borrowings
will be made on the lines of credit 8,253,000 4,471,000
Total notes payable to
bank $23,493,000 16,364,000
The loan agreements contain certain covenants that requires
that, among other things, the Company maintains certain
levels of net worth and working capital and that the ratio
of total liabilities to net worth, debt service ratio and
current ratio do not exceed certain amounts.
As of September 30, 1997, Visual Services, Inc. and Vispac,
Inc.'s lines of credit had expired and are being extended
on a monthly basis by the bank until negotiations of a new
line of credit can be completed.
Notes payable to related parties consist of the following:
1997 1996
Note payable to the spouse of Mr.
Toth. The note is unsecured, bears
interest at 8 percent and is due on - 357,000
demand
Note payable to Mr. Toth. The note
is unsecured, bears interest at
prime (8.50 percent at September 30,
1997) and is due on demand. Mr.
Toth has represented payment will
not be demanded during fiscal 1998 2,181,000 -
Note payable to a limited
partnership controlled by Mr. Toth.
The note is unsecured, bears
interest at 8.25 percent and is due 107,000 -
on demand
Note payable to a limited
partnership controlled by Mr. Toth,
unsecured, due in monthly
installments of $8,265 including
interest at 11 percent (see Note 10) - 553,000
Total notes payable to
related parties 2,288,000 910,000
Less current portion 107,000 910,000
Long-term portion $ 2,181,000 $ -
The weighted-average interest rate on short-term notes
payable was 8.0 percent and 7.9 percent as of September 30,
1997 and 1996, respectively.
NOTE 7 - LONG-TERM DEBT
Long-term debt consists of the following:
1997 1996
Line of credit with a limited
partnership controlled by Mr. Toth
(see Note 10) - 1,152,000
Bonds payable consisting of an
Industrial Revenue Development Bond
("IRDB"). The IRDB bears interest
at 68.875 percent of the prime rate
and is payable in monthly
installments through March 2001.
The bond is collateralized by the
related office/warehouse property
with net book value of $858,000 at
September 30, 1997 269,000 334,000
Mortgage payable to bank, bearing
interest at the bank's prime rate
(8.5 percent at September 30, 1997),
due in monthly installments of
$3,222 plus interest, with a final
principal interest due on March 1,
2002. The mortgage is
collateralized by the related land
and building with a net book value
of $496,000 at September 30, 1997 479,000 518,000
Mortgage payable to bank, bearing
interest at the bank=s prime rate
(8.5 percent at September 30, 1997),
due in monthly installments of
$21,765 including interest, with a
final principal payment due on
September 1, 2004. The mortgage is
collateralized by the related land
and building with a net book value
of $2,537,000 at September 30, 1997 2,508,000 -
Total 3,256,000 2,004,000
Less current portion 156,000 104,000
Long-term portion $3,100,000 $1,900,000
Principal payments due on the long-term debt are as
follows:
Years Ending
September 30 Amount
1998 $ 156,000
1999 166,000
2000 177,000
2001 150,000
2002 398,000
2003 and 2,209,000
thereafter
Total $3,256,000
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lease Commitments - The Company utilizes operating leases
for equipment, stores, warehouse and operating facilities.
For most locations, the Company pays taxes, insurance and
maintenance costs. Lease terms generally range from one to
ten years with renewal options for additional three- to ten-
year periods. Certain retail store leases provide for
additional contingent rentals based on a percentage of
sales in excess of a minimum amount.
The Company leases one of its primary operating facilities
from a partnership that the Company's controlling
stockholder owns 100 percent through direct and indirect
ownership.
The minimum lease payments for the remaining years under
the above leases are as follows:
Years Ending Related
September 30 Party Other Total
1998 $ 551,000 $ 4,604,000 $ 5,155,000
1999 551,000 4,149,000 4,700,000
2000 551,000 3,231,000 3,782,000
2001 551,000 2,441,000 2,992,000
2002 92,000 2,043,000 2,135,000
2003 and - 752,000 752,000
thereafter
Total $2,296,000 $17,220,000 $19,516,000
Rent expense was as follows for the years ended September
30:
1997 1996 1995
Related party $ 641,000 $ 613,000 $ 624,000
Other 4,253,000 5,303,000 4,494,000
Total $4,894,000 $5,916,000 $5,118,000
Consignment Inventories - The Company receives apparel
merchandise on a consignment basis from certain vendors.
Consigned inventories are not reflected on the Company's
balance sheet as the consignors retain ownership of the
merchandise. Consignment inventories (at cost) were
approximately $324,000 and $236,000 at September 30, 1997
and 1996, respectively. Sales of consignment merchandise
were approximately $3,859,000, $123,000 and $199,000 for
the years ended September 30, 1997, 1996 and 1995,
respectively.
NOTE 9 - INCOME TAXES
A summary of deferred tax assets, liabilities and valuation
allowances for deferred tax assets include the following
amounts at September 30, 1997 and 1996:
1997 1996
Deferred tax liabilities -
Depreciation $(205,000) $(220,000)
Deferred tax assets:
Net operating loss carryforwards 2,329,000 2,316,000
Bad debt deductions not recognized
for tax purposes 1,000 103,000
Charitable contribution
carryforwards 43,000 48,000
Uniform capitalization of costs in
inventory 25,000 28,000
Accrued expenses not deductible
for tax purposes 126,000 170,000
Total deferred tax assets 2,524,000 2,665,000
Valuation allowance for deferred tax
assets (545,000) (430,000)
Net deferred tax asset $1,774,000 $2,015,000
At September 30, 1997, the Company had approximately
$5,385,000 and $106,000 of net operating loss and
charitable contribution carryforwards, respectively, for
federal income tax purposes. The net operating loss
carryforward begins to expire in fiscal year 2005. The
charitable contribution carryforwards have begun to expire
with $45,000 expiring during fiscal year 1996.
The Company also had net operating loss carryforwards for
state tax purposes at September 30, 1997, which expire at
varying dates through fiscal year 2011. A valuation
allowance has been recorded to reduce to zero the deferred
tax asset relating to the state net operating loss
carryforwards.
The provision for income taxes consists of:
1997 1996 1995
Current $ - $ - $ -
Deferred 241,000 (1,230,000) (50,000)
Total provision
for income taxes $241,000 $(1,230,000) $ (50,000)
A reconciliation of taxes on income from continuing
operations based on the statutory federal income tax rate
to the provision for income taxes is as follows:
1997 1996 1995
Tax computed at
statutory federal
income tax rate $3,190,000 $1,906,000 $ 984,000
Nondeductible
expenses 7,000 5,000 7,000
Subsidiaries
formerly not
subject to tax
(Note 2) (3,029,000) (3,108,000) (1,052,000)
Other 73,000 (33,000) 11,000
Total
provision for
income taxes $ 241,000 $(1,230,000) $ (50,000)
NOTE 10 - CASH FLOWS
Cash paid during the years ended September 30, 1997, 1996
and 1995 for interest amounted to $1,235,000, $1,571,000
and $1,049,000, respectively.
The Company had the following noncash transactions:
- During 1997, the Company reduced a note receivable from
the limited partnership in exchange for a reduction in a
note payable and a line of credit from the limited
partnership controlled by Mr. Toth in the amount of
$1,572,000.
- During 1996, the Company sold land in exchange for a
land contract receivable of $130,000.
NOTE 11 - SELF-INSURANCE PLAN
The Company is substantially self-insured for employee
medical and dental claims. The policy year of the plan is
October 1 to September 30. The Company has purchased stop-
loss insurance for individual claims that exceed $75,000
annually, up to a maximum of $1,000,000. The approximate
amount of employer contributions paid or accrued for the
plan years ended September 30, 1997, 1996 and 1995 was
$1,689,000, $1,476,000 and $914,000, respectively.
NOTE 12 - STOCK OPTIONS
The Company issued options for the Company's common stock
in the following two arrangements:
Mr. Toth's Options
In 1993, the Company granted Mr. Toth options to purchase
825,000 shares of the Company's common stock at $.15625
per share for providing assistance with financing in
accordance with its Plan of Reorganization. During fiscal
year 1995, 400,000 shares of the 825,000 share options
were exercised by a partnership affiliated with Mr. Toth.
Casablanca Options
In connection with a retail outlet agreement signed on
February 1, 1995 between The Casablanca Group, L.P.
("Casablanca") and the Company, stock options for 5,000
and 35,000 shares were issued to Casablanca during fiscal
1996 and 1995, respectively. During fiscal 1997, all the
retail outlets opened under this agreement were closed.
The options previously issued were canceled.
The Company has stock options outstanding or issuable for
the benefit of employees and directors under the following
plans:
1986 Incentive Stock Option Plan - Options under this plan
were granted to officers and key employees at prices not
less than the market price at date of grant. Options are
generally exercisable one third annually commencing 12
months after the date granted and expire at the end of six
years. This plan terminated March 1996 and no new options
will be granted.
1986 Nonqualified Stock Option Plan - Options under this
plan were granted to officers and employees at prices not
less than the market price at date of grant. Options are
generally exercisable one third annually commencing 12
months after the date granted and expire at the end of 10
years. This plan terminated March 1996 and therefore, no
new options will be granted under the plan.
1997 Nonqualified Stock Option Plan and 1997 Incentive
Stock Option Plan - These plans were established during
1997 to issue options to officers and employees at prices
not less than the market price at date of grant. Each
plan is authorized to issue options for 500,000 shares of
the Company's common stock. As of September 30, 1997, no
options had been granted.
Independent Director Stock Option Plan - Options under
this plan are granted to independent directors who are
neither employees nor beneficial owners of 5 percent or
more of the Company's common stock at prices equal to the
market price of the Company's common stock at date of
grant. Options for 30,000 shares were exercised during
fiscal 1997; during the same period, options for 20,000
shares were granted. Options granted are usually
exercisable 30 days from date of grant as determined by
vesting schedules in the plan.
Effective October 1, 1996, the Company has adopted the
disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation. Accordingly, no compensation cost has been
recognized for the stock option plans. Had compensation
cost for the Company's stock options plans been determined
based on the fair value at the grant date for awards in
1997 and 1996 consistent with the provisions of SFAS No.
123, the Company's net income and earnings per share would
not have been materially affected.
Information regarding these fixed-price option plans for
the years ended September 30, 1997, 1996 and 1995 are as
follows:
1997
Weighted
Shares Average 1996 1995
Exercise
Price Shares Shares
Options outstanding -
Beginning of year 775,000 .34 790,700 1,159,100
Canceled (80,000) .50 (20,000) (3,400)
Granted 20,000 3.13 5,000 35,000
Exercised (155,700) .56 - (400,000)
Options outstanding - End
of year 560,000 .36 775,000 790,700
Option price range - End
of year $.15625 to $3.125
Option price range for
exercised shares $.50 to $1.00
Options available for
future grants - End
of year 1,080,000
Weighted average fair
value of options
granted during the year $2.75
The following table summarizes information about fixed
price stock options outstanding at September 30, 1997:
Options Outstanding Options Exercisable
Weighted-
Range Number Average Weighted- Number Weighted
of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Price 9/30/97 Life Price 9/30/97 Price
$.15625 425,000 3 years $ .15625 425,000 $ .15625
.50 to .75 115,000 6 years .64 80,000 .68
3.125 20,000 5 years 3.125 20,000 3.125
.15625 to
3.125 560,000 525,000 .35
In November 1997, the Company issued options to employees
for 302,000 shares of the Company's common stock. One-
half of the options are exercisable two years from the
date of grant, with the remaining options exercisable
three years from the date of grant. The options have an
exercise price of $6.20 and expire five years from the
date of grant.
NOTE 13 - INDUSTRY SEGMENTS
The Company's operations are classified into three
business segments: marketing services, entertainment and
retail. The marketing services segment performs
administrative and data management services, creates,
prints and prepares promotional materials and performs
other marketing services. In addition, the marketing
services segment provides product and leadership training
and creates and produces video training products,
industrial theater and meetings.
The entertainment segment designs and manufactures
animated displays for the retail and entertainment
industry throughout North America.
The retail segment operates a chain of women's apparel
specialty stores.
Summarized financial information by each of the Company's
three industry segments for the three-year period ended
September 30, 1997 is as follows:
1997 1996 1995
Revenue:
Marketing services sector $124,110,000 $119,489,000 $104,536,000
Entertainment sector 6,506,000 8,724,000 7,523,000
Retain sector 17,722,000 22,086,000 23,959,000
Consolidated total $148,338,000 $150,299,000 $136,018,000
Income from operations:
Marketing services sector $ 11,675,000 $ 9,178,000 $ 3,677,000
Entertainment sector 1,002,000 1,720,000 452,000
Retail sector (491,000) (3,329,000) (53,000)
Equity in earnings of
unconsolidated investee (1,465,000) (335,000) -
Interest expense (1,338,000) (1,629,000) (1,180,000)
Consolidated income
before income taxes $ 9,383,000 $ 5,605,000 $2,896,000
Identifiable assets:
Marketing services sector $ 67,699,000 $ 56,202,000 $55,224,000
Entertainment sector 3,534,000 2,658,000 2,484,000
Retain sector 5,836,000 7,996,000 9,395,000
Consolidated total $ 77,069,000 $ 66,856,000 $67,103,000
Depreciation and amortization:
Marketing services sector $ 3,012,000 $ 2,620,000 $ 2,041,000
Entertainment sector 183,000 174,000 128,000
Retail sector 318,000 422,000 403,000
Consolidated total $ 3,513,000 $ 3,216,000 $ 2,572,000
Capital expenditures:
Marketing services sector $ 6,651,000 $ 3,347,000 $ 3,712,000
Entertainment sector 1,587,000 364,000 324,000
Retail sector 135,000 684,000 63,000
Consolidated total $ 8,373,000 $ 4,395,000 $ 4,899,000
The following companies are considered major customers
comprising 10 percent or greater of the Company's net
sales:
1997 1996 1995
Ford Motor Company 25% 26% 22%
General Motors Corporation 28 24 25
Total 53% 50% 47%
NOTE 14 - LITIGATION
As of September 30, 1997, the Company has pending
litigation with a former employee and stockholder who is
seeking damages for wrongful discharge and increased value
for Company stock sold under a previously determined
formula. The plaintiff has not indicated the dollar
amount of damages being sought. At this time, the case is
in preliminary stages and the outcome is not determinable.
Management feels the case is without merit and plans to
vigorously defend the lawsuit.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
A summary of the fair value of financial instruments, as
well as the methods and significant assumptions used to
estimate fair value, is as follows:
Short-term Financial Instruments - The fair value of short-
term financial instruments, including cash, trade accounts
receivable and payable, accrued liabilities and advances
from customers, approximates the carrying amount in the
accompanying financial statements due to the short
maturity of such instruments.
Notes Receivable and Advances - The fair value of notes
receivable and advances approximates the carrying amount
since the note rates approximate rates currently available
to the Company for notes with similar terms and
maturities.
Notes Payable to Bank - The fair value of variable rate
notes payable approximates the carrying amount since the
current effective rates reflect market rates.
Notes Payable to Related Parties - The fair value of notes
payable to related parties approximates the carrying
amounts since the note rates approximate rates currently
available to the Company for debt with similar terms and
maturities.
Long-term Debt - The fair value of the Company's long-term
debt approximates the carrying amount since the debt rates
approximate rates currently available to the Company for
debt with similar terms and maturities.
NOTE 16 - SUBSEQUENT EVENTS
Stock Granted - In December 1997, the Company granted
approximately 426,000 shares of the Company's common stock
to employees as compensation.
Purchase of Performance Systems Group - In November 1997,
the Company announced that it had entered into a
definitive agreement to acquire the assets of Performance
Systems Group for approximately $5.1 million, consisting
of 280,000 shares of the Company's common stock and $3
million in cash. Additional contingent consideration of
$900,000 may be due based on future earnings of the
purchased business. Performance Systems Group provides in-
field consulting and change process sustainment services
primarily to automobile dealerships. The acquisition will
be accounted for under the purchase method.
Exhibit Index
Consecutively
Exhibit Numbered
Number Pages
3.1 Articles of Incorporation of the Registrant dated April 21, 1997,
together with Articles of Merger of Registrant and The Banker's Note,
Inc. dated April 21, 1997.
3.2 By-Laws of the Registrant, amended and effective on September 12, 1997.
4.1 VSI Holdings, Inc. 1997 Incentive Stock Option Plan as approved at the
Annual Shareholders' Meeting held on April 21, 1997.
4.2 VSI Holdings, Inc. 1997 Non-Qualified Stock Option Plan as approved at
the Annual Shareholders' Meeting held on April 21, 1997.
4.3 The Banker's Note, Inc. Independent Director Stock Option Plan as
approved at the Annual Shareholders' Meeting held on June 23, 1989.
9.1 Voting Agreement dated as of January 18, 1994, by and among Martin S.
Suchik, Steve Toth, Jr., the Steve Toth, Jr. Trust, and CLT.
10.4 Stock Option Agreement dated as of May 6, 1993 between the Registrant,
Steve Toth, Jr., and CLT.
10.5 First Amendment to Stock Option Agreement dated as of December 30, 1993
between the Registrant, Steve Toth, Jr., the Steve Toth, Jr. Trust, and
CLT.
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Plante & Moran LLP, Independent Auditors.
Exhibit 3.1
ARTICLES OF INCORPORATION OF
VSI HOLDINGS, INC.
The Articles of Incorporation of VSI HOLDINGS, INC., effective
the later of April 21, 1997 or filing with the Secretary of State of
Georgia, are as follows:
ARTICLE I
The present name of the Corporation is "VSI HOLDINGS, INC.".
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The Corporation shall be organized pursuant to provisions of the
Georgia Business Corporation Code.
