ITEM 1. BUSINESS
GENERAL
The Company was founded under the name Vaughn Displays, Inc. in 1943 and changed its name to VAUGHN COMMUNICATIONS, INC. in 1987. The Company is engaged in two business segments. The Vaughn Communications Division is a high volume video tape duplicator for the corporate, educational and institutional user, accounting for approximately 80% of the Company's sales in fiscal 1997. The Vaughn Products Division is a manufacturer and distributor of gift, leather products, and custom designed soft goods sold by gift shops and western stores, accounting for approximately 20% of the Company's sales in fiscal 1997.
During the fiscal years ended January 31, 1997, 1996 and 1995, the percentage of sales of the Communications Division and the Products Division as compared to total sales of the Company were as follows:
Year Ended January 31, ---------------------- Division 1997 1996 1995 -------- ---- ---- -----
Communications Division 80% 87% 83% Products Division 20% 13% 17%
The Company's strategic objective is to grow and expand its two businesses through internal growth and acquisitions. (See "Former Businesses" and "Recent Acquisitions" below.) The term "Company" herein refers to the registrant (VAUGHN COMMUNICATIONS, INC.), including its two operating divisions. The Company's principal executive offices are located at 5050 West 78th Street, Minneapolis, Minnesota 55435, and its telephone number is (612) 832-3200.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information about industry segments for the years ended January 31, 1997, 1996 and 1995 included in the notes to the Registrant's audited consolidated financial statements to be included in the 1997 Shareholder Report are incorporated herein by reference.
VAUGHN COMMUNICATIONS DIVISION
The Company's operations in the communication industry are conducted through its Communications Division. The Communications Division currently has video tape duplication facilities in Minneapolis, Milwaukee, Phoenix, Tampa, Portland, Atlanta, Dallas, Houston, Raleigh, Chicago, Denver and Seattle and has additional sales offices in St. Louis, New York City, Los Angeles, Nashville, Washington, D.C. and Ft. Lauderdale. It serves markets that are principally located in the United States.
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PRIMARY PRODUCTS AND SERVICES OF THE VIDEO TAPE DUPLICATION BUSINESS
There are two main formats in the video tape duplication industry regarding VHS - tape standard play and extended play. Standard play is currently the acceptable format for theatrical movies and certain other products. Extended play is garnering a larger segment of the non-theatrical segment. Promotional products, "how to" videos and other videos are moving toward extended play format. The primary reason for this shift in format is that extended play uses one-third the amount of tape required for standard play and can be done in high speed duplication which is ultimately less costly than standard play.
In addition to the primary products and services noted above, the Communications Division offers international standards conversion, graphic design, product fulfillment, MPEG compression, and rents video production and editing equipment on a short-term basis. This group of ancillary services represents approximately 5% of net sales in fiscal 1997.
The Company has continued to expand facilities for the Communications Division's high volume video tape duplication. During the Company's fiscal year ended January 31, 1997 ("fiscal 1997") the Communications Division acquired all of the common stock of Satastar Corporate Services, Inc. which is located in Chicago (see also "RECENT ACQUISITIONS - Merger of Satastar Corporate Services Inc.") and expanded its operations in Seattle from a sales office to a full service duplication facility. Expansion has been financed by cash flow generated from operations, equipment leasing and bank financing.
The Company expended approximately $2,740,000 during fiscal 1997 for additional video tape duplication equipment. It expects to spend an additional $1,400,000 in fiscal 1998 to further expand its duplication facilities.
MANUFACTURING PROCESS
The manufacturing process for video cassettes generally utilizes duplicating machines that copy from a master in "real time" speed, that is the regular speed of the video being duplicated. In its Minneapolis, Milwaukee and Atlanta facilities, the Company utilizes high speed machines which allow it to duplicate a master 150 times faster than in "real time" speed and to utilize less tape than regular speed machines utilize for the same content. In this process, high speed tape loaders are used to load tape spliced to specific program lengths into video shells.
LICENSES
The Victor Company of Japan, Ltd. ("JVC"), which owns the "VHS" logo, has established standards for the physical characteristics of the video cassette. Compliance with the JVC standards ensures that the video cassette will be compatible with any VHS machine. Duplicators whose product conforms to the JVC standards are permitted to apply the "VHS" logo to such product and pay JVC a license fee for such privilege. The Communications Division paid JVC a license fee of approximately $550,000 in fiscal 1997 for the privilege of applying the "VHS" logo to its video product.
