<PAGE> 1
As filed with the Securities and Exchange Commission on June 4, 1996.
Registration No. 333-2848
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1 TO
FORM SB-2
Registration Statement
Under
The Securities Act of 1933, As Amended
----------------------
PLANNED MARKETING ASSOCIATES, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C> <C>
Texas 7389 74-2561677
(State or other jusrisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
CANYON SPRINGS RANCH
WEST DRIVE
HUNT, TEXAS 78024
(Address and telephone number of principal executive offices and principal
place of business)
Steven J. Anderson, President
Planned Marketing Associates, Inc.
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
(210) 238-4357
(Name, address and telephone number of agent for service)
Copy to:
Curtis R. Swinson, Esq.
8117 Preston Road, Suite 700
Dallas, Texas 75225
Approximate date of commencement of proposed sale to the public:
As soon as practicable after Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================
Proposed Proposed
Title of Amount to Maximum Maximum Amount of
Class be Offering Price Aggregate Registration
Registered Registered Per Unit Offering Price (1) Fee
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock, $.01 par value . . . . . . . . 800,000 $5.00 $4,000,000 $1,379.32
shares
Common Stock, $.01 par, issuable to
Underwriter
- ------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . $4,000,000
============================================================================================================
</TABLE>
<PAGE> 2
- --------------------------------------------------------------------------------
(1) Estimated solely for purpose of calculating fee under Rule 457.
Amendment filed in Accordance with Rule 473(a).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
================================================================================
<PAGE> 3
CROSS REFERENCE SHEET PURSUANT TO
RULE 404(a)
<TABLE>
<CAPTION>
Form SB-2 Item Number Caption in Prospectus
- --------------------- ---------------------
<S> <C> <C>
1. Front of the Registration Statement Cover Page; outside front cover page of
Statement and Outside Front Cover Page of Prospectus
Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages of
Prospectus Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Risk Factors; Underwriting
6. Dilution Comparative Data
7. Selling Security Holders Not Applicable
8. Plan of Distribution Underwriting
9. Legal Proceedings Litigation
10. Directors, Executive Officers Management; Security Ownership of Certain
Beneficial Owners and Management
11. Security Ownership of Certain Beneficial Owners Security Ownership of Certain Beneficial Owners
and Management and Management
12. Description of Securities to be Registered Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Underwriting
Indemnification for Securities Act Liabilities
15. Organization Within Five Years Certain Transactions
16. Description of Business Business
17. Management's Discussion and Analysis of Management's Discussion and Analysis of
Financial Condition and Results of Operation Financial Condition and Results of Operations
18. Description of Property Business
19. Certain Relationships and Related Transactions Certain Relationships and Related Transactions
20. Market for Common Equity and Related Stockholder Risk Factors
Matters
21. Executive Compensation Management
22. Financial Statements Financial Statements
22. Changes in and Disagreements with Accountants Not applicable
</TABLE>
<PAGE> 4
SUBJECT TO COMPLETION, Dated
300,000 COMMON SHARES
PLANNED MARKETING ASSOCIATES, INC.
---------------------
Eight hundred thousand (800,000) shares of Common Stock, $0.01 par
value per share ("Shares") are being offered at a price of $5.00 per share with
a minimum purchase of 100 Shares. All of the Shares offered hereby are being
sold by Planned Marketing Associates, Inc. ("Company"). The minimum number of
Shares being sold by the Company is 300,000. The maximum number of Shares
being sold by the Company is 800,000. Proceeds from the sale of the first
300,000 Shares will be held in escrow at River Oaks Trust Company, Dallas,
Texas ("Escrow Agent"). The Company will end the offering period ("Offering
Period") on November 30, 1996, unless extended by the Company to February 28,
1997. If the minimum 300,000 Shares are not sold within the offering period
(including any extension), the offering will terminate and all funds will be
promptly returned to the subscribers with interest. There is no right to
return of funds out of escrow during the Offering Period (including any
extension). Subject to the sale of the minimum 300,000 Shares, the Company may
conduct an initial closing, then continue the offering through the offering
period (including any extension) until final closing. The Company reserves the
right to restrict the number of Shares sold to any investor. There will be no
market-making activities in the Shares until after final closing. There is no
assurance a trading market will develop. See "Risk Factors."
THESE SHARES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. IN
ADDITION, PURCHASERS OF THE SHARES WILL SUFFER IMMEDIATE SUBSTANTIAL DILUTION
IN THAT THE BOOK VALUE PER SHARE OF THE COMMON STOCK AFTER THIS OFFERING WILL
BE SUBSTANTIALLY LESS THAN THE PUBLIC OFFERING PRICE OF THE COMMON STOCK. SEE
"RISK FACTORS" PAGE 6 AND "DILUTION" PAGE 9.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Underwriting Proceeds to
Price to Public Commissions (1) Company(2)
--------------- --------------- -----------
<S> <C> <C> <C>
Per Share $5.00 $0.20 $4.80
Total Minimum (300,000 Shares) $1,500,000 $60,000 $1,440,000
Total Maximum (800,000 Shares) $4,000,000 $160,000 $3,840,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
(1) Does not include expense allowance estimate to $10,000.
(2) Before deducting offering expenses payable by the Company estimated at
$110,000.
PLANNED MARKETING ASSOCIATES, INC.
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
(210) 238-4357
The date of this Prospectus is June, 1996
The Company is not a reporting company under the Securities Exchange Act of
1934 as amended. The Company intends to furnish to its stockholders annual
reports containing audited financial statements examined by its independent
public accountants and quarterly reports containing unaudited financial
information for the first three quarters of each year.
<PAGE> 6
SUMMARY
The following summarizes information selected from this Prospectus, and is
qualified by the narrative and financial statement disclosure elsewhere herein.
THE COMPANY
The Company develops, markets and delivers through seminars, products and
services, ideas, techniques and systems which give professionals, entrepreneurs
and individuals strategies to increase their personal and business results. In
1995 the Company presented keynote speeches and one-day seminars to over 10,000
people in the United States, Canada and Australia. The Company's three-day
"Boot Kamps" and courses were attended by over 3,300 people from North America
and around the world.
The Company targets individuals who are responsible for the development and
growth of their business. The Company has developed strong programs by
training those who have invested heavily in technical skills but lack the
knowledge, system or confidence to market those skills effectively. The
Company has built strong markets with repeat customers who also refer others to
the Company's programs. The Company continues to expand its business by
offering continuing education, training and implementation materials that can
be purchased either at various seminar locations or by mail order. The results
of seminar evaluation forms completed by seminar attendees indicate (i) most
individuals are satisfied with the seminar and (ii) may attend additional
seminars and/or purchase Company products.
The Company's seminars can be divided into three business categories:
General business sales and management people
Professionals who desire to increase their marketing skills
Young adults who seek self-motivation, direction and confidence.
The Company is expanding the seminars in these three business categories.
Currently the Company's revenues come primarily from seminar sales for
professionals who desire to increase their marketing skills. The Company's
goal is to expand the seminars in all areas while at the same time obtaining a
greater percentage of revenues from its products and services.
Company offices are located at Canyon Springs Ranch, West Drive, Hunt, Texas
78024, telephone 210/238-4357.
USE OF PROCEEDS
The Company intends to use the proceeds of this offering for seminar promotion
and direct mail marketing activities, research and development of new products,
product catalog development and promotion, product direct mail development,
-3-
<PAGE> 7
recruiting, hiring and training of additional support personnel, office and
equipment expansion, additional seminar development and working capital. (See
"Use of Proceeds")
RISK FACTORS
Purchase of the Shares involves a high degree of risk and substantial dilution.
The securities should be purchased only by those who can afford to lose the
investment. See "Risk Factors" and "Dilution".
THE OFFERING
If all 800,000 Shares are sold:
<TABLE>
<S> <C>
Shares Offered . . . . . . . . . . . . . 800,000
Offering Price Per Share . . . . . . . . $5.00
Shares Outstanding
Prior to the Offering . . . . . . . . . 3,200,000 *
Shares Outstanding
After Offering . . . . . . . . . . . . 4,000,000
If 300,000 Shares are sold:
Shares Offered . . . . . . . . . . . . . 300,000
Offering Price Per Share . . . . . . . . $5.00
Shares Outstanding
Prior to the Offering . . . . . . . . . 3,200,000 *
Shares Outstanding
After Offering . . . . . . . . . . . . 3,500,000
</TABLE>
* Does not include 100,000 common shares reserved for options under the
Incentive Stock Option Plan and 200,000 common shares reserved for
warrants that may be granted to the Company's Board of Directors and
Advisory Board of Directors. See "Management."
-4-
<PAGE> 8
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- --------------------------
STATEMENT OF OPERATIONS DATA: 1994 1995 1995 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
HISTORICAL
Total revenue $2,286,382 $4,539,106 $1,028,582 $1,684,745
Net Income $407,297 $1,007,049 $329,954 $467,806
Weighted average common
shares outstanding after
stock split (1) 3,200,000 3,200,000 3,200,000 3,200,000
Earnings per common share $ 0.13 $ 0.31 $ 0.10 $ 0.15
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- --------------------------
PRO FORMA: 1994 1995 1995 1996
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $ 407,297 $1,007,049 $ 329,954 $ 467,806
Adjustments:
Office and administrative -
office salaries and lease
payments (2) (306,000) -- -- --
Provision for Federal
income taxes (3) (23,000) (331,000) (112,000) (159,000)
---------- ---------- ---------- ----------
Net Income $ 78,297 $ 676,049 $ 217,954 $ 308,806
========== ========== ========== ==========
Earnings per common share $ 0.02 $ 0.21 $ 0.07 $ 0.10
========== ========== ========== ==========
</TABLE>
(1) As adjusted to reflect stock split described in Note 5 of Notes to
Financial Statements.
(2) Includes salaries of $210,000 and lease payments of $96,000.
(3) Reflects taxes as if the Company were taxed as a C Corporation.
-5-
<PAGE> 9
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ ----------
BALANCE SHEET DATA: 1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Working Capital $369,991 $253,781 $655,558
Total Assets $900,496 $1,522,993 $2,329,351
Total Liabilities $411,303 $1,075,145 $1,413,697
Shareholders' equity $489,193 $447,848 (4) $915,654 (4)
</TABLE>
(4) Does not include estimated Deferred Tax Asset aggregating
approximately $265,000 at December 31, 1995 and $340,000 at March 31,
1996, respectively, in connection with revocation of S Corp election
upon consummation of this offering.
RISK FACTORS
THE SECURITIES BEING OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. BEFORE MAKING AN INVESTMENT IN THE COMPANY, PROSPECTIVE
INVESTORS SHOULD GIVE CAREFUL ATTENTION TO THE FOLLOWING RISK FACTORS INHERENT
IN AND AFFECTING THE BUSINESS OF THE COMPANY.
1. Dependence on Key Personnel; Need for Additional Personnel.
The Company's success during the foreseeable future will depend to a great
extent on the experience, ability and continued services of Steve Anderson and
Walter Hailey and other officers, directors and employees. Mr. Hailey's and
Mr. Anderson's employment contracts have initial terms that expire on January
31, 2001. (See "Business - Employment Contracts") If any of these persons
should become incapacitated or otherwise unavailable, the Company would be
required to seek a qualified replacement. There is no assurance that the
Company would be able to identify or hire the services of qualified key
personnel. The Company does not have key may insurance on Mr. Hailey or Mr.
Anderson. (See "Management.")
2. Competition. Seminar services is an intensely competitive
industry dominated by a few major competitors. Many of these competitors have
been in the business for many years and have substantially greater financial
resources than the Company. The Company competes with competitors who provide
general industry information by providing specific industry seminars. There is
no assurance the competitors will not develop more specific industry seminars.
(See "Business - Competition").
3. Economic Conditioning Impacting Seminar Attendance.
Prospective investors should understand that the Company's revenues are
directly affected by broad trends in business and the economy. If the economy
entered into a recession or became stagnant, prospective clients might defer or
cease taking seminars offered by the Company. (See "Business - Dental
Industry.")
-6-
<PAGE> 10
4. No Dividends. The Company does not anticipate paying
dividends on its Shares in the foreseeable future. The Company intends to
continue to devote a substantial portion of its earnings, if any, to the
expansion of the Company's seminars, products and services. Investors who will
need dividend income should not purchase these shares (see "Dividend Policy").
5. Control by Current Majority Shareholders. After the sale of
the 800,000 Shares in this offering, existing shareholders of the Company will
own approximately 80% of the Shares (91% if 300,000 Shares sold) then
outstanding and will be in a position to elect all the Company's directors and
otherwise control the Company. Accordingly, for the foreseeable future the
vote of the current shareholders will control the election of directors and any
substantive corporate transaction. (See "Security Ownership of Certain
Beneficial Owners and Management")
6. Dilution. The shares of common stock outstanding prior to
this offering were purchased at prices below the public offering price. The
dilutions to investors in this offering if the maximum 800,000 shares are sold,
will be $3.96 per share or $4.50 a share if the minimum 300,000 shares are
sold. Therefore, investors in this offering will bear most of the risk of any
loss from the Company's operations and will incur an immediate and substantial
dilution of their investment, while the shares of common stock held by the
existing shareholders will increase in Net Tangible Book Value as a result of
this offering (see "Dilution" and "Certain Transactions").
7. Potential Future Sales Pursuant to Rule 144. The Company
currently has 3,200,000 shares of common stock outstanding which are
"restricted securities," as that term is defined in Rule 144 under the
Securities Act of 1933, as amended. Under this Rule a person (or persons whose
shares are aggregated) not affiliated with the issuer who has satisfied a
two-year holding period may, under certain circumstances, sell within a
three-month period a number of shares which does not exceed the greater of 1%
of the shares outstanding or the average weekly trading volume during the four
calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who is not an affiliate of the Company and who has satisfied a three-year
holding period. After a three-year holding period, if a person is not an
affiliate or has not been an affiliate for the last three months, then the
person can sell his shares without any restrictions applicable to Rule 144 (see
"Description of Securities"). Future sales under Rule 144 may have a
depressive effect on the price of the Company's common stock.
The 3,200,000 shares represent upon completion of the offering, if 800,000
shares are sold, 80% of the issued and outstanding stock or if 300,000 shares
are sold, 91% of the issued and outstanding stock. Affiliates (generally,
persons who control the Company) cannot sell more than 1% of the issued and
outstanding stock within any three month period, regardless of how long the
securities have been held, so long as they are affiliates.
Affiliates (have held 3,000,000 shares for more than 2 years), will be able to
sell from 35,000 to 40,000 common shares (depending upon the number of shares
outstanding) to the public every three months during the year starting after
the closing of the Offering, subject to the other conditions of Rule 144.
-7-
<PAGE> 11
Since all the Company's common shares currently outstanding are held by
Affiliates, these common shares will be subject to the Rule 144's 1% volume
limitation.
8. Broad Discretion in Application of Proceeds. The Company
intends to use the proceeds from this offering to fund direct mail activities;
recruiting and training additional support personnel; computer expansion for
additional support personnel; catalog development and promotion of additional
products and materials for seminars; additional seminar development; and
working capital. Accordingly, the Company's management will have broad
discretion as to the application of such proceeds (see "Use of Proceeds" and
"Business").
9. Limited Public Market. The Company plans to seek listing with
the National Association of Securities Dealers, Inc. on the NASDAQ National
Market System or NASDAQ Market. The Company will seek listing on Nasdaq
National Market System or Nasdaq Market after the closing of this offering but
does not intend at this time to seek simultaneous listing. If the Company were
to obtain a listing on Nasdaq System but were unable to maintain the listing
requirements, it would have to be traded on an over-the-counter market on an
electronic bulletin board established for securities that do not meet the
Nasdaq System listing requirements or in what is commonly referred to as "pink
sheets". As a result, any investor may find it more difficult to dispose of,
or to obtain accurate quotations as to the price of, the Company's securities.
In addition, if the Company's securities were listed and then subsequently
delisted, they would be subject to a rule that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally defined as
an investor with a net worth in excess of $1 million or annual income exceeding
$200,000 or $300,000 together with a spouse) for transactions covered by this
rule the broker-dealer must make a special suitability determination for the
purchaser and must have received the purchaser's written consent to the
transaction prior to the sale. Consequently, delisting if it occurred, may
affect the ability of broker-dealers to sell the Company's securities and the
ability of purchasers in this Offering to sell their securities in the
secondary market. The Company has no assurances that it will obtain such a
listing. There can be no assurance that a more active market will develop
following this offering or that, if developed, such market will be sustained.
The price at which the Shares are being offered to the public has been
determined by the Company.
10. Penny Stock. If the Company were not able to maintain a price
of $5.00 per share or obtain a listing on the Nasdaq system, it would be
required under the Penny Stock rules to deliver prior to any transaction in the
stock a disclosure schedule prepared by the Securities and Exchange Commission
relating to the penny stock market. The broker-dealer involved in such
transaction would also have to disclose the commissions payable, both to the
broker- dealer and the registered representative, current quotations for the
common stock and if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presume control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the common stock held in the account and information on
the limited market in Penny Stocks. As a result of the proposed offering price
of the Shares, these regulations will not be applicable unless the price were
to become less than $5.00 or the Company had been unable to become listed on
the Nasdaq System.
-8-
<PAGE> 12
11. Trademark and Copyright Matters. The Company has developed
proprietary information regarding the seminars it presents and the products
that it markets in conjunction with those seminars. The Company has applied
for trademark registration of its name as well as copyright applications for
some of its seminar materials. There can be no assurance that the Company will
be able to adequately protect its proprietary information or that other
companies will not independently develop similar information that is a
substantially equivalent or superior to the Company's seminar materials and
products. If such event were to occur this could significantly impact the
Company's competitive position and operations. (See "Business").
12. Adequate Personnel for Seminar Presentations. In order to
expand the number of seminars presented, the Company must have additional
trained presenters or use alternative methods of presentation. While the
Company is training additional personnel, there is no assurance that the
Company will accomplish this training goal. If the Company does not obtain
such additional personnel, the growth in the number of seminars presented may
be limited.
13. Product Concentration. The Company in 1995 had 74% of its
seminar revenues in areas relating to the dental industry. Any adverse
conditions impacting the dental industry would also in all likelihood impact
the Company's own operations. The Company is further expanding into other
industry areas, but there can be no assurances that the Company can develop the
support staff and presentation instructors to service the other industries and
professions, and if they did, whether they would be as successful as the dental
and other programs the Company currently offers.
DILUTION
After giving effect to the sale of 800,000 Shares in this offering, the pro
forma Net Tangible Book Value of the Common Stock as of December 31, 1995,
after the deduction of offering expenses, would be $4,167,848 or approximately
$1.04 per share. Accordingly, investors in this offering would sustain an
immediate dilution of $3.96 per share from the public offering price
(approximately 79%) and present shareholders would benefit by an increase of
$0.90 per share in the Net Tangible Book Value of the shares held by them.
After giving effect to the sale of 300,000 Shares in this offering, the pro
forma Net Tangible Book Value of the Common Stock as of December 31, 1995,
after the deduction of offering expenses, would be $4,167,848 or approximately
$0.50 per share. Accordingly, investors in this offering would sustain an
immediate dilution of $4.50 per share from the public offering price
(approximately 90%) and present shareholders would benefit by an increase of
$0.36 per share in the Net Tangible Book Value of the shares held by them.
-9-
<PAGE> 13
The following table illustrates the effect of dilution per share on the basis
of the public offering price, taking into account the estimated expenses of
this offering:
<TABLE>
<CAPTION>
800,000 SHARES 300,000 SHARES
-------------- --------------
<S> <C> <C>
Public offering price per Share . . . . . . . . . . . . . . . . $5.00 $5.00
Dilution to investors
in this offering(1) . . . . . . . . . . . . . . . . . . . . $3.96 $4.50
Pro Forma Net Tangible Book Value
per Share after this offering (2) . . . . . . . . . . . . . $1.04 $0.50
Net Tangible Book Value per Share
before offering . . . . . . . . . . . . . . . . . . . . . . $0.14 $0.14
Increase per Share attributable to the
sale by the Company of the Shares
offered hereby . . . . . . . . . . . . . . . . . . . . . . $0.90 $0.36
</TABLE>
(1) "Dilution" per share represents the difference between the public
offering price to be paid by a new shareholder for a share of common
stock and the Net Tangible Book Value per share of common stock, as
adjusted to give effect to this offering.
(2) This proforma net tangible book value does not include a Deferred Tax
Asset estimated at $265,000, to be recorded when the existing S Corp
election is revoked. This Deferred Tax Asset is based on earnings,
primarily unearned revenue, previously taxed to individual
shareholders.
-10-
<PAGE> 14
The following table summarizes, upon completion of this offering and the sale
of 800,000 Shares or 300,000 Shares, the number of shares of common stock which
will be held by the present shareholders and by investors in this offering, the
number of Shares to be held as a percentage of the Company's total outstanding
common stock, the aggregate consideration paid for such Shares and outstanding
common stock, the consideration as a percentage of the total consideration and
the average consideration per share for such Shares and outstanding common
stock:
SALE OF 800,000 SHARES
<TABLE>
<CAPTION>
Number of % of Shares Average
Shares to be to be Total % of Total Consideration
Held Outstanding Consideration(1) Consideration Per Share
------------ ----------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Present Shareholders 3,200,000 80% $1,138,287 22% $0.36
Investors, this offering 800,000 20% $4,000,000 78% $5.00
--------- --- ---------- ---
Total 4,000,000 100% $5,138,287 100% $1.30
========= === ========== ===
</TABLE>
SALE OF 300,000 SHARES
<TABLE>
<CAPTION>
Number of % of Shares Average
Shares to be to be Total % of Total Consideration
Held Outstanding Consideration(1) Consideration Per Share
------------ ----------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Present Shareholders 3,200,000 91% $1,138,287 43% $0.36
Investors, this offering 300,000 9% $1,500,000 57% $5.00
--------- --- ---------- ---
Total 3,500,000 100% $2,638,287 100% $0.75
========= === ========== ===
</TABLE>
(1) Includes present shareholders' investment of $11,000 plus previously
taxed earnings retained in the Company during the period of time the
Company was taxed as an "S" Corporation, all as of December 31, 1995.
-11-
<PAGE> 15
USE OF PROCEEDS
Net proceeds to the Company from this offering are estimated to be
approximately $3,720,000 ($1,320,000 if the minimum 300,000 Shares are sold),
after deduction of offering expenses. The following is the Company's best
estimate of its allocation of the net proceeds of this offering, based upon the
current state of its business operations, its current plans and current
economic and industry conditions. These estimates are subject to change based
upon such factors as competition, marketing trends and availability of new
products.
<TABLE>
<CAPTION>
Maximum Maximum Minimum Minimum
800,000 Shares % 300,000 Shares %
-------------- ------- -------------- -------
<S> <C> <C> <C> <C>
Seminar promotion and direct mail $250,000 6.72% $70,000 5.30%
marketing activities
Research and development of new products $1,500,000 40.32% $600,000 45.46%
Product catalog development and $300,000 8.06% $90,000 6.82%
promotion
Product direct mail development $500,000 13.44% $185,000 14.02%
Recruiting, hiring and training of $250,000 6.72% $70,000 5.30%
additional support personnel
Office and equipment expansion $300,000 8.06% $80,000 6.06%
Additional seminar development $350,000 9.41% $150,000 11.36%
Working Capital $270,000 7.27% $ 75,000 5.68%
---------- ------ ---------- ------
Total $3,720,000 100.00% $1,320,000 100.00%
========== ====== ========== ======
</TABLE>
DIVIDEND POLICY
The Company intends to retain earnings for use in the Company's operations.
The Company does not anticipate paying any cash dividends in the foreseeable
future after consummation of this Offering but will continue to make
distributions to shareholders to be used to pay their Federal income taxes on
income earned during the period of time the Company is taxed as an "S"
Corporation under provisions of the Internal Revenue Code.
-12-
<PAGE> 16
CAPITALIZATION
The following table sets forth capitalization of the Company at March 31, 1996.
This table should be read in conjunction with the Financial Statements of the
Company and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL AT
MARCH 31, 1996
--------------
<S> <C>
Shareholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized; --
no shares issued and outstanding
Common Stock, $.01 par value; 20,000,000 shares authorized;
3,200,000 shares issued and outstanding . . . . . . . . . . . . . . . . . $ 32,000
Retained earnings (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . $883,654
--------
Total Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . $915,654
--------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . $915,654
========
</TABLE>
(1) Does not include estimated Deferred Tax Asset of $340,000 in
connection with revocation of S Corp election upon
consummation of this Offering.
-13-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL. Over the past few years, the Company's revenues have grown due to the
expansion of its N.E.E.R.(TM) ("Naturally Existing Economic Relationships")
Marketing Boot Kamp concept to include the Dental Profession (Dental Boot Kamp
and Graduate Dental Boot Kamp), as well as the continuation of the various
leadership forums. During 1994, the Company commenced promotion of merchandise
sales (either at the seminars or through direct mail or telemarketing) and, in
late 1995, implemented the Practice Implementation Program ("PIP"). In
connection with an affiliate, the N.E.E.R. Net subscription service was also
implemented in late 1995. The Company commenced the Crown Council, an
organization dedicated to the purpose of providing a communication link and an
association of dental practices, in 1996. The Company's principal source of
cash is represented by cash generated from operations.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
REVENUES. The Company's operations have increased primarily from the number of
presentations (32 in 1995 as compared with 25 in 1994) and a greater acceptance
by the dental profession which accounted for 74% of revenues ($3,348,000) in
1995 and 66% in 1994 ($1,508,000). In Management's opinion the Company
operates in only one industry segment as its seminars and programs, including
merchandise sales, are based on the N.E.E.R. marketing concept. The Company
uses a common sales force even though some may focus more on the youth program
or various phases of the services to the dental profession. Revenues from the
N.E.E.R. Marketing Boot Kamp were $270,000 and $161,000 in 1995 and 1994 while
the youth forums generated revenue of $228,000 and $134,000. The PIP and
N.E.E.R. Net programs implemented in late 1995 generated approximately 2% of
total revenues ($80,000 and $12,000, respectively). The Company's emphasis on
product sales has resulted in an increase in revenues from $296,000 (13% of
revenues) in 1994 to $428,000 (9% of revenues) in 1995. The principal increase
in other income relates to interest earned on short-term investments during
1995.
