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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended July 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to _________
Commission File Number 0-23388
INTERNATIONAL POST LIMITED
(Exact name of registrant as
specified in its charter)
DELAWARE 13-3735647
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
545 FIFTH AVENUE 10017
NEW YORK, NEW YORK (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code (212) 986-6300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
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 at least the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X].
The aggregate market value of the common stock held by persons other
than affiliates of the registrant, as of September 30, 1996, was approximately
$12,171,000.
The number of shares outstanding of each of the registrant's classes of
common stock, as of September 30, 1996, is as follows:
Class Number of Shares
- -------------------------------------------------------------------------
Common Stock, par value $.01 per share 6,226,958
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's proxy statement in connection with its
1996 annual meeting of shareholders (the "Proxy Statement") are incorporated by
reference into Part III.
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PART 1
ITEM 1. BUSINESS.
GENERAL
International Post Limited and its subsidiaries (collectively, the
"Company") provide a wide range of post-production services primarily to the
television advertising industry and distributors of television programming to
the international market and, to a lesser extent, to program originators. The
Company's services, which are provided by its skilled technicians and artists at
state-of-the-art facilities in the New York metropolitan area and South Florida,
include creative editorial services, film-to-tape transfer, electronic video
editing, computer-generated graphics, standards conversion, duplication and
audio services, all in multiple standards and formats, as well as network
playback and studio operations. The combination of the Company's skilled
personnel and technical resources has enabled the Company to compete effectively
in the rapidly changing video communications industry.
Producers of television programming and commercials generally
out-source post-production services in order to minimize the high fixed overhead
and substantial capital investment needed to provide quality services and to
maintain a staff of expert technicians and artists. The Company believes that
the recent development of cable and independent television networks, and the
deregulation and privatization of overseas television markets, will result in
increased programming needs which will present substantial opportunities for
growth in the post-production services industry.
BACKGROUND
The Company was formed in October 1993 to own and operate, through its
subsidiaries, the businesses previously conducted by Manhattan Transfer/Edit
Company ("MTE Co.") and Audio Plus Video International, Inc. ("Audio Plus
Video"). The Company acquired the business of MTE Co. immediately prior to, and
in connection with, the consummation of its initial public offering in February
1994 pursuant to a transaction in which (i) the general partners of MTE Co.
received additional shares of common stock, $.01 par value per share (the
"Common Stock"), of the Company in exchange for their partnership interests in
MTE Co. and (ii) the assets and liabilities of MTE Co. were contributed to
Manhattan Transfer/Edit, Inc., a newly-formed subsidiary of the Company
("Manhattan Transfer"). The Company used a portion of the proceeds from the
offering to acquire, simultaneously with the consummation of the offering, all
of the outstanding capital stock of Audio Plus Video from subsidiaries of Video
Services Corporation (Video Services Corporation and its subsidiaries are
collectively referred to herein as "VSC").
PRINCIPAL SERVICES
The production of every commercial, television program or corporate
communications video involves the recording of the image on film or videotape.
This is done on location or in a studio by a production company. Once the
footage has been recorded, the post-production process begins in order to
transform the raw recorded footage into a final usable product. Creative and
technical input, which includes the transfer of film-to-tape, color correction,
editing, addition of special effects utilizing 3D and computer-generated
graphics and audio, is needed to complete the process and generate a videotape
master for duplication and distribution to broadcasters. The master tape may
need additional post-production services, such as standards or format
conversion, audio layback of a foreign language track, or the enhancement of the
music and effects tracks to facilitate international distribution.
The Company's services that are provided to the television advertising
industry and program originators, and the specialized video services that are
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provided to television program distributors to the international market, are
generally offered on an hourly or daily rate basis. Standards conversion and
duplication services provided to television program distributors to the
international market are offered at rates that are based on program length. The
Company maintains an in-house engineering staff to facilitate the modification
of equipment to meet client requirements.
The Company provides the following post-production services to the
television advertising industry and to program originators, including
corporations and educational institutions:
CREATIVE EDITORIAL SERVICES (DESIGN): The creative editing process, or
first stage of post-production, for a television commercial generally involves
the selection of the best footage from several thousand feet of film and the
combination of that footage through editing along with special video effects to
create a cohesive message with audience appeal. The creative editor typically is
involved with all facets of the post-production process and usually selects the
post-production facilities in which the remaining and final stages of the
television commercial's post-production takes place.
FILM-TO-VIDEOTAPE TRANSFER: The Company has film-to-videotape transfer
suites for the transferring of images and sound from film to videotape. This
process can be used for either positive or negative, 16 or 35 millimeter film
and for both composite and multi-track systems. The Company's skilled colorists
operate state-of-the-art electronic equipment which provides color correction
and expansion or repositioning of film images. In addition, the Company can
correct and enhance the color of projects originated on videotape. The videotape
element masters resulting from the transfer process can be edited to create the
final product which can then be duplicated for a variety of markets including
television advertising, corporate video cassettes, home video cassettes, pay
cable television, television program syndication, airline in-flight
entertainment, foreign distribution and ancillary application. Transfers are
made in both the PAL (Phase Alternate Line) and NTSC (National Television
Systems Committee) standards.
ELECTRONIC VIDEO EDITING: The Company operates a combination of analog
and digital edit suites. The editing process ranges from simple cuts and
assembly with dissolves, wipes and titles, to complicated layering of images and
special effects. Videotape is edited in many tape formats (sizes) for use in
commercials, shows, corporate and educational videos and other presentations.
COMPUTER-GENERATED GRAPHICS: Company artists create computer-generated
television imagery working with sophisticated computer software for applications
such as main titles for television shows, credits and various electronic special
visual effects including computer animation and electronic graphics in both two
and three dimensions.
VIDEOTAPE DUPLICATION: The Company offers video tape duplication in all
professional broadcast formats, including D1, D2, BetaCam SP, 1" and 3/4", to
meet the needs of the commercial advertising, corporate video, motion picture,
television production and syndicated television program distribution industries.
The Company also creates duplication masters with closed captioning for the
hearing impaired.
The Company provides the following post-production services to
international television program originators and distributors:
STANDARDS CONVERSION: Throughout the world, video signals are recorded
in four principal standards: NTSC-used in several countries including the U.S.,
Canada, Mexico and Japan; PAL-used in numerous countries, including England,
Italy, Australia and China; PAL-Modified-used exclusively in Brazil; and SECAM
(Sequential Color and Memory - used in France, Russia and the Middle East. A
program recorded in one standard cannot be broadcast or played back through
equipment employing another standard unless the program is first "converted" to
the other standard. If for example, RTL, a German television broadcaster, wants
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to air "Sesame Street" (a program produced in the United States and, therefore,
in the NTSC standard), the video signal must first be converted to PAL to make
it compatible with the German standard. The Company provides conversion services
to and from all of the standards currently available.
DUPLICATION: Duplication services are required to accommodate multiple
broadcast locations receiving the same product in the same standard, but
utilizing a variety of videotape formats. Using the same analogy as above, the
German broadcaster received a PAL tape for his 1" equipment, but a Scandinavian
broadcaster needs to receive a PAL tape of that same "Sesame Street" episode for
his D2 equipment. Accordingly, the Company would "duplicate" the tape to the
different format in the same standard.
SPECIALIZED VIDEO SERVICES: The Company is meeting an increasing demand
for specialized services using state-of-the-art, multi-standard film-to-tape,
editing and audio suites. Extensive audio capabilities include restoration,
layback, ADR (automatic dialogue replacement), audio-for-video editing, and the
recreation or enhancement of music and sound effects tracks. Additional services
include scene-by-scene color correction of film or tape, video restoration and
I3 (International Image Interpretation), an innovative standards conversion
technology which achieves extremely high quality for film-originated material.
ADDITIONAL SERVICES: In addition, in the Company's South Florida
facilities, the Company provides studio facilities and technical personnel for
MTV Latino and network playback operations for Discovery Latin America,
Discovery Spain/Portugal and Discovery Brazil/Argentina.
DEVELOPMENT OF BUSINESS
In May 1995, the Company acquired (the "PE Acquisition") all of the
outstanding shares of common stock of The Post Edge, Inc., a Florida corporation
("Post Edge"). In connection with such acquisition, the Company also acquired
(i) all of the outstanding shares of common stock of Interactive Edge, Inc., a
Florida corporation, and (ii) approximately 67% of the outstanding shares of
common stock of Edge Communications, Inc., a Florida corporation which is
dormant, from certain of the shareholders of Post Edge.
In addition, in May 1995, the Company acquired (the "BP/ET
Acquisition") all of the outstanding shares of common stock of Even Time Ltd., a
New York corporation ("ET"), and 85% of the outstanding shares of common stock
of The Big Picture Editorial, Inc., a New York corporation ("BP"). In July 1995,
the Company acquired the remaining 15% of the common stock of BP pursuant to its
rights under a certain Put/Call Agreement entered into in connection with the
BP/ET Acquisition.
The PE Acquisition and BP/ET Acquisition were each funded by borrowings
by the Company from The Bank of New York ("BNY") and Fleet Bank ("Fleet")
pursuant to a Credit Agreement, dated as of May 4, 1995 (the "Credit
Agreement"), by and among the Company, BNY, in its capacity as a Lender, as the
Issuer and as the Agent (in each case as such terms are defined in the Credit
Agreement), and Fleet as a Lender, as amended by Amendment No. 1 thereto. The
aggregate outstanding principal balance of the Term Loans (as defined in the
Credit Agreement), which as of July 31, 1996 was $18,320,000, is due and payable
in twenty-two consecutive installments, payable on the last day of each fiscal
quarter, with final payment due on January 31, 2001. An additional $10,000,000
borrowed under the Credit Agreement is attributable to Working Capital Loans (as
defined in the Credit Agreement) which the Company may from time to time during
the Working Capital Commitment Period (as defined in the Credit Agreement)
prepay and reborrow in accordance with the provisions of the Credit Agreement.
The Credit Agreement also included an $18 million acquisition facility to fund
future acquisitions that met certain parameters. Such acquisition facility was
terminated by the Company in May 1996. At the Company's option, borrowings under
the Credit Agreement bear interest at 1.75% (including 1/4 of 1% as a result of
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the Company's Leverage Ratio (as defined in the Credit Agreement) being greater
than 2.00:1.00 at July 31, 1996) above the Eurodollar Rate or the Prime Interest
Rate plus .375% announced by BNY from time to time.
In October 1995, the Company entered into Amendment No. 2 ("Amendment
No. 2") to the Credit Agreement, which changed, among other things, the Fixed
Charge Coverage Ratio (as defined in the Credit Agreement) and the Leverage
Ratio. In November 1995, the Company entered into Amendment No. 3 to the Credit
Agreement, pursuant to which the financial covenants were raised above those in
Amendment No. 2 but remained lower than those prior to Amendment No. 2. In
addition, the calculation of such ratios commenced on August 1, 1995 which had
the effect of excluding the results of the fourth quarter of fiscal year 1995
from the calculations. In September 1996, the Company entered into Amendment No.
4 to the Credit Agreement, pursuant to which the Fixed Charge Coverage Ratio was
changed from 1.50:1.00 to (a) 1.10:1.00 for the twelve month period ending July
31, 1996, (b) 1.15:1.00 for the twelve month periods ending October 31, 1996 and
January 31, 1997, (c) 1.25:1.00 for the twelve month periods ending April 30,
1997 and July 31, 1997, and (d) 1.50:1.00 for the twelve month period ending
October 31, 1997 and thereafter.
In February 1996, the Company entered into an interest rate swap with a
member of its bank syndicate. Under the agreement, the Company pays a fixed
LIBOR (London Interbank Offered Rate) rate of 5.32% to the bank and the bank
pays a floating rate equal to 90 day LIBOR to the Company on the outstanding
balance of the Term Loans (final maturity January 31, 2001). The effect of this
interest rate swap was to fix the interest rate on the Term Loans at 6.695%. In
March 1996, the Company sold its fixed rate position for $313,000. The Term
Loans were fixed at 6.695% through June 11, 1996, floated at the BNY's Prime
rate or LIBOR plus 1.375% through July 31, 1996 and will float at such Prime
rate plus .375% or LIBOR plus 1.75% thereafter.
In August 1996, Fleet Bank, N.A. (formerly known as NatWest Bank, N.A.)
and Key Bank of New York ("Key Bank") entered into an Assignment and Acceptance
Agreement, pursuant to which Fleet Bank, N.A. assigned to Key Bank a percentage
of its rights and obligations under the Loan Documents (as defined in the Credit
Agreement).
MAJOR CLIENTS AND CUSTOMERS
The Company's major clients include advertising agencies, film editors,
video production companies and international distributors of television
programming. Among the advertising agencies to which the Company provides
services are BBDO New York ("BBDO"), Saatchi & Saatchi, Wells Rich Greene BDDP,
Grey Advertising, Messner Vetere, Uniworld Group, N.W. Ayer, Ogilvy & Mather,
FCB Leber Katz and J. Walter Thompson. International television program
distributors to which the Company provides services include the major television
networks (CBS, NBC and ABC) and syndicators such as Sony Pictures, Turner
Entertainment and Worldvision. In addition, the Company provides network
playback and studio facilities, including technical personnel, to the following
networks: Discovery Latin America, Discovery Spain/Portugal, Discovery
Brazil/Argentina and MTV Latino. The Company also provides post-production and
other services to a variety of program originators including the NBA, National
Geographic, Children's Television Workshop and Discovery Channel. No customer
accounted for more than 10% of the total revenues of the Company during fiscal
year 1996.
Except as set forth below, the Company has no long-term or exclusive
agreements with its clients; however, the Company has had long-term
relationships with many of its clients. Because clients generally do not make
arrangements with the Company until shortly before its services are required,
the Company usually does not have any significant backlog of service orders.
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The Company has a five year contract with Discovery Communications,
Inc., dated as of January 9, 1993, pursuant to which the Company provides
services to Discovery Latin America. The contract was amended on August 4, 1994
to include the provision of services to Discovery Spain/Portugal. In addition,
in September 1995, the Company amended its contract with MTV Latin America,
Inc., dated as of June 7, 1993, pursuant to which the Company provides services
to MTV Latino, extending the term thereof to September 15, 2000.
MARKETING AND SALES STRATEGY
A full time sales force, together with the Company's top management,
actively market the Company's services through industry contacts and through
advertising in the major industry trade magazines such as Shoot, Ad Week and
Post. The focus of this advertising is to promote the Company's image for
quality services, its technical capabilities and its state-of-the-art
facilities.
The Company's marketing strategy, with respect to the services it
provides for television program distributors to the international market, is to
focus on the needs of the end-users as well as on the needs of the clients. The
Company actively develops relationships with overseas facilities and
broadcasters through visits and multi-lingual communication, to learn and
respond to their individual technical and operational requirements. This
strategy has resulted in end-users requesting that their international
television program distributors utilize the Company's services and has
alleviated many problems between the distributors and the broadcasters. Sales
and marketing efforts emphasize the needs of the client and the end-user,
technical proficiency, and the Company's global perspective.
COMPETITION
The video services industry is highly competitive. Certain
post-production service businesses (both independent companies and divisions of
diversified companies) provide most of the same services provided by the
Company, while others specialize in one or several of these services. Certain
film production companies also provide post-production services. The Company's
primary competitors are located in New York City, the principal market for the
Company's services. Certain of these, as well as other competitors of the
Company, have greater financial resources than the Company.
The Company's successful competitive record is based on customer
satisfaction with the range, quality and pricing of its offered services. Its
ability to remain competitive is also based in part on its capacity to respond
to technological change by purchasing state-of-the-art equipment. The Company
also competes on the basis of its ability to attract and retain qualified,
highly skilled personnel. The Company believes that prices for its services are
competitive within its industry, although some competitors may offer certain of
their services at lower rates than the Company. The post-production services
industry has been and is likely to continue to be subject to technological
change to which the Company must respond in order to remain competitive.
EMPLOYEES
The Company and its subsidiaries have approximately 332 full-time
employees. None of the Company's employees is represented by a labor union or is
subject to a collective bargaining agreement. The Company has never experienced
a work stoppage and believes that its employee relations are satisfactory.
ITEM 2. PROPERTIES.
The Company leases seven principal production facilities, three located
in New York City, one in Northvale, New Jersey and three in South Florida. The
New Jersey facilities were consolidated into a 38,000 square foot facility
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including 4,000 square feet for expansion. The Company's three New York City
facilities consist of approximately 68,000 square feet, including the Company's
principal executive offices. The Company plans to move and consolidate two 8,000
square foot facilities in New York City to one 18,000 square foot facility in
the second quarter of fiscal year 1997. The three South Florida facilities
consist of approximately 42,000 square feet.
The Company's facilities include nine film-to-tape transfer and color
correction suites, sixteen on-line editing suites, seventeen off-line editing
suites, sixteen graphic suites (several of which can operate as edit suites),
seven audio suites, ten special project booths and two production rooms
dedicated to standards conversion and duplication services. In addition, the
Company's South Florida facilities include two network playback operations and
one studio facility.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various claims and legal proceedings of a
nature considered normal to its business. While it is not possible to predict or
determine the outcome of these proceedings, it is the opinion of management that
their outcome will have no material adverse effect on the financial position,
liquidity or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the NASDAQ National Market
System (NASDAQ symbol: POST). The Company's Common Stock began trading on
February 8, 1994 at the effective time of the Company's initial public offering.
Prior to such time, there was no public market for the Company's Common Stock.
As of September 30, 1996, there were approximately 720 holders of
record of the Company's Common Stock.