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SIGNIFICANT CUSTOMERS
The Communications Division sells to more than 6,000 accounts in any given year. Approximately 16% of its sales come from ten customers, none of which amount to more than 5% of net sales.
Illustrative of the Communications Division's duplication customers are companies that use videotape to promote their products or instruct their customers on the use of their products, financial service companies which produce videotapes to present new financial products to sales personnel and customers, high technology companies which use videotapes to train sales and service personnel and corporations with many employees or locations that wish to communicate a significant Company development to all employees simultaneously. Such high volume customers are generally those who need 100 or more duplicate videotapes reproduced, addressed to individual locations and forwarded for delivery, often within a few hours or on an overnight basis. The Communications Division also has the capacity to convert one international standard videotape format to either of two other standard formats used around the world or for various specific communication applications. Customers for these services generally require lower volume reproduction.
MARKETING
The Communications Division markets its products nationally through the use of 62 sales personnel who operate throughout the United States. To a lesser degree, the Company also uses advertising in trade publications and participation in trade shows.
SEASONALITY
The Communications Division's products are used consistently throughout the year except for a slight rise in demand in September, October, and November to supply extra requirements to customers for the holiday selling season.
COMPETITION
Though it is not possible to reliably state the Communications Division's relative position in the absence of published statistics, based upon data generated by its own management, the Company believes it is one of the largest duplicators of video tape for the non-theatrical, non-music video segment of the U.S. market. This market is comprised of exercise, educational, corporate, promotional and instructional videos, etc.
The primary competitive factors in the video tape duplication business are price, quality of service and range of products. The Communications Division attempts to compete by offering high volume videotape duplication services, at a competitive price, emphasizing service and customer support.
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The Company's principal competitors are HHG Digital Technologies (formerly Allied Film and Video Company) and The Duplication Factory. The video duplication business is highly competitive, not only with these competitors, but also with many smaller duplicators.
The Company believes that its regional locations, its wide range of product offerings, and national marketing capabilities are competitive advantages over many others in the industry. While selling prices have been declining in recent years as competitors continue to seek market share by lowering prices, the Company has been reasonably successful in maintaining its margins by lowering its material costs and achieving unit volume increases.
VAUGHN PRODUCTS DIVISION
The Products Division is engaged in the manufacture and sale of a line of soft goods, including custom-designed, silk-screened T-shirts and sweatshirts, souvenir leather products, and gift items sold primarily to retail merchants located in the United States and Canada. The Products Division's manufacturing facilities are located in the Company's Minneapolis, Minnesota plant where it produces a line of over 200 leather items such as billfolds, purses, and personal accessory items, and in Seattle, Washington, where it designs and produces its soft goods products. The Products Division corporate headquarters are also located in Seattle. The gift products are sold at wholesale prices for resale, primarily by gift shops,and are marketed under the "Bloom Brothers" and "Indian Arts and Crafts" names. See "RECENT ACQUISITIONS - Purchase of Indian Arts and Crafts, Inc."
SALES AND DISTRIBUTION
Sales of the Products Division's products are made throughout the United States and Canada by in-house sales people and independent manufacturer's representatives. The Products Division employs two sales manager and four sales people, and retains 35 manufacturer's representatives. The products are included in a Company catalog, periodically sent to prospective and known customers and made available for use by the sales organization. The Company also participates in trade shows.
The principal markets for the Products Division's products are gift and souvenir shops that serve the tourist industry.
The Products Division sells to over 3,000 customers, none of which account for more than 5% of its net sales.
MANUFACTURING AND RAW MATERIALS
The Products Division's manufacturing operations consists primarily of assembly, fabricating and converting leather to finished products and silk screening of T-shirts. Numerous subcontractors are utilized to furnish components and subassembly. Materials utilized in these products are standard and readily available from multiple sources at competitive prices.
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SEASONAL OPERATIONS
The operations of the Company's Products Division are seasonal in nature. Approximately half of the production and sale of its products are delivered to customers from March through June.
