<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1996 Commission File No. 0-16992
CONCORDE CAREER COLLEGES, INC.
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
Delaware 43-1440321
- -------------------------------- ---------------------------------
(State of other jurisdiction of (I. R. S. Employer Identification
Incorporation or Organization) Number)
4th Floor, City Center Square
12th & Baltimore, P.O. Box 26610
Kansas City, Missouri 64196
- --------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (816) 474-8002
-----------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 Par Value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
As of August 2, 1996 Concorde Career Colleges, Inc. had 6,958,376 shares of
Common Stock outstanding, with a market value of $6,958,000.
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<PAGE>
CONCORDE CAREER COLLEGES, INC.
FORM 10-Q
SIX MONTHS ENDED JUNE 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1. Financial Information........................................ 1
Condensed Consolidated Balance Sheets................................. 2,3
Condensed Consolidated Statements of Operations....................... 4
Condensed Consolidated Statements of Cash Flows....................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results Operations....................................... 6
</TABLE>
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 1. Legal Proceedings............................................ 11
Item 2. Change in Securities......................................... 13
Item 3, Defaults Upon Senior Securities.............................. 13
Item 4, Submission of Matters to a Vote of Security Holders.......... 13
Item 5. Other Materially Important Events............................ 13
Item 6. Exhibits..................................................... 18
Signatures............................................................ 19
</TABLE>
v
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONCORDE CAREER COLLEGES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
The condensed interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared according to
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations although the Company believes that the disclosures
are adequate to make the information presented not misleading. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest Form
10-K Annual Report for 1995 that was filed by the Company on March 29, 1996.
The information included in these interim financial statements reflects all
normal recurring adjustments that are, in the opinion of management, necessary
to fairly state the results of the periods presented.
Due to the inherent seasonal nature of the career training business,
annualization of amounts in these interim financial statements may not
necessarily be indicative of the actual operating results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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Page 1
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,155,000 $ 3,295,000
Net receivables --
Accounts receivable 15,857,000 17,055,000
Notes receivable for student tuition............ 4,273,000 3,188,000
Allowance for uncollectible accounts............ (1,277,000) (1,394,000)
----------- -----------
18,853,000 18,849,000
Deferred income taxes.............................. 450,000 170,000
Supplies and prepaid expenses...................... 1,087,000 914,000
----------- -----------
Total current assets 22,545,000 23,228,000
PROPERTY and EQUIPMENT, net:......................... 3,015,000 3,220,000
COST IN EXCESS OF NET TANGIBLE ASSETS OF BUSINESSES
ACQUIRED, less accumulated amortization of
$2,720,000 at June 30, 1996 and $2,591,000
at December 31, 1995, respectively................. 1,719,000 1,847,000
OTHER ASSETS:
Long-term notes receivable for student tuition
less allowance for uncollectible accounts of
$1,134,000 at June 30, 1996 and $709,000 at
December 31, 1995, respectively.................... 2,317,000 2,495,000
Other.............................................. 101,000 30,000
----------- -----------
Total other assets.............................. 2,418,000 2,525,000
----------- -----------
$29,697,000 $30,820,000
=========== ===========
</TABLE>
See accompanying Item 2. Management's Discussion.
Page 2
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Deferred student tuition........................... $15,482,000 $15,248,000
Current debt maturities............................ 278,000 215,000
Accrued salaries and wages......................... 888,000 951,000
Accrued interest................................... 12,000
Current deferred income taxes...................... 271,000 471,000
Other accrued liabilities and accounts payable..... 1,881,000 2,413,000
----------- -----------
Total current liabilities........................ 18,800,000 19,310,000
LONG TERM DEBT...................................... 1,343,000
OTHER LONG-TERM LIABILITIES......................... 879,000 80,000
DEFERRED INCOME TAXES............................... 548,000 690,000
SUBORDINATED DEBT DUE TO RELATED PARTY.............. 2,672,000 2,723,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 600,000 shares
authorized 300,000 shares issued and outstanding... 30,000 30,000
Common stock, $.10 par value, 19,400,000 shares
authorized, 6,985,176 shares issued and 6,958,376
shares outstanding................................. 698,000 698,000
Capital in excess of par........................... 8,128,000 8,128,000
Accumulated deficit................................ (1,997,000) (2,121,000)
Less-treasury stock, 26,800 shares, at cost........ (61,000) (61,000)
----------- -----------
Total stockholders' equity........................ 6,798,000 6,674,000
----------- -----------
$29,697,000 $30,820,000
=========== ===========
</TABLE>
See accompanying Item 2. Management's Discussion.
Page 3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
AND THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- ------------------------
1996 1995 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
STUDENT TUITION AND OTHER REVENUE: .......... $20,302,000 $18,346,000 $9,270,000 $8,457,000
----------- ----------- ---------- ----------
OPERATING EXPENSES:
Payroll costs ........................... 9,414,000 8,515,000 4,490,000 4,156,000
Occupancy ............................... 2,532,000 2,616,000 1,183,000 1,224,000
Instructional materials and supplies .... 1,862,000 1,655,000 791,000 661,000
Advertising ............................. 1,425,000 1,323,000 714,000 673,000
Other general and administrative ........ 2,729,000 2,775,000 1,275,00 1,266,000
Provision for uncollectible accounts .... 1,089,000 746,000 567,000 284,000
----------- ----------- ---------- ----------
Total operating expenses ............ 19,051,000 17,630,000 9,020,000 8,264,000
----------- ----------- ---------- ----------
OPERATING INCOME ............................ 1,251,000 716,000 250,000 193,000
INTEREST EXPENSE ............................ 1,087,000 365,000 817,000 175,000
----------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES ........... 164,000 351,000 (567,000) 18,000
PROVISION (BENEFIT) FOR INCOME TAXES ........ 41,000 35,000 (142,000) 2,000
----------- ----------- ---------- ----------
NET INCOME (LOSS) ........................... $ 123,000 $ 316,000 $ (425,000) $ 16,000
=========== =========== ========== ==========
WEIGHTED AVERAGE COMMON AND COMMON SHARE
EQUIVALENTS OUTSTANDING ................... 7,712,000 7,391,000 7,752,000 7,445,000
=========== =========== ========== ==========
EARNINGS PER WEIGHTED AVERAGE COMMON AND
COMMON SHARE EQUIVALENTS OUTSTANDING ...... $0.00 $0.02 ($0.06) ($0.01)
===== ===== ===== =====
</TABLE>
See accompanying Item 2. Management's Discussion.
Page 4
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS --OPERATING ACTIVITIES:
Net income......................................... $ 123,000 $ 316,000
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization.................... 547,000 585,000
Provision for losses on accounts receivable...... 1,089,000 746,000
Change in assets and liabilities, net -
Change in receivables......................... (915,000) 345,000
Change in deferred student tuition............ 234,000 1,936,000
Change in deferred income taxes............... (251,000) (346,000)
Change in accrued income taxes............... (371,000) 41,000
Other changes in assets and liabilities, net.. 14,000 231,000
----------- -----------
Total adjustments......................... 347,000 3,538,000
----------- -----------
Net operating activities................ 470,000 3,854,000
CASH FLOWS --INVESTING ACTIVITIES:
Capital expenditures............................... (188,000) (433,000)
----------- -----------
Net investing activities................ (188,000) (433,000)
----------- -----------
CASH FLOWS --FINANCING ACTIVITIES:
Principal payments on long-term debt............... (1,422,000) (1,518,000)
----------- -----------
Net financing activities................ (1,422,000) (1,518,000)
----------- -----------
Net..................................... (1,140,000) 1,903,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD............................. 3,295,000 1,182,000
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD................................... $ 2,155,000 $ 3,085,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest......................................... $ 102,000 $ 190,000
Income taxes..................................... 663,000 194,000
Cash received during the period for:
Interest......................................... 201,000 175,000
Income tax refunds............................... --- ---
</TABLE>
See accompanying Item 2. Management's Discussion.
Page 5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The Company owns and operates proprietary postsecondary schools which offer
career training, primarily in the allied health field (together the Resident
Schools.) The Company also owns Person/Wolinsky Associates, which offers review
courses for the CPA exam (the CPA Review Courses.) On August 2, 1996, the
Company sold the assets of Person/Wolinsky Associates. In addition, the Company
has signed an Agreement to sell the assets of its' San Jose, California School.
This transaction is expected to close in August. The following table presents
the revenue for the Resident Schools and the CPA Review Courses for the periods
indicated. Amounts are in thousands.
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
------------------ ---------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
Resident Schools ...... $19,079 $17,096 $9,229 $8,422
CPA Review Courses .... 1,223 1,250 41 35
------- ------- ------ ------
Total ............. $20,302 $18,346 $9,270 $8,457
======= ======= ====== ======
</TABLE>
The following table presents the relative percentage of revenues derived
from the Resident Schools and the CPA Review Courses and certain consolidated
statement of earning items as a percentage of total revenue for periods
indicated.
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
----- ----- ----- -----
Allied Health & Computer Schools ........... 94.0% 93.2% 99.6% 99.6%
CPA Review Courses ......................... 6.0 6.8 0.4 0.4
----- ----- ----- -----
Total ...................................... 100.0 100.0 100.0 100.0
===== ===== ===== =====
Operating expenses:
Payroll ................................ 46.4 46.4 48.4 49.1
Occupancy .............................. 12.5 14.3 12.8 14.5
Materials and supplies ................. 9.2 9.0 8.5 7.8
Advertising ............................ 7.0 7.2 7.7 8.0
Other general & administrative ......... 13.4 15.1 13.8 15.0
Provision for uncollectible accounts ... 5.3 4.1 6.1 3.3
----- ----- ----- -----
Total .................................. 93.8 96.1 97.3 97.7
Operating income ........................... 6.2 3.9 2.7 2.3
Interest expense ........................... 5.4 2.0 8.8 2.1
----- ----- ----- -----
Income before income taxes ................. 0.8 1.9 (6.1) 0.2
Provision (benefit) for income taxes ....... 0.2 0.2 (1.5) 0.0
----- ----- ----- -----
Net income ................................. 0.6% 1.7% (4.6)% 0.2%
===== ===== ===== =====
</TABLE>
(The remainder of this page was left intentionally blank.)
Page 6
<PAGE>
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO
QUARTER ENDED JUNE 30, 1995
The Company incurred a net loss of $425,000 for the three months ended June
30, 1996 compared to net income of $16,000 for the same period in 1995. The 1996
net loss was the result of a charge of $721,000 for interest expense as
discussed below. Total revenue increased 9.6%, or $813,000 to $9,270,000 for the
three months ended June 30, 1996 compared to $8,457,000 in 1995. The increase is
a result of enrollment increases and a modest price increase in the second
quarter of 1995.
Because the CPA exam is administered twice each year, the operations of the
CPA Review Courses are seasonal, impacting the results of the Company during the
quarters ending March 31 and September 30. The CPA Review Course had an
operating loss for the quarter of $188,000 in 1996 compared to a loss of
$175,000 in 1995.
Total operating expenses increased $756,000 or 9.1% to $9,020,000 for the
three months ended June 30, 1996 compared to $8,264,000 in 1995.
Payroll increased $334,000 or 8.0% to $4,490,000 in 1996 compared to
$4,156,000 in 1995. The Company has added additional staff as enrollment has
increased. In addition, the Company continues to upgrade the quality of staff
and faculty.
Instructional materials and supplies expense increased 19.7% or $130,000 to
$791,000 in 1996 compared to $661,000 in 1995. Textbook expense has increased
reflecting the increase in enrollments.
Provision for uncollectible accounts increased 99.6% or $283,000 to
$567,000 in 1996 compared to $284,000 in 1995. Beginning in the fourth quarter
of 1995, the Company instituted a plan to reduce reliance on Title IV funding,
and began financing a larger portion of student tuition with promissory notes.
Promissory notes typically require a larger provision for uncollectible
accounts.
Interest expense increased $642,000 to $817,000 in 1996 from $175,000 in
1995. Decreases due to reduced bank and subordinated debt were offset by a
$721,000 charge to interest for an additional payment due CenCor in 1997. See
discussion in "Liquidity and Resources."
In 1996, a tax benefit of $142,000 or 25.0% was recorded compared to a
provision of $2,000 or 11.1% in 1995. This tax benefit is a result of evaluating
the Company's needs as it related to provision for assessment of taxes. During
future evaluation the provision for assessment of taxes may increase or decrease
the overall provision for income taxes.
Weighted average common and common share equivalents outstanding increased
to 7,752,000 from 7,445,000. This increase is due to the dilutive effect of the
Company's incentive stock option plan. Earnings per weighted average common and
common share equivalent (EPS) was ($0.06) and ($0.01) at June 30, 1996 and 1995,
respectively. EPS is shown net of preferred stock dividends (not declared) of
$59,000 for the three months ended June 30, 1996 and $63,000 for the same period
in 1995. Cumulative dividends in arrears on the Preferred Stock was $397,000 as
of June 30, 1996.
(The remainder of this page was left intentionally blank.)
Page 7
<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1995
Net income decreased $193,000 or 61.1% to $123,000 for the six months ended
June 30, 1996 compared to net income of $316,000 in 1995. The 1996 net income
was adversely affected by an interest accrual of $879,000 discussed below. Total
revenue increased 10.7%, or $1,956,000 to $20,302,000 for the six months ended
June 30, 1996 compared to $18,346,000 in 1995. The increase is a result of
enrollment increases and a modest price increase in the second quarter of 1995.
Revenue for the CPA Review Course decreased 2.2% or $27,000 to $1,223,000
from $1,250,000 in 1995. Operating loss for the six months was $77,000 in 1996
compared to operating income of $101,000 in 1995. The declining revenue is
attributed to aggressive competition and fewer CPA exam candidates. Because the
CPA exam is administered twice each year, the operations of the CPA Review
Courses are seasonal, impacting the results of the Company during the quarters
ending March 31 and September 30.