ARTICLE IV
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 62,000,000, of which
2,000,000 shares are of a class designated Preferred Stock having a
par value of $1.00 per share and 60,000,000 shares are of a class
designated Common Stock having a par value of $.01 per share. The
preferences, limitations and relative rights of the Preferred Stock
and the Common Stock shall be as follows:
DIVISION A--THE PREFERRED STOCK
1. The shares of Preferred Stock, par value $1.00 per share,
may be divided into and issued in series. Each such series shall be
so designated as to distinguish the shares thereof from the shares of
all other series and classes, and all shares of the Preferred Stock
shall be identical, except as to the following relative rights and
preferences, as to which there may be variations between different
series:
a. The rate of dividend;
b. The price at, and the terms and conditions at which,
shares may be redeemed;
c. The amount payable upon shares in the event of involuntary
liquidation;
d. The amount payable upon shares in the event of voluntary
liquidation;
e. Mandatory or optional sinking fund provision, if any, for
the redemption or purchase of shares;
f. The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege
of conversion;
g. Voting rights, including the number of votes per shares,
or any fraction thereof, the matters on which such shares
can vote and the contingencies which make such voting
rights effective.
2. The Board of Directors of the Corporation is hereby
authorized, from time to time, by resolution or resolutions providing
for the issuance thereof, to divide the shares of Preferred Stock
into and to establish series of Preferred Stock into and to establish
series of Preferred Stock, to designate each such series, to fix and
determine the relative rights and preferences of the shares of any
series so established, and to issue and sell any and all of the
authorized and unissued shares of Preferred Stock as shares of any
series thereof established by action of the Board of Directors
pursuant hereto.
3. The following provisions shall apply to all shares of the
Preferred Stock irrespective of series:
a. To the extent that the resolution or resolutions creating
any series of Preferred Stock shall provide that any
dividends shall be paid thereon, the holders of Preferred
Stock of each such series shall be entitled to receive on
the dates and for the periods hereafter specified by the
Board of Directors, dividends in cash, payable when, if
and as declared by the Board of Directors out of any funds
legally available therefor, at such rates as shall be
determined by the Board of Directors for the respective
series, from the date on which such shares have been
originally issued. Such dividends, if any, shall be
cumulative from the date of issue, so that no dividend
(other than a dividend payable in Common Stock of the
Corporation) or other distribution shall be paid or
declared or made on, and no amounts shall be applied to
the purchase or redemption of, the Common Stock or any
other class of stock ranking junior to the Preferred Stock
as to dividends or assets unless (i) full cumulative
dividends for all past dividend periods shall have been
paid or declared and set apart for payment, and full
dividends for the then current dividend period shall have
been or simultaneously therewith shall be paid or
declared, on outstanding Preferred Stock of all series
entitled to receive dividends at the rates determined for
the respective series, and (ii) after giving effect to
such payment of dividends, other distribution, purchase or
redemption, the aggregate capital of the Corporation
applicable to all capital stock of the Corporation then
outstanding, plus the earned and capital surplus of the
Corporation, shall exceed the aggregate amount payable on
involuntary dissolution, liquidation or winding up of the
Corporation on all shares of the Preferred Stock and all
stock ranking prior to or on a parity with the Preferred
Stock as to dividends or assets outstanding after the
payment of such dividends, other distribution, purchase or
redemption. Accumulations of dividends shall not bear
interest. Dividends shall not be paid or declared and set
apart for payment on the Preferred Stock of any one series
for any dividend period unless dividends have been or are
contemporaneously paid or declared and set apart for the
payment on the Preferred Stock of all series entitled
thereto for all dividend periods terminating on the same
or earlier date.
b. In the event of any dissolution, liquidation or winding up
of the Corporation, whether voluntarily or involuntarily,
the holders of Preferred Stock of each series then
outstanding, without any preference of the shares of any
series of Preferred Stock over the shares of any other
series of Preferred Stock, shall be entitled to receive in
cash out of the assets of the Corporation, whether capital
or surplus or otherwise, before any distribution of the
assets shall be made to the holders of Common Stock or of
any other class of stock ranking junior to the Preferred
Stock as to dividends or assets, the amount determined by
the Board of Directors, pursuant to the authority granted
hereinabove in Paragraph 2 hereof, to be payable on the
shares of such series in the event of voluntary or
involuntary dissolution, liquidation or winding up, as the
case may be, together, in all cases, with unpaid
accumulated dividends, if any, whether such dividends are
earned, declared or otherwise, to the date fixed for such
payment. If the assets shall not be sufficient to pay in
full the amounts so determined to be payable on all shares
of the Preferred Stock in the event of such voluntary or
involuntary dissolution, liquidation or winding up, as the
case may be, then the assets available for payment shall
be distributed ratably among the holders of the Preferred
Stock of all series in accordance with the amounts so
determined to be payable on the shares of each series in
the event of voluntary or involuntary dissolution,
liquidation or winding up, as the case may be, in
proportion to the full preferential amounts, together with
any and all dividend arrearages, to which they are
respectively entitled. After payment to the holders of
the Preferred Stock of the full preferential amounts
hereinbefore provided for, the holders of Preferred Stock
will have no other rights or claims to any of the
remaining assets of the Corporation either upon
distribution of such assets or upon dissolution,
liquidation or winding up. The sale of all or
substantially all the property of the Corporation to, or
the merger, consolidation or reorganization of the
Corporation into or with any other corporation, or the
purchase or redemption by the Corporation of any shares of
its Preferred Stock or its Common Stock or any other class
of its stock shall not be deemed to be a distribution of
assets or a dissolution, liquidation or winding up for the
purposes of this paragraph.
c. So long as full cumulative dividends on all outstanding
shares of Preferred Stock for all dividend periods ending
on or prior to the date fixed for redemption shall have
been paid or declared and set apart for payment and
subject to any applicable requirements of Georgia law, the
Corporation may, (i) at the option of the Board of
Directors of the Corporation, redeem the whole or any part
of the shares of any series of Preferred Stock determined
by it to be redeemable pursuant to the authority granted
hereinabove in Paragraph 2 hereof, and without redeeming
the shares of any other series thereof, or (ii) redeem the
whole or any part of any series of Preferred Stock to meet
any sinking fund requirement determined pursuant to the
authority granted hereinabove in Paragraph 2 hereof, and
without redeeming the shares of any other series thereof,
in each case on the terms and conditions and at the
redemption price so determined for such series, plus the
amount of unpaid accumulated dividends, if any, to the
date of such redemption. All such redemptions of
Preferred Stock shall be effected in accordance with the
procedure for redemptions set forth in the Georgia
Business Corporation Code in effect at the times of such
redemptions.
On or before the date fixed for redemption, the
Corporation may provide for payment of a sum sufficient to
redeem the shares called for redemption either (1) by
setting aside the sum, separate from its other funds, in
trust for the benefit of the holders of the shares to be
redeemed, or (2) by depositing such sum in a bank or trust
company (either such a financial institution located in
Georgia having capital and surplus or at least ten million
dollars ($10,000,000) according to its latest statement of
condition, or in such other financial institution located
elsewhere in the United States which is now or hereafter
duly appointed and acting as transfer agent of the
Corporation) as a trust fund, with irrevocable
instructions and authority to the bank or trust company to
give or complete the notice of redemption and to pay, on
or after the date fixed for redemption, the redemption
price on surrender of certificates evidencing the shares
of Preferred Stock called for redemption. From and after
the date fixed for redemption, (a) the shares shall be
deemed to be redeemed, (b) dividends thereon shall cease
to accumulate, (c) such setting aside or deposit shall be
deemed to constitute full payment for the shares, (d) the
shares shall no longer be deemed to be outstanding, (e)
the holders thereof shall cease to be shareholders with
respect to such shares, and (f) the holders shall have no
rights with respect thereto, except the right to receive
their proportionate shares of the funds set aside pursuant
hereto or deposited upon surrender of their respective
certificates, and any right to convert such shares which
may exist. Any interest accrued on funds set aside
pursuant hereto or deposited shall belong to the
Corporation. If the holders of shares do not, within six
(6) years after such deposit, claim any amount so
deposited for redemption thereof, the bank or trust
company shall upon demand pay over to the Corporation the
balance of the funds so deposited, and the bank or trust
company shall thereupon be relieved of all responsibility
to such holders.
d. So long as full cumulative dividends on all outstanding
shares of Preferred Stock for all dividend periods ending
on or prior to the date of purchase shall have been paid
or declared and set apart for payment and subject to
applicable requirements of Georgia law, the Corporation
may purchase, directly or indirectly, shares of Preferred
Stock of any series to the extent of the aggregate of
unrestricted capital surplus and unrestricted reduction
surplus available therefor.
e. Upon any issue for money or other consideration of any
stock of the Corporation that may be authorized from time
to time, or treasury stock, no holder of Preferred Stock
shall have any preemptive or other right to subscribe for,
purchase, or receive any proportionate or other shares of
the stock so issued, but the Board of Directors may
dispose of all or any portion of such stock as and when it
may determine, free of any such rights, whether by
offering the same to shareholders or by sale or other
disposition as said Board of Directors may deem advisable.
4. Voting Powers.
a. Except as provided by law, as set forth herein or as may
be provided with respect to any series by the Board of
Directors pursuant to the authority granted hereinabove in
Section 2 hereof, the holders of Preferred Stock shall not
have any right to vote for any purpose or on any matter
whatsoever, all such voting power being vested exclusively
in the shares of Common Stock of the Corporation. Holders
of Preferred Stock shall not be entitled to receive notice
of any meeting of shareholders of the Corporation at which
they are not entitled to vote.
b. The holders of shares of any and all series of Preferred
Stock outstanding on the record date for any such meeting
of the shareholders shall be entitled to vote, as a single
class, upon any proposed amendment to these Articles of
Incorporation, if such amendment would (i) increase or
decrease the aggregate number of authorized shares of
Preferred Stock, (ii) increase or decrease the par value
of shares of Preferred Stock, (iii) effect an exchange,
reclassification or cancellation of all or a part of the
shares of Preferred Stock, (iv) effect an exchange, or
create a right of exchange, of all or any part of the
shares of another class into shares of Preferred Stock,
(v) change the designations, preferences, limitations or
relative rights of any series of Preferred Stock at any
time outstanding in those respects in which the shares
thereof vary from shares of other series of Preferred
Stock at the time outstanding, (vi) change the shares of
Preferred Stock, whether with or without par value, into
the same or a different number of shares, either with or
without par value, of the same class or another class or
classes, (vii) create a new class of Preferred Stock, or
increase the rights and preferences of any class having
rights and preferences equal, prior or superior to the
shares of the Preferred Stock, or increase the rights and
preferences of any class having rights and preferences
equal, prior or superior to the shares of the Preferred
Stock, or increase the rights and preferences of any class
having rights or preferences later or inferior to the
shares of the Preferred Stock in such a manner as to
become equal, prior or superior to the shares of the
Preferred Stock or (viii) cancel or otherwise affect
accumulated but undeclared dividends on the shares of
Preferred Stock, and no such proposed amendment shall be
deemed to have been adopted and approved without the
affirmative vote of holders of that number of shares of
Preferred Stock then outstanding which shall be required
pursuant to the provisions of the Georgia Business
Corporation Code in effect at the time of such vote.
c. The holders of shares of any series of Preferred Stock
outstanding on the record date fixed for any such meeting
of the shareholders shall be entitled to vote, as a single
class, upon any resolution authorizing (i) any plan of
merger or plan of consolidation involving the Corporation,
(ii) the dissolution of the Corporation, and (iii) the
sale, lease, exchange or other disposition of all, or
substantially all of the property and assets of the
Corporation, if not made in the regular course of
business, and no such resolution shall be deemed to have
been adopted and approved without the affirmative vote of
holders of that number of shares of Preferred Stock then
outstanding which shall be required pursuant to that
provision of the Georgia Business Corporation Code in
effect at the time of such vote.
DIVISION B--THE COMMON STOCK
1. Subject to the provisions of Paragraph 3(a) of Division A
hereinabove and after making such provisions, if any, as may be
required for any mandatory sinking fund applicable to any series of
Preferred Stock, dividends may be paid upon the Common Stock to the
exclusion of the Preferred Stock out of any funds of the Corporation
legally available therefor.
2. In the event of any dissolution, liquidation or winding up
of the Corporation, after there shall have been paid or set aside in
cash for the holders of Preferred Stock the full preferential
amounts, together with any and all dividend arrearages, to which they
are entitled pursuant to the provisions of Division A hereinabove,
the holders of the Common Stock shall then be entitled to receive pro
rata all of the remaining assets of the Corporation available for
distribution to shareholders of the Corporation.
3. No shareholder of the Corporation shall, by reason of his
holding shares, have any preemptive or preferential right to purchase
or subscribe to any unissued or treasury shares of any class of the
Corporation now or hereafter to be authorized, to any rights or
options to subscribe for, purchase or otherwise acquire any then
unissued or treasury shares of any class of the Corporation, or to
any notes, bonds or debentures of the Corporation; and the Board of
Directors may issue any such shares, rights, options, notes, bonds or
debentures without offering any of the same to the existing
shareholders of the Corporation.
4. The holders of the Common Stock shall have exclusive
voting rights, except as provided hereinabove in Paragraph 4 of
Division A hereof, for all purposes and on all matters, and each
holder of the Common Stock shall be entitled to one vote for each
share on every matter submitted to a vote of any meeting of
shareholders of the Corporation; provided, however, that such holder
was an owner of record on the record date established for any such
meeting.
ARTICLE V
[RESERVED FOR FUTURE USE]
ARTICLE VI
[RESERVED FOR FUTURE USE]
ARTICLE VII
Cumulative voting by the shareholders of the Corporation at any
election for directors of the Corporation is hereby prohibited.
Every shareholder entitled to vote at each such election shall have
the right to vote, in person or by proxy, the number of shares owned
by him for as many persons as there are directors to be elected and
for whose election he has a right to vote.
ARTICLE VIII
The Corporation shall indemnify to the extent set forth below
any and all persons who may serve or who may have served at any time
in the capacities set forth in paragraph (A) below.
(A) Persons. The Corporation shall indemnify, to the extent
provided in paragraphs (B), (D) and (F):
(1) any person who is or was a director, officer, agent
or employee of the Corporation, and
(2) any person who serves or served at the Corporation's
request as a director, officer, agent, employee, partner or
trustee of another corporation or of a partnership, joint
venture, trust or other enterprise.
(B) Extent - Derivative Suits. In case of a suit by or in the
right of the Corporation against a person named in paragraph (A) by
reason of his holding a position named in paragraph (A), the
Corporation shall indemnify him if he satisfies the standard in
paragraph (C), for expenses (including attorneys' fees but excluding
amounts paid in settlement) actually and reasonably incurred by him
in connection with the defense or settlement of the suit.
(C) Standard - Derivative Suits. In case of a suit by or in
the right of the Corporation, a person named in paragraph (A) shall
be indemnified only if:
(1) he is successful on the merits or otherwise, or
(2) he acted in good faith in the transaction which is the
subject of the suit, and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation.
However, he shall not be indemnified in respect of any claim,
issue or matter as to which he has been adjudged liable for
negligence or misconduct in the performance of his duty to the
Corporation unless (and only to the extent that) the court in
which the suit was brought shall determine, upon application,
that despite the adjudication but in view of all the
circumstances, he is fairly and reasonably entitled to indemnity
for such expenses as the court shall deem proper.
(D) Extent - Nonderivative Suits. In case of a suit, action
or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the
Corporation, together hereafter referred to as a nonderivative suit,
against a person named in paragraph (A) by reason of his holding a
position named in paragraph (A), the Corporation shall indemnify him
if he satisfies the standard in paragraph (E), for amounts actually
and reasonably incurred by him in connection with the defense or
settlement of the nonderivative suit as
(1) expenses (including attorneys' fees),
(2) amounts paid in settlement,
(3) judgments, and
(4) fines.
(E) Standard - Nonderivative Suits. In case of a
nonderivative suit, a person named in paragraph (A) shall be
indemnified only if:
(1) he is successful on the merits or otherwise, or
(2) he acted in good faith in the transaction which is the
subject of the nonderivative suit, and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal action or
proceeding, he had no reason to believe his conduct was
unlawful. The termination of a nonderivative suit by judgment,
order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent shall not, of itself, create a presumption
that the person failed to satisfy the standard of this paragraph
(E)(2).
(F) Determination That Standard Has Been Met. A determination
that the standard of paragraph (C) or (E) has been satisfied may be
made by a court. Or, except as stated in paragraph (C)(2) (2nd
sentence), the determination may be made by:
(1) a majority of the directors of the Corporation
(whether or not a quorum) who were not parties to the action,
suit or proceeding, or
(2) independent legal counsel (appointed by a majority of
the directors of the Corporation, whether or not a quorum, or
elected by the shareholders of the Corporation) in a written
opinion, or
(3) the shareholders of the Corporation.
(G) Proration. Anyone making a determination under paragraph
(F) may determine that a person has met the standard as to some
matters but not as to others, and may reasonably prorate amounts to
be indemnified.
(H) Advance Payment. The Corporation may pay in advance any
expense (including attorneys' fees) which may become subject to
indemnification under paragraphs (A)-(G) if:
(1) the board of directors authorized the specific
payment, and
(2) the person receiving the payment undertakes in writing
to repay unless it is ultimately determined that he is entitled
to indemnification by the Corporation under paragraphs (A)-(G).
(I) Nonexclusive. The indemnification provided by paragraphs
(A)-(G) shall not be exclusive of any other rights.
(J) Continuation. The indemnification and advance payment
provided by paragraphs (A)-(H) shall continue as to a person who has
ceased to hold a position named in paragraph (A) and shall inure to
his heirs, executors and administrators.
(K) Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who holds or who has held any
position, or arising out of his status as such, whether or not the
Corporation would have power to indemnify him against such liability
under paragraphs (A)-(H).
(L) Reports. Indemnification payments, advance payments and
insurance purchase and payments made under paragraphs (A)-(K) shall
be reported in writing to the shareholders of the Corporation with
the next notice of annual meeting, or within six months, whichever is
sooner.
ARTICLE IX
The Corporation may purchase, directly or indirectly, shares of
its capital stock to the extent of the aggregate of unrestricted
capital surplus and unrestricted reduction surplus available
therefor, in addition to any unrestricted earned surplus lawfully
available therefor.