COMPETITION
The primary competitive factors in the Products Division line of business are price, product offering, quality and meeting delivery times. The Company believes that the Products Division is competitive in each of these areas. The Company does not have a significant share of the overall gift market and competes for sales with many national and regional companies throughout the United States and Canada. Many of such competitors have significantly greater resources than the Company.
FORMER BUSINESSES
The Company originally operated as a manufacturer and distributor of flags and banners, Christmas and seasonal decorative displays and parade and float materials. In addition to these businesses and its two current business segments, in 1986 the Company also entered radio broadcasting. The radio broadcast business was not profitable for the Company and the Company's original businesses did not always operate at predictable or acceptable levels of profitability.
Consequently, in 1990 the Company began to redeploy its corporate and personnel resources to the more firmly profitable current businesses operated by the Vaughn Communications and Vaughn Products Divisions. In 1990 and 1991, the Company sold its radio station interests and its audio and video equipment sales and engineering businesses. In February 1992, the Company also withdrew from the Christmas display business.
On March 1, 1994, the Company completed this redeployment by selling its flag, banner, seasonal decorative display and parade and float products operations and assets to Chromatic Concepts Co., a Minneapolis, Minnesota based corporation ("Buyer"). These businesses previously occupied approximately 5,000 square feet of the Company's principal manufacturing plant in Minneapolis, Minnesota and its 12,000 square foot manufacturing plant in Tampa, Florida, and employed 21 manufacturing, sales and administrative personnel. The Buyer reemployed substantially all of these employees. The Company retained its Tampa plant, subject to a short-term lease to the Buyer which expired October 31, 1994, after which this facility was sold to an unrelated party. The portion of the Minneapolis plant previously used by these businesses has been rededicated to use by the Company's Communications and Products Divisions (see "Item 2.
ITEM 2. PROPERTIES
The Company owns its executive and administrative offices and principal manufacturing plant consisting of approximately 67,000 square feet located on a 4.1 acre site at 5050 West 78th Street, Minneapolis, Minnesota. Approximately 5,000 square feet is devoted to and equipped for the fabrication and warehousing of the Vaughn Products Division's products and raw materials.
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Approximately 57,600 square feet is used for the Vaughn Communications Division's separate administrative and sales offices, showrooms, videotape duplication, shipping, warehouse and handling. The remaining space of approximately 4,400 square feet houses the Company's executive and administrative offices. These facilities include a separate adjacent building of approximately 10,600 square feet. See the Notes to the audited financial statements of the Company incorporated by reference for a description of the mortgage term loan to the Company secured by these facilities.
The Company leases Vaughn Communications Division's facilities in Milwaukee, Wisconsin; Phoenix, Arizona; Tampa and Orlando, Florida; Portland, Oregon; Atlanta, Georgia; Dallas, Texas; Houston, Texas; Raleigh, North Carolina; Chicago, Illinois; Seattle, Washington; and Denver, Colorado for sales offices and videotape reproduction, totaling approximately 293,000 square feet under leases expiring from 1998 through 2002, at a current total annual rental of approximately $1,155,000.
The Products Division's Seattle facilities leased from the IAAC Sellers are described under "RECENT ACQUISITIONS - Purchase of Indian Arts and Crafts, Inc." in Item 1 above. In addition, the Products Division leases approximately 24,000 square feet of warehousing and office space in an adjacent building. The lease expires in 1999 and has a current annual rental of $126,000.
The Company is presently utilizing approximately 75% of its manufacturing plant capacity measured on a five-day week/three shift per day basis. Production capacity, however, can be expanded by adding additional personnel or acquiring additional manufacturing equipment. Management believes its manufacturing facilities are generally sufficient for the Company's immediately foreseeable needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings pending against or involving the Company or its properties which, in the opinion of management, will have a material adverse effect upon the Company's financial position or results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the quarter ended January 31, 1997.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY
The Company's Common Stock is traded over-the-counter and has been included in the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") National Market System since March 26, 1994, under the symbol VGHN. The information presented is the quarterly high and low closing sale prices as reported in the NASDAQ's National Market System. All prices are without retail markups, markdowns or commissions.