The following table sets forth the high and low bid prices of the
Company's Common Stock for each full quarterly period within the two most recent
fiscal years.
Fiscal Year 1995 High Low
---------------- ---- ---
First Quarter 9 1/4 7 3/4
(August 1 to October 31)
Second Quarter 9 3 1/2
(November 1 to January 31)
Third Quarter 7 5/8 5 1/4
(February 1 to April 30)
Fourth Quarter 6 1/4 3 5/8
(May 1 to July 31)
Fiscal Year 1996 High Low
---------------- ---- ---
First Quarter
(August 1 to October 31) 5 4
Second Quarter 4 1/4 3 1/8
(November 1 to January 31)
Third Quarter 4 3/64 3
(February 1 to April 30)
Fourth Quarter 4 1/8 3 3/4
(May 1 to July 31)
No cash dividends have ever been declared by the Company on the Common
Stock. The Company intends to retain earnings to finance the development and
growth of its business. Accordingly, the Company does not anticipate that any
dividends will be declared on the Common Stock for the foreseeable future.
Future payment of cash dividends, if any, will depend on the Company's financial
condition, results of operations, business conditions, capital requirements,
restrictions contained in agreements, future prospects and other factors deemed
relevant by the Company's Board of Directors.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following table sets forth selected historical consolidated
financial data for the Company, MTE Co. and its predecessor (the "Predecessor")
for the periods and at the dates indicated. The Predecessor consists of
substantially all of the operating assets and certain of the liabilities, prior
to fiscal year 1993, of MTE Holdings, Inc. ("Holdings"), formerly known as
Manhattan Transfer/Edit, Inc. The historical consolidated financial data for
each of the years in the five-year period ended July 31, 1996, and at July 31,
1992, 1993, 1994, 1995 and 1996, is derived from and qualified by reference to
the historical consolidated financial statements that have been audited and
reported upon by Arthur Andersen LLP, independent public accountants. The
information in the table should be read in conjunction with the historical
financial statements and the notes thereto and other financial information
appearing elsewhere herein. See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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<CAPTION>
PREDECESSOR MTE Co. COMPANY
----------- ---------- --------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
July 31, July 31, July 31, July 31, July 31,
1992 1993 1994 (1) 1995 (1) 1996 (1)
---------- ---------- ----------- ---------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues..................................... $11,648 $20,871 $27,827 $38,349 $49,352
Depreciation and amortization................ 2,822 3,343 3,905 5,749 8,369
Income from operations....................... 1,281 2,347 (2) 3,709 (3) 3,475 3,842
Income before income taxes................... 1,269 1,262 3,243 2,680 1,676
Net income
(Pro forma for Predecessor and MTE Co.).... 37 466 3,320 (4) 1,606 814
Net income per share
(Pro forma for MTE Co.)(2) ................ - 0.13 0.70 0.26 0.13
Weighted average number of shares outstanding
(Pro forma for MTE Co.)(2)................. - 3,471 4,714 6,214 6,220
Total assets................................. 17,691 23,447 35,893 66,673 67,861
Long-term debt, net of current portion....... - 4,500 415 20,257 19,797
Subordinated debt, net of current portion.... - - - 4,927 5,096
Stockholders' equity......................... $16,712 $14,177 $27,930 $29,461 $29,835
-----------------------------------------
(1) See Note 3 of the Notes to Consolidated Financial Statements contained herein.
(2) See Note 1 of the Notes to Consolidated Financial Statements contained herein.
(3) See Note 11 of the Notes to Consolidated Financial Statements contained herein.
(4) See Note 9 of the Notes to Consolidated Financial Statements contained herein.
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
On February 15, 1994 the Company completed its initial public offering.
The net proceeds were used to acquire Audio Plus Video and to repay debt. The
following discussion of the Results of Operations for the years ended July 31,
1996, 1995, and 1994 include the operations of Audio Plus Video from the date of
acquisition and include the operations of MTE Co. for the year ended July 31,
1994 as if the reorganization, in which the business of MTE Co. was contributed
to a newly-formed subsidiary of the Company, had occurred at the beginning of
such period. For Post Edge, BP and ET the discussion includes the operations
from the dates of acquisition for fiscal year 1995 and a full year of operations
for fiscal year 1996.
RESULTS OF OPERATIONS:
FISCAL YEARS ENDED JULY 31, 1996 AND 1995
Revenues increased by $11,003,000 or 28.7% to $49,352,000 in fiscal
year 1996 compared to fiscal year 1995. The growth in revenues was primarily
attributable to the acquisitions of Post Edge (acquired 5/4/95) and BP and ET
(acquired 5/4/95). Fiscal year 1996 includes a full year of operations for these
companies. Revenues recorded in fiscal year 1996 were $7,399,000 and $8,906,000
for Post Edge and BP and ET, respectively, as compared to fiscal year 1995 of
$1,385,000 and $1,673,000, respectively. These increases were partially offset
by a decrease in revenues at Manhattan Transfer and the loss of revenues from
specialized services discontinued in the first and fourth quarters of fiscal
year 1995.
Direct salaries and costs (consisting primarily of salaries and
benefits paid to artists, technicians and engineers, outside labor, occupancy
costs, direct costs including tape stock and equipment rental, and client costs)
decreased as a percentage of revenues to 48.7% in fiscal year 1996 compared to
49.1% in the prior fiscal year. The decrease was primarily attributable to lower
equipment rentals and client related costs, offset by increased equipment
maintenance costs. In the fourth quarter of fiscal year 1995, the Company
discontinued its test commercial and print design divisions, reorganized certain
portions of the operations of Manhattan Transfer, and closed Audio Plus Video's
New York City facility. The Company incurred losses from operations of
approximately $1,100,000 in connection with the items described in the previous
sentence.
Selling, general and administrative expenses decreased as a percentage
of revenues in fiscal year 1996 to 26.0% from 26.8% in the prior fiscal year.
The decrease was primarily attributable to lower sales commissions accrued
during fiscal year 1996. In addition, the costs of the reorganization described
above that related to selling and general and administrative expenses did not
reoccur in fiscal year 1996.
Depreciation expense was $7,229,000 and $5,168,000 in fiscal years 1996
and 1995, respectively. The increase was primarily the result of Post Edge, BP
and ET included for the full fiscal year.
Amortization of intangibles was $1,140,000 and $581,000 in fiscal years
1996 and 1995, respectively. The increase was primarily the result of Post Edge,
BP and ET included for the full fiscal year.
As part of the consolidation of two facilities to one facility, both
located in New York City, the Company recorded a non-cash lease related
obligation in the fourth quarter of fiscal 1996 of $255,000. This represents net
future lease payments the Company will be obligated to make for leases from the
expected vacancy date (second quarter of fiscal 1997) through their respective
termination dates.
Interest expense was $2,262,000 and $810,000 in fiscal years 1996 and
1995, respectively. The increase in interest expense was due to the debt used to
acquire Post Edge, BP and ET being outstanding for the fiscal year ended July
31, 1996.
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The income tax rate applied against pre-tax income was 51% and 40% in
fiscal years 1996 and 1995, respectively. The applicable tax rates include 13%
and 7% in fiscal years 1996 and 1995, respectively, as a result of the
non-deductibility of the intangibles recorded on the Company's balance sheets.
Lower pre-tax income in fiscal year 1996 compared to fiscal year 1995 on higher
amortization of intangibles is the reason for the increase in the impact of this
non-deductible item. The impact of state and local taxes (net of federal
benefit) increased in fiscal year 1996 compared to fiscal year 1995 as a
percentage of pre-tax income. The primary reason for the increase was higher
state taxable income for certain Company subsidiaries.
Net income decreased to $814,000 in fiscal year 1996 compared to
$1,606,000 in fiscal year 1995. This decrease is a result of the items discussed
above.
FISCAL YEARS ENDED JULY 31, 1995 AND 1994
Revenues increased by $10,522,000 or 37.8% to $38,349,000 in fiscal
year 1995 compared to fiscal year 1994. The growth in revenues was primarily
attributable to the acquisitions of Audio Plus Video (acquired 2/15/94), Post
Edge (acquired 5/4/95), and BP and ET (acquired 5/4/95) partially offset by the
decrease in revenues from specialized services discontinued in the first and
fourth quarter of fiscal year 1995.
Direct salaries and costs (consisting primarily of salaries and
benefits paid to artists, technicians and engineers, outside labor, occupancy
costs, direct costs including tape stock and equipment rental, and client costs)
increased as a percentage of revenues to 49.1% in fiscal year 1995 compared to
46.5% in the prior fiscal year. In the fourth quarter of fiscal year 1995, the
Company discontinued its test commercial and print design divisions, reorganized
certain portions of the operations of Manhattan Transfer, and closed Audio Plus
Video's New York City facility. The Company incurred losses from operations of
approximately $1,100,000 in connection with the items described in the previous
sentence. In addition, equipment rentals related to satisfying customer needs
and equipment maintenance were the primary reasons for the increase in this
category as a percentage of revenues.
Selling, general and administrative expenses increased as a percentage
of revenues in fiscal year 1995 to 26.8% from 21.8% in the prior fiscal year.
The costs of the reorganization described above that related to selling and
general and administrative expenses and the costs relating to operating as a
public company including investor relations expenses, professional fees, and
directors and officers' insurance costs were the primary reasons for the
increase in this category as a percentage of revenues.
Depreciation expense was $5,168,000 and $3,534,000 in fiscal years 1995
and 1994, respectively. The increase was primarily the result of the
acquisitions of Audio Plus Video, Post Edge, BP and ET.
Amortization of intangibles was $581,000 and $371,000 in fiscal years
1995 and 1994, respectively. The amortization expenses related to the
acquisitions of Post Edge, BP and ET are the reason for the increase in this
category.
Non-cash stock option related compensation of $1,202,000 in fiscal year
1994 is attributable to stock options granted by two stockholders of the Company
to the President and Chief Executive Officer of the Company. The options entitle
the holder to purchase from such stockholders 208,250 shares of Common Stock at
amounts which range between $1.80 and $7.78 per share. Such amounts were below
the initial public offering price of $11.00 per share at the time of grant.
Interest expense was $810,000 and $506,000 in fiscal years 1995 and
1994, respectively. The increase in debt used to acquire Post Edge, BP and ET
more than offset the pay down in debt, which occurred after the initial public
offering in February 1994.
10
<PAGE>
The Company became a taxable corporation on February 15, 1994. Income
taxes have been presented in the financial statements as if the Company was a
corporate entity in each fiscal year. The income tax rate applied against
pre-tax income was 40% and 45% in fiscal years 1995 and 1994, respectively. The
applicable tax rates include 7% and 4% in fiscal years 1995 and 1994,
respectively, as a result of the non-deductibility of the intangibles recorded
on the Company's balance sheets. Lower pre-tax income in fiscal year 1995
compared to fiscal year 1994 on higher amortization of intangibles is the reason
for the increase in the impact of this non-deductible item. The impact of state
and local taxes (net of federal benefit) declined in fiscal year 1995 compared
to fiscal year 1994 as a percentage of pre-tax income. Lower state tax rates in
the states where certain of the Company's newly-acquired subsidiaries operate
were the primary reason for the decline. These subsidiaries were acquired in
February 1994 and May 1995.
The impact of change in tax status in fiscal year 1994 is a tax benefit
of $1,550,000 relating to the establishment of $1,550,000 of deferred tax assets
primarily attributable to reserves established by MTE Co. which have not been
deducted for tax purposes, and an increase in the tax basis of the assets
obtained from MTE Co.
Net income decreased to $1,606,000 in fiscal year 1995 compared to
$3,320,000 in fiscal year 1994. This decrease is a result of the items discussed
above.
LIQUIDITY AND CAPITAL RESOURCES:
FISCAL YEARS ENDED JULY 31, 1996 AND 1995
The Company's strategy is to continue to expand the range of
video-related services which it provides to existing clients and to increase its
customer base through internal growth and acquisition. The Company is
considering expanding its territorial markets by acquiring post-production
businesses in other areas with a high concentration of production companies and
advertising agencies, such as Los Angeles, subject to its ability to obtain
financing. In fiscal year 1995, the Company acquired three post-production
companies.
In May 1995, the Company acquired BP and ET, two privately-held
companies which provided a variety of creative editorial services to the
television advertising industry. Both companies were based in Manhattan and were
merged with Big Picture/Even Time Limited, a wholly-owned subsidiary of the
Company ("BP/ET"), in December 1995. The purchase price of the acquisition was
$12,070,000, including $6,350,000 principal amount of convertible subordinated
debt of the Company with a 4.0% interest coupon convertible at $14 per share
after five years and redeemable after six years (valued at $4,890,000 at the
date of acquisition). The purchase agreement provides for contingent payments
depending upon future revenues and increases in profitability of the acquired
entities. During fiscal year 1996, the Company was required to pay $342,000 in
such contingent payments, which was added to the excess of cost over fair value
of net assets acquired.
Further, in May 1995, the Company acquired Post Edge, a privately-held
company which provides post-production services to the television advertising
industry and corporate clients as well as network playback services for
Discovery Latin America and Spain/Portugal and studio services and a stage for
MTV Latino. Post Edge has facilities in Hollywood and Miami, Florida. The
purchase price of the acquisition was $8,000,000 in cash.
11
<PAGE>
On May 4, 1995, and as increased on June 12, 1995, the Company entered
into a $50,000,000 credit facility with three banks. To finance the cash portion
of the acquisitions described above and to refinance the Company's $5,000,000
outstanding under its line of credit, the Company entered into a $22,000,000 six
year term loan. In addition, the credit facilities (i) include a $10,000,000 six
year revolving credit facility for working capital and (ii) included an
$18,000,000 acquisition facility to fund future acquisitions that meet certain
parameters which was subsequently terminated by the Company in May 1996. Pricing
is at a spread over the BNY's Prime rate or a spread over LIBOR. Outstandings
currently bear interest at 6.90625%. The credit facilities are secured by all
assets of the Company and contain covenants limiting future debt, dividends, and
capital expenditures. In addition, the Company must maintain certain cash flow
and leverage ratios. In October 1995, the company entered into Amendment No. 2
to the Credit Agreement which changed the Fixed Charge Coverage Ratio and the
Leverage Ratio. In November 1995, the Company entered into Amendment No. 3 to
the Credit Agreement, pursuant to which the financial covenants were raised
above those in Amendment No. 2 but remained lower than those prior to Amendment
No. 2. In addition, the calculation of such ratios commenced on August 1, 1995
which had the effect of excluding the results of the fourth quarter of fiscal
year 1995 from the calculations. In September 1996, the Company entered into
Amendment No. 4 to the Credit Agreement, pursuant to which the Fixed Charge
Coverage Ratio was changed from 1.50:1.00 to (a) 1.10:1.00 for the twelve month
period ending July 31, 1996, (b) 1.15:1.00 for the twelve month periods ending
October 31, 1996 and January 31, 1997, (c) 1.25:1.00 for the twelve month
periods ending April 30, 1997 and July 31, 1997, and (d) 1.50:1.00 for the
twelve month period ending October 31, 1997 and thereafter.
In February 1996, the Company entered into an interest rate swap with a
member of its bank syndicate. Under the agreement, the Company pays a fixed
LIBOR rate of 5.32% to the bank and the bank pays a floating rate equal to 90
day LIBOR to the Company on the outstanding balance of the Term Loans (final
maturity January 31, 2001). The effect of this interest rate swap was to fix the
interest rate on the Term Loans at 6.695%. In March 1996, the Company sold its
fixed rate position for $313,000, which is being amortized over the life of the
Term Loans. The Term Loans were fixed at 6.695% through June 11, 1996, floated
at the Agent's Prime rate or LIBOR plus 1.375% through July 31, 1996 and will
float at such Prime plus .375% rate or LIBOR plus 1.75% thereafter.
In August 1996, Fleet Bank, N.A. (formerly known as NatWest Bank, N.A.)
and Key Bank entered into an Assignment and Acceptance Agreement, pursuant to
which Fleet Bank, N.A. assigned to Key Bank a percentage of its rights and
obligations under the Loan Documents.
Capital expenditures were $5,573,000 in fiscal year 1996 as compared to
$11,078,000 and $8,143,000 in fiscal years 1995 and 1994, respectively. The
expenditures in fiscal year 1996 were used to complete Post Edge's new South
Beach and Hollywood post-production facilities, complete the consolidation of
Audio Plus Video's facilities, and make technological upgrades to existing
equipment. The expenditures in fiscal year 1995 were used to increase
computer-generated graphics capabilities, upgrade and expand equipment, complete
a 25,000 square foot digital post-production facility to consolidate New York
City operations into one facility, and consolidate the Company's New Jersey
facilities into one 34,000 square foot facility. Finally, approximately
$1,500,000 was spent in the fourth quarter to expand the Company's
newly-acquired facilities. The expenditures in fiscal year 1994 consisted of
commencing construction of the 25,000 square foot facility described above, a
digital edit suite, the acquisition of equipment required to expand services to
program originators, and the acquisition of equipment to remain technologically
competitive.
The Company generated net cash from operations of $5,386,000,
$5,079,000 and $7,935,000 in the fiscal years ended July 31, 1996, 1995 and
1994, respectively. This net cash was used in investing activities for net
capital expenditures of $5,324,000, $10,822,000 and $8,143,000 in fiscal years
1996, 1995 and 1994, respectively. In fiscal years 1995 and 1994, $11,661,000
and $17,696,000, respectively, of net cash was used in investing activities to
12
<PAGE>
acquire Post Edge, BP and ET in fiscal year 1995 and Audio Plus Video in fiscal
year 1994. Net cash used by financing activities in fiscal year 1996 includes
$3,494,000 in net proceeds from the revolving credit facility, subordinated
debt, and related parties, which was used to repay $3,770,000 of long-term debt.
