-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VGlSYRO4a2YfAviGnSjBA66tkAMYVxlyzjZKDl43RJYQjVkQ7M2GdmLnzLsQve/K D+B1W+YZbycLhhcOULsT2A== 0000912057-94-001229.txt : 19940404 0000912057-94-001229.hdr.sgml : 19940404 ACCESSION NUMBER: 0000912057-94-001229 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENCOR INC CENTRAL INDEX KEY: 0000018497 STANDARD INDUSTRIAL CLASSIFICATION: 6141 IRS NUMBER: 430914033 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-03417 FILM NUMBER: 94519793 BUSINESS ADDRESS: STREET 1: P O BOX 26098 CITY: KANSAS CITY STATE: MO ZIP: 64196 BUSINESS PHONE: 8162219744 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED SERVICE INC DATE OF NAME CHANGE: 19680709 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Year Ended December 31, 1993 Commission file number 0-3417 CENCOR, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 1100 MAIN STREET, CITY CENTER SQUARE, SUITE 2350 P.O. BOX 26098 kANSAS CITY, MISSOURI 64196-6098 TELEPHONE (816) 221-9744 Incorporated in the State of Delaware 43-0914033 (I.R.S Employer Identification No.) Securities registered pursuant to Section 12(g) of the Act: TITLE OF CLASS -------------- REGULAR COMMON STOCK, $1.00 PAR VALUE indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _x_ Yes ___ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by references in Part III of this Form 10-K or any amendment to this Form 10-K. [] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of March 10, 1994. 1,240,727 SHARES OF REGULAR COMMON STOCK, $1.00 PAR VALUE Market value at March 10, 1994 was $620,364 Documents incorporated by reference--None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CENCOR, INC. FORM 10-K YEAR ENDED DECEMBER 31, 1993 Index
Item Page - ---- ---- PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 5. Market for Registrant's Common Stock and Related Stockholder Matters. . . . . . . . . . . . . . . . . . . 11 Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . 14 Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . 41 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Item 10. Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . . 46 Item 13. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . 50
1 PART I ITEM 1. BUSINESS GENERAL CenCor, Inc. was incorporated under the laws of Delaware on May 27, 1968. As used herein, the term "CenCor" refers to CenCor, Inc. and the term "Century" refers to CenCor's sole operating subsidiary, Century Acceptance Corporation. The term "the Company" as used herein refers to CenCor collectively with Century and, as indicated by the context, its prior subsidiaries. CenCor, through its wholly-owned subsidiary, Century, is primarily engaged in the consumer finance business. Century makes consumer and home equity loans to individuals, generally secured by personal property and real estate. Century also sells various insurance products, including credit life, accident and health, and property insurance in conjunction with its consumer loan business. In addition, Century purchases consumer retail installment sales obligations. On July 19, 1993, CenCor filed a Voluntary Petition with the United States Bankruptcy Court for the Western District of Missouri, seeking protection under Chapter 11 of the United States Bankruptcy Code. At the same time, CenCor filed an Application with the Bankruptcy Court seeking expeditious confirmation of its previously creditor approved prepackaged plan of reorganization. The plan was confirmed by the bankruptcy court on August 30, 1993. On November 1, 1993, CenCor issued new notes and stock to its subordinated noteholders pursuant to the provisions of the plan. The filing did not involve Century. CONSUMER FINANCE OPERATIONS The percentages of gross revenue from consumer financing and insurance commissions during each of the last five years were as follows:
Consumer Loans and Year Ended December 31 Installment Contracts Insurance Operations - ---------------------- --------------------- -------------------- 1989 91.5% 8.5% 1990 92.2 7.8 1991 93.1 6.9 1992 93.1 6.9 1993 95.0 5.0
Since the consumer finance business involves the carrying of receivables, a relatively high ratio of borrowings to invested capital is customary. Net income of the Company and Century is materially dependent on the cost of borrowed funds, and because the maximum rates charged for Century's lending operations are limited by statute, any increase or decrease in interest costs tend to have an adverse or favorable effect on the Company's and Century's net income. 2 The following tables set forth certain information concerning Century's consumer finance business:
Average Net Receivables Unearned Finance For the Year (Gross Receivables Less Charges as a % of Net Receivables Ended December 31 Unearned Finance Charges) Outstanding at Year End ----------------- ------------------------- --------------------------------- 1989 . . . . . . . . . . . . . . . . $ 89,147,000 23.2% 1990 . . . . . . . . . . . . . . . . 98,069,000 22.5 1991 . . . . . . . . . . . . . . . . 104,687,000 24.4 1992 . . . . . . . . . . . . . . . . 90,523,000 25.2 1993 . . . . . . . . . . . . . . . . 88,039,000 25.6
Number Average Offices Loans Balance As of December 31 Operated Outstanding Per Loan ----------------- -------- ----------- -------- 1989 . . . . . . . . 59 108,400 $1,091 1990 . . . . . . . . 59 81,100 1,559 1991 . . . . . . . . 59 75,300 1,768 1992 . . . . . . . . 59 60,200 1,680 1993 . . . . . . . . 53 59,033 2,019
CONSUMER LOANS AND REAL ESTATE LOANS Consumer loan operations are generally confined to two types of loans, as authorized by the laws of the respective states in which business is conducted: (a) loans on which the interest is reflected in the face amount of the note (precompute loans) and (b) loans on which the interest is computed on monthly unpaid balances (interest bearing loans). As of December 31, 1993, 85% of Century's consumer loans receivable were precompute loans. Permitted relevant effective rates for loans vary from 18% per annum to approximately 36% per annum with maximum allowable loans ranging from $2,500 to an unspecified amount. In general, Century charges the maximum rate permitted. During 1993, home equity loan receivables increased by 112% from $6,382,000 to $13,560,000. The average per loan net balance outstanding at December 31, 1993 was $15,327. Home equity loans consist primarily of loans made to individuals which are secured by first or second mortgages on single family homes. If a borrower needs additional money before repaying his loan in full, Century's policy is to extend additional monies if the borrower's credit circumstances warrant. This is done by making a new loan in an amount sufficient to pay off the balance of the old loan and to supply the needed new money. The following table sets forth certain information regarding new and present borrowers: 3
New Borrowers Present Borrowers -------------------------------- ------------------------------------------ During the Gross Gross Year Number % of Amount % of Number % of Amount % of Ended of Total of Total of Total of Total December 31 Loans Loans Loans Loans Loans Loans Loans Amount - ----------- ------ ----- ------ ----- ------ ----- ------ ------ (000) 000 1989 10,444 32.2 $16,906 21.3 21,995 67.8 $60,091 78.7 1990 7,839 28.4 12,895 18.9 19,805 71.6 55,352 81.1 1991 7,954 25.9 14,170 18.2 22,717 74.1 63,627 81.8 1992 10,326 35.7 20,317 26.6 18,583 64.3 56,188 74.3 1993 8,074 21.6 19,276 17.7 29,381 78.4 89,779 82.3 (1) The gross amount of loans to present borrowers at December 31, 1993 includes amounts lent to former borrowers of approximately 24%.
INSURANCE OPERATIONS In conjunction with its consumer lending operations and where applicable laws permit, Century also makes credit life, accident and health, property, and specialty insurance products available to its customers. The insurance is carried through American Bankers Life Assurance Co. of Florida and American Bankers Life Insurance Co. of Florida. The following table sets forth the percentage of revenues from insurance operations attributable to accident and health, property, and credit life policies for the periods indicated.
Year Ended Accident Credit December 31 & Health Property Life - ----------- -------- -------- ------ 1989. . . . . 45% 24% 31% 1990. . . . . 46 23 31 1991. . . . . 43 28 29 1992. . . . . 42 26 32 1993. . . . . 40 32 28
4 LENDING POLICIES In conducting lending activities, it is the policy of Century to require a satisfactory credit history. Loans are made to individuals primarily on the basis of the borrower's income and are limited to amounts which the customer appears able to repay without hardship. Investigation of the credit worthiness of obligors is made by Century's personnel. When security is taken in connection with a loan, the net realizable value of the property on which liens are taken as security (except for real estate in which case the loan amount is limited to a maximum of 75% of the appraised market value) is in many cases less than the amount of the related receivable. Subject to governmental restrictions, Century makes loans secured by consumer goods for varying periods, with original contractual terms up to 36 months and not exceeding 48 months. Home equity loans secured by real estate generally do not exceed 180 months. Century purchases retail installment contracts with original contractual terms generally not exceeding 36 months. CREDIT LOSS EXPERIENCE Past due finance receivables are charged off in accordance with the policies set forth below and when management deems them to be uncollectible, although in most instances collection efforts do not cease. Provisions for credit losses are charged to income in amounts sufficient to maintain the allowance for credit losses at a level considered adequate to cover losses in the existing portfolio (see Note 1 "Credit Losses" to the financial statements). Prior to December 31, 1991, unpaid balances were charged off if no installments had been received for 180 days. At December 31, 1991 Century charged off all non-asset receivables such as bankruptcies, deficiency balances, settlements and the unsecured portions of Chapter XIII bankruptcy accounts. The year end effect of this policy change was to increase 1991 charge offs by $3,000,000. In August 1992, Century implemented a policy of charging off accounts when six (6) or more monthly contractual installments are past due and aggregate collections of principal and interest for a six (6) month period are less than a contractual payment. However, when an account is considered uncollectible, it is charged off immediately. Uncollectible accounts are handled as follows: BANKRUPTCY - CHAPTER 7 - The balance of the account will be charged off in the month following the date of discharge. BANKRUPTCY - CHAPTER 13 - The unsecured portion of the balance will be charged off in the month following the confirmation hearing. SETTLEMENT - The remaining balance will be charged off in the month following the final payment. REPOSSESSION DEFICIENCY - The deficiency balance will be charged off after the appropriate proceeds of the sale of security have been posted. The appropriate supervisor must warrant that there is limited potential for additional collection. 5 The allowance for credit losses in the opinion of management is adequate to cover losses and expenses known through the end of the year. The credit loss experience of Century for each of the five years ended December 31, is set forth below:
1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Gross charge-offs: Amount . . . . . . . . . . . . $ 5,032,000 $16,278,000 $13,412,000 $6,457,000 $5,582,000 Percent of average gross receivables outstanding. . . 4.57% 15.30% 10.26% 5.33% 5.03% Recoveries from loans charged off . . . . . . . . . $ 1,964,000 $ 880,000 $ 1,567,000 $ 455,000 $ 502,000 Net charge-offs (gross charge-offs less recoveries): Amount . . . . . . . . . . . . $3,068,000 $15,398,000 $11,845,000 $6,002,000 $5,080,000 Percent of average gross receivables outstanding . . . 2.78% 14.47% 9.06% 4.95% 4.58% Provisions for credit losses charged to income . . . . . . $2,104,000 $12,988,000 $11,708,000 $4,323,000 $4,332,000
The following is a table of net receivables outstanding (gross receivables less unearned finance charges), percent of allowance for credit losses to net receivables at year-end and net charge offs at the dates indicated:
% of Allowance for Net Credit Losses Net Charge-off's December 31 Receivables To Net Receivables During the Year ----------- ----------- ------------------ ---------------- 1989 $ 96,558,000 4.44% $ 5,080,000 1990 104,073,000 4.33 6,002,000 1991 108,523,000 7.02 11,845,000 1992 80,767,000 7.42 15,398,000 1993 93,998,000 5.35 3,068,000
A summary of delinquent consumer loan receivables (excluding sales contracts) as of December 31, 1989 through 1993 is set forth on the following page. The table includes accounts which have had no collections of principal, 6 interest or charges for 60 days or more, classified as to the period during which the last collection was received. Thus, if any payment has been made on an account within 60 days, even though such payment was more than 60 days delinquent, the account is not included in the amounts shown in the table.
Age of Delinquent Installments 1993 1992 1991 1990 1989 - ----------------------- ---- ---- ---- ---- ---- 60-89 days . . . . . $1,646,000 $ 1,046,000 $ 843,000 $1,332,000 $1,415,000 90-179 days . . . . 1,694,000 386,000 --- 1,694,000 1,619,000 ---------- ----------- ---------- ---------- ---------- Total . . . . . . . $3,340,000 $ 1,432,000 $ 843,000 $3,026,000 $3,034,000 ---------- ----------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
REGULATION Century operates under various state laws which regulate the direct consumer loan business, although the degree and nature of such regulation varies from state to state and depends on the laws involved. In general, the laws under which a substantial amount of Century's business is conducted provide for state licensing of lenders (which licenses may be revoked for cause), impose limitations on the maximum duration and amount of individual loans and the maximum rate of interest and charges and prohibit the taking of assignments of wages. In addition, certain of these laws prohibit the taking of liens on real estate except liens resulting from judgments. In accordance with the Federal Consumer Credit Protection Act, Century discloses to its customers various charges and expenses, including the total finance charge and the annual percentage rate of charges applicable to each transaction. Century also discloses either monthly interest rates or total dollar credit charges as required by the states in which it operates. Century also is subject to the provisions of the Fair Credit Reporting Act ("FCRA") and makes the disclosures to consumers required by the FCRA. Consumers are advised when adverse action, such as the denial of credit or insurance or an increase in charges for credit or insurance, is taken based in whole or in part on information contained in consumer reports received from consumer reporting agencies, such as credit bureaus, or other sources. A rule of the Federal Trade Commission permits a debtor to assert against a purchaser of a consumer credit contract, such as the installment contracts purchased by Century, all claims and defenses which the debtor could assert against the seller of the goods or services obtained by the debtor pursuant to the contract. Although Century has no direct recourse against the seller of such installment contracts, if problems with purchased contracts arise, it is common business practice and Century's history has demonstrated that the seller will exchange a more satisfactory installment contract for the problem one. Therefore, there has been no material impact on operations as a result of the rule. At December 31, 1993, approximately 22% of Century's receivables are from the purchase of installment contracts. 7 Century is subject to the Equal Credit Opportunity Act, Title VII, prohibiting discrimination on the basis of sex or marital status, race, color, religion, national origin, age, receipt of income under public aid or good faith exercise of rights under the Consumer Credit Protection Act. The federal bankruptcy law affects the business of Century in the following principal respects: (A) Rights of the creditor and debtor to reaffirm obligations are limited by necessity of court approval, and then the debtor has 30 days to change his mind; (B) Contact between creditor and debtor must be limited once a bankruptcy case is filed; (C) Debtor next has choice of federal exemptions or state exemptions and in many instances federal exemptions are more liberal so that creditor's rights are limited; (D) Payments made by a debtor to a creditor 90 days before bankruptcy may have to be returned because of presumption of insolvency; (E) The value of secured property can be determined by the court rather than by the balance of the loan, thus making it possible for the debtor to retain property free and clear through payoff of the debt, at an amount which is less than the outstanding balance of the loan. Century continuously modifies its finance forms in order to conform with new interpretations of the various laws and regulations to which it is subject. However, it is virtually impossible, because of numerous new court decisions with retroactive application, to avoid technical violations, especially with respect to the truth-in-lending laws, which may subject Century to substantial liabilities including penalties and attorney's fees payable to its customers. To date, there has not been a significant number of such claims asserted against Century. The sale of insurance is subject to various insurance regulations in each state where Century sells such insurance. EMPLOYEES As of March 7, 1994, the Company had 257 employees. The Company has no contract with any labor union representing its employees and there have been no organizing efforts of employees. ITEM 2. PROPERTIES LOCATION OF OFFICES Century's business requires a relatively small investment in fixed assets. All offices occupied by Century are leased with terms of five years or less. 8 The geographic distribution of Century's business on December 31, 1993 was as follows:
Percent of Percent of Gross Gross State Offices Receivables State Offices Receivables - ----- ------- ----------- ------ ------- ----------- Alabama 3 5.46% Missouri. . . . 2 5.60% Arizona 2 3.08 Nebraska. . . . 1 1.43 Colorado 2 3.07 New Mexico. . . 1 1.55 Florida 6 8.76 Oklahoma. . . . 4 9.28 Georgia 12 19.83 South Carolina 1 1.36 Kansas 6 11.84 Tennessee. . . 5 7.97 Kentucky 1 1.55 Texas. . . . . 4 12.44 Louisiana 1 1.56 Utah. . . . . . 2 5.22 -- ------- 53 100.00% -- ------- -- -------
Item 3. Legal Proceedings Because the business of Century involves the collection of numerous accounts, the validity of liens, accident and other damage or loss claims under many types of insurance, and compliance with state and federal consumer laws, Century and its subsidiaries are from time to time plaintiffs and defendants in numerous legal proceedings. Other than the cases listed below, CenCor, nor any of its subsidiaries is a party to, nor is the property thereof the subject of, any pending legal proceedings which depart from the ordinary routine litigation incident to the kinds of business conducted by Century and its subsidiaries or, if such proceedings constitute other than routine litigation, in which there is a reasonable possibility of an adverse decision which could have any material adverse effect upon the financial condition of CenCor. There are no proceedings pending or, to the Company's knowledge, threatened by or on behalf of any administrative board or regulatory body which would materially affect or impair the right of Century to carry on any of its respective business. For information on legal proceedings involving the Estate of Robert F. Brozman and the CIKC Lenders (as later defined) see Note 4 to the financial statements. A subsidiary of Century commenced litigation on February 19, 1992 in the Circuit Court of the Thirteenth Judicial Circuit of Hillsborough County, Florida, against JoAnn's Instant Finance Cars, Inc. (JoAnn's) and certain of its affiliates from whom Century had purchased automobile financing contracts. The Company alleged a variety of fraudulent and criminal activities by the defendants and was seeking substantial monetary damages as well as various forms of equitable relief. Century was successful in having a receiver appointed to oversee the assets of JoAnn's and the contracts created by JoAnn's that were held by Century. The receiver was subsequently discharged upon a determination that the cost of continuing the receivership would exceed the amount of recovery to Century. On May 7, 1992, the suit filed by JoAnn's against CenCor, Century and two of their officers was dismissed with prejudice. 9 On January 6, 1993, Century's subsidiary was awarded a summary judgment of $6,000,000 against JoAnn's; however, this amount is not necessarily indicative of the actual damages incurred by Century in the fraudulent scheme. Because JoAnn's does not own significant assets, the ability of Century to recover substantial monetary amounts from JoAnn's and/or its affiliates is doubtful, despite the summary judgment granted in Century's favor. On May 13, 1993, George C. Evans, Century's former President and CEO, filed suit against Century in the Circuit Court of Jackson County, Missouri at Kansas City, Sixteenth Judicial Circuit, State of Missouri, Case No. CV93-10201, alleging that he was terminated without cause and should be entitled to compensation for wages and bonuses. On May 13, 1993, Century filed suit against Evans, in the Circuit Court of Jackson County, Missouri at Kansas City, Case No. CV 93-10198, seeking Declaratory and Injunctive Relief. Both actions were dismissed pursuant to a Release and Settlement Agreement between Evans, Century and CenCor dated June 4, 1993. The Agreement requires that the parties keep the terms confidential with certain limited exceptions. Under the Agreement, Evans will receive periodic cash payments and may receive other contingent payments discussed in Note 13 to the financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the registrant's fiscal year ended December 31, 1993. (The remainder of this page is intentionally blank.) 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Until December 7, 1992, the Company's Common Stock was quoted on the NASDAQ National Market System (Symbol-CNCRE). Effective that date, the Common Stock was delisted from the NASDAQ National Market System because of CenCor's failure to meet the NASDAQ capital and surplus requirements. On December 4, 1992, the last date the Common Stock was quoted, the closing price was $ .50 per share. Since that time, CenCor's stock has been quoted on an inter-dealer basis in the over-the-counter market on the so-called "broker's pink sheets." The range of high and low sales price as quoted on broker's pink sheets for each quarter of 1993 and the range of high and low sales price as reported on the National Market system for each quarter of 1992 are as follows:
1992 1993 --------------- ------------- Quarter Ended High Low High Low ------------- ---- --- ---- --- March 31 6 1/2 4 1/2 1/2 1/8 June 30 6 1 1/2 5/16 1/8 September 30 3 3/4 1 3/8 3/16 December 31 1 1/2 3/4 1/2
The quotations from the broker's pink sheets reflect inter-dealer prices without retail mark-up, mark-down, or commission and may not represent actual transactions. On March 10, 1994, the quoted bid price of the Common Stock on broker's pink sheets was $0.50. At March 10, 1994, CenCor had approximately 1,197 shareholders of record. No dividends have been paid on the common stock and the Company does not presently intend to pay dividends. Due to the current financial status of the Company it is unlikely that dividends will be declared or paid. In addition, the terms of Century's restructuring agreements eliminate Century's ability to pay dividends on its common stock other than in shares of Century. Accordingly, CenCor will not be entitled to receive cash dividends from Century until Century's restructured debt obligations have been paid in full. 11 ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31 1993 1992 1991 1990 1989 ---------------------------------------------------------------- Income Statement Data: (In thousands except per share amounts) Revenue: Earned discount, interest and finance charges $ 21,892 $ 24,023 $ 30,089 $ 27,131 $ 23,411 Insurance commissions 1,145 1,782 2,088 2,043 2,136 ----------- ----------- ----------- ----------- ---------- 23,037 $ 25,805 $ 32,177 $ 29,174 $ 25,547 Provision for credit losses 2,104 13,156 12,133 4,323 4,355 Operating expenses 19,339 14,652 18,169 10,325 9,785 Interest expense, warrants 513 - - - - Interest expense, net 9,263 10,685 11,562 10,474 10,487 Operating income (loss) $ (8,182) $ (12,688) $ (9,687) $ 4,052 $ 920 Other income (loss): Gain on sale of finance receivables $ 944 - - - - Loss on sale of property and equipment (18) - - - - Proceeds from officers life insurance - - 652 - - ----------- ------------ ---------- ---------- ----------- 926 - 652 - - ----------- ------------ ----------- ---------- ----------- Income tax benefit (expense) - 336 687 (1,628) (413) ----------- ----------- ----------- ---------- ----------- Income (loss) from continuing operations (7,256) (12,352) (8,348) 2,424 507 ----------- ----------- ----------- ---------- ----------- Discontinued operations:(1) Income (loss) from operations(5) - (502) 111 815 506 Loss on disposal(5) - (3,699) (340) - - Provision for credit losses on subordinated notes assumed by spun-off career training subsidiary(5) - (5,422) - - - ----------- ------------ ----------- ----------- ----------- Income (loss) before extraordinary item $ (7,256) $ (21,975) $ (8,577) $ 3,239 $ 1,013 Extraordinary Item: Gain on restructuring of long-term debt 18,033 - - - - ----------- ----------- ----------- ----------- ----------- Net income (loss) $ 10,777 $ (21,975) $ (8,577) $ 3,239 $ 1,013 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Per Share Amounts:(2) Income (loss) from continuing operations $ (5.45) $ (11.34) $ (7.66) $ 2.14 $ .43 Discontinued operations - (8.84) (.21) .72 .42 Extraordinary item $ 13.55 - - - - ----------- ----------- ----------- ----------- ----------- Net income (loss) applicable to common stock and common stock equivalents $ 8.10 $ (20.18) $ (7.87) $ 2.86 $ .85 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average common and common equivalent shares outstanding 1,331,058 1,089,048 1,089,718 1,134,581 1,195,382 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
12 ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
YEAR ENDED DECEMBER 31 1993 1992 1991 1990 1989 ----------------------------------------------------------- Balance Sheet Data (End of Period): Net finance receivables $88,972 $ 74,777 $100,905 $ 99,571 $ 92,268 Total assets $97,456 $102,130 $146,709 $165,530 $140,223 Indebtedness:(4) Unsecured notes payable and commercial paper - - 491 17,508 27,319 Direct financing lease obligations - - 14,115 16,374 10,269 Long-term debt 96,284 108,321 116,657 106,913 83,680 Stockholders' equity (deficit)(3) (5,715) (16,625) 5,350 14,057 11,215 (1) During 1991 and 1992, the Company sold its temporary services division and the net assets of its equipment leasing company (see Note 3 to the financial statements) (2) Adjusted to reflect the one for five reverse stock split effected August 31, 1990. (3) The purchase of treasury stock reduced the consolidated stockholders' equity of the Company in 1989 and 1991. (4) See Notes 2 and 5 of the financial statements. (5) Amounts shown net of income taxes.