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Price --------------------- Calendar Period High Low --------------- ------- ------- 1997: First Quarter $ 8.00 $ 6.00
1996: First Quarter $ 9.375 $ 8.375 Second Quarter 19.00 9.00 Third Quarter 15.00 9.50 Fourth Quarter 10.50 7.00
1995: First Quarter $7.875 $ 6.25 Second Quarter 7.875 5.75 Third Quarter 9.375 7.125 Fourth Quarter 9.50 7.75
The last sales price for the Company's Common Stock as reported by the NASDAQ National Market System on April 11, 1997 was $5.875 per share. As of January 31, 1997, the Company had 336 shareholders of record. The Company has never paid a cash dividend on its Common Stock. It intends to retain all earnings to finance the development of its business. The Company's loan agreement with its bank contains limitations on paying dividends. Accordingly, no cash dividends are anticipated for the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal year ended January 31, 1997, the Company sold unregistered securities in the amounts, at the times, and for the aggregate amounts of consideration listed below:
a. On June 28, 1996, the Company issued 165,357 shares of its common stock to Satastar Corporate Services, Inc. ("Satastar") in exchange for all of the outstanding capital stock of Satastar. The business combination of Satastar and the Company has been accounted for as a pooling of interest. There were no underwriters involved in this transaction. The shares issued to the shareholders of Satastar were issued in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Act"). With respect to the Company's reliance on Section 4(2) of the Act, the shareholders of Satastar represented that they acquired the shares for investment and the certificates representing the shares issued to the shareholders of Satastar were legended with respect to restrictions on transfer. See the discussion under "RECENT ACQUISITIONS - Purchase of Satastar Corporate Services, Inc." included in "Item 1. Business."
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The financial information set forth in the sections entitled "SELECTED FINANCIAL DATA from Continuing Operations (in Thousands, Except Per Share Amounts)" to be included in the Company's 1997 Shareholder Report is incorporated herein by reference in response to this Item 6. This section should be read in conjunction with the Notes to Consolidated Financial Statements which also appear in the 1997 Shareholder Report and are incorporated herein by reference.
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ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion under the Section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" to be included in the 1997 Shareholder Report is incorporated herein by reference in response to this Item 7.
ITEM 8.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company for each of the years in the three-year period ended January 31, 1997, together with the report thereon of Ernst & Young LLP, contained in the 1997 Shareholder Report, are incorporated herein by reference in response to this Item 8.
The supplementary financial information requirements of Item 302 of Regulation S-K are not applicable to the Company.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The discussions under the sections captioned "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE", "PROPOSAL 1 ELECTION OF DIRECTORS" and "EXECUTIVE OFFICERS" to be included in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission and delivered to the Registrant's shareholders pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 with respect to the Annual Meeting of the Shareholders to be held on June 17, 1997 (the "1997 Proxy Statement") are incorporated herein by reference in response to this Item 10.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The discussions under the sections captioned "COMPENSATION OF DIRECTORS" and "EXECUTIVE COMPENSATION" but excluding the discussions included under the subsections captioned "EXECUTIVE COMPENSATION - Compensation Committee Report on Executive Compensation" and "EXECUTIVE COMPENSATION - Comparative Stock Performance" to be included in the 1997 Proxy Statement are incorporated herein by reference in response to this Item 11.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The discussions under the sections captioned "VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF", "PROPOSAL 1 ELECTION OF DIRECTORS" and "TRANSACTIONS
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WITH MANAGEMENT - E. D. Willette Stock Put Redemption Agreement, Including Change of Control Provision" to be included in the 1997 Proxy Statement are incorporated herein by reference in response to this Item 12.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The discussion under the section captioned "TRANSACTIONS WITH MANAGEMENT" to be included in the 1997 Proxy Statement is incorporated herein by reference in response to this Item 13.
PART IV
ITEM 14.
ITEM 14. EXHIBIT, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) 1. CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY
The consolidated financial statements listed below of the Company for each of the years in the three-year period ended January 31, 1997, together with the report thereon of Ernst & Young LLP, contained in the 1997 Shareholder Report (attached as Exhibit 13) are incorporated herein by reference in response to this Item 14 (a) (1).
Independent Auditor's Report of Ernst & Young LLP Consolidated Balance Sheets as of January 31, 1997 and 1996 Consolidated Statements of Income for the years ended January 31, 1997, 1996 and 1995 Consolidated Statement of Shareholders' Equity for the years ended January 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows for the years ended January 31, 1997, 1996 and 1995 Notes to Consolidated Financial Statements
With the exception of the aforementioned information, and the information specified in Parts II and III, the 1997 Shareholder Report is not to be deemed filed as part of this Report.
