UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended September 30, 1995
or
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____________ to
_______________________
Commission file number 0-18194
WESTCOTT COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
Texas 75-2110878
(State of Incorporation) (I.R.S. Employer Identification No.)
1303 Marsh Lane
Carrollton, TX 75006
(Address of principal executive offices)
(214) 417-4100
(Registrant's telephone number, including area code)
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.
Yes X No
As of November 8, 1995 there were 19,746,565 shares of common stock
outstanding.
<PAGE>
WESTCOTT COMMUNICATIONS, INC.
INDEX
PART I: FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1994 and September 30, 1995. . . . . . . . . . . . 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months Ended September 30, 1994 and 1995. 5
Condensed Consolidated Statement of Shareholders' Equity -
Nine Months Ended September 30, 1995. . . . . . . . . . . . . . 6
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1995 . . . . . . . . . 7
Notes to Condensed Consolidated Financial Statements. . . . . . 9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . . . . 12
PART II: OTHER INFORMATION
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
<TABLE>
Part I - Financial Information
Item 1 - Financial Statements
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
December 31, September 30,
1994 1995
(Unaudited)
___________ ___________
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . $ 5,815,118 $ 12,906,644
Accounts receivable (net of allowance
for doubtful accounts of $776,000
and $748,000 at December 31, 1994
and September 30, 1995, respectively). 20,939,216 21,034,472
Program inventory . . . . . . . . . . . 5,843,078 6,411,904
Prepaid commissions . . . . . . . . . . 2,038,547 2,257,200
Short-term investments. . . . . . . . . 718,437 -
Other current assets. . . . . . . . . . 3,834,796 4,479,568
___________ ___________
Total current assets . . . . . . . . . 39,189,192 47,089,787
Property and equipment, at cost:
Downlink equipment . . . . . . . . . . 32,267,208 33,742,255
Studio equipment . . . . . . . . . . . 10,990,730 11,368,800
Office furniture and equipment . . . . 12,096,651 13,641,278
Leasehold improvements . . . . . . . . 2,499,308 2,574,696
___________ ___________
57,853,897 61,327,029
Accumulated depreciation and
amortization . . . . . . . . . . . . . (22,298,155) (27,967,114)
___________ ___________
35,555,742 33,359,915
Other assets:
Equipment inventory. . . . . . . . . . 2,648,086 1,593,566
Program inventory. . . . . . . . . . . 9,802,493 12,293,306
Goodwill (net of accumulated
amortization of $3,197,000 and
$4,389,000 December 31, 1994 and
September 30, 1995, respectively) . . 16,491,866 20,899,676
Other intangibles, (net of accumulated
amortization of $3,144,000 and
$3,759,000 at December 31, 1994
and September 30, 1995, respectively) 2,997,859 5,092,378
Other assets . . . . . . . . . . . . . 2,302,066 1,699,864
___________ ___________
$108,987,304 $122,028,492
___________ ___________
___________ ___________
</TABLE>
<PAGE>
<TABLE>
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
December 31, September 30,
1994 1995
(Unaudited)
___________ _____________
<S> <C> <C>
Current liabilities:
Accounts payable. . . . . . . . . . . $ 2,430,582 $ 2,933,821
Income taxes payable. . . . . . . . . 213,436 2,166,209
Accrued liabilities . . . . . . . . . 4,557,849 5,071,466
Deferred income taxes . . . . . . . . 1,154,962 -
Unearned revenue. . . . . . . . . . . 14,994,796 13,312,780
Current portion of long-term
obligations. . . . . . . . . . . . . 10,000 10,000
___________ ___________
Total current liabilities . . . . 23,361,625 23,494,276
Long-term obligations . . . . . . . . . 32,254 23,163
Deferred income taxes . . . . . . . . . 1,162,672 1,231,989
Minority interest liability . . . . . . 132,940 232,837
Shareholders' equity:
Common stock, $.01 par value; 29,000,000
shares authorized; 19,561,123 and
19,744,480 shares issued at
December 31, 1994 and
September 30, 1995, respectively. . 195,611 197,444
Additional paid-in capital. . . . . . 71,398,368 73,425,528
Retained earnings . . . . . . . . . . 12,859,978 23,579,399
Less treasury shares at cost;
45,920 shares . . . . . . . . . . . (156,144) (156,144)
___________ ___________
Total shareholders' equity. . . . 84,297,813 97,046,227
___________ ___________
$108,987,304 $122,028,492
___________ ___________
___________ ___________
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months ended
September 30,
_____________________________
1994 1995
___________ ___________
<S> <C> <C>
Revenues. . . . . . . . . . . . . $ 22,181,704 $ 24,135,683
Cost of revenues:
Programming and production . . 4,740,470 4,548,588
Delivery and transmission. . . 2,524,744 3,306,473
Sales and marketing. . . . . . 5,183,184 5,267,891
General and administrative . . 2,392,708 2,295,482
Depreciation and amortization 2,416,164 3,047,861
___________ ___________
Total. . . . . . . . . . . . 17,257,270 18,466,295
Income from operations. . . . . . 4,924,434 5,669,388
Interest expense. . . . . . . . . (41,470) (36,071)
Interest income . . . . . . . . . 10,891 146,112
Other income (expense). . . . . . 2,063 4,311
___________ ___________
Income before income taxes. . . . 4,895,918 5,783,740
Provision for income taxes. . . . 1,864,700 2,313,496
___________ ___________
Net income available to common
shareholders . . . . . . . . . $ 3,031,218 $ 3,470,244
___________ ___________
___________ ___________
Earnings per common share
(Note 2) . . . . . . . . . . . $ .16 $ .18
___________ ___________
___________ ___________
Weighted average common
and common equivalent
shares outstanding . . . . . . 19,436,378 19,692,884
___________ ___________
___________ ___________
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
_____________________________
1994 1995
___________ ____________
<S> <C> <C>
Revenues. . . . . . . . . . . . . $ 65,183,144 $ 72,253,785
Cost of Revenues:
Programming and production . . 13,835,094 14,071,943
Delivery and transmission. . . 7,436,015 9,600,109
Sales and marketing. . . . . . 15,504,947 15,108,860
General and administrative . . 7,372,030 7,142,238
Depreciation . . . . . . . . . 7,410,704 8,896,270
___________ ___________
Total. . . . . . . . . . . . 51,558,790 54,819,420
Income from operations. . . . . . 13,624,354 17,434,365
Interest expense. . . . . . . . . (131,766) (92,872)
Interest income . . . . . . . . . 69,562 378,258
Other income (expense). . . . . . (52,863) 41,874
___________ ___________
Income before income taxes. . . . 13,509,287 17,761,625
Provision for income taxes. . . . 5,109,381 7,042,204
___________ ___________
Net income available to common
shareholders . . . . . . . . . $ 8,399,906 $ 10,719,421
___________ ___________
___________ ___________
Earnings per common share
(Note 2) . . . . . . . . . . . $ .43 $ .55
___________ ___________
___________ ___________
Weighted average common
and common equivalent
shares outstanding . . . . . . 19,340,977 19,618,902
___________ ___________
___________ ___________
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the nine months ended September 30, 1995
(Unaudited)
<CAPTION>
Additional
Common Stock paid-in
Shares Amount capital
___________ ___________ ___________
<S> <C> <C> <C>
Balance at December 31, 1994. . 19,561,123 $ 195,611 $ 71,398,368
Issuance of Common Stock under
Employee Stock Purchase Plan 7,169 72 86,763
Issuance of Common Stock under
Employee Stock Option Plan
and Non-Employee Stock
Option Plan, including federal
income tax benefit (Note 2) . 31,000 310 240,377
Net Income . . . . . . . . . . . - - -
___________ __________ ___________
Balance at March 31, 1995. . . . 19,599,292 195,993 71,725,508
Issuance of Common Stock under
ETC Purchase Agreement (Note 3) 45,045 450 624,550
Issuance of Common Stock under
Employee Stock Purchase Plan 6,204 62 80,690
Issuance of Common Stock under
Employee Stock Option Plan
and Non-Employee Stock Option
Plan, including federal income
tax benefit (Note 2) . . . . . 83,450 834 864,505
Net Income. . . . . . . . . . . . - - -
___________ ___________ ___________
Balance at June 30, 1995. . . . . 19,733,991 197,339 73,295,253
Issuance of Common Stock under
Employee Stock Purchase Plan 5,289 53 69,630
Issuance of Common Stock under
Employee Stock Option Plan
and Non-Employee Stock Option
Plan, including federal income
tax benefit (Note 2) . . . . . 5,200 52 60,645
Net Income. . . . . . . . . . . . - - -
___________ ___________ ___________
Balance at September 30, 1995 . . 19,744,480 $ 197,444 $ 73,425,528
___________ ___________ ___________
___________ ___________ ___________
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the nine months ended September 30, 1995
(Unaudited)
<CAPTION>
Retained Treasury
earnings shares
___________ ___________
<S> <C> <C>
Balance at December 31, 1994. . . . $ 12,859,978 $ (156,144)
Issuance of Common Stock under
Employee Stock Purchase Plan . . - -
Issuance of Common Stock under
Employee Stock Option Plan
and Non-Employee Stock Option
Plan, including federal income
tax benefit (Note 2) . . . . . . - -
Net Income. . . . . . . . . . . . . 3,809,243 -
___________ ___________
Balance at March 31, 1995 . . . . . 16,669,221 (156,144)
Issuance of Common Stock under
ETC Purchase Agreement (Note 3). - -
Issuance of Common Stock under
Employee Stock Purchase Plan . . - -
Issuance of Common Stock under
Employee Stock Option Plan
and Non-Employee Stock Option
Plan, including federal income
tax benefit (Note 2) . . . . . . - -
Net Income. . . . . . . . . . . . . 3,349,934 -
___________ __________
Balance at June 30, 1995. . . . . . 20,109,155 (156,144)
Issuance of Common Stock under
Employee Stock Purchase Plan . . - -
Issuance of Common Stock under
Employee Stock Option Plan
and Non-Employee Stock Option
Plan, including federal income
tax benefit (Note 2) . . . . . . - -
Net income. . . . . . . . . . . . . 3,470,244 -
___________ ___________
Balance at September 30, 1995 . . . $ 23,579,399 $ (156,144)
___________ ___________
___________ ___________
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months ended September 30,
_______________________________
1994 1995
___________ ____________
<S> <C> <C>
Operating activities:
Net income . . . . . . . . . . . . . . $ 8,399,906 $ 10,719,421
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization. . . . 7,410,704 8,896,270
Deferred income taxes. . . . . . . . (1,522,796) -
Loss on sale of property and equipment 3,480 22,729
Changes in operating assets
and liabilities:
Accounts receivable . . . . . . . (8,160,989) 1,106
Other current assets and
prepaid commissions . . . . . . (2,472,854) (793,317)
Accounts payable and
accrued liabilities . . . . . . 237,227 (1,536,645)
Income taxes payable. . . . . . . 4,388,599 1,952,773
Unearned revenue. . . . . . . . . 2,552,371 (2,798,963)
___________ ___________
Net cash provided by
operating activities. . . . . . 10,835,648 16,463,374
Investing activities:
Net (increase) decrease in investments (409,248) 718,437
Additions to property and equipment. . (9,952,130) (3,869,593)
Net increase in other assets . . . . . (1,867,685) (1,573,530)
Net additions to program inventory . . (3,193,357) (2,865,733)
Net additions to interest in partnership 49,382 99,897
Proceeds from sale of assets . . . . . - 22,827
Purchase business combinations,
Net of cash acquired (Note 3). . . . 10,662 (2,858,548)
___________ ___________
Net cash used in
investing activities. . . . . . (15,362,376) (10,326,243)
Financing activities:
Payments on short-term debt
and long-term debt . . . . . . . . . (391,745) (449,598)
Proceeds from issuance of stock, net . 2,111,217 1,403,993
___________ ___________
Net cash provided by (used in)
financing activities. . . . . . 1,719,472 954,395
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . (2,807,256) 7,091,526
Cash and cash equivalents at
beginning of period. . . . . . . . . . 5,545,539 5,815,118
___________ ___________
Cash and cash equivalents at end of period $ 2,738,283 $ 12,906,644
___________ ___________
___________ ___________
Supplemental disclosures of
cash flow information
Cash paid during the period:
Interest. . . . . . . . . . . . . $ 2,093 $ 36,071
Income taxes. . . . . . . . . . . $ 14,414 $ 1,185,404
</TABLE>
See accompanying notes.