Net cash provided by financing activities in fiscal year 1995 includes
$27,565,000 in proceeds from long-term debt, notes payable, and the net proceeds
from the revolving credit facility, which was used in part to repay $5,730,000
in notes payable and $4,402,000 of long-term debt, including amounts paid to
related parties. Net cash provided by financing activities in fiscal year 1994
includes $25,505,000 in proceeds from the initial public offering of Common
Stock less the costs associated with such sale of $2,089,000 and the net
decrease in borrowing of $5,923,000. These activities resulted in a net decrease
in cash of $264,000 in fiscal year 1996, a net increase in cash of $29,000 in
fiscal year 1995, and a net decrease in cash of $634,000 in fiscal year 1994.
The Company's capital structure remains strong. Total long-term debt
(excluding current portion of long-term debt) including subordinated debt at
July 31, 1996 was $24,893,000. The Company's stockholders' equity was
$29,835,000 at July 31, 1996. Outstandings under the Company's $10,000,000
revolving credit facility were $5,000,000 at July 31, 1996. The Company's
capital budget for fiscal year 1997 is $5,269,000. Capital projects of
approximately $340,000, approved in fiscal year 1996, will be incurred in fiscal
year 1997 bringing total capital outlays to approximately $5,609,000 in fiscal
year 1997. Management believes that these expenditures can be financed either by
internally generated funds or by the Company's revolving credit facility.
The Company's fiscal year 1997 capital budget of $5,269,000 and the
$340,000 in carry-over projects approved in fiscal year 1996 will be used to
complete the consolidation of the BP and ET facilities into one location,
install a new computer system, and keep the Company's operations technologically
advanced.
The above discussion contains forward-looking statements. There are
certain important factors that could cause results to differ materially from
those anticipated by the statements made above. These factors include, but are
not limited to: general performance of the economy, specifically as it affects
the advertising industry; the international economic and political climate which
could impact the sale of domestic programming overseas; significant changes in
video technology in the post-production industry; and the loss of key personnel.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item appears in Item 14(a) of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
13
<PAGE>
PART III
ITEMS 10, 11, 12, AND 13
The information called for by Items 10, 11, 12 and 13 of this Form 10-K
is incorporated by reference to those portions of the Company's 1996 Proxy
Statement which contains such information.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) The consolidated financial statements, related notes thereto and
reports of independent public accountants required by Item 8 begin at
page F-1 herein.
(2) The financial statement schedule begins at page F-22 herein.
(3) Exhibits:
Exhibit Number Exhibits
2.1* Acquisition Agreement dated as of December 23,
1993 among the Company, VSC Video Corporation,
Waterfront Communications Corporation, Martin Audio-
Video Corporation, Atlantic Satellite Communications,
Inc., A.F. Associates, Inc. and Video Services
Corporation.
2.2 Stock Purchase Agreement, dated as of May 4, 1995, by
and among the Company, The Post Edge, Inc. and all of
the stockholders of The Post Edge, Inc., including
the exhibits thereto but excluding the schedules
thereto (incorporated by reference to exhibit number
2.1 contained in the Company's Report on Form 8-K,
dated May 18, 1995).
2.3 Stock Purchase Agreement, dated as of April 25, 1995,
by and among the Company, The Big Picture Editorial,
Inc., Even Time Ltd., BP Partnership, ET Partnership,
BPET Partnership, Barbara D'Ambrogio, David
D'Ambrogio, Gregory Letson, Michael Schenkein,
Leonard Smalheiser, Jane Stuart and Big Picture/Even
Time Limited, including the exhibits thereto but
excluding the schedules thereto (incorporated by
reference to exhibit number 2.2 contained in the
Company's Report on Form 8-K, dated May 18, 1995).
3.1+ Certificate of Incorporation of the Company.
3.2+ By-Laws of the Company.
4.1 Form of 4% Convertible Subordinated Note of the
Company (incorporated by reference to the exhibit of
the same number contained in the Company's Report on
Form 8-K, dated May 18, 1995).
10.1* Form of Employment Agreement between Martin Irwin and
the Company.
10.2* Form of Employment Agreement between Jeffrey J.
Kaplan and the Company.
10.3* Form of Employment Agreement between Adrien Macaluso
and the Company.
10.4* Form of International Post Group Inc. Long-term
Incentive Plan, together with form of International
Post Group Inc. Stock Option Agreement.
10.5* Form of International Post Group Inc. Restricted
Share Plan for Directors, together with form of
Restricted Share Agreement.
14
<PAGE>
Exhibit Number Exhibits
10.6* Form of Registration Rights Agreement among the
Company, Holdings, VSC, Martin Irwin, Jeffrey J.
Kaplan, Adrien Macaluso, Terrence A.Elkes and Kenneth
F. Gorman.
10.7** Form of Lease Agreements between Audio Plus Video
and L.I.M.A. Partners.
10.8* Purchase Agreement, dated September 10, 1993, between
A.F. Associates, Inc. and MTE Co.
10.9+ Lease Agreements, dated as of June 30, 1993, between
MTE Co. and Nineteen New York Properties Limited
Partnership.
10.10+ Agreement of Lease, dated as of March 7, 1990,
between 225 Realty Associates and VSC Post, together
with First Supplemental Agreement.
10.11+ Contribution Agreement, dated as of July 30, 1992,
between Holdings and VSC Post.
10.12* Forms of Promissory Notes made by Manhattan Transfer
in favor of Martin Irwin.
10.13+ Letter Agreement, dated February 22, 1993, between
Apollo and Holdings.
10.14+ Promissory Note, dated January 1, 1993, made by
MTE Co. in favor of Terrence A. Elkes and Kenneth F.
Gorman.
10.15+ Security Agreement, dated as of January 1, 1993 among
MTE Co., Terrence A. Elkes and Kenneth F. Gorman.
10.16+ Agreement, dated as of July 1, 1993, among MTE Co.,
Terrence A. Elkes and Kenneth F. Gorman.
10.17+ Security Agreement, dated as of July 1, 1993, among
MTE Co., Terrence A. Elkes and Kenneth F. Gorman.
10.18** Promissory Note, dated July 31, 1992, made by MTE
Co. in favor of P.C. Leasing, a division of
Phoenixcor, Inc.
10.19* Form of Services Agreement between VSC and Manhattan
Transfer.
10.20* Form of Services Agreement between VSC and Audio Plus
Video.
10.21* Form of Roll-Up and Exchange Agreement among
Holdings, VSC Video,Inc., Video Services Corporation,
the Company and Manhattan Transfer.
10.22** Form of Stock Option Agreement among VSC, Holdings
and Martin Irwin.
10.23** Form of Stock Option Agreement between the Company
and Jeffrey J. Kaplan.
10.24** Form of Settlement Agreement between Apollo and
Holdings.
10.25** Form of Services and Option Agreement between
Holdings and Kenneth F. Gorman.
10.26** Form of Services and Option Agreement between
Holdings and Terrence A. Elkes.
10.27** Form of Stock Option Agreement between VSC and
Kenneth F. Gorman.
10.28** Form of Stock Option Agreement between VSC and
Terrence A. Elkes.
10.29** Form of Stock Option Agreement between the Company
and Kenneth F. Gorman.
10.30** Form of Stock Option Agreement between the Company
and Terrence A. Elkes.
10.31** Consent and Authorization, dated December 23, 1993,
by Martin Irwin, Jeffrey J. Kaplan, Adrien Macaluso,
Terrence A. Elkes, Kenneth F. Gorman, VSC, the
Company, Holdings and Apollo.
10.32++ Employment Agreement, dated as of April 21, 1994,
between the Company and Daniel Rosen.
15
<PAGE>
Exhibit Number Exhibits
10.33++ Stock Option Agreement, dated as of April 21, 1994,
between the Company and Daniel Rosen.
10.34 Consulting Agreement, dated as of May 4, 1995,
between The Post Edge, Inc. and Michael Orsburn
(incorporated by reference to exhibit number 10.1
contained in the Company's Report on Form 8-K, dated
May 18, 1995).
10.35 Employment Agreement, dated as of May 4, 1995, among
Big Picture/Even Time Limited, the Company and
Barbara D'Ambrogio (incorporated by reference to
exhibit number 10.2 contained in the Company's Report
on Form 8-K, dated May 18, 1995).
10.36 Employment Agreement, dated as of May 4, 1995, among
Big Picture/Even Time Limited, the Company and David
D'Ambrogio (incorporated by reference to exhibit
number 10.3 contained in the Company's Report on Form
8-K, dated May 18, 1995).
10.37 Employment Agreement, dated as of May 4, 1995, among
Big Picture/Even Time Limited, the Company and
Gregory Letson (incorporated by reference to exhibit
number 10.4 contained in the Company's Report on Form
8-K, dated May 18, 1995).
10.38 Employment Agreement, dated as of May 4, 1995, among
Big Picture/Even Time Limited, the Company and
Michael Schenkein (incorporated by reference to
exhibit number 10.5 contained in the Company's Report
on Form 8-K, dated May 18, 1995).
10.39 Employment Agreement, dated as of May 4, 1995, among
Big Picture/Even Time Limited, the Company and
Leonard Smalheiser (incorporated by reference to
exhibit number 10.6 contained in the Company's Report
on Form 8-K, dated May 18, 1995).
10.40 Employment Agreement, dated as of May 4, 1995, among
Big Picture/Even Time Limited, the Company and Jane
Stuart (incorporated by reference to exhibit number
10.7 contained in the Company's Report on Form 8-K,
dated May 18, 1995).
10.41 Put/Call Agreement, dated as of May 4, 1995, between
Gregory Letson and the Company (incorporated by
reference to exhibit number 10.8 contained in the
Company's Report on Form 8-K, dated May 18, 1995).
10.42 Pledge Agreement, dated as of May 4, 1995, made by
and among BP Partnership, ET Partnership, Barbara
D'Ambrogio, David D'Ambrogio, Michael Schenkein,
Leonard Smalheiser, Jane Stuart and the Company
(incorporated by reference to exhibit number 10.9
contained in the Company's Report on Form 8-K, dated
May 18, 1995).
10.43 Pledge Agreement, dated as of May 4, 1995, made by
and between Gregory Letson and the Company
(incorporated by reference to exhibit number 10.10
contained in the Company's Report on Form 8-K, dated
May 18, 1995).
10.44 Escrow Agreement, dated as of May 4, 1995, by and
among ET Partnership, David D'Ambrogio, Barbara
D'Ambrogio, the Company and Cowan, Gold, DeBaets,
Abrahams & Sheppard, as Escrow Agent (incorporated by
reference to exhibit number 10.11 contained in the
Company's Report on Form 8-K, dated May 18, 1995).
10.45 Escrow Agreement, dated as of May 4, 1995, by and
among BP Partnership, Michael Schenkein, Leonard
Smalheiser, Jane Stuart, Gregory Letson, the Company
and Cowan, Gold, DeBaets, Abrahams & Sheppard, as
Escrow Agent (incorporated by reference to exhibit
number 10.12 contained in the Company's Report on
Form 8-K, dated May 18, 1995).
10.46 Credit Agreement, dated as of May 4, 1995, by and
among the Company, The Bank of New York, in its
capacity as a Lender, as the Issuer and as the Agent,
and Fleet Bank, as a Lender (incorporated by
reference to exhibit number 10.13 contained in the
Company's Report on Form 8-K, dated May 18, 1995).
16
<PAGE>
Exhibit Number Exhibits
10.47 Security Agreement, dated as of May 4, 1995, by and
between the Company and The Bank of New York, as
Agent (incorporated by reference to exhibit number
10.14 contained in the Company's Report on Form 8-K,
dated May 18, 1995).
10.48 Guaranty, dated as of May 4, 1995, by and among the
Persons party thereto and The Bank of New York, as
Agent (incorporated by reference to exhibit number
10.15 contained in the Company's Report on Form 8-K,
dated May 18, 1995).
10.49*** Amendment No. 1 and Reallocation Agreement, dated as
of June 12, 1995, by and among The Bank of New York,
Fleet Bank, NatWest Bank N.A. and the Company, to the
Credit Agreement, dated as of May 4, 1995, by and
among International Post Limited, the Lenders party
thereto, and The Bank of New York, as the Issuer and
as Agent.
10.50*** Form of Amendment No.2, dated as of October 30, 1995,
to the Credit Agreement, dated as of May 4, 1995, by
and among the Company, the Lenders party thereto,
and The Bank of New York, as the Issuer and as Agent.
10.51*** Agreement, dated as of June 7, 1993, by and between
MTV Latin America, Inc. and The Post Edge, Inc.
10.52*** Agreement, dated as of December 9, 1993, by and
between Discovery Communications, Inc. and The Post
Edge, Inc., and Amendment No. 1 thereto.
10.53 Amendment No. 3, dated as of November 30, 1995, to
the Credit Agreement, dated as of May 4, 1995, by and
among the Company, the Lenders party thereto and The
Bank of New York, as the Issuer and as Agent.
10.54 Amendment No. 4, dated as of October 3, 1996, to the
Credit Agreement, dated as of May 4, 1995, by and
among the Company, the Lenders party thereto and The
Bank of New York, as the Issuer and as Agent.
10.55 Amendment No. 1, dated as of September 15, 1995, to
the Agreement, dated as of June 7, 1993, by and
between MTV Latin America,Inc. and The Post Edge,Inc.
10.56 Assignment and Acceptance Agreement, dated as of
August 22, 1996, by and between Fleet Bank, N.A.
(formerly known as NatWest Bank, N.A.) and Key Bank
of New York.
21.1*** Subsidiaries of the Company.
27**** Financial Data Schedule.
- --------------------
* Incorporated by reference to the exhibit of the same number contained in
Amendment No. 4 to the Company's Registration Statement on Form S-1 (the
"Registration Statement"), filed with the Securities and Exchange
Commission (the "SEC") on February 4, 1994.
+ Incorporated by reference to the exhibit of the same number contained in
Amendment No. 1 to the Company's Registration Statement filed with the SEC
on October 21, 1993.
** Incorporated by reference to the exhibit of the same number contained in
Amendment No. 3 to the Company's Registration Statement filed with the SEC
on January 10, 1994.
++ Incorporated by reference to the exhibit of the same number contained in
the Company's Form 10-K for the fiscal year ended July 31, 1994.
*** Incorporated by reference to the exhibit of the same number contained in
the Company's Form 10-K for the fiscal year ended July 31, 1995.
**** Exhibit No. 27 - Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information only and not
filed.
(b) None.
(c) See Item 14(a)(3) above.
(d) Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: 10/15/96 INTERNATIONAL POST LIMITED
By: /s/ Martin Irwin
------------------------
Name: Martin Irwin
Title: President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacities and on the dates indicated.
Name and Signature Title Date
/s/ Martin Irwin President, Chief Executive 10/15/96
- ------------------------ Officer and Director
Martin Irwin (Principal Executive
Officer)
/s/ Jeffrey J. Kaplan Executive Vice President, 10/15/96
- ------------------------ Chief Financial Officer and
Jeffrey J. Kaplan Director (Principal
Financial Officer)
/s/ Gary R. Strack Vice President, Treasurer 10/15/96
- ------------------------ and Secretary (Principal
Gary R. Strack Accounting Officer)
/s/ Terrence A. Elkes Chairman of the Board of 10/15/96
- ------------------------ Directors
Terrence A. Elkes
/s/ Kenneth F. Gorman Director 10/15/96
- ------------------------
Kenneth F. Gorman
/s/ Louis H. Siracusano Director 10/15/96
- ------------------------
Louis H. Siracusano
/s/ Robert H. Alter Director 10/15/96
- ------------------------
Robert H. Alter
/s/ Julius Barnathan Director 10/15/96
- ------------------------
Julius Barnathan
18
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER EXHIBITS PAGE
- -------------- ------------------------------------------- -------
2.1* Acquisition Agreement dated as of December
23, 1993 among the Company, VSC Video
Corporation, Waterfront Communications
Corporation, Martin Audio-Video
Corporation, Atlantic Satellite
Communications, Inc., A.F. Associates, Inc.
and Video Services Corporation.
2.2 Stock Purchase Agreement, dated as of May
4, 1995, by and among the Company, The Post
Edge, Inc. and all of the stockholders of
The Post Edge, Inc., including the exhibits
thereto but excluding the schedules thereto
(incorporated by reference to exhibit
number 2.1 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
2.3 Stock Purchase Agreement, dated as of April
25, 1995, by and among the Company, The Big
Picture Editorial, Inc., Even Time Ltd., BP
Partnership, ET Partnership, BPET
Partnership, Barbara D'Ambrogio, David
D'Ambrogio, Gregory Letson, Michael
Schenkein, Leonard Smalheiser, Jane Stuart
and Big Picture/Even Time Limited,
including the exhibits thereto but
excluding the schedules thereto
(incorporated by reference to exhibit
number 2.2 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
3.1+ Certificate of Incorporation of the
Company.
3.2+ By-Laws of the Company.
4.1 Form of 4% Convertible Subordinated Note of
the Company (incorporated by reference to
the exhibit of the same number contained in
the Company's Report on Form 8-K, dated May
18, 1995).
10.1* Form of Employment Agreement between Martin
Irwin and the Company.
10.2* Form of Employment Agreement between
Jeffrey J. Kaplan and the Company.