(The remainder of this page is intentionally blank.) 13 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company was significantly and adversely affected by certain events in 1991 and 1992. Among other consequences, these events have affected the Company's results of operations, its financial position, its liquidity, and resulted in certain defaults under the loan agreements. As a result of these adverse developments, the Company has, since mid-1991, experienced severe liquidity problems. In July 1992, the Board of Directors began reviewing various financial alternatives that the Company might pursue, including restructuring its outstanding debt by means of an exchange offer or by means of a Chapter 11 bankruptcy filing, with the goal of maximizing its investment in Century and implementing a long-term solution to the Company's financial situation. The review process resulted in the development of a proposed restructuring plan and a prepackaged bankruptcy plan of reorganization, which was circulated to noteholders and other creditors on May 13, 1993. Following creditor approval, CenCor filed for Chapter 11 bankruptcy reorganization on July 19, 1993. The prepackaged bankruptcy plan was confirmed by the bankruptcy court on August 30, 1993. On January 28, 1993, Century completed a restructuring of its debt obligations with its principal creditors (NOTE 5). Subsequent to the restructuring, Century sold or closed twelve non-strategic branches to obtain operating efficiencies. Century has also modernized many of its offices and has converted to an on-line computer system. According to its business plan, Century intends to achieve financial stability and profitability through internal growth with a program to grow its current branches and expand the branch network in states with strong operations. In addition, the business plan calls for the acquisition of compatible receivables and/or companies to achieve growth of receivables of $100 million in the next four years. The plan assumes that Century will be able to retain a substantial portion of acquired accounts as active customers and that acquisitions can be negotiated with acceptable yields and levels of credit risk. Century's acquisition program is also dependent on its ability to obtain additional financing. On August 22, 1992, the Century Board hired George C. Evans as President and CEO to direct the operations of Century. Mr. Evans' employment was terminated effective April 12, 1993 (see Note 13 to the financial statements). Dennis C. Berglund, who had 24 years of experience with Avco Financial Services, was then appointed to fulfill these duties. Effective June 15, 1993, Mr. Berglund was appointed to the positions of President and CEO. During 1993, Century also completed the installation of a modern management information and data processing system which is operated under contract with Norwest Financial Information Services Group ("Norwest"). Norwest provides similar services for the consumer loan operations of its own affiliate and for a large section of the consumer finance industry, which includes approximately 4,000 branch offices throughout the country. The system provides Century headquarter personnel on-line access to branch data and enables Century to provide more timely and informative reports to improve management decision making, supervision and control. 14 CURRENT OVERALL TRENDS During the year ended December 31, 1993, the Company incurred a net loss from continuing operations of $7,256,000 as compared to a net loss of $12,352,000 for 1992. As discussed in further detail below, the loss resulted primarily from a decrease in total revenue of $2,768,000 (11%) and an increase in operating expenses of $4,687,000 (32%). Offsetting these was a decrease in provision for credit losses of $11,052,000 (84%). Century has shifted its emphasis away from sales finance contracts acquired from automobile dealers, and is focusing on more desirable and profitable direct loans, including home equity loans, which typically have lower yields but generally have lower charge-off and servicing costs. In addition, during 1993 Century sold four of its branches and sold an additional six branch offices during January and February of 1994. Management determined that these locations were outside of its focused market area and the cost of operating the offices was not providing adequate benefits. The sale of these branches will enable Century to focus on its more profitable and geographically desirable offices. Century also merged two of its branch offices into other nearby branches during 1993 in order to consolidate resources, improve efficiency, and eliminate overhead costs. Management feels that the above mentioned changes and the completion of the installation of the new data processing system will serve to reduce the amount of operating expenses in 1994. Management intends to closely evaluate and monitor operating expenses throughout the year. 1993 COMPARED TO 1992 Interest on finance receivables decreased by $2,131,000 (9%) in the year ended December 31, 1993. The decrease resulted primarily from the change in the concentration of high yielding assets, such as automobile sales finance contracts, to an increase in the level of lower yielding home equity loans. The provision for credit losses decreased by $11,052,000 to $2,104,000 for the year ended December 31, 1993. The decrease in the provision for credit losses is primarily attributable to the significant decrease in the auto paper portfolio, the increased recoveries of previously charged off receivables and the strengthening of management and controls. Operating expenses increased by $4,687,000 (31%) to $19,339,000 for the year ended December 31, 1993. The increase was mostly due to additional costs incurred to improve the quality and effectiveness of Century's operations. Most of the increase in operating expenses occurred in the following categories: salary and employment expenses (44%), rent expense (30%), computer system conversion (100%), incentives toward the growth of Century's portfolio (68%), settlement with a former employee (100%), and relocation expenses (78%). Interest expense decreased slightly in the year ended December 31, 1993 from $10,685,000 at December 31, 1992 to $9,263,000 at December 31, 1993. The decrease in the interest expense resulted from the restructuring of the outstanding long term debt (see Notes 2 and 5 to the financial statements). 15 In addition, Century, in connection with its debt restructure on January 28, 1993, issued warrants to its noteholders in order to acquire 300,000 shares of Century common stock (see Note 5 to the financial statements). The value of the warrants in excess of the exercise price is being accrued as interest expense. As previously mentioned, Century sold four of its branch offices during 1993. The resulting gain from the sale of the branch receivables ($944,000) and the loss from the sale of the branch fixed assets ($18,000) was recorded as other income (loss) in the accompanying consolidated statement of operations. As a result of CenCor's reorganization plan (see Note 2 to the financial statements), CenCor issued New Notes, Convertible Notes, and stock to its noteholders. The New Notes and Convertible Notes were recorded at their net present value using an estimated market discount rate of 16%. As a result of these transactions, an extraordinary gain of $18,033,000 was recorded. No provision for income tax was recorded in 1993. See Note 10 to the financial statements. 1992 COMPARED TO 1991 Interest on finance receivables decreased in the year ended December 31, 1992 compared to 1991. Although yields were comparable between the two years, average earning balances for the period were lower in 1992 as compared to 1991. This resulted from Century's decision to significantly curtail the purchase of bulk automobile sales contracts subsequent to the discovery of the JoAnn's fraud in late 1991. As a result, net finance receivables were $74,777,000 at December 31, 1992 as compared to $100,905,000 at December 31, 1991. Because principal pay downs were not reinvested in bulk sales contracts, cash and cash equivalents increased $19,976,000 during 1992 to $23,401,000. Insurance commissions were down $306,000 or 15% from 1991. The decrease also reflected the lower consumer loan origination activity in 1992 compared to 1991. The provision for credit losses increased $1,023,000 to $13,156,000 for the year ended December 31, 1992. Net charge offs for 1992 included approximately $2,700,000 of JoAnn's notes of which $2,100,000 had been previously reserved. As a result of significant credit losses in Century's automobile sales contract portfolio, management has increased the related allowance for credit losses to approximately 22% of net outstanding balances. The allowance for credit losses on all other finance receivables is approximately 5% of net outstanding balances. Operating expenses for 1992 decreased to $14,652,000 from $18,169,000 in 1991. The 1991 results included $3,120,000 of service fees paid to JoAnn's and a $3,707,00 loss on fraudulent contracts which did not reoccur in 1992. The 1992 results reflect higher professional expenses incurred in connection with the JoAnn's fraud and dealing with defaults on CenCor's and Century's debt. The loss from discontinued operations for 1992 was $9,623,000 as compared to a loss from discontinued operations of $229,000 for the same period in 1991. The increase is primarily due to the $5,422,000 provision for credit losses related to the Junior Secured Debenture issued by Concorde Career Colleges ("Concorde") and the net loss on disposal of discontinued operations' assets of $3,699,000 (see Note 3 to the financial statements). An income tax benefit of $336,000 was recorded for the 1992 loss. A reconciliation of income tax benefit to the amount computed using the statutory federal income tax rate is included in Note 10 to the financial statements. 16 LIQUIDITY AND CAPITAL RESOURCES DEBT AVAILABILITY On January 29, 1993, after extensive negotiations with its major creditors, Century successfully completed its debt restructuring. Prior to that date, Century had been in default on all its debt due to various covenant violations (see Note 5 to the financial statements for details of Century's debt restructure). The terms of Century's restructuring agreements limit Century's ability to incur additional indebtedness, within certain limits. On October 15, 1993 Century entered into a letter of intent with Congress Financial Corporation ("Congress") that provided for a revolving line of credit up to $25,000,000. The loan will be used to provide future working capital for Century in order to achieve its plan of portfolio growth. The facility is fully secured by a first lien on all of Century's assets. The interest rate on the proposed Congress loan is two percent (2%) above the prime commercial interest rate, adjusted monthly. The revolving credit line is provided for a minimum of two years with automatic year to year renewals unless terminated by either party. Management expects to complete the Congress agreement and have funds available by April 1, 1994. As previously mentioned, CenCor successfully restructured its debt on August 30, 1993. For a further discussion of CenCor's debt restructure, refer to Note 2 of the financial statements. CAPITAL OBLIGATIONS The Company has no significant obligations for capital purchases. DEFAULTS ON LONG-TERM DEBT At December 31, 1992, Century was in default of certain covenants in its long-term debt agreements. On January 29, 1993, Century entered into amendment and exchange agreements with the holders of its long-term debt (the Agreements), whereby the holders agreed to defer all principal payments until April 30, 1997. Additionally, many covenants of the debt agreements were amended. The covenants include, in part, maintaining net worth at certain minimum levels and limitations on indebtedness and payment of dividends. Century is in compliance with the amended covenants of the long-term debt agreements. Pursuant to the Agreements, all of Century's long-term debt will mature on April 30, 1997. However, certain scheduled principal installments as provided for in the original debt agreements are due prior to this date. In lieu of cash payment of the scheduled principal installments, Century will deliver Secured Deferred Payment Notes for the related senior debt and a combination of Secured Deferred Payment Notes and Secured Compound PIK Notes for the related subordinated and junior subordinated debt. These notes will bear interest at a fixed rate equal to the rate on 4.5 year Treasury notes as of the installment due date, plus 2.25% (senior notes), 3.75% (subordinated notes) and 5% (junior subordinated notes). 17 Interest is payable monthly under all of the notes, except for the Secured Compound PIK Notes, for which interest compounds monthly and is payable on April 30, 1997. Prior to the restructuring of its debt, CenCor was in default on both its public and private debt. As part of the Restructuring, which was consummated on August 30, 1993, the old debt was exchanged for New Notes, Convertible Notes, and stock (see Note 2 to the financial statements). The Company is in compliance with all covenants and terms under the new indenture. INTERNAL REVENUE SERVICE EXAMINATION The Company's income tax returns for 1988 and 1989 were examined by the Internal Revenue Service (IRS), which has proposed certain adjustments, a portion of which have been protested by the Company. The Company has also claimed additional deductions in these years. Management believes that the ultimate disposition of the IRS examination will not have a material effect on the financial position of the Company. As a result of the unresolved IRS examination, management cannot precisely estimate the amount of the Company's net operating loss carryforward for financial statement or federal income tax purposes. CONTINUING OPERATIONS As noted earlier, CenCor successfully restructured its long-term debt pursuant to a plan confirmed by the U.S. Bankruptcy Court and approved by the majority of its creditors. Management believes that CenCor's financial condition will not have a material adverse impact on Century's financial condition, operations, or its ability to fund its operations. Funds that are available to CenCor, including cash on hand, investment income and the collection of certain receivables, are expected to be sufficient to support CenCor's limited activities through at least 1996. In addition, with the potential availability of the line of credit provided by Congress, Century intends to pursue its business plans of expansion through acquisitions of consumer finance businesses and portfolios of consumer loans and also through expansion of business with its existing and former customers. INFLATION AND GENERAL ECONOMIC CONDITIONS The cost of Century's operating expenses has increased due to normal inflationary increases. Century foresees no detrimental effects from inflation as long as inflation remains at or near current levels. Changes in interest rates can affect Century. Its liabilities are more sensitive to interest rate changes than its assets. While economic conditions affecting the country have an impact on Century's business, primarily with its cost of funds, the business is such, that specific local economies have a much greater financial impact. For example, a major employer either adding or reducing employees will have a ripple effect in a community which will impact Century's ability to make and collect loans. Century, as it is now structured, does not anticipate any major economic effect on its business. 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS
PAGE ---- CenCor, Inc. Report of Independent Auditors 20 Consolidated Balance Sheets--At December 31, 1993 and 1992 21 Consolidated Statements of Operations--For the Years Ended December 31, 1993, 1992, and 1991 22-23 Consolidated Statements of Stockholders' Equity (Deficit)--For the Years Ended December 31, 1993, 1992, and 1991 24 Consolidated Statements of Cash Flows--For the Years Ended December 31, 1993, 1992, and 1991 25-26 Notes to Consolidated Financial Statements 27
19 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders CenCor, Inc. We have audited the accompanying consolidated balance sheets of CenCor. Inc. (the Company) as of December 31, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion of these financial statements and schedules 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 consolidated financial position of CenCor, Inc. at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG Kansas City, Missouri March 4, 1994 20 CenCor, Inc. Consolidated Balance Sheets
DECEMBER 31 1993 1992 ---------------------------------- ASSETS Cash and cash equivalents $ 3,277,000 $ 23,401,000 Net finance receivables, less allowance for credit losses of $5,026,000 ($5,990,000 in 1992) 88,972,000 74,777,000 Property and equipment, net 1,742,000 665,000 Other assets 3,465,000 3,287,000 ------------ ------------- $ 97,456,000 $102,130,000 ------------ ------------- ------------ ------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Long-term debt $ 96,284,000 $108,321,000 Accrued interest 641,000 5,731,000 Accrued interest - warrants 513,000 - Accounts payable and accrued liabilities 5,733,000 4,703,000 ------------- -------------- Total liabilities 103,171,000 118,755,000 Stockholders' equity (deficit): Common stock, $1 par value, 2,000,000 shares authorized, 1,240,727 shares issued and outstanding (1,360,458 shares in 1992) 1,241,000 1,360,000 Paid-in capital 2,805,000 6,574,000 Accumulated deficit (9,761,000) (20,538,000) Less treasury shares, at cost (271,410 shares in 1992) - (4,021,000) ------------- ------------- Total stockholders' deficit (5,715,000) (16,625,000) ------------- ------------- $ 97,456,000 $102,130,000 ------------ ------------ ------------ ------------
SEE ACCOMPANYING NOTES. 21 CenCor Inc. Consolidated Statements of Operations
YEAR ENDED DECEMBER 31 1993 1992 1991 -------------------------------------------------------------------- Finance charges and insurance commissions $ 23,037,000 $ 25,805,000 $ 32,177,000 Operating expenses: Provision for credit losses 2,104,000 13,156,000 12,133,000 Operating expenses 19,339,000 14,652,000 11,342,000 Loss on fraudulent automobile contracts - - 3,707,000 Repossession service fees - - 3,120,000 Interest expense, net 9,263,000 10,685,000 11,562,000 Interest expense, warrants 513,000 - - -------------------------------------------------------------------- 31,219,000 38,493,000 41,864,000 -------------------------------------------------------------------- Operating loss (8,182,000) (12,688,000) (9,687,000) Other income (loss): Gain on sale of finance receivables 944,000 - - Loss on sale of property & equipment (18,000) - - Proceeds from officers' life insurance - - 652,000 -------------------------------------------------------------------- Loss from continuing operations before income taxes and extraordinary item (7,256,000) (12,688,000) (9,035,000) Income tax benefit - 336,000 687,000 -------------------------------------------------------------------- Loss from continuing operations before extraordinary item (7,256,000) (12,352,000) (8,348,000) Discontinued operations: Income (loss) from operations, net of taxes ($0 in 1992 and $8,000 in 1991) - (502,000) 111,000 Loss on disposal, net of tax benefits ($0 in 1992 and $29,000 in 1991) - (3,699,000) (340,000) Provision for credit loss on subordinated notes assumed by spun-off subsidiary, net of taxes ($0 in 1992) - (5,422,000) - --------------------------------------------------------------- Loss from discontinued operations - (9,623,000) (229,000) --------------------------------------------------------------- Loss before extraordinary item (7,256,000) (21,975,000) (8,577,000) Extraordinary item: Gain on restructuring of long-term debt net of taxes ($0 in 1993) 18,033,000 - - --------------------------------------------------------------- Net income (loss) $ 10,777,000 $(21,975,000) $(8,577,000) --------------------------------------------------------------- ---------------------------------------------------------------
SEE ACCOMPANYING NOTES. 22 CenCor Inc. Consolidated Statements of Operations (continued)
YEAR ENDED DECEMBER 31 1993 1992 1991 ---------------------------------------------------------------- Weighted average common and common equivalent shares outstanding 1,311,058 1,089,048 1,089,718 ---------------------------------------------------------------- ---------------------------------------------------------------- Earnings per share of common stock and common equivalent shares of stock: Earnings (loss) per share from continuing operations $ (5.45) $ (11.34) $ (7.66) Earnings (loss) per share from discontinued operations - (8.84) (.21) ---------------------------------------------------------------- Earnings (loss) per share before extraordinary items (5.45) (20.18) (7.87) Earnings (loss) per share from extraordinary item 13.55 - - ---------------------------------------------------------------- Earnings (loss) per share from net income $ 8.10 $ (20.18) $ (7.87) ---------------------------------------------------------------- ----------------------------------------------------------------
SEE ACCOMPANYING NOTES. 23 CenCor, Inc. Consolidated Statements of Stockholders' Equity (Deficit)
COMMON STOCK TREASURY STOCK ---------------- ------------------ RETAINED PAID- IN EARNINGS SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNT TOTAL - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1990 1,360,458 $1,360,000 $6,574,000 $10,014,000 253,540 $(3,891,000) $14,057,000 Net loss - - - (8,577,000) - - (8,577,000) Treasury stock purchases - - - - 17,870 (130,000) (130,000) ------------------------------------------------------------------------------------------------------ Balance at December 31, 1991 1,360,458 1,360,000 6,574,000 1,437,000 271,410 (4,021,000) 5,350,000 Net loss - - - (21,975,000) - - (21,975,000) ------------------------------------------------------------------------------------------------------ Balance at December 31, 1992 1,360,458 1,360,000 6,574,000 (20,538,000) 271,410 (4,021,000) (16,625,000) Net income - - - 10,777,000 - - 10,777,000 Cancellation of treasury stock (271,410) (271,000) (3,750,000) - (271,410) 4,021,000 - Issuance of common stock 151,679 152,000 (19,000) - - - 133,000 ------------------------------------------------------------------------------------------------------ Balance at December 31, 1993 1,240,727 $1,241,000 $2,805,000 $(9,761,000) - - $(5,715,000) ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. 24 CenCor, Inc. Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31 1993 1992 1991 ------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $10,777,000 $(21,975,000) $(8,577,000) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 191,000 113,000 189,000 Amortization of intangible assets and debt expense 95,000 335,000 720,000 Provision for credit losses 2,104,000 13,156,000 12,133,000 Loss from discontinued operations - 9,623,000 229,000 Gain on sale of finance receivables (944,000) - - Deferred tax benefit - (336,000) (708,000) Gain on restructure of debt (18,033,000) - - Changes in assets and liabilities: Accrued interest 641,000 388,000 6,000 Accrued interest - warrants 513,000 - - Other assets and liabilities 1,164,000 6,696,000 2,064,000 ------------------------------------------------------------------- Total adjustments (14,269,000) 29,975,000 14,633,000 ------------------------------------------------------------------- Net cash provided by (used in) operating activities (3,492,000) 8,000,000 6,056,000 INVESTING ACTIVITIES Capital expenditures, net (1,338,000) (515,000) (30,000) Finance receivables originated or purchased (91,842,000) (52,718,000) (69,406,000) Finance receivables repaid or sold 76,487,000 65,858,000 56,364,000 Cash used in discontinued operations - (671,000) (1,460,000) Proceeds from sale of discontinued operations - 7,042,000 784,000 Proceeds from sale of other assets 61,000 1,202,000 - ------------------------------------------------------------------- Net cash provided by (used in) investing activities (16,632,000) 20,198,000 (13,748,000)
