<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal years ended December 31, 1995, 1996 and 1997.
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to _______________.
Commission File No. 2-86551C
Concourse Corporation
(Name of small business issuer in its charter)
Minnesota 41-1368898
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2545 Dunwoody Lane, Wayzata, Minnesota 55391
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (612) 471-7246
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ X ]
Issuer's revenues for its most recent fiscal year were $175,783.
Aggregate market value of the Issuer's voting and non-voting equity
(voting common stock is the only outstanding equity security of the Issuer) held
by non-affiliates (2,118,954 shares) as of August 31, 1998, was $0, based upon
the fact that there has been no published bid or asked price for the Issuer's
common stock since October 22, 1996.
Number of shares outstanding of each of the Issuer's common stock, as
of August 31, 1998, was 3,067,512 shares.
Transitional Small Business Disclosure Format. Yes [ ] No [ X ]
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART 1.......................................................................................................... 1
Item 1 - Description of Business....................................................................... 1
Item 2 - Description of Property....................................................................... 5
Item 3 - Legal Proceedings............................................................................. 6
Item 4 - Submission of Matters to a Vote of Security Holders........................................... 6
PART II......................................................................................................... 6
Item 5 - Market for Common Equity and Related Stockholder Matters...................................... 6
Item 6 - Management's Discussion and Analysis or Plan of Operation..................................... 7
Item 7 - Financial Statements.......................................................................... 13
Item 8 - Change In and Disagreements with Accountants on Accounting and Financial Disclosure........... 13
PART III........................................................................................................ 14
Item 9 - Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) of the Exchange Act........................................................................ 14
Item 10 - Executive Compensation....................................................................... 15
Item 11 - Security Ownership of Certain Beneficial Owners and Management............................... 16
Item 12 - Certain Relationships and Related Transactions............................................... 17
Item 13 - Exhibits and Reports on Form 8-K............................................................. 18
INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
INDEX TO EXHIBITS...............................................................................................E-1
</TABLE>
ii
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PART 1
ITEM 1 - DESCRIPTION OF BUSINESS
General Development of Business
Concourse Corporation (the "Company"), a corporation organized under
the laws of the state of Minnesota, began business in October 1979, primarily as
a service business designing and developing computer-assisted instructional
programs and instructional seminars on a custom basis for corporate clients.
These instructional programs and instructional seminars generally dealt with
topics intended to improve business-related management and employee skills. From
1981 through 1983, the Company relied primarily upon custom work performed for
Control Data Corporation in Minneapolis, Minnesota. In 1981, the Company began
limited development and marketing of its own computer-assisted instructional
programs, and in 1983 expanded its efforts to include the development of its own
video-assisted instructional seminars. In 1986, the Company began to reduce its
emphasis on custom development work, and by 1990 its primary source of revenue
was from the sale of its own instructional products. From time to time after
1986, the Company also marketed instructional products owned and developed by
others. Beginning in 1990, the Company also began providing business consulting
services through its two executive officers.
From 1983 through 1994, the Company developed three instructional
programs in both video-assisted and computer-based self-study versions. In
addition, the Company developed computer software for testing and student
administration, and a set of statistical computer software programs. The most
significant of its products, in the opinion of the Company's management, were
its instructional programs dealing with statistical process control for
production employees described under "Products" below.
At the end of December 1995, the Company discontinued the sale of two
of its products - "Selling Skills that Work," and "Customer Interaction Skills."
In 1995 these two products accounted for approximately 10% of the Company's
revenues. The discontinuation of these two products was pursuant to a court
order in partial fulfillment of the terms of a lawsuit settlement with a
competitor that had sued the Company for copyright infringement.
During 1996, approximately 95%, and during 1997, substantially all, of
the Company's revenues were derived from the sale of its "Statistical Methods
for Improving Performance" ("Statistical Methods") products and from consulting
services provided by its only executive officer.
General Business
The Company currently is in the business of providing off-the-shelf
training programs for business, industry and government, and of providing
consulting services to businesses, primarily as an adjunct to its Statistical
Methods training products. Since 1995, no new products have been developed by
the Company. In 1996, however, a derivative of the Company's Statistical Methods
product, titled "Statistical Methods for Improving Performance - Office
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Version," was developed, and in 1997, a second derivative of that product,
titled "A Practical Overview of Statistical Process Control," was also
developed.
Sources of Revenue
Revenues during the fiscal years ended December 31, 1995, 1996 and
1997, were generated from the activities indicated in the chart below:
<TABLE>
<CAPTION>
REVENUES FROM
--------------------------------------------------------------------
FISCAL YEAR SALE OF TRAINING PRODUCTS CONSULTING SERVICES MISCELLANEOUS
----------- ------------------------- ------------------- -------------
<S> <C> <C> <C>
1995 $279,806 $ 56,921 $ 4,525
1996 $131,996 $ 62,571 $ 1,733
1997 $ 71,803 $103,833 $ 147
</TABLE>
In 1994 and 1995, approximately 9% and 10%, respectively, of the Company's
revenues came from the sale of the Company's "Selling Skills that Work" product.
The Company's "Customer Interaction Skills" product sales were immaterial, and
accounted for approximately 2% and .5% of the Company's revenues during 1994 and
1995, respectively. In 1995, the Company also received approximately 12% of its
revenues from the sale of an instructional program owned and developed by a
third party called "Writing to Get Things Done." In 1996, 95%, and in 1997,
substantially all product sales came from the Company's "Statistical Methods"
products.
Products
The Company currently markets the following products to which it has
exclusive copyrights, and all of which are referred to as "Statistical Methods"
products:
- - Statistical Methods for Improving Performance ("SMIP"(TM)). This
product is an instructional program that relates to statistical process
control methods. The instructional program is designed to teach
manufacturing managers and shop-floor personnel how to obtain, analyze
and apply sampling results which can be used to control adverse product
variances. The SMIP product is available as a computer-assisted
self-study program which is programmed for use with IBM PC and
compatible microcomputers. The product consists of a set of computer
disks which the purchaser is licensed to copy, and an administrator's
guide, which are priced as a package at approximately $2,000. In
addition, the product includes student workbooks which range in price
from $35 to $50, depending on the size of the workbook order. A
video-assisted seminar version of the SMIP program is also offered by
the Company, and consists of a video tape, color transparencies and a
facilitator's guide which are priced as a package at approximately
$2,500, and student workbooks priced at $35-$50 each. During 1994, the
Company developed a condensed version of the computer-based SMIP
program, entitled "SMIP Quick Course." The SMIP Quick Course includes
computer disks, a license to copy the disks and a facilitator's
guidebook priced at $995 for the package.
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- - Office SMIP. In 1996, the Company developed a video-assisted seminar
version of SMIP, called "Office SMIP," which teaches the application of
statistical methods to improve clerical and administrative processes to
administrative and office personnel. This product package consists of a
video tape, color transparencies and a facilitator's guidebook, priced
at $1,750. Student workbooks sell for $25 to $40 each.
- - A Practical Overview of Statistical Process Control. This product
(referred to as the "Practical Overview" program), developed in 1997,
is an instructional program that teaches executives, managers and
administrators the fundamentals of statistical process control, and
consists of color transparencies and a facilitator's guide book priced
at $1,500. Student workbooks are priced at $15 to $25 each. The
Practical Overview course is intended to be taught primarily by a
facilitator in a classroom setting.
On December 31, 1995, the Company discontinued marketing its Selling
Skills that Work and Customer Interaction Skills products. These products were
discontinued in partial settlement of a lawsuit brought against the Company by
one of its competitors for copyright infringement. (See "Item 3 - Legal
Proceedings"). During 1995, the Company also discontinued sales of its Genie
software products student tracking and administration system. The decision to
discontinue this product was based on declining market demand. These software
products were used to grade student tests. During 1995, the Company also
discontinued its activities to sell products owned by third-party companies. It
was determined that the cost associated with the marketing, sale and
distribution of such products exceeded the income gained from the sales.
Product Development
In order to maintain its financial stability on a long-term basis, the
Company must continually update existing instructional programs and develop or
acquire new programs. However, due to a shortage of capital, the Company has not
been able to make any significant investment in product development since 1991.
During the fiscal years ended December 31, 1995, 1996 and 1997, the Company
spent $5,249, $714 and $2,832, respectively, on development activities. The 1995
development expenses related primarily to the development of Office SMIP, while
the 1996 and 1997 development expenses related primarily to the development of
the Practical Overview of Statistical Process Control program. All costs of
development of instructional programs were expensed as incurred. The Company has
no plans to develop additional products.
The Company's production process, which is conducted by others, does
not involve compliance issues with environmental laws to any material degree.
Principal Suppliers
The Company uses a number of suppliers and is not dependent on any one
supplier. The major suppliers of the Company are: Spectra Images, Minneapolis,
Minnesota for printed color transparencies; Color Express, Minneapolis,
Minnesota, for color printing; AD&P, Minneapolis, Minnesota for printed text,
and Precision Tapes, Minneapolis, Minnesota for video and audio tape
reproduction.
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Sales and Marketing
The Company markets its business products throughout the United States.
The Company delivers products to its customers as orders are received, and does
not carry a material backlog. The primary market for the Company's products and
services is manufacturing organizations which want to improve manufacturing
quality and productivity.
During 1995, and through October 1996, marketing of the Company's
products was conducted primarily through its own part-time, hourly and
commissioned telemarketing personnel, and to a lesser extent through independent
marketing representatives. In October 1996, the Company discontinued its product
telemarketing activities, and, since that time, substantially all product
marketing activities have been performed by one individual independent marketing
representative doing business under the name of Concourse Marketing Company
("Concourse Marketing"). Under a verbal understanding, the Company pays
Concourse Marketing a commission which ranges from 15% to 85% of the product
sales price, less shipping and product production costs. While the Company
advanced some commission payments to Concourse Marketing in 1996 and 1997, that
practice was terminated by the end of 1997, and Concourse Marketing only
receives a commission on sales when the Company receives payment on that sale.
Concourse Marketing packs and ships products based upon orders it receives, and
the Company bills and collects the sales price. Although the Company's
president, William A. Hultgren, is primarily responsible for marketing the
Company's consulting services, Concourse Marketing also assists in finding
customers for those services, for which it receives a commission of
approximately 10% of the consulting fee under certain circumstances.
In 1997, Northrop Grumman Corp. accounted for 53% of the Company's
revenues, which was attributable primarily to consulting services. It is
anticipated that Northrop Grumman Corp. will account for approximately 50% of
the Company's revenues in 1998. During 1995, 1996 and 1997, no customers other
than Northrop Grumman Corp. in 1997 accounted for more than 10% of the Company's
revenue in any of those years.
Competition
The Company's management believes that it competes with several
packaged training program suppliers which have significantly greater financial,
production, technical and marketing resources than the Company. In marketing the
SMIP and related Statistical Methods programs, the Company competes with
Technicomp Corporation, Cleveland, Ohio; and Perry Johnson Seminars, Chicago,
Illinois. Each of these organizations markets a packaged instructional program
dealing with quality control. The Company competes not only with other training
suppliers, but also with professional training groups within corporate
organizations. Competition in the business consulting area is highly intense and
varied, with the major six United States accounting firms as the most visible
competitors. In addition, there are thousands of other smaller training
companies, business consultants and consulting firms with which the Company must
compete.
The Company's management believes that a company's ability to compete
in the packaged training market is generally based on product quality and
availability, relevance of instructional
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content, the ability to effectively reach its market through efficient sales and
marketing techniques, and its ability to obtain positive customer references
from major corporate accounts. While the Company's management believes that the
Company is able to compete on quality, availability, and relevance of
instructional content of its products, it also believes that it lacks the
financial strength and market position to compete in its markets in any
meaningful way.
Copyrights
The Company claims copyrights for all of its current training products,
and has registered copyrights with the United States Register of Copyrights for
its computer and video based SMIP products. The Company has taken further steps
to protect its software and text material, including the use of protective codes
imbedded in some software, the use of restrictions in licenses, and restrictive
legends on text and videotape materials used for preview purposes. There can be
no assurance that the Company's software and other products will not
successfully be copied by others. The loss of exclusive rights to certain of its
products could materially and adversely affect the Company's business.
Employees
The Company decreased its employment from five full-time employees
(including its two executive officers, William A. Hultgren and Roland G.
Barrett), and seven part time employees on March 15, 1995 to one full-time
employee (William A. Hultgren) and seven part-time employees by December 31,
1995. In October, 1996, all remaining employees of the Company, except its
president, were terminated. Since October 1, 1996, the Company has had one
employee, its president.
Merger Transaction
In September 1998, the Company and its newly formed and wholly-owned
subsidiary, Peoples Acquisition Corporation ("Acquisition Co."), entered into an
Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") with
Peoples Publishing Group, Inc. ("Peoples Publishing"), a Pennsylvania
corporation. Under the Merger Agreement, which is effective as of June 4, 1998,
Peoples Publishing will be merged with Acquisition Co. and become the surviving
corporation. Following the merger, the shareholders of Peoples Publishing will
own approximately 95% of the Company's outstanding voting capital stock. Peoples
Publishing, with principal offices in Maywood, New Jersey, is engaged primarily
in the publishing of books for use in elementary and secondary schools, grades K
through 12. (See "Item 6 - Management's Discussion and Analysis or Plan of
Operation - Merger Transaction.")
ITEM 2 - DESCRIPtION OF PROPERTY
Beginning on January 1, 1995, the Company leased 3,471 square feet of
office space in Minneapolis, Minnesota, for $3,110 per month, under a lease
which was to expire on December 31, 1995. In June 1995, the Company reduced its
lease space from 3,471 square feet to approximately 2,500 square feet, and
reduced the monthly rent by $510. The Company renewed the lease as of January 1,
1996, and beginning in February 1996, the Company further reduced its lease
space to approximately 1,707 square feet, at a monthly rent of $1,600. In
October
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1996, the Company terminated its lease altogether. Since October 1, 1996, the
Company has operated out of the home of its president, William A. Hultgren, at
2545 Dunwoody Avenue, Wayzata, Minnesota, and does not incur any office lease
expense.
During 1996, the Company disposed of most of its office equipment and
furnishings. The Company made no substantial capital investments during 1995,
1996 or 1997. The Company currently owns office equipment and furniture having a
minimal value.
ITEM 3 - LEGAl PROCEEDINGS
An action was commenced against the Company in October 1991 in United
States District Court, District of Connecticut, in Bridgeport, Connecticut, by a
competitor of the Company alleging violations of U.S. copyright laws and illegal
trade practices. The action was entitled "Learning International, Inc. v.
Concourse Corporation," and was assigned court file number 591CV00662 (WNW). The
action sought recovery of an unspecified amount of monetary damages. The action
further sought injunctive relief restraining the Company's use of the allegedly
infringing materials. There was some circumstantial evidence that the persons
who developed Selling Skills that Work and Customer Interaction Skills
plagiarized certain assets of similar training programs marketed by Learning
International, Inc.
Primarily because the Company lacked the resources to defend the
lawsuit though trial, and without admitting to infringement, the Company settled
the lawsuit in mid-1995. In the settlement, the Company agreed to discontinue
the sale of it Selling Skills That Work and Customer Interaction Skills
products, effective January 31, 1996, and agreed to a permanent injunction
against producing or publishing the alleged infringing materials. Most of the
Company's legal expenses in the lawsuit were paid by the Company's general
liability insurer which defended a portion of the lawsuit with a reservation of
rights as to coverage. The Company has complied with all terms of the
settlement.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by the Company to a vote of its security
holders during the fiscal years 1995, 1996 or 1997.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock was traded over-the-counter by
broker/dealers in the Minneapolis, Minnesota metropolitan area from
approximately December 1983 until October 1996, when all active trading ceased.
Trading in the Company's common stock had been extremely limited since at least
1993, and, as of December 31, 1994, there was only one broker/dealer in
Minneapolis, Minnesota providing bid and asked quotations. The following table
sets forth for the periods indicated the high and low per share bid prices for
the Company's common stock as reported by broker/dealers in the Minneapolis,
Minnesota area. The information set forth below for 1995 and 1996 was obtained
from Metro Data Company, which collects and publishes over-the-counter
quotations supplied by broker/dealers in the Minneapolis,
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Minnesota metropolitan area. The information set forth below for 1994 was
obtained from the Minneapolis Star and Tribune newspaper, which attributes this
information as coming from Metro Data Company.
Quarters Ended High Low
- -------------- ---- ---
1994
March 31 $0.06 $0.03125
June 30 $0.10 $0.06
September 30 $0.10 $0.09375
December 31 $0.10 $0.03
1995
March 31 $0.08 $0.03125
June 30 $0.0625 $0.03125
September 30 $0.03125 $0.02
December 31 $0.03 $0.02
1996
March 31 $0.03 $0.0035
June 30 $0.02 $0.005
September 30 $0.005 $0.005
December 31 $0.005 $0.005
(through 10/22)
The last bid quote for the Company's common stock was published as of
the close of business on October 22, 1996, and was $0.005 per share. The Company
is unaware of any broker/dealer who has published bid or asked quotations for
the Company's common stock since October 22, 1996. The over-the-counter
quotations above reflect inter-dealer prices, without retail markup, markdown or
commissions, and may not represent actual transactions. There were approximately
240 shareholders owning the Company's common stock of record as of the close of
business on August 31, 1998.
