<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CARIBINER INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389 13-3466655
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
16 WEST 61ST STREET
NEW YORK, NEW YORK 10023-7604
(212) 541-5300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
----------------
ARTHUR F. DIGNAM
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL AND ADMINISTRATIVE OFFICER
CARIBINER INTERNATIONAL, INC.
16 WEST 61ST STREET
NEW YORK, NEW YORK 10023-7604
(212) 541-5300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
BURTON LEHMAN, ESQ. MICHAEL W. BLAIR, ESQ.
SCHULTE ROTH & ZABEL LLP DEBEVOISE & PLIMPTON
900 THIRD AVENUE 875 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(212) 758-0404 (212) 909-6000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continued basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 2,159,930 shares $48.0625 $103,811,636 $31,459
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 281,730 shares which may be purchased by the Underwriters from
the Registrant pursuant to an over-allotment option. See "Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended using
the average of the high and low sales price on the New York Stock Exchange
on December 17, 1996.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 20, 1996
PROSPECTUS
- ----------
1,878,200 SHARES
[CARIBINER INTERNATIONAL, INC. LOGO APPEARS HERE]
COMMON STOCK
------------
Of the 1,878,200 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Caribiner International, Inc. (together with its direct and
indirect wholly-owned subsidiaries, "Caribiner" or the "Company") offered
hereby (the "Offering"), 1,750,000 shares are being offered by the Company and
128,200 shares are being offered by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders.
The Common Stock is listed on the New York Stock Exchange under the trading
symbol "CWC." On December 18, 1996, the last reported sale price of the Common
Stock on the New York Stock Exchange was $48.25. See "Price Range of Common
Stock and Dividend Policy."
SEE "RISK FACTORS" COMMENCING ON PAGE 11 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF
COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2)(3) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share................................. $ $ $ $
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Total (3)................................. $ $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, including expenses of
Selling Stockholders (other than Underwriting Discount and other
commissions) estimated at $ .
(3) The Company and one of the Selling Stockholders have granted to the several
Underwriters a 30-day option to purchase up to an aggregate of 281,730
additional shares of Common Stock to cover over-allotments, if any, of
which 81,730 shares of Common Stock will be offered by the Company if all
such additional shares are purchased. If all such additional shares are
purchased, the total Price to Public, Underwriting Discount, Proceeds to
Company and Proceeds to Selling Stockholders will be $ , $ , $
and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to the
approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made in New York,
New York on or about , 1997.
-----------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
FURMAN SELZ
SCHRODER WERTHEIM & CO.
-----------
The date of this Prospectus is , 1997.
<PAGE>
The photographs presented on the inside front cover and inside back cover of
this Prospectus depict events and projects produced by Caribiner International,
Inc. and are not necessarily indicative of future projects, if any, to be
produced for such clients.
Caribiner designed and developed a Glove Box Video for each of the 1997 Ford
Expedition, Mercury Mountaineer and Lincoln Mark VIII. In each case Caribiner
handled virtually every aspect of the project from the initial concept through
final production. A video accompanies the sale of each new vehicle and
demonstrates the features, advantages and benefits of the vehicle to the buyer.
[PHOTOGRAPH APPEAR HERE]
Caribiner serves ARAMARK on-site at its corporate headquarters in
Philadelphia. Work produced for ARAMARK includes: trade-show design, training,
interactive technologies, video production, brochure design and printing, and
on-going communication services.
[PHOTOGRAPH APPEAR HERE]
Caribiner produced the 1995 McDonald's Operations Road Tour that traveled to
five different locations in the U.S. and Canada and was performed 13 times for a
total audience of nearly 10,000 store managers and operations personnel. The
tour was designed to motivate, train, and inspire the attendees toward higher
levels of achievement. Caribiner developed creative concepts and all staging and
logistical support for the tour. Production elements included original video,
executive speech writing, casting and development of original music, comedy and
other theatrical components.
[PHOTOGRAPH APPEAR HERE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) included elsewhere in this Prospectus. As used in
this Prospectus, the terms "fiscal 1992," "fiscal 1993," "fiscal 1994," "fiscal
1995" and "fiscal 1996" refer to the Company's fiscal years ended September 30,
1992, 1993, 1994, 1995 and 1996, respectively. Except as otherwise indicated,
all information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option. Unless the context otherwise requires, as used in this
Prospectus, the terms "Company" and "Caribiner" mean Caribiner International,
Inc., together with its direct and indirect wholly-owned subsidiaries.
THE COMPANY
Caribiner is a leading international producer of meetings, events and
training programs and a provider of related business communications services
that enable businesses to inform, sell to and train their sales forces,
dealers, franchisees, partners, stockholders and employees. The Company
believes its principal strengths are the depth of its creative and production
talent, its ability to consistently meet its clients' objectives and
expectations and its ability to manage effectively and reliably a number of
complex large-scale projects contemporaneously. Caribiner's clients are
typically large companies that have a business need to communicate with sizable
internal and external constituencies on a regular basis and include some of the
world's largest companies in diverse industries. Major clients include the Ford
Motor Co. (automotive), International Business Machines Corporation ("IBM")
(information technology), Parke-Davis (pharmaceuticals), Holiday Inn Worldwide
(lodging), Shell Oil Company (petroleum) and McDonald's Corporation (fast
food). The Company has offices in Atlanta, Boston, Columbia (MD), Columbia
(SC), Dallas, Detroit, Houston, Los Angeles, New York, Orlando, Rolling Meadows
(IL), San Francisco and White Plains (NY) in the U.S., as well as in London,
Dubai and Hong Kong.
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through additional domestic and
international acquisitions. Caribiner's revenue has grown from $21.8 million in
fiscal 1992 to $81.1 million in fiscal 1995 and $99.8 million for the nine
months ended June 30, 1996. On a pro forma basis reflecting certain
acquisitions, Caribiner's revenue was $167.7 million for the nine months ended
June 30, 1996. (See "Unaudited Pro Forma Consolidated Financial Information.")
For a discussion of the Company's fiscal 1996 results, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Fiscal 1996 Financial Results."
Business activities and events that generate a need for business
communications services include sales meetings, product launches, training and
education of employees and dealers, development of strategic and organizational
communications, conferences, stockholder meetings and other executive
management presentations that are used to convey important information about
the business and/or its products. Although no firm data exists with respect to
the size of the business communications services industry and the number and
size of competitors within the industry, management believes, based on its
experience in the industry, that the business communications services industry
in the United States and abroad is highly fragmented, that no one participant
or small number of participants is dominant in the industry and that its
competitors consist primarily of small, regional firms that do not have the
resources to provide the full range of services offered by the Company.
The Company offers a wide range of business communications services,
including conceptualizing, planning and producing corporate meetings and events
and providing audio visual equipment rentals, sales and related staging
services for such meetings and events, developing training and educational
materials relating to new job skills, products, systems and organizational
processes, handling internal corporate communications and creating interactive
trade show exhibits. The Company believes it has benefited from a trend among
major corporations toward increased corporate outsourcing of meetings, events,
training and communications. These services are delivered in all forms of
media, including film, interactive technologies (including CD-ROM), videotape,
slides, computer graphics and animation, print and multimedia. Examples of such
engagements include:
3
<PAGE>
. The production of the automobile introduction shows for the complete line
of 1997 Ford Motor Co. vehicles, which were attended by approximately
8,000 dealers and their guests and Ford employees in San Francisco over a
two-week period in August, 1996. Beginning eight months prior to the
introductions, the Company's personnel worked closely with Ford's
management and product teams to develop the messages and themes which the
automobile maker wanted to communicate to its dealers. Caribiner designed
and constructed all sets and stage layouts, drafted corporate speeches
made by Ford's management, choreographed the unveiling of the new 1997
vehicles to the dealers, produced several audio/visual presentations and
arranged for live entertainment.
. The introduction to approximately 1,400 sales people from two leading
pharmaceutical companies of a new jointly-promoted product in February,
1996 in Orlando, Florida. Within the span of two months, the Company
produced the entire event, which was designed to educate each of the
companies' sales forces regarding a new antihistamine product. The
Company custom-built and designed several meeting areas within a single
large convention center, designed an interactive computer video game to
test the sales persons' knowledge of the product, produced sketches to
demonstrate the product's advantages over competing products, produced
several videos, arranged for live entertainment and drafted speeches made
by the companies' senior managers.
. The development and delivery in October, 1995 of three interactive
multimedia CD-ROM-based courses for a retailer focusing on product
identification, customer service and technical equipment and procedures
specific to a cashier's job. The courses utilized digital audio, still
images, text and/or video and assessment questions.
. The design of a 3,200 square foot exhibit for Philip Morris Companies,
Inc. for use at the October, 1995 National Association of Convenience
Stores trade show, which was attended by approximately 14,000 people, as
well as the production of two videos and the design and supervision of
all on-site activities, including two interactive exhibits.
. The provision by Total Audio Visual Services ("TAVS") (a business
acquired by the Company in September, 1996) of over 5,000 pieces of audio
visual equipment (including data projectors, video walls, concert sound
systems, overhead projectors and flip charts) to Computer Associates
International, Inc. in connection with its CA World '96 annual users'
conference in New Orleans in August, 1996, which was attended by
approximately 10,000 people. The Company also provided staging and
convention and trade show support services with approximately 150
technicians and other personnel on site.
COMPETITIVE POSITION
Market leader. As a leading international provider of business communications
services in a highly fragmented industry, the Company believes it offers a full
range of business communications services and a depth and breadth of creative,
production, technical and organizational expertise that most of the Company's
competitors lack. Caribiner has established a track record of success in
executing projects of various types and sizes, including multi-million dollar
events, in a number of industries. Caribiner's projects are frequently high
profile events where senior executives of a client, often the CEO, are
presenting new information to the audience. As a result, Caribiner believes
that confidence in a business communications services provider and its ability
to execute effectively are of critical importance to clients. In addition, the
Company believes that it has an advantage over smaller competitors in that its
resources permit it to seek out and manage a number of large-scale projects
contemporaneously. From fiscal 1993 to fiscal 1996, the number of clients to
whom the Company provided services during the year grew from 65 to over 300.
Strong client relationships. The Company's capabilities have resulted in its
developing long-standing relationships and significant levels of revenue with
numerous major clients. In fiscal 1996, Caribiner had revenue in excess of $1
million from each of 24 clients, the majority of which Caribiner has had
relationships with for several years, compared with nine such clients in fiscal
1993. These 24 clients contributed revenue of
4
<PAGE>
$109.8 million in fiscal 1996. Such large accounts are often developed as a
result of the Company's efforts to penetrate a number of different divisions
and departments within a client. For example, for its largest client, Ford
Motor Co., in fiscal 1996 Caribiner executed 160 projects of various sizes for
numerous individual buyers of services in 21 Ford business units, including
Ford Corporate, Ford Division, Lincoln-Mercury Division, Ford Fleet and Lease,
Ford Export and Ford Credit.
Expanding national and international presence. As part of the Company's
strategy to expand its client base, increase its range of services and broaden
its geographic coverage, over the last three years Caribiner has opened new
offices in Boston, San Francisco, White Plains (NY) and Hong Kong, and acquired
offices in Los Angeles, Atlanta, Dallas, Houston, Orlando, Columbia (MD) and
Columbia (SC) in the U.S. and in London and Dubai internationally. This
expansion has provided strategic and operational benefits, which include
enabling the Company to service clients more effectively by being in closer
proximity to them, enabling the Company to serve the international needs of its
clients, expanding and diversifying the Company's client base, securing the
services of the acquired business' key executives and sales personnel, reducing
costs by centralizing finance, administration and information technology
functions and realizing purchasing advantages associated with increased
economies of scale. The Company has also expanded the business communications
services which it offers to clients to include the provision of audio visual
equipment rentals and related staging services through its recent acquisition
of TAVS.
GROWTH STRATEGY
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through domestic and
international acquisitions. To achieve this goal, Caribiner plans to
(i) increase penetration of existing accounts, (ii) develop new large accounts,
(iii) continue to diversify the range of services offered and (iv) continue
expansion domestically and internationally through acquisitions and the opening
of new offices.
Increase penetration of existing accounts. The Company believes that it has
demonstrated the ability to increase its penetration of existing accounts and
to solve a wide range of business communications needs for its clients. The
Company has identified and utilized a number of ways to establish and build a
client relationship with a large account including:
. securing a "blanket purchase order" or other agreement which enables
decision makers within a client to award business to Caribiner without
going through a bidding or selection process;
. establishing a local presence to be in close proximity to a client and to
ensure rapid response to clients; and
. establishing an outsourcing relationship with a client for specific
communications needs.
As a result, the Company has entered into agreements with several key accounts
for a variety of business communications services. The terms of these
agreements provide either specific event and service commitments or blanket
purchase order arrangements, though these agreements are generally terminable
by the client on short notice and do not provide for minimum levels of revenue.
The Company had seven such agreements in place with clients at the end of
fiscal 1996, as compared to two such agreements at the end of fiscal 1994.
Develop new large accounts. The Company intends to develop new large accounts
by continuing to target clients that have significant or potentially
significant business communications needs. The Company utilizes a number of
techniques to develop new large accounts, including responding to requests for
proposals, becoming a part of a company's regular "bid" list, pursuing client
referrals, identifying prospects through research of a potential client's
business communications needs (e.g., the status of product launches) and
actively marketing to
5
<PAGE>
potential new clients. Sales and marketing personnel in each of Caribiner's
offices identify potential client relationship opportunities and promote
Caribiner's expertise and range of services.
Continue to diversify the range of services offered. Caribiner believes there
are significant opportunities to increase its penetration of accounts by
promoting its capabilities in areas such as employee training and education and
corporate communications, which can be utilized by clients either in
conjunction with meetings and events or separately from them. Revenue for the
Company's "non-meetings" business has increased from a relatively insignificant
amount in fiscal 1993 to $18.0 million in fiscal 1995 and $33.5 million in
fiscal 1996. Caribiner believes that continued efforts to promote its non-
meetings business will result in increased usage of the Company's wide range of
business communications services, strengthen ongoing client relationships and
further expand its revenue base. Caribiner also believes there are attractive
opportunities to continue expanding its position as a provider of audio visual
equipment rentals and related staging services through internal growth and
acquisitions. The Company believes that these services complement its other
"meetings-related" activities.
Continue expansion domestically and internationally. Caribiner intends to
continue to expand domestically and internationally by making acquisitions in
the business communications services industry and opening new offices to
service existing or potential new clients. In making acquisitions, the Company
will continue to focus on companies that have an existing or potential client
base that lends itself to increased penetration subsequent to acquisition and
that are in attractive markets. The Company believes that numerous acquisition
candidates are available as a result of the fragmented nature of the industry.
During the last three fiscal years, the Company opened four offices, made nine
acquisitions and acquired a contractual client relationship with a major
corporation from another business communications services provider.
Caribiner believes that its future worldwide opportunities are significant as
a result of the global marketing approach undertaken by its clients as well as
the size of the international business communications market.
RECENT ACQUISITIONS
Since January, 1996, the Company has completed four acquisitions. These
acquisitions have broadened the business communications services offered by the
Company, provided the Company with a significant international presence and
enabled the Company to obtain relationships with large new clients.
The TAVS Acquisition. In September, 1996, the Company acquired TAVS, a
leading provider of audio visual equipment rentals and related staging
services, including hotel audio visual outsourcing services, in the United
States. The acquisition of TAVS enables the Company to offer its own audio
visual equipment and staging services for use at meetings and events serviced
by the Company and reduce the Company's reliance on third party vendors. The
Company also believes that since many TAVS' clients are hotel properties whose
business customers tend to book hotel facilities well in advance of meetings
and events, and often prior to contacting a business communications services
provider, it will have opportunities to benefit from cross-referral of
customers. TAVS reported revenue of approximately $45.9 million for the year
ended December 31, 1995.
The Spectrum Acquisition. In June, 1996, the Company acquired SCH
International Limited ("Spectrum"), a leading London-based producer of meetings
and events and provider of other business communications services, with a
significant presence in the United Kingdom and Europe. Spectrum owns Spectrum
Communications Limited and Mark Wallace Associates Limited ("MWA") in London
and a joint venture interest in Spectrum Communications LLC in Dubai. The
acquisition of Spectrum allowed the Company to establish an international
presence and will enable it to serve the global needs of its domestic clients.
Spectrum reported revenue of approximately $20.5 million for the nine months
ended March 31, 1996.
The Lighthouse Acquisition. In June, 1996, the Company acquired Lighthouse,
Ltd. ("Lighthouse"), a leading midwestern business communications services
provider. The Company integrated its Chicago office with
6
<PAGE>
the Lighthouse headquarters in Rolling Meadows, Illinois and such acquisition
has enabled it to further expand its presence in the midwestern U.S. Lighthouse
reported revenue of approximately $10.4 million for the year ended December 31,
1995.
The Koors Perry Acquisition. In January, 1996, the Company acquired Koors
Perry & Associates, Inc. ("Koors Perry"), a regional business communications
services provider based in Atlanta, Georgia. The Company integrated Koors Perry
with its Atlanta office and has used it as a base from which to expand its
presence in the southeastern U.S. Koors Perry reported revenue of approximately
$8.9 million for the nine months ended September 30, 1995.
RECENTLY ANNOUNCED PURCHASE AGREEMENT
In December, 1996, the Company entered into a definitive agreement to acquire
all of the outstanding capital stock of Blumberg Communications Inc.
("Blumberg"), a provider of audio visual equipment rentals and sales,
production staging services and hotel audio visual outsourcing services in the
upper mid-west and southern U.S. The closing of the acquisition is subject to
certain conditions, including the expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"). Upon consummation of the acquisition, the Company
intends to integrate Blumberg's operations with its existing operations and to
expand its presence in the geographic regions which Blumberg presently serves.
Blumberg reported revenue of $42.3 million for the year ended May 31, 1996.
BACKGROUND
The Company was founded in 1989 by its Chairman of the Board and Chief
Executive Officer, Raymond S. Ingleby, under the name Ingleby Enterprises Inc.
and adopted its present name in December, 1995. The Company became a leader in
the business communications market in June, 1992 when it acquired Caribiner,
Inc., which was founded in 1970.
In March, 1996, the Company consummated an initial public offering (the
"Initial Public Offering") of its Common Stock, which included the sale by the
Company of 2,878,014 shares of Common Stock. In connection with the Initial
Public Offering, certain stockholders of the Company sold an additional 646,963
shares of Common Stock.
RISK FACTORS
There are important risks associated with the Company's business, financial
results and ability to implement its growth strategy. These risks include (i)
uncertainties concerning the Company's ability to sustain, manage and finance
future growth, (ii) the Company's current reliance on a small number of clients
for a significant portion of its revenue, (iii) the Company's vulnerability to
quarterly fluctuations in revenue, operating income and net income as a result
of many factors, including the timing of clients' meetings and events and
delays in or cancellations of clients' product launches and events and (iv) the
dependence of the Company's success on its executive officers and other key
employees, in particular Raymond S. Ingleby, its Chairman of the Board and
Chief Executive Officer. Before purchasing shares of Common Stock offered
hereby, prospective investors should consider carefully all of the information
set forth in this Prospectus including, in particular, the information set
forth under "Risk Factors."
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
By the Company................... 1,750,000 shares
By the Selling Stockholders...... 128,200 shares
-----------------
Total.......................... 1,878,200 shares
=================
Common Stock to be outstanding
after the
Offering(a)....................... 11,348,656 shares
Use of Proceeds.................... The net proceeds to be received by the
Company in connection with the sale by the
Company of the shares of Common Stock
offered hereby will be used to repay all
outstanding bank borrowings (together with
accrued interest), including indebtedness
expected to be incurred in connection with
the acquisition of Blumberg, to make
additional acquisitions of other companies
in the business communications services
industry, to fund working capital needs and
for general corporate purposes.
As of December 11, 1996, the Company had
outstanding approximately $20.5 million in
the aggregate in bank borrowings (including
accrued interest).
New York Stock Exchange
Symbol............................ "CWC"
</TABLE>
- --------
(a) Excludes (i) 14,503 shares of Common Stock reserved for future grant under
the Company's Non-Employee Directors' Stock Plan, (ii) 364,000 shares of
Common Stock reserved under the Company's 1996 Stock Option Plan, with
respect to which options to purchase 184,400 shares of Common Stock have
been granted and options to purchase 8,600 shares of Common Stock are
currently exercisable and (iii) 9,000 shares of Common Stock reserved
pursuant to other options to purchase shares of Common Stock granted by the
Company, all of which are currently exercisable. See "Capitalization,"
"Management--Director Compensation" and "Management--Incentive Plans."
8
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
---------------------------------- ----------------
1992(a) 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................ $21,760 $50,107 $59,174 $81,131 $52,085 $99,777
Cost of revenue........ 15,767 34,907 39,724 54,312 34,786 66,945
------- ------- ------- ------- ------- -------
Gross profit........... 5,993 15,200 19,450 26,819 17,299 32,832
Selling, general and
administrative
expenses.............. 7,321 12,551 14,349 19,306 13,588 21,575
Non-cash compensation
expense(b)............ -- -- -- -- -- 1,072
Depreciation and
amortization.......... 3,064 3,852 2,137 2,330 1,674 2,139
Write-off of certain
intangibles(c)........ -- 4,614 -- -- -- --
------- ------- ------- ------- ------- -------
Total operating
expenses............. 10,385 21,017 16,486 21,636 15,262 24,786
------- ------- ------- ------- ------- -------
Operating income
(loss)................ (4,392) (5,817) 2,964 5,183 2,037 8,046
Interest expense with
related parties....... 345 1,435 2,107 2,234 1,670 1,199
Interest expense, 173 222 502 1,259 813 453
other................. ------- ------- ------- ------- ------- -------
Income (loss) before
taxes................. (4,910) (7,474) 355 1,690 (446) 6,394
Provision (benefit) for
taxes................. 63 23 62 264 (70) 2,238
------- ------- ------- ------- ------- -------
Net income (loss)...... (4,973) (7,497) 293 1,426 (376) 4,156
Preferred stock
dividends(d).......... (120) (517) (582) (655) (484) (327)
------- ------- ------- ------- ------- -------
Net income (loss)
available to common
stockholders.......... $(5,093) $(8,014) $ (289) $ 771 $ (860) $ 3,829
======= ======= ======= ======= ======= =======
Pro forma net income per common share(e)....... $ 0.49 $ 0.13 $ 0.61
======= ======= =======
<CAPTION>
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Number of clients for
the period............ 65 73 139
Number of clients
providing revenue in
excess of $1 million
for the period........ 9 10 12
Number of offices at
end of period......... 3 5 10
Number of full-time
employees at end of
period................ 192 204 250
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA, AS ADJUSTED
--------------------------------------
NINE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, 1995(f) JUNE 30, 1996(f)
--------------------- ----------------
PRO FORMA, AS ADJUSTED, STATEMENT OF
OPERATIONS DATA:
<S> <C> <C>
Revenue.............................. $161,367 $167,665
Operating income..................... 7,468 13,431
Interest expense..................... 172 130
Net income........................... 6,179 8,800
Net income per common share(h)....... 0.54 0.78
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-------------------
PRO
FORMA, AS
ACTUAL ADJUSTED(I)
BALANCE SHEET DATA: ------- -----------
<S> <C> <C>
Working capital........................................... $15,736 $ 67,955
Total assets.............................................. 99,103 179,580
Total debt, including accrued interest.................... 1,874 1,874
Stockholders' equity...................................... 50,097 129,324
</TABLE>
See Notes to Summary Financial and Operating Data
9
<PAGE>
NOTES TO SUMMARY FINANCIAL AND OPERATING DATA
(a) Prior to August, 1993, the Company was wholly-owned by Ingleby
Communications Corporation ("ICC") and comprised substantially all of the
operations of ICC. On June 30, 1992, the Company completed a private
placement of securities to Warburg, the proceeds from which were used in
part to acquire Caribiner, Inc. On August 3, 1993, ICC was merged into a
wholly-owned subsidiary of the Company. See "The Company."
(b) Non-cash compensation expense for the nine months ended June 30, 1996 of
$1.1 million (or $0.09 per share) resulted primarily from the vesting of
non-voting common stock issued at a price lower than its fair market value
under the Company's 1993 Management Stock Plan (the "Management Stock
Plan"), which was terminated upon consummation of the Initial Public
Offering.
(c) Reflects adjustment to net realizable value of certain intangibles,
principally module and film libraries acquired in purchase business
transactions.
(d) All preferred stock was converted into Common Stock in connection with the
Initial Public Offering.
(e) Pro forma net income per common share is calculated using the weighted
average number of shares of Common Stock outstanding during the period,
plus Common Stock issued pursuant to the Management Stock Plan and warrants
to purchase Common Stock issued at prices below the Initial Public Offering
price of $17.00 per share during the twelve months immediately preceding
December 15, 1995 (the initial filing date of the Registration Statement
relating to the Initial Public Offering), assuming such Common Stock was
outstanding for all periods presented. In addition, pro forma net income
per common share assumes conversion of the Company's 11.5% Convertible
Promissory Note (the "Convertible Note") and the conversion of all
outstanding shares of preferred stock into shares of Common Stock (which,
in each case, occurred on March 15, 1996) as if such conversions occurred
on October 1, 1994. Accordingly, pro forma net income per common share
reflects adjustments (i) to eliminate the interest expense of $1.9 million,
$1.4 million and $0.9 million incurred on the Convertible Note during each
of fiscal 1995 and the nine months ended June 30, 1995 and 1996,
respectively, and (ii) to eliminate accrued preferred stock dividends.
(f) Adjusted for the year ended September 30, 1995 to (i) decrease interest
expense and preferred stock dividends by $3.9 million resulting from the
repayment of substantially all outstanding bank borrowings and other long-
term indebtedness of the Company from the proceeds of the Initial Public
Offering and conversion of preferred stock to Common Stock, (ii) reflect
the acquisitions of each of Spectrum and TAVS as of October 1, 1994 and
(iii) decrease pro forma interest expense by $1,197 resulting from the
repayment from the proceeds of the Offering of all bank borrowings that
would have been incurred in connection with the acquisition of TAVS as if
such acquisition had occurred on October 1, 1994. (See "Unaudited Pro Forma
Consolidated Financial Information.") No adjustments have been made with
respect to the acquisitions of Koors Perry and Lighthouse or the definitive
agreement to purchase Blumberg.
(g) Adjusted for the nine months ended June 30, 1996 to (i) decrease interest
expense and preferred stock dividends by $1.9 million resulting from the
repayment of substantially all outstanding bank borrowings and other long-
term indebtedness of the Company from the proceeds of the Initial Public
Offering and conversion of preferred stock to Common Stock, (ii) reflect
the acquisitions of each of Spectrum and TAVS as of October 1, 1994 and
(iii) decrease pro forma interest expense by $1,297 resulting from the
repayment from the proceeds of the Offering of all bank borrowings that
would have been incurred in connection with the acquisition of TAVS as if
such acquisition had occurred on October 1, 1994. (See "Unaudited Pro Forma
Consolidated Financial Information.") No adjustments have been made with
respect to the acquisitions of Koors Perry and Lighthouse or the definitive
agreement to purchase Blumberg.
(h) Pro forma, as adjusted, net income per common share has been calculated
using the weighted average number of shares of Common Stock outstanding
during each of the periods presented, assuming that (i) 2,878,014 shares of
Common Stock issued in connection with the Initial Public Offering and (ii)
1,750,000 shares of Common Stock issued in connection with the Offering,
were outstanding as of the beginning of each period.
(i) Presented on a pro forma, as adjusted, basis to give effect to the
following transactions as if they occurred on June 30, 1996: (i) the
acquisition of TAVS, (ii) the receipt by the Company of net proceeds of
approximately $79,227 from the sale of 1,750,000 shares of Common Stock
offered pursuant to the Offering at an assumed public offering price of
$48.25 per share and (iii) the repayment with the proceeds of the Offering
of bank borrowings that would have been incurred in connection with the
acquisition of TAVS.
10
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business, before purchasing the shares of Common Stock offered
hereby. This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities
Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including statements regarding, among other items, (i) the
Company's growth strategies, including its intention to make acquisitions and
(ii) the Company's ability to control costs and maintain quality. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are
beyond the Company's control. Actual results could differ materially from
these forward-looking statements as a result of the factors described below,
or otherwise.
ABILITY TO MANAGE AND SUSTAIN GROWTH; GROWTH THROUGH DOMESTIC AND
INTERNATIONAL ACQUISITIONS
The Company's future growth will depend on the acquisitions of competitors
in new and existing markets, the opening of offices in new locations,
increased penetration by the Company of existing accounts, development of new
large accounts and diversification of services provided. Sustaining growth
will also require additional management, operational and financial resources.
With respect to the Company's plans to expand its business in part through
acquisitions and opening new offices, there can be no assurance that the
Company will have sufficient cash flow from operations or will be able to
obtain adequate financing to pursue this aspect of the Company's growth
strategy. Additionally, there can be no assurance that the Company will
successfully identify, complete or integrate acquisitions or that any
acquisitions or new offices, particularly those involving new services, such
as the provision of audio visual equipment rentals, sales and related staging
services, or new markets, such as those overseas, will perform as expected or
will contribute significant revenue or profits to the Company. Certain of the
businesses recently acquired by the Company reported net losses for their most
recent fiscal years prior to being acquired, and the Company's future
financial performance will in part depend on its ability to implement
operational improvements in, or exploit potential synergies with, these
acquired businesses. Since the Initial Public Offering, the Company has, in
certain cases, pursued acquisitions of companies larger than those it had
previously acquired. Such larger acquisitions may be more complex to integrate
with the Company's existing business. The Company's current, and any future,
overseas operations also are subject to currency fluctuations and other risks
including adverse developments in the foreign political and economic
environment, difficulties in staffing and managing foreign operations and
potentially adverse tax consequences. Consequently, there can be no assurance
that the Company will be able to sustain its rate of growth or that the
Company will be able to manage its growth effectively and profitably. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business."
RELIANCE ON LARGE CLIENTS; KEY INDUSTRIES
A significant portion of the Company's revenue is generated from a small
number of large clients. Accordingly, the loss of a large client or clients
could have a material adverse effect on the Company. The Company's ten largest
clients accounted for approximately 60% of the Company's revenue in fiscal
1996. The Company's three largest clients in fiscal 1996 were the Ford Motor
Co., IBM and State Farm Group which accounted for approximately 15%, 13% and
11%, respectively, of the Company's revenue during the fiscal year. The
Company's agreements with clients may generally be terminated by the clients
on short notice. The Company's revenue is generated in large part from
projects executed for clients in the automotive, information technology,
insurance, food services, telecommunications and pharmaceutical industries,
which accounted for approximately 75%, in the aggregate, of the Company's
revenue in fiscal 1996. Accordingly, a trend in any of these industries not to
use, or to reduce the use of, business communications services, whether due to
adverse business conditions in those industries or otherwise, including the
cyclical nature of the automobile industry, could have a material adverse
effect on the Company's business. In addition, due to competitive conditions
in certain relatively concentrated industries, the Company is in some cases
subject to contractual or practical limitations on its ability to perform
services for competitors of existing clients. See "Business--Clients."
11
<PAGE>
FLUCTUATIONS IN QUARTERLY AND ANNUAL OPERATING RESULTS; SEASONALITY
The Company experiences quarterly variations in revenue, operating income
and net income as a result of many factors, including the timing of clients'
meetings and events, delays in or cancellation of clients' product launches
and events, as well as changes in the Company's revenue mix among its various
services offered. The Company's reported results for a given quarter are
vulnerable to such fluctuation in part because the Company recognizes revenue
and production costs under the completed contract method of accounting. See
Note 2 of the Notes to Consolidated Financial Statements of the Company. The
Company must plan its operating expenditures based on revenue forecasts, and a
revenue shortfall below such forecast in any quarter would likely adversely
affect the Company's operating results for that quarter. The Company's
business tends to be slower in the first quarter of its fiscal year mainly due
to the Thanksgiving and Christmas holidays when clients traditionally stage
fewer meetings and events. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview." Finally, because
some of the events produced for clients by the Company do not occur on an
annual or recurring basis, such as a significant corporate anniversary or a
product launch, the Company could also experience fluctuations in annual
revenue and operating and net income.
EPISODIC NATURE OF BUSINESS
The Company produces meetings, events, training programs and related
business communications services for its clients on a project-by-project basis
and does not have long term arrangements or agreements with its clients which
require clients to utilize Caribiner on an on-going basis for such clients'
business communications needs or which provide for minimum levels of revenue.
Although the Company has established some arrangements with clients pursuant
to which a client may, at its option, bypass its normal bidding process for a
project, generally the Company competitively bids for each project that it
produces. Accordingly, there can be no assurance that the Company will
maintain its present client relationships or that its clients will retain the
services of the Company for its business communications needs even in the case
of projects that the Company has in the past produced and which a client may
stage on a regular basis.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees and, in
particular, of Raymond S. Ingleby, Chairman of the Board and Chief Executive
Officer. There can be no assurance that the Company will be able to retain the
services of such officers and employees. The failure of the Company to retain
the services of Mr. Ingleby and other key personnel could have a material
adverse effect on the Company. Mr. Ingleby serves in his capacity with the
Company pursuant to an employment agreement expiring on October 1, 1998. The
Company has non-competition agreements with certain of its existing key
personnel. However, courts are at times reluctant to enforce such agreements.
In order to support its growth the Company will, from time to time, be
required to recruit, promote and develop additional qualified management
personnel. See "Management."
COMPETITIVE INDUSTRY
The business communications services industry is very competitive. Although
the business communications services industry is highly fragmented and the
Company competes primarily with small, generally regional firms offering a
limited range of services, there are several participants in the industry
whose business is national and full service in scope. Management believes that
certain competitors have capabilities and resources comparable to and in
certain respects greater than those of the Company. The Company also competes
with in-house communications staffs of many clients and potential clients.
There can be no assurance that, as the Company's industry continues to evolve,
additional competitors with greater resources than the Company will not enter
the industry (or particular segments of the industry) or that the Company's
clients will not choose to service more of their business communications needs
internally. See "Business--Competition."
ECONOMIC CONDITIONS; CONCERN FOR TRAVEL SAFETY
The Company's business is dependent in part on the sale of services to
clients in connection with activities that may be decreased during prolonged
general economic downturns or significant declines in spending on
12
<PAGE>
marketing and sales activities by clients. Accordingly, there can be no
assurance that a general economic recession would not have a material adverse
effect on the Company. In addition, because a significant portion of the
Company's revenue is generated from corporate meetings and events, terrorist
threats or other security concerns affecting commercial air travel may have a
material adverse effect on the Company.
CONTROL BY EXECUTIVE OFFICERS AND CURRENT STOCKHOLDERS
Upon completion of the Offering, Warburg, Pincus Investors, L.P. ("Warburg")
and executive officers of the Company will own or control approximately 36.4%
and 9.0%, respectively, of the Company's outstanding shares of Common Stock
(approximately 36.1% and 7.2%, respectively, if the Underwriters' (as defined
in "Underwriting") over-allotment option is exercised in full) and will
effectively have the ability, under normal circumstances if they act in
concert, to continue to elect the Company's Board of Directors and take other
corporate actions requiring stockholder approval, as well as effectively to
control the direction and policies of the Company. Moreover pursuant to a
stockholders agreement (the "Stockholders Agreement") among Warburg, Raymond
S. Ingleby and the Company, for so long as Warburg beneficially owns at least
35%, 20% or 10% of the outstanding shares of Common Stock, it will have the
right to designate three nominees, two nominees or one nominee, respectively,
for director. At the time of completion of the Offering, the Board of
Directors will consist of five persons. After completion of the Offering, the
Company intends to nominate and appoint one additional person as a director.
So long as Warburg has the right to designate three nominees and the Board is
composed of six or fewer members, Warburg will have the ability to block any
corporate action requiring Board approval. Such stockholders agreement also
provides that, for so long as Mr. Ingleby shall hold office as the Chairman
and Chief Executive Officer of the Company, Mr. Ingleby will have the right to
designate one nominee for director. There can be no assurance that Warburg and
members of management will not decide to sell all or a portion of their
respective holdings at a future date. In addition, there can be no assurance
that in any transfer of a controlling interest in the Company that any other
holders of Common Stock will be allowed to participate in any such transaction
or will realize any premium with respect to their shares of Common Stock. The
foregoing may have the effect of discouraging or preventing certain types of
transactions involving an actual or potential change of control of the
Company. See "Certain Relationships and Transactions with Related Persons" and
"Principal and Selling Stockholders."
EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company's Second Restated Certificate of Incorporation (the
"Certificate") and Second Amended and Restated By-laws (the "By-Laws") and
certain sections of the Delaware General Corporation Law contain certain
provisions that could discourage potential takeover attempts and make attempts
by the Company's stockholders to change management more difficult. The
Certificate and By-Laws require approval of the Chairman of the Board or at
least 50% of the members of the Board of Directors in order for a special
meeting of stockholders to be called, require advance notice by stockholders
of an intention to nominate persons for election to the Board of Directors or
to make stockholder proposals and prohibit the stockholders of the Company
from taking action by written consent in lieu of a meeting. In addition, the
Company's Certificate authorizes the Board of Directors to issue "blank check"
preferred stock without stockholder approval and upon such terms as the Board
of Directors may determine. The rights of the holders of Common Stock would be
subject to, and could be adversely affected by, the rights of the holders of
any preferred stock that may be issued by the Company in the future. While the
Company has no present intention to issue shares of preferred stock, any
issuance could have the effect of making it more difficult for a third party
to acquire a majority of the outstanding voting stock of the Company. See
"Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of the Common Stock in the public market after
the Offering could adversely affect the market price of the Common Stock. Upon
completion of the Offering, the Company will have outstanding 11,348,656
shares of Common Stock. The Common Stock offered hereby will be freely
tradeable
13
<PAGE>
(other than by an "affiliate" of the Company as such term is defined in the
Securities Act) without restriction or registration under the Securities Act.
In addition, the Common Stock offered pursuant to the Initial Public Offering
is freely tradeable (other than by an "affiliate" of the Company) as such term
is defined in the Securities Act, without restriction or registration under
the Securities Act. All remaining shares may be sold under Rule 144 under the
Securities Act, subject to the volume limitations and manner of sale and other
restrictions of Rule 144. The Company, the Selling Stockholders, Warburg and
all of the Company's directors and executive officers have, subject to certain
exceptions in the case of the Company, agreed not to, directly or indirectly,
sell, offer to sell, grant any option for sale of, or otherwise dispose of,
any capital stock of the Company, or any security convertible or exchangeable
into, or exercisable for, such capital stock, or, in the case of the Company,
file any registration statement with respect to any of the foregoing, for a
period of 90 days after the date of this Prospectus, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"). The Company intends to register on Form S-8 approximately 364,000
shares of Common Stock reserved for issuance under the 1996 Stock Option Plan.
See "Management--Incentive Plans." The Company also intends to register on
Form S-3 (when it becomes so eligible, which is anticipated to be March, 1997)
an aggregate of 31,821 shares of Common Stock issued in connection with the
acquisition of Lighthouse and shares of Common Stock having a market value of
$1.4 million (the actual number of shares of Common Stock to be based on the
average closing price per share of the Common Stock for the five business days
prior to closing) to be issued in connection with the acquisition of Blumberg.
See "Shares Eligible for Future Sale." In addition, the Company has granted to
Warburg and Mr. Ingleby certain registration rights with respect to the Common
Stock beneficially owned by them. See "Management--Incentive Plans," "Certain
Relationships and Transactions with Related Persons," "Shares Eligible for
Future Sale" and "Underwriting."
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock has risen substantially since the
Initial Public Offering. Trading prices for the Common Stock could be subject
to significant fluctuations due to many factors, including the depth of the
market for the Common Stock, investor perception of the Company, fluctuations
in the Company's operating results and changes in conditions or trends in the
Company's industry or in the industries of any of the Company's significant
clients, changes in any securities analysts' estimates of the Company's future
performance or general market conditions. In addition, future sales of
substantial amounts of Common Stock by existing stockholders could also
adversely affect the prevailing market price of the Common Stock. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."
14
<PAGE>
THE COMPANY
Caribiner is a leading international producer of meetings, events and
training programs and a provider of related business communications services
that enable businesses to inform, sell to and train their sales forces,
dealers, franchisees, partners, stockholders and employees. The Company
believes its principal strengths are the depth of its creative and production
talent, its ability to consistently meet its clients' objectives and
expectations and its ability to manage effectively and reliably a number of
complex, large-scale projects contemporaneously. Caribiner's clients are
typically large companies that have a business need to communicate with
sizable internal and external constituencies on a regular basis, including
some of the world's largest companies in diverse industries. Major clients
include the Ford Motor Co. (automotive), IBM (information technology), Parke-
Davis (pharmaceuticals), Holiday Inn Worldwide (lodging), Shell Oil Company
(petroleum) and McDonald's Corporation (fast food). The Company has offices in
Atlanta, Boston, Columbia (MD), Columbia (SC), Dallas, Detroit, Houston, Los
Angeles, New York, Orlando, Rolling Meadows (IL), San Francisco and White
Plains (NY) in the U.S., as well as in London, Dubai and Hong Kong.
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through additional domestic
and international acquisitions. Caribiner's revenue has grown from $21.8
million in fiscal 1992 to $81.1 million in fiscal 1995 and $99.8 million for
the nine months ended June 30, 1996. On a pro forma basis reflecting certain
acquisitions, Caribiner's revenue was $167.7 million for the nine months ended
June 30, 1996. (See "Unaudited Pro Forma Consolidated Financial Information.")
For a discussion of the Company's fiscal 1996 results, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Fiscal 1996 Financial Results."
The Company's principal executive offices are located at 16 West 61st
Street, New York, New York 10023-7604, and its telephone number at that
address is (212) 541-5300.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of Common Stock
offered hereby, after deducting underwriting discounts and estimated offering
expenses payable by the Company, are approximately $79.2 million ($83.0
million if the Underwriters exercise their over-allotment option in full),
based on an assumed public offering price equal to the closing price as
reported on December 18, 1996 on the New York Stock Exchange as set forth on
the cover page of this Prospectus ($48.25 per share). The Company will not
receive any proceeds from the sale of Common Stock by the Selling
Stockholders.