10.3* Form of Employment Agreement between Adrien
Macaluso and the Company.
10.4* Form of International Post Group Inc.
Long-term Incentive Plan, together with
form of International Post
Group Inc. Stock Option Agreement.
10.5* Form of International Post Group Inc.
Restricted Share Plan for Directors,
together with form of Restricted Share
Agreement.
10.6* Form of Registration Rights Agreement among
the Company, Holdings, VSC, Martin Irwin,
Jeffrey J. Kaplan, Adrien Macaluso,
Terrence A. Elkes and Kenneth F. Gorman.
10.7** Form of Lease Agreements between Audio Plus
Video and L.I.M.A. Partners.
10.8* Purchase Agreement, dated September 10,
1993, between A.F. Associates, Inc. and MTE
Co.
10.9+ Lease Agreements, dated as of June 30,
1993, between MTE Co. and Nineteen New York
Properties Limited Partnership.
19
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER EXHIBITS PAGE
- -------------- ------------------------------------------- -------
10.10+ Agreement of Lease, dated as of March 7,
1990, between 225 Realty Associates and VSC
Post, together with First Supplemental
Agreement.
10.11+ Contribution Agreement, dated as of July
30, 1992, between Holdings and VSC Post.
10.12* Forms of Promissory Notes made by Manhattan
Transfer in favor of Martin Irwin.
10.13+ Letter Agreement, dated February 22, 1993,
between Apollo and Holdings.
10.14+ Promissory Note, dated January 1, 1993,
made by MTE Co. in favor of Terrence A.
Elkes and Kenneth F. Gorman.
10.15+ Security Agreement, dated as of January 1,
1993 among MTE Co., Terrence A. Elkes and
Kenneth F. Gorman.
10.16+ Agreement, dated as of July 1, 1993, among
MTE Co., Terrence A. Elkes and Kenneth F.
Gorman.
10.17+ Security Agreement, dated as of July 1,
1993, among MTE Co., Terrence A. Elkes and
Kenneth F. Gorman.
10.18** Promissory Note, dated July 31, 1992, made
by MTE Co. in favor of P.C. Leasing, a
division of Phoenixcor, Inc.
10.19* Form of Services Agreement between VSC and
Manhattan Transfer.
10.20* Form of Services Agreement between VSC and
Audio Plus Video.
10.21* Form of Roll-Up and Exchange Agreement
among Holdings, VSC Video, Inc., Video
Services Corporation, the Company and
Manhattan Transfer.
10.22** Form of Stock Option Agreement among VSC,
Holdings and Martin Irwin.
10.23** Form of Stock Option Agreement between the
Company and Jeffrey J. Kaplan.
10.24** Form of Settlement Agreement between Apollo
and Holdings.
10.25** Form of Services and Option Agreement
between Holdings and Kenneth F. Gorman.
10.26** Form of Services and Option Agreement
between Holdings and Terrence A. Elkes.
10.27** Form of Stock Option Agreement between VSC
and Kenneth F. Gorman.
10.28** Form of Stock Option Agreement between VSC
and Terrence A. Elkes.
10.29** Form of Stock Option Agreement between the
Company and Kenneth F. Gorman.
10.30** Form of Stock Option Agreement between the
Company and Terrence A. Elkes.
10.31** Consent and Authorization, dated December
23, 1993, by Martin Irwin, Jeffrey J.
Kaplan, Adrien Macaluso, Terrence A. Elkes,
Kenneth F. Gorman, VSC, the Company,
Holdings and Apollo.
10.32++ Employment Agreement, dated as of April 21,
1994, between the Company and Daniel Rosen.
20
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER EXHIBITS PAGE
- -------------- ------------------------------------------- -------
10.33++ Stock Option Agreement, dated as of April
21, 1994, between the Company and Daniel
Rosen.
10.34 Consulting Agreement, dated as of May 4,
1995, between The Post Edge, Inc. and
Michael Orsburn (incorporated by reference
to exhibit number 10.1 contained in the
Company's Report on Form 8-K, dated May 18,
1995).
10.35 Employment Agreement, dated as of May 4,
1995, between Big Picture/Even Time
Limited, the Company and Barbara D'Ambrogio
(incorporated by reference to exhibit
number 10.2 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
10.36 Employment Agreement, dated as of May 4,
1995, between Big Picture/Even Time
Limited, the Company and David D'Ambrogio
(incorporated by reference to exhibit
number 10.3 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
10.37 Employment Agreement, dated as of May 4,
1995, between Big Picture/Even Time
Limited, the Company and Gregory Letson
(incorporated by reference to exhibit
number 10.4 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
10.38 Employment Agreement, dated as of May 4,
1995, between Big Picture/Even Time
Limited, the Company and Michael Schenkein
(incorporated by reference to exhibit
number 10.5 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
10.39 Employment Agreement, dated as of May 4,
1995, between Big Picture/Even Time
Limited, the Company and Leonard Smalheiser
(incorporated by reference to exhibit
number 10.6 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
10.40 Employment Agreement, dated as of May 4,
1995, between Big Picture/Even Time
Limited, the Company and Jane Stuart
(incorporated by reference to exhibit
number 10.7 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
10.41 Put/Call Agreement, dated as of May 4,
1995, between Gregory Letson and the
Company (incorporated by reference to
exhibit number 10.8 contained in the
Company's Report on Form 8-K, dated May 18,
1995).
10.42 Pledge Agreement, dated as of May 4, 1995,
made by BP Partnership, ET Partnership,
Barbara D'Ambrogio, David D'Ambrogio,
Michael Schenkein, Leonard Smalheiser, Jane
Stuart and the Company (incorporated by
reference to exhibit number 10.9 contained
in the Company's Report on Form 8-K, dated
May 18, 1995).
10.43 Pledge Agreement, dated as of May 4, 1995,
made by Gregory Letson and the Company
(incorporated by reference to exhibit
number 10.10 contained in the Company's
Report on Form 8-K, dated May 18, 1995).
21
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER EXHIBITS PAGE
- -------------- ------------------------------------------- -------
10.44 Escrow Agreement, dated as of May 4, 1995,
by and among ET Partnership, David
D'Ambrogio, Barbara D'Ambrogio, the Company
and Cowan, Gold, DeBaets, Abrahams &
Sheppard, as Escrow Agent (incorporated by
reference to exhibit number 10.11 contained
in the Company's Report on Form 8-K, dated
May 18, 1995).
10.45 Escrow Agreement, dated as of May 4, 1995,
by and among BP Partnership, Michael
Schenkein, Leonard Smalheiser, Jane Stuart,
Gregory Letson, the Company and Cowan,
Gold, Debaets, Abrahams & Sheppard, as
Escrow Agent (incorporated by reference to
exhibit number 10.12 contained in the
Company's Report on Form 8-K, dated May 18,
1995).
10.46 Credit Agreement, dated as of May 4, 1995,
by and among the Company, The Bank of New
York, in its capacity as a Lender, as the
Issuer and as the Agent, and Fleet Bank, as
a Lender (incorporated by reference to
exhibit number 10.13 contained in the
Company's Report on Form 8-K, dated May 18,
1995).
10.47 Security Agreement, dated as of May 4,
1995, by and between the Company and The
Bank of New York, as Agent (incorporated by
reference to exhibit number 10.14 contained
in the Company's Report on Form 8-K, dated
May 18, 1995).
10.48 Guaranty, dated as of May 4, 1995, by and
among the Persons party thereto and The
Bank of New York, as Agent (incorporated by
reference to exhibit number 10.15 contained
in the Company's Report on Form 8-K, dated
May 18, 1995).
10.49*** Amendment No. 1 and Reallocation Agreement,
dated as of June 12, 1995, by and among The
Bank of New York, Fleet Bank, NatWest Bank
N.A. and the Company, to the Credit
Agreement, dated as of May 4, 1995, by and
among International Post Limited, the
Lenders party thereto, and The Bank of New
York, as the Issuer and as Agent.
10.50*** Form of Amendment No. 2, dated as of
October 30, 1995, to the Credit Agreement,
dated as of May 4, 1995, by and among
International Post Limited, the Lenders
party thereto, and The Bank of New York, as
the Issuer and as Agent.
10.51*** Agreement, dated as of June 7, 1993, by and
between MTV Latin America, Inc. and The
Post Edge, Inc.
10.52*** Agreement, dated as of December 9, 1993, by
and between Discovery Communications, Inc.
and The Post Edge, Inc., and Amendment No.
1 thereto.
10.53 Amendment No. 3, dated as of November 30,
1995, to the Credit Agreement, dated as of
May 4, 1995, by and among the Company, the
Lenders party thereto and The Bank of New
York, as the Issuer and as Agent.
10.54 Amendment No. 4, dated as of October 3,
1996, to the Credit Agreement, dated as of
May 4, 1995, by and among the Company, the
Lenders party thereto and The Bank of New
York, as the Issuer and as Agent.
22
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER EXHIBITS PAGE
- -------------- ------------------------------------------- -------
10.55 Amendment No. 1, dated as of September 15,
1995, to the Agreement, dated as of June 7,
1993, by and between MTV Latin America,
Inc. and The Post Edge, Inc.
10.56 Assignment and Acceptance Agreement, dated
as of August 22, 1996, by and between Fleet
Bank, N.A. (formerly known as NatWest Bank,
N.A.) and Key Bank of New York.
21.1*** Subsidiaries of the Company.
27**** Financial Data Schedule.
- --------------------------------------------------------------------------------
* Incorporated by reference to the exhibit of the same number contained in
Amendment No. 4 to the Company's Registration Statement on Form S-1 (the
"Registration Statement"), filed with the Securities and Exchange
Commission (the "SEC") on February 4, 1994.
+ Incorporated by reference to the exhibit of the same number contained in
Amendment No. 1 to the Company's Registration Statement filed with the SEC
on October 21, 1993.
** Incorporated by reference to the exhibit of the same number contained in
Amendment No. 3 to the Company's Registration Statement filed with the SEC
on January 10, 1994.
++ Incorporated by reference to the exhibit of the same number contained in
the Company's Form 10-K for the fiscal year ended July 31, 1994.
*** Incorporated by reference to the exhibit of the same number contained in
the Company's Form 10-K for the fiscal year ended July 31, 1995.
**** Exhibit No. 27 - Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information only and not
filed.
23
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page Number
-----------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of
July 31, 1995 and 1996. F-3
Consolidated Statements of Income for the
years ended July 31, 1994, 1995 and 1996. F-4
Consolidated Statements of Partners' Capital and
Stockholders' Equity for the years ended
July 31, 1994, 1995 and 1996. F-5
Consolidated Statements of Cash Flows for the
years ended July 31, 1994, 1995 and 1996. F-6
Notes to Consolidated Financial Statements. F-7 to F-21
SUPPLEMENTAL SCHEDULE:
II. Valuation and Qualifying Accounts F-22
NOTE:
Schedules other than those referred to above have been omitted as
inapplicable or not required under the instructions contained in
Regulation S-X or the information is included elsewhere in the financial
statements or the notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of International Post Limited:
We have audited the accompanying consolidated balance sheets of
International Post Limited (a Delaware corporation) and subsidiaries as of July
31, 1995 and 1996, and the related consolidated statements of income, partners'
capital and stockholders' equity and cash flows for each of the three years in
the period ended July 31, 1996. These consolidated financial statements and
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of International Post
Limited and subsidiaries as of July 31, 1995 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
July 31, 1996 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
New York, New York
September 25, 1996
F-2
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of July 31, 1995 and July, 31, 1996
(in thousands)
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 368 $ 104
Accounts receivable, net ...................... 8,921 10,308
Deferred income taxes ......................... 823 597
Prepaid expenses and other current assets ..... 738 1,654
------- -------
Total current assets ..................... 10,850 12,663
Fixed assets, net ............................. 31,007 29,533
Excess of cost over fair value of
net assets acquired, net ...................... 22,937 22,397
Deferred income taxes ......................... 476 1,770
Other assets .................................. 1,403 1,498
------- -------
Total assets ............................. $66,673 $67,861
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ......... $ 6,331 $ 5,070
Due to related parties ........................ 383 408
Current portion of long-term debt ............. 3,866 3,856
Income taxes payable .......................... 821 2,283
------- -------
Total current liabilities ................ 11,401 11,617
Long-term debt ................................ 20,257 19,797
Subordinated debt ............................. 4,927 5,096
Other liabilities ............................. 627 1,516
------- -------
Total liabilities ........................ 37,212 38,026
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock: $.01 par value - 3,000
shares authorized; no shares outstanding
at July 31, 1995 and July 31, 1996 .......... - -
Common stock: $.01 par value - 15,000 shares
authorized; 6,214 and 6,227 shares
issued and outstanding at July 31, 1995 and
July 31, 1996, respectively ................. 62 62
Additional paid-in-capital .................... 25,419 24,979
Retained earnings ............................. 3,980 4,794
------- -------
Total stockholders' equity ............... 29,461 29,835
------- -------
Total liabilities and stockholders' equity $66,673 $67,861
======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended July 31, 1994, 1995 and 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 1995 1996
----------------------------------
<S> <C> <C> <C>
Revenues ............................................ $27,827 $38,349 $49,352
Direct salaries and costs ........................... 12,953 18,840 24,049
Selling, general and administrative expenses ........ 6,058 10,285 12,837
Depreciation ........................................ 3,534 5,168 7,229
Amortization ........................................ 371 581 1,140
Non-cash stock option related compensation .......... 1,202 -- --
Non-cash lease related obligation ................... -- -- 255
-------- -------- --------
Income from operations ......................... 3,709 3,475 3,842
Other expense (income):
Interest expense ............................... 506 810 2,262
Interest income and other ...................... (40) (15) (96)
-------- -------- --------
Income before taxes ....................... 3,243 2,680 1,676
Provision for income taxes:
Income taxes .............................. 1,473 1,074 862
Impact of change in tax status ............ (1,550) -- --
-------- -------- --------
Net income .......................................... $ 3,320 $ 1,606 $ 814
======== ======== ========
Net income per share ................................ $ 0.70 $ 0.26 $ 0.13
======== ======== ========
Weighted average number of shares outstanding ....... 4,714 6,214 6,220
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
For the Years Ended July 31, 1994, 1995 and 1996
(in thousands)
<TABLE>
<CAPTION>
MTE Co.
(Note 1) Common Common Capital in
Partners' Stock Stock Excess of Retained
Capital Shares Amount Par Value Earnings
--------- ------ ------ ---------- --------
<S> <C> <C> <C> <C> <C>
Balance, August 1, 1993 ........................... $ 14,177 -- $ -- $ -- $ --
Initial capitalization ....................... -- 1 -- 1 --
Net income for the period ended
February 8, 1994 (1) ...................... 1,892 -- -- -- --
Contribution of MTE Co. into IPL at
February 8, 1994 ........................... (16,069) 3,470 35 16,034 --
Initial public offering of Common
Stock at February 8, 1994 .................. -- 2,300 23 22,562 --
Issuance of Common Stock in
conjunction with the acquisition
of Audio Plus Video at
February 15, 1994 .......................... -- 250 2 2,748 --
Preferential dividend paid in
conjunction with the acquisition
of Audio Plus Video at
February 15, 1994 .......................... -- -- -- (17,825) --
Secondary offering of Common Stock at
March 15, 1994 ............................. -- 193 2 1,974 --
Net income for the period February 9,
1994 through July 31, 1994 ................. -- -- -- -- 2,374
--------- ----- ----- --------- ------
Balance July 31, 1994 ............................. -- 6,214 62 25,494 2,374
Stock and stock option related
compensation ............................... -- -- -- (75) --
Net Income for the year ended
July 31, 1995 .............................. -- -- -- -- 1,606
--------- ----- ----- --------- ------
Balance July 31, 1995 ............................. -- 6,214 62 25,419 3,980
Stock and stock option related
compensation ............................... -- 13 -- (440) --
Net Income for the year ended
July 31, 1996 .............................. -- -- -- -- 814
--------- ----- ----- --------- ------
Balance July 31, 1996 ............................. $ -- 6,227 $ 62 $ 24,979 $4,794
========= ===== ===== ========= ======
(1) Does not reflect pro forma tax provision of $946.