ITEM 6 - MANAGEMENT'S DISCUSSION aND ANALYSIS OR PLAN OF OPERATION
General
The Company began business in 1979, primarily as a service business
designing and developing computer assisted instructional programs on a custom
basis. The Company's business evolved to the point that in 1994 it was engaged
primarily in the business of marketing three instructional programs developed by
the Company. The most important of these training programs, SMIP, provided
instruction regarding statistical methods to evaluate manufacturing process and
was directed to shop floor personnel. A second training program, called
"Customer Interaction Skills," taught field service representatives how to deal
with customers, and the third
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program "Selling Skills that Work," provided instruction for field sales
personnel. The Company also marketed a proprietary software program called
"Genie" used to permit trainers to devise and administer tests which students
take on computers.
In 1995, the Company was sued by Learning International, Inc., a
competitor, alleging that the Company's "Customer Interaction Skills" and
"Selling Skills that Work" programs infringed on its copyrights relating to
similar products Learning International, Inc. was marketing. While the Company
denied infringement, it did not have the resources to defend that action, and
agreed, as part of a settlement, to discontinue the sale of those two programs
effective January 31, 1996. During 1995, the Company also terminated all
full-time employees, other than one executive officer and one sales person, and
conducted its in-house marketing efforts through seven part-time sales
employees. By the end of 1995, the Company terminated its efforts to sell
training programs developed and owned by others.
In October 1996, the Company determined to discontinue all of its
in-house telemarketing efforts. The Company entered into an oral agreement with
an independent sales representative to conduct all of the Company's product
marketing efforts, which at that time consisted only of the Company's SMIP
product, and terminated all part-time sales employees at that time. At that
time, the Company determined to concentrate on providing consulting services
through its president, William A. Hultgren.
Operations
Revenues. Revenues by product and services were generated as follows
from 1994 through 1997:
<TABLE>
<CAPTION>
SOURCE 1994 1995 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Products
SMIP $399,910 $201,932 $122,105 $ 59,893
Selling Skills That Work 49,990 32,826 9,891 ---
Writing to Get Things Done --- 39,440 --- ---
Other Products 22,132 5,608 --- 11,910
-------- -------- -------- --------
Total Products $472,032 $279,806 $131,996 $ 71,803
Services
Consulting $ 81,900 $ 56,921 $ 62,571 $103,833
Other 3,337 4,525 1,733 147
-------- -------- -------- --------
Total Services $ 85,237 $ 61,446 $ 64,304 $103,980
$557,269 $341,252 $196,300 $175,783
======== ======== ======== ========
</TABLE>
1995 as Compared to 1994. The Company's revenues decreased from
$557,269 in 1994 to $341,252 in 1995, or a total of $216,017. This 39% decrease
in sales was largely the result of an approximate $200,000 decrease in the sales
of the Company's SMIP product. This decrease occurred, in management's belief,
because the most obvious customers for the product had already been introduced
to, or had purchased, the product, and customers for the SMIP
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products were increasingly difficult to identify. Cost of product sold and
services rendered increased by $2,505 or 3%, from $73,105 to $75,610 primarily
because of the higher cost associated with the purchase of a training program
owned and developed by a third party which the Company marketed in 1995. Selling
and general administrative expenses decreased $177,579 from 1994 to 1995, from
$530,249 to $352,670, or 33%, reflecting primarily reduced commissions resulting
from lower product sales, and to a lessor extent, a reduction in personnel. The
$103,972 loss in 1995 exceeded the $63,038 loss in 1994, and was primarily due
to the lower revenue generated in 1995 as compared to 1994.
1996 as Compared to 1995. Revenues continued to decline from 1995 to
1996, from $341,252 to $196,300, a total of $144,952, or 42%. The decline in
revenues in 1996 was attributable to a further decline in sales of the Company's
Statistical Methods products, from approximately $202,000 in 1995 to $122,000 in
1996, the fact that the Company did not sell the training product of a third
party which generated $39,440 of sales in 1995; and the loss of the Selling
Skills that Work product that the Company stopped selling in January 1996, and
which accounted for $32,826 of revenues in 1995 and only $9,891 in 1996. While
revenues declined, the cost of producing products and services increased
$43,593, from $75,610 to $119,203, or 58%. This increase was attributable in
part to the fact that a greater percentage of the revenues, 32% as opposed to
17%, were generated in 1996 as compared to 1995 from consulting services, which
have lower revenue to cost margins. Selling, general and administrative expenses
dropped $198,596, from $352,670 to $154,074, or 56%, largely the result of a
lower commission expense associated with lower product sales; the termination of
all of the Company's employees, except for its president, in 1995; and the
termination of the Company's office lease. The net profit in 1996 of $68,452 was
primarily the result of the forgiveness by the Company's two executive officers
of a $113,127 obligation to fund a deferred compensation plan, and the
forgiveness of $32,402 in interest due on the Company's debentures which were
forgiven and converted into common stock of the Company.
1997 as Compared to 1996. Revenues of $175,783 in 1997 represented a
$20,517, or 10%, decrease from the 1996 revenues of $196,300. This reduction was
attributable to a reduction in sales of the proprietary products, offset
partially by a $41,262 increase in revenues from consulting services which made
up $103,833, or 59%, of the Company's revenues in 1997. Cost of product sold and
services rendered decreased $19,398, from $119,203 to $99,805, or 16%, from 1996
to 1997, reflecting lower product sales with higher margins, offset partially by
the higher cost margins associated with consulting services. Selling, general
and administrative expenses decreased $62,027, from $154,074 to $92,047, or 40%,
as the result of lower product sales and a corresponding reduction in commission
expense.
Future Operations. Unless the merger between the Company's subsidiary,
Acquisition Co., and Peoples Publishing is consummated as described below, the
Company anticipates revenues will stabilize to approximately the 1997 levels,
with a gradual deterioration due to the likelihood that product sales will
continue to decrease as the Company's current Statistical Methods products
become older, outdated and over exposed. As a result, the Company anticipates
that revenues in the future will be generated increasingly by the consulting
services provided by its president, William A. Hultgren. This paragraph contains
forward looking statements which may not come true. The future existence of the
Company's business is almost
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entirely dependent upon the continued efforts of William A. Hultgren, and the
loss of Mr. Hultgren's services would almost certainly cause a termination of
the Company's business.
Liquidity and Capital Resources
Current. At December 31, 1997, the Company had cash and cash
equivalents of only $10,537, and a deficit net worth of $662. At the current
level of the Company's operations, and assuming the continued consulting
services provided by William A. Hultgren, the Company's capital resources are
sufficient to continue the Company's operations for more than the next 12
months. However, without additional capital, the Company cannot develop new
training programs, which its management believes is critical for the future
success of its instructional products business and the growth of the Company. It
is unlikely that the Company will be able to attract such capital in the future.
Other
Year 2000. The Company's operations and systems are not subject to any
material costs, risks or uncertainties which would result upon the occurrence of
the year 2000.
Debenture Conversion and Forgiveness. In 1986, the Company issued
$473,000 in principal amount of debentures convertible into common stock of the
Company at $1.25 per share, designated as the "12?% Subordinated Convertible
Debentures due 1988" (the "Debentures"). The Company was unable to pay the
Debentures when they became due on January 1, 1988, and negotiated revisions to
the Debentures, with all Debenture holders, except for one holder having a
Debenture in the principal amount of $3,000, who was paid in full in 1988. These
revisions resulted in an extension of the due date on the Debentures to January
1, 1990. In exchange for the due date extension, the Debenture holders were
granted the right to convert the face amount of the Debentures into the
Company's common stock at a rate of $.50 per share through 1988, and $0.75 per
share through 1989. As part of the negotiation, the Debenture holders also
agreed to forgive $58,700 in unpaid interest due in 1987.
During 1988, $233,000 of the Debentures (based upon the principal
amount due) were converted into 466,000 shares of the Company's common stock,
leaving a principal balance of $234,000 due under the Debentures.
No Debentures were converted into common stock in 1989.
The Company was unable to pay the principal amount of $327,000 due on
the Debentures in 1990, and devised a plan whereby it would make periodic
principal payments to the remaining Debenture holders, along with interest. The
Company, as part of that plan, extended the rights of Debenture holders to
convert a Debenture into common stock at $0.75 per share based upon the face
amount of the Debenture. By the end of 1992, the Company had reduced the
principal amount due on the Debentures to $129,609. The Company continued to pay
interest on the $129,609 of principal amount remaining due on the Debentures
through 1993. No interest was paid after that date.
In March 1996, the Company offered to permit the Debenture holders the
right to convert 1% of each $1.00 of principal amount due on the Debentures into
the Company's common stock,
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at the rate of 5 shares for every $0.01 of principal amount converted, if the
Debenture holders would forgive payment of interest and the remaining principal
amount due on the Debentures. In consideration for this conversion and
forgiveness by all Debenture holders, the Company's two executive officers,
William A. Hultgren and Roland G. Barrett, agreed that they would give the
Company a general release for all obligations due them, including the
cancellation of a wage continuation plan set up for their benefit, forgiving a
$113,127 accrual on the Company's books to fund that plan. All of the remaining
Debenture holders accepted the Company's offer, and in October 1996, the Company
issued 648,052 shares of its common stock to the Debenture holders.
Merger Transaction
In September 1998, the Company and its newly formed and wholly-owned
subsidiary, Peoples Acquisition Corporation ("Acquisition Co."), entered into an
Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") with
Peoples Publishing Group, Inc. ("Peoples Publishing"), a Pennsylvania
corporation. The Merger Agreement constitutes an amendment to and a restating of
an Agreement and Plan of Merger entered into between the Company and Peoples
Publishing on June 4, 1998, and is accordingly made effective as of that date.
Peoples Publishing, with principal offices in Maywood, New Jersey, is engaged
primarily in the publishing of books for use in elementary and secondary
schools, grades K through 12.
Under the terms of the Merger Agreement, Peoples Publishing will merge
with Acquisition Co., and the separate existence of Acquisition Co., which was
formed only to engage in the merger (the "Merger"), will cease.
Peoples Publishing will then be the wholly owned subsidiary of the Company.
To facilitate the Merger, on August 31, 1998, the Board of Directors of
the Company voted to establish three new classes of capital stock out of the
4,000,000 undesignated shares authorized by the Company's Articles of
Incorporation. The rights and privileges of each of the three new classes of
Concourse capital stock are summarized as follows:
- 1998 Convertible Stock. The Board of Directors established
600,000 shares of the 1998 Convertible Stock (the "1998 Stock").
Each share of the 1998 Stock is convertible into 21.75 shares of
the Company's common stock, subject to adjustment in certain
cases to prevent dilution of the interests of the holders of 1998
Stock until December 31, 2001, when the 1998 Stock will be
convertible into 10 shares of the Company's common stock in lieu
of 21.75 shares of the Company's common stock. Each holder of the
1998 Stock has one vote, on all matters submitted to the capital
stockholders of the Company, for each share of the Company's
common stock that holder would be entitled to receive upon
conversion of 1998 Stock into the Company's common stock. The
1998 Stock does not have preferential rights as to dividends or
distributions upon liquidation.
- 1990 Redeemable Cumulative Convertible Preferred Shares. The
Board of Directors established 1,300,000 shares of the 1990
Redeemable Cumulative Convertible Preferred Shares, having a par
value of $0.001 per share (the "1990 Stock"). Each share of 1990
Stock is convertible into 21.75 shares of the Company's common
11
<PAGE> 14
stock, subject to adjustment in certain cases to prevent dilution
of the interests of the holders of 1990 Stock. Each holder of
1990 Stock has one vote, on all matters submitted to the capital
stockholders of the Company, for each share of the Company's
common stock that holder would be entitled to receive upon
conversion of the 1990 Stock into the Company's common stock. The
holders of 1990 Stock are entitled to receive a lump sum cash
dividend of $0.37 per share plus quarterly cash dividends at the
rate of $0.042 per annum per share, if the Company has sufficient
quarterly earnings, and if adequate cash, after establishing a
reasonable cash reserve, is available for such payment. Dividends
will be payable on the last day of each calendar quarter, and
will begin to accumulate for the quarter beginning October 1,
1998. In the event of liquidation of the Company, holders of the
1990 Stock would be entitled to receive $0.84624 per share in
cash out of the assets of the Company distributed in such
liquidation, and all unpaid but accrued dividends. If assets are
not sufficient to make such payments in full, along with payment
obligations to the holders of 1993 Stock (discussed below), the
holders of 1990 Stock and the holders of 1993 Stock would share
distributions pro-rata, based upon the full amount they would
otherwise have been entitled to receive.
On August 24, 2000, 2001 and 2003, the Company is required to
redeem up to one third of the outstanding 1990 Stock at a price
of $0.84624 per share, plus all cumulated but unpaid dividends
due thereon, only if adequate funds are available to effect such
redemption. If less than adequate funds are available, the
Company must redeem such number of shares of the 1990 Stock as it
can.
- 1993 Redeemable Cumulative Convertible Preferred Shares. The
Board of Directors established 700,000 shares of the 1993
Redeemable Cumulative Convertible Preferred Shares, having a par
value of $0.001 per share (the "1993 Stock"). Holders of the 1993
Stock have substantially identical rights as the 1990 Stock, with
respect, among other things, to voting conversion, conversion
rate adjustments, dividends, liquidation and redemption, except
that (i) holders of the 1993 Stock are entitled to a lump sum
cash dividend of $0.33 per share, plus quarterly cash dividends
of $0.062 per annum per share, and (ii) the per share payment
upon liquidation or redemption is $1.25 per share plus unpaid but
accrued dividends.
In consideration of the transaction, the holders of the capital stock
of Peoples Publishing will receive the following:
(i) holders of common stock of Peoples Publishing will
receive 600,000 shares of 1998 Stock of the Company,
convertible (until December 31, 2001) into
approximately 13,050,000 shares of the Company's common
stock;
(ii) holders of 1990 Redeemable Cumulative Convertible
Preferred Stock of Peoples Publishing will receive
1,278,120 shares of 1990 Stock of the Company,
convertible into approximately 27,799,110 shares of the
Company's common stock; and
12
<PAGE> 15
(iii) holders of 1993 Redeemable Cumulative Convertible
Preferred Stock of Peoples Publishing will receive
680,000 shares of 1993 Stock of the Company,
convertible into approximately 14,790,000 shares of the
Company's common stock.
In addition, holders of options to purchase 128,000 shares of Peoples
Publishing's common stock at an average price of $1.25 per share will receive
similar options to purchase 2,784,000 shares of common stock of the Company at
an average price of $0.0575 per share. The actions of the Board of Directors in
establishing the new shares obliges the Company to take action necessary to
increase the Company's authorized common stock in order to facilitate the
conversion rights granted to those newly established shares. Accordingly,
following the Merger, the Company's common stock holders will be asked to vote
in favor of an amendment to the Company's Articles of Incorporation, which,
among other things, would increase the authorized common stock (currently
6,000,000 shares) in order to accommodate such conversion.
Peoples Publishing has loaned the Company $25,000 to pay certain legal
and accounting expenses incurred in connection with the proposed Merger,
including the filing of certain documents with the Securities and Exchange
Commission pursuant to the requirements of the Securities Exchange Act of 1934.
If the Merger is not consummated for reasons other than a breach of warranty or
default on the part of the Company, the $25,000 loan will be forgiven.
The Merger Agreement contemplates that each of the current members of
the Board of Directors of the Company, with the exception of William A.
Hultgren, will resign at the time the transaction is completed. In addition, it
is contemplated that, following the Merger, Mr. Hultgren will be terminated as
an employee of the Company and will acquire the Company's current assets in
exchange for the assumption of its liabilities.
The Merger is expected to be completed on or about October 1, 1998.
Closing of the Merger is contingent upon a number of factors, including the
continued accuracy of warranties and representations made in the Merger
Agreement by each party. There is no assurance that the Merger will be
completed.
ITEM 7 - FINANCIAL STATEMENTS
(See Index to Financial Statements attached)
ITEM 8 - CHANGE IN AND DISAGREEMENTS WITH ACCOuNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company engaged Casey Menden & Co., P.A., Bloomington, Minnesota,
on January 9, 1995, to act as the Company's certified public accounting firm to
audit the financial records of the Company for 1994. Casey Menden & Co.,, P.A.,
was engaged to replace Fox McCue and Company as previously reported in the
Company's Form 10-K for 1994. On approximately December 1, 1995, Casey Menden &
Co., P.A. notified the Company that it was not qualified to act as the auditor
and certified public accounting firm for companies filing periodic reports under
the Securities Exchange Act of 1934, and resigned as the Company's auditors . On
June 10, 1998, the Company appointed McGladrey & Pullen LLP to act as its
certified public
13
<PAGE> 16
accounting firm. There were no disagreements between the Company and Casey
Menden & Co., P.A. on any matter of accounting principles or practice, financial
statement disclosure, or auditing scope or procedure.
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The names, ages and respective positions of the directors and executive
officers of the Company as of the date hereof are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION SERVED AS A DIRECTOR SINCE
- ---- --- -------- --------------------------
<S> <C> <C> <C>
William A. Hultgren 57 President and Chief Executive 85
Officer, Treasurer and Chief
Financial Officer, and a Director
Roland G. Barrett 54 Director 86
Orville H. Huseby 56 Director 85
Oris C. Beucler 57 Director 81
Stephen A. Muscanto 56 Director 88
</TABLE>
WILLIAM A. HULTGREN, the Company's president and chief executive
officer, and treasurer and chief financial officer, has served in those
capacities since August 1995. From November 11, 1985 to September 1995, Mr.
Hultgren was the Company's chairman of the board and chief executive officer.