See Accompanying Notes. 25 CenCor, Inc. Consolidated Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31 1993 1992 1991 ------------------------------------------------------------ FINANCING ACTIVITIES Proceeds from issuance of long-term debt $ - $ - $47,031,000 Principal payments on long-term debt - (7,731,000) (36,428,000) Net decrease in notes payable - - (14,600,000) Net decrease in commercial paper - (491,000) (2,417,000) Purchase of treasury stock - - (130,000) ------------------------------------------------------------ Net cash used in financing activities - (8,222,000) (6,544,000) ------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents (20,124,000) 19,976,000 (14,236,000) Cash and cash equivalents at beginning of year 23,401,000 3,425,000 17,661,000 ------------------------------------------------------------ Cash and cash equivalents at end of year $ 3,277,000 $ 23,401,000 $ 3,425,000 ------------------------------------------------------------ ------------------------------------------------------------ SUPPELMENTAL DISCLOSURES OF CASH FLOW INFROMATION Cash paid during the year for: Interest $ 9,010,000 $11,503,000 $15,333,000 ------------------------------------------------------------ ------------------------------------------------------------ Income taxes $ - $ - $ 306,000 ------------------------------------------------------------ ------------------------------------------------------------
SEE ACCOMPANYING NOTES 26 CenCor, Inc. Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 1. SUMMARY OF SIGNIGICANT ACCOUNTING POLICIES BASIS OF PRESENTATION CenCor, Inc. is essentially a holding company for its wholly-owned subsidiary, Century Acceptance Corporation ("Century"). On January 29, 1993, Century completed a restructuring of its debt obligations with its principal creditors (NOTE 5). On July 19, 1993, CenCor filed a Voluntary Petition with the United States Bankruptcy Court for the Western District of Missouri seeking protection under Chapter 11 of the United States Bankruptcy Court. At the same time, CenCor filed an Application with the Bankruptcy Court seeking expeditious confirmation of its previously creditor approved prepackaged plan of reorganization. The plan was confirmed by the bankruptcy court on August 30, 1993. As discussed further in Note 2, on November 1, 1993, CenCor issued new notes and stock to its subordinated noteholders pursuant to the provisions of the plan. The filing did not involve Century. ACCOUNTING PRINCIPLES The consolidated financial statements have been prepared in accordance with generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the year. Because of changing economic conditions and the economic prospects of borrowers, it is often necessary to make frequent changes in estimates and assumptions. Accordingly, actual results could differ from such estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for credit losses. Management believes that the allowance for credit losses is adequate. While management uses currently available information to recognize losses on finance receivables, future additions to the allowances may be necessary based on changes in economic conditions in the Company's market areas. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of CenCor, Inc., and its subsidiaries, (together, the "Company") all of which are wholly owned. At December 31, 1993, Century was the Company's only subsidiary. The Company, through its subsidiary Century, is engaged in the consumer finance industry. Century provides consumer loans and real estate loans to individuals and purchases installment sales contracts. The Company also sells various insurance products including property, credit life, accident and health insurance in conjunction with its consumer loan business. All significant intercompany accounts and transactions have been eliminated in consolidation. REVENUE RECOGNITION Finance charges on receivables are recognized as revenue using the interest (actuarial) method. Finance charge accruals are suspended on accounts more than two months contractually past due. Once an account is suspended, finance charges are recognized on a collection basis. Insurance commissions are generally recognized as revenue over the term of the loan. 27 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CREDIT LOSSES Provisions for credit losses are charged to income in amounts sufficient to maintain the allowance for credit losses at a level considered adequate to cover the losses in the existing portfolio. The allowance is determined using estimated loss percentages established by management for each major category of receivables. Additions to the allowance are charged to the provision for credit losses. Management evaluates allowance requirements by examining current delinquencies, the characteristics of the accounts, the value of the underlying collateral and general economic conditions and trends. Management also evaluates the availability of dealer reserves to absorb finance receivables losses. Finance receivables are charged to the allowance for credit losses when they are deemed to be uncollectible but, in any event, all accounts (except for real estate secured loans) for which an amount aggregating a full contractual payment has not been received for six consecutive months are written off. Real estate secured loans are charged to the allowance for credit losses when a full contractual payment has not been received for twelve months unless the property has been foreclosed. DEALER RESERVES At the time of the acquisition of certain automobile and sales finance contracts, arrangements are entered into with dealers whereby reserves are established and are available to the Company to charge credit losses associated with such contracts. The balance of the reserve may be refunded to the dealer should the actual loss experience of the contracts be less than the negotiated amount. DEPRECIATION AND AMORTIZATION Furniture and equipment are depreciated over the estimated useful lives of the assets using the straight-line method. Leasehold improvements are amortized ratably over the terms of the related leases. OTHER ASSETS Included in other assets at December 31, 1993 and 1992, is a $1,000,000 receivable from an insurance company in connection with a fidelity bond claim arising from the loss on fraudulent automobile contracts (NOTE 6). Other assets at December 31, 1993 and 1992, also include a $750,000 note receivable related to the sale of Charter Equipment Leasing (Charter) (NOTE 3). GOODWILL AND OTHER INTANGIBLE ASSETS In connection with the sale of The Christine England Corporation (dba Writer's) in 1991, $1,936,000 of goodwill and non-compete agreements were netted against the sale proceeds. In connection with sale of the Company's Temporary Services division and Charter in 1992, all remaining unamortized goodwill and other intangibles of $3,097,000 were netted against the sale proceeds. Amortization expense was $145,000 in 1992, and $427,000 in 1991. 28 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) TRANSACTIONS WITH AFFILIATES Prior to 1993, certain corporate, general and administrative expenses had been allocated from the Company to two former subsidiaries, Concorde Career Colleges, Inc. (Concorde) and LaPetite Academy, Inc. (LaPetite), which were spun off in 1988 and 1983, respectively. These allocations were made in accordance with agreements between the Company, Concorde, and LaPetite based on the estimated amounts attributable to each. The expense allocations from the Company to Concorde were $328,000 in 1992 and $611,000 in 1991. The expense allocations from the Company to LaPetite were $689,000 in 1992 and $1,193,000 in 1991. Management believes the allocations were reasonable and approximate the costs of services had they been obtained from unaffiliated parties. Included in accounts receivable are amounts due from LaPetite which total $36,000 at December 31, 1992. This amount was paid in full in 1993. CASH EQUIVALENTS Cash equivalents consisted of money market funds and are stated at cost, which approximates market. RECLASSIFICATIONS Certain 1991 and 1992 amounts have been reclassified to conform to the 1993 presentation. DIVIDEND RESTRICTION CenCor has limited sources of funds from continuing operations, except from Century. The terms of Century's debt restructuring (NOTE 5) eliminate Century's ability to pay dividends on its common stock other than in the stock of Century. Accordingly, CenCor will not be entitled to receive cash dividends from Century until Century's restructured debt obligations have been paid in full. 2. REORGANIZATION AND EXTRAORDINARY ITEM On July 19, 1993, CenCor filed a Voluntary Petition with the United States Bankruptcy Court. At the same time, CenCor filed an Application with the Bankruptcy Court seeking expeditious confirmation of its previously creditor approved prepackaged plan of reorganization. The plan was confirmed by the Bankruptcy Court on August 30, 1993. Pursuant to the plan, the noteholders received the following securities for each $1,000 aggregate amount of principal and accrued but unpaid interest at December 31, 1992: (i) $600 principal amount of non-interest bearing New Notes (ii) $400 principal amount of non-interest bearing Convertible Notes (iii) 5.2817 shares of CenCor common stock, par value $1 per share The New Notes and Convertible Notes are non-interest bearing and will mature on July 1, 1999. The Convertible Notes may be converted at the option of the holder, at any time, into shares of common stock at 29 2. REORGANIZATION AND EXTRAORDINARY ITEM (CONTINUED) a ratio of one share of common stock for each $20 principal amount of Convertible Notes. The reorganization resulted in the issuance of $17,230,589 of New Notes, $11,487,060 of Convertible Notes, and 151,679 shares of $1 par value common stock on November 1, 1993. Simultaneously the Company cancelled 271,410 shares of treasury stock. The New Notes and Convertible Notes were recorded at their net present value using an estimated market discount rate of 16%. A market value of $0.125 was assigned to the issuance of the common stock. As a result of these transactions, an extraordinary gain of $18,033,000 was recorded. 3. DISCONTINUED OPERATIONS Effective November 6, 1992, the Company sold substantially all the net assets of Charter in exchange for cash of $2,396,000, net of selling expenses of approximately $144,000, a promissory note in the amount of $750,000 and the buyer's assumption of certain liabilities. The promissory note is payable in full on November 5, 1995, including all accrued interest compounded monthly at a rate of 12% per annum. Net assets sold were approximately $6,969,000. The Company recorded a loss on disposal (net of income taxes) of $4,090,000. Effective February 29, 1992, the Company sold seven Temporary Services offices located in Ohio. The gross cash proceeds of the sale was $2,842,000 which was received May 1, 1992. In July 1992, the remainder of the Temporary Services offices were sold. The gross cash proceeds to the Company of the sale was approximately $1,660,000 which was received July 29, 1992. Total net assets of all the offices sold was approximately $4,111,000. The Company recorded a gain of $391,000 (net of income taxes) from the sale of these Temporary Services offices which is classified as discontinued operations in the accompanying consolidated statements of operations. Effective December 11, 1991, the Company sold Writers to Christine England from whom the Company had acquired the business in 1989. The sales price for Writers was $2,560,000, of which $1,110,000 was paid to the Company in cash and the balance eliminated indebtedness, including accrued interest, due from CenCor to Ms. England for the deferred portion of the purchase price payable to her when CenCor acquired Writer's, or amounts due to her as consideration for her agreement not to compete with CenCor. The Company recorded a loss of $369,000 (net of income taxes) related to this sale. Concorde, which was spun off to the stockholders of the Company in 1988, had previously agreed to assume certain obligations of the Company relating to the Company's Series H 10% notes. Concorde notified the Company on October 1, 1992, that it was unable to continue making payments on the assumed debt. On October 30, 1992, Concorde executed a restructuring agreement with the Company, which terminated Concorde's obligations regarding these notes. In consideration, the Company accepted Concorde's Junior Secured Debenture ("Junior Secured Debenture") for $5,422,000. As a result of Concorde's precarious financial condition, the Company established a reserve for the full amount due from Concorde. The loss provision related to the allowance is classified in the accompanying 1992 consolidated statement of operations as discontinued operations. On December 30, 1993, Concorde and Century amended the Restructuring Agreement (as later defined) to provide that CenCor would receive $8,390,000 of Concorde's previously charged-off receivables in full payment of the accrued interest on the Junior Secured Debenture through December 31, 1993 in the amount of $559,353. The receivables, which consist of accounts and notes receivable from students who attended schools operated by Concorde or its subsidiaries, were assigned to CenCor without recourse with CenCor assuming all risk of non-payment of the receivables. The amendment grants CenCor limited rights of substitution until such time as it collects $559,353 from the receivables, exclusive of out-of-pocket collection 30 3. DISCONTINUED OPERATIONS (CONTINUED) fees and expenses paid to third-parties. The Company has engaged a collection agent to pursue recovery of such receivables. The $559,353 accrued but unpaid interest is fully reserved in the accompanying consolidated balance sheet. The income (loss) from operations, net of applicable income taxes, for the Temporary Services division, Writer's and Charter is classified as discontinued operations in the accompanying consolidated statements of operations. The net income (loss) from discontinued operations is as follows:
DECEMBER 31 1993 1992 1991 -------------------------------------------------- Revenue $ - $10,803,000 $32,720,000 Expense - 11,305,000 32,601,000 -------------------------------------------------- Income (loss) from discontinued operations before income taxes - (502,000) 119,000 Income taxes applicable to discontinued operations - - (8,000) -------------------------------------------------- Net income (loss) from discontinued operations $ - $ (502,000) $ 111,000 -------------------------------------------------- --------------------------------------------------
4. CIKC LOANS Robert F. Brozman, who had been the President and Chairman of the Board of CenCor since its incorporation in 1968, died on June 10, 1991. Shortly thereafter, the directors who were serving on CenCor's Board of Directors at the time of Robert F. Brozman's death, including his son, Jack L. Brozman, learned for the first time of the "CIKC Loans" described below. Prior to Robert F. Brozman's death, various banks and other lenders had made loans, purportedly to CenCor, the proceeds of which were never received by, or used for the benefit of, CenCor, but rather were credited to the account of and used by CenCor, Inc. of Kansas City ("CIKC"). CIKC is a wholly-owned subsidiary of Cor, Inc. ("Cor") which was wholly-owned and controlled by Robert F. Brozman. CIKC recorded these loans on its financial statements as its obligations. The lenders whose loan proceeds were received by and used for the benefit of CIKC ("CIKC Lenders") apparently believed, based upon actions taken by or at the direction of Robert F. Brozman, that the loans were being made to CenCor. The principal amount due to the CIKC Lenders was $23,117,820 at the time of Robert F. Brozman's death. The CIKC Lenders have asserted that CenCor (among other parties) is obligated to repay the CIKC Loans. The Estate of Robert F. Brozman (the "Estate"), CIKC and Cor (collectively, the "Indemnitors") entered into an indemnity agreement dated July 26, 1991, with the Company (the "Indemnity Agreement") in which the Estate, CIKC and Cor acknowledged that they are jointly and severally liable to repay the amounts due to the CIKC Lenders. The Indemnitors also agreed to indemnify the Company against certain other injury or loss that the Company might incur as a result of certain unauthorized actions or omissions of the late president. Although CenCor has not admitted liability with respect to these claims, it has executed a Continuing Guarantee of Collection with respect to liabilities flowing from the CIKC Loans as well as a Continuing Guarantee of Collection for Certain Creditors Previously Unsecured of up to $3 million for the benefit of certain unsecured creditors of the Estate of Robert F. Brozman. 31 4. CIKC LOANS (continued) The Company's potential exposure to the CIKC Lenders and to the unsecured creditors of the Estate has been significantly reduced as a result of the sale of the Estate's assets, including the common stock of LaPetite Academy, Inc. owned by the Estate. CenCor has been informed by the Estate that the outstanding balance of the CIKC Loans was $2,142,000 as of March 1, 1994 and that the current balance of the unsecured obligations of the Brozman Estate is approximately $860,000. The Estate has also informed CenCor that it has contracted to sell its last remaining significant asset, which sale may generate sales proceeds, after provision for administrative expenses and taxes, sufficient to satisfy all of its outstanding liabilities. Because the closing contingencies of the sales contract have yet to be satisfied and because the amount of taxes and administrative expenses to be paid by the Estate have not been determined, there can be no assurance that the claims of the CIKC Lenders and the others against CenCor pursuant to the guarantees will not exceed the Estate's ability to satisfy such claims and to indemnify CenCor. CenCor has recorded no provision for loss relating to the contingencies associated with the CIKC loans. (THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.) 32 5. LONG-TERM DEBT Long-term debt at December 31, 1993 and 1992, consisted of:
1993 1992 ------------------------------ CENTURY ACCEPTANCE CORPORATION Senior debt: Senior secured notes, 7.141% to 9.875% $ 45,542,000 $ - payable through April 30, 1997 Senior secured deferred payment notes, 7,658,000 - 7.278% to 7.84%, due April 30, 1997 7% to 11.25%, payable in various installments through 1998 - 53,200,000 ------------------------------ TOTAL SENIOR DEBT 53,200,000 53,200,000 Subordinated debt: Senior Subordinated notes: Subordinated secured notes, 9.5% to 10.875% payable through April, 1997 9,173,000 - Subordinated secured deferred payments notes, 8.393% to 9.34%, due April 30, 1997 5,430,000 - Subordinated secured compound PIK notes, 8.393% to 9.34%, due April 30, 1997 1,147,000 - Senior subordinated notes, 9.5% to 11.75%, payable in various installments through 1998 - 15,680,000 Junior subordinated notes: Junior subordinated secured notes, 10.75% to 11.875%, payable through April 30, 1997 4,725,000 - Junior subordinated secured deferred payment notes, 10.028% to 10.59%, due April 30, 1997 7,637,000 - Junior subordinated secured compound PIK notes, 10.028% to 10.59%, due April 30, 1997 2,952,000 - Junior subordinated notes, 10% to 12.5%, payable in various installments through 1998 - 15,050,000 ------------------------------ Total Subordinated Debt 31,064,000 30,730,000 ------------------------------ Total Century Acceptance Corporation $ 84,264,000 $ 83,930,000 ------------------------------ ------------------------------
33 5. LONG-TERM DEBT (continued)
1993 1992 ------------------------------ CENCOR, INC. Subordinated debt securities, due July 1, 1999 14,635,000 - Less: discount, 16%, effective rate (7,423,000) - Convertible debt securities, due July 1, 1999 9,756,000 - Less: discount, 16%, effective rate (4,948,000) - Subordinated notes, 10%, due in 1996 - 12,999,000 Subordinated notes, 9% to 12%, payable in series from 1992 through 1995 - 11,392,000 ------------------------------ Total CenCor, Inc. 12,020,000 24,391,000 ------------------------------ Total Companies $ 96,284,000 $108,321,000 ------------------------------ ------------------------------