<PAGE>
WESTCOTT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(Unaudited)
Noncash investing activity:
In March 1994, the Company issued 100,000 shares of its Common Stock valued
at approximately $2,100,000 and assumed liabilities of approximately $979,000
in connection with the acquisition of Excellence in Training Corporation.
In April 1995, the Company issued an additional 45,045 shares of its Common
Stock valued at approximately $625,000 in connection with the acquisition of
Excellence in Training Corporation.
<PAGE>
WESTCOTT COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation. The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with the instructions
to Form 10-Q and therefore do not include all information and footnotes
necessary for fair presentation of financial position, results of operations,
and cash flows in conformity with generally accepted accounting principles.
Management believes all adjustments necessary for a fair presentation of the
results of the interim period have been made and are of a normal recurring
nature.
In presenting the accompanying unaudited condensed consolidated financial
statements, certain amounts have been reclassified. These reclassifications
do not have a material impact on the Company's financial statements.
During the first nine months of 1995, the Company recognized a federal
income tax benefit of approximately $226,000 resulting from the exercise of
employee stock options. Under generally accepted accounting principles, this
federal income tax benefit is recognized as a deferred tax asset and added to
additional paid-in-capital in the period of the tax deduction.
These unaudited condensed consolidated financial statements and the notes
thereto should be read in conjunction with the Company's most recent audited
financial statements included in its Annual Report on Form 10-K.
2. Earnings per share. Earnings per share are computed based on the
weighted average number of common, and when material, common equivalent
shares outstanding.
3. Acquisitions. Effective March 1, 1994, the Company acquired all of the
outstanding stock of Excellence in Training Corporation ("ETC") in exchange
for 100,000 shares of the Company's Common Stock valued at approximately
$2,100,000 and the assumption of approximately $979,000 of liabilities. In
addition, the Company entered into an obligation for additional purchase
price and noncompete agreements which are payable through 1996. In April,
1995, in accordance with the terms of the obligation for additional purchase
price, the Company issued 45,045 additional shares of its Common Stock valued
at approximately $625,000.
Effective March 1, 1995, the Company acquired all of the outstanding stock
of Lockert Jackson & Associates, Inc. ("Lockert Jackson") in exchange for a
cash payment of $1,500,000 and the assumption of approximately $2,075,000 of
liabilities. In addition, the Company made a one-time payment of $500,000 in
return for five-year non-competition agreements, and will pay approximately
$318,000 of additional purchase price over the next three years. Lockert
Jackson is nationally recognized as a producer and distributor of "Emergency
Medical Update" and "Safety Watch," subscription based emergency medical and
safety video training products. This acquisition was accounted for as a
purchase, and accordingly, the net assets and results of operations of
Lockert Jackson are included in the Company's consolidated financial
statements commencing March 1, 1995.
Effective August 1, 1995, the Company acquired certain assets of Capital
Training Company ("CTC") in exchange for a cash payment of $1,380,000 and the
assumption of approximately $218,000 of liabilities. In addition, the
Company will pay approximately $250,000 of additional purchase price over the
next two years. CTC produces and distributes videotape training products for
the financial services industry. This acquisition was accounted for as a
purchase, and accordingly, the net assets and results of operations of CTC
are included in the Company's consolidated financial statements commencing
August 1, 1995.
<PAGE>
WESTCOTT COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements - (Continued)
(Unaudited)
Pro forma income statement data for the Lockert Jackson and Capital
Training Company acquisitions are not presented as the pro forma impact on
the Company's financial statements is not material.
4. Long-term Obligations. Effective June 28, 1993, the Company entered into
a two-year revolving credit facility with its bank pursuant to which it may
borrow up to $18,000,000. After the revolver term expires, outstanding
amounts under this facility would be convertible into a four-year term loan.
Effective June 28, 1995, this credit facility was extended for one year to
June 28, 1996. The facility provides a sublimit of $1,000,000 for standby
letters of credit. A commitment fee of one-half of 1% of the unused credit
line and an interest rate of prime, or if lower, an alternate CD rate plus 1
1/2% will be charged.
The credit facility contains various restrictive covenants which, among
other things, prohibit the payment of dividends and require the Company to
maintain certain financial and tangible net worth ratios. The facility is
secured by studio equipment, downlink equipment, other equipment and
fixtures, subsidiary stock and accounts receivable. At September 30, 1995,
there were no amounts borrowed under this facility.
<PAGE>
The following table contains information about products and services offered
by the Company.
Current
Markets Offerings Description Medium
Government & LETN Law Enforcement Television Network S/V/W
Public Services FETN Fire & Emergency Television Network S/V
American Heat American Heat V
Pulse Pulse V
EMU Emergency Medical Update V
GSTN Government Services
Television Network V
Automotive ASTN Automotive Satellite
Television Network S
Detroit (WCMI) Custom Programming N/A
Health Care HSTN Health & Sciences Television Network S
AHA American Hospital Association T
WHTG Healthcare Teleconference Group T
PSYCHNET Sponsored Programming S
LTCN Long Term Care Network S
IMN Custom Programming N/A
FMTN Family Medical Television Network S
Corporate & The CPA Report The CPA Report V
Professional PSTN Professional Security
Television Network V
AFTN Accounting & Financial
Television Network V
ITS Industrial Training Systems V/C
Tel-A-Train Tel-A-Train V/C
ETC Excellence in Training V
Safety Watch Safety Watch V
ATSN Accountants Television
Satellite Network S
IDTN Electronic Classroom I
EXEN Executive Education Network I
Financial
Services BTCC Bankers Training &
Consulting Company V/C
Educational TI-IN K-12 Education S
Legend: S = Private Satellite
V = Videotape
T = Teleconferencing
C = Computer-Based Training
W = Workstation
I = Interactive Multi-Media
N/A = Not Applicable
<PAGE>
Item 2 - Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations:
Comparison of Nine Months Ended September 30, 1995 to the Nine Months Ended
September 30, 1994:
Revenues. The increase in revenues of $7,070,641 or 11% over the
corresponding period last year is primarily attributable to continued revenue
growth in networks internally-developed or acquired since the first quarter
of 1994, such as IDTN, EMU, ETC, Safety Watch, and ATSN. Also contributing
to this overall growth in revenues was an increase in LETN workstation sales.