ROLAND G. BARRETT has been the chief executive officer and a principal
owner of Homeworx Partners, Inc. since April 1996. Homeworx Partners, Inc., with
principal offices in New Brighton, Minnesota, is engaged in the construction of
homes in the Minneapolis/St. Paul, Milwaukee and Cedar Rapids metropolitan
areas. From August 1995 to March 1996, Mr. Barrett acted as chief operating
officer of President Homes, Inc., with principal offices in Minneapolis,
Minnesota. President Homes, Inc. was in the business of constructing homes in
the upper midwest, including the states of Minnesota, Iowa and Wisconsin. From
March 1986 until August 1995, Mr. Barrett was employed by the Company were he
acted as its president and chief operating officer, and treasurer and chief
financial officer.
ORIS C. BEUCLER has been a self employed management and business
valuation consultant in Minneapolis, Minnesota since 1979.
14
<PAGE> 17
STEPHEN A. MUSCANTO has been employed by Pneuseal International
Corporation as chief operating officer since October 1991, and as president and
chief executive officer since January 1994. Pneuseal International Corporation
is engaged in manufacturing heat sealing equipment with principal offices in St.
Paul, Minnesota. From June 1990 to April 1991, Mr. Muscanto was the manager of
manufacturing for Dresser-Rand, Electric Machinery in Minneapolis, Minnesota.
Dresser-Rand is engaged in the manufacture of turbines, compressors, generators
and electric motors with principal offices in Corning, New York.
ORVILLE H. HUSEBY, has been the chief executive officer, and the
majority shareholder of, Variant, Inc. since March 1987. Variant, Inc. is an
importer and distributor of specialty products used primarily as advertising and
promotional items by other businesses, and has its offices in Minneapolis,
Minnesota.
The Company's Board of Directors does not have any standing audit or
nominating committees, or any other committee.
Directors of the Company are elected to one-year terms at the annual
meeting of its shareholders and serve until a successor has been elected and
qualified. A meeting of the shareholders was last held on April 27, 1990.
Officers of the Company serve at the discretion of the Board of Directors.
Reporting under Section 16(a) of the Securities Exchange Act of 1934
As the Company's common stock is not registered under Section 12 of
the Securities Exchange Act of 1934 (the "Exchange Act"), none of the executive
officers or directors of the Company, or persons who beneficially own more than
10 percent of the Company's outstanding shares of common stock, are subject to
Section 16 of the Exchange Act or required to file initial reports of ownership
and reports of changes in ownership of equity securities of the Company with the
Securities and Exchange Commission.
ITEM 10 - EXECUTIVE COMPENSATION
Summary Compensation of Chief Executive Officer
The Summary Compensation Table below shows certain compensation
information for the chief executive officer. Compensation data for other
executive officers is not presented in the charts because annual bonus and
salary compensation for such executive officers did not exceed $100,000 for
services rendered in all capacities during the year ended December 31, 1995. For
the years ended December 31, 1996 and 1997 there was only one executive officer
of the Company. Compensation data is shown for the years ended December 31,
1997, 1996, 1995, 1994 and 1993.
15
<PAGE> 18
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ALL OTHER COMPENSATION ($)
<S> <C> <C> <C>
William A. Hultgren 1997 36,100 0
President and Chief Executive 1996 65,485 0
Officer, and Treasurer and 1995 40,590 0
Chief Financial Officer 1994 72,000 17,652(1)
1993 72,000 9,447(1)
</TABLE>
(1) Includes salary continuation plan contributions by the Company of
$17,652 and $9,447 for the fiscal years ended December 31, 1994 and 1993,
respectively. The salary continuation plan was terminated in July 1996, and
the only two participants in the salary continuation plan released the
Company from liability for any accrual or other obligation under the plan.
(See Item 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.)
Compensation of Directors
Directors of the Company who are not employees are entitled to directors'
fees, payable quarterly, equal to $200 for each meeting attending, and $200 for
each executive committee meeting lasting more than one hour. One payment of $200
was made to each of Mr. Huseby and Mr. Beucler in 1994. No payments were made or
accrued for 1995, 1996 or 1997 or to date in 1998.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 31,
1998, with respect to the number of the Company's shares of common stock
beneficially owned by (i) each director, (ii) the Company's chief executive
officer, (iii) each person beneficially owning more than 5% of the Company's
outstanding shares of common stock, and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
Percent of Total
Name and Address of Beneficial Owner Shares Beneficially Owned Outstanding Shares
- ------------------------------------ ------------------------- ------------------
<S> <C> <C>
William A. Hultgren 232,500 7.6%
2545 Dunwoody Avenue
Wayzata, MN 55391
Roland G. Barrett 208,639 6.8%
100 W. Elmwood Place
Minneapolis, MN 55419
Orville H. Huseby 140,861 4.6%
5412 Vining Point Road
Minnetonka, MN 55345
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C>
Stephen A. Muscanto 196,200(1) 6.4%
2003 Skillman Avenue W.
Roseville, MN 55113
Oris C. Beucler 167,931 5.5%
5959 Woodland Road
Minnetonka, MN 55345
Executive Officers
and Directors as a group
(5 persons) 946,131 30.9%
</TABLE>
(1) Includes 20,000 shares of the Company's common stock owned by Mr.
Muscanto's son, and 11,735 shares owned by Mr. Muscanto's wife. Mr.
Muscanto denies any beneficial interest in those shares.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Redemption of Shares
In June, 1995, the Company redeemed 167,942 shares of its common stock
for $840 from Capital Dimensions Venture Fund, inc. ("CDVF") which, at the time,
owned approximately 7.5% of the Company's outstanding common stock. Under an
agreement with the predecessor of CDVF, the Company was obligated to allow CDVF
to designate a member of the Company's Board of Directors so long as it owned
over 5% of the Company's common stock. Neither CDVF nor its predecessor Control
Data Capital Corporation ever executed that right.
Forgiveness of Obligation to Executive Officers
In July 1996, the Company's then executive officers, William A.
Hultgren and Roland G. Barrett forgave an aggregate of $113,127 in debt due them
from the Company under a wage continuation plan. (See "Item 6 Management's
Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources -
Debenture Conversion and Forgiveness").
Issuance of Stock to Members of the Board of Directors
On May 1, 1998, the Company issued 181,500 shares of its common stock
to members of the Board of Directors for services rendered to the Company as
follows:
NAME NUMBER OF SHARES VALUE OF SERVICES
---- ---------------- -----------------
Oris C. Beucler 100,500 $1,256
Stephen A. Muscanto 81,000 $1,013
17
<PAGE> 20
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) (See "Index to Exhibits" attached)
(b) No reports were filed on Form 8-K during the last quarter of 1995,
1996 or 1997.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Concourse Corporation
By: /s/William A. Hultgren
------------------------------
William A. Hultgren, Chief
Executive Officer
Dated: September ___, 1998
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/William A. Hultgren September ___, 1998
- -------------------------------------------------------------
William A. Hultgren, President and Chief Executive
Officer, Treasurer and Chief Financial Officer and a director
/s/Roland G. Barrett September ___, 1998
- -------------------------------------------------------------
Roland G. Barrett, a director
/s/Orville H. Huseby September ___, 1998
- -------------------------------------------------------------
Orville H. Huseby, a director
/s/Oris C. Beucler September ___, 1998
- -------------------------------------------------------------
Oris C. Beucler, a director
/s/Stephen A. Muscanto September ___, 1998
- -------------------------------------------------------------
Stephen A. Muscanto, a director
</TABLE>
No annual report covering Registrant's fiscal years ended December 31, 1995,
1996 or 1997, and no proxy statement, proxy or other proxy solicitation
materials with respect to any meeting of the Registrant's shareholders held in
1995, 1996 or 1997, has been sent to the Registrant's shareholders. No such
report or proxy materials are to be furnished to the Registrant's shareholders
subsequent to the filing of this Form 10-KSB.
18
<PAGE> 21
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report F-2
Financial Statements
Balance sheets F-3
Statements of operations F-4
Statements of stockholders' equity (deficit) F-5
Statements of cash flows F-6
Notes to financial statements F-7 to F-11
F-1
<PAGE> 22
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Concourse Corporation
Spring Park, Minnesota
We have audited the accompanying balance sheets of Concourse Corporation as of
December 31, 1997, 1996, and 1995, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of Concourse Corporation for the year
ended December 31, 1994, were audited by other auditors whose report, dated
March 21, 1995, on those financial statements included an explanatory paragraph
that expressed substantial doubt about the Company's ability to continue as a
going concern.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Concourse Corporation as of
December 31, 1997, 1996, and 1995, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
St. Paul, Minnesota
July 8, 1998
F-2
<PAGE> 23
CONCOURSE CORPORATION
BALANCE SHEETS
DECEMBER 31, 1997, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
ASSETS 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current Assets
Cash $ 10,537 $ 16,189 $ 10,504 $ 48,709
Trade accounts receivable, less allowance for
doubtful accounts of $3,000 (Note 8) 32,835 877 35,605 37,964
Inventories 6,525 6,320 60,591 89,686
Prepaid expenses and other - - 3,134 11,069
--------------------------------------------------------------------
TOTAL CURRENT ASSETS 49,897 23,386 109,834 187,428
--------------------------------------------------------------------
Equipment, at cost
Office equipment and furniture 36,929 36,929 75,921 73,097
Less accumulated depreciation 35,830 34,661 65,381 60,672
--------------------------------------------------------------------
1,099 2,268 10,540 12,425
--------------------------------------------------------------------
$ 50,996 $ 25,654 $ 120,374 $ 199,853
====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current Liabilities
Note payable to bank (Note 2) $ - $ - $ - $ 17,505
Subordinated convertible debentures (Note 4) - - 129,609 129,609
Trade accounts payable 13,267 8,335 6,963 2,016
Accrued expenses:
Compensation 36,002 - 18,215 10,482
Interest - - 32,402 16,201
Other 2,389 1,812 2,612 12,123
--------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 51,658 10,147 189,801 187,936
--------------------------------------------------------------------
Deferred Compensation Obligation (Note 5) - - 113,127 89,659
--------------------------------------------------------------------
Commitments and Contingencies (Notes 6, 7, and 10)
Stockholders' Equity (Deficit) (Note 9)
Common stock, par value $0.01 per share 27,046 27,046 20,566 22,245
Additional paid-in capital 1,951,385 1,951,385 1,828,256 1,827,417
Accumulated deficit (1,979,093) (1,962,924) (2,031,376) (1,927,404)
--------------------------------------------------------------------
(662) 15,507 (182,554) (77,742)
--------------------------------------------------------------------
$ 50,996 $ 25,654 $ 120,374 $ 199,853
====================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 24
CONCOURSE CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues (Note 8) $ 175,783 $ 196,300 $ 341,252 $ 557,269
---------------------------------------------------------------------
Costs, expenses, and other:
Cost of products sold and
services rendered 99,805 119,203 75,610 73,105
Selling, general, and
administrative expenses 92,047 154,074 352,670 530,249
---------------------------------------------------------------------
TOTAL COSTS AND
EXPENSES 191,852 273,277 428,280 603,354
---------------------------------------------------------------------
OPERATING LOSS (16,069) (76,977) (87,028) (46,085)
Nonoperating income (expense):
Deferred compensation
obligation forgiven (Note 5) - 113,127 - -
Accrued interest forgiven (Note 4) - 32,402 - -
Interest expense - - (16,936) (16,853)
Other, net (100) (100) (8) (100)
---------------------------------------------------------------------
NET INCOME (LOSS) $ (16,169) $ 68,452 $ (103,972) $ (63,038)
=====================================================================
Basic and diluted net income (loss)
per common share $ (0.01) $ 0.03 $ (0.05) $ (0.03)
=====================================================================
Weighted-average common shares
outstanding 2,704,610 2,218,571 2,140,529 2,224,500
=====================================================================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 25
CONCOURSE CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Common Stock Additional
------------------------------ Paid-In Accumulated
Shares Amount Capital Deficit Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 2,224,500 $ 22,245 $ 1,827,417 $ (1,864,366) $ (14,704)
Net loss - - - (63,038) (63,038)
----------------------------------------------------------------------------
Balance, December 31, 1994 2,224,500 22,245 1,827,417 (1,927,404) (77,742)
Redemption of 167,942 shares of common stock (167,942) (1,679) 839 - (840)
Net loss - - - (103,972) (103,972)
----------------------------------------------------------------------------
Balance, December 31, 1995 2,056,558 20,566 1,828,256 (2,031,376) (182,554)
Conversion of subordinated debentures into
common stock (Note 4) 648,052 6,480 123,129 - 129,609
Net income - - - 68,452 68,452
----------------------------------------------------------------------------
Balance, December 31, 1996 2,704,610 27,046 1,951,385 (1,962,924) 15,507
Net loss - - - (16,169) (16,169)
----------------------------------------------------------------------------
Balance, December 31, 1997 2,704,610 $ 27,046 $ 1,951,385 $ (1,979,093) $ (662)
============================================================================
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 26
CONCOURSE CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (16,169) $ 68,452 $ (103,972) $ (63,038)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation 1,169 3,768 4,973 5,042
Loss on disposals of equipment - 3,014 - -
Deferred compensation expense (income) - (113,127) 23,468 31,664
Forgiveness of accrued interest - (32,402) - -
Changes in current assets and liabilities:
Trade accounts receivable (31,958) 34,728 2,359 26,827
Inventories (205) 54,271 29,095 39,134
Prepaid expenses and other - 3,134 7,935 (4,109)
Trade accounts payable 4,932 1,372 4,947 (36,044)
Accrued expenses 36,579 (19,015) 14,423 (25,256)
--------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (5,652) 4,195 (16,772) (25,780)
--------------------------------------------------------
Cash Flows From Investing Activities
Purchases of equipment - (852) (3,088) (1,719)
Proceeds from disposal of equipment - 2,342 - -
--------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - 1,490 (3,088) (1,719)
--------------------------------------------------------
Cash Flows From Financing Activities
Net proceeds (payments) under line-of-credit agreement - - (17,505) 12,583
Redemption of common stock - - (840) -
--------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES - - (18,345) 12,583
--------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (5,652) 5,685 (38,205) (14,916)
Cash
Beginning 16,189 10,504 48,709 63,625
--------------------------------------------------------
Ending $ 10,537 $ 16,189 $ 10,504 $ 48,709
========================================================
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ - $ - $ 16,936 $ 16,853
Income taxes 100 100 100 100
========================================================
Supplemental Schedule of Noncash Investing and Financing Activities
Conversion of subordinated debentures into common stock (Note 4) $ - $ 129,609 $ - $ -
Forgiveness of accrued interest (Note 4) - 32,402 - -
========================================================
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 27
CONCOURSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: Concourse Corporation is engaged in the business of
developing and marketing computer-assisted instruction programs and packaged
instructional seminars for business and industry, as well as related consulting
services. Credit terms are established on a customer-by-customer basis. Since
October 1996, all of the Company's revenue has been generated by the Company's
president, who is also its only employee.
REVENUE RECOGNITION: The Company recognizes revenue upon either the shipment of
its products to the customer or upon completion of each seminar conducted on
behalf of a customer.
INVENTORIES: Inventories, consisting primarily of finished goods (educational
materials), are stated at the lower of cost (specific-identification method) or
market. The first-in, first-out (FIFO) method is used for valuing inventoriable
production and outside vendor service costs.
DEPRECIATION: Depreciation for office equipment and furniture is computed by
using the straight-line method based on estimated useful lives of five to seven
years.
NET INCOME (LOSS) PER SHARE: The Company has adopted Statement of Financial
Accounting Standards No. 128 (SFAS No. 128), Earnings Per Share, which
superseded APB Opinion No. 15. SFAS No. 128 requires the presentation of
earnings per share by all entities that have common stock or potential common
stock, such as options, warrants, and convertible securities, outstanding that
trade in a public market. Those entities that have only common stock outstanding
are required to present basic earnings per share amounts. Basic per share
amounts are computed, generally, by dividing net income or loss by the
weighted-average number of common shares outstanding. All other entities are
required to present basic and diluted per share amounts. Diluted per share
amounts assume the conversion, exercise, or issuance of all potential common
stock instruments unless the effect is antidilutive, thereby reducing a loss or
increasing the income per common share. The Company has applied Statement No.
128 for all periods presented, as required by the statement.
During 1997, the Company had no potential common stock instruments outstanding.
During 1996, 1995, and 1994, the Company had convertible subordinated debentures
outstanding. However, the inclusion of those debentures in the calculation of
diluted net income (loss) per share would have had an antidilutive effect and,
accordingly, were not included in this calculation. Therefore, basic and diluted
income (loss) per share amounts are the same for each period presented.
INCOME TAXES: Deferred income tax assets and liabilities are computed annually
for temporary differences between the financial statement and tax basis of
assets and liabilities that will result in taxable or deductible amounts in the
future. Deferred taxes are based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts more likely than not to be realized. Income tax expense is
the tax payable or refundable for the year plus or minus the change during the
year in deferred tax assets and liabilities.
F-7
<PAGE> 28
CONCOURSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
MANAGEMENT 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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The financial statements include the
following financial instruments: cash, trade accounts receivable, and accounts
payable. No separate comparison of fair values versus carrying values is
presented for the aforementioned financial instruments since their fair values
are the carrying amounts reflected on the balance sheet. The aggregate fair
values of the financial instruments would not represent the underlying value of
the Company.
NOTE 2. LINE OF CREDIT
The Company had a $39,000 bank line-of-credit agreement secured by cash
equivalents and a corporate guarantee. As of December 31, 1994, the balance
outstanding under this agreement was $17,505. There was no balance outstanding
as of December 31, 1995, as the agreement expired in October 1995. The Company
did not obtain a renewal of this agreement in 1996 or 1997.