Gross program margins (the excess of professional education and seminar
revenues over professional education and seminar costs and expenses) increased
to $2,174,000 in 1995 as compared with $989,000 in 1994, primarily as a result
of (i) the Company's ability to absorb more of the fixed costs associated with
the seminars, (ii) a shift to programs designed for the dental profession, as
well as the increase to over 3,300 attendees at the Company seminars in 1995 as
compared with approximately 1,700 in 1994. Dental programs are generally
presented to a larger number of attendees and thus certain costs are spread
over a greater number of persons. Merchandise margins decreased slightly due
to an introduction of several products for which the margins were lower than
1994 and more in line with the Company's expectation for the future.
-14-
<PAGE> 18
EXPENSES. Office and administrative expenses increased from $627,000 in 1994
to $1,251,000 in 1995 and are reflective of the Company's growth and reflect an
increase in salaries (including salaries to officers) and lease expenses for
the Company's facilities in Hunt, Texas.
LIQUIDITY AND CAPITAL RESOURCES. The Company's principal current assets are
cash and cash equivalents ($979,000) and accounts receivable ($177,000) which
declined by approximately $48,000 during 1995. Unearned revenue increased from
$314,000 in 1994 to $953,000 in 1995 as a result of price increases announced
for 1996 for which seminar participants were allowed early registration at
pre-1996 prices and unearned income of $112,000 related to the PIP program.
Prepaid expenses increased due primarily to prepaid seminar costs and prepaid
insurance.
Working capital which management has historically considered adequate and which
has been met with cash generated from operations, decreased in 1995. The
principal reason that working capital decreased in relation to operations
resulted from distributions to shareholders of which a significant portion will
be used to pay their Federal income taxes on income earned during the period of
time the Company operated as an "S" Corporation under provisions of the
Internal Revenue Code. Additional working capital will be needed as operations
are expanded. (See "Use of Proceeds")
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
REVENUES
The Company conducted the same number of presentations (eight) in both 1996 and
1995. Total revenues for 1996 ($1,685,000) represented a 64% increase over
1995 revenue ($1,029,000). In response to management's effort to begin
broadening revenue sources, revenue from dental seminars, which included the
first annual Crown Council meeting in 1996, generated 73% of revenues
($1,237,000) in 1996 and 81% of revenues ($831,000) in 1995. Revenues from
N.E.E.R. Marketing Boot Kamp and Eagle University (youth seminars) were
$126,000 in 1996 up from $90,000 for the same period in 1995. Attendance at
Company seminars increased by 56% with approximately 1,400 attendees
participating in 1996 compared to over 900 during the same period in 1995. The
Practice Implementation Program and N.E.E.R. Net (Video Staff Meetings)
implemented in late 1995 and the Crown Council membership program commencing in
1996 generated approximately 10% of total revenues ($122,000, $28,000, and
$12,000 respectively). The Company's emphasis on product sales has resulted in
an 126% increase in revenues ($120,000 in 1996 compared to $53,000 in 1995) in
this area representing 7% of total revenues for 1996 compared to only 5% of
total revenues in 1995.
EXPENSES
The increase in seminar costs, when compared to revenues, in 1996 over 1995
resulted from two primary factors. In late 1995, the Company changed the
facility used to hold its courses in Texas. While the food and lodging costs
are somewhat higher, the new facility is able to accommodate 75% more attendees
thus making the Company's courses more productive and
-15-
<PAGE> 19
profitable overall. The first annual Crown Council meeting held in 1996 was
the first of its kind held by the Company for which there was no comparable
program in 1995.
Selling and marketing expenses increased from $39,000 to $117,000 in 1996 as a
result of marketing costs associated with the introduction of the Crown
Council.
Office and Administrative expenses increased from $229,000 in 1995 to $342,000
in 1996 due to increases in personnel required to service the overall 64%
increase in sales as well as increases in professional fees and repairs and
maintenance.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $254,000 at December 31, 1995 to $656,000 at
March 31, 1996 primarily as a result of the Company's operating activities.
The increase in accounts receivable at March 31, 1996 relates to a seminar held
in Canada in March for which collections were completed by the sponsoring
organization in Canada and payment made to the Company in May 1996. The
increase in prepaid expenses results from increases in deferred initial public
offering costs and prepaid expenses for the introduction of the Dental Success
Letter (see unearned below). Accrued expenses increased due to accrued payroll
and franchise taxes. The changes in unearned revenue reflect increases in
deferred Crown Council revenue ($133,000) and Dental Success Letter
subscriptions (first issue to be mailed in April 1996) ($152,000) offset by an
increase in earned Practice Implementation Program revenue.
Working capital will be reduced ($150,000 in April 1996) during the period of
time that the Company operates as an "S" corporation under provisions of the
Internal Revenue Code as the Company makes distributions to shareholders to pay
the estimated Federal income tax on income earned during the period the "S"
corporation election is in effect.
BUSINESS
INTRODUCTION AND GENERAL BUSINESS OVERVIEW
The Company was organized as a Texas corporation on November 21, 1988. The
Company develops, markets and delivers through seminars, products and services,
ideas, techniques and systems which give professionals, entrepreneurs, and
individuals strategies to increase their personal and business results. In
1993 and 1994 the Company presented keynote speeches and one-day seminars. In
1995 the Company presented keynote speeches and one-day seminars to over 10,000
people in the United States, Canada and Australia. The Company's three-day
"Boot Kamps" and courses were attended by over 3,300 people from North America
and around the world.
The Company targets individuals who are responsible for the development and
growth of their business. The Company has developed strong programs by
training those who have invested heavily in technical skills but lack the
knowledge, system or confidence to market those skills
-16-
<PAGE> 20
effectively. The Company has built strong markets with repeat customers who
also refer others to the Company's programs. The Company continues to expand
its business by offering continuing education, training and implementation
materials that can be purchased either at various seminar locations or by mail
order. The results of seminar evaluation forms completed by seminar attendees
indicate (i) most individuals are satisfied with the seminar and (ii) may
attend additional seminars and/or purchase Company products.
The Company's seminars can be divided into three business categories:
General business sales and management people
Professionals who desire to increase their marketing skills
Young adults who seek self-motivation, direction and confidence.
The Company is expanding the seminars in these three business categories.
Currently the Company's revenues come primarily from seminar sales for
professionals who desire to increase their marketing skills. The Company's
goal is to expand the seminars in all areas while at the same time obtaining a
greater percentage of revenues from its products and services.
The Company has developed a marketing system that allows individuals to grow in
confidence and dramatically increase their effectiveness in marketing their
products or services. The Company focuses on a complete personal development
system, with a balance between increasing personal self-esteem and implementing
a detailed marketing system that is entertaining to learn. The Company's
programs are intensive, detailed, and entertaining and are sometimes referred
to as "edutainment."
The core concept on which the Company's programs focus is the N.E.E.R.(TM)
Marketing System. The Naturally Existing Economic Relationships ("N.E.E.R.")
System allows users to increase their revenues by putting them in front of more
qualified, less resistant buyers on a consistent basis. It emphasizes a faster
and more effective method of capitalizing on and tapping into "existing"
markets rather than trying to "create" a market from scratch for a product or
service. This system is the focus of the Company's development. See "Business
- - Educational Support Products and Materials."
COMPANY BUSINESS SYSTEM
The Company's core business is to develop, introduce, teach and support
marketing systems that will improve the overall performance and results of the
individual and allow participants to enjoy
-17-
<PAGE> 21
their profession more and experience a more balanced lifestyle. These systems
do not focus solely on business but address many issues including personality
characteristics that could affect the performance of the individual. The
systems focus primarily on individuals that are not comfortable in marketing
themselves or their services.
The Company conducts its business in the following manner:
Development. The Company's management team brings extensive experience in the
creation and management of marketing systems and user teams. Based on research
into each specific market, the Company tailors a system that will give users a
competitive advantage in marketing their products or services. These programs
are developed, tested and then introduced.
Introduction. Once a marketing system has been developed, it is introduced to
the target market via referrals from existing customers, direct mail and public
presentations. Those expressing interest in the program are then contacted by
a trained team of telephone representatives who ensure that the individual is
enrolled in the best program to fit his or her needs. Most of the Company's
customers enroll in various three-day seminars referred to as "Boot Kamps" that
are conducted by the Company throughout North America. At these seminars the
entire marketing system is described and taught.
Teaching. The Company presents its complete marketing systems training to
audiences that need marketing expertise to survive and prosper. Because most
small or emerging businesses have a difficult time penetrating new markets, the
Company has a system to un-complicate what technically trained users view as a
complex business problem. The system outlines a step-by-step process to follow
which makes the process comfortable with predictable results so that many of
the fears associated with marketing can be overcome.
Support. The Company maintains that implementation support of these systems is
essential. The Company has created and intends to expand its revenue by
providing additional implementation tools, study materials, books, and audio
and video tapes to support the Company's customers after they have been through
a Company-sponsored seminar.
DENTAL INDUSTRY
Planned Marketing has built products and services for the dental community.
With various changes taking place in the dental profession, traditional
dentists/owners are seeking new ways to manage and market their services in
order to survive and excel. The Company's program offers a solution to these
management and marketing needs.
Many dentists, while having clinical skills, lack basic marketing skills and
direction. Frequently their clinical skills overshadow their people skills.
Without adequate people skills, their support staff and their business suffer.
The Company offers a detailed, easy to implement system that allows dentists a
program to balance their clinical skills with strong management and people
skills. With these skills in place, the entire dental team begins to realize
better results in patient acceptance of needed treatment.
-18-
<PAGE> 22
The Company currently has on its full-time staff, three individuals that have
been involved in dental practice for over fifteen years each. In addition, the
Company has on its Advisory Board two practicing dentists. These individuals
have provided technical expertise in assisting the Company in implementing its
marketing systems for dental practices.
Referrals are a steady source of new clients for the Company. It is common for
dentists to include their entire staff in the Company's training program. In a
typical Dental Boot Kamp, one-third to one-fourth of attendees are dentists.
The other two-thirds to three-fourths are hygienists, business managers, and
dental assistants.
COMPANY MARKETS
The Company has developed products and services that are useful to individuals
who need to identify, qualify and persuade others to purchase a product or
service. The Company has been particularly successful in the following niche
markets:
Business owners and entrepreneurs
Sales people who are compensated based on commission or performance
Individuals with a strong technical background, but without basic
marketing skills
High school and college students preparing for a career, but lacking
the knowledge of how to market themselves properly.
As most markets become segmented, the Company has responded to the request from
specific markets who want information tailored to their specific needs. The
Company has focused on markets that are comprised of individuals who have a
great deal of education and technical skill but lack fundamental marketing and
management skills which could make them more profitable. It is the Company's
belief that specific knowledge and understanding of marketing techniques
eliminates fear and neglect. In the medical industry in particular, rapid
changes are forcing dental and medical professionals to compete and focus on
their clients as "customers" instead of as "conditions" that need to be fixed.
The Company teaches a marketing system with specific goals, ideas and
implementation procedures tailored to the niche market user. In the seminars
presented by the Company, real-world examples are used and demonstrated. As
part of the implementation of these systems, time management, self-discipline,
goal orientation and self-help issues are also addressed to offer a total
solution. With this in mind, the majority of the Company's efforts are geared
to target individuals who require marketing skills but lack the basic
fundamentals and systems to accomplish their business goals.
The Company has developed systems that help change the perception of its
seminars attendees' potential customers about the attendee. In 1994 the
Company expended $113,000 on its continued development of its seminars and
$230,000 in 1995 on its development of seminars. The Company is of the opinion
that a dentist or a physician can successfully and professionally
-19-
<PAGE> 23
market his or her practice in the community without advertising by the use of
certain common sense skills and communication techniques. The Company's
systems give a user the opportunity to comfortably promote and sell their
product and services without having to resort to advertising, which is not
approved of by many professionals.
The Company continues to expand the products it offers to support the marketing
systems it develops. While support products currently make up approximately
10% of the Company's revenues, the Company has placed an emphasis on increasing
these revenues as a percentage of total sales. Support materials potentially
offer the Company a source of longer-term renewable income. The sale of
continuing education, marketing materials, motivational books and tapes should
enable the Company to continue to profit from the long-term relationships it
develops in its seminars.
As the Company's line of products and services expands, its existing customer
base becomes more valuable. With the satisfied customers, the products and
support services that follow become a more valuable source of revenue.
OPERATIONS AND MARKETING
Marketing. The Company manages its Sales Department by utilizing the same
marketing ideas that it teaches. Comprised of a group of trained telephone
representatives who primarily focus on following up leads that have been
generated all over North America, the Company's marketing personnel handle
requests for information as well as respond to inquiries about Company products
and services, using a step-by-step sales process that is part of the Company's
internal educational curriculum. This procedure allows them to develop a
relationship of trust with potential customers. Moreover, all of the
information on current, past and future customers and prospects is entered into
an extensive data base. Fully integrated with the other departments of the
Company, such as accounting and mailing, this single-entry research and
retrieval system tracks the ongoing relationships and needs of all of the
Company's customers and prospects. The Company has made a significant
investment in time, energy and resources to collect this data in order to
better serve its customers and expand its customer base.
Support Staff. The Company's clients are handled by a well-trained support
team. From the moment a customer enrolls in a seminar, to the moment of
arrival at the seminar site, this team coordinates, by telephone and by mail,
all the customer's needs from registration confirmation, travel arrangements,
lodging accommodations, seminar schedule, menu and dietary considerations to
any special concerns the customer may have. In addition, all audio/visual
needs and printed materials for the seminar (hand-outs, workbooks and
additional products that customers may buy) are handled by the support team, as
are the post-seminar questionnaires, feedback forms and follow-up
implementation efforts.
In cases where the seminar is not presented at the Company's headquarters, all
materials are shipped in advance. A member of the support team arrives a day
before the seminar to ensure
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<PAGE> 24
that all aspects of the seminar run in a proper and timely manner. Once the
seminar is over, the support team follows- up with mailings and telephone calls
to assist in implementation of the Company's marketing systems and to handle
additional requests.
Product Sales. The Company's educational products and support materials are
overseen and coordinated by an editorial team made up of Company personnel
responsible for curriculum development, as well as a team of independent
writers and producers who are educated and knowledgeable about the needs of the
Company's customers. Product design, duplication and printing are provided by
outside suppliers according to the specifications of the Company's editorial
board. Limited inventories are kept by the Company and a contracted
fulfillment operation outside the Company handles the rest of the inventory.
Product orders are filled from either location depending upon the size of the
order.
EDUCATIONAL SUPPORT PRODUCTS AND MATERIALS
In 1994 and 1995, the Company increased its production and sale of educational
support materials offered both to seminar participants and to those
professionals yet to attend a Company-sponsored course. The purpose of the
products is to introduce the market to what the Company has to offer, as well
as the provide in-depth information on specific topics of interest to those
professionals. The Company currently has three books, two audio tape programs,
one video program and a training manual under development. Of these products,
one is in the final packaging stage, three are in the package design stage, one
in the editing stage and one in the content development stage. The following
list includes only those products and services which are fully completed and
are presently being marketed by the Company.
Books.
The Company has written, produced and published four books:
1) BREAKING THE NO BARRIER. Subtitled "The Billion Dollar Battle
Plan for Getting Everyone You Want to Say YES to Your
Proposition."
This 262 page, step-by-step explanation of the NEER Marketing System
is based on 40 years of research, testing and development. It
includes a detailed explanation of key principles, actual examples of
the principles in action and exercises to implement ideas to create
more qualified, less resistant buyers on a more consistent basis for
the reader's product or service. The Company has sold over 13,810
copies.
2) THE WIZARD OF OZ IS YOU.
Written for both children and adults, the purpose of this book is to
help the reader increase self-esteem and self-confidence. In
addition, this book is also a part of a larger package of materials
that can be used by a professional practice or a business to do
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<PAGE> 25
presentations in schools and community groups on related themes. The
Company has sold over 2,831 copies.
3) YOUR KEY TO THE PRACTICE.
Co-authored by dental industry training expert, Linda Miles, this book
is specifically written for team members of dental practices in order
to help them increase their effectiveness and to achieve greater
emotional and financial security. The Company has sold over 1,792
copies.
4) ESP: THE EVERYBODY SEARCH PLAN. Subtitled: "Common Sense
and Easy-to-Implement Ideas to Get Everyone in Your Company
Focused on Creating More Happy Paying Customers, Clients,
Patients, Buyers or Whatever You Call the People Who Do
Business with You."
This book is designed both as a training manual for organizations as
well as for the general business public. The book is sold separately
or as part of a larger package, which includes an audio tape series to
train the listener in the implementation of the book's major points.
The Company is currently releasing and has not sold any copies.
Other Printed Matter.
1) The Company writes, produces and publishes two subscription
newsletters: Inner Circle, a publication dedicated to
marketing and case acceptance in dentistry is an eight to
twelve page bi-monthly report on the activities and concerns
of the Crown Council and The Dental Success Leader. The
Company has, as of March 1996, 287 subscribers to the Crown
Council Inner Circle newsletter and 352 subscribers to the
Dental Success newsletter.
2) The Company has authored over one hundred articles which have
appeared in industry trade publications and magazines where
the Company's products and services have been reviewed or
featured.
3) The Company has compiled a series of special reports on
subjects of special interest. Such reports within the dental
community include, "How to Ask for Referrals from Your
Existing Patients," The "Secrets of Closing Your Presentation
for Full Comprehensive Dentistry," "Preventing Cancellations,"
and "Maximizing the Telephone as a Building Tool for the
Dental Practice."
4) The Company writes, produces and publishes a Company
newsletter/catalogue, Dental Persuasion - The Idea Letter,
which includes Company products, success stories and general
information. Mailed quarterly to participants and prospects,
its purpose is to sell support material and to keep the
Company's products and services in the forefront of the
market's mind.
Audio Tapes.
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<PAGE> 26
The Company has produced a series of educational audio tapes.
1) Dental Persuasion is a twelve audio tape program that
highlights the key points to review and remember from the
Dental Boot Kamp. Participants use this program to
continually review and reinforce the systems and techniques
they have learned which increase their practice.
2) The CEO Boot Kamp is a twelve audio tape program that
highlights the key topics covered in the Company's CEO Boot
Kamp. It includes additional information from four business
experts on specific topics helpful to any business executive.
3) The Power of Persuasion is a twelve audio tape review of the
Company's NEER Marketing Boot Kamp. It includes the basic
principles of NEER Marketing and the step-by-step Anatomy of a
Perfect Sale process that the user can implement to increase
sales and marketing efforts.
4) Dental Tele-Pro is a training tape program for educating the
front desk personnel in telephone skills.
5) Objections as Opportunities deals with the kinds of patient
objections a dental practice has to handle.
6) How Long Have You Had That Infection deals specifically with
the topic of periodontal disease--- educating the client and
treating the disease effectively.
Video Tapes.
The Company has produced several video tape programs on topics that lend
themselves well to a video presentation.
1) Talking Their Language is a three module training program to
introduce and implement the "DiSC" behavior style system in a
dental office. It includes evaluation instruments as well as
audio review tapes. Practices use this system to work better
together as a team as well as work with patients in a way that
they wanted to be treated as individuals.
2) Eight Steps to a Balanced Life in Dentistry is an information
packed one hour presentation on eight key aspects that dental
teams can concentrate on to build a more profitable practice
where each team member lives a more effective, balanced life.
3) STOP Cancellations is a two tape program that contains a
step-by-step system for significantly decreasing the number of
canceled, no show and changed appointments that disrupt most
dental practices.
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<PAGE> 27
4) NEER Net is a monthly subscription service that provides two
concise video staff meetings lasting approximately 15 minutes
each and discussion questions to aid the dental team in
thoroughly implementing the ideas presented. These programs
help busy offices have well prepared staff meetings on a
regular basis that will help the team learn, grow and progress
together to build the practice.
PRODUCT DISTRIBUTION
A significant amount of the educational support material is sold to
participants at seminars, as well as through newsletter/catalogue sales, and
orders which are mailed in, faxed or taken over the phone.
In addition, interest in the educational support material, as well as the
seminar, has come from significant media exposure. The Company from time to
time retains the services of public relations firms in order to publicize its
products and services. In 1995, the Company was featured in ten major
newspapers throughout the country. Over the last two years, Company personnel
have been featured on twenty radio and television talk shows across the United
States.
COMPETITION
The Company faces several well-established and financed competitors that each
offer different aspects of the Company's total product and service line to
broad, mass markets. Franklin Quest, Covey Leadership Center, Career Track and
Nightingale Conant each excels in a different area. Those companies have
substantially greater financial, marketing and personnel resources than the
Company.
Time management systems and leadership and career enhancement seminars have
gained increasing popularity in recent years. In 1995, Franklin Quest had
revenues of $277 million and profits of $38 million from seminars and support
materials sales. Media reports estimate that the privately held Covey
Leadership Center had revenues in 1995 of over $75 million and that the
privately held Career Track had revenues over $70 million. There is no
assurance the Company will reach revenue levels of the companies described in
this paragraph.
OPERATION SYSTEMS
The Company employs 25 persons full time, including its executive officers, and
10 persons part-time. All employees have written contracts. The term of these
contracts for employees other than Mr. Hailey and Mr. Anderson is for a period
of thirty days. The contracts are automatically renewed unless terminated by
either party upon five day's written notice. Mr. Hailey's and Mr. Anderson's
employment contracts are for a term of four years. (See "Management -
Employment Contracts.") The contracts with employees contain noncompete
provisions as well as agreements by the employee not to use the Company's trade
secrets and proprietary information.
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<PAGE> 28
Certain individuals are hired from time to time as independent contractors to
assist the Company in the presentation of its seminars. The Company does not
view these independent contractors as employees for federal income tax
withholding purposes.
FACILITY AND EQUIPMENT LEASES
The Company has entered into a lease for the Company's campus and principal
offices with Walter B. Hailey, Jr. The terms of the lease provide that the
Company will pay $8,000 per month. The lease is for a ten-year period and at
the option of the Company can be renewed with two ten-year renewal options.
The terms of the lease provide that the Company pays all operating expenses,
taxes and insurance related to the property. The terms of this lease were not
negotiated on an arm's length basis.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following states information on beneficial ownership of Company Common
Shares at Prospectus date, by each executive officer and director, all
executive officers and directors as a group, and by all persons who own
beneficially more than five percent of the Common Shares. All persons listed
are officers and/or directors; each has sole voting and investment power with
respect to the Shares indicated.
<TABLE>
<CAPTION>
Percentage
Shares Owned Shares Owned Owned After
Before Offering After Offering Offering
--------------- -------------- ---------------------
Name and Address Min. Max.
- ---------------- (300,000) (800,000)
--------- ---------
<S> <C> <C> <C> <C>
Walter B. Hailey, Jr. 2,200,000 2,200,000 62.86% 55.00%
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
Steven J. Anderson 800,000 800,000 22.86% 20.00%
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
Other shareholders 200,000 200,000 5.71% 5.00%
</TABLE>
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<PAGE> 29
MANAGEMENT
<TABLE>
<CAPTION>
=================================================================================================
NAME AGE DIRECTOR SINCE POSITION WITH COMPANY
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Steven J. Anderson 30 1993 Director, President, Treasurer (1)
- -------------------------------------------------------------------------------------------------
T. W. Eubank 53 1996 Director (1)
- -------------------------------------------------------------------------------------------------
Walter B. Hailey, Jr. 68 1988 Director, Chairman of the Board,
Secretary (1)
- -------------------------------------------------------------------------------------------------
David A. Keener 71 1996 Director (1)
=================================================================================================
</TABLE>
(1) All Directors and Officers serve one-year terms.
BOARD OF DIRECTORS
Walter Hailey, Director, Chairman of the Board. Mr. Hailey has been a
Director and Secretary of the Company since 1989 and Chairman of the
Board since 1993. In 1965, Walter Hailey purchased Lone Star Life
Insurance Company and founded Planned Marketing Associates Inc.
(unrelated to the Company), the first wholesale food insurance
marketing system of its type in the United States. Through the
development and execution of the N.E.E.R. Marketing System, Lone Star
Life sold over one billion dollars in insurance in fewer than eight
years. Lone Star Life went public in 1971 and was sold in 1973 to the
K-Mart Corporation for approximately $78 million. Hailey went on to
co-found two other public companies: American Physicians Service
(API), a medical malpractice insurance company in 1978; and Sunbelt
Oil & Gas Company in 1981, which subsequently became Coda Energy, Inc.
Coda Energy was acquired by an affiliate of Enron Corporation in 1996
for approximately $280 million. In 1988, Mr. Hailey founded Planned
Marketing Associates, Inc. to market and conduct business training
seminars at his Canyon Springs Ranch and locations around the world.
Steven Anderson, Director, President and Treasurer. Mr. Anderson has
been a Director and President/Treasurer since 1993. Mr. Anderson
joined the Company in 1989. He graduated with honors from the
University of Utah and during his last year in college, conducted an
in-depth study of sixty-two entrepreneurs and companies in America.
This study in success became the basis for the Company's business
plan. He has been responsible for developing the Company's business
plan, establishing its long-range goals, and designing a solid
management system for implementation of both.
He has been responsible for hiring and training a management staff and
a nationwide force of sales producers; assembling and guiding a
production team and collaborating with a literary and marketing
support crew. He coordinated Walter Hailey's Hill Country ranch, the
Company's headquarters, with the inner workings of a technically
advanced computer and software system which backs up the Company's
telemarketing team, accounting department, and product inventory and
shipping division.