ARTICLE X
Except to the extent such power may be modified or divested by
action of shareholders representing a majority of the issued and
outstanding shares of the capital stock of the Corporation, the power
to alter, amend or repeal the By-Laws of the Corporation shall be
vested in the Board of Directors.
ARTICLE XI
The initial registered office and mailing address of the
Corporation shall be at 4900 Highlands Parkway, Smyrna, Cobb County,
Georgia 30082. The initial registered agent at such address shall
be Harold D. Cannon.
ARTICLE XII
The name and address of the Incorporator of the Corporation is
Michael Augur Kilgore, 717 Channing Drive, N.W., Atlanta, Georgia
30318-2504.
IN WITNESS WHEREOF, the Incorporator has executed these Articles
of Incorporation, this _____ day of April, 1997.
___________________________________
Michael Augur Kilgore, Incorporator of
VSI HOLDINGS, INC.
STATEMENT OF EXISTENCE
The Banker's Note, Inc. was incorporated in Texas on
April 13, 1981, and was the subject and survivor of an
Agreement and Plan of Merger dated July 1, 1981 with
K.L.S., Inc., a Georgia corporation which had wholly-owned
The Banker's Note, Inc. On September 14, 1987, The
Banker's Note, Inc. amended its Articles of Incorporation
to increase its authorized shares of $.01 par value Common
Stock from 10,000,000 to 20,000,000, and on March 17, 1988
filed a change of Registered Office and/or Agent.
On April 21, 1997, the shareholders of The Banker's
Note, Inc. amended its Articles of Incorporation to change
its state of incorporation from Texas to Georgia and
change its corporate name to "VSI HOLDINGS, INC.". These
Articles of Incorporation of VSI Holdings, Inc. are being
filed on or about April 21, 1997 with the Secretary of
State of Georgia, in anticipation of the later filing of
Articles of Merger between The Banker's Note, Inc. and VSI
Holdings, Inc. with the Secretaries of State of Texas and
Georgia to effect the redomestication of The Banker's
Note, Inc. from Texas to Georgia and the change of
corporate name to "VSI HOLDINGS, INC.". At the time of
the latter filing, The Banker's Note, Inc. was registered
as a foreign corporation in good standing with the
Secretary of State of Georgia.
ARTICLES OF MERGER OF
THE BANKER'S NOTE, INC., a Texas corporation
INTO
VSI HOLDINGS, INC., a Georgia corporation
Pursuant to the provisions of Article 5.07 of the Texas Business
Corporation Act and Section 11.07 of the Georgia Business Corporation
Code, the undersigned corporations adopt the following Articles of
Merger for the purpose of merging them into one of such corporations:
1. The redomestication of The Banker's Note, Inc. from Texas
to Georgia effected by the Agreement and Plan of Merger, attached
hereto as Exhibit "A" and incorporated herein by reference, was
approved by the shareholders of The Banker's Note, Inc. and the sole
shareholder of VSI Holdings, Inc. in the manner prescribed by the
Texas Business Corporation Act and the Georgia Business Corporation
Code, respectively.
2. The number of shares outstanding and entitled to vote on
the redomestication of The Banker's Note, Inc. from Texas to Georgia
effected by the Agreement and Plan of Merger (none of which is
entitled to vote as a class thereon) for each of the merging
corporations is as follows:
Name of Corporation Shares Outstanding
The Banker's Note, Inc. 12,096,087
VSI Holdings, Inc. 500
3. As to each of the undersigned corporations, the total
number of shares voted for and against, and abstaining from voting
on, the redomestication of The Banker's Note, Inc. from Texas to
Georgia effected by the Agreement and Plan of Merger are as follows:
Name of Corporation FOR AGAINST ABSTAINING
The Banker's Note, Inc. 9,966,747 11,744 1,750
VSI Holdings, Inc. 500 -0- -0-
4. At the annual meeting of The Banker's Note, Inc. held
April 21, 1997, in addition to approving the redomestication of The
Banker's Note, Inc. from Texas to Georgia, the shareholders approved
several amendments to the Articles of Incorporation, which amendments
have been effected by the Articles of Incorporation of VSI Holdings,
Inc. filed with the Secretary of State of Georgia on April 21, 1997
into which corporation The Banker's Note, Inc. is merging pursuant to
these Articles of Merger. The following text of the Articles of
Incorporation of VSI Holdings, Inc. will supersede the present text
of Articles I, III, IV (first sentence only), V, VI, XI and XII of
the Articles of Incorporation of The Banker's Note, Inc.:
ARTICLE I
The present name of the Corporation is "VSI HOLDINGS, INC.".
ARTICLE III
The Corporation shall be organized pursuant to provisions
of the Georgia Business Corporation Code.
ARTICLE IV
The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 62,000,000, of
which 2,000,000 shares are of a class designated Preferred Stock
having a par value of $1.00 per share and 60,000,000 shares are
of a class designated Common Stock having a par value of $.01
per share.
[Note: other than the first sentence of Article IV
stated above, the remainder of Article IV is not amended
or affected in any manner, except pursuant to
authorization to amend Article III, now-archaic references
to "Texas" and the "Texas Business Corporation Act" in
Article IV, Division A have been modified to "Georgia" and
the "Georgia Business Corporation Code"]
ARTICLE V
[RESERVED FOR FUTURE USE]
ARTICLE VI
[RESERVED FOR FUTURE USE]
ARTICLE XI
[RESERVED FOR FUTURE USE]
ARTICLE XII
[RESERVED FOR FUTURE USE]
[Note: Articles V, VI, XI and XII were archaic and
concerned (V) the identity of the initial registered agent
and office of the Corporation, (VI) the initial Board of
Directors and initial director of the Corporation, (XI)
the initial required capital of the Corporation, and (XII)
the initial incorporator of the Corporation; Articles XI
and XII of Incorporation of VSI Holdings, Inc. state the
identity of the registered agent and office and the
incorporator as required by the Georgia Business
Corporation Code]
5. The number of shares of the $.01 par value Common Stock
outstanding at the time of adoption was 12,096,087, and the number of
shares entitled to vote thereon was also 12,096,087 (no shares of
Preferred Stock were outstanding or entitled to vote). The number of
shares of the $.01 par value Common Stock voted for and against, and
abstained from voting on, the respective amendments of Articles I,
III, IV, V, VI, XI and XII were:
FOR AGAINST ABSTAINING
ARTICLE I 9,977,866 525 1,750
ARTICLE III 9,966,747 11,744 1,650
ARTICLE IV 9,967,591 9,550 3,000
ARTICLE V 9,965,477 10,914 3,750
ARTICLE VI 9,965,477 10,914 3,750
ARTICLE XI 9,965,477 10,914 3,750
ARTICLE XII 9,965,477 10,914 3,750
Each amendment to the specified Articles was approved by the
statutory super-majorities of 8,064,058, or two-thirds of the
outstanding 12,096,087 shares of Common Stock.
Dated as of April 21, 1997.
THE BANKER'S NOTE, INC.
By:___________________________
Martin S. Suchik, President
Attest:
By:___________________________
Harold D. Cannon, Secretary
VSI HOLDINGS, INC.
By:___________________________
Martin S. Suchik, President
Attest:
By:___________________________
Harold D. Cannon, Secretary
{STATE OF GEORGIA}
{COUNTY OF COBB }
Before me, the undersigned authority, personally appeared MARTIN
S. SUCHIK and HAROLD D. CANNON, who being by me first duly sworn that
they are President and Secretary, respectively, of THE BANKER'S NOTE,
INC.; that they signed the foregoing document as President and
Secretary, respectively, of such corporation and that the statements
contained therein are true.
Given under my hand and seal of office this _____ day of April, 1997.
________________________________
Notary Public in and for Georgia
My Commission Expires:__________
{STATE OF GEORGIA}
{COUNTY OF COBB }
Before me, the undersigned authority, personally appeared MARTIN
S. SUCHIK and HAROLD D. CANNON, who being by me first duly sworn that
they are President and Secretary, respectively, of VSI HOLDINGS,
INC.; that they signed the foregoing document as President and
Secretary, respectively, of such corporation and that the statements
contained therein are true.
Given under my hand and seal of office this _____ day of April, 1997.
________________________________
Notary Public in and for Georgia
My Commission Expires:__________
Exhibit "A" to Articles of Merger
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 21, 1997, by and
between The Banker's Note, Inc., a Texas corporation ("Banker's
Note"), and VSI Holdings, Inc., a Georgia corporation ("VSI"), which
is a wholly-owned subsidiary of Banker's Note.
WHEREAS, The Boards of Directors of Banker's Note and VSI have
determined that it is desirable and in their respective best
interests to redomesticate Banker's Note from Texas to Georgia
pursuant to a merger of Banker's Note into VSI, pursuant to the Texas
Business Corporation Act and the Georgia Business Corporation Code,
as applicable.
NOW THEREFORE, in consideration of the mutual covenants, the
parties agree as follows:
ARTICLE ONE
Section 1.1. At the Effective Time (as hereinafter defined),
Banker's Note shall be merged with and into VSI which shall be the
surviving corporation (the "Surviving Corporation"), and the separate
existence of Banker's Note shall then cease. The Surviving
Corporation shall retain the name "VSI Holdings, Inc." and shall have
all of the rights, privileges, immunities and powers and shall be
subject to all of the duties and liabilities of a corporation
organized under the Georgia Business Corporation Code.
Section 1.2. The redomestication of Banker's Note from Texas to
Georgia effected by this Agreement shall be submitted to the
shareholders of Banker's Note in accordance with the applicable
provisions of the Texas Business Corporation Act, and shall not be
deemed to be adopted until approved by the holders of Banker's Note
common stock.
Section 1.3. The Merger shall become effective upon the filing
of Articles of Merger in the office of the Secretaries of State of
Texas and Georgia, respectively, and the issuance by the Secretary of
State of Georgia of a Certificate of Merger. The date upon which the
Merger shall become effective is herein called the "Effective Date",
and the time at which the Merger shall become effective is herein
called the "Effective Time".
Section 1.4.
(a) Upon the consummation of the Merger, the Surviving
Corporation shall then possess all of the rights, privileges, powers,
immunities and franchises of Banker's Note and VSI. All property
(real, personal and mixed), all debts due on every account, claims
and actions, and every other interest belonging or due to either
Banker's Note or VSI shall be deemed to be transferred to and vested
in the Surviving Corporation, without further act.
(b) The Surviving Corporation shall then be responsible and
liable for all liabilities and obligations of Banker's Note and VSI,
and any claim existing or action or proceeding pending by or against
either of such corporations may be prosecuted as if the Merger had
not taken place, or the Surviving Corporation may be substituted in
its place. Neither the rights of creditors nor any liens upon the
property of either Banker's Note or VSI shall be impaired by the
Merger.
(c) If at any time the Surviving Corporation shall be advised
that any further transfers, assignments, conveyances, assurances in
law or other acts or things are necessary or desirable to vest or
confirm in the Surviving Corporation the title to any property or
asset of either Banker's Note or VSI, Banker's Note and VSI shall
execute and deliver any and all transfers, assignments, conveyances
and assurances, and will do all other acts necessary or proper to
vest or confirm title to such property and assets in the Surviving
Corporation and otherwise to carry out the purpose and intent of this
Agreement.
(d) When the Merger has become effective, the separate
existence and the corporation organization of Banker's Note, except
as they may continue by statute, shall cease.
ARTICLE TWO
Section 2.1. The manner and basis of converting shares of
Common Stock, par value $.01 of Banker's Note into shares of Common
Stock, par value $.01 of VSI in connection with the Merger shall be
as follows:
(a) Each share of Common Stock of Banker's Note outstanding
immediately prior to the Effective Time shall at the Effective Time,
by virtue of the Merger and without any action on the part of the
holder thereof, be converted into one share of the Common Stock, par
value $.01 per share, of VSI whether or not the certificates
representing the Banker's Note Common Stock are surrendered. Upon
surrender of the Banker's Note stock certificates by the holders
thereof to VSI, VSI shall issue certificates to such holders of the
Banker's Note shares representing one share of Common Stock of VSI
for each share of Banker's Note Common Stock so surrendered.
(b) Any and all shares of Banker's Note common stock held in
its treasury at the Effective Time of the Merger shall be held by VSI
as treasury shares of VSI common stock.
(c) Each share of Common Stock of VSI outstanding immediately
prior to the Effective Time shall at the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof,
be cancelled whether or not the certificates representing such shares
are surrendered.
ARTICLE THREE
Section 3.1. Until amended or repealed, the Articles of
Incorporation of VSI in effect at the Effective Time shall continue
to be the Articles of Incorporation of the Surviving Corporation.
Section 3.2. Until amended or repealed, the by-laws of VSI in
effect at the Effective Time shall continue to be the by-laws of the
Surviving Corporation.
ARTICLE FOUR
Section 4.1. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute the same instrument.
Section 4.2. This Agreement shall be construed and enforced in
accordance with the laws of Georgia.
Section 4.3. This Agreement may be amended only by a written
instrument signed by all of the parties.
THE BANKER'S NOTE, INC.
By:___________________________
Martin S. Suchik, President
Attest:
By:___________________________
Harold D. Cannon, Secretary
VSI HOLDINGS, INC.
By:___________________________
Martin S. Suchik, President
Attest:
By:___________________________
Harold D. Cannon, Secretary
Exhibit 3.2
Amended on September 12, 1997
BY-LAWS OF
VSI HOLDINGS, INC.
ARTICLE I--OFFICES
Section 1. Registered Office and Place of Business. The
registered agent of the Corporation shall be the Secretary of the
Corporation or an Assistant Secretary thereof, if the Secretary is
not a resident in the State of Georgia; its registered office shall
be at 4900 Highlands Parkway, Smyrna, Georgia 30082 or any
subsequent primary office of the Corporation in the State of
Georgia. The Corporation may have, in addition to its registered
office, offices and places of business at such places, both within
and without the State of Georgia, as the Board of Directors may
from time to time determine or the business of the Corporation may
require.
ARTICLE II--MEETING OF SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the
shareholders of the Corporation shall be held at such times and at
such place within or without the State of Georgia as shall be
determined by the Board of Directors.
Section 2. Annual Meetings. An annual meeting of the
shareholders shall be held each year at a time and on a day during
the month of February or March to be selected by the Board of
Directors, at which they shall elect a Board of Directors, and
transact such other business as may properly be brought before the
meeting.
Section 3. Voting List. At least ten days before each
meeting of the shareholders, a complete list of the shareholders
entitled to vote at said meeting, arranged in alphabetical order,
with the residence of each and the number of voting shares held by
each, shall be prepared by the officer or agent having charge of
the stock transfer books. Such list, for a period of ten days
prior to such meeting, shall be kept on file at the registered
office of the Corporation and shall be subject to the inspection by
any shareholder at any time during usual business hours. Such list
shall be produced and kept open at the time and place of the
meeting during the whole thereof, and shall be subject to the
inspection of any shareholder who may be present. The original
stock transfer books shall be prima-facie evidence as to who are
the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders. Failure to comply with the
requirements of this section shall not affect the validity of any
action taken at said meeting.
Section 4. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise
prescribed by statute or by the Articles of Incorporation or by
these By-Laws, may be called by the Chairman of the Board, the
President, the Board of Directors or the holders of not less than
one-tenth of all the shares entitled to vote at the meetings.
Business transacted at all special meetings shall be confined to
the purposes stated in the notice of the meeting.
Section 5. Notice of Meetings. Written or printed notice
stating the place, day and hour of the meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten nor more than fifty
days before the date of the meeting, either personally or by mail,
by or at the direction of the President, the Secretary or the
officer or person calling the meeting, to each shareholder of
record entitled to vote at the meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States
mail addressed to the shareholder at his address as it appears on
the stock transfer books of the Corporation, with postage thereon
prepaid.
Section 6. Quorum of Shareholders. The holders of a majority
of the shares issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall be requisite to
and shall constitute a quorum at all meetings of the shareholders
for the transaction of business except as otherwise provided by
statute, by the Articles of Incorporation or by these By-Laws. If
a quorum is not present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present or represented. At such
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 7. Majority Vote; Withdrawal of Quorum. When a
quorum is present at any meeting, the vote of the holders of a
majority of the shares having voting power, present in person or
represented by proxy, shall decide any question brought before such
meeting, unless the question is one on which, by express provision
of the statutes, the Articles of Incorporation or these By-Laws, a
different vote is required, in which case such express provision
shall govern and control the decision of such question. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 8. Method of Voting. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of the shareholders, except to the
extent that the voting rights of the shares of any class or classes
are limited or denied by statute, by the Articles of Incorporation
or by any other certificate creating any class or series of stock.
At any meeting of the shareholders, every shareholder having the
right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such
shareholder or by his duly authorized attorney-in-fact. No proxy
shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy. Each proxy shall be
revocable unless expressly provided therein to be irrevocable and
unless otherwise made irrevocable by law. Each proxy shall be
filed with the Secretary of the Corporation prior to or at the time
of the meeting. Any vote may be taken by voice or by show of hands
unless someone entitled to vote objects, in which case written
ballots shall be used.
Section 9. Record Date; Closing Transfer Books. The Board of
Directors may fix in advance a record date for the purpose of
determining shareholders entitled to notice of or to vote at a
meeting of the shareholders, the record date to be not less than
ten nor more than fifty days prior to the meeting; or the Board of
Directors may close the stock transfer books for such purpose for a
period of not less than ten nor more than fifty days prior to such
meeting. In the absence of any action by the Board of Directors,
the date upon which the notice of the meeting is mailed shall be
the record date.
Section 10. Action Without Meeting. Any action required by
statute to be taken at a meeting of the shareholders, or any action
which may be taken at a meeting of the shareholders, may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to
the subject matter thereof and such consent shall have the same
force and effect as a unanimous vote of the shareholders. Any such
signed consent, or a signed copy thereof, shall be placed in the
minute book of the Corporation.