2. FINANCIAL STATEMENT SCHEDULE OF THE COMPANY
Schedule No. Page ----------- ----
II Valuation and Qualifying Accounts S-1
All other schedules are omitted, because they are not applicable, or not required, or because the information is included in the Company's consolidated financial statements or notes thereto.
b. REPORTS ON FORM 8-K
No current Reports on Form 8-K were filed by the Company during the quarter ended January 31, 1997.
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(c) EXHIBITS
Exhibit No. Description of Exhibits ----------- -----------------------
(2)(a) Stock Purchase Agreement dated April 4, 1995, providing for the Company's purchase of all of the capital stock of Centercom, Inc., a Wisconsin corporation, and Centercom South, Inc. a Florida corporation, from Jeffrey Johnson and Robert Harmon (incorporated herein by reference to Exhibit 2(a)-1 to the Company's Current Report on Form 8-K with a Date of Report of April 14, 1995).
(2)(b) Escrow Agreement dated April 14, 1995 among the Company, Jeffrey Johnson, Robert Harmon and Firstar Trust Company (incorporated herein by reference to Exhibit (2)(a)-2 to the Company's Current Report on Form 8-K with a Date of Report of April 14, 1995).
(2)(c) Purchase and Sale Agreement dated January 31, 1996 between the Company and the Shareholders of Indian Arts and Crafts, Inc. (without Exhibits, Schedules or Attachments) (incorporated by reference to Exhibit (2)(c) to the Company's Annual Report on Form 10-K for the year ended January 31, 1996 (hereinafter referred to as the "1996 Form 10-K")).
(2)(d) Plan and Agreement of Merger dated June 7, 1996, between the Company and Satastar Corporate Services, Inc., doing business as PVS Corporate Services (without Exhibits, Schedules or Attachments).
(3)(i)(a) Restated Articles of Incorporation of the Company, and all amendments filed with the Minnesota Secretary of State through March 12, 1987 (incorporated herein by reference to Exhibit 3(a) to the Company's Registration Statement on Form S-1 No. 33-10918 hereinafter referred to as the "Company's S-1 Registration Statement").
(3)(i)(b) Articles of Amendment to the Company's Restated Articles of Incorporation, as filed with the Minnesota Secretary of State on July 16, 1987 (incorporated herein by reference to Exhibit 19 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1987).
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(3)(i)(c) Articles of Amendment to the Company's Restated Articles of Incorporation, as filed with the Minnesota Secretary of State on June 24, 1993 (incorporated herein by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended January 31, 1994, (hereinafter referred to as the "1994 Form 10-K")).
(3)(ii)(a) Restated By-Laws of the Company and all amendments thereto through March 12, 1987 (incorporated herein by reference to Exhibit 3(b) to the Company's S-1 Registration Statement).
(3)(ii)(b) Third Amendment to the Company's Restated By-Laws adopted April 19, 1994 (incorporated herein by reference to Exhibit 3(b) to the 1994 Form 10-K).
(10)(a) [Intentionally left blank.]
(10)(b) Purchase and Sale Agreement Restated February 17, 1994, dated as of February 28, 1994, providing for the Company's sale of its flag, banner and parade and float products, assets and business to Chromatic Concepts Co. (incorporated herein by reference to Exhibit (10)(b) to the 1994 Form 10-K).
(10)(c) Purchase Agreement dated as of May 25, 1993, providing for the Company's purchase from Cranberry Novelty Manufacturing Company of the "Cranberry Lake" novelty product line (incorporated herein by reference to Exhibit (10)(c) to the 1994 Form 10-K).
(10)(d) Adoption Agreement dated November 5, 1992 for Vaughn Communications, Inc. Retirement Savings Plan (the "Plan") adopting Fidelity Management & Research Co. standard prototype Profit Sharing/401(K) Plan basic plan document No. 7 and copy of Retirement Service Agreement dated November 4, 1992 with Fidelity Management Trust Company, providing for the trust and administration of the Plan, first effective as of the Plan year beginning February 1, 1993 (incorporated herein by reference to Exhibit (10)(d) to the 1994 Form 10-K).