David Keener, Director. Mr. Keener was elected Director of the
Company in February, 1996. David Keener was General Manager of
Affiliated Foods of Dallas, Texas from
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1959 to 1965. Under his leadership, Affiliated Foods grew from
approximately two hundred member stores to over nine hundred member
stores with approximately $300 million in sales. In 1965, he left
Affiliated Foods to co- found an insurance holding company which
became Planned Marketing Associates, Inc. He was responsible for
internal management, expansion and operational growth of the company
nationwide. Mr. Keener was President of Planned Marketing Associates,
Inc. from 1971 to 1974. After the sale of Planned Marketing
Associates, Inc. (unrelated to the Company) in 1973 to K-Mart
Corporation, he co-founded American Physicians Service (API) and the
company that later became Coda Energy. K-Mart Corporation
subsequently discontinued the use of the name, "Planned Marketing
Associates, Inc." For the past 5 years Mr. Keener has acted as a
Director of CODA Energy, Inc. and a principal and Director of National
Insurance Counselors, Inc.
Ted Eubank, Director. Mr. Eubank was elected Director of the Company
in February, 1996. Ted Eubank was a Certified Public Accountant with
Deloitte, Haskins and Sells from 1965 to 1970. He joined Lone Star
Life Insurance Company and Planned Marketing Associates Inc. in 1970
where he served in various capacities including Chief Financial
Officer until 1981. During that time he managed the financial needs
of a public company. He successfully helped negotiate the sale of the
company to K-Mart in 1973 for approximately $78 million and continued
as a key executive in the company until 1981. He co-founded Coda
Energy, Inc., an oil and gas company, in 1981 with Walter Hailey and
David Keener and served in various capacities including President and
Director until the sale of Coda in 1996. In 1995, he successfully
helped negotiate the sale of Coda Energy, Inc. to an affiliate of
ENRON Corp. for approximately $280 million.
NATIONAL MARKETING ADVISORY BOARD
The National Marketing Advisory Board assists the Company in expanding
niche markets for the Company's products. It assists the Company in developing
new markets as well as assisting in the research and development of new
products for new and existing markets. The National Marketing Advisory Board
assists the Company in developing mutually beneficial marketing relationships
with other organizations.
McHenry Lee, D.D.S.(51). Dr. Lee has been working with the Company
since 1990. Dr. Lee is a co-founder of the Company's Dental Division
and a 1972 graduate of Baylor College of Dentistry, Dallas, Texas. A
third generation dentist, Dr. Lee has given over 100 lectures in the
United States and Canada on soft-tissue management, treatment case
acceptance and practice marketing. He maintains a full-time practice
in Edna, Texas. A pioneer in the field of periodontal disease
treatment, Dr. Lee founded McHenry Laboratories, Inc. which
developed, and also markets, the antimicrobial agent, ORA-5. In the
early 1990's, Dr. Lee assisted in the development of the Company's
Dental Boot Kamp and he designed the Company's dental curricula. He
is responsible for coordinating the research and development of the
Company's new dental products and services and is the co-designer
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of the Company's Practice Implementation Program (PIP). He oversees
the selection and training of dental seminar presenters and
facilitators. In addition, Dr. Lee is a principal presenter and
trainer at the Dental Boot Kamp seminars.
Joleen Jackson (49. Ms. Jackson has been working with the Company
since 1990. Joleen Jackson, a seventeen- year veteran in dental
office administration and chairside assisting, is a co-founder of the
Company's Dental Division and Director of the Team and Staff Division.
Ms. Jackson leads the Company's telemarketing department by being one
of the Company's top sales producers. She coordinates and designs
team/ member-related dental products and staff-specific training
manuals and curricula. She is a presenter and team trainer at the
Company's Dental Boot Kamps and has become well known for her ability
to relate to dental staff members as a result of her years of
experience.
Donna B. Blue(45). Ms. Blue has been working with the Company since
1991. Donna Blue has twenty-five years of experience in sales,
marketing and corporate communications. She has been a million dollar
sales producer in residential real estate in Huntsville, Alabama. She
has owned a publishing company comprised of forty-five employees. She
has worked as a sales executive for L.M. Berry Company, a division of
Bell South. She is the founder and director of the Company's Eagle
University Program for young adults (age 13 years to 25 years). This
four-day program is designed to provide young adults with the
necessary tools to navigate both their careers and personal lives.
Jeffrey C. Gray, D.D.S. (36). Dr. Gray has been involved with the
Company since 1994. Dr. Jeffrey Gray, a 1986 graduate of the
University of California at San Francisco, School of Dentistry,
coordinates public relations and promotes the Company's Boot Kamps
within the dental industry. In 1988, Dr. Gray purchased a general
practice in La Mesa, California. He recently was accepted into the
Institute of Cosmetic Dentistry in Las Vegas, Nevada. Since 1994, Dr.
Gray has been featured in newspapers and radio/television new programs
recognizing him for his work in dentistry and his contribution to his
local community by promoting one of this country's first homeless
dental clinics, sponsored by MacDonald Corporation and the St. Vincent
De Paul Society. Through extensive community work and the promotion
of dental health in California, Dr. Gray has become one of the leaders
of the wellness movement within the dental industry.
Erla Kay (45). Erla Kay is Senior Publisher of Dental Practice
Management and Oral Health, Canadian publications for the dental
profession. During her twenty-five years with Southam, Inc. she has
developed magazines for a wide variety of Canadian professions and
industries and was the first woman in the company to achieve the title
of Publisher. She was the first woman to be elected to the Board of
the Dental Industry Association of Canada and served as President from
1993-95. She is a member of the Canadian Business Press and the
Canadian Advertisers Association. She coordinates Planned Marketing
seminars and activities in Canada.
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Gregory B. Anderson(45). Mr. Anderson has been involved with the
Company since 1994. Greg Anderson has spent over twenty years in
product development, sales and marketing, including extensive work in
the development of sales and training aids. Specializing in the
development and brokerage of emergency medical facilities and
commercial real estate, Mr Anderson was previously Vice President of
Sales and Marketing for Anderson Child Wallace, Inc. and Vice
President of Corporate Sales for Zions First National Bank. As
Executive Vice President of Anderson Marketing, Inc. and its training
company, Jump Start Training International, Mr. Anderson was
responsible for the creation, development and production of a full
line of sales and training materials for use all over North America,
Taiwan, Hong Kong, Australia, Japan and designated areas in Europe.
As the National Director of Sales and Marketing and a member of the
Executive Committee, Mr. Anderson helped guide and manage the growth
of The Duplication Group. Through its operating companies, Cassette
Productions, Software Duplicators and the One Off CD Shops
International, The Duplication Group offers the mass duplication of
audio tape, video tape, software and compact disc.
During the past three years, Mr. Anderson has been responsible for the
development, production, packaging and fulfillment of the Company's
sales and training aids using all four duplicated media. He is
currently coordinating the Company's efforts in establishing a
presence on the Worldwide Web. Mr. Anderson is director of the Crown
Council and manager of product development and production for the
Company.
Philip V. Korpi, D.D.S. (39). Dr. Korpi has been involved with the
Company since 1994. Dr. Philip Korpi, a 1982 graduate of the
University of Washington, School of Dentistry, is a prominent general
dentist in Seattle, Washington. Dr. Korpi, a tutor of sales and
marketing techniques, has consulted with hundreds of dentists in his
three-year association with the Company. His technical and business
expertise and vision for achieving a successful practice is
communicated on an individual basis to Dental Boot Kamp participants
to assist them with case acceptance and the development of new
patients. A professional writer and published cartoonist, Dr. Korpi
is the editor of the Company's subscription newsletter, The Dental
Success Leader.
Janice Sloan(43). Ms. Sloan has been involved with the Company since
1993. Janice Sloan is co-designer and director of the Company's
Dental Practice Implementation Program (PIP). The PIP program, which
was initiated in July 1995, is a twelve week or, twenty-four week
support plan designed for Boot Kamp dentists who require coaching
while re-training their team members to perform the principles learned
at the Company's seminars. The PIP program includes a dental practice
training manual, the PIP audio series, and weekly tele-coaching
support by Janice Sloan. Ms. Sloan has twenty years' previous
experience in the dental profession working as a chairside assistant
and office administrator.
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<PAGE> 33
MARKETING SUPPORT TEAM
The Marketing Support Team brings together for the Company's benefit a
wide range of expertise to the marketing and product development efforts of the
Company. The Marketing Support Team coordinates product development activities
and the marketing efforts to ensure consistency of the Company's activities and
sufficiency of services offered by the Company.
Marlon Sanders. Marlon Sanders has a marketing and direct response
background. He writes sales letters and develops marketing strategies
for the Company. He received a B.A. in Journalism and a Masters in
Psychology from the University of Central Oklahoma, in 1982. Mr.
Sanders' marketing expertise incorporates on-line advertising sales.
He also presents seminars on How to Market on the Internet. In
addition, he publishes, The Marlon Sanders Newsletter, a comprehensive
marketing and business review.
John Woods. Served eight and a half years with the United States
Naval Submarine Service and Special Warfare unit. He then worked as a
consultant for the Department of Defense and the University of
Washington, APL. He then became Director of Broadcast Operations at
the Hospital Satellite Network in Los Angeles for four years before
becoming a literary and talent agent for the Gage Group for the next
four years. Presently a freelance writer and producer in Dallas,
Austin and San Antonio, he is also an audio engineer. As the
co-designer for the Company's Practice Implementation Program (PIP),
he has written and produced twenty-four video programs and two audio
tape series -- Dental Tele-Pro and Objections as Opportunities.
Kirpal Gordon. Kirpal Gordon is an experienced New York writer and
former Professor of English at Fordham University. He has been a
member of the Foundation of Feedback Learning and served as
contributing editor to their tide periodical, The Communicator. He
has been the editor of several journals and community magazines. His
book reviews, essays, poems and stories have appeared widely in
various publications.
Vicki Audette. Vicki Audette, formerly a television producer and TV
personality in Minneapolis, Minnesota, is the author of three
non-fiction books. DRESS BETTER FOR LESS, her first, was an alternate
selection of the Literary Guild. Syndicated though King Features, the
first serial rights were sold to Family Circle Magazine. Her national
television experience includes several appearances on the Oprah
Winfrey Show, Lifetime Cable Network and the 700 Club. During her
twelve-year association with Hubbard Broadcasting in Minneapolis, she
developed a popular television feature with a local audience. In
1982, she designed a consumer information program for the Salvation
Army Thrift Stores in Minneapolis. Her promotion and marketing
strategy included speaking to over one hundred Twin Cities
organizations. Currently a Texas resident, Ms. Audette is a
contributing freelance writer for the Company's Crown Council
Newsletter, Inner Circle, and she coordinates product packaging and
production.
Mike Steere. Mike Steere is a freelance writer. He has written for
VIP and Dallas Life magazines. He has a syndicated column entitled
Venturing that is carried by the United Press Syndicate in newspaper
travel sections. He has been a correspondent contributor to Outside
magazine, the New York Times Sunday magazine and electronic
publications
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on the Internet World Wide Web. He has provided editing assistance to
the Company in the publication Of Breaking the No-Barrier. He has
also contributed to the Company's Dental Persuasion newsletter.
JoAn Pickett-Majors. JoAn Pickett-Majors has been working in the
dental field for fifteen years. She has had prior experience in
dental office management and as a dental assistant. She was a part
owner of an insurance information service company. She presently is a
coordinator and organizer of the Dental Book Kamps for the Company.
Mitch Sigler. Mitch Sigler is a sales executive who specializes in
doctor/client marketing. In 1991, he joined Mercer Global Advisors, a
financial management firm. He participated in Mercer's expansion,
adding four regional offices around the country, and was responsible
for hiring and training the new sales teams. He joined the Company in
1996 and opened a branch office in Santa Barbara, California to enroll
new doctor/client businesses for Boot Kamp seminars.
Suzanne Bush Black. Suzanne Black owned a Georgia-based consulting
firm specializing in privately held service businesses (health care,
private practice, property management, legal professionals and CPA's)
with a focus on leadership, team development and operations
management. In 1974, she completed her Masters Degree in
Communication Management from the University of Southern California.
Following her graduation, she was employed by an international
training company and was responsible for their national sales program.
Ms. Black was a finalist in the 1978 Outstanding Young Women of
America program. She joined the Company in 1996 to develop
new-business oriented programs and to organize sales and leadership
seminars for expanded audiences.
EMPLOYMENT CONTRACTS
Mr. Hailey and Mr. Anderson each have entered into contracts with the Company
with a term that expires on January 31, 2001. These contracts will be renewed
for additional one-year terms unless either party gives six months' written
notice prior to their expiration. Mr. Hailey's contract has a base salary of
$90,000, and Mr. Anderson's contract has a base salary of $120,000. Mr. Hailey
and Mr. Anderson have each agreed not to compete with the Company in the event
of the termination of their contracts for a period of two years following the
date of termination. In addition, Mr. Hailey and Mr. Anderson have agreed to
not use Company trade secrets or proprietary information in any other activity.
Mr. Hailey and Mr. Anderson work full-time for the Company.
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EXECUTIVE COMPENSATION
The following table summarizes for the three fiscal years ended December 31,
1995 the compensation paid to the Company's chief executive officer and the
four most highly compensated executive officers other than the chief executive
officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ------------------------- ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Walter B. Hailey, Jr. 1995 $90,000 $-0- $-0- $-0- $786,297(1)
Chairman of Board 1994 $-0- $-0- $-0- $-0- $66,195(1)
1993 $-0- $-0- $-0- $-0- $29,943(1)
Steven J. Anderson 1995 $120,000 $-0- $-0- $-0- $262,097(1)
President 1994 $-0- $-0- $-0- $-0- $22,065(1)
1993 $-0- $-0- $-0- $-0- $2,730(1)
</TABLE>
(1) Represents distributions to shareholders of which a significant
portion will be used to pay Federal Income Taxes on income earned
during the period of time the Company is taxed as an "S" Corporation
under the Internal Revenue Code. Does not include the value of
personal benefits which are less than $3,000 to each person.
INCENTIVE STOCK OPTION
Incentive Stock Options ("ISO") are granted pursuant to a plan ("Plan") that
specifies that an aggregate number of 100,000 shares of the Company's Stock may
be issued under the Plan and defines the class of employees who are eligible to
receive ISO. An employee granted an ISO may not exercise it prior to the third
anniversary date of his or her employment. Thereafter, the ISO may be
exercised at the rate of 20% as of each succeeding employment anniversary date.
The ISO cannot be exercised after the expiration of ten years from the date it
is granted. The ISO exercise price must be not less than the fair market value
of the stock covered by it on the date an option is granted, may be exercised
only by the optionee during the optionee's lifetime and employment with the
Company and cannot be transferred by the optionee. To achieve favorable tax
benefits, an optionee cannot make any disqualifying disposition of stock
received upon the exercise of an ISO within two years from the date the ISO is
granted or one year from the date the stock covered by the option is
transferred to the optionee. Certain additional limitations apply to an
optionee of an ISO who owns more than 10% of the total combined voting power of
all classes of stock of the Company. Shareholders must approve any later
amendments which increase the aggregate number of shares which may be issued
under the Plan or which change the eligibility requirements of the Plan. If
the employee owning stock received upon the exercise of an ISO does not make a
disqualifying disposition, the difference between the exercise price and the
proceeds from any sale should be taxed as capital gains (if
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the stock was a capital asset in the employee's hands). No deduction for the
Company is allowed in connection with any grant, exercise, or disposition of
stock received under an ISO if the relevant provisions of the Internal Revenue
Code are satisfied.
WARRANTS
David A. Keener was issued warrants on January 30 1996 to purchase 5,000 shares
of common stock at $5.00 a share and 5,000 shares of common stock at $7.50.
These warrants expire on January 29, 2001.
T. W. Eubank was issued warrants on January 30, 1996 to purchase 10,000 shares
of common stock at $5.00 a share, 10,000 shares of common stock at $7.50 a
share, 10,000 shares of common stock at $8.75 a share and 10,000 shares of
common stock at $10.00 a share. These warrants expire on January 29, 2001.
The Company has authorized warrants for 100,000 shares of common stock for its
independent directors. These director warrants will vest three years after
issuance at 20% per year. The director warrants will be issued on a pro rata
basis to each independent director then serving. They will be exercisable at
the rate of $5.00 per share. They will expire five years after issuance.
The Company has authorized warrants for a total of 100,000 shares of common
stock for its Advisory Board members. Each Advisory Board member will be
eligible to receive 5,000 warrants. These warrants are exercisable after an
individual serves three years upon the Advisory Board. The warrants will be
exercisable at the rate of 1,000 shares per year at a price of $5.00 per share.
They will expire five years after issuance.
The Company has no other compensation arrangements.
DESCRIPTION OF SECURITIES
SHARES
The Company is a Texas corporation, authorized to issue 20,000,000 Common
Shares, $0.01 par value. Holders of Common Shares are entitled to one vote for
each share held of record on all matters presented to shareholders.
Holders of Common Shares are entitled to receive pro rata such dividends as may
be declared by the board of directors out of funds legally available therefor
and, in the event of liquidation, to share pro rata in the distribution of
Company assets after payment of liabilities. Holders of Common Shares do not
have cumulative or preemptive rights to subscribe to purchase additional
securities of the Company. All the outstanding Common Shares are, and those
offered hereby will be upon issue, fully paid and nonassessable.
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PREFERRED SHARES
The Company is authorized to issue 5,000,000 Preferred Shares, $0.01 par value,
in series, with the rights and preferences to be fixed by the board of
directors by appropriate resolutions and filings pursuant to Texas law. The
issuance of Preferred Shares could adversely effect, among other things, the
rights of existing stockholders or could delay or prevent a change in control
of the Company without further action by the stockholders. The issuance of
Preferred Shares could decrease the amount of earnings and assets available for
distribution to holders of Common Shares. In addition, any such issuance could
have the effect of delaying, deferring or preventing a change in control of the
Company and could make the removal of the present management of the Company
more difficult. The Company has no current plans to issue any Preferred
Shares.
TRANSFER AGENT
The transfer agent for the Common Shares is American Stock Transfer Company.
CERTAIN TRANSACTIONS
STOCK SPLIT
The Company's Board of Directors approved a resolution on January 24, 1996
authorizing a thirty-two-for-one split of the Company's common stock to such
shareholders. This resulted in the shareholders being issued thirty-one
additional shares of common stock for each share held. All references in this
Prospectus relating to shares of common stock have been adjusted for this stock
split.
TEMPORARY LEASE
The Company has leased Mr. Hailey approximately 800 square feet for living
quarters while Mr. Hailey completes construction of his home near the Company's
offices. Mr. Hailey's lease rate is $10.00 per square foot. The rate is
considered by the Company to be at market rate.
FUTURE TRANSACTIONS
The Company's Board of Directors has passed a resolution that all future
transactions, including loans, between the Company and its officers, directors
and principal stockholders and their affiliates will be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested directors of the Board of Directors, and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.
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PLAN OF DISTRIBUTION
The Shares will be offered through (a) the Company's officers who will
receive no commission, bonus or other separate compensation in connection
therewith and (b) Brazos Securities, Inc., a member of the National Association
of Securities Dealers, Inc. for the purpose of selling the Shares. Subject to
certain conditions, Brazos Securities, Inc. will receive an underwriting fee
equal to 1% of the gross proceeds of all Shares sold. In addition, Brazos
Securities, Inc. will receive sales commissions equal to 3% of the gross
proceeds of Shares sold to customers of Brazos Securities, Inc., and
individuals who otherwise purchase Shares that are assisted by Brazos
Securities, Inc. while purchasing such Shares.
Brazos Securities, Inc. will receive 10,000 warrants exercisable for
10,000 shares of common stock at $6.00 per share of common stock with an
expiration date of five years from the closing of the Offering and 10,000
warrants exercisable for 10,000 shares of common stock at $8.00 per share of
common stock with an expiration date of five years from the closing of the
Offering. The warrants will contain piggyback rights for registration of the
underlying common stock when the Company files its next registration statement.
Brazos Securities, Inc. will receive payment for all reasonable
expenses incurred in the Offering including but not limited to filing fees and
costs associated with registering Brazos Securities, Inc. in states in which
Brazos Securities, Inc. is requested to offer Shares by the Company.
All funds received by the Underwriter(s) will be transmitted not later
than noon on the first business day after receipt, to River Oaks Trust Company,
according to terms of an Escrow Agreement with River Oaks Trust Company. All
checks from investors must be made payable to "Planned Marketing Associates,
Inc. -- Escrow Account."
Subscriptions for Shares will be held in an interest bearing escrow
account pending receipt by the Company of the minimum $1,500,000 (or 300,000
Shares) in subscriptions for Shares and pending acceptance of the subscription
and will be returned promptly with interest, if the minimum is not achieved, if
the subscription for Shares is not accepted by the Company or if the Offering
is otherwise terminated by the Company. The Company intends to accept valid
subscriptions for Shares continuously during the Offering Period, after
achievement of the minimum amount of Share subscriptions. The Company reserves
the right to restrict or reduce the amount of Shares sold to any subscriber.
LITIGATION
The Company is not a party to any pending litigation and is not aware
of any threatened litigation.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Shares
offered hereby are being passed upon by the Company by Malouf Lynch Jackson
Kessler & Collins, P.C., Dallas, Texas.
EXPERTS
The financial statements of the Company which appear in this
Prospectus have been included, to the extent and for the periods indicated in
its reports, in reliance upon the report
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of Lightfoot Guest Wagner & Co., P.C., independent certified public accountants
appearing elsewhere herein, and upon the authority of such firm as experts in
accounting and auditing.
INDEMNIFICATION
The corporation shall indemnify and advance expenses to, in accordance
with applicable law, particularly Article 2.02-1 of the Texas Business
Corporation Act, any person who was, is, or is threatened to be made a named
defendant or respondent in a proceeding because he is or was a director or
advisory director of the corporation, or because, while a director of the
corporation, he is or was serving at the request of the corporation as a
director, advisory director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise. Such person shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the Texas
Business Corporation Act or the Texas Miscellaneous Corporation Laws Act, as
the same may exist or may hereafter be amended but, in the case of any such
amendment, only to the extent such amendment permits the corporation to provide
broader indemnification than said laws permitted the corporation to provide
prior to such amendment.
If a claim is not paid in full by the corporation within thirty (30)
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring an action against the corporation to recover
the unpaid amount of the claim and, if successful, the claimant shall be
entitled to his expenses of prosecuting such claim. It shall be a defense to
any such action that the claimant has not met the standards of conduct required
for such indemnification under the Texas Business Corporation Act or the Texas
Miscellaneous Corporation Laws Act.
To the extent required by applicable law, the corporation shall
indemnify and advance expenses to an advisory director, officer, employee or
agent who is not a director, or to persons who are not or were not directors,
officers, employees or agents of the corporation, but who are or were serving
at the request of the corporation as a director, advisory director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise. Further,
the corporation may indemnify and advance expenses to advisory directors,
officers, employees, agents or such persons, who are not directors, to the same
extent that it may indemnify and advance expenses to directors, but only to
such extent, consistent with law, as may be provided by its Articles of
Incorporation, Bylaws, general or specific action of the board of directors, or
contract or as permitted or required by common law.
The corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, advisory
director, officer, employee, or agent of the corporation or who is or was
serving at the request of the corporation as a director, advisory director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, against any liability asserted against him and incurred
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<PAGE> 40
by him in such a capacity or arising out of his status as such a person,
whether or not the corporation would have the power to indemnify him against
that liability under the Texas Business Corporation Act or the Texas
Miscellaneous Corporation Laws Act.
Any indemnification of or advance of expenses to a director of the
corporation shall be reported in writing to the shareholders with or before the
notice or waiver of notice of the next shareholders' meeting or with or before
the next submission to shareholders of a consent to action without a meeting
and, in any case, within the twelve (12) month period immediately following the
date of the indemnification or advance.
AVAILABLE INFORMATION
Pursuant to provisions of the 1933 Act, the Company has filed a
registration statement on Form SB-2 with the Securities and Exchange Commission
(file no. 333-2848) relating to the offer and sale of the Common Shares by
means of this Prospectus, which comprises part of such registration statement.
This Prospectus does not contain all the information set forth in the
registration statement, certain portions of which have been omitted from the
Prospectus as permitted by Commission rules and regulations. For further
information regarding the Company and the securities offered by this
Prospectus, reference is made to the registration statement on Form SB-2 and
its exhibits, which may be inspected without charge at the Commission's
principal office at 450 Fifth Street N.W., Judiciary Plaza, Washington D.C.
20549. Copies of such items may be obtained from the Commission upon payment
of prescribed fees.
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<PAGE> 41
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT AUDITORS F-2
Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996 (Unaudited) F-3
Statements of Income and Retained Earnings for the Years Ended December 31,
1994 and 1995 and the three months ended March 31, 1995 and 1996 (Unaudited) F-5
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995
and for the Three Months ended March 31, 1995 and 1996 (Unaudited) F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE> 42
[LIGHTFOOT GUEST WAGNER & CO. LETTERHEAD]
Report of Independent Auditors
The Board of Directors and Shareholders
Planned Marketing Associates, Inc.
We have audited the accompanying balance sheets of Planned Marketing
Associates, Inc. as of December 31, 1995 and 1994, and the related statements
of income and retained earnings 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.
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 Planned Marketing Associates,
Inc. at December 31, 1995 and 1994, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ LIGHTFOOT GUEST WAGNER & CO. P.C.