NOTE 3. INCOME TAXES
A reconciliation of federal statutory income taxes to the Company's effective
tax provision is as follows:
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------------
1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computed "expected" federal tax
expense (benefit) at statutory rates $ (5,000) $ 23,000 $ (34,000) $(21,000)
Effect of income taxed at lower rates 3,000 (12,000) 12,000 11,000
State income taxes, net of federal benefit - (3,000) - -
Net operating losses unused (used) 2,000 (10,000) 19,000 2,000
Other - 2,000 3,000 8,000
---------------------------------------------------------------
$ - $ - $ - $ -
===============================================================
</TABLE>
Net deferred taxes included the following at December 31, 1997, 1996, 1995, and
1994:
<TABLE>
<CAPTION>
1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred tax assets $ 289,000 $ 287,000 $ 297,000 $ 278,000
Valuation allowance for deferred tax
assets (289,000) (287,000) (297,000) $(278,000)
---------------------------------------------------------------
Net $ - $ - $ - -
===============================================================
</TABLE>
F-8
<PAGE> 29
CONCOURSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 3. INCOME TAXES (CONTINUED)
Deferred tax assets are comprised of the following at December 31, 1997, 1996,
1995, and 1994:
<TABLE>
<CAPTION>
1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss carryforwards $ 289,000 $ 287,000 $ 275,000 $ 263,000
Accrued expenses - - 22,000 15,000
-------------------------------------------------------------------
Subtotal 289,000 287,000 297,000 278,000
Valuation allowance for deferred tax
assets (289,000) (287,000) (297,000) (278,000)
-------------------------------------------------------------------
$ - $ - $ - $ -
===================================================================
</TABLE>
At December 31, 1997, the Company has approximately $1,927,000 of federal net
operating loss (NOL) carryforwards available to offset future taxable income.
These NOL carryforwards expire as follows:
<TABLE>
<CAPTION>
Years ending December 31:
<S> <C>
1998 $ 115,000
1999 876,000
2000 442,000
2001 154,000
2004 23,000
2006 76,000
2008 37,000
2009 30,000
2010 81,000
2011 77,000
2012 16,000
------------------
$ 1,927,000
==================
</TABLE>
The planned merger (see Note 10), if completed, will limit the annual
availability of the aforementioned NOL carryforwards.
NOTE 4. SUBORDINATED CONVERTIBLE DEBENTURES
In February 1986, the Company sold $473,000 of 12.5 percent subordinated
convertible debentures pursuant to registration exemptions provided by federal
and state securities laws. The debentures were issued in $1,000 denominations
and at the time of issuance were convertible into common stock at $1.25 per
share, or 800 shares per denomination.
F-9
<PAGE> 30
CONCOURSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. SUBORDINATED CONVERTIBLE DEBENTURES (CONTINUED)
During 1987, the Company negotiated revisions with the debenture holders whereby
the maturity date was extended to January 1, 1990, as well as changes to the
conversion features and interest payments.
As a result of insufficient funds, the Company was unable to repay the
debentures which became due and payable on January 1, 1990. The remaining
principal of outstanding debentures was $129,609 at December 31, 1995, as a
result of periodic payments made to debenture holders during 1990 to 1992,
including interest thereon. The remaining accrued interest related to these
debentures was $32,402 at December 31, 1995. During 1996, these debentures were
converted into 648,052 shares of common stock. The related accrued interest of
$32,402 was forgiven and is included as a component of nonoperating income for
the year ended December 31, 1996.
NOTE 5. DEFERRED COMPENSATION
In 1989, the Company entered into nonqualified deferred compensation agreements
for the benefit of two key executives, one of which is a stockholder. The
agreements provided for a postretirement benefit to be paid for ten years
immediately following retirement. The agreements also contained early death and
disability benefit provisions. During 1996, the two key executives covered by
the agreements released the Company from these deferred compensation obligations
in full, and no additional future benefit payments related to these agreements
are required by the Company. Accordingly, in 1996, the Company recognized income
resulting from the reversal of the related deferred compensation obligation.
NOTE 6. LEASE COMMITMENT
The Company had a lease commitment on the office space it used to conduct
business during 1994 and 1995. Rent expense was $33,179 and $30,933 for 1995 and
1994, respectively. This lease commitment expired at December 31, 1995. The
Company renewed this commitment for reduced space through October 1996, at which
point the lease was terminated altogether. Since this time, the Company has
operated out of the home of its president, who is also its only employee. No
other lease commitments have been incurred during the year ending December 31,
1997.
NOTE 7. LITIGATION
The Company was named in a legal action alleging violations of copyright laws
and illegal trade practices. This litigation was fully settled in 1995.
NOTE 8. MAJOR CUSTOMER
As of and for the year ended December 31, 1997, 96 percent of the Company's
trade accounts receivable were from one customer, and 53 percent of the
Company's revenues for the year were from this same customer. There were no
major customers for the years ending December 31, 1996, 1995, or 1994.
F-10
<PAGE> 31
CONCOURSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 9. AUTHORIZED SHARES
The Company has 10,000,000 shares of capital stock authorized for issuance. Of
these shares, 6,000,000 are designated as common stock and 4,000,000 are
undesignated.
NOTE 10. MERGER
In September 1998, the Company and its newly formed and wholly-owned subsidiary,
Peoples Acquisition Corporation (PAC), entered into an Amended and Restated
Agreement and Plan of Merger (Merger Agreement) with Peoples Publishing Group,
Inc. (PPG), a Pennsylvania corporation. Under the Merger Agreement, which is
effective as of June 4, 1998, PPG will be merged with PAC and become the
surviving corporation. Following the merger, the shareholders of PPG will own
approximately 95 percent of the Company's outstanding voting capital stock. PPG,
with principal offices in Maywood, New Jersey, is engaged primarily in the
publishing of books for use in elementary and secondary schools, grades K
through 12.
The merger is expected to be completed on or about October 1, 1998. Closing of
the merger is contingent upon a number of factors, including the continued
accuracy of warranties and representations made in the Merger Agreement by each
party. There is no assurance that the merger will be completed.
NOTE 11. SUBSEQUENT EVENT
Subsequent to year end, the Company's general counsel agreed to forgive
approximately $17,000 of indebtedness owed by the Company. The Company also
issued 75,000 shares of common stock to its general counsel for services
rendered to the Corporation, valued by the Board of Directors at approximately
$930.
F-11
<PAGE> 32
INDEX TO EXHIBITS
3(i)(1) Restated Articles of Incorporation of Registrant
3(ii)(1) Restated By-Laws of Registrant
4.1(1) Specimen of Common Stock Certificate (See also Exhibits 3.1 and 3.2
4.2(2) 12 1/2% Subordinated Convertible Debenture, Due 1990
4.3(3) Company's offer to repay the 12 1/2% Subordinated Convertible
Debentures, due 1990, dated December 15, 1989
4.4 Designation of 1998 Convertible Stock
4.5 Designation of 1990 and 1993 Redeemable Cumulative Convertible Stock
10.3(3) Salary Continuation Agreement dated
March 30, 1989, between Registrant and William A. Hultgren
10.4(3) Salary Continuation Agreement dated
March 30, 1989, between Registrant and Roland G. Barrett
10.5(5) Lease Agreement dated October 17, 1994 covering
Registrant's facilities
10.6 Amended and Restated Agreement and Plan of Merger dated as of June 4,
1998, between the Registrant, Peoples Acquisition Corporation and The
Peoples Publishing Group, Inc.
16.1(4) Letter dated February 14, 1995 from Fox, McCue and Company, P.A.
27.1 Financial Data Schedule
- ------------------------
(1) Incorporated by reference to Registrant's Registration Statement on
Form S-18, No. 2086551C, filed with the Securities and Exchange
Commission.
(2) Incorporated by reference to the Registrant's Form 10-K for the year
1987 filed with the Securities and Exchange Commission.
(3) Incorporated by reference to the Registrant's Form 10-K for the year
1989 filed with the Securities and Exchange Commission.
(4) Incorporated by reference to the Registrant's Form 8-K with a date of
report of January 9, 1995 filed with the Securities Exchange
Commission.
(5) Incorporated by reference to the Registrant's Form 10-K for the year
1994 filed with the Securities and Exchange Commission.
E-1
<PAGE> 1
EXHIBIT 4.4
DESIGNATION OF 1998 CONVERTIBLE STOCK
1. Designation and Number.
This designation is for a class of shares of the capital stock of Concourse
Corporation (the "Corporation"), out of its undesignated shares, which class
shall be identified as the 1998 Convertible Stock, and will have a par value of
$0.01 per share. The number of shares of such class is 600,000 shares. The
Corporation may issue, and the holders may transfer, fractional shares of 1998
Convertible Stock.
2. Voting Rights.
Each holder of 1998 Convertible Stock shall have one vote on all matters
submitted to the stockholders for each share of the Corporation's $0.01 par
value common stock (the "Common Stock") which such holder of the 1998
Convertible Stock would be entitled to receive upon the conversion of his or her
1998 Convertible Stock pursuant to the provisions of Section 3 hereof.
3. Conversion of 1998 Convertible Stock.
A. Conversion. Each share of 1998 Convertible Stock shall be convertible at
the option of the holder thereof into 21.75 shares of Common Stock through
December 31, 2001, and thereafter into 10 shares of Common Stock. The 21.75
shares and 10 shares of Common Stock, as the case may be, for each share of 1998
Convertible Stock, is referred to herein as the "Conversion Ratio." In order to
exercise the conversion privilege, a holder of each such share shall surrender
the certificate representing such shares to the Corporation at its principal
office, accompanied by written notice to the Corporation that the holder elects
to convert a specified portion or all of such shares. The shares shall be deemed
to have been converted on the day of surrender of the certificate representing
such shares for conversion in accordance with the foregoing provisions, and at
such time the rights of the holder of such shares, as such holder, shall cease
and such holder shall be treated for all purposes as the record holder of the
Common Stock issuable upon conversion.
B. Adjustment.
(i) In case the Corporation shall declare a dividend upon its Common
Stock payable otherwise then in cash out of earnings or surplus (including
a dividend payable in Common Stock), then thereafter each holder of 1998
Convertible Stock upon the conversion thereof will be entitled to receive
the number of shares of Common Stock into which such 1998 Convertible Stock
may be converted and, in addition and without payment therefor, the stock
or other securities (including Common Stock) which such holder would have
received by way of dividends or distributions (otherwise than out of
earnings or surplus) if continuously since the record date for any such
dividend or distribution such holder (for each share of 1998 Convertible
Stock held as of such record date) (x) had been the record holder of the
number of shares of Common Stock then received and (y) had retained all
dividends or distributions in stock or securities payable
<PAGE> 2
in respect of such Common Stock or in respect of any stock or securities
paid as dividends or distributions and originating directly or indirectly
from such Common Stock.
(ii) In case the Corporation shall at any time subdivide or split its
outstanding Common Stock into a greater number of shares, the Conversion
Ratio in effect immediately prior to such subdivision or split shall be
proportionately increased, and conversely, in the case the outstanding
Common Stock shall be combined into a smaller number of shares, the
Conversion Ratio in effect immediately prior to such combination shall be
proportionately decreased.
(iii) If any capital reorganization or reclassification of the capital
stock of the Corporation, or consolidation or merger of the Corporation
with another corporation, or the sale of all or substantially all of its
assets to another corporation shall be effected in such a way that holders
of Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provision shall be made whereby the holders of 1998
Convertible Stock shall thereafter have the right to receive in lieu of the
Common Stock of the Corporation immediately theretofore receivable upon the
conversion of such 1998 Convertible Stock, such shares of stock securities
or assets as may be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number of shares
of Common Stock immediately theretofore receivable upon the conversion of
such 1998 Convertible Stock had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the holders of the 1998 Convertible Stock to the end that the
provisions hereof (including without limitation provisions for adjustments
of the Conversion Ratio and of the number of shares receivable upon the
conversion of such 1998 Convertible Stock) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or
assets thereafter received upon the conversion of such 1998 Convertible
Stock. The Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the surviving corporation in
the merger (if other than the Corporation), the corporation or other entity
resulting from such consolidation, or the corporation or other entity
purchasing such assets shall assume by written instrument executed and
mailed to the registered holders of the 1998 Convertible Stock at the last
address of such holders appearing on the books of the Corporation, the
obligation to deliver to such holders such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to receive.
C. Exchange of Certificates. As promptly as practicable on or after the
conversion date, the Corporation shall issue and mail or deliver to such holder
a certificate or certificates for the number of shares of Common Stock issuable
upon conversion, computed to the nearest full share.
D. Reservation of Stock Issuable Upon Conversion. The Corporation shall
reserve and keep available solely for the purpose of effecting the conversion of
shares of 1998 Convertible Stock, such number of shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the 1998 Convertible Stock, and,
<PAGE> 3
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of 1998 Convertible Stock, the Corporation will forthwith take such action as
may be necessary or appropriate to increase its authorized but unissued shares
of Common Stock to such number of shares of 1998 Convertible Stock as shall be
sufficient for such purpose.
4. Other Rights and Preferences.
Except as provided hereunder, each share of the 1998 Convertible Stock
shall have all the same rights and preferences as would be available to the
holder of the number of shares of Common Stock which such holder of 1998
Convertible Stock would be entitled to exercise or receive upon conversion
pursuant to Section 3 hereof, including, but not limited to, rights to dividends
and to distributions upon liquidation.
<PAGE> 1
EXHIBIT 4.5
DESIGNATION OF 1990 AND 1993 REDEEMABLE CUMULATIVE CONVERTIBLE STOCK
A. Designation and Number.
This designation is for a class of the capital stock of Concourse
Corporation (the "Corporation"), out of its undesignated shares, which class
shall be redeemable, provide for the payment of cumulative dividends, be
convertible into common shares of the Corporation, have a par value of $0.01 per
share, and be identified as the "Redeemable Convertible Stock." the number of
shares of such class shall be 2,000,000, and shall consist of two series, one of
which is identified as the "1990 Redeemable Convertible Stock," and consists of
1,300,000 shares, and the second of which shall be identified as the "1993
Redeemable Convertible Stock," and consists of 700,000 shares (the 1993
Redeemable Convertible Stock, together with the 1990 Redeemable Convertible
Stock may be referred to herein as the "Convertible Stock"). The shares of the
common stock of the Corporation (the "Common Stock"), the shares of the 1998
Convertible Stock of the Corporation (the "1998 Convertible Stock"), and the
Convertible Stock of the Corporation are herein sometimes referred to
collectively as the "Capital Stock." The Corporation may issue, and holders may
transfer, fractional shares of Capital Stock.
B. Rights and Preferences. The rights, preferences, privileges and restrictions
granted to or imposed upon the respective classes or series of shares of Capital
Stock or the holders thereof are as follows:
1. Voting Rights. Each holder of Common Stock shall have one
vote on all matters submitted to the stockholders for each share of
Common Stock outstanding in the name of such holder on the books of the
Corporation. Each holder of 1998 Convertible Stock shall have the
number of votes specified in the terms of the 1998 Convertible Stock.
Each holder of Convertible Stock shall have one vote on all matters
submitted to the stockholders for each share of Common Stock which such
holder of Convertible Stock would be entitled to receive upon the
conversion of his or her Convertible Stock pursuant to the provisions
of Subsection B.4(c) hereof. No holder of any shares of Capital Stock
shall have any cumulative voting rights.
2. Preemptive Rights. No holders of shares of any class of
Capital Stock shall be entitled, as such, as a matter of right, to
subscribe for, purchase or receive any part of any class whatsoever, or
of securities convertible into or exchangeable for any stock of any
class whatsoever, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of dividend.
3. Dividends.
a. The holders of 1990 Redeemable Convertible Stock
shall be entitled to receive $0.37 per share, and quarterly
cash dividends at the rate of $0.042 per annum per share, and
the holders of 1993 Redeemable Convertible Stock shall be
entitled to receive $0.33 per share, and quarterly cash
dividends at the rate of $0.062 per annum per share if the
Corporation has sufficient current quarterly earnings and if
adequate cash funds are legally available for the payment of
cash dividends; provided, however, nothing in this Subsection
B.3(a) shall limit or restrict the Corporation's Board of
Directors from
<PAGE> 2
establishing a reasonable cash reserve. Such dividends shall
be payable quarterly not later than the last business day of
each March, June, September and December. Dividends on the
1990 Redeemable Convertible Stock and the 1993 Redeemable
Convertible Stock shall start to accrue on October 1, 1998.
Following such dates, dividends on the Convertible Stock shall
be cumulative, whether or not earned.
b. In no event shall any dividend be paid or declared
nor shall any distribution be made on the Common Stock nor
shall any Common Stock be purchased, redeemed or otherwise
acquired by the Corporation for value unless all dividends on
the Convertible Stock for all past quarterly dividend periods
and for the then-current quarterly dividend period shall have
been paid or declared and a sum sufficient for the payment
thereof set apart for payment; provided, however, that
notwithstanding the foregoing, payments to any current or
former employee of the Corporation for Common Stock pursuant
to a written agreement between the current or former employee
and the Corporation, which agreement has been approved by the
Board of Directors of the Corporation, shall not be subject to
the restriction contained in this Subsection B.3(b).
