UNITED STATES
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, 1998
[ ] 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)
Registrant's telephone number, including area code:
(248) 644-0500
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 (4,925,678 shares), as of
December 18, 1998, was approximately $22,165,551 (at closing
asked price of $4.50).
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 32,940,665 shares of Common Stock, $.01 par
value, outstanding on December 18, 1998, excluding 7,954,355
treasury shares.
DOCUMENTS INCORPORATED BY REFERENCE--None
Item 1. Business
VSI Holdings, Inc. ("VSIH" referred hereinafter as the "Company")
presently consists of wholly owned subsidiaries/divisions in the
Marketing Services and Entertainment sectors. Reference is made to
Note 13 of Notes to Consolidated Financial Statements for
financial information about industry segments.
The Company employs approximately 1,025 individuals in all
operations, none of which are covered by an employment contract,
nor are represented by a union. To date, the Company believes it
has been successful in its efforts to recruit qualified
employees, but there is no assurance that it will continue to be
as successful in the future. The Company believes relations
with its employees are good.
Purchase of The Performance Systems Group. In February 1998,
the Company acquired the assets of The Performance Systems Group
for approximately $4.5 million, consisting of 280,000 shares of
the Company's common stock and $2.6 million in cash. Additional
contingent consideration of $1,000,000 may be due in June 2000
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 was accounted for under the purchase method. See
Note 1 of Notes to Consolidated Financial Statements.
Discontinued Operations. In June 1998, the Company decided
to sell the subsidiaries constituting the retail sector.
Subsequently, it was sold to Martin S. Suchik and certain of his
affiliated entities in exchange for a surrender of 143,750 shares
of the Company. As a result, the Company no longer has any
involvement in the retailing of women's apparel. The Company
recognized a post-tax loss on discontinued operations of $428,000,
and a net gain on the sale of $271,000. See Note 15 of Notes to
Consolidated Financial Statements. The Company does not expect
any other operating losses from this activity. See Item 13
Contingent Liability for Discontinued Operations.
MARKETING SERVICES SECTOR
Visual Services, Inc.
Vispac, Inc.
Performance Systems Group (PSG) (acquired February, 1998)
VSIH's Marketing Services sector provides a broad range of
marketing support, primarily to automotive manufacturers and
their dealership networks in education and training, corporate
communications and administrative services areas.
These programs and services focus on researching and assessing
organizations and their customers and applying this knowledge to
help the Company's clients define their corporate mission,
strategic objectives and methods to achieve these objectives.
History
As of October 1, 1996, Martin S. Suchik, was the President of The
Banker's Note, Inc. ("TBN"), a public company incorporated in
April 1981, that operated retail women's apparel stores. Prior
to 1997, Suchik's uncle - Steve Toth, Jr., the President and Chief
Executive Officer of the Company and his affiliates ("Toth") held
a 33% interest in TBN as the result of the provision of financing
which had started in 1991. In February 1997, TBN acquired Advanced
Animations, Inc. ("AAI"), a company controlled by Toth, for
7,563,077 shares of TBN stock and Toth became the controlling
shareholder. In April 1997, he Company reincorporated in Georgia
from Texas, changed its corporate name to "VSI Holdings, Inc."
(VSIH) from "The Banker's Note, Inc.", and placed its women's
apparel retailing business in an operating subsidiary, BKNT Retail
Stores, Inc. ("RSI"). As of July 1 and September 30, 1997, the
Company acquired Vispac, Inc. ("Vispac") for 6,200,000 shares of
VSIH stock and Visual Services, Inc. ("VSI") for a net of
14,285,715 shares of VSIH stock. Both Vispac and VSI were also
controlled by Toth. See Note 1 of Notes to the Consolidated
Financial Statements.
Steve Toth, Jr. founded VSI in 1962 to design and sell 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 expertise
proved 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 VSI created, implemented, and
administered the first major automotive cash-back rebate award
program in history. Rebate checks were issued to purchasers of
vehicles who provided proof of purchase and submitted claims,
which VSI validated. Rebates and cash incentives have become a
standard marketing practice for many automotive and consumer
product manufacturers. Since 1976, VSI has, on behalf of and
funded by its customers, administered over $40 billion in cash
rebates and incentive awards and, in the process, has
established a telemarketing infrastructure 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 VSI's development as a fully
integrated provider of communications-related services with a
diverse and encompassing array of products and services.
As the automotive industry evolves and manufacturers
increasingly rely on vendors to provide services previously
performed in-house, VSI continues to expand its services and
leverage off past experiences. New engagements often result
as outgrowths of previous projects. VSI's range of services
include short-term administrative functions, such as data
processing, as well as the intricate planning and implementing
of national training programs and product launches.
Vispac was formed in 1968 to provided warehousing and distribution
services related to marketing fulfillment services.
Products and Services Overview
The Marketing Services sector's projects range from simple,
short-term engagements to highly complex assignments lasting a
number of years and involving many competencies. These services
are delivered using an extensive array of disciplines, such as
customer relationship marketing via database management and
ongoing customer contact and follow-up, interactive technologies
(including video and CD-ROM), videoconferencing, film, slides,
live theater, computer graphics and animation, print multimedia,
and global satellite broadcasts.
The Marketing Services sector's products and services can be
grouped into six major categories.
1. Education and Training
VSI has targeted the 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
financial commitments to educate their dealership personnel and
to promote effective, customer-oriented processes in
dealerships. VSI is a provider of educational resources to
effect these improvements. VSI's curriculum design experts
apply contemporary learning theories and state-of-the-art
technology to create processes and materials that will
effectively educate course participants. VSI's training programs
use interactive technology, such as Interactive Distance
Learning (IDL) (a live, satellite based, two way interactive
broadcast technology), designed to improve employee productivity
in the areas of product knowledge, team building, sales skills,
personal skills and behavioral development.
2. Change Process
Change Process is the systematic approach towards envisioning
and reaching elevated goals and objectives. Changing the
culture of an organization is never easy. The problem is
compounded with automotive manufacturers, who must not only
transform their own large bureaucracies, but also their networks
of thousands of independently owned dealerships.
One example of VSI's expertise in change process is its
development, implementation and operation of Ford Motor
Company's XL2000: Excellence in Leadership Learning Center.
Ford's XL2000 is a change process learning program, the goal of
which 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. VSI managed the design and construction of the
42,000 square foot, XL2000 Leadership Learning Center.
Curriculum design, facility operations and training facilitation
are also provided by VSI. Thousands of Ford Motor Company and
dealership personnel have attended the intensive three and a
half-day seminar.
3. Interactive Technology
Over the last three years VSI has developed and broadcast
approximately 400 Interactive Distance Learning (IDL) course
hours. This technology provides live video of an experienced
trainer to various remote locations, along with two-way audio.
Thus, students can ask questions, discuss problems and be tested
on the subject matter. IDL has aided the automotive industry,
because the training is conducted at the dealership, so personnel
do not have to lose valuable time away from the job traveling to a
conference center. VSI develops the course curriculum (including
audio-visual support) and hires the trainers.
VSI uses technology as part of a 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.
An example of VSI's use of interactive technology is its role
helping an automotive manufacturer sell branded vehicle
accessories. A customer who has received a personalized catalog
with accessories for his vehicle can call a toll free line and
get answers to questions about the products, as well as ordering
them. VSI then electronically contacts the accessory
manufacturer who ships the products directly to the consumer.
4. Space-Based Marketing
Space-based marketing refers to marketing efforts that occur at
various places convenient to the targeted audiences. VSI
develops and executes trade shows and exhibits, as well as
comprehensive merchandise display systems. VSI produced the
automotive industry's first ride-and-drive learning experience
for Porsche sales consultants in 1981. A ride-and-drive is an
opportunity for sales consultants (or consumers if desired by
the manufacturer) to learn about a vehicle by driving it (and
sometimes also competitive vehicles) on a specially designed
course. Since then, hundreds of thousands of automotive
dealership personnel have taken part in ride-and-drives for a
variety of manufacturers. VSI also develops innovative marketing
tools on the World Wide Web. An example was VSI's development of
a full product catalog for an automotive manufacturer, which
allowed consumers to configure and price the vehicle of their
choice and locate the nearest dealer.
5. Integrated Logistics
Integrated Logistics refers to start-to-finish services for
printing, warehousing and distributing materials to intended
recipients. Vispac provides marketing logistical support
primarily to automotive manufacturers. Vispac stores various
marketing materials for the manufacturer and then distributes
them, as needed, to company offices and dealerships throughout
the world. 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. For example,
one shipment might go only to dealers in a particular geographic
area, while another might go only to dealerships with a certain
sales volume. Vispac maintains numerous databases to provide
this customized distribution, as well as complete tracking and
follow-up systems. Vispac uses the U.S. Postal Service and a
variety of commercial freight operators to physically ship the
materials.
6. Consulting Services
VSI provides a wide range of support, from custom-tailored
change process development to 360 assessments. Change process
development forms a plan for an individual to improve weak areas
of job performance or for an organization to become more
efficient and to better serve its customers. A 360 assessment
helps an individual identify and improve weak areas of job
performance through measured evaluations by superiors, peers and
subordinates. Consulting Services also includes on-site
evaluation, follow up, and the utilization of a variety of
analytical tools. The Company's automotive consultants assist
dealerships in developing best-practice systems, and enhance
dealership relationship marketing and change process
initiatives.
Customers
Both VSI and Vispac operate primarily in the automotive
industry. The various divisions of Ford, General Motors, and
Nissan accounted for 78%, 71%, and 70% of the revenues of the
Company for fiscal years 1998, 1997, and 1996 respectively. The
loss of any of these customers would have a material adverse
effect on the Company. While these companies have historically
been steady customers of the Company, there can be no assurance
that such relationships will continue.
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
manufacturers. 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 undue pressure to buy. The
Company's services provide the dealers and their sales forces
with the training and knowledge critical to effective selling in
this dynamic environment.
The number of suppliers to the automotive industry is dwindling.
Manufacturers are demanding systems from their suppliers rather
than individual parts. For example, a manufacturer previously
might buy a door from one supplier, electronic controls for the
door from another supplier and the window from yet a third.
Today the manufacturer is more likely to purchase the entire
door/electronics/window system from a single supplier. This
trend is causing suppliers to consolidate and streamline their
operations. As a turnkey business communication provider to the
automotive industry, the Company's management believes it is well
positioned to continue to compete in this highly competitive
environment.
Industry and Competition
The practice of turning essential but often non-core business
processes over to third party vendors is expected to continue.
The Company expects to continue 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 call
center telemarketing industry through integrated telemarketing.
This is the simultaneous provision of inbound and outbound
service (calls from and to customers) with real-time (while the
customer is on the phone) access to customer databases. VSI's
telemarketers are skilled in product specifications,
troubleshooting, and providing professional support.
As a consolidator of business communications and services, the
Company believes that the use of distance learning technology
will continue to grow. More and more corporations are using
distance learning training as an alternative to 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 agencies, incentive and
distribution fulfillment and marketing services firms. These
firms generally provide a limited range of services that compete
only with a portion of the Company's services. Management
believes that no single company or small group of companies
dominates the marketing services industry.
Competition in the Marketing Services sector is intense, and the
Company expects that competition will increase. The Company
competes on the basis of service quality, creativity and price.
The Company competes against many companies, some of which have
significantly greater financial resources than it has. There can
be no assurance that the Company will have the financial
resources, technical expertise or marketing, distribution and
support capabilities to compete in the future. Competitive
pressures could reduce the demand for the Company's products and
services, cause the Company to reduce prices, increase expenses or
cause delays or cancellations of customer orders, any of which
could adversely affect the Company's business and results of
operations.
In October 1998, the Marketing Services Sector had backlogs of
approximately $80 million, all of which is expected to be
completed by the coming fiscal year. This compares to
approximately $85 million in October 1997. The Company considers
backlog to represent firmly committed business. The forward-
looking estimates of the firmness of such orders is subject to
future events (e.g. cancellation of a purchase order by a client
due to strike, budget constraints, or other client internal
matters) which may cause the amount of the 1998 backlog actually
fulfilled to change. The principal markets for the Company's
services are the North American operations of automobile
manufacturers and their distribution networks, including
automotive dealerships. Services are sold directly to the
manufacturer and/or dealer. The Company uses a variety of
distribution methods to deliver its services, including the U.S.
Postal Service, commercial freight services, the Internet and
satellite transmissions.
There are currently no products in development that would
require significant financial investment to bring to market.
Materials have historically been widely available from numerous
sources. The Company has no material patents, trademarks,
licenses, franchises, or concessions. There is no significant
seasonality in the Marketing Services sector. The Marketing
Services sector competes primarily in the automotive industry,
where slow payment of invoices is a standard practice. Bank lines
of credit are used to finance receivables.
THE ENTERTAINMENT SECTOR: ADVANCED ANIMATIONS, INC. (AAI) AND
ADVANCED EXHIBITS DIVISION (AE)
AAI provides commercial-based, compliant-motion technology for
3-D animatronic (robotic) figures for display in theme parks,
casinos, retail and other entertainment venues. AAI uses
hydraulic motion technology to create lifelike movement. This
technology has attracted projects such as the Terminator 2
exhibit at Universal Studios, Florida and Atlantis at the
Forum Shops at Caesars Palace in Las Vegas. All manufacturing
and design work occurs at AAI's Stockbridge, Vermont, facility.
As an example of its technology, AAI's Drunk Driving Simulator
is in its 11th year of touring the U.S. The tours, sponsored by
Chrysler Corporation and supported by Mothers Against Drunk
Driving, visits nearly 400 high schools per year.
AE, a division of AAI, in partnership with United Exhibits Group
of Denmark, has developed "Missing Links -- alive!", a touring
exhibit that debuted in the 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. The Company has a ten year exclusivity
agreement to operate the tour of "Missing Links - alive!"
exhibit with the United Exhibits Group.
Advanced Animations' products are sold on a custom made-to-order
basis directly to companies worldwide.
There are currently no products in development which would
require significant financial investment to bring to market.
Materials have historically been widely available from numerous
sources. The Company has no material patents, trademarks,
franchises or concessions. There is no significant seasonality in
the Entertainment sector. The Company receives payments as work
progresses on custom projects, so there are no significant
working capital issues. AAI has no customers who constitute a
significant portion of the Company's revenue.
In October 1998, the Entertainment sector had backlogs of
approximately $1.5 million, all of which is expected to be
completed in the coming fiscal year. This compares to
approximately $1.6 million in October 1997. The forward-looking
estimates of the firmness of such orders is subject to future
events which may cause the amount of the 1998 backlog actually
fulfilled to change.
Competition in the Entertainment sector is intense, and the
Company expects that competition will increase. The Company
competes on the basis of product quality, creativity and price.
There can be no assurance that the Company will have the
financial resources, technical expertise or marketing,
distribution and support capabilities to compete in the future.
Competitive pressures could reduce the demand for the Company's
products and services, cause the Company to reduce prices,
increase expenses or cause delays or cancellations of
customer orders, any of which could adversely affect the
Company's business and results of operations.
Item 2. Properties.
The Company headquarters is located in Bloomfield Hills,
Michigan and consists of 103,000 square feet. The current lease
continues until February 2003 and has a five-year renewal
option. This facility is also the base for subsidiary VSI, which
also leases a training facility/office of 38,000 square feet in
Rochester Hills, Michigan, a training facility/office of 42,000
square feet in Allen Park, Michigan, a 23,000 square foot storage
facility in Livonia, Michigan and a 12,000 square foot sales
office in Cypress, California. VSI purchased a 45,000 square foot
office building in Livonia, Michigan, in December 1997.
Vispac is based in a 149,000 square foot office/warehouse
building in Livonia, Michigan that it leases from a partnership
that is, directly or indirectly, owned by a Toth family
investment partnership. Vispac owns two warehouse facilities in
Livonia, Michigan of 92,000 and 93,000 square feet that
collateralize mortgages of $441,000 and $2,452,000; Vispac also
leases a 175,000-square foot warehouse in Ypsilanti Township,
Michigan.
The Entertainment sector is based in a 26,900 square foot
office/manufacturing plant in Stockbridge, Vermont. The
property is owned by VSI and is leased to AAI.
The Company generally considers the productive capacity of each
facility operated by each of its industry segments to be
adequate and suitable for their requirements.
Item 3. Legal Proceedings.
The Company is periodically involved in routine proceedings. There
are no legal matters, existing, pending, or threatened, which
management presently believes could result in a material loss to
the Company.
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 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:
Fiscal Quarters High Low
First Quarter, 1997 $1.18 $ .38
Second Quarter, 1997 1.50 .81
Third Quarter, 1997 4.25 1.00
Fourth Quarter, 1997 6.00 2.88
First Quarter, 1998 $7.13 $4.75
Second Quarter, 1998 7.13 6.06
Third Quarter, 1998 8.13 6.25
Fourth Quarter, 1998 7.25 4.88
Based on past requests for proxy materials, the Company believes
that it has substantially more beneficial holders of its Common
Stock than the approximately 390 "of record" holders on December
18, 1998. The Company currently reinvests all earnings rather
than paying cash dividends and for the foreseeable future, intends
to continue that policy. The Company's loan agreements
prohibit the payment of cash dividends without prior bank
approval. There were no dividends declared in the year ended
September 30, 1998.
Item 6. Selected Financial Data.
BALANCE SHEET DATA
As of
(in thousands) Sep. 30 Sep. 30 Sep. 30 Sep. 30 Sep. 30
1998 1997 1996 1995 1994
Working Capital $ 9,121 ($ 1,969) $ 9,105 $10,368 $11,782
Total Assets 89,555 77,069 66,856 67,103 42,724
Long-Term Debt 19,466 5,281 1,900 1,406 564
Total Liabilities 69,413 65,402 36,784 41,116 24,453
Stockholders'
Equity 20,142 11,667 28,072 25,987 20,524
See footnotes below 1 2 & 5 2 2 1 & 4
OPERATING DATA Year Ended
(in thousands,
except per Sep. 30 Sep. 30 Sep. 30 Sep. 30 Sep. 30
share) 1998 1997 1996 1995 1994
Net Sales $163,426 $130,526 $128,213 $112,059 102,081
Income from Continuing
Operations 9,211 9,658 9,141 3,096 8,229
Income from Continuing Operations
Per Share (3) 0.28 0.20 0.18 0.10 0.17
Number of Shares 32,851 32,784 32,767 32,453 32,354
See footnotes below 1 2 2 2 1 & 4
The Company paid no dividends on its Common Stock during any of
the periods presented.
1. September 30, 1998 and 1994 balance sheet data and operating
data exclude BNKT Retail Stores, Inc. accounts.
2. September 30, 1997, 1996, and 1995 Balance Sheet data include
the accounts of BKNT Retail Stores, Inc. The operating data
excludes the operations of BKNT Retail Stores, Inc.
3. Pro Forma Earnings per Share Information for 1997 through 1994:
See Income Statement of Consolidated Financial Statements
4.Certain information (related to Vispac, Inc. for year ended
September 1994) is unaudited.
5. See Item 13 Declared Distributions to Stockholders regarding
distributions of previously taxed undistributed earnings to the
stockholders of acquired subsidiaries. This reduced working
capital and stockholders' equity.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OPERATING RESULTS
Marketing Services Sector:
Year Ended September 30, 1998
Revenues from the Marketing Services sector increased 26% to
$155,949,000 for the year ended September 30, 1998 from
$124,020,000 last year. This increase was due in large part to
the pilot phase of a ride & drive program for an automotive
manufacturer. The program, which took place in Denver, and
Washington D.C. provided over 10,000 consumers with an opportunity
to drive nearly every type car and truck sold by the manufacturer,
as well as selected competitive products. Over 40,000 test drives
were taken in the two cities. VSI drew from the full range of its
in-house capabilities to create, produce and field the program
within a 90-day timeframe. The Company also completed the launch
of a new truck product for an automotive manufacturer and was
immediately awarded the assignment to launch two new 1999 model
year trucks.
Income from Operations from the Marketing Services sector
increased 27% for fiscal 1998, to $14,834,000, up from $11,674,000
the year before. The increase is attributable to an increase in
sales and the efficient utilization of overhead. Because automotive
manufacturers have focused on core competencies and continue to
outsource services previously performed internally, the Company
experienced additional business opportunities. There can be no
assurances this will continue in the future.
Year Ended September 30, 1997
Revenues from the Marketing Services sector increased 4% to
$124,020,000 for the year ended September 30, 1997 from
$119,489,000 last year. The increase is attributed to the
addition of new assignments from major automotive manufactures.
Assignments included new automotive vehicle introductions
(referred to as a "launch") to dealership personnel, and a sizable
consulting project to occur at automotive dealerships nationwide.
The consulting project is designed to assist dealers in the
development and maintenance of more effective business practices.
The launch experience stimulated interest in the Company's ability
to serve as a turnkey provider of the many marketing services the
Company provides. In addition, the launch served to underscore
the emerging role that events like are likely to play in future
automotive manufacturers marketing campaigns.
Income from operations from the Marketing Services sector
increased 27% to $11,674,000 for the year ended September 30, 1997
from $9,178,000 for the prior year. This increase is attributable
to three factors: (1) opportunities (such as new vehicle launches)
to more extensively utilize a broader range of the Company's
competencies, (2) the Company also benefited from labor
efficiencies that resulted from experience within the education
and training segment of the business, and (3) controlled personnel
costs. Because automotive manufacturers have focused on core
competencies and continue to outsource services previously
performed internally, the Company experienced additional business
opportunities. There can be no assurances this will continue in
the future.
Year Ended September 30, 1996
Revenues from the Marketing Services sector increased 14% 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
a telemarketing campaign designed to encourage consumers whose
vehicle leases were about to expire to drive and lease a new
vehicle by the same manufacturer, 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 from the Marketing Services sector
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 such as simplifying and
streamlining the print and video production process associated
with the education and training business as well as controlling
personnel cost.
Because automotive manufacturers have focused on core
competencies and continue to outsource services previously
performed internally, the Company experienced additional
business opportunities. There can be no assurances this will
continue in the future.
Entertainment Sector:
Year Ended September 30, 1998
Revenues from the Entertainment sector increased 15% to $7,477,000
for the year ended September 30, 1998 from $6,506,000 for the
prior year. The increase was due primarily to new animation work
received from Universal Studios Hollywood for T2:3D "Battle Across
Time" attraction and for the E.T. Adventure attraction coming to
Universal Studios - Japan. The Entertainment sector's sales
represent discretionary spending on the part of its customers
and their customers. Because of this, projects are sometimes
delayed; conversely several different projects can be awarded in
a short period of time. The revenue and earnings of the
Entertainment sector are highly variable, and will probably
continue to be so.
Income from operations from the Entertainment sector increased 58%
to $1,584,000 for the Year Ended September 30, 1998 from
$1,002,000 for the prior year. The increase was due primarily to
efficiencies achieved from utilization of existing tooling and
technologies on repetitive projects. It is difficult to
anticipate trends.
Year Ended September 30, 1997
Revenues from the Entertainment sector 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
resulting from the lack of client site readiness and availability
for the Chung Ho project to deliver in Asia, and the delay in a
contract award and the subsequent build and installation schedules
of the Universal Studios - California project.
Income from the Entertainment sector 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 above mentioned
delays.
Year Ended September 30, 1996
Revenues from the Entertainment sector 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 receiving the T2:3D
project from Universal Studios - Florida and a major travelling
Dinosaur project to deliver in Korea.
Income from the Entertainment sector 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.
LIQUIDITY AND CAPITAL RESOURCES:
Operating Activities.
The Company's two 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. It also experiences a relatively
steady cash flow; there is historically slightly increased need
for working capital in the late summer and early autumn as new
vehicle communications services are provided. This results in
greater bank borrowings during that time of year; the lines of
credit are designed to meet any such need the Company may have.
The Entertainment sector requires relatively little capital for
operating purposes, because its clients typically pay sizable
deposits before projects begin, and make progress payments during
project fabrication. Sales represent discretionary spending on
the part of its customers and their customers. Because of this,
projects are sometimes delayed; conversely several different
projects can be awarded in a short period of time. The revenue
and earnings of the Entertainment sector are highly variable, and
will probably continue to be so.
Operating Expense. The Company's operating expenses have grown
from $62,687,000 in 1997 to $74,810,000 in 1998. The rate of
growth in operating expenses is less than the rate of growth in
revenues. This increase is mainly attributable to personnel costs
to support the work load generated by additional sales. The Company
intends to pursue its continued growth of its business, however,
there can be no assurance that such growth will be achieved. The
Company's future operating results will depend in part on management's
ability to manage any future growth and control expenses. An
unexpected decline in revenues, without a corresponding and timely
reduction in staffing and other expenses, or a staffing increase that
is not accompanied by a corresponding increase in revenues, could
have a material adverse effect on the Company's operating results.