Section 11. Telephone Meeting. Subject to the provisions of
applicable law and these By-Laws, shareholders may participate in
and hold a meeting by means of conference telephone or similar
communications equipment by which all persons participating in the
meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at
such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
ARTICLE III--DIRECTORS
Section 1. Management of the Corporation. The business and
affairs of the Corporation shall be managed by its Board of
Directors, who may exercise all such powers of the Corporation and
do all such lawful acts and things as are not, by statute or by the
Articles of Incorporation or by these By-Laws, directed or required
to be exercised or done by the shareholders.
Section 2. Number and Qualifications. The Board of Directors
shall consist of up to nine (9) members, none of whom need be
shareholders or residents of the State of Georgia. The directors
shall be elected at the annual meeting of the shareholders, except
as hereinafter provided, and each director elected shall hold
office until his successor shall be elected and shall qualify.
Section 3. Change in Number. The number of directors may be
increased or decreased from time to time by amendment to these
By-Laws; provided that at all times the number of directors shall
be at least one and no decrease shall have the effect of shortening
the term of any incumbent director. Any directorship to be filled
by reason of an increase in the number of directors shall be filled
by election at an annual meeting or at a special meeting of
shareholders called for that purpose; provided, however, that a
majority of directors then in office may elect to fill a single
vacancy in the Board of Directors created by an increase in the
number of directors if the person elected represents a holder of
ten percent or more of the Corporation's Common Stock and the Board
of Directors has authorized an agreement into which the Corporation
has entered providing for the Corporation to use its best efforts
to elect such representative.
Section 4. Removal. Any director may be removed either for
or without cause at any special meeting of shareholders by the
affirmative vote of a majority in number of the shareholders
present in person or represented by proxy at such meeting and
entitled to vote for the election of such director, if notice of
the intention to act upon such matter shall have been given in the
notice calling such meeting.
Section 5. Vacancies. If any vacancies occur in the Board of
Directors by the death, resignation, retirement, disqualification
or removal from office of any director, or otherwise than as a
result of an increase in the number of directors, a majority of the
directors then in office, though less than a quorum, may choose a
successor or successors, or a successor or successors may be chosen
at a special meeting of shareholders called for that purpose. A
director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any vacancy in the
Board of Directors to be filled by reason of an increase in the
number of directors shall be filled by election at the annual
meeting of the shareholders or at a special meeting of shareholders
called for that purpose; provided, however, that a majority of
directors then in office may elect to fill a single vacancy in the
Board of Directors created by an increase in the number of
directors if the person elected represents a holder of ten percent
or more of the Corporation's Common Stock and the Board of
Directors has authorized an agreement into which the Corporation
has entered providing for the Corporation to use its best efforts
to elect such representative.
Section 6. Election of Directors. Directors shall be elected
by plurality vote. Cumulative voting shall not be permitted.
Section 7. Place of Meetings. The directors of the
Corporation may hold their meetings, both regular and special,
either within or without the State of Georgia.
Section 8. Annual Meetings. The first meeting of each newly
elected Board shall be held without further notice immediately
following the annual meeting of the shareholders and at the same
place, unless by majority vote of the directors then elected and
serving such time or place is changed.
Section 9. Regular Meetings. Regular meetings of the Board
of Directors may be held without notice at such time and place as
may be fixed from time to time by resolutions adopted by the Board
and communicated to all directors. Except as otherwise provided by
statute, the Articles of Incorporation or these By-Laws, neither
the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such
meeting.
Section 10. Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman of the Board or the
President on twenty-four (24) hours' notice to each director either
personally or by mail or by telegram. Special meetings shall be
called by the President or Secretary in like manner and on like
notice on the written request of two directors. Except as may be
otherwise expressly provided by statute, the Articles of
Incorporation or these By-Laws, neither the business to be
transacted at, nor the purpose of, any special meeting need be
specified in the notice or waiver of notice of such meeting.
Section 11. Quorum; Majority Vote. At all meetings of the
Board of Directors, the presence of a majority of the Directors
fixed by these By-Laws shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of
a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute, the Articles of
Incorporation or these By-Laws. If a quorum is not present at any
meeting of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present. At any such adjourned
meeting any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 12. Compensation. The Board of Directors shall have
authority to determine from time to time the amount of
compensation, if any, which shall be paid to its members for their
services as directors and as members of standing or special
committees of the Board. The Board shall also have power in its
discretion to provide for and to pay to directors rendering
services to the Corporation not ordinarily rendered by directors as
such, special compensation appropriate to the value of such
services as determined by the Board from time to time. Nothing
herein contained shall be construed to preclude any directors from
serving the Corporation in any other capacity and receiving
compensation therefor.
Section 13. Procedure. The Board of Directors shall keep
regular minutes of its proceedings. The minutes shall be placed in
the minute book of the Corporation.
Section 14. Action Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or any
committee thereof may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all the
members of the Board of Directors or such committee, as the case
may be. Such consent shall have the same force and effect as a
unanimous vote at a meeting, and may be stated as such in any
document or instrument filed with the Secretary of State. The
signed consent, or a signed copy, shall be placed in the minute
book of the Corporation.
Section 15. Telephone Meeting. Subject to the provisions of
applicable statutes and these By-Laws, members of the Board of
Directors or of any committee thereof may participate in and hold a
meeting of the Board of Directors or any committee thereof by means
of conference telephone or similar communications equipment by
which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this section shall
constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
ARTICLE IV--EXECUTIVE COMMITTEE
Section 1. Designation. The Board of Directors may, by
resolution adopted by a majority of the number of directors fixed
by these By-Laws, designate an Executive Committee, to consist of
two or more of the directors of the Corporation (with such
alternatives, if any, as may be deemed desirable), one of whom
shall be the President of the Corporation.
Section 2. Authority. The Executive Committee, to the extent
provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors in the management of the
business and affairs of the Corporation, except where action of the
full Board of Directors is required by statute or by the Articles
of Incorporation.
Section 3. Change in Number. The number of members of the
Executive Committee may be increased or decreased from time to time
by resolution adopted by a majority of the whole Board of
Directors.
Section 4. Removal. Any member of the Executive Committee
may be removed by the Board of Directors by the affirmative vote of
a majority of the whole Board, whenever in its judgment the best
interests of the Corporation will be served thereby.
Section 5. Vacancies. Any vacancy in the Executive Committee
may be filled by the affirmative vote of a majority of the whole
Board.
Section 6. Meetings. Time, place and notice, if any, of
meetings of the Executive Committee shall be determined by the
Executive Committee.
Section 7. Quorum; Majority Vote. At meetings of the
Executive Committee, a majority of the number of members designated
by the Board of Directors shall constitute a quorum for the
transaction of business. The act of a majority of the members
present at any meeting at which a quorum is present shall be the
act of the Executive Committee, except as otherwise specifically
provided by statute, the Articles of Incorporation or these
By-Laws. If a quorum is not present at a meeting of the Executive
Committee, the members present may adjourn the meeting from time to
time, without notice other than an announcement at the meeting,
until a quorum is present.
Section 8. Compensation. See Article III, Section 12.
Section 9. Procedure. The Executive Committee shall keep
regular minutes of its proceedings and report the same to the Board
of Directors when required. The minutes of the proceedings of the
Executive Committee shall be placed in the minute book of the
Corporation. The Secretary of the Corporation, or, in his absence,
an Assistant Secretary, shall act as the secretary of the Executive
Committee, or the committee may, in its discretion, appoint its own
secretary.
Section 10. Action Without Meeting. See Article III, Section
14.
Section 11. Telephone Meeting. See Article III, Section 15.
Section 12. Responsibility. The designation of an Executive
Committee and the delegation of authority to it shall not operate
to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by law.
ARTICLE V--OTHER COMMITTEES OF THE BOARD
Section 1. Other Committees. The Board of Directors may, by
resolution adopted by affirmative vote of a majority of the whole
Board, designate two or more directors (with such alternates, if
any, as may be deemed desirable) to constitute another committee or
committees for any purpose; provided, that any such other committee
or committees shall have and may exercise only the power of
recommending action to the Board of Directors and the Executive
Committee and of carrying out and implementing any instructions or
any policies, plans and programs therefore approved, authorized and
adopted by the Board of Directors or the Executive Committee.
ARTICLE VI--NOTICE
Section 1. Manner of Giving Notice. Whenever under the
provisions of the statutes, the Articles of Incorporation or these
By-Laws, notice is required to be given to any committee member,
director or shareholder, and no provisions are made as to how such
notice shall be given, it shall not be construed to mean personal
notice, but any such notice may be given in writing, by mail,
postage prepaid, addressed to such committee member, director or
shareholder at the address appearing on the books of the
Corporation. Any notice required or permitted to be given by mail
shall be deemed given at the time when the same is thus deposited
in the United States mails as aforesaid.
Section 2. Waiver of Notice. Whenever any notice is required
to be given to any committee member, director or shareholder of the
Corporation under the provisions of the statutes, the Articles of
Incorporation or these By-Laws, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or
after the time stated in such notice, shall be deemed equivalent to
the giving of such notice. Attendance at a meeting shall
constitute a waiver of notice of such meeting, except where a
person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not
lawfully called or convened.
ARTICLE VII--OFFICERS, EMPLOYEES AND AGENTS: POWERS AND DUTIES
Section 1. Elected Officers. The elected officers of the
Corporation shall be a Chairman of the Board, a President, one or
more Vice Presidents as may be determined from time to time by the
Board (and, in the case of each such Vice President, with such
descriptive title, if any, as the Board of Directors shall deem
appropriate), a Secretary and a Treasurer. The Chairman of the
Board shall be a member of the Board of Directors; no other elected
officer of the Corporation need be a director of the Corporation,
and no elected officer of the Corporation need be a shareholder or
resident of the State of Georgia.
Section 2. Appointive Officers. The Board of Directors may
also appoint one or more Assistant Secretaries and Assistant
Treasurers and such other officers and assistant officers and
agents (none of whom need be a member of the Board, a shareholder
or resident of the State of Georgia) as it shall from time to time
deem necessary, who shall exercise such powers and perform such
duties as shall be set forth in these By-Laws or determined from
time to time by the Board of Directors or the Executive Committee.
Section 3. Two or More Offices. Any two (2) or more offices
may be held by the same person, except that the President and
Secretary shall not be the same person.
Section 4. Compensation. The compensation of all officers of
the Corporation shall be fixed from time to time by the Board of
Directors or the Executive Committee. The Board of Directors or
the Executive Committee may from time to time delegate to the
President the authority to fix the compensation of any or all of
the other officers (except the Chairman of the Board) of the
Corporation.
Section 5. Term of Office; Removal; Filling of Vacancies.
Unless otherwise specified by the Board at the time of election or
in an employment contract approved by the Board, each elected
officer's term shall end at the first meeting of directors after
the next annual meeting of shareholders. Each elected officer of
the Corporation shall hold office until his successor is chosen and
qualified in his stead or until his earlier death, resignation or
removal from office. Each appointive officer or agent shall hold
office at the pleasure of the Board of Directors without the
necessity of periodic reappointment. Any officer or agent elected
or appointed by the Board of Directors may be removed at any time
by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any,
of the person so removed. If the office of any officer becomes
vacant for any reason, the vacancy may be filled by the Board of
Directors.
Section 6. Chairman of the Board. The Chairman of the Board
shall be the ranking and chief executive officer of the
Corporation. As such, he shall have the power to call special
meetings of the shareholders and directors for any purpose or
purposes, and he shall preside when present, if he so elects, at
all meetings of the shareholders and Board of Directors. The
Chairman of the Board shall have general supervision of the affairs
of the Corporation and general control of all its business. He
shall have authority to sign stock certificates. The Chairman of
the Board may exercise his general supervision and control of the
business and affairs of the Corporation through the President and
may delegate all or any of his powers or duties to the President,
if and to the extent deemed by the Chairman of the Board to be
desirable or appropriate. In the absence or disability of the
Chairman of the Board, his duties shall be performed and his powers
may be exercised by the President, unless otherwise determined by
the Chairman of the Board, the Executive Committee or the Board of
Directors.
Section 7. President. The President shall be the chief
operating officer of the Corporation. He shall preside at meetings
of the Board of Directors and shareholders unless the Chairman of
the Board shall elect to do so, and he shall have the power to call
special meetings of the Board of Directors and shareholders for any
purpose or purposes. Subject to the supervision, approval and
review of his actions by the Chairman of the Board, the Executive
Committee and the Board of Directors: he shall have authority to
cause the employment or appointment of and the discharge of
employees and agents of the Corporation, other than officers, and
fix their compensation; suspend for cause, pending final action by
the authority which shall have elected or appointed him, any
officer subordinate to the President; make and sign bonds, deeds,
contracts and agreements in the name of and on behalf of the
Corporation and to affix the corporate seal thereto; and sign stock
certificates. The President shall put into operation the business
policies of the Corporation as determined by the Chairman of the
Board, the Executive Committee and the Board of Directors and as
communicated to him by such officer and bodies. In carrying out
such business policies, the President shall, subject to the
supervision of the Chairman of the Board, the Executive Committee
and the Board of Directors, have general management and control of
the day-to-day business operations of the Corporation. He shall
see that the books, reports, statements and certificates required
by statutes or laws applicable to the Corporation are properly
kept, made and filed according to law. The President shall be
subject only to the authority of the Chairman of the Board, the
Executive Committee and the Board of Directors in carrying out his
duties. He shall make recommendations to the Chairman of the Board
on all matters which would normally be reserved for the final
executive responsibility of the Chairman of the Board. In the
absence or disability of the President, his duties shall be
performed and his powers may be exercised by the Vice Presidents in
order of their seniority, unless otherwise determined by the
President, the Chairman of the Board, the Executive Committee, or
the Board of Directors.
Section 8. Vice Presidents. Each Vice President shall
generally assist the President and shall have such powers and
perform such duties and services as shall from time to time be
prescribed or delegated to him by the President, the Executive
Committee or the Board of Directors.
Section 9. Secretary. The Secretary shall see that notice is
given of all meetings of the shareholders and special meetings of
the Board of Directors and shall keep and attest true records of
all proceedings at all meetings of the shareholders and the Board
of Directors. He shall have charge of the corporate seal and have
authority to attest any and all instruments or writings to which
the same may be affixed. He shall keep and account for all books,
documents, papers and records of the Corporation except those for
which some other officer or agent is properly accountable. He
shall have authority to sign stock certificates and shall generally
perform all the duties usually appertaining to the office of
secretary of a corporation. In the absence or disability of the
Secretary, his duties shall be performed and his powers may be
exercised by the Assistant Secretaries in the order of their
seniority, unless otherwise determined by the Secretary, the
President, the Executive Committee or the Board of Directors.
Section 10. Assistant Secretaries. Each Assistant Secretary
shall generally assist the Secretary and shall have such powers and
perform such duties and services as shall from time to time be
prescribed or delegated to him by the Secretary, the President, the
Executive Committee or the Board of Directors.
Section 11. Treasurer. The Treasurer shall be the chief
accounting and financial officer of the Corporation and shall have
active control of and shall be responsible for all matters
pertaining to the accounts and finances of the Corporation. He
shall audit all payrolls and vouchers of the Corporation and shall
direct the manner of certifying the same; shall receive, audit and
consolidate all operating and financial statements of the
Corporation and its various departments; shall have supervision of
the books of account of the Corporation, their arrangement and
classification; shall supervise the accounting and auditing
practices of the Corporation and shall have charge of all matters
relating to taxation. The Treasurer shall have the care and
custody of all monies, funds and securities of the Corporation;
shall deposit or cause to be deposited all such funds in and with
such depositaries as the Board of Directors or the Executive
Committee shall from time to time direct or as shall be selected in
accordance with procedure established by the Board or Executive
Committee; shall advise upon all terms of credit granted by the
Corporation; and shall be responsible for the collection of all its
accounts and shall cause to be kept full and accurate accounts of
all receipts and disbursements of the Corporation. He shall have
the power to endorse for deposit or collection or otherwise all
checks, drafts, notes, bills of exchange or other commercial papers
payable to the Corporation and to give proper receipts or
discharges for all payments to the Corporation. The Treasurer
shall generally perform all the duties usually appertaining to the
office of treasurer of a corporation. In the absence or disability
of the Treasurer his duties shall be performed and his powers may
be exercised by the Assistant Treasurers in the order of their
seniority, unless otherwise determined by the Treasurer, the
President, the Executive Committee or the Board of Directors.
Section 12. Assistant Treasurers. Each Assistant Treasurer
shall generally assist the Treasurer and shall have such powers and
perform such duties and services as shall from time to time be
prescribed or delegated to him by the Treasurer, the President, the
Executive Committee or the Board of Directors.
Section 13. Additional Powers and Duties. In addition to the
foregoing especially enumerated duties, services and powers, the
several elected and appointive officers of the Corporation shall
perform such other duties and services and exercise such further
powers as may be provided by statute, the Articles of Incorporation
or these By-Laws or as the Board of Directors or the Executive
Committee may from time to time determine or as may be assigned to
them by any competent superior officer.
ARTICLE VIII--STOCK AND TRANSFER OF STOCK
Section 1. Certificates Representing Shares. Certificates in
such form as may be determined by the Board of Directors and as
shall conform to the requirements of the statutes, the Articles of
Incorporation and these By-Laws shall be delivered representing all
shares to which shareholders are entitled. Such certificates shall
be consecutively numbered and shall be entered in the books of the
Corporation as they are issued. Each certificate shall state on
the face thereof that the Corporation is organized under the laws
of the State of Georgia, the holder's name, the number and class of
shares and the designation of the series, if any, which such
certificate represents, the par value of such shares or a statement
that such shares are without par value and such other matters as
may be required by law. Each certificate shall be signed by the
Chairman of the Board or the President or a Vice President and the
Secretary or an Assistant Secretary and may be sealed with the seal
of the Corporation or a facsimile thereof. If any certificate is
countersigned by a transfer agent or registered by a registrar,
either of which is other than the Corporation or an employee of the
Corporation, the signature of any such officer may be a facsimile.