March 6, 1996
(March 18, 1996 as to Note 6)
F-2
<PAGE> 43
Planned Marketing Associates, Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 31,
December 31, 1996
1994 1995 (Unaudited)
-------------- --------------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 492,618 $ 979,380 $ 1,497,276
Accounts receivable - trade, less
allowance for doubtful accounts
of $22,750 225,043 177,094 286,165
Inventories 49,457 57,285 76,425
Prepaid expenses 14,176 115,167 209,390
-------------- --------------- --------------
Total current assets 781,294 1,328,926 2,069,256
Property and equipment, less
accumulated depreciation and
amortization of $106,982, $144,434,
and $157,184 in 1994,1995 and 1996,
respectively (Note 2) 99,331 144,051 211,434
Other assets:
Accounts receivable - affiliate (Note 4) - 30,000 30,000
Due from officers and shareholders 14,665 15,480 14,425
Due from employees 3,710 2,550 2,250
Other 1,496 1,986 1,986
-------------- --------------- --------------
Total other assets 19,871 50,016 48,661
-------------- --------------- --------------
Total assets $ 900,496 $ 1,522,993 $ 2,329,351
============== =============== ==============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 44
Planned Marketing Associates, Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 31,
December 31, 1996
1994 1995 (Unaudited)
-------------- --------------- --------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 86,048 $ 50,013 $ 64,494
Accrued expenses 11,032 71,896 151,094
Unearned revenue 314,223 953,236 1,198,109
-------------- --------------- --------------
Total current liabilities 411,303 1,075,145 1,413,697
-------------- --------------- --------------
Commitments and contingencies (Note 3) - - -
Shareholders' equity (Notes 5 and 6):
Preferred stock, $.01 par value,
5,000,000 shares authorized,
no shares issued - - -
Common stock, $.01 par value;
20,000,000 shares authorized;
100,000 shares and 3,2000,000
issued and outstanding in 1994,
1995 and 1996, respectively 1,000 32,000 32,000
Retained earnings 488,193 415,848 883,654
-------------- --------------- --------------
Total shareholders' equity 489,193 447,848 915,654
-------------- --------------- --------------
Total liabilities and shareholders' equity $ 900,496 $ 1,522,993 $ 2,329,351
============== =============== ==============
</TABLE>
See notes to financial statements.
F-4
<PAGE> 45
Planned Marketing Associates, Inc.
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
Three Months Ended March 31,
Years Ended December 31, (Unaudited)
1994 1995 1995 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Professional education and
seminars $ 1,975,501 $ 4,048,256 $ 967,029 $ 1,545,791
Merchandise sales 295,993 427,629 52,732 120,333
Other 14,888 63,221 8,821 18,621
-------------- -------------- -------------- --------------
Total revenues 2,286,382 4,539,106 1,028,582 1,684,745
-------------- -------------- -------------- --------------
Costs and expenses:
Professional education and
seminars 986,814 1,873,700 415,452 730,899
Cost of merchandise sold 75,013 119,028 15,059 26,538
Selling and marketing 189,800 287,842 39,259 117,162
Office and administrative 627,458 1,251,487 228,858 342,340
-------------- -------------- -------------- --------------
Total costs and expenses 1,879,085 3,532,057 698,628 1,216,939
-------------- -------------- -------------- --------------
Net income 407,297 1,007,049 $ 329,954 467,806
==============
Retained earnings, beginning
of period 169,156 488,193 415,848
Stock split (Note 5) - (31,000) -
Distributions to shareholders
(Note 5):
Withdrawals for tax
payments (11,000) (723,426) -
Other, including monthly
distributions (77,260) (324,968) -
-------------- -------------- --------------
Retained earnings, end
of period $ 488,193 $ 415,848 $ 883,654
============== ============== ==============
</TABLE>
See notes to financial statements.
F-5
<PAGE> 46
Planned Marketing Associates, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31,
Years Ended December 31, (Unaudited)
1994 1995 1995 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flow from operating
Activities:
Net income $ 407,297 $ 1,007,049 $ 329,954 $ 467,806
Adjustments to reconcile
net income to net cash
provided by operating
activities -
Depreciation and
amortization 20,292 39,691 9,923 12,750
Changes in operating assets
and liabilities:
Accounts receivable (114,505) 47,949 (17,797) (109,071)
Due from officers and
shareholders 7,131 (815) (67,334) 1,055
Inventories (39,457) (7,828) (7,357) (19,140)
Prepaid expenses 11,801 (100,991) (19,338) (94,223)
Other assets (5,196) 670 300 300
Accounts payable 24,800 (36,035) 23,550 14,481
Accrued expenses 2,461 60,864 285,089 79,198
Unearned revenue 225,297 (639,013) (162,355) 244,873
-------------- -------------- -------------- --------------
Net cash provided by operating
activities 539,921 1,649,567 374,635 598,029
-------------- -------------- -------------- --------------
Cash flow from investing activities:
Account receivable - affiliate - (30,000) - -
Purchase of property and
equipment (35,950) (84,411) (16,740) (80,133)
-------------- -------------- -------------- --------------
Net cash used in investing activities (35,950) (114,411) (16,740) (80,133)
-------------- -------------- -------------- --------------
Cash flow from financing activities -
Distributions to shareholders (88,260) (1,048,394) - -
-------------- -------------- -------------- --------------
Net cash used in financing activities (88,260) (1,048,394) - -
-------------- -------------- -------------- --------------
Net increase (decrease) in cash
and cash equivalents 415,711 486,762 357,895 517,896
Cash and cash equivalents,
beginning of period 76,907 492,618 492,618 979,380
-------------- -------------- -------------- --------------
Cash and cash equivalents,
end of period $ 492,618 $ 979,380 $ 850,513 $ 1,497,276
============== ============== ============== ==============
</TABLE>
See notes to financial statements.
F-6
<PAGE> 47
PLANNED MARKETING ASSOCIATES, INC.
Notes to Financial Statements
December 31, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Planned Marketing Associates, Inc. (the "Company"), a Texas corporation, was
incorporated on November 30, 1988. The Company, a professional development
corporation, was organized to present educational services and marketing and
sales training by sponsoring seminars, lectures, speeches and other related
activities to professional associations, their members, and other interested
parties at locations throughout North America. Approximately 80% of the
Company's revenues are generated from services and products for the dental
profession.
BASIS OF PRESENTATION
The accompanying financial statements are prepared on the accrual basis.
Professional education and seminar fees and directly related expenses are
deferred and recognized upon presentation of the seminar. Service program
revenues and newsletter subscriptions are recognized over the period of the
programs which range from six months to one year, or the term of subscription
which ranges from one to two years. Merchandise sales are recognized on date
of shipment. Certain reclassifications have been made to amounts reported in
the prior year to conform to current year presentation.
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenue and expenses.
CASH EQUIVALENTS
The Company considers all investments in money market accounts to be cash
equivalents.
ALLOWANCE FOR BAD DEBTS
The Company performs periodic reviews of its accounts receivable and provides
an allowance for losses on such receivables which have historically been within
management's expectations.
INVENTORY
The Company's inventories consist of merchandise purchased for resale and/or
distributed to attendees at the seminars. Inventories are carried at the lower
of cost (determined on first in, first out basis) or market.
F-7
<PAGE> 48
PLANNED MARKETING ASSOCIATES, INC.
Notes to Financial Statements (continued)
December 31, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight-line and accelerated methods over the assets'
estimated useful lives of 3 to 7 years. Leasehold or similar improvements are
amortized over the term of the lease unless the useful life is a shorter
period.
INCOME TAXES
The Company, under the provisions of the Internal Revenue Code, elected to be
taxed as an "S" corporation. No corporate income taxes are paid as the
shareholders are taxed individually on their proportionate share of the
Company's taxable income, which includes unearned revenue. Under such
election, the Company's federal income or loss, on a cash basis, and tax
credits were passed through to the individual shareholders.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
-------------- --------------
<S> <C> <C>
Data processing equipment and software $ 138,496 $ 65,105
Furniture, office and other equipment 89,870 84,139
Automobiles 52,544 52,544
Leasehold improvements 7,575 4,525
-------------- --------------
Total 288,485 206,313
Less accumulated depreciation and amortization (144,434) (106,982)
-------------- --------------
$ 144,051 $ 99,331
============== ==============
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
The Company has entered into operating leases for automobiles and other office
equipment. Future minimum lease payments under operating leases at December
31, 1995 are as follows:
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1996 7,985
1997 7,985
1998 1,182
1999 -
</TABLE>
F-8
<PAGE> 49
PLANNED MARKETING ASSOCIATES, INC.
Notes to Financial Statements (continued)
December 31, 1995 and 1994
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Rental expense for operating leases (except those with related parties and with
lease terms of a month or less) aggregated approximately $8,000 for each of the
years ended December 31, 1995 and 1994.
4. RELATED PARTY TRANSACTIONS
The Company occupied facilities during 1994, in which certain of its courses
and seminars were conducted, that were owned by the major shareholder of the
Company. The Company agreed to pay operating expenses (including taxes,
insurance, and utilities), maintenance, cleaning, and other household occupancy
costs in lieu of payment of rent. Such expenses for the use of this facility
aggregated approximately $86,000 and $94,000 for the years ended December 31,
1994 and 1995, respectively.
Effective January 1, 1995, the Company entered into a triple net lease
agreement with its major shareholder for the lease of these facilities. Such
lease is for a ten year period ending in 2004 with two ten year renewal options
and requires a monthly fixed rental of $8,000.
During 1995, the Company purchased goods and services aggregating $102,000 from
companies associated with the brother of the President of the Company.
The Company has made an advance to a fifty-percent owned, non-consolidated
subsidiary and receives a royalty ($12,000 in 1995) from video presentations by
Company presenters and guests.
5. OTHER MATTERS
The Company maintains its cash in bank deposit accounts which, at times, may
exceed the federally insured limits. The Company has not experienced any
losses in such accounts. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.
In January 1996, the Company's shareholders approved an amendment to the
Company's Certificate of Incorporation authorizing the issuance of five million
shares of Preferred stock and increasing the number of authorized shares of
common stock from one million to twenty million shares. In connection
therewith, the Company approved a thirty-two to one stock split, thereby
increasing the outstanding shares to 3.2 million from 100,000. All share
amounts reflect the stock split.
A significant portion of the distributions to shareholders represents amounts
used to pay their Federal income taxes for income earned during the period of
time the Company was taxed as an "S" corporation under provisions of the
Internal Revenue Code.
F-9
<PAGE> 50
PLANNED MARKETING ASSOCIATES, INC.
Notes to Financial Statements (continued)
December 31, 1995 and 1994
6. SUBSEQUENT EVENT
During 1996, the Company adopted a stock option plan providing for the granting
of stock options to officers and key employees. Compensation expense will not
be recognized at the time the options are granted because the option price per
share will represent the market value of the share at the date of grant. The
Plan permits the granting of options to purchase up to 100,000 shares of common
stock. Such options will become exercisable over a five year period from date
of grant.
In addition, the Company reserved 100,000 warrants to be granted to the Board
of Directors and 100,000 to be granted to the Advisory Board of Directors with
the expiration date and exercise price to be determined on the date of grant.
The Company entered into employment contracts with the Chairman of the Board
and President that expire January 31, 2001 and contain additional one year
renewal options unless either party gives written notice prior to their
expiration. The officers have agreed not to compete with the Company in the
event of termination of their contracts for a period of two years following the
date of termination nor use Company trade secrets or proprietary information in
any other activity.
INTERIM RESULTS (UNAUDITED)
The accompanying balance sheet as of March 31, 1996 and related statements of
income and retained earnings and cash flows for the three months ended March
31, 1995 and 1996, are unaudited. In the opinion of management, these
statements have been prepared on the same basis as the audited financial
statements and include all adjustments necessary (consisting only of normal
recurring adjustments) for the fair presentation of financial position, results
of operations and cash flows. The results of operations for the three months
ended March 31, 1996 are not necessarily indicative of the results which may be
expected for an entire year.
The following disclosures relate to the aforementioned unaudited interim
financial statements:
1. On March 29, 1996 the Company filed a Registration Statement on Form
SB-2 with the Securities and Exchange Commission ("SEC") to register a
minimum of 300,000 Shares or a maximum of 800,000 Shares of the
Company's common stock. The above referenced filing is Subject to
Completion and has not been approved by the SEC.
2. On January 30, 1996 the Company granted warrants to purchase a total of
50,000 shares at the following prices:
<TABLE>
<S> <C> <C> <C> <C>
Price per Share $5.00 $7.50 $8.75 $10.00
Number of Shares 15,000 15,000 10,000 10,000
</TABLE>
These warrants are currently exercisable and expire five years after
issuance.
F-10
<PAGE> 51
PLANNED MARKETING ASSOCIATES, INC.
Notes to Financial Statements (continued)
December 31, 1995 and 1994
INTERIM RESULTS (UNAUDITED) (CONTINUED)
3. In April 1996, the Company made distributions of $150,000 to
shareholders for their use in making estimated quarterly Federal income
tax payments on income earned during the time the Company expects to be
taxed as an "S" corporation under provisions of the Internal Revenue
Code.
F-11
<PAGE> 52
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Underwriter.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Company since the date hereof or that the information
contained herein is correct as of any date subsequent to the date hereof. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any securities offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making the
offer is not qualified to do so or to anyone to whom it is unlawful to make
such offer or solicitation.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary . . . . . . . . . . . . . . . . . . . 3
Summary Financial Data . . . . . . . . . . . 5
Risk Factors . . . . . . . . . . . . . . . . 6
Dilution . . . . . . . . . . . . . . . . . . 9
Use of Proceeds . . . . . . . . . . . . . . . 12
Dividend Policy . . . . . . . . . . . . . . . 12
Capitalization . . . . . . . . . . . . . . . 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 14
Business . . . . . . . . . . . . . . . . . . 16
Security Ownership of Certain
Beneficial Owners and Management . . . . . 25
Management . . . . . . . . . . . . . . . . . 25
Description of Securities . . . . . . . . . . 33
Certain Transactions . . . . . . . . . . . . 34
Plan of Distribution . . . . . . . . . . . . 35
Litigation . . . . . . . . . . . . . . . . . 35
Legal Matters . . . . . . . . . . . . . . . . 36
Experts . . . . . . . . . . . . . . . . . . . 36
Indemnification . . . . . . . . . . . . . . . 36
Available Information . . . . . . . . . . . . 37
Financial Statements . . . . . . . . . . . . F-1
</TABLE>
_______________
================================================================================
================================================================================
300,000 SHARES
PLANNED MARKETING
ASSOCIATES, INC.
COMMON STOCK
------------
PROSPECTUS
------------
, 1996
================================================================================
<PAGE> 53
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall indemnify and advance expenses to, in accordance
with applicable law, particularly Article 2.02-1 of the Texas Business
Corporation Act, any person who was, is, or is threatened to be made a named
defendant or respondent in a proceeding because he is or was a director or
advisory director of the corporation, or because, while a director of the
corporation, he is or was serving at the request of the corporation as a
director, advisory director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise. Such person shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the Texas
Business Corporation Act or the Texas Miscellaneous Corporation Laws Act, as
the same may exist or may hereafter be amended but, in the case of any such
amendment, only to the extent such amendment permits the corporation to provide
broader indemnification than said laws permitted the corporation to provide
prior to such amendment.
If a claim is not paid in full by the corporation within thirty (30)
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring an action against the corporation to recover
the unpaid amount of the claim and, if successful, the claimant shall be
entitled to his expenses of prosecuting such claim. It shall be a defense to
any such action that the claimant has not met the standards of conduct required
for such indemnification under the Texas Business Corporation Act or the Texas
Miscellaneous Corporation Laws Act.
To the extent required by applicable law, the corporation shall
indemnify and advance expenses to an advisory director, officer, employee or
agent who is not a director, or to persons who are not or were not directors,
officers, employees or agents of the corporation, but who are or were serving
at the request of the corporation as a director, advisory director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise. Further,
the corporation may indemnify and advance expenses to advisory directors,
officers, employees, agents or such persons, who are not directors, to the same
extent that it may indemnify and advance expenses to directors, but only to
such extent, consistent with law, as may be provided by its Articles of
Incorporation, Bylaws, general or specific action of the board of directors, or
contract or as permitted or required by common law.
The corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, advisory
director, officer, employee, or agent of the corporation or who is or was
serving at the request of the corporation as a director, advisory director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, against any liability asserted against him and incurred by him in
such a capacity or arising out of his status as such a person, whether or not
the
II-1
<PAGE> 54
corporation would have the power to indemnify him against that liability under
the Texas Business Corporation Act or the Texas Miscellaneous Corporation Laws
Act.
Any indemnification of or advance of expenses to a director of the
corporation shall be reported in writing to the shareholders with or before the
notice or waiver of notice of the next shareholders' meeting or with or before
the next submission to shareholders of a consent to action without a meeting
and, in any case, within the twelve (12) month period immediately following the
date of the indemnification or advance.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Document Exhibit Number
-------- --------------
<S> <C>
Registrant's Certificate of Incorporation . . . . . . . . 3.1
Registrant's Bylaws, as amended . . . . . . . . . . . . . 3.2
</TABLE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
the Common Stock being registered hereby. All amounts are estimates, except
the SEC registration fee.
<TABLE>
<CAPTION>
Item Amount
---- ------
<S> <C>
SEC registration fees . . . . . . . . . . . . . . . . . $ 1,379.32
NASD filing fees . . . . . . . . . . . . . . . . . . . 900.00
Blue Sky fees and expenses . . . . . . . . . . . . . . 31,000.00
Printing . . . . . . . . . . . . . . . . . . . . . . 4,000.00
Legal fees . . . . . . . . . . . . . . . . . . . . . . 35,000.00
Accounting Fees . . . . . . . . . . . . . . . . . . . . 32,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . 5,720.68
-----------
Total . . . . . . . . . . . . . . . . . . . . $110,000.00 *
</TABLE>
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
None
ITEM 27. EXHIBITS.
(a) EXHIBITS
<TABLE>
<S> <C>
1.1 Underwriting Agreement (3)
</TABLE>
II-2
<PAGE> 55
<TABLE>
<S> <C>
3.1 Articles of Incorporation, as amended to date (1)
3.2 Bylaws of Registrant (1)
4.1 Specimen certificate for common stock (3)
5.1 Opinion and Consent of Malouf Lynch Jackson Kessler &
Collins, P.C. (3)
10.1 1996 Incentive Stock Option Plan (3)
10.2 Lease, dated December 28, 1995, between Registrant
and Walter B. Hailey, Jr. (3)
10.3 Employment Contract with Walter B. Hailey, Jr. (3)
10.4 Employment Contract with Steven Anderson (3)
23.1 Consent of Independent Auditors (1)
23.2 Consent of Malouf Lynch Jackson Kessler & Collins,
P.C. (to be included as part of Exhibit 5.1) (3)
99.1 Escrow Agreement (3)
</TABLE>
(1) Previously filed.
(2) Amended herewith.
(3) New Exhibit.
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933, as amended.
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and notwithstanding the forgoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospects
filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of this
chapter) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
II-3
<PAGE> 56
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(c) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(d) That it will provide to the Underwriters at the closing of
this offering stock certificates in such denominations and registered in such
names as required by the Underwriters as to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers,
and controlling persons of the registrant, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action suit or proceeding) is asserted by such
officer, director, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by its is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 57
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Hunt,
State of Texas, on June 4, 1996.
Planned Marketing Associates, Inc.
----------------------------------
Steven J. Anderson, President
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signatures Date
- ---------- ----
<S> <C>
June 4, 1996
- --------------------------------------------
Walter B. Hailey, Jr.
Chairman, Secretary and Director
[Chief Executive Officer]
June 4, 1996
- --------------------------------------------
Steven J. Anderson
President, Treasurer and Director
[Principal Financial and Accounting Officer]
June 4, 1996
- --------------------------------------------
Ted W. Eubank
Director
June 4, 1996
- --------------------------------------------
David A. Keener
Director
</TABLE>
II-5
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1 Underwriting Agreement (3)
3.1 Articles of Incorporation, as amended to date (1)
3.2 Bylaws of Registrant (1)
4.1 Specimen certificate for common stock (3)
5.1 Opinion and Consent of Malouf Lynch Jackson Kessler &
Collins, P.C. (3)
10.1 1996 Incentive Stock Option Plan (3)
10.2 Lease, dated December 28, 1995, between Registrant
and Walter B. Hailey, Jr. (3)
10.3 Employment Contract with Walter B. Hailey, Jr. (3)
10.4 Employment Contract with Steven Anderson (3)
23.1 Consent of Independent Auditors (1)
23.2 Consent of Malouf Lynch Jackson Kessler & Collins,
P.C. (to be included as part of Exhibit 5.1) (3)
99.1 Escrow Agreement (3)
</TABLE>
(1) Previously filed.
(2) Amended herewith.
(3) New Exhibit.
<PAGE> 1
EXHIBIT 1.1
AGREEMENT
June 3, 1996
Brazos Securities, Inc.
5735 Pineland Drive, Suite 215
Dallas, Texas 75251
Gentlemen:
Planned Marketing Associates, Inc. (the "Company") hereby confirms its
agreement with you (the "Dealer") as follows:
1. Terms of the Offering.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company hereby appoints you as its Dealer for
the purpose of offering the shares of the Company's common
stock (the "Shares") on a "best efforts" basis. You agree to
use your best efforts to sell the Shares as the Company's
agent. It is understood and agreed that you have made no firm
commitment to purchase any of the Shares. The price of each
share of common stock is $5.00. The maximum number of Shares
to be offered is 800,000.
(b) Promptly after the effective date of the Company's
Registration Statement, you shall commence the offering of the
Shares for cash to the public in jurisdictions in which the
Shares are registered or qualified for sale or in which such
offering is otherwise permitted. Each person desiring to
purchase Shares will be required to complete and execute a
Subscription Agreement and to return such Subscription
Agreement to you with a check in the amount of the purchase
price of said Shares. Until 300,000 Shares are sold, you
shall promptly deposit all payments received by you in an
escrow account with the River Oaks Trust Company (the
"Escrow Agent"). Checks should be made payable to Planned
Marketing Associates, Inc. Escrow Account.
(c) If subscriptions for at least 300,000 Shares (the minimum
amount) have not been received and accepted during the period
ending November 30, 1996 (the "Minimum Subscription Period"),
the offering will terminate, no Shares will be sold, and all
funds, together with interest earned thereon, will be returned
to investors. If subscriptions for at least 300,000 Shares
are received and accepted during the Minimum Subscription
Period, the offering, if extended by the Company, shall
continue until February 28, 1997.
(d) Until subscriptions for the minimum number of Shares are
received and accepted, all prospective purchasers' funds
received by you will be placed in an escrow account with the
Escrow Agent. Upon the Company's receipt of subscriptions for
<PAGE> 2
at least 300,000 Shares, the Escrow Agent will release the
purchasers' funds to the Company.
2. Compensation. As compensation for the services rendered by you, the
Company agrees as follows:
(a) An underwriting fee equal to 1% of the gross proceeds of all
Shares sold.
(b) Sales commissions equal to 3% of the gross proceeds of shares
sold to customers of Dealer (including customers who became
customers of Dealer because of state law requirements that they
be represented by a broker/dealer).
(c) Sales commissions of 3% of the gross proceeds of Shares sold to
individuals investing through the Company (if permitted by
applicable state law), if such individuals are assisted by
Dealer while purchasing Shares.
(d) 20,000 Warrants exercisable for 20,000 shares of the Company's
common stock with an expiration of 5 years from the close of the
offering exercisable as follows:
10,000 at $6.00 per share of common stock
10,000 at $8.00 per share of common stock
These warrants will contain piggyback rights for Registration of
the underlying common stock when the Company files its next
registration statement.
(e) The items described in 2.(a) - 2.(d) will be payable only if
300,000 Shares are sold. Additionally, the Company agrees to pay
the reasonable expenses of the Dealer which are incurred in
relation to this Offering, whether or not the minimum is sold.
These expenses will be payable from time to time at the request
of the Dealer and may include, but not be limited to:
i. Filing fees and costs associated with registering the
Dealer in the states which Dealer is requested to
register by the Company.
ii. Salary, if any, paid to Joel Price if he becomes an
employee of Dealer until 300,000 Shares are sold. This
amount will be deducted from any commissions payable to
Joel Price, if any.
iii. Reimbursement of all travel and lodging expenses incurred
relating to the Offering.
iv. Miscellaneous expenses such as postage, stationery,
printing, copies, long distance phone charges, and
temporary employees, if any, relating to the Offering.
3. Indemnification. The Company agrees to indemnify and hold harmless
Brazos Securities, Inc. and each person, if any, who controls Brazos
Securities, Inc. against any and all losses, claims, damages, liabilities and
expenses to which Brazos Securities, Inc. or such controlling persons may
become subject under the 1933 Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or alleged untrue statement of material fact contained in
the Company's Registration Statement or Prospectus or are based upon the
omission or alleged omission to state a material fact necessary to make the
Prospectus not misleading.
4. Termination. This Agreement may be terminated by either party giving
the other party five (5) days' written notice. In the event of termination by
the Company, all fees due and payable Brazos Securities, Inc. through the date
of termination shall be paid.
Very truly yours,
PLANNED MARKETING ASSOCIATES, INC.
By:
------------------------------
Its: President
The foregoing is confirmed and accepted as of the date first above
written.
BRAZOS SECURITIES, INC.
By:
------------------------------
Its: President
-2-
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK PAR VALUE $.01
NUMBER SHARES
C
[PLANNED MARKETING ASSOCIATES, INC. LOGO]
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF TEXAS CUSIP
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE
OF $.01 EACH OF
PLANNED MARKETING ASSOCIATES, INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar. In
Witness Whereof, the Corporation has caused this Certificate to be endorsed by
the facsimile signatures of its duly authorized officers and to be sealed with
the facsimile seal of the Corporation.