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended July 31, 1994, 1995 and 1996
(in thousands)
<TABLE>
<CAPTION>
1994 1995 1996
----------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income ............................................. $ 3,320 $ 1,606 $ 814
Adjustments to reconcile net income to net cash
provided by operating activities:
Pro forma provision for income taxes in 1994 ....... 946 -- --
Depreciation ....................................... 3,534 5,168 7,229
Amortization ....................................... 371 581 1,140
Provision for bad debts ............................ 8 185 232
(Gain) loss on disposal of fixed assets ............ (2) 55 (136)
Provision for stock options ........................ 1,202 -- --
Deferred taxes ..................................... (22) 37 (1,508)
Impact of change in tax status ..................... (1,550) -- --
(Increase) decrease in operating assets:
Accounts receivable ................................ (1,319) (577) (1,915)
Prepaid expenses and other current assets .......... (348) 278 (916)
Other assets ....................................... 258 (749) (644)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities ........... 1,418 (827) (1,261)
Income taxes payable ............................... 468 (484) 1,462
Other liabilities .................................. (349) (194) 889
-------- -------- --------
Net cash provided by operating activities ...... 7,935 5,079 5,386
-------- -------- --------
Cash Flows From Investing Activities:
Additions to fixed assets .......................... (8,143) (11,078) (5,573)
Proceeds from sale of fixed assets ................. -- 256 249
Deposits on fixed assets ........................... (223) -- (50)
Purchase of companies, net of cash acquired ........ (17,696) (11,661) --
-------- -------- --------
Net cash (used in) investing activities ........ (26,062) (22,483) (5,374)
-------- -------- --------
Cash Flows From Financing Activities:
Proceeds from notes payable ........................ 1,500 3,500 --
Repayment of notes payable ......................... -- (5,730) --
Proceeds from revolving credit facility, net ....... -- 1,700 3,300
Proceeds from subordinated debt .................... -- -- 169
Proceeds from long-term debt borrowing ............. 193 22,337 --
Proceeds from related parties ...................... 42 28 25
Repayment of related parties ....................... (854) (267) --
Repayment of long-term debt ........................ (6,804) (4,135) (3,770)
Proceeds from sale of common stock ................. 25,505 -- --
Costs associated with initial public offering ...... (2,089) -- --
-------- -------- --------
Net cash provided by (used in)
financing activities ....................... 17,493 17,433 (276)
-------- -------- --------
Net (decrease) increase in cash .. (634) 29 (264)
Cash and cash equivalents, beginning of period ........... 973 339 368
======== ======== ========
Cash and cash equivalents, end of period ................. $ 339 $ 368 $ 104
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
International Post Limited and subsidiaries ("IPL" or the "Company")
was organized by the partners of Manhattan Transfer/Edit Company ("MTE Co.") for
the purpose of acquiring the business of MTE Co. The partners in MTE Co. were
MTE Holdings, Inc. ("Holdings" or "Predecessor") and Video Services Corporation
("VSC"). This partnership was established for the purpose of enabling Holdings
to effect the acquisition of specified assets and liabilities of VSC Post
Production, Inc. ("VSC Post"), a wholly-owned subsidiary of VSC. IPL was formed
on October 12, 1993 and began operations on February 8, 1994.
The Company was established with an initial capitalization of $1,000,
represented by 1,000 shares of Common Stock having a par value of $.01 per
share. Pursuant to a transaction which occurred immediately prior to, and in
connection with, the consummation of the offering of shares of the Company's
common stock (the "Offering") on February 8, 1994, the assets and liabilities of
MTE Co. were contributed to Manhattan Transfer/Edit, Inc. ("Manhattan
Transfer"), a newly-formed subsidiary of IPL, and an incremental 3,469,833
shares were issued to IPL's shareholders. The Company accounted for the
contribution of these assets and liabilities at the historical amounts reflected
in MTE Co.'s financial statements.
Manhattan Transfer provides a wide range of post-production services
primarily to the television advertising industry, including film-to-tape
transfers, electronic video editing, computer-generated graphics and
duplication.
Audio Plus Video International, Inc. ("APV") provides a broad range of
services to distributors of television programming to the international market
and, to a lesser extent, a variety of program originators, including standards
conversion, duplication, electronic video editing, film-to-tape transfers and
audio services in multi-standards and formats.
The Post Edge, Inc. ("Post Edge") provides post-production services
to the television advertising industry and corporate clients as well as network
playback and studio services.
Big Picture/Even Time Limited ("BP/ET") provides a variety of creative
editorial services to the television advertising industry.
In connection with the Offering, the Company registered 2,961,250 of
its shares. Of the total shares registered, the Company sold 2,493,125 shares,
VSC sold 377,125 shares and Holdings sold 91,000 shares. The Company received
net proceeds of $25,504,669, after deducting underwriters' discounts applicable
to the shares sold by the Company and all costs of the Offering.
F-7
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company recorded a pretax restructuring charge of $1,702,000 in
fiscal year 1993 in connection with the consolidation of the VSC Post facility
into MTE Co.'s facilities. The balance of the liability at July 31, 1995 and
1996 was $534,704 and $491,353, respectively. At July 31, 1996, it was estimated
that the remaining liability, consisting of lease commitments, will be settled
in fiscal 1997. Management anticipates that funding for these amounts will be
provided by operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of IPL and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
REVENUE RECOGNITION - Revenue from services (except editorial) is recorded at
completion of services for the customer. Revenue for editorial services is
recorded as services are provided to customers on a percentage of completion
method.
INVENTORY - Inventory consists of blank video tape stock and is valued at the
lower of cost or market on a FIFO basis.
FIXED ASSETS - Property and equipment are carried at cost and depreciated by the
straight-line method over their estimated useful lives. Leasehold improvements
are amortized over the shorter of their estimated useful lives or the term of
the underlying lease. Estimated useful lives by class of assets are as follows:
Machinery and equipment............ 3-10 years
Furniture and fixtures............. 3-10 years
Leasehold improvements............. 3-15 years
Repairs and maintenance are charged to expense as incurred.
Expenditures that result in the enhancement of the value of the facilities
involved are treated as additions to property and equipment. Cost of property
and equipment disposed of and accumulated depreciation thereon are removed from
the related accounts, and gain or loss, if any, is recognized.
GOODWILL - The excess of cost over net assets acquired is amortized on a
straight-line basis over a 25 year period. Amortization expense for the years
ended July 31, 1994, 1995 and 1996 was $355,757, $517,311 and $1,002,892,
F-8
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
respectively. Accumulated amortization at July 31, 1995 and 1996 was $2,177,511
and $3,180,403, respectively. The Company continually evaluates the carrying
value and the remaining economic useful life of all goodwill, and will adjust
the carrying value and related amortization period if and when appropriate.
CASH EQUIVALENTS - The Company classifies as cash equivalents all short-term,
highly liquid instruments having original maturities of three months or less.
The fair market value of these instruments approximate their carrying value.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of the Company's
accounts receivable, accounts payable, accrued liabilities an debt approximate
fair market value based upon the relatively short-term nature of these financial
instruments.
CONCENTRATION OF CREDIT - Financial instruments which potentially subject the
Company to concentration of credit risk consist principally of trade accounts
receivable. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral from its customers. The
Company had sales to an individual customer aggregating 13%, 8% and 5% of
revenues for the years ended July 31, 1994, 1995 and 1996, respectively. The
Company had accounts receivable from such customer amounting to $307,826 and
$505,708 at July 31, 1995 and 1996, respectively.
USE OF ESTIMATES - The financial statements are prepared in conformity with
generally accepted accounting principles and, accordingly, include amounts that
are based on management's best estimates and judgements.
RECLASSIFICATIONS - Certain reclassifications have been made to prior year
amounts to conform with current year presentation.
NET INCOME PER SHARE - Net income per share has been computed using the weighted
average number of shares outstanding during each period.
INCOME TAXES - The Company accounts for income taxes pursuant to the provisions
of the Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting
for Income Taxes."
F-9
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Statement of Cash Flow Information -
(in thousands)
1994 1995 1996
------ ------ ------
Amounts paid for:
Interest........................ $ 489 $ 731 $1,797
====== ====== ======
Income taxes.................... $ - $1,520 $ 904
====== ====== ======
Non-cash transactions:
Investing-
Acquisition of Audio
Plus Video:
Common stock issued........... $2,750
======
Financing-
Acquisition of Big Picture
Editorial Inc. and Even
Time Limited:
Subordinated debt issued...... $4,890
======
NOTE 3 - ACQUISITIONS
On February 15, 1994, the Company used a portion of the net proceeds of
the Offering to acquire all of the outstanding stock of APV and all of the
outstanding stock of VSC Express Courier, Inc. (collectively referred to as
"Audio Plus Video"), each formerly indirectly-owned subsidiaries of VSC. The
aggregate purchase price for Audio Plus Video was $20,179,923, consisting of
$17,429,923 in cash and the issuance of 250,000 common shares of IPL totaling
$2,750,000, valued at the initial public offering price. The balance of the
proceeds has been used to retire debt of Audio Plus Video and Manhattan
Transfer.
The Company accounted for the acquisition of Audio Plus Video at the
historical cost of Audio Plus Video's assets and liabilities as reflected in
Audio Plus Video's financial statements at February 15, 1994. The excess of the
purchase price paid over the historical cost of the net assets acquired is
deemed to be a preferential dividend and was accounted for as a charge to the
Company's stockholders' equity.
On May 4, 1995, the Company used a portion of its new Term Loan (see
Note 6) to purchase Post Edge, The Big Picture Editorial, Inc. ("BP") and Even
F-10
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Time Ltd. ("ET"). The assets and operations of BP and ET were merged into the
Company's wholly-owned subsidiary BP/ET in December 1995.
The purchase price for Post Edge was $8,000,000 in cash. The purchase
price for BP and ET was $12,070,000, including $6,350,000 principal amount of
convertible subordinated debt of the Company with a 4.0% interest coupon
convertible at $14 per share after five years and redeemable after six years
(valued at $4,890,000 at the date of acquisition). The purchase agreement
provides for contingent payments depending upon future revenues and increases in
profitability of BP/ET. These acquisitions have been accounted for under the
purchase method and the excess purchase price paid over the historical cost of
the net assets acquired is accounted for as goodwill. During fiscal year 1996
the Company was required to pay $342,000 of contingent purchase price which was
added to the excess of cost over fair value of net assets acquired.
The following presents the unaudited combined pro forma results of
operations for the years ended July 31, 1994 and 1995, as if the acquisition of
Audio Plus Video, Post Edge, BP and ET had been completed by the Company as of
the beginning of the year ended July 31, 1994. The unaudited combined pro forma
results of operations are not necessarily indicative of the results of
operations that would have occurred had the companies actually combined during
the periods presented or of future results of operations of the combined
operations.
(in thousands, except per share amounts)
1994 1995
------- -------
Revenues................................... $47,402 $47,775
Net income................................. $ 3,848 $ 141
Net income per share (a)................... $ .66 $ .02
(a) The pro forma weighted average number of shares outstanding for
1994 (5,792,039) and 1995 (6,213,958) gives effect to: 1) the
acquisition of MTE Co. by the Company (3,470,833), 2) the sale by
the Company of 1,737,778 shares of its common stock, which provided
the Company with proceeds of $17,429,923 in order to acquire Audio
Plus Video, and 3) the issuance of an additional 250,000 shares of
the Company's common stock to VSC as part of the purchase price of
Audio Plus Video for an aggregate value of $2,750,000, as if each
transaction had been consummated as of August 1, 1993. This
calculation gives effect as of February 15, 1994 to the sale by the
Company of 755,347 shares of its common stock which provided the
Company with proceeds to reduce outstanding indebtedness.
As part of the consolidation of the BP and ET facilities to one
facility in New York City, the Company recorded a non-cash lease related
obligation in the fourth quarter of fiscal 1996 of $255,000. This represents net
future lease payments the Company will be obligated to make for leases from the
expected vacancy date (second quarter of fiscal 1997) through their respective
termination dates.
F-11
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ACCOUNTS RECEIVABLE
July 31, July 31,
1995 1996
---------- -----------
Accounts receivable, trade................. $9,537,200 $11,032,078
Less: Allowance for doubtful accounts.... 615,754 724,565
---------- -----------
$8,921,446 $10,307,513
========== ===========
NOTE 5 - FIXED ASSETS
Fixed assets, at cost, including capitalized leases (see Note 6), summarized by
major categories consist of the following:
July 31, July 31,
1995 1996
----------- -----------
Machinery and equipment.................... $33,119,832 $35,092,788
Leasehold improvements..................... 11,129,538 12,147,475
Furniture and fixtures..................... 1,652,018 1,918,573
----------- -----------
45,901,388 49,158,836
Less: Accumulated depreciation........... 14,894,052 19,625,422
----------- -----------
$31,007,336 $29,533,414
=========== ===========
NOTE 6 - LONG-TERM DEBT
Senior long-term debt
July 31, July 31,
1995 1996
----------- -----------
Senior secured term loan................... $22,000,000 $18,320,000
Senior secured revolving credit loan....... 1,700,000 5,000,000
Collateralized by fixed assets
Notes payable to credit institutions
bearing interest at 8.0%, originally
payable through 1996...................... 16,989 4,815
Capital lease obligations.................. 405,198 328,665
----------- -----------
24,122,187 23,653,480
Less: Current maturities................... 3,865,624 3,856,292
----------- -----------
$20,256,563 $19,797,188
=========== ===========
SENIOR SECURED LONG-TERM DEBT - During fiscal year 1995, the Company established
a $22,000,000 senior secured term loan (the "Term Loan") and the Revolving Loan
(as defined herein), pursuant to a Credit Agreement with a syndicate
of financial institutions secured by 1) all assets of the Company and
its existing and future direct and indirect owned subsidiaries and 2) the
F-12
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
capital stock of all such subsidiaries. The Term Loan and the Revolving Loan
bear interest at the Bank of New York's Prime rate or LIBOR plus 1.375% through
July 31, 1996 and will float at such Prime rate plus .375% or LIBOR plus 1.75%
thereafter, and contains various covenants limiting future debt, dividends and
capital expenditures. In addition, the Company must maintain certain cash flow
and leverage ratios. In September 1996, the Company amended the Credit
Agreement, pursuant to which certain covenants were changed for fiscal year 1996
and prospective periods.
In February 1996, the Company entered into an interest rate swap
agreement with a member of the bank syndicate. Under the agreement, the Company
had effectively fixed the LIBOR rate and thereby the interest rate of the Term
Loan until maturity (January 2001) at 6.695%. In March 1996, the Company sold
the fixed rate position for $313,000, which is being amortized over the life of
the Term Loan. The Company's Term Loan rate was fixed at 6.695% through June 11,
1996, and floated at the BNY's Prime rate or LIBOR plus 1.375% through July 31,
1996.
In August 1996, Fleet Bank, N.A. (formerly known as NatWest Bank, N.A.)
and Key Bank of New York ("Key Bank") entered into an Assignment and Acceptance
Agreement, pursuant to which Fleet Bank, N.A. assigned to Key Bank a percentage
of its rights and obligations under the Loan Documents (as defined in the Credit
Agreement).
LINE OF CREDIT AND REVOLVING CREDIT FACILITY - During fiscal year 1995, the
Company repaid its outstanding $5,000,000 bank line of credit and established a
$10,000,000 senior secured revolving credit facility (the "Revolving Loan") with
a syndicate of financial institutions pursuant to the Credit Agreement. The
Company had outstanding direct borrowings of $1,700,000 under the Revolving Loan
at July 31, 1995, and $5,000,000 under the Revolving Loan at July 31, 1996. The
Company is being charged a commitment fee equal to 0.375% on the unused amount
of the Revolving Loan. In addition, the Company also had outstanding letters of
credit in the amount of $761,337 and $1,196,482 at July 31, 1995 and 1996,
respectively.
SUBORDINATED DEBT - The Company, in connection with the acquisition of BP and ET
in May 1995, issued $6,350,000 principal amount of eight year convertible
subordinated notes, due May 4, 2003, with an interest rate of 4.0% convertible
at $14 per share after five years and redeemable after six years. The debt was
valued at $4,890,000 at the date of acquisition using an effective rate of
8.34%. The valuation discount is being accreted over the life of the notes.
Required payments of principal on senior and subordinated debt
outstanding at July 31, 1996, are summarized as follows:
Fiscal Year Amount
----------- -----------
1997............................ $ 3,856,000
1998............................ 3,776,000
1999............................ 3,762,000
2000............................ 3,680,000
2001............................ 10,717,000
Thereafter...................... 4,233,000
-----------
$30,024,000
===========
F-13
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - RELATED PARTIES
In connection with the acquisition of specified assets and liabilities
from VSC Post, MTE Co. agreed to assume responsibility for all payments due by
VSC Post under a lease for a facility which was utilized by VSC Post. Annual
rent under such lease was approximately $400,000 per year (plus additional
amounts for real estate taxes and operating expenses) and the lease expired in
June 1996.
From January 1993 to February 1994, MTE Co. paid VSC $4,000 per month
in return for certain consulting services. In addition, beginning August 1993,
the Company paid VSC $3,500 per month with respect to the rental and maintenance
of computer hardware and software. These arrangements were terminated by the
Company in March 1995.
In connection with the acquisition of specified operating assets and
liabilities from VSC Post, MTE Co. was required to make payments on notes
payable to an officer of MTE Co., now the chief executive officer of the
Company. These notes bore interest at rates ranging from 8.0% to 9.2%. The
balance of the notes at July 31, 1995 and 1996 as reflected in the Company's
consolidated balance sheets is $382,724 and $408,000, respectively. The balance
at July 31, 1996 was subsequently paid in August 1996.
As part of the consolidation of its post-production facilities, the
Company had entered into an agreement with A.F. Associates, Inc. ("A.F.
Associates"), a subsidiary of VSC, to purchase video equipment and design,
engineer, fabricate and install turnkey video systems. Payment in the amount of
$931,000 was made during the year ended July 31, 1995. During fiscal 1996, the
Company purchased certain machinery and equipment from A.F. Associates for
$103,000. The Company believes that the terms of these agreements were
comparable to terms it could have obtained in an arms-length transaction.
During fiscal 1995, the Company purchased certain computer hardware and
software from VSC for $135,000. The Company believes that the terms of this
agreement were comparable to terms it could have obtained in an arms-length
transaction.
During the years ended July 31, 1995 and 1996, the Company provided
services totaling $165,000 and $184,000 to, and purchased materials and services
totaling $313,000 and $241,000 from, VSC and its affiliated companies,
respectively. Revenues included post-production work and courier services, and
direct costs included duplication services, repairs and maintenance, equipment
rentals and tape stock purchases. In addition, the Company purchased certain
machinery and equipment from VSC and its affiliated companies for $192,000.
The Company leased a New York City facility from VSC, under a lease
accounted for as an operating lease. The lease was terminated on July 31, 1995.