Revenues from the Company's six principal markets for the periods indicated
were as follows:
<TABLE>
<CAPTION>
Markets Revenues
_____________________________ _______________________________
Nine Months Ended
September 30, September 30,
1994 1995
___________ _____________
<S> <C> <C>
Government and Public Services . . . $ 13,792,243 $ 15,648,236
Automotive . . . . . . . . . . . . . 7,968,700 7,972,906
Health Care. . . . . . . . . . . . . 14,156,790 14,986,022
Corporate and Professional . . . . . 17,480,947 21,552,709
Financial Services . . . . . . . . . 4,225,605 4,530,821
Education. . . . . . . . . . . . . . 6,360,436 6,650,565
Other. . . . . . . . . . . . . . . . 1,198,423 912,526
___________ ___________
Total. . . . . . . . . . . . . . . . $ 65,183,144 $ 72,253,785
___________ ___________
___________ ___________
</TABLE>
Revenues in the Government and Public Services market increased $1,855,993
or 13% primarily as a result of an increase in LETN workstation sales, a
product introduced during the first quarter of 1995. Also contributing to
this increase was EMU, a product acquired in the acquisition of Lockert
Jackson in the first quarter of 1995; and GSTN, which continued to experience
a growth in revenues as a result of an increase in subscribers over the same
period last year. Partially offsetting these increases was a decrease in
revenues for LETN and FETN, which both experienced a decline in subscribers
over the same period last year.
Revenues in the Automotive market remained constant over the same period
last year, though WCMI experienced an increase in revenues resulting from
several custom programming projects completed during the first nine months of
1995. This increase was partially offset by a decrease in revenues for ASTN
as a result of a decrease in subscribers over the same period last year.
Revenues in the Health Care market increased $829,232 or 6% primarily due
to LTCN which experienced an increase in revenues as a result of an increase
in subscribers over the same period last year. In addition, WHTG experienced
an increase in teleconference revenues in connection with its alliance with
the Joint Commission on Accreditation of Healthcare Organizations.
Offsetting these increases was a decrease in revenues for HSTN as a result of
a decrease in subscribers over the same period last year. Management
believes this decrease in subscribers has stabilized over the second and
third quarter of 1995.
Revenues in the Corporate and Professional market increased $4,071,762 or
23% primarily as a result of IDTN's electronic classroom which began
operations in the first quarter of 1994; and ETC, which was acquired in the
first quarter of 1994. Also contributing to this increase was Safety Watch,
<PAGE>
a product acquired in the acquisition of Lockert Jackson in the first quarter
of 1995, and the introduction of ATSN, an internally-developed network which
began operations in the second quarter of 1995. Partially offsetting these
increases were decreases in one-time sales revenues for Tel-A-Train and ITS
which management believes result from an industry-wide decline in safety
training sales, and a decline in international sales as a result of the
decline in economic conditions in Mexico.
Revenues in the Financial Services market increased $305,216 or 7% due to
an increase in subscription-based revenue as a result of an increase in
subscribers for BTCC over the same period last year; as well as the
acquisition of CTC in the third quarter of 1995.
Revenues in the Education market increased $290,129 or 5% over the same
period last year primarily due to revenues generated from a government grant
received in the first quarter of 1995.
Programming and Production. Programming and production costs increased
$236,849 or 2% primarily as a result of production costs associated with IDTN
which began operations in early 1994. In addition, programming and production
expenses for WCMI increased over the same period last year, as several custom
programming projects were completed during the first nine months of 1995 as
compared with the same period last year. Offsetting these increases were
decreases in programming and production costs for many of the Company's more
mature satellite networks such as LETN, IMN, ASTN, FETN and HSTN, as a result
of the more efficient use of production facilities and utilization of
existing program inventory.
Delivery and Transmission. An increase of $2,164,094 or 29% over the
corresponding period last year is primarily due to an increase in transponder
expense, resulting from an amendment in 1994 to the Company's long-term
transponder lease which increased its satellite transponder capacity.
Delivery and transmission costs also increased over the same period last year
for IDTN, which began operations in early 1994. In addition, Tel-A-Train
experienced an increase in delivery costs as a result of a large one-time
sale of videotape products to Columbia during the third quarter of 1995.
Sales and Marketing. A decrease of $396,087 or less than 3% over the
corresponding period last year is due primarily to a reduction in commission
expense for ITS resulting from a decrease in sales for the same period last
year, the implementation of a new sales commission plan and the closing of
the New Jersey sales office in late 1994. LETN, ASTN and FETN also
experienced a reduction in commission expense resulting from the decrease in
sales over the same period last year. Partially offsetting these decreases
were an increase in sales and marketing expenses and cost of goods sold
attributable to the increase in LETN workstation sales; and an increase in
marketing expense attributable to ATSN, an internally-developed network which
began operations in the second quarter of 1995.
Sales personnel are compensated through commissions on new sales and
renewals, supplemented by a small base salary. Therefore, commission expense
for most of the satellite networks in any reporting period will vary with the
number of subscriptions and renewals sold during such reporting period.
However, commissions relating to videotape and teleconference networks, as
well as TI-IN, are deferred and amortized over the life of the respective
contract, which is generally a period of one to three years.
General and Administrative. General and administrative expenses decreased
$229,792 or 3%. This category includes operating costs for the Company's
travel agency, bad debt expense, executive compensation, facilities and other
expenses not directly attributed to the operation of the programming,
production and sales and marketing departments. The decrease in general and
administrative expense over the same period last year is primarily
attributable to the reduction in outside consulting expense for BTCC, the
reduction of overhead expenses at Tel-A-Train; and the sale of the travel
<PAGE>
agency in the first quarter of 1995. These decreases were partially offset
by an increase in general and administrative expense for ETC, which was
acquired in the first quarter of 1994.
Depreciation and Amortization. The $1,485,566 or 20% increase in
depreciation and amortization expense over the same period last year is
primarily attributable to depreciation increases for the installation of
downlink equipment at customer receive sites for the Company's satellite
networks. Computer equipment and software, One-Touch equipment installed at
TI-IN sites, equipment installed for IDTN electronic classrooms, leasehold
improvements and production equipment purchases necessary to accommodate the
Company's overall growth also contributed to this increase in depreciation
expense. Amortization increased over the same period last year primarily as
a result of intangibles acquired in the acquisitions of ETC, Lockert Jackson
and Capital Training Company since the first quarter of 1994.
Interest. Interest expense decreased by $38,894 or 30% primarily as a
result of the payment of $1,100,000 of long-term debt in December, 1994.
Interest income increased $308,696 or 444% over the same period last year
primarily as a result of the increase in temporary interest-bearing
investments.
Income Taxes. The provision for income taxes as a percentage of income
before income taxes increased from 38% for the nine-month period ended
September 30, 1994 to 40% for the nine-month period ended September 30, 1995
primarily as a result of an increase in non-deductible goodwill amortization,
an increase in state income taxes and the application of graduated tax rates.
Comparison of Three Months Ended September 30, 1995 to the Three Months Ended
September 30, 1994:
Revenues. The increase in revenues of $1,953,979 or 9% over the
corresponding period last year is primarily attributable to the introduction
of LETN workstations during the first quarter of 1995, and continued revenue
growth in IDTN, a network internally-developed during the first quarter of
1994. Revenues from the Company's six principal markets for the periods
indicated were as follows:
<TABLE>
<CAPTION>
Markets Revenues
________________________________ _______________________________
Three Months Ended
September 30, September 30,
1994 1995
___________ ___________
<S> <C> <C>
Government and Public Services . . . $ 4,707,384 $ 5,518,193
Automotive . . . . . . . . . . . . . 2,694,222 2,544,742
Health Care. . . . . . . . . . . . . 4,686,971 4,662,291
Corporate and Professional . . . . . 6,383,774 7,794,616
Financial Services . . . . . . . . . 1,382,819 1,581,978
Education. . . . . . . . . . . . . . 1,881,642 1,719,411
Other. . . . . . . . . . . . . . . . 444,892 314,452
___________ ___________
Total. . . . . . . . . . . . . . . . $ 22,181,704 $ 24,135,683
___________ ___________
___________ ___________
</TABLE>
Revenues in the Government and Public Services market increased $810,809
or 17% primarily as a result of an increase in LETN workstation sales, a
product introduced during the first quarter of 1995. Also contributing to
this increase were revenues generated from EMU, a product acquired in the
<PAGE>
acquisition of Lockert Jackson in the first quarter of 1995. Partially
offsetting this increase was a decrease in revenues for LETN as a result of
a decrease in subscribers over the same period last year.
Revenues in the Automotive market decreased $149,480 or 6% due primarily
to a decrease in subscribers for ASTN. This decrease was partially offset by
an increase in revenues for WCMI attributable to several custom programming
projects completed during the third quarter of 1995.
Revenues in the Health Care market decreased $24,680 or 1% primarily as a
result of a decrease in revenues for HSTN and AHA as a result of a decrease
in subscribers and subscriber sites over the same period last year.
Partially offsetting this decrease was an increase in revenues for LTCN as a
result of an increase in subscribers over the same period last year. IMN
also experienced an increase in revenues as a result of an increase in the
number of teleconference series offered by this network during the third
quarter of 1995 over the same quarter last year.
Revenues in the Corporate and Professional market increased $1,410,842 or
22% primarily as a result of IDTN's electronic classroom which began
operations in the first quarter of 1994; and Tel-A-Train which experienced an
increase in revenues as a result of a large sale of videotape products in
Columbia during the third quarter of 1995. Partially offsetting this
increase was a decrease in revenues for ETC resulting from exceptional sales
reported for the third quarter of 1994 from the introduction of an
internally-produced program, when no such programs were introduced during the
third quarter of 1995.
Revenues in the Financial Services market increased $199,159 or 14% due to
an increase in subscription-based revenue as a result of an increase in
subscribers for BTCC over the same period last year; as well as the
acquisition of CTC in the third quarter of 1995.
Revenues in the Education market decreased $162,231 or 9% primarily due to
a decrease in the number of student enrollments over the same period last
year.