4. Convertible Shares.
a. Liquidation Preference. In the event of the
liquidation, dissolution or winding up of the Corporation,
whether voluntary of involuntary, the holders of the 1990
Redeemable Convertible Stock shall be entitled to receive in
cash, out of the assets of the Corporation, an amount equal to
$0.84624 per share for each outstanding share of 1990
Redeemable Convertible Stock, and the holders of the 1993
Redeemable Convertible Stock shall be entitled to receive in
cash, out of the assets of the Corporation an amount equal to
$1.25 per share for each outstanding share of 1993 Redeemable
Convertible Stock. In addition to such amounts, holders of the
Convertible Stock shall be entitled to receive a further
amount equal to the dividends accumulated and unpaid thereon
to the date of such distribution. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of
the Corporation are insufficient to pay the foregoing amounts,
the holders of such Convertible Stock shall share pro rata in
any such distribution in proportion to the full amounts to
which they would otherwise be respectively entitled. Such
distribution shall be made to the holders of the Convertible
Stock before any payment shall be made or any assets
distributed to the holders of Common Corporation or any other
class of shares of the Corporation ranking junior to the
Convertible Stock with respect to the payment of dividends or
upon dissolution or liquidation of the Corporation; and the
holders of the Common Stock shall be entitled, to the
exclusion of the holders of the Convertible Stock , to share
ratably in all of the assets of the Corporation thereafter
remaining.
b. Required Redemptions.
(1) Commencing on August 24, 2000, and
tannually thereafter, on each August 24, the
Corporation, if adequate cash funds are legally
available therefor, shall redeem from each holder of
1990 Convertible Stock and each holder of 1993
Convertible Stock , at a per share redemption price
of $0.84624 and $1.25, respectively, plus an amount
equal to the dividends accumulated and unpaid thereon
through the date of such redemption, that number of
shares of 1990 Convertible Stock and 1993 Convertible
Stock equal to one-third of each such
<PAGE> 3
class of shares held by such holder on August 24,
2000. The Corporation shall give notice by mail of
redemption to the holders of record of Convertible
Stock at least 20 days prior to each of such dates of
redemption. The notice (x) shall specify the date of
redemption and the number of shares to be redeemed
from each holder (subject to reduction due to
conversion of Convertible Stock by such holder before
the date of redemption) and (y) shall be addressed to
each holder at his or her address as shown on the
records of the Corporation. On or after the date
fixed for redemption, each holder of Convertible
Stock called for redemption shall surrender the
certificate or certificates evidencing such shares to
the Corporation at the place designated in such
notice and shall thereupon be entitled to receive
payment. If less than all of the shares represented
by any such surrendered certificate or certificates
are redeemed, the Corporation shall issue a new
certificate for the unredeemed shares.
(2) On or before each of July 31, 2000, July
31, 2001 and July 31, 2003, the Corporation shall
deposit in trust with a bank or trust company located
in the United States and having capital, surplus and
undivided profits of at least $5,000,000, an amount
in cash, if adequate cash funds ate legally available
therefor, sufficient to redeem on the next date fixed
for redemption thereof the shares to be called for
redemption in accordance with Subsection B.4(b)(1),
and, in addition to such amount, a further amount, if
cash funds are legally available therefor, equal to
the dividends accumulated and unpaid thereon to the
date of such redemption, with instructions and
authority to such bank or trust company to pay the
redemption price on or after the date fixed for
redemption, upon surrender by such holders of the
certificates evidencing the number of shares of
Convertible Stock being redeemed. If the required
funds are deposited in accordance with this
subsection and the certificates evidencing such
shares are not surrendered, all rights with respect
to such shares shall forthwith after such date cease
and terminate, except only the right of the holders
to receive the redemption price without interest upon
surrender of their certificates therefor. Any monies
deposited by the Corporation pursuant to this
Subsection B.4(b)(2) and unclaimed at the end of one
year after the date fixed for redemption shall be
repaid to the Corporation upon its request expressed
in a resolution of its Board of Directors, and
thereafter the holders of shares so called for
redemption shall be entitled to receive payment of
the redemption price only from the Corporation. All
Convertible Stock which is in any manner redeemed or
acquired by the Corporation shall be retired and
canceled and none of such shares shall be reissued.
c. Conversion Rights.
(1) Optional Conversion. Each share of
Convertible Stock shall be convertible at the option
of the holder thereof into 21.75 shares of Common
Stock of the Corporation, on the terms provided in
Subsection B.4(c) hereof. Each share of Convertible
Stock called for redemption by the Corporation shall
cease to be convertible on and after the redemption
date if provision shall have been duly made for its
payment. In order to exercise the conversion
privilege, a holder of the Convertible Stock shall
surrender the certificate representing such shares to
the Corporation at its principal office, accompanied
by written notice to the Corporation that the holder
elects to covert a specified portion or all of
<PAGE> 4
such shares. Convertible Stock shall be deemed to
have been converted on the day of surrender of the
certificate representing such shares for conversion
in accordance with the foregoing provisions, and at
such time the rights of the holder of such
Convertible Stock, as such holder, shall cease and
such holder shall be treated for all purposes as the
record holder of the Common Stock issuable upon
conversion.
(2) Exchange of Certificates. As promptly as
practicable on or after the conversion date, the
Corporation shall issue and mail or deliver to such
holder a certificate or certificates for the number
of shares of Common Stock issuable upon conversion,
computed to the nearest full share, and a certificate
or certificates for the balance of the Convertible
Stock surrendered, if any, not so converted into
Common Stock. In addition, if the Corporation has
sufficient current earnings and adequate cash funds
legally available for payment of cash dividends, then
a cash payment shall be made in an amount equal to
the accrued but unpaid dividends on the number of
shares of Convertible Stock surrendered for
conversion through the date of surrender of the
shares for conversion. If the Corporation does not
have sufficient current earnings or adequate funds
legally available to pay all such accrued dividends,
the amount of the unpaid dividends shall remain on
the books of the Corporation and shall be paid as
soon as current earnings and adequate funds are
legally available to pay such dividends. The
Corporation shall reserve and keep available solely
for the purpose of effecting the conversion of shares
of the Convertible Stock, such number of shares of
the Corporation's Common Stock as shall from time to
time be sufficient to effect the conversion of all
outstanding shares of the Convertible Stock, and, if
at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares
of the Convertible Stock, the Corporation will
forthwith take such corporate action as may be
necessary or appropriate to increase its authorized
but unissued shares of Common Stock to such number of
shares of Convertible Stock as shall be sufficient
for such purpose.
(3) Adjustment. The number of shares of
Common Stock issuable in exchange for each share of
1990 Convertible Stock upon the exercise of these
conversion rights shall be equal to (x) $0.84624
divided by (y) the 1990 Conversion Price then in
effect. The 1990 Conversion Price for the 1990
Convertible Stock shall initially be $0.84624 per
share, but shall be subject to adjustment from time
to time as hereinafter provided. The number of shares
of Common Stock issuable in exchange for each share
of 1993 Convertible Stock upon the exercise of these
conversion rights shall be equal to (x) $1.25 divided
by (y) the 1993 Conversion Price then in effect. The
1993 Conversion Price for the 1993 Convertible Stock
shall initially be $1.25 per share, but shall be
subject to adjustment from time to time as
hereinafter provided (the 1990 Conversion Price and
the 1993 Conversion Price are referred to
collectively herein as the "Conversion Prices").
(i) In case the Corporation shall
declare a dividend upon its Common Stock
payable otherwise then in cash out of
earnings or surplus (including a dividend
payable in Common Stock), then thereafter
each holder of Convertible Stock upon the
conversion thereof will be entitled
<PAGE> 5
to receive the number of shares of Common
Stock into which such Convertible Stock may
be converted and, in addition and without
payment therefor, the stock or other
securities (including Common Stock) which
such holder would have received by way of
dividends or distributions (otherwise than
out of earnings or surplus) if continuously
since the record date for any such dividend
or distribution such holder (for each share
of Convertible Stock held as of such record
date) (x) had been the record holder of the
number of shares of Common Stock then
received and (y) had retained all dividends
or distributions in stock or securities
payable in respect of such Common Stock or
in respect of any stock or securities paid
as dividends or distributions and
originating directly or indirectly from such
Common Stock.
(ii) In case the Corporation shall
at any time subdivide or split its
outstanding Common Stock into a greater
number of shares, the Conversion Prices in
effect immediately prior to such subdivision
or split shall be proportionately decreased,
and conversely, in case the outstanding
Common Stock of the Corporation shall be
combined into a smaller number of shares,
the Conversion Prices in effect immediately
prior to such combination shall be
proportionately increased.
(iii) If any capital reorganization
or reclassification of the Capital Stock of
the Corporation, or consolidation or merger
of the Corporation with another corporation,
or the sale of all or substantially all of
its assets to another corporation shall be
effected in such a way that holders of
Common Stock shall be entitled to receive
stock, securities or assets with respect to
or in exchange for Common Stock, Shares,
then as a condition of such reorganization,
reclassification, consolidation, merger or
sale, lawful and adequate provision shall be
made whereby the holders of Convertible
Stock shall thereafter have the right to
receive in lieu of the Common Stock of the
Corporation immediately theretofore
receivable upon the conversion of such
Convertible Stock, such shares of stock,
securities or assets as may be issued or
payable with respect to or in exchange for a
number of shares of outstanding Common Stock
equal to the number of shares of Common
Stock immediately theretofore receivable
upon the conversion of such Convertible
Stock had such reorganization,
reclassification, consolidation, merger or
sale not taken place, and in any such case
appropriate provision shall be made with
respect to the rights and interests of the
holders of the Convertible Stock to the end
that the provisions hereof (including
without limitation provisions for
adjustments of the Conversion Price and of
the number of shares receivable upon the
conversion of such Convertible Stock) shall
thereafter be applicable, as nearly as may
be, in relation to any shares of stock,
securities or assets thereafter received
upon the conversion of such Convertible
Stock. The Corporation shall not effect any
such consolidation, merger or sale, unless
prior to the consummation thereof the
surviving corporation (if other than the
Corporation), the corporation or other
entity resulting from such consolidation or
the corporation or other entity purchasing
such assets shall assume by written
instrument executed and mailed to the
registered holders of the Convertible Stock
at
<PAGE> 6
the last address of such holders appearing
on the books of the Corporation, the
obligation to deliver to such holders such
shares of stock, securities or assets as, in
accordance with the foregoing provisions,
such holders may be entitled to receive.
(iv) The merger of the Corporation's
subsidiary, Peoples Acquisition Corporation,
into The Peoples Publishing Group, Inc., and
all Capital Stock issuable pursuant thereto,
shall not cause any adjustment hereunder.
(4) Upon any adjustment of the respective
Conversion Prices, then and in each such case the
Corporation shall give written notice thereof, by
first-class mail, postage prepaid, addressed to the
registered holders of the Convertible Stock at the
addresses of such holders as shown on the books of
the Corporation, which notice shall state the
Conversion Prices resulting from such adjustment and
the increase or decrease, if any, in the number of
shares receivable at such Conversion Price upon the
conversion of the Convertible Stock, setting forth in
reasonable detail the method of calculation and the
facts upon which such calculation is based.
(5) In case any time:
(i) the Corporation shall pay any
dividend payable in stock upon its Common
Stock or make any distribution (other than
regular cash dividends) to the holders of
its Common Stock; or
(ii) the Corporation shall offer for
subscription pro rata to the holders of its
Common Stock any additional shares of stock
of any class or other rights; or
(iii) there shall be any capital
reorganization, reclassification of the
Capital Stock of the Corporation, or
consolidation or merger of the Corporation
with, or sale of all or substantially all of
its assets to another corporation; or
(iv) there shall be a voluntary or
involuntary dissolution, liquidation or
winding up of the corporation;
then, in any one or more of said cases, the
corporation shall give written notice, by first-class
mail, postage prepaid, addressed to the holders of
the Convertible Stock at the addresses of such
holders as shown on the books of the corporation, of
the date on which the books of the corporation shall
close or a record shall be taken for such
subscription rights, or the date on which such
reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up
shall take place, as the case may be. Such notice
shall also specify the date as of which the holders
of Common Stock of record shall participate in such
subscription rights, or shall be entitled to exchange
their shares of Common Stock for securities or other
property deliverable upon such reorganization,
reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given at least
30 days prior
<PAGE> 7
to the action in question and not less than 30 days
prior to the record date or the date on which the
Corporation's transfer books are closed in respect
thereto.
(6) As used in Subsection B.4(c), the term
"Common Stock" shall mean and include the
Corporation's currently authorized Common Stock and
shall also include any capital stock of any class of
the Corporation hereafter authorized which shall have
the right to vote on all matters submitted to the
stockholders of the Corporation and shall not be
limited to a fixed sum or percentage in respect of
the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; provided that the
shares receivable pursuant to conversion of the
Convertible Stock shall include shares designated as
Common Stock of the Corporation as of the date of
issuance of such Convertible Stock, or, in the case
of any reclassification of the outstanding shares
thereof, the stock, securities or assets provided for
in Subsection B.4(c)(3)(iii) hereof.
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (the
"Agreement"), dated as of August 31, 1998, is made by and between The Peoples
Publishing Group, Inc., a Delaware corporation ("PPG"), and Concourse
Corporation, a Minnesota corporation ("Concourse") and Peoples Acquisition
Corporation, a Minnesota corporation and wholly-owned subsidiary of Concourse
("PAC").
BACKGROUND
Concourse is currently engaged in the business of providing consulting
services and publishing educational materials (the "Concourse Business"). PPG is
in the educational publishing business (the "PPG Business"). On June 4, 1998,
Concourse and PPG entered into a Merger Agreement, and effective August 31,
1998, amended and restated the Merger Agreement to reflect the structure and
terms contained in this Agreement.
The Boards of Directors of Concourse and PPG have each determined that
it is in the best interest of their respective shareholders for PAC to merge
with and into PPG, which merger will be accomplished upon the terms and subject
to the conditions set forth in this Agreement and in the Plan of Merger attached
as Exhibit A.
It is the intention of the parties that, following the merger (taking
into consideration the effect of any exercise of outstanding options for capital
stock), PPG shareholders shall collectively hold approximately 95% of the voting
power of the issued and outstanding capital stock of Concourse in the form of
capital stock convertible into common stock; Concourse shareholders shall
collectively hold approximately 5% of the voting power of such issued and
outstanding capital stock in the form of existing common stock; and that the
Concourse capital stock held by the PPG shareholders shall be convertible into a
number of shares of Concourse common stock equal to its voting power.
Now, therefore, the parties agree as follows:
TERMS
1. THE MERGER
1.1 TERMS OF THE MERGER. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in Section
1.3):
<PAGE> 2
(A) THE MERGER. PAC will be merged with and into PPG (the
"Merger") in accordance with the Delaware General
Corporation Law (the "DGCL") and the Minnesota
Business Corporation Act (the "MBCA"). The separate
existence of PAC will cease, and PPG will continue as
the surviving corporation (the "Surviving
Corporation").
(B) CERTIFICATE AND BYLAWS OF SURVIVING CORPORATION. The
Certificate of Incorporation and Bylaws of the
Surviving Corporation will initially be the same as
the Certificate of Incorporation and Bylaws,
respectively of PPG in effect immediately prior to
the Merger.
(C) DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The
directors of the Surviving Corporation will be the
directors of PPG immediately prior to the Merger, and
the officers of the Surviving Corporation will be the
officers of PPG immediately prior to the Merger.
(D) CONVERSION OF PPG COMMON STOCK. Each share of common
stock, $.001 par value, of PPG ("PPG Common Stock")
outstanding immediately prior to the Effective Time
will, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into
one (1) share of newly authorized $.01 par value 1998
Convertible Stock of Concourse ("1998 Convertible
Stock"), the terms of which are more particularly
described in the attached Exhibit 1.1(D).
(E) CONVERSION OF PPG PREFERRED STOCK. Each share of 1990
Redeemable Cumulative Convertible preferred stock,
$.001 par value, of PPG (the "1990 Preferred Shares)
outstanding immediately prior to the Effective Time,
will, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into
one (1) share of newly created 1990 Convertible Stock
of Concourse (the "1990 Convertible Stock"), the
terms and conditions of which are described on the
attached Exhibit 1.1(E), and each share of 1993
Redeemable Cumulative Convertible preferred stock,
$.001 par value, of PPG (the "1993 Preferred Shares")
(the 1990 Preferred Shares, together with the 1993
Preferred Shares, are referred to herein as the "PPG
Preferred Stock"), outstanding immediately prior to
the Effective Time will, by virtue of the Merger and
without any action on the part of the holder thereof,
be converted into one (1) share of newly created 1993
Convertible Stock of Concourse (the "1993 Convertible
Stock"), the terms and conditions of which are
described on the attached Exhibit 1.1(E) (the 1990
Convertible Stock, together with the 1993 Convertible
Stock and the 1998 Convertible Stock are referred to
herein as the "Concourse Convertible Stock").
2
<PAGE> 3
(F) CONVERSION OF PPG OPTIONS. Each option to purchase
PPG Common Stock pursuant to PPG's 1993 Stock Option
Plan (the "PPG Stock Options") outstanding
immediately prior to the Effective Time, will, by
virtue of the Merger and without any action on the
part of the holder thereof, be converted into an
option to purchase 21.75 shares of Concourse Common
Stock at an exercise price equal to 1/21.75 of the
exercise price of the PPG stock options immediately
prior to the Effective Time, and otherwise on terms
and conditions identical to the PPG Stock Options
(the Concourse Options") and pursuant to an option
plan of Concourse substantially identical to the PPG
1993 Stock Option Plan.
(G) EFFECT OF MERGER. All of the respective property,
rights, privileges, powers and franchises of PAC and
PPG will vest in the Surviving Corporation, and all
of the respective debts, liabilities and duties of
PAC and PPG will become the debts, liabilities and
duties of the Surviving Corporation. The Merger will
have all of the effects provided by applicable law."