Such rental expense of the Company amounted to $176,004, for the year ended July
31, 1995.
The Company sublets its New York City corporate office from a VSC
affiliate, under a lease accounted for as an operating lease. Such rental
expense of the Company for the years ended July 31, 1995 and 1996 amounted to
$5,675 and $24,500, respectively. In addition, the Company contracted with the
F-14
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
VSC affiliate to perform the leasehold improvements in the amount of $48,000 for
its New York City corporate office. The Company believes that the terms of this
agreement were comparable to terms it could have obtained in an arms-length
transaction.
The Company consolidated its New Jersey operations into a single
facility that it leases from a partnership, whose partners own a majority
interest in VSC, under a lease accounted for as an operating lease. The lease
was renegotiated and extended, with such rental expense of the Company amounting
to $161,000, $376,000 and $444,000, for the years ended July 31, 1994, 1995 and
1996, respectively.
At July 31, 1996, future minimum rental payments under such
non-cancelable leases are as follows (see Note 8):
Fiscal Year Amount
----------- ----------
1997............................ $ 414,600
1998............................ 414,600
1999............................ 414,600
2000............................ 407,937
2001............................ 387,948
Thereafter...................... 4,041,125
----------
$6,080,810
==========
Note 8 - COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS - The Company leases property under leases accounted for as
operating leases. Certain leases include escalation clauses. At July 31, 1996,
future minimum rental payments, including related party leases, under
non-cancelable leases for buildings and equipment are as follows:
Fiscal Year Amount
----------- -----------
1997............................ $ 3,108,159
1998............................ 3,656,660
1999............................ 3,664,768
2000............................ 3,377,758
2001............................ 3,272,954
Thereafter...................... 22,009,940
-----------
$39,090,239
===========
Rental expense for the years ended July 31, 1994, 1995 and 1996
amounted to $1,232,881, $2,047,762 and $2,781,750, respectively.
F-15
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EMPLOYMENT AGREEMENTS - At July 31, 1996, the Company is obligated under
employment contracts with certain key employees providing for base salary and
incentive bonuses based upon the results of operations. Minimum amounts due
under these contracts are as follows:
Fiscal Year Amount
----------- ----------
1997............................ $1,245,569
1998............................ 695,833
1999............................ 600,000
2000............................ 450,000
----------
$2,991,402
==========
LITIGATION - The Company is involved in various claims and legal proceedings of
a nature considered normal to its business. While it is not possible to predict
or determine the outcome of these proceedings, it is the opinion of management
that their outcome will have no material adverse effect on the financial
position, liquidity or results of operations of the Company.
NOTE 9 - INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes." Deferred income taxes reflect the tax impact of temporary differences
between financial reporting and income tax purposes, measured by applying
currently enacted tax laws. During fiscal year 1994, the Company established
$1,550,000 of deferred tax assets, primarily attributable to reserves
established by MTE Co. which have not yet been deducted for tax purposes, and an
increase in the tax basis of the assets obtained from MTE Co.
MTE Co. was treated as a partnership for Federal, state and local
income tax purposes and the net income of the partnership was included in the
Federal, state and local income tax returns of its partners. No provision for
income taxes has been deducted in determining MTE Co.'s net income for the first
six months of the year ended July 31, 1994. As a result, the Company has
presented a pro forma income tax provision as if it were a corporate taxpayer
for the twelve months of the year ended July 31, 1994.
The reconciliation between the statutory tax rate and those reflected
in the Company's income tax provision is as follows:
1994 1995 1996
---- ---- ----
Statutory tax rate........................... 34% 34% 34%
Non-deductible intangibles................... 4 7 13
State & local taxes, net of Federal benefit.. 10 (1) -
Other........................................ (3) - 4
---- ---- ----
45% 40% 51%
==== ==== ====
F-16
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes for the Company is as follows:
1994 1995 1996
---------- ---------- ----------
Current
Federal............................... $1,498,918 $ 480,063 $1,263,647
State and local....................... 597,292 159,691 300,362
Deferred
Federal............................... (468,496) 605,702 (408,378)
State and local....................... (154,092) (171,782) (293,781)
---------- ---------- ----------
$1,473,622 $1,073,674 $ 861,850
========== ========== ==========
The Company's 1994 provision for income taxes includes a pro forma
income tax provision of $946,254 for the first six months of the fiscal year.
The impact of change in tax status in fiscal 1994 of $1,550,000
includes $1,098,000 for Federal purposes and $452,000 for state and local
purposes.
The components of net deferred tax assets arising from temporary
differences as of July 31, 1995 and 1996 were as follows:
July 31, July 31,
1995 1996
---------- ----------
Restructuring reserves..................... $ 260,000 $ 238,000
Stock options and awards.................. 541,000 -
Depreciation............................... (244,000) 583,000
Allowance for doubtful accounts............ 284,000 309,000
State net operating loss................... 337,000 702,000
Interest rate swap......................... - 124,000
Straight lined rent........................ - 141,000
Other...................................... 121,000 270,000
---------- ----------
$1,299,000 $2,367,000
========== ==========
At July 31, 1996, the Company has available $6,452,000 of unused state
operating loss carryforwards that may be applied against future taxable income
and that expire in years 2009, 2010 and 2011.
F-17
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management believes that the deferred tax benefits will be fully
realized through future taxable income.
NOTE 10 - RETIREMENT PLANS
The Company adopted a qualified salary reduction plan for eligible
employees under Section 401(k) of the Internal Revenue Code (the "Retirement
Plan"). The Retirement Plan is funded by salary reduction contributions by the
participants thereof. The Company's contributions to the Retirement Plan are
based on participant contributions (which are limited to a fixed percentage of
participant compensation) and matching employer contributions with a five year
vesting provision in Company stock. Additionally, the Company may contribute a
discretionary amount. For the years ended July 31, 1995 and 1996, the Company
contributed $44,654 and $116,575, respectively.
The Company does not offer any post-retirement health or welfare
benefits, nor does it have any post-employment benefits required to be accrued
at July 31, 1995 and 1996.
NOTE 11 - STOCK OPTIONS
The stockholders and directors of the Company have approved a long-term
incentive plan (the "Stock Plan") under which eligible employees may receive
grants of options, stock appreciation rights and restricted stock awards. An
aggregate of 600,000 shares of common stock have been reserved for issuance
under the Stock Plan and options or other grants with respect thereto may be
made over a ten-year term. Options may be either incentive options, within the
meaning of the Internal Revenue Code, or non-qualified options. The Stock Plan
is administered by the compensation committee of the board of directors of the
Company who will determine the employees entitled to grants, the exercise price,
which may not be less than the fair market value on the date of grant, and the
other terms of options or grants. During fiscal year 1995, 60,000 shares of
common stock options were granted. During fiscal year 1996, all prior options
granted from inception of the Stock Plan were replaced. The replacement options
were granted with revised terms, including without limitation, three year
vesting commencing in fiscal year 1996 and a range in price from $4.00 to $6.00
per share. In addition, 65,600 shares were forfeited by employees that were
terminated during fiscal year 1996.
F-18
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in outstanding options and options available for grant,
expressed in number of shares, are as follows:
Price Range
Shares Per Share
------- ----------------
Options outstanding at February 8, 1994.... -- --
Granted.................................... 436,500 $11.00
Exercised.................................. -- --
Forfeited or cancelled..................... -- --
------- ----------------
Options outstanding at July 31, 1994....... 436,500 $11.00
Granted.................................... 60,000 $5.75 -- $9.00
Exercised.................................. -- --
Forfeited or cancelled..................... -- --
------- ----------------
Options outstanding at July 31, 1995....... 496,500 $5.75 -- $11.00
Granted.................................... 430,900 $4.00 -- $6.00
Exercised.................................. -- --
Forfeited or cancelled..................... 496,500 $5.75 -- $11.00
------- ----------------
Options outstanding at July 31, 1996....... 430,900 $4.00 -- $6.00
======= ================
Options available for grant July 31, 1996.. 169,100
=======
The stockholders and directors of the Company have also approved a
restricted share plan for directors who are not employees of the Company. A
total of 50,000 shares of common stock are available for issuance under such
plan. Upon grant these options will vest upon the earliest to occur of two
consecutive years of board service, the death or disability of the recipient or
a "change of control date" (as defined in the Company's restricted share plan).
During fiscal year 1994, 13,000 shares of common stock were awarded to the
directors of the Company. All such shares are currently vested. At the date of
grant, the share price was $11.375. Compensation expense charged to operations
in fiscal year 1995 was $148,000. During fiscal 1996, the directors received the
13,000 shares previously awarded. Accordingly, the Company utilized a portion of
the deferred tax asset in relation to compensation expense recognized by the
directors. The Company recorded a reduction of $70,918 to net deferred tax
assets with corresponding decreases in current income taxes payable of $23,338
and additional paid in capital of $47,580.
In February 1994, in connection with the acquisition of Audio Plus
Video, the chief financial officer of the Company was granted ten-year,
non-qualified stock options to purchase 181,818 shares of the Company's common
stock at an exercise price of $9.35 per share. Such options are fully vested and
are presently exercisable.
In February 1994, the Company and VSC each granted five-year
non-qualified options to purchase an aggregate of 60,000 shares of the Company's
common stock to the two principals of the trustee. The exercise price of such
F-19
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
options is equal to the initial public offering price of $11 per share. Such
options vested three months after the consummation of the Offering.
The principals of the trustee have been granted by Holdings six-year,
non-qualified options to purchase 299,024 shares of common stock from Holdings
at an exercise price of $2.06 per share. Such options are non-transferable and
vested on January 1, 1995. Such principals covenanted under the related option
agreements to serve as directors of the Company and to not compete with the
Company for a term of two years commencing on the date of the Offering.
The principal shareholders of Holdings, through a trust, and VSC
granted options to the Company's chief executive officer, which were exercisable
immediately, to acquire 138,833 outstanding shares of IPL common stock held by
such shareholders at amounts which ranged between $1.80 and $5.98 per share.
These shareholders also granted to the Company's chief executive officer options
to acquire a further 69,417 outstanding shares of IPL common stock, at $7.78 per
share, which became exercisable if certain performance targets were met. These
options expired on December 31, 1995. Given that these options contained
exercise prices which were below the initial public offering price, the Company
recorded in the period of the initial public offering a non-cash compensation
charge to pre-tax income of $1,202,000 and a corresponding increase in
additional paid-in capital of $637,000, net of taxes. At July 31, 1995, the
value of the 69,417 stock options with an exercise price of $7.78 was adjusted
based upon the quoted market price of the Company's common stock on that date of
$4.75, which required an adjustment to compensation expense increasing pre-tax
income for fiscal year 1995 by $223,000. During fiscal year 1996, the Company's
chief executive officer exercised 69,417 stock options at $1.80, at which time
the quoted market price of the Company's common stock was $4.125. In connection
with this transaction, the Company recorded a reduction of $77,000 to net
deferred tax assets and current income taxes payable. The remaining 69,416 stock
options at $5.98 expired. In connection with the expiration of these options,
the Company recorded a reduction of $392,000 to net deferred tax assets and
additional paid-in capital.
NOTE 12 - REGISTRATION RIGHTS
The Company has agreed to register for sale shares of common stock held
by Holdings, upon its request. The Company has also agreed to register shares,
on a pro-rata basis, held by VSC and its transferees, certain officers of the
Company and principals of the trustee at such time as Holdings demands
registration of its shares of common stock. In addition, the Company will be
required to file a shelf registration statement on Form S-3 to register shares
of common stock underlying options granted to certain officers of the Company
and principals of the trustee.
NOTE 13 - PREFERRED STOCK
The Company's certificate of incorporation authorizes the board of
directors to issue from time to time, in one or more series, shares of preferred
stock with such designations and preferences, relative voting rights (except
that voting rights, if any, in respect of the election of directors shall be
F-20
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
limited to voting with the holders of common stock, with no more than one vote
per share of preferred stock), redemption, conversion, participation and other
rights and qualifications, limitations and restrictions as permitted by law. The
board of directors by its approval of certain series of preferred stock could
adversely affect the voting power of the holders of common stock, and, by
issuing shares of preferred stock with certain voting, conversion, redemption
rights or other terms, could delay, discourage or make more difficult changes of
control or management of the Company.
NOTE 14 - DIVIDEND POLICY
The board of directors of the Company does not intend to declare any
dividends in the foreseeable future and intends to retain all earnings in the
Company to finance the growth of operations, including acquisitions. Future
dividend policy will be based upon the Company's results of operations,
financial condition, capital requirements and other circumstances.
NOTE 15 - UNAUDITED QUARTERLY RESULTS
Unaudited quarterly financial information for fiscal year 1995 and 1996
is set forth below (See Note 3). All dollar amounts are in thousands except per
share data.
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------
Company
----------------------------------------------------------------
October 31, January 31, April 30, July 31,
1994 1995 1995 1995
----------- ----------- --------- --------
Fiscal 1995
<S> <C> <C> <C> <C>
Revenues................................. $8,372 $9,384 $9,364 $11,228
Income (loss) from operations............ $1,094 $1,512 $1,511 ($ 641)
Net income (loss)........................ $ 653 $ 847 $ 809 ($ 703)
Net income (loss) per share.............. $ 0.11 $ 0.14 $ 0.13 ($ 0.11)
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------
Company
----------------------------------------------------------------
October 31, January 31, April 30, July 31,
1995 1996 1996 1996
----------- ----------- --------- --------
Fiscal 1996
<S> <C> <C> <C> <C>
Revenues................................. $12,202 $12,099 $12,666 $12,385
Income (loss) from operations............ $ 1,813 $ 1,347 $ 1,283 ($ 601)
Net income (loss)........................ $ 673 $ 405 $ 307 ($ 571)
Net income (loss) per share.............. $ 0.11 $ 0.07 $ 0.05 ($ 0.09)
</TABLE>
F-21
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance at
Beginning of Costs and Deductions End of
Period Expenses Write-Offs Period
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
International Post Limited For the year
ended July 31, 1994:
Allowance for doubtful accounts............. $470,871 $156,874 $ 57,868 $569,877
======== ======== ======== ========
International Post Limited For the year
ended July 31, 1995:
Allowance for doubtful accounts............. $569,877 $184,771 $138,894 $615,754
======== ======== ======== ========
International Post Limited For the year
ended July 31, 1996:
Allowance for doubtful accounts............. $615,754 $231,983 $123,172 $724,565
======== ======== ======== ========
</TABLE>
F-22
<PAGE>
EXHIBIT 10.53
<PAGE>
AMENDMENT NO. 3
---------------
Amendment No. 3 (this "Amendment"), dated as of November 30, 1995, to
the Credit Agreement, dated as of May 4, 1995, by and among International Post
Limited (the "Borrower"), the Lenders party thereto, and The Bank of New York,
as the Issuer and as the Agent (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement").
RECITALS
I. The Borrower and the Agent wish to amend the Credit Agreement upon
the terms, and subject to the conditions, herein contained.
Therefore, in consideration of the Recitals, the terms and conditions
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Agent hereby
agree as follows:
1. The defined term "Fixed Charge Coverage Ratio" contained in Section
1.1(b) of the Credit Agreement is hereby amended and restated in its entirety as
follows:
"Fixed Charge Coverage Ratio": (i) as of the fiscal quarter
ending October 31, 1995, the ratio of (a) EBITDA in respect of the fiscal
quarter then ended minus all capital expenditures (other than those made with
property insurance proceeds) during such fiscal quarter made by the Borrower and
the Subsidiaries on a Consolidated basis, to (b) Fixed Charges in respect of
such fiscal quarter, (ii) as of the fiscal quarter ending January 31, 1996, the
ratio of (a) EBITDA in respect of the two consecutive fiscal quarters then ended
minus all capital expenditures (other than those made with property insurance
proceeds) during such two consecutive fiscal quarters made by the Borrower and
the Subsidiaries on a Consolidated basis, to (b) Fixed Charges in respect of
such two consecutive fiscal quarters, (iii) as of the fiscal quarter ending
April 30, 1996, the ratio of (a) EBITDA in respect of the three consecutive
fiscal quarters then ended minus all capital expenditures (other than those made
with property insurance proceeds) during such three consecutive fiscal quarters
made by the Borrower and the Subsidiaries on a Consolidated basis, to (b) Fixed
Charges in respect of such three consecutive fiscal quarters, and (iv) as of
each fiscal quarter ending on or after July 31, 1996, the ratio of (a) EBITDA in
respect of the four consecutive fiscal quarters then ended minus all capital
expenditures (other than those made with property insurance proceeds) during
such four consecutive fiscal quarters made by the Borrower and the Subsidiaries
on a Consolidated basis, to (b) Fixed Charges in respect of such four
consecutive fiscal quarters. For purposes of this definition, "EBITDA" shall
mean EBITDA of the Borrower and the Subsidiaries on a Consolidated basis.