(10)(e) [Intentionally left blank.]
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(10)(f) 1990 Company-Wide Stock Option Plan adopted by the Company's Board of Directors on June 26, 1990, as amended December 17, 1990, and forms of 1990 Incentive Stock Option and 1990 Non-statutory Stock Option Agreements (incorporated herein by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended January 31, 1991), and copy of amendment to such Plan adopted by the Board June 24, 1992 (incorporated herein by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended January 31, 1993, (hereinafter referred to as the "1993 Form 10-K")).
(10)(g) 1988 Stock Option Plan adopted by the Company's Board of Directors on December 20, 1988, and forms of 1988 Incentive Stock Option and 1988 Nonstatutory Stock Option Agreements (incorporated herein by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended January 31, 1989), and copies of amendments to such Plan adopted by the Board June 24, 1992 (incorporated herein by reference to Exhibit 10(g) to the 1993 Form 10-K).
(10)(h) Amended and Restated Stock Put Redemption Agreement dated August 27, 1986, between the Company and E. David Willette (incorporated herein by reference to Exhibit 10(h) to the 1993 Form 10-K).
(10)(i) 1983 Incentive Stock Option Plan and form of 1983 Incentive Stock Option Agreement (incorporated by reference to Exhibit 10(1) to the Company's S-1 Registration Statement), and copy of amendment to such Plan adopted by the Board June 24, 1992 (incorporated herein by reference to Exhibit 10(i) to the 1993 Form 10-K).
(10)(j) 1985 Stock Option Plan (incorporated by reference to Exhibit 10(m) to the Company's S-1 Registration Statement), copy of Amendment to the 1985 Stock Option Plan adopted by the Company's Board of Directors on December 10, 1987, and corresponding revised forms of 1985 Incentive Stock Option Agreement and 1985 Nonstatutory Option Agreement (incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended January 31, 1988), and copy of amendment to such Plan adopted by the Board June 24, 1992 (incorporated herein by reference to Exhibit 10(j) to the 1993 Form 10-K).
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(10)(k) 1990 Non-Employee Directors Stock Option Plan adopted by the Company's Board of Directors June 26, 1990, as amended December 17, 1990, and form of 1990 Non-Employee Directors Stock Option Agreement (non-statutory) (incorporated herein by reference to Exhibit 10(k) to the 1993 Form 10-K).
(10)(l) Mortgage and Security Agreement and Fixture Financing Statement and Promissory Note, dated February 26, 1988, between the Company (as mortgagor and borrower) and The Canada Life Assurance Company (as mortgagee and lender), providing for a three year $1,600,000 mortgage loan to the Company with three year renewal options secured by the Company's Minneapolis, Minnesota headquarters and adjacent plant and office facilities (incorporated by reference to Exhibit 10(1) to the Company's Annual Report on Form 10-K for the year ended January 31, 1988).
(10)(m) 1990 Discounted Stock Option Plan adopted by the Company's Board of Directors on June 26, 1990, as amended December 17, 1990, and form of 1990 Discounted Stock Option Agreement (nonstatutory) (incorporated herein by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the year ended January 31, 1991), and copy of amendment to such Plan adopted by the Board June 24, 1992 (incorporated herein by reference to Exhibit 10(m) to the 1993 Form 10-K).
(10)(n) Leases each dated April 4, 1995, between Centercom, Inc., the Company's wholly-owned subsidiary, as Lessee, and Centercom Partnership, a partnership owned by Jeffrey Johnson and Robert Harmon, the former owners of all of the capital stock of Centercom, Inc., as Lessor, and Specialty Services, Inc., a real estate holding corporation owned by Messrs. Johnson and Harmon, as Lessor, respectively providing for the lease and rental from and after April 4, 1995, of the real estate and buildings located at 5737 West Hemlock Street and 5621 West Hemlock Street, Milwaukee, Wisconsin, from which the Company's wholly-owned subsidiary, Centercom, Inc., conducts its Milwaukee, Wisconsin based videotape duplication operations (incorporated herein by reference to Exhibit (10)(n) to the 1995 Form 10-K).