Total operating expenses increased $1,421,000 or 8.1% to $19,051,000 for
the six months ended June 30, 1996 compared to $17,630,000 in 1995.
Payroll increased $899,000 or 10.6% to $9,414,000 in 1996 compared to
$8,515,000 in 1995. The Company has added additional staff as enrollment has
increased. In addition, the Company continues to upgrade the quality of staff
and faculty.
Instructional materials and supplies expense increased 12.5% or $207,000 to
$1,862,000 in 1996 compared to $1,655,000 in 1995. Textbook expense has
increased reflecting the increase in enrollments.
Other general and administrative expenses decreased 1.7% or $46,000 to
$2,729,000 in 1996 from $2,775,000 in 1995. The decrease was partially due to a
provision of $282,000 established in the first quarter of 1995 when the Company
was informed that its' Lauderdale Lakes, Florida School would be required to
refund Title IV funds to government agencies. This decrease was offset by
increases in 1996 for printing and scholarship expenses.
Provision for uncollectible accounts increased 46.0% or $343,000 to
$1,089,000 in 1996 compared to $746,000 in 1995. Beginning in the fourth quarter
of 1995, the Company instituted a plan to reduce reliance on Title IV funding,
and began financing a larger portion of student tuition with promissory notes.
Promissory notes typically require a larger provision for uncollectible
accounts.
Interest expense increased 197.8% or $722,000 to $1,087,000 in 1996 from
$365,000 in 1995. Decreases due to reduced bank and subordinated debt were
offset by a $879,000 charge to interest for an additional payment due CenCor in
1997. See discussion in "Liquidity and Resources."
In 1996, a tax benefit of $41,000 or 25.0% was recorded compared to a
provision of $35,000 or 10.0% in 1995. This tax benefit is a result of
evaluating the Company's needs as it related to provision for assessment of
taxes. During future evaluation the provision for assessment of taxes may
increase or decrease the overall provision for income taxes.
Weighted average common and common share equivalents outstanding increased
to 7,712,000 in 1996 from 7,391,000 in 1995. This increase is due to the
dilutive effect of the Company's incentive stock option plan. Earnings per
weighted average common and common share equivalent (EPS) was $0.00 and $0.02
for the six months ended June 30,1996 and 1995, respectively. EPS is shown net
of preferred stock dividends (not declared) of $119,000 for the six months ended
June 30, 1996 and $123,000 for the same period in 1995. Cumulative dividends in
arrears on the Preferred Stock was $397,000 as of June 30, 1996.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Effective October 30, 1992, the Company and CenCor, Inc. ("CenCor") entered
into a Restructuring, Security and Guaranty Agreement pursuant to which the
Company was released from its obligations relating to assumed subordinated
indebtedness issued by CenCor. As consideration for the release, the Company
issued to CenCor a Junior Secured Debenture (the "Debenture") in the principal
amount of $5,422,307, representing the full principal amount of the assumed
subordinated debt and accrued interest through October 30, 1992. Interest on the
Debenture accrued from October 30, 1992 through June 30, 1996. The first
principal and interest payment was made June 30, 1996. The entire balance of the
Debenture is due July 31, 1997. Interest accrues at 1.5% over the prime rate. At
July 31, 1997 CenCor is entitled to an amount equal to 25% of the amount by
which the "market capitalization" of the Company exceeds $3,500,000. Market
capitalization is the total common shares of the Company multiplied by the
highest average share price (high-bid) for any period of 30 consecutive trading
days between January 1, 1997 and June 30, 1997. At June 30, 1996 this payment
was accrued and would have been valued at $879,000. As the Company's average
stock price increases the payment due CenCor increases. (See the table below.)
Management will continue to accrue an estimate of the payment based on the
average stock price.
The table below reflects the payment due CenCor at July 31, 1997 if the
average high-bid stock price reaches the stated levels:
<TABLE>
<CAPTION>
Stock Price Payment Due
----------- -----------
<S> <C>
$ .50 $ - 0-
.75 430,000
1.00 865,000
1.50 1,734,000
2.00 2,604,000
</TABLE>
Effective November 15, 1994 CenCor exchanged $3,000,000 face value of the
Debenture for 300,000 shares of Cumulative Preferred Stock ( the Preferred Stock
). The Preferred Stock, $.10 par value, has a per share liquidation preference
of $10.00. Cumulative quarterly dividends accrue at a rate equal to 73% of the
then current interest rate on the Debenture. The dividends cumulate until such
time as the Debenture has been repaid in full which is currently scheduled for
July 31, 1997. At such time, the accumulated quarterly dividends will be paid
ratably over the ensuing 12 fiscal quarters. The Preferred Stock has no
mandatory redemption date but the Company may redeem the Preferred Stock, in
whole or in part, at any time, at liquidation value plus accrued cumulative
dividends. The exchange reduced long-term debt and increased the equity of the
Company by $3,000,000. By virtue of the reduced debt, interest is reduced which
improves income before taxes, but the Company will incur non-deductible
dividends on the preferred shares. Approximately half of the proceeds of the
sale of assets of the CPA Review Courses and the San Jose School, will be used
to redeem preferred stock.
Additionally, the Company paid the remaining balance of a bank term loan in
1996. The balance of this bank debt was $1,343,000 at December 31, 1995. The
Company currently has no bank line of credit for working capital.
Net cash provided by operating activities was $470,000 for the six months
ended June 30, 1996 a decrease of $3,384,000 as compared to the same period in
1995. This decrease is primarily a result of less cash collections at the
Schools due to increased loans provided by the Company's Schools, as discussed
below. Deferred student tuition increased $234,000 compared to an increase of
$1,936,000 in 1995. Other changes in assets and liabilities increased $14,000 in
1996 compared to an increase of $231,000 in 1995. The decrease of $217,000 was
attributable to decreased accrued expenses and other liabilities.
Capital expenditures in 1996 were $188,000 compared to $433,000 in 1995.
Capital expenditures for 1996 and 1995 were primarily for additional classroom
equipment. Principal payments on bank debt were $1,422,000 in 1996 compared to
$1,518,000 in 1995.
Page 9
<PAGE>
Beginning with the fourth quarter of 1995, the Company increased the number
of loans provided by the Company's Schools for their students. These are loans
made by the School to the School's students. As a result, the ratio of current
to long term accounts and notes receivable net of deferred tuition decreased to
61.2% at June 30, 1996 compared to 66.5% at December 31, 1995. These loans defer
cash collections, and currently reduce the Company's cash flow. Increased
reliance on loans may have an additional impact on future liquidity and may
increase bad debt expense. Net cash flow for the six months ending June 30, 1996
was a negative $1,140,000 compared to a positive $1,903,000 for the same period
in 1995.
On August 2, 1996, the Company sold the assets of Person/Wolinsky
Associates, which offers review courses in 16 states, to a group that is
comprised of individuals currently involved with Person/Wolinsky as instructors
and editorial writers. In addition, the Company signed an agreement to sell the
assets of its Allied Health School located in San Jose, California. This sale is
also expected to close in August. CenCor, which agreed to release its security
interest in these assets and to consent to these sales, will receive
approximately half of the proceeds in the form of a preferred stock redemption.
See Part II, Item 5 for additional information.
Earnings per weighted average common and common equivalent share is shown
net of preferred stock dividends (not declared) of $59,000 for the three months
ended June 30, 1996 and $63,000 for the same period in 1995. Preferred stock
dividends (not declared) were $119,000 for the six months ended June 30, 1996
compared to $123,000 for the same period in 1995. Cumulative Preferred Stock
dividends in arrears were $397,000 as of June 30, 1996.
The Company generally relies on the availability of various federal and
state student financial aid programs to provide funding for the students
attending the Company's Schools. The Company also relies on the availability of
lending institutions willing to participate in these programs and to grant loans
to these students. If the Company's Schools would be limited, suspended or
terminated from participation in the federal or state student financial aid
programs, or if lending institutions withdrew access to student loans, the
Company's continuing operations would be in doubt. Management does not
anticipate any material change in liquidity based on the Company's Schools'
participation in these programs.
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Page 10
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Department of Education Matters
The DOE regularly conducts program reviews of educational institutions
participating in Title IV programs. The Company disputed a program review
finding concerning "pro rata" refunds at one School. In February 1996, an
Administrative Law Judge ruled against the Company, and the issue was appealed
to the Secretary of Education. On May 15, 1996 the Secretary certified the
finding. The Company has not received notification of any monetary liability.
However, the Company believes any amount owed will be immaterial.
The DOE is authorized to limit, suspend, or terminate the eligibility of a
school to participate in Federal Title IV student loan programs and, in certain
circumstances, the Pell grant program, if the rate of students who default on
their loans during a defined period is equal to or exceeds 25% during each of
the three most recent fiscal years. As a result of litigation, the Company's
1991 rates were suspended. The 1992 and 1993 rates have been published for the
Company's Schools, and seven of the Schools have rates that equal or exceed 25%
for both 1992 and 1993. The final 1994 rates are expected to be published later
in 1996.
The Company is challenging the DOE's authority to enforce the 1992 Cohort
Default Rates and the rates for all subsequent years, in light of the DOE's rate
correction regulations, adopted on April 25, 1994 and November 29, 1994, which
the Company contends are inconsistent with Title IV statutory provisions and
therefore are invalid. The Company has requested the Court to officially suspend
the 1992 Cohort Default Rates and to enjoin enforcement of subsequent rates.
While the Court thus far has declined to enter a temporary restraining order or
a preliminary injunction prohibiting enforcement of the 1992 Cohort Default
Rates and subsequent rates, the Company has conducted some discovery and intends
to further pursue its request for an injunction if necessary to maintain its
Title IV eligibility.
The Company also has pursued administrative appeals seeking a reduction of
its previously announced and suspended 1990 and 1991 rates, and the published
1992 rates and 1993 rates. These appeals are being pursued under a rate
correction appeal process established by Congress in late 1993 for the
correction of default rates for demonstrated occurrences of improper loan
servicing and collections. The Company's appeals were commenced in the fall of
1994 and in the spring of 1996. The appeals were for loan servicing errors
and/or erroneous data.
During July 1996, the Company received responses on its appeals for nine of
its Schools' 1990, 1991, and 1992 rates. 1990 rates were adjusted for three of
the Company's Schools and 1992 rates were adjusted for one School. The
adjustments did not decrease the rates more than 1%. All of the adjusted rates
are greater than 25%. The Company's Schools have outstanding erroneous data
appeals for 1992 rates. As previously noted, the Company's Schools have
servicing errors and erroneous data appeals pending, for 1993 rates.
Consequently, the referenced Schools will continue to maintain Title IV
eligibility until receipt of rulings on the 1993 appeals, which are still
pending.
While the outcome of matters pertaining to the DOE and litigation cannot be
determined with certainty, management believes that the final outcome will not
have a material impact on its results of operations or its financial position.
Southern Career Institute
On May 31, 1990, the Company, through a wholly-owned subsidiary, Concorde
Career Institute, Inc., a Florida corporation, acquired substantially all the
assets of Southern Career Institute, Inc., a proprietary, postsecondary
vocational home-study school specializing in paralegal education, for a total
investment of $5,383,000. The acquisition was accounted for as a purchase and
after the acquisition the school was operated as Southern Career Institute
("SCI").
Page 11
<PAGE>
In 1991, an accrediting commission failed to reaffirm accreditation of SCI
under the ownership of Concorde Career Institute, Inc. Also in 1991, SCI
received notice from the Department of Education (DOE) alleging that commencing
June 1, 1990 SCI was ineligible to participate in federal student financial
assistance programs. The DOE gave notice that it intended to require SCI to
repay all student financial assistance funds disbursed from June 1, 1990 to
November 7, 1990, the effective date upon which the DOE discontinued disbursing
student financial assistance funds. The amount being claimed by DOE is not
determinable, but the total of the amounts shown on six separate notices dated
January 13, 1994 is approximately $2.7 million. By letter dated February 24,
1994, counsel for SCI provided certain information to the collection agency for
DOE and offered to settle all claims of DOE for the $9,828 on deposit in the SCI
bank account. As of August 2, 1996, neither SCI nor its counsel has received a
response to the settlement offer.
Because management of SCI had determined in late 1991 to wind down SCI's
operations and discontinue its business, SCI entered into a transaction with an
entity created by the former owner of Southern Career Institute, Inc. as the
purchaser. The purchaser acquired SCI's tuition receivables and agreed to
"teach-out" the then enrolled students, but did not assume any obligations to
DOE. The purchaser also agreed to pay SCI a portion of amounts it realized on
collections of the tuition receivables in excess of its operating costs. As of
August 2, 1996, SCI had received payments totaling approximately $30,000
pursuant to that agreement.
In light of the manner in which SCI was operated by Concorde Career
Institute, Inc. as a subsidiary of the Company, applicable corporate law limits
the liability of stockholders and it is the opinion of management of the Company
that the Company will not be liable for debts of SCI. Therefore, if SCI is
required to pay the DOE's claims it is the opinion of management it will not
have a material adverse impact on the Company's financial condition and its
results of operations.