1.2 DEFINITION OF MERGER CONSIDERATION. The 1998 Convertible
Stock, 1990 Convertible Stock, and the 1993 Convertible Stock
being issued upon conversion of PPG Common Stock and PPG
Preferred Stock, respectively, together with the Concourse
Options being issued upon conversion of the PPG Stock Options,
shall collectively be referred to herein as the "Merger
Consideration."
1.3 FILING OF ARTICLES OF MERGER. As soon as practicable after
satisfaction, or, to the extent permitted under this
Agreement, the written waiver, of all conditions to the Merger
set forth in Section 3, the parties must cause the Merger to
be consum mated by filing appropriate articles of merger (the
"Articles of Merger") with each of the Minnesota Secretary of
State and the Delaware Secretary of State, in such form as
required by, and executed in accordance with, the relevant
provisions of the MBCA and the DGCL, and the parties must make
all other filings or recordings required by the MBCA and the
DGCL in connection with the Merger and the transactions
contemplated by this Agreement. The Merger is effective when
the Articles of Merger are duly filed with the Minnesota
Secretary of State and the Delaware Secretary of State or such
later date as may be set forth in the Articles of Merger (the
"Effective Time").
1.4 "NEW SHARE CERTIFICATES; TREATMENT OF PPG AND PAC SHARES.
Promptly following the Effective Time, Concourse shall issue
to holders of PPG Common Stock and PPG Preferred Stock,
certificates representing one (1) share of 1998 Convertible
Stock, 1990 Convertible Stock, and 1993 Convertible Stock, in
exchange for each outstanding certificate representing one
share of PPG Common Stock and PPG Preferred Stock, as
applicable, and the certificates representing PPG Common Stock
and PPG Preferred Stock shall be canceled. All shares of PAC
common stock
3
<PAGE> 4
which at the Effective Time are issued and outstanding shall,
by virtue of the Merger, become an equal number of shares of
the Surviving Corporation."
2. CLOSING. Unless otherwise terminated under Section 10 or agreed by PPG
and Concourse, the closing (the "Closing") of the Merger will be held at the
offices of Lindquist & Vennum P.L.L.P., 4200 IDS Center, Minneapolis, MN 55402,
at a time and date agreed by the parties, which shall be promptly following
satisfaction of the Closing Conditions in Section 3 hereof (the "Closing Date").
3. CLOSING CONDITIONS.
3.1 PPG'S OBLIGATIONS. The obligation of PPG to consummate the
Merger is subject to the satisfaction, or written waiver by
PPG, of all of the following conditions as of the Closing
Date:
(A) REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by Concourse in this Agreement
must be true and correct as of the date of this
Agreement and, except as specifically contemplated by
this Agreement, on and as of the Closing Date as
though made on and as of the Closing Date, and
Concourse must have performed or complied in all
material respects with all obligations and covenants
required by this Agreement to be performed or
complied with by Concourse by the Closing Date.
(B) NO ADVERSE ACTIONS. There must be no injunction or
order of any court or administrative agency of
competent jurisdiction in effect as of the Closing
Date which restrains or prohibits the Merger;
(C) OPINION OF COUNSEL. Concourse must have delivered to
PPG an opinion dated as of the Closing Date of
Frommelt & Eide, Ltd., counsel for Concourse, as to
the matters set forth in Exhibit 3.1(C), which
opinion must be reasonably satisfactory to PPG;
(D) MODIFICATIONS OF SCHEDULES. All modifications made by
Concourse to the Schedules to this Agreement, taken
as a whole, must not be material to the Concourse
Business, taken as a whole;
(E) DOCUMENTATION. Concourse must have delivered to PPG
all documents as are specifically required under this
Agreement to be delivered by Concourse to PPG, in a
form and substance reasonably satisfactory to PPG;
(F) [Reserved]
4
<PAGE> 5
(G) FINANCIAL AUDIT. Concourse shall have caused an
accounting firm acceptable to PPG to conduct
financial audits of Concourse for its fiscal years
1995, 1996 and 1997, and the audited balance sheet of
Concourse as of December 31, 1997 shall not vary
materially and adversely from the unaudited balance
sheet provided in Schedule 3.1(G) (the "1997
Unaudited Balance Sheet");
(H) SEC AND OTHER REQUIRED FILINGS. Concourse shall have
caused any and all filings to be made with the
Securities and Exchange Commission (the "SEC") which
are necessary to be considered by the SEC as current
in its SEC filings as of the Closing Date and PPG's
legal counsel must have concurred that Concourse has
achieved such current status;
(I) [Reserved]
(J) RESIGNATION OF CONCOURSE OFFICERS AND DIRECTORS. At
Closing, Concourse shall deliver to PPG the written
resignation of each officer and director of
Concourse, with the exception of William Hultgren,
and resolutions appointing John C. Bergstrom, Tony J.
Christianson, Roy Mayers, Diane M. Miller, and James
J. Peoples, as new Concourse directors.
(K) [Reserved]
(L) INVESTMENT BANKING SUPPORT. PPG shall be satisfied in
its sole discretion, with the general reputation of
Concourse in the investment banking community, and
that there exists a reasonable prospect of the
Surviving Corporation achieving a listing on the
Nasdaq system (assuming sufficient additional capital
investment) within a year of the Effective Time.
3.2 CONCOURSE'S OBLIGATION. The obligation of Concourse to
consummate the Merger is subject to the satisfaction or
written waiver by Concourse of all of the following conditions
as of the Closing Date:
(A) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of PPG made in this Agreement must be
true and correct as of the date of this Agreement and
on and as of the Closing Date, as though made on and
as of the Closing Date, and PPG, must have performed
or complied in all material respects with all
obligations and covenants required by this Agreement
to be performed or complied with by PPG by the
Closing Date;
(B) NO ADVERSE ACTIONS. There must be no injunction or
order of any court or administrative agency of
competent jurisdiction in effect as of the Closing
Date which restrains or prohibits the Merger;
5
<PAGE> 6
(C) OPINION OF COUNSEL. PPG must have delivered to
Concourse an opinion dated as of the Closing Date of
Lindquist & Vennum, P.L.L.P., counsel for PPG, as to
the matters set forth in Exhibit 3.2(C), which
opinion must be reasonably satisfactory to Concourse;
(D) DOCUMENTATION. PPG must have delivered to Concourse
all documents as are specifically required under this
Agreement to be delivered by PPG to Concourse, all in
a form and substance reasonably satisfactory to
Concourse.
(E) [Reserved]
4. REPRESENTATIONS AND WARRANTIES OF CONCOURSE. Concourse represents and
warrants to PPG as follows:
4.1 ORGANIZATION AND AUTHORITY. Concourse is, or will be prior to
the Closing Date, a corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota, and is, or will prior to the Closing Date, be
qualified as a foreign corporation in every jurisdiction where
failure to so qualify would result in a Material Adverse
Effect on Concourse. All corporate acts and proceedings
required to be taken by Concourse to authorize the execution,
delivery and performance of, and the consummation of the
transactions contemplated by this Agreement have been duly and
properly taken.
4.2 DUE EXECUTION. This Agreement has been duly executed and
delivered by Concourse and constitutes a valid and binding
obligation of Concourse, enforceable against Concourse in
accordance with its terms.
4.3 NO CONFLICTS. The execution and delivery of this Agreement
does not, and the consummation of the transactions
contemplated by, and the compliance with the terms of this
Agreement will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a
benefit under, or require any consent, authorization or
approval under
(A) any provision of the articles of incorporation or
bylaws of Concourse,
(B) any Material Contract, or
(C) any judgment, order or decree or any statute, law,
ordinance, rule or regulation applicable to the
Concourse Business, other than those that may be
required solely by reason of PPG's (as opposed to any
other party's) participation in the transactions
contemplated by this Agreement; and
6
<PAGE> 7
necessary filings with the Secretary of State of
Minnesota in connection with the Merger.
4.4 GOVERNMENTAL CONSENTS. No consent, approval, license, permit,
order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by or with respect
to Concourse in connection with the execution and delivery of
this Agreement, or the consummation by Concourse of the
transactions contemplated by this Agreement, other than: those
that may be required solely by reason of PPG's (as opposed to
any other party's) participation in the transactions
contemplated by this Agreement; necessary filings with the
Secretary of State of Delaware and Minnesota in connection
with the Merger; such filings as may be required pursuant to
Section 14 of the Securities Exchange Act of 1934 and the
regulations thereunder; and such filings and approvals as may
be applicable under state securities laws.
4.5 CAPITALIZATION. There are 2,688,585 shares of the $0.01 par
value common stock (the "Concourse Stock") currently
outstanding, which constitutes 100% of the currently issued
and outstanding capital stock of Concourse. All of the issued
and outstanding shares of the capital stock of Concourse are
validly issued, fully paid and nonassessable. There are
4,000,000 shares of undesignated stock, of which 1,300,000
shares have been duly designated in compliance with Minnesota
law as 1990 Convertible Stock, 700,000 shares have been
designated as 1993 Convertible Stock, and 600,000 shares have
been designated as 1998 Convertible Stock. There are no
outstanding subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of
any character relating to the capital stock of Concourse, or
any other securities of Concourse or otherwise obligating
Concourse to issue, transfer, register or sell any such
securities, except for the obligation to issue approximately
378,927 shares of Concourse Stock for services rendered to
Concourse, which shares will be issued prior to the Closing
and except for the obligation to issue Concourse options to
PPG option holders as contemplated by this Agreement. With the
exception of PAC, Concourse does not hold, directly or
indirectly, any outstanding equitable, legal or beneficial
interests in any corporation or other entity. All shares of
the Concourse capital stock and options received by PPG
shareholders as contemplated by this Amendment shall be duly
authorized, validly issued, fully paid, non-assessable shares
not subject to any preemptive rights.
4.6 NO RESTRICTIONS. Other than transfer restrictions imposed by
applicable state or federal securities laws, or by contracts
which will be terminated on or prior to the Closing Date,
there are no transfer restrictions, subscriptions, options,
warrants, rights, calls, contracts, voting trusts, irrevocable
proxies, voting arrangements, commitments, understandings or
agreements which have been imposed, issued or
7
<PAGE> 8
entered into by Concourse, and which relate to the sale,
voting or transfer of any of the shares of the capital stock
of Concourse, except as disclosed in this Agreement. To the
knowledge of Concourse, and except as otherwise provided
herein, there are no agreements among Concourse shareholders
relating to the sale, voting or transfer of any capital stock
of Concourse.
4.7 FINANCIAL STATEMENTS. The 1997 Unaudited Balance Sheet has
been prepared in accordance with the applicable books and
records of Concourse, and fairly represents the financial
condition of Concourse as of December 31, 1997, subject to
changes in subsequent periods occurring in the ordinary course
of business.
4.8 UNDISCLOSED LIABILITIES. Concourse has no liabilities or
obligations, except for (i) those reflected on or reserved
against in the 1997 Unaudited Balance Sheet; (ii) those
incurred in the ordinary course of business since December 31,
1997; (iii) those set forth on any Schedule to this
Agreement;(iv) those which would not have a Material Adverse
Effect on Concourse; or (v) those incurred as expenses in
connection with the contemplated Merger (not to exceed $5,000
as contemplated by Section 7.2; the remaining Merger expenses
have been paid with the proceeds of the Loan referred to in
Section 7.1).
4.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, Concourse
has incurred no debts, obligations or liabilities, absolute,
accrued or contingent and whether due or to become due, except
in the ordinary course of business, none of which would have a
Material Adverse Effect on Concourse; paid no obligation or
liability, or discharged or satisfied any Liens other than in
the usual and ordinary course of business; entered into no
Material Contract other than in the ordinary course of
business; declared or made no payment to or distribution to
its shareholders as such, or purchased or redeemed none of its
shares of capital stock or obligated itself to do so;
mortgaged, pledged or subjected to Lien no material asset of
Concourse except in the ordinary course of business; sold,
transferred or leased no material asset except in the ordinary
course of business; suffered no physical damage, destruction
or loss not covered by insurance which would have a Material
Adverse Effect on Concourse; encountered no strike or labor
union organizing activities, or issued or sold any shares of
capital stock or other securities or granted any options with
respect thereto; nor has Concourse agreed to do any of the
foregoing, other than as disclosed in or as part of this
Agreement.
4.10 TITLE TO PROPERTIES AND ENCUMBRANCES. Concourse has good and
valid title to all of its properties and assets, including
without limitation the properties and assets reflected in the
1997 Unaudited Balance Sheet.
4.11 CONTRACTS. Concourse has no Material Contracts as of the
Effective Time.
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<PAGE> 9
4.12 INTELLECTUAL PROPERTY. Concourse owns no material Intellectual
Property. Neither the Business nor any products sold by the
Business infringes on the intellectual property rights of any
Person. No claims are pending or, to the knowledge of
Concourse, threatened in writing against Concourse by any
Person with respect to the ownership, validity, enforceability
or use of any of the Intellectual Property or otherwise
challenging or questioning the validity or effectiveness of
any of the Intellectual Property.
4.13 LITIGATION.
(A) There are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of
Concourse, threatened against Concourse before any
court or any administrative, governmental or
regulatory body or authority, domestic or foreign;
(B) Except as reflected on Schedule 4.13(B), neither
Concourse nor any of its officers, directors, agents
or employees (in their capacities as such) is subject
to any order, judgment, injunction or decree relating
to the Concourse Business;
(C) No complaint has been filed, and there is no pending,
or to the knowledge of Concourse, threatened
proceeding or investigation, involving an alleged
violation of any federal, state, local or foreign law
related to the Concourse Business; and
(D) To the knowledge of Concourse, there is no basis for
any such claim, action suit, proceeding,
investigation, order, judgment, injunction, decree or
complaint which could reasonably be expected to have
a Material Adverse Effect on the Concourse Business,
except as a result of the failure to file periodic
reports as required under the Securities Exchange Act
of 1934.
4.14 COMPLIANCE WITH APPLICABLE LAWS.
(A) NON-ENVIRONMENTAL MATTERS. Concourse is being
operated in compliance with all applicable statutes,
laws, ordinances, rules, orders and regulations of
any governmental authority or instrumentality,
domestic or foreign.
(B) ENVIRONMENTAL MATTERS. Concourse has received no
communication from a governmental authority that
alleges that the Concourse Business is not in
compliance with any Environmental Laws, including the
rules and regulations relating thereto; the Concourse
Business is in compliance with the Environmental Laws
and all permits, licenses and governmental
9
<PAGE> 10
authorizations required to be held by Concourse to
conduct the Concourse Business under Environmental
Laws.
(C) PERMITS. Other than a state of Minnesota Sales and
Use Tax permit, there are no material permits,
licenses or governmental authorizations required and
relating to the current conduct of the Concourse
Business.
4.15 TAXES. Concourse has timely filed all tax or assessment
reports and tax returns that are required by any law or
regulation to be filed by Concourse, and all those reports and
returns are accurate in all respects. Concourse has duly paid
or deposited all taxes due and payable pursuant to those
reports and returns, or which have been assessed against
Concourse or which Concourse is obligated to withhold from
amounts owing to any employee. All material taxes relating to
the current year operations through the end of the most
recently concluded fiscal month of Concourse prior to the
Closing Date have been accrued or reflected in the books and
records of Concourse. No taxing or assessment authority has
indicated to Concourse any intent to conduct an audit or other
investigation or asserted any unresolved deficiencies with
respect to tax liabilities of Concourse for any period and
Concourse has no knowledge of any facts or circumstances which
would give rise thereto.
4.16 LABOR RELATIONS. Concourse has no:
(A) unfair labor practice charge or complaint or other
proceeding pending or, to its knowledge, threatened
against it before the National Labor Relations Board;
(B) labor strike, slowdown or stoppage pending or, to the
knowledge of Concourse, threatened against or
affecting it;
(C) pending collective bargaining negotiations relating
to the employees of Concourse;
(D) pending petitions for recognition of a labor union or
association as the exclusive bargaining agent for any
or all of the employees of Concourse, and, to the
knowledge of Concourse, there has not been any
general solicitation of representation cards by any
union seeking to represent the employees of Concourse
as their exclusive bargaining agent;
(E) collective bargaining agreements; or
(F) material arbitrations, grievances, suits or
administrative proceedings before any government
entity relating to labor or employment matters
involving any employees of Concourse.
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4.17 ERISA.
(A) PLANS. Schedule 4.17 accurately identifies all Plans
in existence on the date of this Agreement or at any
time during the history of Concourse. Concourse has
delivered or caused to be delivered to PPG a copy of
each Plan; and (i) no Plan has been terminated within
the past twenty-four months; and, (ii) there is no
investigation, action, suit, arbitration or other
legal, administrative or other proceeding pending, or
to the knowledge of Concourse, threatened, against
any Plan or any assets of any Plan.
(B) COMPLIANCE. Each Plan is in compliance in all
material respects with all applicable provisions of
the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the Internal Revenue Code
of 1986, as amended (the "Code"), as well as each
Plan's terms and conditions. There have been no
"prohibited transactions" and no "reportable events"
within the meaning of the ERISA and the Code within
the last twenty-four months with respect to any Plan.
Concourse has incurred no "accumulated funding
deficiency" within the meaning of ERISA nor any
liability to the Pension Benefit Guaranty Corporation
in connection with a Plan (or other benefit that the
Pension Benefit Guaranty corporation has elected to
insure).