Section 2. Issuance. Subject to the provisions of the
statutes, the Articles of Incorporation or these By-Laws, shares
may be issued for such consideration and to such persons as the
Board of Directors may determine from time to time. Shares may not
be issued until the full amount of the consideration, fixed as
provided by law, has been paid.
Section 3. Payment for Shares. The consideration for the
issuance of shares shall consist of money paid, labor done
(including services actually performed for the Corporation) or
property (tangible or intangible) actually received. Neither
promissory notes nor the promise of future services shall
constitute payment for shares. In the absence of fraud in the
transaction, the judgment of the Board of Directors as to the value
of consideration received shall be conclusive. When consideration,
fixed as provided by law, has been paid, the shares shall be deemed
to have been issued and shall be considered fully paid and
nonassessable.
Section 4. Lost, Stolen or Destroyed Certificates. The Board
of Directors, the Executive Committee, the President, or such other
officer or officers of the Corporation as the Board of Directors
may from time to time designate, in its or his discretion may
direct a new certificate or certificates representing shares to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors, the Executive Committee, the
President, or any such other officer, in its or his discretion and
as a condition precedent to the issuance thereof, may require the
owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in
such manner as it or he shall require and/or give the Corporation a
bond in such form, in such sum, and with such surety or sureties as
it or he may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfers of Shares. Shares of stock shall be
transferable only on the books of the Corporation by the holder
thereof in person or by his duly authorized attorney, Upon
surrender to the Corporation or the transfer agent of the
Corporation of a certificate or certificates representing shares,
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, with all required stock
transfer tax stamps affixed thereto and cancelled or accompanied by
sufficient funds to pay such taxes, it shall be the duty of the
Corporation or the transfer agent of the Corporation to issue a new
certificate or certificates to the person entitled thereto, cancel
the old certificate or certificates and record the transaction upon
its books.
Section 6. Registered Shareholders. The Corporation shall be
entitled to treat the holder of record of any share or shares of
stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE IX--MISCELLANEOUS
Section 1. Dividends. Dividends upon the outstanding shares
of the Corporation, subject to the provisions of the statutes and
of the Articles of Incorporation, may be declared by the Board of
Directors at any annual, regular or special meeting and may be paid
in cash, in property or in shares of the Corporation, or in any
combination thereof.
The Board of Directors may fix in advance a record date for
the purpose of determining shareholders entitled to receive payment
of any dividend, the record date to be not less than ten nor more
than fifty days prior to the payment date of such dividend, or the
Board of Directors may close the stock transfer books for such
purpose for a period of not less than ten nor more than fifty days
prior to the payment date of such dividend. In the absence of any
action by the Board of Directors, the date upon which the Board of
Directors adopts the resolution declaring the dividend shall be the
record date.
Section 2. Reserves. There may be created from time to time
by resolution of the Board of Directors, out of the earned surplus
of the Corporation, such reserve or reserves as the directors from
time to time, in their discretion, think proper to provide for
contingencies, or to equalize dividends, or to repair or maintain
any property of the Corporation or for such other purpose as the
directors shall think beneficial to the Corporation. The directors
may modify or abolish any such reserve in the manner in which it
was created.
Section 3. Signature of Negotiable Instruments. All bills,
notes, checks or other instruments for the payment of money shall
be signed or countersigned by such officer, officers, agent or
agents and in such manner as are permitted by these By-Laws and/or
as, from time to time, may be prescribed by resolution (whether
general or special) of the Board of Directors or the Executive
Committee.
Section 4. Fiscal Year. The fiscal year of the Corporation
shall begin on October 1 and shall end of September 30 of the
following year.
Section 5. Seal. The Corporation's seal shall be in such
form as shall be adopted and approved from time to time by the
Board of Directors. The seal may be used by causing it, or a
facsimile thereof, to be impressed, affixed, imprinted or in any
manner reproduced.
Section 6. Books and Records. The Corporation shall keep
correct and complete books and records of account and shall keep
minutes of the proceedings of its shareholders and Board of
Directors and shall keep at its registered office or principal
place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of the
shares held by each.
Section 7. Resignation. Any director, committee member,
officer or agent may resign by giving written notice to the
President or the Secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified.
Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 8. Indemnification. Any person made a party to, or
involved in, any civil, criminal or administrative action, suit or
proceeding by reason of the fact that he, his testator or
intestate, is or was a director, officer, employee, partner or
trustee of the Corporation, or of any other corporation or any
partnership, joint venture, trust or other enterprise which he, his
testator or intestate, served as such at the request of the
Corporation, shall be indemnified by the Corporation against
expenses reasonably incurred by him or imposed on him in connection
with, or resulting from, the defense of such action, suit or
proceeding, or in connection with, or resulting from, any appeal
therein, except with respect to matters as to which it is adjudged
in such action, suit or proceeding that such officer or director is
liable to the Corporation or to such other corporation,
partnership, joint venture, trust or other enterprise for
negligence or misconduct in the performance of his duties. As used
herein the term "expenses" shall include all obligations incurred
by such person for the payment of money including, without
limitation, attorney's fees, judgments, awards, fines, penalties
and amounts paid in satisfaction of judgment or in settlement of
any such action, suit or proceeding, except amounts paid to the
Corporation or such other corporation, partnership, joint venture,
trust or other enterprise by him. A judgment or conviction
(whether based on a plea of guilty or nolo contendere or its
equivalent, or after trial) shall not of itself be deemed an
adjudication that such director or officer is liable to the
Corporation or such other corporation, partnership, joint venture,
trust or other enterprise for negligence or misconduct in the
performance of his duties. Determination of the right to such
indemnification and the amount thereof may be made, at the option
of the person to be indemnified, pursuant to procedure set forth
from time to time by these By-Laws or by any of the following
procedures: (a) order of the court or administrative body or
agency having jurisdiction of the action, suit or proceeding,
(b) resolution adopted by a majority of a quorum of the Board of
Directors of the Corporation without counting in such majority or
quorum any directors who have incurred expenses in connection with
such action, suit or proceeding, (c) if there is no quorum of
directors who have not incurred expenses in connection with such
action, suit or proceeding, then by resolution adopted by a
majority of a committee of shareholders or directors who have not
incurred such expenses, appointed by the Board of Directors of the
Corporation, (d) resolution adopted by the holders of a majority of
the shares entitled to vote and present in person or represented by
proxy et any meeting of shareholders of the Corporation at which a
quorum is so present or represented, such holders voting together
and not by class or (e) order of any court having jurisdiction over
the Corporation. Any such determination that a payment by way of
indemnity should be made shall be binding upon the Corporation.
Such right of indemnification shall not be exclusive of any other
right which such directors and officers of the Corporation, and the
other persons above mentioned, may have or hereafter acquire and,
without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under the
Articles of Incorporation or any other by-law, agreement, vote of
shareholders, provisions of law or otherwise, as well as their
rights under this Section. The provisions of this Section shall
apply to any member of any committee appointed by the Board of
Directors as fully as though such person had been a director or
officer of the Corporation.
The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in
any such capacity or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against
such liability under the provisions of this Section.
Section 9. Surety Bonds. Such officers and agents of the
Corporation (if any) as the President, the Board of Directors or
the Executive Committee may direct, from time to time, shall be
bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death,
resignation, retirement, disqualification or removal from office,
of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging
to the Corporation, in such amounts and by such surety companies as
the President, the Board of Directors or the Executive Committee
may determine. The premiums on such bonds shall be paid by the
Corporation, and the bonds so furnished shall be in the custody of
the Secretary.
Section 10. Interested Directors, Officers and Shareholders.
(a) Validity. Any contract or other transaction between the
Corporation and any of its directors, officers or shareholders (or
any corporation or firm in which any of them are directly or
indirectly interested) shall be valid for all purposes
notwithstanding the presence of such director, officer or
shareholder at the meeting authorizing such contract or
transaction, or his participation or vote in such meeting or
authorization.
(b) Disclosure; Approval. The foregoing shall, however,
apply only if the material facts of the relationship or the
interest of each such director, officer or shareholder is known or
disclosed:
(1) to the Board of Directors and it nevertheless
authorizes or ratifies the contract or transaction by a
majority of the directors present, each such interest director
to be counted in determining whether a quorum is present but
not in calculating the majority necessary to carry the vote;
or
(2) to the shareholders and they nevertheless authorize
or ratify the contract or transaction by a majority of the
shares present, each such interested person to be counted for
quorum and voting purposes.
(c) Non-Exclusive. This provision shall not be construed to
invalidate any contract or transaction which would be valid in the
absence of this Provision.
ARTICLE X--AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed
or new By-Laws may be adopted at any meeting of the Board of
Directors at which a quorum is present by the affirmative vote of a
majority of the directors present at such meeting.
Exhibit 4.1
VSI HOLDINGS, INC.
1997 INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of this l997 Incentive Stock Option
Plan of VSI Holdings, Inc. (the "Plan") is to advance the interest of
VSI Holdings, Inc., a Georgia corporation (the "Company") and its
Affiliates (as hereinafter defined) by encouraging and enabling the
acquisition of a financial interest in the Company by certain Key
Employees (as hereafter provided) of the Company and its Affiliates.
In addition, the Plan in intended to aid the Company and its
Affiliates in attracting and retaining such Key Employees, to
stimulate their efforts on behalf of the Company and its Affiliates
and to strengthen their desire to remain in the employ of the Company
and its Affiliates. "Affiliates" shall mean any present or future
parent corporation or subsidiary corporation of VSI Holdings, Inc. as
defined in Sections 425(e) and 425(f) of the Internal Revenue Code of
1986, as amended (the "Code").
The Company may grant stock options which constitute "incentive
stock options" ("ISOs") within the meaning of section 422A of the
Code and may grant stock appreciation rights ("Rights") for use in
connection with Options granted by the Company.
2. Stock. The Stock to be issued, transferred and/or sold
under the Plan shall be shares of Common Stock, $.01 par value, of
the Company (the "Stock"). Subject to adjustment as provided in
Section 4(b) hereof, the total number of shares of Stock that may be
issued under the Plan pursuant to Options or Rights granted
thereunder shall not exceed 500,000 shares of the authorized but
unissued Stock, provided that the number of shares that may be
granted to any employee under the Plan shall be reasonable in
relation to the purpose of the Plan and the needs of the Company.
Shares that, by reason of the expiration of an Option or Right or
otherwise, are no longer subject to purchase pursuant to an Option or
Right granted under the Plan may be reoptioned under the Plan. The
Company shall not be required upon the exercise of any Option or
Right to issue or deliver any shares of Stock prior to the completion
of such registration or other qualification of such shares under any
state or Federal law, rule or regulation as the Company shall
determine to be necessary or desirable.
3. Participants. Persons eligible to be granted Options or
Rights under the Plan shall be limited to such key employees of the
Company (including officers who are also directors of the Company,
but not including directors who are not also officers) who have
substantial responsibility in the direction and management of the
Company, as indicated by the action of the Committee (as that term is
defined in Section 5) in granting an Option or Right to such employee
(the "Participants").
4. Terms and Conditions of Options. Options granted pursuant
to the Plan shall be evidenced by agreements in such form, not
inconsistent with this Plan, as the Committee shall from time to time
approve, provided that the substance of the following terms and
conditions be included therein, subject to adjustment only as
provided in Section 4(h).
(a) Option Price. The option price shall not be less
than the fair market value of the Stock on the date the Option is
granted; however, notwithstanding the foregoing, the option price for
Options granted to any employee owning Stock (using the attribution
of stock ownership rules of Section 425(d) of the Code) possessing
more than 10% of the total combined voting power of all classes of
Stock of the Company or any of its Affiliates ("Shareholder
Employee") on the date such Option is granted, shall be at least 110%
of the fair market value of the Stock on the date the Option is
granted. The Committee shall, in good faith, determine the fair
market value of the Stock on the date the Option is granted, and the
fair market value may be more or less than the book value of the
Stock; provided, however, that such fair market value shall not be
less than the closing bid price of the Stock on the date of grant.
(b) Duration of Options. The duration of Options shall
be determined by the Committee, but in no event shall the duration of
an Option exceed ten (10) years from the date of its grant. The
duration of an Option granted to a Shareholder Employee shall not
exceed five (5) years from the date of its grant.
(c) Vesting Schedules. The Committee may, in its
discretion, grant Options the exercise of which may be conditioned
upon the Participant's continued employment with the Company. Each
Option may contain provisions, not inconsistent with the provisions
of this Plan, which vest the Participant with the right to exercise a
portion of the Option granted at certain specified intervals of time.
Such vesting schedules shall be determined by the Committee in its
discretion and need not be the same for each Option or each
Participant.
(d) Manner of Exercise. An Option may be exercised
either partially or in full in the discretion of the Participant.
Shares of Stock purchased upon exercise of an Option shall at the
time of purchase be paid for in full with (i) cash, (ii) the
equivalent fair market value of shares of Stock, properly endorsed,
or (iii) any combination of (i) and (ii). To the extent that the
right to purchase shares has accrued hereunder, Options may be
exercised from time to time by written notice to the Company stating
the number of shares with respect to which the Option is being
exercised and the time of delivery thereof, which shall be not
earlier than fifteen (15) days after the giving of such notice unless
an earlier date shall have been mutually agreed upon, accompanied by
payment in full by certified or official bank check or the equivalent
thereof acceptable to the Company, At the time of delivery, the
Company shall, without transfer or issue tax to the optionee, deliver
to the participant at the principal office of the Company, or such
other place as shall be mutually agreed upon, a certificate or
certificates for such shares; provided, however, that the time of
delivery may be postponed by the Company for such period as may be
required for it with reasonable diligence to comply with any
requirements of law. In the event the Stock issuable upon exercise
is not registered under the Securities Act of 1933 (the "Act"), then
the Company at the time of exercise will require in addition that the
registered owner deliver an investment representation in form
acceptable to the Company and its counsel and the Company will place
an appropriate legend on the certificate for such Stock restricting
the transfer of same. There shall be no obligation or duty for the
Company to register under the Act at any time the Stock issuable upon
exercise of the Options. If the Participant fails to accept delivery
of all or any part of the number of shares specified in such notice
upon tender of delivery thereof, the right to exercise the Option
with respect to such shares that Participant fails to accept shall be
terminated and the consideration given for such shares shall be
returned.
(e) Limitation on Amount. The aggregate fair market
value (determined as of the time an option is granted) of Common
Stock with respect to which incentive stock options are exercisable
for the first time by an employee during any calendar year (under the
Plan and all other plans of the Company and its parent and subsidiary
corporations) shall not exceed $100,000.
(f) Non-Assignability of Option Rights. No Option shall
be assignable or transferable otherwise than by will or by the laws
of descent and distribution. During the lifetime of a Participant,
the option is exercisable only by him.
(g) Termination of Employment. In the event that a
Participant's employment by the Company shall terminate, the
Participant shall have the right, subject to Section 4(b) hereof, to
exercise his Option at any time within thirty (30) days after such
termination to the extent that he was entitled to exercise the same
immediately prior to termination. However, if a Participant's
employment is terminated by the Company for cause, the Committee may,
in its discretion, terminate any outstanding Options held by such
Participant.
(h) Adjustment of Options on Recapitalization or
Reorganization. The aggregate number of shares of Stock for which
Options may be granted to Participants under the Plan, the number of
shares covered by each outstanding Option, and the exercise price per
share for each such Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Stock
resulting from the subdivision or consolidation of shares, or the
payment of a stock dividend after the effective date of this Plan, or
other increase or decrease in such shares effected without receipt of
consideration by the Company; provided, however, that any Options to
purchase fractional shares resulting from any such adjustment shall
be eliminated.
If the Company shall at any time merge or consolidate with or
into another corporation, the holder of each Option will thereafter
receive, upon the exercise thereof, the securities or property to
which a holder of the number of shares of Stock then deliverable upon
the exercise of such Option would have been entitled upon such merger
or consolidation, and the Company shall take such steps in connection
with such merger or consolidation as may be necessary to assure that
the provisions of this Plan shall thereafter be applicable, as nearly
as reasonably may be, in relation to any securities or property
thereafter deliverable upon the exercise of such Option. A sale of
all or substantially all the assets of the Company for a
consideration (apart from the assumption of obligations) consisting
primarily of securities shall be deemed a merger or consolidation for
the foregoing purposes.
(i) Rights as a Shareholder. The Participant shall have
no rights as a shareholder with respect to any shares of Stock held
under Option until the date of issuance of the Stock certificates to
him for such shares. Except as provided in Section 4(h), no
adjustment shall be made for dividends or other rights for which the
record date is prior to the date of such issuance.
5. Terms and Conditions of Stock Appreciation Rights. The
Committee may, at any time and in its discretion, grant a Right to
any Participant who is awarded or who holds an outstanding Option.
Such Rights shall be evidenced by agreements in such form as the
Committee shall from time to time approve. Such agreements shall
comply with, and be subject to, the following terms and conditions:
(a) Grant. Each Right shall relate to a specific Option
under the Plan. The number of shares of Stock subject to such Right
shall be equal to the number of shares of Stock that the Participant
is entitled to receive pursuant to the related Option. The number of
shares of Stock subject to a Right held by a Participant shall be
reduced by:
(i) the number of shares of Stock designated by the
Participant in Section 5(b) as being the amount with respect to
which the Right is being exercised, and
(ii) the number of shares of Stock purchased by such
Participant pursuant to the related Option.
(b) Manner of Exercise. A Participant shall exercise a
Right by giving written notice of such exercise to the Company. The
date upon which such written notice is received by the Company shall
be the exercise date for the Right, The Participant shall designate
in such written notice, the number of shares of Stock with respect to
which such Right is being exercised.
(c) Appreciation Available. A Right shall entitle a
Participant to the amount which the fair market value of the Stock
subject to the Right exceeds the option price per share of Stock of
the related Option. The total amount of appreciation available to a
Participant upon the exercise of a Right shall be equal to the number
of shares of Stock with respect to which the Right is being
exercised, multiplied by the amount of appreciation per Right
determined under this Section 5(c).