Generally, all obligations of the Company are met out of cash
flow generated from operations and bank lines of credit. For the
fiscal year ended September 30, 1998, Company operations generated
$12,489,000 cash flow. The Company anticipates continuing to be
able to meet its obligations.
In the Marketing Services sector, the Company expects continued
growth in the areas of Education and Training, Interactive
Technology, and Space Based marketing. The Company presently
expects operating income from the Marketing Services and
Entertainment sectors to increase in fiscal year 1999. Toward
the end of fiscal year 1998, the Entertainment sector began to
receive revenues from the first of the Missing Links exhibits.
The future amount of revenue will depend on attendance at
museums in the United States and from a second exhibit launched
in Asia in December 1998.
In the non-automotive arena, The OZ Entertainment Company (OEC)
awarded VSI Holdings a multi-year contract to become the
marketing services agency-of-record and to provide the animated
character production for The Wonderful World of OZ Theme Park
and Resort. This new family entertainment complex is slated to
open in Kansas in 2002. The launch effort will draw from a full
range of Company competencies, including website design and
administration, education and training, site-based marketing,
public relations and advertising support and relationship
marketing. The Company's arrangement with OEC will impact
revenues beginning in fiscal 1999.
Discontinued Operations. In June 1998, the Company decided to
sell the subsidiaries constituting the Retail sector. As a
result, the Company no longer has any involvement in the
retailing of women's apparel. Pre-tax losses from operations of
the Retail sector were $648,000, $739,000, and $3,536,000 for the
years ended September 30, 1998, 1997, and 1996 respectively.
The Company does not expect any future losses from this
activity. See Item 13 Contingent Liability for Discontinued
Operations.
Investing Activities.
The Marketing Services sector acquired a building in December
1997. Capital expenditures for furniture, fixtures and
equipment, and leasehold improvements for the Marketing Services
sector are expected to decline in fiscal year 1999. The
Entertainment sector requires no material capital improvements
in fiscal year 1999 except for incremental investment for
Missing Links exhibits.
Purchase of the Performance Systems Group Inc.
In February 1998, the Company acquired the assets of The
Performance Systems Group for approximately $4.5 million,
consisting of 280,000 shares of the Company's common stock
and $2.6 million in cash. Additional contingent consideration
of $1,000,000 may be due in June 2000 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 was accounted for under
the purchase method.
In the summer of 1998, the Company committed to a $4 million
investment in a limited partnership (as a limited partner) which
will develop the Wonderful World Of Oz theme park. In September
1998, the Company invested $400,000. Subsequent to year end, the
Company invested an additional $1.8 million in the theme park.
Management expects to invest the remaining $1.8 million during the
fiscal year ending September 30, 1999.
Subsequent to year end, the Company invested $3.5 million in
convertible preferred stock in a private placement offering of a
company engaged in developing Internet-based education for
colleges and universities.
See the discussion in Item 13 regarding related party notes
receivable and payable and advances, and declared distributions
to stockholders.
Financing Activities.
At September 30, 1998, the Company had lines of credit totaling
$45,000,000; interest on these lines were at London Inter-Bank
Offered Rate ("LIBOR") plus 1.5%; at September 30, 1998 the
interest rate was 7.125%. At September 30, 1998, the outstanding
balances on the lines of credit were $25,139,000. These lines
of credit had covenants restricting the Company from borrowing
elsewhere, loaning or guaranteeing a loan of another company
without the prior written consent of the bank; transferring
assets except in the ordinary course of business; and declaring
dividends. Other covenants mandate 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.
Visual Services acquired a building in December 1997. In October
1998, the Company closed on a three-year term loan for $1,100,000
and a seven-year balloon mortgage for $2,480,000. These loans had
interest rates of 6.52% and 6.3% respectively. Shortly before the
end of fiscal year 1997, Vispac, Inc. acquired a warehouse
financed by a 7-year balloon mortgage of $2.5 million. No other
long-term debt financing for facilities, or any accelerated
payment of existing long-term debt, is expected in fiscal year
1999.
The Company has had a long term relationship with its current bank.
Through the years, it has provided financing and lines of credit
for the Company. There can, however, be no assurances that the
lines of credit will be renewed when they mature on January 31 and
June 30, 1999. If the Company is unable to renew the line of
credit, other sources of financing would be sought, primarily a line
of credit from another banking institution.
Since the Company is a net borrower of funds, minimal cash
balances are kept on hand. At any point in time, the Company
may have more money in checks outstanding than the cash balance.
When checks are presented for payment, the bank notifies the
Company, which borrows on its lines of credit to cover the
checks.
On a long-term basis, increased financing may be necessary to
fund any large project awarded to the Company, or any
acquisitions the Company may make. While there are no current
plans to conduct an offering of stock, in the long term, that
cannot be ruled out.
Capital Activities.
Several employees exercised stock options for 64,000 shares in
fiscal year 1998. In fiscal year 1998, the Company granted
incentive options for 518,000 shares to employees at a weighted
average price of $6.70 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
500,000 shares. Awards of 462,375 shares were granted under
the restricted stock plan during fiscal year ended September
30, 1998. The shares vest one, two and three years from the
date of grant in three equal parts. 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 1999.
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 in fiscal years
1997 and prior. 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 to
repurchase their shares.
The Company believes that cash flows from operations along with
bank borrowings will be sufficient to finance the Company's
activities in 1999. The Company has no current plans to conduct
an offering of its shares to the public in fiscal year 1999.
280,000 shares of stock were issued in connection with the
purchase of The Performance Systems Group in February 1998. These
shares are subject to a put option whereby the holder of the shares
can sell the shares back to the Company at a fixed price per share
of $7.50 or a total of $2,100,000. This option is exercisable in a
defined period, and management views the payment of this amount as
probable in April 1999. (See Item 1. for further information on the
purchase of Performance Systems Group).
Year 2000 (Y2K)
Most computer systems were originally designed to utilize a two
character field (or string of data) to reference any given year
in the 20th century. If not corrected, many computer systems
could fail or produce erroneous results. On January 1, 2000
computer systems may confuse "00" (meant to be 2000) as 1900.
A product defined as being Year-2000 compliant will not produce
errors in date data related to the year change from December 31,
1999 to January 1, 2000.
State of Readiness
The Company's plans for preparing and testing its computer
systems for Y2K compliance have been approved by its management,
and the project is being funded in the normal course of the
Company's operations. The Company expects to complete remediation
of the Year 2000 issue for all Information Systems by June 1999,
although no assurance can be given of the timely completion of
this project. The Company estimates that the software remediation
phase is more than 70 percent complete at November 2, 1998, and
the remaining conversions are on schedule to be completed by
spring of 1999.
The Company has identified 5 distinct areas for its Year 2000
compliance efforts which involves all areas of the its business:
Critical Business Computer Systems: These include computer
systems and applications relating to operations such as
financial reporting, human resources, sales, purchasing and new
business development.
Suppliers: The Company is taking steps to determine the status
of the Y2K compliance plans of its significant vendors. For
instance, surveys have been sent to all significant vendors with
whom the Company interacts, requesting that they report their
respective level of Y2K compliance. The Company is currently
monitoring the progress of those business-critical vendors who are
still working towards achieving compliance.
End-User Computing: The Company's plans include Y2K compliance
of desktop and laptop computers used throughout the Company and
replace or repair all non-complaint computers and related
software.
Application Development: The Company is addressing the
compliance regarding all applications development for internal
and external clients by modifying or replacing existing
applications.
Technical Infrastructure: The Company has established a testing
facility for testing system infrastructures, internal phone
systems, local area networks, electronic data center, e-mail
systems and web hosting. Components are tested in the lab
following Y2K compliance certification with suppliers. This
should be the last step in Y2K verification.
Y2K Programming Timing
Plan Date Present Status
Critical Business Computer Systems 2/99 70%
Suppliers 2/99 50%
End-User Computing 1/99 98%
Application Development 3/99 70%
Technical Infrastructure 6/99 15%
- ----------------------------------------------------------------
Y2K Costs
The Company estimates that it will spend about $400,000 during
the next fiscal year for its Y2K compliance efforts. This
estimate is also as of September 30, 1998, and excludes the time
that may be spent by management and administrative staff in
guiding and assisting the information technology effort
described above. All Y2K related costs are expected to be
funded through operating cash flows. The cost of the project is
based on the Company's estimates.
Y2K risks: The most reasonably likely worst case scenario for
the Company with respect to the Y2K problem is the failure of a
third parties such as: energy, computer and component hardware, as
well as other potential product or service suppliers failing to
provide products and/or services. The failure to correct a
material Year 2000 problem could result in an interruption in, or
a failure of, certain normal business activities or operations.
Such failures could materially and adversely affect the Company's
result of operations, liquidity and financial condition. Due to
the general uncertainty inherent in the Year 2000 problem,
resulting in part from the uncertainty of the Year 2000 readiness
of third-party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Year 2000
failures will have a material impact on the Company's result of
operations, liquidity or financial condition. The Year 2000
Project is expected to reduce the Company's level of uncertainty
about the Year 2000 problem, and in particular, about the Year
2000 compliance and readiness of its material third parties. The
Company believes, but can not assure that with the completion of the
Project as scheduled, the possibility of significant interruptions of
normal operations should be reduced.
Readers are cautioned that forward-looking statements contained
in the Year 2000 update should be read in conjunction with the
Company's disclosures under the heading: "CAUTIONARY STATEMENT
FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995".
Y2K Contingency Plan:
Currently, the Company does not anticipate the need for a
contingency plan. If necessary, a decision to create and implement a
contingency plan is expected to be made by summer 1999.
Outlook
The U.S. economy's continued control of inflationary factors and low
interest rates, added to low unemployment argues for a relatively stable
market. Most automotive industry forecasts show approximately
15,000,000 new automobile and truck sales in the United States in 1999.
This market has been relatively consistent over the past few years. Over
90% of the Company's revenues are directly associated with the automotive
industry. Based on most forecasters the auto industry is not running "out
of steam". To date, the economic crises through out the world has not been
as damaging to automotive sales as some had predicted.
In the Marketing Services sector, the alternatives represented
by technology driven communication and customer contact, not
readily available before, is providing 10-12% annual growth of
these diversified services. If manufacturers continue to
outsource, the Company has an opportunity to provide additional
services to these manufacturers, advertisers, and other
marketers representing growth opportunity for the Company.
Manufacturers want solution providers such as Visual Services,
that identify their customer base, create and execute strategic
tactical marketing, distribute and fulfill and ultimately
evaluate results to justify the expenditure. The Company is
poised to participate in this shift to "New Marketing" and how
the world goes about conducting business and accessing
information.
The growth in marketing services and the accelerated integration
of technology, particularly internet related, is a positive for
the Company. Revenue and earnings are expected to grow for year-
end September 30, 1999. The projected growth is attributable to
the education/entertainment and technology related World Wide
Web offerings that provide a variety of customer driven
solutions, e.g. access to computer based information, program
development, and personal web-based training.
The Company's Entertainment sector is benefiting from worldwide
expansion and growth in theme parks. Specifically, projects for Oz
Entertainment Company's Wonderful World of Oz and Universal
Studios should drive growth.
"CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995"
Certain statements in Management Discussion and Analysis of
Financial Condition and Results of Operations and certain other
sections of this Annual Report are forward-looking. These may
be identified by the use of forward-looking words or phrases
such as "believe," "expect," "anticipate," "should," "planned,"
"estimated," and "potential," among others. These forward-
looking statements are based on the Company's reasonable current
expectations. The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for such forward-looking
statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause
the Company's actual results or experience to differ materially
from the anticipated results or other expectations expressed in
such forward-looking statements. The risks and uncertainties
that may affect the operations, performance, development and
results of the Company include but are not limited to: (1) the
complexity and uncertainty regarding the development of new
products and services; (2) the loss of market share through
competition; (3) the introduction of competing products or
service technologies by other companies; (4) pricing pressures
from competitors and/or customers; (5) the Company's inability
to protect proprietary information and technology; (6) the
Company's and its significant third parties inability to
complete the implementation of its Year 2000 plans timely;
(7) the loss of key employees.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
See Financial Statements attached.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Steve Toth, Jr., age 74, 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 53, is Executive Vice President of the
Company responsible for the Entertainment sector, and was
President of the Company from 1976 to 1997. Suchik formerly
served as the President of the former subsidiary BKNT Retail
Stores, Inc. and BKNT, Inc. Suchik is the nephew of Toth.
Thomas W. Marquis, age 55, became Treasurer and Chief Financial
and Accounting Officer of the Company in April 1997, became
Secretary of the Company in June 1998, 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 Advanced Animations, Inc.
Terry Sparks, age 44, was appointed a Board member in July 1997,
and is General Manager of subsidiary Advanced Animations, Inc.
He became an Executive Vice President of Visual Services, Inc.
in 1991, and has been General Manager of Advanced Animations,
Inc. since 1991.
Jerry L. Barton, age 61, 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 55, 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.
Robert Sui, age 45, became a Company director in 1998. He is a
Senior Vice President with Merrill Lynch, where he has served
for the last 20 years.
In the last year, the Board held three meetings (two by
telephone), which all directors attended except for one meeting
by telephone for which Sui was absent. Toth, Marquis, and Sui
comprise the Executive Committee; Sui, Barton, and Bernhardt
comprise the Audit Committee, which reviewed the report of the
Company's auditors about the results of last year's audit;
Barton, Bernhardt, Suchik, and Marquis comprise the Compensation
and Stock Option Committee. None of the Committees met last
year.
Each non-executive officer director receives a $750 meeting fee,
with no additional payment for membership on or meetings of any
committees, except pursuant to the Independent Director Stock
Option Plan (see stock ownership table). Except for Toth and
Suchik, no officer or director is related to another by blood,
marriage or adoption, not more remote than first cousin. In the
last year, Forms 4 were filed by Suchik (5), and a Form 3 was
filed by Sui, all on a timely basis. Barton failed to report
August 1998 information on Form 4, which failure was rectified by
his November 1998 Form 5. All directors are believed to have
filed this year's annual Forms 5 on a timely basis.
See Item 12 for a description of the Toth/Suchik voting
agreement. There are no other voting agreements other than
those listed in Item 12.
Officers serve at the discretion of the Board of Directors.
All Directors are elected at each annual meeting.
Item 11. Executive Compensation.
The compensation for the last three years paid the Company's
executive officers were:
Annual Compensation
(a) (b) (c) (d) (e)
Other
Name Annual
And Compen-
Principal sation
Position Year Salary($) Bonus($) ($)
Steve Toth Jr.
CEO 1998 624,000 0 950
1997 642,000 0 0
1996 638,000 0 1,800
Martin S. Suchik
Exec VP 1998 120,000 0 0
1997 165,000 0 0
1996 197,000 0 0
Thomas W. Marquis
Treasurer, 1998 150,000 0 885
Secretary 1997 150,000 0 0
1996 90,000 0 1,080
None of the executive officers have contractual compensation
agreements. The "other" amounts listed are the Company's 401(k)
contributions. None of the above officers received long term
compensation payouts or awards covered by the table above.
At September 30, 1998, Suchik was fully vested in stock options
for 40,000 and 32,020 shares under the 1986 Incentive and Non-
Qualified Plans, with respective exercise prices of $.55 and
$.50 per share; these options expire January 15, 2001.
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 18, 1998, the Company had 32,940,665 shares
of Common Stock (net of 7,954,355 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 81.77%
2100 North Woodward West
Suite 201
Bloomfield Hills, Mich. 48304
Martin S. Suchik (2) 518,758 1.56%
1778 Ellsworth Industial Blvd.
Atlanta, Georgia 30318
Thomas W. Marquis (3) 520,431 1.56%
2100 North Woodward West
Suite 201
Bloomfield Hills, Mich. 48304
Terry Sparks 88,213 .26%
2100 North Woodward West
Suite 201
Bloomfield Hills, Mich. 48304
Jerry L. Barton (4) 5,500 .02%
1660 Brandon Hall Drive
Dunwoody, Georgia 30350
Dr. Kenneth L. Bernhardt (4) 23,500 .07%
Georgia State University
University Plaza
Atlanta, Georgia 30303
Robert F. Sui (4) 1,500 .00%
1577 North Woodward Avenue
Bloomfield Hills, Michigan 48304
All directors and officers 28,509,071 85.24%
as a group (7 persons) (1-4)
(1) Toth owns 1,000 shares, and is trustee of trusts
benefiting him that own 1,775,850 and 11,826,323 shares. Toth's
spouse is the trustee of trusts benefiting Toth's daughter that
owns 6,138,298, 2,297,266 and 3,476,635 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 real estate and investment partnership, 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 435,625 shares, while his IRA owns another
11,113 shares. Trusts for Suchik's three adult children own
100,626, 111,187 and 111,187 shares. Suchik disclaims beneficial
interest in such shares, which are held by an independent trustee,
and therefore are not included with his holdings. Suchik is fully
vested in two options for 40,000 and 32,020 shares under the 1986
Incentive and Non-Qualified Plans exercisable at $.55 and $.50 per
share, respectively; these options expire on January 15, 2001.
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's nominees
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, or vice versa.
(3) Marquis is trustee of a trust benefiting him that owns
257,567 shares. His spouse is trustee of a trust benefiting her
that owns 252,864 shares. Marquis disclaims beneficial
ownership of his spouse's shares.
(4) Barton owns 1,000 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. Sui's appointment as a director was confirmed
by the shareholders on April 8, 1998 at which time he received a
10,000 share option exercisable for $6.375 per share. Such
options vest at the rate of 500 shares for each Board meeting
attended and 1,000 shares annually; Barton, Bernhardt, and Sui
are vested in 4,500, 4,000, and 1,500 shares respectively.
Item 13. Certain Relationships and Related Transactions.
Steve Toth, Jr. (Toth), President of the Company, directly and
indirectly owns 81.77% of the Company.
Loans to and from Toth Family. At September 30, 1998 and 1997
respectively, the Company had advanced Toth $566,000 and
$489,000, which amounts are 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 35.61% of the Company (included with Toth's
holdings). Offsetting those amounts, the Company had an 8.5%
note payable of $2,181,000 to Toth at September 30, 1997.
During the year ended September 30, 1998 this note was
subordinated (See "Declared Distributions to Stockholders" below)
and bears a rate of interest of 7% and matures on December 31,
2002. In fiscal year 1997, the Company repaid an unsecured 8%
note payable of $357,000 to Toth's spouse, beneficiary of a
trust owning 3.02% of the Company (included with Toth's holdings).
Marquis Advance. At September 30, 1998, the Company had advanced
$65,000 to Thomas Marquis, Chief Financial Officer, Secretary,
and Treasurer of the Company which amount is non-interest
bearing and unsecured. Offsetting this amount is a subordinated
note payable to Marquis. (See "Declared Distributions to
Stockholders" below.)
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 was issued. During
the year ended September 30, 1998 the $850,000 was paid off and
all stand-by letters of credit were cancelled.
CLT Stock Option. The 1993 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 of those options
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.
The Retail sector was sold to Martin S. Suchik and certain other
affiliated entities in exchange for a surrender to the Company of
143,750 shares valued at the time at $736,000. The Board of
Directors of the Company determined the purchase price was fair in
light of the continuing losses suffered by the retail sector.
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 owed, 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. $9,313,000 of the $20,659,00 was converted into a
subordinated note payable from the Company to these former
Stockholders. $7,553,000 and $53,000 of this subordinated note
belongs to Toth and Marquis, respectively.
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. The
rental charges do not exceed those ordinarily and customarily paid
in the community.
Contingent liability for discontinued operations
VSI Holdings, Inc. is the guarantor of several store leases
being used by the BKNT Retail Stores, Inc. At September 30, 1998
the lease obligations amounted to $2,879,000. This amount will
reduce by $1,166,000 in the year ended September 30, 1999;
$858,000 in the fiscal year ended 2000; $545,000 in the fiscal
year ended 2001; $281,000 in the fiscal year ended 2002; and
$29,000 in the fiscal year ended 2003. This contingent liability
is partially offset by the pledging of 216,250 of the Company
shares by Martin Suchik.
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, filed as
Exhibit.3.1 to form 10-K for fiscal year ended September
30,1997.
* 3.2 By-Laws of the Registrant, amended and effective on
September 12, 1997, filed as Exhibit.3.2 to form 10-K for fiscal
year ended September 30,1997.
* 4.1 VSI Holdings, Inc. 1997 Incentive Stock Option Plan as
approved at the Annual Shareholders' Meeting held on April 21,
1997, filed as Exhibit.4.1 to form 10-K for fiscal year ended
September 30,1997.
* 4.2 VSI Holdings, Inc. 1997 Non-Qualified Stock Option
Plan as approved at the Annual Shareholders' Meeting held on
April 21, 1997, filed as Exhibit.4.2 to form 10-K for fiscal
year ended September 30, 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, filed as Exhibit.4.3 to form 10-K for fiscal
year ended September 30, 1997.
* 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.
+ 4.6 VSI HOLDINGS, INC.RESTRICTED STOCK PLAN December 1,
1997 as approved at the annual shareholders meeting held on
April 8, 1998.
+ 4.7 VSI HOLDINGS, INC.EMPLOYEE STOCK PURCHASE PLAN October
7, 1997 as approved at the annual shareholders meeting held on
April 8, 1998.
+ 4.8 ADVANCED ANIMATIONS, INC. AGREEMENT AND PLAN OF MERGER
dated February 7, 1997
+ 4.9 VISPAC, INC. AGREEMENT AND PLAN OF MERGER dated June 13, 1997
+ 4.10 VISUAL SERVICES, INC. AGREEMENT AND PLAN OF MERGER
dated September 24, 1997
* 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, filed as Exhibit 9.1 to form 10-K for fiscal
year ended September 30, 1997.
* 10.4 Stock Option Agreement dated as of May 6, 1993 between
the Registrant, Steve Toth, Jr., and CLT, filed as Exhibit 10.4
to form 10-K for fiscal year ended September 30, 1997.
* 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, filed as Exhibit 10.5 to form
10-K for fiscal year ended September 30, 1997.
+ 21.1 List of Subsidiaries of the Registrant.
+ 23.1 Consent of Plante & Moran LLP, Independent Auditors.
(b) Reports on Form 8-K: None
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: January 7, 1999
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
January 7, 1999 Chief Executive Officer
Steve Toth, Jr.
/s/ Martin S. Suchik Director and Executive
January 7, 1999
Martin S. Suchik Vice President
/s/ Thomas W. Marquis Director, Treasurer, Secretary
January 7, 1999
Thomas W. Marquis Chief Accounting Officer,
and Principal Financial Officer
/s/ Terry Sparks Director
January 7, 1999
Terry Sparks
VSI Holdings, Inc. and Subsidiaries
Consolidated Financial Report
September 30, 1998
Contents
Report Letter 1
Consolidated Financial Statements
Balance Sheet 2
Statement of Income 3-4
Statement of Changes in Stockholders' Equity 5
Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-25
Independent Auditor's Report
To the Board of Directors and Stockholders
VSI Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of VSI Holdings,
Inc. and subsidiaries as of September 30, 1998 and 1997 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, 1998.
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, 1998 and 1997 and the
consolidated results of their operations and their cash flows for each year in
the three-year period ended September 30, 1998, in conformity with generally
accepted accounting principles.