Programming and Production. Programming and production costs decreased
$191,882 or 4% primarily as a result of more efficient use of production
facilities, utilization of existing programming inventory, and a reduction in
printing and publishing expenditures. In addition, ETC experienced a
decrease in royalty expenses resulting from a decrease in revenues for the
third quarter of 1995 over the same period last year. Offsetting these
decreases was an increase in programming and production expenses for IDTN,
which began operations in early 1994.
Delivery and Transmission. An increase of $781,729 or 31% over the
corresponding period last year is primarily due to an increase in delivery
costs for Tel-A-Train as a result of a large one-time sale of videotape
products to Columbia in the third quarter of 1995. In addition, delivery
and transmission costs increased over the same period last year as a result
of an increase in the proportion of service related activity as opposed to
installation and CLI conversion activity.
Sales and Marketing. An increase of $84,707 or 2% over the corresponding
period last year is due primarily to an increase in commission expense for
Tel-A-Train resulting from the large one-time sale of videotape products to
Columbia during the third quarter of 1995. Also contributing to this
increase was an increase in commissions and cost of goods sold related to the
increase in LETN workstations sales, and to the introduction of ATSN, an
internally-developed network which began operations in mid-1995. Partially
offsetting this increase was a decrease in sales and marketing expense for
ITS, ASTN and LETN as a result of a decline in sales over the same period
last year.
Sales personnel are compensated through commissions on new sales and
renewals, supplemented by a small base salary. Therefore, commission expense
for most of the satellite networks in any reporting period will vary with the
number of subscriptions and renewals sold during such reporting period.
<PAGE>
However, commissions relating to videotape and teleconference networks, as
well as TI-IN, are deferred and amortized over the life of the respective
contract, which is generally a period of one to three years.
General and Administrative. General and administrative expenses decreased
$97,226 or 4%. This category includes operating costs for the Company's
travel agency, bad debt expense, executive compensation, facilities and other
expenses not directly attributed to the operation of the programming,
production and sales and marketing departments. The decrease in general and
administrative expense over the same period last year is primarily
attributable to the sale of the travel agency in the first quarter of 1995;
and to BTCC which experienced a decrease in outside consulting expense over
the same period last year.
Depreciation and Amortization. The $631,697 or 26% increase in
depreciation and amortization expense over the same period last year is
primarily attributable to depreciation increases for the installation of
downlink and CDV equipment at LTCN, AHA, TI-IN, ATSN, EXEN and HSTN sites.
Computer equipment and software, One-Touch equipment installed at TI-IN
sites, equipment installed for IDTN electronic classrooms, leasehold
improvements and production equipment purchases necessary to accommodate the
Company's overall growth also contributed to this increase in depreciation
expense. Amortization increased as a result of intangible assets acquired in
the acquisitions of Lockert Jackson and Capital Training Company during 1995.
Interest. Interest expense decreased by $5,399 or 13% primarily as a
result of the payment of $1,100,000 of long-term debt in December, 1994.
Interest income increased $135,221 or 1242% over the same period last year
primarily as a result of the increase in temporary interest-bearing
investments.
Income Taxes. The provision for income taxes as a percentage of income
before income taxes increased from 38% for the three-month period ended
September 30, 1994 to 40% for the three-month period ended September 30, 1995
primarily as a result of an increase in non-deductible goodwill amortization,
an increase in state income taxes and the application of graduated tax rates.
Liquidity and Capital Resources. During the quarter ended September 30,
1995, the Company satisfied its liquidity needs principally from cash flow
from operations. In addition, the Company has a credit facility under which
the Company may borrow up to $18,000,000. No amounts had been drawn against
this facility as of September 30, 1995. The facility, which has been
extended through June 28, 1996, provides a sublimit of $1,000,000 for standby
letters of credit. A commitment fee of one half of 1% of the unused credit
line and an interest rate of prime, or if lower, an alternate CD rate plus 1
1/2% will be charged. As of September 30, 1995, the Company had $12,906,644
in cash, cash equivalents and temporary investments.
During the nine months ended September 30, 1995, the Company generated
approximately $16 million in cash from operations. Approximately $10 million
in cash was used in investment activities, primarily in connection with the
purchase of equipment, investment in program inventory and the acquisition of
Lockert Jackson and Capital Training Company during 1995. The Company's
financing activities during this period provided approximately $954,000 in
cash, primarily resulting from the issuance of common stock under the
Employee Stock Purchase Plan.
The Company has identified capital needs of approximately $8 million
through 1996 primarily to fund additional purchases and installations of
downlink equipment, computer hardware and software for the A/S 400, purchases
and installation of equipment for EXEN classroom sites, and investments in
program inventory. The Company believes that cash generated from operations,
cash on hand, and funds available under the revolving line of credit will be
sufficient to meet its budgeted capital and liquidity requirements through
the foreseeable future.
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults
None
Item 4 - Submission of Matters to a Vote
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
2. Asset Purchase Agreement between Capital Training Company, its
Majority Stockholder and Bankers Consulting Company,
dated August 1, 1995.
11. Computation of Earnings Per Share
27. Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTCOTT COMMUNICATIONS, INC.
Date: November 13, 1995 By: /s/ JACK T. SMITH
(Jack T. Smith)
President and
Chief Operating Officer
Date: November 13, 1995 By: /s/ PHYLLIS FARRAGUT
(Phyllis Farragut)
Executive Vice President and
Chief Financial Officer
(Chief Accounting Officer)
EXHIBIT 11
<TABLE>
WESTCOTT COMMUNICATIONS, INC.
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months ended
September 30,
___________________________
1994 1995
____________ ____________
<S> <C> <C>
Earnings per share:
Net income available to common
shareholders. . . . . . . . . . . $ 3,031,218 $ 3,470,244
____________ ____________
____________ ____________
Weighted average Common and
Common equivalent shares(1) . . . 19,436,378 19,692,884
____________ ____________
____________ ____________
Earnings per share. . . . . . . . . $ .16 $ .18
____________ ____________
____________ ____________
Earnings per Common and
Common Equivalent Share:
Weighted average shares
outstanding . . . . . . . . . . . 19,436,378 19,692,884
Net shares to be issued upon exercise
of dilutive stock options after
applying treasury stock method. . 275,510 246,764
____________ ____________
Weighted average Common and
Common equivalent shares . . . . 19,711,888 19,939,648
____________ ____________
____________ ____________
Earnings per Common and
Common equivalent shares. . . . . $ .15 $ .17
____________ ____________
____________ ____________
Earnings per Common Share
Assuming Full Dilution:
Weighted average shares
outstanding . . . . . . . . . . . 19,436,378 19,692,884
Net shares to be issued upon exercise
of dilutive stock options after
applying treasury stock method. . 320,692 246,635
____________ ____________
Weighted average Common and
Common equivalent shares. . . . . 19,757,070 19,939,519
____________ ____________
____________ ____________
Earnings per Common Share assuming
assuming full dilution. . . . . . $ .15 $ .17
____________ ____________
____________ ____________
</TABLE>
<PAGE>
<TABLE>
Nine Months ended
September 30,
____________________________
1994 1995
____________ ____________
<S> <C> <C>
Earnings per share:
Net income available to common
shareholders. . . . . . . . . . . $ 8,399,906 $ 10,719,422
____________ ____________
____________ ____________
Weighted average Common and
Common equivalent shares(1) . . . 19,340,977 19,618,902
____________ ____________
____________ ____________
Earnings per share. . . . . . . . . $ .43 $ .55
____________ ____________
____________ ____________
Earnings per Common and
Common Equivalent Share:
Weighted average shares
outstanding. . . . . . . . . . . . 19,340,977 19,618,902
Net shares to be issued upon exercise
of dilutive stock options after
applying treasury stock method . . 455,270 247,578
____________ ____________
Weighted average Common and
Common equivalent shares . . . . . 19,796,247 19,866,480
____________ ____________
____________ ____________
Earnings per Common and
Common equivalent shares . . . . . $ .42 $ .54
____________ ____________
____________ ____________
Earnings per Common Share
Assuming Full Dilution:
Weighted average shares
outstanding. . . . . . . . . . . . 19,340,977 19,618,902
Net shares to be issued upon exercise
of dilutive stock options after
applying treasury stock method . . 469,739 282,668
____________ ____________
Weighted average Common and
Common equivalent shares . . . . . 19,810,716 19,901,570
____________ ____________
____________ ____________
Earnings per Common Share assuming
assuming full dilution . . . . . . $ .42 $ .54
____________ ____________
____________ ____________
</TABLE>
(1) For the three-month and six-month periods ended June 30, 1995, the
calculation of earnings per share was based upon weighted average common shares
outstanding, due to the fact that both primary and fully-diluted earnings per
share were more than 97% of earnings per common share outstanding. For the
three-month and six-month periods ended June 30, 1994, the calculation of
earnings per share was based upon weighted average common and common equivalent
shares outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Condensed Consolidated Balance Sheets, Statements of Income, Statement
of Shareholders' Equity and Statements of Cash Flows at and for the six months
ended June 30, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 21,782,831
<ALLOWANCES> 748,359
<INVENTORY> 22,030,575
<CURRENT-ASSETS> 47,089,787
<PP&E> 61,327,029
<DEPRECIATION> 27,967,114
<TOTAL-ASSETS> 122,028,492
<CURRENT-LIABILITIES> 23,494,274
<BONDS> 23,163
<COMMON> 197,444
0
0
<OTHER-SE> 96,848,783
<TOTAL-LIABILITY-AND-EQUITY> 122,028,492
<SALES> 0
<TOTAL-REVENUES> 72,253,785
<CGS> 0
<TOTAL-COSTS> 54,819,420
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 978,764
<INTEREST-EXPENSE> 92,872
<INCOME-PRETAX> 17,761,626
<INCOME-TAX> 7,042,204
<INCOME-CONTINUING> 10,719,422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,719,422