(d) Payment of Appreciation. In the discretion of the
Committee, the total appreciation available to a Participant from the
exercise of a Right may be paid to the Participant either in Stock or
in cash, or both. If paid in cash the amount thereof shall be the
amount of the appreciation determined under Section 5(c) above. If
paid in Stock, the number of shares of Stock that shall be issued
pursuant to the exercise of a Right shall be determined by dividing
the amount of appreciation determined in Section 5(c) by the fair
market value of the Stock on the exercise date of the Right;
provided, however, that no fractional shares shall be issued upon the
exercise of a Right.
(e) Limitations Upon Exercise of Rights. A Participant
may exercise a Right with respect to a share of Stock only in
conjunction with the reduction of the number of shares of stock
subject to the Option to which the Right relates. Rights may be
exercised only at such times and by such persons as may exercise
Options under the Plan. Adjustment to the number of shares in the
Plan and the price per share pursuant to Section 4(h) shall also be
made to any Rights held by each Participant. Any termination,
amendment, or revision of the Plan pursuant to Sections 7 and 8 shall
be deemed a termination, amendment, or revision of Rights to the same
extent.
(f) Other Terms and Conditions. Notwithstanding any
provision in the Plan to the contrary, any Right granted pursuant to
the Plan must meet the following requirements:
(i) the Right must expire no later than the
underlying Option;
(ii) the Right may entitle its holder to no more than
100% of the difference between the exercise price of a share of
Stock subject to the underlying Option and the fair market value
of the Stock subject to the underlying Option at the time the
Right is exercised.
(iii) the Right must be transferable only when the
underlying Option is transferable, and under the same
conditions;
(iv) the Right may be exercised only when, and to the
extent, the underlying Option is eligible to be exercised; and
(v) the Right may be exercised only when the fair
market value of the Stock exceeds the exercise price of a share
of Stock subject to the underlying Option.
6. Administration.
(a) The Plan shall be administered by a stock option
committee (the "Committee") consisting of not less than three (3)
directors of the Company to be appointed by the board of directors of
the Company ("Board of Directors"). In lieu of appointing the
Committee, the entire Board of Directors may collectively act as the
Committee until such time as the Committee is appointed. The Board
of Directors may, from time to time, remove members from or add
members to the Committee. Vacancies in the Committee, however
caused, shall be filled by the Board of Directors. The Committee
shall select one of its members as chairman and shall hold meetings
at such times and places as it may determine. The Committee may
appoint a secretary and, subject to the provisions of the Plan and to
policies determined by the Board of Directors, may make such rules
and regulations for the conduct of its business as it shall deem
advisable. A majority of the Committee shall constitute a quorum.
All action of the Committee shall be taken by a majority of its
members. Any action may be taken by a written instrument signed by a
majority of the members, and action so taken shall be fully as
effective as if it had been taken by a vote of the majority of the
members at a meeting duly called and held.
(b) Subject to the express terms and conditions of the
Plan, the Committee shall have full power to grant Options and Rights
under the Plan, the construe or interpret the Plan, to prescribe,
amend and rescind rules and regulations relation and to make all
other determinations necessary or advisable for its administration.
(c) Subject to the provisions of Sections 3 and 4 hereof,
the Committee may, from time to time, determine which Participants
shall be granted Options and Rights under the Plan, the number of
shares of Stock subject to each Option and Right, the time or times
at which Options and Rights shall be granted, and grant such Options
and Rights under the Plan.
(d) The Committee shall report to the Board of Directors
the names of Participants granted Options and Rights, the number of
shares subject to, and the terms and conditions of, each Option and
Right.
(e) No member of the Board of Directors or of the
Committee shall be liable for any action or determination made in
good faith with respect to the Plan or to any Option or Right.
7. Effective Date and Termination.
(a) The effective date of the Plan is April 21, 1997.
(b) The Plan shall terminate on April 20, 2007 but the
Board of Directors may terminate the Plan at any time prior to ten
years from the effective date of the Plan. Termination of the Plan
shall not alter or impair, without the consent of the Participant,
any of the rights or obligations and any Option or Right theretofore
granted under the Plan.
8. Amendments. The Board of Directors or the Committee may,
from time to time, alter, amend, suspend, or Plan, or alter or amend
any and all Option or Rights granted thereunder; provided, however,
that no such action of the Directors or the Committee may alter the
provisions of the Plan so as to:
(a) Permit the grant of Options at less than the fair
market value permitted pursuant to Section 4(a) hereof;
(b) Extend the term of the Plan beyond ten (10) years or
the maximum term of the Options or Rights granted beyond ten (10)
years;
(c) Alter any outstanding Option or Rights Agreement to
the detriment of the Participant without his consent; or
(d) Decrease, directly or indirectly (by cancellation and
substitution of Options or otherwise), the option price applicable to
any Option granted under this Plan.
9. Qualifications. Options granted pursuant to this Plan are
intended to qualify as Incentive Stock Options within the meaning of
Section 422A of the Code, and shall be so construed; provided,
however, that nothing in this Plan shall be interpreted as a
representation, guarantee or other undertaking on the part of the
Company that the Options granted pursuant to this Plan are, or will
be, determined to be Incentive Stock Options, within that section of
the Code.
10. Use of Proceeds. The proceeds from the sale of Stock
pursuant to the exercise of Options will be used for the general
corporate purposes of the Company.
Exhibit 4.2
VSI HOLDINGS, INC.
1997 NON-QUALIFIED STOCK OPTION PLAN
Section 1. Purpose.
The purpose of the 1997 Non-Qualified Stock Option Plan of VSI
Holdings, Inc. (the "Plan") is to advance the interests of VSI
Holdings, Inc. (the "Company") and its Affiliates (as defined in
Section 4 hereof) by encouraging and enabling the acquisition of a
financial interest in the Company by officers and other key
employees of the Company and its Affiliates (the "Participants").
In addition, the Plan is intended to aid the Company and its
Affiliates in attracting and retaining Participants, to stimulate
the efforts of such Participants on behalf of the Company and its
Affiliates and to strengthen their desire to remain in the employ
of the Company and its Affiliates.
The Company may grant non-qualified stock options which do not
constitute "incentive stock options" within the meaning of Section
422A of the Internal Revenue Code of 1954, as amended (the "Code")
("Options") to Participants, and may grant Participants stock
appreciation rights which are attached to such Options ("Attached
Rights") and stock appreciation rights which are independent of
such Options ("Independent Rights"). (Attached Rights and
Independent Rights may hereafter be collectively referred to as
"Rights")
Section 2. Administration.
The Plan shall be administered by a Committee (the
"Committee") appointed by the Board of Directors of the Company
(the "Board") from among its members and shall be comprised of not
less than three (3) members of the Board, In lieu of appointing
the Committee, the entire Board of Directors may collectively act
as the Committee until such time as the Committee is appointed.
The Committee shall determine the Participants of the Company and
its Affiliates to whom, and the time or times at which, Options or
Rights may be granted, the number of shares subject to each Option
or Right, the schedules upon which each Option or Right becomes
vested to the Participant, the duration of each Option or Right,
the period or periods within which each Option or Right may be
exercised, the basis for cancellation of each Option or Right, the
Appreciation Base (as hereinafter defined in Section 6(b)) and any
other conditions of the grant of the Option or Right. The
provisions and conditions of the grant, exercise or other action
with respect to Options and Rights need not be the same with
respect to each Participant or with respect to each Option or each
Right granted to a Participant.
The Committee may, subject to the provisions of the Plan,
establish such rules and regulations as it may deem necessary,
advisable, or appropriate for the proper administration of the
Plan, and may make such determinations and may take such other
action in connection with or pursuant to the Plan, and the Rights
and Options granted thereunder, as it may deem necessary,
advisable, or appropriate. Each determination or other action made
or taken in connection with, or pursuant to, the Plan, including
interpretations of the Plan and the specific conditions and
provisions of the Options and Rights granted thereunder by the
Committee, shall be final and conclusive for all purposes and upon
all interested persons including, but without limitation, the
Company, its Affiliates, the Board, the Participants of the Company
and/or its Affiliates and their respective successors in interest.
Section 3. Stock.
The stock which shall be issued pursuant to the exercise of
Options and/or Rights granted under the Plan, or which shall be
used to determine the amount of appreciation pursuant to the
exercise of Rights under the Plan, shall be shares of Common Stock,
$.01 par value, of the Company (the "Stock"). The Stock shall be
reserved from the authorized and unissued Stock of the Company.
The total number of shares of Stock that may be issued pursuant to
exercised Options and Rights may not exceed 500,000 shares. Such
number of authorized shares of Stock shall be subject to adjustment
in accordance with Section 11 hereof and shall be reduced by the
number of shares of Stock issued pursuant to the Plan. Stock
subject to any unexercised Option or Right, or portion thereof,
which expires or is cancelled, surrendered, or terminated for any
reason may, by affirmative action of the Committee, again be
subject to Options and/or Rights granted under the Plan.
Section 4. Eligibility.
Options and Rights may be granted to officers and employees of
the Company and its Affiliates (including officers who are
directors thereof), and contingently granted to prospective
officers or employees thereof, conditioned upon their acceptance
and initiation of employment within three months of such grant.
The term "Affiliates" shall mean any present or future parent
corporation or subsidiary corporation of the Company as defined in
Sections 425(e) and (f), respectively, of the Code. No Participant
shall be granted Options or Rights with respect to the Plan
consisting of more than twenty-five percent of the aggregate number
of shares of stock issuable under the Plan.
Section 5. Awards of Options.
The Committee may, from time to time and in its discretion,
award to Participants of the Plan, Options to purchase Stock of the
Company. The amount of Stock subject to such Options shall be
determined by the Committee but in no event shall an Option be
granted to purchase an amount of Stock which exceeds the adjusted
balance of the authorized amount of Stock subject to the Plan as
determined pursuant to Section 3 hereof, reduced by the number of
shares of Stock subject to outstanding Options and further reduced
by the amount of shares of Stock used to determine the aggregate
amount of appreciation payable upon the exercise of all outstanding
Independent Rights. Except as otherwise specifically provided
herein, Options granted pursuant to the Plan shall be subject to
the following terms and conditions:
(a) Employment Agreement. The Committee may, in its
discretion, include in any Option granted under the Plan a
condition that the Participant enter into an agreement whereby the
Participant agrees to remain in the employ of, and render services
to the Company or any of its affiliates for a period of time
(specified in the agreement) from the date the Option is granted.
No such agreement shall impose upon the Company or any of its
Affiliates, however, any obligation to employ the Participant for
such period of time.
(b) Option Price. Unless otherwise determined by the
Committee the option price shall be 100% of the fair market value
of the Stock on the date of the grant. The Committee shall, in
good faith, determine the fair market value of the Stock on the
date the Option is granted, and the fair market value may be more
or less than the book value of the Stock. Unless otherwise
determined by the Committee, the fair market value of the Stock
shall be the closing "bid" price of the Stock on the date an Option
is granted.
(c) Time and Manner of Exercise. A Participant shall
exercise an Option by giving written notice of such exercise to the
Company. The date upon which such written notice is received by
the Company shall be the exercise date of the Option. Unless
otherwise provided in the Plan and in the particular Option
agreement, an Option may be exercised either partially or in full
at such time or times as the Participant in his discretion may
determine. The number of shares of Stock which a Participant may
purchase upon exercise of an Option shall be the number of shares
of Stock subject to the Option as provided in the Option agreement
reduced by the following:
(i) The number of shares of Stock purchased by such
Participant pursuant to the Option agreement, and
(ii) In the case of an Option coupled with an
Attached Right, the number of Attached Rights exercised by the
Participant for Stock or cash pursuant to the Attached Right
agreement.
(d) Payment. Unless otherwise determined by the Committee,
the option price with respect to an exercised Option, or portion
thereof, shall be paid in full at the time of exercise. No shares
of Stock shall be issued until full payment has been received
therefor. Full or partial payment of the option price may be in
cash or, with the prior approval of, and upon the conditions
established by, the Committee, by delivery of fully paid,
restricted or unrestricted, shares of Stock owned by the
Participant. If payment is made by the delivery of shares of
Stock, the value of the shares of Stock delivered shall be the fair
market value of the shares of Stock as the Committee shall, in good
faith, determine as of the date of exercise.
(e) Duration of Options. The duration of each Option shall
be determined by the Committee, but in no event shall the duration
of an Option exceed ten (10) years from the date of its grant.
(f) Other Terms and Conditions. Options may contain such
other provisions, not inconsistent with the provisions of the Plan,
as the Committee shall determine to be necessary, advisable or
appropriate from time to time. The grant of an Option to any
Participant shall not affect in any way the right of the Company or
any Affiliate to terminate the employment of the holder thereof.
Section 6. Award of Rights.
The Committee may grant Attached or Independent Stock
Appreciation Rights to Participants at such time or times as the
Committee in its discretion shall determine. Attached Rights may
be granted simultaneously with the grant of the related Option or
may be granted with respect to designated, outstanding Options
previously granted under the Plan. Independent Rights may be
awarded by the Committee at such time or times as the Committee may
in its discretion determine. In no event shall an Independent Right
be granted where the number of shares of Stock used to calculate
the aggregate amount of appreciation payable with respect to such
Right exceeds the adjusted balance of the authorized amount of
Stock subject to the Plan as determined pursuant to Section 3
herein, reduced by the number of shares of Stock subject to
outstanding Options and further reduced by the number of shares of
Stock used to determine the aggregate amount of appreciation
payable upon the exercise of all outstanding Independent Rights.
Rights shall be evidenced by agreements in such form as the
Committee shall from time to time approve, Such agreements shall
comply with, and be subject to, the following terms and conditions:
(a) Employment Agreement. The Committee may, in its
discretion, include in any Right granted under the Plan a condition
that the Participant shall enter into an agreement whereby the
Participant agrees to remain in the employ of, and to render
services to, the Company or any of its Affiliates for a period of
time (specified in the agreement) from the date the Right is
granted. No such agreement shall impose upon the Company or any of
its Affiliates, however, any obligation to employ the Participant
for any period of time.
(b) Appreciation Base. Upon the grant of a Right, the
Committee shall determine the market price of a share of Stock
which shall become the basis for measuring the amount of
appreciation with respect to such Right ("Appreciation Basis").
Unless otherwise determined by the Committee, the Appreciation
Basis with respect to an Independent Right shall be 100% of the
fair market value of the Stock on the date of grant or, in the case
of an Attached Right, the option price of the related Option
whether such option price is higher or lower than the fair market
value of the Stock on the date the Independent Right is granted.
The Committee shall, in good faith, determine the fair market value
of the Stock on the date the Right is granted, and the fair market
value may be more or less than the book value of the Stock. Unless
otherwise determined by the Committee, the fair market value of the
Stock shall be the closing "bid" price of the Stock on the date an
Independent Right is granted.
(c) Time and Manner of Exercise. A Participant shall
exercise a Right by giving written notice of such exercise to the
Company. The date upon which such written notice is received by
the Company shall be the exercise date of the Right. Unless
otherwise provided in the Plan and in the particular Independent
Rights agreement, an Independent Right may be exercised either
partially or in full and at such time or times as the Participant
may in his discretion determine. The number of Independent Rights
held by a Participant shall be equal to the number of shares of
Stock used to determine the aggregate appreciation payable upon the
exercise of the Independent Right as provided in the Independent
Right agreement reduced by the number of Independent Rights
exercised by the Participant for Stock or cash under the
Independent Right agreement.
An Attached Right may be exercised in such amount or amounts
and at such time or times as the related Option may be exercised as
determined under Section 5(c) hereunder. Unless otherwise
determined by the Committee, the number of Attached Rights granted
to a Participant shall be equal to the number of shares of Stock
that the Participant is entitled to receive pursuant to the related
Option. The number of Attached Rights held by a Participant shall
be reduced by:
(i) The number of Attached Rights exercised for Stock or
cash under the Attached Right agreement, and
(ii) The number of shares of Stock purchased by such
Participant pursuant to the related Option.
(d) Appreciation Available. Each Right shall entitle a
Participant to the following amount of appreciation: the excess of
the fair market value of a share of Stock on the exercise date (as
determined by the Committee in accordance with Section 6(b)) over
the Appreciation Base of the Right. The total appreciation
available to a Participant from the exercise of a Right shall be
equal to the number of Rights being exercised, multiplied by the
amount of appreciation per Right determined under this Section 6.
(e) Payment of Appreciation. In the discretion of the
Committee, the total appreciation available to a Participant from
the exercise of a Right may be paid to the Participant either in
Stock or cash, or partly in stock and partly in cash. If paid in
cash, the amount thereof shall be the amount of appreciation
determined in Subsection (d) above. If paid in Stock, the number
of shares of Stock that shall be issued pursuant to the exercise of
a Right shall be determined by dividing the amount of appreciation
determined under Subsection (d) above by the fair market value of
Stock on the exercise date of the Right; provided, however, that no
fractional shares of Stock shall be issued upon the exercise of a
Right. The Committee may provide for the elimination of fractional
shares of Stock without adjustment, or for the payment of the value
of such fractional shares in cash.
(f) Duration of Rights. An Attached Right may be exercised
only as long as the related Option is exerciseable. In no event
shall an Attached Right be exercised more than ten (10) years from
the date of the grant of the related Option. The duration of an
Independent Right shall be governed according to the agreement
granting such Independent Right, but, in no event, shall an
Independent Right be exercised more than ten (10) years from the
date of the grant.
(g) Other Terms and Conditions. Rights may contain such
other provisions, not inconsistent with the provisions of the Plan,
as the Committee shall determine to be necessary, advisable or
appropriate from time to time.
Section 7. Replacement/Extension of Terms of Options and Rights.