Other
During July 1993, nine former students of the Jacksonville, Florida school
filed individual lawsuits against the school, alleging deceptive trade
practices, breach of contract, and fraud and misrepresentation. These suits have
since been dismissed, and these and additional former students have been added
to another complaint which was filed in the Circuit Court, Fourth Judicial
District, Duval County, Florida (Case 93-04005-CA). The latter case was served
on August 26, 1993, and was amended to comprise 69 plaintiffs. The Company filed
various objections and motions, including Motions to Dismiss and Motions to
Strike. After hearings, the trial court dismissed the lawsuit, but allowed the
lawsuit to be amended on behalf of one plaintiff, and authorized the remaining
plaintiffs to file individual suits if they so desired. The order of dismissal
was appealed and reversed. During the appeal process, two additional suits
making essentially the same claims have been filed. The matter is still in
discovery. The Company believes these suits are without merit and plans to
defend against them vigorously. In May 1995, plaintiffs requested permission to
amend the complaint by the 69 plaintiffs to convert the case to a class action,
which class would include the plaintiffs in all three cases. The Company opposed
the motion, and the proposed class action complaint was dismissed in August
1995, with permission to amend again. The amended class action complaint was
filed in August 1995, and the Company again moved to dismiss the complaint, and
to strike portions from the complaint. The motion to dismiss was denied November
7, 1995; the motion to strike was granted in part and denied in part. The
Company has answered the complaint, and filed numerous affirmative defenses.
Discovery restricted to class certification issues is currently ongoing, with a
hearing to determine whether or not the class should be certified anticipated in
the late fall, 1996. In the meantime, all activity and progress in the other
suits have been stayed. The Company will continue to strongly oppose class
certification.
The Company has litigation pending which arose in the ordinary course of
business. Litigation is subject to many uncertainties and the outcome of the
individual matters is not presently determinable. It is management's opinion
that this litigation and the litigation above will not result in liabilities
that would have a material adverse effect on the Company's financial position or
results of operations.
Page 12
<PAGE>
ITEM 2. CHANGE IN SECURITIES --NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES --NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --NONE
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
PERSON/WOLINSKY ASSOCIATES
On August 2, 1996 the Company sold the assets of Person/Wolinsky Associates
(the CPA Review Courses) for $2,250,000. The sales price is composed of $750,000
due at closing and an additional $1,500,000 profit participation payable, if
certain events occur, in ten annual installments commencing March 1, 1998.
Because this is a profit participation agreement the Company can not estimate if
any or all of the $1,500,000 will be paid. In addition, the Company is to
receive $750,000 for a non-compete agreement in ten annual installments
commencing December 15, 1996.
The buyer is a group that is comprised of individuals currently involved
with Person/Wolinsky as instructors and editorial writers.
All assets of the Company are currently held as collateral by CenCor, Inc.
for the debt due CenCor. CenCor agreed to consent to the sale and release of
assets in exchange for approximately fifty percent of the proceeds from the
sale. In addition, the first two non-compete payments, totaling $150,000, will
be paid to CenCor. These amounts will be used to redeem outstanding preferred
stock currently held by CenCor.
(The remainder of this page was left intentionally blank.)
Page 13
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the
Asset Sale of Person/Wolinsky Associates and associated transactions as of
January 1, 1995 for balance sheet and statement of operations purposes after
giving effect to the pro forma adjustments described in the accompanying notes.
The pro forma financial information is based on, and should be read in
conjunction with, the historical financial statements and notes related thereto
of the Registrant which are on file with the Securities and Exchange Commission
(File No. 0-16992).
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
<TABLE>
<CAPTION> PRO FORMA
--------------------------------------------------
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents................ $ 2,155,000 $506,000 (3) $ 2,661,000
Net receivables --
Accounts receivable.................. 15,857,000 (26,000) (2) 15,831,000
Notes receivable for student tuition.. 4,273,000 4,273,000
Allowance for uncollectible accounts.. (1,277,000) (1,277,000)
----------- -------- ----------
Total net receivables............... 18,853,000 (26,000) 18,827,000
Deferred income taxes.................... 450,000 450,000
Supplies and prepaid expenses............ 1,087,000 (276,000) (2) 811,000
----------- ---------- ----------
Total current assets................ 22,545,000 204,000 22,749,000
PROPERTY and EQUIPMENT, net................ 3,015,000 (41,000) (2) 2,974,000
TOTAL INTANGIBLE ASSETS.................... 1,719,000 (778,000) (2) 941,000
LONG-TERM NOTES RECEIVABLE................. 2,317,000 (78,000) (2) 2,239,000
OTHER...................................... 101,000 (407,000) (4) 508,000
----------- ---------- ----------
Total other assets.................... 2,418,000 329,000 2,747,000
----------- ---------- ----------
TOTAL ASSETS............................... $29,697,000 ($286,000) $29,411,000
=========== ========== ==========
</TABLE>
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Page 14
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------------
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Deferred student tuition.............. 15,482,000 (111,000) (2) $15,371,000
Current debt maturities............... 278,000 278,000
Accrued salaries and wages............ 888,000 888,000
Current deferred income taxes......... 271,000 29,000 (2) 300,000
Other accrued liabilities and
accounts payable................... 1,881,000 (55,000) (2) 1,826,000
----------- --------- -----------
Total current liabilities........ 18,800,000 (137,000) 18,663,000
OTHER LONG-TERM LIABILITIES............. 879,000 879,000
DEFERRED INCOME TAXES................... 548,000 60,000 (2) 608,000
SUBORDINATED DEBT DUE TO RELATED PARTY.. 2,672,000 2,672,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock....................... 30,000 (3,000) (2) 27,000
Common stock.......................... 698,000 698,000
Capital in excess of par.............. 8,128,000 (350,000) (2) 7,778,000
Accumulated deficit................... (1,997,000) 144,000 (5) (1,853,000)
Less-treasury stock................... (61,000) (61,000)
----------- --------- -----------
6,798,000 (209,000) 6,589,000
----------- --------- -----------
Total stockholders' equity......... $29,697,000 ($286,000) $29,411,000
=========== ======= ===========
</TABLE>
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Page 15
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA SIX MONTHS ENDED 6/30/96
---------------------------------------------
HISTORICAL ADJUSTMENTS(2) PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
STUDENT TUITION AND
OTHER REVENUE......................................... $20,302,000 ($1,223,000) $19,079,000
----------- ---------- -----------
OPERATING EXPENSES:
Payroll costs......................................... 9,414,000 (633,000) 8,781,000
Occupancy............................................. 2,532,000 (306,000) 2,226,000
Instructional materials and supplies.................. 1,862,000 (274,000) 1,588,000
Advertising........................................... 1,425,000 (38,000) 1,387,000
Other general and administrative...................... 2,729,000 (49,000) 2,680,000
Provision for uncollectible accounts.................. 1,089,000 1,089,000
----------- ---------- -----------
Total operating expenses........................ 19,051,000 (1,300,000) 17,751,000
----------- ---------- -----------
OPERATING INCOME........................................ 1,251,000 77,000 1,328,000
INTEREST EXPENSE........................................ 1,087,000 1,087,000
----------- ---------- -----------
INCOME BEFORE INCOME TAXES.............................. 164,000 77,000 241,000
PROVISION FOR INCOME TAXES.............................. 41,000 19,000 60,000
----------- ---------- -----------
NET INCOME.............................................. $ 123,000 $ 58,000 $ 181,000
=========== ========== ===========
WEIGHTED AVERAGE COMMON AND
COMMON SHARE EQUIVALENTS
OUTSTANDING........................................... 7,712,000 7,712,000
========== =========
EARNINGS PER WEIGHTED AVERAGE
COMMON AND COMMON SHARE
EQUIVALENTS OUTSTANDING............................... $0.0 $0.01
==== =====
</TABLE>
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Page 16
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA TWELVE MONTHS ENDED 12/31/95
----------------------------------------
Historical Adjustments(2) Pro Forma
----------- ------------ -----------
<S> <C> <C> <C>
STUDENT TUITION AND
OTHER REVENUE.................................. $39,274,000 ($2,914,000) $36,360,000
----------- ------------ -----------
OPERATING EXPENSES:
Payroll costs.................................. 17,725,000 (1,195,000) 16,530,000
Occupancy...................................... 5,197,000 (538,000) 4,659,000
Instructional materials and supplies........... 3,637,000 (535,000) 3,102,000
Advertising.................................... 2,820,000 (73,000) 2,747,000
Other general and administrative............... 5,879,000 (95,000) 5,784,000
Provision for uncollectible accounts........... 1,577,000 1,577,000
----------- ------------ -----------
Total operating expenses.................. 36,835,000 (2,436,000) 34,399,000
----------- ------------ -----------
OPERATING INCOME.................................. 2,439,000 (478,000) 1,961,000
INTEREST EXPENSE.................................. 659,000 659,000
----------- ------------ -----------
INCOME BEFORE INCOME TAXES........................ 1,780,000 (478,000) 1,302,000
PROVISION FOR INCOME TAXES........................ 181,000 (48,000) 133,000
----------- ------------ -----------
NET INCOME........................................ $ 1,599,000 ($ 438,000) $ 1,169,000
=========== ============ ===========
WEIGHTED AVERAGE COMMON AND
COMMON SHARE EQUIVALENTS
OUTSTANDING.................................... 7,642,000 7,642,000
=========== ===========
EARNINGS PER WEIGHTED AVERAGE
COMMON AND COMMON SHARE
EQUIVALENTS OUTSTANDING........................ $0.18 $0.12
===== =====
</TABLE>
GENERAL
Note 1: On August 2, 1996 the assets of Person/Wolinsky Associates, a wholly
owned subsidary of the Company were sold. The above accompanying
unaudited pro forma balance sheets and statements of operations give
effect to the sale and the use of the resulting net proceeds for the
Company assuming the transaction occurred on January 1, 1995.
As a result of the sale the Company will receive proceeds of $859,000.
Approximately $353,000 of these proceeds will be used to redeem 31,000
shares of preferred stock held by CenCor.
The pro forma consolidated financial data presented herein is based on
certain assumptions and do not purport to represent what the
Registrant's results of operations would have been had such
transactions, in fact, occurred at the dates indicated, or to project
the Registrant's results of operations or financial condition to any
future date or period. The pro forma financial data are based upon and
should be read in conjunction with the historical consolidated
financial statements including the notes thereto, included on this
Form 10-Q and the Registrant's Annual Report to Form 10-K for the year
ended December 31, 1995.
Page 17
<PAGE>
Note 2: Assuming the assets of Person/Wolinsky Associates were sold January 1,
1995 for statement of operations and balance sheet purposes, assets,
liabilities, and various income statement components would not have
been included in the Company's consolidated financial statements in
the periods presented.
Note 3: Reflects the proceeds of the sale less cash paid to CenCor for
redemption of 31,000 shares of preferred stock and the related
dividends.
<TABLE>
<S> <C> <C>
Cash at closing................................ $ 750,000
Costs and expenses related to the fall course
incurred by Seller prior to May 1, 1996..... 89,000
Sale of inventory.............................. 20,000
Redemption of preferred stock.................. (353,000)
---------
$ 506,000
=========
</TABLE>
Note 4: The $750,000 non-compete Agreement is payable in ten equal annual
installments commencing December 15, 1996. The payments have been
discounted at a 13% effective rate for pro forma balance sheet
presentation.
Note 5: Gain on sale of Person/Wolinsky Associates has been estimated as
follows:.
<TABLE>
<S> <C> <C>
Net cash received (Note 3).................... $ 506,000
Redemption of preferred stock.................. 353,000
Net present value of non-compete agreement..... 436,000
Assets sold.................................... (1,228,000)
Liabilities sold............................... 166,000
-----------
Sub-total 233,000
Taxes, 38% effective tax rate.................. (89,000)
-----------
Gain on sale of assets............... $ 144,000
===========
</TABLE>
ITEM 6. EXHIBITS:
Exhibit 1 - Person/Wolinsky Associates Asset Sale Contract
Exhibit 2 - Amendment Number Three to CenCor, Inc. Debt
Agreement
(The remainder of this page was left intentionally blank.)
Page 18
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONCORDE CAREER COLLEGES, INC.
DATED: AUGUST 2, 1996
BY: /S/ JACK L. BROZMAN
--------------------------
JACK L. BROZMAN, PRESIDENT
BY: /S/ GREGG GIMLIN
-------------------------------------
GREGG GIMLIN, CHIEF FINANCIAL OFFICER
<PAGE>
CONCORDE CAREER COLLEGES, INC.
FORM 10-Q
SIX MONTHS ENDED JUNE 30, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page Numbers
------- ----------- ------------
<S> <C> <C>
10(k) Asset Purchase Agreement among Person/Wolinsky 1 - 19
Associates, Inc., Concorde Career Colleges, Inc.
and DGZ Associates, Inc. July 10, 1996
10(h)(vii) Third Amendment to the Restructuring, Security 20 - 36
and Guaranty Agreement
27 Financial Data Schedule 37
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
AMONG
PERSON/WOLINSKY ASSOCIATES, INC.,
CONCORDE CAREER COLLEGES, INC.
AND
DGZ ASSOCIATES, INC.