The net proceeds to be received by the Company in connection with the
Offering will be used to repay all outstanding bank borrowings (together with
accrued interest), including indebtedness expected to be incurred in
connection with the acquisition of Blumberg, to make additional acquisitions
of other companies in the business communications services industry, to fund
working capital needs and for general corporate purposes. As of December 11,
1996, $20.5 million was outstanding under the Company's six-year reducing
revolving credit facility (the "Reducing Revolver") (which amount was drawn
down to repay indebtedness incurred during fiscal 1996 to finance the
acquisition of TAVS). The maturity date of the Reducing Revolver is December
31, 2002 and the interest rate is currently LIBOR plus 1.125%. (See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.")
The management of the Company regularly reviews the operations of, and
discusses the possibility of acquisitions with, other domestic and
international companies in the business communications services industry.
However, other than the recent agreement to acquire Blumberg, there are
currently no definitive agreements in effect with respect to the acquisition
of any such companies.
Pending application of the net proceeds of the Offering as described above,
the Company intends to invest such proceeds in United States government
securities and investment grade, interest-bearing instruments.
16
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed on the New York Stock Exchange under the symbol
"CWC." The following table sets forth on a per share basis, for the periods
indicated, the high and low sales prices of the Common Stock as reported by
the New York Stock Exchange. The Common Stock was not publicly traded prior to
the Initial Public Offering.
<TABLE>
<CAPTION>
PRICE RANGE
---------------
HIGH LOW
------- -------
<S> <C> <C>
Fiscal 1996:
Second Quarter (from March 11, 1996)................... $26 7/8 $21 1/8
Third Quarter.......................................... 36 3/4 24 1/2
Fourth Quarter......................................... 43 28
Fiscal 1997:
First Quarter (through December 18, 1996).............. $49 $41 3/4
</TABLE>
The closing price as reported on December 18, 1996 on the New York Stock
Exchange is set forth on the cover page of this Prospectus.
The Company has not paid any dividends with respect to the Common Stock. The
Company presently intends to retain future earnings to finance its growth and
development and therefore does not anticipate any cash dividends in the
foreseeable future. Payment of future dividends, if any, will depend upon
future earnings and capital requirements of the Company and other factors
which the Board of Directors considers appropriate.
17
<PAGE>
CAPITALIZATION
The following table sets forth the actual and pro forma, as adjusted (giving
effect to the acquisition of TAVS and to the Offering), capitalization of the
Company, on an unaudited basis, as of June 30, 1996 (in thousands, except
share data).
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1996
---------------------
PRO FORMA,
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Short-term debt, including current portion of long-term
debt................................................... $ 691 $ 691(a)
======== ========
Long-term debt, including accrued interest, net of
current portion........................................ $ 1,184 $ 1,184(a)
Stockholders' equity:
Preferred Stock, $.01 par value; 2,000,000 shares
authorized; none issued or outstanding................ -- --
Common Stock; 40,000,000 shares authorized, 9,598,159
shares issued and
outstanding (actual) and 11,348,159 shares issued and
outstanding on a
pro forma, as adjusted, basis(b)...................... 96 114
Additional paid-in capital............................. 60,582 139,791
Accumulated deficit.................................... (10,581) (10,581)
-------- --------
Total stockholders' equity............................ 50,097 129,324
-------- --------
Total capitalization................................ $ 51,281 $130,508
======== ========
</TABLE>
- --------
(a) Gives effect to the application of a portion of the net proceeds to the
Company in connection with the Offering to the repayment of $21,000 of
indebtedness of the Company incurred in connection with the acquisition of
TAVS. On a pro forma, as adjusted basis as of June 30, 1996, the Company
would have had cash of $59,583.
(b) The Company has reserved (i) 14,503 shares of Common Stock for future
grant under the Non-Employee Directors' Stock Plan and (ii) 364,000 shares
of Common Stock for future issuance under the Company's 1996 Stock Option
Plan, with respect to which options to purchase 2,500 shares of Common
Stock were granted prior to such date. See "Management--Director
Compensation" and "Management--Incentive Plans."
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following information sets forth the unaudited pro forma consolidated
financial information of the Company for the year ended September 30, 1995 and
at and for the nine months ended June 30, 1996. The Unaudited Pro Forma
Consolidated Statements of Operations for the year ended September 30, 1995,
and the nine months ended June 30, 1996, give effect to (a) the acquisition of
Spectrum which occurred as of June 1, 1996, (b) the acquisition of TAVS which
occurred on September 27, 1996 and (c) the Offering and the Initial Public
Offering, as if such events had occurred on October 1, 1994. No adjustments
have been made with respect to the acquisitions of Koors Perry and Lighthouse
or the definitive agreement to purchase Blumberg. The Unaudited Pro Forma
Consolidated Balance Sheet as of June 30, 1996 gives effect to the acquisition
of TAVS and the Offering as if such events had occurred on June 30, 1996.
The unaudited pro forma consolidated financial information is based upon the
historical consolidated financial statements of each of the Company, Spectrum
and TAVS and should be read in conjunction with the financial statements and
the related notes thereto included elsewhere in this Prospectus. The
historical financial information of Spectrum has been adjusted for inclusion
in the Unaudited Pro Forma Consolidated Financial Information to conform to
United States generally accepted accounting principles and has been translated
into United States dollars based upon the applicable exchange rates. The
Company's historical results of operations for the nine months ended June 30,
1996 include the results of operations of Spectrum since June 1, 1996, its
effective date of acquisition. Spectrum's fiscal year-end (June 30) differed
from the Company's fiscal year-end (September 30). The Unaudited Pro Forma
Consolidated Statements of Operations for the year ended September 30, 1995,
and the nine months ended June 30, 1996, include Spectrum's historical results
of operations for the year ended June 30, 1995 and the eight months ended May
31, 1996, respectively. Certain amounts in Spectrum's Statement of Operations
have been reclassified to conform to the presentation of the Company's
Statement of Operations.
TAVS' fiscal year-end (December 31) differed from the Company's fiscal year-
end (September 30). The Unaudited Pro Forma Consolidated Statements of
Operations for the year ended September 30, 1995, and the nine months ended
June 30, 1996, include TAVS' historical results of operations for the year
ended December 31, 1995 and the nine months ended June 30, 1996, respectively.
As a result of the differing year-ends of the Company and of TAVS, the results
of operations for the three months ended December 31, 1995 are included in
both periods. Certain amounts in TAVS' Statement of Operations have been
reclassified to conform to the presentation of the Company's Statement of
Operations.
The pro forma financial information presented does not purport to be
indicative of the financial position or operating results which would have
been achieved had the transactions described above taken place at the dates
indicated and are not necessarily indicative of the Company's financial
position or results of operations for any future date or period.
19
<PAGE>
CARIBINER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS PRO FORMA,
--------------------------- ----------------------------------- AS ADJUSTED
CARIBINER SPECTRUM TAVS IPO ACQUISITIONS(a) OFFERING CARIBINER
--------- -------- ------- ------ --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $81,131 $34,312 $45,924 $ -- $ -- $ -- $161,367
Cost of revenue......... 54,312 25,834 34,054 -- -- -- 114,200
------- ------- ------- ------ ----- ------ --------
Gross profit............ 26,819 8,478 11,870 -- -- -- 47,167
Operating expenses:
Selling, general and
administrative
expenses.............. 19,306 7,444 6,915 -- -- -- 33,665
Depreciation and
amortization.......... 2,330 699 2,609 -- (280)(d) --
676 (e) 6,034
------- ------- ------- ------ ----- ------ --------
Total operating
expenses............... 21,636 8,143 9,524 -- 396 39,699
------- ------- ------- ------ ----- ------ --------
Operating income (loss). 5,183 335 2,346 -- (396) 7,468
Interest expense
(income), with related
parties................ 2,234 -- -- (2,234)(b) -- -- --
Interest expense
(income), net ......... 1,259 392 1,200 (1,087)(b) (395)(f) (1,197)(g) 172
Other expense, net...... -- 248 212 -- -- -- 460
------- ------- ------- ------ ----- ------ --------
Income (loss) before
taxes.................. 1,690 (305) 934 3,321 (1) 1,197 6,836
Income tax expense
(benefit).............. 264 (101) 428 294 (c) (334)(c) 106 (c) 657
------- ------- ------- ------ ----- ------ --------
Net income (loss)....... $ 1,426 $ (204) $ 506 $3,027 $ 333 $1,091 $ 6,179
======= ======= ======= ====== ===== ====== ========
Pro forma, as adjusted $ 0.54(h)
net income per common share...................................................... ========
Pro forma weighted average 11,347
shares outstanding............................................................... ========
</TABLE>
20
<PAGE>
CARIBINER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS PRO FORMA,
--------------------------- ------------------------------------ AS ADJUSTED
CARIBINER SPECTRUM TAVS IPO ACQUISITIONS(a) OFFERING CARIBINER
--------- -------- ------- ------- --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $99,777 $26,730 $41,158 $ -- $ -- $ -- $167,665
Cost of revenue......... 66,945 20,661 28,632 -- -- -- 116,238
------- ------- ------- ------- ----- ------ --------
Gross profit............ 32,832 6,069 12,526 -- -- -- 51,427
Operating expenses:
Selling, general and
administrative
expenses.............. 21,575 4,322 5,885 -- -- -- 31,782
Non-cash compensation
expense............... 1,072 -- -- -- -- -- 1,072
Depreciation and
amortization.......... 2,139 231 2,475 -- (210)(d) --
507 (e) 5,142
------- ------- ------- ------- ----- ------ --------
Total operating ex- 24,786 4,553 8,360 -- 297 -- 37,996
penses................. ------- ------- ------- ------- ----- ------ --------
Operating income (loss). 8,046 1,516 4,166 -- (297) -- 13,431
Interest expense (in-
come) with
related parties........ 1,199 -- -- (1,199)(i) -- -- --
Interest expense (in-
come), net............. 453 221 1,000 (719)(i) 472(f) (1,297)(g) 130
Other income, net....... -- (303) (586) -- -- -- (889)
------- ------- ------- ------- ----- ------ --------
Income (loss) before
taxes.................. 6,394 1,598 3,752 1,918 (769) 1,297 14,190
Income tax (benefit) ex- 2,238 527 1,548 671(c) (87)(c) 493 (c) 5,390
pense.................. ------- ------- ------- ------- ----- ------ --------
Net income (loss)....... $ 4,156 $ 1,071 $ 2,204 $ 1,247 $(682) $ 804 $ 8,800
======= ======= ======= ======= ===== ====== ========
Pro forma, as adjusted, $ 0.78 (h)
net income per common share........................................................ ========
Pro forma weighted average 11,319
shares outstanding................................................................. ========
</TABLE>
21
<PAGE>
CARIBINER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA,
------------------ --------------------- AS ADJUSTED
CARIBINER TAVS TAVS OFFERING CARIBINER
--------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash
equivalents............ $ 6,956 $ 19 $ (19)(j) $ 58,227 (l) $ 59,583
(5,600)(k) --
Trade accounts
receivable, net........ 40,215 9,622 (9,622)(j) -- 40,215
Deferred charges........ 8,613 -- -- -- 8,613
Prepaid expenses and
other current assets... 2,062 842 -- -- 2,904
-------- ------- -------- -------- --------
Total Current Assets.. 57,846 10,483 (15,241) 58,227 111,315
Property and equipment-
net..................... 9,406 12,210 (1,400)(k) -- 20,216
Intangible assets-net... 31,256 3,966 (3,579)(j) -- --
15,811 (k) -- 47,454
Other assets............ 595 -- -- -- 595
-------- ------- -------- -------- --------
Total Assets.......... $ 99,103 $26,659 $ (4,409) $ 58,227 $179,580
======== ======= ======== ======== ========
Liabilities and
Stockholders' Equity
Bank line of credit..... $ -- $ -- $ 6,000 (k) $ (6,000)(l) $ --
Current portion of long-
term debt.............. 691 -- -- -- 691
Trade accounts payable.. 10,340 1,474 (1,474)(j) -- 10,340
Accrued expenses and
other current
liabilities............ 15,114 1,566 (1,566)(j) -- (l) 16,364
1,250 (k) -- --
Deferred income......... 15,965 -- -- -- 15,965
-------- ------- -------- -------- --------
Total Current
Liabilities.......... 42,110 3,040 4,210 (6,000) 43,360
Long-term debt.......... 1,184 -- 15,000 (k) (15,000)(l) 1,184
Deferred income......... 5,605 -- -- -- 5,605
Deferred tax liability.. -- 1,572 (1,572)(j) -- --
Other liabilities....... 107 -- -- -- 107
Due to GECCLC........... -- 19,905 (19,905)(j) -- --
-------- ------- -------- -------- --------
Total Liabilities..... 49,006 24,517 (2,267) (21,000) 50,256
Common stock............ 96 -- -- 18 (l) 114
Additional paid-in
capital................ 60,582 -- -- 79,209 (l) 139,791
Accumulated (deficit)
earnings............... (10,581) 2,142 (2,142)(j) -- (10,581)
-------- ------- -------- -------- --------
Total Stockholders'
Equity............... 50,097 2,142 (2,142) 79,227 129,324
-------- ------- -------- -------- --------
Total Liabilities and
Stockholders' Equity. $ 99,103 $26,659 $ (4,409) $ 58,227 $179,580
======== ======= ======== ======== ========
</TABLE>
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(a) Adjustments related to the acquisitions of Spectrum and TAVS.
(b) Gives effect to the Initial Public Offering and related transactions as if
such transactions had occurred on October 1, 1994 to (i) decrease interest
expense with related parties by $2,234, which consists of (a) $374
relating to the repayment of a term loan of $3,000 made by Warburg to the
Company in 1993 (the "Warburg Term Loan") and (b) $1,860 relating to the
conversion of the Convertible Note and (ii) decrease other interest
expense by $1,087 relating to the repayment of all bank borrowings.
(c) The pro forma, as adjusted, income tax expense for fiscal 1995 reflects
the increased utilization of net operating loss carryforwards resulting
from increased income on a pro forma basis. The pro forma, as adjusted,
income tax expense for the nine months ended June 30, 1996 reflects the
utilization of the remaining available net operating loss carryforwards on
a pro forma basis.
(d) Adjustment to decrease depreciation expense by $280 and $210 for the year
ended September 30, 1995 and for the nine months ended June 30, 1996,
respectively, resulting from an adjustment to reduce the net carrying
value of certain fixed assets of TAVS to fair market value, assuming such
adjustment occurred on October 1, 1994.
(e) Adjustment to reflect amortization of the goodwill of $8,000 resulting
from the acquisition of Spectrum and the goodwill of $15,811 resulting
from the acquisition of TAVS, based upon the Company's estimated period of
benefit (i.e., 25 years), assuming each of the acquisitions occurred on
October 1, 1994. The adjustments of $676 and $507 for the year ended
September 30, 1995 and for the nine months ended June 30, 1996,
respectively, reflecting amortization of goodwill in addition to $276 and
$207 of amortization expense included in the historical results of
operations of TAVS for the year ended September 30, 1995 and for the nine
months ended June 30, 1996, respectively.
(f) Net adjustment to (decrease) increase interest expense as follows,
assuming the acquisitions of Spectrum and TAVS occurred on October 1,
1994.
<TABLE>
<CAPTION>
NINE
YEAR MONTHS
ENDED ENDED
SEPTEMBER 30, JUNE 30,
1995 1996
------------- --------
<S> <C> <C>
Increase in interest expense resulting from the
$21,000 of debt incurred upon the acquisition of
TAVS................................................ $1,890 $1,417
Decrease in interest expense from repayment of debt
incurred above, from proceeds of the Initial Public
Offering............................................ (1,323) (591)
Decrease in interest expense for debt not assumed
upon acquisition of TAVS............................ (1,200) (1,000)
Increase in interest expense to support working capi-
tal requirements of TAVS............................ 630 471
Decrease in interest expense for debt repaid in con-
nection with the
acquisition of Spectrum............................. (392) (221)
Decrease in interest income earned on proceeds of the
Initial Public Offering............................. -- 396
------ ------
Net (decrease) increase in interest expense.......... $ (395) $ 472
====== ======
</TABLE>
(g) Decreases interest expense by $567 and $826 resulting from the repayment
of debt incurred upon the acquisition of TAVS, and $630 and $471 resulting
from repayment of debt incurred to support working capital requirements of
TAVS, for the year ended September 30, 1995 and the nine months ended June
30, 1996, respectively.
(h) Pro forma, as adjusted, net income per common share has been calculated
using the weighted average number of shares of Common Stock outstanding
during each of the periods presented assuming that (i) 2,878,014 shares of
Common Stock issued upon consummation of the Initial Public Offering and
(ii) 1,750,000 shares of Common Stock issued in connection with the
Offering were outstanding as of the beginning of each period presented.
23
<PAGE>
(i) Gives effect to the Initial Public Offering and related transactions as if
such transactions had occurred on October 1, 1994 to (i) decrease interest
expense with related parties by $1,199, which consists of (a) $273
relating to the repayment of the Warburg Term Loan and (b) $926 relating
to the conversion of the Convertible Note and (ii) decrease other interest
expense by $719 relating to the repayment of all bank borrowings.
(j) Adjustment to eliminate certain assets not acquired and liabilities not
assumed in connection with the acquisition of TAVS, an operating division
of General Electric Capital Computer Leasing Corporation ("GECCLC").
(k) The following reflects the acquisition of TAVS and the allocation of
purchase price to the net assets acquired.
<TABLE>
<S> <C> <C>
Total consideration paid at closing financed as follows:
Cash.................................................... $ 5,600
Bank line of credit..................................... 6,000
Long-term debt.......................................... 15,000
Transaction costs........................................ 1,250
-------
Total costs............................................. 27,850
Allocation of purchase price to the fair market value of
assets acquired:
Resale inventory........................................ 232
Prepaid expenses and other current assets............... 610
Property and equipment-net.............................. 12,210
Fair market value adjustment........................... (1,400)
------
10,810 10,810
Purchased software...................................... 387
-------
12,039
-------
Goodwill................................................. $15,811
=======
</TABLE>
(l) Reflects the receipt of net proceeds of $79,227 to be received by the
Company upon the sale of 1,750,000 shares of Common Stock in connection
with the Offering at an assumed public offering price per share of $48.25
and the repayment upon consummation of the Offering of all outstanding
bank borrowings, including accrued interest thereon.
24
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT SHARE AND OPERATING DATA)
The historical selected financial data presented below as of and for the
fiscal years ended September 30, 1992, 1993, 1994 and 1995, are derived from,
and are qualified by reference to, the financial statements that have been
audited by Ernst & Young LLP, independent auditors. Interim unaudited data as
of June 30, 1996 and for the nine months ended June 30, 1995 and 1996 reflect,
in the opinion of management of the Company, all adjustments which are
necessary for a fair presentation of such data. Results for the nine months
ended June 30, 1996 are not necessarily indicative of the results which may be
expected for any other interim period or for the fiscal year ending September
30, 1996. The data presented below should be read in conjunction with the
Company's financial statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
-------------------------------------- -----------------
1992(a) 1993 1994 1995 1995 1996
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue............... $ 21,760 $ 50,107 $ 59,174 $ 81,131 $52,085 $99,777
Cost of revenue....... 15,767 34,907 39,724 54,312 34,786 66,945
-------- -------- -------- -------- ------- -------
Gross profit.......... 5,993 15,200 19,450 26,819 17,299 32,832
Selling, general and
administrative
expenses............. 7,321 12,551 14,349 19,306 13,588 21,575
Non-cash compensation
expense(b)........... -- -- -- -- -- 1,072
Depreciation and
amortization......... 3,064 3,852 2,137 2,330 1,674 2,139
Write-off of certain
intangibles(c)....... -- 4,614 -- -- -- --
-------- -------- -------- -------- ------- -------
Total operating ex- 10,385 21,017 16,486 21,636 15,262 24,786
penses............... -------- -------- -------- -------- ------- -------
Operating income
(loss)............... (4,392) (5,817) 2,964 5,183 2,037 8,046
Interest expense with
related parties...... 345 1,435 2,107 2,234 1,670 1,199
Interest expense,
other................ 173 222 502 1,259 813 453
-------- -------- -------- -------- ------- -------
Income (loss) before
taxes................ (4,910) (7,474) 355 1,690 (446) 6,394
Provision (benefit)
for taxes............ 63 23 62 264 (70) 2,238
-------- -------- -------- -------- ------- -------
Net income (loss)..... (4,973) (7,497) 293 1,426 (376) 4,156
Preferred stock
dividends(d)......... (120) (517) (582) (655) (484) (327)
-------- -------- -------- -------- ------- -------
Net income (loss)
available to common
stockholders......... $ (5,093) $ (8,014) $ (289) $ 771 $ (860) $ 3,829
======== ======== ======== ======== ======= =======
Pro forma net income
per common share(e).. $ 0.49 $ 0.13 $ 0.61
======== ======= =======
OPERATING DATA:
Number of clients for the
period........................ 65 73 139
Number of clients providing
revenue in excess of $1
million for the period........ 9 10 12
Number of offices at end of
period........................ 3 5 10
Number of full-time employees
at end of period.............. 192 204 250
<CAPTION>
AS OF SEPTEMBER 30, AS OF
-------------------------------------- JUNE 30,
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit)............ $ (1,229) $ (1,349) $ (1,452) $ 352 $15,736
Total assets.......... 27,852 15,182 31,266 45,298 99,103
Total debt, including
accrued interest..... 13,937 19,223 24,531 34,175 1,874
Stockholders' equity.. (1,273) (12,269) (13,249) (12,434) 50,097
</TABLE>
See Notes to Selected Financial and Operating Data
25
<PAGE>
NOTES TO SELECTED FINANCIAL AND OPERATING DATA
(a) Prior to August, 1993, the Company was wholly-owned by ICC and comprised
substantially all of the operations of ICC. On June 30, 1992, the Company
completed a private placement of securities to Warburg, the proceeds from
which were used in part to acquire Caribiner, Inc. On August 3, 1993, ICC
was merged into a wholly-owned subsidiary of the Company. See "The
Company."
(b) Non-cash compensation expense for the nine months ended June 30, 1996 of
$1.1 million (or $0.09 per share) resulting primarily from the vesting of
non-voting common stock issued at a price lower than its fair market value
under the Management Stock Plan, which was terminated upon consummation of
the Initial Public Offering.
(c) Reflects adjustment to net realizable value of certain intangibles,
principally module and film libraries acquired in purchase business
transactions.
(d) All preferred stock was converted into Common Stock in connection with the
Initial Public Offering.
(e) Pro forma net income per common share is calculated using the weighted
average number of shares of Common Stock outstanding during the period,
plus Common Stock issued pursuant to the Management Stock Plan and
warrants to purchase Common Stock issued at prices below the Initial
Public Offering price of $17.00 per share during the twelve months
immediately preceding December 15, 1995 (the initial filing date of the
Registration Statement relating to the Initial Public Offering), assuming
such Common Stock was outstanding for all periods presented. In addition,
pro forma net income per common share assumes conversion of the
Convertible Note and the conversion of all outstanding shares of preferred
stock into shares of Common Stock (which, in each case, occurred on March
15, 1996) as if such conversions occurred on October 1, 1994. Accordingly,
pro forma net income per common share reflects adjustments (i) to
eliminate the interest expense of $1.9 million, $1.4 million and $0.9
million incurred on the Convertible Note during each of fiscal 1995 and
the nine months ended June 30, 1995 and 1996, respectively, and (ii) to
eliminate accrued preferred stock dividends.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion of the Company's historical results of operations
and of its liquidity and capital resources should be read in conjunction with
the Unaudited Pro Forma Consolidated Financial Information, the Selected
Financial and Operating Data and Consolidated Financial Statements of the
Company and related notes thereto included elsewhere in this Prospectus.
The Company's revenue has increased from $21.8 million in fiscal 1992 to
$81.1 million in fiscal 1995 and $99.8 million for the nine months ended June
30, 1996. On a pro forma basis reflecting certain acquisitions, Caribiner's
revenue was $167.7 million for the nine months ended June 30, 1996. (See
"Unaudited Pro Forma Consolidated Financial Information.") For a discussion of
the Company's fiscal 1996 results, see "--Fiscal 1996 Financial Results." This
growth in revenue can be attributed to a number of factors including (i) the
increased penetration of existing accounts, (ii) the development of new large
accounts, (iii) the diversification of the range of services offered and (iv)
domestic and international expansion through acquisitions and opening of new
offices.
Caribiner's sales and marketing activities have focused on targeting clients
with significant recurring needs for business communications services. In
fiscal 1993, 1994, 1995 and 1996, Caribiner had 9, 10, 12 and 24 clients,
respectively, that generated in excess of $1 million of revenue ("million-
dollar clients") for the Company. While the composition of the Company's
million-dollar clients varies from year to year, in part because its clients'
needs for large corporate events and meetings depends on product launches and
other key corporate events, the timing of which may change from year to year,
the Company has significantly increased its revenue from its largest clients
over the past several years. In fiscal 1996, the 24 clients who were million-
dollar clients generated aggregate revenue of $109.8 million for the Company.
Of these 24 clients, Ford Motor Co., IBM and State Farm Group accounted for
approximately 15%, 13% and 11%, respectively, of the Company's revenue in
fiscal 1996. (See "Risk Factors--Reliance on Large Clients; Key Industries.")
Over the past three years the Company has developed seven corporate agreements
with clients, some of whom are million-dollar clients. Though these agreements
may generally be terminated by the clients on short notice and do not provide
for minimum levels of revenue, it has been the Company's experience that such
arrangements strengthen the Company's relationship with a client following the
securing of such arrangement. These arrangements range from one to ten years
and cover clients in four different industries: automotive, information
technology, lodging and petroleum.
The Company has broadened its product offerings over the past three years to
include services which are sold both in conjunction with and separately from
the Company's meetings business, such as training, education and corporate
communication programs. As a result, revenue generated from the Company's "non-
meetings" business has increased from a relatively insignificant amount in 1993
to $18.0 million in fiscal 1995 and $33.5 million in fiscal 1996.
Over the last three fiscal years, Caribiner has purchased nine companies and
acquired a contractual relationship with a major corporation from another
business communications services provider. Certain of the businesses recently
acquired by the Company reported net losses for their most recent fiscal years
prior to being acquired, and the Company's future financial performance will in
part depend on its ability to implement operational improvements in, or exploit
potential synergies with, these acquired businesses. For additional information
regarding the Company's recent acquisitions, see "Business--Recent
Acquisitions." These transactions have contributed to its revenue growth and
have resulted in the Company's acquiring offices in Los Angeles, Atlanta,
Dallas, Houston, Orlando, Columbia (MD) and Columbia (SC) in the U.S. and
London and Dubai internationally, as well as expanding the client base and
operations of the Company's New York office. The acquisitions were structured
as purchases for accounting purposes with the excess of cost over the fair
value of net assets acquired being recorded as goodwill. See "Business."
27
<PAGE>
In order to service the Company's outstanding client base more effectively,
as well as to locate in areas with attractive potential clients, during the
last three fiscal years the Company opened offices in White Plains (NY) (July,
1994), San Francisco (March, 1995), Boston (April, 1995) and Hong Kong (June,
1996). The Company has been successful in either expanding existing
relationships or securing significant new accounts subsequent to the opening
of each of these offices.
The Company records revenue on the completed contract method of accounting.
See Note 2 to the Consolidated Financial Statements of the Company. The
recognition of revenue and production costs is deferred until a project is
completed, which is often within a one to six-month time period. Consequently,
while the Company may have recurring revenue from a client, the scheduling of
projects can affect the comparability of operating results from period to
period. The Company produces projects on fixed fee and "cost plus" bases and
provides audio visual equipment rentals based on published price lists. The
cost plus arrangements are primarily with Ford Motor Co. and are based on the
Company's arrangement with that client. See "--Billings and Collections."
The Company experiences quarterly variations in revenue, operating income
and net income as a result of several factors, including the timing of
clients' meetings and events, delays in or cancellation of clients' product
launches and events, as well as changes in the Company's revenue mix among its
various services offered. In addition, such variation also results from the
fact that the Company produces projects for its clients on a project-by-
project basis and does not have fixed, long term arrangements with clients.
The Company's revenue is also affected by seasonal factors. In particular,
revenue tends to be lower during the Company's first fiscal quarter since
clients prefer not to schedule major events close to the Thanksgiving and
Christmas holidays. Accordingly, since the Company's operating expenses are
relatively stable from quarter to quarter, the Company's results of operations
tend to be lower during the Company's first fiscal quarter. The Company's
reported results for a given quarter are also vulnerable to fluctuation in
part because the Company recognizes revenue and production costs under the
completed contract method of accounting discussed above. See "Risk Factors--
Fluctuations in Quarterly and Annual Operating Results; Seasonality," "Risk
Factors--Episodic Nature of Business" and "--Quarterly Results" below.
For fiscal 1996, the Company incurred a non-cash compensation expense of
$1.1 million (or $0.08 per share) in connection with the stock issued pursuant
to the Management Stock Plan. See "Management--Incentive Plans."
FISCAL 1996 FINANCIAL RESULTS
The Company's recently announced financial results for the year ended
September 30, 1996 and similar information for the year ended September 30,
1995 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
----------------
1995 1996
------- --------
<S> <C> <C>
Revenue....................................................... $81,131 $148,330
Gross profit.................................................. 26,819 48,532
Operating income.............................................. 5,183 13,876
Net income.................................................... 1,426 7,989
Pro forma net income per common share(a)...................... $0.49 $1.05
Pro forma average shares outstanding(a)....................... 6,620 8,245
</TABLE>
- --------
(a) Pro forma net income per common share for the periods presented assumes
conversion of the Convertible Note and all outstanding shares of preferred
stock into Common Stock (which, in each case, occurred on March 15, 1996
immediately prior to the Initial Public Offering) as if such conversion
occurred on October 1, 1994. Pro forma net income per common share
reflects adjustments (i) to eliminate the interest expense incurred on the
Convertible Note during each of the periods presented and (ii) to
eliminate accrued preferred stock dividends.
28
<PAGE>
For fiscal 1996, revenue increased $67.2 million, or 83%, to $148.3 from
$81.1 million in fiscal 1995. Net income for fiscal 1996 increased to $8.0
million from $1.4 million in fiscal 1995. Pro forma net income per common
share for fiscal 1996 increased to $1.05 from $0.49 in fiscal 1995.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
components of the Company's operating statement data, including such data as a
percentage of revenue.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
---------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
--------------- ------------- ------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $50,107 100.0% $59,174 100.0% $81,131 100.0% $52,085 100.0% $99,777 100.0%
Cost of revenue......... 34,907 69.7 39,724 67.1 54,312 66.9 34,786 66.8 66,945 67.1
-------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit............ 15,200 30.3 19,450 32.9 26,819 33.1 17,299 33.2 32,832 32.9
Selling, general and
administrative
expenses............... 12,551 25.0 14,349 24.3 19,306 23.8 13,588 26.1 21,575 21.6
Non-cash compensation
expense................ -- -- -- -- -- -- -- -- 1,072 1.1
Depreciation and amorti-
zation................. 3,852 7.7 2,137 3.6 2,330 2.9 1,674 3.2 2,139 2.1
Write-off of certain in-
tangibles.............. 4,614 9.2 -- -- -- -- -- -- -- --
-------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total operating ex-
penses................. 21,017 41.9 16,486 27.9 21,636 26.7 15,262 29.3 24,786 24.8
-------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating income (loss). (5,817) (11.6) 2,964 5.0 5,183 6.4 2,037 3.9 8,046 8.1
Interest expense with
related parties........ 1,435 2.9 2,107 3.6 2,234 2.7 1,670 3.2 1,199 1.2
Interest expense, other. 222 0.4 502 0.8 1,259 1.6 813 1.6 453 0.5
-------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income (loss) before
taxes.................. (7,474) (14.9) 355 0.6 1,690 2.1 (446) (0.9) 6,394 6.4
Provision (benefit) for
taxes.................. 23 0.1 62 0.1 264 0.3 (70) (0.1) 2,238 2.2
-------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net income (loss)....... $ (7,497) (15.0)% $ 293 0.5% $ 1,426 1.8% $ (376) (0.7)% $ 4,156 4.2%
======== ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Nine Months Ended June 30, 1996 Compared to Nine Months Ended June 30, 1995
Revenue. Revenue increased $47.7 million, or 92%, to $99.8 million in the
nine months ended June 30, 1996 from $52.1 million in the nine months ended
June 30, 1995. The increase resulted primarily from expanded activities from
existing clients, projects for new clients and the acquisition of other
business communications services providers.
Contributing to the increase were a product launch for an existing
pharmaceutical client, a franchisee meeting for a new food services client,
sales meetings in connection with a triennial event held by a client in the
insurance industry, and increased business from both existing clients and
clients developed through acquisitions. Approximately $3.0 million of the
increase resulted from new model introduction meetings for certain import
automotive clients held in the quarter ended December 31, 1995, which had, in
earlier years, been held in the Company's previous fiscal quarter.
Gross profit. Gross profit increased 90% to $32.8 million in the nine months
ended June 30, 1996 from $17.3 million in the same period of 1995, primarily
as a result of the revenue growth described above. As a percentage of revenue,
gross profit decreased slightly to 32.9% in the nine-month period ended June
30, 1996 from 33.2% in the prior comparable period.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $8.0 million, or 59%, to $21.6 million in
the nine months ended June 30, 1996 from $13.6 million in the nine months
29
<PAGE>
ended June 30, 1995. The increase is attributable primarily to the addition of
new offices and personnel resulting from acquisitions and in support of other
revenue growth, as well as normal inflationary increases. The $1.1 million
nonrecurring non-cash compensation charge was primarily the result of the
vesting of common stock sold pursuant to the Company's management stock plan
at a price lower than its fair market value.
Depreciation and amortization. Depreciation and amortization expense for the
nine months ended June 30, 1996 was $2.1 million, an increase of $0.4 million,
or 28%, as compared to $1.7 million for the corresponding period in the prior
year. This increase was primarily due to the purchase of computer equipment
and goodwill from acquisitions.
Interest expense. Interest expense with related parties decreased $0.5
million due to the repayment and conversion of debt as of March 15, 1996 in
connection with the Initial Public Offering. Other interest expense, net
decreased due to a lower average borrowing level, the repayment of outstanding
balances as of March 15, 1996 in connection with the Initial Public Offering,
and interest income earned on the proceeds from the Initial Public Offering.
Income before income taxes. Income (loss) before taxes increased to $6.4
million in the nine months ended June 30, 1996 from a loss of $0.4 million in
the nine months ended June 30, 1995.
Income tax provision. Taxes reflect an allocation based on the full year
anticipated effective tax rate. For the nine months ended June 30, 1995, there
were losses before taxes and, accordingly, an assumed benefit has been
reflected.
Net income (loss). Net income increased to $4.2 million in the nine months
ended June 30, 1996 from a net loss of $0.4 million in the nine months ended
June 30, 1995, for the reasons set forth in the preceding paragraphs.
Excluding the effect of the nonrecurring non-cash compensation charge of $1.1
million, pro forma net income per common share would have been $0.70 for the
nine months ended June 30, 1996.
Fiscal 1995 Compared to Fiscal 1994
Revenue. Revenue increased 37.1% from $59.2 million in fiscal 1994 to $81.1
million in fiscal 1995. Higher revenue from the Ford Motor Co. accounted for
approximately two-thirds of the revenue increase. Increased revenue from
clients in the information technology sector contributed approximately 25% of
the increase.
Gross profit. Gross profit increased 37.9% from $19.5 million in fiscal 1994
to $26.8 million in fiscal 1995. The $7.4 million increase resulted primarily
from the revenue growth described in the preceding paragraph. Gross profit as
a percentage of revenue rose slightly from 32.9% to 33.1%.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 34.5% from $14.3 million in fiscal 1994 to
$19.3 million in fiscal 1995. Salaries and related costs increased $3.1
million primarily as a result of acquisitions, new office openings and
additional personnel in connection with the Company's growth as well as annual
inflationary increases. Direct selling expenses increased $0.4 million to
support revenue growth. In addition, other general and administrative expenses
for new and additional offices increased $1.5 million. Selling, general and
administrative expenses as a percentage of revenue declined from 24.3% in
fiscal 1994 to 23.8% in fiscal 1995.
Depreciation and amortization. Depreciation and amortization expense
increased by $0.2 million from fiscal 1994 to fiscal 1995 due primarily to the
purchase of computer equipment and goodwill from acquisitions.
Interest expense. Interest expense with related parties increased $0.1
million due to compounding. Other interest expense increased $0.8 million due
to higher borrowing under the Company's then-existing bank facility to fund
acquisitions, office expansions and increased working capital requirements.
Income before income taxes. Income before income taxes increased from $0.4
million to $1.7 million as revenue growth both from internal business as well
as acquired businesses contributed to the improved earnings of the Company.
30
<PAGE>
Income tax provision. The provision for income taxes reflected on the
statement of operations represents federal, state and local minimum taxes. See
"--Income Taxes."
Fiscal 1994 Compared to Fiscal 1993
Revenue. Revenue increased 18.1% from $50.1 million in fiscal 1993 to $59.2
million in fiscal 1994. IBM accounted for approximately one-half of the
overall increase. In addition, in the second quarter of fiscal 1994, the
Company completed the acquisition of a Los Angeles-based business
communications services provider, which contributed approximately $6.0 million
in revenue. The year to year comparison was also affected by the inclusion in
fiscal 1993 of revenue associated with a major triennial meeting held by a
client in that year.
Gross profit. Gross profit increased 28.0% from $15.2 million in fiscal 1993
to $19.5 million in fiscal 1994. The increase resulted primarily from the
revenue growth described in the preceding paragraph. In addition, gross profit
as a percentage of revenue increased from 30.3% to 32.9%. Management believes
that the increase was in part due to improved information systems, which
allowed the Company to manage more closely its margins on projects.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 14.3% from $12.6 million in fiscal 1993 to
$14.3 million in fiscal 1994. Salaries and related costs increased $1.8
million primarily as a result of acquisitions, new office openings and
additional personnel in connection with the Company's growth as well as annual
inflationary increases. Direct selling expenses increased $0.5 million to
support revenue growth. In addition, other general and administrative expenses
for new and additional offices increased $0.4 million offset by the
elimination of the charges described below. In fiscal 1993, selling, general
and administrative expenses included approximately $1.0 million of non-
recurring expenses related to three items: (i) a reserve for the rent
commitment on an idle facility, (ii) professional fees and reorganization
costs resulting from the acquisition of Caribiner, Inc. in fiscal 1992 and
incurred subsequent to the finalization of the purchase price allocation and
(iii) the write-off of the remaining net assets used in licensing activities
in fiscal 1993.
Depreciation and amortization. Depreciation and amortization expense
decreased $1.7 million from fiscal 1993 to fiscal 1994. The lower depreciation
and amortization was due to the $4.6 million write-off in fiscal 1993 of
certain intangibles, principally film and module libraries. Based on the
levels of revenue generated from these assets, the values assigned to film and
module libraries were adjusted to reflect their estimated net realizable
value.
Interest expense. Interest expense with related parties increased $0.7
million due to the full year effect of additional debt resulting from the
Warburg Term Loan and the Convertible Note. Other interest expense increased
$0.3 million due primarily to higher borrowing under the Company's then-
existing bank facility to fund acquisitions, office expansions and increased
working capital requirements.
Income before income taxes. Income before income taxes increased $7.8
million due to the absence of the write-off of certain intangibles and non-
recurring expenses as described above, Caribiner's higher revenues and
improved gross profit margin.
Income tax provision. The provision for income taxes reflected on the
Company's statement of operations represents state and local taxes. For fiscal
1993 and 1994, the Company was in an operating loss position for tax purposes
and, accordingly, made no provision for income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through internal cash flow
and bank financing, including the Company's new financing facilities (as
described below), its recently replaced line of credit (the "1994 Line of
Credit") (as described below) and its recently replaced term facility (the
"1994 Term Facility") (as described below). These sources of funds have been
used to fund the Company's efforts to grow both internally and through
acquisitions.
31
<PAGE>
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER ENDED
30, JUNE 30,
------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities........... $ (620) $ 2,872 $ 442 $ 56 $ (4,475)
Investing activities........... (3,462) (6,601) (7,758) (3,787) (15,426)
Financing activities........... 3,530 3,572 7,256 3,515 26,645
</TABLE>
In fiscal 1993, $0.6 million was used in operating activities. The net loss
of $7.5 million adjusted for depreciation and amortization of $3.9 million and
a non-cash write-off of intangibles and film/module library assets of $4.6
million provided $1.0 million. The net change in working capital (excluding
cash) used $1.6 million with decreases in accounts payable and deferred income
partially offset by reductions in accounts receivable and deferred charges and
an increase in accrued liabilities. The $3.5 million used in investing
activities resulted primarily from cash payments made in connection with the
merger with ICC and the purchase of property and equipment. Financing
activities provided $3.5 million through use of the Warburg Term Loan and the
1994 Line of Credit.
In fiscal 1994, the Company generated $2.9 million from its operating
activities. Net income plus depreciation and amortization provided $2.4
million. The net change in working capital provided $0.5 million, with
increases in accounts receivable resulting from increased revenue being more
than offset by increases in accounts payable, deferred income and accrued
liabilities. Investing activities required $6.6 million as a result of the
acquisition of businesses, purchase of property and equipment and additional
payments in connection with the merger with ICC. Financing activities provided
$3.6 million through use of the 1994 Line of Credit and the 1994 Term
Facility.
In fiscal 1995, the Company generated approximately $0.4 million from
operating activities compared to $2.9 million in fiscal 1994. The decrease was
the result of higher working capital requirements resulting from expansion of
operating activities and revenue growth. Investing activities included the
purchase of property and equipment and acquisitions of intangibles and
businesses that required approximately $7.8 million. Financing activities
provided approximately $7.3 million through use of the 1994 Line of Credit and
the 1994 Term Facility.