Plante & Moran, LLP
Ann Arbor, Michigan
December 7, 1998
Consolidated Balance Sheet
September 30
1998 1997
Assets
Current Assets
Cash $463,000 $235,000
Cash in escrow (Note 2) 1,797,000 1,206,000
Trade accounts receivable:
Billed 36,081,000 29,706,000
Unbilled 13,485,000 6,987,000
Current portion of notes receivable and
advances (Note 3):
Related party 319,000 9,889,000
Other 800,000 103,000
Inventory (Note 2) 409,000 2,606,000
Accumulated costs of uncompleted program 3,220,000 2,665,000
Deferred tax asset (Note 8) 1,336,000 1,185,000
Other current assets 1,158,000 3,570,000
Total current assets 59,068,000 58,152,000
Long-term Portion of Notes Receivable -
Related parties (Note 3) 804,000 581,000
Property, Plant and Equipment (Note 4) 24,182,000 16,766,000
Deferred Tax Asset (Note 8) 194,000 589,000
Goodwill (Note 2) 4,286,000 -
Investments (Note 2) 1,021,000 981,000
Total assets $89,555,000 $77,069,000
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of long-term debt (Note 6) $461,000 $156,000
Trade accounts payable 11,926,000 10,704,000
Notes payable to related parties (Note 5) - 107,000
Notes payable to bank (Note 5) 25,139,000 23,493,000
Accrued liabilities 3,817,000 2,728,000
Federal income tax payable 4,562,000 -
Declared distributions to stockholders - 20,659,000
Advances from customers for uncompleted
projects 4,042,000 2,274,000
Total current liabilities 49,947,000 60,121,000
Notes Payable - Related parties (Note 5) 11,494,000 2,181,000
Long-term Debt - Net of current portion (Note 6) 6,012,000 3,100,000
Redeemable Common Stock (Note 1) 1,960,000 -
Stockholders' Equity (Notes 1 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, 407,000 404,000
60,000,000 shares authorized, 40,741,000
shares issued in 1998 and 40,371,000 in 1997
Additional paid-in capital 8,208,000 7,917,000
Retained earnings 15,218,000 6,253,000
Treasury stock, at cost - 7,888,000 shares (3,643,000) (2,907,000)
in 1998, 7,744,000 shares in 1997
Stock subscription receivable (25,000) -
Foreign currency translation adjustments (23,000) -
Total stockholders' equity 20,142,000 11,667,000
Total liabilities and $89,555,000 $77,069,000
stockholders' equity
See Notes to Consolidated Financial Statements
Consolidated Statement of Income
Year Ended September 30
1998 1997 1996
Revenue $163,426,000 $130,526,000 $128,213,000
Expenses
Cost of revenue 72,129,000 56,101,000 55,971,000
Operating expenses 74,810,000 62,687,000 62,231,000
Total expenses 146,939,000 118,788,000 118,202,000
Operating Income 16,487,000 11,738,000 10,011,000
Other Income (Expenses)
Equity in losses of
unconsolidated investee
(Note 2) - (1,465,000) (335,000)
Gain (loss) on sale of
property, plant and equipment - (26,000) 158,000
Interest and other income (69,000) 964,000 729,000
(expense)
Interest expense (2,320,000) (1,089,000) (1,422,000)
Total other expenses (2,389,000) (1,616,000) (870,000)
Income - Before income taxes 14,098,000 10,122,000 9,141,000
Provision for Income Taxes (Note 8) 4,887,000 464,000 -
Income - From continuing operations 9,211,000 9,658,000 9,141,000
Discontinued Operations (Note 15)
Loss from discontinued
operations - Net of
income tax benefit of
$220,000, $223,000 and
$1,230,000 in 1998, 1997
and 1996, respectively (428,000) (516,000) (2,306,000)
Gain on disposal of subsidiary
- Net of income tax of
$140,000 271,000 - -
Total discontinued
operations (157,000) (516,000) (2,306,000)
Net Income $9,054,000 $9,142,000 $ 6,835,000
Earnings Per Share
Basic:
Income from continuing operations$ 0.28 $ - $ -
Loss from discontinued operations (0.01) - -
Gain on disposal of subsidiary 0.01 - -
Net Income $ 0.28 $ - $ -
Fully diluted:
Income from continuing operations$ 0.27 $ - $ -
Loss from discontinued operations (0.01) - -
Gain on disposal of subsidiary 0.01 - -
Net Income $ 0.27 $ - $ -
Pro Forma Information (Note 2)
Income - before income taxes $ - $10,122,000 $ 9,141,000
Pro forma income taxes - 3,493,000 3,108,000
Pro forma income from continuing
operations - 6,629,000 6,033,000
Loss from discontinued operations
- net of tax - (516,000) (2,306,000)
Pro Forma Net Income $ - $6,113,000 $ 3,727,000
Pro Forma Basic Earnings Per Share
Income from continuing operations $ - $ 0.20 $ 0.18
Loss from discontinued operations - (0.01) (0.07)
Net Income $ - $ 0.19 $ 0.11
Pro Forma Fully Diluted Earnings Per Share
Income from continuing operations $ - $ 0.19 $ 0.18
Loss from discontinued operations - (0.01) (0.07)
Net Income $ - $ 0.18 $ 0.11
Weighted Average Shares Outstanding
Basic 32,851,000 32,784,000 32,767,000
Effect of stock options 682,000 490,000 387,000
Fully Diluted 33,533,000 33,274,000 33,154,000
See Notes to Consolidated Financial Statements.
Consolidated Statement of Changes in Stockholders' Equity
Common Stock Additional
Paid-in Retained
Shares Amount Capital Earnings
Balance - October 1, 1995 40,577,000 $406,000 $7,884,000 $20,629,000
Net Income - - - 6,835,000
Redemption of stock (94,000) (1,000) (22,000) (91,000)
Distributions to stockholders - - - (4,661,000)
Balance-September 30, 1996 40,483,000 405,000 7,862,000 22,712,000
Net Income - - - 9,142,000
Exercise of stock options 156,000 2,000 86,000 -
Distributions to stockholders - - (1,000) (25,225,000)
Redemption of stock (283,000) (3,000) (45,000) (376,000)
Issuance of stock 15,000 - 15,000 -
Balance - September 30, 1997 40,371,000 404,000 7,917,000 6,253,000
Net Income - - - 9,054,000
Exercise of stock options 64,000 - 45,000 -
Issuance of stock options (Note 12) - - 83,000 -
Acquisition of stock for treasury - - - -
Distributions to stockholders - - - (89,000)
Foreign currency translation
adjustments - - - -
Stock issued in acquisition-
(Note 1) 280,000 3,000 - -
Issuance of stock 26,000 - 163,000 -
Balance - September 30, 1998 40,741,000 $407,000 $8,208,000 $15,218,000
Foreign
Stock Currency Total
Tresury Subscription Translation Stockholders
Stock Receivable Adjustments Equity
Balance - October 1, 1995 (2,907,000) $(25,000) $ - $25,987,000
Net Income - - - 6,835,000
Redemption of stock - 25,000 - (89,000)
Distributions to stockholders - - - (4,661,000)
Balance-September 30, 1996 (2,907,000) - - 28,072,000
Net Income - - - 9,142,000
Exercise of stock options - - - 88,000
Distributions to stockholders - - - (25,226,000)
Redemption of stock - - - (424,000)
Issuance of stock - - - 15,000
Balance - September 30, 1997 (2,907,000) - - 11,667,000
Net Income - - - 9,054,000
Exercise of stock options - - - 45,000
Issuance of stock options (Note 12) - - - 83,000
Acquisition of stock for treasury(736,000) - - (736,000)
Distributions to stockholders - - - (89,000)
Foreign currency translation
adjustments - - (23,000) (23,000)
Stock issued in acquisition-
(Note 1) - - - 3,000
Issuance of stock - (25,000) - 138,000
Balance - September 30, 1998 $(3,643,000) $(25,000)$ (23,000) $(20,142,000)
Consolidated Statement of Cash Flows
Year Ended September 30
1998 1997 1996
Cash Flows from Operating Activities
Net income $ 9,054,000 $ 9,142,000 $ 6,835,000
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 4,865,000 3,513,000 3,216,000
Equity in losses of unconsolidated
investee 295,000 1,465,000 335,000
Noncash proceeds from sale of
subsidiary (736,000) - -
Deferred income taxes 244,000 241,000 (1,230,000)
(Gain)loss on sale of property,
plant and equipment 32,000 19,000 (158,000)
Issuance of stock options 83,000 - -
Write-off of leasehold improvements - 405,000 312,000
Bad debt expense - 151,000 100,000
(Increase) decrease in assets:
Trade accounts receivable (12,881,000) (2,847,000) 891,000
Inventory 381,000 1,238,000 2,417,000
Accumulated costs of uncompleted
programs (555,000) 1,198,000 1,756,000
Other current assets 2,361,000 (2,462,000) 408,000
Increase (decrease) in liabilities:
Trade accounts payable 2,000,000 (272,000) (3,551,000)
Accrued liabilities 1,607,000 (992,000) 1,498,000
Federal income tax payable 4,562,000 - -
Advances from customers for
uncompleted projects 1,177,000 (401,000) 810,000
Net cash provided by operating
activities 12,489,000 10,398,000 13,639,000
Cash Flows from Investing Activities
Additions to property, plant and
equipment (13,506,000) (8,373,000) (4,395,000)
Proceeds from sale of property,
plant and equipment 2,000 - 152,000
Additions to notes receivable
and advances (1,138,000) (10,784,000) (7,676,000)
Payments on notes receivable
and advances 9,708,000 5,416,000 3,951,000
Investments in affiliates (2,925,000) (1,139,000) -
Increase in cash surrender value
of insurance policies - - (49,000)
Cash sold in sale of subsidiary (307,000) - -
Proceeds from surrender of
insurance policies - 661,000 -
Proceeds from store lease
construction allowances - - 121,000
Net cash used in investing
activities (8,166,000) (14,219,000) (7,896,000)
Cash Flows from Financing Activities
Principal payments on long-term debt (164,000) (104,000) (100,000)
Proceeds from long-term debt 3,580,000 2,508,000 -
Principal payments on related
party debt - (383,000) -
Proceeds from related party debt 11,055,000 2,181,000 26,000
Net borrowings (payments) on
notes payable 1,994,000 7,129,000 (2,830,000)
Proceeds from issuance of stock 211,000 7,000 -
Distributions to stockholders (20,748,000) (7,209,000) (2,656,000)
Payment for redemption of stock - (424,000) (89,000)
Net cash provided by (used in)
financing activities (4,072,000) 3,705,000 (5,649,000)
Effect of Exchange Rate Changes on Cash (23,000) - -
Net Increase (Decrease) in Cash 228,000 (116,000) 94,000
Cash - Beginning of year 235,000 351,000 257,000
Cash - End of year $ 463,000 $ 235,000 $ 351,000
See Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
September 30, 1998 and 1997
Note 1- Organization of the Company and Basis of Presentation
The accompanying consolidated financial statements include the accounts
of VSI Holdings, Inc. (the "Company") and its wholly owned subsidiaries,
consisting of Advanced Animations, Inc., Vispac, Inc., Visual Services,
Inc., BKNT Retail Stores, Inc., J.D. Dash, Inc., BKNT, Inc. and PSG
International, Inc. Intercompany balances and transactions have been
eliminated in consolidation.
Advanced Animations, Inc. designs and manufactures product simulators
and animatronic displays. Customers are worldwide, primarily from the
entertainment industry.
Vispac, Inc. provides administrative and promotional services,
warehousing and packaging operations 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.
PSG International, Inc. provides curriculum development and product
training to automobile manufacturers throughout Canada, Australia,
New Zealand and Taiwan. PSG International, Inc. was formed during the
year ended September 30, 1998 when the Company completed the purchase
of the assets of an unrelated company. The assets purchased consisted
of furniture and equipment with an approximate fair value of $60,000.
No liabilities were assumed as part of the purchase. The total purchase
price was $4,543,625. The Company issued 280,000 shares of common stock
valued at $7.00 per share, with the balance of $2,583,625 paid in cash.
As part of the PSG International, Inc. purchase agreement, the shares
issued to the seller are subject to a "put option" in which the seller
has the option to sell the shares back to the Company in April 1999 for
$2,100,000 ($7.50 per share). The difference between the value at the
date of purchase and the "put option" amount is being accrued as an
interest cost over the appropriate period. The redeemable stock is
separately reported on the Company's balance sheet.
In addition, the Company has agreed to pay the seller a performance
bonus of up to $1,000,000 if certain performance goals are met. As part
of the performance goals, the portion of the business acquired is
required to produce average annual pretax income from the period April
1, 1997 to March 31, 2000 of $900,000. To the extent the target average
annual pretax income is not met, the bonus is reduced by a factor of six
times the shortfall.
BKNT Retail Stores, Inc. operated women's apparel specialty stores
throughout the southeastern United States. On September 30, 1998, the
Company completed the sale of its wholly owned subsidiaries, BKNT Retail
Stores, Inc., J.D. Dash, Inc. and BKNT, Inc. The consolidated statement
of income for the years ended September 30, 1997 and 1996 has been
adjusted to reflect the discontinued operations (see Note 15).
The current organizational structure was established during the year
ended September 30, 1997, when 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 at historical cost 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.
Note 2 - Significant Accounting Policies
Revenue Recognition - Visual Services, Inc., Vispac, Inc. and PSG
International, Inc. recognize revenue over the period of the contract
as individually identifiable phases of contracts are completed. Amounts
recognized are accumulated in unbilled accounts receivable until billed
in accordance with contract terms.
Advanced Animations, Inc. records revenue on display contracts of
varying duration on the basis of the Company's estimates of the
percentage of completion of individual contracts. A percentage of the
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. Billings are
made in accordance with contract terms. At the time a loss on a
contract becomes known, the entire amount of the estimated 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 - Inventory, 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:
1998 1997
Raw materials $ 409,000 $ 439,000
Finished goods - 2,167,000
Total inventory $ 409,000 $ 2,606,000
Accumulated Costs of Uncompleted Programs - Accumulated costs of
uncompleted programs consist of costs accumulated on various service-
related contracts of Visual Services, Inc. The accumulated costs are
included as a current asset, as they consist of ongoing job costs, which
will be recorded as cost of revenue against the appropriate revenue
recognized within the next fiscal year.
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.
Production costs, representing the direct materials, labor, overhead
costs and interest associated with self-constructed assets, are
capitalized during construction. Once completed and placed in service,
the assets are depreciated over the appropriate depreciable lives.
Goodwill - Goodwill represents the excess cost of PSG International,
Inc. over the fair value of its net assets at the date of acquisition.
The amount is being amortized on a straight-line basis over a 15-year
period. Amortization expense amounted to $199,000 for the year ended
September 30, 1998.
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 currently enacted
income tax rates. 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 year in deferred tax assets and
liabilities.
Prior to the 1997 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 are
included in the consolidated tax return of VSI Holdings, Inc. At
September 30, 1997, the subsidiaries declared distributions of
previously taxed undistributed income totaling $25,360,000 to the
stockholders of these entities.
Pro forma income taxes for 1997 and 1996 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 $212,000 and $369,000 for the years ended
September 30, 1998 and 1996, respectively. There was no contribution
made for the year ended September 30, 1997.
Investments - During the year ended September 30, 1998, the Company
acquired a less than 10 percent interest in an investment
partnership. This investment has been accounted for under the cost
method. Accordingly, dividends, if any, received from the investment
are included in other income. The investment amounted to $400,000 at
September 30, 1998. In October 1998, an additional $1,800,000 was
invested in the partnership.
Equity Investments - During 1997 and 1996, the Company held an 11
percent interest in VSI Consulting, L.L.C. (VSIC LLC). The majority
stockholder of the Company, through indirect ownership, held the
remaining interest in VSIC LLC. The investment in VSIC LLC was 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. During 1997,
VSIC LLC was dissolved.
The Company also holds 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 losses of $295,000 and $284,000 for
the years ended September 30, 1998 and 1997, respectively, which have
been netted against the investment. The investment amounted to $614,000
and $909,000 at September 30, 1998 and 1997, respectively.
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 - Earnings per share and pro forma earnings per share
are computed using the weighted average number of shares outstanding.
The pro forma amounts for the years ended September 30, 1997 and 1996
have been calculated as if the subsidiaries had been consolidated for
all years presented.
During the year ended September 30, 1998, the Company adopted Statement
of Financial Accounting Standards No. 128 (SFAS 128), Earnings Per
Share, which established standards for computing and presenting earnings
per share. The pro forma earnings per share amounts for the years ended
September 30, 1997 and 1996 have been restated.
Stock Options - The Company has several stock option plans
(see Note 12). Options granted to nonemployees are accounted for at
fair value. 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 to
employees 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 -Notes Receivable and Advances
Notes receivable and advances consist of the following:
1998 1997
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 $ - $ 9,628,000
Note receivable from an unrelated entity,
collateralized by all assets of the Company,
bearing interest at 9 percent and due on demand 800,000 -
Note receivable from a stockholder, unsecured,
bearing interest at 7 percent and due on demand 171,000 171,000
Advances, noninterest-bearing, unsecured,
due on demand:
Officers 631,000 489,000
Employees 298,000 182,000
Other 23,000 103,000
Total 1,923,000 10,573,000
Less current portion 1,119,000 9,992,000
Long-term portion $ 804,000 $ 581,000
Note 4 - Property, Plant and Equipment
Property, plant and equipment consist of the following:
Depreciable
1998 1997 Life - Years
Land and land improvements $ 1,286,000 $ 1,088,000 -
Building 8,193,000 5,712,000 18-39 yrs
Furniture, fixtures and equipment 32,995,000 26,380,000 5-10 yrs
Leasehold improvements 3,695,000 4,845,000 18-39 yrs
Production costs 1,100,000 1,564,000 -
Vehicles 2,082,000 305,000 5 yrs
Total 49,351,000 39,894,000
Less accumulated depreciation
and amortization 25,169,000 23,128,000
Net carrying amount $24,182,000 $16,766,000
Depreciation expense amounted to $4,666,000, $3,513,000 and $3,216,000
for the years ended September 30, 1998, 1997 and 1996, respectively.
Note 5 - Notes Payable
The Company has several lines of credit. They are as follows:
1998 1997
Bank line of credit permitting borrowings
up to $27,000,000 at the bank's prime rate
(8.5 percent at September 30, 1998).
Borrowings equal to or greater than $500,000
can be made for fixed periods of time at a
fixed rate equal to LIBOR plus 1.50 percent
(LIBOR at September 30, 1998 was 5.62 percent).
Collateralized by all assets of the Company.
standby letters of credit of $2,100,000 further
reduce available borrowings on the line at
September 30, 1998 $ 18,334,000 $ 14,390,000
Bank line of credit permitting borrowings up
to $3,000,000 at the bank's prime rate (8.5
percent at September 30, 1998). Collateralized
by all assets of the Company 2,365,000 -
Bank line of credit permitting borrowings up
to $2,000,000 at the bank's prime rate.
Guaranteed by Mr. Toth. During 1998, the
line of credit was terminated - 850,000
Checks written but not yet presented to the
bank. Upon presentation to the bank,
additional borrowings will be made on the line
of credit. The Company policy is to reflect
these checks as additional amounts payable to
the bank 4,440,000 8,253,000
Total notes payable to bank $ 25,139,000 $ 23,493,000
The loan agreements contain certain covenants that require that, among
other things, the Company maintain 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.
Notes payable to related parties consist of the following:
1998 1997
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.
During 1998, this note was converted to
subordinated debt $ - $ 2,181,000
Note payable to a limited partnership
controlled by Mr. Toth. The note is unsecured
bears interestat 8.25 percent. Upon the sale
of BKNT Retail Stores, Inc., the note was
assumed by the purchaser (Note 15) - 107,000
Subordinated notes payable to stockholders
of VSI Holdings, Inc. These notes are
unsecured, bear interest at 7 percent and
are due December 31, 2002. The notes are
subordinated to all bank debt 11,494,000 -
Total notes payable to related
parties 11,494,000 2,288,000
Less current portion - 107,000
Long-term portion $ 11,494,000 $ 2,181,000
The weighted-average interest rate on short-term notes payable was 7.35
percent and 8.0 percent as of September 30, 1998 and 1997, respectively.
Note 6 - Long-term Debt
Long-term debt consists of the following:
1998 1997
Mortgage payable to bank, bearing interest
at the bank's prime rate (8.5 percent at
September 30, 1998), due in monthly
installments of $3,222 plus interest, with
a final principal payment due on March 1,
2002. The mortgage is collateralized by the
related land and building with a net book
value of $432,000 at September 30, 1998 $ 441,000 $ 479,000
Mortgage payable to bank, bearing interest
at the bank's prime rate (8.5 percent at
September 30, 1998), 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
$2,473,000 at September 30, 1998 2,452,000 2,508,000
Mortgage payable to bank, bearing interest
at 2 percent above the stated rate on
seven-year fixed rate United States
Department of Treasury bills (seven-year
Treasury bills had a rate of 4.30 percent
at September 30, 1998), due in monthly
installments of $18,199 including interest,
with a final principal payment due on
October 8, 2005. The mortgage is
collateralized by the related land and
building with a net book value of
$3,545,000 at September 30, 1998 2,480,000 -
Term loan payable to bank, bearing
interest at 6.52 percent, due in monthly
installments of $33,724 including interest
with the final payment due October 8, 2001.
The loan is collateralized by all assets of
the Company 1,100,000 -
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. Upon the
sale of BKNT Retail Stores, Inc., the
liability for the bonds was assumed by the
purchaser (Note 15) $ - $ 269,000
Total 6,473,000 3,256,000
Less current portion 461,000 156,000
Long-term portion $ 6,012,000 $ 3,100,000
Principal payments due on the long-term debt are as follows:
Years Ending
September 30 Amount
1999 $ 461,000
2000 530,000
2001 564,000
2002 508,000
2003 158,000
2004 and thereafter 4,252,000
Total $ 6,473,000
Note 7 - 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 six years with renewal options for
additional three- to five-year periods.
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
September 30 Related Party Other Total
1999 $ 551,000 $ 4,899,000 $ 5,450,000
2000 551,000 4,155,000 4,706,000
2001 551,000 3,212,000 3,763,000
2002 623,000 2,597,000 3,220,000
2003 638,000 995,000 1,633,000
2004 & thereafter 1,913,000 145,000 2,058,000
Total $ 4,827,000 $ 16,003,000 $ 20,830,000
The Company remains as the guarantor of the operating leases of BKNT
Retail Stores, Inc. The sole stockholder of BKNT Retail Stores, Inc.
has pledged 216,250 shares of VSI Holdings, Inc. as collateral relating
to the lease commitments. The minimum lease payments for the remaining
years under these leases are as follows:
Years Ending
September 30 Amount
1999 $ 1,166,000
2000 858,000
2001 545,000
2002 281,000
2003 29,000
Total $ 2,879,000
Rent expense was as follows for the years ended September 30:
1998 1997 1996
Related party $ 551,000 $ 641,000 $ 613,000
Other 4,176,000 4,253,000 5,303,000
Total $ 4,727,000 $ 4,894,000 $5,916,000
Note 8 - Income Taxes
A summary of deferred tax assets, liabilities and valuation allowances
for deferred tax assets include the following amounts at September 30,
1998 and 1997:
1998 1997
Deferred tax assets (liabilities):
Depreciation $ 159,000 $ (205,000)
Net operating loss carryforwards 820,000 2,329,000
Bad debt deductions not recognized
for tax purposes - 1,000
Charitable contribution carryforwards - 43,000
Uniform capitalization of costs in
inventory - 25,000
Accrued expenses not deductible for
tax purposes 551,000 126,000
Total deferred tax assets 1,530,000 2,319,000
Valuation allowance for deferred tax assets - (545,000)
Net deferred tax asset $ 1,530,000 $ 1,774,000
At September 30, 1998, the Company had approximately $2,413,000 of net
operating loss carryforwards for federal income tax purposes. The net
operating loss carryforward begins to expire in fiscal year 2005.
The provision for income taxes consists of the following:
1998 1997 1996
Current $ 4,643,000 $ - $ -
Deferred 244,000 464,000 -
Total provision
for income
taxes $ 4,887,000 $ 464,000 $ -
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:
1998 1997 1996
Tax computed at
statutory federal
income tax rate $ 4,793,000 $ 3,441,000 $ 3,108,000
Nondeductible expenses 92,000 7,000 5,000
Subsidiaries formerly
not subject to tax
(Note 2) - (3,029,000) (3,108,000)
Other 2,000 45,000 (5,000)
Total provision
for income taxes $ 4,887,000 $ 464,000 $ -
Note 9 - Cash Flows
Cash paid during the years ended September 30, 1998, 1997 and 1996 for
interest amounted to $2,123,000, $1,235,000 and $1,571,000,
respectively. Cash paid for income taxes in those years was $6,000,
$0 and $0, respectively.
The Company had the following noncash transactions:
During 1998, the Company purchased the assets of an unrelated company
and formed PSG International, Inc. As part of the purchase price, the
Company paid $2,584,000 in cash and issued 280,000 shares of common
stock with a value at the date of purchase of $1,960,000.
During 1998, the Company received 144,000 shares of its own common
stock as proceeds on the sale of the discontinued operations. The value
of the shares at the date of sale of $736,000 was recorded as an
addition to treasury stock and reflected as proceeds in determining the
gain on the sale of the subsidiary.
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 10 - 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, 1998, 1997 and 1996 was $1,630,000, $1,689,000 and
$1,476,000, respectively.
Note 11 - Stock Compensation
In December 1997, the Board of Directors approved a restricted stock
compensation plan for certain key employees. Under the plan, key
employees are allocated the right to receive stock, subject to
forfeiture if employment terminates prior to the end of prescribed
periods ranging from one to three years. During the year ended
September 30, 1998, the Company awarded key employees the right to
receive 462,375 shares. The market value of shares awarded amounted
to $2,961,000. This amount will be recognized and charged as
compensation expense as earned over the future service period. For
the year ended September 30, 1998, compensation expense recognized
relating to the restricted stock awards amounted to $1,357,000. As of
September 30, 1998, no stock had been issued under the plan.
Note 12 - Stock Options
The Company issued options for the Company's common stock in the
following 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 1995, options for 400,000 shares were exercised. Options for
425,000 shares remain outstanding at September 30, 1998.