On January 29, 1993, Century entered into amendment and exchange agreements with the holders of its long-term debt (the Agreements), whereby the holders exchanged their prior notes for new notes and the terms and covenants of the debt agreements were amended. The covenants include in part, maintaining net worth at certain minimum levels and limitations on indebtedness and payment of dividends. Century is in compliance with the amended covenants of the long-term debt agreements at December 31, 1993. Pursuant to the Agreements, all of Century's long-term debt will mature on April 30, 1997. However, scheduled principal installments as provided for in the original debt agreements are due prior to this date (except for past-due installments as of January 28, 1993, aggregating approximately $18.7 million, for which a combination of Secured Deferred Payment Notes and Secured Compound PIK Notes were issued but are not due prior to April 30, 1997). In lieu of cash payment of the scheduled principal installments, Century has delivered Secured Deferred Payment Notes for the related senior debt and a combination of Secured Deferred Payment Notes and Secured Compound PIK Notes for the related subordinated and junior subordinated debt. These notes will bear interest at the rate of 4.5 year Treasury Notes as of the installment due date, plus 2.25% (senior notes), 3.75% (subordinated notes) and 5% (junior subordinated notes). Interest is payable monthly under all of the notes, except for the Secured Compound PIK Notes, for which interest compounds monthly and is payable on April 30, 1997. All of the notes issued are secured by a security interest in the assets of Century. The noteholders have agreed to subordinate their lien to providers of new secured lending, provided that Century is in compliance with the conditions specified in the Agreements. Century is required under the debt agreements to pay a prepayment penalty if Century pays off the notes in full prior to the April 30, 1997 maturity date. The amount of the prepayment penalty is dependent upon the rates at which the noteholders can reinvest the principal. Century is prohibited from making partial principal payments and from redeeming less than all of the notes. 34 5. LONG-TERM DEBT (continued) Prior to the execution of the Agreements, Century had scheduled principal installment payments due subsequent to April 30, 1997 of approximately $16,547,000. Pursuant to the Agreements, the notes issued in exchange for these scheduled payments mature on April 30, 1997, at which time Century may be required to pay a premium based upon the rates at which the noteholders are able to reinvest the principal. In consideration for the noteholders entering into the Agreements, Century issued warrants to the noteholders to acquire 300,000 shares of Century's common stock which constitutes 25% of Century's common stock on a fully diluted basis. The warrants vested on April 30, 1993 and expire on January 1, 2003. The exercise price of the warrants is $.01 per share. Century has the right to call the warrants in May 1997 if the notes have been paid in full. The noteholders can require Century to purchase (at a per share price based upon the greater of the fair value of the shares or equity value, equal to the book value of Century plus a 5% premium on net finance receivables) their warrants and the shares obtained from the exercise of the warrants [at the greater of their then current market value if an offer exists, or equity value (as defined)] after the notes are paid in full or upon the occurrence of certain events including the sale of substantially all of the assets of Century. The value of the warrants in excess of the exercise price (the put adjustment) is accrued as interest expense over the period from the date of issuance to the earliest date the creditors may force Century to buy the warrants (the put date). Changes in the highest redemption price after the date of issuance and before the earliest put date, including changes in interim periods, will be considered changes in accounting estimates and will affect the put adjustment on a prospective basis. Changes in the highest redemption price after the earliest put date will be recognized as interest expense in the current year. The term and provisions of the long-term debt of CenCor, Inc. are described in Note 2 to the financial statements. 6. LOSS ON PURCHASE OF FRAUDULENT AUTOMOBILE CONTRACTS During 1991, Century was the victim of a fraudulent scheme involving the purchase of automobile financing contracts which the Company determined were fictitious or missing vehicle titles. The receivables were acquired in 1991 from JoAnn's Instant Finance Cars, Inc. (JoAnn's), a used car dealer. Century had an agreement with JoAnn's for JoAnn's to sell vehicles repossessed by certain of Century's subsidiaries. When the vehicles were purportedly sold by JoAnn's, Century acquired the purchasers' installment contracts. A service fee (representing repossession and automobile restoration costs) was paid to JoAnn's at the time the new contract was acquired. When those receivables became delinquent, JoAnn's exchanged other installment contracts for the delinquent accounts. Century had approximately $11,200,000 of finance receivables purchased from JoAnn's, of which $8,500,000 were charged off in 1991. During 1992, all remaining JoAnn's finance receivables were charged off, with a resulting charge to the provision for credit losses of $600,000. Century does not have any other such agreements for the sale of repossessed vehicles. These transactions were classified in the 1991 consolidated statement of operations as follows: Other operating expense (aggregate service fees paid to JoAnn's) $3,120,000 Provision for credit losses 1,673,000 Loss on fraudulent automobile contracts 3,707,000 ------------- $8,500,000 ------------- -------------
35 6. LOSS ON PURCHASE OF FRAUDULENT AUTOMOBILE CONTRACTS (continued) A subsidiary of Century commenced litigation February 19, 1992, against JoAnn's Instant Finance Cars, Inc. (JoAnn's) in the Circuit Court of the Thirteenth Judicial Circuit of Hillsborough County, Florida. The Company alleged a variety of fraudulent and criminal activities by the defendants and was seeking monetary damages, as well as various forms of equitable relief. On January 19, 1993, the Court of Florida issued a final judgement for $6,000,000 in favor of Century. Management believes it is unlikely any portion of the judgement will be recovered, and accordingly, the Company has not recorded any related amounts in the consolidated financial statements. 7. CREDIT LOSS EXPERIENCE An analysis of the allowance for credit losses on finance receivables is as follows:
DECEMBER 31 1993 1992 1991 ------------------------------------------------- BALANCE AT BEGINNING OF YEAR $ 5,990,000 $ 7,618,000 $ 4,502,000 Charge offs (5,032,000) (16,278,000) (13,412,000) Fidelity bond claim - - 1,000,000 Recoveries 1,964,000 880,000 567,000 ------------------------------------------------- Net charge offs (3,068,000) (15,398,000) (11,845,000) Provision charged to continuing operations 2,104,000 12,988,000 11,708,000 Additions from purchases of bulk sales contracts - 782,000 3,253,000 ------------------------------------------------- Balance at end of year $ 5,026,000 $ 5,990,000 $ 7,618,000 ------------------------------------------------- -------------------------------------------------
36 8. FINANCE RECEIVABLES Finance receivables at December 31, 1993 and 1992, consisted of:
1993 1992 ------------------------------------------- Consumer loans $ 78,951,000 $ 65,530,000 Real estate loans 13,560,000 6,382,000 Automobile contracts 1,407,000 14,453,000 Installment sales contracts 25,258,000 14,751,000 ------------------------------------------- 119,176,000 101,116,000 Less: Unearned finance charges (24,063,000) (18,838,000) Allowance for credit losses (5,026,000) (5,990,000) Dealer reserves (1,115,000) (1,511,000) ------------------------------------------- Net finance receivables $ 88,972,000 $ 74,777,000 ------------------------------------------- -------------------------------------------
Finance receivables may be originated at any one of Century's 53 branch offices or may be purchased. Century's branches are located in 16 states, primarily in the Midwest and the South. As of December 31, 1993, the five states with the largest concentration of net finance receivables are as follows: Georgia $19,077,000 Texas 12,309,000 Kansas 11,045,000 Florida 9,862,000 Oklahoma 8,648,000
The maximum term of finance receivables, other than real estate secured accounts, is 48 months, although Century generally restricts maturities to 36 months. The maximum term over which real estate loans are written is 180 months. Contractual maturities at December 31, 1993, were estimated to be as follows: 37 8. FINANCE RECEIVABLES (continued)
1997 and 1994 1995 1996 Thereafter --------------------------------------- Consumer/Real Estate 51% 33% 12% 4% Sales finance and automobile contracts 55 25 11 9
Experience of the finance industry indicates a substantial portion of finance receivables will be paid off or renewed prior to contractual maturity dates. Accordingly, the preceding table cannot be regarded as a forecast of future cash collections. Although Century may require borrowers to pledge collateral on precompute and interest-bearing loans, such collateral is generally not pursued in the event of default. Sales finance and automobile contracts are generally collateralized, although the fair value of the collateral in the event of repossession has historically been significantly less than the book value of the contract. 9. EARNINGS PER SHARE As of December 31, 1993, 1992 and 1991, earnings per common share and common equivalent shares were computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. For the period ended December 31, 1993, the number of weighted average common share equivalents was increased under the assumption that all of the Convertible Notes were converted to common stock. As indicated in Note 2, the Convertible Notes may be converted, at the option of the holder at any time, into shares of common stock at a ratio of one share of common stock for each $20 principal amount of Convertible Notes. 10. INCOME TAXES On January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS109). The adoption of SFAS 109 had no impact on the Company's consolidated financial statements. The Company and its subsidiaries file a consolidated federal income tax return. The benefit for income taxes allocated to continuing operations for each of the three years in the periods ended December 31, consisted of the following: 38 10. INCOME TAXES (CONTINUED)
1993 1992 1991 ----------------------------------------- Federal income taxes: Deferred taxes arising from: Utilization of net operating loss to extent of existing deferred income taxes $ - $ - $ (687,000) Other, net - (336,000) - ----------------------------------------- $ - $ (336,000) $ (687,000) ----------------------------------------- -----------------------------------------
A reconciliation of income tax benefit allocated to continuing operations to the amount computed using the statutory federal income tax rate is as follows:
1993 1992 1991 ----------------------------------------- Benefit at statutory rate (34%) $ (2,467,000) $(4,314,000) $(3,072,000) Estimated limitation of recognition of operating loss under applicable accounting principles 2,467,000 3,978,000 2,385,000 ----------------------------------------- Income tax benefit allocated to continuing operations $ 0 $ (336,000) $ (687,000) ----------------------------------------- -----------------------------------------
The Company's income tax returns for 1988 and 1989 were examined by the Internal Revenue Service (IRS), which has proposed certain adjustments, a portion of which have been protested by the Company. The Company has also claimed additional deductions in these years as a result of the prior period adjustments. Management believes that the ultimate disposition of the IRS examination will not have a material effect on the financial position of the Company. As a result of the matters described above, management cannot precisely estimate the amount of the Company's net operating loss carryforward for financial reporting and income tax purposes and thus, the deferred tax assets which may exist. However, a valuation allowance would be required during 1993 to fully offset the amount of any such assets. Accordingly, the present inability to estimate the net operating loss carryforward for income tax purposes has no impact on the consolidated financial statements. 11. STOCK OPTION PLAN In March 1993, the Company's stock option plan was terminated and participants were paid $0.50 for each of the 5,380 options previously outstanding in exchange for a waiver of rights with respect to acquiring shares of CenCor common stock under the plan. 39 12. EMPLOYEE BENEFIT PLAN The Company has a Profit-Sharing and 401(k) Retirement Savings Plan (the Plan) which covers all employees, age 21 or older, with one year of service. Participants may contribute from 1% to 20% of their annual compensation, with certain exclusions. The Company may make discretionary contributions. No contributions were made by the Company to the Plan in 1993, 1992, or 1991. 13. COMMITMENTS AND CONTINGENCIES The Company has agreed not to compete with Charter in the equipment leasing business through November 1995. Additionally, the Company has agreed not to engage in the business of temporary services for various terms, the longest of which extends through July, 1997. The Company rents substantially all office space under leases expiring at various dates through 1998. Certain of the leases contain renewal options and/or obligations or occupancy expenses allocated to tenants. Total rent expense was $946,000, $980,000 and $1,158,000 in 1993, 1992 and 1991, respectively. Aggregate minimum future rentals under these noncancelable operating leases at December 31, 1993, were as follows: 1994 $ 777,000 1995 656,000 1996 554,000 1997 551,000 1998 158,000 ---------- $2,696,000 ---------- ----------
On April 12, 1993, Century terminated the employment of its President and Chief Executive Officer (CEO). Century and the CEO entered into a settlement agreement which details the economic terms of severance benefits to the CEO. The amounts related to these benefits have been recorded in the accompanying consolidated financial statements. The agreement also provides for a bonus that may be payable in the event a majority of Century's assets or stock is sold prior to April 13, 1996. (THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.) 40 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. (THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.) 41 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following tables sets for the names of the directors of the registrant and certain related information as of December 31, 1993. Each of the directors has been elected to serve until the next annual meeting of stockholders or until his successor is duly elected and qualified.
NAME OF NOMINEE SERVED PRINCIPAL OCCUPATION FOR FOR DIRECTOR SINCE AGE LAST FIVE YEARS AND DIRECTORSHIPS(1) - ------------ ----- --- ------------------------------------ Jack L. Brozman(1) 1979 43 Chairman of the Board, President and Chief Executive Officer of CenCor and Concorde Career Colleges, Inc. ("Concorde") since June 1991. Chief Executive Officer of Century from July 1991 to August 1992. Chairman of the Board and Treasurer, from June 1991 until July 23, 1993, and President and Director, for more than five years prior to July 23, 1993, of LaPetite Academy, Inc. ("LaPetite"). Director of Century and Concorde. Edward G. Bauer, 1991 65 Vice President and General Counsel of Philadelphia Electric Company for more than the prior Jr.(2)(3) five years through August 1988. Retired from this position at the end of August 1988. Director of Continental Bank, Philadelphia, Pennsylvania for the five-year period prior to September 1992. George L. 1991 62 Chief Operating Officer of Dilworth, Paxson, Kalish & Kauffman, Philadelphia, Pennsylvania Bernstein(2)(3) (law firm) since November 1991. Executive Partner/Chief Executive Officer of Laventhol & Horwath (national public accounting firm which filed for protection under the bankruptcy laws in November 1990) for more than the prior five years through May 1990. Director of R & B, Inc. (distributor of automotive parts). Director of Century effective April 8, 1993. Director of O'Brien Environmental Energy, Inc. effective March, 1994. Marvin S. 1991 64 Executive Vice President and Chief Financial Officer of Subaru of America, Inc. for more Riesenbach(2)(3) than the prior five years through October 1990. Retired from this position at the end of October 1990. (1) Jack L. Brozman is the son of the late Robert F. Brozman and the sole executor of the Brozman Estate. (2) Director effective July 1, 1991. (3) Member of Special and Audit Committees beginning July 1, 1991. Elected to Executive Compensation Committee on August 21, 1991.
42 The Board of Directors of the Company held thirteen meetings and acted by unanimous written consent on seven occasions during the last fiscal year. Standing committees, consisting of the Special Committee and the Audit Committee, held five meetings during the last fiscal year. The Executive Compensation Committee, which did not become active until early 1993, makes salary and bonus recommendations for certain executive officers. The Audit Committee oversees the work of CenCor's independent auditors. The Company's Board of Directors does not have a nominating committee. The Special Committee has the final authority to thoroughly investigate and report to the Board of Directors on certain matters concerning the misappropriation of CenCor's assets by CenCor's previous chairman of the board, Robert F. Brozman, or certain of his affiliated privately held companies. The Special Committee also has the power and authority to consider the adequacy of CenCor's internal controls and procedures and to explore strategic steps to maximize value for all relevant constituencies of CenCor and to investigate and report upon such other matters as the Special Committee considers appropriate. The Special Committee, the Executive Compensation Committee, and the Audit Committee are composed of Messrs. Bauer, Bernstein and Riesenbach. In addition to Jack L. Brozman, the following persons also serve as executive officers of CenCor or Century. NAME AGE PRINCIPAL OCCUPATION FOR LAST FIVE YEARS - ---- --- ---------------------------------------- Dennis C. Berglund 56 Chief Executive Officer and President of Century since June 1993. Acting Chief Executive Officer and President of Century from April 1993 until June 1993. Chief Financial Officer, Executive Vice President and Chief Administrative Officer of Imperial Thrift and Loan Association, Burbank, California, from March 1988 through November 1992. Experience includes 24 years with Avco Financial Services, an international consumer finance company. Patrick F. Healy 41 Vice President-Finance, Treasurer and Chief Financial Officer of CenCor and Century since July 1991. General partner in Equity Analysts, a Kansas City, Missouri based real estate investment group, for more than the prior five years. Vice President, Treasurer and Director of TSI Holdings, Inc., a parent company of a manufacturing enterprise, from November 1989 through June 1991. Randall J. Opliger 36 Controller of CenCor and Vice President and Controller of Century since July 1992. Controller and member of Executive Committee of Garsite/TSR, Inc., a Kansas City, Kansas manufacturing enterprise, from April 1990 to December 1991. Director of Finance of R.F.D. Travel Corp., Overland Park, Kansas from July 1984 to March 1990. William J. Turner 58 Executive Vice President-Acquisitions and Administration of Century since January 1993. Employed by Century in various management positions for approximately 29 years. 43 DISCLOSURE OF DELINQUENT FILERS Except as described below, the Company believes, based on information filed with the Company, that all reports required to be filed for the past two years with the Securities and Exchange Commission under Section 16 by the Company's executive officers, directors, and ten percent stockholders have been filed in compliance with applicable rules: Randall J. Opliger failed to file an initial report on Form 3 with respect to his appointment as an executive officer of the Company in July 1992. A report on Form 5 disclosing the information required by Form 3 (and reporting no common stock ownership or transactions) was subsequently filed, on an untimely basis, with the Securities and Exchange Commission. Dennis C. Berglund failed to file an initial report on Form 3 with respect to his appointment as an executive officer of the Company in June 1993. A report on Form 5 disclosing the information required by Form 3 (and reporting no common stock ownership or transactions) was subsequently filed, on an untimely basis, with the Securities and Exchange Commission. ITEM 11. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION TABLE The following table sets forth information as to the compensation of the Chief Executive Officer and each of the other executive officers of CenCor and Century, whose total annual salary and bonus exceeded $100,000, during the year ended December 31, 1993 for services in all capacities to CenCor and its subsidiaries in 1991, 1992, and 1993.
LONG-TERM COMPENSATION ANNUAL ---------------- COMPENSATION AWARDS ------------------------------------------------------------- OTHER ANNU- AL COMPEN- NAME AND PRINCIPAL SALARY BONUS SATION OPTIONS/SARS POSITION YEAR ($) ($) ($) (#) - ----------------------------------------------------------------------------------------------------------------------- Jack L. Brozman, Chairman of the Board 1993 $129,800(1) $25,000(2) 60,000(3) and Chief Executive Officer of CenCor; Chief Executive Officer of Century to Au- 1992 $125,000(1) gust 1992 1991 $ 66,500(1) Patrick F. Healy, Vice President-Finance; 1993 $161,000 $ 5,000(4) 30,000(3) Treasurer and Chief Financial Officer of CenCor and Century 1992 $144,000 1991 $ 65,000 Dennis Berglund, Chief Executive Officer 1993 $100,077 74,400(5) and President of Century - ---------------- (1) Mr. Brozman also received compensation as an executive officer of LaPetite and Concorde. (2) Mr. Brozman was awarded and paid a $25,000 cash bonus in 1993 in recognition of his excellent performance during 1992. See "Executive Compensation and Certain Transactions--Executive Compensation Committee Report." (3) "See "Executive Compensation--Option/SAR Grants in Last Fiscal Year." (4) Mr. Healy was awarded and paid a $5,000 cash bonus in 1993 in recognition of his excellent performance to the Company during 1992. See "Executive Compensation and Certain Transactions--Executive Compensation Committee Report. (5) Consists of the value of a leased automobile, vacation earned as the result of a promotional program, relocation prerequisites ($51,400), and gross up payment for tax liability.
44 OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table sets forth information as to stock appreciation rights granted by CenCor during 1993 to executive officers named in the Summary Compensation Table.
POTENTIAL REALIZABLE VALUE AT ASSUMED AN- NUAL RATES OF STOCK PRICE INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1) - ------------------------------------------------------------------------------------------------------------------- PERCENT OF TOTAL OPTIONS/SARS EXERCISE OR OPTIONS/SARS GRANTED TO EM- BASE PRICE EXPIRATION NAME GRANTED(#) PLOYEES IN FISCAL ($/SH) DATE 5%($) 10%($) - ------------------------------------------------------------------------------------------------------------------- Jack L. Brozman 60,000(2) 67% $1.00 n/a 0 0 Patrick F. Healy 30,000(3) 33% $1.00 n/a 0 0 - ---------------- (1) Although the phantom share options (see following footnotes) do not have expiration dates (except upon the occurance of certain events of forfeiture), the table assumes that the options are exercised five years from the date of grant. (2) On February 4, 1993, CenCor's Compensation Committee approved a phantom share option agreement between CenCor and Mr. Brozman. Under the terms of the agreement, Mr. Brozman was granted phantom share options relating to 60,000 shares of Common Stock. For each option exercised, Mr. Brozman will receive a cash payment (subject to applicable tax withholding required by law) equal to the excess, if any, over $1.00 per share of the greater of the closing price of the Common Stock on the NASDAQ National Market (as determined on the date the option is exercised), the stockholders' equity of CenCor at the end of its most recent fiscal quarter, and (1) the aggregate distributions per share received by CenCor's stockholders in the event CenCor is liquidated. For the purposes of the phantom share option agreement, a merger or consolidation in which CenCor is not the surviving party or a transaction in which the CenCor stockholders receive cash or securities of another company in exchange for their CenCor shares shall be deemed to be a liquidation. The options may not be exercised unless Mr. Brozman remains a director until February 3, 1994. The options automatically terminate five years after Mr. Brozman resigns or is removed as a director, or 1. on the date Mr. Brozman engages in certain misconduct under his employment agreement. (3) CenCor and Mr. Healy executed a phantom share option agreement on February 4, 1993 pursuant to which Mr. Healy received phantom share options relating to 30,000 shares of Common Stock. The phantom share options expire (i) five years after Mr. Healy ceases to be an employee of CenCor or (ii) on the date Mr. Healy engages in certain misconduct under his employment agreement. The other terms of Mr. Healy's phantom share option agreement are essentially identical to those set forth with respect to Mr. Brozman in Note 2 above.
OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR VALUE TABLE No option on stock appreciation rights were exercised by any of the named executive officers during 1993. The following table provides information with respect to the named executive officers concerning unexercised options held as of December 31, 1993.
# OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY NAME UNEXERCISED SARS AT FY-END SARS AT FY-END ($)(1) - --------------------------------------------------------------------------------------------- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ------------------------------------------------------------------------- Jack L. Brozman, 60,000(2) 0 0 CEO Patrick F. Healy 30,000(2) 0 0 - --------------- (1) Based on the difference between the closing price of the Company's common stock on December 31, 1993 and the exercise price on the phantom share options. (2) Became exercisable on February 3, 1994.
45 COMPENSATION OF DIRECTORS Each non-officer/director of CenCor is paid an annual retainer of $5,000 plus a fee (based on time spent on corporate matters, including attendance at board and committee meetings) and expenses. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGE- MENTS On February 10, 1993, CenCor entered into a two-year employment agreement with Mr. Healy. Under the terms of the agreement, Mr. Healy will continue to serve as CenCor's Chief Financial Officer at an annual salary of $155,000. Mr. Healy has also agreed that he will not, during the term of the employment agreement and without the express written consent of CenCor's Board of Directors, directly or indirectly have any interest in any business which is a supplier to CenCor. On June 28, 1993, Century entered into a three-year employment agreement with Mr. Berglund. Under the terms of the agreement, Mr. Berglund will serve as Century's President and Chief Executive Officer at annual salaries of $140,000, $160,000 and $180,000 for the first, second and third years respectively of the agreement. Mr. Berglund may also receive an annual bonus based on annual pre- tax profits. Mr. Berglund has also agreed that he will not, during the term of the employment agreement and without the expressed written consent of Century's Board of Directors, directly or indirectly have any interest in any business which is a supplier to Century. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, with respect to the Company's common stock (the only class of voting securities), the only person known to be a beneficial owner of more than five percent (5%) of any class of the Company's voting securities as of March 1, 1994.
NUMBER OF SHARES AND NAME AND ADDRESS NATURE OF BENEFICIAL OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS - ----------------------------------------------------------------------------- Jack L. Brozman, Trustee 597,064(2) 48.1% Robert F. Brozman Trust 1100 Main St. Kansas City, Missouri 64105 - --------------- (1) Nature of ownership of securities is direct. Beneficial ownership as shown in the table arises from sole voting power and sole investment power. (2) Does not include 34,344 shares held by Jack L. Brozman or 20,025 shares held by or for the benefit of Robert F. Brozman's other children, in which the Trust disclaims any beneficial interest.
The following table sets forth, with respect to the Company's common stock (the only class of voting securities), (i) shares beneficially owned by all directors of the Company and nominees for director, and (ii) total shares beneficially owned by directors and officers as a group, as of March 1, 1994. 46
NUMBER OF SHARES AND NAME AND ADDRESS NATURE OF BENEFICIAL OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS - ------------------------------------------------------------------------------- Jack L. Brozman 631,408(2) 51% Edward G. Bauer, Jr. --- -- George L. Bernstein --- -- Marvin S. Riesenbach --- -- Directors and Officers as a Group 631,408(2) 51% - ------------- (1) Nature of ownership of securities is indirect. Beneficial ownership as shown in the table arises from sole voting power and sole investment power. (2) Includes 34,344 shares held by Jack L. Brozman and 597,064 shares held by the Robert E. Brozman Trust. Does not include 20,025 shares held by or for the benefit of Robert F. Brozman's other children, in which the Trust disclaims any beneficial interest. Jack L. Brozman is the sole trustee and is also one of the beneficiaries of the Robert F. Brozman Trust.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS TRANSACTIONS WITH CONCORDE AND LAPETITE Concorde, a former CenCor subsidiary, continues to be indebted to CenCor as a result of a 1992 restructuring agreement between Concorde and CenCor (the "Restructuring Agreement"). Under the Restructuring Agreement, Concorde, which is in the business of operating proprietary vocational training schools, was released from an earlier agreement by which it assumed the obligations of CenCor to make principal and interest payments on CenCor's outstanding Series H 10% Notes. In consideration for releasing Concorde from this obligation, CenCor received from Concorde a Junior Secured Debenture in the principal amount of $5,422,000 (the amount of the principal and accrued interest on the Series H 10% Notes immediately prior to the execution of the Restructuring Agreement) and received Concorde's promise to pay an additional contingent payment to CenCor on July 31, 1997 in an amount equal to 25% of the market value of Concorde's outstanding common stock in excess of $3,500,000. The Junior Secured Debenture is secured by a lien on substantially all of Concorde's assets, which lien is junior to the lien of Concorde's secured bank lender. The Junior Secured Debenture bears interest ranging from prime plus 1% to prime plus 1-1/2% per annum, and provides for principal and interest payments commencing September 30, 1995 based on a ten-year amortization schedule. The Junior Secured Debenture initially provided that interest would accrue and compound quarterly through September 30, 1995, when the first interest payment would be due. Interest will be payable quarterly thereafter. In addition, the Junior Secured Debenture provides that Concorde shall make annual prepayments equal to 50% of Concorde's Excess Cash Flow, as defined in the debt restructuring agreement between CenCor and Concorde. On February 9, 1993, Concorde's secured bank lender and CenCor executed an intercreditor agreement. Under the terms of the intercreditor agreement, CenCor has agreed not to assert its rights against collateral pledged to it by Concorde until the earlier to occur of (i) payment in full of Concorde's secured bank debt or (ii) July 31, 1997. In addition, CenCor agreed that any amount due to CenCor under the terms of the Restructuring Agreement or the Junior Secured Debenture would be subordinate to the indebtedness evidenced by Concorde's secured bank debt. 47 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED) On December 30, 1993, Concorde and Century amended the Restructuring Agreement to provide that CenCor would receive $8,390,000 of Concorde's previously charged-off receivables in full payment of the accrued interest on the Junior Secured Debenture through December 31, 1993 in the amount of $559,353. The receivables, which consist of accounts and notes receivable from students who attended schools operated by Concorde or its subsidiaries, were assigned to CenCor without recourse with CenCor assuming all risk of non-payment of the receivables. The amendment grants CenCor limited rights of substitution until such time as it collects $559,353 from the receivables, exclusive of out- of-pocket collection fees and expenses paid to third-parties. Concorde has reported that it has an ongoing dispute with the United States Department of Education ("DOE") concerning Concorde's compliance with DOE factors of financial responsibility and, therefore, its eligibility to participate in various student financial assistance programs. Concorde has also reported that it is contesting DOE findings that certain of its proprietary schools have violated DOE regulations concerning administration of Title IV federal student financial assistance programs. CenCor has acknowledged that if its schools are not allowed to participate in these student financial assistance programs, the viability of Concorde's continuing operations would be in doubt. Because the outcome of Concorde's regulatory disputes cannot be predicted, there can be no assurance that Concorde will be able to perform its obligations under the Junior Secured Debenture or that CenCor will receive any additional payment based on the market value of Concorde's stock. Accordingly, CenCor has established a reserve in its consolidated financial statements in the full amount of the Junior Secured Debenture plus the receivables received in payment of the accrued but unpaid interest of $559,353. Jack L. Brozman, who is Chairman of the Board of CenCor and Century, is Chairman of the Board of Concorde. Mr. Brozman owns 171,724 shares of Concorde (2.5% of the outstanding). As sole fiduciary for the Estate of Robert F. Brozman (the "Brozman Estate") and the Robert F. Brozman Trust (he is one of the beneficiaries of the estate and the trust), he owns 2,985,324 shares of Concorde (42.9% of the outstanding). Prior to April 1993, CenCor shared leased office space with LaPetite, another former CenCor subsidiary, and Concorde in Kansas City, Missouri in space leased by LaPetite. Until October 1993, CenCor also shared certain office services with both LaPetite and Concorde, and there were several common officers and employees who divided their time between the three companies. Effective January 11, 1993, CenCor entered into an agreement with LaPetite and Concorde that provided for the allocation of certain costs as long as the corporations continue to share employees/officers. Under the January 11, 1993 agreement and a replacement transition agreement dated July 23, 1993, CenCor, LaPetite and Concorde each paid their own direct expenses plus an allocated portion of certain common expenses and each paid an allocated portion of salary and payroll costs of the common employees. This sharing agreement between the three companies terminated September 30, 1993. The three companies now maintain separate office leases and office services and all intercompany accounts have been settled. Prior to July 23, 1993, Jack L. Brozman was the Chairman of the Board of LaPetite and owned directly 2.1% of LaPetite's outstanding common stock. In addition, the Brozman Estate and Robert E. Brozman Trust owned 11.8% of the outstanding common stock of LaPetite prior to July 23, 1993. Management believes that these transactions with LaPetite and Concorde have been made on no less favorable terms than could be obtained from unaffiliated third parties. 48 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED) OTHER TRANSACTIONS Prior to Robert F. Brozman's death on June 10, 1991, loans were made by outside institutions, purportedly to CenCor, whose proceeds were never received by or used for the benefit of CenCor, but rather were credited to the account of and used by CenCor, Inc. of Kansas City ("CIKC"). CIKC is a wholly-owned subsidiary of Cor, Inc., which was, at the time of the loans, wholly-owned and controlled by Robert F. Brozman. CIKC recorded such loans (the "CIKC Loans") on its financial statements as its obligations. Shortly following the death of Robert F. Brozman, the Board of Directors of CenCor learned for the first time of the CIKC Loans, which had at that time a principal balance of $23,117,820. Certain creditors, including the institutions referred to above (the "CIKC Lenders"), have asserted claims against CenCor, among others, for actions taken by the late Robert F. Brozman, CenCor's former chairman, including the CIKC Loans. Although CenCor has not admitted liability with respect to these claims, it has executed a Continuing Guarantee of Collection with respect to liabilities flowing from the CIKC Loans as well as a Continuing Guarantee of Collection for Certain Creditors Previously Unsecured of up to $3 million for the benefit of certain unsecured creditors of the Estate of Robert F. Brozman. The Estate of Robert F. Brozman and the related Trust of Robert F. Brozman (collectively the "Brozman Estate"), Cor, and CIKC (collectively the "Indemnitors") have executed an Indemnity Agreement (the "Indemnity Agreement") with CenCor in which the Indemnitors acknowledge that they are jointly and severally liable to repay the amounts due to the CIKC Lenders. The Indemnitors also agree that they are jointly and severally liable to CenCor to the extent CenCor is obligated to pay any of the CIKC Loans or Cor any loss, damages or expense in connection with the CIKC Loans. The Brozman Estate has been liquidating its assets in order to satisfy the claims against it, including the claims to which the CenCor guarantees apply. CenCor has been informed by the Brozman Estate that the outstanding balance of the CIKC Loans was $2,142,000 as of March 1, 1994 and that the current balance of the unsecured obligations of the Brozman Estate is approximately $860,000. The Brozman Estate has also informed CenCor that it has contracted to sell its last remaining significant asset, which sale may generate sales proceeds, after provision for administrative expenses and taxes, sufficient to satisfy all of its outstanding liabilities. Because the closing contingencies of the sales contract have yet to be satisfied and because the amount of taxes and administrative expenses to be paid by the Brozman Estate have not been determined, there can be no assurance that the claims of the CIKC Lenders and the others against CenCor pursuant to the guarantees will not exceed the Brozman Estate's ability to satisfy such claims and to indemnify CenCor. 49 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Annual Report on Form 10-K. 1. The following Consolidated Financial Statements of CenCor, Inc. and Subsidiaries are included in Item 8: Consolidated Balance Sheets--At December 31, 1993 and 1992. Consolidated Statements of Operations--For the years ended December 31, 1993, 1992, and 1991. Consolidated Statements of Stockholders' Equity (Deficit)--For the years ended December 31, 1993, 1992, and 1991. Consolidated Statements of Cash Flows--For the years ended December 31, 1993, 1992, and 1991. Notes to Consolidated Financial Statements. 2. The following Consolidated Financial Statement Schedules of CenCor, Inc. and Subsidiaries are included in Item 14(d): Schedule II--Amounts Receivable From Related Parties, Underwrit- ers, Promoters and Employees Other Than Related Parties. Schedule III--Condensed Financial Information of Registrant (Parent Company Only). Schedule VIII--Valuation and Qualifying Accounts and Allowances. Schedules other than those referred to above have been omitted as not applicable or not required under the instructions contained in Regulations S-X, or the information is included elsewhere in the financial statements or notes thereto. 3. Exhibits. Exhibit Number Description ------ ----------- 2(a) Plan of Reorganization (Incorporated by reference--Exhibit 2(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 3(a) Certificate of Incorporation and all Amendments thereto through August 31, 1990. (Incorporated by reference--Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 3(b) Bylaws amended through July 29, 1991. (Incorporated by reference--Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.) 50 4(a) Specimen common stock certificate. (Incorporated by reference-- Exhibit 4(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 4(b) Certificate of Incorporation and all Amendments and Amended and Restated Bylaws. (Incorporated by reference--Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 and included as Exhibit 3(b) hereto.) 4(c) Composite Conform Copy Relating To: Century Acceptance Corpora- tion Amendment and Exchange Agreement dated as of January 28, 1993 and Composite Conformed Copy of Amendment and Exchange Agreement Regarding Century Acceptance Corporation Amendment and Exchange Agreement dated as of January 28, 1993 relating to the restructuring of Century Acceptance Corporation's outstanding indebtedness to All State Life Insurance Company, Inc., American Banker's Life Insurance Company of Florida, American Mutual Life Insurance Company, Continental American Life Insurance Company, The Lincoln National Life Insurance Company, Mutual Services Casualty Insurance Company, New England Mutual Life Insurance Company, Principal Mutual Life Insurance Company, Provident Mutual Life Annuity Company of America, Provident Mutual Life Insurance Company of Philadelphia, and Standard Insurance Company. (Incorporated by reference -- Exhibit 4(d) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 4(d) Indentures between CenCor, Inc. and Commercial National Bank of Kansas City, N.A. dated April 27, 1993 with respect to notes due 1999. (Incorporated by reference--Exhibit T3C to Company's Application of Form T-3; SEC file #22-24246. 4(e) Indenture between CenCor, Inc. and Commercial National Bank of Kansas City, N.A. dated April 27, 1993, with respect to convertible notes due 1999; SEC file #22-24248. 10(a) Indemnity Agreement dated July 26, 1991 between the Company and the Indemnitors. (Incorporated by reference--Exhibit 2 to Report on Form 8-K dated July 29, 1991.) 10(b) First Amendment to Indemnity Agreement dated August 20, 1991 between the Company and the Indemnitors. (Incorporated by reference--Exhibit 1 to Report on Form 8-K dated September 3, 1991.) 10(c) Modification and Exchange Agreement and Lender Consent Stipulation dated August 1, 1991 between the Company, the Indemnitors, and certain CIKC Lenders. (Incorporated by reference--Exhibit 2 to Report on the Company's Form 8-K dated September 3, 1991.) 10(d) Standstill Agreement dated August 14, 1991 between the Company and College Boulevard National Bank. (Incorporated by reference- -Exhibit 4 to Report on the Company's Form 8-K dated September 3, 1991.) 10(e) Expense Sharing Agreement dated January 1, 1993 between CenCor, Inc., Century Acceptance Corporation, LaPetite Academy, Inc., and Concorde Career Colleges, Inc. (Incorporated by reference -- Exhibit 10(h) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10(f) Restructuring, Security and Guaranty Agreement dated October 30, 1992 between CenCor, Inc. and Concorde Career Colleges, Inc., Minnesota Institute of Medical 51 and Dental Assistants, Inc., United Health Careers Institute, Inc., Southern California College of Medical and Dental Assistants, Inc., Concorde Careers--Florida, Inc., Colleges of Dental and Medical Assistants, Inc. and Computer Career Institute, Inc. (Incorporated by reference -- Exhibit 10(j) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10(g) Amendment to Agreement for Transfer of Assets and Assumption of Liabilities dated October 30, 1992 between CenCor, Inc. and Concorde Career Colleges, Inc. (Incorporated by reference -- Exhibit 10(k) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10(h) Employement Agreement with Dennis C. Berglund dated June 28, 1993. 10(i) First Amendment to Restructuring, Security and Guarantee Agreement between CenCor, Concorde, Minnesota Institute of Medical and Dental Assistance, Texas College of Medical and Dental Assistants, Texas College of Medical and Dental Assistants, Inc., United Health Careers Institute, Inc., Southern California College of Medical and Dental Assistants, Inc., Concorde Careers--Florida, Inc., College of Dental and Medical Assistants, Inc. and Computer Career Institute, Inc. dated December 30, 1993. 10(j) Transition Service Agreement between CenCor, Century, LaPetite, and Concorde dated July 23, 1993. 10(k) Termination of Transition Services Agreement dated August 30, 1993 between LaPetite, CenCor, and Concorde. 21 Subsidiaries of the Registrant. 27 Financial Data Schedule. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ending December 31, 1993. 52 CENCOR, INC. AND SUBSIDIARIES ---------- SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
BALANCE AT BALANCE AT DESCRIPTION NAME OF DEBTOR BEGINNING OF PERIOD ADDITIONS DEDUCTIONS END OF PERIOD - ----------- -------------- ------------------- --------- ---------- ------------- YEAR ENDED Estate of DECEMBER 31, 1993 Robert F. Brozman $ 178,000 $ 3,000 $ 178,000 $ 3,000 Concorde Career College, Inc. $ - - - $ 676,000 $ 676,000 $ - - - YEAR ENDED Estate of DECEMBER 31, 1992 Robert F. Brozman $ 687,000 $ 241,000 $ 750,000 $ 178,000 First Bancshares, Inc. $ 375,000 $ - - - $ 375,000 $ - - - Concorde Career College, Inc.(1) $5,201,000 $ 387,000 $5,588,000 $ - - - YEAR ENDED Estate of DECEMBER, 31, 1991 Robert F. Brozman $ - - - $ 687,000 $ - - - $ 687,000 First Bancshares,Inc. $1,000,000 $ - - - $ 625,000 $ 375,000 Concorde Career College, Inc. $6,060,000 $ - - - $ 859,000 $5,201,000 - ------------------ (1) During 1992, the registrant recorded an allowance for credit losses for the entire amount of the Junior Secured Debenture ($5,422,000) and other advances ($166,000) due from Concorde Career College, Inc.