For the nine months ended June 30, 1996, $4.5 million was used in operating
activities. The net income adjusted for depreciation and amortization and the
non-cash compensation charge of $1.1 million provided $7.4 million. The net
change in working capital used $11.8 million, with increases in deferred
income, accrued expenses and accounts payable more than offset by increases in
accounts receivable, prepaid expenses and other current assets, and a decrease
in accrued interest. Investing activities required $15.4 million due to
acquisition-related expenditures and property and equipment additions.
Financing activities provided $26.6 million in the nine months ended June 30,
1996, of which an aggregate of $44.9 million of net proceeds were received
during the period from the issuance of common stock and the exercise of
warrants to purchase common stock and $3.0 million was provided by the Warburg
Term Loan, offset by $21.1 million used to repay all outstanding bank
borrowings and substantially all other long-term indebtedness, and pay all
accrued preferred stock dividends. In addition, $0.2 million was used to
repurchase common stock during the period.
For the nine months ended June 30, 1995, operating activities provided
approximately $0.1 million. The net loss adjusted for depreciation and
amortization used $1.3 million. The net change in working capital used $1.2
million with increases in trade accounts receivable, deferred charges, prepaid
expenses and other assets and accrued expenses and other liabilities,
partially offset by increases in deferred income and accrued interest payable.
Investing activities required $3.8 million due to acquisition-related
expenditures and property and
32
<PAGE>
equipment additions. Financing activities provided $3.5 million in the nine
months ended June 30, 1995 from the 1994 Line of Credit and the 1994 Term
Facility to fund working capital requirements and acquisitions.
The 1994 Line of Credit provided the Company with funds to handle working
capital requirements, and the 1994 Term Facility was used primarily to finance
acquisitions. As of September 30, 1996, approximately $6.0 million was
outstanding under the 1994 Line of Credit and $15.0 million was outstanding
under the 1994 Term Facility. As of September 30, 1996, each of the 1994 Line
of Credit and the 1994 Term Facility bore interest at the rate of 9.25% per
annum which was 1% over the lender's prime rate. On December 4, 1996, the
Company entered into a new loan agreement with a syndicate of banks pursuant
to which the Company increased its aggregate available bank financing from $27
million to $100 million, consisting of the $75 million Reducing Revolver to be
utilized in connection with the financing of acquisitions and $25 million in a
six year revolving line of credit (the "Revolving Line" and together with the
Reducing Revolver, the "1996 Facilities"). Amounts outstanding under the 1994
Line of Credit and the 1994 Term Facility were repaid with proceeds from the
1996 Facilities. The maturity date of each of the New Facilities is December
31, 2002. Interest on outstanding amounts under the 1996 Facilities is payable
quarterly in arrears and at the option of the Company accrues at either (i)
LIBOR plus an applicable margin or (ii) an alternate base rate based on the
greatest of (a) the agent bank's prime rate, (b) the three month secondary
certificate of deposit rate and (c) the federal funds rate. The interest rate
on each of the 1996 Facilities is currently LIBOR plus 1.125%. The applicable
interest rates will increase by 2.0% if principal or interest is not paid when
due (after applicable grace periods). Pursuant to the terms of the 1996
Facilities, the Company is required to reduce outstanding amounts under the
Revolving Line to less than $5.0 million for a period of not less than 30 days
during every 12-month period commencing on December 4, 1996. All outstanding
amounts under the Reducing Revolver and the Revolving Line, as the case may
be, will be repaid upon consummation of the Offering, and accordingly, upon
completion of the Offering and the application of the proceeds therefrom, the
Company expects to have no outstanding indebtedness for money borrowed. (The
Company will have indebtedness in connection with commitments under certain
finance lease arrangements.) See "Use of Proceeds" and "Capitalization."
In January, 1996, the Company acquired substantially all of the assets of
Koors Perry. A payment of $2.5 million made at the closing of such acquisition
was funded by a drawing on the 1994 Term Facility. In June, 1996, the Company
acquired Lighthouse for $5.3 million in cash, $0.7 million in the repayment of
certain indebtedness and $1.0 million in shares of Common Stock (31,821 shares
of Common Stock). The cash payment was funded by proceeds from the Initial
Public Offering. Also in June, 1996, the Company acquired Spectrum. The
purchase price was $5.0 million in cash (including $2.6 million to repay
outstanding indebtedness) plus contingent cash payments in the event that
Spectrum meets certain performance goals. The cash payment was funded by
proceeds from the Initial Public Offering. In September, 1996, the Company
acquired TAVS for approximately $26.6 million in cash, subject to adjustment
in certain circumstances. The cash payment was funded in part by proceeds from
the Initial Public Offering and drawings on the 1994 Line of Credit and the
1994 Term Facility. See "Business--Recent Acquisitions."
Capital expenditures were $1.6 million in each of fiscal 1994 and fiscal
1995 and $1.7 million for the nine months ended June 30, 1996. For fiscal 1995
and the nine months ended June 30, 1996, the purchase of additional personal
computers and expanded capabilities for the computer system were the largest
areas of expenditure. Capital expenditures in fiscal 1994 increased by $1.0
million as compared with fiscal 1993. This increase was due to expenditures
for personal computers, an IBM AS/400 mid-range computer, furniture and
fixtures and leasehold improvements. The Company depreciates its equipment
over the estimated useful lives of such assets ranging from five to seven
years. The Company believes that capital expenditure requirements will
increase to approximately $9.0 million in fiscal 1997 (including Blumberg's
anticipated capital expenditure requirements, but excluding capital
expenditure requirements of any additional businesses acquired) primarily as a
result of planned investments in audio visual and staging equipment which the
Company will rent to its clients.
The Company believes that cash flow from operations, the net proceeds from
the Offering and available credit under the New Facilities will be sufficient
to meet operating needs and capital spending requirements and fund reasonably
forseeable acquisition strategies for at least the next twelve months.
33
<PAGE>
BILLINGS AND COLLECTIONS
Customers are normally billed on a per-project or per-rental basis.
Generally, the Company produces projects on a fixed-price basis. The
components of the fixed price are labor, both internal and external, outside
purchases and equipment utilization. The Company also produces projects priced
on a "cost-plus" basis, whereby the Company bills its employees' services to
the client at hourly or per diem rates, depending upon the employee, and then
charges for actual outside purchases plus an agreed upon mark-up. Like fixed
pricing, however, cost-plus pricing has a ceiling that cannot be exceeded
without written permission of the client. For both fixed-price and cost-plus
projects, the Company has a project change notice system to authorize all
production/price changes. TAVS provides audio visual equipment rentals to
customers based on published price lists. Generally, billing terms are one-
third due upon contract signing, one-third due during production and the
remainder due upon delivery and completion of the project. In the case of
TAVS, customers are billed upon completion of the staging service or rental.
Billings prior to delivery date are carried as deferred income in the
Company's financial statements and costs incurred prior to the delivery date
are carried as deferred charges. The Company has not had any material
collection problems in connection with its business.
In the event a client cancels a project after production work has begun, the
client is billed for work performed and expenses incurred through the date of
cancellation.
INCOME TAXES
The Company's effective tax rates for fiscal 1994 and fiscal 1995 were 17.5%
and 15.7%, respectively, which resulted from the utilization of federal net
operating loss ("NOL") carryforwards. For fiscal 1996, the Company expects to
recognize benefit related to the utilization of the available NOL
carryforward. Thereafter, the Company does not expect to recognize any
material benefit related to the utilization of NOL carryforwards and expects
to reflect a tax rate in accordance with statutory tax rates adjusted for
book/tax differences such as non-deductible expenses.
RECENT DEVELOPMENTS
Lighthouse Acquisition. The Company's historical results of operations for
the nine months ended June 30, 1996 include the results of operations of
Lighthouse since June 1, 1996, the effective date of the acquisition. The
acquisition of Lighthouse is not reflected in the Unaudited Pro Forma
Consolidated Financial Information included herein. For its fiscal year ended
December 31, 1995, Lighthouse had revenue of $10.4 million, gross profit of
$3.4 million, operating income of $0.2 million and a net loss of $.04 million.
At December 31, 1995, Lighthouse had total assets of $3.3 million. The
acquisition of Lighthouse resulted in an increase of approximately $7.0
million in goodwill, which is reflected on the Company's June 30, 1996
consolidated balance sheet. Management does not believe that Lighthouse's
historical financial results prior to being acquired by the Company are
necessarily indicative of Lighthouse's future contribution to the results of
operations of the Company. See "Business--Recent Acquisitions."
Blumberg Purchase Agreement. In December, 1996, the Company entered into a
definitive purchase agreement to acquire all of the outstanding capital stock
of Blumberg for consideration consisting of $16.6 million in cash, repayment
of approximately $5.5 million of indebtedness and shares of Common Stock
having a market value of $1.4 million (the actual number of shares of Common
Stock to be based on the average closing price per share of the Common Stock
for the five business days prior to closing). The closing of the Blumberg
acquisition (which is subject to certain conditions, including the expiration
or early termination of the waiting period under the HSR Act) is expected to
occur in January, 1997. The proposed acquisition of Blumberg is not reflected
in the Unaudited Pro Forma Consolidated Financial Information included herein.
For its fiscal year ended May 31, 1996, Blumberg had revenue of $42.3 million.
See "Business--Recently Announced Purchase Agreement."
34
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued two standards which will
be applicable to the Company beginning in fiscal 1997: No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of and No. 123, Accounting for Stock-Based Compensation. The impairment
standard is not expected to have a significant impact on the Company. The
Company has not yet determined which of the acceptable approaches it will use
under the stock compensation standard. Adoption of certain approaches under
the stock compensation standard could result in non-cash charges which, if
made, are not expected to be material. At a minimum, the standard will require
disclosures about the fair value of employee stock options.
QUARTERLY RESULTS
The following table sets forth the unaudited quarterly results of operations
for each of the quarters in fiscal 1995 and fiscal 1996. In management's
opinion, this unaudited quarterly information includes all adjustments which
are necessary for a fair presentation of the information for the quarters
presented. The operating results in any quarter are not necessarily indicative
of the results which may be expected for any other interim period.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996
-------------------------------- --------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $11,399 $19,045 $21,641 $29,046 $20,407 $31,220 $48,150 $48,553
Gross profit............ 3,912 5,861 7,528 9,518 7,066 10,190 15,576 15,701
Operating income (loss). (1,143) 938 2,242 3,146 (87) 1,576 6,556 5,830
Net income (loss)....... (1,593) 91 1,127 1,801 (898) 643 4,408 3,836
</TABLE>
For a discussion of factors affecting the Company's quarterly results, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
35
<PAGE>
BUSINESS
Caribiner is a leading international producer of meetings, events and
training programs and a provider of related business communications services
that enable businesses to inform, sell to and train, their sales forces,
dealers, franchisees, partners, stockholders and employees. The Company
believes its principal strengths are the depth of its creative and production
talent, its ability to consistently meet its clients' business objectives and
expectations and its ability to manage effectively and reliably a number of
complex, large-scale projects contemporaneously. Caribiner's clients are
typically large companies that have a business need to communicate with
sizable internal and external constituencies on a regular basis and include
some of the world's largest companies in diverse industries. Major clients
include the Ford Motor Co. (automotive), IBM (information technology), Parke-
Davis (pharmaceuticals), Holiday Inn Worldwide (lodging), Shell Oil Company
(petroleum) and McDonald's Corporation (fast food). The Company has offices in
Atlanta, Boston, Columbia (MD), Columbia (SC), Dallas, Detroit, Houston, Los
Angeles, New York, Orlando, Rolling Meadows (IL), San Francisco and White
Plains (NY) in the U.S., as well as in London, Dubai and Hong Kong.
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through additional domestic
and international acquisitions. Caribiner's revenue has grown from $21.8
million in fiscal 1992 to $81.1 million in fiscal 1995 and $99.8 million for
the nine months ended June 30, 1996. On a pro forma basis reflecting certain
acquisitions, Caribiner's revenue was $167.7 million for the nine months ended
June 30, 1996. (See "Unaudited Pro Forma Consolidated Financial Information.")
For a discussion of the Company's fiscal 1996 results, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Fiscal 1996 Financial Results."
Business activities and events that generate a need for business
communications services include sales meetings, product launches, training and
education of employees and dealers, development of strategic and
organizational communications, conferences, stockholder meetings and other
executive management presentations that are used to convey important
information about the business and/or its products. These business
constituencies are not typically communicated with by public relations firms,
which assist a business in communications with or through the news media, or
advertising agencies, which create advertising and marketing campaigns to
communicate with consumers. Large-scale events and programs to communicate
essential corporate messages are often not part of a company's core businesses
because of the unique skills necessary to develop, produce and successfully
stage such events. As a result, many companies look to engage outside firms to
perform these functions. In addition, large corporate events tend not to occur
regularly, depending, for example, on timing of product roll-outs, changing
competitive environments and shifts in corporate strategy, which makes it
relatively costly to maintain the internal resources to create and execute
these events.
The Company offers a wide range of business communications services,
including conceptualizing, planning and producing corporate meetings and
events and providing audio visual equipment rentals, sales and related staging
services for such meetings and events, developing training and educational
materials relating to new job skills, products, systems and organizational
processes, handling internal corporate communications and creating interactive
trade show exhibits. The Company believes it has benefited from a trend among
major corporations toward increased corporate outsourcing of meetings, events,
training and communications. These services can be delivered in all forms of
media, including film, interactive technologies (including CD-ROM), videotape,
slides, computer graphics and animation, print and multimedia. Examples of
such engagements include:
. The production of the automobile introduction shows for the complete line
of 1997 Ford Motor Co. vehicles, which were attended by approximately
8,000 dealers and their guests and Ford employees in San Francisco over a
two-week period in August, 1996. Beginning eight months prior to the
introductions, the Company's personnel worked closely with Ford's
management and product teams to develop the messages and themes which the
automobile maker wanted to communicate to its dealers. Caribiner designed
and constructed all sets and stage layouts, drafted corporate speeches
made by Ford's management, choreographed the unveiling of the new 1997
vehicles to the dealers, produced several audio/visual presentations and
arranged for live entertainment.
36
<PAGE>
. The introduction to approximately 1,400 sales people from two leading
pharmaceutical companies of a new jointly-promoted product in February,
1996 in Orlando, Florida. Within the span of two months, the Company
produced the entire event, which was designed to educate each of the
companies' sales forces regarding a new antihistamine product. The
Company custom-built and designed several meeting areas within a single
large convention center, designed an interactive computer video game to
test the sales persons' knowledge of the product, produced sketches to
demonstrate the product's advantages over competing products, produced
several videos, arranged for live entertainment and drafted speeches made
by the companies' senior managers.
. The development and delivery in October, 1995 of three interactive
multimedia CD-ROM-based courses for a retailer focusing on product
identification, customer service and technical equipment and procedures
specific to a cashier's job. The courses utilized digital audio, still
images, text and/or video and assessment questions.
. The design of a 3,200 square foot exhibit for Philip Morris Companies,
Inc. for use at the October, 1995 National Association of Convenience
Stores trade show, which was attended by approximately 14,000 people, as
well as the production of two videos and the design and supervision of
all on-site activities, including two interactive exhibits.
. The provision by TAVS of over 5,000 pieces of audio visual equipment
(including data projectors, video walls, concert sound systems, overhead
projectors and flip charts) to Computer Associates International, Inc. in
connection with its CA World "96 annual users' conference in New Orleans
in August, 1996, which was attended by approximately 10,000 people. The
Company also provided staging and convention and trade show support
services with approximately 150 technicians and other personnel on site.
COMPETITIVE POSITION
Market leader. As a leading international provider of business
communications services in a highly fragmented industry, the Company believes
it offers a full range of business communications services and a depth and
breadth of creative, production, technical and organizational expertise that
most of the Company's competitors generally lack. Caribiner has established a
track record of success in executing projects of various types and sizes,
including multi-million dollar events, in a number of industries. Caribiner's
projects are frequently high profile events where senior executives of a
client, often the CEO, are presenting new information to the audience. As a
result, Caribiner believes that confidence in a business communications
services provider and its ability to execute effectively are of critical
importance to clients. In addition, the Company believes that its resources
permit it to seek out and manage a number of large-scale projects
contemporaneously. From fiscal 1993 to fiscal 1996 the number of clients to
whom the Company provided services during the year grew from 65 to over 300.
Strong client relationships. The Company's capabilities have resulted in its
developing long-standing relationships and significant levels of revenue with
numerous major clients. In fiscal 1996, Caribiner had revenue in excess of $1
million from each of 24 clients, the majority of which Caribiner has had
relationships with for several years, compared with nine such clients in
fiscal 1993. These 24 clients contributed revenue of $109.8 million in fiscal
1996. Such large accounts are often developed as a result of the Company's
efforts to penetrate a number of different divisions and departments within a
client. For example, for its largest client, Ford Motor Co., in fiscal 1996
Caribiner executed 160 projects of various sizes for numerous individual
buyers of services in 21 Ford business units, including Ford Corporate, Ford
Division, Lincoln-Mercury Division, Ford Fleet and Lease, Ford Export and Ford
Credit.
Expanding national and international presence. As part of the Company's
strategy to expand its client base, increase its range of services and broaden
its geographic coverage, over the last three years Caribiner has opened new
offices in Boston, San Francisco, White Plains (NY) and Hong Kong, and
acquired offices in Los Angeles, Atlanta, Dallas, Houston, Orlando, Columbia
(MD) and Columbia (SC) in the U.S. and in London and Dubai internationally.
This expansion has provided strategic and operational benefits, which include
enabling the Company to service clients more effectively by being in closer
proximity to them, expanding and diversifying
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the Company's client base, securing the services of the acquired business' key
executives and sales personnel, reducing costs by centralizing finance,
administration and information technology functions and realizing purchasing
advantages associated with increased economies of scale. The Company has also
expanded the business communications services which it offers to clients to
include the provision of audio visual equipment rentals and related staging
services through its recent acquisition of TAVS.
GROWTH STRATEGY
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through domestic and
international acquisitions. To achieve this goal, Caribiner plans to
(i) increase penetration of existing accounts, (ii) develop new large
accounts, (iii) continue to diversify the range of services offered and (iv)
continue expansion domestically and internationally through acquisitions and
the opening of new offices.
Increase penetration of existing accounts. The Company believes that it has
demonstrated the ability to increase its penetration of existing accounts and
to solve a wide range of business communications needs for its clients. The
Company has identified and utilized a number of ways to establish and build a
client relationship with a large account including:
. securing a "blanket purchase order" or other agreement which enables
decision makers within a client to award business to Caribiner without
going through a bidding or selection process;
. establishing a local presence to be in close proximity to a client and to
ensure rapid response to clients; and
. establishing an outsourcing relationship with a client for specific
communications needs.
As a result, the Company has entered into agreements with several key accounts
for a variety of business communications services. The terms of these
agreements provide either specific event and service commitments or blanket
purchase order arrangements, though these agreements are generally terminable
by the client on short notice and do not provide for minimum levels of
revenue. The Company had seven such agreements in place with clients at the
end of fiscal 1996, as compared to two such agreements at the end of fiscal
1994.
Develop new large accounts. The Company intends to develop new large
accounts by continuing to target clients that have significant or potentially
significant business communication needs. The Company utilizes a number of
techniques to develop new large accounts, including responding to requests for
proposals, becoming a part of a company's regular "bid" list, pursuing client
referrals, identifying prospects through research of a potential client's
business communications needs (e.g., the status of product launches) and
actively marketing to potential new clients. Sales and marketing personnel in
each of Caribiner's offices identify potential client relationship
opportunities and promote Caribiner's expertise and range of services.
Continue to diversify the range of services offered. Caribiner believes
there are significant opportunities to increase its penetration of accounts by
promoting its capabilities in areas such as employee training and education
and corporate communications, which can be utilized by clients either in
conjunction with meetings and events or separately from them. Revenue for the
Company's "non-meetings" business has increased from a relatively
insignificant amount in fiscal 1993 to $18.0 million in fiscal 1995 and $33.5
million in fiscal 1996. Caribiner believes that continued efforts to promote
its non-meetings business will result in increased usage of the Company's wide
range of business communications services, strengthen ongoing client
relationships and further expand its revenue base. Caribiner also believes
there are attractive opportunities to continue expanding its position as a
provider of audio visual equipment rentals and related staging services
through internal growth and acquisitions. The Company believes that these
services complement its other "meetings-related" activities.
Continue expansion domestically and internationally. Caribiner intends to
continue to expand domestically and internationally by making acquisitions in
the business communications services industry and opening new offices to
service existing or potential new clients. In making acquisitions, the Company
will continue to focus
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<PAGE>
on companies that have an existing or potential client base that lends itself
to increased penetration subsequent to acquisition and that are in attractive
markets. The Company believes that numerous acquisition candidates are
available as a result of the fragmented nature of the industry. During the
last three fiscal years, the Company opened four offices, made nine
acquisitions and acquired a contractual client relationship with a major
corporation from another business communications services provider.
Caribiner believes that its future worldwide opportunities are significant
as a result of the global marketing approach undertaken by its clients as well
as the size of the international business communications services market.
RECENT ACQUISITIONS
One of the components of the Company's growth strategy is to expand its
client base by making acquisitions in the business communications services
industry. Caribiner's management believes that its acquisitions to date have
allowed the Company to (i) acquire additional large clients, further develop
its relationships with existing clients and acquire experienced personnel
needed to service such clients and (ii) enhance operating income by leveraging
the Company's existing infrastructure and industry knowledge.
During fiscal 1994 and 1995, Caribiner completed five acquisitions and
acquired a contractual client relationship with a major corporation from
another business communications services provider. Three such acquisitions
were business communications services providers located in New York City,
which permitted the Company to expand its client base and secure the services
of experienced executive management personnel of the acquired businesses. In
addition, during such fiscal years, the Company also completed three other
transactions through which it increased its client base and expanded into new
geographic regions by the addition of offices in Los Angeles, Atlanta, Dallas
and Houston. The total initial purchase cost of the acquisitions completed in
fiscal 1994 and 1995 was $4.5 million and $4.3 million, respectively. Several
such acquisitions also provide for contingent payments following their
purchase based upon achievement of gross profits above specified target
levels.
Effective as of January 1, 1996, the Company acquired substantially all of
the assets of Koors Perry, a regional business communications services
provider based in Atlanta, Georgia with revenue of approximately $8.9 million
for the nine months ended September 30, 1995. The Company has integrated Koors
Perry with its Atlanta office and has used it as a base from which to expand
its presence in the southeastern U.S. In June, 1996, the Company acquired
Lighthouse, a leading midwestern business communications services provider,
with revenue of approximately $10.4 million for the year ended December 31,
1995. The Company has integrated its Chicago office with the Lighthouse
headquarters in Rolling Meadows, Illinois and has used it as a base from which
to expand its presence in the midwestern U.S. The acquisition of Lighthouse
resulted in the Company's establishing a relationship with, among other
clients, Motorola, Inc. Also in June, 1996, the Company acquired Spectrum, a
leading London-based producer of meetings and events and provider of other
business communications services with a significant presence in the United
Kingdom and Europe with revenue of approximately $20.5 million for the nine
months ended March 31, 1996. The acquisition of Spectrum allowed the Company
to establish an international presence, resulted in the Company's establishing
a relationship with, among other clients, the European division of a large
domestic automobile manufacturer and will enable it to serve the global needs
of its domestic clients.
In September, 1996, the Company acquired TAVS, a leading provider of audio
visual equipment rentals and related staging services, including hotel audio
visual outsourcing services, in the United States. The acquisition of TAVS
enables the Company to offer its own audio visual equipment and staging
services for use at meetings and events serviced by the Company and reduce the
Company's reliance on third party vendors. The Company also believes that
since many TAVS' clients are hotel properties whose business customers tend to
book hotel facilities well in advance of meetings and events, and often prior
to contacting a business communications services provider, it will have
opportunities to benefit from cross-referral of customers. TAVS reported
revenue of approximately $45.9 million for the year ended December 31, 1995.
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The total initial purchase price of the acquisitions completed during fiscal
1996 was approximately $43.9 million. Certain of such acquisitions also
included contingent payment provisions.
RECENTLY ANNOUNCED PURCHASE AGREEMENT
In December, 1996, the Company entered into a definitive agreement to
acquire all of the outstanding capital stock of Blumberg, a provider of audio
visual equipment rentals and sales, production and staging services and hotel
audio visual outsourcing services in the upper mid-west and southern U.S. Upon
consummation of the acquisition, the Company intends to integrate Blumberg's
operations with its existing operations and to expand its presence in the
geographic regions which Blumberg presently serves. Blumberg reported revenue
of $42.3 million for the year ended May 31, 1996.
SERVICES
Caribiner offers a wide range of business communications services, including
conceptualizing, planning and producing corporate meetings and events,
developing training and educational materials relating to new job skills,
products, systems and organizational processes, handling internal corporate
communications and creating interactive trade show exhibits. The Company also,
through its TAVS division, provides audio visual equipment rentals and staging
services, as well as hotel audio visual outsourcing services.
Specifically, Caribiner's services include:
BUSINESS MEETINGS AND EVENTS that introduce new products, present newly
designed corporate strategies to targeted audiences or honor a company's
leading contributors. Examples of recent engagements include:
. The creation, production and staging in May, 1995 of IBM's Golden Circle
Meeting, an event held each year to recognize outstanding achievements
during the year by IBM employees and attended by over 2,000 people.
Caribiner created, produced and staged the corporate presentations,
produced several video presentations, drafted speeches, composed original
music and identified and hired motivational speakers.
. The creation, production, staging and logistical support of the 1995
McDonald's Corporation Operations Road Tour, a traveling event held in
five different locations in the U.S. and Canada and performed 13 times
for an audience of nearly 10,000 store managers and operations personnel.
Caribiner produced original video presentations, drafted speeches given
by management and cast and developed original music, comedy and other
theatrical components for the project, which was used by McDonald's to
communicate business objectives for the coming year and update and train
attendees on new developments in operations systems and procedures.
. The production in October, 1996 of the Holiday Inn Worldwide Annual
Conference in Las Vegas, Nevada. This four-day event was designed to
reward, educate and inform 2,200 delegates made up of hotel owners,
partners and franchise holders who came together from around the world.
Caribiner drafted speeches, provided speech training, created visual
support, produced videos that specifically supported the marketing
presentations and provided staging for the event.
AUDIO VISUAL EQUIPMENT RENTAL AND STAGING SERVICES through its TAVS division
which is the preferred in-house provider of audio visual rental equipment in
approximately 70 hotel properties primarily in the southeastern U.S. and also
supplies such equipment and services to production companies and corporations
for use at meetings, events and training programs. In addition, the Company
recently signed an agreement to purchase Blumberg, which provides similar
services. See "--Recently Announced Purchase Agreement."
TRAINING PROGRAMS using interactive and technology-driven hardware designed
to improve employee productivity, in the areas of product knowledge, team
building, sales skills, personal skills and behavioral development. Some
examples include:
. The development in December, 1995 of computer-based training modules,
print-based quick reference tools, applications workshops and audio-based
reinforcement modules for Eastman Kodak Corporation to meet its need of
educating its sales representatives in connection with a new marketing
strategy.
. The development of a series of workshops for Sony USA Inc.'s National
Sales Meeting held in April, 1995 to achieve Sony's objectives of
reinforcing team-oriented concepts, educating its sales force about
products and services and instructing attendees about sales strategies
and applications. Caribiner designed
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several exercises, including a computer-based quiz game in which a team of
sales representatives were required to demonstrate their mastery of
important messages, information, strategies and tactics supporting their
marketing efforts and a team-building exercise involving their
construction of a tower from various props, which was interspersed with
various learning and discussion activities.
. The design and production of a video-based learning module in connection
in November, 1995 with a training workshop to assist Chemical Bank in its
effort to integrate its various divisions in order to provide a more
comprehensive array of business services to its clients.
CORPORATE COMMUNICATIONS PROGRAMS used to disseminate management's message
to employees and others. Some examples include:
. The development of strategic communication programs in 1995 for the Ford
Motor Co. that orient and train employees in connection with Ford 2000,
the re-engineering initiative undertaken by the automobile maker. Working
with Ford management throughout the world, Caribiner has developed a new
global internal communications plan and developed and coordinated an
executive development program that provides communications tools and
logistical support to Ford executives in their effort to educate
personnel regarding the objectives of Ford 2000.
. The preparation and design in 1995 of printed brochures and the
production of audio and visual materials used by ARAMARK in both its
internal and external communications as well as consultation with company
management in connection with their overall communications strategy.
EXHIBITS AND DISPLAYS, which involves the design and development of a
company's trade show exhibit or a visitor's center/lobby display. For example:
. The development of all creative and production elements for a major
consumer electronics company exhibit at the 1995 COMDEX Show in Las
Vegas. Caribiner designed the exhibit, created and produced all of the
creative elements in the form of both videos and printed materials and
developed and scripted presentations designed to attract participants to
the exhibit.
CLIENTS
Caribiner targets clients with large or potentially large recurring needs
for business communications services. Caribiner's client list covers a number
of industry sectors including automotive, information technology, insurance,
pharmaceuticals, financial services, fast food, lodging, petroleum and soft
drink.
Caribiner's clients include ARAMARK, Eastman Kodak Corporation, Ford Motor
Co., Holiday Inn Worldwide, IBM, McDonald's Corporation, Parke-Davis, a
division of Warner Lambert, Schering-Plough, Sears, Roebuck & Co. and Shell
Oil Company. During fiscal 1996, Ford Motor Co., IBM and State Farm Group
accounted for approximately 15%, 13% and 11%, respectively, of Caribiner's
revenues. From fiscal 1993 to fiscal 1996, the number of clients to whom the
Company provided services during the year grew from 65 to over 300.
Caribiner's size and strategic focus on enhancing and establishing client
relationships with large or potentially large accounts permits it to dedicate
personnel to a single client to strengthen and build the relationship and
increase the opportunity for cross-selling to other divisions or departments
of the client. When the Company recognized significant opportunities to expand
relationships with Ford Motor Co. and IBM, management decided to increase
Company resources devoted to the servicing of these two accounts. Accordingly,
the Company maintains a Detroit facility with a total of 27 full-time
employees to service the business communications needs of numerous individual
buyers from the 21 Ford business units for whom Caribiner executed projects in
fiscal 1996. In addition, in July, 1995 Caribiner dedicated personnel and
facilities in its White Plains (NY) office to provide services to IBM on a
worldwide basis. Caribiner believes that the strategy it has followed with the
Ford Motor Co. and IBM to build and maintain these accounts can be utilized to
develop and build relationships with other clients having a significant need
for business communications services.
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Among the ways the Company seeks to differentiate itself to clients from
other providers of business communications services are by its customer
service, its breadth of creative and technical expertise, its ability to
execute programs successfully, with complete "back-up" system technology, its
demonstrated ability to produce a broad range of projects, large and small,
across a number of industries, its full range of business communications
services, its continuous investment in new technology and equipment, its size
and its international presence.
SALES AND MARKETING
Historically, Caribiner has acquired new clients and marketed its services
primarily by cross-selling to existing clients, responding to requests for
proposals, pursuing client referrals, identifying prospects through research
of a potential client's business communications needs, actively marketing to
potential new customers and through acquisitions of other business
communications services providers. The Company solicits prospective accounts
through personal contacts by members of Caribiner's senior management as well
as through the Company's managers responsible for business development. When a
new account is established, the Company immediately assigns a sales executive
(an account manager) to the client to build the relationship and ensure that
the client's needs are being met, and to seek out further opportunities to
penetrate this account. The Company employs a full-time sales and marketing
staff of approximately 100 persons, and has dedicated a senior group of sales
and marketing executives to identify potential client relationship
opportunities and promote Caribiner's expertise and range of services.
Generally, account managers are assigned a number of different accounts which
may be comprised of a number of businesses or a number of divisions,
departments or groups within the same business.
OPERATIONS
General. Each of the Company's regional offices is run by a general manager,
who is supported by sales executives (the account managers) who establish and
foster customer relationships; creative and technical personnel who direct
concept development, staging and execution of a project; and producers and
project managers who have ultimate responsibility for project execution, media
creation and theatrical staging of an event. In addition, the Company employs
on-site service representatives to serve TAVS' hotel properties. Each regional
office supplements its staff with independent contractors or part-time
employees where needed. Caribiner has long-standing relationships with
freelance contractors and part-time employees in various production and
creative disciplines, which gives it a competitive advantage in being able to
produce the highest quality events for its customers while keeping overhead
lower and utilizing resources more efficiently.
Although each office focuses on serving the needs of clients located in its
geographic region, Caribiner's management emphasizes the coordination of
activities between offices and allocates, when necessary, resources from one
office in order to support another. This coordination of activities allows the
Company to serve its clients at a local level while at the same time providing
clients with resources and expertise of an international organization.
Caribiner has also centralized the accounting, finance, and information
technology functions of the Company in New York and Atlanta to minimize
overhead and administrative expense.
Foreign Operations. In June, 1996, the Company acquired Spectrum, a leading
London-based producer of meetings and events and provider of other business
communications services with a significant presence in the United Kingdom and
Europe. Spectrum owns Spectrum Communications Limited and MWA in London and a
joint venture interest in Spectrum Communications LLC in Dubai. In addition,
in June, 1996, the Company opened its Hong Kong office, primarily to better
serve its international clients in the Pacific Rim. During fiscal 1996, the
Company's foreign operations generated revenue of $7.0 million and an
operating loss of $.1 million and at September 30, 1996 had identifiable
assets, including goodwill, of $16.1 million. Such financial information
reflects only four months of foreign operations, and the Company expects that
its foreign operations will be more material in the future.
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EMPLOYEES AND FACILITIES
As of December 13, 1996, Caribiner employed 818 full-time employees based as
follows:
<TABLE>
<CAPTION>
OFFICE LOCATION NUMBER OF
--------------- FULL-TIME
Domestic EMPLOYEES
-------- ---------
<S> <C>
New York (including corporate headquarters)..................... 125
Atlanta ........................................................ 185
Rolling Meadows (IL)............................................ 59
Orlando......................................................... 64
Detroit......................................................... 30
White Plains (NY)............................................... 28
Los Angeles .................................................... 18
Dallas.......................................................... 17
Boston.......................................................... 13
Columbia (MD)................................................... 7
Houston......................................................... 5
San Francisco................................................... 4
Columbia (SC)................................................... 3
<CAPTION>
International
-------------
<S> <C>
London.......................................................... 88
Dubai........................................................... 14
Hong Kong....................................................... 5
</TABLE>
Approximately 153 employees are located on site at various hotels for which
TAVS is the preferred provider of in-house audio visual equipment rentals.
The Company has no collective bargaining or similar agreements with unions;
however, the Company does from time to time independently contract with or
hire part-time union personnel, especially during the production of a
particular meeting or event. Over the course of any given project period, the
Company evaluates the production personnel requirements and determines the
extent to which it must supplement its available employee base with the use of
freelance contractors or part time employees. Depending on the timing and
specific requirements of the events and the number of overlapping events in
any given planning period, the use of freelance contractors and part time
employees can vary significantly. The Company considers its relations with its
full-time employees, part-time employees and independent contractors to be
good.
Caribiner's corporate headquarters and New York office are located in leased
offices occupying approximately 40,000 square feet at 16 West 61st Street, New
York, New York 10023-7604. The lease for the Company's headquarters expires in
2000. The Company is presently reviewing expansion into additional space it
expects to require as it grows, but has not entered into any commitments.
The Company also leases offices in each of the cities listed in the above
table (including two offices in the Detroit area). The Company leases
warehouse space in Atlanta, Chicago, Dallas, North Bergen (NJ), Orlando,
Columbia (MD) and Columbia (SC). The terms of the leases expire between 1997
and 2011. The Company anticipates that as it expands, it will require
additional office space to support such growth and believes that suitable
additional or alternative space will be available as needed.
COMPETITION
Although no firm data exists with respect to the size of the business
communications services industry and the number and size of competitors within
the industry, management believes, based on its experience in the
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industry, that the business communications services industry is highly
fragmented. Caribiner believes that no one participant or small number of
participants is dominant in the industry and that its competitors consist
primarily of small, generally regional firms which provide a limited range of
services, although there are several participants in the industry whose
business, like that of Caribiner, is full service in scope. Management
believes that certain competitors have capabilities and resources comparable
to and in certain respects greater than those of the Company. Caribiner also
competes with in-house communications staffs of existing and potential
clients.
Management believes that the competitive factors most important in the
business communications services industry are organizational breadth,
creative, production and technical expertise, demonstrated ability to execute
projects, range of services offered, range of industries serviced, size,
geographical presence and price.
The Company believes its principal strengths are the depth of its creative
and production talent, its ability to consistently meet its clients'
objectives and expectations, its focus on quality and customer service and its
ability to manage effectively and reliably several complex, large-scale
projects contemporaneously. The Company believes it is at a competitive
disadvantage in certain regions where it does not have local offices.
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incidental to its
business. In the opinion of the Company, no such litigation has had or is
likely to have a material adverse effect on the Company's results of
operations, financial condition or liquidity.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Raymond S. Ingleby............. 33 Chairman of the Board and Chief Executive
Officer of Caribiner International, Inc.
Arthur F. Dignam............... 50 Executive Vice President and Chief Financial
and Administrative Officer of Caribiner
International, Inc.
Mark M. Cohen.................. 49 Executive Vice President of Caribiner
International, Inc. and President of
Caribiner Communications
Lawrence P. Golen.............. 39 Executive Vice President of Caribiner
International, Inc. and President of Total
Audio Visual Services
Brian Shepherd................. 39 Executive Vice President, Strategic Planning
and International Operations, of Caribiner
International, Inc.
Errol M. Cook.................. 57 Director
Bryan D. Langton............... 60 Director
Sidney Lapidus................. 59 Director
David E. Libowitz.............. 33 Director
</TABLE>
RAYMOND S. INGLEBY has been a director and Chief Executive Officer of the
Company since its formation in 1989, and Chairman since June, 1993. From 1988
through 1993, Mr. Ingleby served as Chairman and Chief Executive Officer of
Ingleby Communications Corporation, which he founded in 1988. In 1985, Mr.
Ingleby, a British citizen, founded his own advertising company that was
engaged in the installation of advertising displays in hotels, which he sold
in 1988.
ARTHUR F. DIGNAM has been Executive Vice President and Chief Financial
Officer of the Company since February, 1994 and Chief Administrative Officer
since November, 1995. Prior to joining Caribiner, Mr. Dignam worked as an
independent consultant from August, 1993 to January, 1994, and was Vice
President and Chief Financial Officer for Panavision International, the
privately-held predecessor to Panavision Inc., a company that manufactures
high quality cameras and accessories for the film and television industry,
from February, 1989 to July, 1993. Prior thereto, Mr. Dignam served as chief
financial officer in both the news division and operations and technical
services division of the National Broadcasting Company.
MARK M. COHEN has been Executive Vice President of the Company and President
of Caribiner Communications since November, 1995. Mr. Cohen joined Caribiner
in November, 1993 as Executive Vice President of Caribiner, Inc. and General
Manager of its New York office. Prior to joining Caribiner, Mr. Cohen served
in various general management positions with Maritz Inc., a marketing service
and performance improvement company, from June, 1976 to November, 1993.
LAWRENCE P. GOLEN has been Executive Vice President of the Company and
President of TAVS since October, 1996, when he joined Caribiner after its
acquisition of TAVS from GECCLC. Prior thereto, Mr. Golen served as General
Manager of TAVS from September, 1994 to October, 1996 and as General Manager
of the Test Equipment Management Services division of GECCLC from May, 1994 to
October, 1996. Prior thereto, Mr. Golen served as Vice President-Marketing and
Sales of Douglas Manufacturing from January, 1993 to April, 1994 and Regional
Marketing Director of GE Plastics from November, 1991 to December, 1993.
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BRIAN SHEPHERD has been Executive Vice President, Strategic Planning and
International Operations, of Caribiner International, Inc. since November,
1995. Mr. Shepherd joined the Company as Vice President of Caribiner, Inc. and
General Manager of its Atlanta office in July, 1995. Mr. Shepherd was formerly
President and Chief Executive Officer of Imagination (USA) Inc., a subsidiary
of Imagination, UK, a large European-based business communications company,
from December, 1992 to July, 1995. Previously, he had been Managing Director
of the London office of Imagination, UK.
ERROL M. COOK has been a director of the Company since June, 1992. Mr. Cook
has been a Managing Director of E.M. Warburg, Pincus & Co., Inc. ("EMW") since
March, 1991. Mr. Cook serves on the board of directors of certain privately
held companies.
BRYAN D. LANGTON has been a director of the Company since April, 1996. Mr.
Langton has been the Chairman Emeritus of Holiday Inn Worldwide, a subsidiary
of Bass plc, since December, 1996. Prior thereto Mr. Langton served as
Chairman and Chief Executive Officer of Holiday Inn Worldwide and Holiday Inn,
Inc. from February, 1990 to December, 1996. Mr. Langton serves on the board of
directors of Bass plc.
SIDNEY LAPIDUS has been a director of the Company since June, 1992. Mr.
Lapidus is a Managing Director of EMW. Mr. Lapidus has been with EMW or its
predecessor since 1967. Mr. Lapidus serves on the board of directors of
Renaissance Communications Corp., Pacific Greystone Corporation and Panavision
Inc., as well as several privately held companies.
DAVID E. LIBOWITZ has been a director of the Company since June, 1992. Mr.
Libowitz has served as a Vice President of Warburg, Pincus Ventures, Inc., the
venture banking subsidiary of EMW, since January, 1995 and has been associated
with EMW since July, 1991. Mr. Libowitz serves on the board of directors of
certain privately held companies.
BOARD COMPOSITION; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION; OTHER COMMITTEES
At present, the Board of Directors of the Company is composed of five
directors. The Board intends to nominate and appoint one additional person to
serve as an independent director. Pursuant to the terms of the Stockholders
Agreement, subject to certain conditions, Warburg has the right to designate
up to three persons for nomination to the Board and Raymond S. Ingleby has the
right to be designated as a director for nomination to the Board. See "Risk
Factors--Control by Management and Current Stockholders" and "Certain
Relationships and Transactions with Related Persons--Stockholders Agreement."