The Committee from time to time may permit a Participant under
the Plan to surrender for cancellation any unexercised outstanding
Option and/or Right and receive from the Company in exchange
therefor an Option for such number of shares of Stock as may be
designated by the Committee. Such Participants also may be granted
Independent or Attached Rights as provided in Section 6. In
addition, the Committee may extend the duration of any Option
and/or Right for a period not to exceed five years, subject to the
provisions of Subsections 5(e) and 6(f) without changing the option
price of an Option or the Appreciation Base of a Right and on such
terms and conditions as the Committee may determine.
Section 8. Nontransferability of Options and Rights.
Unless otherwise determined by the Committee, no Option or
Right granted pursuant to the Plan shall be transferable otherwise
than by will or the laws of descent and distribution. During the
lifetime of a Participant, the Option or Right shall be exercisable
only by the Participant personally or by the Participant's legal
representative.
Section 9. Termination of Employment.
Except as provided in Section 10 below or otherwise determined
by the Committee, if a Participant ceases to be employed by the
Company or its Affiliates, his Options and Rights shall terminate
immediately; provided, however, that if a Participant's cessation
of employment with the Company or its Affiliates is due to his
retirement with the consent of the Company or any of its
Affiliates, the Participant may, at any time within thirty days
after such cessation of employment, exercise his Options and Rights
to the extent that he was entitled to exercise them on the date of
cessation of employment, but in no event shall any Option or Right
be exerciseable more than ten (10) years from the date it was
granted. The Committee may cancel an Option or Right during the
period following cessation of employment provided in this Section,
if the Participant engages in employment or activities contrary, in
the opinion of the Committee, to the best interests of the Company
or any of its Affiliates. The Committee shall determine in each
case whether a termination of employment shall be considered a
retirement with the consent of the Company or its Affiliates and,
subject to applicable law, whether a leave of absence shall
constitute a termination of employment.
Section 10. Rights in Event of Death.
If a Participant dies while employed by the Company or any of
its Affiliates, or within three months after having retired with
the consent of the Company or any of its Affiliates, and without
having fully exercised his Options and/or Rights, the executors or
administrators, or legatees or heirs, of his estate shall have the
right to exercise for one year after the date of death such Options
and/or Rights to the extent that such deceased Participant was
entitled to exercise the Options and/or Rights on the date of his
death; provided, however, that in no event shall the Options and/or
Rights be exercisable more than ten (10) years from the date they
were granted.
Section 10. Rights as a Stockholder.
A Participant, or a transferee of an Option or Right pursuant
to Section 8, shall have no rights as a stockholder with respect to
any Stock subject to an Option or Right or receivable upon the
exercise of an Option or Right until the Participant or transferree
shall become the holder of record of such Stock, and no adjustment
shall be made for dividends in cash or other property or other
distributions or rights with respect to such Stock for which the
record date is prior to the date on which the Participant or
transferee shall have in fact become the holder of record of the
shares of Stock acquired pursuant to the Option or Right.
Section 12. Adjustment in Number of Shares, Option Price and
Appreciated Value.
In the event that there is any change in the shares of Stock
through the declaration of stock dividends or stock splits or
through recapitalization or a merger or consolidation or
combinations of shares or otherwise, the Board shall make such
adjustment, if any, as it may deem appropriate in the number of
shares of Stock available for Options and Rights as well as the
number of shares of Stock subject to any outstanding Option or
Right, the option price of an Option and the Appreciation Base of a
Right. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to any Option
or Right without payment therefore.
Section 13. Reservation of Shares of Stock.
The Company, during the term of this Plan, will at all times
reserve and keep available, and will seek to obtain from any
regulatory body having jurisdiction, any requisite authority
necessary to issue and to sell the numbers of shares of Stock that
shall be sufficient to satisfy the requirements of this Plan. The
inability of the Company to obtain from any regulatory body having
jurisdiction the authority deemed necessary by counsel for the
Company for the lawful issuance and sale of its
Stock hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell Stock as to which the
requisite authority has not been obtained.
Section 14. Unregistered Shares.
In the event the Stock issuable upon exercise of an Option or
Right is not registered under the Securities Act of 1933, as
amended (the "Act"), the Company, at the time of exercise, will
require that the Participant deliver an investment letter with
representations in form acceptable to the Company and its counsel
and the Company shall place an appropriate legend on the
certificate representing such Stock restricting the transfer of
same. There shall be no obligation or duty for the Company to
register under the Act at any time the Stock issuable upon exercise
of an Option or Right.
Section 15. Amendments, Modification and Termination of Plan.
The Board may terminate the Plan, in whole or in part, may
suspend the Plan, in whole or in part, and may amend the Plan,
including the adoption of amendments necessary or desireable to
qualify the Options and/or Rights or the Stock subject to such
Option and/or Rights, under the laws of various states and
countries (including tax laws) and under rules and regulations
promulgated by the Securities and Exchange Commission with respect
to employees who are subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended, or to correct any
defect or supply an omission or reconcile any inconsistency in the
plan or in any Option or Right granted thereunder, without the
approval of the stockholders of the Company; provided, however,
that no action shall be taken without the approval of the
stockholders of the Company to increase the number of shares of
Stock for which Options and Rights may be granted, or change the
manner of determining the option price of an Option, or change the
manner of determining the Appreciation Base or the amount payable
upon exercise of a Right, or increase the maximum duration of an
Option or Right, or change the class of employees eligible to
participate, or permit any person while a member of the Committee
to be eligible to receive or hold an Option or Right granted under
the Plan. No amendment or termination or modification of the Plan
shall in any manner affect any Option or Right theretofore granted
without the consent of the Participant, except that the Committee
may amend or modify the Plan in a manner that does affect Options
or Rights theretofore granted upon a finding by the Committee that
such amendment or modification is in the best interest of holders
of outstanding Options or Rights affected thereby. The Plan shall
terminate on April 20, 2007, unless earlier terminated by the Board
or by the Committee. Termination of the Plan shall not affect any
Option or Right previously granted.
Section 16. Governing Law.
The Plan and all determinations made and actions taken
pursuant thereto shall be governed by the laws of the State of
Georgia and construed in accordance therewith.
Exhibit 4.3
THE BANKER'S NOTE, INC.
INDEPENDENT DIRECTOR STOCK OPTION PLAN
1. Purpose of the Plan. The purpose of the Independent
Director Stock Option Plan (the "Plan") of The Banker's Note, Inc.
(the "Corporation") is to promote the interests of the Corporation
and its shareholders in obtaining and maintaining the services of
knowledgeable and independent directors on the Corporation's Board of
Directors (hereinafter referred to as the "Board of Directors" or the
"Board"). The Plan is intended to make available for purchase an
ownership interest in the Corporation by independent directors who
are neither employees of the Corporation or any subsidiary thereof or
beneficial owners of 5% or more of the Corporation's common stock,
par value $.01 per share (the "Common Stock"), thus providing an
additional incentive for such directors to continue to serve on the
Board and giving them a greater interest as shareholders in the
success of the Corporation.
2. Effective Date of Plan. The Plan shall take effect on the
later of July 1, 1988 or adoption by the Board of Directors (the
"Effective Date"), subject to approval by the shareholders at the
next annual meeting of shareholders. If the Plan is not so approved
by the shareholders, the Plan shall terminate and any options granted
thereunder shall be void and have no force or effect.
3. Shares Subject to the Plan. Subject to adjustment as
provided in paragraph 13 hereof, an aggregate of 100,000 shares of
the Common Stock shall be available for issuance upon the exercise of
all options granted under the Plan. Such shares may consist either
in whole or in part, as the Board of Directors in its discretion
shall from time to time determine, either of authorized but unissued
shares of Common Stock or issued shares of Common Stock which have
been reacquired by the Corporation. If any option granted under this
Plan expires or ceases to be exercisable without having been
exercised in full, the unpurchased shares shall thereafter be
available for the grant of further options under the Plan.
4. Administration of the Plan. The Plan shall be
administered by the Board of Directors. The Board shall, subject to
the provisions of the Plan, have the power toconstrue the Plan, to
determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it
may deem desirable.
5. Eligibility; Grant of Options.
(a) The Board may grant options under the Plan to any director
of the Corporation (I) who is not otherwise an employee of the
Corporation or any subsidiary of the Corporation and (II) who is not
a beneficial owner, directly or indirectly, of 5% or more of the
Common Stock ("Independent Director") as of the Effective Date or, in
the case of any director as of a date subsequent to the Effective
Date and who otherwise then meets the above eligibility requirements,
as of the date a director is duly elected, reelected or appointed as
a director of the Corporation ("Subsequent Effective Date"). A
director otherwise ineligible under the Plan may not become an
Independent Director until one year after the effective date of the
event which terminated his disqualification under (I) and/or (II)
above. An Independent Director may be granted a subsequent option
after his first option provided the time periods for the vesting of
shares as set forth in paragraph 8(a) herein under any existing
option granted hereunder shall have expired.
(b) The Board may grant each Independent Director as of the
Effective Date of the Plan, or, in the case of future Independent
Directors, as of a Subsequent Effective Date, an option to acquire as
many as 10,000 shares of Common Stock each, subject to adjustment as
set forth in paragraph 13 hereof. Each option granted under the Plan
shall be evidenced by an option agreement (an "Agreement") duly
executed on behalf of the Corporation and by the director to whom
such option is granted, which Agreement shall comply with and be
subject to the terms and conditions of the Plan. An Agreement may
contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Board. No option shall be
deemed to be granted within the meaning of the Plan and no purported
grant of any option shall be deemed effective until such an Agreement
shall have been duly executed on behalf of the Corporation and the
director to whom the option is to be granted.
6. Option Price. The option price per share with respect to
each option granted under the Plan shall be 100% of the fair market
value of the Common Stock on the Effective Date or, in the case of
future Independent Directors, on the Subsequent Effective Date, in
either case said date to be referred to as the "Date of Grant". For
purposes of the preceding sentence, the fair market value of a share
of Common Stock shall mean the closing sale price of the Common Stock
on the Date of Grant or, in case no sale is publicly reported, the
average of the closing bid and asked questions for the Common Stock
on that date, in either case as reported in The Wall Street Journal
or, if the Common Stock is not then quoted in The Wall Street Journal
or an equivalent publication, as furnished by a member of the
National Association of Securities Dealers selected by the
Corporation for that purpose.
7. Term of Options. The term of each option granted under
the Plan shall be five (5) years from the Date of Grant, subject to
earlier termination as provided in paragraphs 10 and 11 herein.
8. Time and Manner of Exercise of Options.
(a) Except as otherwise provided herein, options granted under
the Plan shall not be exercisable for a period of thirty days after
the Date of Grant. Thereafter, an option shall be exercisable in
accordance with the terms of the Plan at any time or from time to
time during the term of that option, subject to the following:
(I) (i) not more than 10% of the total number of option shares
shall be purchasable on or following thirty days after the Date of
Grant; (ii) not more than 20% of the total number of option shares
shall be purchasable on or following the first anniversary of the
Date of Grant; (iii) not more than 30% of the total number of option
shares shall be purchasable on or following the second anniversary of
the Date of Grant; and (iv) 40% of the option shares shall be
purchasable on or following the third anniversary of the Date of
Grant, and
(II) notwithstanding the above schedule, additional 5%
increments of the option shares shall be purchasable on or following
the fifth day after the date of the first 12 regularly scheduled
quarterly and annual meetings of the Board after July 1, 1988, or, in
the case of future Independent Directors, after the Subsequent
Effective Date; provided, that, each such 5% increment of shares
shall not be exercisable and shall be forfeited should the optionee
not attend in person each such respective meeting of the Board.
(b) Subject to the foregoing, an option granted under the Plan
may be exercised in full at one time or in part from time to time by
giving written notice, signed by the person or persons exercising the
option, to the Corporation, stating the number of shares with respect
to which the option is being exercised. The purchase price of the
shares shall be paid in full in cash or in shares of Common Stock
valued on the basis of paragraph 6 herein as of the exercise date
upon the exercise of the option, and the Corporation shall not be
required to deliver certificates for such shares until such payment
has been made.
(c) The holder of an option granted under the Plan shall not
have any rights as a shareholder with respect to the shares subject
to the option until certificates representing such shares are
delivered to him by the Corporation upon the exercise of his option.
9. Nontransferability of Options. No option granted under
the Plan shall be transferable or assignable by the optionee,
otherwise than by will or the laws of descent and distribution.
During the lifetime of the optionee, the option shall be exercisable
only by him.
10. Effect of Termination of Service or Loss of Independent
Director Status. An option granted under the Plan shall terminate
within thirty (30) days immediately following (1) the Independent
Director's discontinuance of service on the Board of Directors for
any reason, with or without cause, other than his death or the
discontinuance of his services due to the circumstances set forth in
paragraph 12 herein, or (ii) the Independent Director's loss of
independent status with respect to the Corporation on the basis of
the standards set forth in paragraph 5(a) herein. In either of such
events, the optionee may exercise his option during such thirty-day
period, to the extent of the number of shares of Common Stock covered
by his option which were purchasable by him at the date of such
termination or loss of non-independent status, as the case may be.
11. Death of Option Holder. In the event of the death of an
optionee while serving as an independent director of the Corporation,
the option shall terminate on the earlier of three (3) months
following the date of death or the expiration date of the option as
provided by paragraph 7 of the Plan. Such option may be exercised
during such time by the executors or administrators of the optionee
or by any person or persons to whom the option is transferred by will
or the applicable laws of descent and distribution, to the extent of
the full number of shares that the optionee was entitled to purchase
under the option on the date of his death.
12. Change in Control. If an optionee's service as a member
of the Board of Directors is terminated or discontinued due to or as
result of any extraordinary corporate proceeding affecting the
Corporation (as determined by the Board), pursuant to which the
Corporation is not to survive immediately following such proceeding
and/or which results in a change in control of the Corporation (by
merger, consolidation, sale or acquisition of assets or stock or
otherwise), his option shall become immediately exercisable in full
as of a period beginning thirty (30) days prior to such proceeding,
without regard to the provisions of paragraph 8(a) of the Plan. For
purposes of this paragraph, a "change in control" of the business and
operations of the Corporation shall mean a change in control of a
nature that would be required to be reported in response to Item 1 of
Form 8-K promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on the Effective Date;
provided, that, without limitation, such a change in control shall be
deemed to have occurred if any "person" (as such term is issued in
Section 13(d) of the Exchange Act) after the Effective Date becomes
the beneficial owner, directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of
the Corporation's then outstanding securities.
13. Adjustments Upon Changes in Capitalization. In the event
that the outstanding shares of the Common Stock of the Corporation
are changed into or exchanged for a different number or kind of
shares or other securities of the Corporation or of another
corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of
shares or dividends payable in capital stock, appropriate adjustment
shall be made in the number and kind of shares as to which
outstanding options, or portions thereof then unexercised, shall be
exercisable, to the end that the proportionate interest of the
optionee shall be maintained as before the occurrence of such event;
such adjustment in outstanding options shall be made without change
in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per
share.
14. Securities Matters. The exercise of any option granted
hereunder shall only be effective at such time as counsel to the
Corporation shall have determined that the issuance and delivery of
shares of Common Stock pursuant to such exercise will not violate any
state or federal securities or other laws. The optionee desiring to
exercise an option may be required by the Corporation, as a condition
of the effectiveness of any exercise of an option granted hereunder,
to agree in writing that all shares of Common Stock to be acquired
pursuant to such exercise shall be held for investment for his own
account without a view to any further distribution thereof, that the
certificates for such shares shall bear an appropriate legend to that
effect and that such shares will not be transferred or disposed of
except in compliance with applicable federal and state laws. The
Corporation may, in its sole discretion, defer the effectiveness of
any exercise of an option granted hereunder in order to allow the
issuance of shares of Common Stock pursuant thereto to be made
pursuant to registration or an exemption from registration or other
methods for compliance available under federal or state securities
laws. The Corporation shall be under no obligation to effect the
registration pursuant to the Securities Act of 1933, as amended, of
any shares of Common Stock to be issued hereunder or to effect
similar compliance under any state laws.
The Corporation shall inform the optionee in writing of its
decision to defer the effectiveness of the exercise of an option
granted hereunder. During the period that the exercise of the option
has been deferred, the optionee may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect
thereto.
15. Termination and Amendment of the Plan. Unless sooner
terminated as herein provided, the Plan shall terminate ten (10)
years from the Effective Date. The Board may suspend or terminate
the Plan or make such modification or amendment thereto as it deems
advisable; provided, however, that except under the circumstances
provided in paragraph 13, the Board may not, without the approval of
the shareholders of the Corporation, change the number of shares
subject to the Plan or any option granted thereunder, extend the
option period provided for in paragraph 7, or materially increase the
benefits under the Plan. No termination, modification or amendment
of the Plan shall, without the consent of an optionee, adversely
affect the rights of such optionee.
Exhibit 9.1
VOTING AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of January __, 1994,
among Martin S. Suchik, a Georgia resident ("Suchik") whose address
is 4900 Highlands Parkway, Smyrna, Georgia 30082, Steve Toth, Jr., a
Michigan resident ("Toth") whose address is 2100 North Woodward West,
Suite 201, Bloomfield Hills, Michigan 48403, the Steve Toth, Jr.
Trust, a Michigan trust (the "Toth Trust"), the address of which is
2100 North Woodward West, Suite 201, Bloomfield Hills, Michigan
48403, and CLT, a general partnership organized and existing under
the laws of Michigan ("CLT"), the address of which is 2100 North
Woodward West, Suite 201, Bloomfield Hills, Michigan 48403.