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
ASSET PURCHASE AGREEMENT
BETWEEN
CAPITAL TRAINING COMPANY
a Missouri corporation
and its MAJORITY STOCKHOLDER
AND
BANKERS CONSULTING COMPANY,
a Missouri corporation
Dated as of
August 1, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
PURCHASE AND SALE OF ASSETS
Page
1.1 Assets to be Acquired . . . . . . . . . . . . . . . . . . .1
1.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . .1
1.3 Transfer of Assets. . . . . . . . . . . . . . . . . . . . .1
1.4 Assumption of Liabilities . . . . . . . . . . . . . . . . .2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1 Due Organization. . . . . . . . . . . . . . . . . . . . . .2
2.2 Due Authorization . . . . . . . . . . . . . . . . . . . . .2
2.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . .3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERAND MAJORITY STOCKHOLDER
3.1 Due Organization. . . . . . . . . . . . . . . . . . . . . .3
3.2 Due Authorization . . . . . . . . . . . . . . . . . . . . .3
3.3 No Consents . . . . . . . . . . . . . . . . . . . . . . . .4
3.4 Tax or Informational Returns. . . . . . . . . . . . . . . .4
3.5 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.6 Properties. . . . . . . . . . . . . . . . . . . . . . . . .4
3.7 Licenses and Permits. . . . . . . . . . . . . . . . . . . .4
3.8 Intellectual Rights . . . . . . . . . . . . . . . . . . . .4
3.9 Compliance with Laws. . . . . . . . . . . . . . . . . . . .5
3.10 Employee Plans. . . . . . . . . . . . . . . . . . . . . . .5
3.11 Contracts and Agreements. . . . . . . . . . . . . . . . . .5
3.12 Claims and Proceedings. . . . . . . . . . . . . . . . . . .6
3.13 Financial Statements. . . . . . . . . . . . . . . . . . . .6
3.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.15 Business Relations. . . . . . . . . . . . . . . . . . . . .7
3.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . .7
3.17 Inventory . . . . . . . . . . . . . . . . . . . . . . . . .7
<PAGE>
3.18 Accounts Receivable . . . . . . . . . . . . . . . . . . . .7
3.19 Information Furnished to Purchaser. . . . . . . . . . . . .8
3.20 Subscribers and Customers . . . . . . . . . . . . . . . . .8
ARTICLE 4
CONCURRENT DELIVERIES
4.1 Deliveries to Purchaser . . . . . . . . . . . . . . . . . .8
4.2 Deliveries to Seller and Majority Stockholder . . . . . . .9
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification of Purchaser. . . . . . . . . . . . . . . .9
5.2 Indemnification of Seller.. . . . . . . . . . . . . . . . .9
5.3 Defense of Third-Party Claims . . . . . . . . . . . . . . 10
5.4 Direct Claims . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Bulk Sales Indemnification. . . . . . . . . . . . . . . . 11
5.6 Limits on Indemnification . . . . . . . . . . . . . . . . 11
5.7 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . 12
5.8 Real Property Lease . . . . . . . . . . . . . . . . . . . 12
ARTICLE 6
MISCELLANEOUS
6.1 Use of Seller's Name. . . . . . . . . . . . . . . . . . . 12
6.2 Collateral Agreements, Amendments, and Waivers. . . . . . 12
6.3 Records . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Successors and Assigns. . . . . . . . . . . . . . . . . . 13
6.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Sales Taxes . . . . . . . . . . . . . . . . . . . . . . . 13
6.7 Invalid Provisions. . . . . . . . . . . . . . . . . . . . 13
6.8 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.10 Survival of Representations, Warranties, and Covenants. . 14
6.11 Further Assurances. . . . . . . . . . . . . . . . . . . . 14
<PAGE>
6.12 No Third-Party Beneficiaries. . . . . . . . . . . . . . . 14
6.13 Best Knowledge. . . . . . . . . . . . . . . . . . . . . . 14
6.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . 14
6.15 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 15
6.16 Sections; Exhibits. . . . . . . . . . . . . . . . . . . . 15
6.17 Disclosure Schedule . . . . . . . . . . . . . . . . . . . 15
6.18 Number and Gender of Words. . . . . . . . . . . . . . . . 15
6.19 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBITS
A - Form of Bill of Sale
B - Employment Agreement
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and
entered into as of August 1, 1995, by and among Capital Training
Company, a Missouri corporation ("Seller"), Mr. Dean A. Pichee
("Majority Stockholder") and Bankers Consulting Company
("Purchaser").
R E C I T A L S
WHEREAS, Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, upon the terms and subject to the
conditions set forth herein, substantially all of property, assets
and business of Seller;
WHEREAS, Majority Stockholder owns 77.8% of the issued and
outstanding stock, $.01 par value per share, of Seller.
NOW, THEREFORE, in consideration of the respective
representations, warranties, covenants, agreements, and conditions
set forth herein, and other good and valuable consideration, the
parties hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Assets to be Acquired. On the basis of the
representations and warranties and for the consideration set forth
in this Agreement, Seller hereby agrees to sell to Purchaser, and
Purchaser hereby agrees to purchase from Seller, upon the terms and
conditions set forth in this Agreement, the name "CAPITAL TRAINING
COMPANY," and all other property, assets and rights of Seller,
including without limitation those assets set forth on
Schedule 1.1A, wherever located and whether or not reflected in the
books and records of Seller (the "Transferred Assets"), except for
excluded assets set forth on Schedule 1.1B. It is expressly
understood and agreed that Purchaser shall not be liable for and
does not assume any of Seller's obligations or liabilities (whether
known or unknown, matured or unmatured, or fixed or contingent),
except as specifically stated in Section 1.4 below.
1.2 Purchase Price. The Purchase Price payable by Purchaser
in consideration for sale of the Transferred Assets is $1,380,000
(the "Purchase Price"), which is being paid by Purchaser
concurrently with the execution hereof to Seller through a wire
transfer to the account designated by Seller.
1.3 Transfer of Assets. Concurrently with the execution
hereof, Seller is executing and delivering to Purchaser a Bill of
Sale with respect to the Transferred Assets, which Bill of Sale
shall be substantially in the form attached hereto as Exhibit A
(the "Bill of Sale").
<PAGE>
1.4 Assumption of Liabilities. Subject to the terms of this
Agreement, Purchaser agrees to assume and become responsible at
Closing for those liabilities listed on Schedule 1.4, including
those liabilities and obligations of Seller under the agreements,
contracts, leases, licenses and other arrangements with customers
and providers of Seller with respect to the Transferred Assets.
Purchaser will not assume or have any responsibility, however, with
respect to any other obligation or liability of Seller not included
in Schedule 1.4.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and
Majority Stockholder as follows (with the understanding that Seller
and Majority Stockholder are relying materially on each such
representation and warranty in entering into and performing this
Agreement):
2.1 Due Organization. Purchaser is a corporation, validly
existing, and in good standing under the laws of the State of
Missouri and has full power and authority and is entitled to own or
lease its properties and to carry on its business as, and in the
places where, such properties are owned or leased and such business
is conducted.
2.2 Due Authorization. Purchaser has full power and
authority to enter into and perform its obligations under this
Agreement and each agreement, instrument, and document required to
be executed by Purchaser in accordance herewith. The execution,
delivery, and performance by Purchaser of this Agreement and the
agreements, documents, and instruments required to be executed and
delivered by Purchaser in accordance herewith have been duly
authorized by the Board of Directors of Purchaser. This Agreement
and the agreements, documents, and instruments required to be
executed and delivered by Purchaser in accordance herewith have
been duly and validly executed and delivered by Purchaser and
constitute valid and binding obligations of Purchaser, enforceable
in accordance with their respective terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency,
fraudulent transfer, or other laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses (including commercial
reasonableness, good faith, and fair dealing) and to the discretion
of the court before which any proceeding therefor may be brought.
Neither the execution, delivery, nor performance of this Agreement
or any other agreement, instrument, or document to be executed by
Purchaser in connection herewith shall (a) violate any federal,
state, county, or local law, rule, or regulation or any order,
writ, injunction, or decree of any court, agency or governmental
body applicable to Purchaser or its properties, (b) violate or
conflict with, or permit the cancellation of, any agreement to
which Purchaser is a party, or by which it or any of its properties
are bound, or result in the creation of any lien, security
interest, charge, or encumbrance upon any of such properties, or
(c) violate or conflict with any provision of the Articles of
Incorporation or the Bylaws of Purchaser.
<PAGE>
2.3 Brokers and Finders. Purchaser has not incurred any
liability to any finder, broker, or sales agent in connection with
the execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
AND MAJORITY STOCKHOLDER
Seller and Majority Stockholder jointly and severally
represent and warrant to Purchaser as follows (with the
understanding that Purchaser is relying materially on each such
representation and warranty in entering into and performing this
Agreement):
3.1 Due Organization. To the best of Seller's and Majority
Stockholder's knowledge, Seller is a corporation validly existing
and in good standing under the laws of the State of Missouri and
has full power and authority and is qualified to own or lease its
properties and to carry on its businesses in the U.S. and in places
where such properties are owned or leased and such business is
conducted except where the failure to qualify would not have a
material adverse effect on the Transferred Assets or the business
acquired by Purchaser from Seller.
3.2 Due Authorization. Seller and Majority Stockholder have
full power and authority to enter into and perform their respective
obligations under this Agreement and each agreement, instrument,
and document required to be executed by Seller and Majority
Stockholder in accordance herewith. This Agreement has been duly
and validly authorized, executed and delivered by Seller and
Majority Stockholder, as the case may be, and constitutes valid and
binding obligations of Seller and Majority Stockholder, as the case
may be, enforceable in accordance with its terms, except that
(i) such enforcement may be subject to applicable bankruptcy,
insolvency, fraudulent transfer, or other laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses (including commercial
reasonableness, good faith, and fair dealing) and to the discretion
of the court before which any proceeding therefor may be brought.