The Compensation Committee of the Board of Directors of the Company
determines the salaries and bonuses of the Company's executive officers and
administers the 1996 Stock Option Plan. During the Company's last completed
fiscal year Errol M. Cook, David E. Libowitz and, following his appointment to
the Board of Directors, Bryan D. Langton served as members of the Compensation
Committee. The sole general partner of Warburg is Warburg, Pincus & Co., a New
York general partnership ("WP"). Lionel I. Pincus is the managing partner of
WP and may be deemed to control WP. E.M. Warburg, Pincus & Company, a New York
general partnership that has the same general partners as WP ("E.M. Warburg"),
manages Warburg. WP has a 20% interest in the profits of Warburg, and through
its wholly owned subsidiary, EMW, owns 1.13% of the limited partnership
interests in Warburg. Mr. Cook is a Managing Director of EMW, and a partner of
WP and E.M. Warburg. Mr. Libowitz is an officer of a wholly-owned subsidiary
of EMW. See "Certain Relationships and Transactions with Related Persons."
The Audit Committee of the Board of Directors recommends the appointment of
auditors and oversees the accounting and audit functions of the Company. At
present, Bryan D. Langton serves as the Chairman and sole member of the Audit
Committee. The Board of Directors has indicated its intention to appoint to
the Audit Committee a second independent director when such director is
appointed to the Board. During the Company's last completed fiscal year Errol
M. Cook and David E. Libowitz also served as members of the Audit Committee
until their resignations from such committee upon Mr. Langton's appointment to
such committee in May, 1996.
46
<PAGE>
DIRECTOR COMPENSATION
Directors who are not employees or officers of the Company receive cash
compensation of $12,500 per annum payable quarterly (other than directors
affiliated with Warburg, who have waived the right to receive any
compensation). Directors are also reimbursed for certain expenses in
connection with attendance at Board and committee meetings. Other than with
respect to reimbursement of expenses, directors who are employees or officers
of the Company do not receive additional compensation for services as a
director.
Effective March 11, 1996, the Company adopted the Non-Employee Directors'
Stock Plan, pursuant to which the Company awards directors (other than
directors affiliated with Warburg, who have waived the right to receive any
compensation, or directors who may be employees of the Company) upon their
becoming a director and on January 1 of each year shares of Common Stock
having a market value of $12,500. The Non-Employee Directors' Stock Plan
provides that the maximum number of shares of Common Stock available for issue
under the plan is 15,000 shares, subject to adjustment to prevent dilution or
expansion of rights.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid or accrued by the Company for services rendered to the
Company and its subsidiaries in all capacities for the fiscal years ended
September 30, 1995 and 1996, by its Chief Executive Officer and each of the
Company's other executive officers whose total salary and bonus exceeded
$100,000 during such fiscal year (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL
COMPENSATION SECURITIES
----------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Raymond S. Ingleby
Chairman of the Board and Chief
Executive Officer of
Caribiner International, Inc.
1996.............................. $384,027 (1) -0- $2,200(2)
1995.............................. 325,000 $162,500 -0- 2,200(2)
Arthur F. Dignam
Executive Vice President and Chief
Financial and Administrative Officer
of Caribiner International, Inc.
1996.............................. 215,851 (1) 3,000 -0-
1995.............................. 195,834 37,600 -0- -0-
Mark M. Cohen
Executive Vice President of Caribiner
International, Inc. and President of
Caribiner Communications
1996.............................. 227,728 (1) 3,000 -0-
1995.............................. 190,000 46,500 -0- -0-
Brian Shepherd
Executive Vice President, Strategic
Planning and International
Operations of Caribiner
International, Inc.
1996.............................. 220,001 (1) 3,000 -0-
1995.............................. 33,031 -0- -0- -0-
</TABLE>
- --------
(1) The final allocation of the bonus pool for fiscal 1996 will not be
determined until the end of December, 1996.
(2) All Other Compensation consists of life insurance premiums paid by the
Company.
47
<PAGE>
Option Grants
The following table sets forth the grants of options with respect to Common
Stock during the year ended September 30, 1996, to the Named Executive
Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ---------------------------------------------------------------------- -----------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Raymond S. Ingleby...... -- -- -- -- -- --
Arthur F. Dignam........ 3,000(1) 2.0% $28.875 07/29/2006 $13,654 $23,432
Mark M. Cohen........... 3,000(1) 2.0% 28.875 07/29/2006 13,654 23,432
Brian Shepherd.......... 3,000(1) 2.0% 28.875 07/29/2006 13,654 23,432
</TABLE>
- --------
(1) Such options will vest one-third on July 29, 1997, one-third on July 29,
1998 and one-third on July 29, 1999.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Ingleby,
Dignam, Cohen, Shepherd and Golen. Mr. Ingleby's employment agreement expires
on October 1, 1998. The employment agreements of Messrs. Dignam and Cohen
expire on December 1, 1998. Mr. Shepherd's employment agreement expires on
July 25, 1998. Mr. Golen's employment agreement expires on October 14, 1999.
The Company is required to give Mr. Ingleby at least 12 months' notice if it
does not intend to renew or extend his contract, and otherwise must pay him all
compensation under the agreement for 12 months from delivery of such notice.
The employment agreement for each of Mr. Dignam and Mr. Cohen provides that the
Company is required to give such executive at least six months' notice if it
does not intend to renew or extend his contract. The employment agreement for
each of Mr. Dignam and Mr. Cohen provides for an option to renew for an
additional three years at the discretion of the Company.
The annual base salary of Mr. Ingleby, Mr. Dignam, Mr. Cohen, Mr. Shepherd
and Mr. Golen under their employment agreements currently is $385,000,
$220,000, $235,000, $220,000 and $210,000, respectively. Each executive is also
entitled to fringe benefits, and to an annual bonus based on Company
performance against targets established by the Board each year. Under each
agreement the Board is to review the employee's salary at least annually and
the salary amounts may be increased in the Board's discretion. Each executive
may be terminated for "cause" (as defined in the agreements), with all
compensation ceasing. Under Messrs. Ingleby, Dignam and Cohen's employment
agreements, if the executive is terminated without cause or, if the executive
terminates his employment for "good reason" (as defined), the executive is
entitled to full compensation for the remaining term of the agreement (or, if
longer, in the case of Mr. Ingleby, for 12 months). "Good reason" includes, in
the case of Mr. Ingleby, a change in control (as defined) of the Company. The
consummation of the Offering will not result in such a change in control. Each
employment agreement includes a two year non-competition and non-solicitation
of clients and employees provision. The employment agreements of Mr. Ingleby,
Mr. Dignam and Mr. Cohen provide that, in the event of the employee's death,
the employee's beneficiary will receive a payment equal to six months' base
salary. Each of Mr. Shepherd's and Mr. Golen's employment agreement provides
for a payment equal to one month's base salary in the event of his death.
48
<PAGE>
INCENTIVE PLANS
1996 STOCK OPTION PLAN
Effective January 1, 1996, the Company adopted the 1996 Stock Option Plan
(the "Option Plan"). The Option Plan is designed to provide employees with a
more direct stake in the Company's future welfare and an incentive to remain
with the Company. It is also expected that the Option Plan will encourage
qualified persons to seek employment with the Company.
The Option Plan provides for grants of "Incentive Stock Options," meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and "Non-qualified Stock Options." The Option Plan
provides that options for an aggregate of 364,000 shares of Common Stock shall
be available for award, subject to adjustment by the Committee (as hereinafter
defined) to prevent dilution or expansion of rights. Options may be granted to
employees of the Company or any of its subsidiaries, provided that no employee
may receive options for more than 200,000 shares of Common Stock in the
aggregate in any fiscal year. As of December 1, 1996, stock options to
purchase an aggregate of 184,400 shares of Common Stock (175,800 of which have
not yet vested) were outstanding.
The Option Plan is administered by the Compensation Committee of the Board
of Directors (the "Committee") and is comprised of not less than two
disinterested directors within the meaning of Rule 16b-3 of the Exchange Act.
The Option Plan permits the Committee to determine which employees shall
receive options and the times when options are to be granted. The Committee
also determines the purchase price of Common Stock covered by each option, the
term of each option, the number of shares of Common Stock to be covered by
each option and any performance objectives or vesting standards applicable to
each option. The Committee also designates whether the options shall be
Incentive Stock Options or Non-qualified Stock Options.
The purchase price per share under each Incentive Stock Option or Non-
qualified Stock Option is the "Market Price" (as such term is defined in the
Option Plan) of the Common Stock on the date the option is granted, except
that the exercise price for an Incentive Stock Option granted to a 10%
stockholder may not be less than 110% of the Market Price of the Common Stock
on the date of the grant. The aggregate Market Price of the Common Stock
exercisable under Incentive Stock Options held by any optionee during any
calendar year may not exceed $100,000. Incentive Stock Options granted to
employees under the Option Plan have a maximum term of ten years. Incentive
Stock Options granted to 10% stockholders have a maximum term of five years.
Options are not transferable except by will or pursuant to the applicable laws
of descent and distribution. Notwithstanding the general restriction on
transferability, in the sole discretion of the Committee, Non-qualified Stock
Options may be made transferable subject to the requirements of Rule 16b-3.
In the event that an employee is terminated for any reason other than death,
Disability, Retirement or Cause (as such terms are defined in the Option
Plan), to the extent that the employee had the right to exercise an option,
such option will be exercisable until the earlier of the expiration date of
the option, or within 30 days of the date of such termination. Options held on
the date of Disability or Retirement, whether or not exercisable on such date,
are exercisable within one year of the date of Disability or Retirement.
Options held by an employee at the date of death, whether or not exercisable
on the date of death, are exercisable by the beneficiary of the employee
within one year from the date of death. The Committee may, in its sole
discretion, cause any option to be forfeited upon an employee's termination
for Cause (as defined in the Option Plan). In the event of a Change of Control
(as such term is defined in the Plan) of the Company, all outstanding options
will vest and appropriate provisions shall be made for the protection of
options by substitution on an equitable basis of appropriate stock of the
Company or appropriate stock of the merged, consolidated or otherwise
reorganized corporation, as the case may be.
The Board is permitted to suspend, terminate, modify or amend the Option
Plan, provided that any amendment that would (i) materially increase the
aggregate number of shares, (ii) materially increase benefits
49
<PAGE>
accruing to employees, or (iii) materially modify the eligibility requirements
for participation shall be subject to stockholder approval, provided, however,
that stockholder approval is not required for adjustments to the Option Plan
or to the number of shares available thereunder which are deemed appropriate
by the Committee to prevent dilution or expansion of rights.
401(K) PLAN
In December, 1994, Caribiner, Inc. adopted the Employee Profit Sharing Plan
and Trust For Employees of Caribiner, Inc. (the "401(k) Plan") to replace a
previously existing similar plan. Generally, any employee who has completed 3
months of service and is over 21 years of age is eligible to participate in
the 401(k) Plan. Each eligible employee may elect to contribute to the 401(k)
Plan, through payroll deductions, up to 10% of his or her compensation for
services rendered in any year, not to exceed a statutorily prescribed annual
limit. Participants in the 401(k) Plan are always fully vested in their own
contributions. The terms of the 401(k) Plan provide that the Company may make
matching contributions to the 401(k) Plan based on the company's net income
and at the discretion of the Board of Directors. Each participant becomes
fully vested in the Company's contributions allocated to his or her account
upon completion of five years of service. The Company's contributions are tax-
deductible to the Company. Company contributions to the 401(k) Plan for fiscal
1994, 1995 and 1996 were not significant, and no contributions were made by
the Company to the accounts of any of the Named Executive Officers.
50
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RELATED PERSONS
INVESTMENT BY WARBURG, PINCUS INVESTORS, L.P.
Pursuant to a Securities Purchase Agreement, dated as of June 30, 1992,
Warburg purchased the Convertible Note in the principal amount of $12.0 million
and shares of preferred stock for $4.0 million. The proceeds from the sale to
Warburg of the Convertible Note and the preferred stock were used in part to
finance the Company's acquisition in June, 1992 of Caribiner, Inc. Immediately
prior to the consummation of the Initial Public Offering, Warburg converted the
Convertible Note and all the shares of its preferred stock (including the
shares of preferred stock which it received upon conversion of the Convertible
Note) into an aggregate of 3,596,250 shares of Common Stock.
The Convertible Note accrued interest at the rate of 11.5% per annum on the
outstanding principal amount thereof, and interest was payable quarterly in
cash. Pursuant to the terms of the Convertible Note, the Company chose to defer
interest on such note, which deferred interest also accrued interest at the
rate of 11.5% per annum.
Pursuant to the terms of the preferred stock, Warburg was entitled to
received, when and as declared by the Company's Board, a cash dividend at the
annual rate of 12% of the liquidation preference per share of the preferred
stock. Dividends on the preferred stock were cumulative, and unpaid dividends
(whether or not declared) accrued at the rate of 12% per annum.
Proceeds from the Initial Public Offering aggregating $8.5 million were used
to pay accrued interest on the Convertible Note and accumulated dividends on
the preferred stock.
WARBURG TERM LOAN AND WARRANTS
Pursuant to the Loan and Warrant Agreement, dated as of August 3, 1993, which
governed the Warburg Term Loan, Warburg had agreed to lend to the Company up to
$10.0 million in loans for acquisitions and other corporate purposes approved
by the Board of Directors of the Company. Amounts outstanding under the Warburg
Term Loan accrued interest at the rate of 11% per annum compounded semi-
annually. As of December 31, 1995, there was approximately $3.0 million
outstanding under the Warburg Term Loan. The outstanding amount under the
Warburg Term Loan, including accrued interest of approximately $4.0 million,
was repaid upon consummation of the Initial Public Offering, and the Loan and
Warrant Agreement was terminated.
In partial consideration for making advances under the Warburg Term Loan,
Caribiner issued warrants to Warburg at the rate of 0.50% of the then fully
diluted Common Stock per each $1.0 million principal amount of an advance. In
addition, after the first anniversary of each advance and at the close of every
quarter thereafter, additional warrants were issuable to Warburg at the rate
0.375% of the fully diluted Common Stock per each $1.0 million in outstanding
principal amount of such advance. As of December 31, 1995, warrants to purchase
an aggregate 534,505 shares of Common Stock had been issued to Warburg with a
weighted average exercise price per share of $3.16. Warburg exercised all of
the warrants immediately prior to the completion of the Initial Public
Offering.
ADVANCES TO RAYMOND S. INGLEBY
As a result of a series of advances made from 1989 to 1992, Raymond S.
Ingleby, the Chairman of the Board and Chief Executive Officer of the Company,
became obligated to pay to the Company an aggregate amount of $362,630. Such
repayment obligations did not bear interest. The Company fully reserved against
such obligations in fiscal 1992. Mr. Ingleby repaid the full amount of such
obligations in connection with the Initial Public Offering.
51
<PAGE>
STOCKHOLDERS AGREEMENT
Upon completion of the Initial Public Offering, the Company entered into the
Stockholders Agreement with Warburg and Raymond S. Ingleby. The Stockholders
Agreement contains, among other things, various terms regarding nominations
for the Company's Board of Directors and certain registration rights granted
by the Company. Pursuant to the terms of the Stockholders Agreement, for so
long as Warburg beneficially owns at least 35%, 20% or 10% of the outstanding
shares of Common Stock, it will have the right to designate three nominees,
two nominees or one nominee, respectively, for director. The Stockholders
Agreement also provides that for so long as Mr. Ingleby shall hold office as
the Chairman and Chief Executive Officer of the Company, he will have the
right to be designated as a nominee for director.
Additionally, the Stockholders Agreement provides that Warburg is entitled
to three "demand" registrations, which may be exercised at any time. The
Stockholders Agreement also provides that Raymond S. Ingleby will be entitled
to one "demand" registration with respect to not less than 50% of the number
of shares of Common Stock that he beneficially owned immediately prior to the
completion of the Initial Public Offering (i.e., 698,178 shares), provided
that Mr. Ingleby may not exercise such "demand" until the earliest of (i) six
months after the effective date of a registration statement filed by the
Company in respect of shares of Common Stock owned by Warburg, (ii) the
distribution by Warburg of shares of Common Stock to its partners and (iii)
March 15, 2001. In addition, in the event Mr. Ingleby is terminated from his
employment by the Company and he has not exercised his demand registration, he
will be entitled to one "demand" registration six months after the date of his
termination to the extent he would be required by law to effect such
registration in order to sell his shares. Mr. Ingleby is also entitled to
"piggyback" registration rights in the event that Warburg exercises a "demand"
registration. In addition, the Stockholders Agreement grants to Mr. Ingleby
certain co-sale rights in the event that Warburg sells, transfers or otherwise
disposes of any shares of its Common Stock.
52
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of December 1, 1996, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby with respect to
(i) each person known by the Company to be the beneficial owner of more than
5% of the Common Stock, (ii) each director of the Company, (iii) each of the
executive officers of the Company and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES NUMBER SHARES
BENEFICIALLY OF SHARES BENEFICIALLY
OWNED PRIOR TO BEING OWNED
OFFERING OFFERED AFTER OFFERING
NAME AND ADDRESS OF BENEFICIAL ----------------- --------- -----------------
OWNER NUMBER PERCENT NUMBER NUMBER PERCENT
- ------------------------------ --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Warburg, Pincus Investors, L.P.
(1)............................. 4,130,755 43.0% -- 4,130,755 36.4%
466 Lexington Avenue
10th Floor
New York, NY 10017
Raymond S. Ingleby(2)............ 1,047,266 10.9 100,000 947,266 8.3
c/o the Company
16 West 61st Street
New York, NY 10023
Arthur F. Dignam................. 36,898 * 14,000 22,898 *
Mark M. Cohen.................... 35,508 * 14,200 21,308 *
Lawrence P. Golen (3)............ 7,300 * -- 7,300 *
Brian Shepherd................... 23,611 * -- 23,611 *
Errol M. Cook (1)................ 4,130,755 43.0 -- 4,130,755 36.4
Bryan D. Langton(4).............. 13,497 * -- 13,497 *
Sidney Lapidus (1)............... 4,130,755 43.0 -- 4,130,755 36.4
David E. Libowitz (1)............ -- * -- -- *
All executive officers and
directors as a group
(9 persons)(5).................. 5,294,835 55.2% 128,200 5,166,635 45.5%
</TABLE>
- --------
* Less than 1%
(1) The sole general partner of Warburg is Warburg, Pincus & Co., a New York
general partnership ("WP"). Lionel I. Pincus is the managing partner of WP
and may be deemed to control WP. E.M. Warburg, Pincus & Company, a New
York general partnership that has the same general partners as WP ("E.M.
Warburg"), manages Warburg. WP has a 20% interest in the profits of
Warburg, and through its wholly owned subsidiary, EMW, owns 1.13% of the
limited partnership interests in Warburg. Messrs. Errol M. Cook and Sidney
Lapidus, each a director of the Company, are Managing Directors of EMW,
and partners of WP and E.M. Warburg. As such, Messrs. Cook and Lapidus may
be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Exchange Act) in an indeterminate portion of the
shares of Common Stock beneficially owned by Warburg, EMW and WP. Mr.
David E. Libowitz, a director of the Company, is an officer of a wholly-
owned subsidiary of EMW. Each of Messrs. Cook, Lapidus and Libowitz
disclaims "beneficial ownership" of the Common Stock owned by Warburg
within the meaning of Rule 13d-3 under the Exchange Act.
(2) In the event the over-allotment option is exercised in full and Mr.
Ingleby sells an additional 200,000 shares of Common Stock pursuant
thereto, Mr. Ingleby would beneficially own 747,266 shares of Common Stock
after the Offering, or 6.5%.
(3) Includes presently exercisable options to purchase 7,000 shares of Common
Stock at $44.75 per share, which expire in October, 2006.
(4) Includes presently exercisable options to purchase 9,000 shares of Common
Stock at $42.62 per share, which expire in November, 2006.
(5) In the event the over-allotment option is exercised in full and Mr.
Ingleby sells an additional 200,000 shares of Common Stock pursuant
thereto, all executive officers and directors as a group would be offering
an aggregate of 328,200 shares of Common Stock and would beneficially own
4,966,635 shares of Common Stock after the Offering, or 43.4%.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 42,000,000 shares,
of which 40,000,000 shares are shares of Common Stock and 2,000,000 shares are
shares of preferred stock. At December 1, 1996, there were 9,598,656 shares of
Common Stock outstanding, held of record by 73 shareholders, and no shares of
preferred stock outstanding.
The following summary description relating to the capital stock does not
purport to be complete. Reference is made to the Certificate which is filed as
an exhibit to the Registration Statement of which this Prospectus is a part,
for a detailed description of the provisions thereof summarized below.
COMMON STOCK
Holders of Common Stock are entitled to receive such dividends as may from
time to time be declared by the Board of Directors of the Company out of funds
legally available therefor. Holders of Common Stock are entitled to one vote
per share on all matters on which the holders of Common Stock are entitled to
vote and do not have any cumulative voting rights. Holders of Common Stock
have no preemptive, conversion, redemption or sinking fund rights. In the
event of a liquidation, dissolution or winding-up of the Company, holders of
Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all debts and liabilities of
the Company and the liquidation preference of any outstanding Preferred Stock.
The outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby when issued will be, fully paid and nonassessable. The rights,
preferences and privileges of holders of Common Stock are subject to, and may
be adversely affected by, the rights of the holders of any class or series of
Preferred Stock which the Company may issue in the future.
The Common Stock is listed on the New York Stock Exchange under the symbol
"CWC."
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of
Preferred Stock in one or more classes or series and to fix the number of
shares constituting any such class or series, and the voting powers,
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof,
including the dividend rights, dividend rate, terms of redemption, redemption
price or prices, conversion rights and liquidation preferences of the shares
constituting any class or series, without any further vote or action by the
stockholders of the Company. The issuance of Preferred Stock by the Board of
Directors could adversely affect the rights of holders of Common Stock. For
example, the issuance of Preferred Stock could result in a class of securities
outstanding that would have preferences over the Common Stock with respect to
dividends and in liquidation and that could (upon conversion or otherwise)
enjoy all of the rights appurtenant to Common Stock.
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control
of the Company through merger, tender offer, proxy, consent or otherwise by
making such attempts more difficult to achieve or more costly. The Board of
Directors may issue Preferred Stock without stockholder approval and with
voting and conversion rights which could adversely affect the voting power of
holders of Common Stock.
DELAWARE LAW, CHARTER AND BY-LAW PROVISIONS
Section 203 of the Delaware General Corporation Law (the "DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" (as defined in Section 203, generally, to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the
assets or stock of the corporation or its majority-owned subsidiaries and
transactions
54
<PAGE>
which increase an interested stockholder's percentage ownership of stock) with
a publicly-held Delaware corporation for three years following the time such
person became an interested stockholder unless (i) before such person became
an interested stockholder, the board of directors of the corporation approved
the transaction in which the interested stockholder became an interested
stockholder or approved the business combination, (ii) upon consummation of
the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding voting stock held by directors who are also officers of
the corporation and by employee benefit plans that do not provide employees
with the right to determine confidentially whether shares held by the plan
will be voted or tendered in a tender or exchange offer) or (iii) following
the transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the corporation
and ratified at a meeting of stockholders (and not by written consent) by the
affirmative vote of the holders of two-thirds of the outstanding voting stock
of the corporation not owned by the interested stockholder. The Board of
Directors of the Company approved the transactions in June, 1992 pursuant to
which Warburg became an interested stockholder.
The Certificate and By-Laws of the Company (i) require the approval of at
least 50% of the members of the Board of Directors in order for a special
meeting of stockholders to be called, (ii) prohibit the stockholders of the
Company from taking action by written consent in lieu of a meeting and (iii)
require advance notice by stockholders of an intention to nominate persons for
election to the Board of Directors. Such provisions could have the effect of
discouraging attempts by others to obtain control of the Company or delaying
changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
11,348,656 shares of Common Stock, of which 5,658,387 will be freely tradeable
(other than by an "affiliate" of the Company (as such term is defined in the
Securities Act)) without restriction or registration under the Securities Act.
The remaining 5,690,269 shares of Common Stock to be outstanding (the
"Restricted Shares") are held by officers, directors, employees and other
stockholders of the Company. The Restricted Shares were sold by the Company in
reliance on exemptions from the registration requirements of the Securities
Act, and include 510,836 Restricted Shares which were sold by the Company in
reliance on the exemption from the registration requirements of the Securities
Act contained in Rule 701 under the Securities Act (the "Rule 701 Shares").
All of the Restricted Shares are "restricted securities" within the meaning of
Rule 144 and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including
the exemption contained in Rule 144.
Approximately 5,123,446 Restricted Shares are eligible for sale in the
public market, subject to the provisions of Rule 144 (of which approximately
shares are subject to the lock-up described below). The Company, the
Selling Stockholders, Warburg and all of the Company's directors and executive
officers have, subject to certain exemptions in the case of the Company,
agreed not to, directly or indirectly sell, offer to sell, grant any option
for sale of, or otherwise dispose of, any capital stock of the Company, or any
security convertible or exchangeable into, or exercisable for, such capital
stock, or, in the case of the Company, file any registration statement with
respect to any of the foregoing, for a period of 90 days after the date of
this Prospectus, without the prior written consent of Merrill Lynch. The
remainder of the Restricted Shares held by existing stockholders will become
eligible for sale at various times, subject to the provisions of Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, is entitled to sell within any three-month period
a number of restricted securities that does not exceed the greater of 1% of
the then outstanding
55
<PAGE>
shares of Common Stock and the average weekly trading volume on a national
securities exchange and/or in the over-the-counter market during the four
calendar weeks preceding such sale, provided that at least two years have
elapsed since such shares were acquired from the Company and certain manner of
sale, notice requirements and requirements as to the availability of current
public information about the Company are satisfied. Any person who is deemed
to be an affiliate of the Company must comply with the provisions of Rule 144
(other than the two-year holding period requirement) in order to sell shares
of Common Stock which are not restricted securities (such as shares acquired
by affiliates in the Offering). In addition, under Rule 144(k), a person who
is not an affiliate of the Company, and who has not been an affiliate of the
Company at any time during the 90 days preceding any sale, is entitled to sell
such shares without regard to the foregoing limitations, provided at least
three years have elapsed since the shares were acquired from the Company.
Securities issued in reliance on Rule 701 are deemed to be restricted
securities within the meaning of Rule 144 and (unless subject to the lock-up
agreements described above), may be sold by persons other than affiliates
without having to comply with the public-information, holding-period, volume-
limitation or notice provisions of Rule 144 and by affiliates without having
to comply with the minimum holding-period provision of Rule 144.
The Company has, in the past, issued shares of Common Stock as partial
consideration for certain of its acquisitions and may do so again in the
future.
Sales of substantial amounts of the Common Stock in the public market, or
the perception that such sales could occur, could have an adverse impact on
the market price.
REGISTRATION RIGHTS
Pursuant to the terms of the Stockholders Agreement, the Company granted to
Warburg and Raymond S. Ingleby certain registration rights regarding shares of
Common Stock owned by them. See "Certain Relationships and Transactions with
Related Persons--Stockholders Agreement."
In addition, the Company granted registration rights with respect to the
31,821 shares of Common Stock which it issued in connection with the
acquisition of Lighthouse. The Company has also agreed to grant registration
rights with respect to shares of Common Stock having a market value of $1.4
million (the actual number of shares of Common Stock to be based on the
average closing price per share of the Common Stock for the five business days
prior to closing) which it will issue in connection with the acquisition of
Blumberg. In both cases, the Company has agreed to use its best efforts to
effect the registration and sale of such shares of Common Stock as soon as it
becomes eligible to file a registration statement on Form S-3, provided, that
the Company may delay such filing for up to 120 days in the event such filing
would cause certain material adverse events.
56
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company and each of the Selling Stockholders have
agreed to sell to each of the Underwriters named below (the "Underwriters")
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Alex. Brown & Sons Incorporated, Furman Selz LLC and Schroder Wertheim & Co.
Incorporated are acting as representatives (the "Representatives"), and each
of the Underwriters has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set
forth opposite its name below at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Purchase Agreement provides that, subject to the terms and conditions set
forth therein, the Underwriters are obligated to purchase all of the shares of
Common Stock being sold pursuant to the Purchase Agreement if any of the
shares of Common Stock are purchased. Under certain circumstances, under the
Purchase Agreement, the commitments of non-defaulting Underwriters may be
increased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................................
Alex. Brown & Sons Incorporated....................................
Furman Selz LLC....................................................
Schroder Wertheim & Co. Incorporated...............................
---------
Total......................................................... 1,878,200
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose initially to offer the shares of Common Stock to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share of Common Stock on sales to
certain other dealers. After the initial public offering of the shares of
Common Stock offered hereby, the public offering price, concession and
discount may be changed.
Mr. Ingleby and the Company have granted the Underwriters an option to
purchase up to an additional 200,000 shares of Common Stock and 81,730 shares
of Common Stock, respectively, at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discount. Such option,
which will expire 30 days after the date of this Prospectus, may be exercised
solely to cover over-allotments, if any, made in connection with the sale of
shares of Common Stock offered hereby. To the extent that the Underwriters
exercise this option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage
thereof which the number of shares of Common Stock to be purchased initially
by that Underwriter bears to the total number of shares of Common Stock to be
purchased initially by the Underwriters. If purchased, the Underwriters will
offer such additional shares of Common Stock on the same terms as those on
which the 1,878,200 shares of Common Stock are being offered hereby.
The Company, the Selling Stockholders, Warburg and all of the Company's
directors and executive officers have, subject to certain exemptions in the
case of the Company, agreed not to, directly or indirectly, sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any capital stock
of the Company, or any security convertible or exchangeable into, or
exercisable for, such capital stock, or file or cause the Company to file any
registration statement with respect to any of the foregoing, for a period of
90 days after the date of this Prospectus, without the prior written consent
of Merrill Lynch.
57
<PAGE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales of Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act or contribute to payments the Underwriters may be required
to make in respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain legal
matters will be passed upon for the Company by Schulte Roth & Zabel LLP, New
York, New York. Debevoise & Plimpton, New York, New York, has acted as counsel
for the Underwriters in connection with the Offering.
EXPERTS
The consolidated financial statements of Caribiner International, Inc. at
September 30, 1994 and 1995 and for each of the three years in the period
ended September 30, 1995, the financial statements of Total Audio Visual
Services at December 31, 1995 and for the year then ended and the consolidated
financial statements of SCH International Limited at March 31, 1996 and for
the nine months then ended appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company can
be inspected and copied at the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and copies
may be obtained at prescribed rates. Such reports, proxy statements and other
information filed by the Company can also be inspected at the offices of the
New York Stock Exchange located at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement, which may be inspected, without charge, at the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048 and its Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of all or any portion of the Registration Statement may be obtained
from the Public Reference Section of the Commission, upon payment of
prescribed fees. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
Web site is http://www.sec.gov.
58
<PAGE>
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent
accounting firm and quarterly reports containing unaudited consolidated
financial information for each of the first three fiscal quarters of each
fiscal year of the Company.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CARIBINER INTERNATIONAL, INC.
Report of Independent Auditors.......................................... F-2
Consolidated Balance Sheets as of September 30, 1994 and 1995........... F-3
For the Years Ended September 30, 1993, 1994 and 1995:
Consolidated Statements of Operations................................. F-4
Consolidated Statements of Cash Flows................................. F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit).. F-6
Notes to Consolidated Financial Statements.............................. F-7
Consolidated Balance Sheet as of June 30, 1996.......................... F-15
For the Nine Months Ended June 30, 1995 and 1996:
Consolidated Statements of Operations................................. F-16
Consolidated Statements of Cash Flows................................. F-17
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for
the Nine Months Ended June 30, 1996 ................................... F-18
Notes to Unaudited Consolidated Financial Statements.................... F-19
SCH INTERNATIONAL LIMITED
Report of Independent Auditors.......................................... F-21
Consolidated Profit and Loss Account for the Nine Months Ended 31 March
1996................................................................... F-22
Consolidated Balance Sheet as of 31 March 1996.......................... F-23
Consolidated Cash Flow Statement for the Nine Months Ended 31 March
1996................................................................... F-24
Notes to the Accounts................................................... F-25
TOTAL AUDIO VISUAL SERVICES
Report of Independent Auditors ......................................... F-36
Balance Sheet as of December 31, 1995................................... F-37
For the Year Ended December 31, 1995:
Statement of Operations and Divisional Equity......................... F-38
Statement of Cash Flows............................................... F-39
Notes to Financial Statements......................................... F-40
Balance Sheet as of June 30, 1996....................................... F-44
For the Six Months Ended June 30, 1995 and 1996:
Statements of Operations and Divisional Equity........................ F-45
Statements of Cash Flows.............................................. F-46
Note to Unaudited Financial Statements................................ F-47
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Caribiner International, Inc.
We have audited the accompanying consolidated balance sheets of Caribiner
International, Inc. (the "Company") as of September 30, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended September 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 the Company
at September 30, 1994 and 1995 and the consolidated results of its operations
and its cash flows for each of the three years in the period ended September
30, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
New York, New York
November 22, 1995,
except for Note 14 as to
which the date is March 4,
1996
F-2
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................... $ 272,070 $ 212,612
Trade accounts receivable--net of allowance for
doubtful accounts of $50,000 in 1994 and $81,600
in 1995........................................... 16,442,619 22,920,679
Deferred charges................................... 1,016,381 3,804,858
Prepaid expenses and other current assets.......... 365,601 607,494
------------ ------------
TOTAL CURRENT ASSETS........................... 18,096,671 27,545,643
Property and equipment--net........................ 5,704,982 6,383,975
Goodwill--net...................................... 6,180,316 10,288,503
Other intangibles--net............................. 524,194 340,251
Other assets....................................... 759,912 740,040
------------ ------------
TOTAL ASSETS................................... $ 31,266,075 $ 45,298,412
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Bank line of credit................................ $ 2,360,000 $ 4,220,000
Current portion of long-term debt.................. 1,017,164 4,677,054
Trade accounts payable............................. 4,712,056 4,581,165
Accrued expenses and other current liabilities..... 7,029,370 6,954,317
Deferred income.................................... 4,430,226 6,761,589
------------ ------------
TOTAL CURRENT LIABILITIES...................... 19,548,816 27,194,125
Long-term debt..................................... 5,256,584 7,147,675
Convertible Note including accrued interest........ 15,487,092 17,346,397
Deferred income.................................... 2,442,543 3,275,023
Accrued preferred stock dividends.................. 1,219,093 1,874,135
Other liabilities.................................. 560,943 895,288
------------ ------------
TOTAL LIABILITIES.............................. 44,515,071 57,732,643
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value:
authorized 700,000 Series A, 350,000 Series B
voting, and 100,000 undesignated; issued and
outstanding 100,000 Series A and 350,000 Series B
voting; liquidation preference $20.00 per share
Series A and $5.71 per share Series B............. 4,500 4,500
Common stock, $.01 par value:
authorized 12,330,000 voting and 685,000 non-
voting shares: issued and outstanding 1,924,240
voting at 1994 and 1995 and 527,405 and 577,239
non-voting shares at 1994 and 1995, respectively.. 24,516 25,015
Additional paid-in capital......................... 1,901,497 1,945,272
Accumulated deficit................................ (15,179,509) (14,409,018)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)........... (13,248,996) (12,434,231)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFI-
CIT).............................................. $ 31,266,075 $ 45,298,412
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------ -----------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue....................... $50,107,438 $59,173,739 $81,131,219
Production costs ............. 34,907,488 39,723,994 54,312,550
----------- ----------- -----------
Gross profit.................. 15,199,950 19,449,745 26,818,669
Operating expenses:
Selling, general and admin-
istrative expenses......... 12,550,994 14,348,904 19,305,899
Depreciation and amortiza-
tion....................... 3,851,929 2,137,100 2,329,869
Write-off of certain intan-
gibles..................... 4,614,158 -- --
----------- ----------- -----------
Total operating expenses...... 21,017,081 16,486,004 21,635,768
----------- ----------- -----------
Operating income (loss)....... (5,817,131) 2,963,741 5,182,901
Interest expense with related
parties...................... 1,435,000 2,107,383 2,233,623
Interest expense, other....... 222,418 501,509 1,259,315
----------- ----------- -----------
Income (loss) before taxes.... (7,474,549) 354,849 1,689,963
Provision for taxes........... 22,676 62,257 264,430
----------- ----------- -----------
Net income (loss)........... $(7,497,225) $ 292,592 $ 1,425,533
=========== =========== ===========
Net income (loss) applicable
to common stock............ $(8,014,321) $ (289,405) $ 770,491
=========== =========== ===========
Pro Forma net income per common share............... $0.49
===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1993 1994 1995
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................... $(7,497,225) $ 292,592 $ 1,425,533
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization......... 3,851,929 2,137,100 2,329,869
Write-off of certain intangibles...... 4,614,158 -- --
Change in assets and liabilities:
Decrease (increase) in accounts
receivable......................... 3,215,274 (10,322,839) (6,407,492)
Decrease (increase) in deferred
charges............................ 1,174,207 (256,856) (2,558,543)
(Increase) in prepaid expenses and
other current assets............... (47,563) (91,303) (261,873)
Decrease in other assets............ 130,105 264,219 150,536
(Decrease) increase in accounts
payable............................ (1,277,554) 2,766,666 (130,891)
(Decrease) increase in deferred
income............................. (5,706,856) 4,565,558 2,874,963
(Decrease) increase in accrued
expenses and other liabilities..... (511,067) 1,409,775 786,513
Increase in accrued interest
payable............................ 1,435,000 2,107,383 2,233,623
----------- ------------ -----------
Net cash provided by (used in)
operating activities............... (619,592) 2,872,295 442,238
----------- ------------ -----------
Cash flow used in investing activities:
Purchase of property and equipment.... (543,629) (1,592,848) (1,605,978)
Acquisition of intangibles and
businesses, net of cash acquired..... (97,915) (4,599,285) (6,151,649)
Net cash paid in merger with ICC...... (2,820,300) (408,938) --
----------- ------------ -----------
Net cash used in investing
activities........................... (3,461,844) (6,601,071) (7,757,627)
----------- ------------ -----------
Cash flow provided by (used in)
financing activities:
Net proceeds from bank line of
credit............................... 1,145,969 660,000 2,550,000
Repayments of debt.................... (618,918) (85,000) (1,297,574)
Proceeds from long-term debt.......... 3,000,000 3,000,000 6,000,000
Proceeds from issuance of common
stock................................ 2,910 2,050 5,383
Repurchase of common stock............ -- (4,899) (1,878)
----------- ------------ -----------
Net cash provided by financing
activities........................... 3,529,961 3,572,151 7,255,931
----------- ------------ -----------
Net decrease in cash................... (551,475) (156,625) (59,458)
Cash, beginning of year................ 980,170 428,695 272,070
----------- ------------ -----------
Cash, end of year...................... $ 428,695 $ 272,070 $ 212,612
=========== ============ ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK TOTAL
-------------------- ---------------- ADDITIONAL ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT PAID IN CAPITAL DEFICIT EQUITY (DEFICIT)
---------- -------- -------- ------- --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1,
1992................... 2,397,500 $ 23,975 450,000 $ 4,500 $ 5,447,025 $ (6,871,466) $ (1,395,966)
Cancellation of stock
held by ICC............ (2,397,500) (23,975) -- -- 23,975 -- --
Exchange offer and
merger................. 1,875,173 18,752 -- -- (3,523,387) -- (3,504,635)
Issuance of common stock
under the Management
Stock Plan............. 452,654 4,526 -- -- 3,404 -- 7,930
Issuance of warrant to
purchase 93,509 shares
of common stock........ -- -- -- -- 816 -- 816
Accrued preferred stock
dividends.............. -- -- -- -- -- (517,096) (517,096)
Net loss................ -- -- -- -- -- (7,497,225) (7,497,225)
---------- -------- -------- ------- ----------- ------------ ------------
Balance at September 30,
1993................... 2,327,827 23,278 450,000 4,500 1,951,833 (14,885,787) (12,906,176)
Issuance of common stock
upon the purchase of
MultiMedia Holdings,
Inc.................... 54,714 547 -- -- (388) -- 159
Exchange offer and
merger................. (5,647) (57) -- -- (60,416) -- (60,473)
Repurchase of common
stock under the
Management Stock Plan.. (33,222) (332) -- -- (250) (4,317) (4,899)
Issuance of common stock
under the Management
Stock Plan............. 107,973 1,080 -- -- 811 -- 1,891
Issuance of warrants to
purchase 71,435 shares
of common stock........ -- -- -- -- 9,907 9,907
Accrued preferred stock
dividends.............. -- -- -- -- -- (581,997) (581,997)
Net income.............. -- -- -- -- -- 292,592 292,592
---------- -------- -------- ------- ----------- ------------ ------------
Balance at September 30,
1994................... 2,451,645 24,516 450,000 4,500 1,901,497 (15,179,509) (13,248,996)
Repurchase of Management
Stock Plan shares by
the company............ (24,916) (249) -- -- (1,629) -- (1,878)
Issuance of warrants to
purchase 293,967 shares
of common stock........ -- -- -- -- 40,769 -- 40,769
Issuance of common stock
under the Management
Stock Plan............. 74,750 748 -- -- 4,635 -- 5,383
Accrued preferred stock
dividends.............. -- -- -- -- -- (655,042) (655,042)
Net income.............. -- -- -- -- -- 1,425,533 1,425,533
---------- -------- -------- ------- ----------- ------------ ------------
Balance at September 30,
1995................... 2,501,479 $ 25,015 450,000 $ 4,500 $ 1,945,272 $(14,409,018) $(12,434,231)
========== ======== ======== ======= =========== ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-6
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Caribiner International, Inc., formerly Business Communications Group, Inc.,
and its subsidiaries (together, the "Company") are engaged in the production
of meetings, events, training programs and related business communications
services that enable businesses to inform, sell to and train their sales
forces, dealers, franchisees, partners, stockholders and employees.