Dated:
[ILLEGIBLE] [SEAL] [ILLEGIBLE]
PRESIDENT SECRETARY
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
---------------------------------------------
AMERICAN BANK NOTE COMPANY MAY 7, 1996
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 043875FC
(310) 989-2333
(FAX) (310) 426-7450 7B NEW
---------------------------------------------
<PAGE> 2
[PLANNED MARKETING ASSOCIATES, INC. LOGO]
THE ARTICLES OF INCORPORATION OF THE CORPORATION ON FILE IN THE OFFICE OF THE
SECRETARY OF STATE OF TEXAS SET FORTH FULL STATEMENTS OF (A) ALL OF THE
DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF THE SHARES OF
EACH CLASS AUTHORIZED TO BE ISSUED, THE VARIATIONS IN THE RELATIVE RIGHTS AND
PREFERENCES OF EACH SERIES OF PREFERRED STOCK (TO THE EXTENT THEY HAVE BEEN
FIXED AND DETERMINED) AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO FIX AND
DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES, AND (B) THE
DENIAL TO SHAREHOLDERS OF PREEMPTIVE RIGHTS TO ACQUIRE UNISSUED OR TREASURY
SHARES OF THE CORPORATION AND OF THE RIGHT OF CUMULATIVE VOTING. THE
CORPORATION WILL FURNISH A COPY OF SUCH STATEMENTS TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE ON WRITTEN REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - Custodian
-------- --------
(Cust) (Minor)
Under Uniform Gifts to Minors
Act
-----------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received,
-------------------------------------------------
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
- -------------------------------------- IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE,
OF ASSIGNEE
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named
Corporation, with full power of substitution in the premises.
Dated
---------------------------------
NOTICE: X
THE SIGNATURE(S) TO ---------------------------------------------------
THIS ASSIGNMENT MUST (SIGNATURE)
CORRESPOND WITH THE
NAME(S) AS WRITTEN
UPON THE FACE OF THE X
CERTIFICATE IN EVERY ---------------------------------------------------
PARTICULAR WITHOUT (SIGNATURE)
ALTERATION OR EN-
LARGEMENT OR ANY
CHANGE WHATEVER.
---------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
---------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
---------------------------------------------------
- ---------------------------------------------
AMERICAN BANK NOTE COMPANY MAY 7, 1996
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 043875BK
(310) 989-2333
(FAX) (310) 426-7450 NEW
- ---------------------------------------------
<PAGE> 1
EXHIBIT 5.1
[MALOUF LYNCH JACKSON KESSLER & COLLINS LETTERHEAD]
June 4, 1996
Planned Marketing Associates, Inc.
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
Gentlemen:
We have acted as counsel to Planned Marketing Associates, a Texas corporation
(the "Company") in connection with its proposed public offering of its common
stock for a maximum of 800,000 Shares (the "Shares"). We have examined
Registration Statement No. 333-2848 on Securities and Exchange Commission Form
SB-2 relating to the proposed offering (the "Registration Statement"), and such
other documents and records as we have considered necessary for the purposes of
this opinion. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to authentic originals of all documents submitted as certified or
authentic copies, and the accuracy of the facts stated in such documents.
Based upon our examination, in our opinion:
1. The corporation has been duly organized, is validly existing, and is
in good standing under the laws of Texas.
2. If and when the common stock is sold pursuant to the Registration
Statement, it will be duly authorized and validly issued and fully
paid and nonassessable.
3. The opinion is subject to the qualification that the stock is sold
pursuant to the Registration Statement and applicable state securities
laws and is further limited by the following: (i) the rights of
United States under the Federal Tax Lien Act of 1966, as amended; (ii)
principles of equity which may limit the availability of certain
equitable remedies; and (iii) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other laws applicable to
creditors' rights or the collection of debtors' obligations generally.
We hereby consent to be named in the Registration Statement, and in the
Prospectus which constitutes a part thereof, as counsel for the Company who
have passed upon legal matters in connection with the offering of the Shares.
We further consent to the filing of this opinion as an exhibit to the
Registration Statement.
Dated at Dallas, Texas this 4th day of June, 1996.
Respectfully,
MALOUF LYNCH JACKSON
KESSLER & COLLINS
<PAGE> 1
EXHIBIT 10.1
1996 INCENTIVE STOCK OPTION PLAN
OF
PLANNED MARKETING ASSOCIATES, INC.
Effective
February 29, 1996
Prepared By
Malouf Lynch Jackson Kessler & Collins, P.C.
8117 Preston Road, Suite 700
Dallas, Texas 75225
(214) 750-0722
<PAGE> 2
1996 INCENTIVE STOCK OPTION PLAN
OF
PLANNED MARKETING ASSOCIATES, INC.
Index
<TABLE>
<S> <C>
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.01. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.02. Interpretation of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.03. Liability of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.04. Indemnification of Committee . . . . . . . . . . . . . . . . . . . . . . . . 1
2.05. Administrative Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.01. Full Time Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.02. Limitation on Number of Options . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE IV. STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.01. Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.02. Maximum Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.03. Shares Subject to Expired Options . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE V. TERMS AND CONDITIONS OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
5.01. Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5.02. Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.03. Maximum Value of Stock Under an Option . . . . . . . . . . . . . . . . . . . 3
5.04. Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.05. Exercise, Time, and Payment . . . . . . . . . . . . . . . . . . . . . . . . 3
5.06. Term of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(1) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(2) Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(3) Right of Cumulation and Duration of Exercise . . . . . . . . . . . 3
5.07. Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.08. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(1) Applicable to Optionee . . . . . . . . . . . . . . . . . . . . . 4
(2) Stock Transfer Restriction Agreement . . . . . . . . . . . . . . . 4
5.09. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.10. Rights as a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.11. Modification, Extension and Renewal of Options . . . . . . . . . . . . . . . 4
5.12. Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.13. Delayed Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.14. Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.01. Effective Date of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.02. Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.03. Amendment of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.04. No Obligation to Exercise Option . . . . . . . . . . . . . . . . . . . . . . 5
6.05. Legend on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.06. Reference to Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.07. Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.09. Illegal or Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 4
1996 INCENTIVE STOCK OPTION PLAN
OF
PLANNED MARKETING ASSOCIATES, INC.
ARTICLE I. PURPOSE
1.01. General. This 1996 Incentive Stock Option Plan (the "Plan")
is intended to allow selected full time employees of Planned Marketing
Associates, Inc. (the "Company") or its subsidiaries to acquire or increase a
proprietary interest in the success of the Company.
1.02. Qualification. Options issued pursuant to this Plan (the
"Options") are intended to qualify for favorable tax treatment under Section
422 of the Internal Revenue Code of 1986, as amended ("Code"). However,
Options shall be enforceable whether or not the Options so qualify.
ARTICLE II. ADMINISTRATION
2.01. Administration. The Plan shall be administered by a committee
("Committee") appointed by the Board of Directors (the "Board") of the Company.
The Committee shall consist of at least two (2) non-employee, disinterested
members of the Board.
2.02. Interpretation of Plan. In its sole and absolute discretion,
the Committee shall administer, interpret and construe the Plan and all of its
provisions and all matters of any Option granted under it.
2.03. Administrative Rules. From time to time, the Committee shall
adopt rules or procedures that, in its sole and absolute discretion, it deems
appropriate to administer the Plan.
2.04. Liability of Committee. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option.
2.05. Indemnification of Committee. Each member of the Committee,
and any employee of a Company acting for, on behalf of, or at the direction of
the Company or the Committee shall be indemnified jointly and severally by the
Company against costs, expenses and liabilities (other than amounts paid in
settlement to which the Company does not consent) reasonably incurred by such
person in connection with any claim asserted against or any action to which
such person may be a party by reason of any action or omission related to the
Plan. However, this Section 2.05 shall not provide any indemnification
protection in relation to any matter as to which such person shall be finally
adjudged in a legal action to be personally guilty of gross negligence or
willful
- Page 1 -
<PAGE> 5
misconduct. The foregoing right to indemnification shall be in addition to any
other rights such person may enjoy as a matter of law or by reason of insurance
coverage of any kind, but shall not extend to costs, expenses and/or
liabilities otherwise covered by insurance or that would be so covered by any
insurance then in force if such insurance contained a waiver of subrogation.
Rights granted hereunder shall be in addition to and not in lieu of any rights
to indemnification to which the person may be entitled pursuant to the bylaws
of any Company.
ARTICLE III. ELIGIBILITY
3.01. Full Time Employees. The individuals eligible to receive
Options shall be those full time employees of the Company (whether or not they
are members of the Board) who are selected by the Committee, in its sole and
absolute discretion, to be granted an Option. For the purpose of this Plan,
those employees shall be referred to as "Optionees."
3.02. Limitation on Number of Options. An Optionee may hold more
than one Option, but only on the terms and subject to the restrictions embodied
in this Plan.
ARTICLE IV. STOCK
4.01. Description. The stock subject to the Options shall be shares
of the Company's $0.01 par value Common Stock (the "Stock"). As determined by
the Committee, shares issued pursuant to Options may be previously issued
shares which were reacquired and are held by the Company, authorized and
unissued shares, or any combination thereof.
4.02. Maximum Number of Shares. Subject to adjustment as provided
in Section 5.09, the aggregate number of shares of Stock which may be issued
under Options granted pursuant to this Plan shall be One Hundred Thousand
(100,000) shares.
4.03. Shares Subject to Expired Options. If any outstanding Option
for any reason expires, is terminated, or is not exercised, the shares of Stock
allocable to the unexercised portion of such Option may again be subject to an
Option.
ARTICLE V. TERMS AND CONDITIONS OF OPTIONS
5.01. Agreements. Options shall be authorized by the Committee and
shall be evidenced by a written agreement granting such stock options, which
agreement shall be executed by the Company and the Optionee, stating the number
of shares of Stock subject to the Option evidenced thereby and in such form as
the Committee may from time to time determine. Each Optionee shall agree that
the provisions of the Plan shall be binding on the Optionee and the Optionee's
estate, executors, heirs, administrators,
- Page 2 -
<PAGE> 6
legal representatives and successors, and no Option shall be transferable by
the Optionee.
5.02. Number of Shares. Each Option shall state the number of
shares of Stock to which it pertains.
5.03. Maximum Value of Stock Under an Option. The aggregate fair
market value at the time of grant of all the Stock for which any key employee
may first exercise an Option in any calendar year shall not exceed ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) plus any unused limit carryover amount permitted
under Code Section 422.
5.04. Option Price. The Board will determine the exercise price for
each share of Stock covered by any Option (the "Option Price"), which price
shall not be less than one hundred percent (100%) of the fair market value of
the Stock which is subject to the Option at the time such Option is granted.
The Committee shall have full authority and discretion to fix the Option price
and shall be fully protected in doing so.
5.05. Exercise, Time, and Payment. An Optionee shall exercise his
Option strictly in accordance with each grant thereof, by giving written notice
to that effect to the Company, specifying the number of shares, and
transmitting payment of the Option price. The Option price, determined
pursuant to Section 5.04 hereof, shall be paid to the Company in a form
satisfactory to the Company at the time of exercise. The Company shall, as
soon as reasonably practical thereafter, issue the Stock, subject to the
Company's rights to delay such issuance pursuant to this Plan. In no event
shall the Company be liable for any delay in issuing the Stock.
5.06. Term of Options.
(1) In General. Except as otherwise provided herein, no Option
shall be exercisable, either in whole or in part, prior to the time established
by the Committee in granting the Option.
(2) Other Terms. The Committee may permit any Option to be
exercised in installments and may accelerate the time for exercising any
outstanding Option in whole or in part. No Option shall be exercisable after
the expiration of ten (10) years from the date it is granted. The Option may
be exercised only by the Optionee or his or her legal guardian, executor,
administrator, other legal representative, heir or distributee.
(3) Right of Cumulation and Duration of Exercise. Except as
otherwise provided by the Code or in the written agreement evidencing the
Option, the rights to exercise an Option shall be cumulative and may be
exercised, in whole or in part, at any time after grant, but not later than ten
(10) years from the date the Option is granted, subject to the provisions and
limitations under Section 422 of the Code.
- Page 3 -
<PAGE> 7
5.07. Termination of Employment. If an Optionee ceases to be
employed by the Company for any reason, including death, any Option or portion
thereof which the Optionee may then exercise but which the Optionee has not
exercised as of the date of termination, or the date of death, as the case may
be, shall automatically then expire, and no person, including the Optionee,
shall thereafter have any rights with respect thereto. Whether authorized
leave of absence or absence for military or governmental service or any other
situation or circumstance shall constitute termination of employment for the
purposes of the Plan shall be determined by the Committee.
5.08. Restrictions.
(1) Applicable to Optionee. No Option, nor any rights therein,
shall be transferable by the Optionee (except by Will or the laws of descent
and distribution). An Option may be exercised only while the Optionee is
employed by the Company or a subsidiary or parent (as permitted under Section
422 of the Code) and only by the Optionee or any legal guardian or legal
representative of the Optionee.
(2) Stock Transfer Restriction Agreement. The Committee, in its
sole and absolute discretion, may condition the exercise of any Option or
purchase of any Stock upon the execution by the Optionee of a stock transfer
restriction agreement containing such terms, provisions, conditions, and
restrictions regarding the sale, assignment, transfer, pledge, hypothecation,
gift, transfer, or other disposition of all or any part of the Stock, as the
Committee may deem to be appropriate.
5.09. Adjustments. In the event of a reorganization,
recapitalization, change of shares, stock split, spin- off, stock dividend,
reclassification, subdivision or combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure or shares or
capital stock of the Company as it relates to the Stock, the Committee, subject
to the Board, may make such adjustment as it deems appropriate. Such
adjustments may include an adjustment to the number of shares of Stock which
may be issued under the Plan, the number of shares of Stock subject to Options
theretofore granted under the Plan, the option price of Options theretofore
granted under the Plan, and any and all other matters deemed appropriate by the
Committee.
5.10. Rights as a Stockholder. An Optionee shall have no rights as
a stockholder with respect to any shares of Stock covered by his Option until
the date of the issuance of a stock certificate to him or her for such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash, securities, or other property) or distributions or other rights for
which the record date is prior to the date the certificate representing the
Stock is issued, except as provided in Section 5.09 hereof.
5.11. Modification, Extension and Renewal of Options. Subject to
the terms and conditions of this Plan and the written agreement evidencing the
Option, the Committee may modify, extend, or renew outstanding Options granted
under the Plan or accept the
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<PAGE> 8
surrender of outstanding Options (to the extent not exercised) and authorize
the granting of new Options in substitution therefor (to the extent not
exercised).
5.12. Investment Purpose. Each Option under the Plan shall be
granted on the condition that, if so required by the Company, the purchases of
Stock thereunder shall be for investment purposes, and not with a view to
resale or distribution. In the event the Stock is registered under the
Securities Act of 1933, as amended, or in the event a resale of the Stock
without such registration would otherwise be permissible, such condition shall
be inoperative if in the opinion of counsel for the Company such condition is
not required under the Securities Act of 1933 or any other applicable law,
regulation, or rule of any governmental agency.
5.13. Delayed Issuance. Each Option shall be subject to the
requirement that if at any time the Committee shall determine that the listing,
registration, or qualification of the shares of Stock subject thereto upon any
securities exchange or under any state or federal law or the consent or
approval of any governmental regulatory body is necessary or desirable in
connection with the granting of such Option or the issue or purchase of Stock,
no such Option may be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
5.14. Other Provisions. The Option agreements authorized under the
Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Option, as the Committee shall deem
advisable.
ARTICLE VI. MISCELLANEOUS
6.01. Effective Date of the Plan. The Plan shall be effective on
the date adopted by the Board, following the approval of the Plan by the
shareholders of the Company.
6.02. Term of Plan. Options may be granted, from time to time,
within a period of ten (10) years after the date the Plan is adopted by the
Board.
6.03. Amendment of the Plan. The Board may, with respect to any
shares of Stock at the time not subject to any Options, suspend or discontinue
the Plan or amend it in any respect whatsoever. However, if the Plan is
submitted to and approved by the stockholders of the Company, no amendment to
the Plan which changes the number of shares subject to the Plan, changes the
designation of class of employees eligible to receive Options, or decreases in
the price at which an Option may be granted shall be effective until approved
by the stockholders.
6.04. No Obligation to Exercise Option. The grant of an Option
imposes no obligation upon the Optionee to exercise the Option.
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<PAGE> 9
6.05. Legend on Certificates. The Board or Committee may, at its
sole and absolute discretion, cause legends to be placed upon certificates
representing Stock (including certificates issued upon transfers) to properly
give notice of any matters contained herein or cause the Company's transfer
agent to place stop transfer orders against the transfer of such shares.
6.06. Reference to Code. Any reference in this Plan to specific
provisions of the Code shall include any amendments of or changes in such
provisions and also any similar successor provisions in future revenue laws.
6.07. Terms. All personal pronouns used in this Plan, whether the
masculine, feminine, or neuter gender, shall include all other genders; the
singular shall include the plural, and vice versa. Titles of articles and
sections are for convenience only and shall not be construed to either limit or
amplify the provisions of the Plan itself, and all references herein to
articles, sections, or subdivisions thereof shall refer to the corresponding
article, section, or subdivision thereof of this Plan unless specific reference
is made to articles, sections, or subdivisions of another document or
instrument.
6.08. Governing Law. THIS PLAN SHALL BE CONSTRUED UNDER AND IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND ALL OBLIGATIONS OF THE
PARTIES CREATED HEREUNDER ARE PERFORMABLE IN TARRANT COUNTY, TEXAS.
6.09. Illegal or Invalid Provisions. If any provision of this Plan
is held to be illegal, invalid, or unenforceable under present or future laws
in effect during the term hereof, such provision shall be fully severable.
This Plan shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, and the remaining
provisions shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its severance from this
Plan. Furthermore, in lieu of each such illegal, invalid, or unenforceable
provision, there shall be added automatically, as a part of this Plan, a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
DATE PLAN ADOPTED BY BOARD OF DIRECTORS: February 29, 1996
DATE PLAN APPROVED BY SHAREHOLDERS: February 29, 1996
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EXHIBIT 10.2
NET COMMERCIAL LEASE AGREEMENT
STATE OF TEXAS
COUNTY OF KERR
This Lease Agreement made and entered into by and between Walter B.
Hailey, Jr. or Barbara Dunbar Hailey, their successors or assigns hereinafter
referred to as "Landlord," and Planned Marketing Associates, Inc. hereinafter
referred to as "Tenant;"
WITNESSETH:
Landlord hereby leases to Tenant, and Tenant hereby takes from
Landlord the following described premises (hereinafter referred to as the
"demised premises") situated within the County of Kerr, State of Texas:
HWY 39, 9 miles west (on the Hill), Kerrville, TX
6 buildings
together with all rights, privileges, easements and appurtenances belonging to
or in any way pertaining to the demised premises and together with the building
and other improvements now situated or to be erected upon the demised premises.
TO HAVE AND TO HOLD the same for a term of ten years, with two ten
year renewal options beginning on January 1, 1995, upon the following terms,
conditions and covenants:
1. RENT:
Tenant agrees to pay Landlord rent for the demised premises at the
rate of Eight Thousand Dollars ($8,000.00) per month in advance. One such
monthly installment shall be due and payable on or before January 1, 1995, the
beginning date of this lease, and a like monthly installment shall be due and
payable on or before the first day of each succeeding calendar month during the
term hereof; provided that, in the event the term hereof shall commence or end
during a calendar month, the rent for any fractional calendar month following
the commencement or preceding the end of the term of this lease shall be
prorated by days. (If percentage rent is to be payable to Landlord, refer to
Exhibit A attached to this lease. In such case Exhibit A shall be incorporated
into and become a part of this lease when physically attached hereto.)
The monthly rental rate should be adjusted on an annual basis
commencing in January 1996 to reflect the increase in the Consumer Price Index
as published by the Bureau of Labor Statistics of the U.S. Department of Labor.
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Tenant has deposited with Landlord, upon delivery of this lease N/A
Dollars to be applied as follows:
(a) $ N/A for rent for
(b) $ N/A as a security deposit. Such security deposit
shall be held by Landlord without interest as security for the performance by
Tenant of Tenant's covenants and obligations under this lease. The security
deposit is not an advance payment of rental or the full measure of liquidated
damages in case of default by Tenant. Upon the occurrence of any event of
default, Landlord may, from time to time, without prejudice to any other remedy
provided herein or provided by law, use the security deposit in the extent
necessary to make good any arrears of rent and any other damage, injury,
expense or liability caused to Landlord by such event of default. Following
any such application of the security deposit, Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the security deposit to its
original amount. If Tenant is not in default, hereunder, any remaining balance
of such deposit shall be returned by Landlord to Tenant upon expiration or
termination of this lease.
2. ACCEPTANCE OF PREMISES:
Tenant acknowledges that it has fully inspected the demised premises
and accepts the demised premises, and any buildings and improvements situated
thereon, as suitable for the purposes for which the same are leased in their
present condition with no exceptions.
(If this lease provides for a building to be constructed for Tenant, refer to
Exhibit B attached to this lease. In such case this paragraph 2 shall become
inapplicable, and Exhibit B shall be incorporated into and become a part of
this lease when physically attached herein.)
3. USE OF PREMISES:
The demised premises shall be used and occupied only for the purpose
of Planned Marketing Associates, Inc.'s home office and related operations and
not otherwise. Tenant shall at its own expense obtain any and all governmental
licenses and permits necessary for such use.
4. COMPLIANCE WITH LAW:
Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the demised premises, and shall promptly
comply with all governmental orders and directives for the correction,
prevention and abatement of nuisances in or upon, or connected with the demised
premises, all at Tenant's sole expense.
5. REAL ESTATE TAXES:
(a) Tenant agrees to pay before they become delinquent all taxes
(both general and special), assessments or governmental charges of any kind and
nature whatsoever (hereinafter collectively referred to as the "taxes"), levied
or assessed against the premises or any part
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thereof. Tenant shall furnish to Landlord not later than twenty (20) days
before the date any such taxes become delinquent, official receipts of the
appropriate taxing authority or other evidence satisfactory to Landlord
evidencing payment thereof. If Tenant shall fail to pay any taxes,
assessments, or governmental charges required to be paid by Tenant hereunder,
in addition to any other remedies provided herein, Landlord may if it so elects
pay such taxes, assessments, and governmental charges. Any sums so paid by
Landlord shall be deemed to be so much additional rental owing by Tenant to
Landlord and due and payable on written demand by Landlord together with
interest thereon at the rate of ten percent (10%) per annum from date paid by
Landlord to date of repayment by Tenant.
(b) All real estate taxes and assessments on the demised premises
owned by Landlord shall be prorated between Landlord and Tenant with respect to
the tax years in which this lease commences or terminates. Tenant shall pay
that part of the real estate taxes attributable to the portion of the tax year
covered by this lease.
(c) In the event the premises constitute a portion of a multiple
occupancy building, in lieu of Tenant paying the "taxes" as above provided,
Landlord agrees to pay before they become delinquent all "taxes" lawfully
levied or assessed against such building and the grounds, parking areas,
driveways and alleys around the said building, and Tenant agrees to pay to
Landlord upon written demand the amount of Tenant's "proportional share" of all
such "taxes" paid by Landlord. Tenant's "proportionate share," as used
throughout this lease, shall mean a fraction, the numerator of which is the
space occupied by Tenant and the denominator of which is the entire gross space
contained in the building.
(d) Tenant may, alone or along with any other tenants of said
building, at its or their sole cost and expense, in its or their own name(s)
and/or in the name of the Landlord, dispute and contest any "taxes" by
appropriate proceedings diligently conducted in good faith, but only after
Tenant and all other tenants, if any, joining with Tenant in such contest have
deposited with Landlord the amount so contested and unpaid, or their
proportionate shares thereof as the case may be, which shall be held by
Landlord without obligations for interest until the termination of the
proceedings, at which time the amount(s) deposited shall be applied by Landlord
toward the payment of the items held valid (plus any court costs, interest,
penalties and other liabilities associated with the proceedings), and Tenant's
share of any excess shall be returned to Tenant. Tenant further agrees to pay
to Landlord upon demand Tenant's share (as among all tenants who participated
in the contest) of all court costs, interest, penalties and other liabilities
relating to such proceedings. Tenant hereby indemnifies and agrees to hold
harmless the Landlord from and against any cost, damage or expense, including
attorney's fees, in connection with any such proceedings.
(e) If at any time during the term of this Lease, the present
method of taxation shall be changed so that in lieu of the whole or any part of
any taxes, assessments, levies or charges levied, assessed or imposed on real
estate and the improvements thereon there shall be levied, assessed or imposed
on Landlord a capital levy or other tax directly on the rents received
therefrom and/or a franchise tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents or the present or any future
building or buildings on the premises,
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<PAGE> 4
then all such taxes, assessments, levies or charges, or the part thereof so
measured or based, shall be deemed to be included within the term "taxes" for
the purpose hereof.
6. REPAIRS AND MAINTENANCE:
(a) Tenant shall at its own cost and expense keep, maintain and
take good care of the premises and make all necessary repairs thereto, interior
and exterior, structural and non-structural, ordinary and extraordinary, and
shall suffer no waste or nuisance; provided, however, that the cost of
maintenance and repair of any common party wall (any wall, divider, partition
or any other structure separating the premises from any adjacent premises
occupied by other tenants) shall be shared equally by Tenant and the Tenant
occupying adjacent premises. Tenant shall not damage any party wall or disturb
the integrity and support provided by any party wall and shall, at its cost and
expense, promptly repair any damage or injury to any party wall caused by
Tenant or its employees, agents or invitees. At the end of the term or other
termination of this lease. Tenant shall deliver the premises with all
improvements thereon in good repair and condition, reasonable wear and tear
only excepted.
(b) Tenant shall at its own cost and expense care for the grounds
around the buildings on the premises, including the regular mowing of grass,
care of shrubs and general landscaping and maintenance of the parking areas,
driveways, alleys and shall maintain the whole of the premises in a clean and
sanitary condition.
(c) In the event the premises constitute a portion of a multiple
occupancy building, Tenant and its employees, customers, and licensees shall
have the nonexclusive right to use, in common with the other parties occupying
said building, the parking areas, driveways and alleys adjacent to said
building, subject to such reasonable rules and regulations as Landlord may from
time to time prescribe, and Tenant shall, in lieu of the obligations set forth
under subparagraph (b) above, be liable for its proportionate share of the cost
and expense of the care for the grounds around the said building, including but
not limited to, the mowing of grass, care of shrubs, general landscaping, and
maintenance of parking areas, driveways and alleys. Tenant shall at Landlord's
option either (i) pay when due its proportionate share of such costs and
expenses along with the other tenants of the building directly to the persons
performing such work, or (ii) reimburse Landlord upon demand for the amount of
its proportionate share of such costs and expenses in the event Landlord elects
to perform or cause to be performed such work.