Except as described on Schedule 3.2, neither the execution,
delivery, nor performance of this Agreement or any other agreement,
instrument, or document to be executed by Seller in connection
herewith shall (a) to the best of Seller's or Majority
Stockholder's knowledge, violate any federal, state, county, or
local law, rule, or regulation, (b) violate any order, writ,
injunction, or decree of any court, agency or governmental body
applicable to Seller or its properties, (c) violate or conflict
with, or permit the cancellation of, any agreement to which Seller
is a party, or by which it or any of its properties are bound, or
result in the creation of any lien, security interest, charge, or
encumbrance upon any of such properties, (d) result in the
acceleration of the maturity of any indebtedness of, or
indebtedness secured by any property or other assets of, Seller, or
(e) violate or conflict with any provision of the Articles of
Incorporation or the Bylaws of Seller.
<PAGE>
3.3 No Consents. Except as described on Schedule 3.2, no
consent or approval of any governmental agency or third party is
required in order for Seller or Majority Stockholder to enter into
and perform this Agreement or any agreement, instrument, or
document executed by Seller or Majority Stockholder in accordance
herewith.
3.4 Tax or Informational Returns. Schedule 3.4 lists all
federal and state tax returns of Seller for the four years ended
December 31, 1994, true and correct copies of which have been
delivered to Purchaser.
3.5 Assets. Schedule 1.1A sets forth all material assets of
Seller. Schedule 3.5 lists all liens, security interests, claims,
charges or other encumbrances against Seller or any of Seller's
assets listed on Schedule 1.1A.
3.6 Properties. Upon the consummation of the transactions
contemplated hereby, Purchaser shall acquire good and marketable
title to the Transferred Assets, free and clear of all liens,
security interests, claims, and encumbrances except as set forth on
Schedule 3.5. The Transferred Assets are in good operating
condition and repair, normal wear and tear excepted, are free from
material defects, and are fit for the particular purposes for which
they are intended. To the best of Seller's and Majority
Stockholder's knowledge, the operation of the respective properties
and businesses of Seller in the manner in which they are now and
have been operated does not violate any zoning ordinances,
municipal regulations, or other rules, regulations, or laws.
3.7 Licenses and Permits. To the best of Seller's and
Majority Stockholder's knowledge, set forth on Schedule 3.7A is a
list of all federal, state, county, and local governmental
licenses, authorizations, accreditations, certificates, permits,
and orders held or applied for by Seller. To the best of Seller's
and Majority Stockholder's knowledge, Seller has complied, and is
complying, in all material respects, with the terms and conditions
of all such licenses, authorizations, accreditations, certificates,
permits, and orders, and no material violation of any such
licenses, authorizations, accreditations, certificates, permits, or
orders, or the laws or rules governing the issuance or continued
validity thereof, has occurred. To the best of Seller's and
Majority Stockholder's knowledge, no additional license,
authorization, accreditation, certificate, permit, or order is
required from any federal, state, county, or local governmental
agency or body thereof in connection with the conduct of the
business of Seller, except (a) as may be required by authorities
listed on Schedule 3.7B, and (b) those which the failure to obtain
would not have a material effect on the conduct of the business of
Seller. No claim has been made by any governmental authority (and,
to the best actual knowledge of Seller and Majority Stockholder, no
such claim is anticipated) to the effect that any license,
authorization, accreditation, certificate, permit, or order in
addition to those listed on Schedules 3.7A and 3.7B is necessary
with respect to the business conducted by Seller.
3.8 Intellectual Rights. To the best of Seller's and Majority
Stockholder's knowledge, Schedule 3.8 is a list and description of
<PAGE>
all material patents, trademarks, service marks, trade names, and
copyrights and applications therefor owned by or registered in the
name of Seller or in which Seller has any right, license, or
interest. Except for the agreements listed on Schedule 3.8, Seller
is not a party to any license agreements, either as licensor or
licensee, with respect to any patents, trademarks, service marks,
trade names, or copyrights or applications therefor. Except as
disclosed on Schedule 3.8, to the best of Seller's and Majority
Stockholder's knowledge, Seller has good and marketable title to,
or the right to use, such assets and all inventions, processes,
designs, formulae, trade secrets, and know-how necessary for the
conduct of its business, without the payment of any royalty or
similar payment. Seller has not applied for or obtained any
copyright or other intellectual property protection for its media,
and to the best of its knowledge, Seller is not infringing any
patent, trademark, service mark, trade name, or copyright of
others, and Seller is not aware of any infringement by others of
any such rights owned by Seller.
3.9 Compliance with Laws. To the best of Seller's and
Majority Stockholder's knowledge, Seller has complied in all
material respects, and is in compliance in all material respects,
with all federal, state, county, and local laws, regulations, and
orders that are applicable to Seller's business and has filed with
the proper authorities all statements and reports required by the
laws, regulations, and orders to which Seller or its properties or
operations are subject. No claim has been made by any governmental
authority (and, to the best knowledge of Seller and Majority
Stockholder, no such claim is anticipated) to the effect that the
business conducted by Seller fails to comply, in any respect, with
any law, rule, regulation, or ordinance. Without limiting the
foregoing, to the best of Seller's and Majority Stockholder's
knowledge, Seller has complied in all material respects with all
judicial and governmental requirements relating to pollution and
environmental control and regulation and employee health and safety
including, but not limited to, laws, rules, regulations,
ordinances, and orders related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport,
handling, presence, emission, discharge, release, or threatened
release into or on the air, land, surface, water, groundwater,
personal property, or structures, wherever located, of any
contaminants, hazardous materials, hazardous or toxic substances,
or wastes as defined under any federal, state, or local laws,
regulations, or ordinances.
3.10 Employee Plans. Seller does not have any employee
benefit, savings, or retirement plans or agreements or employment
or consulting contracts or agreements other than those set forth on
Schedule 3.10. Except for the plans listed on Schedule 3.10,
Seller does not have any employee plans or agreements which are
subject to ERISA.
3.11 Contracts and Agreements. The agreements listed on
Schedule 3.11A attached hereto constitute all of the written or
oral contracts, commitments, leases, and other agreements relating
to the subscribers and customers listed by Seller on Schedule 3.20
or to the Transferred Assets which are to be assigned to Purchaser.
Seller has afforded, to Purchaser and its officers, attorneys, and
other representatives the opportunity to review complete and
correct copies of all such contracts, commitments, leases, and
other agreements to which Seller is a party or by which Seller or
its properties are bound. Except as listed in Schedule 3.11,
Seller is not and, to the best knowledge of Seller and Majority
<PAGE>
Stockholder, no other party thereto is in default (and no event has
occurred which, with the passage of time or the giving of notice,
or both, would constitute a default) under any such contract,
commitment, lease, or other agreement material to the Transferred
Assets or business acquired hereunder, and Seller has not waived
any right under any such contract, commitment, lease, or other
agreement. Neither Seller nor Majority Stockholder has received
any notice of default or termination under any such contract,
commitment, lease, or other agreement and, except as contemplated
by this Agreement, and Seller has not assigned or otherwise
transferred any rights under any such contract, commitment, lease,
or other agreement. There are no written or oral contracts,
commitments or other agreements pursuant to which or in connection
with which Seller has accepted payment for services or goods yet to
be performed or provided by Seller to a third party other than
those set forth in Schedule 3.11B (including a description of such
services or goods to be performed or delivered and the amounts
received by Seller).
3.12 Claims and Proceedings. There are no claims, actions,
suits, proceedings, and investigations pending or, to the best
knowledge of Seller and Majority Stockholder, threatened against or
affecting Seller or any of its properties or assets, at law or in
equity, or before or by any court, municipal or other governmental
department, commission, board, agency, or instrumentality. No
inquiry, action, or proceeding has been asserted, instituted, or,
to the best knowledge of Seller and Majority Stockholder,
threatened to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the
validity of such transactions or any part thereof or seeking
damages on account thereof. To the best knowledge of each of
Seller and Majority Stockholder, there is no basis for any such
claim or action.
3.13 Financial Statements. Seller has delivered to Purchaser
a complete and correct copy of Seller's compiled financial
statements for the three year period ended December 31, 1994, and
its unaudited balance sheet and income statement at and for the
three month period ended March 31, 1995 (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis with prior periods and each of the Financial
Statements fairly present the financial position, results of
operations, and changes in financial position of Seller as of the
indicated date and for the indicated period. Since December 31,
1994, there has been no material adverse change in the financial
position, assets, results of operations, or business of Seller,
other than those normally encountered in the market place.
3.14 Taxes. Except as set forth on Schedule 3.14A, to the
best of Seller's and Majority Stockholder's knowledge, all federal,
foreign, state, county, and local income, gross receipts, excise,
property, franchise, license, sales, use, withholding, and other
tax (collectively, "Taxes") returns, reports, and declarations of
estimated tax (collectively, "Returns") which were required to be
filed by Seller on or before the date hereof have been filed within
the time and in the manner provided by law, and all such Returns
are true and correct and accurately reflect the Tax liabilities of
Seller. To the best of Seller's and Majority Stockholder's
knowledge, all Taxes, assessments, penalties, and interest which
<PAGE>
have become due pursuant to such Returns have been paid or
adequately accrued in the Financial Statements. Schedule 3.14B
lists all of the states in which Seller has filed Returns during
the 1994 calendar year and sets forth the amount and type of Taxes
paid to such states. Seller has not executed any presently
effective waiver or extension of any statute of limitations against
assessments and collections of Taxes. There are no pending or, to
the best of Seller's and Majority Stockholder's knowledge,
threatened, claims, assessments, notices, proposals to assess,
deficiencies, or audits (collectively, "Seller Tax Actions") with
respect to any Taxes owed or allegedly owed by Seller. Except as
set forth on Schedule 3.14A, to the best knowledge of Seller and
Majority Stockholder, there is no basis for any Seller Tax Actions.