(10)(o) Consulting and Non-Competition Agreements, each dated April 4, 1995, among the Company, its wholly-owned subsidiary, Centercom, Inc. and each of Jeffrey Johnson and Robert Harmon, the prior shareholders of Centercom, Inc., from whom the Company acquired the capital stock of Centercom, Inc., providing
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for certain covenants of Jeffrey Johnson and Robert Harmon against competition with the Company and Centercom, Inc. and for performance of certain consulting services by said prior shareholders (incorporated herein by reference to Exhibit (10)(o) to the 1995 Form 10-K).
(10)(p) Shareholder Voting Agreement dated April 4, 1995, among the Company, E. David Willette and Jeffrey Johnson and Robert Harmon, providing that E. David Willette will vote his own shares of the Company's Common Stock for the election of Jeffrey Johnson and Robert Harmon as members of the Company's Board of Directors (incorporated herein by reference to Exhibit (10)(p) to the 1995 Form 10-K).
(10)(q) Amended and Restated Loan Agreement dated February 1, 1996, between the Company and American Bank N.A. (incorporated by reference to Exhibit (10)(q) to the 1996 Form 10-K.)
(10)(r) 1995 Non-Employee Director Stock Option Plan adopted by the Board of Directors on June 20, 1995 and form of 1995 Non-Employee Director Nonstatutory Stock Option Agreement.
10)(s) Third Modification Agreement and Amendment to Mortgage dated January 1, 1997 between the Company and the Canada Life Assurance Company.
(11) Statement Regarding Computation of Earnings Per Share.
(13) 1997 Annual Report to Shareholders.
(23) Consent of Independent Auditors
(24) Power of Attorney (see the Signature Page of this Report)
(27) Financial Data Schedules
(d) Financial Statements required by Regulation S-X which are excluded from the Annual Report to Shareholders.
None.
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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.
VAUGHN COMMUNICATIONS, INC.
By \s\ E. David Willette ------------------------------------- E. David Willette Chairman and Chief Executive Officer (Principal Executive Officer)
By \s\ M. Charles Reinhart ------------------------------------- M. Charles Reinhart Chief Financial Officer (Principal Financial and Accounting Officer)
Dated: April 30, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears above or below, constitutes and appoints E. David Willette and M. Charles Reinhart, or either of them, his true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company in their respective capacities as directors of the Company.
\s\ E. David Willette Director April 30, 1997 - ---------------------------------- E. David Willette
\s\ Roger F. Heegaard Director April 30, 1997 - ---------------------------------- Roger F. Heegaard
\s\ Harold G. Wahlquist Director April 30, 1997 - ---------------------------------- Harold G. Wahlquist
\s\ William D. Smith Director April 30, 1997 - ---------------------------------- William D. Smith
\s\ Laurence F. LeJeune Director April 30, 1997 - ---------------------------------- Laurence F. LeJeune
\s\ Michael R. Sill Director April 30, 1997 - ---------------------------------- Michael R. Sill
\s\ Rodney P. Burwell Director April 30, 1997 - ---------------------------------- Rodney P. Burwell
\s\ Jeffrey Johnson Director April 30, 1997 - ---------------------------------- Jeffrey Johnson
\s\ Robert Harmon Director April 30, 1997 - ---------------------------------- Robert Harmon
\s\ Donald J. Drapeau Director April 30, 1997 - ---------------------------------- Donald J. Drapeau
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VAUGHN COMMUNICATIONS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- ------------------------ (1) Uncollectible accounts written off, net of recoveries
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VAUGHN COMMUNICATIONS, INC.
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit - ----------- ----------------------
(2)(d) Plan and Agreement of Merger dated June 7, 1996 between the Company and Satastar Corporate Services, Inc., doing business as PVS Corporate Services (without exhibits, schedules and attachments).
(10)(r) 1995 Non-Employee Director Stock Option Plan adopted on June 20, 1995 and Form of 1995 Non-Employee Director Nonstatutory Stock Option Agreement.
(10)(s) Third Modification Agreement and Amendment to Mortgage dated January 1, 1997, between the Company and Canada Life Assurance.
(11) Statement Regarding Computation of Earnings Per Share
(13) 1997 Annual Report to Shareholders
(23) Consent of Independent Auditors
(24) Power of Attorney (see Signature Page of Report)
(27) Financial Data Schedules
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VAUGHN COMMUNICATIONS, INC.
COMPUTATI0N OF EARNINGS PER SHARE
EXHIBIT 11