JULY 10, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
Page
----
ARTICLE I CERTAIN DEFINITIONS............................................ 1
Section 1.1 Business Assets................................................ 1
Section 1.2 Excluded Assets................................................ 3
Section 1.3 Liabilities.................................................... 3
Section 1.4 Assumed Liabilities............................................ 3
Section 1.5 Excluded Liabilities........................................... 4
Section 1.6 Course/Courses................................................. 4
ARTICLE II SALE AND PURCHASE.............................................. 4
Section 2.1 Sale and Purchase of Business Assets; Assumption of Liabilities 4
Section 2.2 Purchase Consideration......................................... 4
Section 2.3 Calculation and Payment of Purchase Price...................... 5
Section 2.4 Security Interest.............................................. 5
Section 2.5 Closing........................................................ 6
Section 2.6 Deliveries..................................................... 6
Section 2.7 Use of Corporate Name.......................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER....................... 6
Section 3.1 Corporate Existence............................................ 6
Section 3.2 Execution, Delivery and Performance............................ 6
Section 3.3 Title to Business Assets....................................... 7
Section 3.4 Consents and Approvals......................................... 7
Section 3.5 Notice From Third Parties...................................... 8
Section 3.6 Litigation..................................................... 8
Section 3.7 Broker's Fees.................................................. 8
Section 3.8 Tax Matters.................................................... 8
Section 3.9 Employee Matters............................................... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.................... 9
Section 4.1 Corporate Existence............................................ 9
Section 4.2 Execution, Delivery and Performance............................ 9
Section 4.3 Consents and Approvals......................................... 9
Section 4.4 Litigation..................................................... 9
Section 4.5 Broker's Fees.................................................. 10
ARTICLE V COVENANTS OF SELLER............................................ 10
Section 5.1 Conduct of Business Prior to Closing........................... 10
Section 5.2 Access to Information.......................................... 10
Section 5.3 Employee Matters............................................... 10
Section 5.4 Consents and Approvals......................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.5 Noncompetition................................................. 10
Section 5.6 Bulk Sales Law................................................. 11
Section 5.7 No Solicitations; Other Transactions........................... 11
ARTICLE VI COVENANTS OF PURCHASER......................................... 11
Section 6.1 Consents and Approvals......................................... 11
Section 6.2 Performance of Assumed Liabilities............................. 11
Section 6.3 Confidentiality................................................ 11
Section 6.4 Collection of Receivables...................................... 11
Section 6.5 Right of Inspection............................................ 11
Section 6.6 Preservation of Service Mark................................... 12
ARTICLE VII CONDITIONS TO CLOSING.......................................... 12
Section 7.1 Conditions as to Obligations of Purchaser...................... 12
Section 7.2 Conditions to Obligations of Seller............................ 13
ARTICLE VIII INDEMNIFICATION................................................ 13
Section 8.1 Indemnification by Seller and Concorde......................... 13
Section 8.2 Indemnification by Purchaser................................... 14
Section 8.3 Time and Manner of Certain Claims.............................. 14
Section 8.4 Determination of Damages and Related Matters................... 14
Section 8.5 Defense of Claims by Third Parties............................. 15
ARTICLE IX MISCELLANEOUS.................................................. 15
Section 9.1 Termination.................................................... 15
Section 9.2 Survival....................................................... 16
Section 9.3 Entire Agreement............................................... 16
Section 9.4 Amendment...................................................... 17
Section 9.5 Notice......................................................... 17
Section 9.6 Waiver......................................................... 18
Section 9.7 Severability................................................... 18
Section 9.8 Interpretation................................................. 19
Section 9.9 Counterparts................................................... 19
Section 9.10 Governing Law.................................................. 19
Section 9.11 Assignment..................................................... 19
Section 9.12 Payment of Fees and Expenses................................... 19
Section 9.13 Further Documents.............................................. 19
</TABLE>
ii
<PAGE>
SCHEDULES
---------
1.1(a) Equipment, Computer Hardware, Etc.
1.1(b) Inventory
1.1(d) Prepaid Expenses and Deposits
1.1(e) Transferred Contracts
1.1(f) Software
1.1(g) Trademarks, Trade Names, Service Marks, etc.
3.0 Disclosure Schedule
EXHIBITS
--------
2.2 Costs and Expenses Paid by Seller on or after May 1, 1996 (to be
attached at Closing)
2.3 Calculation of Profit Participation
2.4 Memorandum of Security Interest
5.5 Noncompetition Agreement With Purchaser, Seller and Concorde
7.1 Southgate Sublicense
iii
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 10th day of July, 1996, by and among Person/Wolinsky Associates,
Inc., a New York corporation with principal offices at 4 Roosevelt Avenue, Port
Jefferson Station, New York 11776 ("Seller"); Concorde Career Colleges, Inc., a
Delaware corporation with principal offices at 1100 Main, Suite 416, Kansas
City, Missouri 64105 ("Concorde"); and DGZ Associates, Inc., a New York
corporation with principal offices at 4 Roosevelt Avenue, Port Jefferson
Station, New York 11776 ("Purchaser").
W I T N E S S E T H:
-------------------
WHEREAS, Seller is engaged in the business of offering, directly and
indirectly through Course directors, review courses for candidates preparing for
the CPA Examination administered by the American Institute of Certified Public
Accountants (the "Business"); and
WHEREAS, Purchaser is a corporation wholly owned by certain associates
of Seller (the "Purchaser's Stockholders") and formed for the purpose of
acquiring the Business; and
WHEREAS, Purchaser desires to purchase, acquire, or assume, and Seller
desires to sell, transfer, and assign to Purchaser, substantially all of the
assets, properties and liabilities of the Business, all as set forth in Sections
1.1 and 1.4, below, as a going concern, for the purchase price and upon the
terms subject to the conditions set forth herein (the "Acquisition").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties set forth herein, the parties hereby agree as follows.
ARTICLE I
CERTAIN DEFINITIONS
-------------------
SECTION 1.1 BUSINESS ASSETS. As used in this Agreement, the "Business
Assets" shall mean all of the right, title, and interest of Seller, as in
existence on the Closing Date, as defined herein, in and to the tangible and
intangible assets related to the Business (excluding the Excluded Assets) and
listed below:
(a) All equipment, computer hardware, and other fixed assets
owned by Seller and utilized in connection with the Business, as itemized
on Schedule 1.1(a);
(b) All inventories of course materials, brochures, advertising
materials, work in process, and supplies related to the Business, including
office supplies and miscellaneous items, all as listed on Schedule 1.1(b)
(the "Inventory");
1
<PAGE>
(c) All notes and accounts receivable from students with respect
to the 1996 Fall Course or cash collected thereon;
(d) All prepaid expenses related to the Business and all
prepayments or prepaid deposits by students with respect to Courses to be
conducted after the Closing, all as listed on Schedule 1.1(d);
(e) All of the rights and obligations of Seller under all
contracts, arrangements, service contracts, licenses, equipment leases, and
other agreements, arrangements, commitments or understandings, including
but not limited to those existing agreements with Course directors, leases
or contracts for Course sites (provided the rights and obligations of
Concorde, Seller's sole stockholder, under the Southgate Tower Hotel
license shall be extended to Purchaser through a sublicense, to be attached
hereto as Exhibit 7.1 (the "Southgate Sublicense")); the June 25, 1996
letter agreement with Richard Slusz (the "Slusz Agreement"); the contract
with Sam Person; and the lease on the Roosevelt Avenue building, all as
listed on Schedule 1.1(e) (the "Transferred Contracts");
(f) All software used in the Business, including enhancements
thereto, whether developed or purchased, including the "PrepWise" software
and all copyrights related thereto, all as listed on Schedule 1.1(f);
(g) The core curriculum for the Course, all trademarks, service
marks, trade names, registered user names, copyrights, and copyright
registrations, including all applications and registrations therefore,
whether registered or common law, including but not limited to the mark
"PERSON-WOLINSKY CPA REVIEW COURSES", U.S. Trademark Registration No.
1,165,892, all goodwill associated therewith and all common law and
statutory rights therein (collectively, the "Service Mark"), the names
"Person/Wolinsky", "PrepWise" (U.S. Trademark Registration No. 1,758,047),
any marks related thereto, all as listed on Schedule 1.1(g), and all choses
in action, past, present or future, concerning infringement thereof, as
well as all plans, trade secrets, processes and procedures, databases,
websites, homepages, research records and know-how, related to the
Business, as well as the telephone numbers related to the Business, and any
interest that Seller may have, if any, in the book entitled: "How to
Prepare for the Certified Accountant Exam," fifth edition, published by
Barron's, all as listed on Schedule 1.1(g) (collectively, the "Intellectual
Property");
(h) All books, records (other than the corporate records of
Seller), correspondence, mailing lists, lists of students, brochures and
promotional materials, including catalogues and research and development
files related to the Business; and
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(i) To the extent their transfer is permitted by law, all
governmental licenses, permits, rights, approvals, license applications,
and registrations; provided however,
(j) To the extent that the Business Assets consist of written
documents which are necessary for Seller's records, the Seller may deliver
such portion of the Business Assets by either delivering to Purchaser the
original documents and retaining a duplicate copy thereof or by delivering
to Purchaser a duplicate copy and retaining the original document, but in
any event, Seller shall not retain any original Business documents which
are necessary to effectuate the transfer of any Business Asset to Purchaser
pursuant to this Agreement. Furthermore, Purchaser agrees to allow Seller
access to all of the business records transferred by and through this
Section for the purpose of responding to any governmental audits, servicing
extended service contracts, and for any other such similar purpose.
SECTION 1.2 EXCLUDED ASSETS. As used in this Agreement, "Excluded
Assets" means:
(a) all cash and accounts receivable existing prior to the
Closing, including, but not limited to, course fees receivable, and
accounts and notes receivable from, or with respect to, student tuition,
from completed courses (inclusive of forfeited cassette deposits), but
excluding all notes and cash received on tuition payments with respect to
the 1996 Fall Course; and
(b) the personal computer and facsimile machine currently used by
Samuel Person, and the art work in the Roosevelt Avenue building, all of
which is the personal property of Mr. Person.
SECTION 1.3 LIABILITIES. As used in this Agreement, "Liabilities"
means all costs, expenses, charges, accruals, debts, liabilities and
obligations, contingent or otherwise, including, without limitation, those
arising under any legislation, regulation or rule of any governmental authority,
commission, board, agency or instrumentality, domestic or foreign, any award of
any arbitrator or court and any contract, agreement, arrangements, lease,
commitment or undertaking.
SECTION 1.4 ASSUMED LIABILITIES. As used in this Agreement, "Assumed
Liabilities" shall mean only those Liabilities of the Business (a) incurred by
Seller related to the Business on or after May 1, 1996, whether or not paid by
Seller on or before the Closing, including capital expenditures made in the
ordinary course of business and any advances to, or payments made on behalf of,
Richard Slusz on or after May 1, 1996 pursuant to the Slusz Agreement; (b)
arising on or after the Closing Date which are directly related or attributable
to or arising out of the contractual obligations of Seller under the Transferred
Contracts, including all obligations owed pursuant to Samuel Person's employment
contract and the letter agreements with Paula Chazen and Rory Stecker concerning
employment, or otherwise related to the Business; and (c) related to the costs
of supplies reasonably ordered by Seller for the Business prior to the Closing
Date which are received by Purchaser after the Closing Date (but billed to
Seller).
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SECTION 1.5 EXCLUDED LIABILITIES. As used in this Agreement, "Excluded
Liabilities" shall mean all Liabilities of Seller other than the Assumed
Liabilities, including, but not limited to, any Liabilities related to
employees, or former employees, of Seller, other than those Liabilities
identified in Section 1.4. Seller shall remain responsible for all Liabilities
incurred by Seller on or before the Closing which do not constitute Assumed
Liabilities.
SECTION 1.6 COURSE/COURSES. As used in this Agreement, "Courses" shall
mean the CPA review courses offered on a bi-annual basis by Seller and its
Course directors, the "SPRING COURSE" being typically offered in preparation for
the CPA exam given in May of each year and the "FALL COURSE" being typically
offered in preparation for the CPA exam given in November of each year.
ARTICLE II
SALE AND PURCHASE
-----------------
SECTION 2.1 SALE AND PURCHASE OF BUSINESS ASSETS; ASSUMPTION OF
LIABILITIES. Subject to and upon the terms and conditions set forth in this
Agreement, Seller shall sell, transfer, convey, assign, and deliver all of the
Business Assets to Purchaser at the Closing, and Purchaser shall purchase the
Business Assets subject to and upon such terms and conditions. Contemporaneously
with the sale and purchase of the Business Assets, Purchaser shall assume, and
shall agree to pay, discharge, or perform, all of Seller's obligations arising
out of, or with respect to, the Assumed Liabilities.
SECTION 2.2 PURCHASE CONSIDERATION. In consideration for the sale,
transfer, conveyance, assignment, and delivery of the Business Assets and the
grant of rights hereunder, Purchaser shall pay to Seller the purchase price as
determined in accordance with Section 2.3 hereof (the "Purchase Price"). The
allocation of the Purchase Price among the Business Assets will be as mutually
agreed by Purchaser and Seller.
Additionally, (a) Purchaser shall pay Concorde an aggregate of seven
hundred fifty thousand dollars ($750,000) (the "Noncompete Fee") for the
noncompetition agreement described in Section 5.5, below; and (b) on or before
September 15, 1996, from the cash received with respect to tuition for the 1996
Fall Course, Purchaser shall reimburse Seller (i) eighty-eight thousand eight
hundred and thirty-four dollars ($88,834)) for the amount of costs and expenses
related to the 1996 Fall Course incurred by Seller prior to May 1, 1996; (ii)
the amount of all costs and expenses, including capital expenditures made in the
ordinary course of business and payments made pursuant to the Slusz Agreement,
paid by Seller related to the Business on or after May 1, 1996 (as set forth on
Exhibit 2.2 to be attached hereto at Closing); and (iii) twenty-thousand dollars
($20,000) for the inventory being acquired by Purchaser (collectively, the
"Reimbursements").
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SECTION 2.3 CALCULATION AND PAYMENT OF PURCHASE PRICE. The Purchase
Price shall be two million two hundred fifty thousand dollars ($2,250,000),
subject to adjustment pursuant to (b), below, payable to Seller by Purchaser as
follows:
(a) Seven hundred fifty thousand dollars ($750,000), by credit at
Closing of the seventy-five thousand dollars ($75,000) deposit paid by
Purchaser at the time of execution of this Agreement with respect to the
Acquisition, to be held in escrow by Seller's counsel on terms consistent
with Section 9.1 and mutually satisfactory to the parties, with the balance
of six hundred seventy-five thousand dollars ($675,000) in cash, by wire
transfer, or certified or cashier's check at Closing; and
(b) Up to one million five hundred thousand dollars ($1,500,000),
payable in ten (10) annual installments commencing on March 1, 1998, as set
forth on Exhibit 2.3 (the "Profit Participation"). It is understood that
Seller's rights in and to the Profit Participation shall be assigned at
Closing to Concorde.