The Company was organized on December 1, 1989 by its then parent, Ingleby
Communications Corp. ("ICC") and comprised substantially all of the operations
of ICC. Effective as of June 30, 1992, the Company completed a $16 million
private placement (the "Private Placement"), with Warburg, Pincus Investors,
L.P. ("Warburg") consisting of $12 million principal amount of the Company's
11.5% Convertible Promissory Note, due June 30, 1997 (the "Convertible Note")
and $4 million of Series A Cumulative Redeemable Convertible Voting Preferred
Stock, par value $.01 per share (the "Series A Preferred") and Series B
Cumulative Redeemable Convertible Voting Preferred Stock, par value $.01 per
share (the "Series B Preferred"). Simultaneously with the Private Placement,
the Company and ICC entered into a Stockholders Agreement with Warburg that
gave Warburg significant control in current and future operations of the
Company and its subsidiaries.
On July 16, 1993, the Company entered into an agreement with certain
shareholders of ICC (the "Exchange Offer") to exchange shares of its voting
common stock, par value $.01 per share (the "Common Stock"), for shares of ICC
common stock held by such shareholders. As a result of these transactions, ICC
was merged into a wholly owned subsidiary of the Company in a manner similar
to a pooling of interests (the "Merger"). In addition, the Stockholders
Agreement was terminated in connection with the Exchange Offer and a new
stockholders agreement was entered into among the Company, Warburg and each of
the other stockholders of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.
Revenue Recognition
Revenue is recorded principally on the completed contract method of
accounting. The recognition of revenue and production costs is deferred until
a project is completed which is often within a three to six month time period.
For those projects which provide for multiple events, the contract revenue and
costs are apportioned and revenue and profit are recognized as each event
occurs. If a client cancels a project after production has begun, the client
is billed for work performed and expenses incurred through the date of
cancellation, and there are no provisions for non-payment by the client.
Deferred income, which represents advance billings on uncompleted jobs, is
classified as long-term in the same proportion that anticipated profit on such
jobs bears to the related contract price. Deferred charges represent costs
incurred on uncompleted jobs.
Production Costs
Production costs include salaries and benefits of production, creative and
technical personnel spent on specific contracts, and other direct costs
including contracted services, equipment rentals and costs associated with the
production of audio-visual effects. Such costs are deferred until project
completion.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets ranging
from five to seven years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or the estimated
useful life.
F-7
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Goodwill and Other Intangibles
Goodwill represents the excess of the cost over the fair value of net assets
of purchased businesses and is amortized on a straight-line basis over periods
ranging from 15 years to 25 years. Accumulated amortization of goodwill was
$1,062,794 and $1,608,612 at September 30, 1994 and 1995, respectively. The
cost of other acquired intangibles, consisting of non-compete agreements,
sales backlog, and customer lists, is amortized on a straight-line basis over
their estimated useful lives ranging from one to six years. The cost of the
film and module library is amortized on a straight-line basis over the five-
year estimated useful lives. Accumulated amortization of other acquired
intangible assets was $1,654,652 and $1,975,095 at September 30, 1994 and
1995, respectively.
The Company reviews the recoverability of intangible and other long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. A loss is recognized for the difference between
the carrying amount and the estimated fair value of the asset. In fiscal 1993
certain intangibles, principally film and module libraries, were written down
to their estimated fair values.
Deferred Financing Fees
Deferred financing fees are amortized over the term of the related debt.
Accumulated amortization on deferred financing fees is $313,367 and $505,200
at September 30, 1994 and 1995, respectively.
New Accounting Pronouncements
The Financial Accounting Standards Board recently issued two standards which
will be applicable to the Company but which the Company has not yet adopted:
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of and No. 123, Accounting for Stock-Based Compensation.
The impairment standard is not expected to have a significant impact on the
Company. The Company has not yet determined which of the acceptable approaches
it will use under the stock compensation standard. Adoption of certain
approaches under the stock compensation standard could result in non-cash
charges which if made, are not expected to be material. At a minimum, the
standard will require disclosures about the fair value of employee stock
options.
3. ACQUISITIONS
During fiscal 1994 and fiscal 1995, the Company acquired certain assets and
assumed certain liabilities of five companies engaged in providing business
communication services.
In fiscal 1994, the Company acquired Weiss/Watson, Inc. (October, 1993),
MultiMedia Holdings, Inc. ("MultiMedia") (March, 1994) and Cortez/Seidner,
Inc. (April, 1994). These transactions resulted in initial payments in the
aggregate of $4.5 million, which were financed through bank borrowings. In
connection with the purchase of MultiMedia, 54,714 shares of Common Stock were
sold to MultiMedia's sole shareholder at par value.
During fiscal 1995, the Company acquired Decomas, Incorporated and Executive
Support Systems, Inc. (collectively, "Decomas") (October, 1994) and Richard
Kidd Productions, Inc. (September, 1995). In addition, in August, 1995, the
Company acquired a contractual relationship with a major corporation from
another business communications services provider. These transactions resulted
in initial payments in the aggregate of $4.3 million, which were financed
through bank borrowings.
F-8
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The accounting for these acquisitions is in accordance with the purchase
method and, accordingly, operations of the acquired businesses are included in
the accompanying consolidated statements of operations from their respective
dates of acquisition.
The acquisitions of each of Weiss/Watson, Inc., MultiMedia and Decomas
provided for contingent payments for three years following the purchase based
upon the achievement of gross profits above specified target levels.
Contingent payments are accounted for as additional purchase price as they
become known. No significant contingent payments were made during 1994. In
1995, a payment was made to the seller of MultiMedia to settle earnout rights.
The unaudited consolidated pro forma revenues of the Company for the years
ended September 30, 1994 and 1995 assuming the Company's business acquisitions
took place as of the beginning of fiscal 1994 were $68.2 million and $83.3
million, respectively. The pro forma effect of the acquisitions on the
Company's net income was immaterial.
The unaudited pro forma consolidated revenues do not purport to be
indicative of the actual results of operations that would have occurred had
the acquisitions been made at the beginning of fiscal 1994, or of results
which may occur in the future.
4. PROPERTY AND EQUIPMENT
At September 30, 1994 and 1995 property and equipment consisted of:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------
1994 1995
---------- -----------
<S> <C> <C>
Furniture and equipment................................. $6,487,206 $ 8,216,736
Leasehold improvements.................................. 1,941,621 2,354,692
---------- -----------
8,428,827 10,571,428
Less--accumulated depreciation and amortization......... 2,723,845 4,187,453
---------- -----------
$5,704,982 $ 6,383,975
========== ===========
</TABLE>
The related depreciation and amortization expense for the years ended
September 30, 1994 and 1995 was $955,420, and $1,463,608 respectively.
5. DEBT
Line of Credit
Under the terms of a bank line of credit agreement (the "Line of Credit")
the Company may borrow up to $12 million, bearing interest at prime plus 1%,
limited to 85% of trade receivables outstanding at each month-end. At
September 30, 1995, the prime rate was 8.75% per annum. So long as the company
complies with the provisions of the agreement, the amounts borrowed are
renewable through April 1, 1997. A portion of the outstanding borrowings under
the Line of Credit, $750,000, has been excluded from current liabilities since
the Company intends and has the ability to keep that amount outstanding under
the Line of Credit or the Term Facility beyond one year from the balance sheet
date, or that any repayment of this amount would be from sources other than
current assets at September 30, 1995 such as new equity financing.
F-9
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-term Debt and Convertible Note
At September 30, 1994 and 1995, long-term debt consisted of:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-----------------------
1994 1995
----------- -----------
<S> <C> <C>
Bank term loan......................................... $ 3,000,000 $ 7,750,000
Bank line of credit.................................... -- 750,000
Loan payable to Warburg................................ 2,999,181 2,999,181
Equipment lease commitments............................ 274,567 325,548
----------- -----------
6,273,748 11,824,729
Less--current portion of long-term debt................ 1,017,164 4,677,054
----------- -----------
$ 5,256,584 $ 7,147,675
=========== ===========
Convertible Note including accrued interest............ $15,487,092 $17,346,397
=========== ===========
</TABLE>
On July 20, 1994 the Company entered into a credit agreement with a bank
providing for a term loan (the "Term Facility") commitment of up to $5
million. As of September 29, 1995 the Company had signed an amendment
increasing the availability of funds to $15 million of which $7.25 million is
available for working capital, general corporate purposes and for acquisitions
through June 30, 1996. Principal is payable on a quarterly basis with final
maturity on June 30, 1997. Interest is payable quarterly at the bank's prime
rate plus 1%. The Term Facility requires mandatory prepayment from excess cash
flow, as defined, as well as compliance with certain other covenants including
required financial performance ratios and limitations on capital expenditures.
Additional repayments from excess cash flow were required as of September 30,
1994 and 1995, which have been included in the current portion of long term
debt.
Approximately $3 million of a $10 million Warburg loan facility (the
"Warburg Term Loan"), which is due June 30, 1997 and accrues interest at 11%
per annum, is outstanding. In addition, warrants are issuable during the term
that the Warburg Term Loan is outstanding (see Note 6).
The $12 million Convertible Note bears interest at a rate of 11.5% annually.
Principal and accrued interest is payable in full to Warburg on June 30, 1997.
Warburg may convert the principal amount into 600,000 shares of the Series A
Preferred. The 600,000 shares of Series A Preferred may convert into 2,055,000
shares of the Company's Common Stock.
The aggregate payments of long-term debt outstanding at September 30, 1995,
for the next five years, are as follows: 1996--$4.7 million; 1997--$24.4
million; 1998--$0.09 million and 1999--$0.03 million; totaling $29.22 million.
6. CAPITAL STOCK
Redeemable Preferred Stock
The Series A Preferred and Series B Preferred issued in connection with the
Private Placement bear a cumulative compounding 12% dividend, are redeemable
at the option of the Company at liquidation preference plus accrued and unpaid
dividends, and are convertible into 1,541,250 shares of the Company's Common
Stock. No dividends have been declared or paid as of September 30, 1995.
Warrants
In August, 1993, as a result of entering into the Warburg Term Loan (see
Note 5), the Company issued warrants to Warburg for the purchase of 93,509
shares of the Company's Common Stock at an aggregate exercise
F-10
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
price of $3,000. In addition, one year later, and for each quarter that the
principal remains outstanding thereafter, additional warrants were issued at
the rate of .375% of fully diluted Common Stock, as defined, per each $1
million in principal advanced. Additional warrants for 71,435 shares in 1994
and 293,967 shares in 1995 were exercisable at an aggregate price of $281,250
in 1994 and $1,125,000 in 1995, respectively. All warrants expire on July 31,
2013. The fair values of the warrants of $816, $9,907 and $40,769 were
included in interest expense in fiscal 1993, fiscal 1994 and fiscal 1995,
respectively.
Common Stock
In connection with the Exchange Offer and Merger described in Note 1, a
total of 1,869,525 shares of the Company's Common Stock was issued in the
exchange and a total of $3,229,238 was paid for the remaining ICC shares and
options and related professional fees. In addition, the Company assumed net
liabilities of $280,872 of ICC. The excess of the consideration paid by the
Company over the net book value of ICC was charged to additional paid-in
capital.
Management Stock Plan
During fiscal 1993, the Company adopted the 1993 Management Stock Plan (the
"Management Stock Plan"). Under the Management Stock Plan, a committee of the
Board of Directors may grant to employees awards of the Company's Series A
Non-Voting Common Stock, par value $.01 per share (the "Non-Voting Common
Stock"). Such awards are designated on the date of grant as either Stock Award
A, Stock Award B or both. Stock Award A vests over a period of three years.
Stock Award B also vests over a period of three years provided the Company
attains certain performance targets set by the Board. If certain performance
targets are not met during a particular fiscal year, the shares for such
fiscal year will become fully vested on September 30, 1999 provided the
recipient is still employed by the Company. In the event of an initial public
offering of the Company's voting common stock, all awarded stock will be
considered fully vested. As of September 30, 1995, 577,239 shares of the
Company's non-voting common stock had been awarded, of which 458,891 shares
have vested.
Receivables of $5,020 from certain officers and employees pursuant to
management stock awards in fiscal 1993 were collected in fiscal 1994.
7. NONRECURRING EXPENSES
In fiscal 1993, selling, general and administrative expenses include
approximately one million dollars of nonrecurring expenses for a reserve for
the rent commitment on an idle facility, professional fees and reorganization
costs related to the acquisition of Caribiner, Inc. in fiscal 1992 and
incurred subsequent to the finalization of the purchase price allocation, and
write-off of remaining net assets of licensing businesses discontinued in
fiscal 1993.
8. RELATED PARTY TRANSACTIONS
In the normal course of producing projects for clients, the Company
periodically uses the services of individuals related to and/or companies
owned by relatives of certain of its employees. During the year ended
September 30, 1995, the Company paid approximately $1.3 million to seven such
vendors. In fiscal 1993 and fiscal 1994, the Company paid these vendors
approximately $0.7 million and $0.6 million, respectively.
The Company has a receivable from an officer of $362,630 which was fully
reserved in fiscal 1992. Such amount will be repaid by the officer upon the
consummation of a public offering of the Common Stock.
F-11
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution plan of the profit sharing
type, covering all qualified employees. Company contributions to the plan each
year are based on net income and are at the discretion of the Board of
Directors. Company contributions for fiscal 1993, fiscal 1994 and fiscal 1995
were not significant. The Company's policy is to fund the costs accrued.
10. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the carrying amounts used for income tax purposes. Differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes resulted from the acquisition of certain
business operations, the difference between financial reporting recovery
periods and tax reporting recovery periods and the write-down of business
assets for financial reporting purposes.
Significant components of the Company's deferred tax assets and liabilities
as of September 30, 1994 and September 30, 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
NOL and tax credit carryforwards................. $ 4,322,000 $ 3,422,000
Intangibles amortization......................... 894,929 574,975
Other............................................ -- 221,513
----------- -----------
Total deferred tax assets...................... 5,216,929 4,218,488
Valuation allowance.............................. (4,859,069) (3,691,321)
----------- -----------
Net deferred tax assets............................ $ 357,860 $ 527,167
----------- -----------
Deferred tax liabilities:
Tax over book depreciation and amortization...... 357,860 527,167
----------- -----------
Total deferred liabilities..................... $ 357,860 $ 527,167
----------- -----------
Net deferred tax................................... $ -- $ --
----------- -----------
</TABLE>
The valuation allowance represents a reduction of deferred tax assets for
future tax benefits that may not be realized.
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- --------
<S> <C> <C> <C>
Current:
Federal........................................... $ -- $ -- $ 42,150
State............................................. 22,676 62,257 222,280
------- ------- --------
Total current................................... 22,676 62,257 264,430
Deferred............................................ -- -- --
------- ------- --------
$22,676 $62,257 $264,430
======= ======= ========
</TABLE>
At September 30, 1994 and 1995 the Company has net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $10.1 million
and $8.2 million, respectively, that expire in the years 2001
F-12
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
through 2009. Approximately $3.2 million of NOL carryforwards may be subject
to limitations under the change in ownership and consolidated return
provisions of the Internal Revenue Code. The use of the NOL carryforwards, as
adjusted, may also be limited for state and local income tax purposes.
However, the Company has not recorded as an asset on its balance sheet any
future benefit related to the usage of the NOL carryforwards.
The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory tax rates to income tax expense is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- --------- ---------
<S> <C> <C> <C>
Tax expense/(benefit) at
statutory rate......... $(2,541,347) $ 120,469 $ 574,587
State income tax net of
federal benefit........ 14,966 41,090 146,705
Non-deductible expenses. 120,406 34,527 163,568
Utilization of NOL
carryforwards.......... -- -- (900,000)
Change in valuation
allowance and other.... 2,428,651 (133,829) 279,570
----------- --------- ---------
$ 22,676 $ 62,257 $ 264,430
=========== ========= =========
</TABLE>
11. MAJOR CUSTOMERS
A portion of the Company's total revenue was derived from two major
customers in the automotive and information technology industries. Revenues
from these two customers aggregated 24% and 16%, respectively, in 1993; 21%
and 19%, respectively, in 1994; 34% and 16%, respectively, in 1995. Amounts
due from these two customers represented 31% and 24%, respectively, at
September 30, 1994, and 46% and 17%, respectively, at September 30, 1995, of
current accounts receivable.
12. COMMITMENTS AND CONTINGENCIES
Minimum annual rentals under noncancelable operating leases, excluding
escalations based upon increases in real estate taxes and operating expenses,
are payable as follows, for the year ended September 30: 1996--$1.7 million;
1997--$1.6 million; 1998--$1.0 million; 1999--$1.0 million; 2000--$0.7
million; thereafter--$1.1; totaling $7.1 million.
Rent expense charged to operations in fiscal 1994 and fiscal 1995, was
$1,701,682 and $2,006,304, respectively.
The Company has employment contracts with certain of its officers and key
employees expiring at various dates through 1998 with future minimum payments
as follows, for the year ended September 30: 1996--$4.0 million; 1997--$3.0
million; 1998--$2.1 million; totaling $9.1 million. Also, certain agreements
provide additional compensation based on performance.
The Company is, from time to time, a defendant in various lawsuits arising
in the ordinary course of business. In the opinion of management resolving
these actions will not have a material effect on the Company's financial
condition, results of operations or liquidity.
13. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid was $161,976, $272,959, and $807,475 in fiscal 1993, fiscal
1994 and fiscal 1995, respectively. Taxes paid were $22,676, $62,257 and
$264,430 for fiscal 1993, fiscal 1994 and fiscal 1995, respectively.
F-13
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS
The Company has filed a registration statement with the Securities and
Exchange Commission pursuant to an initial public offering. Immediately prior
to the completion of the initial public offering, Warburg will convert its
Convertible Note into shares of the Company's Series A Preferred, which will
be immediately converted into Common Stock, convert the remaining outstanding
shares of Series A Preferred and Series B Preferred into Common Stock, and all
of the shares of Non-Voting Common Stock outstanding under the Management
Stock Plan will be converted into Common Stock. The Company then intends to
terminate the Plan and replace it with the 1996 Stock Option Plan. In
addition, all outstanding warrants issued to Warburg in connection with the
Warburg Term Loan will be exercised to purchase Common Stock. Also, effective
with the closing of the initial public offering, the Company will enter into a
new stockholders agreement. On March 4, 1996, the Company effected a 3.425-
for-1 stock split of the outstanding Common Stock and Non-Voting Common Stock.
The accompanying consolidated financial statements have been restated to
reflect such stock split as if it occurred on October 1, 1993.
15. UNAUDITED PRO FORMA INFORMATION
Pro forma net income per common share is calculated using the weighted
average number of shares of Common Stock outstanding during the period, plus
Common Stock issued pursuant to the Management Stock Plan and warrants to
purchase Common Stock issued at prices below the assumed initial public
offering price per share during the twelve months immediately preceding the
initial filing date of the Company's Registration Statement for its public
offering, assuming such Common Stock was outstanding for all periods
presented. In addition, shares of Common Stock issuable upon the conversion of
all shares of Series A Preferred (including shares of Series A Preferred
issuable upon the conversion of the Convertible Note) and Series B Preferred
into shares of Common Stock are included in the calculation as if they were
outstanding for all periods presented. The weighted average number of shares
of Common Stock outstanding during the twelve months ended September 30, 1995,
after reflecting a 3.425-for-1 stock split to be completed immediately prior
to the initial public offering, is 6,620,004.
Of the net proceeds from the sale of shares of Common Stock offered by the
Company in an initial public offering, approximately $27.2 million will be
used to repay aggregate bank borrowings and other long-term indebtedness,
including accrued interest and accrued preferred stock dividends. Assuming the
issuance and sale of only that number of shares of Common Stock which would
generate net proceeds sufficient to repay indebtedness of $27.2 million and
assuming that such indebtedness had been repaid as of October 1, 1994,
supplementary pro forma net income per common share for fiscal 1995 would have
been $0.56. For purposes of this computation, the weighted average number of
shares of Common Stock outstanding during the twelve months ended September
30, 1995, after reflecting the 3.425-for-1 stock split to be completed
immediately prior to the initial public offering, is 8,338,108.
F-14
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 6,956,389
Trade accounts receivable--net of allowance for doubtful accounts
of $304,860...................................................... 40,214,913
Deferred charges................................................... 8,613,294
Prepaid expenses and other current assets.......................... 2,061,975
-----------
TOTAL CURRENT ASSETS........................................... 57,846,571
Property and equipment--net........................................ 9,406,451
Intangible assets--net............................................. 31,256,380
Other assets....................................................... 593,764
-----------
TOTAL ASSETS................................................... $99,103,166
===========
</TABLE>
<TABLE>
<S> <C>
LIABILITIES AND
STOCKHOLDERS'
EQUITY
</TABLE>
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C>
Bank line of credit................................................. $ --
Current portion of long-term debt................................... 691,324
Trade accounts payable.............................................. 10,340,356
Accrued expenses and other current liabilities...................... 15,113,174
Deferred income..................................................... 15,965,298
----------
TOTAL CURRENT LIABILITIES....................................... 42,110,152
Long-term debt...................................................... 1,183,862
Deferred income..................................................... 5,605,230
Other liabilities................................................... 106,244
----------
TOTAL LIABILITIES............................................... 49,005,488
</TABLE>
<TABLE>
<S> <C>
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
2,000,000 shares authorized, none issued and outstanding........ --
Common stock, $.01 par value:
40,000,000 voting shares authorized, 9,598,159 issued and out-
standing........................................................ 95,982
Additional paid-in capital....................................... 60,582,494
Accumulated deficit.............................................. (10,580,798)
------------
TOTAL STOCKHOLDERS' EQUITY................................... 50,097,678
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................... $ 99,103,166
============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-15
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE
30,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Revenue............................................... $52,085,407 $99,776,939
Production costs...................................... 34,785,967 66,945,123
----------- -----------
Gross profit.......................................... 17,299,440 32,831,816
Operating expenses:
Selling, general and administrative expenses........ 13,588,141 21,574,964
Non-cash compensation expense....................... -- 1,072,000
Depreciation and amortization....................... 1,674,482 2,138,746
----------- -----------
Total operating expenses.............................. 15,262,623 24,785,710
----------- -----------
Operating income...................................... 2,036,817 8,046,106
Interest expense with related parties................. 1,670,007 1,199,281
Other interest expense, net........................... 812,378 453,436
----------- -----------
(Loss) income before taxes............................ (445,568) 6,393,389
Income tax (benefit) expense.......................... (69,719) 2,237,686
----------- -----------
Net (loss) income................................... $ (375,849) $ 4,155,703
=========== ===========
Pro forma net income per common share............... $ 0.13 $ 0.61
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-16
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE
30,
-----------------------
1995 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income .................................. $ (375,849) $ 4,155,703
Adjustments to reconcile net (loss) income to net
cash used in
operating activities:
Depreciation and amortization....................... 1,674, 482 2,138,746
Non-cash compensation............................... -- 1,072,000
Change in assets and liabilities:
(Increase) in trade account receivable.............. (6,117,807) (8,533,261)
(Increase) in deferred charges...................... (3,914,041) (315,872)
(Increase) in prepaid expenses and other current
assets.............................................. (407,895) (812,461)
(Increase) decrease in other assets................. (54,209) 83,145
(Decrease) increase in trade accounts payable....... (173,960) 807,027
Increase in deferred income......................... 8,116,251 3,163,580
(Decrease) increase in accrued expenses and other
liabilities......................................... (351,384) 1,016,854
Increase (decrease) in accrued interest payable..... 1,660,200 (7,250,375)
---------- -----------
Net cash provided by (used in) operating activities. 55,788 (4,474,914)
---------- -----------
Cash flow used in investing activities:
Purchase of property and equipment.................. (1,362,115) (1,706,964)
Acquisition of intangibles and businesses, net of (2,424,958) (13,719,507)
cash acquired....................................... ---------- -----------
Net cash used in investing activities............... (3,787,073) (15,426,471)
---------- -----------
Cash flow provided by financing activities:
Net proceeds from issuance of common stock.......... -- 43,029,987
Proceeds from exercise of warrants.................. -- 1,690,500
Repayments of long-term debt........................ (883,502) (14,650,970)
Net proceeds (repayments) of bank line of credit.... 2,400,000 (4,220,000)
Proceeds from long-term debt........................ 2,000,000 3,000,000
Payment of preferred stock dividends................ -- (2,201,618)
Proceeds from issuance of common stock under the
Management Stock Plan............................... 728 174,167
Repurchase of common stock.......................... (1,880) (176,904)
---------- -----------
Net cash provided by financing activities........... 3,515,346 26,645,162
---------- -----------
Net (decrease) increase in cash....................... (215,939) 6,743,777
Cash, beginning of period............................. 272,070 212,612
---------- -----------
Cash, end of period................................... $ 56,131 $ 6,956,389
========== ===========
Supplemental disclosure of cash flow information:
Interest paid....................................... $ 626,322 $ 7,862,260
========== ===========
Income taxes paid................................... $ 227,647 $ 1,868,446
========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-17
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK TOTAL
------------------ ------------------- ADDITIONAL DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT PAID IN CAPITAL COMPENSATION DEFICIT EQUITY (DEFICIT)
--------- ------- ---------- ------- --------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September
30, 1995............ 2,501,479 $25,015 450,000 $ 4,500 $ 1,945,272 $ -- $(14,409,018) $(12,434,231)
Issuance of common
stock under the
Management Stock
Plan................ 87,210 872 -- -- 1,245,295 (1,072,000) -- 174,167
Issuance of warrants
to purchase 75,593
shares of common
stock............... -- -- -- -- 79,456 -- -- 79,456
Repurchase of common
stock............... (31,091) (311) -- -- (176,593) -- -- (176,904)
Accrued preferred
stock dividends..... -- -- -- -- -- -- (327,483) (327,483)
Conversion of
Convertible Note
into preferred
stock............... -- -- 600,000 6,000 11,979,450 -- -- 11,985,450
Conversion of
preferred stock into
common stock........ 3,596,250 35,963 (1,050,000) (10,500) (10,913) -- -- 14,550
Exercise of warrants. 534,505 5,345 -- -- 1,685,155 -- -- 1,690,500
Issuance of common
stock upon
consummation of
initial public
offering............ 2,877,985 28,780 -- -- 42,835,690 -- -- 42,864,470
Issuance of common
stock upon
acquisition of
Lighthouse, Ltd. ... 31,821 318 -- -- 999,682 -- -- 1,000,000
Non-cash compensation
charge.............. -- -- -- -- -- 1,072,000 -- 1,072,000
Net income........... -- -- -- -- -- -- 4,155,703 4,155,703
--------- ------- ---------- ------- ----------- ---------- ------------ ------------
Balance at June 30, 9,598,159 $95,982 -- $ -- $60,582,494 $ -- $(10,580,798) $ 50,097,678
1996................ ========= ======= ========== ======= =========== ========== ============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-18
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements of Caribiner
International, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the consolidated financial statements contain
all adjustments, consisting of normal recurring adjustments, considered
necessary to present fairly the consolidated financial position, results of
operations and cash flows of the Company. The results of operations for the
nine months ended June 30, 1996 are not necessarily indicative of the results
of operations that may be expected for any other interim period or for the
fiscal year ending September 30, 1996.
2. INITIAL PUBLIC OFFERING
On March 15, 1996, the Company completed the initial public offering (the
"IPO") of 2,877,985 shares of its common stock (including 459,779 shares
granted to the underwriters upon exercise of their over-allotments) for $17.00
per share (such number of shares does not include fractional shares
aggregating 29 shares of Common Stock that were repurchased by the Company
after the stock split described below and prior to the IPO). The Company
received net proceeds of approximately $43.0 million after deducting
underwriting discounts and expenses. Proceeds of approximately $25.6 million
were used to repay all outstanding bank borrowings and substantially all other
long-term indebtedness (including accrued interest), and to pay accrued
preferred stock dividends. The remaining proceeds are available to fund
working capital needs, to make acquisitions and for general purposes.
Immediately prior to the consummation of the IPO, the following transactions
occurred:
a) The Company's $12 million, 11.5% Convertible Promissory Note (the
"Convertible Note") was converted by the holder thereof into 600,000 shares of
convertible preferred stock, which were immediately converted into 2,055,000
shares of common stock. Upon conversion, approximately $165,000 of unamortized
debt issuance costs relating to the Convertible Note were charged to
additional paid in capital;
b) Shares of convertible preferred stock outstanding on March 15, 1996 (other
than shares of convertible preferred stock issued upon conversion of the
Convertible Note) were converted into 1,541,250 shares of common stock;
c) All shares of non-voting common stock outstanding under the Company's 1993
Management Stock Plan (the "Management Stock Plan") were converted without any
action on the part of the holders thereof into 664,450 shares of voting common
stock, and such Management Stock Plan was then terminated; and
d) Outstanding warrants to purchase 534,505 shares of common stock, which were
issued in connection with one of the Company's loan facilities, were exercised
by the holder thereof for an aggregate exercise price of approximately $1.7
million.
All shares and per share data have been retroactively adjusted to reflect a
3.425-for-1 stock split completed prior to the IPO on March 4, 1996.
3. MANAGEMENT STOCK
During the three months ended December 31, 1995, the Company sold common
stock pursuant to the Management Stock Plan at a price lower than its fair
market value and recorded non-cash compensation expense of $93,000 during such
period. Upon consummation of the IPO in March, 1996, the Company incurred an
additional non-cash compensation charge of $979,000 in connection with the
immediate vesting of such stock.
F-19
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. BUSINESS ACQUISITIONS
During the nine months ended June 30, 1996, the Company acquired certain
assets and assumed certain liabilities of three companies engaged in providing
business communications services.
In January, 1996, the Company acquired substantially all of the assets of
Koors, Perry & Associates, Inc ("Koors, Perry"), a regional business
communications services provider based in Atlanta, Georgia. The initial
purchase price for the acquisition consisted of $2.5 million in cash, which
was financed by an additional drawing on one of the Company's credit
facilities, a promissory note for $1.5 million payable over three years and
the assumption of certain liabilities.
In June, 1996, the Company acquired substantially all of the assets and
assumed certain of the liabilities of Lighthouse, Ltd. ("Lighthouse"), a
business communications services provider headquartered in Rolling Meadows,
Illinois, for an aggregate consideration of approximately $5.3 million in cash
and approximately $1.0 million of common stock of the Company (31,821 shares).
Additionally, in June, 1996, the Company acquired all of the stock of SCH
International Limited (formally known as Spectrum Communications Holdings
International Limited) ("Spectrum"), a London-based business communications
services provider. The initial purchase price was approximately $5.0 million,
which was financed from the Company's working capital.
The accounting for these acquisitions is in accordance with the purchase
method and accordingly, operations of the acquired businesses are included in
the accompanying unaudited consolidated statements of operations from their
effective dates of acquisition.
The acquisitions of each of Koors, Perry and Spectrum provide for contingent
payments for three years following the purchase dates based upon the
achievement of certain performance goals. Contingent payments are accounted
for as additional purchase price as they become known.
The unaudited consolidated pro forma revenues of the Company for the nine
months ended June 30, 1996 assuming these acquisitions took place as of
October 1, 1995 would have been approximately $118.8 million. The pro forma
effect of the acquisitions on the Company's net income for the nine months
ended June 30, 1996 was immaterial.
5. PRO FORMA NET INCOME PER COMMON SHARE
Pro forma net income per common share is calculated using the weighted
average number of shares of common stock outstanding during the respective
periods. Pursuant to the requirements of the Securities and Exchange
Commission, common stock issued under the Management Stock Plan and warrants
to purchase common stock issued at prices below the initial public offering
price per share during the twelve months immediately preceding the date of the
initial filing of the Company's Registration Statement on Form S-1 have also
been included in the calculation of common shares, using the treasury stock
method, as if they were outstanding for all periods presented. In addition,
shares of common stock issued upon the conversion of all shares of convertible
preferred stock into shares of common stock are included in the calculation as
if they were outstanding for all periods presented.
The weighted average number of shares of common stock outstanding during
each of the three and nine months ended June 30, 1996 is 9,575,295 and
7,806,805, respectively. The weighted average number of shares of common stock
outstanding during each of the three months and nine months ended June 30,
1995 is 6,620,003.
Assuming the issuance and sale of only that number of shares of common stock
which would have generated net proceeds sufficient to repay indebtedness of
$25.6 million, and assuming that such indebtedness had been repaid as of the
beginning of each period presented, supplementary pro forma net income per
share would have been $0.62 and $0.23 for the nine months ended June 30, 1996
and 1995, respectively. For purposes of this computation, the weighted average
number of shares of common stock outstanding during the nine months ended June
30, 1996 and 1995 is 8,774,804 and 8,237,270, respectively.
F-20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS
SCH INTERNATIONAL LIMITED
We have audited the accompanying consolidated balance sheet of SCH
International Limited as at March 31, 1996 and the related consolidated profit
and loss account and statement of total recognised gains and losses and cash
flows for the nine months ended March 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SCH International Limited at March 31, 1996 and the consolidated results of
its operations and cash flows for the nine months ended March 31, 1996 in
conformity with accounting principles generally accepted in the United
Kingdom.
Ernst & Young
Chartered Accountants
London, England
December 18, 1996
F-21
<PAGE>
SCH INTERNATIONAL LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
9 MONTHS ENDED 31 MARCH 1996
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
NOTES (Pounds)'000 (Pounds)'000
----- ------------ ------------
<S> <C> <C> <C>
TURNOVER: 2 13,678
Cost of sales.................................. (9,669)
------
GROSS PROFIT................................... 4,009
------
Distribution costs............................. (515)
Administrative expenses:
Exceptional.................................... 3 (215)
Other.......................................... (3,766)
------
(3,981)
------
OPERATING LOSS (487)
------
Income from investment in associate company.... 37
Other income................................... 3
Interest payable............................... 4 (181)
Exceptional item--Disposal of fixed asset in- 72
vestment...................................... 3 ------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION.... (556)
Tax on loss on ordinary activities............. 5 85
------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION..... (471)
Minority interest.............................. (34)
------
RETAINED LOSS FOR THE FINANCIAL PERIOD......... (505)
Retained profit brought forward................ 10
------
RETAINED LOSS CARRIED FORWARD.................. (495)
======
</TABLE>
The operating loss is derived entirely from continuing operations.
There are no recognised gains and losses other than the loss for the period.
F-22
<PAGE>
SCH INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEET
31 MARCH 1996
<TABLE>
<CAPTION>
AT
31 MARCH
1996
NOTE (Pounds)'000 (Pounds)'000
---- ------------ ------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets................................. 10 795
Investments..................................... 11 --
------
795
CURRENT ASSETS
Stocks and work in progress..................... 12 2,907
Debtors......................................... 13 2,801
Cash at bank and in hand........................ 1,494
------
7,202
------
CREDITORS: amounts falling due within one year
Bank overdraft.................................. 704
Trade creditors................................. 1,409
Sundry creditors................................ 14 8,031
------
10,144
------
NET CURRENT LIABILITIES......................... (2,942)
------
TOTAL ASSETS LESS CURRENT LIABILITIES........... (2,147)
CREDITORS: amounts falling due after more than
one year....................................... 15 (1,100)
PROVISIONS FOR LIABILITIES AND CHARGES.......... 17 (4)
------
(3,251)
======
CAPITAL AND RESERVES
Called up share capital......................... 18 311
Share premium account........................... 19 14
Reserves:
Profit and loss account....................... 19 (495)
Goodwill...................................... 19 (3,238)
------
EQUITY SHAREHOLDERS' FUNDS...................... (3,408)
Equity minority interest........................ 157
------
TOTAL CAPITAL EMPLOYED.......................... (3,251)
======
</TABLE>
F-23
<PAGE>
SCH INTERNATIONAL LIMITED
CONSOLIDATED CASH FLOW STATEMENT
9 MONTHS ENDED 31 MARCH 1996
<TABLE>
<CAPTION>
9 MONTHS
ENDED 31
MARCH 1996
NOTES (Pounds)'000 (Pounds)'000
----- ------------ ------------
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES...... 6 1,486
RETURN ON INVESTMENTS AND SERVICING OF FINANCE:
Interest paid................................. (181)
Income from investment in associated company.. 37
----
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
SERVICING OF FINANCE.......................... (144)
TAXATION:
UK corporation tax paid....................... (127)
----
TAX PAID....................................... (127)
INVESTING ACTIVITIES
Purchase of tangible fixed assets.............. (98)
Sale of interests in associated company........ 150
----
NET CASH INFLOW FROM INVESTING ACTIVITIES...... 52
-----
NET CASH INFLOW BEFORE FINANCING............... 1,267
-----
FINANCING......................................
Purchase of shares by Employee Share Ownership
Plan trust.................................... (99)
Repayment of term loan......................... (200)
Repayment of loan stock........................ (93)
----
NET CASH OUTFLOW FROM FINANCING................ 392
-----
INCREASE IN CASH AND CASH EQUIVALENTS.......... 7 875
=====
</TABLE>
F-24
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
1. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are described
below:
CONVENTION
The financial statements are prepared under the historical cost convention.
NON-STATUTORY ACCOUNTS
The consolidated financial statements comprise non-statutory accounts.
TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is calculated to write down their cost or valuation to their
estimated residual values by equal annual installments over the period of
their estimated useful economic lives, which are considered to be:
<TABLE>
<S> <C>
Short leasehold buildings and improvements...................... Period of lease
Other leased assets............................................. Period of lease
Plant and machinery............................................. 2-5 years
Motor vehicles.................................................. 4 years
Fixtures, computer and office equipment......................... 4-8 years
</TABLE>
STOCKS AND WORK IN PROGRESS
Stocks and work in progress are stated at the lower of cost and net realisable
value.
Cost of stocks is calculated on a first-in, first-out basis. Work in progress
cost includes all production related overheads and the appropriate proportion
of indirect overhead expenditure.
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on timing
differences arising from the inclusion of items of income and expenditure in
taxation computations in periods different from those in which they are
included in the financial statements to the extent that it is probable that a
liability or asset will crystallise in the future.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities denominated in foreign currencies are translated
into sterling at the rates ruling at the balance sheet date. Transactions
denominated in foreign currencies are translated at the rates ruling at the
dates of the transactions. All exchange differences are dealt with through the
profit and loss account.
On consolidation, the temporal method is used to translate the foreign
currency balance sheets in view of the control exercised over these entities.
Exchange differences are dealt with through the profit and loss account.
BASIS OF CONSOLIDATION
The group financial statements consolidate the financial statements of the
company and all subsidiaries for the period ended 31 March 1996.
GOODWILL
Goodwill is written off to reserves when it arises.
INVESTMENTS
Investments held as fixed assets are stated at cost less any provision for
permanent diminution in value.
F-25
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
1. ACCOUNTING POLICIES (CONTINUED)
LEASED ASSETS
Assets held under finance leases and the related lease obligation are recorded
in the balance sheet at the fair value of the leased assets at the inception
of the leases. The amounts by which the lease payments exceed the recorded
lease obligation are treated as finance charges which are amortised over the
lease term to give a constant rate of charge on the remaining balance of the
obligation.
Rental costs under operating leases on occupied and unoccupied properties are
charged to profit and loss account in equal annual instalments over the period
of the lease.
PENSIONS
The company's cost is charged to the profit and loss account so as to spread
the cost of pensions as incurred over members' working lives with the company.
2. TURNOVER
Turnover represents the amounts invoiced to customers in respect of completed
projects and is stated after deduction of trade discounts and value added tax.
3. EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Administrative expenses:
Contributions to the Employee Share Ownership Plan............... (80)
Specific bad debt................................................ (135)
----
(215)
====
Disposal of fixed asset investment................................. 72
====
</TABLE>
SCH International Limited disposed of its remaining 40% interest in Delegate
Management Services Limited during the period.
F-26
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
4. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Bank loans and overdrafts repayable within five years............. 116
Debenture loans................................................... 42
Other interest.................................................... 23
------
181
======
5. TAX ON LOSS ON ORDINARY ACTIVITIES
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Taxation based on the loss for the period comprises:
United Kingdom corporation tax (recoverable)/payable at 33% on (85)
taxable loss..................................................... ------
(85)
======
6. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Operating loss.................................................... (487)
Depreciation charges.............................................. 141
Provisions against investment..................................... 80
(Increase) in stocks and work in progress......................... (1,875)
Decrease in debtors............................................... 862
Increase in creditors............................................. 2,765
------
Net cash inflow from operating activities......................... 1,486
======
</TABLE>
F-27
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
7. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS IN THE YEAR
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Balance at 1 July 1995............................................. (85)
Net cash inflow.................................................... 875
---
Balance at 30 March 1996........................................... 790
===
</TABLE>
8. ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS AS SHOWN IN THE
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
CHANGE IN
1996 1995 YEAR
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
Cash at bank and in hand................. 1,494 58 1,436
Bank overdraft........................... (704) (143) (561)
----- ---- -----
790 (85) 875
===== ==== =====
</TABLE>
F-28
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
9. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
EMPLOYEES
AVERAGE NUMBER OF PERSONS EMPLOYED BY THE GROUP IN THE YEAR:
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
------------
NO.