Other Options
During the year ended September 30, 1998, the Company issued stock
options for 58,000 common shares to certain consultants of the Company.
The exercise prices ranged from $6.20 to $8.70. The fair value of the
options amounted to $83,000, which was charged to expense. Generally,
the options are exercisable three years from the date of issuance.
There were no options exercised during the year.
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 in March 1996 and no new options will
be granted. Options for 22,000 shares were exercised during the year
ended September 30, 1998.
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 in March 1996 and no new options
will be granted under the plan. Options for 42,290 shares were
exercised during the year ended September 30, 1998.
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. Generally, the options vest over a three-year
period with 50 percent vesting after two years and the remaining vesting
after three years from the date of grant. During the year ended
September 30, 1998, 518,000 incentive stock options were 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. During the years ended September 30, 1998 and 1997,
10,000 and 20,000 options were granted, respectively. Options for
30,000 shares were exercised during the year ended September 30, 1997.
No options were exercised during the year ended September 30, 1998.
Options granted are usually exercisable 30 days from date of grant as
determined by vesting schedules in the plan.
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
option plans been determined based on the fair value at the grant date,
the Company's income from continuing operations for 1998 would have been
reduced by $100,000 (no effect on earnings per share). Earnings in 1997
would not have been materially affected.
Information regarding these fixed-price option plans for the years ended
September 30, 1998, 1997 and 1996 are as follows:
1998 1997
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
Options outstanding -
Beginning of year 600,000 $ .38 815,700 $ .34
Canceled - - (80,000) .50
Granted 586,000 6.28 20,000 3.13
Exercised (64,290) .71 (155,700) .56
Options outstanding -
End of year 1,121,710 3.64 600,000 .38
Option price range -
End of year $.15625 to $8.70 $.15625 to $3.125
Option price range for
exercised shares $.50 to $.75 $.50 to $1.00
Options available for
future grants - End
of year 570,000 1,080,000
Weighted average fair
value of options
granted during the year $1.13 $2.75
1996
Shares
Options outstanding -
Beginning of year 830,700
Canceled (20,000)
Granted 5,000
Exercised -
Options outstanding -
End of year 815,700
The following table summarizes information about fixed price stock
options outstanding at September 30, 1998:
Options Outstanding
Weighted
Number Average
Range of Outstanding at Remaining Weighted
Exercise September 30, Contractual Average
Prices 1998 Life Exercise
$ .15625 425,000 2 years $ .15625
.50 to .55 90,710 5 years .52
3.125 20,000 6 years 3.125
6.20 to 6.70 487,000 4 years 6.35
8.20 to 8.70 99,000 3 years 8.45
.15625 to 8.70 1,121,710 3.64
Options Exercisable
Number
Exercisable at Weighted
September 30, Average
1998 Exercise Price
425,000 $ .15625
90,710 .52
8,500 3.125
1,500 6.38
- -
525,710 .28
Note 13 - Industry Segments
The Company's operations are classified into two business segments:
marketing services and entertainment. The marketing services segment
performs customer relationship, 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 satellite broadcasts, integrated distance learning, video
training products, industrial theater and meetings.
The entertainment segment designs and manufactures animated displays for
the retail and entertainment industry throughout the world. In
addition, the entertainment segment operates and administers touring
animated educational displays.
The Company had sales from foreign activities of $5,375,000, $181,000
and $1,479,000 for the years ended September 30, 1998, 1997 and 1996,
respectively.
Summarized financial information by each of the Company's two industry
segments for the three-year period ended September 30, 1998 is as
follows:
1998 1997 1996
Revenue:
Marketing services
sector $ 155,949,000 $ 124,020,000 $ 119,489,000
Entertainment sector 7,477,000 6,506,000 8,724,000
Consolidated total $ 163,426,000 $ 130,526,000 $ 128,213,000
Income from operations:
Marketing services
sector $ 14,834,000 $ 11,674,000 $ 9,178,000
Entertainment sector 1,584,000 1,002,000 1,720,000
Equity in earnings of
unconsolidated investee - (1,465,000) (335,000)
Interest expense (2,320,000) (1,089,000) (1,422,000)
Consolidated income
from operations
before income taxes $ 14,098,000 $ 10,122,000 $ 9,141,000
Identifiable assets:
Marketing services
sector $ 83,848,000 $ 67,699,000 $ 56,202,000
Entertainment sector 5,707,000 3,534,000 2,658,000
Consolidated total $ 89,555,000 $ 71,233,000 $ 58,860,000
Depreciation and amortization:
Marketing services
sector $ 4,166,000 $ 3,012,000 $ 2,620,000
Entertainment sector 301,000 183,000 174,000
Consolidated total $ 4,467,000 $ 3,195,000 $ 2,794,000
Capital expenditures:
Marketing services
sector $ 11,848,000 $ 6,651,000 $ 3,347,000
Entertainment sector 1,658,000 1,587,000 364,000
Consolidated total $ 13,506,000 $ 8,238,000 $ 3,711,000
The following companies are considered major customers comprising 10
percent or greater of the Company's net sales:
1998 1997 1996
Ford Motor Company 25% 29% 30%
General Motors Corporation 44 32 29
Nissan Motor Corporation 9 10 11
Total 78% 71% 70%
Note 14 - Litigation
As of September 30, 1998, 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. 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 - Discontinued Operations
On June 30, 1998, the Company adopted a formal plan to sell the stock
of its wholly owned subsidiaries, BKNT Retail Stores, Inc., J.D. Dash,
Inc. and BKNT, Inc. to Mr. Martin Suchik, an officer in VSI Holdings,
Inc., in exchange for stock in VSI Holdings, Inc. The Company
completed the sale on September 30, 1998. The VSI Holdings, Inc. stock
exchanged had a total value of $736,000 on the date the sale was
completed.
Operating results of BKNT Retail Stores, Inc., J.D. Dash, Inc. and BKNT,
Inc. for the nine months ended June 30, 1998 are shown separately as
discontinued operations in the accompanying income statement. The
income statements for the years ended September 30, 1997 and 1996 have
been restated and operating results of BKNT Retail Stores, Inc., J.D.
Dash, Inc. and BKNT, Inc. are also shown separately.
Net sales of BKNT Retail Stores, Inc., J.D. Dash, Inc. and BKNT, Inc.
for the years ended September 30, 1998, 1997 and 1996 were approximately
$12,190,000, $17,725,000 and $22,175,000, respectively. These amounts
are not included in net sales in the accompanying income statements.
Note 16 - 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 consolidated 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 estimated fair value and carrying
amounts of notes payable to related parties at September 30, 1998 are
$10,789,000 and $11,494,000, respectively. The fair value of notes
payable to related parties was determined based on 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.
Exhibit Index
Consecutively
Exhibit Numbered
Number Pages
4.6 VSI HOLDINGS, INC.RESTRICTED STOCK PLAN December 1, 1997 as
approved at the annual shareholders meeting held on April 8, 1998.
4.7 VSI HOLDINGS, INC. EMPLOYEE STOCK PURCHASE PLAN October 7,
1997 as approved at the annual shareholders meeting held on April 8, 1998.
4.8 ADVANCED ANIMATIONS, INC. AGREEMENT AND PLAN OF MERGER dated February 7,
1997
4.9 VISPAC, INC. AGREEMENT AND PLAN OF MERGER dated June 13, 1997
4.10 VISUAL SERVICES, INC. AGREEMENT AND PLAN OF MERGER dated September 24,
1997
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Plante & Moran LLP, Independent Auditors.
Exhibit 4.6
VSI HOLDINGS, INC.
RESTRICTED STOCK PLAN
December 1, 1997
1. Purpose: The purpose of the Restricted Stock Plan
(the Plan) is to provide deferred compensation benefits for a
select group of certain designated key employees of VSI
Holdings, Inc. (the Company) as a means of a (a) affording
additional incentive for management to increase the earnings of
the Company on a long-term basis; (b) attracting and retaining
key employees in the employ of the Company; and (c) furthering
the identity of interest of the key management of the Company
with those of its shareholders.
2. Definitions: As used in the Plan, the following
capitalized words and phrases shall have the meaning set forth
below, unless the context clearly indicates that a different
meaning is otherwise intended.(a) Company means VSI Holdings,
Inc. a Georgia corporation, or any successor thereto, whether by
merger, consolidation, liquidation, reorganization, or otherwise
which has made provision for adoption of the Plan and the
assumption of the Company's obligations thereunder.
(b) Common Stock means the shares of $0.01 par value Common
Stock of VSI Holdings, Inc.
(c) Employee means any person, including an officer of the
Company (whether or not he or she is also a director thereof),
who is employed by the Company on a full-time basis. The term
does not include persons who are retained by the Company as
consultants only.
(d) Participant means a key Employee who is granted Restricted
Stock under this Plan.
(e) Termination Date shall mean the date of a Participant's
cessation of employment with the Company by death, retirement,
disability, resignation, discharge or otherwise.
(f) Grant Date shall mean the date that appears on the
Restricted Stock Grant Agreement given to the Participant when
restricted stock is granted.
3. Administration: The Plan shall be administered by the
Committee established within the sole discretion of the Board of
Directors of the Company. Subject to the provisions of the Plan,
the Committee shall have exclusive power to select the key
employees to be granted Restricted Stock.
The committee shall have full discretionary authority
to interpret the Plan, to adopt and revise rules regulations
relating to the Plan, ton determine the conditions subject to
which any awards may be made, and to make any other
determinations which it believes necessary or advisable for the
administration of the Plan, determinations by the Committee are
final and binding on all parties with respect to all matters
relating to the Plan.
4. Grants: Restricted Shares shall be granted to such key
employees of the Company as the Committee shall determine, who
shall hereafter be referred to as Participants. Participants
shall be limited to those employees of the Company who because
of their positions and responsibilities comprise key management
personnel. If a Restricted Stock awarded under the Plan shall be
forfeited or canceled for any reason, such Restricted Stock may
again be awarded under the Plan. Restricted Stock shall be
granted at such time or times and shall be subject to such terms
and conditions, in addition to the terms and conditions set
forth in the Plan, as the Committee shall determine.
5. Vesting: (a) Restricted Shares granted to a
Participant shall vest according to the following schedule:
Anniversary Percentage of
Grant Date Vested Shares
1 33.3%
2 66.6%
3 100.0%
(b) As long as the Participant is an active employee of
the Company on the anniversary dates mentioned above, a stock
certificate of the vested shares will be issued by the Company.
All non vested shares shall be forfeited upon the Participant's
termination of employment with the Company for any reason other
than death.
(c) Notwithstanding the vesting provisions of paragraph
(a), in the event of the death of the Participant, a
proportionate number of the Restricted Shares vesting in the
current twelve (12) month period shall vest, all other non-
vested shares shall be forfeited. Example: Participant has
1,000 shares that are vesting in the current twelve (12) month
period, Participant dies after completing 195 days of the
current period. Completed days represent 53.4% of the twelve
(12) month vesting period, thus, Participants estate would
receive 534 shares. All fractional shares will be eliminated.
6. Changes in Capital Structures: In the event of any
change in the outstanding shares of common stock of the Company
by reason of stock split or reverse stock split, all non-vested
Restricted Stock will be proportionately adjusted and any
resulting fractional shares will be eliminated.
7. Miscellaneous Provisions: (a) No employee or other
person shall have any claim or right to be granted any
Restricted Stock under the Plan. Neither the Plan nor any action
taken hereunder shall be construed as giving an employee any
right to be retained in the employ of the Company.
(b) The Plan shall at all times remain unfunded and no
provision shall at any time be made with respect to segregating
assets of the Company for the purpose of providing benefits
hereunder. No Participant of other person shall have an
interest in any particular assets of the Company by reason of a
right to receive a benefit under this Plan and any such
Participant or other person shall have only the rights of a
general unsecured creditor of the Company with respect to any
rights under the Plan.
(c) This Plan shall be governed and construed in
accordance with the laws of the State of Michigan.
8. Amendment of the Plan: The Board of Directors of the
Company may alter or amend the Plan at any time and from time to
time, without obtaining the approval of the stockholders of the
Company. Except as otherwise provided herein, no amendment to
the Plan may alter, impair or reduce the number of Restricted
Shares granted under the Plan prior to the effective date of
such amendment without the written consent of any affected
Participant.
9. Right of Company to Terminate Employment: Nothing
contained in the Plan, or in any grant awarded pursuant to the
Plan, shall interfere or impair in any way with the right of the
Company to terminate the employment of the Participant at any
time for any reason with or without cause.
10. Stockholder Approval: The Plan is being initiated
anticipating stockholder approval at our next stockholder
meeting.
Exhibit 4.7
VSI HOLDINGS, INC.
EMPLOYEE STOCK PURCHASE PLAN
October 7, 1997
Visual Services has made arrangements with Merrill Lynch for
you, at your option, to purchase VSI Holdings Stock without a
brokerage commission.
The following outlines the procedures for purchase:
1. Obtain forms from Nancy Osey to open your CBA Account with
Merrill Lynch, return to same.
2. Purchases may be made on Fridays from 9am - 12 pm.
You may, of course, purchase stock on the open market through any
brokerage at any time. (the arrangement with Merrill Lynch was
made to save you the commission on your VSI Holdings Stock
purchase, but you are not obligated to use them.)
3. Purchase price will be the price of the stock closed at on Thursday.
4. Payment options are as follows:
a. You may pay for your purchase by personal check, cashier's
check or money order, or
b. If you are a full time employee, you may purchase through
payroll deductions.
c. This is subject to a minimum purchase of 50 shares.
d. Deductions may be made over 6 checks for a salaried employee
and 12 checks for an hourly employee.
e. You will need to sign a payroll deduction authorization form.
5. To sell your stock, you will deal directly with Merrill Lynch
and pay the appropriate commission or brokerage charge for this
service.
This program may be cancelled or amended at any time without prior notice.
EXHIBIT 4.8
ADVANCED ANIMATIONS, INC.
AGREEMENT AND PLAN OF MERGER
PRIVATE
This AGREEMENT AND PLAN OF MERGER is made and entered into
as of 8:00 a.m. on the 1st day of February, 1997, by and among
(i) The Banker's Note, Inc., a corporation organized and
existing under the laws of the State of Texas ("BKNT"), (ii) AA
Acquisitions Corp., a corporation organized and existing under
the laws of the State of Georgia (the "Acquired Company") and
successor to, as of 5:00 p.m. on January 31, 1997, VSI-AA, LLC,
d/b/a Advanced Animations, a limited liability company organized
and existing under the laws of the State of Michigan ("VSI-AA"),
and (iii) Advanced Animations, Inc., a corporation organized by
BKNT and existing under the laws of the state of Georgia (the
"Acquiring Company") for the purpose of acquiring the Acquired
Company.
SECTION 1--DEFINITIONS
As used in this Agreement, the following terms shall have
the following meanings respectively:
"Acquired Stock" means the Acquired Company's 5,720 (of
10,000 authorized) issued and outstanding shares of $.01 par
value common stock.
"Agreement" means this Agreement and Plan of Merger.
"BKNT Stock" means the $.01 par value common stock of BKNT.
"Closing Date" means the date on which the Merger shall be
consummated, but no later than March 1, 1997.
"Effective Date" means the date of which the Merger become
effective pursuant to applicable state law as determined by
Sections 2 and 3.4 of this Agreement.
"Financial Statements" means (i) with respect to BKNT, its
audited financial statements for the years ended September 30,
1996 and 1995 and January 28, 1995, and unaudited interim
financial statements for the quarters ended December 31, 1995,
March 31, 1996 and June 30, 1996, (ii) with respect to the
Acquired Company, the audited financial statements of VSI-AA for
the years ended September 30, 1996 and 1995, and unaudited
interim financial statements for the quarters ended December 31,
1995, March 31, 1996 and June 30, 1996.
"Georgia Code" means the Georgia Business Corporation Code,
as amended, as applicable to the Merging Entities.
"Holders" means the holders of the Acquired Stock:
Visual Services, Inc. -- 4,398 shares
Margaret J. Toth -- 301 shares
Thomas W. Marquis -- 301 shares
BKNT -- 720 shares
"Merger" means the merger of the Acquired Company into the
Acquiring Company.
"Merging Entities" means the Acquiring and Acquired Companies.
"Per Share Consideration" means the Purchase Price divided
by the Acquired Stock other than the 720 shares held by BKNT, or
approximately 1,512.6154 shares of BKNT Stock per share of
Acquired Stock, payable to all Holders, except BKNT, as follows:
Visual Services, Inc. -- 6,652,483 shares
Margaret J. Toth -- 455,297 shares
Thomas W. Marquis -- 455,297 shares
Regarding BKNT, the "Per Share Consideration" shall be .10 share
of the Acquiring Company for each of 720 shares of the Acquired
Company.
"Purchase Price" means 7,563,077 shares of BKNT Stock.
"Stock Plans" means, with respect to BKNT, (i) the 1982
Incentive Stock Option Plan, (ii) the 1986 Incentive Stock
Option Plan, (iii) the 1986 Non-Qualified Stock Option Plan,
(iv) the Independent Director Stock Option Plan, and (v) the
August 22, 1995 Retail Outlet Store Agreement (and the series of
Stock Option Agreements issuable thereunder) with The Casablanca
Group, L.P.
"Texas Code" means the Texas Business Corporation Act, as
amended, as applicable to BKNT.
"Voting Agreement" means, with respect to BKNT, the January
18, 1994 Voting Agreement by and among Martin S. Suchik, Steve
Toth, Jr., the Steve Toth Jr. Trust, and CLT, as amended.
SECTION 2--TERMS OF THE MERGER
2.1 Merger. On the Effective Date, the Acquired
Company shall be merged with and into the Acquiring Company in
accordance with, and with the effect of, the applicable
provisions of the Georgia Code. The Acquiring Company shall be
the surviving corporation after the Merger and, as a result of
the Merger, BKNT shall continue as the sole shareholder of the
Acquiring Company. The separate existence of the Acquired
Company shall cease as of the effectiveness of the Merger.
Pursuant to the Merger and as of the effectiveness of the
Merger, each outstanding share of Acquired Stock will be
converted into the right to receive the Per Share Consideration.
2.2 Payment for Shares of Acquired Stock. All of the
shares of Acquired Stock issued and outstanding immediately
prior to the effectiveness of the Merger shall, as of the
Effective Date, by virtue of the Merger and without any further
action on the part of the holders, entitle such holders in the
aggregate to receive the Purchase Price, on or after the
Effective Date. At closing, BKNT shall deliver stock
certificates made payable to the Holders in amounts equal to the
product of the Per Share Consideration multiplied by the number
of shares of Acquired Stock represented by such shareholders'
share certificates delivered by them.
SECTION 3--PROCEDURES FOR THE MERGER
The Merger shall be consummated and the purposes of this
Agreement accomplished in accordance with the following
procedures:
3.1 Vote of Directors and by Sole Shareholder of
Acquiring Company; Authorization by BKNT Board to Consummate.
This Agreement shall be approved by the affirmative vote of all
of the directors of BKNT and the Acquired Company, whereupon the
respective officers of those companies shall be authorized to
execute and deliver this Agreement. This Agreement shall also
be approved by the affirmative vote of the sole shareholder and
all directors of the Acquiring Company, whereupon the respective
officers of such company shall be authorized to execute and
deliver this Agreement.
3.2 Vote of Directors and Shareholders of Acquired
Company. The Board of Directors of the Acquired Company shall
submit this Agreement to the shareholders of the Acquired
Company and, upon the unanimous vote of such shareholders
holding the Acquired Stock, the officers of the Acquired Company
shall then be authorized to consummate the Merger. Notice of
such meeting shall be accompanied by a copy of this Agreement
and a full statement of the rights and remedies of dissenting
shareholders, the method of exercising such rights and remedies,
and the limitations on them. If this Agreement is approved by
the unanimous vote of the shareholders of the Acquired Company
owning the Acquired Stock issued and outstanding as of the
record date of such meeting, then this Agreement shall be the
agreement of the Acquired Company and the officers of such
Acquired Company shall then be authorized to consummate this
Agreement.
3.3 Other Approvals; Closing. BKNT and the Acquired
Company shall proceed expeditiously and cooperate fully in the
procurement of any other consents and approvals and in the
taking of any other action, and the satisfaction of all other
requirements prescribed by law or otherwise, necessary for the
consummation of the Merger on the terms herein provided by the
Effective Date. The parties hereto shall proceed in good faith
to complete their due diligence and consummate the Merger as
soon as practicable following approval of the Agreement by the
Board of Directors f BKNT, but in no event later than the
Closing Date.
3.4 Effective Time of the Merger. Subject to the
terms and upon satisfaction of all requirements of law and the
conditions specified in the Agreement, including, among other
conditions, the prior filing of Articles of Merger regarding the
Merger with the Secretary of State of Georgia and the receipt of
all required approvals, the Merger shall become effective by
operation of law without further act or deed upon the part of
either BKNT or the Merging Entities, and the effective time
shall be at the time specified in the Articles of Merger to be
issued by the Secretary of State of Georgia.
3.5 Other Acts. The directors and officers of BKNT
and the Merging Entities, both prior to and following the
Effective Date, shall execute all such other instruments and
shall take all such other actions as may be necessary or
advisable to consummate the Merger and to cause this Agreement
to be carried out in accordance with its terms.
SECTION 4--EFFECT OF THE AGREEMENT
4.1 Name. Upon the Effective Date, the name of the
entity surviving the Merger shall be the name of the Acquiring
Company, "Advanced Animations, Inc."
4.2 Articles of Incorporation and By-Laws. Upon the
Effective Date, the Articles of Incorporation and By-Laws of the
entity surviving the Merger shall be the Articles of
Incorporation and By-Laws of the Acquiring Company, and such
surviving entity shall be domiciled in Georgia and subject to
the Georgia Code.
4.3 Directors and Officers. Upon the Effective Date,
the directors and officers of the entity surviving the Merger
shall be the directors and officers of the Acquired Company
which are:
Steve Toth, Jr. President, Director
Margaret J. Toth Director
Thomas W. Marquis Vice President, Secretary, Treasurer,
Director
4.4 Assumption of Rights and Liabilities. All assets
of the respective Merging Entities, as they exist upon the
Effective Date, shall pass to and vest in the Acquiring Company
without any conveyance or other transfer. The Acquiring Company
shall assume and be responsible for all of the liabilities of
the Acquired Company of every kind and description as of the
Effective Date.
SECTION 5--REPRESENTATIONS AND WARRANTIES OF ACQUIRED
COMPANY
The Acquired Company represents and warrants to BKNT and
the Acquiring Company as follows:
5.1 Organization. The Acquired Company is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia with power and
authority necessary to carry on the business in which it is
engaged, to own the property owned by it, and to enter into and
perform its obligations under this Agreement.
5.2 Capital Stock. The authorized capital stock of
the Acquired Company consists of 10,000 shares of common stock,
$1.00 par value, of which 5,720 shares are issued and
outstanding. There are no outstanding securities of the
Acquired Company which are convertible into, or evidence the
right to purchase or subscribe for, any shares of capital stock
of the issuing entity. There are no outstanding or authorized
options, warrants, calls, subscriptions, rights, commitments or
any other agreements of any character obligating the Acquired
Company to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase
or subscribe for any shares of such stock. There are no
agreement or understandings with respect to the voting, sale or
transfer of any shares of capital stock of the Acquired Company.
5.3 Financial Statements. Each of the Financial
Statements of the Acquired Company was prepared in accordance
with generally accepted accounting principles applied on a
consistent basis, and fairly present the financial position of
the Acquired Company as of the dates thereof and the results of
its operations and changes in its financial position for the
periods then ended.
5.4 Authorization of Agreement; No Breach. The
execution and delivery of this Agreement has been duly
authorized by the Board of Directors of the Acquired Company.
This Agreement is thus a legal, valid and binding obligation of
the Acquired Company enforceable against the Acquired Company in
accordance with its terms, subject to the Agreement's approval
and adoption by all of shareholders of the Acquired Company.
All persons who have executed this Agreement or who have acted
or will act on behalf of the Acquired Company have been duly
authorized to do so by all necessary corporate action of the
Acquired Company. The execution, delivery and performance of
this Agreement in accordance with its terms and the consummation
of the Merger will not (i) violate or result in any breach of,
or default and acceleration under, the Articles of Incorporation
or By-Laws of the Acquired Company or any instrument or
agreement to which the Acquired Company is a party or is bound;
(ii) violates any judgment, order, injunction, decree or award
against or binding upon the Acquired Company or upon the
securities, property or business of the Acquired Company; or
(iii) to the knowledge of the Acquired Company, violate any law
or regulation of any jurisdiction relating to the Acquired
Company or to its securities, properties or business.