53 CENCOR, INC. (PARENT COMPANY ONLY) ---------- SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEETS DECEMBER 31, 1993 and 1992 ASSETS
1993 1992 ----------- ----------- Cash and cash equivalents. . . . . . . . . . . . . $ 986,000 $ 1,533,000 Investments in and advances to subsidiaries. . . . 5,614,000 11,062,000 Fixed assets, net. . . . . . . . . . . . . . . . . --- 29,000 Other assets . . . . . . . . . . . . . . . . . . . 872,000 678,000 ---------- ----------- $ 7,472,000 $ 13,302,000 ---------- ----------- ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Long-term debt . . . . . . . . . . . . . . . . . . $12,020,000 24,391,000 Other liabilities. . . . . . . . . . . . . . . . . 1,167,000 5,536,000 Stockholders' equity (deficit) . . . . . . . . . . (5,715,000) (16,625,000) ---------- ----------- $ 7,472,000 $ 13,302,000 ---------- ----------- ---------- -----------
See Notes to Consolidated Financial Statements of CenCor, Inc. included elsewhere in this report. 54 CENCOR, INC. (PARENT COMPANY ONLY) ---------- SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31
1993 1992 1991 ------------------------------------------- Revenue $ 318,000 $ 419,000 $ 862,000 Expenses Salaries and other operating expenses, net 913,000 1,438,000 639,000 Interest expense 2,109,000 3,359,000 3,907,000 ------------------------------------------- 3,022,000 4,797,000 4,546,000 ------------------------------------------- ------------------------------------------- Loss from continuing operations before income taxes, equity in undistributed losses of subsidiaries and extraordinary item (2,704,000) (4,378,000) (3,684,000) Income tax allocation - 1,646,000 687,000 ------------------------------------------- Loss from continuing operations before equity in undistributed losses of subsidiaries and extraordinary item (2,704,000) (2,732,000) (2,997,000) Equity in undistributed losses of subsidiaries (4,552,000) (9,620,000) (5,351,000) ------------------------------------------- Loss from continuing operations before extraordinary item (7,256,000) (12,352,000) (8,348,000) Loss from discontinued operations, net of income taxes - (9,623,000) (229,000) ------------------------------------------- Net loss before extraordinary item (7,256,000) (21,975,000) (8,577,000) Gain on restructuring of long-term debt net of taxes ($0 in 1993) 18,033,000 - - ------------------------------------------- Net income (loss) $10,777,000 $(21,975,000) $(8,577,000) ------------------------------------------- ------------------------------------------- Weighted average common and common equivalent shares outstanding 1,331,058 1,089,048 1,089,718 ------------------------------------------- ------------------------------------------- Earnings per share of common share and common equivalent shares of stock: Earnings (loss) per share from continuing operations $ (5.45) $ (11.34) $ (7.66) Earnings (loss) per share from discontinued operations - (8.84) (.21) ------------------------------------------- Earnings (loss) per share before extraordinary item (5.45) (20.18) (7.87) Earnings (loss) per share from extraordinary item 13.55 - - ------------------------------------------- Earnings (loss) per share from net income $ 8.10 $ (20.18) $ (7.87) ------------------------------------------- -------------------------------------------
See Notes to Consolidated Financial Statements of CenCor, Inc. included elsewhere in this report. 55 CENCOR, INC. (PARENT COMPANY ONLY) ---------- SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31
Cash flows from operating activities: 1993 1992 1991 ------------------------------------------- Net income (loss) $10,777,000 $(21,975,000) $(8,577,000) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation - 21,000 105,000 Amortization of intangibles and debt expense - 226,000 662,000 Provision for credit losses - 168,000 426,000 Deferred tax benefit - - (362,000) Provision for credit losses on subordinated notes assumed by spun-off subsidiary - 5,422,000 - Change in assets and liabilities, net of effects from acquisitions: Investment in and advances to subsidiaries - 16,656,000 8,544,000 Income tax receivable - 2,494,000 3,106,000 Gain on restructure of debt (18,033,000) - - Other assets and liabilities 6,648,000 5,343,000 2,682,000 ------------------------------------------- Total adjustments (11,385,000) 30,330,000 15,163,000 ------------------------------------------- Net cash provided by (used in) operating activities (608,000) 8,355,000 6,586,000 ------------------------------------------- Cash flows from investing activities: Capital expenditures, net - - (50,000) Proceeds from sale of other assets 61,000 1,202,000 - ------------------------------------------- Net cash flow provided by (used in) investing activities 61,000 1,202,000 (50,000) ------------------------------------------- Cash flows from financing activities: Repayment of note payable - (491,000) (13,517,000) Principal payments under long-term debt - (6,536,000) (11,617,000) Net increase in notes payable to banks - - 8,830,000 Purchase of treasury stock - - (130,000) ------------------------------------------- Net cash used in financing activities - (7,027,000) (16,434,000) -------------------------------------------- Net increase (decrease) in cash and cash equivalents (547,000) 2,530,000 (9,898,000) Cash and cash equivalents at beginning of year 1,533,000 (997,000) 8,901,000 ------------------------------------------- Cash and cash equivalents at end of year $ 986,000 $ 1,533,000 $ (997,000) ------------------------------------------- ------------------------------------------- Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ - $ 2,085,000 $ 2,974,000 ------------------------------------------- ------------------------------------------- Income taxes $ - $ - $ 306,000 ------------------------------------------- -------------------------------------------
See Notes to Consolidated Financial Statements of CenCor, Inc. included elsewhere in this report. 56 CENCOR, INC. SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
ADDITIONS DEDUCTIONS ----------------------------------------- ----------------------------------------- BALANCE AT CHARGED TO CHARGED TO NET CHARGE-OFF BALANCE AT BEGINNING COSTS AND OTHER TRANSFERS OF RECEIVABLES END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS TO INCOME AND OTHER PERIOD - ----------- ---------- ---------- ---------- --------- -------------- ---------- YEAR ENDED DECEMBER 31, 1993: Allowance for credit losses on accounts receivable $ 70,000 $ --- $ 525,000 $ --- $ --- $ 595,000 Allowance for credit losses on finance receivables 5,990,000 2,104,000 --- --- 3,068,000 5,026,000 Allowance for credit loss on Concorde note 5,588,000 --- 487,000 93,000 --- 5,982,000 Unearned discount, interest and finance charges 20,349,000 --- 26,721,000(1) 21,892,000 --- 25,178,000 YEAR ENDED DECEMBER 31, 1992: Allowance for credit losses on accounts receivable $ 366,000 $ 168,000 $ --- $ --- $ 464,000(2) $ 70,000 Allowance for credit losses on finance receivables 7,618,000 12,988,000 782,000(3) --- 15,398,000 5,990,000 Allowance for credit losses on net investment in direct financing leases 575,000 56,000 --- --- 631,000(4) --- Allowance for credit loss on Concorde note --- 5,588,000 --- --- --- 5,588,000 Unearned discount, interest and finance charges 24,659,000 --- $19,713,000(1) 24,023,000 --- 20,349,000 YEAR ENDED DECEMBER 31, 1991: Allowance for credit losses on accounts receivable $ 408,000 $ 556,000 $ --- $ --- $ 598,000 $ 366,000 Allowance for credit losses on finance receivables 4,502,000 11,708,000 3,253,000(3) --- 11,845,000 7,618,000 Allowance for credit losses on net investment in direct financing leases --- 655,000 --- --- 80,000 575,000 Unearned discount, interest and finance charges 22,396,000 --- 31,617,000(1) 29,354,000 --- 24,659,000 - --------------- (1) Additions from purchases of bulk sale contracts and origination of installment notes receivable. (2) Result from sale of the Temporary Services division. (3) Additions from purchases of bulk sale contracts. (4) Result from sale of certain Charter net assets.
57 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. CENCOR, INC. By /s/ JACK L. BROZMAN ----------------------- Jack L. Brozman Chairman of the Board Date: March 31, 1994 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE DATE By:/s/ JACK L. BROZMAN March 31, 1994 ---------------------------------------------------------------------- Jack L. Brozman (Chairman of the Board, Chief Executive Officer and Director) By:/s/ PATRICK F. HEALY March 31, 1994 ---------------------------------------------------------------------- Patrick F. Healy (Vice President-Finance and Treasurer, Principal Financial Officer) By:/s/ EDWARD G. BAUER, JR. March 31, 1994 ---------------------------------------------------------------------- Edward G. Bauer, Jr. (Director) By:/s/ GEORGE L. BERNSTEIN March 31, 1994 ---------------------------------------------------------------------- George L. Bernstein (Director) By:/s/ MARVIN S. RIESENBACH March 31, 1994 ---------------------------------------------------------------------- Marvin S. Riesenbach (Director) 58 EXHIBIT INDEX Exhibit Number Description ------------------ 2(a) Plan or Reorganization (Incorporated by reference--Exhibit 2(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 3(a) Certificate of Incorporation and all Amendments thereto through August 31, 1990. (Incorporated by reference--Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 3(b) Bylaws amended through July 29, 1991. (Incorporated by reference-- Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.) 4(a) Specimen common stock certificate. (Incorporated by reference--Exhibit 4(a) to the Company's Annual Report on Form 10-K for the year ended De- cember 31, 1990.) 4(b) Certificate of Incorporation and all Amendments and Amended and Restated Bylaws. (Incorporated by reference--Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 and included as Exhibit 3(b) hereto.) 4(c) Composite Conform Copy Relating To: Century Acceptance Corporation Amendment and Exchange Agreement dated as of January 28, 1993 and Composite Conformed Copy of Amendment and Exchange Agreement Regarding Century Acceptance Corporation Amendment and Exchange Agreement dated as of January 28, 1993 relating to the restructuring of Century Acceptance Corporation's outstanding indebtedness to All State Life Insurance Company, Inc., American Banker's Life Insurance Company of Florida, American Mutual Life Insurance Company, Continental American Life Insurance Company, The Lincoln National Life Insurance Company, Mutual Services Casualty Insurance Company, New England Mutual Life Insurance Company, Principal Mutual Life Insurance Company, Provident Mutual Life Annuity Company of America, Provident Mutual Life Insurance Company of Philadelphia, and Standard Insurance Company. (Incorporated by reference -- Exhibit 4(d) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 4(d) Indentures between CenCor, Inc. and Commercial National Bank of Kansas City, N.A. dated April 27, 1993 with respect to notes due 1999. (Incorporated by reference--Exhibit T3C to Company's application on Form T-3; SEC file #22-24246 4(e) Indenture between CenCor, Inc. and Commercial National Bank of Kansas City, N.A. dated April 27, 1993 with respect to convertible notes due 1999; (Incorporated by reference--Exhibit T3C to Company's application on Form T-3; SEC file #22-24248 10(a) Indemnity Agreement dated July 26, 1991 between the Company and the Indemnitors. (Incorporated by reference--Exhibit 2 to Report on Form 8-K dated July 29, 1991.) 10(b) First Amendment to Indemnity Agreement dated August 20, 1991 between the Company and the Indemnitors. (Incorporated by reference--Exhibit 1 to Report on Form 8-K dated September 3, 1991.) 10(c) Modification and Exchange Agreement and Lender Consent Stipulation dated August 1, 1991 between the Company, the Indemnitors, and certain CIKC Lenders. (Incorporated by reference--Exhibit 2 to Report on the Company's Form 8-K dated September 3, 1991.) 10(d) Standstill Agreement dated August 14, 1991 between the Company and College Boulevard National Bank. (Incorporated by reference--Exhibit 4 to Report on the Company's Form 8-K dated September 3, 1991.) 10(e) Expense Sharing Agreement dated January 1, 1993 between CenCor, Inc., Century Acceptance Corporation, La Petite Academy, Inc., and ConCorde Career Colleges, Inc. (Incorporated by reference -- Exhibit 10(h) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10(f) Restructuring, Security and Guaranty Agreement dated October 30, 1992 between CenCor, Inc. and Concorde Career Colleges, Inc., Minnesota Institute of Medical and Dental Assistants, Inc., United Health Careers Institute, Inc., Southern California College of Medical and Dental Assis- tants, Inc., Concorde Careers--Florida, Inc., Colleges of Dental and Medical Assistants, Inc. and Computer Career Institute, Inc. (Incor- porated by reference -- Exhibit 10(j) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10(g) Amendment to Agreement for Transfer of Assets and Assumption of Liabili- ties dated October 30, 1992 between CenCor, Inc. and Concorde Career Colleges, Inc. (Incorporated by reference -- Exhibit 10(k) to Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10(h) Employment Agreement with Dennis C. Berglund dated June 28, 1993. 10(i) First Amendment to Restructuring, Security and Guarantee Agreement between CenCor, ConCorde, Minnesota Institute of Medical and Dental As- sistance, Texas College of Medical and Dental Assistants, Texas College of Medical and Dental Assistants, Inc., United Health Careers Institute, Inc., Southern California College of Medical and Dental Assistants, Inc., ConCorde Careers--Florida, Inc., College of Dental and Medical Assistants, Inc. and Computer Career Institute, Inc. dated December 30, 1993. 10(j) Transition Service Agreement between CenCor, Century, LaPetite, and Concorde dated July 23, 1993. 10(k) Termination of Transition Services Agreement dated August 30, 1993 be- tween LaPetite, CenCor, and ConCorde. 21 Subsidiaries of the Registrant. 27 Financial Data Schedule. EX-10.H 2 EXHIBIT 10(H) Exhibit 10(h) EMPLOYMENT AGREEMENT THIS AGREEMENT, dated this 28th day of June, 1993, is made by and between Dennis C. Berglund, resident of the State of Missouri ("Executive"), and Century Acceptance Corporation, a Delaware corporation ("Employer") any corporation, partnership association or other entity to which Employer is sold, acquired by or merged. The successor shall also be defined as "Employer." RECITALS A. Employer is a consumer finance company which principal office is located in Kansas City, Missouri, known as Century Acceptance Corporation. B. Executive desires to be employed by Employer, and Employer desires to employ Executive under the terms set forth herein. AGREEMENT In consideration of the mutual promises, covenants and agreements contained herein and other good and valuable consideration, the legal sufficiency of which is hereby acknowledged by Executive and Employer, the parties hereto agree as follows: 1. EMPLOYMENT AND TERM OF EMPLOYMENT. Employer hereby employs Executive, and Executive hereby accepts employment with Employer for the term commencing on June 28, 1993 and continuing until June 27, 1996, unless sooner terminated as provided in Section 5. After the initial term hereof, this Agreement shall continue on a month-to-month basis until terminated under Section 5. 2. DUTIES AND AUTHORITY. Subject to Employer's lenders' approval, which shall be obtained no later than July 15, 1993, Executive's principal duties shall be that of President and Chief Executive Officer and Director of the business of Employer located in Missouri. 3. COMPENSATION. During the term of this Agreement, Employer shall pay to Executive the following compensation: 3.01 SALARY. Executive shall be paid the following annual salary payable in accordance with the policies established by Employer from time to time but no less than every (2) weeks: June 28, 1993 to June 27, 1994 $140,000.00 June 28, 1994 to June 27, 1995 $160,000.00 June 28, 1995 to June 27, 1996 $180,000.00 3.02 FRINGE BENEFITS. Executive will be entitled to the following fringe benefits: (a) Employer will offer Executive group health insurance, life insurance and other fringe benefit programs which are currently available to its employees; (b) Employer will include Executive in Employer's profit sharing plan on a basis comparable to that provided for Executives of the Corporation; (c) Employer shall provide the use of a 1992 Lincoln Town car which is currently being leased by Employer. Executive will have the option after the lease has matured for a period of 30 months to obtain a new model leased car with a value of a new model Lincoln Town car equipped comparably to the 1992 model. (d) Executive shall be entitled to Four (4) weeks paid vacation. 3.03 BONUS. Executive shall be paid a bonus, if earned, based upon annual pre-tax profit on the following schedule: $ 0.00 - $500,000.00 0% $ 500,001.00 - $1,000,000.00 3% $1,000,001.00 - $2,000,000.00 5% Over $2,500,000.00 7% Bonus to be paid annually upon completion of the year end audit and shall accrue on a pro-rata basis and shall be paid to Executive within ninety (90) days of Executive's termination. Executive, at Executive's option, may elect to defer the payment of earned bonus. 3.04 REIMBURSEMENT OF EXPENSES. Employer shall reimburse Executive for ordinary, necessary and reasonable business expenses incurred to conduct or promote Employer's business, including travel and entertainment, provided Executive submits supporting documentation, made at or near the time the expenditure was incurred, indicating (a) the amount of the expenditure, (b) the time, place and nature of the expenditure, (c) the business reason for or the benefit derived or expected to be derived from the expenditure, and (d) the name and other appropriate information concerning any other person entertained or otherwise deriving a direct benefit from such expenditure. 4. NONDISCLOSURE. Executive hereby covenants and agrees as follows: 2 4.01 CONFIDENTIALITY. Executive acknowledges that as a result of his employment by Employer, Executive has used and acquired and, in the future, will use and acquire knowledge and information used by Employer in its business and which is not generally available to the public ("Confidential Information"), including, without limitation, Employer's systems, procedures, manuals, confidential reports, lists of clients, suppliers and manufacturers with which Employer has business relations, services, methods used and preferred by its customers, the pricing structure of its existing contemplated products and services formulas, compositions and copyrights. As a material inducement to Employer to enter into this Agreement, and to pay to Executive the compensation set forth herein, Executive agrees that Executive shall not, at any time, directly or indirectly, divulge or disclose to any person, for any purpose, any Confidential Information, except to those persons authorized by Employer to receive Confidential Information and then only if use by such person is for Employer's benefit. 5. TERMINATION. This Agreement shall terminate as follows: 5.01 DEATH On the date of Executive's death. 5.02 DISABILITY. At Employer's option, upon Executive's disability effective on the day Executive receives notice from Employer that Employer is exercising its option granted by this Section to terminate this Agreement. "Disability" as used in this Agreement shall mean Executive's inability, because of sickness or other incapacity, whether physical or mental, to perform Executive's duties under this Agreement for a period in excess of One Hundred Eighty (180) consecutive days. 5.03 WRONGFUL CONDUCT. On the day Executive commits any act of dishonesty toward Employer, theft of corporate property or unethical business conduct or is convicted of any misdemeanor or felony involving dishonest, immoral or unethical conduct. 5.04 BREACH OF EMPLOYEE. Upon failure by Executive to comply with the provisions of Section 2 hereof. 5.05 RESIGNATION OR BREACH. On the date Executive resigns or either party hereto commits any act which is a material breach of this Agreement. 5.06 NOTICE. Thirty (30) days after receipt of written notice from either party. 6. PAYMENTS UPON TERMINATION. 6.01 TERMINATION UPON DEATH, DISABILITY OR AFTER INITIAL TERM. Upon the termination of this Agreement pursuant to Sections 5.01, 5.02 and 5.06, and provided Executive has not breached this Agreement, Employer shall pay, or cause to be 3 paid, to Executive, Executive's designated beneficiary or Executive's legal representative. (a) Three months severance pay if terminated during the first year of this Agreement. Six months severance pay if terminated in years two or three of this Agreement; and (b) All ordinary, necessary and reasonable business expenses incurred by Executive prior to termination of this Agreement. 6.02 TERMINATION FOR BREACH BY EXECUTIVE. Upon termination of this Agreement pursuant to Section 5.03, 5.04 or 5.05, where Executive is the breaching party, Employer shall not be obligated to pay Executive any sums. 6.03 PAYMENT OF AMOUNTS DUE UPON TERMINATION. If Executive is entitled to payment of base salary, fringe benefits and business expenses upon termination of this Agreement, Employer shall make such payments within the ordinary course of Employer's business and pursuant to the terms hereof. 7. CONFLICT OF INTEREST. During the term of this Agreement, Executive shall not, directly or indirectly, have any interest in any business which is a supplier of Employer without the express written consent of Employer's Board of Directors. Such interest shall include, without limitation, an interest as a partner, officer, director, stockholder, advisor or employee of such a supplier. An ownership interest of less than five percent (5%) in a supplier whose stock is publicly held or regularly traded shall not be a violation of this Paragraph. 8. GENERAL PROVISIONS. 8.01 LOCATION OF EMPLOYMENT. Executive's principal office shall be located at 1100 Main Street, Suite 2350, Kansas City, Missouri. 8.02 ASSIGNMENT. Neither party may assign any of the rights or obligations under this Agreement without the written consent of the other party, which consent shall not be unreasonably withheld. 8.03 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties' heirs, successors and assigns, to the extent allowed herein. 4 8.04 SEVERABILITY. The provisions of this Agreement are severable. The invalidity or unenforceability of any one or more of the provisions hereof shall not affect the validity or enforceability of any other part of this Agreement. 8.05 ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding between the parties with respect to Executive's employment by Employer. 8.06 WAIVER. Waiver of any provisions of this Agreement or any breach thereof by either party shall not be construed to be a waiver of any other provision or any subsequent breach of this Agreement. 8.07 NOTICES. Any notice or other communication required or permitted herein shall be sufficiently given if delivered in person or sent by certified mail, return receipt requested, postage prepaid, addressed to: Employer: Century Acceptance Corporation c/o CenCor, Inc. 1100 Main Street, Suite 2350 Kansas City, Missouri 64105 Attn: Jack L. Brozman, Chairman Executive: Dennis C. Berglund 5331 NW 60th Street Kansas City, Missouri 64151 or such other address as shall be furnished in writing by any such party. Any notice sent by the above-described method shall be deemed to have been received on the date personally delivered or so mailed. Notices sent by any other method shall be deemed to have been received when actually received by the addressee or its or his authorized agent. 