------------
<S> <C>
Production and design staff...................................... 59
Sales and distribution staff..................................... 14
Administration staff............................................. 20
------
93
======
STAFF COSTS DURING THE YEAR, INCLUDING DIRECTORS, IN RESPECT OF THESE EMPLOYEES
WERE:
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
------------
(Pounds)'000
------------
<S> <C>
Wages and salaries............................................... 2,123
Social security costs 188
Pension costs.................................................... 61
------
2,372
======
DIRECTORS' EMOLUMENTS
Management remuneration including pension contributions.......... 380
Compensation for loss of office.................................. 5
------
385
======
Emoluments (excluding pension contributions) of the Chairman..... 84
======
Emoluments (excluding pension contributions) of the directors
fell within the following ranges: NUMBER
(Pounds)25,001 -- (Pounds)30,000................................. 1
(Pounds)65,001 -- (Pounds)70,000................................. 1
(Pounds)70,001 -- (Pounds)75,000................................. 1
(Pounds)85,001 -- (Pounds)90,000................................. 2
======
</TABLE>
F-29
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
10. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT
LEASEHOLD ASSETS
BUILDINGS FURNITURE, HELD
AND PLANT COMPUTER UNDER
IMPROVE- AND MOTOR AND OFFICE FINANCE
MENTS MACHINERY VEHICLES EQUIPMENT LEASES TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cost:
At 1 July 1995.......... 619 834 8 1,523 94 3,078
Additions............... 17 -- 6 75 -- 98
Disposals............... -- (11) -- (2) -- (13)
--- --- --- ----- --- -----
At 31 March 1996 636 823 14 1,596 94 3,163
--- --- --- ----- --- -----
Accumulated
depreciation:
At 1 July 1995.......... 162 809 2 1,167 88 2,228
Provided during the
period................. 33 12 2 88 6 141
Disposals............... -- -- -- (1) -- (1)
--- --- --- ----- --- -----
At 31 March 1996........ 195 821 4 1,254 94 2,368
--- --- --- ----- --- -----
Net book value:
At 31 March 1996........ 441 2 10 342 -- 795
=== === === ===== === =====
</TABLE>
The assets held under finance leases comprise furniture, computer and office
equipment.
The assets of SCH International Limited and its subsidiaries have been charged
in favour of GiroCredit Bank as security for loans outstanding to SCH
International Limited amounting to (Pounds)1,548,750.
11. FIXED ASSETS INVESTMENTS
<TABLE>
<CAPTION>
ASSOCIATED OWN
UNDERTAKINGS SHARES TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
Balance at 1 July 1995................... 44 153 197
Investments made during the period....... -- 59 59
Disposal in the period................... (44) (117) (161)
Provision................................ -- (95) (95)
--- ---- ----
-- -- --
=== ==== ====
</TABLE>
All investments are in unquoted companies.
F-30
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
11. FIXED ASSETS INVESTMENTS (CONTINUED)
The above investments are stated at cost less provisions for permanent
diminution in value and, in the opinion of the directors, the value of the
investments is not less than the value at which they are stated in the
accounts.
SCH International Limited disposed of its remaining 40% interest in Delegate
Management Services Limited on 11 March 1996.
The company operated an Employee Share Ownership Plan for the purpose of
purchasing shares in SCH International Limited from employees who leave the
group. The intention was to sell or distribute shares to new and existing
employees. Shares held by the trust were disclosed as investment in own shares
within fixed assets as the purchases had been financed by a loan from the
company. On 13 June 1996 the shares held by the trust were redistributed to
employees. The entire share capital of the company was disposed of to Caribiner
Holdings (UK) Limited on the same date.
Employees hold options to purchase 58,000 10p ordinary shares in SCH
International Limited at 31 March 1996.
The trust holds a total of 1,218,325 10p ordinary shares in SCH International
at 31 March 1996.
12. STOCKS AND WORK IN PROGRESS
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Raw materials...................................................... 11
Work in progress................................................... 2,896
-----
2,907
=====
13. DEBTORS
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Trade debtors...................................................... 2,419
Other debtors...................................................... 84
Prepayments and accrued income..................................... 185
Corporation tax recoverable........................................ 113
-----
2,801
=====
</TABLE>
F-31
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS--(CONTINUED)
9 MONTHS ENDED 31 MARCH 1996
14. SUNDRY CREDITORS
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Other creditors.................................................... 192
Corporation tax.................................................... 23
Other taxation and social security................................. 193
Bank loans......................................................... 900
Unsecured loan stock "B"........................................... 116
Accruals and deferred income....................................... 6,607
-----
8,031
=====
15. CREDITORS: amounts falling due after more than one year
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Debenture loans:
Unsecured loan stock "A".......................................... 104
Unsecured loan stock "B".......................................... 347
Bank loans......................................................... 649
-----
1,100
=====
16. BORROWINGS
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Analysis of loan repayments
</TABLE>
<TABLE>
<S> <C>
Bank loans and overdrafts
Within one year or on demand............................................. 1,604
Between one and two years................................................ 649
Between two and five years............................................... --
Unsecured loan stock "A"
Over one year............................................................ 104
Unsecured loan stock "B"
Within one year.......................................................... 116
Over one year............................................................ 347
-----
2,820
=====
</TABLE>
F-32
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
16. BORROWINGS (continued)
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Due within one year
Bank overdraft.................................................... 704
Unsecured loan stock "B".......................................... 116
Bank loans........................................................ 900
-----
1,720
-----
Due after more than one year
Unsecured loan stock "A".......................................... 104
Unsecured loan stock "B".......................................... 347
Bank loans........................................................ 649
-----
1,100
-----
2,820
=====
</TABLE>
The bank loans are secured by a fixed and floating charge on the assets of the
group.
Loan stock "A" and "B" is repayable at any time at the directors' discretion
and the option of the stockholders, subject to agreement with GiroCredit Bank.
Other than the amounts shown above due within one year, repayment of which has
been agreed, the directors understand that no other repayment of loan stock
"A" and "B" will be made before 30 June 1996.
Loan stock "A" bears interest at 15% per annum and is unsecured.
Loan stock "B" bears interest at a rate equivalent to the National Westminster
Bank PLC base rate on amounts outstanding after 1 December 1992 and is
unsecured.
17. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
Deferred taxation:
At 1 July 1995..................................................... 4
---
At 31 March 1996................................................... 4
===
The amounts of deferred taxation provided in the financial statements are as
follows:
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Capital allowances in excess of depreciation....................... 4
===
</TABLE>
There was no deferred taxation unprovided in either the current or preceding
financial years.
F-33
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
18. SHARE CAPITAL
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Authorised:
5,000,000 ordinary shares of 10p each.............................. 500
===
Allotted and fully paid:
3,106,750 (1995--3,106,750) ordinary shares of 10p each............ 311
===
</TABLE>
GiroCredit Bank has rights under a warrant instrument to subscribe for 279,068
ordinary shares of the Company at 10.53p per share. The warrant is exercisable
by GiroCredit Bank at any time on or before 31 December 1999.
19. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
SHARE
SHARE PREMIUM PROFIT AND
CAPITAL ACCOUNT GOODWILL LOSS ACCOUNT TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at 1 July 1995.. 311 14 (3,238) 10 (2,903)
Loss for the period..... -- -- -- (505) (505)
--- --- ------ ---- ------
Balance at 31 March 311 14 (3,238) (495) (3,405)
1996................... === === ====== ==== ======
</TABLE>
20. FINANCIAL COMMITMENTS
At 31 March 1996 the group was committed to making the following payments
during the next year in respect of operating leases:
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHER
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Leases which expire:
Within one year...................................... -- 77
Within two to five years............................. -- 103
After five years..................................... 385 --
--- ---
385 180
=== ===
</TABLE>
F-34
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
21. CONTINGENT LIABILITIES
The company has entered into a cross guarantee arrangement with the following
group companies:
Spectrum Communications Limited
Mark Wallace Associates Limited
The overdraft facility of all the above companies subject to the cross
guarantee totalled (Pounds)150,000 at 31 March 1996.
A loan of (Pounds)1,548,750 advanced to SCH International Limited is secured
on all the assets of the group. The total facility available is
(Pounds)1,775,000. The company has given a debenture creating charges over its
entire assets in order to secure the obligations of the company under the
guarantee.
The company is grouped for VAT purposes with certain other group companies.
Consequently the company is contingently liable for the VAT liabilities of
those other companies.
22. RELATED PARTY TRANSACTIONS
The lease to the premises at 32 Berrymade Road, Chiswick is held by a director
of the company. The annual rental under this lease is (Pounds)25,000.
23. ADDITIONAL INFORMATION ON SUBSIDIARY AND ASSOCIATE COMPANIES
<TABLE>
<CAPTION>
COUNTRY OF PERCENTAGE
INCORPORATION/ OF ORDINARY
REGISTRATION SHARES HELD
---------------------- -----------
<S> <C> <C> <C>
Spectrum Communications Limited.... England and Wales 100%
Spectrum Communications
(Birmingham) Limited.............. England and Wales 100%* Dormant
Mark Wallace Associates Limited.... England and Wales 80%
Spectrum Communications GmbH....... Germany 100%
Spectrum Communications LLC........ Dubai 49%*
Spectrum Communications
International BVI, Limited........ British Virgin Islands 100% Dormant
</TABLE>
The subsidiary companies are engaged in the production and stage management
of conferences.
* Held by subsidiary company.
During the year the company sold its remaining 40% share of Delegate
Management Services Limited.
F-35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholder of General Electric Capital Computer Leasing Corporation
We have audited the accompanying balance sheet of Total Audio Visual
Services (a division of General Electric Capital Computer Leasing Corporation)
as of December 31, 1995, and the related statements of operations and
divisional equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Total Audio Visual
Services as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Atlanta, Georgia
November 15, 1996
F-36
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................. $ 995,514
Accounts receivable, less allowance for doubtful accounts of
$123,000........................................................ 7,644,557
Resale inventory................................................. 345,566
Prepaid expenses and other assets................................ 399,935
Deferred tax asset............................................... 170,800
-----------
Total current assets........................................... 9,556,372
Property and equipment, net........................................ 10,600,031
Goodwill, net of accumulated amortization of $376,864.............. 3,781,769
Purchased software................................................. 176,130
-----------
Total assets................................................... $24,114,302
===========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable................................................. $ 737,323
Sales tax payable................................................ 376,015
Accrued payroll.................................................. 497,160
Vacation accrual................................................. 396,304
Other liabilities................................................ 506,415
-----------
Total current liabilities...................................... 2,513,217
Deferred tax liability............................................. 820,689
Due to GECCLC...................................................... 19,764,975
Divisional equity.................................................. 1,015,421
-----------
Total liabilities and divisional equity........................ $24,114,302
===========
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENT OF OPERATIONS AND DIVISIONAL EQUITY
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Total revenue...................................................... $45,923,658
Cost of equipment sales............................................ 2,757,492
-----------
Gross Profit....................................................... 43,166,166
-----------
Operating Expenses:
Payroll and related expenses..................................... 15,603,445
Rental expense................................................... 2,320,224
Commission expense............................................... 7,104,104
Other operating expenses......................................... 6,269,230
Depreciation and amortization expense............................ 2,609,470
General and administrative expenses.............................. 6,914,737
-----------
Total operating expenses....................................... 40,821,210
-----------
Operating income................................................... 2,344,956
Other expense:
Interest expense, net............................................ 1,200,000
Other expense.................................................... 211,770
-----------
Income before provision for income taxes........................... 933,186
Provision for income taxes......................................... 428,003
-----------
Net income......................................................... 505,183
Divisional equity, beginning of year............................... 510,238
-----------
Divisional equity, end of year..................................... $ 1,015,421
===========
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................................... $ 505,183
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense.......................... 2,609,470
Deferred tax expense........................................... 428,003
Changes in operating assets and liabilities:
Increase in accounts receivable, net......................... (330,418)
Decrease in resale inventory................................. 153,579
Increase in prepaid expenses and other assets................ (199,326)
Decrease in accounts payable................................. (309,365)
Increase in sales tax payable................................ 206,576
Increase in accrued payroll.................................. 4,378
Increase in vacation accrual................................. 19,149
Decrease in other liabilities................................ (270,358)
-----------
Net cash provided by operating activities........................ 2,816,871
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of software............................................ (161,130)
Purchases of property and equipment.............................. (5,719,623)
-----------
Net cash used in investing activities............................ (5,880,753)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from GECCLC......................................... 3,825,272
-----------
Net cash provided by financing activities........................ 3,825,272
-----------
Net increase in cash............................................. 761,390
Cash at beginning of year........................................ 234,124
-----------
Cash at end of year.............................................. $ 995,514
===========
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Total Audio Visual Services ("TAVS" or the "Company") is a division of
General Electric Capital Computer Leasing Corporation ("GECCLC"), which is an
indirect wholly-owned subsidiary of General Electric Company ("GE"). TAVS is a
provider of audio visual equipment rentals and staging services to companies,
as well as hotel audio visual outsourcing services in the United States. TAVS
enters into short-term rentals of equipment on a daily, weekly and monthly
basis. TAVS also sells equipment to customers.
GECCLC acquired TAVS in September 1994 for a purchase price of approximately
$15,000,000. The acquisition was accounted for under the purchase method of
accounting. The excess of the purchase price over the fair value of net assets
of the business acquired was recorded as goodwill and is being amortized
straight-line over 15 years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue at the end of the rental period for rental
and service agreements. Sales of equipment are recognized in the period sold.
Accounts Receivable
The December 31, 1995 accounts receivable balance includes unbilled revenue
of approximately $750,000.
Resale Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out method.
Property and Equipment
Property and equipment is recorded at cost, net of accumulated depreciation
and amortization. Depreciation is computed on the straight-line method over
the estimated useful lives of related assets. The estimated useful lives of
the assets are five years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or the estimated life.
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121 ("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS No.
121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company plans to adopt SFAS No. 121 in 1996; however, they
do not believe the adoption will have a significant impact on the Company.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of
businesses acquired and is amortized over a 15 year period using the straight-
line method. Amortization expense for 1995 totaled approximately $278,000.
F-40
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Advertising
Advertising costs are expensed as incurred and totaled $34,000 for 1995.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and accounts
receivable. The Company maintains cash with various financial institutions.
The Company performs periodic evaluations of the relative credit standing of
those financial institutions to minimize credit risk. Concentrations of credit
risk with respect to trade accounts receivable are limited due to the large
number of entities comprising the Company's customer base. The Company
performs periodic evaluations of its customers' financial condition and
generally does not require collateral. At December 31, 1995, accounts
receivable from hotel and convention centers approximated $4,359,000.
The carrying amounts reported in the balance sheet for cash, accounts
receivable and accounts payable approximate their fair values.
Statement of Cash Flows
Taxes and interest paid in 1995 were settled through the "Due to GECCLC"
account and thus no cash was remitted by the Company for these items.
3. RELATED PARTY TRANSACTIONS
The amount payable to GECCLC represents a net amount due to various entities
of GECCLC for services provided or expenses paid by GECCLC on behalf of the
Company offset by cash remitted to GECCLC. GECCLC charged interest to TAVS
based upon their monthly budgeted net investment in TAVS using an interest
rate of approximately 7.25%.
GECCLC and several of its divisions provide substantial services to the
Company, including treasury, tax, financial reporting, legal, payroll,
marketing, and information systems. GECCLC charged the Company $180,000 for
these services in 1995. These charges are allocated based upon headcount,
direct cost or the number of transactions processed. In addition, certain
employees of GECCLC, work exclusively for the Company. As a result, the
payroll and related benefits for these employees are rebilled to TAVS.
Management believes that the basis used for allocating these services is
reasonable. However, the terms of these transactions may differ from those
that would result from transactions among unrelated parties.
Certain employees are eligible for GE benefits related to health care,
pension and a savings and security plan. GECCLC charges the Company a
percentage of labor costs for these benefits. Payroll expenses in 1995
includes approximately $2,800,000 of charges for these benefits.
F-41
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
The components of property and equipment as of December 31, 1995 consists
of:
<TABLE>
<S> <C>
Equipment leased to others.................................... $10,105,581
Furniture and fixtures........................................ 1,621,236
Leasehold improvements........................................ 1,606,474
Vehicles...................................................... 153,682
-----------
Total property and equipment.................................. 13,486,973
Accumulated depreciation and amortization..................... (2,886,942)
-----------
$10,600,031
===========
</TABLE>
5. LEASE ARRANGEMENTS
TAVS leases office space for periods up to 5 years under operating lease
agreements. These leases are subject to price escalations for certain costs.
TAVS leases space at hotels for lease periods less than one year which are
cancelable. Total rent expense for all such leases was approximately $644,000
in 1995.
Future minimum lease payments under the noncancelable operating leases at
December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996.............................. $ 281,988
1997.............................. 256,136
1998.............................. 266,948
1999.............................. 204,928
2000.............................. 101,185
Thereafter........................ --
----------
$1,111,185
==========
</TABLE>
6. INCOME TAXES
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
<TABLE>
<S> <C>
Deferred tax assets:
Current:
Accrued expenses........................................... $ 121,600
Allowance for doubtful accounts............................ 49,200
---------
170,800
Non-current:
Net operating loss......................................... 124,862
---------
295,662
Deferred tax liability:
Property and equipment....................................... (945,551)
---------
Net deferred tax liability..................................... $(649,889)
=========
</TABLE>
The provision for income taxes consists of the following components:
<TABLE>
<S> <C>
Current........................................................... $ --
Deferred.......................................................... 428,003
--------
$428,003
========
</TABLE>
F-42
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is as follows:
<TABLE>
<S> <C>
Tax expense at statutory rate.................................... $317,283
State income tax net of federal benefit.......................... 55,991
Non-deductible expenses.......................................... 54,729
--------
$428,003
========
</TABLE>
7. SUBSEQUENT EVENTS
On September 12, 1996, GECCLC signed an Agreement of Purchase and Sale of
Assets to sell certain of the assets of TAVS to Caribiner International, Inc.
("Caribiner") for total consideration of approximately $27 million in cash
which is subject to certain post-closing adjustments. The transaction closed on
September 27, 1996. The December 31, 1995 financial statements do not include
any adjustments as a result of this transaction.
F-43
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
<S> <C>
ASSETS
Current assets:
Cash.............................................................. $ 19,084
Accounts receivable, less allowance for doubtful accounts of
$47,000 9,621,605
Resale inventory.................................................. 231,684
Prepaid expenses and other assets................................. 611,499
-----------
Total current assets........................................ 10,483,872
Property and equipment, net....................................... 12,210,241
Goodwill, net of accumulated amortization of $51,864.............. 3,578,519
Purchased software................................................ 386,839
-----------
Total assets................................................ $26,659,471
===========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable.................................................. $ 1,054,301
Sales tax payable................................................. 420,122
Accrued payroll................................................... 155,909
Vacation accrual.................................................. 455,470
Other liabilities................................................. 954,971
-----------
Total current liabilities................................... 3,040,773
Deferred tax liability............................................ 1,571,871
Due to GECCLC..................................................... 19,904,540
Divisional equity................................................. 2,142,287
-----------
Total liabilities and divisional equity..................... $26,659,471
===========
</TABLE>
See accompanying note to financial statements.
F-44
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENTS OF OPERATIONS AND DIVISIONAL EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
------------------------
1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Total revenue......................................... $24,295,409 $28,493,990
Cost of equipment sales............................... 1,340,577 1,211,391
----------- -----------
Gross Profit.......................................... 22,954,832 27,282,599
----------- -----------
Operating Expenses:
Payroll and related expenses........................ 7,986,741 8,606,641
Rental.............................................. 1,192,449 1,511,043
Commission expense.................................. 3,960,852 4,872,165
Other operating expenses............................ 3,623,189 3,747,129
Depreciation and amortization expense............... 1,304,541 1,787,848
General and administrative expenses................. 3,512,889 4,088,558
----------- -----------
Total operating expenses.............................. 21,580,661 24,613,384
----------- -----------
Operating income...................................... 1,374,171 2,669,215
Other income (expense):
Interest expense, net............................... (600,000) (699,693)
Other income (expense).............................. (578,345) 79,328
----------- -----------
Income before provision for income taxes.............. 195,826 2,048,850
Provision for income taxes............................ 88,122 921,984
----------- -----------
Net income............................................ 107,704 1,126,866
Divisional equity, beginning of year.................. 510,237 1,015,421
----------- -----------
Divisional equity, end of year........................ $ 617,941 $ 2,142,287
=========== ===========
</TABLE>
See accompanying note to financial statements.
F-45
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
------------------------
1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..........................................
Adjustments to reconcile net income to net cash
provided by operating activities: $ 107,704 $ 1,126,866
Depreciation and amortization expense............. 1,304,541 1,787,848
Deferred tax expenses............................. 88,122 921,982
Changes in operating assets and liabilities:
Increase in accounts receivable, net............ (817,588) (1,977,048)
Decrease in resale inventory.................... 296,789 113,882
Decrease (increase) in prepaid expenses and
other assets................................... 59,264 (211,564)
(Decrease) increase in accounts payable......... (124,813) 316,978
Increase in sales tax payable................... 189,966 44,107
Increase (decrease) in accrued payroll.......... 4,378 (341,251)
Increase in vacation accrual.................... 76,248 59,166
Increase in other liabilities................... 1,005,954 448,556
----------- -----------
Net cash provided by operating activities........... 2,190,565 2,289,522
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of software................................ (73,000) (210,709)
Purchase of property and equipment, net............. (2,694,304) (3,194,808)
----------- -----------
Net cash used in investing activities............... (2,767,304) (3,405,517)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from GECCLC............................ 366,936 139,565
----------- -----------
Net cash provided by financing activities........... 366,936 139,565
----------- -----------
Net decrease in cash................................ (209,803) (976,430)
Cash at beginning of year........................... 234,124 995,514
----------- -----------
Cash at end of year................................. $ 24,321 $ 19,084
=========== ===========
</TABLE>
See accompanying note to financial statements.
F-46
<PAGE>
TOTAL AUDIO VISUAL SERVICES
NOTE TO UNAUDITED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles from interim
financial information and should be read in conjunction with Total Audio
Visual Services' audited financial information. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Such adjustments are of a normal recurring nature. Operating
results for the six months ended June 30, 1996 and 1995 are not necessarily
indicative of the results that may be expected for any other period or for a
full fiscal year.
F-47
<PAGE>
[TWO PHOTOGRAPHS APPEAR HERE]
In October, 1995, Caribiner produced the HOLIDAY INN Worldwide annual Conference
in San Antonio, Texas. This four-day event was designed to reward, educate and
inform 2,200 delegates made up of hotel owners, partners and franchise holders
who came together from around the world. Caribiner drafted speeches, provided
speech training, created visual support, produced videos that specifically
supported the marketing presentations and provided staging for the event.
[PHOTOGRAPH APPEAR HERE]
Caribiner designed the structure and all visual elements for PHILIP MORRIS'
exhibit at the July, 1995 AWMA (American Wholesale Markets Association) trade
show. The 30' X 40' booth featured light boxes, motion message signs, a video
wall and interactive kiosks. Attendees were able to access information about
Philip Morris' incentive program and their current status in it.
In March, 1995, Caribiner designed and developed a series of training tools for
KEY PHARMACEUTICALS' UNI-DUR(Registered Trademark) product launch. The training
began in the field before the launch event and continued through activities at
the on-site product launch meeting. Training tools included computer based
learning modules, a series of video presentations and a continuous computer
based learning competition which required the sales representatives to
demonstrate their mastery of the UNI-DUR(Registered Trademark) product platform.
[TWO PHOTOGRAPHS APPEAR HERE]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HERE-
OF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 11
The Company............................................................... 15
Use of Proceeds........................................................... 16
Price Range of Common Stock and Dividend Policy........................... 17
Capitalization............................................................ 18
Unaudited Pro Forma Consolidated Financial Information.................... 19
Selected Financial and Operating Data..................................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 27
Business.................................................................. 36
Management................................................................ 45
Certain Relationships and Transactions with Related Persons............... 51
Principal and Selling Stockholders........................................ 53
Description of Capital Stock.............................................. 54
Shares Eligible for Future Sale........................................... 55
Underwriting.............................................................. 57
Legal Matters............................................................. 58
Experts................................................................... 58
Additional Information.................................................... 58
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,878,200 SHARES
[LOGO OF CARIBINER INTERNATIONAL, INC.]
COMMON STOCK
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
FURMAN SELZ
SCHRODER WERTHEIM & CO.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized list of the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 31,459
NASD filing fee................................................. 10,882
New York Stock Exchange listing fee............................. *
Blue sky fees and expenses...................................... 5,000
Printing and engraving expenses................................. *
Legal fees and expenses......................................... *
Accounting fees and expenses.................................... 150,000
Transfer agent and registrar fees............................... *
Miscellaneous fees and expenses................................. *
--------
Total....................................................... $ *
</TABLE>
- --------
* To be completed by amendment.
The Company will bear all of the foregoing fees and expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), Article Seventh of the Certificate) (filed as Exhibit 3.1 to this
Registration Statement) eliminates the liability of the Company's directors to
the Company and its stockholders, except for liabilities related to a breach of
duty of loyalty to the Company and its stockholders, acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, any transaction from which the director derives an improper personal
benefit and certain other liabilities and, in the event of an amendment to the
DGCL, eliminates such personal liability of the Company's directors to the
fullest extent permitted by the DGCL, as so amended.
Subsection (a) of Section 145 of the DGCL empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation except that no indemnification may be
made in respect of any claim, issue, or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in
II-1
<PAGE>
which such action or suit was brought shall determine that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee, or agent of a corporation has been successful in the
defense of any action, suit, or proceeding referred to in subsections (a) and
(b) or in the defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 of the DGCL shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of any person acting
in any of the capacities set forth in the second preceding paragraph against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have
the power to indemnify him against such liabilities under Section 145 of the
DGCL.
The By-Laws (filed as Exhibit 3.2 to this Registration Statement) require
the Company, under certain circumstances, to indemnify any person who is, was
or has agreed to become a director, officer, employee or agent against
expenses, liability and loss actually and reasonably incurred by him. The By-
laws also provide that expenses incurred in connection with a civil, criminal,
administrative or investigative action, suit or proceeding, or threat thereof,
may be paid by the Company in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in the By-laws.
In addition, the Registrant has obtained directors' and officers'
reimbursement and liability insurance which insures against liabilities that
directors and officers of the Registrant may incur in such capacities. The
risks covered by such policies do not exclude liabilities under the Securities
Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1993, the Company has issued and sold the following
unregistered securities:
1. From May, 1993 to May, 1994, the Company issued and sold an aggregate of
602,156 shares of Series A Non-Voting Common Stock, par value $.01 per share
(the "Non-Voting Common Stock"), to 21 officers and employees of the Company
for an aggregate purchase price of $10,549 in cash pursuant to award
agreements under the Company's 1993 Management Stock Plan (the "Management
Stock Plan").
2. In July, 1993, pursuant to an exchange offer and merger agreement with
certain shareholders of Ingleby Communications Corp. ("ICC"), the Company
exchanged shares of Common Stock for shares of the common stock of ICC. An
aggregate of 1,869,525 shares of Common Stock were issued in the exchanges to
24 holders of ICC common stock.
3. From August, 1993 through November, 1995 the Company issued to Warburg as
further inducement to make a term loan to the Company of up to $10 million,
warrants to purchase an aggregate of 534,505 shares of Common Stock.
4. From October, 1994 through July, 1995 the Company issued and sold an
aggregate of 33,222 shares of Non-Voting Common Stock to two officers and
employees of the Company for an aggregate purchase price of $8,730 in cash
pursuant to award agreements under the Management Stock Plan.
5. In November, 1995, the Company issued and sold an aggregate of 87,210
shares of Non-Voting Common Stock to 35 officers and employees of the Company
for an aggregate purchase price of $130,625 in cash pursuant to award
agreements under the Management Stock Plan.
II-2
<PAGE>
6. In April, 1996, the Company granted to an employee options to purchase
2,500 shares of Common Stock at an exercise price of $25.6875 under the
Company's 1996 Stock Option Plan.
7. In June, 1996 the Company issued and sold an aggregate of 31,821 shares
of Common Stock to Mark P. Fitzgerald, Warren F. Moore II and Richard C. Hunt
in connection with the purchase of substantially all of the assets, and the
assumption of certain of the liabilities, of Lighthouse, Ltd.
8. In July, 1996, the Company granted to employees options to purchase
140,000 shares of Common Stock at an exercise price of $28.875 under the
Company's 1996 Stock Option Plan.
9. In September, 1996, the Company granted to employees options to purchase
8,900 shares of Common Stock at an exercise price of $40.375 under the
Company's 1996 Stock Option Plan.
10. In October, 1996, the Company granted to an employee options to purchase
28,000 shares of Common Stock at an exercise price of $44.75 under the
Company's 1996 Stock Option Plan.
11. In November, 1996, the Company issued 497 shares of Common Stock at a
price of $25.125 to Mr. Langton pursuant to the Non-Employee Directors Stock
Plan. Pursuant to such Plan, the number of shares of Common Stock issued was
determined by dividing $12,500 by $25.125 (the average of the high and low
sales price of the Common Stock on the date of Mr. Langton's appointment to
the Board of Directors (April 11, 1996)). In addition, in November, 1996, the
Company issued to Mr. Langton options to purchase 9,000 shares of Common Stock
at an exercise price per share of $42.625.
12. In November, 1996, the Company granted to an employee options to
purchase 5,000 shares of Common Stock at an exercise price of $42.625.
Except as set forth above, since January 1, 1993, the Company has made no
offers or sales of its unregistered securities.
There were no underwriters employed in connection with any of the
transactions set forth above.
The transactions described above were effected in reliance upon an exemption
from the registration requirements of the Securities Act on the basis that
such transactions did not involve any public offering. The recipients of
securities in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to sell or offer for
sale the securities in connection with any distribution thereof and
appropriate legends were affixed to the securities issued in such
transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*1.1 Form of Purchase Agreement
**3.1 Second Restated Certificate of Incorporation of the Registrant filed March
15, 1996 with the Secretary of State of the State of Delaware
***3.2 Second Amended and Restated By-Laws of the Registrant
***4 Specimen of Certificate of Common Stock of the Registrant
*5 Opinion of Schulte Roth & Zabel LLP (including the consent of such firm)
regarding the legality of the securities being offered
***10.1 1996 Stock Option Plan of the Registrant
***10.2 Non-Employee Directors' Stock Plan of the Registrant
***10.3 Employment Agreement, dated as of October 1, 1995, between the Registrant
and Raymond S. Ingleby
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
***10.4 Employment Agreement, dated as of December 1, 1995, between the Registrant
and Arthur F. Dignam
***10.5 Employment Agreement, dated as of December 1, 1995, between the Registrant
and Mark M. Cohen
*10.6 Employment Agreement, dated as of July 25, 1995, between the Registrant
and Brian Shepherd
*10.7 Employment Agreement, dated October 14, 1996, between the Registrant and
Lawrence P. Golen
10.8 Credit Agreement, dated as of December 4, 1996, among the Registrant,
Caribiner, Inc., the lenders named therein and the Chase Manhattan Bank,
as agent (schedules and exhibits omitted--the Registrant agrees to furnish
a copy of any such schedule and exhibit to the Securities and Exchange
Commission upon request)
***10.9 Stockholders Agreement, dated as of March 15, 1996, among the Registrant,
Warburg, Pincus Investors, L.P. and Raymond S. Ingleby
11.1 Statement Regarding Computation of Pro Forma Net Income Per Common Share
11.2 Statement Regarding Computation of Supplementary Pro Forma Income Per
Common Share
*21 Subsidiaries of the Registrant
*23.1 Consent of Schulte Roth & Zabel LLP (included as part of Exhibit 5 hereto)
23.2 Consent of Ernst & Young LLP, independent auditors
</TABLE>
- --------
* To be filed by amendment.
** Included as an exhibit to the Registrant's quarterly report on Form 10-Q
for the three months ended March 31, 1996 and incorporated herein by
reference.
*** Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-80481) and incorporated herein by reference.
(b) SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES:
The Supplemental Financial Statement Schedules have been intentionally
omitted because they are either not required or the information has been
included in the Notes to the Consolidated Financial Statements included as
part of this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
1. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
2. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule
II-4
<PAGE>
430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(b) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will
be deemed to be the initial bona fide offering thereof.
(c) It will provide to the Underwriters at the closing specified in
the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on December 19, 1996.
CARIBINER INTERNATIONAL, INC.
/s/ Raymond S. Ingleby
By___________________________________
Name: Raymond S. Ingleby
Title: Chairman of the Board
andChief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below hereby constitutes and appoints Raymond S. Ingleby and David E.
Libowitz and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all pre- or post-effective amendments
to this Registration Statement, any subsequent Registration Statement for the
same offering which may by filed under Rule 462(b) (a "Rule 462(b)
Registration Statement") and any and all pre-or post-effective amendments
thereto, and to file the same, with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing which they, or any of
them, may deem necessary or advisable to be done in connection with this
Registration Statement or any Rule 462(b) Registration Statement, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and conforming all that said attorneys-in-fact and agents or any of them or
any substitute or substitutes for any or all of them, may lawfully do or cause
to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Raymond S. Ingleby Chairman of the Board, Chief December 19, 1996
____________________________________ Executive Officer and
Raymond S. Ingleby Director
/s/ Arthur F. Dignam Executive Vice President, December 19, 1996
____________________________________ Chief Financial and
Arthur F. Dignam Administrative Officer and
Secretary (Principal
Financial and Accounting
Officer)
/s/ Errol M. Cook Director December 19, 1996
____________________________________
Errol M. Cook
/s/ Sidney Lapidus Director December 19, 1996
____________________________________
Sidney Lapidus
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David E. Libowitz Director December 19, 1996
____________________________________
David E. Libowitz
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Bryan D. Langton Director December 19, 1996
____________________________________
Bryan D. Langton
</TABLE>
/s/ Raymond S. Ingleby
By:____________________________
Raymond S. Ingleby
Attorney-in-Fact
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ------------
<C> <S> <C>
*1.1 Form of Purchase Agreement
**3.1 Second Restated Certificate of Incorporation of the
Registrant filed March 15, 1996 with the Secretary of
State of the State of Delaware
***3.2 Second Amended and Restated By-Laws of the Registrant
***4 Specimen of Certificate of Common Stock of the
Registrant
*5 Opinion of Schulte Roth & Zabel LLP (including the
consent of such firm) regarding the legality of the
securities being offered
***10.1 1996 Stock Option Plan of the Registrant
***10.2 Non-Employee Directors' Stock Plan of the Registrant
***10.3 Employment Agreement, dated as of October 1, 1995,
between the Registrant and Raymond S. Ingleby
***10.4 Employment Agreement, dated as of December 1, 1995,
between the Registrant and Arthur F. Dignam
***10.5 Employment Agreement, dated as of December 1, 1995,
between the Registrant and Mark M. Cohen
*10.6 Employment Agreement, dated as of July 25, 1995,
between the Registrant and Brian Shepherd
*10.7 Employment Agreement, dated October 14, 1996, between
the Registrant and Lawrence P. Golen
10.8 Credit Agreement, dated as of December 4, 1996, among
the Registrant, Caribiner, Inc., the lenders named
therein and the Chase Manhattan Bank, as agent
(schedules and exhibits omitted--the Registrant
agrees to furnish a copy of any such schedule and
exhibit to the Securities and Exchange Commission
upon request)
***10.9 Stockholders Agreement, dated as of March 15, 1996,
among the Registrant, Warburg, Pincus Investors, L.P.
and Raymond S. Ingleby
11.1 Statement Regarding Computation of Pro Forma Net
Income Per Common Share
11.2 Statement Regarding Computation of Supplementary Pro
Forma Income Per Common Share
*21 Subsidiaries of the Registrant
*23.1 Consent of Schulte Roth & Zabel LLP (included as part
of Exhibit 5 hereto)
23.2 Consent of Ernst & Young LLP, independent auditors
</TABLE>
- --------
* To be filed by amendment.
** Included as an exhibit to the Registrant's quarterly report on Form 10-Q
for the three months ended March 31, 1996 and incorporated herein by
reference.
*** Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-80481) and incorporated herein by reference.
<PAGE>
EXHIBIT 10.8
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
among
CARIBINER INTERNATIONAL, INC.,
CARIBINER, INC.,
The Several Lenders from Time to Time Parties Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
dated as of December 4, 1996
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS..................................................... 1
SECTION 1.01. Defined Terms........................................... 1
SECTION 1.02. Classification of Loans and Borrowings.................. 19
SECTION 1.03. Terms Generally......................................... 19
SECTION 1.04. Accounting Terms; GAAP.................................. 20
ARTICLE II. AMOUNT AND TERMS OF LOANS...................................... 20
SECTION 2.01. Reducing R/C Credit Commitments; Revolving
Credit Commitments.......................................... 20
SECTION 2.02. Reducing R/C Notes; Revolving Credit Notes.............. 21
SECTION 2.03. Borrowing Procedure..................................... 21
SECTION 2.04. Fees.................................................... 23
SECTION 2.05. Optional Prepayments and Termination or
Mandatory Reduction of Commitments.......................... 23
SECTION 2.06. Interest Elections...................................... 25
SECTION 2.07. Funding of Borrowings................................... 26
SECTION 2.08. Interest................................................ 26
SECTION 2.09. Alternate Rate of Interest.............................. 27
SECTION 2.10. Increased Costs......................................... 27
SECTION 2.11. Break Funding Payments.................................. 28
SECTION 2.12. Taxes................................................... 29
SECTION 2.13. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.................................................... 30
ARTICLE III. REPRESENTATIONS AND WARRANTIES................................ 31
SECTION 3.01. Organization; Powers.................................... 31
SECTION 3.02. Authorization; Enforceability........................... 31
SECTION 3.03. Governmental Approvals; No Conflicts.................... 32
SECTION 3.04. Financial Condition; No Material Adverse Change......... 32
SECTION 3.05. Properties.............................................. 32
SECTION 3.06. Intellectual Property................................... 33
SECTION 3.07. Litigation and Environmental Matters.................... 33
SECTION 3.08. Compliance with Laws and Agreements..................... 33
SECTION 3.09. Investment Company Act; Other Regulations............... 33
SECTION 3.10. Taxes................................................... 34
</TABLE>
-i-
<PAGE>
Page
----
SECTION 3.11. Subsidiaries........................................... 34
SECTION 3.12. Purpose of Loans....................................... 34
SECTION 3.13. ERISA.................................................. 34
SECTION 3.14. Federal Regulations.................................... 34
SECTION 3.15. Disclosure............................................. 35
SECTION 3.16. Security Documents..................................... 35
SECTION 3.17. Labor Matters.......................................... 35
SECTION 3.18. Solvency............................................... 35
ARTICLE IV. CONDITIONS PRECEDENT.......................................... 36
SECTION 4.01. Effective Date......................................... 36
SECTION 4.02. Conditions to Each Loan................................ 38
SECTION 4.03. Conditions to Each Loan for Future Material Acquisition 39
ARTICLE V. AFFIRMATIVE COVENANTS.......................................... 40
SECTION 5.01. Financial Statements and Other Information............. 40
SECTION 5.02. Notices of Material Events............................. 42
SECTION 5.03. Existence; Conduct of Business......................... 43
SECTION 5.04. Payment of Obligations................................. 43
SECTION 5.05. Maintenance of Properties; Insurance................... 43
SECTION 5.06. Books and Records; Inspection Rights................... 43
SECTION 5.07. Compliance with Laws; Contractual Obligations.......... 43
SECTION 5.08. Environmental Laws..................................... 44
SECTION 5.09. Further Assurances; Security Interests................. 44
SECTION 5.10. Additional Collateral.................................. 44
SECTION 5.11. Use of Proceeds........................................ 45
ARTICLE VI. NEGATIVE COVENANTS............................................ 45
SECTION 6.01. Financial Condition Covenants.......................... 46
SECTION 6.02. Limitation on Indebtedness............................. 46
SECTION 6.03. Limitation on Liens.................................... 47
SECTION 6.04. Limitation on Guarantees............................... 48
SECTION 6.05. Limitations on Fundamental Changes..................... 48
SECTION 6.06. Limitation on Sale of Assets........................... 49
SECTION 6.07. Limitation on Investments, Loans and Advances.......... 49
SECTION 6.08. Limitation on Optional Payments and Modifications of
Subordinated Debt Instruments.............................. 50
SECTION 6.09. Limitation on Transactions with Affiliates............. 50
SECTION 6.10. Limitation on Sales and Leasebacks..................... 51
SECTION 6.11. Limitation on Changes in Fiscal Year................... 51
SECTION 6.12. Limitation on Negative Pledge Clauses.................. 51
SECTION 6.13. Limitation on Lines of Business........................ 51
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<PAGE>
Page
----
SECTION 6.14. Restrictions Affecting Subsidiaries.................... 51
ARTICLE VII. EVENTS OF DEFAULT............................................ 51
ARTICLE VIII. GUARANTEE................................................... 53
SECTION 8.01. Guarantee.............................................. 54
SECTION 8.02. No Subrogation......................................... 54
SECTION 8.03. Amendments, etc., with respect to the Obligations...... 54
SECTION 8.04. Guarantee Absolute and Unconditional................... 55
SECTION 8.05. Reinstatement.......................................... 55
SECTION 8.06. Payments............................................... 56
ARTICLE IX. THE ADMINISTRATIVE AGENT...................................... 56
SECTION 9.01. Appointment............................................ 56
SECTION 9.02. Delegation of Duties................................... 56
SECTION 9.03. Exculpatory Provisions................................. 56
SECTION 9.04. Reliance by Administrative Agent....................... 57
SECTION 9.05. Notice of Default...................................... 57
SECTION 9.06. Non-Reliance on Administrative Agent and Other Lenders. 57
SECTION 9.07. Indemnification........................................ 58
SECTION 9.08. Administrative Agent in Its Individual Capacity........ 58
SECTION 9.09. Successor Administrative Agent......................... 59
ARTICLE X. MISCELLANEOUS.................................................. 59
SECTION 10.01. Amendments and Waivers................................ 59
SECTION 10.02. Notices............................................... 60
SECTION 10.03. No Waiver; Cumulative Remedies........................ 61
SECTION 10.04. Survival of Representations and Warranties............ 61
SECTION 10.05. Payment of Expenses and Taxes......................... 61
SECTION 10.06. Successors and Assigns; Participations and Assignments 62
SECTION 10.07. Adjustments; Set-off.................................. 64
SECTION 10.08. Counterparts.......................................... 65
SECTION 10.09. Severability.......................................... 65
SECTION 10.10. Integration........................................... 65
SECTION 10.11. GOVERNING LAW......................................... 65
SECTION 10.12. Submission To Jurisdiction; Waivers................... 65
SECTION 10.13. Acknowledgements...................................... 66
SECTION 10.14. WAIVERS OF JURY TRIAL................................. 66
SECTION 10.15. Headings.............................................. 66
SECTION 10.16. Confidentiality....................................... 66
-iii-
<PAGE>
SCHEDULES:
Schedule 1 - Commitments and Lender Information
Schedule 3.07 - Disclosed Matters
Schedule 3.11 - Subsidiaries
Schedule 3.16(b) - Offices for Filing Financing Statements
Schedule 4.01(b)(i) - Contingent Liabilities
Schedule 4.01(b)(ii) - Litigation
Schedule 4.01(b)(iii) - Capital Leases
Schedule 6.02(d) - Indebtedness
Schedule 6.03(e) - Existing Liens
Schedule 6.04 - Guarantees
EXHIBITS:
Exhibit A-1 - Form of Reducing R/C Note
Exhibit A-2 - Form of Revolving Credit Note
Exhibit B - Form of Assignment and Acceptance
Exhibit C-1 - Form of Opinion of Counsel to the Parent, the
Borrower and Ingleby
Exhibit C-2 - Form of Opinion of Special English Counsel
Exhibit D-1 - Form of Parent Pledge Agreement
Exhibit D-2 - Form of Ingleby Pledge Agreement
Exhibit D-3 - Form of CHUK Pledge Agreement
Exhibit E - Form of Security Agreement
Exhibit F - Form of Ingleby Guarantee
Exhibit G - Form of Closing Certificate
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of December 4, 1996, among CARIBINER
INTERNATIONAL, INC., a Delaware corporation (the "Parent"), CARIBINER, INC., a
------
New York corporation, as Borrower (the "Borrower"), the several banks and other
--------
financial institutions from time to time parties to this Agreement (the
"Lenders"), and THE CHASE MANHATTAN BANK, as Administrative Agent for the
-------
Lenders hereunder (in such capacity, the "Administrative Agent").