5.5 Litigation and Material Claims. There are no
judgments unsatisfied against the Acquired Company or consent
decrees or injunctions to which the Acquired Company is subject,
and there is no litigation, claim or proceeding pending, or, to
the knowledge of the Acquired Company, threatened against or
relating to the Acquired Company, or its properties or business,
which would have a material adverse effect on the Merger.
5.6 Tax Matters. The Acquired Company has filed all
foreign, federal, state and local tax returns (including
information returns and reports) required to be filed, and has
paid or made adequate provision for all foreign, federal, state
and local taxes and other income, social security, wage
withholding, excise, withholding, sales and use or similar taxes
and taxes of any kind, together with any related penalties,
additions or interest charges required to be paid therewith.
All such taxes and governmental charges levied or assessed
against the property or business of the Acquired Company have
been paid, other than taxes or charges, the payment of which is
not yet due or which, if due, is not yet delinquent or which
have not been finally determined or which are being contested in
good faith. To the knowledge of the Acquired Company, no
additional tax has been assessed, discussed or proposed with
respect to taxable periods occurring prior to the Effective Date
by the Internal Revenue Service or other applicable taxing
authority. There are no known tax liens on any property of the
Acquired Company.
SECTION 6--COVENANTS AND AGREEMENTS OF ACQUIRED COMPANY
The Acquired Company covenants and agrees with BKNT and
the Acquiring Company as follows:
6.1 Meetings of Holders. As soon as practicable after
the execution of this Agreement, the Acquired Company will cause
a meeting of its respective Holders to be held on a date
acceptable to BKNT at which this Agreement will be submitted for
approval and adoption by such Holders. The Acquired Company
will give notice of its meeting to all Holders in a manner and
form complying with the requirements of its Articles of
Incorporation and By-Laws and all state and federal laws and
regulations applicable to it.
6.2 Changes in Articles of Incorporation or By-Laws.
Between the date of this Agreement and the Effective Date, there
will be no changes in the Articles of Incorporation or By-Laws
of the Acquired Company or in the authorized or issued capital
stock of the Acquired Company except with the express written
consent of BKNT.
6.3 Issuance or Purchase of Securities. Between the
date of this Agreement and the Effective Date, the Acquired
Company will not: (i) issue any additional capital stock or any
instrument evidencing the right to convert to its capital stock;
(ii) declare, set aside or pay any dividend or make any other
distribution in respect to its capital stock; (iii) directly or
indirectly redeem, purchase or otherwise acquire any shares of
its capital stock; or (iv) issue to any person or entity
options, warrants, or other rights to acquire any of its
securities other than as contemplated under this Agreement.
6.4 Maintenance of Properties. Prior to the Effective
Date, the Acquired Company will maintain its properties and
assets in good repair, order and condition, reasonable wear and
use excepted, and will maintain its books, accounts and records
in the usual, regular and ordinary manner on a basis consistent
with prior years and in accordance with generally accepted
accounting principles consistently applied throughout the
periods covered by such statements. Prior to the Effective
Date, the Acquired Company will not cancel any insurance policy
or other contract or agreement unless such contract, insurance
policy or agreement is replaced in the ordinary course of
business.
6.5 Access to Properties and Records. From the date
hereof to and including the Effective Date, the Acquired Company
will allow access to its properties and such of its books and
records as may be useful for BKNT to make such investigation as
it may desire of the properties and businesses. The Acquired
Company will permit BKNT to review and examine its assets, books
and records, and otherwise have general access to its facilities
and key personnel, for the sole purpose of conducting its due
diligence investigation during its normal business hours and
days. The Acquired Company will also permit BKNT and its agents
to discuss the financial condition, business and affairs of the
Acquired Company with its independent certified public
accountants. BKNT shall use such information solely for the
purpose of BKNT's due diligence in connection with the
transactions contemplated by this Agreement, shall keep all such
information confidential, provided that such information may be
disclosed to directors, officers, employees, lenders, attorneys
and representatives of BKNT who need to know such information,
and, upon termination of this Agreement, BKNT shall return all
copies of such information to the Acquired Company.
6.6 Taxes. The Acquired Company shall punctually pay
and discharge prior to the Effective Date all taxes, assessments
and other governmental charges lawfully imposed upon it or any
of its properties, or upon the income and profits thereof;
provided, however, that nothing herein shall prohibited the
Acquired Company from contesting in good faith and by
appropriate proceedings the validity of any tax, assessment or
governmental charge.
6.7 Operation of Business. From the date hereof to
and including the Effective Date, the Acquired Company agrees:
(i) to operate in the ordinary course of business only; and (ii)
to use its best efforts to preserve intact its business
organization, keep available the services of its officers and
key employees, and maintain satisfactory business relationships
with vendors, licensors, suppliers, distributors and others have
business relationships with the Acquired Company.
6.8 Best Efforts. Subject to the terms and conditions
herein provided, the Acquired Company agrees to use its best
efforts to take, or cause to be taken, all action required to be
taken and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the Merger.
6.9 Consents. The Acquired Company will use all
reasonable efforts to obtain consents of all third parties with
which it has contractual relations, which might prohibit or
otherwise affect the consummation of the Merger.
SECTION 7--REPRESENTATIONS AND WARRANTIES OF BKNT AND
ACQUIRING COMPANY
Each of BKNT and the Acquiring Company represents and
warrants to the Acquired Company as follows:
7.1 Organization. Each of BKNT and the Acquiring
Company is a corporation duly organized, validly existing and in
good standing under the laws of the States of Texas and Georgia,
respectively, with power and authority necessary to carry on the
business in which it is engaged, to own the property owned by
it, and to enter into and perform its obligations under this
Agreement.
7.2 Capital Stock. The authorized capital stock of
BKNT and the Acquiring Company consists, respectively, of (i)
20,000,000 shares of common stock, $.01 par value, of which
4,407,310 shares are issued and outstanding, and 2,000,000
shares of preferred stock, $1.00 par value, none of which is
issued and outstanding, and (ii) 10,000 shares of common stock,
$1.00 par value, of which 500 shares are issued and outstanding.
Except for the Stock Plans, there are no outstanding securities
of BKNT or the Acquiring Company which are convertible into, or
evidence the right to purchase or subscribe for, any shares of
capital stock of the issuing entity. Except for the Stock
Plans, there are no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other
agreements of any character obligating BKNT or the Acquiring
Company to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase
or subscribe for any shares of such stock. Except for the
Voting Agreements, there are no agreement or understandings with
respect to the voting, sale or transfer of any shares of capital
stock of BKNT or the Acquiring Company.
7.3 Financial Statements. Each of the Financial
Statements of BKNT was prepared in accordance with generally
accepted accounting principles applied on a consistent basis,
and fairly present the financial position of BKNT as of the
dates thereof and the results of its operations and changes in
its financial position for the periods then ended.
7.4 Authorization of Agreement; No Breach. The
execution and delivery of this Agreement has been duly
authorized by the Board of Directors of BKNT and the Acquiring
Company. This Agreement is thus a legal, valid and binding
obligation of BKNT and the Acquiring Company enforceable against
BKNT and the Acquiring Company in accordance with its terms.
All persons who have executed this Agreement or who have acted
or will act on behalf of BKNT and the Acquiring Company have
been duly authorized to do so by all necessary corporate action
of BKNT and the Acquiring Company. The execution, delivery and
performance of this Agreement in accordance with its terms and
the consummation of the respective Merger will not (i) violate
or result in any breach of, or default and acceleration under,
the Articles of Incorporation or By-Laws of BKNT or the
Acquiring Company or any instrument or agreement to which BKNT
or the Acquiring Company is a party or is bound; (ii) violates
any judgment, order, injunction, decree or award against or
binding upon BKNT or the Acquiring Company or upon the
securities, property or business of BKNT or the Acquiring
Company; or (iii) to the knowledge of BKNT or the Acquiring
Company, violate any law or regulation of any jurisdiction
relating to BKNT or the Acquiring Company or to its securities,
properties or business.
7.5 Litigation and Material Claims. There are no
judgments unsatisfied against BKNT or the Acquiring Company or
consent decrees or injunctions to which BKNT or the Acquiring
Company is subject, and there is no litigation, claim or
proceeding pending, or, to the knowledge of BKNT or the
Acquiring Company, threatened against or relating to BKNT or the
Acquiring Company, or its properties or business, which would
have a material adverse effect on the Merger.
7.6 Tax Matters. BKNT and the Acquiring Company has
filed all foreign, federal, state and local tax returns
(including information returns and reports) required to be
filed, and has paid or made adequate provision for all foreign,
federal, state and local taxes and other income, social
security, wage withholding, excise, withholding, sales and use
or similar taxes and taxes of any kind, together with any
related penalties, additions or interest charges required to be
paid therewith. All such taxes and governmental charges levied
or assessed against the property or business of BKNT and the
Acquiring Company have been paid, other than taxes or charges,
the payment of which is not yet due or which, if due, is not yet
delinquent or which have not been finally determined or which
are being contested in good faith. To the knowledge of BKNT and
the Acquiring Company, no additional tax has been assessed,
discussed or proposed with respect to taxable periods occurring
prior to the Effective Date by the Internal Revenue Service or
other applicable taxing authority. There are no known tax liens
on any property of BKNT and the Acquiring Company.
7.7 Periodic Reports. BKNT has timely filed all
required annual and quarterly reports and documents with the
Securities and Exchange Commission since January 1, 1994, all of
which complied, as of the date of filing, in all material
respects with all applicable requirements of the Securities
Exchange Act of 1934, as amended. To the knowledge of BKNT, as
of their respective dates, none of such reports, including
without limitation any financial statements or schedules
included therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
SECTION 8--COVENANTS AND AGREEMENTS OF BKNT AND ACQUIRING
COMPANY
Each of BKNT and the Acquiring Company covenants and agrees
with the Acquired Company as follows:
8.1 Changes in Articles of Incorporation or By-Laws.
Between the date of this Agreement and the Effective Date, there
will be no changes in the Articles of Incorporation or By-Laws
of BKNT or the Acquiring Company or in the authorized or issued
capital stock of BKNT or the Acquiring Company except pursuant
to the Stock Plans or with the express written consent of the
Acquired Company.
8.2 Issuance or Purchase of Securities. Between the
date of this Agreement and the Effective Date, BKNT and the
Acquiring Company will not: (i) issue any additional capital
stock or, except pursuant to the Stock Plans, any instrument
evidencing the right to convert to its capital stock; (ii)
declare, set aside or pay any dividend or make any other
distribution in respect to its capital stock; (iii) directly or
indirectly redeem, purchase or otherwise acquire any shares of
its capital stock; or (iv) issue to any person or entity
options, warrants, or other rights to acquire any of its
securities other than as contemplated under this Agreement.
8.3 Maintenance of Properties. Prior to the Effective
Date, BKNT and the Acquiring Company will maintain its
properties and assets in good repair, order and condition,
reasonable wear and use excepted, and will maintain its books,
accounts and records in the usual, regular and ordinary manner
on a basis consistent with prior years and in accordance with
generally accepted accounting principles consistently applied
throughout the periods covered by such statements. Prior to the
Effective Date, BKNT and the Acquiring Company will not cancel
any insurance policy or other contract or agreement unless such
contract, insurance policy or agreement is replaced in the
ordinary course of business.
8.4 Access to Properties and Records. From the date
hereof to and including the Effective Date, BKNT and the
Acquiring Company will allow access to its properties and such
of its books and records as may be useful for the Acquired
Company to make such investigation as it may desire of the
properties and businesses. Each of BKNT and the Acquiring
Company will permit the Acquired Company to review and examine
its assets, books and records, and otherwise have general access
to its facilities and key personnel, for the sole purpose of
conducting its due diligence investigation during its normal
business hours and days. Each of BKNT and the Acquiring Company
will also permit the Acquired Company and its agents to discuss
the financial condition, business and affairs of BKNT and the
Acquiring Company with its independent certified public
accountants. The Acquired Company shall use such information
solely for the purpose of their due diligence in connection with
the transactions contemplated by this Agreement, shall keep all
such information confidential, provided that such information
may be disclosed to directors, officers, employees, lenders,
attorneys and representatives of the Acquired Company who need
to know such information, and, upon termination of this
Agreement, the Acquired Company shall return all copies of such
information to BKNT and the Acquiring Company.
8.5 Taxes. Each of BKNT and the Acquiring Company
shall punctually pay and discharge prior to the Effective Date
all taxes, assessments and other governmental charges lawfully
imposed upon it or any of its properties, or upon the income and
profits thereof; provided, however, that nothing herein shall
prohibited BKNT and the Acquiring Company from contesting in
good faith and by appropriate proceedings the validity of any
tax, assessment or governmental charge.
8.6 Operation of Business. From the date hereof to and
including the Effective Date, each of BKNT and the Acquiring
Company agrees: (i) to operate in the ordinary course of
business only; and (ii) to use its best efforts to preserve
intact its business organization, keep available the services of
its officers and key employees, and maintain satisfactory
business relationships with vendors, licensors, suppliers,
distributors and others have business relationships with BKNT
and the Acquiring Company.
8.7 Best Efforts. Subject to the terms and conditions
herein provided, each of BKNT and the Acquiring Company agrees
to use its best efforts to take, or cause to be taken, all
action required to be taken and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger.
8.8 Consents. Each of BKNT and the Acquiring Company
will use all reasonable efforts to obtain consents of all third
parties with which it has contractual relations, which might
prohibit or otherwise affect the consummation of the Merger.
SECTION 9--CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED
COMPANY
The obligations of the Acquired Company under this
Agreement are subject to the fulfillment prior to or on the
Effective Date of the following conditions:
9.1 Representations and Warranties. Each of the
representations and warranties of BKNT and the Acquiring Company
contained in this Agreement shall be accurate in all material
respects as of the date hereof and as of the Effective Date, and
BKNT and the Acquiring Company shall have performed all
covenants and agreements on its part required to be performed
and shall not be in default under any of the provisions of this
Agreement at the Effective Date. In the event any
representation or warranty of BKNT or the Acquiring Company
contained in this Agreement is not accurate in all material
respects as of the date hereof and as of the Effective Date and
such inaccurate representation or warranty was not known by BKNT
or the Acquiring Company to be inaccurate at such date or if any
representation or warranty cannot be remade at the Effective
Date due to changes in facts and circumstances beyond the
control of BKNT or the Acquiring Company, the sole remedy of the
Acquired Company against BKNT and the Acquiring Company and
their respective officers, directors and agents hereunder is not
to perform the obligations of the Acquired Company hereunder.
9.2 Certified Copies of Resolutions. Each of BKNT and
the Acquiring Company shall have delivered to the Acquired
Company copies, certified by the duly qualified and acting
Secretary thereof, of resolutions adopted by its Board of
Directors, and by the sole shareholder of the Acquiring Company,
with respect to this Agreement, as well as a certificate of
incumbency with respect to its officers.
9.3 Consents. Each of BKNT and the Acquiring Company
shall have obtained consents of all third parties with which it
has contractual relations which might prohibit or otherwise
affect the consummation of the Merger contemplated by this
Agreement and all such consents shall have been executed and
delivered to the Acquired Company.
9.4 No Material Adverse Change. Prior to the Effective
Date, there shall be no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise,
the results of operations, or prospects of BKNT and the
Acquiring Company, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do
business, fire, acts of war, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or act
of God or other public force or otherwise.
9.5 Absence of Litigation. No order of any court of
competent jurisdiction shall have been entered and not withdrawn
prohibiting consummation of the Merger, and no action or
proceeding shall be instituted or threatened before any court,
governmental agency or regulatory body seeking to enjoin or
modify, or to obtain damages or a discovery order in respect of,
the Merger or any other transaction contemplated by this
Agreement.
9.6 Completion of Due Diligence. The Acquired Company
and its representatives shall have completed to its satisfaction
the review of BKNT and the Acquiring Company as contemplated by
this Agreement, and no fact or circumstance shall have come to
the attention of the Acquired Company as a result of such review
which materially and adversely affects the business, prospects
or financial condition of BKNT or the Acquiring Company or any
of their respective assets or properties.
9.7 Filing of Articles of Merger. The Articles of
Merger with respect to the Merger shall have been executed by
each Merging Entity and delivered in a form acceptable for
filing with the Secretary of State of Georgia.
SECTION 10--CONDITIONS PRECEDENT TO OBLIGATIONS OF BKNT AND
ACQUIRING COMPANY
The obligations of BKNT and the Acquiring Company under
this Agreement are subject to the fulfillment prior to or on the
Effective Date of the following conditions:
10.1 Representations and Warranties. Each of the
representations and warranties of the Acquired Company contained
in this Agreement shall be accurate in all material respects as
of the date hereof and as of the Effective Date, and the
Acquired Company shall have performed all covenants and
agreements on its part required to be performed and shall not be
in default under any of the provisions of this Agreement at the
Effective Date. In the event any representation or warranty of
the Acquired Company contained in this Agreement is not accurate
in all material respects as of the date hereof and as of the
Effective Date and such inaccurate representation or warranty
was not known by the Acquired Company to be inaccurate at such
date or if any representation or warranty cannot be remade at
the Effective Date due to changes in facts and circumstances
beyond the control of the Acquired Company, the sole remedy of
BKNT and the Acquiring Company against the Acquired Company and
its officers, directors and agents hereunder is not to perform
the obligations of BKNT and the Acquiring Company hereunder.
10.2 Approval by Holders. This Agreement shall have
been approved by all of the Holders of the Acquired Company.
10.3 Certified Copies of Resolutions. The Acquired
Company shall have delivered to BKNT and the Acquiring Company
copies, certified by the duly qualified and acting Secretary
thereof, of resolutions adopted by its Board of Directors and
Holders with respect to this Agreement, as well as a certificate
of incumbency with respect to its officers.
10.4 Consents. The Acquired Company shall have
obtained consents of all third parties with which it has
contractual relations, which might prohibit or otherwise affect
the consummation of the Merger contemplated by this Agreement
and all such consents shall have been executed and delivered to
BKNT and the Acquiring Company.
10.5 No Material Adverse Change. Prior to the
Effective Date, there shall be no material adverse change in the
assets or liabilities, the business or condition, financial or
otherwise, the results of operations, or prospects of the
Acquired Company, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do
business, fire, acts of war, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or act
of God or other public force or otherwise.
10.6 Absence of Litigation. No order of any court of
competent jurisdiction shall have been entered and not withdrawn
prohibiting consummation of the Merger, and no action or
proceeding shall be instituted or threatened before any court,
governmental agency or regulatory body seeking to enjoin or
modify, or to obtain damages or a discovery order in respect of,
the Merger or any other transaction contemplated by this
Agreement.
10.7 Completion of Due Diligence. BKNT and its
representatives shall have completed to its satisfaction the
review of the Acquired Company as contemplated by this
Agreement, and no fact or circumstance shall have come to the
attention of BKNT as a result of such review which materially
and adversely affects the business, prospects or financial
condition of any of the Acquired Company or any of their
respective assets or properties.
10.8 Filing of Articles of Merger. The Articles of
Merger with respect to the Merger shall have been executed by
each Merging Entity and delivered in a form acceptable for
filing with the Secretary of State of Georgia.
SECTION 11--AMENDMENTS AND WAIVERS
11.1 Amendments. At any time before or after approval
of this Agreement by the Holders, this Agreement may be amended,
modified or supplemented in writing in such manner as may be
approved by BKNT, the Acquiring Company and the Acquired
Company.
11.2 Waivers. Any party to this Agreement, acting
individually or through its Board of Directors, as applicable,
shall have the right at any time to waive any or all of the
conditions precedent to its obligations to the consummation of
the transactions contemplated by this Agreement, except any
condition that, if not satisfied, would result in the violation
of any law or applicable governmental regulation.
SECTION 12--MISCELLANEOUS
12.1 Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties hereto
with regard to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject
matter.
12.2 Governing Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the
State of Texas regarding obligations of BKNT, the laws of the
State of Georgia regarding obligations of the Merging Entities.
12.3 Headings. The headings in this Agreement are for
convenience only and shall not affect the construction or
interpretation of this Agreement.
12.4 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and
the same instrument.
12.5 Expenses. Except as set forth herein, each party to
this Agreement shall bear its own costs and shall make no claim
for contribution from any other party.
12.6 Notices. Unless specifically provided to the contrary
herein, any notice, demand or other communication required or
permitted to be given pursuant to this Agreement shall be sent
in writing and shall be deemed to have been duly given or made
five days after deposited in the U.S. Mail, or the next business
day after delivered to a recognized overnight courier service
for next-day delivery, or the next business day when sent by
telecopier, addressed as follows or to such other address as may
be hereafter provided by the respective parties to this
Agreement:
to BKNT and the Acquiring Company: to the Acquired Company:
The Banker's Note, Inc. Visual Services, Inc.
c/o Harold D. Cannon c/o Thomas W. Marquis
4900 Highlands Parkway 2100 N. Woodward Avenue
Smyrna, Georgia 30082 Suite West 201
Bloomfield Hills, MI 48304
Telephone: (770) 432-0636 Telephone: (810) 644-0500
Telecopy: (770) 432-2499 Telecopy: (810) 646-3233
12.7 Termination. Unless consummated sooner, this
Agreement and the parties' obligations hereunder and be of no
further force and effect after the Effective Date except those
set forth in Sections 6.5 and 8.4 of this Agreement which shall
survive any termination hereunder.
12.8 Time of the Essence. Time shall be of the essence for
this Agreement.
12.9 Non-Survival of Representations and Warranties.
The representations and warranties of the parties to this
Agreement shall not survive the Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered on January 20, 1997.
The Banker's Note, Inc. Advanced Animations, Inc. AA
Acquisitions Corp.
By:_________________ By:________________ By:__________________
President President President
By:_________________ By:________________ By:__________________
Secretary Secretary Secretary
ARTICLES OF MERGER BETWEEN
ADVANCED ANIMATIONS, INC. and AA ACQUISITIONS CORP.
I. Attached hereto as Exhibit "A" and by reference made
a part hereof is the Agreement and Plan of Merger ("Plan") duly
approved and adopted by ADVANCED ANIMATIONS, INC., a Georgia
corporation, and AA ACQUISITIONS CORP., a Georgia corporation.
II. On January 20, 1997, the Board of Directors and the
sole shareholder of ADVANCED ANIMATIONS, INC. approved the Plan.
III. On January 20, 1997, the Board of Directors and
the sole shareholder of AA ACQUISITIONS CORP. approved the Plan.
IV. As provided in Sections 2.1, 4.1, and 4.2 of the
Plan, ADVANCED ANIMATIONS, INC. will be the surviving legal
entity, and will retain its present Articles of Incorporation
and By-Laws, after the Effective Date of the Merger, and that
the name of the merged entity shall be "ADVANCED ANIMATIONS,
INC."
V. The Effective Date of the Merger shall be 8:00 a.m.
on February 1, 1997.
VI. Section 2.2 of the Plan details the manner and
basis of converting the 5,720 shares of AA ACQUISITIONS CORP.
into 72 shares of ADVANCED ANIMATIONS, INC. and 7,563,077 shares
of The Banker's Note, Inc., a Texas corporation and sole
shareholder of ADVANCED ANIMATIONS, INC.
VII. After the Effective Date of the Merger, ADVANCED
ANIMATIONS, INC. will hold the assets, assume the liabilities,
and carry on the business of AA ACQUISITIONS CORP. in Vermont
and, notwithstanding any failure to file the Articles of
Incorporation of ADVANCED ANIMATIONS, INC. or these Articles of
Merger therein, ADVANCED ANIMATIONS, INC. should be considered
to be the successor of AA ACQUISITIONS CORP. for the purpose of
being registered to do business in such states.
Executed this ___ day of January, 1997.
ADVANCED ANIMATIONS, INC. AA ACQUISITIONS CORP.
By:___________________ By:_____________________
President President
By:___________________ By:_____________________
Secretary Secretary
January 21, 1997
Atlanta Business Chronicle
1801 Peachtree Street, N.E.
Atlanta, Georgia 30309-9806
Attn: Legal Advertising
Dear Sirs:
You are requested to publish, once a week for two
consecutive weeks commencing within ten days after the receipt
of this request, a notice in the following form:
NOTICE OF MERGER
Notice is given that Articles of Merger which will effect
a merger by and between ADVANCED ANIMATIONS, INC., a Georgia
corporation, and AA ACQUISITIONS CORP., a Georgia corporation,
will be delivered to the Secretary of State for filing in
accordance with the applicable provisions of the Georgia
Business Corporation Code. The surviving/acquiring corporation
is ADVANCED ANIMATIONS, INC., a corporation incorporated in the
State of Georgia, which will continue under its present name
"ADVANCED ANIMATIONS, INC." The registered office of such
Corporation is located at 4900 Highlands Parkway, Smyrna,
Georgia 30082 and its registered agent at such address is
Harold D. Cannon.
Enclosed is a check in the amount of $40.00 in payment of the
cost of publishing this notice. Please call me at 404-351-7766
if you have any questions about this matter.