8.08 APPLICABLE LAW. This Agreement shall be construed in accordance with the laws of the State of Missouri. The parties agree to submit irrevocably to the jurisdiction of the courts of the State of Missouri. 8.09 ATTORNEY FEES. In the event of any litigation between the parties arising out of or relating to this Agreement, the prevailing parties shall be entitled to a court award of attorney fees and litigation costs from the losing party for all trial and appellate proceedings, as well as for all post-judgment collection proceedings. 5 IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first written above. EXECUTIVE: DENNIS C. BERGLUND /s/ Dennis C. Berglund -------------------------------- EMPLOYER: CENTURY ACCEPTANCE CORPORATION /s/ Jack L. Brozman -------------------------------- Jack L. Brozman, Chairman 6 EX-10.I 3 EXHIBIT 10(I) Exhibit 10(i) FIRST AMENDMENT TO THE RESTRUCTURING, SECURITY AND GUARANTY AGREEMENT THIS AGREEMENT, made and entered into as of the 30th day of December, 1993, (the "First Amendment") by and among CENCOR, INC., a Delaware corporation ("CenCor"); CONCORDE CAREER COLLEGES, INC., a Delaware corporation ("Concorde"); MINNESOTA INSTITUTE OF MEDICAL AND DENTAL ASSISTANTS, INC., a Minnesota corporation ("Minnesota"); TEXAS COLLEGE OF MEDICAL AND DENTAL ASSISTANTS, INC., a Texas corporation ("Texas"); UNITED HEALTH CAREERS INSTITUTE, INC., a California corporation ("United"); SOUTHERN CALIFORNIA COLLEGE OF MEDICAL AND DENTAL ASSISTANTS, INC., a California corporation ("Southern California"); CONCORDE CAREERS - FLORIDA, INC., a Florida corporation ("Florida"); COLLEGES OF DENTAL AND MEDICAL ASSISTANTS, INC., a California corporation ("Dental"); and COMPUTER CAREER INSTITUTE, INC., an Oregon corporation ("Computer") (Minnesota, Texas, United, Southern California, Florida, Dental, and Computer being herein- after referred to collectively as "Guarantors" and each individually as a "Guarantor") amends that certain Restructuring, Security and Guaranty Agreement (the "Agreement") between the parties dated as of October 30, 1992. RECITALS (i) Pursuant to the Agreement entered into by CenCor, Concorde and the Guarantors, Concorde issued a debenture to CenCor in the principal amount of $5,422,307, dated October 30, 1992 (the "Debenture"). (ii) Under the terms of the Agreement and the Debenture, the interest due on the principal amount of the Debenture is to be accrued until the commencement of quarterly payments on September 30, 1995. (iii) At this time Concorde wishes to pay to CenCor all interest accrued on the Debenture through and including December 31, 1993, totaling $559,353 (the "Accrued Interest"), by the assignment of certain of Concorde's receivables to CenCor, all on the terms and conditions set forth below. (iv) CenCor wishes to receive payment of the Accrued Interest at this time through the assignment of such receivables, all on the terms and conditions set forth below. (v) Concorde and CenCor wish to amend the Agreement to provide for such payment of the Accrued Interest. (vi) The Guarantors, each a wholly-owned subsidiary of Concorde, wish to reduce the amount of their guaranteed obligations through such payment of the Accrued Interest and thus consent to the amendment of the Agreement to provide for such payment. AGREEMENT In consideration of the premises and the mutual covenants and agreements herein contained, CenCor, Concorde and Guarantors agree as follows: ARTICLE I DEFINITIONS 1.1 CERTAIN DEFINED TERMS. The following terms used herein shall have the meanings set forth in this Article and in the other parts of this Agreement referred to in this Article, and such meanings shall apply to both the singular and plural forms of such terms. (a) "Allowable Collection Expenses" shall mean those out-of-pocket fees and expenses actually paid by CenCor to independent unaffiliated third party collection agents or legal counsel engaged to collect Receivables (the "Collection Agents"). It is agreed that selection of a Collection Agent and the terms of its engagement shall be approved by Concorde, as set forth in Section 3.2. (b) "Gross Collections" shall mean the amount of funds collected by CenCor on the Receivables, provided that if a Student has entered into a settlement agreement with CenCor which provides for instalment payments, "Gross Collections" shall only include payments that have been actually received by CenCor. (c) "Outstanding Unworked Receivables" means those Receivables at any given time which (i) have not been collected, either in full, or in part pursuant to a settlement agreement with the Student, (ii) for which there is not an installment settlement agreement with the Student, or (iii) for which all Collection Efforts have not been completed. (d) "Receivables" shall mean the receivables due on all Accounts (as defined in the Agreement), itemized on Schedule I (subject to adjustment to reflect payments received through December 31, 1993) to the Assignment and Acceptance Agreement, attached hereto as Exhibit A and hereby incorporated herein by reference (the "Assignment"), having aggregate balances due of $8,400,071.38, plus any Substituted Receivables subsequently assigned to 2 CenCor pursuant to Section 4.1, hereof, it being understood that all Receivables are accounts or notes receivable which have previously been written off by Concorde or a Guarantor for financial statement purposes, pursuant to Concorde's historical accounting practices. (e) "Remainder of Accrued Interest" shall mean the amount by which, if any, the amount of Accrued Interest exceeds CenCor's Gross Collections net of Allowable Collection Expenses. (f) "Students" shall mean the obligors on the Receivables. (g) "Worked Receivables" are those Receivables which remain uncollected (and for which no settlement agreement has been entered into) after completion of all Collection Efforts with respect to each such Receivable. 1.2 OTHER TERMS. All capitalized terms used herein, not defined in Section 1.1 or elsewhere in this First Amendment, shall have the meanings and be as defined in the Agreement. ARTICLE II ASSIGNMENT AND PAYMENT OF ACCRUED INTEREST 2.1 ASSIGNMENT OF RECEIVABLES. Subject to the terms and conditions contained herein, Concorde hereby transfers, assigns and conveys the Receivables having an aggregate face value of $8,390,000, to CenCor. 2.2 ACCEPTANCE OF PAYMENT OF ACCRUED INTEREST. Subject to the terms and conditions contained herein, including without limitation the execution and delivery to CenCor of all consents, releases and other documents set forth in Article VII, CenCor hereby accepts the assignment of the Receivables, as payment in full of the Accrued Interest, which totaled $559,353 at December 31, 1993. 2.3 ASSIGNMENT OF FUTURE PAYMENTS. In the event any Students make payments on the Receivables to Concorde or a Guarantor after the date hereof, it is agreed that any such payments shall be delivered to CenCor. 2.4 WITHOUT RECOURSE. This assignment shall be without recourse, and CenCor shall fully assume all risks of nonpayment of the Receivables, subject to the limited Right of Substitution set forth in Section 4.1 3 ARTICLE III TERMS OF ASSIGNMENT 3.1 DELIVERY OF DOCUMENTATION. Commencing on or about March 4, 1994 Concorde will deliver to CenCor all relevant documentation underlying each of the Receivables, including copies of ledger cards, enrollment agreements, promissory notes (if existing), and any documentation, available to either Concorde or the Guarantors, concerning prior collection efforts on the part of any of them or their agents. In order to facilitate the efficient and orderly recording and processing of this documentation, itemized deliveries will be made weekly, each such delivery covering groups of Receivables aggregating $750,000 to $1,000,000 in face value, until the documentation for all the Receivables has been delivered. Deliveries shall be made to CenCor at its offices at City Center Square, 1100 Main Street, Suite 2350, Kansas City, Missouri 64105, or such other location that CenCor shall designate in writing. 3.2 COLLECTION EFFORTS. In consideration of the Right of Substitution afforded to CenCor and in light of the Right of Credit, CenCor agrees that it will take reasonable steps to collect, in full or part, in a lump sum or in installment payments, each of the Receivables (the "Collection Efforts"), including, but not necessarily limited to reasonable search efforts to locate the Student (if necessary) and if the Student's location is known or determined: (a) initial telephone contact with the Student and, if collection is not obtained as a result thereof; (b) the sending of a default letter, outlining liability and penalties for failure to pay or settle the Receivable, by certified mail to Student and, if collection is not obtained as a result thereof; (c) reasonable follow-up telephone contact with the Student and, if collection is not obtained as a result thereof; (d) management review as to feasibility of legal action to collect. These Collection Efforts shall be made by a Collection Agent or Agents hired by CenCor, subject to Concorde's reasonable approval as to such employment and the terms of engagement (including fee schedules, acceptable collection procedures and settlement parameters, and provision of adequate indemnification of Concorde for any liability resulting from such agent's collection or settlement activities, which is secured by adequate insurance coverage). Furthermore, Concorde shall have the right to reasonably request that CenCor terminate its 4 engagement with a given Collection Agent within 30 days of such written request. In addition to the Collection Efforts, CenCor may elect to (i) settle a Receivable for a partial payment, in cash or in installments, (ii) turn a Receivable over to legal counsel for collection, or (iii) make such other efforts through a Collection Agent to obtain collection as CenCor deems appropriate. 3.3 RECORD KEEPING AND REPORTS. CenCor shall maintain, or cause its Collection Agents to maintain, a record on each Receivable as to efforts made to collect each such Receivable; the terms of any settlement entered into with respect to each such Receivable; all amounts received by CenCor in connection with each such Receivable; and the amount, if any, of Allowable Collection Expenses actually paid with respect to each such Receivable. CenCor shall provide, or cause its Collection Agents to provide, to Concorde (with copies to Mark Twain Kansas City Bank, a Missouri banking corporation ["Mark Twain"]) reports, at least quarterly, which set forth the foregoing and report, in aggregate: (a) the amount of Gross Collections, in the preceding period and from contract inception to date; and (b) the amount of Allowable Collection Expenses paid by CenCor (and to whom) on the Receivables, in the preceding period and from contract inception to date. ARTICLE IV RIGHTS OF SUBSTITUTION AND CREDIT 4.1 RIGHT OF SUBSTITUTION. Subject to the provisions set forth herein, provided that CenCor has not yet recouped an amount equal to one hundred percent (100%) of the Accrued Interest, and a Remainder of Accrued Interest exists, CenCor shall have a limited right of substitution as to the Receivables (the "Right of Substitution"), and may elect to reassign certain Worked Receivables to Concorde in exchange for the assignment from Concorde or the Guarantors of additional receivables of equal face value ("Substituted Receivables"). (a) This Right of Substitution may be exercised once every six months, commencing six months after the date of the first delivery of Receivables, pursuant to Section 3.1, by CenCor giving written notice of its election to exercise its Right of Substitution to Concorde. This Right of Substitution shall terminate at such time as CenCor has recouped an amount equal to one hundred percent (100%) of the Accrued Interest. 5 (b) The amount of Receivables as to which CenCor may exercise this Right of Substitution shall be limited to the amount of Receivables that constitute Worked Receivables on the date of exercise of the right, up to a maximum face amount equal to the then current Remainder of Accrued Interest multiplied by fifteen. (c) The amount of Worked Receivables to be Substituted may only be exercised as to $100,000 (one hundred thousand dollar) blocks, based on face value (unless Concorde's total receivables available for substitution at such time are less than $100,000, in which case the total amount of such receivables shall be the cap). (d) Substituted Receivables shall be selected at the discretion of Concorde and limited to its then outstanding receivables which have been written off by Concorde or the Guarantors for financial statement purposes pursuant to Concorde's historical accounting practices and which comply with the representations and warranties set forth in Section 8.1. 4.2 RIGHT OF CREDIT. In the event the amount of CenCor's Gross Collections, less Allowable Collection Expenses, exceeds the amount of the Accrued Interest, the amount of such excess (the "Overage") shall be: (a) paid to Concorde as reimbursement of amounts paid by Concorde in legal fees and expenses, either to Concorde's legal counsel or CenCor's legal counsel (pursuant to Section 9.1) in connection with the negotiation, preparation and implementation of this First Amendment; and (b) to the extent the Overage exceeds such reimbursement, retained by CenCor but applied as a credit to any amounts owing from Concorde to CenCor under the Debenture, first to interest which has accrued since December 31, 1993 and then, to the extent of any excess Overage, either to prepayment of principal or to prepayment of future interest payments due, at the option of Concorde. In the event of an Overage, and in lieu of creating additional Overages, CenCor may elect to cease its Collection Efforts on Outstanding Unworked Receivables by reassigning those remaining Outstanding Unworked Receivables to Concorde and/or may assign any outstanding installment payments on settlement agreements with Students to Concorde. 6 ARTICLE V AMENDMENT OF AGREEMENT 5.1 PAYMENT TERMS AND MATURITY. Section 2.3 of the Agreement is hereby amended by the addition of the following subsection at the end of the existing text: "(e) Notwithstanding the foregoing, the interest accrued from the date of issuance of the Debenture through and including December 31, 1993 shall be prepaid by Concorde through the Assignment of the Receivables. In the event the Collection Efforts of CenCor, pursuant to the terms of the First Amendment, yield an Overage, the amount of such Overage shall be (a) paid to Concorde as reimbursement of amounts paid by Concorde in legal fees and expenses, either to Concorde's legal counsel or CenCor's legal counsel (pursuant to Section 9.1 of the First Amendment) in connection with the negotiation, preparation and implementation of the First Amendment; and (b) to the extent the Overage exceeds such reimbursement, retained by CenCor but applied as a credit first against the interest on the Debenture then accrued but unpaid, and then, to the extent of any excess Overage, either to prepayment of principal or to prepayment of future interest payments due, at the option of Concorde. Additionally, subject to the written consent of CenCor's Board of Directors, Concorde and Mark Twain, interest on the Debenture accrued after December 31, 1993 may be paid or prepaid by the future assignment of additional receivables, on the same terms as set forth in the First Amendment, as evidenced by the execution of subsequent assignments, substantially in the form of Exhibit A, hereto." 5.2 INTEREST: RATE AND TERMS. Section 2.4 of the Agreement is hereby amended by the addition of the following sentence at the end of the existing text: "Notwithstanding the foregoing, accrued interest may be prepaid as set forth in Section 2.3(e), hereof." 5.3 NOTICES. Section 10.6 of the Agreement is hereby amended to read as follows: 10.6 NOTICES. All notices, requests, demands and other communications required or permitted by this Agreement shall be in writing and shall be given to or made upon the respective parties hereto by depositing the same in the United States mail, certified or registered, postage prepaid, or by telegram or 7 private courier service, charges prepaid, or by delivery in person, to the appropriate address set forth below, and shall be deemed given or made when so deposited in the mail, delivered to the telegraph company or personally delivered. IF TO CONCORDE: Concorde Career Colleges, Inc. City Center Square 1100 Main Street, Suite 416 Kansas City, Missouri 64105 with a copy to: Bryan Cave 3300 One Kansas City Place 1200 Main Street P.O. Box 419914 Kansas City, Missouri 64141-6914 Attention: Lorna Wright IF TO CENCOR: CenCor, Inc. City Center Square 1100 Main Street, Suite 2350 Kansas City, Missouri 64105 with a copy to: Polsinelli White Vardeman & Shalton 1100 Plaza Steppes Building 700 West 47th Street Kansas City, Missouri 64112 Attention: Lisa M. Schultes Either party may change its notice address by giving written notice to the other party. When given to Concorde as herein provided, notice shall also be deemed to have been given to all Guarantors. " 5.4 OTHER AMENDMENTS. Additionally, the Agreement shall be amended to correct certain typographical errors, as set forth below: (a) The definition of "Transaction Costs" in Section 1. I of the Agreement is hereby amended to read as follows: '"TRANSACTION COSTS' means CenCor's reasonable out-of-pocket costs, fees and 8 expenses actually incurred in connection with the restructuring of the Contract Obligations, evidenced by this Agreement, including Board of Directors, legal, and consulting fees and expenses, all as supported by reasonable documentation, which shall be reimbursed by Concorde to the extent and in the manner as set forth in Section 2.7." (b) Section 10.7 of the Agreement is hereby amended to read as follows: "10.7 AMENDMENTS. Concorde, CenCor and Guarantors may from time to time enter into written agreements supplemental hereto for the purpose of modifying or adding any provision to this Agreement or changing the rights and privileges of CenCor, Concorde or any Guarantor hereunder. Any such supplemental agreement shall be binding upon Concorde, CenCor and Guarantors and their respective successors and assigns. The provisions of this Section 10.7 shall not, under any circumstances, limit CenCor's rights, or Concorde's or any Guarantor's obligations, under Section 3.3 or any other provision of this Agreement." (c) Section 10.12 of the Agreement is hereby amended to read as follows: "10.12 EXPENSES OF CENCOR. Concorde and Guarantors jointly and severally agree to pay or reimburse CenCor, on demand, for all reasonable out-of-- pocket costs, fees and expenses, including but not limited to reasonable attorneys' fees and expenses (whether or not suit be commenced and including fees and expenses in connection with proceedings in bankruptcy and appellate courts), if and to the extent not prohibited by applicable law, incurred or paid by CenCor in connection with the negotiation, preparation, execution, interpretation and enforcement of this Agreement and the Debenture (subject to the terms of Section 2.7 hereof), or in connection with the collection or enforcement of any of the Debenture Liabilities or the exercise of any of CenCor's rights 9 and remedies under the Agreement, all of which costs, fees and expenses shall become and remain a part of the Debenture Liabilities until paid or reimbursed and shall bear interest from the date of CenCor's demand until paid or reimbursed in full." ARTICLE VI CROSS INDEMNIFICATIONS 6.1 INDEMNIFICATION BY CONCORDE AND GUARANTORS. Concorde and each of the Guarantors jointly and severally agree to indemnity and hold harmless CenCor from and against any and all damages, losses, and expenses (including attorney fees and expenses) directly incurred, sustained or suffered by or asserted against CenCor resulting from, arising out of, relating to, or caused by (a) the breach of any representation or warranty contained in Section 8.1, (b) any breach or failure on the part of Concorde or any Guarantor to perform or comply with any obligation, agreement or covenant hereunder, or (c) a claim by a Student with respect to the transactions giving rise to a given Receivable or the collection efforts by Concorde, any Guarantor, or their agents prior to the delivery of documentation to Cencor or its Collection Agents with respect to such Receivable pursuant to Sections 3.1 or 4.1, as applicable; provided however that such indemnity as to claims by Students shall not extend to losses related to uncollectibility of such Receivables, provided, however, that any payments made pursuant to this Section 6.1 shall be subordinated to Mark Twain's superior right of payment for amounts due and owing pursuant to that certain Revolving Credit, Security and Guaranty Agreement, dated as of September 3, 1991, and amended April 30, 1992 and April 30, 1993, among Mark Twain, Concorde and the Guarantors (the "Mark Twain Agreement"). 6.2 INDEMNIFICATION BY CENCOR. CenCor agrees to indemnity and hold harmless Concorde and each of the Guarantors from and against any and all damages, losses, and expenses (including attorney fees and expenses) directly incurred, sustained or suffered by or asserted against any of them resulting from, arising out of, relating to, or caused by (a) the breach of any representation or warranty contained in Section 8.2, (b) any breach or failure on the part of CenCor to perform or comply with any obligation, agreement or covenant hereunder, or (c) any actions taken by CenCor, or its agents, in connection with collection activities with respect to the Receivables, which have been taken in the absence of Concorde's rights of approval set forth in Section 3.2, or any actions taken by CenCor or its affiliates in contravention of Concorde's rights of approval set forth in Section 3.2. 10 ARTICLE VII CONSENTS AND RELEASES 7.1 CONSENT TO TRANSACTION. Attached as Exhibit B hereto is the consent (the "Mark Twain Consent") of Mark Twain, Concorde's primary lender, under the Mark Twain Agreement, whereby Mark Twain consents to Concorde's prepayment of Accrued Interest and the Assignment of the Receivables, all pursuant to the terms hereof. 7.2 RELEASE OF SECURITY INTERESTS. (a) As set forth in the Mark Twain Consent, Mark Twain has agreed to release any and all security interests it has in the Receivables, granted to it either by Concorde or any of the Guarantors pursuant to the Mark Twain Agreement, and has agreed to execute all necessary UCC statements, and/or other documents, necessary to effectuate such release. (b) Concorde hereby agrees to release any and all security interests it has in the Receivables granted to it by the Guarantors pursuant to the Mark Twain Agreement, the Agreement, or otherwise and has agreed to execute all necessary UCC statements, and/or other documents, necessary to effectuate such release. 