SECTION 2.4 SECURITY INTEREST.
(a) The payment of the Profit Participation and the Noncompete
Fee shall be secured by the grant by Purchaser to Concorde of a first
security interest in the Service Mark (the "Security Interest"), by
execution of recordable Memorandum of Security Interest, including a
conditional assignment in the event of default and an irrevocable power of
attorney with respect thereto, to be attached hereto as Exhibit 2.4. It is
understood that payment of the Noncompete Fee and the Profit Participation
are corporate obligations of Purchaser, and are not personally guaranteed
by Purchaser's shareholders or officers, except to the extent payments are
owed to Seller pursuant to Section 2.4(b) as a result of the sale of the
Business effected through sale of stock by the shareholders of Purchaser.
(b) It is agreed that in the event Purchaser sells the Business,
whether through a stock sale, an asset sale, or otherwise, (i) prior to the
payment of the full Profit Participation to Seller, Seller (or its assigns)
shall receive fifty percent (50%) of the aggregate sales price in excess of
one million five hundred thousand dollars ($1,500,000), less the amount of
the Profit Participation previously paid to Seller and (ii), prior to the
expiration of the ten (10) year Noncompete term, the benefit and burden of
Noncompete will be assumed by Purchaser's buyer (or paid in full upon the
closing of such sale). It is agreed that sales of stock of the Purchaser
between existing stockholders of Purchaser shall not constitute a sale of
the Business for purposes of this Section 2.4.
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SECTION 2.5 CLOSING. The transactions contemplated by this Agreement
shall take place and be effective as of the closing (the "Closing") which shall
occur as of the close of business on Wednesday, July 31, 1996, or as mutually
agreed by the parties after such date but prior to August 31, 1996. The date
that the Closing occurs is sometimes referred to as the "Closing Date." The
Closing shall be held at the offices of Bryan Cave LLP, 245 Park Avenue, New
York, New York 10167, or at such other place as the parties may agree.
SECTION 2.6 DELIVERIES. At the Closing, Seller shall, upon receipt of
the purchase consideration, deliver to Purchaser all such bills of sale,
assignments, or other instruments of transfer and conveyance as shall be
necessary or appropriate, in the reasonable judgment of Purchaser, to transfer
the Business Assets, including the Intellectual Property, to Purchaser, and
Seller shall take all other steps as may be necessary to put Purchaser in actual
control of the Business Assets.
SECTION 2.7 USE OF CORPORATE NAME. At the Closing, Seller shall assign
to Purchaser the exclusive right to use the trade names listed on Schedule
1.1(g), including but not limited to "Person/Wolinsky", it being agreed and
understood that Purchaser intends to change its corporate name to
"Person/Wolinsky, Inc." immediately after the Closing. Notwithstanding anything
herein to the contrary, the parties agree that Seller will have the right to
continue to use the corporate name "Person/Wolinsky Associates, Inc."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Purchaser that the following
representations and warranties are, and will be as of the Closing, true and
correct, except as set forth on the Disclosure Schedule attached hereto as
Schedule 3 and except as otherwise arising out of facts and circumstances as to
which Purchaser's Stockholders, by virtue of their employment by Seller, have or
should have knowledge:
SECTION 3.1 CORPORATE EXISTENCE. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New York. Seller has the corporate power and authority to own and use its
properties and to conduct its Business as the same is presently conducted.
SECTION 3.2 EXECUTION, DELIVERY AND PERFORMANCE. Seller has full
corporate power and authority to enter into this Agreement, and the Exhibits
hereto, and to perform its obligations hereunder, or thereunder, and to
consummate the transactions contemplated hereby, or thereby, and neither the
execution nor performance of this Agreement or the Exhibits hereto by Seller nor
the consummation of the transactions contemplated hereby, or thereby, will:
(a) result in the breach of any material statute or regulation of
the United States or of any state in which Seller is qualified to do
business; or
(b) conflict with or result in a material breach of or default by
Seller
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of the terms and provisions of the Certificate of Incorporation or Bylaws
of Seller as presently in effect; or
(c) result in a material breach of, default under, or
acceleration of any material obligation under any material agreement,
license, instrument, decree, order, judgment, or other restriction to which
Seller is a party or by which it may be bound or which would create a lien
on the Business Assets. All proceedings required to be taken by Seller to
authorize the execution, delivery, and performance of this Agreement have
been properly taken and this Agreement constitutes a valid and binding
obligation of Seller, enforceable in all material respects in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, or similar laws affecting the rights of creditors generally and
except for equitable remedies being at the discretion of the court from
which they are sought.
SECTION 3.3 TITLE TO BUSINESS ASSETS.
(a) The Business Assets, which upon consummation of the
transactions contemplated hereby shall be transferred to Purchaser, are
held free and clear of all material liens and encumbrances, subject only to
the claims of third parties arising from the Assumed Liabilities.
(b) There exists no restriction on the right of Seller to sell,
transfer, convey, assign, and deliver the Business Assets and to convey
good title thereto to Purchaser, that will not have been eliminated on or
before Closing.
(c) There exists no condition, restriction, or reservation
affecting the title to or utility of the Business Assets that would prevent
Purchaser from utilizing the Business Assets in a manner consistent with
Seller's present utilization thereof.
SECTION 3.4 CONSENTS AND APPROVALS. No consent, approval, or
authorization of, or declaration, filing, or registration with, any governmental
or regulatory authorities, or any other person or entity is required to be made
by Seller or obtained for the valid execution, delivery, and performance of this
Agreement by Seller or the valid consummation by Seller of the transactions
contemplated hereby, that will not have been obtained on or before the Closing.
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SECTION 3.5 NOTICE FROM THIRD PARTIES. Seller has not received notice
of any intent by a third party to repudiate its obligations under any
Transferred Contract, or to take any action with respect to any Business Asset
or Assumed Liability which action will or could materially adversely alter the
nature of such, or materially adversely effect, singly or in aggregate, the
Business.
SECTION 3.6 LITIGATION.
(a) There is no suit, claim, action, arbitration, governmental
investigation, or other legal or administrative proceeding now pending or
to the knowledge of Seller threatened before any court, administrative or
regulatory body, or any other governmental agency, to which Seller is a
party or which may result in any judgment, order, decree, liability, or
other determination, which will, or could, have any materially adverse
effect upon the Business, the Business Assets or Seller's interest therein;
(b) No such judgment, order, or decree has been entered against
Seller and no such liability has been incurred by Seller which has, or
could have, such effect;
(c) There is no claim, action, or proceeding now pending, or to
the best knowledge of Seller threatened, before any court, administrative
or regulatory body, or any governmental agency, which will, or could,
prevent the consummation of the transactions contemplated by this
Agreement; and
(d) Seller shall be obligated to advise Purchaser should any such
litigation be instituted.
SECTION 3.7 BROKER'S FEES. Seller shall indemnify and hold Purchaser
harmless in respect to any claim for brokerage or finder's fees or commissions
with respect to the transactions contemplated herein by anyone claiming to have
acted on behalf of Seller.
SECTION 3.8 TAX MATTERS. Neither the Internal Revenue Service nor any
other taxing authority is now asserting or, to the knowledge of Seller,
threatening to assert against Seller any deficiency or claim for additional
taxes or interest or penalties, which could cause the imposition of a tax lien
on any of the Business Assets, nor, to the knowledge of Seller, does any basis
exist for the imposition of any such lien.
SECTION 3.9 EMPLOYEE MATTERS. There are no collective bargaining
agreements affecting Seller's employees.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Seller that the following
representations and warranties are, and will be as of Closing, true and correct:
SECTION 4.1 CORPORATE EXISTENCE. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New York.
SECTION 4.2 EXECUTION, DELIVERY AND PERFORMANCE. Purchaser has full
corporate power and authority to enter into this Agreement, and the Exhibits
hereto, and to perform its obligations hereunder, or thereunder, and to
consummate the transactions contemplated hereby, or thereby, and neither the
execution nor performance of this Agreement nor the Exhibits hereto by Purchaser
nor the consummation of the transactions contemplated hereby, or thereby, will:
(a) result in the breach of any material statute or regulation of
the United States or of any state in which Purchaser is qualified to do
business; or
(b) conflict with or result in a material breach of or default by
Purchaser of the terms and provisions of the Certificate of Incorporation
or Bylaws of Purchaser as presently in effect; or
(c) result in a material breach of, default under, or
acceleration of any material obligation under any material agreement,
license, instrument, decree, order, judgment, or other restriction to which
Purchaser is a party or by which it may be bound. All proceedings required
to be taken by Purchaser to authorize the execution, delivery, and
performance of this Agreement have been properly taken, and this Agreement
constitutes a valid and binding obligation of Purchaser, enforceable in all
material respects in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, or similar laws
affecting the rights of creditors generally and except for equitable
remedies being at the discretion of the court from which they are sought.
SECTION 4.3 CONSENTS AND APPROVALS. No material consent, approval, or
authorization of, or declaration, filing, or registration with, any governmental
or regulatory authorities, or any other person or entity is required to be made
by Purchaser or obtained for the valid execution, delivery, and performance of
this Agreement by Purchaser or the valid consummation by Purchaser of the
transactions contemplated hereby.
SECTION 4.4 LITIGATION. There is no claim, action, or proceeding now
pending, or to the best knowledge of Purchaser threatened, before any court,
administrative or regulatory body, or any governmental agency, which will, or
could, prevent the consummation of the transactions contemplated by this
Agreement.
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SECTION 4.5 BROKER'S FEES. Purchaser shall indemnify and hold Seller
harmless in respect to any claim for brokerage or finder's fees or commissions
with respect to the transactions contemplated herein by anyone claiming to have
acted on behalf of Purchaser.
ARTICLE V
COVENANTS OF SELLER
-------------------
SECTION 5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. From the date hereof
until the Closing Date, Seller shall operate the Business according to its
ordinary and usual course of business as historically conducted. During such
period, without prior written notice to and agreement of Purchaser, Seller shall
not incur any indebtedness which might create a lien of encumbrance against any
of the Business Assets, or take any action materially adversely affecting the
Business Assets or materially increasing the Assumed Liabilities.
SECTION 5.2 ACCESS TO INFORMATION. Seller shall afford Purchaser, its
counsel, financial advisors, auditors, and other authorized representatives
reasonable access for any purpose consistent with this Agreement from the date
hereof until the Closing Date, during normal business hours, to the offices,
properties, books, and records of Seller and shall furnish to Purchaser such
additional financial and operating data, including financial statements of
Seller for years 1994 and 1995, and other information as Seller may possess and
as Purchaser may reasonably request, subject to Purchaser's obligations
regarding the confidentiality of such information as set forth in Section 6.3
hereof.
SECTION 5.3 EMPLOYEE MATTERS. Seller will satisfy any legal
obligations it may have to the persons employed in connection with the Business
with regard to their employment with Seller or the termination thereof.
Effective as of the day before Closing, Seller will terminate the employment of
all such persons, it being agreed that Purchaser will offer employment to all
such persons. In the event Purchaser hires any of Seller's former employees,
Purchaser shall have no obligation to treat those individuals, for any purpose,
as anything other than new employees as of the date of their employment by
Purchaser, except pursuant to certain Assumed Liabilities related to three
employees, as set forth in Section 1.4 hereof.
SECTION 5.4 CONSENTS AND APPROVALS. Seller shall use reasonable
efforts to obtain, and to cooperate with Purchaser in obtaining, from third
parties each contractual consent required for the consummation of the
transactions contemplated hereby, including the payment by Seller of reasonable
fees to obtain such consents up to an aggregate maximum of ten thousand dollars
($10,000).
SECTION 5.5 NONCOMPETITION. In consideration of Purchaser's
acquisition of the Business Assets, its payment of the Purchase Price to Seller,
assumption of the Assumed Liabilities and the payment of the Noncompete Fees
($75,000 per year, commencing December 15, 1996, for the 10 year term) set forth
in the Noncompete Agreement attached hereto as Exhibit 5.5, Seller agrees that,
for a period of ten (10) years immediately following the date of Closing (the
"Restricted Period"), it and its sole stockholder, Concorde, will refrain from
competition with Purchaser with respect to the Business in the United States.
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SECTION 5.6 BULK SALES LAW. Purchaser has waived Seller's compliance
with the provisions of applicable state Bulk Sales Laws, in consideration of
Seller and Concorde's agreement to indemnify Purchaser against all claims of
creditors that could be asserted against Purchaser by reason of any failure to
so comply, to the extent that such claims do not relate to or arise out of
Assumed Liabilities.
SECTION 5.7 NO SOLICITATIONS; OTHER TRANSACTIONS. Seller shall not,
prior to including affiliates of Seller, with respect to the sale of all or a
substantial portion of the Business Assets or the Business, other than
transactions in the ordinary course of business.
ARTICLE VI
COVENANTS OF PURCHASER
----------------------
SECTION 6.1 CONSENTS AND APPROVALS. Purchaser shall use reasonable
efforts to obtain, and will cooperate with Seller in obtaining, from third
parties each contractual consent required for the consummation of the
transactions contemplated hereby.
SECTION 6.2 PERFORMANCE OF ASSUMED LIABILITIES. Purchaser shall
perform its obligations for the benefit of any third person with respect to the
Assumed Liabilities to the fullest extent and within the time periods required
thereby.