Very truly yours,
Michael Augur Kilgore, Attorney
on behalf of ADVANCED ANIMATIONS, INC.
January 20, 1997
CERTIFICATE OF REQUEST FOR PUBLICATION AND PAYMENT
The undersigned officer of ADVANCED ANIMATIONS, INC. hereby
certifies and verifies that the request for publication of a
notice of intent to file Articles of Merger, regarding its
merger with AA ACQUISITIONS CORP., a Georgia corporation, and
the $40.00 payment for such publication have been made as
required by subsection (b) of O.C.G.A. 14-2-1105.1, as
evidenced by a copy of the transmittal letter therefor to the
Atlanta Business Chronicle attached hereto.
ADVANCED ANIMATIONS, INC.
By:___________________________
Harold D. Cannon, Secretary
EXHIBIT 4.9
VISPAC, INC.
AGREEMENT AND PLAN OF MERGER
PRIVATE
This AGREEMENT AND PLAN OF MERGER is made and entered into
as of the 13th day of June, 1997, by and among (i) VSI Holdings,
Inc., a corporation organized and existing under the laws of the
State of Georgia ("VSI"), (ii) VISPAC, Inc., a corporation
organized and existing under the laws of the State of Michigan
(the "Acquired Company"), and (iii) VISPAC, Inc., a corporation
organized by VSI and existing under the laws of the state of
Georgia (the "Acquiring Company") for the purpose of acquiring
the Acquired Company.
SECTION 1--DEFINITIONS
As used in this Agreement, the following terms shall have
the following meanings respectively:
"Acquired Stock" means the Acquired Company's 5,885 and
52,965 issued and outstanding shares of $.20 par value common
stock, Series A Voting and B Non-Voting, which shall, for
purposes of this Agreement, be considered a single class of
58,850 shares of stock.
"Agreement" means this Agreement and Plan of Merger.
"Closing Date" means the date on which the Merger shall be
consummated, but in no event later than October 1, 1997.
"Effective Date" means the date of which the Merger become
effective pursuant to applicable state law as determined by
Sections 2 and 3.4 of this Agreement.
"Financial Statements" means (i) with respect to VSI, its
audited financial statements for the years ended September 30,
1996 and 1995, and unaudited interim financial statements for
the quarters ended December 31, 1996 and March 31, 1997, (ii)
with respect to the Acquired Company, its audited financial
statements for the years ended September 30, 1996 and 1995, and
unaudited interim financial statements for the quarters ended
December 31, 1996 and March 31, 1997.
"Georgia Code" means the Georgia Business Corporation Code,
as amended, as applicable to VSI and the Acquiring Company.
"Holders" means the holders of Acquired Stock:
Margaret A. Toth, as trustee under Trust Agreement
dated 9/1/67 f/b/o Margaret Joan Toth -- 1,635 A, 14,715 B
shares
Steve Toth, Jr., as trustee under Trust Agreement
dated 12/20/76 f/b/o Steve Toth, Jr. -- 4,250 A, 5,250 B
shares
Steve Toth, Jr., as independent trustee of the
Steve Toth, Jr. Grantor Retained Annuity Trust -- 33,000 B
shares
"Merger" means the merger of the Acquired Company into the
Acquiring Company.
"Merging Entities" means the Acquiring and Acquired
Companies.
"Michigan Code" means the Michigan Business Corporation
Code, as
amended, as applicable to the Acquired Company.
"Per Share Consideration" means the Purchase Price divided
by the Acquired Stock, or approximately 105.35259 shares of VSI
Stock per share of Acquired Stock, payable to the Holders as
follows:
Margaret A. Toth, as trustee under Trust Agreement
dated 9/1/67 f/b/o Margaret Joan Toth -- 1,722,515 shares
Steve Toth, Jr., as trustee under Trust Agreement
dated 12/20/76 f/b/o Steve Toth, Jr. -- 1,000,850 shares
Steve Toth, Jr., as independent trustee of the
Steve Toth, Jr. Grantor Retained Annuity Trust - 3,476,635
shares
"Purchase Price" means 6,200,000 shares of VSI Stock.
"Stock Plans" means, with respect to VSI, (i) the 1986
Incentive Stock Option Plan, (ii) the 1986 Non-Qualified Stock
Option Plan, (iii) the Independent Director Stock Option Plan,
(iv) the August 22, 1995 Retail Outlet Store Agreement (and the
series of Stock Option Agreements issuable thereunder) with The
Casablanca Group, L.P., (v) the 1997 Incentive Stock Option
Plan, and (vi) the 1997 Non-Qualified
Stock Option Plan.
"Voting Agreement" means, with respect to VSI, the January
18, 1994 Voting Agreement by and among Martin S. Suchik, Steve
Toth, Jr., the Steve Toth Jr. Trust, and CLT, as amended.
"VSI Stock" means the $.01 par value common stock of VSI.
SECTION 2--TERMS OF THE MERGER
2.1 Merger. On the Effective Date, the Acquired
Company shall be merged with and into the Acquiring Company in
accordance with, and with the effect of, the applicable
provisions of the Georgia Code and the Michigan Code. The
Acquiring Company shall be the surviving corporation after the
Merger and, as a result of the Merger, VSI shall continue as the
sole shareholder of the Acquiring Company. The separate
existence of the Acquired Company shall cease as of the
effectiveness of the Merger. Pursuant to the Merger and as of
the effectiveness of the Merger, each outstanding share of
Acquired Stock will be converted into the right to receive the
Per Share Consideration.
2.2 Payment for Shares of Acquired Stock. All of the
shares of Acquired Stock issued and outstanding immediately
prior to the effectiveness of the Merger shall, as of the
Effective Date, by virtue of the Merger and without any further
action on the part of the holders, entitle such holders in the
aggregate to receive the Purchase Price, on or after the
Effective Date. At closing, VSI shall deliver stock
certificates made payable to the Holders in amounts equal to the
product of the Per Share Consideration multiplied by the number
of shares of Acquired Stock represented by such shareholders'
share certificates delivered by them.
SECTION 3--PROCEDURES FOR THE MERGER
The Merger shall be consummated and the purposes of this
Agreement accomplished in accordance with the following
procedures:
3.1 Vote of Directors and by Sole Shareholder of
Acquiring Company; Authorization by VSI Board to Consummate.
This Agreement shall be approved by the affirmative vote of all
of the directors of VSI and the Acquired Company, whereupon the
respective officers of those companies shall be authorized to
execute and deliver this Agreement. This Agreement shall also
be approved by the affirmative vote of the sole shareholder and
all directors of the Acquiring Company, whereupon the respective
officers of such company shall be authorized to execute and
deliver this Agreement.
3.2 Vote of Directors and Shareholders of Acquired
Company. The Board of Directors of the Acquired Company shall
submit this Agreement to the shareholders of the Acquired
Company and, upon the unanimous vote of such shareholders
holding the Acquired Stock, the officers of the Acquired Company
shall then be authorized to consummate the Merger. Notice of
such meeting shall be accompanied by a copy of this Agreement
and a full statement of the rights and remedies of dissenting
shareholders, the method of exercising such rights and remedies,
and the limitations on them. If this Agreement is approved by
the unanimous vote of the shareholders of the Acquired
Company owning the Acquired Stock issued and outstanding as of
the record date of such meeting, then this Agreement shall be
the agreement of the Acquired Company and the officers of such
Acquired Company shall then be authorized to consummate this
Agreement.
3.3 Other Approvals; Closing. VSI and the Acquired
Company shall proceed expeditiously and cooperate fully in the
procurement of any other consents and approvals and in the
taking of any other action, and the satisfaction of all other
requirements prescribed by law or otherwise, necessary for the
consummation of the Merger on the terms herein provided by the
Effective Date. The parties hereto shall proceed in good faith
to complete their due diligence and consummate the Merger as
soon as practicable following approval of the Agreement by the
Board of Directors of VSI, but in no event later than the
Closing Date.
3.4 Effective Time of the Merger. Subject to the terms
and upon satisfaction of all requirements of law and the
conditions specified in the Agreement, including, among other
conditions, the prior filing of Articles of Merger regarding the
Merger with the Secretaries of State of Michigan and Georgia and
the receipt of all required approvals, the Merger shall become
effective by operation of law without further act or deed upon
the part of either VSI or the Merging Entities, and the
effective time shall be at the time specified in the Articles of
Merger to be issued by the Secretary of
State of Michigan.
3.5 Other Acts. The directors and officers of VSI and
the Merging Entities, both prior to and following the Effective
Date, shall execute all such other instruments and shall take
all such other actions as may be necessary or advisable to
consummate the Merger and to cause this Agreement to be carried
out in accordance with its terms.
SECTION 4--EFFECT OF THE AGREEMENT
4.1 Names. Upon the Effective Date, the name of the
entity surviving the Merger between the Acquiring Company and
the Acquired Company shall be the name of the Acquiring Company.
4.2 Articles of Incorporation and By-Laws. Upon the
Effective Date, the Articles of Incorporation and By-Laws of the
entity surviving the Merger shall be the Articles of
Incorporation and By-Laws of the Acquiring Company, and such
surviving entity shall be domiciled in Georgia and subject to
the Georgia Code.
4.3 Directors and Officers. Upon the Effective Date,
the directors and officers of the entity surviving the Merger
shall be the directors and officers of the Acquired Company
which are:
Steve Toth, Jr. Director, President
Margaret J. Toth Director
Thomas W. Marquis Director, Vice President, Secretary,
Treasurer
4.4 Assumption of Rights and Liabilities. All assets
of the respective Merging Entities, as they exist upon the
Effective Date, shall pass to and vest in the Acquiring Company
without any conveyance or other transfer. The Acquiring Company
shall assume and be responsible for all of the liabilities of
the Acquired Company of every kind and description as of the
Effective Date.
SECTION 5--REPRESENTATIONS AND WARRANTIES OF ACQUIRED
COMPANY
The Acquired Company represents and warrants to VSI and the
Acquiring Company as follows:
5.1 Organization. The Acquired Company is a limited
liability corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan with power
and authority necessary to carry on the business in which it is
engaged, to own the property owned by it, and to enter into and
perform its obligations under this Agreement.
5.2 Capital Stock. The authorized capital stock of the
Acquired Company consists of 80,000 shares (15,000 A Voting,
65,000 B Non-Voting) of common stock, $.20 par value, of which
58,850 shares (5,885 A Voting, 52,965 B Non-Voting) are issued
and outstanding. There are no outstanding securities of the
Acquired Company which are convertible into, or evidence the
right to purchase or subscribe for, any shares of capital stock
of the issuing entity. There are no outstanding or authorized
options, warrants, calls, subscriptions, rights, commitments or
any other agreements of any character obligating the Acquired
Company to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase
or subscribe for any shares of such stock. There are no
agreement or understandings with respect to the voting, sale or
transfer of any shares of capital stock of the Acquired Company.
5.3 Financial Statements. Each of the Financial
Statements of the Acquired Company was prepared in accordance
with generally accepted accounting principles applied on a
consistent basis, and fairly present the financial position of
the Acquired Company as of the dates thereof and the results of
its operations and changes in its financial position for the
periods then ended.
5.4 Authorization of Agreement; No Breach. The
execution and delivery of this Agreement has been duly
authorized by the Board of Directors of the Acquired Company.
This Agreement is thus a legal, valid and binding obligation of
the Acquired Company enforceable against the Acquired Company in
accordance with its terms, subject to the Agreement's approval
and adoption by all of shareholders of the Acquired Company.
All persons who have executed this Agreement or who have acted
or will act on behalf of the Acquired Company have been duly
authorized to do so by all necessary corporate action of the
Acquired Company. The execution, delivery and performance of
this Agreement in accordance with its terms and the consummation
of the Merger will not (i) violate or result in any breach of,
or default and acceleration under, the Articles of Incorporation
or By-Laws of the Acquired Company or any instrument or
agreement to which the Acquired Company is a party or is bound;
(ii) violates any judgment, order, injunction, decree or award
against or binding upon the Acquired Company or upon the
securities, property or business of the Acquired Company; or
(iii) to the knowledge of the Acquired Company, violate any law
or regulation of any jurisdiction relating to the Acquired
Company or to its securities, properties or business.
5.5 Litigation and Material Claims. There are no
judgments unsatisfied against the Acquired Company or consent
decrees or injunctions to which the Acquired Company is subject,
and there is no litigation, claim or proceeding pending, or, to
the knowledge of the Acquired Company, threatened against or
relating to the Acquired Company, or its properties or business,
which would have a material adverse effect on the Merger.
5.6 Tax Matters. The Acquired Company has filed all
foreign, federal, state and local tax returns (including
information returns and reports) required to be filed, and has
paid or made adequate provision for all foreign, federal, state
and local taxes and other income, social security, wage
withholding, excise, withholding, sales and use or similar taxes
and taxes of any kind, together with any related penalties,
additions or interest charges required to be paid therewith.
All such taxes and governmental charges levied or assessed
against the property or business of the Acquired Company have
been paid, other than taxes or charges, the payment of which is
not yet due or which, if due, is not yet delinquent or which
have not been finally determined or which are being contested in
good faith. To the knowledge of the Acquired Company, no
additional tax has been assessed, discussed or proposed with
respect to taxable periods occurring prior to the Effective Date
by the Internal Revenue Service or other applicable taxing
authority. There are no known tax liens on any property of the
Acquired Company.
SECTION 6--COVENANTS AND AGREEMENTS OF ACQUIRED COMPANY
The Acquired Company covenants and agrees with VSI and the
Acquiring Company as follows:
6.1 Meetings of Holders. As soon as practicable after
the execution of this Agreement, the Acquired Company will cause
a meeting of its respective Holders to be held on a date
acceptable to VSI at which this Agreement will be submitted for
approval and adoption by such Holders. The Acquired Company
will give notice of its meeting to all Holders in a manner and
form complying with the requirements of its Articles of
Incorporation and By-Laws and all state and federal laws and
regulations applicable to it.
6.2 Changes in Articles of Incorporation or By-Laws.
Between the date of this Agreement and the Effective Date, there
will be no changes in the Articles of Incorporation or By-Laws
of the Acquired Company or in the authorized or issued capital
stock of the Acquired Company except with the express written
consent of VSI.
6.3 Issuance or Purchase of Securities. Between the
date of this Agreement and the Effective Date, the Acquired
Company will not: (i) issue any additional capital stock or any
instrument evidencing the right to convert to its capital stock;
(ii) declare, set aside or pay any dividend or make any other
distribution in respect to its capital stock; (iii) directly or
indirectly redeem, purchase or otherwise acquire any shares of
its capital stock; or (iv) issue to any person or entity
options, warrants, or other rights to acquire any of its
securities other than as contemplated under this Agreement.
6.4 Maintenance of Properties. Prior to the Effective
Date, the Acquired Company will maintain its properties and
assets in good repair, order and condition, reasonable wear and
use excepted, and will maintain its books, accounts and records
in the usual, regular and ordinary manner on a basis consistent
with prior years and in accordance with generally accepted
accounting principles consistently applied throughout the
periods covered by such statements. Prior to the Effective
Date, the Acquired Company will not cancel any insurance policy
or other contract or agreement unless such contract, insurance
policy or agreement is replaced in the ordinary course of
business.
6.5 Access to Properties and Records. From the date
hereof to and including the Effective Date, the Acquired Company
will allow access to its properties and such of its books and
records as may be useful for VSI to make such investigation as
it may desire of the properties and businesses. The Acquired
Company will permit VSI to review and examine its assets, books
and records, and otherwise have general access to its facilities
and key personnel, for the sole purpose of conducting its due
diligence investigation during its normal business hours and
days. The Acquired Company will also permit VSI and its agents
to discuss the financial condition, business and affairs of the
Acquired Company with its independent certified public
accountants. VSI shall use such information solely for the
purpose of VSI's due diligence in connection with the
transactions contemplated by this Agreement, shall keep all such
information confidential, provided that such information may be
disclosed to directors, officers, employees, lenders, attorneys
and representatives of VSI who need to know such information,
and, upon termination of this Agreement, VSI shall return all
copies of such information to the Acquired Company.
6.6 Taxes. The Acquired Company shall punctually pay
and discharge prior to the Effective Date all taxes, assessments
and other governmental charges lawfully imposed upon it or any
of its properties, or upon the income and profits thereof;
provided, however, that nothing herein shall prohibited the
Acquired Company from contesting in good faith and by
appropriate proceedings the validity of any tax, assessment or
governmental charge.
6.7 Operation of Business. From the date hereof to and
including the Effective Date, the Acquired Company agrees: (i)
to operate in the ordinary course of business only; and (ii) to
use its best efforts to preserve intact its business
organization, keep available the services of its officers and
key employees, and maintain satisfactory business relationships
with vendors, licensors, suppliers, distributors and others have
business relationships with the Acquired Company.
6.8 Best Efforts. Subject to the terms and conditions
herein provided, the Acquired Company agrees to use its best
efforts to take, or cause to be taken, all action required to be
taken and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the Merger.
6.9 Consents. The Acquired Company will use all
reasonable efforts to obtain consents of all third parties with
which it has contractual relations which might prohibit or
otherwise affect the consummation of the Merger.
SECTION 7--REPRESENTATIONS AND WARRANTIES OF VSI AND
ACQUIRING COMPANY
Each of VSI and the Acquiring Company represents and
warrants to the Acquired Company as follows:
7.1 Organization. VSI and the Acquiring Company is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, with power and
authority necessary to carry on the business in which it is
engaged, to own the property owned by it, and to enter into and
perform its obligations under this Agreement.
7.2 Capital Stock. The authorized capital stock of VSI
and the Acquiring Company consists, respectively, of (i)
60,000,000 shares of common stock, $.01 par value, of which
12,111,287 shares are issued and outstanding, and 2,000,000
shares of preferred stock, $1.00 par value, none of which is
issued and outstanding, and (ii) 10,000 shares of common stock,
$1.00 par value, of which 500 shares are issued and outstanding.
Except for the Stock Plans, there are no outstanding securities
of VSI or the Acquiring Company which are convertible into, or
evidence the right to purchase or subscribe for, any shares of
capital stock of the issuing entity. Except for the Stock
Plans, there are no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other
agreements of any character obligating VSI or the Acquiring
Company to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase
or subscribe for any shares of such stock. Except for the
Voting Agreements, there are no agreement or understandings with
respect to the voting, sale or transfer of any shares of capital
stock of VSI or the Acquiring Company.
7.3 Financial Statements. Each of the Financial
Statements of VSI was prepared in accordance with generally
accepted accounting principles applied on a consistent basis,
and fairly present the financial position of VSI as of the dates
thereof and the results of its operations and changes in its
financial position for the periods then ended.
7.4 Authorization of Agreement; No Breach. The
execution and delivery of this Agreement has been duly
authorized by the Board of Directors of VSI and the Acquiring
Company. This Agreement is thus a legal, valid and binding
obligation of VSI and the Acquiring Company enforceable against
VSI and the Acquiring Company in accordance with its terms. All
persons who have executed this Agreement or who have acted or
will act on behalf of VSI and the Acquiring Company have been
duly authorized to do so by all necessary corporate action of
VSI and the Acquiring Company. The execution, delivery and
performance of this Agreement in accordance with its terms and
the consummation of the respective Merger will not (i) violate
or result in any breach of, or default and acceleration under,
the Articles of Incorporation or By-Laws of VSI or the Acquiring
Company or any instrument or agreement to which VSI or the
Acquiring Company is a party or is bound; (ii) violates any
judgment, order, injunction, decree or award against or binding
upon VSI or the Acquiring Company or upon the securities,
property or business of VSI or the Acquiring Company; or (iii)
to the knowledge of VSI or the Acquiring Company, violate any
law or regulation of any jurisdiction relating to VSI or the
Acquiring Company or to its securities, properties or business.
7.5 Litigation and Material Claims. There are no
judgments unsatisfied against VSI or the Acquiring Company or
consent decrees or injunctions to which VSI or the Acquiring
Company is subject, and there is no litigation, claim or
proceeding pending, or, to the knowledge of VSI or the Acquiring
Company, threatened against or relating to VSI or the Acquiring
Company, or its properties or business, which would have a
material adverse effect on the Merger.
7.6 Tax Matters. VSI and the Acquiring Company has
filed all foreign, federal, state and local tax returns
(including information returns and reports) required to be
filed, and has paid or made adequate provision for all foreign,
federal, state and local taxes and other income, social
security, wage withholding, excise, withholding, sales and use
or similar taxes and taxes of any kind, together with any
related penalties, additions or interest charges required to be
paid therewith. All such taxes and governmental charges levied
or assessed against the property or business of VSI and the
Acquiring Company have been paid, other than taxes or charges,
the payment of which is not yet due or which, if due, is not yet
delinquent or which have not been finally determined or which
are being contested in good faith. To the knowledge of VSI and
the Acquiring Company, no additional tax has been assessed,
discussed or proposed with respect to taxable periods occurring
prior to the Effective Date by the Internal Revenue Service or
other applicable taxing authority. There are no known tax liens
on any property of VSI and the Acquiring Company.
7.7 Periodic Reports. VSI has timely filed all
required annual and quarterly reports and documents with the
Securities and Exchange Commission since January 1, 1994, all of
which complied, as of the date of filing, in all material
respects with all applicable requirements of the Securities
Exchange Act of 1934, as amended. To the knowledge of VSI, as
of their respective dates, none of such reports, including
without limitation any financial statements or schedules
included therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
SECTION 8--COVENANTS AND AGREEMENTS OF VSI AND ACQUIRING
COMPANY
Each of VSI and the Acquiring Company covenants and agrees
with the Acquired Company as follows:
8.1 Changes in Articles of Incorporation or By-Laws.
Between the date of this Agreement and the Effective Date, there
will be no changes in the Articles of Incorporation or By-Laws
of VSI or the Acquiring Company or in the authorized or issued
capital stock of VSI or the Acquiring Company except pursuant to
the Stock Plans or with the express written consent of the
Acquired Company.
8.2 Issuance or Purchase of Securities. Between the
date of this Agreement and the Effective Date, VSI and the
Acquiring Company will not: (i) issue any additional capital
stock or, except pursuant to the Stock Plans, any instrument
evidencing the right to convert to its capital stock; (ii)
declare, set aside or pay any dividend or make any other
distribution in respect to its capital stock; (iii) directly or
indirectly redeem, purchase or otherwise acquire any shares of
its capital stock; or (iv) issue to any person or entity
options, warrants, or other rights to acquire any of its
securities other than as contemplated under this Agreement.
8.3 Maintenance of Properties. Prior to the Effective
Date, VSI and the Acquiring Company will maintain its properties
and assets in good repair, order and condition, reasonable wear
and use excepted, and will maintain its books, accounts and
records in the usual, regular and ordinary manner on a basis
consistent with prior years and in accordance with generally
accepted accounting principles consistently applied throughout
the periods covered by such statements. Prior to the Effective
Date, VSI and the Acquiring Company will not cancel any
insurance policy or other contract or agreement unless such
contract, insurance policy or agreement is replaced in the
ordinary course of business.
8.4 Access to Properties and Records. From the date
hereof to and including the Effective Date, VSI and the
Acquiring Company will allow access to its properties and such
of its books and records as may be useful for the Acquired
Company to make such investigation as it may desire of the
properties and businesses. Each of VSI and the Acquiring
Company will permit the Acquired Company to review and examine
its assets, books and records, and otherwise have general access
to its facilities and key personnel, for the sole purpose of
conducting its due diligence investigation during its normal
business hours and days. Each of VSI and the Acquiring Company
will also permit the Acquired Company and its agents to discuss
the financial condition, business and affairs of VSI and the
Acquiring Company with its independent certified public
accountants. The Acquired Company shall use such information
solely for the purpose of their due diligence in connection with
the transactions contemplated by this Agreement, shall keep all
such information confidential, provided that such information
may be disclosed to directors, officers, employees, lenders,
attorneys and representatives of the Acquired Company who need
to know such information, and, upon termination of this
Agreement, the Acquired Company shall return all copies of such
information to VSI and the Acquiring Company.
8.5 Taxes. Each of VSI and the Acquiring Company shall
punctually pay and discharge prior to the Effective Date all
taxes, assessments and other governmental charges lawfully
imposed upon it or any of its properties, or upon the income and
profits thereof; provided, however, that nothing herein shall
prohibited VSI and the Acquiring Company from contesting in good
faith and by appropriate proceedings the validity of any tax,
assessment or governmental charge.
8.6 Operation of Business. From the date hereof to and
including the Effective Date, each of VSI and the Acquiring
Company agrees: (i) to operate in the ordinary course of
business only; and (ii) to use its best efforts to preserve
intact its business organization, keep available the services of
its officers and key employees, and maintain satisfactory
business relationships with vendors, licensors, suppliers,
distributors and others have business relationships with VSI and
the Acquiring Company.