W I T N E S S E T H :
WHEREAS, Suchik is the President and Chief Executive Officer of
The Banker's Note, Inc. (the "Company") and the holder of more than
20% of its outstanding shares, and
WHEREAS, Toth has assigned certain rights under the Stock Option
Agreement dated as of May 6, 1993 (the "Option Agreement") to the
Toth Trust and CLT to purchase up to 1,600,000 shares of the Company,
and
WHEREAS, the Toth Trust has exercised its assigned rights to
purchase 650,000 and 125,000 shares of the Company for $.25 and
$.4375 per share respectively, and
WHEREAS, CLT has until May 5, 2000 to exercise its assigned
right to purchase 825,000 shares of the Company for $.15625 per
share, and
WHEREAS, by Section 5(b) of the Option Agreement, the Company
has obligated itself to elect two persons nominated by Toth and CLT
to the Company's Board of Directors, and
WHEREAS, each of Suchik, Toth, the Toth Trust, and CLT agree
that the continuity of the Company's present management is in its
best interests,
IT IS HEREBY AGREED that, as of this 18th day of January 1994,
Until the earliest of (i) the tenth anniversary of the date
hereof, (ii) the date on which Toth, the Toth Trust, and CLT, or any
affiliated person of any of them (the term "affiliated person" being
used herein as such term is defined in the Investment Company Act of
1940, as amended) no longer collectively hold, or have the right to
purchase, more than 100,000 shares of the Company, and (iii) the date
on which Suchik or any affiliated person to him no longer holds more
than 100,000 shares of the Company:
(a) Toth, the Toth Trust and CLT and any affiliated
person of any of them shall vote the shares of the Company held
by them in favor of such nominees to the Company's Board of
Directors as shall be nominated by the Board of Directors.
(b) Suchik and any affiliated person of him shall vote
the shares of the Company held by them in favor of two nominees
to the Company's Board of Directors as shall be designated and
nominated by Toth, the Toth Trust, and CLT.
Each of Suchik, Toth, the Toth Trust and CLT agree to execute any and
all proxies reasonably requested by another party hereto to further
evidence the voting rights granted pursuant to this Agreement. Each
of Suchik, Toth, the Toth Trust and CLT agree to cause any affiliated
person of any of them holding shares of the Company to execute any
and all proxies reasonably requested by another party hereto to
further evidence the voting rights granted pursuant to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Voting
Agreement to be duly executed by their duly authorized
representatives.
_______________________________
MARTIN S. SUCHIK
________________________________
STEVE TOTH, JR.
STEVE TOTH, JR. TRUST
By
Its
CLT
By
Its
Exhibit 10.4
STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of May 6, 1993, among
The Banker's Note, Inc., a Texas corporation (the "Company"), Steve
Toth, Jr., a Michigan resident ("Toth") whose address is 2100 North
Woodward West, Suite 201, Bloomfield Hills, Michigan 48403, and CLT,
a general partnership organized and existing under the laws of
Michigan ("CLT"), the address of which is 2100 North Woodward West,
Suite 201, Bloomfield Hills, Michigan 48403.
W I T N E S S E T H :
WHEREAS, the parties wish for Toth and CLT (singularly or
together, the "Purchaser") to become a substantial equity investor in
the Company, and the Company has agreed, in connection with (I) the
performance by Toth in providing the Company with a $1,500,000 line
of credit during its reorganization from August 7, 1991 to May 6,
1993, (II) the performance by Toth in purchasing the secured debt of
the Company on May 29, 1992 from Bank South, N.A. and reducing the
$720,000 principal balance of such debt by $117,000, and (III) Toth's
agreement to facilitate, or causing to be facilitated, a line of
credit for the Company for a three-year period beginning May 6, 1993,
to grant to Toth three options to purchase an aggregate of 1,600,000
shares (the "Option Shares"), of its Common Stock, $.01 par value per
share (the "Common Stock"), as more fully set forth herein, and the
Purchaser has agreed to purchase the Option Shares, to the extent
that it determines to exercise such options, in accordance with the
terms of this Agreement.
AND, WHEREAS, the execution of this Agreement was authorized,
and the eventual issuance of the Option Shares to the Purchaser was
contemplated, by the May 6, 1993 Order of the U.S. Bankruptcy Court
for the Southern District of New York which confirmed the Company's
Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code,
and therefore such execution and issuance are exempt from
registration under Section 5 of the Securities Act of 1933 (the
"Securities Act") pursuant to 11 U.S.C.A. ?1145.
NOW, THEREFORE, in consideration of the payment by the Purchaser
to the Company of $1.00 and of the premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as
follows:
SECTION 1. Options to Purchase the Shares; Purchase Price;
Closing. (a) Subject to the terms and provisions of this Agreement,
the Company hereby grants to Toth three options to purchase any or
all of the Option Shares (the "Options"). The first Option shall be
for 650,000 shares of Common Stock at $.25 per Option Share, the
second Option for 825,000 shares of Common Stock at $.15625 per
Option Share, and the third Option for 125,000 shares of Common Stock
at $.4375 per Option Share. Simultaneously herewith, Toth has
assigned all of his interest in the above-described second Option for
825,000 shares to CLT.
(b) Each Option shall be exercisable by the Purchaser, in
whole or in part (i) on or before May 5, 2000 (the "Exercise Date"),
(ii) for such number of Option Shares as shall be specified by the
Purchaser (such number of Option Shares, being hereinafter referred
to as the "Shares") and (iii) for a purchase price per Option Share
as specified above (such purchase price, being the "Price", and
multiplied by the number of Shares, the "Aggregate Price").
(c) The Purchaser may exercise the Options, by notice to the
Company on or before the Exercise Date. Such notice shall set forth
the number of Option Shares to be purchased from each Option, the
Price, the Aggregate Price and the Closing Date (as hereinafter
defined). Such Notice shall be conclusive and binding between the
parties absent manifest error. Upon the exercise of the Option, the
Company shall sell the Shares and the Purchaser shall purchase such
Shares from the Company, at a purchase price equal to the Aggregate
Price for the Shares.
(d) Upon the exercise of an Option, the purchase and sale of
the Shares (the "Closing") shall take place on the tenth business day
after the date of the notice given by the Purchaser pursuant to
subsection (b) above, or at such other time as the parties may agree
(the "Closing Date"). It is presently contemplated that the exchange
of documents, checks and stock certificates pursuant to such closing
be conducted by overnight mail (the "Closing"). Pursuant to the
Closing on the Closing Date, the Company will deliver to the
Purchaser, or its authorized representative, a certificate
representing the Shares, which shall be registered in the name of the
Purchaser, or its nominee, against payment therefor by the Purchaser
of the Aggregate Price of such Shares. Payment of the Aggregate
Price of such Shares on such Closing Date by the Purchaser shall be
made by depositing by Purchaser's check to the Company in immediately
available funds. A "business day" shall be any day other than a
Saturday, Sunday or other day on which banks are closed in any of
Smyrna, Georgia or Detroit, Michigan.
SECTION 2. Representations and Warranties of the Company. The
Company represents and warrants to the Purchaser that:
(a) The Company is a corporation duly incorporated and validly
existing under the laws of the State of Texas. The Company is in
good standing under the laws of such State and has all corporate
power and authority, rights, franchises, permits and other
authorizations necessary to make and perform this Agreement.
(b) This Agreement has been duly authorized by all necessary
corporate action of the Company, has been duly executed and delivered
by the Company, and is a legal, valid and binding agreement of the
Company enforceable against the Company, in accordance with its
terms.
(c) As of the date of this Agreement, the capital stock of the
Company consists of: (i) 20,000,000 shares of Common Stock, duly
authorized, of which 4,323,432 shares are outstanding and are validly
issued, fully paid and non-assessable (991,122 shares of such
outstanding shares are held by the Company as treasury stock); and
(ii) 2,000,000 shares of preferred stock, duly authorized, of which
none have been issued. The Company is not under any obligation or
agreement to issue or grant any of its capital stock or any options,
warrants or rights to purchase or otherwise acquire any of its
capital stock, other than as specifically referenced in the Form 10-K
(as hereinafter defined); and no claim based upon preemptive rights
can successfully be asserted against the Company.
(d) The Shares have been duly authorized and are validly
issued, fully paid and non-assessable; the Purchaser will not be
subject to personal liability by reason of being a holder of the
Shares; and no preemptive rights will be violated by the making or
performance of this Agreement.
(e) Neither the making nor the performance of this Agreement
constitutes a default under or a violation of any of the terms of the
Company's Articles of Incorporation or By-laws, or any material
provision of any indenture, mortgage or other agreement or instrument
to which the Company or any of its subsidiaries is a party, or any
applicable law, rule, regulation, order or decree of any government,
governmental instrumentality or court of competent jurisdiction.
(f) The Company has delivered to the Purchaser true copies of
the following, in each case as filed with the Securities and Exchange
Commission (the "SEC"):
(i) A copy of the Company's Annual Report on Form 10-K for the
year ended January 30, 1993 (the "Form 10-K").
(ii) A copy of the Company's Quarterly Report on Form 10-Q for
the quarters ended May 1 and July 31, 1993.
(iii) A copy of the Company's Current Report of Form 8-K dated
May 6, 1993.
Such documents so furnished (i) comprise all of the substantive
documents that the Company was required to, and did actually, file
with the SEC between January 1, 1993 and the date of this Agreement,
(ii) when filed were each in substantial compliance with the
requirements of the applicable SEC form; (iii) as of their respective
dates, did not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
contained therein not misleading, and (iv) do not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading, except to
the extent information contained in any such document has been
revised or superseded by a later filed such document.
(g) The consolidated financial statements set forth or
incorporated by reference in the Form 10-K present fairly in all
material respects the consolidated financial position of the Company
and its subsidiary at January 30, 1993 and February 1, 1992, and the
results of operations of the Company and its subsidiaries for the
three years ended January 30, 1993, all in conformity with generally
accepted accounting principles applied on a consistent basis; the
unaudited consolidated financial statements set forth in the
Company's quarterly reports on Form 10-Q for the quarters ended May 1
and July 31, 1993, present fairly the financial position of the
Company and its subsidiary at such dates and the results of
operations for the three-month period ended on such dates; the
consolidated financial statements set forth or incorporated by
reference in any subsequent annual report (on Form 10-K or such other
form as the SEC shall prescribe) filed with the SEC, shall present
fairly in all material respects the consolidated financial position
of the Company and its subsidiary at the date thereof and at any
previous date or dates required to be set forth therein, and the
results of operations of the Company and its subsidiary for the years
required to be set forth therein; the unaudited consolidated
financial statements set forth in any subsequent interim report (on
Form 10-Q or such other form as the SEC shall prescribe) filed with
the SEC shall present fairly in all materials respects the financial
position of the Company and its subsidiary at the dates thereof and
the results of operations for the interim periods ended on such
dates, all in conformity with generally accepted accounting
principles applied on a consistent basis; neither the Company nor its
subsidiary has knowledge of any material obligation or liability,
whether absolute, accrued, contingent or otherwise, that is not
reflected in such financial statements; and, since the date of the
most recent of such financial statements, there has been no material
adverse change in the financial condition or results of operations of
the Company and its subsidiary taken as a whole.
SECTION 3. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company that:
(a) To the extent that the Option is exercised the Purchaser
will purchase the Shares for its own account for investment and not
with a view to or in connection with the distribution or resale
thereof; provided, however, that the disposition of the property of
the Purchaser will at all times be within its control, subject to the
applicable requirements of the Securities Act and the provisions of
this Agreement. The Purchaser agrees that it will not offer to sell,
sell, or otherwise dispose of the Shares unless they are registered
pursuant to the provisions of the Securities Act or unless an
exemption from registration is available thereunder. The Purchaser
further agrees that it will comply with the provisions of the
Securities Exchange Act of 1934 with regard to its reporting its
status as a director of the Purchaser and its ownership in the
Company.
(b) This Agreement has been duly authorized by all necessary
corporate action of the Purchaser, has been duly executed and
delivered by the Purchaser, and is a legal, valid and binding
agreement of the Purchaser enforceable in accordance with its terms.
SECTION 4. Conditions to Closing. Upon the exercise of any
Option, the obligation of the Purchaser to purchase and pay for the
Shares on the Closing Date shall be subject, upon the affirmative
request of the Purchaser, to the following condition:
(a) The representations and warranties of the Company set
forth in Section 2 shall have been true in all material respects when
made and shall be true in all material respects on the Closing Date
as if made again on and as of such date, and the Purchaser shall have
received a certificate dated the Closing Date to that effect, signed
by its President and its Secretary or Treasurer.
SECTION 5. Covenants of the Company. (a) The Company will at
all times have authorized, and reserve and keep available, free from
preemptive rights, a number of shares of Common Stock sufficient for
the purpose of enabling it to satisfy the exercise of the Option
hereunder.
(b) As soon as practicable after the execution of this
Agreement, the Company's Board of Directors will elect two persons
designated by Toth and CLT to the Company's Board of Directors.
SECTION 6. Expenses. The Company and the Purchaser agree that,
whether or not the transactions hereby contemplated shall be
consummated, each such party will pay the expenses incurred by it in
connection with the transactions contemplated by this Agreement.
SECTION 7. Survival of Covenants, Representations and
Warranties. All representations, warranties, covenants and
agreements of the Company and the Purchaser contained in this
Agreement shall survive the delivery to the Purchaser of the Shares
and shall continue in full force and effect thereafter; provided,
however, that after the first anniversary of the delivery of the
Shares to the Purchaser hereunder, without prejudice to any rights
which the Purchaser may have other than under this Agreement, the
following provisions shall no longer continue in effect: Sections
2(a), 2(c), 2(f) and 2(g).
SECTION 8. No Assignment; Successors. No party may assign this
Agreement without the written consent of the other except as
specifically provided herein; provided, however, that the Purchaser
(but not any assignee of the Purchaser) may assign this Agreement
without the written consent of the Company to an affiliated person of
the Purchaser. All references to the Company or to the Purchaser
shall be deemed to include any corporation that succeeds to
substantially all of the business of the Company or the Purchaser,
respectively, by merger, purchase of assets or otherwise.
SECTION 9. Communications. All communications provided for
herein shall be delivered by overnight courier or telecopied and
shall be addressed:
If to Toth and/or CLT:
2100 North Woodward West
Suite 201
Bloomfield Hills, Michigan 48403
Attn: Steve Toth, Jr./Tom Marquis
Telecopy: (313) 646-0888
If to the Company:
4900 Highlands Parkway
Smyrna, Georgia 30082
Attn: Martin S. Suchik/Harold D. Cannon
Telecopy: (404) 432-2499
Such communication shall be deemed to have been duly given the day
after its delivery to the overnight delivery service or, if
telecopied, after transmission on a telecopier to the proper address.
Either party may change its address or addressee set forth above by
giving the other party notice of such change in accordance with the
provisions of this Section 9.
SECTION 10. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions hereof shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
SECTION 11. Governing Law. This Agreement shall be governed
by, and construed in accordance with the laws of Texas, the state of
incorporation of the Company.
SECTION 12. Counterparts. This Agreement may be executed in
any number of counterparts and each such counterpart shall be deemed
an original and all counterparts shall constitute together one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized
representatives.
THE BANKER'S NOTE INC.
By
Its
________________________________
STEVE TOTH, JR.
CLT
By
Its
Exhibit 10.5
FIRST AMENDMENT TO STOCK OPTION AGREEMENT
THIS FIRST AMENDMENT, dated as of December 30, 1993, to the
STOCK OPTION AGREEMENT dated as of May 6, 1993 (the "Agreement"),
among The Banker's Note, Inc. (the "Company") whose address is 4900
Highlands Parkway, Smyrna, Georgia 30082, Steve Toth, Jr., a
Michigan resident ("Toth") whose address is 2100 North Woodward West,
Suite 201, Bloomfield Hills, Michigan 48403, and CLT, a general
partnership organized and existing under the laws of Michigan
("CLT"), the address of which is 2100 North Woodward West, Suite 201,
Bloomfield Hills, Michigan 48403, is being executed for the sole
purpose of making the Steve Toth, Jr. Trust, a Michigan trust (the
"Toth Trust"), the address of which is 2100 North Woodward West,
Suite 201, Bloomfield Hills, Michigan 48403, a party to the
Agreement. Such Amendment is necessitated by the assignment by Toth
of all of his interest in the first and third Options described in
Section 1(a) of the Agreement to the Toth Trust, both of which
Options were exercised by the Toth Trust on the date of this First
Amendment. Accordingly, it is hereby agreed by the parties to the
Agreement that the Toth Trust shall be a party to the Agreement as if
the Toth Trust, an assignee of Toth like CLT, were an original
signatory thereto.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to the Stock Option Agreement to be duly executed by their
duly authorized representatives.
THE BANKER'S NOTE INC.
By
Its
________________________________
STEVE TOTH, JR.
STEVE TOTH, JR. TRUST
By
Its
CLT
By
Its
Exhibit 21.1
LIST OF SUBSIDIARIES OF VSI HOLDINGS, INC.
Visual Services, Inc., a wholly owned Georgia corporation
Vispac, Inc., a wholly owned Georgia corporation
Advanced Animations, Inc., a wholly owned Georgia corporation
BKNT Retail Stores, Inc., a wholly owned Georgia corporation
BKNT, Inc., a wholly owned Georgia corporation
Balmoral Group, a 99%-owned Georgia general partnership
The Company's 99% interest in Balmoral Group is held by BKNT, Inc., of which
19/99ths is jointly held by Martin S. Suchik and Harold D. Cannon for the
benefit of BKNT, Inc.; the remaining 1% interest in Balmoral Group is
personally held by Martin S. Suchik.
JD DASH, Inc., a wholly owned Georgia corporation
Pursuant to the requirements of Section 13 or 15(d) 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.
Exhibit 23.1
SIGNATURE AUTHORIZATION FOR ELECTRONIC FILING
(Regulation S-T, 232.302)
In connection with the Annual Report on Form 10-K of VSI Holdings, Inc. for the
year ended September 30, 1997, we hereby authenticate, acknowledge or otherwise
authorize the use of the Plante & Moran, LLP signature in typed form on our
independent auditor's report dated December 5, 1997 and on the Consent of
Independent Auditors dated January 9, 1998 included therein.
January 9, 1998
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Annual Report on Form 10-K of our
independent auditors' report dated December 5, 1997 on the financial
statements of VSI Holdings, Inc. for the year ended September 30, 1997.
/s/ PLANTE & MORAN, LLP
Ann Arbor, Michigan
January 9, 1998