(d) In the event the premises constitute a portion of a multiple
occupancy building, Landlord shall be responsible for coordinating any repairs
and other maintenance of any rail tracks serving or to serve the building, and
Tenant shall reimburse Landlord for Tenant's proportionate share of the costs
of such repairs and maintenance and any other sums specified in any agreement
to which Landlord is a party respecting such tracks.
(e) In the event Tenant shall fail to maintain the demised
premises or any paving, landscaping or railroad siding in accordance with this
paragraph 6, Landlord shall have the right (but not the obligation) to cause
all repairs or other maintenance to be made and the reasonable costs therefor
expended by Landlord shall be paid by Tenant on written demand.
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<PAGE> 5
7. ALTERATIONS, ADDITIONS AND IMPROVEMENTS:
Tenant shall not create any openings in the roof or exterior walls, or
make any alterations, additions or improvements to the demised premises without
prior written consent of Landlord. Consent for non-structural alterations,
additions or improvements shall not be unreasonably withheld by Landlord.
Tenant shall have the right to erect or install shelves, bins, machinery, air
conditioning or heating equipment and trade fixtures, provided that Tenant
complies with all applicable governmental laws, ordinances and regulations. At
the expiration or termination of this lease, Tenant shall have the right to
remove such items so installed, provided Tenant is not in default at the time
of such removal and provided further that Tenant shall, at the time of removal
of such items, repair in a good and workmanlike manner any damages caused by
installation or removal thereof.
Tenant shall pay for all costs incurred or arising out of alterations,
additions or improvement in or to the demised premises and shall not permit a
mechanic's or materialman's lien to be asserted against the demised premises.
Upon request by Landlord, Tenant shall deliver to Landlord proof of payment
reasonably satisfactory to Landlord of all costs incurred or arising out of any
such alterations, additions or improvements.
All alterations, additions or improvements in or to the demised
premises shall become the property of Landlord at the expiration or termination
of this lease, however, Landlord may direct the removal of alterations,
additions or improvements by giving written notice to Tenant prior to the
expiration or termination of this lease. At the direction of Landlord, Tenant
shall promptly remove all alterations, additions and improvements and any other
property placed in the demised premises by Tenant and Tenant shall repair in a
good and workmanlike manner any damage caused by such removal.
8. SIGNS:
Tenants shall not place or affix any signs or other objects upon or to
the roof or exterior walls of the demised premises or paint or otherwise deface
the exterior walls of the demised premises without the prior written consent of
Landlord. Any signs installed by Tenant shall conform with applicable laws and
deed and other restrictions. Tenant shall remove all signs at the termination
of this lease and shall repair any damage and close any holes caused or
revealed by such removal.
9. INSURANCE, FIRE AND CASUALTY DAMAGE:
(a) Tenant agrees to maintain insurance covering the building of
which the demised premises are a part in an amount not less than 90% (or such
greater percentage as may be necessary to comply with the provisions of any co-
insurance clauses of the policy) of the "replacement cost" thereof as such term
is defined in the Replacement Cost Endorsement to be attached thereto, insuring
against the perils of Fire, Lightning, Extended Coverage, Vandalism and
Malicious Mischief, extended by Special Extended Coverage Endorsement to insure
against all other Risks of Direct Physical Loss, such coverages and
endorsements to be as defined,
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<PAGE> 6
provided and limited in the standard bureau forms prescribed by the insurance
regulatory authority for the State in which the demised premises are situated
for use by insurance companies admitted in such state for the writing of such
insurance on risks located within such state. Subject to the provisions of
subparagraphs 9(b) and 9(e) below, such insurance shall be for the sole benefit
of Landlord and under its sole control. Tenant agrees to pay Landlord's cost
of maintaining such insurance on said building (or, in the event the premises
constitute a portion of a multiple occupancy building, Tenant's full
proportionate share of such cost). Said payments shall be made to Landlord
within ten days after presentation to Tenant of Landlord's statement setting
forth the amount due. Any payment to be made pursuant to this subparagraph (a)
with respect to the year in which this lease commences or terminates shall bear
the same ratio to the payment which would be required to be made for the full
year as that part of such year covered by the term of this lease bears to a
full year.
(b) If the buildings situated upon the premises should be damaged
or destroyed by any peril covered by the insurance to be provided by Landlord
under subparagraph 9(b) above, Tenant shall give immediate notice thereof to
Landlord and Landlord shall at its sole cost and expense thereupon proceed with
reasonable diligence to rebuild and repair such buildings to substantially the
condition in which they existed prior to such damage or destruction, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions or other improvements which may have been
placed in, on or about the premises by Tenant and except that Tenant shall pay
to Landlord upon demand any applicable deductible amounts specified under
Landlord's Insurance. The rent payable hereunder shall in no event abate by
reason of any damage or destruction.
(c) If the buildings situated upon the premises should be damaged
or destroyed by a casualty other than a peril covered by the insurance to be
provided by Landlord under subparagraph 9(a) above, or if any other
improvements situated on the demised premises should be in any manner damaged
or destroyed, Tenant shall at its sole cost and expense thereupon proceed with
reasonable diligence to rebuild and repair such buildings and/or improvements
to substantially the condition in which they existed prior to such damage or
destruction, subject to Landlord's approval of the plans and specifications for
such rebuilding and repairing, which approval shall not be unreasonably
withheld. Tenant's obligation hereunder shall not include destruction of the
premises by war, riot, civil disobedience, or flood.
(d) Tenant covenants and agrees to maintain insurance on all
alterations, additions, partitions and improvements erected by, or on behalf
of, Tenant in, on or about the demised premises in an amount not less than 90%
(or such greater percentage as may be necessary to comply with the provisions
of any co-insurance clause of the policy) of the "replacement cost" thereof as
such term is defined in the Replacement Cost Endorsement to be attached
thereto. Such insurance shall insure against the perils and be in form,
including stipulated endorsements, as provided in subparagraph 9(b) hereof.
Such insurance shall be for the sole benefit of Tenant and under its sole
control. All such policies shall be procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certified copies of policies of
such insurance, together with receipt evidencing payment of premiums therefor
shall be delivered to Landlord prior to the commencement date of this lease.
Not less than fifteen (15) days prior to the
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<PAGE> 7
expiration date of any such policies, certified copies of renewals thereof
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be cancelled or changed to reduce insurance provided thereby.
(e) Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed of trust covering
the premises required that the insurance proceeds be applied to such
indebtedness then the Landlord shall have the right to terminate this lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made by any such holder, whereupon all rights and
obligations hereunder shall cease and terminate.
10. WAIVER OF SUBROGATION:
Each party hereto waives any and every claim which arises or may arise
in its favor against the other party hereto during the term of this lease or
any renewal or extension thereof for any and all loss of, or damage to, any of
its property located within or upon, or constituting a part of, the demised
premises, which loss or damage is covered by valid and collectible fire and
extended coverage insurance policies, to the extent that such loss or damage is
recoverable under such insurance policies. Such mutual waivers shall be in
addition to, and not in limitation or derogation of, any other waiver or
release contained in this lease with respect to any loss of, or damage to,
property of the parties hereto. Inasmuch as such mutual waivers will preclude
the assignment of any aforesaid claim by way of subrogation or otherwise to an
insurance company (or any other person), each party hereby agrees immediately
to give to each insurance company which has issued to its policies of fire and
extended coverage insurance, written notice of the terms of such mutual
waivers, and to cause such insurance policies to be properly endorsed, if
necessary, to prevent the invalidation of such insurance coverages by reason of
such waivers.
Landlord and its authorized agents shall have the right, during normal
business hours, to enter the demised premises (a) to inspect the general
condition and state of repair thereof, (b) to make repairs required or
permitted under this lease, (c) to show the premises to any prospective tenant
or purchaser or (d) for any other reasonable purpose.
During the final 150 days of the lease term, Landlord and its
authorized agents shall have the right to erect and maintain on or about the
demised premises customary signs advertising the property for lease or for
sale.
12. UTILITY SERVICES:
Tenant shall pay the cost of all utility services, including but not
limited to initial connection charges, all charges for gas, water and
electricity used on the demised premises, and for all electric lights, lamps
and tubes.
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13. ASSIGNMENT AND SUBLEASING:
Tenant shall not, without the prior written consent of Landlord,
assign this lease or sublet the demised premises or any portion thereof. Any
assignment or subletting shall be expressly subject to all terms and provisions
of this lease, including the provisions of paragraph 3 pertaining to the use of
the demised premises. In the event of any assignment or subletting, Tenant
shall remain fully liable for the full performance of all Tenant's obligations
under this lease. Tenant shall not assign his rights hereunder or sublet the
premises without first obtaining a written agreement from assignee or sublessee
whereby assignee or sublessee agrees to be bound by the terms of this lease.
No such assignment or subletting shall constitute a novation. In the event of
the occurrence of an event of default while the demised premises are assigned
or sublet, Landlord, in addition to any other remedies provided herein or by
law, may at Landlord's option, collect directly from such assignee or subtenant
all rents becoming due under such assignment of subletting and apply such rent
against any sums due to Landlord hereunder. No direct collection by Landlord
from any such assignee or subtenant shall release Tenant from the performance
of its obligations hereunder.
14. INDEMNITY AND PUBLIC LIABILITY INSURANCE:
(a) Landlord shall not be liable to Tenant or Tenant's employees,
agents, patrons or visitors, or to any other person whomsoever, for any injury
to person or damage to property on or about the premises, caused by the
negligence or misconduct of Tenant, its agents, servants or employees, or of
any other person entering upon the premises under express or implied invitation
of Tenant, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant agrees to indemnify Landlord and hold it harmless from any loss,
expenses or claims including attorney's fees, arising out of any such damage or
injury, except injury to persons or damage to property the sole cause of which
is the negligence of the Landlord.
(b) Tenant shall procure and maintain throughout the term of this
lease a policy or policies of insurance, at its sole cost and expense, insuring
both Landlord and Tenant against all claims, demands, or actions arising out of
or in connection with: (i) the premises; (ii) the condition of the premises,
the limits of such policy or policies to be in the amount of not less than
$300,000 per person and $1,000,000 per occurrence in respect of injury to
persons (including death), and in the amount of not less than $50,000 per
occurrence in respect to property damage or destruction, including loss of use
thereof. All such policies, shall be procured by Tenant from responsible
insurance companies satisfactory to Landlord. Certified copies of such
policies, together with receipt evidencing of premiums therefor, shall be
delivered to payment Landlord prior to the commencement date of this lease.
Not less than fifteen (15) days prior to the expiration date of any such
policies, certified copies of the renewals thereof (bearing notations
evidencing the payment of renewal premiums) shall be delivered to Landlord.
Such policies shall further provide that not less than thirty (30) days written
notice shall be given to landlord before such policy may be cancelled or
changed to reduce insurance provided thereby.
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(c) If Tenant should fail to comply with the foregoing
requirements relating to insurance, Landlord may obtain such insurance, and
Tenant shall pay to Landlord on demand, as additional rental hereunder, the
premium cost thereof plus interest at the rate of ten percent (10%) per annum
from the date of payment by Landlord until repaid by Tenant.
15. CONDEMNATION:
A. If, during the term of this lease or any extension or renewal
thereof, all or a substantial part of the demised premises should be taken for
any public or quasi-public use under any governmental law, ordinance regulation
or by right of eminent domain, or should be sold to the condemnity authority
under threat of condemnation, this lease shall terminate and the rent shall be
abated during the unexpired portion of this lease, effective from the date of
taking of the demised premises by the condemnity authority.
B. If less than a substantial part of the demised premises is
taken for public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or is sold to the condemnity
authority under threat of condemnation, Landlord, at its option, may by written
notice terminate this lease or shall forthwith at its sole expense restore and
reconstruct the buildings and improvements (other than leasehold improvements
made by Tenant or any assignee, subtenant or other occupant of the demised
premises) situated on the demised premises in order to make the same reasonably
tenantable and suitable for the uses for which the demised premises are leased
as defined in paragraph 3. The rent payable hereunder during the unexpired
portion of this lease shall be adjusted equitable.
C. Landlord and Tenant shall be entitled to receive and retain
such separate awards and portions of lump sum awards as may be allocated to
their respective interests in any condemnation proceedings. The termination of
this lease shall not affect the rights of the respective parties to such
awards.
16. HOLDING OVER:
Should Tenant, or any of its successors in interest fail to surrender
the demised premises, or any part thereof, on the expiration of the term of
this lease, such holding over shall constitute a tenancy from month to month,
at a monthly rental equal to 150% of the rent paid for the last month of the
term of this lease unless otherwise agreed in writing.
17. DEFAULT BY TENANT:
The following events shall be deemed to be events of default under
this lease;
A. Failure of Tenant to pay any installment of the rent or other
sum payable to Landlord hereunder on the date that same is due and such failure
shall continue for a period of 10 days.
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B. Failure of Tenant to comply with any term, condition or
covenant of this lease, other than the payment of rent or other sum of money,
and such failure shall not be cured within 30 days after written notice thereof
to Tenant.
C. Insolvency, the making of a transfer in fraud of creditors, or
the making of an assignment for the benefit of creditors by Tenant or any
guarantor of Tenant's obligations.
D. Filing of a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of the
United States or any State thereof by Tenant or any guarantor of Tenant's
obligations or adjudication as a bankrupt or insolvent in proceedings filed
against Tenant or such guarantor.
E. Appointment of a receiver or trustee for all or substantially
all of the assets of Tenant or any guarantor of Tenant's obligation hereunder.
F. Abandonment by Tenant of any substantial portion of the
demised premises or cessation of the use of the demised premises for the
purpose leased.
18. REMEDIES OF LANDLORD:
Upon the occurrence of any of the events of default listed in Section
19, Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand whatsoever:
A. Terminate this lease, in which event Tenant shall immediately
surrender the demised premises to Landlord. If Tenant fails to so surrender
such premises, Landlord may, without prejudice to any other remedy which it may
have for possession of the demised premises or arrearages in rent, enter upon
and take possession of the demised premises and expel or remove Tenant and any
other person who may be occupying such premises or any part thereof, by force
if necessary, without being liable for prosecution or any claim for damages
therefor. Tenant shall pay to Landlord on demand the amount of all loss and
damage which Landlord may suffer by reason of such termination, whether through
inability to relet the demised premises on satisfactory terms or otherwise.
B. Enter upon and take possession of the demised premises, by
force if necessary, without terminating this lease and without being liable for
prosecution or for any claim for damages therefor, and expel or remove Tenant
and any other person who may be occupying such premises or any part thereof.
Landlord may relet the demised premises and receive the rent therefor. Tenant
agrees to pay to Landlord monthly or on demand from time to time any deficiency
that may arise by reason of any such reletting. In determining the amount of
such deficiency, the brokerage commission, attorney's fees, remodeling expenses
and other costs of reletting shall be subtracted from the amount of rent
received under such reletting.
C. Enter upon the demised premises, by force, if necessary,
without terminating this lease and without being liable for any prosecution or
for any claim for damages therefor, and
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<PAGE> 11
do whatever Tenant is obligated to do under the terms of this lease. Tenant
agrees to pay Landlord on demand for expenses which Landlord may incur in this
effecting compliance with Tenant's obligations under this lease, together with
interest thereon at the rate of 10% per annum from the date expended until
paid. Landlord shall not be liable for any damages resulting to the Tenant
from such action, whether caused by negligence of Landlord or otherwise.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by
law, nor shall pursuit of any remedy herein provided constitute a forfeiture or
waiver of any rent due to Landlord hereunder or of any damages accruing to
Landlord by reason of the violation of any of the terms, conditions and
covenants herein contained.
19. LANDLORD'S LIEN:
In addition to the statutory Landlord's lien, Tenant hereby grants to
Landlord a security interest to secure payment of all rent and other sums of
money becoming due hereunder from Tenant, upon all goods, wares, equipment,
fixtures, furniture and other personal property of Tenant situated in or upon
the demised premises, together with the proceeds from the sale or lease
thereof. Such property shall not be removed without the consent of Landlord
until all arrearages in rent and other sums of money then due to Landlord
hereunder shall first have been paid and discharged. Upon the occurrence of
any event of default, Landlord may, in addition to any other remedies provided
herein or by law, enter upon the demised premises and take possession of any
and all goods, wares, equipment, fixtures, furniture and other personal
property of Tenant situated on the premises without liability for trespass or
conversion, and sell the same at public or private sale, with or without having
such property at the sale, after giving Tenant reasonable notice of the time
and place of any such sale. Unless otherwise required by law, notice to Tenant
of such sale shall be deemed sufficient if given in the manner prescribed in
this lease at least 10 days before the time of the sale. Any public sale made
under this paragraph shall be deemed to have been conducted in a commercially
reasonable manner if held in the demised premises or where the property is
located, after the time, place and method of sale and a general description of
the types of property to be sold have been advertised in a daily newspaper
published in Kerr County, Texas, for five consecutive days before the date of
the sale. Landlord or its assigns may purchase at a public sale and, unless
prohibited by law, at a private sale. The proceeds from any disposition dealt
with in this paragraph, less any and all expenses connected with the taking of
possession, holding and selling of the property (including reasonable
attorney's fees and legal expenses), shall be applied as a credit against the
indebtedness secured by the security interest granted herein. Any surplus
shall be paid to Tenant or as otherwise required by law; Tenant shall pay any
deficiencies forthwith. Upon request by Landlord, Tenant agrees to execute and
deliver to Landlord a financing statement in form sufficient to perfect the
security interest of Landlord in the aforementioned property and proceeds
thereof under the provisions of the Uniform Commercial Code in force in the
State of Texas. The statutory lien for rent is expressly reserved; the
security interest herein granted is in addition and supplementary thereto.
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<PAGE> 12
20. ATTORNEY'S FEES:
If, on account of any breach or default by Landlord or Tenant of their
respective obligations under this lease, it shall become necessary for the
other to employ an attorney to enforce or defend any of its rights or remedies
hereunder, and should such party prevail, it shall be entitled to any
reasonable attorneys' fees incurred in such connection.
21. QUIET ENJOYMENT:
Landlord warrants that it has full right and power to execute and
perform this lease and to grant the estate demised herein and that Tenant, on
payment of rent and performing the covenants herein contained, shall peaceably
and quietly have, hold and enjoy the demised premises during the full term of
this lease and any extension or renewal hereof; provided, however, that Tenant
accepts this lease subject and subordinate to any recorded mortgage, deed of
trust or other lien presently existing upon the demised premises, Landlord is
hereby irrevocably vested with full power and authority to subordinate Tenant's
interest hereunder to any mortgage, deed of trust or other lien hereafter
placed on the demised premises, and Tenant agrees upon demand to execute such
further instruments subordinating this lease as Landlord may request, provided
such further subordination shall be upon the express condition that this lease
shall be recognized by the mortgagee and that the rights of Tenant shall remain
in full force and effect during the term of this lease so long as Tenant shall
continue to perform all of the covenants of this lease.
22. WAIVER OF DEFAULT:
No waiver by the parties hereto of any default or breach of any term,
condition or covenant of this lease shall be deemed to be waiver of any
subsequent default or breach of the same or any other term, condition or
covenant contained herein.
23. CERTIFICATE OF OCCUPANCY:
Tenant may, prior to the commence of the term of this lease, apply for
a Certificate of Occupancy to be issued by the municipality in which the
demised premises are located, but this lease shall not be contingent upon
issuance thereof. Nothing herein contained shall obligate Landlord to install
any additional electrical wiring, plumbing or plumbing fixtures which are not
presently existing in the demised premises, or which have not been expressly
agreed upon by Landlord in writing.
24. FORCE MAJEURE:
In the event performance by Landlord of any term, condition or
covenant in this lease is delayed or prevented by any Act of God, strike,
lockout, shortage of material or labor restriction by any governmental
authority, civil riot, flood, and any other cause not within the control of
Landlord, the period for performance of such term, condition or covenant shall
be extended for a period equal to the period Landlord is so delayed or
hindered.
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<PAGE> 13
25. EXHIBITS:
All exhibits, attachments, annexed instruments and addenda referred to
herein shall be considered a part hereof for all purposes with the same force
and effect as if copied at full length herein.
26. USE OF LANGUAGE:
Words of any gender used in this lease shall be held and construed to
include any other gender and words in the singular shall be held to include the
plural, unless the context otherwise requires.
27. CAPTIONS:
The captions or headings of paragraphs in this lease are inserted for
convenience only, and shall not be considered in construing the provisions
hereof if any question of intent should arise.
28. SUCCESSORS:
The terms, conditions and covenants contained in this lease shall
apply to, inure to the benefit of, and be binding upon the parties hereto and
their respective successors in interest and legal representatives except as
otherwise herein expressly provided. All rights, privileges, immunities and
duties of Landlord under this lease, including, but not limited to, any notices
required or permitted to be delivered by Landlord to Tenant hereunder, may, at
Landlord's option, be exercised or performed by Landlord's agent or attorney.
29. SUBLEASE:
If this lease is in fact a sublease, Tenant accepts this lease subject
to all of the terms and conditions of the lease under which Landlord holds the
demised premises as lessee. Tenant covenants that it will do no act or thing
which would constitute a violation by Landlord of its obligation under such
lease.
30. SEVERABILITY:
If any provision in this lease should be held to be invalid or
unenforceable, the validity and enforceability of the remaining provisions of
this lease shall not be affected thereby.
31. NOTICES:
Any notice or document required or permitted to be delivered hereunder
may be delivered in person or shall be deemed to be delivered, whether actually
received or not, when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested,
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<PAGE> 14
addressed to the parties at the addresses indicated below, or at such other
addresses as may have theretofore been specified by written notice delivered in
accordance herewith.
LANDLORD: Walter B. Hailey, Jr. or
Barbara Dunbar Hailey,
their successors or assigns
P. O. Box 345
Hunt, Texas 78024
TENANT: Planned Marketing Associates, Inc.
P. O. Box 345
Hunt, Texas 78024
32. SPECIAL CONDITIONS:
EXECUTED the 28th day of December, 1995.
ATTEST:
Tenant: Planned Marketing Associates, Inc.
- ------------------------
By:
-------------------------
Title:
-------------------------
ATTEST:
Landlord: Walter B. Hailey, Jr. and
- ------------------------ Barbara Dunbar Hailey
By:
-------------------------
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<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT made effective as of February 1, 1996 by and between PLANNED
MARKETING ASSOCIATES, INC. ("Company"), and WALTER B. HAILEY, JR.
("Executive"), an individual residing at Canyon Springs Ranch, West Drive,
Hunt, Texas 75028.
W I T N E S S E T H:
In consideration of the representations, warranties and covenants
hereinafter set forth, the Parties hereto, intending to be legally bound,
hereby agree be follows:
1. Employment. The Company agrees to employ Executive and
Executive agrees to serve (a) Company and (b) all subsidiaries of Company
("Affiliates") upon the terms and subject to the conditions hereinafter set
forth.
2. Effective Date of Agreement and Term. The effective date of
this Agreement and the term of employment of Executive under this Agreement
("Employment Term") shall commence on February 1, 1996 ("Effective Date").
Unless sooner terminated pursuant to Sections 6, 7, 8 and 9 hereof, the
Employment Term shall continue in full and effect until January 31, 2001;
provided, however, that the Employment Term shall continue for additional
periods of one (1) year unless and until either party shall give the other
Party not less than six (6) months written notice prior to the expiration of
the applicable Employment Term.
3. Duties and Nature of Executive's Services.
(a) The principal duties of Executive shall be to serve
as (i) Chairman of the Board of Directors of the
Company; and (ii) Secretary of the Company; and any
other office or capacity in which Executive shall
serve at the request of the Company. In such
capacity, Executive shall render such managerial,
administrative and other services as are customarily
associated with or incident to such position and
shall perform such other duties and responsibilities
for Company or as Company may reasonably require of
him consistent with his position. Nothing in this
Agreement shall preclude Executive from devoting time
during reasonable periods required for investing his
personal assets and/or those of family members in
such form or manner that will not violate this
Agreement. These activities will be permitted so
long as they do not materially adversely affect the
performance of Executive's duties and obligations to
Company.
(b) The principal place of employment of Executive shall
be the principal offices of Company in the Hunt,
Texas area. Executive acknowledges that in the
course of his employment hereunder he may be required
from time to time to travel on behalf of Company at
such times and to such places as are reasonable.
<PAGE> 2
4. Compensation.
(a) Salary. Commencing on the Effective Date and during
the Employment Term, Company agrees to pay Executive
a base salary of $90,000 per annum ("Base Salary"),
payable in accordance with the regular payroll
practices of Company.
(b) Executive Retirement and Incentive Plans. During the
Employment Term, Executive shall be entitled to
participate in Company's retirement plans and
supplemental retirement plans (including, but not
limited to, plans intended to qualify under Section
401(a) of the Internal Revenue Code of 1986, as
amended ("Code")) generally available from time to
time to employees of Company ("Retirement Plans") and
any incentive plans, programs or arrangements
available to executives and key employees ("Incentive
Plans").
(c) Bonus. The Board, in its sole discretion, may award
bonuses to Executive based upon Company's performance
and determined upon any criteria which the Board
shall select in its sole discretion.
(d) Health and Welfare Benefit Plans. Until the later of
(i) the expiration of the Employment Term or (ii)
Executive's termination of active employment with the
Company, Company shall provide Executive and his
spouse ("Spouse"), if applicable, ("Executive and his
Spouse" shall always be deemed to include the
qualifier "or the survivor of them") with major
medical, hospitalization, dental, short-term
disability, long-term disability, accidental, death
and dismemberment and life insurance benefits the
same or substantially the same (as applicable for
each benefit) as the coverage generally available
from time to time to active employees of Company
("Welfare Benefit Plans"). Company shall have the
right at any time and from time to time to change
insurance carriers and to modify or amend the scope
of coverage and other terms of Welfare Benefit Plans;
provided, however, that with respect to any
pre-existing conditions which may be added to any
Welfare Benefit Plan, Company shall (and shall
require its insurance carrier to) waive exceptions to
coverage for pre-existing conditions for Executive
and his Spouse.