SECTION 6.3 CONFIDENTIALITY. Purchaser shall maintain all information
gained from Seller in connection with its evaluation of the transactions
contemplated by this Agreement (the "Confidential Information") in strict
confidence, and shall take all precautions necessary to prevent disclosure,
access to, or transmission of the Confidential Information, or any part thereof,
to any third party, except for the exclusive purposes of arranging financing for
the purchase of the Business Assets or completing the transactions contemplated
herein. In the event the Closing does not occur for any reason, Purchaser shall,
promptly upon Seller's request, return all copies and recordings of the
Confidential Information in its possession or under its control and delete all
records thereof in any data storage system maintained by or for Purchaser.
SECTION 6.4 COLLECTION OF RECEIVABLES. Purchaser agrees to assist
Seller after Closing in the collection of notes and accounts receivable retained
by Seller as part of the Excluded Assets. Any payment received by Purchaser on
such notes and accounts shall be forwarded to Seller. In the event Seller
requests any further assistance from Purchaser in such collections, it shall be
obligated to bear the costs associated therewith.
SECTION 6.5 RIGHT OF INSPECTION. Following the Closing, Seller shall
have the right, from time to time, at reasonable times and pursuant to prior
notice to Purchaser, to inspect Purchaser's books and records with respect to
(i) payments owed with respect to the Reimbursements pursuant to Section 2.2;
(ii) payments owed with respect to collection of notes and accounts receivable
that constitute Excluded Assets; and (iii) calculation and payment of the Profit
Participation.
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SECTION 6.6 PRESERVATION OF SERVICE MARK. Purchaser covenants and
agrees that during the term of the Security Interest it will maintain at least
the same high level of services associated with the Service Mark immediately
prior to the Closing and will take no action, or fail to take any action, the
result of which would be to dilute, tarnish, bring into ill repute, or in any
way injure the Service Mark.
ARTICLE VII
CONDITIONS TO CLOSING
---------------------
SECTION 7.1 CONDITIONS AS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to consummate the transactions contemplated hereby are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Purchaser:
(a) All representations and warranties of Seller set forth herein
shall be true and correct in all material respects on the Closing Date as
if made on and as of the Closing Date and Seller shall have performed in
all material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Closing Date;
(b) All material consents, approvals, and waivers from third
parties and governmental authorities, reasonably necessary for the
consummation of the transactions contemplated hereby shall have been
obtained;
(c) Concorde shall have entered into the Southgate Sublicense
pursuant to the consent of the landlord, as attached hereto as Exhibit 7.1;
(d) Seller shall have entered into a consulting and
noncompetition agreement with Purchaser and Concorde, substantially in the
form of Exhibit 5.5, attached hereto;
(e) Neither the Business nor the Business Assets have been
materially adversely affected since April 30, 1996;
(f) No action, suit, or proceeding by any governmental authority
or any other person shall have been instituted or threatened which
questions or attacks the validity or legality of the transactions
contemplated hereby in any material fashion; and
(g) All Schedules hereto have been completed and attached hereto
subject to the provisions of Section 9.3 below.
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SECTION 7.2 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation
to consummate the transactions contemplated hereby are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Seller:
(a) All representations and warranties of Purchaser set forth
herein shall be true and correct in all material respects on the Closing
Date as if made on and as of the Closing Date and Purchaser shall have
performed in all material respects all agreements and covenants required by
this Agreement to be performed by it on or prior to the Closing Date;
(b) All material consents, approvals, and waivers from third
parties and governmental authorities, reasonably necessary for the
consummation of the transactions contemplated hereby, shall have been
obtained;
(c) Purchaser shall have entered into the Southgate
Sublicense;
(d) No action, suit, or proceeding by any governmental
authority or any other person shall have been instituted or threatened
which questions or attacks the validity or legality of the transactions
contemplated hereby; and
(e) Purchaser shall have entered into a noncompetition
agreement with Seller and Concorde, substantially in the form of Exhibit
5.5 attached hereto.
ARTICLE VIII
INDEMNIFICATION
---------------
SECTION 8.1 INDEMNIFICATION BY SELLER AND CONCORDE. Seller and
Concorde, jointly and severally, covenant and agree to be liable for and to
indemnify and hold each of Purchaser, its directors, officers, employees,
agents, representatives, stockholders, affiliates, successors, and assigns
(collectively the "Purchaser Indemnified Parties") harmless in respect of any
claim, loss, cost, expense, liability, fine, penalty, interest payment, and/or
damage (including reasonable counsel and other reasonable professional fees) (a
"Claim") directly or indirectly incurred, sustained or suffered by or asserted
against any Purchaser Indemnified Party relating to, arising out of, resulting
from or in any way connected with (a) any material breach of, or material
incorrectness in, any representation or warranty made herein by Seller and/or
Concorde pursuant to Article III (a Claim for which is made within the survival
period set forth in Section 9.2 hereof), (b) any material nonfulfillment of any
agreement or covenant on the part of the Seller under this Agreement or under
any other agreement or instrument executed and delivered pursuant hereto, or (c)
any Excluded Liability.
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SECTION 8.2 INDEMNIFICATION BY PURCHASER. Purchaser covenants and
agrees to be liable for and to indemnify and hold each of Seller, Concorde and
each of their respective directors, officers, employees, agents,
representatives, stockholder, affiliates, successors, and assigns (collectively
the "Seller Indemnified Parties") harmless in respect of any Claim directly or
indirectly incurred, sustained or suffered by or asserted against any Seller
Indemnified Party relating to, arising out of, resulting from or in any way
connected with (a) any material breach of, or material incorrectness in, any
representation or warranty made herein by Purchaser pursuant to Article IV (a
Claim for which is made within the survival period set forth in Section 9.2
hereof), (b) any material nonfulfillment of any agreement or covenant on the
part of the Purchaser under this Agreement or under any other agreement or
instrument executed and delivered pursuant hereto, or (c) any Assumed Liability.
SECTION 8.3 TIME AND MANNER OF CERTAIN CLAIMS. In the event that
any Seller Indemnified Party or Purchaser Indemnified Party wishes to make a
Claim under this Agreement or under any other agreement or instrument executed
and delivered pursuant hereto, such Claim shall be asserted by the party making
the Claim in writing and delivered to the other party (or parties) in accordance
herewith. Any such notice of Claim will indicate briefly the facts giving rise
to any alleged basis for the Claim in sufficient detail to enable Seller and
Concorde, or Purchaser, as the case may be, to make a reasonable assessment
thereof, and the amount claimed (or a bona fide estimate thereof), and shall be
accompanied by all relevant and available supporting documentation. Seller and
Concorde shall promptly reimburse such Purchaser Indemnified Party for all
amounts finally determined to be owing hereunder or pursuant hereto from time to
time and in respect of which indemnification is sought in accordance with the
terms hereof, and Purchaser shall promptly reimburse such Seller Indemnified
Party for all amounts determined to be owing hereunder or pursuant hereto from
time to time and in respect of which indemnification is sought in accordance
with the terms hereof. Notwithstanding the foregoing, the aggregate
indemnification owed by Seller and/or Concorde to the Purchaser Indemnified
Parties shall be limited to the aggregate Purchase Price actually received.
SECTION 8.4 DETERMINATION OF DAMAGES AND RELATED MATTERS. In
calculating any amount owing hereunder or pursuant hereto and in respect of
which indemnification is sought in accordance with the terms hereof, Seller and
Concorde, or Purchaser, as the case may be, shall receive credit for any
insurance recoveries of the Purchaser Indemnified Parties or the Seller
Indemnified Parties, as the case may be, and no amount shall be paid by
Purchaser to the Seller Indemnified Parties or by Seller or Concorde to the
Purchaser Indemnified Parties for consequential damages suffered directly by the
Purchaser Indemnified Parties or the Seller Indemnified Parties, as the case may
be.
SECTION 8.5 DEFENSE OF CLAIMS BY THIRD PARTIES. If any Claims are
made against any of the Purchaser Indemnified Parties or Seller Indemnified
Parties that, if sustained, would give rise to a Liability of the other under
this Agreement, such Purchaser Indemnified Party or Seller Indemnified Party, as
the case may be, shall promptly cause notice of the Claim to be delivered to the
indemnifying party (or parties) and shall afford the indemnifying party (or
parties) and its or their counsel, at the indemnifying party's sole expense, the
opportunity to defend or settle the Claim. Notice of the Claim delivered shall
contain sufficient detail to enable the indemnifying party (or parties) to make
a reasonable assessment thereof and shall be accompanied by all relevant and
available supporting documentation. Notwithstanding the foregoing, if such
notice is delayed and is not promptly given the indemnifying party's obligation
to indemnify pursuant to this Article VIII shall not be
14
<PAGE>
effected, unless the indemnifying party can show its rights were materially
impaired, or its liability hereunder was not significantly increased, as a
result of such delay and failure. Seller shall promptly reimburse such Purchaser
Indemnified Party for all amounts finally determined to be owing hereunder or
pursuant hereto from time to time and in respect of which indemnification is
sought in accordance with the terms hereof, and Purchaser shall promptly
reimburse such Seller Indemnified Party for all amounts determined to be owing
hereunder or pursuant hereto from time to time and in respect of which
indemnification is sought in accordance with the terms hereof.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.1 TERMINATION. This Agreement may be terminated prior to
the Closing Date as follows:
(a) At any time by the mutual consent of Seller and Purchaser;
(b) By either Seller or Purchaser, at its sole election, at any
time after August 31, 1996, if the Closing shall not have occurred on or
prior to such date; and
(c) By Purchaser if the conditions set forth in Section 7.1
hereof shall not have been met on or before the Closing, and by Seller if
the conditions set forth in Section 7.2 hereof shall not have been met on
or before the Closing Date.
In the event of the termination and abandonment of this Agreement,
this Agreement shall become void and have no effect, without any liability on
the part of any party, unless this Agreement has been terminated pursuant to
subparagraph (c) above because the other party has willingly or in bad faith
failed to satisfy a condition to the Closing. In the event of a termination of
this Agreement under the provisions of such section, a party not then in
material breach of this Agreement shall stand fully released and discharged of
any and all obligations under this Agreement, and shall be entitled to pursue,
exercise, and enforce any and all remedies, rights, powers, and privileges
available at law or in equity against such "bad faith" party and such "bad
faith" party. It is agreed that in the event of a termination (i) at the
election of the Purchaser pursuant to Subparagraph (b), above, or (ii) by Seller
pursuant to Subparagraph (c), above, as a result of a failure of the condition
set forth in Section 7.2(a) or a failure of any of the conditions set forth in
Section 7.2(b)-(e) resulting directly or indirectly from the actions, or failure
to act, of Purchaser, or otherwise caused by Purchaser or its affiliates, the
seventy-five thousand dollars ($75,000) deposit held in escrow pursuant to
Section 2.3(a) shall be released to Seller. In all other terminations pursuant
to this Section 9.1, such deposit shall be released to Purchaser, unless
otherwise mutually agreed. Notwithstanding the foregoing, if the cause of the
termination by Seller is the failure of the condition set forth in Section
7.2(c) resulting from Seller's failure to comply with its obligations under
Section 5.4, the escrowed deposit shall be released to Purchaser.
15
<PAGE>
SECTION 9.2 SURVIVAL. The provisions set forth in Articles III and
IV hereof shall survive for a period of one (1) year from the date of Closing,
except the representations and warranties of Seller in Section 3.8 (Taxes) which
shall survive the Closing for the applicable statute of limitations respecting
the tax matter at issue, plus thirty (30) days. All other terms and provisions
hereof shall survive the Closing and continue to be effective thereafter without
limitation as to duration.
SECTION 9.3 ENTIRE AGREEMENT. This Agreement and the Schedules and
Exhibits hereto set forth the entire agreement and understanding among the
parties hereto as to the subject matter hereof, and merge and supersede all
other prior discussions, agreements, and understandings of every kind and nature
among them, and neither party hereto shall be bound by any condition,
definition, warranty, or representation other than expressly provided for in
this Agreement and the Schedules and Exhibits hereto, as the same shall apply to
such party, or as otherwise set forth in a writing after the date of this
Agreement signed by the party hereto which is to be bound thereby. The Recitals,
Schedules and Exhibits hereto are hereby incorporated herein and made a part
hereof. It is agreed that Seller may complete and attach some or all of the
Schedules and/or Exhibits hereto after the date hereof, provided that all such
post-execution Schedules or Exhibits shall be subject to the approval of
Purchaser, which approval shall not be unreasonably withheld and shall be
completed and attached (subject only to nonmaterial "bring down" adjustments
required at Closing) no later than July 30, 1996, but in no event later than the
Closing Date.
SECTION 9.4 AMENDMENT. This Agreement shall not be changed,
modified, or amended except by a writing signed by both parties hereto, and any
obligation of a party pursuant to this Agreement may not be discharged except by
performance in accordance with its terms or by a written waiver signed by the
party to whose benefit such obligation runs.
SECTION 9.5 NOTICE. Any notice required in this Agreement must be
in writing and given (i) by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by fax transmission confirmed by
the recipient, or (iii) by delivering the same in person. Such notice shall be
deemed received on the date on which it was hand-delivered or on which its fax
transmission was confirmed, or on the third business day following the date on
which it is so mailed. For purposes of notice, the addresses of the parties
shall be:
If to Seller: Concorde Career Colleges, Inc.
1100 Main Street, Suite 416
Kansas City, Missouri 64105
Fax: (816) 474-7610
Attn: Jack L. Brozman, President
With a copy to: Lorna Wright, Esq.
Bryan Cave LLP
3500 One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Fax: (816) 374-3300
16
<PAGE>
If to Purchaser: DGZ Associates, Inc.
4 Roosevelt Avenue
Port Jefferson Station, New York 11776
Fax: (516) 473-6210
Attn: Nick Dauber
With a copy to: Richard E. Grayson
175 Main Street, Suite 307
White Plains, New York 10601
Fax: (914) 684-0646
Either party may change its address for notice by written notice given
to the other party in accordance with this Section.