4.18 BROKERS OR FINDERS. Concourse has not engaged the services of
any broker or finder with respect to the transactions
contemplated by this Agreement.
4.19 TRANSACTIONS WITH AFFILIATES. Other than as specified in
Schedule 4.19, no director or officer of Concourse (i) has any
contractual relationship or arrangements with, or commitments
to, nor has any claim against Concourse; (ii) has any direct
or indirect interest in any right, property or assets which
are used by Concourse in the conduct of its business; or (iii)
owns any securities of, or has any direct or indirect interest
in, any entity which conducts a material amount of business
with Concourse.
4.20 ADDITIONAL ACQUISITION CORPORATION REPRESENTATIONS AND
WARRANTIES. As applicable, the foregoing representations and
warranties in this Section 4 shall be deemed to be made by
Concourse on behalf of Concourse and PAC. In addition,
Concourse makes the following representations and warranties
for PAC:
(A) ORGANIZATION AND AUTHORITY. PAC is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Minnesota, and is
qualified as a foreign corporation in every
jurisdiction where failure to so qualify would result
in a Material Adverse Effect on Concourse or PAC. All
corporate acts and proceedings required to be taken
by PAC to authorize the execution, delivery and
performance of, and the consummation of the
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transactions contemplated by this Amendment have been
duly and properly taken.
(B) CAPITALIZATION. There are 1,000 shares of the $0.01
par value common stock authorized, of which 100
shares will be issued or outstanding and held of
record and beneficially owned by Concourse. There are
and will be no outstanding subscriptions, options,
warrants, calls, rights, convertible securities or
other agreements or commitments of any character
relating to the capital stock of PAC, or any other
securities of PAC or otherwise obligating of PAC to
issue, transfer, register or sell any such
securities. PAC does not and will not hold, directly
or indirectly, any outstanding equitable, legal or
beneficial interests in any corporation or other
entity.
(C) DUE EXECUTION. This Agreement has been duly executed
and delivered by PAC and constitutes a valid and
binding obligation of PAC, enforceable against PAC in
accordance with its terms.
(D) NO CONFLICTS. The execution and delivery of this
Agreement does not, and the consummation of the
transactions contemplated by, and the compliance with
the terms of this Agreement will not, conflict with,
or result in any violation of or default (with or
without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a
benefit under, or require any consent, authorization
or approval under
(i) any provision of the articles of
incorporation or bylaws of PAC,
(ii) any Material Contract, or
(iii) any judgment, order or decree or any
statute, law, ordinance, rule or regulation
applicable to the Concourse Business, other
than those that may be required solely by
reason of PPG's (as opposed to any other
party's) participation in the transactions
contemplated by this Agreement; and
necessary filings with the Secretary of
State of Minnesota in connection with the
Merger.
(E) NO ASSETS OR LIABILITIES. PAC has no assets,
liabilities, or business other than as may be
required to effect the Merger.
5. REPRESENTATIONS AND WARRANTIES OF PPG. PPG represents and warrants to
Concourse as follows:
5.1 ORGANIZATION AND AUTHORITY. PPG is a corporation duly
organized, validly existing and in good standing under the
laws of the state of Delaware. PPG is duly qualified
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as a foreign corporation in every jurisdiction where failure
to so qualify would result in a Material Adverse Effect on
PPG. All corporate acts and proceedings required to be taken
by PPG to authorize the execution, delivery and performance of
the transactions contemplated by this Agreement have been duly
and properly taken.
5.2 DUE EXECUTION. This Agreement has been duly executed and
delivered by PPG and constitutes a valid and binding
obligation of PPG, enforceable in accordance with its terms.
5.3 NO CONFLICTS. Except as identified in Schedule 5.3, the
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by, and the
compliance with the terms of this Agreement will not conflict
with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any
obligation or to loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of
PPG under any provision of, or require any consent,
authorization or approval under
(A) any provision of the articles of incorporation or
bylaws of PPG;
(B) any Material Contract, agreement, instrument or other
document to which PPG is a party or by which its
properties or assets are bound; or
(C) any judgment, order or decree or any material
statute, law, ordinance, rule or regulation
applicable to PPG or its assets, other than those
that may be required solely by reason of Concourse's
(as opposed to any other party's) participation in
the transactions contemplated by this Agreement and
necessary filings with the Secretary of State of
Minnesota or of Delaware in connection with the
Merger.
5.4 GOVERNMENTAL CONSENTS. No consent, approval, license, permit,
order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or
foreign, is required to be obtained or made by or with respect
to PPG in connection with the execution and delivery of this
Agreement, or the consummation by PPG of the transactions
contemplated by this Agreement, other than those that may be
required solely by reason of Concourse's (as opposed to any
other party's) participation in the transactions contemplated
by this Agreement; and necessary filings with the Secretary of
State of Minnesota or of Delaware in connection with the
Merger.
5.5 CAPITALIZATION. Schedule 5.5 accurately identifies and sets
forth all of the authorized capital stock of PPG and the
rights of the holders thereof, the number of shares of such
capital stock outstanding, the record holders of that stock,
and the number of
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options outstanding, as well as the record holders of such
options. The capital stock identified constitutes 100% of the
issued and outstanding capital stock of PPG. All of the issued
and outstanding shares of the capital stock are validly
issued, fully paid and nonassessable. Except as identified on
Schedule 5.5, there are no outstanding subscriptions, options,
warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to the
capital stock, or any other securities of PPG or otherwise
obligating PPG to issue, transfer, register or sell any such
securities. PPG does not hold, directly or indirectly, any
outstanding equitable, legal or beneficial interests in any
corporation or other entity.
5.6 NO RESTRICTIONS. Other than transfer restrictions imposed by
applicable state or federal securities laws, or by contracts
which will be terminated on or prior to the Closing Date,
there are no transfer restrictions, subscriptions, options,
warrants, rights, calls, contracts, voting trusts, irrevocable
proxies, voting arrangements, commitments, understandings or
agreements which have been imposed, issued or entered into by
PPG and which relate to the sale, voting or transfer of any of
the shares of the capital stock of PPG, except as disclosed in
this Agreement.
5.7 FINANCIAL STATEMENTS. The audited financial statements of PPG
for the years ended December 31, 1995, 1996 and 1997, attached
hereto as Schedule 5.7, fairly represent the financial
operations and condition of PPG for and as of the dates
indicated. The balance sheet of PPG as of December 31, 1997
(the "1997 PPG Balance Sheet") fairly represents the financial
condition of PPG as of that date, subject to changes in
subsequent periods occurring in the ordinary course of
business.
5.8 UNDISCLOSED LIABILITIES. PPG has no liabilities or
obligations, except for (i) those reflected on or reserved
against in the 1997 PPG Balance Sheet; (ii) those incurred in
the ordinary course of business since December 31, 1997; (iii)
those set forth on any Schedule to this Agreement; (iv) those
which would not have a Material Adverse Effect on PPG; or (v)
those incurred as expenses in connection with the contemplated
Merger.
5.9 ABSENCE OF CERTAIN CHANGES. Other than as disclosed in the
schedules to this Agreement, since December 31, 1997, PPG has
incurred no debts, obligations or liabilities, absolute,
accrued or contingent and whether due or to become due, except
in the ordinary course of business, none of which would have a
Material Adverse Effect on PPG; paid no obligation or
liability, or discharged or satisfied any Liens other than in
the usual and ordinary course of business; entered into no
Material Contract other than in the ordinary course of
business; declared or made no payment to or distribution to
its shareholders as such, or purchased or redeemed none of its
shares of capital stock or obligated itself to do so;
mortgaged, pledged or subjected to Lien no material asset of
PPG except in the ordinary course of business; sold,
transferred or leased no material asset except in the ordinary
course of business; suffered no physical damage, destruction
or loss not covered by insurance which
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<PAGE> 15
would have a Material Adverse Effect on PPG; encountered no
strike or labor union organizing activities, or issued or sold
any shares of capital stock or other securities or granted any
options with respect thereto; nor has PPG agreed to do any of
the foregoing, other than as disclosed in or as part of this
Agreement.
5.10 TITLE TO PROPERTIES AND ENCUMBRANCES. PPG has good and valid
title to all of its properties and assets, including without
limitation the properties and assets reflected in the 1997
Unaudited Balance Sheet.
5.11 [Reserved]
5.12 BROKERS OR FINDERS. PPG has not engaged the services of any
broker or finder with respect to the transactions contemplated
by this Agreement.
5.13 LITIGATION.
(A) There are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of PPG,
threatened against PPG before any court or any
administrative, governmental or regulatory body or
authority, domestic or foreign;
(B) Neither PPG nor any of its officers, directors,
agents or employees (in their capacities as such) is
subject to any order, judgment, injunction or decree
relating to the PPG Business;
(C) No complaint has been filed, and there is no pending,
or to the knowledge of PPG, threatened proceeding or
investigation, involving an alleged violation of any
federal, state, local or foreign law related to the
PPG Business; and
(D) To the knowledge of PPG, there is no basis for any
such claim, action suit, proceeding, investigation,
order, judgment, injunction, decree or complaint
which could reasonably be expected to have a Material
Adverse Effect on the PPG Business.
6. COVENANTS OF CONCOURSE. Concourse covenants and agrees as follows:
6.1 ACCESS. Prior to the Closing, Concourse shall give PPG, and
PPG's representatives, employees, counsel and accountants,
reasonable access, during normal business hours and upon
reasonable notice, to all personnel, properties, books and
records of Concourse.
6.2 ORDINARY CONDUCT. Except as permitted by the terms of this
Agreement, from the date of this Agreement to the Closing
Date, Concourse will conduct the Concourse
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Business in the ordinary course consistent with past practice.
Without the prior written consent of PPG, Concourse will not
do any of the following:
(A) sell, lease, license or otherwise dispose of, or
agree to sell, lease, license or otherwise dispose
of, any interest in any of Concourse's assets that
are material, individually or in the aggregate, to
the Concourse Business, except with respect to the
transfer of assets as set forth in Schedule 4.11;
(B) create, incur, assume or guarantee any indebtedness
for money borrowed or increase the amount of any
indebtedness outstanding under any line of credit,
loan agreement, mortgage, or other borrowing
arrangement in existence on the date of this
Agreement;
(C) amend any existing Material Contract, or enter into
any new contract that would constitute a Material
Contract;
(D) except as specifically contemplated in this
Agreement, declare or pay any dividend or other
distribution on its capital stock, issue or agree to
issue any such stock or other securities or redeem or
repurchase any of its securities; or
(E) enter into any agreement to do any of the foregoing.
7. COVENANTS OF PPG. PPG covenants and agrees as follows:
7.1 LOAN TO CONCOURSE. PPG shall, promptly following the execution
of this Agreement, Loan to Concourse an aggregate of up to
$25,000 due one year from the date of this Agreement, with
interest at the rate of 8% per annum, which sum will be
applied by Concourse to pay the legal ($10,000 payable to
Frommelt & Eide upon execution of this Agreement) and
accounting ($10,000 payable to McGladrey & Pullen upon
execution of this Agreement) fees and expenses, and other
expenses (up to $5,000), incurred by Concourse in connection
with the negotiation and compliance with the terms of this
Agreement. If the Merger is not completed as a result of PPG's
action or failure to meet the closing obligations set forth in
Section 3.2 (including a termination pursuant to Section
3.1(L)), the Loan will be forgiven. The Loan will be evidenced
by a Note substantially in the form of the attached Exhibit
7.1.
7.2 PAYMENT BY PPG OF CERTAIN CONCOURSE EXPENSES. Upon completion
of the Merger, PPG will honor and pay up to $5,000 of
Concourse legal expenses, (in addition to those paid with the
proceeds of the Loan, which Loan will be assumed by the
Surviving Corporation as a result of the Merger).
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8. MUTUAL COVENANTS. The parties jointly and severally covenant and agree with
each other as follows:
8.1 PUBLICITY. Concourse and PPG agree that, from the date of this
Agreement through the Closing Date, no public release or
announcement concerning the transactions contemplated by this
Agreement may be issued by Concourse, on the one hand, or PPG,
on the other, without the prior written consent of the other
parties (which consent may not be unreasonably withheld),
except as such release or announcement may be required by law,
in which case the party required to make the release or
announcement must allow the other party reasonable time to
comment on such release or announcement in advance of such
issuance.
8.2 BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms of this
Agreement, each party will use its best efforts to cause the
closing of the transactions contemplated in this Agreement to
occur by the Closing Date. From time to time, as and when
requested by any party, any other party must execute and
deliver, or cause to be executed and delivered, all such
documents and instruments and must take, or cause to be taken,
all such further or other actions, as such other party may
reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement.
8.3 [Reserved]
8.4 [Reserved]
8.5 [Reserved]
9. INDEMNIFICATION.
9.1 INDEMNIFICATION OF PPG. Subject to the provisions of this
Section 9, PPG shall be indemnified by Concourse and its
principal shareholders (the Inside Group), to the extent of
their holdings, against any damages, claims, liabilities,
losses and expenses, including without limitation reasonable
attorney's fees related thereto, of any kind or nature
whatsoever which may be sustained or suffered by PPG as a
result of any material breach of any representation, warranty
or covenant made by Concourse in this Agreement (each a "Loss"
and collectively "Losses").
9.2 INDEMNIFICATION OF CONCOURSE. Subject to the provisions of
this Section 9, Concourse, its officers, directors, agents and
legal counsel shall be indemnified by PPG against any damages,
claims, liabilities, losses and expenses, including without
limitation reasonable attorney's fees related thereto, of any
kind or nature whatsoever which may be sustained or suffered
by Concourse, its officers, directors, agents and legal
counsel as a result of any material breach of any
representation, warranty or
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covenant made by PPG in this Agreement (each a "Loss" and
collectively "Losses"); provided that after the Effective
Time, Concourse's right to recovery on any such
indemnification claim or other claim involving breach of this
Agreement shall be limited to a total of Twenty-five Thousand
Dollars ($25,000).
9.3 NOTICE OF INDEMNIFICATION CLAIMS. Promptly after the receipt
by an indemnified party of notice from any third party of any
suit, claim, demand or investigation as to which such party
may seek indemnification under this Agreement, the party
receiving such notice shall notify the party or parties from
whom it is seeking indemnification (the "Indemnifying Party").
In the case of a claim asserted by a third party, such
Indemnifying Party shall have the right to defend at its own
expense by its own counsel such matter to the extent of the
potential indemnification liability of the Indemnifying Party.
If the Indemnifying Party shall undertake to defend the
matter, it shall promptly notify the other party or parties of
such determination.
9.4 LIMITATIONS ON INDEMNIFICATION CLAIMS. The right to
indemnification under this Agreement shall be limited as
follows:
(A) No claims for indemnification shall be made more than
two years after the Closing Date, and any such claims
which have been made and remain outstanding two years
after the Closing Date shall be processed to a
conclusion.
(B) Any proceeds from insurance paid to the party seeking
indemnification as a result of the Loss shall
constitute a reduction of the amount of the Loss for
purposes of indemnification.
(C) The calculation of the Loss shall take into account
any tax liabilities and/or tax benefits attributable
to the Loss.
(D) No claim for indemnification shall be made unless the
amount of the Loss for which the claim is made, after
any reductions as provided in (B) and (C) above,
exceeds a threshold of $10,000 and the claim shall be
only for the amount of the Loss in excess of such
$10,000 threshold.
10. TERMINATION.
10.1 Notwithstanding any provision in this Agreement contrary, this
Agreement may be terminated, and the transactions contemplated
by this Agreement abandoned, at any time on or prior to the
Closing Date
(A) by mutual written consent of Concourse and PPG;
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(B) by Concourse if any of the conditions set forth in
Section 3.2 have not been satisfied, or waived in
writing by Concourse, on the Closing Date;
(C) by PPG if any of the conditions set forth in Section
3.1 have not been satisfied, or waived in writing by
PPG, on the Closing Date; or
(D) by either Concourse or PPG in writing if the Closing
does not occur on or prior to December 31, 1998.
10.2 If Concourse or PPG desires to terminate this Agreement
pursuant to Section 10.1, that party must give written notice
to the other party. Upon receipt of that notice, this
Agreement will be terminated without further action by any
party.
10.3 If this Agreement is terminated as provided in this Section
10, this Agreement will become void and of no further force
and effect, except for the provisions of:
(A) Section 8.2 (Publicity);
(B) this Section 10;
(C) Section 11.2 (Certain Expenses);
(D) Section 11.3 (Attorneys' Fees and Expenses);
(E) Section 11.4 (Notices); and
(F) Section 11.5 (Miscellaneous).
10.4 Nothing contained in this Section 10 will release any party
from any liability for any breach by such party of any of the
terms or provisions of this Agreement or impair the right of
any party to compel specific performance by another party of
its obligations under this Agreement.
11. GENERAL PROVISIONS.
11.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
specifically contemplated by this Agreement, none of the
representations and warranties in this Agreement, or in any
instrument delivered pursuant to this Agreement, will survive
the Effective Time.
11.2 CERTAIN EXPENSES. Whether or not the transactions contemplated
by this Agreement are consummated, and except as otherwise
provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions
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contemplated by this Agreement must be paid by the party
incurring those costs or expenses.
11.3 ATTORNEYS' FEES. Should any litigation be commenced concerning
this Agreement, or the rights and duties of any party with
respect to it, the party prevailing will be entitled, in
addition to such other relief as may be granted, to a
reasonable sum for such party's attorneys' fees and expenses
determined by the court in such litigation or in a separate
action brought for that purpose. This Section 11.3 will
survive the Merger indefinitely.