5. Indemnification. Company will indemnify Executive to the
fullest extent permitted by applicable law, the articles of incorporation and
by-laws of Company.
6. Disability. If Executive shall be incapacitated by reason of
any mental or physical disability which prevents Executive from adequately
performing his duties hereunder for a continuous period of more than six (6)
months during the Employment Term, his active employment pursuant to this
Agreement and the Employment Term shall immediately terminate, and Executive
shall only be entitled to compensation pursuant to Section 4 hereof up to the
date of such termination and employee benefits in accordance with the terms of
the applicable
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<PAGE> 3
employee benefit plans. Compensatory benefits will vest, if applicable, for
termination due to disability by actual plan provision.
7. Death. In the event of the death of Executive during the
Employment Term hereunder, this Agreement and the Employment Term shall
automatically terminate and Company shall not have any further obligations to
Executive hereunder other than to pay to Executive's estate any compensation
then due and payable to Executive pursuant to Section 4 hereof through the date
of such termination and to pay lifetime major medical and hospitalization
benefits to Executive's Spouse as provided in Section 4(d) hereof. Any death
benefits payable on account of Executive's death shall be paid to the
appropriate beneficiaries in accordance with the terms of the applicable life
insurance policies. Compensatory benefits will vest, if applicable, for
termination due to death by actual plan provision.
8. Termination of Active Duties. Company shall, under this
Section 8, have the right to remove Executive from his position as an officer
or director of Company and terminate this Agreement as well as prohibit
Executive from being on the premises of Company, if Executive shall have
committed any of the acts or omissions listed below:
(a) the willful engaging by Executive of conduct which is
demonstrably and materially injurious to Company,
monetarily or otherwise, except any conduct which was
made by the express direction or instruction of the
Board of Directors of Company or was made by
Executive in good faith without the intent of causing
harm to Company; or
(b) a felony involving moral turpitude which Executive is
convicted with no further rights of appeal.
A removal of Executive as an officer or director pursuant to this Section 8.
will constitute a termination of this Agreement "for cause".
9. Change in Position, Duties or Geographical Location. A change
in the position, duties or geographical location of Executive made without the
consent of Executive during the Employment Term or a termination of this
Agreement by Company except pursuant to Section 8. shall, at the option of
Executive, constitute a termination of this Agreement "without cause".
10. Severance Payments. If this Agreement is terminated for cause
as described in Section 8, Executive shall not be entitled to any severance
payments. If this Agreement is terminated without cause as described in
Section 9 then Executive shall receive two (2) monthly payments each in an
amount equal to Executive's then current annual salary divided by twelve less
all normal and customary deductions. If Executive resigns then Executive shall
not be entitled to any severance.
11. Trade Secrets. Executive acknowledges that the Company has
developed valuable goodwill and presently is a leader in its industry.
Executive further expressly recognizes and agrees that the following items are
secret, proprietary, and confidential to the Company and constitute the
Company's trade secrets (the "Trade Secrets"):
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<PAGE> 4
(a) the names of past, present, and prospective clients
of the Company, including all records regarding
products and services furnished to them by the
Company; and
(b) the names of past, present, and prospective employees
of the Company; and
(c) the past, present, and prospective systems, records,
financial information, methods, procedures, and
techniques of the Company including all aspects of
its business, such as designing, installing,
maintaining, promoting, marketing, pricing,
advertising, selling, and franchising any products,
services, or training programs of the Company, and
further including all aspects of the management,
organization, and administration involved in the
operations of the Company's business, whether
provided to Executive by the Company or developed or
created by Executive or under Executive's direction
in pursuit of Executive's employment duties.
(d) Notwithstanding anything contained herein to the
contrary, Executive understands and agrees that
during the course of his employment by the Company,
Executive may participate in the preparation, writing
and/or production, either alone or along with other
executives or agents of Company, of audio and/or
video instructional or educational tapes, study
materials, computer software, articles, advertising
materials, recruiting materials, policies and
procedure manuals; and such materials and audio/video
tapes shall be the property of the company and
Executive shall have no rights to use, distribute,
copy or show above mentioned materials or tapes to
any third parties without Company's prior written
consent, nor shall Executive by entitled to receive
any commission, royalty, license or copyright fee or
any remuneration of any type both during and after
his employment for such preparation, writing and/or
production of the above mentioned materials and
types. Additionally, Executive gives his consent for
Company to use, in any way directly related to
Company's business, any of the above mentioned
materials in which Executive is a participant in any
way, without further consent from or further payment
to the Executive.
12. Nondisclosure of Trade Secrets. Executive agrees that
Executive will not, during the term of this Agreement or any time thereafter,
directly or indirectly disclose the Company's trade Secrets to any entity or
any person who is not an employee of the Company or who is not directly
connected with the Company unless expressly authorized to do so by the Board of
Directors of the Company.
13. Return of Trade Secrets and Other Property. On termination of
this Agreement, Executive will return to the Company all property of any nature
pertaining to the Company's Trade Secrets, including but not limited to all
books, audio cassettes, video cassettes, publications, articles, systems,
records, plans, designs, proposals, invoices, customer or prospect
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<PAGE> 5
lists, financial or customer data, photographs, advertisements, notes,
sketches, manuals, blueprints, notebooks, products, tools, fixtures, and all
other papers and tangible property, whether provided to Executive by the
Company or developed or created by Executive or under Executive's direction in
pursuit of Executive's employment duties under this Agreement. Executive
agrees that all such property will remain the exclusive property of the
Company, and Executive agrees that none of it will be copied, reproduced, or
removed from the premises of the Company except in the ordinary course of the
Company's business and in furtherance of the Company's interests. Executive
agrees that Executive will not sell, rent, deliver, pledge, grant a security
interest in or otherwise exhibit, encumber, or disclose any of such property to
anyone who is not an employee of the Company or who is not directly connected
with the Company except in the ordinary course of the Company's business and in
furtherance of the Company's interests.
14. Covenant Not to Compete. During the term of Executive's
employment and for a period of two (2) years following the date of termination
("the Restriction Period"), Executive agrees that Executive will not directly
or indirectly, in any capacity whatsoever, individually or on behalf of any
other person or entity, engage in any business activity that is in any way
competitive with the Company's business within a three hundred fifty (350) mile
radius of any office of the Company existing at the time of Executive's
termination.
15. Solicitation of Clients. Executive agrees that, during the
term of Executive's employment, Executive will receive valuable consideration
under this Agreement and will receive valuable consideration under this
Agreement and will have exposure and access to the Trade Secrets of the
Company. Therefore, during the Restriction Period, Executive will not solicit,
for purposes of any business activity any client for whom the Company has
performed services or provided products within one (1) year prior to the
termination of Executive's employment, or any prospective customer to who the
Company has made a proposal or prepared to make a proposal with one (1) year
prior to the termination of the Executive's employment without express written
consent of the Company. Executive agrees that during the Restriction Period,
Executive will not solicit any such customer or prospective customer to do
business with a competitor of the Company. Executive will not request or
advise any customer of the company to withdraw, curtail, or cancel such
customer's business with the Company.
16. Usage Charge. Notwithstanding the restrictions agreed upon
herein, if Executive uses the Client lists which are part of Company's Trade
Secrets and causes the Clients to use the services of some other entity for
services offered by the Company within 18 months of the effective date of
termination of Executive's employment, Executive agrees to pay Company for two
years an amount calculated as follows:
3 X Annual Net Revenue
where Annual Net Revenue is defined as the fees earned from Clients who
Executive furnishes services.
17. Relevant Portions of Books and Records. Executive consents to
allow Company to inspect or examine relevant portions of his or any entity
which he solely owns books, records,
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<PAGE> 6
or tax returns solely for the purpose of confirming any usage charge. Such
right to inspect relevant books and records may only be exercised by Company
upon 30 days written notice to Executive specifying the books and records to be
reviewed and Company's execution of a Confidentiality Agreement which is
acceptable to Executive.
18. Company's Remedies. EXECUTIVE AGREES THAT ALL OBLIGATIONS
IMPOSED UPON EXECUTIVE BY SECTIONS 11 THROUGH 17 SHALL SURVIVE THE TERMINATION
OF THE EMPLOYMENT RELATIONSHIP AND SHALL SURVIVE THE TERMINATION OF THIS
AGREEMENT FOR A PERIOD NOT TO EXCEED EIGHTEEN (18) MONTHS FOLLOWING THE
TERMINATION DATE OF EMPLOYMENT OF EXECUTIVE. If Executive breaches or
threatens to breach any term or provision contained in Sections 11 through 17
of this Agreement, Executive agrees that Company will be entitled to seek any
remedy at law or in equity. The right of Company to seek such relief will not
be construed to prevent Company from pursuing, either conjunctively or
concurrently, any other legal or equitable remedies available by contract, law,
or otherwise for such breach or threatened breach, nor to preclude Company from
seeking to recover damages from Executive.
19. Withholding. Anything to the contrary in this Agreement
notwithstanding, all payments required to be made by Company hereunder to
Executive or to his estate shall be subject to withholding of such amounts
relating to taxes as Company may reasonably determine it should withhold
pursuant to any applicable law or regulation. In lieu of withholding such
amount, in whole or in part, Company may, in its sole discretion, accept other
provisions for the payment of taxes as required by law, provided Company is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
20. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the employment by Company of
Executive, and supersedes any and all prior agreements, commitments and
understandings between them (whether oral or written) relating to such subject
matter. This Agreement may not be amended, changed or terminated, except
pursuant to an instrument in writing duly executed and delivered by Executive
and Company.
21. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
APPLICABLE TO INSTRUMENTS MADE, EXECUTED AND PERFORMED WHOLLY IN SUCH STATE.
22. Notice and Waiver of Breach and Cure. Pursuant to Section 22
herein, Company shall notify Executive of any alleged breach on the part of
Executive of this Agreement. In such event, Executive shall have the
opportunity to demonstrate to the Board that no breach has occurred, or, if
Executive can demonstrate that the breach was not made in bad faith, Executive
shall have a reasonable period of time to cure the violation to the
satisfaction of the Board which satisfaction shall not be unreasonably
withheld. A waiver by Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach by the other party.
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<PAGE> 7
23. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or mailed (by first class, postage prepaid
and certified mail, with return receipt requested)
to Company: Planned Marketing Associates
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
Attn: Steve Anderson
and to Executive:
Walter B. Hailey, Jr.
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
or at such other address as either of Company or Executive may designate to the
other.
24. Section Headings. The Section headings set forth in this
Agreement are for convenience only and shall not be considered to be a part of
this Agreement in any respect, nor shall they in any way affect the substance
of any provisions contained in this Agreement.
25. Successors and Assigns. This Agreement shall not be
assignable by Executive or Company except that Company shall be entitled to
assign this Agreement to any successor in connection with any merger,
consolidation or other corporate reorganization. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs and personal representatives of
Executive and the successors and assigns of Company.
26. Severability. If, at any time subsequent to the date hereof,
any provisions of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of
no force and effect, but the illegality or unenforceability of such provision
shall have no effect upon and shall not impair the enforceability of any other
provisions of this Agreement.
27. Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed to be an original and all
of which shall be deemed to be one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
----------------------------------
WALTER B. HAILEY, JR.
PLANNED MARKETING ASSOCIATES, INC.
By:
------------------------------
Name:
------------------------
Title:
-----------------------
-8-
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
AGREEMENT made effective as of February 1, 1996 by and between PLANNED
MARKETING ASSOCIATES, INC. ("Company"), and STEVE ANDERSON ("Executive"), an
individual residing at Canyon Springs Ranch, West Drive, Hunt, Texas 75028.
W I T N E S S E T H:
In consideration of the representations, warranties and covenants
hereinafter set forth, the Parties hereto, intending to be legally bound,
hereby agree be follows:
1. Employment. The Company agrees to employ Executive and
Executive agrees to serve (a) Company and (b) all subsidiaries of Company
("Affiliates") upon the terms and subject to the conditions hereinafter set
forth.
2. Effective Date of Agreement and Term. The effective date of
this Agreement and the term of employment of Executive under this Agreement
("Employment Term") shall commence on February 1, 1996 ("Effective Date").
Unless sooner terminated pursuant to Sections 6, 7, 8 and 9 hereof, the
Employment Term shall continue in full and effect until January 31, 2001;
provided, however, that the Employment Term shall continue for additional
periods of one (1) year unless and until either party shall give the other
Party not less than six (6) months written notice prior to the expiration of
the applicable Employment Term.
3. Duties and Nature of Executive's Services.
(a) The principal duties of Executive shall be to serve
as (i) Director of the Company; and (ii) President
and Treasurer of the Company; and any other office or
capacity in which Executive shall serve at the
request of the Company. In such capacity, Executive
shall render such managerial, administrative and
other services as are customarily associated with or
incident to such position and shall perform such
other duties and responsibilities for Company or as
Company may reasonably require of him consistent with
his position. Nothing in this Agreement shall
preclude Executive from devoting time during
reasonable periods required for investing his
personal assets and/or those of family members in
such form or manner that will not violate this
Agreement. These activities will be permitted so
long as they do not materially adversely affect the
performance of Executive's duties and obligations to
Company.
(b) The principal place of employment of Executive shall
be the principal offices of Company in the Hunt,
Texas area. Executive acknowledges that in the
course of his employment hereunder he may be required
from time to time to travel on behalf of Company at
such times and to such places as are reasonable.
<PAGE> 2
4. Compensation.
(a) Salary. Commencing on the Effective Date and during
the Employment Term, Company agrees to pay Executive
a base salary of $120,000 per annum ("Base Salary"),
payable in accordance with the regular payroll
practices of Company.
(b) Executive Retirement and Incentive Plans. During the
Employment Term, Executive shall be entitled to
participate in Company's retirement plans and
supplemental retirement plans (including, but not
limited to, plans intended to qualify under Section
401(a) of the Internal Revenue Code of 1986, as
amended ("Code")) generally available from time to
time to employees of Company ("Retirement Plans") and
any incentive plans, programs or arrangements
available to executives and key employees ("Incentive
Plans").
(c) Bonus. The Board, in its sole discretion, may award
bonuses to Executive based upon Company's performance
and determined upon any criteria which the Board
shall select in its sole discretion.
(d) Health and Welfare Benefit Plans. Until the later of
(i) the expiration of the Employment Term or (ii)
Executive's termination of active employment with the
Company, Company shall provide Executive and his
spouse ("Spouse"), if applicable, ("Executive and his
Spouse" shall always be deemed to include the
qualifier "or the survivor of them") with major
medical, hospitalization, dental, short-term
disability, long-term disability, accidental, death
and dismemberment and life insurance benefits the
same or substantially the same (as applicable for
each benefit) as the coverage generally available
from time to time to active employees of Company
("Welfare Benefit Plans"). Company shall have the
right at any time and from time to time to change
insurance carriers and to modify or amend the scope
of coverage and other terms of Welfare Benefit Plans;
provided, however, that with respect to any
pre-existing conditions which may be added to any
Welfare Benefit Plan, Company shall (and shall
require its insurance carrier to) waive exceptions to
coverage for pre-existing conditions for Executive
and his Spouse.
5. Indemnification. Company will indemnify Executive to the
fullest extent permitted by applicable law, the articles of incorporation and
by-laws of Company.
6. Disability. If Executive shall be incapacitated by reason of
any mental or physical disability which prevents Executive from adequately
performing his duties hereunder for a continuous period of more than six (6)
months during the Employment Term, his active employment pursuant to this
Agreement and the Employment Term shall immediately terminate, and Executive
shall only be entitled to compensation pursuant to Section 4 hereof up to the
date of such termination and employee benefits in accordance with the terms of
the applicable
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<PAGE> 3
employee benefit plans. Compensatory benefits will vest, if applicable, for
termination due to disability by actual plan provision.
7. Death. In the event of the death of Executive during the
Employment Term hereunder, this Agreement and the Employment Term shall
automatically terminate and Company shall not have any further obligations to
Executive hereunder other than to pay to Executive's estate any compensation
then due and payable to Executive pursuant to Section 4 hereof through the date
of such termination and to pay lifetime major medical and hospitalization
benefits to Executive's Spouse as provided in Section 4(d) hereof. Any death
benefits payable on account of Executive's death shall be paid to the
appropriate beneficiaries in accordance with the terms of the applicable life
insurance policies. Compensatory benefits will vest, if applicable, for
termination due to death by actual plan provision.
8. Termination of Active Duties. Company shall, under this
Section 8, have the right to remove Executive from his position as an officer
or director of Company and terminate this Agreement as well as prohibit
Executive from being on the premises of Company, if Executive shall have
committed any of the acts or omissions listed below:
(a) the willful engaging by Executive of conduct which is
demonstrably and materially injurious to Company,
monetarily or otherwise, except any conduct which was
made by the express direction or instruction of the
Board of Directors of Company or was made by
Executive in good faith without the intent of causing
harm to Company; or
(b) a felony involving moral turpitude which Executive is
convicted with no further rights of appeal.
A removal of Executive as an officer or director pursuant to this Section 8.
will constitute a termination of this Agreement "for cause".
9. Change in Position, Duties or Geographical Location. A change
in the position, duties or geographical location of Executive made without the
consent of Executive during the Employment Term or a termination of this
Agreement by Company except pursuant to Section 8. shall, at the option of
Executive, constitute a termination of this Agreement "without cause".
10. Severance Payments. If this Agreement is terminated for cause
as described in Section 8, Executive shall not be entitled to any severance
payments. If this Agreement is terminated without cause as described in
Section 9 then Executive shall receive two (2) monthly payments each in an
amount equal to Executive's then current annual salary divided by twelve less
all normal and customary deductions. If Executive resigns then Executive shall
not be entitled to any severance payments.
11. Trade Secrets. Executive acknowledges that the Company has
developed valuable goodwill and presently is a leader in its industry.
Executive further expressly recognizes and agrees that the following items are
secret, proprietary, and confidential to the Company and constitute the
Company's trade secrets (the "Trade Secrets"):
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<PAGE> 4
(a) the names of past, present, and prospective clients
of the Company, including all records regarding
products and services furnished to them by the
Company; and
(b) the names of past, present, and prospective employees
of the Company; and
(c) the past, present, and prospective systems, records,
financial information, methods, procedures, and
techniques of the Company including all aspects of
its business, such as designing, installing,
maintaining, promoting, marketing, pricing,
advertising, selling, and franchising any products,
services, or training programs of the Company, and
further including all aspects of the management,
organization, and administration involved in the
operations of the Company's business, whether
provided to Executive by the Company or developed or
created by Executive or under Executive's direction
in pursuit of Executive's employment duties.
(d) Notwithstanding anything contained herein to the
contrary, Executive understands and agrees that
during the course of his employment by the Company,
Executive may participate in the preparation, writing
and/or production, either alone or along with other
executives or agents of Company, of audio and/or
video instructional or educational tapes, study
materials, computer software, articles, advertising
materials, recruiting materials, policies and
procedure manuals; and such materials and audio/video
tapes shall be the property of the company and
Executive shall have no rights to use, distribute,
copy or show above mentioned materials or tapes to
any third parties without Company's prior written
consent, nor shall Executive by entitled to receive
any commission, royalty, license or copyright fee or
any remuneration of any type both during and after
his employment for such preparation, writing and/or
production of the above mentioned materials and
types. Additionally, Executive gives his consent for
Company to use, in any way directly related to
Company's business, any of the above mentioned
materials in which Executive is a participant in any
way, without further consent from or further payment
to the Executive.
12. Nondisclosure of Trade Secrets. Executive agrees that
Executive will not, during the term of this Agreement or any time thereafter,
directly or indirectly disclose the Company's trade Secrets to any entity or
any person who is not an employee of the Company or who is not directly
connected with the Company unless expressly authorized to do so by the Board of
Directors of the Company.
13. Return of Trade Secrets and Other Property. On termination of
this Agreement, Executive will return to the Company all property of any nature
pertaining to the Company's Trade Secrets, including but not limited to all
books, audio cassettes, video cassettes, publications, articles, systems,
records, plans, designs, proposals, invoices, customer or prospect
-4-
<PAGE> 5
lists, financial or customer data, photographs, advertisements, notes,
sketches, manuals, blueprints, notebooks, products, tools, fixtures, and all
other papers and tangible property, whether provided to Executive by the
Company or developed or created by Executive or under Executive's direction in
pursuit of Executive's employment duties under this Agreement. Executive
agrees that all such property will remain the exclusive property of the
Company, and Executive agrees that none of it will be copied, reproduced, or
removed from the premises of the Company except in the ordinary course of the
Company's business and in furtherance of the Company's interests. Executive
agrees that Executive will not sell, rent, deliver, pledge, grant a security
interest in or otherwise exhibit, encumber, or disclose any of such property to
anyone who is not an employee of the Company or who is not directly connected
with the Company except in the ordinary course of the Company's business and in
furtherance of the Company's interests.
14. Covenant Not to Compete. During the term of Executive's
employment and for a period of two (2) years following the date of termination
("the Restriction Period"), Executive agrees that Executive will not directly
or indirectly, in any capacity whatsoever, individually or on behalf of any
other person or entity, engage in any business activity that is in any way
competitive with the Company's business within a three hundred fifty (350) mile
radius of any office of the Company existing at the time of Executive's
termination.
15. Solicitation of Clients. Executive agrees that, during the
term of Executive's employment, Executive will receive valuable consideration
under this Agreement and will receive valuable consideration under this
Agreement and will have exposure and access to the Trade Secrets of the
Company. Therefore, during the Restriction Period, Executive will not solicit,
for purposes of any business activity any client for whom the Company has
performed services or provided products within one (1) year prior to the
termination of Executive's employment, or any prospective customer to who the
Company has made a proposal or prepared to make a proposal with one (1) year
prior to the termination of the Executive's employment without express written
consent of the Company. Executive agrees that during the Restriction Period,
Executive will not solicit any such customer or prospective customer to do
business with a competitor of the Company. Executive will not request or
advise any customer of the company to withdraw, curtail, or cancel such
customer's business with the Company.
16. Usage Charge. Notwithstanding the restrictions agreed upon
herein, if Executive uses the Client lists which are part of Company's Trade
Secrets and causes the Clients to use the services of some other entity for
services offered by the Company within 18 months of the effective date of
termination of Executive's employment, Executive agrees to pay Company for two
years an amount calculated as follows:
3 X Annual Net Revenue
where Annual Net Revenue is defined as the fees earned from Clients who
Executive furnishes services.
17. Relevant Portions of Books and Records. Executive consents to
allow Company to inspect or examine relevant portions of his or any entity
which he solely owns books, records,
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<PAGE> 6
or tax returns solely for the purpose of confirming any usage charge. Such
right to inspect relevant books and records may only be exercised by Company
upon 30 days written notice to Executive specifying the books and records to be
reviewed and Company's execution of a Confidentiality Agreement which is
acceptable to Executive.
18. Company's Remedies. EXECUTIVE AGREES THAT ALL OBLIGATIONS
IMPOSED UPON EXECUTIVE BY SECTIONS 11 THROUGH 17 SHALL SURVIVE THE TERMINATION
OF THE EMPLOYMENT RELATIONSHIP AND SHALL SURVIVE THE TERMINATION OF THIS
AGREEMENT FOR A PERIOD NOT TO EXCEED EIGHTEEN (18) MONTHS FOLLOWING THE
TERMINATION DATE OF EMPLOYMENT OF EXECUTIVE. If Executive breaches or
threatens to breach any term or provision contained in Sections 11 through 17
of this Agreement, Executive agrees that Company will be entitled to seek any
remedy at law or in equity. The right of Company to seek such relief will not
be construed to prevent Company from pursuing, either conjunctively or
concurrently, any other legal or equitable remedies available by contract, law,
or otherwise for such breach or threatened breach, nor to preclude Company from
seeking to recover damages from Executive.
19. Withholding. Anything to the contrary in this Agreement
notwithstanding, all payments required to be made by Company hereunder to
Executive or to his estate shall be subject to withholding of such amounts
relating to taxes as Company may reasonably determine it should withhold
pursuant to any applicable law or regulation. In lieu of withholding such
amount, in whole or in part, Company may, in its sole discretion, accept other
provisions for the payment of taxes as required by law, provided Company is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
20. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the employment by Company of
Executive, and supersedes any and all prior agreements, commitments and
understandings between them (whether oral or written) relating to such subject
matter. This Agreement may not be amended, changed or terminated, except
pursuant to an instrument in writing duly executed and delivered by Executive
and Company.
21. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
APPLICABLE TO INSTRUMENTS MADE, EXECUTED AND PERFORMED WHOLLY IN SUCH STATE.
22. Notice and Waiver of Breach and Cure. Pursuant to Section 22
herein, Company shall notify Executive of any alleged breach on the part of
Executive of this Agreement. In such event, Executive shall have the
opportunity to demonstrate to the Board that no breach has occurred, or, if
Executive can demonstrate that the breach was not made in bad faith, Executive
shall have a reasonable period of time to cure the violation to the
satisfaction of the Board which satisfaction shall not be unreasonably
withheld. A waiver by Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach by the other party.
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<PAGE> 7
23. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or mailed (by first class, postage prepaid
and certified mail, with return receipt requested)
to Company: Planned Marketing Associates
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
Attn: Steve Anderson
and to Executive:
Steve Anderson
Canyon Springs Ranch
West Drive
Hunt, Texas 78024
or at such other address as either of Company or Executive may designate to the
other.
24. Section Headings. The Section headings set forth in this
Agreement are for convenience only and shall not be considered to be a part of
this Agreement in any respect, nor shall they in any way affect the substance
of any provisions contained in this Agreement.
25. Successors and Assigns. This Agreement shall not be
assignable by Executive or Company except that Company shall be entitled to
assign this Agreement to any successor in connection with any merger,
consolidation or other corporate reorganization. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs and personal representatives of
Executive and the successors and assigns of Company.