7.3 ASSIGNMENTS. Concorde and each Guarantor agrees to execute all assignments, powers of attorney and other documents, in form and substance satisfactory to CenCor's counsel, to transfer the Receivables to CenCor and to grant CenCor or its agent the right to file suit on behalf of or in the name of Concorde to collect such Receivables. ARTICLE VIII REPRESENTATIONS 8.1 OF CONCORDE AND GUARANTORS. (a) Subject to the release of the security interests held by Mark Twain and Concorde, as set forth in Section 7.2, and those granted to CenCor under the Agreement, Concorde is the owner of the Receivables, free and clear from any Lien or other right, title or interest of any other persons and free from any restriction on transfer. (b) Concorde is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware. Each Guarantor is a corporation duly organized and existing in good standing under the laws of 11 the jurisdiction in which it is incorporated, as indicated in the first paragraph of this Agreement. (c) Each of Concorde and Guarantors has all requisite power and authority to enter into and perform this First Amendment and to execute, deliver and perform its obligations thereunder. The First Amendment has been duly authorized by all necessary corporate action by and has been duly executed and delivered by authorized officers of Concorde and Guarantors, and is the valid agreement and obligation of Concorde and Guarantors legally binding upon and enforceable against them, in accordance with its terms. (d) Subject to the Mark Twain Consent, as set forth in Section 7.1, neither the execution nor the delivery of this First Amendment nor Concorde's and Guarantors' performance of and compliance with the terms and provisions hereof, will conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon any of the Assets of Concorde or any of the Guarantors pursuant to, or require any authorization, consent, approval, exemption or other action by or notice to or filing with any court, governmental body, administrative agency or other Person pursuant to, the charter or bylaws of Concorde or any of the Guarantors, any agreement (including any agreement with stockholders), lease, indenture, mortgage, security agreement or other instrument (other than agreements, leases, indentures, mortgages, security agreements and other instruments relating to the Mark Twain Liabilities), or any order, judgment, decree, arbitration award, law, rule or regulation to or by which Concorde or any of the Guarantors or any of Concorde's Assets are subject or bound. (e) The Receivables are and will be valid debts owed by Students, fully transferrable and assignable to CenCor. None of the Receivables are, nor will be, (i) guaranteed student loans, (ii) subject to any rules or regulations of the U.S. Department of Education regarding collection procedures, or (iii) subject to any pending, or to Concorde's knowledge, threatened, litigation or counterclaim by a Student. 8.2 OF CENCOR. (a) CenCor is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware. 12 (b) CenCor has all requisite power and authority to enter into and perform this First Amendment and to execute, deliver and perform its obligations thereunder. The First Amendment has been duly authorized by all necessary corporate action by and has been duly executed and delivered by authorized officers of CenCor and is the valid agreement and obligation of CenCor legally binding upon and enforceable against it, in accordance with its terms. (c) Neither the execution nor the delivery of this First Amendment nor CenCor's performance of and compliance with the terms and provisions hereof, will conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or require any authorization, consent, approval, exemption or other action by or notice to or filing with any court, governmental body, administrative agency or other Person pursuant to, the charter or bylaws of CenCor, any agreement (including any agreement with stockholders), lease, indenture, mortgage, security agreement or other instrument, or any order, judgment, decree, arbitration award, law, rule or regulation to or by which CenCor is subject or bound. ARTICLE IX Miscellaneous 9.1 ATTORNEYS' FEES. Notwithstanding anything in the Agreement or herein to the contrary, Concorde shall pay to CenCor in cash CenCor's expenses in connection with the negotiation of this First Amendment and the consummation of the transaction contemplated thereby, including attorneys' fees and expenses, of which $3,000.00 shall be paid on February 18, 1994 and the remainder within ten (10) business days after receiving an invoice from CenCor with supporting documentation, which the parties agree shall not exceed $6,000.00 in the aggregate. 9.2 RATIFICATION. All provisions of the Agreement not specifically amended in this First Amendment are hereby ratified and reaffirmed. 9.3 Governing Law. Except as otherwise provided by express reference to the Uniform Commercial Code, this First Amendment shall be construed in accordance with and governed by the laws, statutes and decisions of the State of Missouri, to the nonexclusive jurisdiction of whose courts, state and federal, Concorde and Guarantors irrevocably agree to submit. 9.4 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an 13 original and all of which together shall constitute one and the same instrument. 9.5 FURTHER ASSURANCES. Concorde and the Guarantors will execute, and pursuant to the provisions of the Mark Twain Consent, Mark Twain Bank will execute, all additional documents reasonably necessary to effectuate the transaction contemplated herein, including without limitation those documents to transfer the Substituted Receivables to CenCor free and clear of all liens and encumbrances. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to the Agreement to be executed by their respective duly authorized officers as of the day and year first above written. Oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable. To protect the debtor and creditor from misunderstanding or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete and exclusive statement of the agreement between us, except as we may later agree in writing to modify it. 14 CENCOR, INC. ATTEST: /s/ Lisa M. Henak By: /s/ Patrick F. Healy - ------------------------ ------------------------- Secretary Patrick F. Healy, Vice President-Finance ACKNOWLEDGEMENT STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BE IT REMEMBERED, that on this 18th day of February, 1994, before me the undersigned, a notary public in and for said state, came Patrick F. Healy, Vice President-Finance of CenCor, Inc., a Delaware corporation, to me personally known to be such officer and the same person who executed as such officer the foregoing instrument on behalf of said corporation, and such person duly acknowledged the execution of the same to be the act and deed of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal at my office in Kansas City, Missouri, the day and year last above mentioned. /s/ Lisa M. Henak ------------------------------ Notary Public in and for said County and State My commission expires: September 7, 1996 - ---------------------- 15 CONCORDE CAREER COLLEGES, INC. ATTEST: /s/ Lisa M. Henak By:/s/ M. Gregg Gimlin - ------------------------ ------------------------------- M. Gregg Gimlin M. Gregg Gimlin Secretary Vice President ACKNOWLEDGEMENT STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BE IT REMEMBERED, that on this 18th day of February, 1994, before me the undersigned, a notary public in and for said state, came M. Gregg Gimlin, Vice President of Concorde Career Colleges Inc., a Delaware corporation, to me personally known to be such officer and the same person who executed as such officer the foregoing instrument on behalf of said corporation, and such person duly acknowledged the execution of the same to be the act and deed of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal at my office in Kansas City, Missouri, the day and year last above mentioned. /s/ Lisa M. Henak ----------------------------- Notary Public in and for said County and State My commission expires: September 7, 1996 - ---------------------- 16 EXHIBIT A ASSIGNMENTS AND ACCEPTANCE AGREEMENT Subject to the terms and conditions of the First Amendment to the Restructuring, Security and Guaranty Agreement, dated as of December 30, 1993, by and among CenCor, Inc., a Delaware corporation ("CenCor"); Concorde Career Colleges, Inc., a Delaware corporation ("Concorde"); Minnesota Institute of Medical and Dental Assistants, Inc.; Texas College of Medical and Dental Assistants, Inc.; United Health Careers Institute, Inc.; Southern California College of Medical and Dental Assistants, Inc.; Concorde Careers-Florida, Inc.; Colleges of Dental and Medical Assistants, Inc.; and Computer Career Institute, Inc., Concorde does hereby irrevocably assign, transfer, sell, deliver and set over to CenCor all of Concorde's right, title and interest, as of the close of business on the date hereof, in and to the receivables listed on Schedule I, attached hereto and incorporated herein and CenCor hereby accepts such assignment subject to such terms. IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement as of December 30, 1993. CONCORDE CAREER COLLEGES, INC. CENCOR, INC. By:/s/ M. Gregg Gimlin By:/s/ Patrick F. Healy ---------------------------- ------------------------ M. Gregg Gimlin, Patrick F. Healy, Vice President Vice President-Finance SCHEDULE The Agreement was also signed by officers of the following corporations on behalf of these corporations: Minnesota Institute of Medical and Dental Assistants, Inc. Texas College of Medical and Dental Assistants, Inc. United Health Careers Institute, Inc. Southern California College of Medical and Dental Assistants College of Dental and Medical Assistants, Inc. Computer Career Institute, Inc. Concorde Careers - Florida, Inc. EX-10.J 4 EXHIBIT 10(J) Exhibit 10(j) TRANSITION SERVICES AGREEMENT ----------------------------- TRANSITION SERVICES AGREEMENT (the "Agreement"), dated as of July 23, 1993, among CenCor, Inc. ("CenCor"), Century Acceptance Corporation ("Century"), La Petite Academy, Inc. ("La Petite") and Concorde Career Colleges, inc. ("Concorde"). RECITALS -------- WHEREAS, CenCor, Century, La Petite and Concorde share office space at 12th & Baltimore, City Center Square, Kansas City, Missouri 64196 (the "Shared Office"); WHEREAS, the parties entered into that certain Salary Allocation and Expense Sharing Agreement (the "Expense Sharing Agreement") on May 4, 1993, pursuant to which the parties agreed to certain arrangements regarding the sharing of expenses incurred by the parties with respect to the Shared Office and payroll costs for personnel who provide services to more than one of the parties; WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated February 20, 1993, as amended, between La Petite and La Petite Acquisition Corp. ("LPAC"), LPAC will merge with an into La Petite (the "Merger"), and sometime after the effective time of the Merger (the "Effective Time"), La Petite will vacate the Shared Office; and WHEREAS, in connection with the consummation of the Merger, the parties desire to terminate the Expense Sharing Agreement and make provision for the sharing of certain services and expenses during the transition period from the Effective Time until the time when La Petite vacates the Shared Office. AGREEMENTS ---------- In consideration of the premises and the mutual agreements set forth below, the parties agree as follows: 1. TERM AND TERMINATION. a. This Agreement shall become effective as of the Effective Time and shall continue until one of the parties has vacated the Shared Office (the "Transition Period"), provided such vacating party has provided 30 days prior written notice to the other parties. b. Notwithstanding anything herein to the contrary, this Agreement and any rights granted hereunder can be terminated prior to expiration of the Transition Period as follows: i. by the mutual written consent of the parties; ii. by any nondefaulting party, upon any material breach or default by another party of any provision or obligation of this Agreement which is not cured within 30 days after notice is delivered to such other party of such breach or default; or iii. by La Petite upon Century or Concorde (a) having an order for relief entered with respect to it under Federal bankruptcy laws, (b) making an assignment for the benefit of creditors, or (c) instituting any proceeding seeking an order for relief under Federal bankruptcy laws. c. Any termination pursuant to this Section 1 shall not affect any rights or obligations of any party arising under this Agreement prior to such termination and shall be without prejudice to any other remedies of any party provided in Section 10 hereof. Upon the termination of this Agreement pursuant to the terms of Section 1 hereof, the parties shall have no obligations to one another to provide services or share expenses including, but not limited to, payroll costs for personnel. 2. WAREHOUSE FACILITIES. Notwithstanding the terms of Section 1 hereof, in the event this Agreement is terminated, (i) CenCor, Century and Concorde shall continue to have access to the storage and warehouse facilities identified in Exhibit A hereto on the same terms and conditions as existed prior to such termination, and (ii) CenCor, Century and Concorde may be denied access to and evicted from said facilities only upon 30 days prior written notice. 3. TERMINATION OF THE EXPENSE SHARING AGREEMENT. As of the Effective Time, the Expense Sharing Agreement shall terminate and be of no further force and effect. 4. SHARING OF EXPENSES. The parties agree to share expenses incurred during the Transition Period relating to the Shared Office in the following manner: a. To the extent practicable, each party shall be billed separately by vendors for goods received or services performed for the sole benefit of such party; b. Except as provided in subsection (c) of this Section 3, if a common invoice is used by a vendor, the parties shall, in good faith, agree to an allocation of the invoice amount based upon actual usage of the goods or services so billed; and 2 c. The parties shall allocate the expenses incurred from the provision of goods or services described in Exhibit A hereto in the manner set forth therein. 5. ALLOCATION OF EMPLOYEES SALARIES. The parties agree to allocate all salary and other payroll costs accrued during the Transition Period that are attributable to employees listed in Exhibit B hereto (the "Scheduled Employees"), in the manner set forth herein, provided, that after the Scheduled Employee's duties with respect to CenCor, Century or Concorde have diminished such that Exhibit B no longer reflects the proper allocation of the Scheduled Employee's work on behalf of the parties, the parties hereby agree to adjust the allocation of costs with regards to such Scheduled Employee. 6. PAYMENT OF EXPENSES. On or prior to the tenth day of each month during the Transition Period, the parties shall settle and discharge all liabilities owed to one another pursuant to the terms and conditions of this Agreement for services or goods received during the preceding month. 6. GOODS REMAINING UPON EXPIRATION OF TRANSITION PERIOD. At the expiration of the Transition Period, any goods on hand at the Shared Office which were purchased by the parties and the costs of which were allocated among the parties under this Agreement or any previous sharing agreement among the parties, including the Expense Sharing Agreement, shall be distributed to the parties in accordance with the expense allocation provisions contained in Section 3 hereof made for such goods, unless otherwise agreed among the parties. 7. DELIVERY OF INFORMATION; COOPERATION BETWEEN THE PARTIES. The parties shall provide each other with such information and material reasonably necessary to effect each party's prompt and complete performance of its duties and obligations under this Agreement. The parties agree that they will cooperate with each other and will act in such a manner as to promote the prompt and efficient completion of their respective obligations hereunder. 9. CONFIDENTIALITY. All information concerning a party which is obtained by another party in the course of performing its obligations hereunder shall be treated as confidential by such party and shall only be disclosed to the extent required to perform such party's obligations hereunder. Upon termination of this Agreement, the parties hereto shall return to the appropriate party all copies of information relating to such party that were provided to it or generated by it in the course of performing its obligations hereunder. 10. REMEDIES IN GENERAL. Each party shall have all remedies available to it under applicable law or in equity in addition to all other remedies contemplated by this Agreement. Every right and remedy provided herein or now or hereafter available under applicable law or in equity will be cumulative 3 and concurrent and will be in addition to every other right and remedy provided herein, or now or hereafter available under applicable law or in equity, and the exercise by a party of any other or more of such rights or remedies will not preclude the concurrent or subsequent exercise by such party of any other such rights or remedies. 11. WAIVER. The failure of any party to insist, in any one or more instances, upon performance of the terms or conditions of this Agreement shall not be construed as a waiver or a relinquishment of any right granted under this Agreement or of the future performance of any such term, covenant or condition. 12. NOTICES. Any notice to be given under this Agreement is deemed given and sufficient if in writing and delivered or, if mailed, five (5) business days following mailing by registered or certified mail, return receipt requested, to each party at the Shared Office or to such other address as any party may designate by notice in writing to the other parties. 12. BENEFIT. This Agreement shall be binding upon and inure to the benefit of and will be enforceable by each party hereto and its respective successors and assigns. No party may assign any of its rights or obligations under this Agreement without the consent of each of the other parties. 13. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable for any reason, the remaining covenants, restrictions and provisions of this Agreement will remain enforceable. Any court of competent jurisdiction may modify the objectionable provisions to make them enforceable. 14. AMENDMENT. This Agreement and the attached exhibits may be amended from time to time only by an agreement in writing signed by the parties. 15. PAROL EVIDENCE. This Agreement and the exhibits referred to herein or therein or delivered pursuant hereto or thereto which form a part hereof or thereof contain the understanding of the parties with respect to its subject matter. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. 4 IN WITNESS WHEREOF, CenCor, Inc., Century Acceptance Corporation, La Petite Academy, Inc. and Concorde Career Colleges, Inc. have caused this Transition Service Agreement to be executed by their duly authorized offices as of the date first above written. CENCOR, INC. By: /s/ Jack L. Brozman ------------------------------ Jack L. Brozman, President CENTURY ACCEPTANCE CORPORATION By: /s/ Dennis C. Berglund ------------------------------ Dennis C. Berglund, President LA PETITE ACADEMY, INC. By: /s/ David J. Anglewidz ------------------------------ David J. Anglewidz, President CONCORDE CAREER COLLEGES, INC. By: /s/ Michael S. Saverly ------------------------------ Michael S. Saverly, President 5 EX-10.K 5 EXHIBIT 10(K) Exhibit 10(k) August 30, 1993 Jack L. Brozman Jack L. Brozman President President CenCor, Inc. ConCorde Career Colleges, Inc. 1100 Main St., Suite 1050 1100 Main St., Suite 1050 Kansas City, MO 64105 Kansas City, MO 64105 Dennis C. Berglund President Century Acceptance Corporation 1100 Main St., Suite 2350 Kansas City, MO 64105 Re: Transition Services Agreement Gentlemen: Pursuant to Paragraph 1(a) of the above referenced Agreement, please be advised that La Petite Academy, Inc. intends to vacate the Shared Office on or about October 1, 1993 at which time the Transition Services Agreement shall terminate. Payroll services will continue until September 30, 1993 at such time we will provide a final tape for any reconciliation purposes. Very truly yours, LA PETITE ACADEMY, INC. /s/ James R. Kahl ------------------------------------ James R. Kahl Chief Executive Officer ACKNOWLEDGED AND AGREED TO CENCOR, INC. By: /s/ Jack L. Brozman Date: 8/31/93 ----------------------- -------------------- Jack L. Brozman President Page 2 CONCORDE CAREER COLLEGES, INC. By: /s/ Jack L. Brozman Date: 8/31/93 ------------------------ -------------------- Jack L. Brozman President CENTURY ACCEPTANCE CORPORATION By: /s/ Dennis C. Berglund Date: 8/31/93 -------------------------- -------------------- Dennis C. Berglund President EX-21 6 EXHIBIT 21 EXHIBIT 21 CENCOR, INC. SUBSIDIARIES OF THE REGISTRANT Century Acceptance Corporation. All subsidiaries are 100% owned The following is a list of Century's wholly-owned subsidiaries: NAME STATE OF INCORPORATION Century Finance Company of Alabama . . . . . . . . . . . . . . Alabama Century Finance Company of Colorado. . . . . . . . . . . . . . Colorado Century Finance Company of Florida . . . . . . . . . . . . . . Florida Century Finance Company, Inc.. . . . . . . . . . . . . . . . . Georgia Century Finance Company, Inc. of Buckhead dba Century Finance Company, Inc. of Augusta . . . Georgia Century Finance Company, Inc. of Brunswick . . . . . . . . . . Georgia Century Finance Company, Inc. of Carrollton. . . . . . . . . . Georgia Century Finance Company, Inc. of Columbus. . . . . . . . . . . Georgia Century Finance Company, Inc. of Dalton. . . . . . . . . . . . Georgia Century Finance Company, Inc. of East Point. . . . . . . . . . Georgia Century Finance Company, Inc. of Georgia . . . . . . . . . . . Georgia Century Finance Company, Inc. of Macon . . . . . . . . . . . . Georgia Century Finance Company, Inc. of Marietta. . . . . . . . . . . Georgia Century Finance Company, Inc. of Rome. . . . . . . . . . . . . Georgia Century Finance Company, Inc. of Savannah. . . . . . . . . . . Georgia Century Finance Company of Kansas. . . . . . . . . . . . . . . Kansas Century Finance Company of Kentucky. . . . . . . . . . . . . . Kentucky Century Finance Company of Louisiana . . . . . . . . . . . . . Louisiana Century Finance Company of Missouri. . . . . . . . . . . . . . Missouri Century Finance Company of Omaha, Inc. . . . . . . . . . . . . Nebraska Century Finance Company of Oklahoma, Inc.. . . . . . . . . . . Oklahoma Century Finance Company of Greenville, Inc.. . . . . . . . . . South Carolina Century Finance Company of Tennessee . . . . . . . . . . . . . Tennessee Century Acceptance Corporation of Texas. . . . . . . . . . . . Texas Century Finance Company of Kearns. . . . . . . . . . . . . . . Utah Century Finance Company of Main. . . . . . . . . . . . . . . . Utah EX-27 7 EXHIBIT 27 EXHIBIT 27 CENCOR, INC. FINANCIAL DATA SCHEDULE FOR THE YEAR ENDED DECEMBER 31, 1993 Cash and cash items $3,277,000 Marketable securities -0- Notes and accounts receivable-trade 93,998,000 Allowances for doubtful accounts 5,026,000 Inventory -0- Total current assets 95,714,000 Property, plant and equipment 2,424,000 Accumulated depreciation 682,000 Total assets 97,456,000 Total current liabilities 6,887,000 Bonds, mortgages, and similar debt 96,284,000 Preferred stock--mandatory redemption -0- Preferred stock--no mandatory redemption -0- Common stock 1,241,000 Other stockholders' equity (6,956,000) Total liabilities and stockholders' equity 97,456,000 Net sales of tangible products -0- Total revenues 23,037,000 Cost of tangible goods sold -0- Total costs and expenses applicable to sales revenue 19,339,000 Other costs and expenses (926,000) Provision for doubtful accounts and notes 2,104,000 Interest and amortization of debt discount 9,776,000 Income before taxes and other items (7,256,000) Income tax expense -0- Income/loss continuing operations (7,256,000) Discontinued operations -0- FINANCIAL DATA SCHEDULE (CONTINUED) Extraordinary items 18,033,000 Cumulative effect-changes in accounting principles -0- Net income or loss 10,777,000 Earnings per share--primary 8.10 Earnings per share--fully diluted 8.10 -----END PRIVACY-ENHANCED MESSAGE-----