2. The defined term "Leverage Ratio" contained in Section 1.1(b) of the
Credit Agreement is hereby amended and restated in its entirety as follows:
"Leverage Ratio": (i) as of the fiscal quarter end October
31, 1995, the ratio of (a) the sum of (1) the aggregate liquidation preference
value of all preferred stock (including without limitation, Preferred Stock)
issued by the Borrower, plus (2) all Indebtedness of the Borrower and the
Subsidiaries on a Consolidated basis on such date, to (b) four multiplied by
EBITDA in respect of the fiscal quarter then ended, (ii) as of the fiscal
quarter end January 31, 1996, the ratio of (a) the sum of (1) the aggregate
liquidation preference value of all preferred stock (including without
limitation, Preferred Stock) issued by the Borrower, plus (2) all Indebtedness
of the Borrower and the Subsidiaries on a Consolidated basis on such date, to
(b) two multiplied by EBITDA in respect of the two consecutive fiscal quarters
then ended, (iii) as of the fiscal quarter end April 30, 1996, the ratio of (a)
the sum of (1) the aggregate liquidation preference value of all preferred stock
(including without limitation, Preferred stock) issued by the Borrower, plus (2)
all Indebtedness of the Borrower and the Subsidiaries on a Consolidated basis on
such date, to (b) (4/3) multiplied by EBITDA in respect of the three consecutive
fiscal quarters then ended, and (iv) as of each fiscal quarter ending on or
after July 31, 1996, the ratio of (a) the sum of (1) the aggregate liquidation
preference value of all preferred stock (including without limitation, Preferred
Stock) issued by the Borrower, plus (2) all Indebtedness of the Borrower and the
Subsidiaries on a Consolidated basis on such date, to (b) EBITDA in respect of
the four consecutive fiscal quarters then ended. For purposes of this
definition, (x) "EBITDA" shall mean EBITDA of the Borrower and the Subsidiaries
on a Consolidated basis, and (y) with respect of the Approved Subordinated Debt
and the Other Subordinated Debt, and the liquidation preference value in respect
of preferred stock issued by the Borrower, shall each be as set forth on the
balance sheet of the Borrower as of such fiscal period end.
3. Section 6.4 of the Credit Agreement is amended and restated in its
entirety as follows:
6.4 Acquisition Loans
In connection with each Acquisition Loan, (a) the Borrower
shall have delivered to the Agent (for delivery to each Lender) each of the
Acquisition Notes, executed by the Borrower, (b) the Leverage Ratio at the
fiscal quarter end (in respect of which a Compliance Certificate shall have been
delivered to each Lender pursuant to Section 7.l7 (d)) immediately preceding the
date of such Loan shall not exceed 2.75:1.00, and (c) the Fixed Charge Coverage
Ratio at the fiscal quarter end (in respect of which a Compliance Certificate
shall have been delivered to each Lender pursuant to Section 7.7(d)) immediately
preceding the date of such Loan shall be greater than or equal to 1.50:1.00.
4. Section 7.12 of the Credit Agreement is amended and restated in its
entirety as follows:
7.12 Fixed Charge Coverage Ratio
At each fiscal quarter end occurring during each period set
forth below, have a Fixed Charge Coverage Ratio greater than or equal to the
ratio set forth adjacent to such period:
Period Ratio
- ------------------------------------------ ---------
October 1, 1995 through October 31, 1995 0.65:1.00
November 1, 1995 through January 31, 1996 0.80:1.00
February 1, 1996 through April 30, 1996 1.20:1.00
May 1, 1996 and thereafter 1.50:1.00
5. Section 8.4(f) (viii) of the Credit Agreement is amended by (a)
deleting the words "Section 7.11" and inserting in its place "Sections 7.11 and
7.12", and (b) deleting the words "such Section" and inserting in their place
the words "such Sections".
6. Sections 1-5 of this Amendment shall not be effective until such
time as each of the following conditions precedent shall have been fulfilled:
(a) Required Lenders shall have consented to the execution and
delivery hereof by the Agent.
(b) The Borrower shall have paid to the Agent, for the pro rata
account of the Lenders, an amendment fee in the sum of $45,000.
(c) All legal matters incident to the execution and delivery of
this Amendment shall be reasonably satisfactory to Special Counsel.
7. The Borrower hereby (a) reaffirms and admits the validity and
enforceability of all the Loan Documents and its obligations thereunder, (b)
agrees and admits that it has no valid defenses to or offsets against any of its
obligations to the Agent, the Issuer or the Lenders under the Loan Documents,
(c) represents and warrants that, after giving effect hereto, no Default or
Event of Default has occurred or is continuing, and (d) agrees to pay the
reasonable fees and disbursements of Special Counsel to the Agent incurred in
connection with the preparation, negotiation and closing of this Amendment, and
(e) represents and warrants that all of the representations and warranties
contained in the Loan Documents are true and correct on and as of the date
hereof.
8. In all other respects, the Agreement and the other Loan Documents
shall remain in full force and effect.
9. This Amendment may be executed in any number of counterparts, each
of which shall be an original and all of which shall constitute one agreement.
It shall not be necessary in making proof of this Amendment to produce or
account for more than one counterpart signed by the party against which
enforcement is sought.
10. THIS AMENDMENT IS BEING DELIVERED IN AND IS INTENDED TO BE
PERFORMED IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCEABLE IN
ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
<PAGE>
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Amendment to be
duly executed on its behalf.
THE BANK OF NEW YORK,
as the Agent
By: /s/ RON R. REEDY
Name: Ron R. Reedy
Title: Vice President
INTERNATIONAL POST LIMITED
By: /s/ JEFFREY J. KAPLAN
Name: Jeffrey J. Kaplan
Title: Executive Vice President
and Chief Financial Officer
Each of the following Lenders hereby acknowledges and consents to the execution
and delivery of this Amendment by the Agent:
THE BANK OF NEW YORK
By: /s/ RON R. REEDY
Name: Ron R. Reedy
Title: Vice President
FLEET BANK
By: /s/ JUAN M. CSILLAGI
Name: Juan M. Csillagi
Title: Senior Vice President
NATWEST BANK N.A.
By: /s/ PHILIP MCDONOUGH
Name: Philip McDonough
Title: Vice President
<PAGE>
EXHIBIT 10.54
<PAGE>
AMENDMENT NO. 4
Amendment No. 4 (this "Amendment"), dated as of October 3, 1996, to the
Credit Agreement, dated as of May 4, 1995, by and among International Post
Limited, the Lenders party thereto, and The Bank of New York, as the Issuer and
as the Agent (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement").
RECITALS
I. Capitalized terms used herein which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
II. The Borrower and the Agent wish to amend the Credit Agreement upon
the terms, and subject to the conditions, herein contained.
Therefore, in consideration of the Recitals, the terms and conditions
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Agent hereby
agree as follows:
1. The definition "Applicable Margin" contained in Section 1.1(b) of
the Credit Agreement is amended as follows:
(a) The grid contained in such definition is amended and restated
in its entirety as follows:
Whenever the Leverage Non-Acquisition Acquisition
Ratio is: ABR Eurodollar Eurodollar LC Fee
- ---------------------------- ------ --------------- ----------- ------
Greater than 2.00 0.375% 1.750% 1.875% 1.750%
Greater than or equal to
1.00 less than equal to 2.00 0.125% 1.500% 1.625% 1.500%
Less than 1.00 0.125% 1.250% 1.375% 1.250%
(b) Clause (d) of such definition is amended by inserting the
phrase "or if at any time from and after October 3, 1996 and prior to the date,
if any, upon which the Fixed Charge Coverage Ratio shall be less than 1.50:1.00"
immediately after the reference to Section 7.7(d) contained in such clause.
2. Section 1.1 of the Credit Agreement is amended by adding the
following definition in the appropriate alphabetical order:
"Pro-forma Operating Lease Obligation": at any time with respect to
any Person, any obligation or liability of such Person at such time or at any
time thereafter, as lessee under any lease, which in accordance with GAAP is not
required to be capitalized on the balance sheet of such Person.
3. Section 7.12 of the Credit Agreement is amended and restated in its
entirety as follows:
7.12 Fixed Charge Coverage Ratio
At each fiscal quarter end occurring during each period set
forth below, have a Fixed Charge Coverage Ratio greater than or equal to the
ratio set forth adjacent to such period:
Period Ratio
----------------------------------------------- ---------
July 31, 1996 through October 30, 1996 1.10:1.00
October 31, 1996 through January 31, 1997 1.15:1.00
February 1, 1997 through July 31, 1997 1.25:1.00
August 1, 1997 and thereafter 1.50:1.00
4. Section 7.7(b) is amended by (a) deleting the terms "8.6 and 8.7"
contained therein, and (b) inserting the terms "8.6, 8.7 and 8.14" in their
place.
5. Section 8 of the Credit Agreement is amended by adding the following
Section at the end thereof:
8.14 Pro-forma Operating Lease Obligations
At any time, create, incur, assume or suffer to exist any
Pro-forma Operating Lease Obligation, or permit any Subsidiary so to do, except
any one or more of the following Pro-forma Operating Lease Obligations:
(a) Pro-forma Operating Lease Obligations of the Borrower and
the Subsidiaries in respect of leases for property, plant and equipment entered
into to enable the Borrower and the Subsidiaries to satisfy their respective
obligations and liabilities under service contracts, provided that (i) each such
service contract is entered into with a third party and (A) such third party is
an investment grade credit, or (B) all of the obligations and liabilities of
such third party under such service contract are supported by one or more
letters of credit, in each case issued by a financial institution having capital
and undivided surplus of not less than $500,000,000, and (ii) each such lease
shall expire on or prior to the expiration of the corresponding service
contract.
(b) Pro-forma Operating Lease Obligations of the Borrower and
the Subsidiaries in respect of leases for real property, and
(c) other Pro-forma Operating Lease Obligations of the
Borrower and the Subsidiaries, provided that the aggregate amount of all such
Pro-forma Operating Lease Obligations shall at no time exceed $4,000,000 on a
Consolidated basis.
6. Paragraphs 1 - 5 of this Amendment shall not be effective until such
date as each of the following conditions shall have been satisfied:
(a) The Required Lenders shall have consented to the execution and
delivery hereof by the Agent.
(b) The Borrower shall have paid to the Agent, for the pro rata
account of the Lenders, an amendment fee in the sum of $35,000.
(c) All legal matters incident to the execution and delivery of
this Amendment shall be reasonably satisfactory to Special Counsel.
7. The Borrower hereby (a) reaffirms and admits the validity and
enforceability of all the Loan Documents and its obligations thereunder, (b)
agrees and admits that it has no valid defenses to or offsets against any such
obligation, (c) represents and warrants that no Default or Event of Default has
occurred or is continuing, and (d) agrees to pay the reasonable fees and
disbursements of Special Counsel to the Agent incurred in connection with the
preparation, negotiation and closing of this Amendment, and (e) represents and
warrants that each of the representations and warranties made by it in the Loan
Documents is true and correct with the same effect as though such representation
and warranty had been made on the date hereof.
8. In all other respects, the Loan Documents shall remain in full force
and effect, and no amendment in respect of any term or condition of any Loan
Document contained herein shall be deemed to be an amendment in respect of any
other term or condition contained in any Loan Document.
9. This Amendment may be executed in any number of counterparts all of
which, taken together, shall constitute one Amendment. In making proof of this
Amendment, it shall only be necessary to produce the counterpart executed and
delivered by the party to be charged.
10. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED
TO BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCEABLE
IN ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
<PAGE>
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Amendment to be
duly executed on its behalf.
THE BANK OF NEW YORK,
as the Agent
By: /s/ RONALD R. PAGOTO
Name: Ronald R. Pagoto
Title: Vice President
INTERNATIONAL POST LIMITED
By: /s/ JEFFREY J. KAPLAN
Name: Jeffrey J. Kaplan
Title: Executive Vice President
and Chief Financial Officer
Each of the following hereby acknowledges and consents to the execution and
delivery of this Amendment by the Agent:
THE BANK OF NEW YORK,
Individually and as the Issuer
By: /s/ RONALD R. PAGOTO
Name: Ronald R. Pagoto
Title: Vice President
FLEET BANK, N.A. (formerly known as
NatWest Bank N.A.)
By: /s/ THOMAS J. LEVY
Name: Thomas J. Levy
Title: Vice President
KEY BANK OF NEW YORK
By: /s/ BRENDAN SACHTJEN
Name: Brendan Sachtjen
Title: Vice President
<PAGE>
EXHIBIT 10.55
<PAGE>
FIRST AMENDMENT
---------------
THIS FIRST AMENDMENT, dated as of this 15th day of September, 1995, by
and between MTV Latin America, Inc. (n/k/a MTV Latino Inc.) ("MTVL") and Post
Edge Inc. ("PE").
W I T N E S S E T H:
WHEREAS, PE and MTVL entered into that certain Agreement, dated as of
June 7, 1993, wherein PE furnished for the exclusive use of MTVL certain
premises located at 420 Lincoln Road, Miami, Florida (the "Agreement"). Unless
otherwise defined herein, the terms of the Agreement are incorporated herein by
reference as therein defined;
WHEREAS, MTVL wishes to: (i) extend the Initial Term of the Agreement
for an additional 5 years or sixty (60) months, thereby amending the Agreement
by changing the expiration date from September 16, 1995 to September 15, 2000 on
the same terms and conditions set forth in the Agreement subject to the
provisions contained herein and (ii) delete Section 2.2 of the Agreement.
WHEREAS, MTVL and PE wish to amend the Agreement with additional and
new terms and conditions stated herein;
NOW THEREFORE, for and in consideration of the Premises, Services and
Crew, the parties hereto, intending to be legally bound, hereby extend the
Initial Term of the Agreement and amend the Agreement as follows:
I. The Initial Term of the Agreement is extended for an additional five (5) year
period or sixty (60) months from September 16, 1995 through September 15, 2000
(the "Extended Term"), on the same terms and conditions set forth in the
Agreement subject to the provisions contained herein. Notwithstanding anything
to the contrary contained herein or in the Agreement (except for MTVL's right to
terminate the Agreement in accordance with Section 10 thereof), MTVL shall have
the right to cancel the Agreement at any time during the Extended Term upon four
(4) months' written notice to PE (the "Cancellation Period") at the end of which
period MTVL shall be released from all obligations under the Agreement, provided
that MTVL pays to PE a penalty fee of fifteen percent (15%) of the annual
Extended Fee (as defined below) applicable to the year when the cancellation
right is exercised (the "Penalty Fee"). MTVL shall not be responsible for the
Penalty Fee in the event the cancellation of the Agreement is due to MTVL
terminating its operations as a cable television network or for any other
termination right already granted to MTVL under the Agreement. Moreover, should
PE be able to lease the Premises to a third party during said Cancellation
Period, MTVL will consider PE's request to vacate the Premises prior to the end
of the Cancellation Period provided MTVL is fully released of all obligations
under the Agreement (as modified herein) except for its obligation to pay the
Penalty Fee.
II. Section 6.1 (c) of the Agreement is hereby amended as follows:
Except as otherwise provided in the Agreement and/or hereunder, in full
and complete consideration for the Premises, Services and Crew provided by PE
during the Extended Term (or any portion thereof), and provided that PE has
performed its obligations under the Agreement, MTVL agrees to pay PE and PE
agrees to accept the following monthly payments set forth in the following
payment schedule (the "Extended Fee"):
Year 1: $ 88,465.00 per month beginning September 16, 1995 through
September 15, 1996
Year 2: $ 95,140.00 per month beginning September 16, 1996 through
September 15, 1997
Year 3: $100,465.00 per month beginning September 16, 1997 through
September 15, 1998
Year 4: $110,165.00 per month beginning September 16, 1998 through
September 15, 1999
Year 5: $118,450.00 per month beginning September 16, 1999 through
September 15, 2000.
III. Section 6.2 of the Agreement is hereby modified to include the following:
(e) Notwithstanding anything to the contrary in the Agreement or
herein, on any four (4) day weekend holiday (including, but not limited to,
Thanksgiving, Fourth of July, Christmas and New Years Day) on which any
non-holiday day of such a weekend the MTVL offices are closed for business (for
example during a holiday weekend when an additional weekday is given as a day
off), but on which weekday the Crew is required to work (the "MTVL Day Off"), PE
and MTVL hereby agree that all PE employees shall be offered that additional
weekday as a non-working day provided the following:
1. all employees shall be offered the option of taking the day off in
exchange for their agreement to work a pre-determined amount of additional
overtime hours during the week prior or the week post the respective holiday
weekend;
2. with respect to the week between Christmas and New Year's Day during
which MTVL will not be needing studio services (the "Christmas Week"), all
employees shall be offered the option of taking the Christmas Week off in
exchange for their agreement to work a reasonable mutually pre-determined amount
of additional overtime hours during the two (2) weeks prior or the two (2) weeks
post such Christmas Week; and
3. all employees agree to the same arrangement for such holiday periods
and are compensated fairly at their usual overtime rates for the week
representing the permitted days off.
IV. Section 6.6 (a) of the Agreement is modified to include the following
language:
Notwithstanding anything to the contrary contained herein, PE shall
make available to MTVL the following Additional Equipment at no additional cost
for the Extended Term:
(a) Cyc and curtains
(b) Two (2) wireless headsets
(c) Two (2) wireless microphones
(d) Wide angle lens
V. In addition to the foregoing, PE shall also provide to MTVL, at no additional
cost, for the Extended Term, a Grass Valley Kaleidoscope, to the extent
obtainable by PE and if not, a digital video effects device mutually acceptable
to the parties to be used by MTVL in conjunction with the V Series Paintbox and
Harry equipment currently being used by MTVL and located at the PE post
facility.
VI. For the Extended Term, PE shall grant to MTVL a total discount of twenty
percent (20%) from the rate card rates as published in the PE rate card dated
September 1, 1992 for MTVL's use of the D2 Dubbing facilities (including
equipment) located at the Premises.
VII. Schedule A of the Agreement is hereby amended to: (i) reduce the Crew by
one (1) member by consolidating the Chyron Operator and Teleprompter Operator
positions and (ii) delete the reference to the Bullpen Area (approximately 240
square feet).