11.4 NOTICES. All notices, and replies to such notices, required
under this Agreement must be in writing, properly addressed to
the other party, signed by the party giving notice, and may be
delivered by hand, sent by facsimile transaction, sent by a
nationally-recognized overnight delivery service, or sent by
certified mail, return receipt requested. Notices are
effective upon receipt. Notices sent by mail are deemed to be
received on the date of receipt indicated by the return
verification provided by the U.S. Postal Service. Notice sent
by a nationally-recognized overnight delivery service are
deemed to be received on the next business day after date of
sending. Notices sent by facsimile are deemed to be received
the date on which sent and are conclusively presumed to have
been received if the sender's copy of the facsimile
transaction contains the "answer back" of the other party's
facsimile transaction. Notice must be given, mailed or sent to
the parties at the following addresses, or at such other
address as may be given by proper notice. This Section 11.4
will survive the Merger indefinitely.
If to Concourse addressed to:
Concourse Corporation
2545 Dunwoody Lane
Wayzata, MN 55391
Attn: William Hultgren
Fax No.: 612-471-7250
with a copy to (which copy does not constitute notice):
Frommelt & Eide, Ltd.
900 Second Avenue South, Suite 580
Minneapolis, MN 55402
Attn: Roger H. Frommelt
Fax No.: 612-342-2761
If to PPG, addressed to:
The Peoples Publishing Group, Inc.
230 W. Passaic Street
Maywood, NJ 07607
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Attn: James J. Peoples
Fax No.: 201-712-0045
with a copy to (which copy does not constitute notice):
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attn: John R. Houston
Fax No.: 612-371-3207
11.5 MISCELLANEOUS. No amendment to this Agreement is effective
unless it is in writing and signed by each party. The headings
contained in this Agreement, or in any Schedule or Exhibit,
are for reference purposes only and do not affect in any way
the meaning or interpretation of this Agreement. This
Agreement may be executed in one or more counterparts, all of
which are considered one and the same agreement, and are
effective when one or more of those counterparts have been
signed by each of the parties and delivered to the other
parties. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject
matter of this Agreement and supersedes all prior agreements
and understandings relating to that subject matter. If any
provision of this Agreement, or the application of any such
provision to any Person or circumstance, is held invalid,
illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision of this
Agreement. No party may assign or otherwise transfer any of
its rights or obligations under this Agreement without the
prior written consent of each of the other parties; provided,
however, that PPG may assign its rights hereunder to an
affiliate or subsidiary without the consent of Concourse. This
Agreement is for the sole benefit of the parties and their
permitted assigns, and nothing in this Agreement is intended
to give to any Person, other than such parties and persons,
any legal or equitable rights under this Agreement. This
Agreement is governed in accordance with the internal laws of
the State of Minnesota, without regard to the conflict of laws
statutes or provisions of any jurisdiction. This Section 11.5
will survive the Closing Date indefinitely.
12. CERTAIN DEFINITIONS.
12.1 "CONFIDENTIAL INFORMATION"
(A) "Confidential Information" means
(1) all written financial, technical, commercial
or other information disclosed by one party
to the other, its directors, officers,
employees, advisors or affiliates (such
Person is referred to as a "Recipient") in
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connection with the transactions
contemplated by this Agreement, which
information is marked "Confidential";
(2) the fact of the transactions contemplated by
this Agreement; and
(3) each of the terms, conditions and other
provisions contained in this Agreement and
the agreements or documents delivered
pursuant to this Agreement.
(B) Notwithstanding Section 12.1(A), Confidential
Information does not include any information that
(1) is in the public domain at the time of
disclosure to the Recipient or becomes part
of the public domain after such disclosure
through no action or fault of any Recipient;
(2) is already know by Recipient from
independent sources at the time of
disclosure to such Recipient other than as a
result of a breach of any provision of this
Agreement; or from any source who, after
reasonable investigation by Recipient, is
not bound by any confidentiality agreement
with, or other contractual, legal or
fiduciary duty of confidentiality to the
party to this Agreement who made the
disclosure; or
(3) is subsequently disclosed to a Recipient by
any Person who is not a party to this
Agreement (but only if that Recipient does
not have actual knowledge after reasonable
investigation that such Person is prohibited
from disclosing such information, either by
reason of contract or legal or fiduciary
obligation) and who has a legal right to
transmit that information.
12.2 "ENVIRONMENTAL LAWS" means all applicable federal, state and
local laws and regulations now in effect relating to pollution
or the protection of the environment (including, without
limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation,
the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C.A. Sections 9601 et seq., the Resource
Conversation and Recovery Act, 42 U.S.C.A. Sections 6901 et
seq., the Clean Water Act, 33 U.S.C.A. Sections 1251 et seq.,
the Clean Air Act 42 U.S.C.A. Sections 7401 et seq., and The
Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.
12.3 "INTELLECTUAL PROPERTY" means all of the following (and all
amendments, modifications, and improvements thereto):
(A) letters patent and patent applications;
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(B) tradenames, trademarks or service marks, and all
registrations and applications related thereto,
common law trademarks, and all goodwill associated
therewith;
(C) copyrights and copyright registrations and
applications; and
(D) discoveries, ideas, technology, know-how, trade
secrets, processes, formulas, drawings and designs,
computer programs or software.
12.4 "KNOWLEDGE" means the actual knowledge of the officers of
Concourse or PPG, as applicable.
12.5 "LIEN" means any lien, encumbrance, security interest, pledge,
mortgage, option, charge or similar restriction.
12.6 "MATERIAL CONTRACTS" means those contracts and agreements that
(A) relate to the borrowing of money or the guaranty of
any obligation for the borrowing of money;
(B) involve the receipt or payment of more than $5,000
($25,000 in the case of PPG) in any one year;
(C) prohibits or limits the ability of either party to
engage in any business or compete with any Person; or
(D) obligates a party to purchase goods or services for
consideration in excess of $5,000 ($25,000 in the
case of PPG).
12.7 "MATERIAL ADVERSE EFFECT" means any effect on any entity that
is, in the aggregate, materially adverse to the business,
operations or financial condition of that entity, other than
an effect which is the result of changes in (i) the general
economic conditions affecting the industry in which the entity
operates, (ii) applicable laws or regulations or the official
interpretations of such law or regulations, or (iii) generally
accepted accounting principles.
12.8 "PERSON" means any natural person or entity.
12.9 "PLAN" means any "employee benefit plan," "employee pension
benefit plan," "defined benefit plan" or "multiemployer
benefit plan" which Concourse maintains, contributes to, or is
required to maintain or contribute to. As used in this
Agreement, the terms "employee benefit plan," "employee
pension benefit plan," "defined benefit plan," and
"multiemployer benefit plan" have the respective meanings
assigned to
23
<PAGE> 24
each of them in Section 3 of ERISA and any applicable rules
and regulations promulgated under ERISA.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE PEOPLES PUBLISHING GROUP, INC.
By
-----------------------------------
Its
---------------------------------
CONCOURSE CORPORATION
By
-----------------------------------
Its
---------------------------------
PEOPLES ACQUISITION CORPORATION
By
-----------------------------------
Its
---------------------------------
24
<PAGE> 25
INDEX OF SCHEDULES AND EXHIBITS
EXHIBITS
Exhibit A Articles and Plan of Merger
Exhibit 1.1(D) Terms of 1998 Convertible Stock
Exhibit 1.1(E) Terms of 1990 and 1993 Convertible Stock
Exhibit 3.1(C) Opinion of Counsel for Concourse
Exhibit 3.2(C) Opinion of Counsel for PPG
Exhibit 7.1 Loan Note
SCHEDULES
Schedule 3.1(G) Concourse Financial Statements
Schedule 4.13(B) Concourse Litigation
Schedule 4.17 Concourse ERISA Plans
Schedule 4.19 Concourse Transactions with Affiliates
Schedule 5.3 PPG Conflicts
Schedule 5.5 PPG Capitalization
Schedule 5.7 PPG Financial Statements
<PAGE> 26
EXHIBIT A
ARTICLES OF MERGER
OF
PEOPLES ACQUISITION CORPORATION,
A MINNESOTA CORPORATION
INTO
THE PEOPLES PUBLISHING GROUP, INC.,
A DELAWARE CORPORATION
These Articles of Merger are adopted pursuant to Minnesota Statute
302A.615 by Peoples Acquisition Corporation, a Minnesota corporation, (the
"Merging Corporation") and The Peoples Publishing Group, Inc., a Delaware
corporation, (the "Surviving Corporation").
The Surviving Corporation and the Merging Corporation do hereby agree
and certify that:
1. Attached hereto and incorporated herein is the Plan of Merger dated
__________, 1998 (the "Plan of Merger") for the merger of the Merging
Corporation with and into the Surviving Corporation.
2. The Plan of Merger has been duly adopted and approved by the Board
of Directors and sole shareholder of the Surviving Corporation pursuant to
Section 302A.613 of the Minnesota Business Corporation Act and by the Board of
Directors and shareholders of the Merger Corporation pursuant to Section 252 of
the General Corporation Law of the State of Delaware. The Plan of Merger has
been duly signed and delivered.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed this _____ day of ______________, 1998.
THE PEOPLES PUBLISHING GROUP, INC.
By
-----------------------------
Its
----------------------------
PEOPLES ACQUISITION CORPORATION
By
-----------------------------
Its
----------------------------
<PAGE> 27
PLAN OF MERGER
This Plan of Merger (the "Plan"), dated as of __________, 1998, is
among The Peoples Publishing Group, Inc., a Delaware corporation ("PPG"),
Concourse Corporation, a Minnesota corporation ("Concourse"), and Peoples
Acquisition Corporation ("Acquisition Corporation"), a Minnesota corporation
that is a wholly-owned subsidiary of Concourse. In this Plan, PPG, Concourse and
Acquisition Corporation are sometimes collectively referred to as the
"Constituent Corporations" and individually as a "Constituent Corporation".
BACKGROUND
PPG, Concourse, and Acquisition Corporation entered into an Amended and
Restated Agreement and Plan of Merger, dated as of August 31, 1998 (the
"Agreement"), which contemplates the merger (the "Merger") referred to in this
Plan.
The respective boards of directors of the Constituent Corporations deem
it desirable and in the best interests of each corporation and its shareholders
that Acquisition Corporation be merged with and into PPG. PPG will be the
surviving corporation (the "Surviving Corporation"), in accordance with the laws
of the states of Minnesota and Delaware and on the terms set forth in this Plan.
The parties agree as follows:
ARTICLE 1
MERGER OF PPG INTO ACQUISITION CORPORATION
At the Effective Time (as defined in Article 4), Acquisition
Corporation will be merged into PPG in accordance with the laws of the states of
Minnesota and Delaware, the separate existence of Acquisition Corporation will
then cease, and PPG will be the Surviving Corporation. The Surviving Corporation
will continue its corporate existence under the laws of the state of Delaware
under the name "The Peoples Publishing Group, Inc." and will possess all the
rights, privileges, power and franchises of each of PPG and Acquisition
Corporation.
ARTICLE 2
CERTIFICATE OF INCORPORATION; BYLAWS; OFFICERS AND DIRECTORS
The Certificate of Incorporation of PPG in effect at the Effective Time
will be the Certificate of Incorporation of the Surviving Corporation until
amended in accordance with applicable law. The Bylaws of PPG in effect at the
Effective Time will be the Bylaws of the Surviving Corporation, until amended in
accordance with applicable law.
ARTICLE 3
EXCHANGE OF SHARES AND OPTIONS
The manner of exchanging the shares of PPG at the Effective Time will
be as follows:
1
<PAGE> 28
At the Effective Time, each issued and outstanding share of common
stock of PPG will, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into one (1) share of 1998 Convertible Stock of
Concourse; each issued and outstanding share of 1990 convertible preferred stock
of PPG will, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into one (1) share of 1990 Convertible Stock of
Concourse; each issued and outstanding share of 1993 convertible preferred stock
of PPG will, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into one (1) share of 1993 Convertible Stock of
Concourse; and, each option issued and outstanding for the purchase of a share
of common stock of PPG will, by virtue of the Merger and without any action on
the part of the holder hereof, be converted into an option to purchase 21.75
shares of Concourse common stock at an exercise price equal to 1/21.75 of the
exercise price of the outstanding options to purchase common stock of PPG, and
otherwise on identical terms and conditions as the outstanding options to
purchase PPG common stock. Following the Merger, certificates and agreements
representing new Convertible Stock of Concourse and options, as applicable, will
be mailed to holders of PPG common and preferred stock and options, PPG common
and preferred stock certificates will be canceled, and issued and outstanding
shares of Acquisition Corporation common stock will become an equal number of
shares of common stock of the Surviving Corporation.
ARTICLE 4
EFFECTIVE DATE OF MERGER
If this Plan is not terminated or abandoned as provide in Article 5 of
this Plan, as soon as practicable after the conditions provided for in the
Agreement have been satisfied or waived in writing, this Plan of Merger must be
filed, certified and acknowledged in compliance with the provisions of the
Minnesota Business Corporation Act and the Delaware General Corporation Law to
be effective upon such filings (such hour and date of filing being referred to
as the "Effective Time").
ARTICLE 5
ABANDONMENT OF MERGER; AMENDMENT OF AGREEMENT
5.1 This Plan may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after submission to or adoption
by the shareholders of the Constituent Corporations, only in accordance with the
provisions of the Agreement.
5.2 This Plan may be amended or modified at any time prior to the
Effective Time by the mutual agreement of the boards of directors of the
Constituent Corporations, whether before or after adoption thereof by the
shareholders of the Constituent Corporations. But, no such amendment or
modification may be made which may affect the rights of the shareholders of the
Constituent Corporations in a manner which, in the judgment of the respective
boards of directors, is materially adverse to such shareholders.
2
<PAGE> 29
ARTICLE 6
COUNTERPARTS
This Plan may be executed in any number of counterparts, each of which
when executed is deemed to be an original, and such counterparts will together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Plan as of the day
and year first above written.
THE PEOPLES PUBLISHING GROUP, INC.
By
------------------------------------
Its
-----------------------------------
CONCOURSE CORPORATION
By
------------------------------------
Its
-----------------------------------
PEOPLES ACQUISITION CORPORATION
By
------------------------------------
Its
-----------------------------------
3
<PAGE> 30
Exhibit 1.1(D)
Terms of 1998 Convertible Stock of Concourse
(Attached)
<PAGE> 31
Exhibit 1.1(E)
Terms of 1990 and 1993 Convertible Stock of Concourse
(Attached)
<PAGE> 32
Exhibit 3.1(C)
Opinion of Counsel for Concourse
1. Concourse and Peoples Acquisition are corporations validly existing and
in good standing under the laws of the state of Minnesota, and have
full corporate power to own and hold their respective properties and to
carry on their respective businesses as now conducted.
2. The authorized capital stock of Concourse consists of 10,000,000 shares
having a par value of $0.01 per share, 6,000,000 of which are common
shares, and 4,000,000 of which are undesignated shares. In compliance
with Minnesota Statutes, Section 302A.401, the Board of Directors of
Concourse has designated 1,300,000 shares as 1990 Redeemable
Convertible Stock, 700,000 shares as 1993 Redeemable Convertible Stock
and 600,000 shares as 1998 Convertible Stock.
3. There are 3,067,512 common shares issued and oustanding; and no shares
of 1990 Redeemable Convertible Stock or 1993 Redeemable Convertible
Stock are issued or outstanding. All of the oustanding shares of the
Concourse common stock or 1998 Convertible Stock are duly authorized,
validly issued, and, to our knowledge, fully paid for and
non-assessable. To our knowledge, there are no outstanding
subscriptions, options, warrants, calls, rights, convertible securities
or other agreements or commitments of any character relating to the
capital stock of Concourse, other than as contemplated by the
Agreement. To our knowledge, with the exception of Peoples Acquisition,
Concourse does not hold, directly or indirectly, any outstanding
equitable, legal or beneficial interests in any corporation or other
entity.
4. The authorized capital stock of Peoples Acquisition consists of 1,000
shares of common stock, $0.01 par value per share, of which 100 shares
are issued and outstanding and held of record and beneficially owned by
Concourse. To our knowledge, there are no outstanding subscriptions,
options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to the capital
stock. To our knowledge, Peoples Acquisition Corporation does not hold,
directly or indirectly, any outstanding equitable, legal or beneficial
interests in any corporation or other entity.
5. All shares of the capital stock of Concourse received by PPG
shareholders as contemplated by the Agreement will, when issued and
delivered in accordance with the Agreement, be duly authorized, validly
issued, fully paid and non-assessable shares not subject to any
preemptive rights.
6. Concourse and Peoples Acquisition have full corporate power and
authority to execute and deliver the Agreement and to carry out the
transactions contemplated therein. All actions required to be taken by
Concourse and Peoples Acquisition to authorize the execution and
delivery of the Agreement and the performance of the transactions
contemplated thereby have been duly taken in compliance with all
applicable laws. The Agreement has been duly
1
<PAGE> 33
executed and delivered by the Concourse and Peoples Acquisition and
constitutes legal, valid and binding obligations of Concourse and
Peoples Acquisition, which are enforceable in accordance with their
terms.
7. Except as disclosed in the schedules to the Agreement, to our knowledge
there are no legal, administrative, arbitration or other proceedings or
governmental investigations pending or threatened against Concourse or
Peoples Acquisition which, if resolved unfavorably would have a
material adverse effect on Concourse or Peoples Acquisition.
2
<PAGE> 34
Exhibit 3.2(C)
Opinion of Counsel for PPG
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