8.7 Best Efforts. Subject to the terms and conditions
herein provided, each of VSI and the Acquiring Company agrees to
use its best efforts to take, or cause to be taken, all action
required to be taken and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger.
8.8 Consents. Each of VSI and the Acquiring Company
will use all reasonable efforts to obtain consents of all third
parties with which it has contractual relations which might
prohibit or otherwise affect the consummation of the Merger.
SECTION 9--CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED
COMPANY
The obligations of the Acquired Company under this
Agreement are subject to the fulfillment prior to or on the
Effective Date of the following conditions:
9.1 Representations and Warranties. Each of the
representations and warranties of VSI and the Acquiring Company
contained in this Agreement shall be accurate in all material
respects as of the date hereof and as of the Effective Date, and
VSI and the Acquiring Company shall have performed all covenants
and agreements on its part required to be performed and shall
not be in default under any of the provisions of this Agreement
at the Effective Date. In the event any representation or
warranty of VSI or the Acquiring Company contained in this
Agreement is not accurate in all material respects as of the
date hereof and as of the Effective Date and such inaccurate
representation or warranty was not known by VSI or the Acquiring
Company to be inaccurate at such date or if any representation
or warranty cannot be remade at the Effective Date due to
changes in facts and circumstances beyond the control of VSI or
the Acquiring Company, the sole remedy of the Acquired Company
against VSI and the Acquiring Company and their respective
officers, directors and agents hereunder is not to perform the
obligations of the Acquired Company hereunder.
9.2 Certified Copies of Resolutions. Each of VSI and
the Acquiring Company shall have delivered to the Acquired
Company copies, certified by the duly qualified and acting
Secretary thereof, of resolutions adopted by its Board of
Directors, and by the sole shareholder of the Acquiring Company,
with respect to this Agreement, as well as a certificate of
incumbency with respect to its officers.
9.3 Consents. Each of VSI and the Acquiring Company
shall have obtained consents of all third parties with which it
has contractual relations which might prohibit or otherwise
affect the consummation of the Merger contemplated by this
Agreement and all such consents shall have been executed and
delivered to the Acquired Company.
9.4 No Material Adverse Change. Prior to the Effective
Date, there shall be no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise,
the results of operations, or prospects of VSI and the Acquiring
Company, whether as a result of any legislative or regulatory
change, revocation of any license or rights to do business,
fire, acts of war, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation or act of God or other
public force or otherwise.
9.5 Absence of Litigation. No order of any court of
competent jurisdiction shall have been entered and not withdrawn
prohibiting consummation of the Merger, and no action or
proceeding shall be instituted or threatened before any court,
governmental agency or regulatory body seeking to enjoin or
modify, or to obtain damages or a discovery order in respect of,
the Merger or any other transaction contemplated by this
Agreement.
9.6 Completion of Due Diligence. The Acquired Company
and its representatives shall have completed to its satisfaction
the review of VSI and the Acquiring Company as contemplated by
this Agreement, and no fact or circumstance shall have come to
the attention of the Acquired Company as a result of such review
which materially and adversely affects the business, prospects
or financial condition of VSI or the Acquiring Company or any of
their respective assets or properties.
9.7 Filing of Articles of Merger. The Articles of
Merger with respect to the Merger shall have been executed by
each Merging Entity and delivered in a form acceptable for
filing with the Secretaries of State of Georgia and Michigan.
SECTION 10--CONDITIONS PRECEDENT TO OBLIGATIONS OF VSI AND
ACQUIRING COMPANY
The obligations of VSI and the Acquiring Company under this
Agreement are subject to the fulfillment prior to or on the
Effective Date of the following conditions:
10.1 Representations and Warranties. Each of the
representations and warranties of the Acquired Company contained
in this Agreement shall be accurate in all material respects as
of the date hereof and as of the Effective Date, and the
Acquired Company shall have performed all covenants and
agreements on its part required to be performed and shall not be
in default under any of the provisions of this Agreement at the
Effective Date. In the event any representation or warranty of
the Acquired Company contained in this Agreement is not accurate
in all material respects as of the date hereof and as of the
Effective Date and such inaccurate representation or warranty
was not known by the Acquired Company to be inaccurate at such
date or if any representation or warranty cannot be remade at
the Effective Date due to changes in facts and circumstances
beyond the control of the Acquired Company, the sole remedy of
VSI and the Acquiring Company against the Acquired Company and
its officers, directors and agents hereunder is not to perform
the obligations of VSI and the Acquiring Company hereunder.
10.2 Approval by Holders. This Agreement shall have
been approved by all of the Holders of the Acquired Company.
10.3 Certified Copies of Resolutions. The Acquired
Company shall have delivered to VSI and the Acquiring Company
copies, certified by the duly qualified and acting Secretary
thereof, of resolutions adopted by its Board of Directors and
Holders with respect to this Agreement, as well as a certificate
of incumbency with respect to its officers.
10.4 Consents. The Acquired Company shall have
obtained consents of all third parties with which it has
contractual relations which might prohibit or otherwise affect
the consummation of the Merger contemplated by this Agreement
and all such consents shall have been executed and delivered to
VSI and the Acquiring Company.
10.5 No Material Adverse Change. Prior to the
Effective Date, there shall be no material adverse change in the
assets or liabilities, the business or condition, financial or
otherwise, the results of operations, or prospects of the
Acquired Company, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do
business, fire, acts of war, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or act
of God or other public force or otherwise.
10.6 Absence of Litigation. No order of any court of
competent jurisdiction shall have been entered and not withdrawn
prohibiting consummation of the Merger, and no action or
proceeding shall be instituted or threatened before any court,
governmental agency or regulatory body seeking to enjoin or
modify, or to obtain damages or a discovery order in respect of,
the Merger or any other transaction contemplated by this
Agreement.
10.7 Completion of Due Diligence. VSI and its
representatives shall have completed to its satisfaction the
review of the Acquired Company as contemplated by this
Agreement, and no fact or circumstance shall have come to the
attention of VSI as a result of such review which materially and
adversely affects the business, prospects or financial condition
of any of the Acquired Company or any of their respective assets
or properties.
10.8 Filing of Articles of Merger. The Articles of
Merger with respect to the Merger shall have been executed by
each Merging Entity and delivered in a form acceptable for
filing with the Secretaries of State of Georgia and Michigan.
SECTION 11--AMENDMENTS AND WAIVERS
11.1 Amendments. At any time before or after approval
of this Agreement by the Holders, this Agreement may be amended,
modified or supplemented in writing in such manner as may be
approved by VSI, the Acquiring Company and the Acquired Company.
11.2 Waivers. Any party to this Agreement, acting
individually or through its Board of Directors, as applicable,
shall have the right at any time to waive any or all of the
conditions precedent to its obligations to the consummation of
the transactions contemplated by this Agreement, except any
condition that, if not satisfied, would result in the violation
of any law or applicable governmental regulation.
SECTION 12--MISCELLANEOUS
12.1 Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties hereto
with regard to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject
matter.
12.2 Governing Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the
State of Texas regarding obligations of VSI, the laws of the
State of Georgia regarding obligations of the Acquiring Company,
and the laws of the State of Michigan regarding obligations of
the Acquired Company.
12.3 Headings. The headings in this Agreement are for
convenience only and shall not affect the construction or
interpretation of this Agreement.
12.4 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and
the same instrument.
12.5 Expenses. Except as set forth herein, each party to
this Agreement shall bear its own costs and shall make no claim
for contribution from any other party.
12.6 Notices. Unless specifically provided to the contrary
herein, any notice, demand or other communication required or
permitted to be given pursuant to this Agreement shall be sent
in writing and shall be deemed to have been duly given or made
five days after deposited in the U.S. Mail, or the next business
day after delivered to a recognized overnight courier service
for next-day delivery, or the next business day when sent by
telecopier, addressed as follows or to such other address as may
be hereafter provided by the respective parties to this
Agreement:
to VSI and the Acquiring Company: to the Acquired Company:
VSI Holdings, Inc. Visual Services, Inc.
c/o Harold D. Cannon c/o Thomas W. Marquis
4900 Highlands Parkway 2100 N. Woodward Avenue
Smyrna, Georgia 30082 Suite West 201
Bloomfield Hills, MI 48304
Telephone: (770) 432-0636 Telephone: (810) 644-0500
Telecopy: (770) 432-2499 Telecopy: (810) 646-3233
12.7 Termination. Unless consummated sooner, this
Agreement and the parties' obligations hereunder and be of no
further force and effect after the Effective Date except those
set forth in Sections 6.5 and 8.4 of this Agreement which shall
survive any termination hereunder.
12.8 Time of the Essence. Time shall be of the essence for
this Agreement.
12.9 Non-Survival of Representations and Warranties.
The representations and warranties of the parties to this
Agreement shall not survive the Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first
written above.
VSI Holdings, Inc., VISPAC, Inc., VISPAC, Inc.,
A Georgia corporation, a Georgia corporation a Michigan
corporation
By:________________ By:_______________ By:__________________
President President President
By:________________ By:_______________ By:__________________
Secretary Secretary Secretary
ARTICLES OF MERGER BETWEEN
VISPAC, INC., a Georgia corporation, and VISPAC, INC.,
a Michigan corporation
I. Attached hereto as Exhibit "A" and by reference made
a part hereof is the Agreement and Plan of Merger ("Plan") duly
approved and adopted by VISPAC, Inc., a Georgia corporation
("Georgia VISPAC"), and VISPAC, Inc., a Michigan corporation
("Michigan VISPAC").
II. On June 13, 1997, the Board of Directors and sole
shareholder of Georgia VISPAC approved the Plan.
III. On June 27, 1997, the Board of Directors and the
shareholders of Michigan VISPAC unanimously approved the Plan.
IV. As provided in Sections 2.1, 4.1, and 4.2 of the
Plan, Georgia VISPAC will be the surviving legal entity, and
will retain such corporate name as well as its present Articles
of Incorporation and By-Laws, after the Effective Date of the
Merger.
V. The Effective Date of the Merger shall be July 1,
1997.
VI. Section 2.2 of the Plan details the manner and
basis of converting the 58,850 shares of Michigan VISPAC into
6,200,000 shares of VSI Holdings, Inc., a Georgia corporation
and sole shareholder of Georgia VISPAC.
VII. After the Effective Date of the Merger, Georgia
VISPAC will hold the assets, assume the liabilities, and carry
on the business of Michigan VISPAC in Michigan and, upon the
filing of these Articles of Merger therein, Georgia VISPAC
should be considered to be the successor of Michigan VISPAC for
the purpose of being registered to do business in such states.
Executed this ___ day of June, 1997.
VISPAC, Inc., a VISPAC, Inc., a
Georgia corporation Michigan corporation
By:___________________ By:_____________________
President President
By:___________________ By:_____________________
Secretary Secretary
June ____, 1997
Atlanta Business Chronicle
1801 Peachtree Street, N.E.
Atlanta, Georgia 30309-9806
Attn: Legal Advertising
Dear Sirs:
You are requested to publish, once a week for two
consecutive weeks commencing within ten days after the receipt
of this request, a notice in the following form:
NOTICE OF MERGER
Notice is given that Articles of Merger which will
effect a merger by and between VISPAC, Inc., a Georgia
corporation, and VISPAC, Inc., a Michigan corporation, will be
delivered to the Secretary of State for filing in accordance
with the applicable provisions of the Georgia Business
Corporation Code. The name of the surviving/acquiring
corporation is VISPAC, Inc., a corporation incorporated in the
State of Georgia. The registered office of the Corporation is
located at 4900 Highlands Parkway, Smyrna, Georgia 30082 and
its registered agent at such address is Harold D. Cannon.
Enclosed is a check in the amount of $40.00 in payment of the
cost of publishing this notice. Please call me at 404-351-7766
if you have any questions about this matter.
Very truly yours,
Michael Augur Kilgore, Attorney
on behalf of VISPAC, Inc., a
Georgia corporation
June ___, 1997
CERTIFICATE OF REQUEST FOR PUBLICATION AND PAYMENT
The undersigned officer of VISPAC, Inc., a Georgia
corporation, hereby certifies and verifies that the request for
publication of a notice of intent to file Articles of Merger,
regarding its merger with VISPAC, Inc., a Michigan corporation,
and the $40.00 payment for such publication have been made as
required by subsection (b) of O.C.G.A. 14-2-1105.1, as
evidenced by a copy of the transmittal letter therefor to the
Atlanta Business Chronicle attached hereto.
VISPAC, Inc., a Georgia corporation
By:___________________________
Harold D. Cannon, Secretary
EXHIBIT 4.10
VISUAL SERVICES, INC.
AGREEMENT AND PLAN OF MERGER
PRIVATE
This AGREEMENT AND PLAN OF MERGER is made and entered into
as of the 24th day of September, 1997, by and among (i) VSI
Holdings, Inc., a corporation organized and existing under the
laws of the State of Georgia ("VSI"), (ii) Visual Services,
Inc., a corporation organized and existing under the laws of the
State of Michigan (the "Acquired Company"), and (iii) Visual
Services, Inc., a corporation organized by VSI and existing
under the laws of the state of Georgia (the "Acquiring Company")
for the purpose of acquiring the Acquired Company.
SECTION 1--DEFINITIONS
As used in this Agreement, the following terms shall have
the following meanings respectively:
"Acquired Stock" means the Acquired Company's 11,393 issued
and outstanding shares as of the date of this Agreement, plus
any shares issued thereafter as of or before the Effective Date.
"Agreement" means this Agreement and Plan of Merger.
"Closing Date" means the date on which the Merger shall be
consummated, but in no event later than January 1, 1998.
"Effective Date" means the date of which the Merger become
effective pursuant to applicable state law as determined by
Sections 2 and 3.4 of this Agreement.
"Financial Statements" means (i) with respect to VSI, its
audited financial statements for the years ended September 30,
1996 and 1995, and unaudited interim financial statements for
the quarters ended December 31, 1996, March 31, 1997 and June
30, 1997, (ii) with respect to the Acquired Company, its audited
financial statements for the years ended September 30, 1996 and
1995, and unaudited interim financial statements for the
quarters ended December 31, 1996, March 31, 1997 and June 30,
1997.
"Georgia Code" means the Georgia Business Corporation Code,
as amended, as applicable to VSI and the Acquiring Company.
"Holders" means the holders of Acquired Stock as shall be
identified by the Acquired Company.
"Merger" means the merger of the Acquired Company into the
Acquiring Company.
"Merging Entities" means the Acquiring and Acquired
Companies.
"Michigan Code" means the Michigan Business Corporation
Code, as amended, as applicable to the Acquired Company.
"Per Share Consideration" means the Purchase Price divided
by the number of shares of Acquired Stock.
"Purchase Price" means 20,938,198 shares of VSI Stock.
"Stock Plans" means, with respect to VSI, (i) the 1986
Incentive Stock Option Plan, (ii) the 1986 Non-Qualified Stock
Option Plan, (iii) the Independent Director Stock Option Plan,
(iv) the August 22, 1995 Retail Outlet Store Agreement (and the
series of Stock Option Agreements issuable thereunder) with The
Casablanca Group, L.P., (v) the 1997 Incentive Stock Option
Plan, and (vi) the 1997 Non-Qualified Stock Option Plan.
"VSI Treasury Stock" means, prior to the Effective Date,
the 6,652,483 shares of VSI Stock held by the Acquired Company.
"Voting Agreement" means, with respect to VSI, the January
18, 1994 Voting Agreement by and among Martin S. Suchik, Steve
Toth, Jr., the Steve Toth Jr. Trust, and CLT, as amended.
"VSI Stock" means the $.01 par value common stock of VSI.
SECTION 2--TERMS OF THE MERGER
2.1 Merger. On the Effective Date, the Acquired
Company shall be merged with and into the Acquiring Company in
accordance with, and with the effect of, the applicable
provisions of the Georgia Code and the Michigan Code. The
Acquiring Company shall be the surviving corporation after the
merger and, as a result of the Merger, VSI shall continue as the
sole shareholder of the Acquiring Company. The separate
existence of the Acquired Company shall cease as of the
effectiveness of the Merger. Pursuant to the Merger and as of
the effectiveness of the Merger, each outstanding share of
Acquired Stock will be converted into the right to receive the
Per Share Consideration. This Agreement will be furnished by
the Acquiring Corporation, on request and without cost, to any
shareholder of any constituent corporation.
2.2 Payment for Shares of Acquired Stock. All of the
shares of Acquired Stock issued and outstanding immediately
prior to the effectiveness of the Merger shall, as of the
Effective Date, by virtue of the Merger and without any further
action on the part of the holders, entitle such holders in the
aggregate to receive the Purchase Price, on or after the
Effective Date. At closing, VSI shall deliver stock
certificates made payable to the Holders in amounts equal to the
product of the Per Share Consideration multiplied by the number
of shares of Acquired Stock represented by such shareholders'
share certificates delivered by them.
SECTION 3--PROCEDURES FOR THE MERGER
The Merger shall be consummated and the purposes of this
Agreement accomplished in accordance with the following
procedures:
3.1 Vote of Directors and by Sole Shareholder of
Acquiring Company; Authorization by VSI Board to Consummate.
This Agreement shall be approved by the affirmative vote of all
of the directors of VSI and the Acquired Company, whereupon the
respective officers of those companies shall be authorized to
execute and deliver this Agreement. This Agreement shall also
be approved by the affirmative vote of the sole shareholder and
all directors of the Acquiring Company, whereupon the respective
officers of such company shall be authorized to execute and
deliver this Agreement.
3.2 Vote of Directors and Shareholders of Acquired
Company. The Board of Directors of the Acquired Company shall
submit this Agreement to the shareholders of the Acquired
Company and, upon the unanimous vote of such shareholders
holding the Acquired Stock, the officers of the Acquired Company
shall then be authorized to consummate the Merger. If this
Agreement is approved by the unanimous vote of the shareholders
of the Acquired Company owning the Acquired Stock issued and
outstanding as of the record date of such vote, then this
Agreement shall be the agreement of the Acquired Company and the
officers of such Acquired Company shall then be authorized to
consummate this Agreement.
3.3 Other Approvals; Closing. VSI and the Acquired
Company shall proceed expeditiously and cooperate fully in the
procurement of any other consents and approvals and in the
taking of any other action, and the satisfaction of all other
requirements prescribed by law or otherwise, necessary for the
consummation of the Merger on the terms herein provided by the
Effective Date. The parties hereto shall proceed in good faith
to complete their due diligence and consummate the Merger as
soon as practicable following approval of the Agreement by the
Board of Directors of VSI, but in no event later than the
Closing Date.
3.4 Effective Time of the Merger. Subject to the terms
and upon satisfaction of all requirements of law and the
conditions specified in the Agreement, including, among other
conditions, the prior filing of Articles of Merger regarding the
Merger with the Secretary of State of Georgia and the Michigan
Department of Consumer and Industry Services (Corporation,
Securities and Land Development Bureau, Corporation Division)
and the receipt of all required approvals, the Merger shall
become effective by operation of law without further act or deed
upon the part of either VSI or the Merging Entities, and the
effective time shall be at the time specified in the Articles of
Merger to be issued by the Secretary of State of Georgia.
3.5 Other Acts. The directors and officers of VSI and
the Merging Entities, both prior to and following the Effective
Date, shall execute all such other instruments and shall take
all such other actions as may be necessary or advisable to
consummate the Merger and to cause this Agreement to be carried
out in accordance with its terms.
SECTION 4--EFFECT OF THE AGREEMENT
4.1 Names. Upon the Effective Date, the name of the
entity surviving the Merger between the Acquiring Company and
the Acquired Company shall be the name of the Acquiring Company.
4.2 Articles of Incorporation and By-Laws. Upon the
Effective Date, the Articles of Incorporation and By-Laws of the
entity surviving the Merger shall be the Articles of
Incorporation and By-Laws of the Acquiring Company, and such
surviving entity shall be domiciled in Georgia and subject to
the Georgia Code.
4.3 Directors and Officers. Upon the Effective Date,
the directors and officers of the entity surviving the Merger
shall be the directors and officers of the Acquired Company
which are:
Steve Toth, Jr. Director, President
Margaret J. Toth Director
Thomas W. Marquis Director, Vice President, Secretary,
Treasurer
4.4 Assumption of Rights and Liabilities. All assets
of the respective Merging Entities, as they exist upon the
Effective Date, shall pass to and vest in the Acquiring Company
without any conveyance or other transfer; the VSI Treasury Stock
shall become treasury shares of VSI. The Acquiring Company
shall assume and be responsible for all of the liabilities of
the Acquired Company of every kind and description as of the
Effective Date.
SECTION 5--REPRESENTATIONS AND WARRANTIES OF ACQUIRED COMPANY
The Acquired Company represents and warrants to VSI and the
Acquiring Company as follows:
5.1 Organization. The Acquired Company is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan with power and
authority necessary to carry on the business in which it is
engaged, to own the property owned by it, and to enter into and
perform its obligations under this Agreement.
5.2 Capital Stock. As of the date of this Agreement,
the issued and outstanding capital stock of the Acquired Company
consists of 11,393 shares of common stock, $1.00 par value.
There are no outstanding securities of the Acquired Company
which are convertible into, or evidence the right to purchase or
subscribe for, any shares of capital stock of the issuing
entity. There are no outstanding or authorized options,
warrants, calls, subscriptions, rights, commitments or any other
agreements of any character obligating the Acquired Company to
issue any shares of its capital stock or any securities
convertible into or evidencing the right to purchase or
subscribe for any shares of such stock. There are no agreement
or understandings with respect to the voting, sale or transfer
of any shares of capital stock of the Acquired Company;
provided, however, after the date of this Agreement and as of or
before the Effective Date, the Acquired Company may issue up to
586 additional shares.
5.3 Financial Statements. Each of the Financial
Statements of the Acquired Company was prepared in accordance
with generally accepted accounting principles applied on a
consistent basis, and fairly present the financial position of
the Acquired Company as of the dates thereof and the results of
its operations and changes in its financial position for the
periods then ended.
5.4 Authorization of Agreement; No Breach. The
execution and delivery of this Agreement has been duly
authorized by the Board of Directors of the Acquired Company.
This Agreement is thus a legal, valid and binding obligation of
the Acquired Company enforceable against the Acquired Company in
accordance with its terms, subject to the Agreement's approval
and adoption by all of shareholders of the Acquired Company.
All persons who have executed this Agreement or who have acted
or will act on behalf of the Acquired Company have been duly
authorized to do so by all necessary corporate action of the
Acquired Company. The execution, delivery and performance of
this Agreement in accordance with its terms and the consummation
of the Merger will not (i) violate or result in any breach of,
or default and acceleration under, the Articles of Incorporation
or By-Laws of the Acquired Company or any instrument or
agreement to which the Acquired Company is a party or is bound;
(ii) violates any judgment, order, injunction, decree or award
against or binding upon the Acquired Company or upon the
securities, property or business of the Acquired Company; or
(iii) to the knowledge of the Acquired Company, violate any law
or regulation of any jurisdiction relating to the Acquired
Company or to its securities, properties or business.
5.5 Litigation and Material Claims. There are no
judgments unsatisfied against the Acquired Company or consent
decrees or injunctions to which the Acquired Company is subject,
and there is no litigation, claim or proceeding pending, or, to
the knowledge of the Acquired Company, threatened against or
relating to the Acquired Company, or its properties or business,
which would have a material adverse effect on the Merger.
5.6 Tax Matters. The Acquired Company has filed all
foreign, federal, state and local tax returns (including
information returns and reports) required to be filed, and has
paid or made adequate provision for all foreign, federal, state
and local taxes and other income, social security, wage
withholding, excise, withholding, sales and use or similar taxes
and taxes of any kind, together with any related penalties,
additions or interest charges required to be paid therewith.
All such taxes and governmental charges levied or assessed
against the property or business of the Acquired Company have
been paid, other than taxes or charges, the payment of which is
not yet due or which, if due, is not yet delinquent or which
have not been finally determined or which are being contested in
good faith. To the knowledge of the Acquired Company, no
additional tax has been assessed, discussed or proposed with
respect to taxable periods occurring prior to the Effective Date
by the Internal Revenue Service or other applicable taxing
authority. There are no known tax liens on any property of the
Acquired Company.
SECTION 6--COVENANTS AND AGREEMENTS OF ACQUIRED COMPANY
The Acquired Company covenants and agrees with VSI and the
Acquiring Company as follows:
6.1 Vote of Holders. As soon as practicable after the
execution of this Agreement, the Acquired Company will cause a
vote of its respective Holders to be held on a date acceptable
to VSI at which this Agreement will be submitted for approval
and adoption by such Holders. The Acquired Company will give
notice of its vote to all Holders in a manner and form complying
with the requirements of its Articles of Incorporation and By-
Laws and all state and federal laws and regulations applicable
to it.