--------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Parent and the Borrower have requested the Lenders to
provide revolving credit facilities, the proceeds of which will be used by the
Parent, the Borrower or their subsidiaries (i) to finance the purchase of assets
and/or businesses, which in each case do not result in a material change in the
nature of the businesses engaged in by the Parent and its subsidiaries taken as
a whole, including the fees, costs and expenses incurred in connection with such
purchases, (ii) to finance the working capital requirements, and for general
corporate purposes, of the Parent and its subsidiaries, (iii) to refinance all
outstanding indebtedness of the Borrower under the Existing Credit Agreement and
Existing Credit Line (as such terms are defined below); and
WHEREAS, the Lenders are willing to provide such revolving credit
facilities on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
--------------
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Acquiree" means any Person to be acquired, or the assets and business
--------
of which is to be acquired, in a Future Acquisition.
"Acquisition Date" means, with respect to any Future Acquisition, the
----------------
date of execution of the purchase agreement with respect to such Future
Acquisition.
"Acquisition Documents" means the purchase agreement or other
---------------------
acquisition agreement and any other material agreements or instruments related
thereto executed in connection with any Future Acquisition.
<PAGE>
"Adjusted LIBO Rate" means, with respect to any Eurodollar Loan for
------------------
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" shall have the meaning assigned to such in the
--------------------
preamble hereof.
"Administrative Questionnaire" means an Administrative Questionnaire
----------------------------
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
Notwithstanding the foregoing, none of the Wholly Owned Subsidiaries of the
Parent shall be the Parent's Affiliate.
"Aggregate Commitment" means, collectively, the Reducing R/C
--------------------
Commitments of all Lenders and the Revolving Credit Commitments of all Lenders.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" means, with respect to each Type of Loan, the
-----------------
Applicable Margins set forth below under the column for such Type based on the
ratio of Consolidated Funded Debt to Consolidated EBITDA for the most recently
ended four consecutive fiscal quarters:
Applicable Margin
-----------------
Consolidated Funded Debt Eurodollar ABR
to Consolidated EBITDA Ratio Loans Loans
--------------------------------- ---------- -----
Greater than 3.0 to 1.0 1.875% .625%
Greater than 2.5 to 1.0 but less than or 1.625% .375%
equal to 3.0 to 1.0
Greater than 2.0 to 1.0 but less than or 1.375% .125%
equal to 2.5 to 1.0
Less than or equal to 2.0 to 1.0 1.125% .0%
-2-
<PAGE>
provided that the effective date of any change in the Applicable Margin shall be
- --------
the fifth day following the date on which the Administrative Agent has received
the financial statements and certificates of the Parent required to be delivered
pursuant to Sections 5.01 (a), (b) and (c) and provided further if any such
--------
financial statements and certificates are not delivered by the time required by
such Sections the Applicable Margin shall be 1.875% or .625%, as the case may
be, from the fifth day after the date on which such financial statements and
certificates are required to be delivered to the Administrative Agent pursuant
to Sections 5.01(a), (b) and (c) until the date on which such required financial
statements and certificates are received.
"Assessment Rate" means, for any day, the annual assessment rate in
---------------
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
--------
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.06), and accepted by the Administrative Agent, in the
form of Exhibit B or any other form approved by the Administrative Agent.
"Authorized Officer" means the Chief Financial Officer of the Borrower
------------------
or any individual designated as such in writing by such Chief Financial Officer.
"Available Commitments" means, collectively, the Available Reducing
---------------------
R/C Commitment and Available Revolving Credit Commitment.
"Available Reducing R/C Commitment" means, as to any Lender at any
---------------------------------
time, an amount equal to the excess, if any, of (a) the amount of such Lender's
Reducing R/C Commitment over (b) such Lender's Reducing R/C Commitment
Percentage of the aggregate outstanding principal amount of all Reducing R/C
Loans.
"Available Revolving Credit Commitment" means, as to any Lender at any
-------------------------------------
time, an amount equal to the excess, if any, of (a) the amount of such Lender's
Revolving Credit Commitment over (b) such Lender's Revolving Credit Commitment
Percentage of the aggregate outstanding principal amount of all Revolving Credit
Loans.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
------------
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
-3-
<PAGE>
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" shall have the meaning assigned to such term in the
--------
preamble hereof.
"Borrowing" means a borrowing consisting of Loans of the same Type
---------
made, converted or continued on the same day by the Lenders, as to which a
single Interest Period is in effect.
"Borrowing Date" means any Business Day specified in a Borrowing
--------------
Request, as a date on which the Borrower requests the Lenders to make Loans
hereunder.
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capital Expenditure" means, for any period, the amount equal to the
-------------------
sum (without duplication) of all expenditures (by the expenditure of cash or the
incurrence of Indebtedness) made by the Parent and its Subsidiaries during such
period in respect of the purchase or other acquisition or improvement of any
fixed or capital asset and any other amounts which would, in accordance with
GAAP, be set forth as capital expenditures on the consolidated statement of cash
flows of the Parent and its Subsidiaries for such period; provided that the term
--------
"Capital Expenditures" shall not include (a) expenditures made in connection
with the replacement, substitution or restoration of assets (i) to the extent
financed from insurance proceeds paid on account of the loss of or damage to the
assets being replaced or restored or (ii) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets being replaced,
(b) the purchase price of equipment that is purchased simultaneously with the
trade-in of existing equipment to the extent that the gross amount of such
purchase price is reduced by the credit granted by the seller of such equipment
for the equipment being traded in at such time and (c) the purchase of plant,
property or equipment made within one year of the sale of any asset to the
extent purchased with the proceeds of such sale.
"Capital Lease" means any lease of (or other arrangement
--------------
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent
-4-
<PAGE>
ownership interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.
"Cash Equivalents" means (i) securities issued or directly and fully
----------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition ("Government Obligations"), (ii)
----------------------
U.S. dollar denominated (or foreign currency fully hedged) time deposits, demand
deposits, certificates of deposit, Eurodollar time deposits and Eurodollar
certificates of deposit of (y) any domestic commercial bank of recognized
standing having capital and surplus in excess of $250,000,000 or (z) any bank
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent thereof
(any such bank being an "Approved Bank"), in each case with maturities of not
more than 364 days from the date of acquisition, (iii) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
-------------
company thereof) or any variable rate notes issued by, or guaranteed by any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six
months of the date of acquisition, (iv) repurchase agreements with a bank or
trust company (including a Lender) or a recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations issued by
or fully guaranteed by the United States of America, (v) obligations of any
state of the United States or any political subdivision thereof for the payment
of the principal and redemption price of and interest on which there shall have
been irrevocably deposited Government Obligations maturing as to the principal
and interest at times and in amounts sufficient to provide such payment, (vi)
auction preferred stock rated in the highest short-term credit rating category
by S&P or Moody's, (vii) U.S. dollar denominated time and demand deposit
accounts with any domestic commercial banks insured by the Federal Deposit
Insurance Corporation with an aggregate balance not to exceed $100,000 in the
aggregate at any time at any such bank, (viii) investments in money market
mutual funds having assets in excess of $2,500,000,000, and (x) federally tax
exempt securities rated A or better by either S&P or Moody's.
"Change in Control" means (a) the acquisition of ownership, directly
-----------------
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof) other than
Warburg, its Affiliates and any other Person which is an Affiliate of the Parent
as of the date hereof, of shares representing more than 30% (or such higher
percentage as shall be owned at such time by Warburg and/or its Affiliates) of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Parent; or (b) occupation of a majority of the seats (other
than vacant seats) on the board of directors of the Parent by Persons who are
not Continuing Directors; or (c) the Parent ceases to own, directly or
indirectly, all of the issued and outstanding Capital Stock of the Borrower.
"Change in Law" means (a) the adoption of any law, rule or regulation
-------------
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or
-5-
<PAGE>
application thereof by any Governmental Authority after the date of this
Agreement or (c) compliance by any Lender (or, for purposes of Section 2.10(b),
by any lending office of such Lender or by such Lender's holding company, if
any) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this
Agreement.
"CHUK" means Caribiner Holdings (UK) Limited, a company organized
----
under the law of the United Kingdom.
"CHUK Pledge Agreement" means the Mortgage of Shares, dated December
---------------------
4, 1996, to be executed and delivered by the Parent and the Administrative
Agent, substantially in the form of Exhibit D-3, as the same may be amended,
supplemented or otherwise modified from time to time.
"Class" when used in reference to any Loan or Borrowing, refers to
-----
whether such Loan, or the Loans comprising such Borrowing, are Reducing R/C
Revolving Loans or Revolving Credit Loans.
"Closing Date" means December 4, 1996.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral" means all assets of the Loan Parties, now owned or
----------
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitments" means, collectively, the Reducing R/C Commitments and
-----------
the Revolving Credit Commitments.
"Consolidated Current Assets" means, at a particular date, the sum of
---------------------------
all amounts which would, in conformity with GAAP, be set forth opposite the
caption "total current assets" (or any like caption) on a consolidated balance
sheet of the Parent and its Subsidiaries at such date.
"Consolidated Current Liabilities" means at a particular date, all
--------------------------------
amounts which would, in conformity with GAAP, be set forth opposite the caption
"total current liabilities" (or any like caption) (excluding the current portion
of "long term debt" (or any like caption) on a consolidated balance sheet of the
Parent and its Subsidiaries at such date.
"Consolidated Debt Service" means, for any period of four consecutive
-------------------------
fiscal quarters, repayment obligations during such period in respect of the
principal of Consolidated Funded Debt (other than the Capital Leases),
including, without limitation, the amount of all repayments of the Revolving R/C
Loans as a result of the mandatory reduction of the Reducing R/C Commitment
pursuant to Section 2.05(c) but excluding (i) all other repayments
-6-
<PAGE>
of the Loans, including, without limitation, the amount of all repayments made
in connection with the paydown obligation of the Revolving Credit Commitment
pursuant to the proviso of the last sentence of Section 2.01(b), and (ii) the
principal amount of any Indebtedness of the Parent and its Subsidiaries repaid
in connection with the initial public offering by the Parent of its common stock
in 1996.
"Consolidated EBITDA" means, for any period, the sum of (a)
-------------------
Consolidated Net Income for such period (excluding, to the extent included in
such Consolidated Net Income, (i) any non-cash income or expense other than the
items covered in (b), (c) or (d) below and (ii) any gains or losses from sales,
exchange and other dispositions of property not in the ordinary course of
business), plus to the extent deducted in determining such Consolidated Net
Income (b) income taxes accrued during such period, (c) depreciation and
amortization for such period, (d) interest accrued in such period, as computed
on the accrual method in accordance with GAAP and (e) any other non-cash
charges.
"Consolidated Free Cash Flow" means, for any period, Consolidated Net
---------------------------
Income for such period plus, without duplication and to the extent reflected as
----
a charge in the statement of such Consolidated Net Income for such period, the
sum of (a) the amount of interest on any subordinated indebtedness of the Parent
or its Subsidiaries repaid with proceeds of the initial public offering of the
Parent's common stock in 1996, (b) depreciation and amortization expense, (c)
any net decrease in deferred tax assets or net increase in deferred tax
liabilities, and (d) any other noncash charges, minus the sum of (i) the
-----
aggregate amount actually paid by the Parent and its Subsidiaries in cash during
such period on account of Capital Expenditures, (ii) the aggregate amount
actually paid by the Parent and its Subsidiaries in cash during such period on
account of the principal amount of Capital Leases, (iii) to the extent reflected
in determining such Consolidated Net Income, any net decrease in deferred tax
liabilities or net increase in deferred tax assets, (iv) any other noncash
income not in the ordinary course of business, (v) any cash dividends (other
than the dividends paid on preferred stock in fiscal year 1996) and net stock
purchases, (vi) all amounts actually paid in cash by the Parent or its
Subsidiaries pursuant to Earn-Out Agreements during such period and (vii) the
cash cost of any Future Acquisition to the extent not funded with the proceeds
of Loans or equity, all as determined on a consolidated basis. The Consolidated
Free Cash Flow of an Acquiree shall be included in the calculation of the
Consolidated Free Cash Flow of the Parent for the period of four consecutive
fiscal quarters most recently ended prior to the closing date of the Future
Acquisition involving such Acquiree (and thereafter on a rolling four quarters
basis), if the Administrative Agent has received the audited financial
statements of such Acquiree prior to such calculation, provided that, there
shall be added to the Consolidated Free Cash Flow of such Acquiree for any
period non-recurring expenses and discretionary Capital Expenditures of such
Acquiree for such period adjusted on a pro forma basis to reflect changes that
would have occurred had the acquisition occurred at the beginning of the period,
in each case in such amount as shall be determined in good faith by the Parent
and reasonably acknowledged and agreed to by the Administrative Agent.
"Consolidated Funded Debt" means all Indebtedness of the Parent and
------------------------
its Subsidiaries on a consolidated basis in accordance with GAAP (including the
current portion
-7-
<PAGE>
thereof) that matures more than one year from the date of its creation or
matures within one year from such date but is renewable or extendible, at the
option of the Parent or any of such Subsidiaries, as the case may be, to a date
more than one year from such date or arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during a period
of more than one year from such date, including, without limitation, all current
maturities and current sinking fund payments in respect of such Indebtedness
whether or not required to be paid within one year from the date of its creation
and shall in any event include all Subordinated Indebtedness.
"Consolidated Indebtedness" means as of the date of determination, all
-------------------------
Indebtedness of the Parent and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" means for any period, net income of the
-----------------------
Parent and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP; provided, that Consolidated Net Income shall not include any
--------
extraordinary or non-recurring gains or losses and income taxes related thereto.
"Consolidated Revenue" means, at the end of a particular period, the
--------------------
sum of all amounts which would, in conformity with GAAP, be set forth opposite
the caption "revenue" (or any like caption) on a consolidated income statement
of the Parent and its Subsidiaries.
"Consolidated Total Assets" means, at a particular date, the sum of
-------------------------
all amounts which would, in conformity with GAAP, be set forth opposite the
caption "assets" (or any like caption) on a consolidated balance sheet of the
Parent and its Subsidiaries.
"Continuing Directors" means the directors of the Parent on the
--------------------
Closing Date and each other director, if such other director's nomination for
election to the board of directors of the Parent is recommended by a majority of
the then Continuing Directors.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
-----------------
environmental matters disclosed in Schedule 3.07.
"dollars" or "$" refers to lawful money of the United States of
------- -
America.
-8-
<PAGE>
"Domestic Subsidiary" means any Subsidiary of the Parent organized
-------------------
under the laws of any jurisdiction within the United States of America.
"Earn-Out Agreement" means any agreement or instrument providing for
------------------
contingent obligations to pay future consideration in connection with
acquisitions which are not otherwise recorded as a liability in accordance with
GAAP.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.01 are satisfied (or waived in accordance with Section 10.01).
"Environmental Laws" means all laws, rules, regulations, codes,
------------------
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Parent or any of its Subsidiaries directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) that, together with the Parent, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
-----------
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Parent or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Parent or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Parent or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or
-9-
<PAGE>
(g) the receipt by the Parent or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the Parent or any ERISA Affiliate of any
notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Eurodollar Loans" means Loans the rate of interest applicable to
----------------
which is based upon the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
----------------
Article VII.
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Parent and the Borrower hereunder, (a) Taxes imposed on (or
measured by) net income by the United States of America, or by the jurisdiction
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable lending
office is located or by any political subdivision or taxing authority in the
United States of America or any such jurisdiction, (b) any branch profits Taxes
imposed by the United States of America and (c) in the case of a Foreign Lender,
any Tax that is imposed on amounts payable to such Foreign Lender at the time
such Foreign Lender becomes a party to this Agreement (or becomes a Participant
hereunder) or is attributable to such Foreign Lender's failure or inability to
comply with Section 2.12(e), except to the extent that such Foreign Lender's
assignor or seller of a participating interest (if any) was entitled, at the
time of assignment, to receive additional amounts from the Parent or the
Borrower, as the case may be, with respect to such withholding tax pursuant to
Section 2.12(a).
"Existing Credit Agreement" means the Credit Agreement, dated as of
-------------------------
July 20, 1994, among the Borrower, the banks party thereto and The Chase
Manhattan Bank, formerly known as Chemical Bank, as agent for such banks, as the
same may be amended, supplemented or otherwise modified from time to time.
"Existing Credit Line" means the credit line in the amount of
--------------------
$12,000,000 maintained by the Borrower with The Chase Manhattan Bank.
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
-10-
<PAGE>
"Financial Officer" means the chief financial officer, principal
-----------------
accounting officer, treasurer or controller of the Borrower.
"Foreign Lender" means any Lender or Participant that is organized
--------------
under the laws of a jurisdiction other than the United States of America or any
State thereof.
"Foreign Subsidiary" means any Subsidiary other than a Domestic
------------------
Subsidiary.
"Future Acquisition" means any future acquisition by the Parent, the
------------------
Borrower or their Subsidiaries of assets and/or businesses of other entities,
which in each case do not result in a material change in the nature of the
businesses engaged in by the Parent and its Subsidiaries taken as a whole. In
determining the amount of consideration paid in connection with any Future
Acquisition, there shall be included (a) any Indebtedness assumed in connection
with such Future Acquisition, (b) the amount reasonably projected by the
Borrower prior to such Future Acquisition to be required during the 12 months
following consummation of such Future Acquisition as initial capital investments
in, and one-time capital expenditures by, the Acquiree and (c) the fees, costs
and expenses incurred by the Parent or its Subsidiaries in connection with such
Future Acquisition.
"Future Material Acquisition" means any Future Acquisition (a)(i) as
---------------------------
to which the amount of the consideration paid by the Parent and its Subsidiaries
in connection with such Future Acquisition exceeds $15,000,000 and (ii) which is
funded, in whole or in part, with the proceeds of Loans, (b)(i) as to which
such consideration paid is greater than $30,000,000 and (ii) which is funded
entirely with equity issued by the Parent and/or cash flow of the Parent and its
Subsidiaries or (c)(i) as to which such consideration paid is greater than
$35,000,000 and (ii) which is funded entirely with equity issued by the Parent.
"GAAP" means generally accepted accounting principles in the United
----
States of America.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any
-11-
<PAGE>
other financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation or (d)
as an account party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that the term
--------
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any contingent obligation shall be
equal to the present value of the portion of the obligation so guaranteed or
otherwise supported, in the case of known recurring obligations, and the maximum
reasonably anticipated liability in respect of the portion of the obligation so
guaranteed or otherwise supported assuming such person is required to perform
thereunder, in all other cases.
"Hazardous Materials" means all explosive or radioactive substances
-------------------
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedge Agreements" shall mean interest rate swap, cap or collar
----------------
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements entered into by
the Parent or its Subsidiaries in order to protect the Parent against
fluctuations in interest rates or currency rates.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind (excluding progress billings in the normal course of
business), (b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (c) all obligations of such Person upon which
interest charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h)
all Capital Leases of such Person, (i) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters
of guaranty and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances; provided that Indebtedness shall not include
--------
the obligations under Earn-Out Agreements. The Indebtedness of any Person shall
include the Indebtedness of any other entity (including any partnership in which
such Person is a general partner) to the extent such Person is reasonably
expected to be required to pay such Indebtedness.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Ingleby" means Ingleby Holding Corp., a Delaware corporation.
-------
-12-
<PAGE>
"Ingleby Guarantee" means the Guarantee to be executed and delivered
-----------------
by Ingleby, substantially in the form of Exhibit F, as the same may be amended,
supplemented or otherwise modified from time to time.
"Ingleby Pledge Agreement" means the Pledge Agreement to be executed
------------------------
and delivered by Ingleby, substantially in the form of Exhibit D-2, as the same
may be amended, supplemented or otherwise modified from time to time.
"Intellectual Property" shall have the meaning ascribed to such term
---------------------
in Section 3.06.
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Borrowing in accordance with Section 2.06(b).
"Interest Payment Date" means (a) with respect to any ABR Loan, the
---------------------
last day of each March, June, September and December and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Loan:
---------------
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the Borrower in
its notice of borrowing or notice of conversion, as the case may be, given
with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months thereafter, as selected by the Borrower by
irrevocable notice to the Administrative Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
- --------
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the immediately
preceding Business Day;
(2) any Interest Period in respect of Reducing R/C Loans or Revolving
Credit Loans that would otherwise extend beyond the Reducing R/C
Termination Date or the
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<PAGE>
Revolving Credit Termination Date, as the case may be, shall end on the
Reducing R/C Termination Date on the Revolving Credit Termination Date, as
the case may be;
(3) any Interest Period pertaining to a Eurodollar Loan that begins
on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a calendar
month; and
(4) the Parent shall select Interest Periods so as not to require a
payment or prepayment of any Eurodollar Loan during an Interest Period for
such Loan.
"Lenders" means the Persons listed on Schedule 1 and any other Person
-------
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance.
"LIBO Rate" means, with respect to any Eurodollar Loan for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 A.M., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits in an amount approximately equal to the amount of such Eurodollar
Borrowing and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 A.M., London time,
two Business Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
----
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means, collectively, this Agreement, the Notes, the
--------------
Ingleby Guarantee, the Subsidiaries Guarantees and the Security Documents.
"Loan Parties" means, collectively, the Borrower, the Parent and each
------------
other Subsidiary of the Parent which is a party to a Loan Document.
-14-
<PAGE>
"Loans" means the Reducing R/C Loans and Revolving Credit Loans made
-----
by the Lenders to the Borrower pursuant to this Agreement.
"Majority Lenders" at any time, shall mean the holders of more than
----------------
50% of the Aggregate Commitment in effect at such time (or, after termination of
the Commitments, holders of more than 50% of the aggregate outstanding principal
amount of Loans).
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, operations or condition, financial or otherwise, of the Parent
and its Subsidiaries taken as a whole, (b) the ability of the Borrower to
perform its payment obligations hereunder, or the ability of the Loan Parties to
perform their material obligations under this Agreement or the other Loan
Documents or (c) the rights of or benefits available to the Lenders under this
Agreement or other Loan Documents taken as a whole.
"Maturity Date" means December 31, 2002.
-------------
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"Obligations" means, collectively, (i) the unpaid principal of and
-----------
interest on the Loans and all other obligations and liabilities of the Borrower
to the Administrative Agent and the Lenders (including, without limitation,
interest accruing at the then applicable rate provided in this Agreement after
the maturity of the Loans and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, the Notes, the
other Loan Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all reasonable fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be paid by
the Borrower pursuant to the terms of this Agreement or any other Loan Document)
and (ii) the obligations and liabilities under the Hedge Agreements to which any
Lender or any Affiliate of any Lender is a party.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Parent" shall have the meaning ascribed to such term in the preamble
------
hereof.
-15-
<PAGE>
"Parent Guarantee" means the guarantee obligations of the Parent set
----------------
forth in Article VIII.
"Parent Pledge Agreement" means the Pledge Agreement to be executed
-----------------------
and delivered by the Parent, substantially in the form of Exhibit D-1, as the
same may be amended, supplemented or otherwise modified from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreements" means, collectively, the Parent Pledge Agreement,
-----------------
the Ingleby Pledge Agreement, the CHUK Pledge Agreement and any other pledge or
similar agreement delivered on or after the date hereof granting a security
interest in the stock (or other indicia of ownership interest) of any Subsidiary
of the Parent.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Pledged Securities" means the securities to be pledged pursuant to
------------------
the Pledge Agreements.
"Reducing R/C Commitment" means, as to any Lender, the obligation of
-----------------------
such Lender to make Reducing R/C Loans to the Borrower hereunder, expressed as
an amount representing the maximum aggregate amount of such Lender's Reducing
R/C Exposure hereunder, as such obligation may be (a) reduced from time to time
pursuant to Section 2.05(b) and (c) and (b) reduced or increased from time to
time pursuant to assignment by or to such Lender pursuant to Section 10.06. The
initial amount of each Lender's Reducing R/C Commitment is set forth on Schedule
1, or in the Assignment and Acceptance pursuant to which such Lender shall have
assumed its Reducing R/C Commitment, as applicable.
"Reducing R/C Commitment Percentage" means, as to any Lender at any
----------------------------------
time, the percentage which such Lender's Reducing R/C Commitment then
constitutes of the Aggregate Reducing R/C Commitments (or, at any time after the
Reducing R/C Commitments
-16-
<PAGE>
shall have expired or terminated, the percentage which the aggregate principal
amount of such Lender's Reducing R/C Loans then outstanding constitutes of the
aggregate principal amount of the Reducing R/C Loans then outstanding).
"Reducing R/C Commitment Period" means the period from and including
------------------------------
the date hereof to but not including the Reducing R/C Termination Date or such
earlier date on which the Reducing R/C Commitments shall terminate as provided
herein.
"Reducing R/C Exposure" means, with respect to any Lender at any time,
---------------------
the outstanding principal amount of such Lender's Reducing R/C Loans at such
time.
"Reducing R/C Loans" means the reducing revolving credit loans made by
------------------
the Lenders to the Borrower pursuant to Section 2.01(a) of this Agreement.
"Reducing R/C Notes" shall have the meaning assigned to such term in
------------------
Section 2.02(a).
"Reducing R/C Termination Date" means the Maturity Date or such
-----------------------------
earlier date on which the Reducing R/C Commitments shall terminate as provided
herein.
"Register" has the meaning set forth in Section 10.06.
--------
"Revolving Credit Commitment" means, as to any Lender, the obligation
---------------------------
of such Lender to make Revolving Credit Loans to the Borrower hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender's Revolving Credit Exposure hereunder, as such obligation may be (a)
reduced from time to time pursuant to Section 2.05(d) and (b) reduced or
increased from time to time pursuant to assignment by or to such Lender pursuant
to Section 10.06. The initial amount of each Lender's Revolving Credit
Commitment is set forth on Schedule 1, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Revolving Credit
Commitment, as applicable.
"Revolving Credit Commitment Percentage" means, as to any Lender at
--------------------------------------
any time, the percentage which such Lender's Revolving Credit Commitment then
constitutes of the aggregate Revolving Credit Commitments (or, at any time after
the Revolving Credit Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such Lender's Revolving
Credit Loans then outstanding constitutes of the aggregate principal amount of
the Revolving Credit Loans then outstanding).
"Revolving Credit Commitment Period" means the period from and
----------------------------------
including the date hereof to but not including the Revolving Credit Termination
Date or such earlier date on which the Revolving Credit Commitments shall
terminate as provided herein.
"Revolving Credit Exposure" means, with respect to any Lender at any
-------------------------
time, the outstanding principal amount of such Lender's Revolving Credit Loans
at such time.
-17-
<PAGE>
"Revolving Credit Loans" means the revolving credit loans made by the
----------------------
Lenders to the Borrower pursuant to Section 2.01(b).
"Revolving Credit Notes" shall have the meaning assigned to such term
----------------------
in Section 2.02(b).
"Revolving Credit Termination Date" means the Maturity Date or such
---------------------------------
earlier date on which the Revolving Credit Commitments shall terminate as
provided herein.
"S&P" means Standard & Poor's.
---
"SEC" means the Securities and Exchange Commission of the United
---
States.
"Security Agreement" means the Security Agreement to be executed and
------------------
delivered by the Borrower, substantially in the form of Exhibit E, as the same
may be amended, supplemented or otherwise modified from time to time.
"Security Documents" means, collectively, the Pledge Agreements, the
------------------
Security Agreement and all other security documents hereafter delivered to the
Administrative Agent granting a Lien on any asset or assets of any Person to
secure the obligations and liabilities of the Parent and the Borrower hereunder
and under any of the other Loan Documents or to secure any guarantee of any such
obligations and liabilities.
"Significant Subsidiary" shall mean, as at any time, any Subsidiary of
----------------------
the Parent that (a) has assets in excess of $2,000,000 at such time (or, if such
Subsidiary's assets are denominated in a currency other than U.S. dollars, the
U.S. dollar equivalent thereof) or (b) has revenues of at least $2,000,000
during the previous fiscal year of such Subsidiary (or, if such Subsidiary's
revenues are denominated in a currency other than U.S. dollars, the U.S. dollar
equivalent thereof).
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
-18-
<PAGE>
"Subordinated Indebtedness" means, with respect to the Parent,
-------------------------
Indebtedness (a) whose tenor, terms and conditions shall be not more restrictive
than those applicable to the Loans hereunder and (b) which is subordinated in
right of payment to the Parent's obligations under this Agreement pursuant to a
subordination agreement reasonably satisfactory to the Majority Lenders.
"Subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiaries Guarantees" means the Guarantees to be executed and
-----------------------
delivered by the Subsidiaries of the Parent in accordance with the provisions of
Sections 5.10(b) and (c), as the same may be amended, supplemented or otherwise
modified from time to time.
"TAVS" means Total Audio Visual Services, a division of the Borrower,
----
which is comprised of assets formerly owned by a subsidiary of GE Capital Corp.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority on a Person or such Person's property.
"Three-Month Secondary CD Rate" means, for any day, the secondary
-----------------------------
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Transactions" means the execution, delivery and performance by each
------------
of the Loan Parties of this Agreement and the other Loan Documents to which it
is a party and the borrowing of Loans and the use of the proceeds thereof by the
Borrower.
"Transferee" shall have the meaning ascribed to such term in Section
----------
10.06(f).
-19-
<PAGE>
"Type" means, when used in reference to any Loan or Borrowing, refers
----
to whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Warburg" means Warburg, Pincus Investors, L.P., a Delaware limited
-------
partnership.
"Wholly Owned Subsidiary" means, with respect to any Person, a
-----------------------
Subsidiary, all of the stock ordinarily having the power to vote for the
election of directors of which is owned directly or indirectly by such Person,
other than directors' qualifying shares and shares issued to other Persons to
comply with local law (provided, however, that such directors' qualifying and
-------- -------
other shares shall not constitute more than 4% of all of the stock ordinarily
having the power to vote for the election of directors).
"Withdrawal Liability" means liability to a Multiemployer Plan as a
--------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes
---------------------------------------
of this Agreement, Loans may be classified and referred to by Class (e.g., a
----
"Reducing R/C Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
----
(e.g., a "Eurodollar Reducing R/C Loan"). Borrowings also may be classified and
----
referred to by Class (e.g., a "Reducing R/C Borrowing") or by Type (e.g., a
---- ----
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Reducing R/C
----
Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
----------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
-----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance
-20-
<PAGE>
with GAAP, as in effect from time to time; provided that, if the Parent notifies
--------
the Administrative Agent that the Parent requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date hereof in
GAAP or in the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Majority Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.
ARTICLE II. AMOUNT AND TERMS OF LOANS
SECTION 2.01. Reducing R/C Credit Commitments; Revolving Credit
-------------------------------------------------
Commitments. (a) Subject to the terms and conditions hereof, each Lender
- -----------
severally agrees to make revolving credit loans ("Reducing R/C Loans") to the
------------------
Borrower from time to time during the Reducing R/C Commitment Period in an
aggregate principal amount that will not result in such Lender's Reducing R/C
Exposure exceeding such Lender's Reducing R/C Commitment. During the Reducing
R/C Commitment Period the Borrower may use the Reducing R/C Commitments by
borrowing, prepaying the Reducing R/C Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
(b) Subject to the terms and conditions hereof, each Lender
severally agrees to make revolving credit loans ("Revolving Credit Loans") to
----------------------
the Borrower from time to time during the Revolving Credit Commitment Period in
an aggregate principal amount that will not result in such Lender's Revolving
Credit Exposure exceeding such Lender's Revolving Credit Commitment. During the
Revolving Credit Commitment Period the Borrower may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof;
provided that for a period of not less than 30 consecutive days in every period
- --------
of 12 months commencing on the Closing Date, the total Revolving Credit
Exposures shall be not more than $5,000,000.
(c) The Reducing R/C Loans and the Revolving Credit Loans may
from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination
thereof, as determined by the Parent and notified to the Administrative Agent in
accordance with Sections 2.03 and 2.06; provided that none of the Reducing R/C
--------
Loans and Revolving Credit Loans shall be made as a Eurodollar Loan after the
day that is one month prior to the Reducing R/C Termination Date or the
Revolving Credit Termination Date, as the case may be.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Eurodollar Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.
-21-
<PAGE>
SECTION 2.02. Reducing R/C Notes; Revolving Credit Notes. (a) The
------------------------------------------
Reducing R/C Loans made by each Lender shall be evidenced by a promissory note
of the Borrower, substantially in the form of Exhibit A-1, with appropriate
insertions as to payee, date and principal amount (a "Reducing R/C Note"),
-----------------
payable to the order of such Lender and in a principal amount equal to the
lesser of (i) the amount of the initial Reducing R/C Commitment of such Lender
and (ii) the aggregate unpaid principal amount of all Reducing R/C Loans made by
such Lender. Each Lender is hereby authorized to record the date and amount of
each Reducing R/C Loan made by such Lender and the date and amount of each
payment or prepayment of principal thereof on the schedule annexed to and
constituting a part of its Reducing R/C Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded,
----- -----
provided that the failure to make any such recordation or any error in such
- --------
recordation shall not affect the Borrower's obligations hereunder or under such
Reducing R/C Note. Each Reducing R/C Note shall (x) be dated the Closing Date,
(y) be stated to mature on the Reducing R/C Termination Date and (z) provide for
the payment of interest in accordance with Section 2.08.
(b) The Revolving Credit Loans made by each Lender shall be evidenced
by a promissory note of the Borrower, substantially in the form of Exhibit A-2,
with appropriate insertions as to payee, date and principal amount (a "Revolving
---------
Credit Note"), payable to the order of such Lender and in a principal amount
- -----------
equal to the lesser of (i) the amount of the initial Revolving Credit Commitment
of such Lender and (ii) the aggregate unpaid principal amount of all Revolving
Credit Loans made by such Lender. Each Lender is hereby authorized to record
the date and amount of each Revolving Credit Loan made by such Lender and the
date and amount of each payment or prepayment of principal thereof on the
schedule annexed to and constituting a part of its Revolving Credit Note, and
any such recordation shall constitute prima facie evidence of the accuracy of
----- -----
the information so recorded, provided that the failure to make any such
--------
recordation or any error in such recordation shall not affect the Borrower's
obligations hereunder or under such Revolving Credit Note. Each Revolving
Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the
Revolving Credit Termination Date and (z) provide for the payment of interest in
accordance with Section 2.08.
SECTION 2.03. Borrowing Procedure. (a) The Borrower may borrow
-------------------
under the Reducing R/C Commitments during the Reducing R/C Commitment Period on
any Business Day, provided that an Authorized Officer of the Borrower shall give
--------
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to 11:00 A.M., New York City time, (i) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Loans are to be initially Eurodollar Loans, or (ii) one Business Day
prior to the requested Borrowing Date, otherwise), specifying (i) the aggregate
amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the
borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv)
if the Borrowing is to be entirely or partly of Eurodollar Loans, the amounts of
such Type of Loan and the lengths of the amounts of such Type of Loan and the
lengths of the initial Interest Period to be applicable thereto, which shall be
a period contemplated by the definition of the term "Interest Period" and (v)
the location and number of the Borrower's account to
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<PAGE>
which funds are to be disbursed, which shall comply with the requirements of
Section 2.07. If no election as to the Type of Borrowing is specified, then the
requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Reducing R/C Loan, then the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. Each borrowing under the Reducing R/C Commitments shall be (A) in the
case of ABR Loans, in an amount equal to $1,000,000 or a whole multiple of
$500,000 in excess thereof (or if the then Available Reducing R/C Commitments
are less than $1,000,000, such lesser amount) or (B) in the case of Eurodollar
Loans, in an amount equal to $2,000,000 or a whole multiple of $1,000,000 in
excess thereof. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Lender thereof. Each Lender will
make the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in Section 10.02 prior to 11:00 A.M., New York
City time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by 2:00 P.M. New York City time on such day by the
Administrative Agent transferring to an account of the Borrower with the
Administrative Agent and thereafter as directed by the Borrower the aggregate of
the amounts made available to the Administrative Agent by the Lenders and in
like funds as received by the Administrative Agent.
(b) The Borrower may borrow under the Revolving Credit Commitments
during the Revolving Credit Commitment Period on any Business Day, provided that
--------
an Authorized Officer of the Borrower shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 11:00 A.M., New York City time, (i) three Business Days prior to the
requested Borrowing Date, if all or any part of the requested Loans are to be
initially Eurodollar Loans, or (ii) one Business Day prior to the requested
Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the
requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar
Loans, ABR Loans or a combination thereof, (iv) if the Borrowing is to be
entirely or partly of Eurodollar Loans, the amounts of such Type of Loan and the
lengths of the initial Interest Period to be applicable thereto, which shall be
a period contemplated by the definition of the term "Interest Period" and (v)
the location and number of the Borrower's account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.07. If no
election as to the Type of Borrowing is specified, then the requested Borrowing
shall be an ABR Borrowing. If no Interest Period is specified with respect to
any requested Eurodollar Revolving Credit Loan, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. Each
borrowing under the Revolving Credit Commitments shall be (A) in the case of ABR
Loans, in an amount equal to $1,000,000 or a whole multiple of $500,000 in
excess thereof (or, if the then Available Revolving Credit Commitments are less
than $1,000,000, such lesser amount) or (B) in the case of Eurodollar Loans, in
an amount equal to $2,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Lender thereof. Each Lender will make the
amount of its pro rata share of each borrowing available to the Administrative
Agent for the account of the Borrower at the office of the Administrative Agent
specified in Section 10.02 prior to 11:00 A.M., New York City time, on the
Borrowing Date requested by
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the Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by 2:00 P.M. New York City
time on such day by the Administrative Agent transferring to an account of the
Borrower with the Administrative Agent and thereafter as directed by the
Borrower the aggregate of the amounts made available to the Administrative Agent
by the Lenders and in like funds as received by the Administrative Agent.
SECTION 2.04. Fees. (a) The Borrower agrees to pay to the
----
Administrative Agent for the account of each Lender a commitment fee for the
period from and including the first day of the Reducing R/C Commitment Period to
the Reducing R/C Termination Date, computed at the rate of .375% per annum on
the average daily amount of the Available Reducing R/C Commitment of such Lender
during the period for which payment is made, payable quarterly in arrears on the
last day of each March, June, September and December and on the Reducing R/C
Termination Date or such earlier date on which the Reducing R/C Commitments
shall terminate as provided herein, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee for the period from and including the
first day of the Revolving Credit Commitment Period to the Revolving Credit
Termination Date, computed at the rate of .375% per annum on the average daily
amount of the Available Revolving Credit Commitment of such Lender during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Revolving Credit
Termination Date or such earlier date on which the Revolving Credit Commitments
shall terminate as provided herein, commencing on the first of such dates to
occur after the date hereof.
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
in writing between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution, in
the case of commitment fees as provided under paragraphs (a) and (b) of this
Section 2.04, to the Lenders. Fees paid shall not be refundable under any
circumstances.
SECTION 2.05. Optional Prepayments and Termination or Mandatory
-------------------------------------------------
Reduction of Commitments. (a) Unless previously terminated, each of the
- ------------------------
Reducing R/C Commitments and the Revolving Credit Commitments shall terminate on
the Maturity Date.
(b) Subject to prior notice in accordance with Section 2.05(e) the
Borrower shall have the right to terminate the Reducing R/C Commitments or, from
time to time, to reduce the amount of the Reducing R/C Commitments without
incurring any fee or penalty; provided that reductions of the Reducing R/C
--------
Commitments pursuant to this Section 2.05(b) shall be applied to the remaining
schedule of reductions of the Reducing R/C Commitment
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specified in Section 2.05(c) in the order of maturity. Any such reduction shall
be in an amount equal to $500,000 or a whole multiple thereof and shall reduce
permanently the Reducing R/C Commitments then in effect. Any reduction of the
Reducing R/C Commitments pursuant to this Section 2.05(b) shall be accompanied
by the prepayment of the Reducing R/C Loans to the extent, if any, that the sum
of the aggregate outstanding Reducing R/C Loans of all Lenders exceeds the
amount of the Reducing R/C Commitments as so reduced.
(c) On each March 31, June 30, September 30 and December 31 during
the period from and including March 31, 1999 to the Reducing R/C Termination
Date, the Reducing R/C Commitments shall be reduced by $4,650,000.