SECTION 9.6 WAIVER. No waiver by either party or any default by the
other party of any covenant, condition, representation, or warranty contained in
this Agreement, any Exhibit or any document, instrument, or certificate
contemplated by this Agreement shall be deemed to be a waiver of any subsequent
default by such party of the same or any other covenant, condition,
representation, or warranty. No course of dealing on the part of a party in
exercising any right under this Agreement or at law or in equity shall operate
as a waiver of those rights or otherwise prejudice any of such party's rights.
All remedies, whether at law or in equity, shall be cumulative and the election
of any one or more shall not constitute a waiver of the right to pursue other
available remedies.
SECTION 9.7 SEVERABILITY. The provisions of this Agreement are
severable, and if the application of any provision hereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each such provision of this Agreement shall be valid and
be enforced to the fullest extent permitted by law.
17
<PAGE>
SECTION 9.8 INTERPRETATION. Headings at the beginning of each Article
and Section are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and vice
versa.
SECTION 9.9 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
SECTION 9.10 GOVERNING LAW. This Agreement and its validity,
construction, and performance shall be governed in all respects by the laws of
the State of New York, without giving effect to principles of conflict of law.
SECTION 9.11 ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, and assigns. This Agreement may be assigned by either party to any
entity that controls, is controlled by, or is under common control with it upon
prior notice to and the consent of the other party.
SECTION 9.12 PAYMENT OF FEES AND EXPENSES. Each party hereto shall pay
all fees and expenses of such party's respective counsel, accountants, and other
experts and agents and all other expenses incurred by such party incident to the
negotiation, preparation, and execution of this Agreement and the consummation
of the transactions contemplated hereby, whether or not such transactions are in
fact consummated, including any finder's or broker's fees.
SECTION 9.13 FURTHER DOCUMENTS. Each party hereto agrees to execute
and deliver to the other party such other and further agreements, consents,
documents, or instruments of conveyance, assignment, assumption, or transfer,
and to do such other things and to take such other actions supplemental or
confirmatory as may be required by the other party for the purpose of or in
connection with the consummation or evidencing of the transactions contemplated
hereby.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PERSON/WOLINSKY ASSOCIATES, INC.
By: /s/ Jack L. Brozman
---------------------
Name: Jack L. Brozman
Title: Chairman of the Board
DGZ ASSOCIATES, INC.
By: /s/ Nick Dauber
-----------------
Name: Nick Dauber
Title: President
CONCORDE CAREER COLLEGES, INC.
By: /s/ Jack L. Brozman
---------------------
Name: Jack L. Brozman
Title: Chairman of the Board
19
<PAGE>
THIRD AMENDMENT
TO THE
RESTRUCTURING, SECURITY AND GUARANTY AGREEMENT
----------------------------------------------
THIS AGREEMENT, made and entered into as of the 30th day of July,
1996, (the "THIRD AMENDMENT") by and among CENCOR, INC., a Delaware corporation
("CENCOR"); CONCORDE CAREER COLLEGES, INC., a Delaware corporation ("CONCORDE");
MINNESOTA INSTITUTE OF MEDICAL AND DENTAL ASSISTANTS, INC., a Minnesota
corporation ("MINNESOTA"); TEXAS COLLEGE OF MEDICAL AND DENTAL ASSISTANTS, INC.,
a Texas corporation ("TEXAS"); UNITED HEALTH CAREERS INSTITUTE, INC., a
California corporation ("UNITED"); SOUTHERN CALIFORNIA COLLEGE OF MEDICAL AND
DENTAL ASSISTANTS, INC., a California corporation ("SOUTHERN CALIFORNIA");
CONCORDE CAREERS - FLORIDA, INC., a Florida corporation ("FLORIDA"); COLLEGES OF
DENTAL AND MEDICAL ASSISTANTS, INC., a California corporation ("DENTAL"); and
COMPUTER CAREER INSTITUTE, INC., an Oregon corporation ("COMPUTER") (Minnesota,
Texas, United, Southern California, Florida, Dental, and Computer being
hereinafter referred to collectively as "GUARANTORS" and each individually as a
"GUARANTOR") amends that certain Restructuring, Security and Guaranty Agreement
between the parties dated as of October 30, 1992, as previously amended by
written agreements dated as of December 30, 1993 and November 15, 1994
(collectively, the "AGREEMENT").
RECITALS
--------
(i) Pursuant to the Agreement entered into by CenCor, Concorde
and the Guarantors, Concorde issued a debenture to CenCor in the principal
amount of $5,422,307, dated October 30, 1992 (the "DEBENTURE").
(ii) Pursuant to the terms of the November 15, 1994 amendment
(the "SECOND AMENDMENT"), Concorde exchanged 300,000 shares of its Class A
Redeemable Preferred Stock, $.10 par value (the "PREFERRED STOCK") for
$3,000,000 of the principal amount of the Debenture; reduced the
outstanding principal amount of the Debenture to $2,442,307, and amended
the Debenture to reflect such.
(iii) The Mark Twain liabilities have been paid in full by
Concorde and are no longer outstanding.
(iv) Concorde desires to sell substantially all of the assets
(the "SAN JOSE ASSETS") of the career college it operates at 1290 N. 1st
Street, San Jose, California, known as Concorde Career Institute (the "SAN
JOSE INSTITUTE") pursuant to a certain Asset Purchase Agreement, dated July
11, 1996, between Concorde and Corinthian Schools, Inc. (the "SAN JOSE
AGREEMENT"), a true and correct copy of which has been delivered to CenCor
by Concorde.
20
<PAGE>
(v) Concorde desires to cause its wholly-owned subsidiary,
Person/Wolinsky Associates, Inc., a New York corporation ("P/W"), to sell
substantially all of its assets (the "P/W ASSETS") pursuant to a certain
Asset Purchase Agreement, dated July 10, 1996, among P/W, Concorde and DGZ
Associates, Inc. (the "P/W AGREEMENT"), a true and correct copy of which
has been delivered to CenCor by Concorde.
(vi) CenCor holds a security interest in substantially all of
the assets of Concorde and the Guarantors, securing the payment of the
principal amount of the Debenture and the Agreement prohibits the sale of
assets by Concorde, including the San Jose Assets or P/W, including the P/W
Assets, without the consent of CenCor.
(vii) CenCor has agreed to the sale of the San Jose Assets
pursuant to the terms of the San Jose Agreement (the "San Jose Sale") and
the sale of the P/W Assets pursuant to the terms of the P/W Agreement (the
"P/W Sale") and to the release of its security interest in such assets,
subject to Concorde's agreement to use a certain portion of the proceeds
received by it and/or P/W pursuant to the San Jose Sale and the P/W Sale to
redeem outstanding shares of Preferred Stock held by CenCor, and thereafter
to retire the Debenture, all as set forth herein.
(viii) Concorde and CenCor wish to amend the Agreement to provide
for such sale of assets and such redemption and retirement.
(ix) The Guarantors, each a wholly-owned subsidiary of
Concorde, wish to reduce the amount of their guaranteed obligations through
such retirement and thus consent to the amendment of the Agreement to
provide for such.
AGREEMENT
---------
In consideration of the premises and the mutual covenants and
agreements herein contained, CenCor, Concorde and Guarantors agree as follows:
ARTICLE I
DEFINITIONS
-----------
I.1 CERTAIN DEFINED TERMS. The following terms used herein shall have
the meanings set forth in this Article and in the other parts of this Agreement
referred to in this Article, and such meanings shall apply to both the singular
and plural forms of such terms.
21
<PAGE>
(a) "ALLOCATED PROCEEDS" means that portion of proceeds from the San
Jose Sale or the P/W Sale identified on Exhibit A, attached hereto and
incorporated herein, actually received by Concorde and/or P/W.
(b) "PREFERRED STOCK" means the Class A Redeemable Preferred Stock,
$.10 par value, of Concorde.
(c) "REDEMPTION" means the redemption of shares of Preferred Stock by
Concorde pursuant to the provisions of Section 2.2, herein.
(d) "REDEMPTION PRICE" means the per share redemption price set forth
in the Certificate of Designations filed with the Secretary of State of
Delaware with respect to the Preferred Stock, of $10.00 per share, plus all
accrued but unpaid dividends thereon, calculated on the basis set forth in
Section (1)(iii) of such Certificate of Designations.
(e) "RETIREMENT" means the full or partial retirement of the Debenture
by Concorde pursuant to the provisions of Section 2.3 herein.
(f) "THIRD AMENDMENT" means this Third Amendment to the Restructuring,
Security and Guaranty Agreement, dated October 30, 1992, as previously
amended by written agreements dated as of December 30, 1993 and November
15, 1994.
1.2 OTHER TERMS. All capitalized terms used herein, not defined in
Section 1.1 or elsewhere in this Third Amendment, shall have the meanings and be
as defined in the Second Amendment, and if not therein defined, as defined in
the First Amendment, and if not therein defined, as defined in the original
provisions of the Agreement.
ARTICLE II
THE EXCHANGE
------------
2.1 APPLICATION OF PROCEEDS. Concorde hereby agrees that, upon the
closing of the San Jose Sale and/or the P/W Sale and the receipt by Concorde or
P/W of proceeds therefrom, it shall apply, or cause to be applied, the Allocated
Proceeds, as follows:
(a) first, to the redemption of shares of Preferred Stock (the
"REDEMPTION"), and, upon the Redemption of all of the
Preferred Stock,
(b) second, to the retirement of the Debenture (the
"RETIREMENT").
22
<PAGE>
2.2 REDEMPTION OF THE PREFERRED STOCK. Promptly upon the receipt of
Allocated Proceeds, Concorde shall redeem that number of whole shares of
Preferred Stock held by CenCor (or its assigns) equal to the amount of such
Allocated Proceeds divided by the Redemption Price. Any Allocated Proceeds
remaining that would have been applied but for the requirement that only whole
shares be redeemed, shall be retained by Concorde and aggregated with
subsequently received Allocated Proceeds for future Redemptions/Retirements.
2.3 RETIREMENT OF DEBENTURE. Following the Redemption of all
outstanding shares of Preferred Stock, promptly upon receipt of Allocated
Proceeds, Concorde shall pay such Allocated Proceeds to CenCor with respect to
the Debenture, pursuant to the terms of the Agreement, first to be applied to
the payment of any then accrued but unpaid interest on the Debenture and next to
the principal amount of the Debenture.
2.4 DATE OF REDEMPTION/RETIREMENT. Except as otherwise provided for
in Section 2.2, above, the date of Redemption or Retirement with respect to any
Allocated Proceeds shall be:
(a) the closing date of the respective asset sales, with respect
to Allocated Proceeds received by Concorde and/or P/W on
such closing dates, and
(b) on or before three (3) business days from the date of the
receipt of good funds with respect to Allocated Proceeds
received by Concorde and/or P/W after such closing dates.
It is agreed that if Allocated Proceeds are not received by the Scheduled Date
designated on Exhibit A, Concorde and P/W shall promptly notify CenCor and take
all reasonably prudent steps necessary to collect such funds. Notwithstanding
anything herein to the contrary, Concorde shall have no obligation to effect a
Redemption or Retirement unless and until its receipt of Allocated Proceeds.
2.5 PROCEDURES. In connection with:
(a) any Redemption or Retirement, Concorde shall provide CenCor
with an accounting of the calculation of the then current
Redemption Price; and
(b) a Redemption, (i) Concorde shall provide CenCor with a
calculation of the application the of Allocated Proceeds and
any carryover thereof; (ii) CenCor shall submit its stock
certificate representing the Preferred Stock,
23
<PAGE>
fully endorsed for transfer, and (iii) Concorde shall
reissue a new stock certificate to CenCor representing the
remaining shares of Preferred Stock not being so redeemed,
if any.
2.6 PAYMENT IN FULL. Upon the Redemption of all outstanding shares of
Preferred Stock owned by CenCor (or its assigns) and the Retirement of the
entire Debenture (including accrued interest thereon), Concorde shall be
entitled to retain any remaining Allocated Proceeds and CenCor has had no
further rights or interest in such Allocated Proceeds.
ARTICLE III
CONSENT AND RELEASE OF COLLATERAL
---------------------------------
3.1 CONSENT TO SALE. CenCor hereby consents to the San Jose Sale
pursuant to the San Jose Agreement and to the P/W Sale pursuant to the terms of
the P/W Agreement, and waives any restrictions set forth in Section 7.1 or
elsewhere in the Agreement with respect thereto.
3.2 RELEASE OF COLLATERAL. CenCor hereby agrees:
(a) to release its security interest in the San Jose Assets,
effective upon the closing of the San Jose Sale, and agrees
to promptly execute, obtain and furnish to Concorde any and
all termination statements, releases or other UCC
documentation or other documents or materials as Concorde
may reasonably request in order to so release such
Collateral;
(b) that upon such releases, the San Jose Assets shall no longer
constitute Collateral pursuant to Article IV of the
Agreement; and
(c) that in the event Concorde determines to dissolve and
liquidate P/W after the closing of the P/W Sale, CenCor
shall (i) release its security interest in the stock of P/W
owned by Concorde, (ii) return the Pledged Stock of P/W
which Cencor holds pursuant to Section 4.7 of the Agreement
with respect thereto; and (iii) consent to such dissolution
and liquidation.
3.3 UNDERTAKING. Concorde agrees to execute any security agreements,
UCC-1 financing statements and other documents reasonably requested by CenCor to
grant a security interest in all of the assets of Concorde and the Guarantors
which are not being sold pursuant to the San Jose Agreement or
24
<PAGE>
the P/W Agreement. Concorde will not agree to any amendment, delay or waiver of
its rights or P/W's right to receive any of the Allocated Proceeds on the dates
set forth on Exhibit A without CenCor's written consent.