6.2 Changes in Articles of Incorporation or By-Laws.
Between the date of this Agreement and the Effective Date, there
will be no changes in the Articles of Incorporation or By-Laws
of the Acquired Company or in the authorized or issued capital
stock of the Acquired Company except with the express written
consent of VSI.
6.3 Issuance or Purchase of Securities. Between the
date of this Agreement and the Effective Date, the Acquired
Company will not: (i) issue any additional capital stock or any
instrument evidencing the right to convert to its capital stock;
(ii) declare, set aside or pay any dividend or make any other
distribution in respect to its capital stock; (iii) directly or
indirectly redeem, purchase or otherwise acquire any shares of
its capital stock; or (iv) issue to any person or entity
options, warrants, or other rights to acquire any of its
securities other than as contemplated under this Agreement.
6.4 Maintenance of Properties. Prior to the Effective
Date, the Acquired Company will maintain its properties and
assets in good repair, order and condition, reasonable wear and
use excepted, and will maintain its books, accounts and records
in the usual, regular and ordinary manner on a basis consistent
with prior years and in accordance with generally accepted
accounting principles consistently applied throughout the
periods covered by such statements. Prior to the Effective
Date, the Acquired Company will not cancel any insurance policy
or other contract or agreement unless such contract, insurance
policy or agreement is replaced in the ordinary course of
business.
6.5 Access to Properties and Records. From the date
hereof to and including the Effective Date, the Acquired Company
will allow access to its properties and such of its books and
records as may be useful for VSI to make such investigation as
it may desire of the properties and businesses. The Acquired
Company will permit VSI to review and examine its assets, books
and records, and otherwise have general access to its facilities
and key personnel, for the sole purpose of conducting its due
diligence investigation during its normal business hours and
days. The Acquired Company will also permit VSI and its agents
to discuss the financial condition, business and affairs of the
Acquired Company with its independent certified public
accountants. VSI shall use such information solely for the
purpose of VSI's due diligence in connection with the
transactions contemplated by this Agreement, shall keep all such
information confidential, provided that such information may be
disclosed to directors, officers, employees, lenders, attorneys
and representatives of VSI who need to know such information,
and, upon termination of this Agreement, VSI shall return all
copies of such information to the Acquired Company.
6.6 Taxes. The Acquired Company shall punctually pay
and discharge prior to the Effective Date all taxes, assessments
and other governmental charges lawfully imposed upon it or any
of its properties, or upon the income and profits thereof;
provided, however, that nothing herein shall prohibited the
Acquired Company from contesting in good faith and by
appropriate proceedings the validity of any tax, assessment or
governmental charge.
6.7 Operation of Business. From the date hereof to and
including the Effective Date, the Acquired Company agrees: (i)
to operate in the ordinary course of business only; and (ii) to
use its best efforts to preserve intact its business
organization, keep available the services of its officers and
key employees, and maintain satisfactory business relationships
with vendors, licensors, suppliers, distributors and others have
business relationships with the Acquired Company.
6.8 Best Efforts. Subject to the terms and conditions
herein provided, the Acquired Company agrees to use its best
efforts to take, or cause to be taken, all action required to be
taken and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the Merger.
6.9 Consents. The Acquired Company will use all
reasonable efforts to obtain consents of all third parties with
which it has contractual relations which might prohibit or
otherwise affect the consummation of the Merger.
SECTION 7--REPRESENTATIONS AND WARRANTIES OF VSI AND
ACQUIRING COMPANY
Each of VSI and the Acquiring Company represents and
warrants to the Acquired Company as follows:
7.1 Organization. Each of VSI and the Acquiring
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, with power
and authority necessary to carry on the business in which it is
engaged, to own the property owned by it, and to enter into and
perform its obligations under this Agreement.
7.2 Capital Stock. The authorized capital stock of VSI
and the Acquiring Company consists, respectively, of (i)
60,000,000 shares of common stock, $.01 par value, of which
18,341,287 shares are issued and outstanding (exclusive
1,091,122 treasury shares), and 2,000,000 shares of preferred
stock, $1.00 par value, none of which is issued and outstanding,
and (ii) 10,000 shares of common stock, $1.00 par value, of
which 500 shares are issued and outstanding. Except for the
Stock Plans, there are no outstanding securities of VSI or the
Acquiring Company which are convertible into, or evidence the
right to purchase or subscribe for, any shares of capital stock
of the issuing entity. Except for the Stock Plans, there are no
outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of
any character obligating VSI or the Acquiring Company to issue
any shares of its capital stock or any securities convertible
into or evidencing the right to purchase or subscribe for any
shares of such stock. Except for the Voting Agreements, there
are no agreement or understandings with respect to the voting,
sale or transfer of any shares of capital stock of VSI or the
Acquiring Company.
7.3 Financial Statements. Each of the Financial
Statements of VSI was prepared in accordance with generally
accepted accounting principles applied on a consistent basis,
and fairly present the financial position of VSI as of the dates
thereof and the results of its operations and changes in its
financial position for the periods then ended.
7.4 Authorization of Agreement; No Breach. The
execution and delivery of this Agreement has been duly
authorized by the Board of Directors of VSI and the Acquiring
Company. This Agreement is thus a legal, valid and binding
obligation of VSI and the Acquiring Company enforceable against
VSI and the Acquiring Company in accordance with its terms. All
persons who have executed this Agreement or who have acted or
will act on behalf of VSI and the Acquiring Company have been
duly authorized to do so by all necessary corporate action of
VSI and the Acquiring Company. The execution, delivery and
performance of this Agreement in accordance with its terms and
the consummation of the respective Merger will not (i) violate
or result in any breach of, or default and acceleration under,
the Articles of Incorporation or By-Laws of VSI or the Acquiring
Company or any instrument or agreement to which VSI or the
Acquiring Company is a party or is bound; (ii) violates any
judgment, order, injunction, decree or award against or binding
upon VSI or the Acquiring Company or upon the securities,
property or business of VSI or the Acquiring Company; or (iii)
to the knowledge of VSI or the Acquiring Company, violate any
law or regulation of any jurisdiction relating to VSI or the
Acquiring Company or to its securities, properties or business.
7.5 Litigation and Material Claims. There are no
judgments unsatisfied against VSI or the Acquiring Company or
consent decrees or injunctions to which VSI or the Acquiring
Company is subject, and there is no litigation, claim or
proceeding pending, or, to the knowledge of VSI or the Acquiring
Company, threatened against or relating to VSI or the Acquiring
Company, or its properties or business, which would have a
material adverse effect on the Merger.
7.6 Tax Matters. VSI and the Acquiring Company has
filed all foreign, federal, state and local tax returns
(including information returns and reports) required to be
filed, and has paid or made adequate provision for all foreign,
federal, state and local taxes and other income, social
security, wage withholding, excise, withholding, sales and use
or similar taxes and taxes of any kind, together with any
related penalties, additions or interest charges required to be
paid therewith. All such taxes and governmental charges levied
or assessed against the property or business of VSI and the
Acquiring Company have been paid, other than taxes or charges,
the payment of which is not yet due or which, if due, is not yet
delinquent or which have not been finally determined or which
are being contested in good faith. To the knowledge of VSI and
the Acquiring Company, no additional tax has been assessed,
discussed or proposed with respect to taxable periods occurring
prior to the Effective Date by the Internal Revenue Service or
other applicable taxing authority. There are no known tax liens
on any property of VSI and the Acquiring Company.
7.7 Periodic Reports. VSI has timely filed all required
annual and quarterly reports and documents with the Securities
and Exchange Commission since January 1, 1994, all of which
complied, as of the date of filing, in all material respects
with all applicable requirements of the Securities Exchange Act
of 1934, as amended. To the knowledge of VSI, as of their
respective dates, none of such reports, including without
limitation any financial statements or schedules included
therein, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 8--COVENANTS AND AGREEMENTS OF VSI AND ACQUIRING
COMPANY
Each of VSI and the Acquiring Company covenants and agrees
with the Acquired Company as follows:
8.1 Changes in Articles of Incorporation or By-Laws.
Between the date of this Agreement and the Effective Date, there
will be no changes in the Articles of Incorporation or By-Laws
of VSI or the Acquiring Company or in the authorized or issued
capital stock of VSI or the Acquiring Company except pursuant to
the Stock Plans or with the express written consent of the
Acquired Company.
8.2 Issuance or Purchase of Securities. Between the
date of this Agreement and the Effective Date, VSI and the
Acquiring Company will not: (i) issue any additional capital
stock or, except pursuant to the Stock Plans, any instrument
evidencing the right to convert to its capital stock; (ii)
declare, set aside or pay any dividend or make any other
distribution in respect to its capital stock; (iii) directly or
indirectly redeem, purchase or otherwise acquire any shares of
its capital stock; or (iv) issue to any person or entity
options, warrants, or other rights to acquire any of its
securities other than as contemplated under this Agreement.
8.3 Maintenance of Properties. Prior to the Effective
Date, VSI and the Acquiring Company will maintain its properties
and assets in good repair, order and condition, reasonable wear
and use excepted, and will maintain its books, accounts and
records in the usual, regular and ordinary manner on a basis
consistent with prior years and in accordance with generally
accepted accounting principles consistently applied throughout
the periods covered by such statements. Prior to the Effective
Date, VSI and the Acquiring Company will not cancel any
insurance policy or other contract or agreement unless such
contract, insurance policy or agreement is replaced in the
ordinary course of business.
8.4 Access to Properties and Records. From the date
hereof to and including the Effective Date, VSI and the
Acquiring Company will allow access to its properties and such
of its books and records as may be useful for the Acquired
Company to make such investigation as it may desire of the
properties and businesses. Each of VSI and the Acquiring
Company will permit the Acquired Company to review and examine
its assets, books and records, and otherwise have general access
to its facilities and key personnel, for the sole purpose of
conducting its due diligence investigation during its normal
business hours and days. Each of VSI and the Acquiring Company
will also permit the Acquired Company and its agents to discuss
the financial condition, business and affairs of VSI and the
Acquiring Company with its independent certified public
accountants. The Acquired Company shall use such information
solely for the purpose of their due diligence in connection with
the transactions contemplated by this Agreement, shall keep all
such information confidential, provided that such information
may be disclosed to directors, officers, employees, lenders,
attorneys and representatives of the Acquired Company who need
to know such information, and, upon termination of this
Agreement, the Acquired Company shall return all copies of such
information to VSI and the Acquiring Company.
8.5 Taxes. Each of VSI and the Acquiring Company shall
punctually pay and discharge prior to the Effective Date all
taxes, assessments and other governmental charges lawfully
imposed upon it or any of its properties, or upon the income and
profits thereof; provided, however, that nothing herein shall
prohibited VSI and the Acquiring Company from contesting in good
faith and by appropriate proceedings the validity of any tax,
assessment or governmental charge.
8.6 Operation of Business. From the date hereof to and
including the Effective Date, each of VSI and the Acquiring
Company agrees: (i) to operate in the ordinary course of
business only; and (ii) to use its best efforts to preserve
intact its business organization, keep available the services of
its officers and key employees, and maintain satisfactory
business relationships with vendors, licensors, suppliers,
distributors and others have business relationships with VSI and
the Acquiring Company.
8.7 Best Efforts. Subject to the terms and conditions
herein provided, each of VSI and the Acquiring Company agrees to
use its best efforts to take, or cause to be taken, all action
required to be taken and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger.
8.8 Consents. Each of VSI and the Acquiring Company
will use all reasonable efforts to obtain consents of all third
parties with which it has contractual relations which might
prohibit or otherwise affect the consummation of the Merger.
SECTION 9--CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED
COMPANY
The obligations of the Acquired Company under this
Agreement are subject to the fulfillment prior to or on the
Effective Date of the following conditions:
9.1 Representations and Warranties. Each of the
representations and warranties of VSI and the Acquiring Company
contained in this Agreement shall be accurate in all material
respects as of the date hereof and as of the Effective Date, and
VSI and the Acquiring Company shall have performed all covenants
and agreements on its part required to be performed and shall
not be in default under any of the provisions of this Agreement
at the Effective Date. In the event any representation or
warranty of VSI or the Acquiring Company contained in this
Agreement is not accurate in all material respects as of the
date hereof and as of the Effective Date and such inaccurate
representation or warranty was not known by VSI or the Acquiring
Company to be inaccurate at such date or if any representation
or warranty cannot be remade at the Effective Date due to
changes in facts and circumstances beyond the control of VSI or
the Acquiring Company, the sole remedy of the Acquired Company
against VSI and the Acquiring Company and their respective
officers, directors and agents hereunder is not to perform the
obligations of the Acquired Company hereunder.
9.2 Certified Copies of Resolutions. Each of VSI and
the Acquiring Company shall have delivered to the Acquired
Company copies, certified by the duly qualified and acting
Secretary thereof, of resolutions adopted by its Board of
Directors, and by the sole shareholder of the Acquiring Company,
with respect to this Agreement, as well as a certificate of
incumbency with respect to its officers.
9.3 Consents. Each of VSI and the Acquiring Company
shall have obtained consents of all third parties with which it
has contractual relations which might prohibit or otherwise
affect the consummation of the Merger contemplated by this
Agreement and all such consents shall have been executed and
delivered to the Acquired Company.
9.4 No Material Adverse Change. Prior to the Effective
Date, there shall be no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise,
the results of operations, or prospects of VSI and the Acquiring
Company, whether as a result of any legislative or regulatory
change, revocation of any license or rights to do business,
fire, acts of war, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation or act of God or other
public force or otherwise.
9.5 Absence of Litigation. No order of any court of
competent jurisdiction shall have been entered and not withdrawn
prohibiting consummation of the Merger, and no action or
proceeding shall be instituted or threatened before any court,
governmental agency or regulatory body seeking to enjoin or
modify, or to obtain damages or a discovery order in respect of,
the Merger or any other transaction contemplated by this
Agreement.
9.6 Completion of Due Diligence. The Acquired Company
and its representatives shall have completed to its satisfaction
the review of VSI and the Acquiring Company as contemplated by
this Agreement, and no fact or circumstance shall have come to
the attention of the Acquired Company as a result of such review
which materially and adversely affects the business, prospects
or financial condition of VSI or the Acquiring Company or any of
their respective assets or properties.
9.7 Filing of Articles of Merger. The Articles of
Merger with respect to the Merger shall have been executed by
each Merging Entity and delivered in a form acceptable for
filing with the Secretary of State of Georgia and the Michigan
Department of Consumer and Industry Services (Corporation,
Securities and Land Development Bureau, Corporation Division).
SECTION 10--CONDITIONS PRECEDENT TO OBLIGATIONS OF VSI AND
ACQUIRING COMPANY
The obligations of VSI and the Acquiring Company under this
Agreement are subject to the fulfillment prior to or on the
Effective Date of the following conditions:
10.1 Representations and Warranties. Each of the
representations and warranties of the Acquired Company contained
in this Agreement shall be accurate in all material respects as
of the date hereof and as of the Effective Date, and the
Acquired Company shall have performed all covenants and
agreements on its part required to be performed and shall not be
in default under any of the provisions of this Agreement at the
Effective Date. In the event any representation or warranty of
the Acquired Company contained in this Agreement is not accurate
in all material respects as of the date hereof and as of the
Effective Date and such inaccurate representation or warranty
was not known by the Acquired Company to be inaccurate at such
date or if any representation or warranty cannot be remade at
the Effective Date due to changes in facts and circumstances
beyond the control of the Acquired Company, the sole remedy of
VSI and the Acquiring Company against the Acquired Company and
its officers, directors and agents hereunder is not to perform
the obligations of VSI and the Acquiring Company hereunder.
10.2 Approval by Holders. This Agreement shall have
been approved by all of the Holders of the Acquired Company.
10.3 Certified Copies of Resolutions. The Acquired
Company shall have delivered to VSI and the Acquiring Company
copies, certified by the duly qualified and acting Secretary
thereof, of resolutions adopted by its Board of Directors and
Holders with respect to this Agreement, as well as a certificate
of incumbency with respect to its officers.
10.4 Consents. The Acquired Company shall have
obtained consents of all third parties with which it has
contractual relations which might prohibit or otherwise affect
the consummation of the Merger contemplated by this Agreement
and all such consents shall have been executed and delivered to
VSI and the Acquiring Company.
10.5 No Material Adverse Change. Prior to the
Effective Date, there shall be no material adverse change in the
assets or liabilities, the business or condition, financial or
otherwise, the results of operations, or prospects of the
Acquired Company, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do
business, fire, acts of war, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or act
of God or other public force or otherwise.
10.6 Absence of Litigation. No order of any court of
competent jurisdiction shall have been entered and not withdrawn
prohibiting consummation of the Merger, and no action or
proceeding shall be instituted or threatened before any court,
governmental agency or regulatory body seeking to enjoin or
modify, or to obtain damages or a discovery order in respect of,
the Merger or any other transaction contemplated by this
Agreement.
10.7 Completion of Due Diligence. VSI and its
representatives shall have completed to its satisfaction the
review of the Acquired Company as contemplated by this
Agreement, and no fact or circumstance shall have come to the
attention of VSI as a result of such review which materially and
adversely affects the business, prospects or financial condition
of any of the Acquired Company or any of their respective assets
or properties.
10.8 Filing of Articles of Merger. The Articles of
Merger with respect to the Merger shall have been executed by
each Merging Entity and delivered in a form acceptable for
filing with the Secretary of State of Georgia and the Michigan
Department of Consumer and Industry Services (Corporation,
Securities and Land Development Bureau, Corporation Division).
SECTION 11--AMENDMENTS AND WAIVERS
11.1 Amendments. At any time before or after approval
of this Agreement by the Holders, this Agreement may be amended,
modified or supplemented in writing in such manner as may be
approved by VSI, the Acquiring Company and the Acquired Company.
11.2 Waivers. Any party to this Agreement, acting
individually or through its Board of Directors, as applicable,
shall have the right at any time to waive any or all of the
conditions precedent to its obligations to the consummation of
the transactions contemplated by this Agreement, except any
condition that, if not satisfied, would result in the violation
of any law or applicable governmental regulation.
SECTION 12--MISCELLANEOUS
12.1 Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties hereto
with regard to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject
matter.
12.2 Governing Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the
State of Texas regarding obligations of VSI, the laws of the
State of Georgia regarding obligations of the Acquiring Company,
and the laws of the State of Michigan regarding obligations of
the Acquired Company.
12.3 Headings. The headings in this Agreement are for
convenience only and shall not affect the construction or
interpretation of this Agreement.
12.4 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and
the same instrument.
12.5 Expenses. Except as set forth herein, each party to
this Agreement shall bear its own costs and shall make no claim
for contribution from any other party.
12.6 Notices. Unless specifically provided to the contrary
herein, any notice, demand or other communication required or
permitted to be given pursuant to this Agreement shall be sent
in writing and shall be deemed to have been duly given or made
five days after deposited in the U.S. Mail, or the next business
day after delivered to a recognized overnight courier service
for next-day delivery, or the next business day when sent by
telecopier, addressed as follows or to such other address as may
be hereafter provided by the respective parties to this
Agreement:
to VSI and the Acquiring Company: to the Acquired Company:
VSI Holdings, Inc. Visual Services, Inc.
c/o Harold D. Cannon c/o Thomas W. Marquis
4900 Highlands Parkway 2100 N. Woodward Avenue
Smyrna, Georgia 30082 Suite West 201
Bloomfield Hills, MI 48304
Telephone: (770) 432-0636 Telephone: (248) 644-0500
Telecopy: (770) 432-2499 Telecopy: (248) 646-3233
12.7 Termination. Unless consummated sooner, this
Agreement and the parties' obligations hereunder and be of no
further force and effect after the Effective Date except those
set forth in Sections 6.5 and 8.4 of this Agreement which shall
survive any termination hereunder.
12.8 Time of the Essence. Time shall be of the essence for
this Agreement.
12.9 Non-Survival of Representations and Warranties. The
representations and warranties of the parties to this Agreement
shall not survive the Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first
written above.
VSI Holdings, Inc.,Visual Services, Inc.,Visual Services, Inc.,
a Georgia corporation, a Georgia corporation, a Michigan
corporation
By:___________________ By:________________ By:__________________
Ex. Vice President President Vice President
By:_________________ By:_________________ By:__________________
Secretary Secretary Asst. Secretary
ARTICLES OF MERGER BETWEEN
Visual Services, Inc., a Georgia corporation, and Visual
Services, Inc., a Michigan corporation
I. Attached hereto as Exhibit "A" and by reference
made a part hereof is the Agreement and Plan of Merger ("Plan")
duly approved and adopted by Visual Services, Inc., a Georgia
corporation ("Georgia Visual"), and Visual Services, Inc., a
Michigan corporation ("Michigan Visual").
II. On September 24, 1997, the Board of Directors and
sole shareholder of Georgia Visual approved the Plan.
III. On September 23, 1997, the Board of Directors of
Michigan Visual approved the Plan, which was submitted to the
shareholders of Michigan Visual who unanimously approved the
Plan.
IV. As provided in Sections 2.1, 4.1, and 4.2 of the
Plan, Georgia Visual will be the surviving legal entity,
maintain its corporate name as "Visual Services, Inc.", and
retain its present Articles of Incorporation and By-Laws, after
the Effective Date of the Merger.
V. The Effective Date of the Merger shall be September
30, 1997.
VI. Section 2.2 of the Plan details the manner and basis
of converting the 11,979 shares of Michigan Visual, outstanding
as of the Effective Date, into 20,938,198 shares of VSI
Holdings, Inc., a Georgia corporation and sole shareholder of
Georgia Visual.
VII. After the Effective Date of the Merger, Georgia
Visual will hold the assets, assume the liabilities, and carry
on the business of Michigan Visual in Michigan and, upon the
filing of these Articles of Merger therein, Georgia Visual
should be considered to be the successor of Michigan Visual for
the purpose of being registered to do business in such states.
Executed this ___ day of September, 1997.
VSI Holdings, Inc., Visual Services, Inc., Visual Services,
Inc.,
a Georgia corporation, a Georgia corporation, a Michigan
corporation
By:__________________ By:_________________ By:__________________
Ex. Vice President President Vice President
By:___________________ By:________________ By:__________________
Secretary Secretary Asst. Secretary
September 30, 1997
Atlanta Business Chronicle
1801 Peachtree Street, N.E.
Atlanta, Georgia 30309-9806
Attn: Legal Advertising
Dear Sirs:
You are requested to publish, once a week for two
consecutive weeks commencing within ten days after the receipt
of this request, a notice in the following form:
NOTICE OF MERGER
Notice is given that Articles of Merger which will
effect a merger by and between Visual Services, Inc., a Georgia
corporation, and Visual Services, Inc., a Michigan corporation,
will be delivered to the Secretary of State for filing in
accordance with the applicable provisions of the Georgia
Business Corporation Code. The name of the surviving/acquiring
corporation is Visual Services, Inc., a corporation incorporated
in the State of Georgia, which will thereafter maintain the name
of Visual Services, Inc. The registered office of the
Corporation is located at 4900 Highlands Parkway, Smyrna,
Georgia 30082 and its registered agent at such address is
Harold D. Cannon.
Enclosed is a check in the amount of $40.00 in payment of the
cost of publishing this notice. Please call me at 404-351-7766
if you have any questions about this matter.
Very truly yours,
Michael Augur Kilgore, Attorney on behalf of
Visual Services, Inc., a Georgia corporation
September 30, 1997
CERTIFICATE OF REQUEST FOR PUBLICATION AND PAYMENT
The undersigned officer of Visual Services, Inc., a Georgia
corporation, hereby certifies and verifies that the request for
publication of a notice of intent to file Articles of Merger,
regarding its merger with Visual Services, Inc., a Michigan
corporation, and the $40.00 payment for such publication have
been made as required by subsection (b) of O.C.G.A. 14-2-
1105.1, as evidenced by a copy of the transmittal letter
therefor to the Atlanta Business Chronicle attached hereto.
Visual Services, Inc., a Georgia corporation
By:___________________________
Harold D. Cannon, Secretary
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
PSG International, Inc., incorporated in Georgia
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITOR'S
We consent to the inclusion in this Annual Report on Form 10-K of
our
independent auditor's report dated December 7, 1998 on the
financial statements
of VSI Holdings, Inc. for the year ended September 30, 1998
PLANTE & MORAN, LLP
Ann Arbor, Michigan
January 6, 1999
Exhibit 23.1
SIGNATURE AUTHORIZATION FOR ELECTRONIC FILING
(Regulation S-T, Sec. 232.302)
In connection with the Annual Report on Form 10-K of VSI Holdings,
Inc. for the year ended September 30, 1998, 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 7,
1998 and on the Consent of Independent Auditors dated January 6, 1999 included
therein.
PLANTE & MORAN, LLP
Ann Arbor, Michigan
January 6, 1999