VIII. Section 17 of the Agreement shall be amended to include the following
language: At any point during the Extended Term, PE hereby agrees that MTVL
shall have the right to permit a third party vendor to use all or any part of
the Premises for its use for any period of time provided:
1. MTVL shall at all times remain primarily responsible to PE for all
obligations under the Agreement, including without limitation, the obligation to
pay the Extended Fee, and MTVL shall not be relieved of such obligations due to
any actions or failure to act by PE (, or said third party or any other party
invited by such third party) in connection with any third party or other party's
(invited by such third party) use of the Premises as contemplated by this
Section 17;
2. MTVL shall give PE notice of its intention to permit a specific
third party the right to use the Premises no less than 15 days prior to the date
of the third party's intended use of the Premises;
3. PE shall have the right to approve the selection of the third party
and must give notice to MTVL no later than 72 hours from MTVL's notice to PE of
the designated third party, provided however PE's approval may not be
unreasonably withheld or delayed;
4. MTVL shall consult with PE as to the costs MTVL will be charging
such third party of the use of the Premises, provided all final decisions
regarding such third party shall be MTVL's decision;
5. MTVL shall share with PE fifty percent (50%) of any and all profits
received by MTVL from such third parties' use of the Premises; "profits" shall
be defined to mean any amounts recovered by MTVL in excess of the Extended Fee
(after deducting therefrom the fees, if any, for Overtime Services and those
charges described in Section 8 (vi) herein) payable to PE received from such
third party which Extended Fees shall be prorated (solely for the purpose of
calculating profits and not releasing MTVL from paying such Extended Fees) for
the period of time the Premises are being used by such third party;
6. in the event such third party requests additional equipment from PE,
PE shall be entitled to charge such party its discounted rate for the additional
equipment and shall also be entitled to charge such party PE's standard and
customary markup (which shall not exceed the markup for equipment PE charges to
MTVL) and standard Overtime rates; any monies in excess of that paid by such
third party shall be shared on an equal basis between MTVL and PE;
7. any third party agreeing to use the Premises shall report directly
to MTVL and shall deliver to MTVL and PE adequate Certificates of Insurance and
other standard and customary documentation (all in form satisfactory to MTVL and
PE) as to its ability to indemnify MTVL and PE in the event of any damage, loss
or claim resulting from its use;
8. in the event MTVL elects to permit the use of the Premises by any
affiliated entity of the Viacom Inc. group of related companies, MTVL shall not
be obligated to pay to PE any amounts recovered in excess of the Extended Fee.
9. MTVL shall be fully and solely responsible for the use of the
Premises by third parties or other parties (invited by such third parties) as
contemplated in this Section 17. MTVL shall at all times indemnify and hold
harmless PE against and from any and all claims, expenses, costs, sums, suits,
liabilities and damages including reasonable attorneys' fees (including but not
limited to trial and appellate attorneys' fees) which result from or arise out
of or are in connection with such third party's or other party's (provided such
other party is invited by a third party) use of the Premises as contemplated in
this Section 17.
IX. Section 19 of the Agreement is hereby amended to include the following:
Copies of all notices to MTVL shall also be forwarded to Robin Taubin,
Esq., Vice President Counsel for Real Estate, Viacom Inc. at 1515 Broadway, New
York, New York 10036.
X. Except as modified hereby, the Agreement shall remain in full force and
effect and all terms, conditions, representations and warranties contained
therein are hereby ratified and confirmed.
IN WITNESS WHEREOF, MTVL and PE have duly executed this First Amendment
as of the day and year first above written.
MTV LATIN AMERICA, INC.
(n/k/a MTV Latino, Inc.)
By: /s/ TOM HUNTER
Name: Tom Hunter
Title: President
POST EDGE INC.
By: /s/ KEN LORBER
Name: Ken Lorber
Title: President
<PAGE>
EXHIBIT 10.56
<PAGE>
ASSIGNMENT AND ACCEPTANCE AGREEMENT
Assignment and Acceptance Agreement (as the same may be amended,
supplemented or otherwise modified from time to time, this "Agreement"), dated
as of August 22, 1996, by and between Fleet Bank, N.A. (formerly known as,
NatWest Bank N.A., the "Assignor") and Key Bank of New York (the "Assignee").
RECITALS
I. Reference is made to the Credit Agreement, dated as of May 4, 1995,
as amended by Amendment No. 1 and Reallocation Agreement, dated as of June 12,
1995, Amendment No. 2, dated as of October 27, 1995, Amendment No. 3, dated as
of November 30, 1995, by and among International Post Limited, the Lenders party
thereto, and The Bank of New York, as the Issuer and as the Agent (as the same
may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement").
II. The Assignor wishes to assign and delegate to the Assignee, and the
Assignee wishes to purchase and assume from the Assignor, some of the Assignor's
rights and obligations under the Loan Documents upon the terms, and subject to
the conditions, contained herein.
Therefore, in consideration of the Recitals, the terms and conditions
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor and the Assignee
hereby agree as follows:
1. Defined Terms
(a) Each capitalized term used herein which is not otherwise
defined herein shall have the meaning ascribed thereto in the Credit Agreement.
(b) When used in this Agreement, each of the following capitalized
terms shall have the meaning ascribed thereto unless the context hereof
otherwise specifically requires:
"Assigned Percentage": 58.333333%.
"Assignment Effective Date": as defined in Section 5.
"Assignee Notes": as defined in Section 5(a)(v).
"Assignor Rights and Obligations": as of the Assignment Effective
Date, the Assigned Percentage of all of the Assignor's rights and obligations
under the Loan Documents, including, without limitation, such percentage of its
Loans, its Letter of Credit Participation, its rights and obligations in respect
of the LC Outstandings, its Commitments, its Notes, and its rights and
obligations under the Security Agreement and the Guaranty.
"LC Outstandings": as of any date, the excess of (a) the aggregate
sum of all payments by the Assignor in participation of the Reimbursement
Obligations, over (b) all payments to the Assignor in respect of such
participation.
"New Assignor Notes": as defined in Section 5(a)(v).
"Purchase Price": an amount equal to the Assigned Percentage of the
sum of (a) the aggregate unpaid principal amount of the Assignor's Loans as of
the Assignment Effective Date, plus (b) the LC Outstandings as of the Assignment
Effective Date.
2. Assignment; Payment by Assignee
Pursuant to Section 11.7(c) of the Credit Agreement, the Assignor
hereby assigns and delegates to the Assignee, and the Assignee hereby purchases
and assumes from the Assignor, without recourse or, except as otherwise
specifically provided herein, representation or warranty, the Assignor Rights
and Obligations. The Assignee agrees to pay to the Assignor the Purchase Price
on the Assignment Effective Date.
3. Representations and Warranties
(a) Assignor. The Assignor hereby represents and warrants to the
Assignee as follows:
(i) aggregate unpaid principal amount of its Working Capital Loans
is $3,840,000, and such Working Capital Loans are composed of the following
Working Capital ABR Advances and Working Capital Eurodollar Advances: (1)
Working Capital ABR Advances: $0, and (2) Working Capital Eurodollar Advances:
(A) $480,000 for 31 days, the last day of which is August 29, 1996, (B)
$2,340,000 for 31 days, the last day of which is September 19, 1996, (C)
$180,000 for 31 days, the last day of which is September 8, 1996, and (D)
$840,000 for 30 days, the last day of which is September 6, 1996,
(ii) the aggregate unpaid principal amount of its Acquisition Loans
is $0,
(iii) the aggregate unpaid principal amount of its Term Loan is
$10,992,000, and such Term Loan is composed of the following Term Loan ABR
Advances and Term Loan Eurodollar Advances: (1) Term Loan ABR Advances: $12,000,
and (2) Term Loan Eurodollar Advances: $10,980,000 for 31 days, the last day of
which is September 12, 1996,
(iv) its Working Capital Commitment Amount is $6,000,000,
(v) its Acquisition Commitment Amount is $0.00,
(vi) the amount of its Letter of Credit Participation is
$717,889.40, and
(vii) the LC Outstandings are $0.00.
(b) Assignee. The Assignee hereby represents and warrants to
the Assignor that (i) it is legally authorized to enter into this Agreement,
(ii) it is an "accredited investor" within the meaning of Regulation D of the
Securities and Exchange Commission, as amended, and (iii) it has, independently
and without reliance upon the Assignor, and based on such documents and
information as it has deemed appropriate, reviewed the Loan Documents and made
its own evaluation of, and investigation into, the business, operations,
Property, financial and other condition and creditworthiness of the Borrower and
made its own decision to enter into this Agreement.
4. Covenants of the Assignee
The Assignee hereby covenants and agrees that it will,
independently and without reliance upon the Assignor, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, evaluations and decisions in taking or not taking
action under the Loan Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, Property, financial
and other condition and creditworthiness of the Borrower.
5. Effectiveness of this Agreement
(a) Section 2 of this Agreement shall not become effective; until
such date (the "Assignment Effective Date") as all of the following conditions
shall have been fulfilled:
(i) The Agent shall have received this Agreement duly executed by
each of the Assignor, the Assignee and, if required by the Credit Agreement, the
Borrower;
(ii) The Agent shall have executed a copy of this Agreement;
(iii) The Assignor shall have delivered to the Assignee (with a
copy to the Agent) a duly completed letter in the form of Annex A hereto;
(iv) The Assignee shall have confirmed in writing to the Assignor
(with a copy to the Agent) that, on or before the Assignment Effective Date, it
shall have transferred (in accordance with Section 6 hereof) the Purchase Price
to the Assignor. At the time of such confirmation, the Assignee shall be deemed
to have remade the representations and warranties contained in Section 3(b)(i),
(ii) and (iii) hereof on and as of the date of such confirmation;
(v) The Agent shall have received (1) for the Assignee, (A) a new
Working Capital Note in a maximum principal amount equal to the Working Capital
Commitment Amount of the Working Capital Commitment assumed by the Assignee
hereunder, and (B) a new Term Note in a principal amount equal to the amount of
the Term Loan assigned to the Assignee hereunder, in each case payable to the
order to the Assignee and dated the first Borrowing Date (collectively, the
"Assignee Notes"), and (2) for the Assignor, (A) a new Working Capital Note in a
maximum principal amount equal to the Working Capital Commitment Amount of the
Working Capital Commitment retained by the Assignor, and (B) a new Term Note in
a principal amount equal to the amount of the Term Loan retained by the
Assignor, in each case payable to the order of the Assignor and dated the first
Borrowing Date (collectively, the "New Assignor Notes"); and
(vi) All of the conditions set forth in Section 11.7(c) with
respect to this Agreement, and the transactions contemplated hereby, shall have
been fulfilled.
(b) Upon the Assignment Effective Date, (i) the Agent shall record
the assignment contemplated hereby, (ii) the Assignee shall be a Lender, and
(iii) the Assignor, to the extent of the assignment provided for herein, shall
be released from its obligations under the Loan Documents.
(c) The Assignee hereby appoints and authorizes the Agent to take
such action, on and after the Assignment Effective Date, as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to the
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto.
(d) From and after the Assignment Effective Date, the Agent shall
make all payments in respect of the interest assigned hereby (including payments
of principal, interest, fees and other amounts) to the Assignee. The Assignor
and the Assignee shall make all appropriate adjustments with respect to amounts
under the Loan Documents which accrued prior to the Assignment Effective Date
and which were paid thereafter, directly between themselves.
(e) Each of the Assignee Notes and the New Assignor Notes shall be
held by the Agent in escrow, pending the effectiveness of Section 2 of this
Agreement and the delivery of, or against receipt of, all of the Assignor's
existing Notes, at which time they shall be returned to the Borrower.
6. Payment Instructions
All payments to be made to the Assignor by the Assignee hereunder
shall be made by wire transfer of immediately available funds to the Assignor
at:
Fleet Bank, N.A.
ABA #: 021200339
International Post Limited
Loan Operations Dept. 838
<PAGE>
7. Notices
All notices, requests and demands to or upon the Assignee in
connection with this Agreement and the Loan Documents are to be sent or
delivered to the place set forth adjacent to its name on the signature page(s)
hereof.
8. Miscellaneous
(a) For purposes of this Agreement, all calculations and
determinations with respect to the outstanding principal amount of the
Assignor's Loans, the Assignor's Commitment Amounts and all other similar
calculations and determinations, shall be made and shall be deemed to be made as
of the commencement of business on the date of such calculation or
determination, as the case may be.
(b) Section headings have been inserted herein for convenience only
and shall not be construed to be a part hereof.
(c) This Agreement embodies the entire agreement and understanding
between the Assignor, the Assignee, the Borrower and the Agent with respect to
the subject matter hereof and supersedes all other prior arrangements and
understandings between the Assignor and the Assignee with respect to the subject
matter hereof.
(d) This Agreement may be executed in any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same agreement. It shall not be necessary in making proof
of this agreement to produce or account for more than one counterpart signed by
the party to be charged.
(e) Every provision of this Agreement is intended to be severable,
and if any term or provision hereof shall be invalid, illegal or unenforceable
for any reason, the validity, legality and enforceability of the remaining
provisions hereof shall not be affected or impaired thereby, and any invalidity,
illegality or unenforceability in any jurisdiction shall not affect the
validity, legality or enforceability of any such term or provision in any other
jurisdiction.
(f) This Agreement shall be binding upon and inure to the benefit
of the Assignor and the Assignee and their respective successors and permitted
assigns, except that neither party may assign or transfer any of its rights or
obligations hereunder (i) without the prior written consent of the other party,
and (ii) in contravention of the Credit Agreement.
(g) This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of New York without regard to principles of
conflicts of law.
<PAGE>
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Agreement to be
duly executed on its behalf.
FLEET BANK, N.A. (formerly known
as NatWest bank N.A.)
By: /s/ THOMAS J. LEVY
Name: Thomas J. Levy
Title: Vice President
KEY BANK OF NEW YORK
By: /s/ BRENDAN SACHTJEN
Name: Brendan Sachtjen
Title: Vice President
Address for notices:
Key Bank of New York
2 Gannett Drive
White Plains, NY 10604
Attention: Brendan E. Sachtjen,
Vice President
Telephone: (914) 694-8446
Facsimile: (914) 694-8463
Consented to and Accepted this
20th day of August, 1996
THE BANK OF NEW YORK, as Agent
By: /s/ RONALD R. PAGOTO
Name: Ronald R. Pagoto
Title: Vice President
Consented to this 20th day
of August, 1996
INTERNATIONAL POST LIMITED
By: /s/ JEFFREY J. KAPLAN
Name: Jeffrey J. Kaplan
Title: Executive Vice President
and Chief Financial Officer
<PAGE>
ANNEX A TO ASSIGNMENT AND
ACCEPTANCE AGREEMENT
FORM OF LETTER
August 22, 1996
Key Bank of New York
2 Gannett Drive
White Plains, New York 10604
Attention: Brendan E. Sachtjen,
Vice President
Re: Assignment and Acceptance Agreement, dated as of August 22,
1996, by and between Fleet Bank, N.A. (formerly known as NatWest Bank N.A.) and
Key Bank of New York (as the same may be amended, supplemented or otherwise
modified from time to time, the "Agreement")
Ladies and Gentlemen:
This letter is being delivered pursuant to Section 5(a)(iii) of the
Agreement. Capitalized terms used herein which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the agreement.
The Assignor hereby represents and warrants to the Assignee as
follows:
(a) the aggregate unpaid principal amount of its Working Capital
Loans is $3,840,000, and such Working Capital Loans are composed of the
following Working Capital ABR Advances and Working Capital Eurodollar Advances:
(1) Working Capital ABR Advances: $0, and (2) Working Capital Eurodollar
Advances: (A) $480,000 for 31 days, the last day of which is August 29, 1996,
(B) $2,340,000 for 31 days, the last day of which is September 19, 1996, (C)
$180,000 for 31 days, the last day of which is September 8, 1996, and (D)
$840,000 for 30 days, the last day of which is September 6, 1996,
(b) the aggregate unpaid principal amount of its Acquisition Loans
is $0,
(c) the aggregate unpaid principal amount of its Term Loan is
$10,992,000, and such Term Loan is composed of the following Term Loan ABR
Advances and Term Loan Eurodollar Advances: (1) Term Loan ABR Advances: $12,000,
and (2) Term Loan Eurodollar Advances: $10,980,000 for 31 days, the last day of
which is September 12, 1996,
(d) its Working Capital Commitment Amount is $6,000,000,
(e) its Acquisition Commitment Amount is $0.00,
(f) the amount of its Letter of Credit Participation is
$717,889.40, and
(g) the LC Outstandings are $0.00.
Very truly yours,
FLEET BANK, N.A.
By: /s/ THOMAS J. LEVY
Name: Thomas J. Levy
Title: Vice President
cc: Ronald R. Pagoto,
Vice President
<PAGE>
EXHIBIT 27
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 11,032
<ALLOWANCES> 725
<INVENTORY> 0
<CURRENT-ASSETS> 12,663
<PP&E> 49,159
<DEPRECIATION> 19,625
<TOTAL-ASSETS> 67,861
<CURRENT-LIABILITIES> 11,617
<BONDS> 0
0
0
<COMMON> 62
<OTHER-SE> 29,773
<TOTAL-LIABILITY-AND-EQUITY> 67,861
<SALES> 49,352
<TOTAL-REVENUES> 49,352
<CGS> 24,049
<TOTAL-COSTS> 24,049
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 232
<INTEREST-EXPENSE> 2,262
<INCOME-PRETAX> 1,676
<INCOME-TAX> 862
<INCOME-CONTINUING> 814
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 814
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