26. Severability. If, at any time subsequent to the date hereof,
any provisions of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of
no force and effect, but the illegality or unenforceability of such provision
shall have no effect upon and shall not impair the enforceability of any other
provisions of this Agreement.
27. Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed to be an original and all
of which shall be deemed to be one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
----------------------------------
STEVE ANDERSON
PLANNED MARKETING ASSOCIATES, INC.
By:
------------------------------
Name:
------------------------
Title:
-----------------------
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<PAGE> 1
EXHIBIT 99.1
SUBSCRIPTION ESCROW AGREEMENT
This AGREEMENT, hereinafter sometimes referred to as the "Agreement",
made and entered into this _____ day of May, 1996, by and among RIVER OAKS
TRUST COMPANY, (the "Escrow Agent"), and PLANNED MARKETING ASSOCIATES, INC., a
Texas Corporation.
WITNESSETH:
WHEREAS, PLANNED MARKETING ASSOCIATES, INC., hereinafter sometimes
referred to as (the "Company"), is offering 800,000 shares of common stock at
$5 per share; and,
WHEREAS, the Company will attempt to sell 300,000 shares for a minimum
of $1,500,000 and 800,000 shares for a maximum of $4,000,000;
WHEREAS, the funds received in payment for subscriptions to the
interests offered by the Company are to be deposited in a special segregated
account and held by the Escrow Agent for the account of the Company pending the
sale of 300,000 shares offered, to be refunded to the subscribers making such
payments if the 300,000 shares offered are not sold during the offering period
ending November 30, 1996, unless extended by the Company until February 28,
1997; and,
WHEREAS, the Company desires to employ the Agent to hold the funds
paid in by the subscribers in escrow pursuant to the terms of this Agreement;
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and for the
promises and undertakings of the parties hereto as set out herein, it is hereby
agreed as follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby
appointed depository with respect to the offering pursuant to the terms and
condition of this Agreement.
<PAGE> 2
SUBSCRIPTION ESCROW AGREEMENT
Page 2
1.1 Establishment of Escrow Account. The Company will establish
an escrow account with the Escrow Agent, which escrow account shall be entitled
Escrow Account (the "Escrow Account"). The Company will instruct subscribers to
make checks for subscriptions payable to the order of the Escrow Agent. Any
checks received that are made payable to a party other than the Escrow Agent
shall be returned to the offeree who submitted the check.
2. Escrow Period. The Escrow Period shall begin on _______ of
May, 1996, and shall terminate on the date that the first of the following
events occurs:
(a) Gross proceeds of $1,500,000 have been delivered to
the Escrow Agent and the Escrow Agent has been notified by the Company, in
writing, of the total amount received.
(b) The Escrow Agent is notified by the Company that the
Offering Period (ending November 30, 1996, unless extended by the Company until
February 28, 1997,) for the sale of shares has terminated prior to the sale of
300,000 shares of common stock of the Company. See "Exhibit A."
3. Deposits into the Escrow Account. The Company agrees that it
shall promptly deliver all monies received from subscribers for the payment of
the interests to the Escrow Agent for deposit into the Escrow Account, together
with a written account of each sale, which account shall set forth, among other
things, the subscriber's name and address, U.S. taxpayer identification number,
the number of interests purchased, the amount paid therefor, and whether the
cash consideration received was in the form of a check, draft, or money order.
All monies so deposited in the Escrow Account are hereinafter referred to as
the "Escrow Amount." Each deposit shall be accompanied by a transmittal
letter, a copy of which acknowledging receipt shall be returned by the Escrow
Agent to the Company. See "Exhibit B."
4. Disbursements from the Escrow Account. In the event the
Escrow Agent does not receive the Escrow Amount totaling $1,500,000 prior to
the termination of the Escrow Period or extension thereof, the Escrow Agent
shall refund to each subscriber the amount received from the subscriber,
without deduction, penalty, or expense to the subscriber and the Escrow Agent
shall notify the Company of its distribution of the funds. The purchase money
returned to each subscriber shall be free and clear of any and all claims of
the Company or any of its creditors. See "Exhibit C."
<PAGE> 3
SUBSCRIPTION ESCROW AGREEMENT
Page 3
In the event the Escrow Agent does receive $1,500,000 prior to the
termination of the Escrow Period, the Escrow Agent shall, upon receipt of
notice (See "Exhibit C") from the Company, make disbursement of the funds on
deposit on the date of receipt of such notice from the Company as follows: (See
"Exhibit D").
(a) To the Company $1,500,000 of the escrow amount.
In the event the Escrow Agent does receive $1,500,000 prior to
termination of the Escrow Period, the Escrow Amount on deposit with the Escrow
Agent at any time or from time to time shall not be released to the Company
until such amount is received by the Escrow Agent in collected funds. For
purposes of this Agreement, the term "collected funds" shall mean all funds
received by the Escrow Agent which have cleared normal banking channels and are
in the form of cash.
5. Collection Procedure. The Escrow Agent is hereby authorized
to forward each check for collection and, upon collection of the proceeds of
each check, deposit the collected proceeds in the Escrow Account. As an
alternative, the Escrow Agent may telephone the bank on which the check is
drawn to confirm that the check has been paid.
Any check returned unpaid to the Escrow Agent shall be returned to
the Company.
If the Company rejects any subscription for which the Escrow Agent has
already collected funds, the Escrow Agent shall promptly issue a refund check
to the rejected subscriber. If the Company rejects any subscription which the
Escrow Agent has not yet collected funds but has submitted the subscriber's
check for collection, the Escrow Agent shall promptly issue a check in the
amount of the subscriber's check to the rejected subscriber after the Escrow
Agent has cleared such funds. If the escrow Agent has not yet submitted a
rejected subscriber's check for collection, the Escrow Agent shall promptly
remit the subscriber's check directly to the subscriber. See "Exhibit E."
6. Investment of Escrow Amount. The Escrow Agent will invest the
Escrow Amount as directed by the Company's President, but only in the following
accounts or investments:
(1) short-term debt obligations issued or guaranteed
by, and bearing the full faith and credit as to the repayment in full principal
and interest of, the United States of America, (2) short-term certificates of
deposit or time or demand deposits, not to exceed $100,000 at any one
institution, of any federally insured bank chartered and supervised by the
United States of America and holding FDIC (or its successor) insurance, and (3)
share of, or other comparable interest in, money market funds (including any
such fund with regard to which the Escrow Agent or any of its affiliates, shall
serve as compensated investment advisor sponsor
<PAGE> 4
SUBSCRIPTION ESCROW AGREEMENT
Page 4
or underwriter) which invest only in the type of securities described in clause
(1) or (2) of this Paragraph 6, and (4) any time or savings deposit of the
Escrow Agent not to exceed $100,000 at any one institution, of any federally
insured bank chartered and supervised by the United States of America and
holding FDIC (or its successor) insurance. See "Exhibit F."
The interest earned on the invested Escrow Amounts during the offering
period will be held by the Escrow Agent and added to the Escrow Amount and
shall be disbursed as follows upon receipt of written directions from the
Company's President.
(a) If the offering does not result in attaining the subscriptions
of $1,500,000 and is terminated and not closed, then accrued
interest paid to Subscribers shall be determined as follows:
The amount invested by each Subscriber shall be held in escrow
(such resulting figure being termed the "Dollar/Day Amount").
The ratio of the Dollar/Day Amount of each Subscriber to the
total of a Dollar/Day Amounts for all subscribers shall be
multiplied by the total amount of interest earned on the
escrowed funds in order to determine the amount of interest
due to each Subscriber.
(b) If the Escrow Agent does receive subscription funds of at
least $1,500,000 and the offering is or will be closed, then
accrued interest will be paid to the Company to reimburse it
for Escrow Agent's fee and its administrative and
miscellaneous expense incurred in connection with this
Agreement. In this latter event, such accrued interest shall
be paid to the Company at the time or times disbursements of
subscription funds are otherwise made pursuant hereto.
7. Compensation of Escrow Agent. The Company shall pay the
Escrow Agent upon execution of the Escrow Agreement, the annual base fee of
$2,000. Fees for transaction/activity and extraordinary services will be paid
by the Company to the Escrow Agent in accordance with the attached Escrow
Services Fee Schedule. The Escrow Agent shall also be entitled to
reimbursement of its out-of-pocket expenses incurred in connection with the
performance of its services as Escrow Agent, including reasonable fees and
disbursements of legal counsel. The Escrow Agent shall be entitled to payment
of its fees and reimbursement of its expenses out of the Escrow Fund and the
rights of the Subscribers, the Company and the Underwriter shall be
subordinated to the right of the Escrow Agent to receive such payments
hereunder in the event that the funds in the Escrow Fund are insufficient to
satisfy such payments to the Escrow Agent.
<PAGE> 5
SUBSCRIPTION ESCROW AGREEMENT
Page 5
8. Removal of Escrow Agent. The Company shall have the right at
any time to remove the incumbent Escrow Agent by giving notice thereof to the
incumbent Escrow Agent, whereupon the Company shall appoint a successor Escrow
Agent by notice to the incumbent Escrow Agent, and the incumbent Escrow Agent
shall cease to be Escrow Agent upon such appointment of a successor Escrow
Agent. The Escrow Agent may, and hereby reserve the right to, resign at any
time by giving notice to the Company of such resignation, specifying the
effective date thereof. If the Escrow Agent is removed by the Company, resigns
or is unable to serve for any reason and if, within 30 days thereafter, the
Company appoints a successor Escrow Agent, the incumbent Escrow Agent shall
distribute, in escrow, the Offering proceeds then held hereunder to the
successor Escrow Agent. If a successor Escrow Agent has not been appointed or
has not accepted such appointment by such date, the incumbent Escrow Agent's
sole responsibility thereafter shall be to keep safely all Offering proceeds
then held by it and to deliver the same to a person or entity designated in
writing by the Company or pursuant to the order of a court of competent
jurisdiction and the reasonable costs, expenses and attorney's fees which are
incurred by the Escrow Agent in connection with any such proceeding shall be
paid by the Company. Any successor Escrow Agent shall have all of the rights,
powers and privileges of the Escrow Agent provided herein.
9. Duties of the Escrow Agent. The Escrow Agent undertakes to
perform only such duties as are specifically set forth herein and may
conclusively rely and shall be protected in acting or refraining from acting on
any written notice, instrument or signature believed by it to be genuine and to
have been signed or presented by the proper party or parties duly authorized to
do so. The Escrow Agent shall have no responsibility for the accuracy or
reliability of the contents of any instructions or any information received by
it from the Company as contemplated hereby and may rely without any liability
upon the contents thereof. Notwithstanding anything in this Escrow Agreement
to the contrary, the Escrow Agent shall not be required to make any
distribution hereunder except out of the Escrow Account as constituted at the
time of such distribution.
10. Authority to Act. The Escrow Agent is hereby authorized to
act in any jurisdiction where permitted by law to do so. If, by reason of the
law of any jurisdiction in which it may be necessary to perform any act in the
administration of the Escrow, the Escrow Agent may be disqualified from acting,
then the Escrow Agent shall designate one or more persons, banks or trust
companies to be ancillary escrow agent, who shall serve without bond or
security in any jurisdiction in which ancillary administration may be
necessary. The ancillary escrow agent shall receive compensation at rates to
be determined between the Escrow Agent and the ancillary escrow agent, and such
compensation shall be and expense of the administration of the Escrow, payable
out of the Escrow Fund or by the Company. The ancillary escrow agent shall
perform all of the acts required to be performed in such jurisdiction in the
administration of the Escrow upon receipt of instructions from the Escrow
Agent. Any ancillary escrow agent appointed in this Section 10 shall accept
such appointment by signed, written notice to the Escrow Agent, and the
Company.
<PAGE> 6
SUBSCRIPTION ESCROW AGREEMENT
Page 6
11. Limitation of Liability. The Escrow Agent (and any ancillary
escrow agent) shall not be liable for any action taken or omitted by it through
an authorized officer acting in good faith and in the belief that such action
was authorized hereby or within the rights or powers conferred upon the Escrow
Agent hereunder or under applicable law, or taken or omitted by the Escrow
Agent in reasonable reliance upon the advise of counsel (which counsel may be
of the Escrow Agent's own choosing) and, further, shall not be liable for any
mistake of fact or error of judgement or acts or omissions of any kind unless
caused by willful misconduct or gross negligence.
12. Indemnification. The Company, shall indemnify the Escrow
Agent (any ancillary escrow agent) and hold it harmless against any and all
liabilities, losses, claims and damages of any nature whatsoever arising as a
result of, or in connection with, any nature whatsoever arising as a result of,
or in connection with, any act or omission by it related to the Escrow or
otherwise incurred by it hereunder, except for liabilities, losses, claims and
damages incurred by the Escrow Agent resulting from its own willful misconduct
or gross negligence, and the Escrow Agent shall be entitled to payment and
reimbursement by the Company.
13. Waiver of Bond. Except as otherwise required by law, neither
the Escrow Agent or ancillary escrow agent nor any successor Escrow Agent or
ancillary escrow agent shall be required to obtain or post a bond or any other
security in connection with the performance of its services hereunder.
14. Challenges to the Escrow. In the event the Escrow Agent
receives notice of any action, suit or proceeding challenging the validity or
enforceability of any provision of this Escrow Agreement or the ability of the
Escrow Agent to disburse funds or distribute any asset in accordance with the
provisions if this Escrow Agreement, the Escrow Agent shall promptly give
written notice thereof to the Company and, upon request of any representative
of the Company or counsel therefor, shall provide such information as may be
available to it with respect to such event. Upon written instructions from the
Company, the Escrow Agent shall retain legal counsel to represent the interests
of the Company under this Agreement in such action, suit or proceeding or to
commence and prosecute an appropriate action to enforce the rights of the
Escrow under the Agreement. All expenses (including fees and disbursements of
legal counsel) reasonably incurred in connection with any such action, suit or
proceeding shall be paid by the Company. Notwithstanding any other provision
of this Escrow Agreement, the Escrow Agent may suspend payment on any
instructions, and shall be excused from making such distribution in accordance
herewith, during which (i) any court or administration or executive order or
decree is in effect prohibiting such payment, even if such order or decree
shall subsequently be reversed or vacated or held unlawful, or (ii) any such
action, suite or proceeding challenging payment on any distribution shall be
pending and during which the Escrow Agent, upon advice of counsel, shall have
reasonably determined that payment on such distribution might expose the Escrow
Agent to personal liability.
<PAGE> 7
SUBSCRIPTION ESCROW AGREEMENT
Page 7
15. Miscellaneous.
(a) This Agreement, and the Escrow created hereunder,
shall be governed and regulated by, and construed in accordance with, the laws
of the State of Texas, as from time to time in effect. For any litigation
arising out of or relating to this Escrow Agreement, the parties hereto consent
to the exclusive personal jurisdiction and venue of the state courts of the
State of Texas or the federal courts of the United States of America sitting in
the State of Texas and hereby stipulate to the convenience of such forum.
(b) This Agreement shall be binding upon and shall inure
to the benefit of the heirs, executors, personal and legal representatives,
successors and assigns of the Escrow Agent, any successor Escrow Agent and each
representative.
(c) No amendment to this Agreement shall be effective
unless such amendment is in writing and signed by the Escrow Agent or any
successor Escrow Agent and the Company.
(d) Section headings contained in this Agreement have
been inserted for reference purposes only, and shall not effect the meaning or
construction of this agreement.
(e) For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto and each
such executed counterpart shall be, and shall be deemed to be, an original, and
all of such counterparts shall constitute one and the same instrument binding
on all of the parties hereto.
(f) In case any provision in this Agreement shall be
invalid, illegal or unenforceable generally or under any particular
circumstances, the validity, legality and enforceability of the remaining
provisions, or of such provisions under other circumstances, shall not in any
way be affected or impaired thereby and, to the fullest extent permitted by
law, this Agreement shall be deemed revised and construed so as to be valid,
legal and enforceable giving effect to the greatest extent permissible to the
purposes of this Agreement.
(g) Business day for the purposes hereof, "a business
day" is any day other than a Saturday or Sunday or a day on which banking
institutions in the State of Texas are not required to be open for business.
(h) All of the terms and conditions in connection with
River Oaks Trust Company's duties and responsibilities are contained in this
instrument, and, except as provided in the release provisions of Paragraphs 2
and 4 and the assignment provisions of Paragraph 8, River Oaks Trust Company is
not expected or required to be familiar with the provisions of any other
instrument or agreement between the Company, or anyone else, and shall not
<PAGE> 8
SUBSCRIPTION ESCROW AGREEMENT
Page 8
be charged with any responsibility or liability in connection with the
observance or nonobservance by anyone of the provisions of any such instrument
or agreement.
(i) All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed, registered or certified mail, postage
prepaid:
If to the Company:
Mailing Address: Address for Deliveries:
---------------- -----------------------
Planned Marketing Associates, Inc.
Attn: Steven J. Anderson
Canyon Springs Ranch Same
West Drive
Hunt, TX 78024
(214)238-4357
If to the Escrow Agent:
Mailing Address: Address for Deliveries:
---------------- -----------------------
River Oaks Trust Company
Attn: Thelma Williams Same
8080 N. Central Expwy
Suite 350
Dallas, TX 75206
(214)891-8042
or to such other address as the persons to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above,
provided that notices of changes of address shall be effective only upon
receipt. A notice given in accordance with the preceding sentence shall be
deemed to have been duly given upon delivery thereof with receipt acknowledged
or, except where receipt is expressly required by the terms thereof, five (5)
business days after being mailed by registered or certified mail, postage
prepaid, return receipt requested, and properly addressed.
<PAGE> 9
SUBSCRIPTION ESCROW AGREEMENT
Page 9
IN WITNESS WHEREOF, and in reliance upon the terms and conditions of
this Agreement and the agreements referred to herein, the parties hereto have
executed and delivered this Agreement as of the date first set forth above.
ESCROW AGENT: THE COMPANY:
RIVER OAKS TRUST COMPANY PLANNED MARKETING ASSOCIATES, INC.
By: By:
------------------------------ ---------------------------------
Its:
--------------------------------
Tax I.D.#
---------------------------
<PAGE> 10
EXHIBIT A
FORM OF TERMINATION CERTIFICATE
Ms. Thelma Williams
River Oaks Trust Company
8080 Central Expressway
Suite 350
Dallas, TX 75206
Pursuant to Subsection (b) of Section 2 of that certain Escrow
Agreement (the "Agreement"), dated as of ____________, 19____ by and among
RIVER OAKS TRUST COMPANY, (the "Escrow Agent"), PLANNED MARKETING ASSOCIATES,
INC., (the "Company"), the undersigned hereby certifies to you the Offering
referred to in the Agreement has been terminated.
Date:___________________, 19____
PLANNED MARKETING ASSOCIATES, INC.
By:_______________________
Its:_______________________
<PAGE> 11
EXHIBIT B
TRANSMITTAL OF CHECKS
_______________________, 19____
Ms. Thelma Williams
River Oaks Trust Company
8080 Central Expressway
Suite 350
Dallas, TX 75206
RE: Escrow Account for PLANNED MARKETING ASSOCIATES, INC.
Dear Ms. Williams:
Pursuant to that Certain Escrow Agreement (the "Agreement"), by and
among RIVER OAKS TRUST COMPANY, (the "Escrow Agent"), PLANNED MARKETING
ASSOCIATES, (the "Company"), enclosed please find the following described
check(s) submitted by the following prospective investor(s):
<TABLE>
<CAPTION>
Number
Name of of Units Check
Investor Check # Subscribed Amount
-------- -------- ---------- ------
<S> <C> <C> <C>
</TABLE>
Please deposit the enclosed check(s) into the Escrow Account
established pursuant to the Agreement, and invest the funds as directed in
Section 6 of the Agreement.
Enclosed is a copy of this letter. Please date and execute the same
in the places provided therefore and return it to the undersigned as an
acknowledgment of your receipt of the enclosed check(s) and deposit of same in
the foregoing Escrow Account.
Very truly yours, RECEIVED
PLANNED MARKETING ASSOCIATES, INC.
By:____________________ __________________________
Trust Officer
Its:____________________
Enclosures
<PAGE> 12
EXHIBIT C
FORM OF TERMINATION CERTIFICATE
River Oaks Trust Company
Attn: Thelma Williams
8080 N. Central Expressway
Suite 350
Dallas, TX 75206
Pursuant to Section 4 of that certain Escrow Agreement (the
"Agreement"), dated as of ____________, 19_____ by and among RIVER OAKS TRUST
COMPANY, (the "Escrow Agent"), PLANNED MARKETING ASSOCIATES, INC., (the
"Company"), the undersigned hereby certifies to you that the Offering referred
to in the Agreement has been terminated.
Dated:________________________________, 19_____
Very truly yours,
PLANNED MARKETING ASSOCIATES, INC.
By:__________________________________________
Its:_________________________________________
<PAGE> 13
EXHIBIT D
FORM OF DISBURSEMENT CERTIFICATE
River Oaks Trust Company
Attn: Thelma Williams
8080 N. Central Expressway
Suite 350
Dallas, TX 75206
Pursuant to Section 4, (Paragraph 2) of that certain Escrow Agreement
(the "Agreement"), dated as of __________ ________, 19_____, by and among RIVER
OAKS TRUST COMPANY, (the "Escrow Agent"), and PLANNED MARKETING ASSOCIATES,
INC., (the "Company"), the undersigned hereby certifies to you that the Minimum
Offering referred to in the Agreement has been fully subscribed in accordance
with the Prospectus (as such term is defined in the Agreement).
Dated:_________________________________, 19_____
Very truly yours,
PLANNED MARKETING ASSOCIATES, INC.
By:________________________________________
Its:_______________________________________
<PAGE> 14
EXHIBIT E
FORM OF SUBSCRIPTION REJECTION
River Oaks Trust Company
Attn: Thelma Williams
8080 N. Central Expressway
Suite 350
Dallas, TX 75206
Pursuant to Section 5, (Paragraph 3) of that certain Escrow Agreement
(the "Agreement"), dated as of __________ __________, 19_____ by and among
RIVER OAKS TRUST COMPANY, (the "Escrow Agent"), PLANNED MARKETING ASSOCIATES,
INC., (the "Company"), the undersigned hereby rejects the subscription
submitted by the following prospective investor:
<TABLE>
<CAPTION>
Taxpayer Number
Name I.D. Number of Units Check
Investor (if available) Subscribed Amount
-------- -------------- ---------- ------
<S> <C> <C> <C>
</TABLE>
Dated:_____________________________, 19_____
PLANNED MARKETING ASSOCIATES, INC.
By:_________________________________________
Its:________________________________________
<PAGE> 15
EXHIBIT F
FORM OF INVESTMENT INSTRUCTIONS
_______________________, 19____
Ms. Thelma Williams
River Oaks Trust Company
8080 Central Expressway, Suite 350
Dallas, TX 75206
RE: Escrow Account (the "Agreement"), dated as of ____________,
19____ by and among RIVER OAKS TRUST COMPANY, (the "Escrow
Agent"), PLANNED MARKETING ASSOCIATES, INC. (the "Company")
Dear Ms. Williams:
In accordance with Section 6 of the above referenced Agreement, this
letter will serve as written notice with regard to the types of accounts or
investments in which the Funds as defined in the Agreement, may be invested by
the Escrow Agent. The Escrow Agent shall direct the investment of the Funds
in:
(1) Short-term debt obligations issued or guaranteed by, and
bearing the full faith and credit as to the repayment in full of principal and
interest of, the United States of America;
(2) Share of, or other comparable interest in, money market funds
(including, any such fund with regard to which the Escrow Agent, or any of its
affiliates, shall serve as compensated investment advisor, sponsor, or
underwriter) which invest only in the type of securities described in (1)
above; or
(3) Any time or savings deposit of the Escrow Agent not to exceed
$100,000 at any one institution, of any federally insured bank chartered and
supervised by the United States of America and holding FDIC (or its successor)
insurance.
Any deviation from the above accepted investments will require the prior
written consent of the Company or Underwriter.
Should you have any questions or need any additional information, please
contact the undersigned.
Very truly yours,
PLANNED MARKETING ASSOCIATES, INC.
By:_____________________
Its:____________________
<PAGE> 16
RIVER OAKS TRUST COMPANY
ESCROW SERVICES FOR PLANNED MARKETING ASSOCIATES, INC.
FEE SCHEDULE
March 21, 1996
ACCEPTANCE FEE
All legal instruments will be reviewed by counsel for the River Oaks Trust
Company prior to account acceptance. All legal expenses incurred in this
review and during the period of escrow will be borne by the parties in
interest.
SUBSCRIPTION ESCROW
Receiving deposits from two or more investors or subscribers up to a
maximum of 200 participants, providing investor recordkeeping, investment
of funds as directed, and disbursement of funds on initial closing; there
is a $2,000 minimum per year or for any portion of a year.
Up to $1,000,000 in aggregate deposits .200%
Next $4,000,000 in aggregate deposits .050%
Next $10,000,000 in aggregate deposits .015%
Next $10,000,000 in aggregate deposits .0095%
Balance of deposits Negotiated
Minimum annual fee: $2,000 for any portion of the year.
ADDITIONAL PARTICIPANTS: There will be an additional charge of $1.00 per
participant for each participant over the 200 maximum referenced above.
This fee will be in addition to any minimum fees that may be applicable.
IN CASE OF RETURN OF SUBSCRIPTION FUNDS TO INVESTORS:
Allocation of interest, disbursements, 1099 reporting
relating to return of subscription funds $7 per participant
TRANSACTION CHARGES
Normal transactions including book entries, cash receipts and
disbursements, and wire transfers will be done at no charge. Foreign
securities will be assessed transaction fees as incurred.
EXTRAORDINARY SERVICES AND OUT-OF-POCKET EXPENSES
For services which cannot be presently anticipated but which may be
necessary or desirable, a reasonable fee will be charged based on nature
of the work, time involved, and responsibility involved.