There are no tax liens on any of the assets of Seller. To the best
of Seller's and Majority Stockholder's knowledge, proper and
accurate amounts have been withheld and remitted by Seller from and
in respect of its employees for all periods in full and complete
compliance with the tax withholding provisions of all applicable
laws and regulations. Seller is, and for all of its existence has
been, an S corporation as defined in the Internal Revenue Code of
1986, as amended.
3.15 Business Relations. Neither Seller nor Majority
Stockholder knows or has any reason to believe that any customer,
client, or supplier of Seller will cease or otherwise refuse to do
business with Purchaser after the closing of the transactions
contemplated herein in the same manner as such business was
previously conducted with Seller. Neither Seller nor Majority
Stockholder have received any notice of any disruption (including
delayed deliveries or allocations by suppliers) in the availability
of the materials or products used by Seller nor is Seller or
Majority Stockholder aware of any facts which could lead it to
believe that the business of Seller will be subject to any such
material disruption. This Section 3.15 does not constitute a
warranty by Seller or Majority Stockholder of the size of the
subscription base that will be maintained by Purchaser following
the closing of the transactions contemplated herein or of such
subscribers' satisfaction with video tapes, programs or services
provided by Purchaser.
3.16 Brokers and Finders. Seller has not caused any liability
to be incurred to any finder, broker, or sales agent in connection
with the execution, delivery, or performance of this Agreement or
the transactions contemplated herein.
3.17 Inventory. Schedule 3.17 is a true, complete and
accurate list of each item of Seller's tape library. As used
herein, the term "tape library" shall include all printed material
prepared for and to be sent or used in connection with such tapes.
Seller owns such inventory free and clear of all liens, security
interests and third party claims which would interfere with the use
of such inventory, subject to the agreements listed on Schedule
3.11A.
3.18 Accounts Receivable. Schedule 3.18 is a list of all of
the Accounts Receivable of Seller as of June 30, 1995 and July 31,
1995. Except as listed on Schedule 3.18, (a) all of such Accounts
Receivable are free and clear of any security interests, liens,
encumbrances, or other charges; (b) to the best of Seller's and
Majority Stockholder's knowledge, none of such Accounts Receivable
<PAGE>
are subject to any offset or claims of offset; and (c) none of the
obligors of such Accounts Receivable have given notice that they
will or may refuse to pay the full amount thereof or any portion
thereof.
3.19 Information Furnished to Purchaser. Seller has made
available to Purchaser and its officers, attorneys, accountants,
and representatives true and correct copies of all agreements,
documents, and other items listed on the schedules to this
Agreement and all books and records of Seller, and, to the best
knowledge of Seller and Majority Stockholder, neither this
Agreement, the schedules hereto, nor any information, agreements,
or documents delivered to or made available to Purchaser or its
officers, attorneys, accountants, or representatives pursuant to
this Agreement contain any untrue statement of a material fact or
omit any material fact necessary to make the statements herein or
therein, as the case may be, not misleading.
3.20 Subscribers and Customers. Schedule 3.20 accurately sets
forth as of July 31, 1995 the name of each existing subscriber and
customer of Seller and a description of the date and term of the
agreement relating to such subscriber or customer.
ARTICLE 4
CONCURRENT DELIVERIES
4.1 Deliveries to Purchaser. Concurrently with, and as a
condition to, its delivery and execution hereof, Purchaser is being
delivered the following:
(a) A copy of the resolutions duly adopted by Seller's
Board of Directors approving the adoption, execution and
delivery of this Agreement and authorizing all necessary or
proper action to enable Seller to comply with the terms
hereof.
(b) A copy of the resolutions duly adopted by Seller's
stockholders authorizing the adoption, execution and delivery
of this Agreement and approving the sale of Seller's assets as
contemplated hereby.
(c) The Bill of Sale, duly executed by Seller.
(d) A certificate executed by the President of Seller
accurately setting forth the number of Subscribers as of the
date hereof as customarily counted by Seller.
(e) The Employment Agreement in the form attached hereto
as Exhibit B (the "Employment Agreement"), duly executed by
Dean A. Pichee.
(f) At least one master copy of each item of tape
inventory included in the Transferred Assets.
<PAGE>
(g) Physical possession of all items of tangible
property included in the Transferred Assets.
(h) The Disclosure Schedules as described in
Section 6.17 hereof.
(i) Possession and control, together with proper
signature authority, of the bank accounts and other deposits
of Seller.
4.2 Deliveries to Seller and Majority Stockholder.
Concurrently with its execution and delivery hereof, Seller is
being delivered the following:
(a) A copy of the resolutions duly adopted by
Purchaser's Board of Directors or a duly authorized committee
thereof approving the execution and delivery of this Agreement
and authorizing all necessary or proper action to enable
Purchaser to comply with the terms hereof.
(b) A wire transfer of the Purchase Price as set forth
in Section 1.2 hereof.
(c) The Employment Agreement, duly executed by
Purchaser.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification of Purchaser. Seller and Majority
Stockholder agree to jointly and severally indemnify and hold
harmless Purchaser, and its respective affiliates, officers,
directors, stockholders and employees (collectively, the "Purchaser
Indemnified Parties") from and against any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs, and
expenses (including court costs and reasonable attorneys' fees and
expenses incurred in investigating and preparing for any litigation
or proceeding) (collectively, "Purchaser Indemnified Costs") which
any of Purchaser Indemnified Parties may sustain, or to which any
of Purchaser Indemnified Parties may be subjected, arising out of
any breach or default by Seller or Majority Stockholder of or under
any of their respective representations, warranties, covenants,
agreements, or other provisions of this Agreement or any agreement
or document executed in connection herewith.
5.2 Indemnification of Seller. Purchaser agrees to indemnify
and hold harmless Seller and Majority Stockholder, and each of
their respective affiliates, officers, directors, and employees
(collectively, the "Seller Indemnified Parties" and, collectively
with Purchaser Indemnified Parties, the "Indemnified Parties") from
and against any and all damages, losses, claims, liabilities,
demands, charges, suits, penalties, costs, and expenses (including
court costs and reasonable attorneys' fees incurred in
investigating and preparing for any litigation or proceeding)
(collectively, the "Seller Indemnified Costs" and, collectively
<PAGE>
with Purchaser Indemnified Costs, the "Indemnified Costs") which
any of Seller Indemnified Parties may sustain, or to which any of
Seller Indemnified Parties may be subjected, arising out of any
breach or default by Purchaser under any of their respective
representations, warranties, covenants, agreements, or other
provisions of this Agreement or any agreement or document executed
in connection herewith.
5.3 Defense of Third-Party Claims. An Indemnified Party
shall give prompt written notice to the party who is obligated to
provide indemnification hereunder (the "Indemnifying Party") of the
commencement or assertion of any action, proceeding, demand, or
claim by a third party (collectively, a "third-party action") in
respect of which such Indemnified Party shall seek indemnification
hereunder. Any failure so to notify the Indemnifying Party shall
relieve the Indemnifying Party from any liability that it may have
to such Indemnified Party under this Article 5. The Indemnifying
Party shall have the right to assume control of the defense of,
settle, or otherwise dispose of such third-party action on such
terms as it deems appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at his,
her, or its own expense, to participate in the defense of such
third-party action (provided, however, that the Indemnifying
Party shall pay the attorneys' fees of the Indemnified Party
if (i) the employment of separate counsel shall have been
authorized in writing by the Indemnifying Party in connection
with the defense of such third-party action, (ii) the
Indemnifying Party shall not have employed counsel reasonably
satisfactory to the Indemnified Party to have charge of such
third-party action, (iii) the Indemnified Party shall have
reasonably concluded that there may be defenses available to
it which are different from or additional to those available
to the Indemnifying Party, or (iv) the Indemnified Party's
counsel shall have advised the Indemnified Party in writing,
with a copy to the Indemnifying Party, that there is a
conflict of interest that could make it inappropriate under
applicable standards of professional conduct to have common
counsel);
(b) The Indemnifying Party shall obtain the prior
written approval of the Indemnified Party before entering into
or making any settlement, compromise, admission, or
acknowledgement of the validity of such third-party action or
any liability in respect thereof if, pursuant to or as a
result of such settlement, compromise, admission, or
acknowledgement, injunctive or other equitable relief would be
imposed against the Indemnified Party or if, in the opinion of
the Indemnified Party, such settlement, compromise, admission,
or acknowledgement could have a material adverse effect on its
business or, in the case of an Indemnified Party who is a
natural person, on his or her assets or interests;
(c) The Indemnifying Party shall not consent to the
entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by
each claimant or plaintiff to each Indemnified Party of a
release from all liability in respect of such third-party
action; and
<PAGE>
(d) The Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at its own
expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement,
compromise, admission, or acknowledgement of any third-party
action (i) as to which the Indemnifying Party fails to assume
the defense within a reasonable length of time or (ii) to the
extent the third-party action seeks an order, injunction, or
other equitable relief against the Indemnified Party which, if
successful, would materially adversely affect the business,
operations, assets, or financial condition of the Indemnified
Party; provided, however, that the Indemnified Party shall
make no settlement, compromise, admission, or acknowledgement
which would give rise to liability on the part of the
Indemnifying Party without the prior written consent of the
Indemnifying Party.