ARTICLE IV
MISCELLANEOUS
-------------
4.1 OBLIGATIONS OF P/W. In consideration of CenCor's agreement to the
terms of this Third Amendment and its consent to the P/W Sale, P/W has agreed to
guarantee the obligation of Concorde to apply the Allocated Proceeds from the
P/W Sale to the Redemption and/or Retirement as provided for herein and has
executed Exhibit 4.1 hereto in evidence of such guarantee.
4.2 MARK TWAIN LIABILITIES. Mark Twain has executed the confirmation,
attached hereto as Exhibit 4.2, acknowledging the payment in full of the Mark
Twain Liabilities.
4.3 ATTORNEYS' FEES. Notwithstanding anything in the Agreement or
herein to the contrary, Concorde shall pay to CenCor in cash one-half of
CenCor's attorneys' fees and expenses incurred in connection with the
negotiation of this Third Amendment and the consummation of the transactions
contemplated thereby, within ten (10) business days after receiving an invoice
from CenCor with supporting documentation, which the parties agree shall not
exceed $5,000.00 in the aggregate.
4.4 RATIFICATION. All provisions of the Agreement not specifically
amended in this Third Amendment are hereby ratified and reaffirmed.
4.5 GOVERNING LAW. Except as otherwise provided by express reference
to the Uniform Commercial Code, this Third Amendment shall be construed in
accordance with and governed by the laws, statutes and decisions of the State of
Missouri, to the non-exclusive jurisdiction of whose courts, state and federal,
Concorde and Guarantors irrevocably agree to submit.
4.6 INCORPORATION. The recitals and exhibits hereto are hereby
incorporated herein by reference.
4.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
4.8 FURTHER ASSURANCES. The parties hereto agree to execute all
additional documents reasonably necessary to effectuate the transactions
contemplated herein, including without limitation those documents necessary to
release the Liens with respect to the San Jose Assets and the P/W Assets on a
timely basis.
25
<PAGE>
4.9 BENEFIT AND BURDEN. This Agreement shall be binding upon and inure
to the benefit of the successors of CenCor, Concorde and P/W. Cencor may assign
its rights hereunder, including without limitation to a liquidating trust.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to the Agreement to be executed by their respective duly authorized
officers as of the day and year first above written.
Oral agreements or commitments to loan money, extend credit or to
forbear from enforcing repayment of a debt including promises to extend or renew
such debt are not enforceable. To protect the debtor and creditor from
misunderstanding or disappointment, any agreements we reach covering such
matters are contained in this writing, which is the complete and exclusive
statement of the agreement between us, except as we may later agree in writing
to modify it.
CENCOR, INC.
ATTEST:
By: /s/Terri Rinne
-----------------------
/s/Lisa M. Henak Terri Rinne
- ----------------------------- Vice President
Secretary
ACKNOWLEDGEMENT
---------------
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came Terri Rinne, Vice
President of CenCor, Inc., a Delaware corporation, to me personally known to be
such officer and the same person who executed as such officer the foregoing
instrument on behalf of said corporation, and such person duly acknowledged the
execution of the same to be the act and deed of said corporation.
26
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
/s/ Lisa M. Henak
-----------------------------
Notary Public in and for said
County and State
My commission expires:
September 7, 1996
(Stamp and Seal)
----------------
LISA M. HENAK
Notary Public - State of Missouri
Commissioned In Clay County
My Commission Expires Sept. 7, 1996
CONCORDE CAREER COLLEGES, INC.
ATTEST:
By: /s/M. Gregg Gimlin
---------------------------
/s/Lisa M. Henak M. Gregg Gimlin
- ------------------ Vice President
Secretary
ACKNOWLEDGEMENT
---------------
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came M. Gregg Gimlin, Vice
President of Concorde Career Colleges, Inc., a Delaware corporation, to me
personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
/s/Lisa M. Henak
(Seal) -----------------------------
Notary Public in and for said
County and State
My commission expires:
September 7, 1996
- ----------- --
27
<PAGE>
MINNESOTA INSTITUTE OF MEDICAL
AND DENTAL ASSISTANTS, INC.
ATTEST:
By: /s/A. Eugene Johnson
-----------------------
/s/Lisa M. Henak A. Eugene Johnson
- ------------------ President
Secretary
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
---------------
) ss.
COUNTY OF Jackson )
---------------
BE IT REMEMBERED, that on this 30th day of _____July______, 1996,
before me, the undersigned, a notary public in and for said state, came A.
Eugene Johnson President of Minnesota Institute of Medical and Dental
Assistants, Inc. a Minnesota corporation, to me personally known to be such
officer and the same person who executed as such officer the foregoing
instrument on behalf of said corporation, and such person duly acknowledged the
execution of the same to be the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri the day and year last above
mentioned.
/s/Lisa M. Henak
-----------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------- -- My Commission Expires Sept. 7, 1996
TEXAS COLLEGE OF MEDICAL AND
DENTAL ASSISTANTS, INC.
ATTEST:
By: /s/ A. Eugene Johnson
------------------------
/s/ Lisa M. Henak A. Eugene Johnson
- ------------------ President
Secretary
28
<PAGE>
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
----------------
) ss.
COUNTY OF Jackson )
----------------
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came A. Eugene Johnson,
President of Texas College of Medical and Dental Assistants, Inc. a Texas
corporation, to me personally known to be such officer and the same person who
executed as such officer the foregoing instrument on behalf of said corporation,
and such person duly acknowledged the execution of the same to be the act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri the day and year last above
mentioned.
/s/ Lisa M. Henak
-----------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------- -- My Commission Expires Sept. 7, 1996
UNITED HEALTH CAREERS INSTITUTE,
INC.
ATTEST:
By: /s/ A. Eugene Johnson
------------------------
/s/ Lisa M. Henak A. Eugene Johnson
- ------------------ President
Secretary
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
---------------
) ss.
COUNTY OF Jackson )
--------------
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came A. Eugene Johnson,
President of United Health Careers Institute, Inc. a California corporation, to
me personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
29
<PAGE>
my official seal at my office in Kansas City, Missouri the day and year last
above mentioned.
/s/ Lisa M. Henak
-----------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------------- My Commission Expires Sept. 7, 1996
SOUTHERN CALIFORIA COLLEGE OF
MEDICAL AND DENTAL ASSISTANTS
INC.
ATTEST:
By:/s/ A. Eugene Johnson
------------------------
/s/ Lisa M. Henak A. Eugene Johnson
- ------------------ President
Secretary
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
---------------
) ss.
COUNTY OF Jackson )
--------------
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came A. Eugene Johnson,
President of Southern California College of Medical and Dental Assistants, Inc.,
a California corporation, to me personally known to be such officer and the
same person who executed as such officer the foregoing instrument on behalf of
said corporation, and such person duly acknowledged the execution of the same to
be the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri the day and year last above
mentioned.
/s/ Lisa M. Henak
-----------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------------- My Commission Expires Sept. 7, 1996
COLLEGES OF DENTAL AND MEDICAL
ASSISTANTS, INC.
ATTEST:
By:/s/ A. Eugene Johnson
------------------------
/s/ Lisa M. Henak A. Eugene Johnson
- ------------------ President
Secretary
30
<PAGE>
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
--------
) ss.
COUNTY OF Jackson )
-------
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came A. Eugene Johnson,
President of Colleges of Dental and Medical Assistants, Inc, a California
corporation, to me personally known to be such officer and the same person who
executed as such officer the foregoing instrument on behalf of said corporation,
and such person duly acknowledged the execution of the same to be the act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
/s/ Lisa M. Henak
-----------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------------- My Commission Expires Sept. 7, 1996
COMPUTER CAREER INSTITUTE, INC.
ATTEST:
By:/s/ A. Eugene Johnson
------------------------
/s/ Lisa M. Henak A. Eugene Johnson
- ------------------ President
Secretary
31
<PAGE>
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
--------
) ss.
COUNTY OF Jackson )
-------
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came A. Eugene Johnson,
President of Computer Center Institute, Inc., an Oregon corporation, to me
personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
/s/ Lisa M. Henak
-----------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------------- My Commission Expires Sept. 7, 1996
CONCORDE CAREERS-FLORIDA, INC.
ATTEST:
By: /s/ A. Eugene Johnson
------------------------
/s/ Lisa M. Henak A. Eugene Johnson
- ------------------ President
Secretary
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
--------
) ss.
COUNTY OF Jackson )
-------
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came A. Eugene Johnson,
President of Concorde Careers-Florida, Inc., a Florida corporation, to me
personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
32
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri the day and year last above
mentioned.
/s/ Lisa M. Henak
-----------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------------- My Commission Expires Sept. 7, 1996
33
<PAGE>
EXHIBIT A
FUNDS TO BE APPLIED TO
RETIREMENT OF PREFERRED STOCK
AND
REDEMPTION OF DEBENTURE
<TABLE>
<CAPTION>
ALLOCATED
SCHEDULED AGGREGATE PROCEEDS/
SOURCE DATE OF RECEIPT/(1)/ AMOUNT PERCENTAGE
- ------------------------- --------------------- -------------- ------------
<S> <C> <C> <C>
San Jose Sale SJ Closing Date/(2)/ $ 150,000 $ 75,000/50%
-Purchase Price
P/W Sale P/W Closing Date/(3)/ $705,000/(4)/ $352,500/50%
-Purchase Price
P/W Sale 12/15/96/(5)/ $ 75,000 $75,000/100%
-Noncompete
San Jose Sale 12/31/96 $ 200,000 $100,000/50%
-Purchase Price
P/W Sale 12/15/97/(5)/ $ 75,000 $75,000/100%
-Noncompete
P/W Sale 3/1/98-07/(6)/ (6) (6)/50%
-Profit Participation
</TABLE>
__________________________
/(1)/ Subject to the actual closing of the respective sales of assets.
/(2)/ The San Jose Sale is currently scheduled to close on July 31, 1996.
/(3)/ The P/W Sale is currently scheduled to close on August 2, 1996.
/(4)/ Fee of 6% has been deducted from closing proceeds of the P/W Sale.
/(5)/ It is agreed that in the event such proceeds are not paid pursuant to the
Noncompetition Agreement under the P/W Agreement, Concorde and/or P/W
shall apply the next funds received by either of them under the P/W
Agreement for the Redemption/Retirement, up to the amount of such failed
payment.
/(6)/ "Profit Participation", up to a cumulative maximum amount of $1,500,000,
is due annually based upon the actual "Net Profit", as defined in Exhibit
2.3 of the P/W Agreement, of the purchaser of the P/W Assets for the
fiscal years ended December 31, 1997 through December 31, 2006 and is
payable on or before March 1 of each of the following years (1998-2007).
The amount to be paid in any given year, if any, is not currently
ascertainable. One-half of the monies so received, if any, shall be
Allocated Proceeds.
A-1
<PAGE>
EXHIBIT 4.1
IN CONFIRMATION OF THE OBLIGATIONS SET FORTH IN SECTIONS 2.4 and 4.1, above:
PERSON/WOLINSKY ASSOCIATES, INC.
ATTEST:
By:/s/ Jack L. Brozman
-------------------------------------
/s/ Lisa M. Henak Jack L. Brozman
- ------------------ Chairman of the Board
Secretary
ACKNOWLEDGEMENT
---------------
STATE OF Missouri )
----------------
) ss.
COUNTY OF Jackson )
----------------
BE IT REMEMBERED, that on this 30th day of July, 1996, before me, the
undersigned, a notary public in and for said state, came Jack L. Brozman,
Chairman of the Board of Person/Wolinsky Associates, Inc., a New York
corporation, to me personally known to be such officer and the same person who
executed as such officer the foregoing instrument on behalf of said corporation,
and such person duly acknowledged the execution of the same to be the act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri the day and year last above
mentioned.
/s/ Lisa M. Henak
----------------------------------------
(Seal) Notary Public in and for said
County and State
My commission expires: (Stamp)
LISA M. HENAK
Notary Public - State of Missouri
September 7, 1996 Commissioned In Clay County
- ----------------- My Commission Expires Sept. 7, 1996
<PAGE>
EXHIBIT B
CONFIRMATION
The undersigned, Mark Twain Kansas City Bank, a Missouri banking
corporation, hereby confirms that it has been paid in full with respect to all
obligations owed to it under the Mark Twain Agreement and that any conditions in
the Agreement requiring the subordination to, the consent of, or notice to Mark
Twain Kansas City Bank are null and void.
Dated: July 30, 1996
MARK TWAIN KANSAS CITY BANK
By: /s/ Mark Degner
-------------------------
Mark Degner, its
Senior Vice President
36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10-Q June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 APR-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 2,155 0
<SECURITIES> 0 0
<RECEIVABLES> 20,130 0
<ALLOWANCES> 1,277 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 22,545 0
<PP&E> 12,554 0
<DEPRECIATION> 9,539 0
<TOTAL-ASSETS> 29,697 0
<CURRENT-LIABILITIES> 18,800 0
<BONDS> 2,672 0
<COMMON> 698 0
0 0
30 0
<OTHER-SE> 6,070 0
<TOTAL-LIABILITY-AND-EQUITY> 29,697 0
<SALES> 20,302 9,270
<TOTAL-REVENUES> 20,302 9,270
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 17,962 8,453
<LOSS-PROVISION> 1,089 567
<INTEREST-EXPENSE> 1,087 817
<INCOME-PRETAX> 164 (567)
<INCOME-TAX> 41 (142)
<INCOME-CONTINUING> 123 (425)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 123 (425)
<EPS-PRIMARY> 0.00 (0.06)
<EPS-DILUTED> 0.00 (0.06)
</TABLE>