The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to
this Article 5 and, in connection therewith, shall furnish such
records, information, and testimony and attend such conferences,
discovery proceedings, hearings, trials, and appeals as may be
reasonably requested.
5.4 Direct Claims. In any case in which an Indemnified Party
seeks indemnification hereunder which is not subject to Section 5.3
hereof because no third-party action is involved, the Indemnified
Party shall notify the Indemnifying Party in writing of any
Indemnified Costs which he, she, or it claims are subject to
indemnification under the terms hereof. The failure of the
Indemnified Party to exercise promptness in such notification shall
amount to a waiver of such claim.
5.5 Bulk Sales Indemnification. The parties hereto hereby
waive compliance with any laws governing bulk sales (to the extent
such laws are applicable to the transactions contemplated by this
Agreement). Seller hereby agrees to indemnify Purchaser for any
liabilities incurred by Purchaser as a result of such non-compliance or
claims asserted against Purchaser or any of the Transferred Assets in respect
of any liabilities of Seller that are not assumed by Purchaser.
5.6 Limits on Indemnification. Notwithstanding anything in
this Agreement to the contrary, (i) Seller and Majority Stockholder
shall not have any obligation to indemnify the Purchaser
Indemnified Parties under this Article 5 until Purchaser has
suffered Material Purchaser Indemnified Costs (as defined below) in
excess of $10,000.00 aggregate; and (ii) Majority Stockholder's
obligation to indemnify the Purchaser Indemnified Parties under
this Article 5 shall cease when the amount of Purchaser Indemnified
Costs paid by Majority Stockholder exceeds the amount of the
Purchase Price allocated to and received by Majority Stockholder.
"Material Purchaser Indemnified Costs" are (i) any Purchaser
Indemnified Costs arising from the breach of Sections 3.2, 3.4,
3.5, the first two sentences of Section 3.6, the last sentence of
Section 3.7, the second and third sentences of Section 3.8, the
second sentence of Section 3.9, Sections 3.10, 3.11, 3.12, 3.13,
the third, fourth, fifth, sixth and seventh sentences of Section
3.14, Sections 3.15, 3.16, 3.17, 3.18, 3.19 and 3.20, and (ii) any
<PAGE>
portion of a Purchaser Indemnified Cost which arises from breach of
any other representation, warranty, covenant, agreement or other
provision of this Agreement or any agreement or document executed
in connection herewith and which is in excess of a material amount
on an individual basis.
5.7 Exclusive Remedy. The indemnification provided in this
Article 5 shall be the sole and exclusive remedy and recovery for
(a) any Purchaser Indemnified Party against Seller or Majority
Stockholder for any Purchaser Indemnified Costs for breach of a
representation or warranty contained in Article 3, and (b) any
Seller Indemnified Party against Purchaser for any Seller
Indemnified Costs for breach of a representation or warranty
contained in Article 2.
5.8 Real Property Lease. Purchaser acknowledges that Seller
is a party to a real property lease by and between Seller and
County Life Insurance Company for the property located at 744
Office Parkway Boulevard, Suite 150, St. Louis, Missouri 63141,
expiring on October 31, 1996 (the "Lease"). Purchaser agrees to
indemnify and hold the Seller Indemnified Parties harmless from and
against any Seller Indemnified Costs which any of the Seller
Indemnified Parties may sustain or to which any of the Seller
Indemnified Parties may be subjected, arising out of or related to
the Lease which accrue on or after Closing.
ARTICLE 6
MISCELLANEOUS
6.1 Use of Seller's Name. Seller and Majority Stockholder,
jointly and severally, hereby covenant and agree concurrently with
the execution of this Agreement, they shall cause an amendment of
Seller's Articles of Incorporation to change its name or take such
other action as is reasonable and necessary to enable Purchaser to
use the name "Capital Training Company" and gain the benefits of
all contracts, rights, trademarks, trade names, service marks and
the Transferred Assets.
6.2 Collateral Agreements, Amendments, and Waivers. This
Agreement (together with the documents delivered in connection
herewith) supersedes all prior documents, understandings, and
agreements, oral or written, relating to this transaction and
constitutes the entire understanding among the parties with respect
to the subject matter hereof. Any modification or amendment to, or
waiver of, any provision of this Agreement (or any document
delivered in connection herewith unless otherwise expressly
provided therein) may be made only by an instrument in writing
executed by the party against whom enforcement thereof is sought.
6.3 Records. Concurrently with the execution hereof, Seller
is turning over and delivering to Purchaser all files of Seller
relating to the Transferred Assets, including, without limitation,
all subscription documents and records, any and all operating
<PAGE>
manuals, third party warranties, and like materials and data in
Seller's and Majority Stockholder's possession relating to the
operation of business, facilities, improvements, and equipment
included in the Transferred Assets, and all appropriate books and
records, accounting information, and operating information and
data, whether current or historical, reasonably related to the
Transferred Assets.
6.4 Successors and Assigns. No rights or obligations of any
party hereto under this Agreement may be assigned (except that
Purchaser may assign any part of its rights and obligations to any
affiliate thereof). Any assignment in violation of the foregoing
shall be null and void. Subject to the preceding sentences of this
Section 6.4, the provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, and successors.
6.5 Expenses. Each of the parties hereto shall pay its own
respective costs and expenses, including but not limited to
attorneys' fees, incurred in connection with this Agreement.
6.6 Sales Taxes. Seller shall be responsible for and shall
pay all federal, state, or local taxes, if any, arising by reason
of or resulting from the sale of the Transferred Assets as
contemplated hereby.
6.7 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term hereof, such provision shall
be fully severable; this Agreement shall be construed and enforced
as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions shall remain
in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance therefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid,
and enforceable.
6.8 Waiver. No failure or delay on the part of any party in
exercising any right, power, or privilege hereunder or under any of
the documents delivered in connection with this Agreement shall
operate as a waiver of such right, power, or privilege; nor shall
any single or partial exercise of any such right, power, or
privilege preclude any other or future exercise thereof or the
exercise of any other right, power, or privilege.
6.9 Notices. Any notices required or permitted to be given
under this Agreement (and, unless otherwise expressly provided
therein, under any document delivered in connection with this
Agreement) shall be given in writing and shall be deemed received
(a) when personally delivered to the relevant party at such party's
address as set forth below, (b) when confirmed if delivered by
facsimile or similar device, or (c) if sent by mail, on the third
day following the date when deposited in the United States mail,
certified or registered mail, postage prepaid, to the relevant
party at its or his address indicated below:
<PAGE>
If to Purchaser: Bankers Consulting Company
1303 Marsh Lane
Carrollton, Texas 75006
Attn: Mr. Jack T. Smith
Fax No: (214) 716-5105
If to Seller or
Majority Stockholder: Dean A. Pichee
744 Office Parkway, Suite 150
St. Louis, Missouri 63141
Fax No. (314) 567-0909
With a copy to: Ronald N. Compton, Esq.
Summers, Compton, Wells & Hamburg, P.C.
8909 Ladue Road
St. Louis, Missouri 63124
Fax No. (314) 991-2413
Each party may change its address for purposes of this Section 6.9
by proper notice to the other parties.
6.10 Survival of Representations, Warranties, and Covenants.
All covenants, agreements, representations, and warranties of each
party made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the closing of the
transactions contemplated hereby (unless the other party knew or
had reason to know of any misrepresentation or breach of a
covenant, agreement or warranty at the time of Closing) and shall
remain in effect for a period of two (2) years after the date
hereof.
6.11 Further Assurances. From time to time hereafter, at the
request of Purchaser, but without further consideration, Seller and
Majority Stockholder jointly and severally agree to execute and
deliver such other instruments of conveyance, assignment, transfer,
and delivery and take such other action as Purchaser may reasonably
request in order more effectively to consummate the transactions
contemplated hereby.
6.12 No Third-Party Beneficiaries. No person or entity not a
party to this Agreement shall be deemed to be a third-party
beneficiary hereunder or entitled to any rights hereunder.
6.13 Best Knowledge. When used in this Agreement, the term
"best knowledge" (or any variation thereof) refers to knowledge
obtained after due inquiry.
6.14 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri.
<PAGE>
6.15 Headings. The headings, captions, and arrangements used
in this Agreement are, unless specified otherwise, for convenience
only and shall not be deemed to limit, amplify, or modify the terms
of this Agreement or affect the meaning hereof.
6.16 Sections; Exhibits. All references to "Sections",
"Subsections", "Schedules", and "Exhibits" herein are, unless
specifically indicated otherwise, references to sections,
subsections, schedules, annexes, and exhibits of and to this
Agreement.
6.17 Disclosure Schedule. All of the Schedules referred to
herein are, unless specifically indicated otherwise, contained in
the Disclosure Schedule to this Agreement of even date herewith
which is made a part hereof for all intents and purposes.
6.18 Number and Gender of Words. Whenever herein the singular
number is used, the same shall include the plural where
appropriate, and words of any gender shall include each other
gender where appropriate.
6.19 Counterparts. This Agreement may be executed in multiple
counterparts; provided that all such counterparts together shall be
deemed to constitute one agreement. This Agreement may be executed
by facsimile signatures.
6.20 Effective Date. This Agreement shall be deemed effective
as of August 1, 1995. Whenever adjustments or assumptions of
liabilities are referred to herein as occurring at Closing, they
shall be made effective as of August 1, 1995.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in one or more counterparts (all of which shall
constitute one and the same agreement) as of the day and year first
above written.
BANKERS CONSULTING COMPANY
By: Gary Corona
Vice President
CAPITAL TRAINING COMPANY
By: Dean A. Pichee
President