(d) Subject to prior notice in accordance with Section 2.05(e) the
Borrower shall have the right to terminate the Revolving Credit Commitments or,
from time to time, to reduce the amount of the Revolving Credit Commitments
without incurring any fee or penalty. Any such reduction shall be in an amount
equal to $500,000 or a whole multiple thereof and shall reduce permanently the
Revolving Credit Commitments then in effect. Any reduction of the Revolving
Credit Commitments pursuant to this Section 2.05(d) shall be accompanied by the
prepayment of the Revolving Credit Loans to the extent, if any, that the sum of
the aggregate outstanding Revolving Credit Loans of all Lenders exceeds the
amount of the Revolving Credit Commitments as so reduced.
(e) The Borrower shall notify the Administrative Agent of any
election to terminate or permanently reduce the Reducing R/C Commitments or the
Revolving Credit Commitments, as the case may be, under paragraph (b) or (d) of
this Section 2.05 not later than 11:00 A.M., New York City time, three Business
Days prior to the effective date of such termination or reduction, specifying
such election and the effective date thereof. Promptly following receipt of any
notice, the Administrative Agent shall advise the Lenders of the contents
thereof. Each notice delivered by the Borrower pursuant to this Section 2.05(e)
shall be irrevocable. Each reduction of the Reducing R/C Commitments or
Revolving Credit Commitments, as the case may be, shall be made ratably among
the Lenders in accordance with their respective Reducing R/C Commitments or
Revolving Credit Commitments, as the case may be. If any such notice is given,
the amount specified in such notice to be payable shall be due and payable on
the date specified therein, together with any amounts payable pursuant to
Section 2.11.
(f) The Borrower may at any time and from time to time prepay the
Loans, in whole or in part, without premium or penalty, upon at least three
Business Days' irrevocable notice to the Administrative Agent in the case of
Eurodollar Loans and upon irrevocable notice given not later than 10:00 A.M. New
York time, on the date of any proposed prepayment in the case of ABR Loans,
specifying the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each; provided, that if a Eurodollar Loan is
prepaid on any day other than the last day of the Interest Period applicable
thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.11.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. Prepayments
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<PAGE>
of Loans shall be in an aggregate principal amount of $500,000 or a whole
multiple of $100,000 in excess thereof.
SECTION 2.06. Interest Elections. (a) Each Borrowing initially
-------------------
shall be of the Type specified in the applicable notice pursuant to Section
2.03(a) or Section 2.03(b), as the case may be, and, in the case of a Eurodollar
Borrowing, shall have an initial Interest Period as specified in such Borrowing
Request. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this Section.
The Borrower may elect different options with respect to different portions of
the affected Borrowing, in which case each such portion shall be allocated
ratably among the Lenders holding the Loans comprising such Borrowing, and the
Loans comprising each such portion shall be considered a separate Borrowing.
Such conversions and continuations shall not be deemed to be repayments or
borrowings of Loans.
(b) To make an election pursuant to this Section, an Authorized
Officer of the Borrower shall give the Administrative Agent irrevocable written
notice of such election (each, an "Interest Election Request"), which notice
-------------------------
must be received by the Administrative Agent prior to 11:00 A.M., New York City
time, three Business Days prior to the effective date of such election in the
case of an election to convert to or continue as a Eurodollar Loan, or one
Business Day prior to the effective date of such election in the case of an
election to convert to an ABR Loan.
(c) Each Interest Election Request shall specify the following
information in compliance with Section 2.01:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified pursuant
to clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing
or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
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(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Majority Lenders, so notifies the Borrower, so long as an Event
of Default is continuing (i) no outstanding Borrowing may be converted to or
continued beyond the end of the Interest Period applicable thereto as a
Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto. No Reducing R/C Loan or Revolving Credit Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Reducing R/C
Termination Date or Revolving Credit Termination Date, as the case may be.
SECTION 2.07. Funding of Borrowings. Unless the Administrative Agent
---------------------
shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender's share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with this
Agreement and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or
(ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If
such Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.08. Interest. (a) The Loans comprising each ABR Borrowing
---------
shall bear interest at a rate per annum equal to the Alternate Base Rate plus
the Applicable Margin.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Margin then in effect.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due (whether at stated maturity, by acceleration or otherwise), such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided above or (ii) in the
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case of overdue interest, fees or other amounts, 2% plus the rate applicable
to ABR Loans as provided above.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
--------
to Section 2.08(c) shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Loan
prior to the end of the Reducing R/C Commitment Period or Revolving Credit
Commitment Period, as the case may be), accrued interest on the principal amount
repaid or prepaid shall be payable on the date of such repayment or prepayment,
(iii) in the event of any conversion of any Eurodollar Loan prior to the end of
the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion and (iv) all accrued interest
on Reducing R/C Loans and Revolving Credit Loans shall be payable upon
termination of the Reducing R/C Commitments or Revolving Credit Commitments, as
the case may be.
(e) Fees and, whenever it is calculated on the basis of the Prime
Rate, interest shall be calculated on the basis of 365 - (or 366- in a leap
year) day year for the actual days lapsed (including the first day but excluding
the last day); and, otherwise, interest shall be calculated on the basis of a
360-day year for the actual days elapsed (including the first day but excluding
the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO
Rate shall be determined by the Administrative Agent, and such determination
shall be conclusive and binding absent manifest error.
SECTION 2.09. Alternate Rate of Interest.
--------------------------
If prior to the commencement of any Interest Period for a Eurodollar
Borrowing:
(i) the Administrative Agent determines (which determination
shall be conclusive and binding absent manifest error) that adequate and
reasonable means do not exist for ascertaining the Adjusted LIBO Rate or
the LIBO Rate, as applicable, for such Interest Period; or
(ii) the Administrative Agent is advised by the Majority
Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for
such Interest Period will not adequately and fairly reflect the cost to
such Lenders of making or maintaining their Loans included in such
Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Parent and the Lenders that the
circumstances giving rise to such notice no longer exist, (x) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as a Eurodollar Borrowing shall be ineffective,
(y) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing
shall be made as an ABR Borrowing; provided that if the circumstances giving
--------
rise to such notice affect only one
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<PAGE>
Type of Borrowings, then another Type of Borrowings shall be permitted. Until
such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans.
SECTION 2.10. Increased Costs. (a) If any Change in Law shall:
---------------
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by such
Lender (other than any condition relating to Taxes);
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered. This covenant shall survive the termination of this
Agreement and the payment of the Loans and all other amount payable hereunder.
(b) If any Lender determines that any Change in Law regarding capital
requirements has the effect of reducing the rate of return on such Lender's
capital or on the capital of such Lender's holding company, if any, as a
consequence of this Agreement or the Loans made by such Lender to a level below
that which such Lender or such Lender's holding company could have achieved but
for such Change in Law (taking into consideration such Lender's policies and the
policies of such Lender's holding company with respect to capital adequacy),
then from time to time the Borrower will pay to such Lender such additional
amount or amounts as will compensate such Lender or such Lender's holding
company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts
necessary to compensate such Lender or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive and binding absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 15 days after receipt thereof.
(d) The Borrower will not be required to compensate a Lender for any
increased costs or increased capital pursuant to this Section incurred by such
Lender more than 90 days prior to its request to the Borrower for such
compensation.
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<PAGE>
SECTION 2.11. Break Funding Payments. In the event of (i) the
----------------------
payment or prepayment of any principal of any Eurodollar Loan other than on the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (ii) the conversion of any Eurodollar Loan other than on the
last day of the Interest Period applicable thereto or (iii) the failure to
borrow, convert, continue or prepay any Loan on the date specified in any notice
delivered pursuant hereto then, in any such event, the Borrower shall compensate
each Lender for the actual loss, cost and expense attributable to such event
(excluding loss of margin). In the case of a Eurodollar Loan, the loss to any
Lender attributable to any such event may include an amount determined by such
Lender to be equal to the excess, if any, of (i) the amount of interest that
such Lender would pay for a deposit equal to the principal amount of such Loan
for the period from the date of such payment, conversion or failure to the last
day of the then current Interest Period for such Loan (or, in the case of a
failure to borrow, convert or continue, the duration of the Interest Period that
would have resulted from such borrowing, conversion or continuation) if the
interest rate payable on such deposit were equal to the Adjusted LIBO Rate for
such Interest Period, over (ii) the amount of interest that such Lender would
earn on such principal amount for such period if such Lender were to invest such
principal amount for such period at the interest rate that would be bid by such
Lender (or an affiliate of such Lender) for dollar deposits from other banks in
the eurodollar market at the commencement of such period. A certificate of any
Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 15 days after receipt thereof.
SECTION 2.12. Taxes. (a) Any and all payments by or an account of
-----
any obligation of the Parent and the Borrower hereunder shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Parent or the Borrower shall be required to deduct any
- --------
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent or Lender (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Parent or the Borrower, as the case may be, shall make such deductions and (iii)
the Parent or the Borrower, as the case may be, shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
(b) In addition, the Parent and the Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law;
except Other Taxes imposed on or with respect to any assignment or sale of a
participating interest as contemplated by Section 10.06 hereof.
(c) The Parent and the Borrower shall indemnify the Administrative
Agent and each Lender, within 10 days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes that are the responsibility
of the Parent or the Borrower under Section 2.12(a) or (b) hereof (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) paid by the Administrative
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<PAGE>
Agent or such Lender and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender, or by the Administrative Agent
on its own behalf or on behalf of a Lender, shall be conclusive absent manifest
error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Parent or the Borrower, as the case may be, to a Governmental
Authority, the Parent shall deliver to the Administrative Agent the original or
a certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.
(e) Each Foreign Lender that is entitled to an exemption from or
reduction of United States withholding tax, with respect to payments under this
Agreement shall deliver to the Parent and the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Parent or the Borrower, such properly completed and
executed documentation prescribed by applicable law as will permit such payments
to be made without withholding or at a reduced rate.
SECTION 2.13. Payments Generally; Pro Rata Treatment; Sharing of Set-
------------------------------------------------------
offs. (a) Each of the Parent and the Borrower shall make each payment required
- ----
to be made by it hereunder (whether of principal, interest or fees, or under
Section 2.10, 2.11 or 2.12, or otherwise) prior to 12:00 noon, New York City
time, on the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 270
Park Avenue, New York, New York, except that payments pursuant to Sections 2.10,
2.11, 2.12 and 10.05 shall be made directly to the Persons entitled thereto.
The Administrative Agent shall distribute any such payments received by it for
the account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied (i) first, to pay interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, to pay principal then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal then due to such
parties.
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(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participation in the Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participation is purchased
--------
and all or any portion of the payment giving rise thereto is recovered, such
participation shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Parent and the
Borrower pursuant to and in accordance with the express terms of this Agreement
or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans to any assignee or participant,
other than to the Parent or any Subsidiary or Affiliate of the Parent (as to
which the provisions of this paragraph shall apply). Each of the Parent and the
Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender acquiring a participation pursuant
to the foregoing arrangements may exercise against the Parent or the Borrower,
as the case may be, rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Parent or
the Borrower, as the case may be, in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders hereunder that the Borrower will not make
such payment, the Administrative Agent may assume that the Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the Federal Funds Effective Rate.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.07(b) or 2.13(d) then the Administrative Agent may,
in its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Administrative Agent for the account of such
Lender to satisfy such Lender's obligations under such Sections until all such
unsatisfied obligations are fully paid.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make Loans, each of the Parent and the Borrower represents and
warrants to the Administrative Agent and each Lender that:
SECTION 3.01. Organization; Powers. Each of the Parent and its
--------------------
Subsidiaries (a) is duly organized, validly existing and in good standing (or
similar concept under applicable law) under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged and (c) is duly qualified
as a foreign corporation and in good standing (or similar concept under
applicable law) under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification except to the extent that the failure to so qualified could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; provided, that the Parent is not in good standing in Delaware on
--------
the Closing Date as a result of the failure to pay franchise taxes, but will be
in good standing in Delaware within five Business Days after the Closing Date.
SECTION 3.02. Authorization; Enforceability. The Transactions are
-----------------------------
within the corporate powers of the Parent and the Borrower and the other Loan
Parties and have been duly authorized by all necessary corporate and, if
required, stockholder action. Each of the Loan Documents to which a Loan Party
is a party has been duly executed and delivered by such Loan Party and
constitutes a legal, valid and binding obligation of such Loan Party,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
------------------------------------
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of any of the Parent or any of its Subsidiaries or any order of any
Governmental Authority, except to the extent that such violations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Parent or any of its Subsidiaries
or its assets, or give rise to a right thereunder to require any payment to be
made by the Parent or any of its Subsidiaries, except to the extent that such
violations could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, and (d) will not result in the creation or
imposition of any Lien on any asset of the Parent or any of its Subsidiaries,
except the Liens created by the Security Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
-----------------------------------------------
The Parent has heretofore furnished to the Lenders its consolidated balance
sheet and statements of
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income, stockholders equity and cash flows (i) as of and for the fiscal year
ended September 30, 1995, reported on by Ernst & Young LLP, independent
certified public accountants, and (ii) as of and for the fiscal quarter and the
portion of the fiscal year ended June 30, 1996, certified by the Chief Financial
Officer of the Parent. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Parent and its consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP applied consistently throughout the period involved,
subject to year-end audit adjustments and the absence of footnotes in the case
of the statements referred to in clause (ii) above.
(b) Since September 30, 1995, there has occurred no event or
circumstance which has had a Material Adverse Effect.
SECTION 3.05. Properties. (a) Each of the Parent and its
----------
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes,
and none of such property is subject to any Lien, except the Liens created by
the Security Documents and Liens permitted by Section 6.03.
(b) The Parent and each of its Subsidiaries have, to their respective
best knowledge, complied with their material obligations under all leases to
which they are a party and under which they are in occupancy, and all such
leases are in full force and effect and the Parent and each of its Subsidiaries
enjoy peaceful and undisturbed possession under all such leases, in each case
except to the extent the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.06. Intellectual Property. The Parent and its Subsidiaries
---------------------
own or are licensed to use all trademarks, tradenames, patents, patent licenses,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect (the "Intellectual Property"). As of the Closing
---------------------
Date, no claim has been asserted in writing and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does the Parent
have actual knowledge of any valid basis for any such claim. The use of such
Intellectual Property by the Parent and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.07. Litigation and Environmental Matters. (a) There are
------------------------------------
no actions, investigations, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Parent,
threatened against or affecting the Parent or any of its Subsidiaries or any of
its or their respective properties or revenues (i) as to which there is a
reasonable likelihood of an adverse determination and that, if
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<PAGE>
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any Loan Document or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Parent nor any of
its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability or (iii) has received written notice of any claim with respect to any
Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect.
SECTION 3.08. Compliance with Laws and Agreements. Each of the
-----------------------------------
Parent and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
SECTION 3.09. Investment Company Act; Other Regulations. None of the
-----------------------------------------
Parent and the Borrower is an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
SECTION 3.10. Taxes. Each of the Parent and its Subsidiaries has
-----
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Parent or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect; no Lien for Tax has been filed, and, to the knowledge
of the Parent, no claim is being asserted with respect to any such Tax, which
could reasonably be expected to have a Material Adverse Effect. As of the
Closing Date, no Federal income tax returns of the Parent or any of its
Subsidiaries are currently being audited by the United States Internal Revenue
Service.
SECTION 3.11. Subsidiaries. The Subsidiaries listed on Schedule 3.11
------------
constitute all of the Subsidiaries of the Parent at the date hereof.
SECTION 3.12. Purpose of Loans. (i) The proceeds of the Reducing
----------------
R/C Loans shall be used by the Parent, the Borrower and their Subsidiaries (A)
to finance Future Acquisitions, (B) to refinance all outstanding Indebtedness of
the Borrower under the Existing
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Credit Agreement and the Existing Credit Line and (C) to finance capital
investments and capital expenditures made and to be made by the Borrower in its
TAVS division in an aggregate amount not exceeding $8,000,000, and (ii) the
proceeds of the Revolving Credit Loans shall be used (A) to finance the working
capital requirements, and for general corporate purposes, of the Parent, the
Borrower and their Subsidiaries and (B) to refinance all outstanding
Indebtedness of the Borrower under the Existing Credit Line.
SECTION 3.13. ERISA. No ERISA Event has occurred or is reasonably
-----
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $2,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $2,000,000 the fair
market value of the assets of all such underfunded Plans.
SECTION 3.14. Federal Regulations. No part of the proceeds of any
-------------------
Loans will be used for "purchasing" or "carrying" any "margin stock" (within the
respective meanings of each of the quoted terms under Regulation G or Regulation
U of the Board as now and from time to time hereafter in effect) in violation of
such Regulations. If requested by any Lender or the Administrative Agent, each
of the Parent and the Borrower will furnish to the Administrative Agent and each
Lender a statement to the foregoing effect in conformity with the requirements
of FR Form G-1 or FR Form U-1 referred to in said Regulation G or Regulation U,
as the case may be.
SECTION 3.15. Disclosure. Each of the Parent and its Subsidiaries
----------
has disclosed to the Lenders all agreements, instruments and corporate or other
restrictions to which the Parent or such Subsidiary is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of the reports, financial
statements, certificates or other written information furnished by or on behalf
of the Parent or such Subsidiary to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder (as modified or supplemented by other information so
furnished and taken as a whole with all other information so furnished) contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading in any material respect, in either case which has
not been corrected, supplemented or remedied by subsequent documents furnished
or statements made in writing to the Lenders prior to the date hereof.
SECTION 3.16. Security Documents. (a) Each of the Pledge Agreements
------------------
is effective to create in favor of the Administrative Agent, for the benefit of
the Lenders, a legal, valid and enforceable security interest in the Pledged
Securities described therein and proceeds
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<PAGE>
thereof and, when the Pledged Securities described therein are delivered to the
Administrative Agent, each such Pledge Agreement shall grant a fully perfected
first priority Lien on, and security interest in, all right, title and interest
of the relevant Loan Party in such Pledged Securities and the proceeds thereof,
as security for the Obligations.
(b) The Security Agreement is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and proceeds
thereof, and when financing statements in appropriate form are filed in the
offices specified on Schedule 3.16(b), the Security Agreement shall grant a
fully perfected first priority Lien on, and security interest in, all right,
title and interest of the Borrower in such Collateral and the proceeds thereof,
as security for the Obligations, subject to the Liens permitted by Section 6.03.
SECTION 3.17. Labor Matters. There are no strikes pending or, to the
-------------
Parent's knowledge, threatened against the Parent or any of its Subsidiaries
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. The hours worked and payments made to employees of the
Parent and each of its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable legal requirements, except to the extent
such violations could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect. All material payments due from the
Parent or any of its Subsidiaries, on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability on
the books of the Parent or such Subsidiary, except where the failure to do so
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 3.18. Solvency. (a) The fair salable value of the assets of
--------
the Parent and its consolidated Subsidiaries taken as a whole is not less than
the amount that will be required to be paid on or in respect of the probable
liability on the existing debts and other liabilities (including contingent
liabilities) of the Parent and its consolidated Subsidiaries, as they become
absolute and mature.
(b) The assets of the Parent and its consolidated Subsidiaries taken
as a whole do not constitute unreasonably small capital for the Parent and its
consolidated Subsidiaries to carry out their business as now conducted and as
proposed to be conducted including the capital needs of the Parent and its
consolidated Subsidiaries, taking into account the particular capital
requirements of the business conducted by the Parent and its consolidated
Subsidiaries and projected capital requirements and capital availability
thereof.
(c) The cash flow of the Parent and its consolidated Subsidiaries
taken as a whole, after taking into account all anticipated uses of the cash of
the Parent and its consolidated Subsidiaries, will at all times be sufficient to
pay all obligations of the Parent and its consolidated Subsidiaries when such
obligations are required to be paid.
ARTICLE IV. CONDITIONS PRECEDENT
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<PAGE>
SECTION 4.01. Effective Date. The obligations of the Lenders to make
--------------
Loans hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 10.01):
(a) Loan Documents. The Administrative Agent shall have received (i)
--------------
this Agreement, executed and delivered by a duly authorized officer of the
Parent and the Borrower, with a counterpart for each Lender, (ii) for the
account of each Lender, Notes, executed and delivered by a duly authorized
officer of the Borrower, (iii) each of the Pledge Agreements, each executed and
delivered by a duly authorized officer of the parties thereto, with a
counterpart or a conformed copy for each Lender, (iv) the Security Agreement,
executed and delivered by a duly authorized officer of the Borrower, with a
counterpart or a conformed copy for each Lender and (v) the Ingleby Guarantee,
executed and delivered by a duly authorized officer of the parties thereto, with
a counterpart or a conformed copy for each Lender.
(b) Due Diligence Documents. The Administrative Agent shall have
-----------------------
received and reviewed to its satisfaction, schedules, certified as to accuracy
by the Parent, listing (i) all contingent liabilities of the Parent and its
Subsidiaries in an amount in excess of $100,000 as reportable and calculated
under GAAP, (ii) all pending litigation against the Parent and its Subsidiaries
where there is a reasonable likelihood of an adverse determination and, if
adversely determined, could reasonably be expected to result in the payment of
money damages in excess of $100,000 and (iii) all operating leases and Capital
Leases of the Parent and its Subsidiaries requiring annual payments in excess of
$100,000.
(c) Closing Certificates. The Administrative Agent and each Lender
--------------------
shall have received a certificate of the Loan Parties, dated the Closing Date,
substantially in the form of Exhibit G, with appropriate insertions and
attachments, satisfactory in form and substance to the Administrative Agent,
executed by the Chief Financial Officer of each of the Loan Parties.
(d) Corporate Proceedings of Loan Parties. The Administrative Agent
--------------------------------------
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative Agent, of
the Board of Directors of each Loan Party authorizing (i) the execution,
delivery and performance of this Agreement and the other Loan Documents to which
it is a party and the granting by it of the Liens created pursuant to the
Security Documents and (ii) in the case of the Parent and the Borrower, the
Borrowings contemplated hereunder, certified by the Secretary or an Assistant
Secretary of the Parent and the Borrower as of the Closing Date, which
certificate shall be in form and substance satisfactory to the Administrative
Agent and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(e) Incumbency Certificates. The Administrative Agent shall have
-----------------------
received, with a counterpart for each Lender, in form and substance satisfactory
to the Administrative Agent, a certificate of each Loan Party, dated the Closing
Date, as to the incumbency and signature of the officers of such Loan Party
executing any Loan Document, executed by the
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President or any Vice President and the Secretary or any Assistant Secretary of
such Loan Party.
(f) Corporate Documents. The Administrative Agent shall have
-------------------
received, with a counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of each Loan Party, certified as of the
Closing Date as complete and correct copies thereof by the Secretary or an
Assistant Secretary of such Loan Party.
(g) Good Standing Certificates. The Administrative Agent shall have
--------------------------
received a certificate from the Secretary of State, or other appropriate
authority of such jurisdiction, evidencing the good standing (or similar concept
under applicable law) of each of the Loan Parties in the jurisdiction of its
incorporation or organization and each jurisdiction in which a failure to so
qualify could reasonably be expected to have a Material Adverse Effect.
(h) Fees. The Administrative Agent shall have received (i) the fees
----
to be received on the Closing Date referred to in Section 2.04 or in the
Commitment Letter, dated October 16, 1996, between the Borrower and the
Administrative Agent and (ii) without affecting the obligations of the Borrower
under Section 10.05, all reasonable fees and disbursements of counsel to the
Administrative Agent and the Lenders incurred in connection with the
negotiations, documentation and closing of the Transactions, regardless of
whether such fees and disbursements have been incurred prior to the execution of
this Agreement.
(i) Legal Opinions. The Administrative Agent shall have received,
--------------
with a counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Schulte Roth & Zabel LLP,
counsel to the Parent, the Borrower and Ingleby, substantially in the form
of Exhibit C-1; and
(ii) the executed legal opinion of Allen & Overy, special
English counsel to the Administrative Agent, in form and substance
reasonably satisfactory to the Administrative Agent.
Each legal opinion shall cover such other matters incident to the Transactions
as the Administrative Agent may reasonably require.
(j) Pledged Securities; Stock Powers. The Administrative Agent shall
--------------------------------
have received the stock certificates representing the shares (or other indicia
of ownership interests to the extent applicable) pledged pursuant to each Pledge
Agreement, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof.
(k) UCC Searches. The Administrative Agent shall have received the
------------
results of recent searches by a Person reasonably satisfactory to the
Administrative Agent, of the Uniform Commercial Code, judgement and tax lien
filings which may have been filed with
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respect to personal property of the Borrower in each jurisdiction where their
assets are located, and the results of such searches shall be satisfactory to
the Administrative Agent.
(l) Filings, Registrations and Recordings. Each document (including,
-------------------------------------
without limitation, any Uniform Commercial Code financing statement) required by
the Security Documents or under law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Lenders, a perfected
first priority Lien on the Collateral described therein, subject to the Liens
permitted by Section 6.03 shall be in proper form for filing, registration or
recordation and shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested.
(m) Refinancing. All outstanding Indebtedness under the Existing
-----------
Credit Agreement and the Existing Credit Line shall have been repaid in full
(which may be with the proceeds of the Loans hereunder) and the commitments to
extend credit thereunder shall have been replaced by the Commitments hereunder.
(n) Additional Matters. All corporate and other proceedings, and all
------------------
documents, instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received such
other documents and legal opinions in respect of any aspect or consequence of
the transactions contemplated hereby or thereby as it shall reasonably request.
SECTION 4.02. Conditions to Each Loan. The obligation of each Lender
------------------------
to make a Loan on any date is subject to the satisfaction of the following
conditions (and in the case of the making of any Loan for any Future Material
Acquisition, subject further to the satisfaction of the conditions under Section
4.03):
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Loan Parties in or pursuant to the Loan Documents shall
be true and correct in all material respects on and as of such date as if made
on and as of such date except for any representation and warranty which is
expressly made as of an earlier date, which representation and warranty shall
have been true and correct in all material respects as of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the Loans requested to
be made on such date.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Parent on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
SECTION 4.03. Conditions to Each Loan for Future Material
-------------------------------------------
Acquisition. In addition to the satisfaction of the conditions in Section 4.02,
- ------------
the obligation of each Lender to
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make a Loan for a Future Material Acquisition is subject to satisfaction of the
following conditions:
(a) Notice. The Parent shall have notified the Administrative Agent
------
of such Future Material Acquisition not later than 30 days prior to the
Acquisition Date of such Future Material Acquisition and the Administrative
Agent shall notify the Lenders thereof promptly after its receipt of such
notification.
(b) Review of Documents. The Parent shall have delivered to the
-------------------
Administrative Agent:
(i) on or before the date that is twenty-one days prior to the
Acquisition Date (A) a summary of the material terms of the Future Material
Acquisition, including the proposed purchase price and (B) if available (x)
three year historical financial statements of the Acquiree, and (y) annual
projections and plans of the Parent and its Subsidiaries for the following
two years giving effect to such Future Material Acquisition, with a
certificate of the Chief Financial Officer of the Parent stating that (1)
such projections were prepared in good faith and are based on reasonable
estimates and assumptions, and (2) such projections demonstrate prospective
compliance at the end of each of the following two years with Sections
6.01(a), (b) and (c);
(ii) on or before the date that is ten days prior to the
Acquisition Date (A) a copy of the most recent drafts of any Acquisition
Documents, including all schedules and exhibits thereto that are available
at such time, certified as a true and correct copy thereof by the Chief
Financial Officer of the Parent, (B) if any of the material terms of the
Future Material Acquisition have changed since the delivery required by
clause (i)(A) of this paragraph (b), a revised summary of the material
terms, (C) if not delivered, or if revised since the delivery as required
by clause (i)(B) of this paragraph (b), each of the documents required by
clause (i)(B) of this paragraph (b), and (D) such other information with
respect to the Future Material Acquisition as the Administrative Agent may
reasonably request;
(iii) on or before the date that is two days prior to the
Acquisition Date (A) a copy of the most recent drafts of any Acquisition
Documents, including all schedules and exhibits thereto that are available
at such time, certified as a true and correct copy thereof by the Chief
Financial Officer of the Parent, and (B) such other information with
respect to the Future Material Acquisition as the Administrative Agent may
reasonably request; and
(iv) on the Acquisition Date, the Administrative Agent shall
have received (A) a copy of each Acquisition Document, including all
schedules and exhibits thereto, certified as a true and correct copy
thereof by the Chief Financial Officer of the Parent, and together with a
certificate of such Chief Financial Officer stating that there have been no
material changes to the terms, including the purchase price, of the Future
Material Acquisition since the delivery made to the Administrative Agent
pursuant to
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<PAGE>
clause (ii) of this paragraph (b); (B) evidence reasonably
satisfactory to the Administrative Agent that such Future Material
Acquisition has been consummated or is being consummated on the date of
such Loan, that all material consents, filings and approvals required by
applicable law in connection therewith shall have been obtained and made or
waived, and that such Future Material Acquisition was consummated in
compliance in all material respects with the articles of incorporation and
by-laws of the purchaser and all material applicable laws and regulations,
and (C) evidence reasonably satisfactory to the Administrative Agent that
all actions required by Sections 5.09 and 5.10 have been taken in respect
of the assets acquired in such Future Material Acquisition.
The Administrative Agent will (i) promptly deliver to the Lenders the
documents delivered to the Administrative Agent pursuant to paragraph (b)(i) of
this Section and (ii) deliver to any Lender upon its request, copies of any
document delivered to the Administrative Agent pursuant to paragraphs (ii)
through (iv) of this Section to the extent reasonably requested by such Lender.
ARTICLE V. AFFIRMATIVE COVENANTS
The Parent hereby agrees that, until the Commitments have expired or
been terminated and the principal of and interest on each Loan and all fees
payable hereunder shall have been paid in full, the Parent shall and (except in
the case of delivery of financial information, reports and notices) shall cause
each of its Subsidiaries to:
SECTION 5.01. Financial Statements and Other Information. Furnish to
------------------------------------------
the Administrative Agent and each Lender:
(a) as soon as available, but in any event within 120 days after the
end of each fiscal year of the Parent, its audited consolidated balance sheet
and related statements of operations, stockholders' equity and cash flows as of
the end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by Ernst & Young LLP or
other independent public accountants of recognized national standing (without a
"going concern" or like qualification or exception and without any qualification
or exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Parent and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, it being acknowledged that Form-10K to be filed by the Parent with the
SEC shall be satisfactory for the purpose of this Section 5.01(a);
(b) as soon as available, but in any event within 50 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Parent, (i) its consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case
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<PAGE>
of the balance sheet, as of the end of) the previous fiscal year, all
certified by the Chief Financial Officer of the Parent as presenting fairly in
all material respects the financial condition and results of operations of the
Parent and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes, it being acknowledged that Form 10-Q to be filed by
the Parent with the SEC shall be satisfactory for the purpose of this Section
5.01(b) and (ii) its unaudited consolidating balance sheet showing intercompany
eliminations, and the related unaudited consolidating statements of operations
showing inter-company eliminations, as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, certified by the Chief
Financial Officer of the Parent as being fairly stated in all material respects
when considered in relation to the Parent's consolidated financial statements
taken as a whole;
(c) as soon as available, but in any event within 50 days after the
end of each calendar quarter a quarterly aging of the accounts receivable of the
Parent and its Subsidiaries, together with a certificate of the Chief Financial
Officer of the Parent to the effect that such Officer has no actual knowledge
that such aging of accounts receivable is incorrect or misleading in any
material respect;
(d) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of the Chief Executive Officer or Chief
Executive Officer of the Parent (i) certifying to his knowledge, after
reasonable investigation, as to whether during the period covered by such
certificate a Default or Event of Default has occurred and, if a Default or
Event of Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections 6.01 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;
(e) concurrently with any delivery of financial statements under
clause (a) above, (i) a certificate (which certificate may be limited to the
extent required by accounting rules or guidelines) of the independent certified
accountants reporting on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial statements of
any Default or Event of Default relating to accounting matters (including
calculations demonstrating compliance, as of the dates of the financial
statements being furnished at such time, with the covenants set forth in Section
6.01 and, if such a Default or Event of Default has occurred, specifying the
nature and extent thereof and any corrective action taken or proposed to be
taken with respect thereto) and (ii) as soon as available, a copy of the
management letter delivered to the Parent by such accountants in connection with
their audit of such financial statements;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements, registration statements, and other
materials filed by the Parent or its Subsidiaries with the SEC, or any
Governmental Authority succeeding to any or
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all of the functions of the SEC, or with any national securities exchange, or
distributed by the Parent to its shareholders generally, as the case may be;
(g) (i) with respect to any Future Material Acquisition, provide to
the Administrative Agent the information, within the time periods, required by
Section 4.03 and (ii) with respect to each Future Acquisition (other than a
Future Material Acquisition) for which the consideration paid exceeds
$15,000,000, provide to the Administrative Agent the information, within the
time periods, described in Section 4.03(b)(i) and, reasonably promptly after
consummation of such Future Acquisition, copies of the Acquisition Documents
related thereto; and
(h) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the Parent
or any of its Subsidiaries, or compliance with the terms of this Agreement or
any other Loan Document, as the Administrative Agent or any Lender may
reasonably request.
SECTION 5.02. Notices of Material Events. Furnish promptly, but in
--------------------------
no event shall be later than 10 days, to the Administrative Agent and each
Lender written notice of the following:
(a) the occurrence of any Default or Event of Default;
(b) any default or event of default under any indenture, agreement or
other instrument binding upon the Parent or any of its Subsidiaries that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;
(c) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting the
Parent or any Subsidiary thereof that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect;
(d) any litigation or proceeding affecting the Parent or any of its
Subsidiaries in which there is a reasonable likelihood that damages against the
Parent or any of its Subsidiaries will be recovered in the amount of $1,000,000
or more and such damages will not be covered by insurance, or any litigation or
proceeding in which the amount is $1,000,000 or more and in which injunctive or
similar relief is sought;
(e) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate amount
exceeding $1,000,000; and
(f) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
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Each notice delivered under this Section shall be accompanied by a
statement of the Chief Financial Officer or the Chief Executive Officer of the
Parent setting forth the details of the event or development requiring such
notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. Do or cause to be done
------------------------------
all things necessary to preserve, renew and keep in full force and effect its
legal existence and the rights, licenses, permits, privileges and franchises
necessary to the conduct of its business; provided that the foregoing shall not
--------
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.05.
SECTION 5.04. Payment of Obligations. Pay, discharge or otherwise
----------------------
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, including tax liabilities, that, if
not paid, could reasonably be expected to result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Parent or such Subsidiary has set aside on its books
adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. (a) Keep and
------------------------------------
maintain all property necessary to the conduct of its business in good working
order and condition, ordinary wear and tear excepted, (b) maintain, with
financially sound and reputable insurance companies, insurance in such amounts
and against such risks (including in any event business interruption) as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations, and (c) furnish to each Lender, upon
written request, full information as to the insurance carried.
SECTION 5.06. Books and Records; Inspection Rights. Keep proper
------------------------------------
books of record and account in which full, true and correct entries in
conformity with GAAP and all applicable legal requirements shall be made of all
dealings and transactions in relation to its business and activities; permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice and during business hours, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss the affairs, finances and condition of the Parent and its Subsidiaries
with officers and employees of the Parent and its Subsidiaries and with its
independent accountants, all at such reasonable times and as often as reasonably
requested, provided that, in the absence of a continuing Event of Default, such
visits, examinations and inspection shall not occur more than once each calendar
year.
SECTION 5.07. Compliance with Laws; Contractual Obligations. Comply
---------------------------------------------
with all laws, rules, regulations and orders of any Governmental Authority
applicable to the Parent and its Subsidiaries or their property, including, with
limitation, ERISA and any rule and regulations promulgated thereunder, and any
indenture, agreement or other instrument binding upon the Parent or any of its
Subsidiaries, except where the failure to do so,
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individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
SECTION 5.08. Environmental Laws. (a) Comply with all applicable
------------------
Environmental Laws and obtain and comply with and maintain any and all licenses,
approvals, notifications, registrations or permits required by applicable
Environmental Laws except to the extent that failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental Laws except to the extent
that the failure to do so could not be reasonably expected to have a Material
Adverse Effect.
SECTION 5.09. Further Assurances; Security Interests. Upon the
--------------------------------------
request of the Administrative Agent, promptly perform or cause to be performed
any and all acts and execute or cause to be executed any and all documents
(including, without limitation, the execution, amendment or supplementation of
any financing statement and continuation statement or other statement) for
filing under the provisions of the UCC and the rules and regulations thereunder,
or any other statute, rule or regulation of any applicable foreign, federal,
state or local jurisdiction, which are desirable, from time to time, in order to
grant and maintain in favor of the Lenders as beneficiaries thereof the security
interest in the Collateral contemplated hereby.
SECTION 5.10. Additional Collateral. (a) With respect to any
---------------------
assets acquired after the Closing Date by the Parent or any of its Domestic
Subsidiaries (other than (y) any assets described in paragraph (b) or (c) below
and (z) immaterial assets a security interest with respect to which cannot be
perfected by filing UCC-1 financing statements), promptly (i) execute and
deliver to the Administrative Agent such amendments to this Agreement or the
relevant Security Document or such other documents as the Administrative Agent
or the Majority Lenders deem necessary or advisable in order to grant to the
Administrative Agent, for the benefit of the Lenders, a security interest in
such assets, (ii) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in such assets, subject to Liens permitted by Section 6.03,
including without limitation, the filing of UCC financing statements in such
jurisdictions as may be required by the appropriate Security Document or by law
or as may be requested by the Administrative Agent and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in the preceding clauses (i) and (ii), which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(b) With respect to any Domestic Subsidiary which is or becomes a
Significant Subsidiary after the Closing Date, promptly upon the request of the
Administrative Agent (i) execute and deliver to the Administrative Agent a new
pledge agreement or such amendments
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to the relevant Pledge Agreement as the Administrative Agent deems necessary or
advisable in order to grant to the Administrative Agent, for the benefit of the
Lenders, a perfected first priority security interest in the Capital Stock of
such Subsidiary which is owned by the Parent or any of its Subsidiaries, subject
to Liens permitted by Section 6.03 and (ii) deliver to the Administrative Agent
the certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Parent or such Subsidiary, as the case may be, (iii) cause such new Subsidiary
(A) to become a party to a guarantee and a security agreement, in each case,
substantially in the form of Exhibits E and F to this Agreement and (B) to take
such actions necessary or advisable to grant to the Administrative Agent for the
benefit of the Lenders a perfected first priority security interest in the
collateral to be described in such security agreement with respect to such
Subsidiary, including, without limitation, the filing of UCC financing
statements in such jurisdictions as may be required by such subsidiary security
agreement or by law or as may be requested by the Administrative Agent, subject
to Liens permitted by Section 6.03 and (iv) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described in the preceding clauses (i), (ii) and (iii), which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) With respect to any Domestic Subsidiary which is or becomes a
Significant Subsidiary after the Closing Date (i) promptly upon the request of
the Administrative Agent, cause such Domestic Subsidiary to become a party to a
guarantee substantially in the form of Exhibit F to this Agreement and (ii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matter described in the preceding clause, which opinion
shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(d) With respect to any Person that becomes a Foreign Subsidiary
after the Closing Date, promptly upon the request of the Administrative Agent
(i) execute and deliver to the Administrative Agent a new pledge agreement or
such amendments to the relevant Pledge Agreement as the Administrative Agent
deems necessary or advisable in order to grant to the Administrative Agent, for
the benefit of the Lenders, a perfected security interest in the Capital Stock
of such Subsidiary which is owned by the Parent or any of its Subsidiaries
(provided that in no event shall more than 65% of the Capital Stock of any such
Subsidiary be required to be so pledged), (ii) deliver to the Administrative
Agent the certificates representing such Capital Stock, if any, together with
undated stock powers, in blank, executed and delivered by a duly authorized
officer of the Parent or such Subsidiary, as the case may be and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in the preceding clauses (i) and
(ii), which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(e) As promptly as practicable, and in any event within 30 days after
the Closing Date, amend the Memorandum and Articles of Association (or other
organic documents) of CHUK to remove any restrictions on transfer of the shares
of CHUK to the
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extent such restrictions would be inconsistent with the CHUK Pledge Agreement or
with the exercise by the Administrative Agent and the Lenders of their rights
thereunder.
SECTION 5.11. Use of Proceeds. Use the proceeds of the Loans only as
---------------
provided in Section 3.12.
ARTICLE VI. NEGATIVE COVENANTS
The Parent hereby agrees that, until the Commitments have expired or
terminated and the principal of and interest on each Loan and all fees payable
hereunder have been paid in full, the Parent shall not, and (except with respect
to Section 6.01) shall not permit any of its Subsidiaries to, directly or
indirectly:
SECTION 6.01. Financial Condition Covenants.
-----------------------------
(a) Maintenance of Current Ratio. Permit the ratio of (i)
----------------------------
Consolidated Current Assets to (ii) Consolidated Current Liabilities at any time
to be less than 1.00 to 1.00.
(b) Maintenance of Ratio of Consolidated Funded Debt to Consolidated
----------------------------------------------------------------
Free Cash Flow. Permit on any date of determination the ratio of (i)
- --------------
Consolidated Funded Debt on such determination date to (ii) Consolidated Free
Cash Flow for the period of four consecutive fiscal quarters most recently ended
to be greater than the ratio set forth below opposite the period in which such
determination date occurs:
Period Ratio
------ -----
Closing Date - September 30, 1997 6.50 to 1:00
October 1, 1997 - Thereafter 5.00 to 1:00.
(c) Maintenance of Ratio of Consolidated Free Cash Flow to
------------------------------------------------------
Consolidated Debt Service. Permit on any date of determination the ratio of (i)
- -------------------------
Consolidated Free Cash Flow for the period of four consecutive fiscal quarters
most recently ended to (ii) Consolidated Debt Service for such period, to be
less than 1.25 to 1.00.
SECTION 6.02. Limitation on Indebtedness. Create, incur, assume or
--------------------------
suffer to exist any Indebtedness, except (if after giving effect to the
incurrence thereof no Event of Default shall be in existence):
(a) Indebtedness of the Parent, the Borrower and the other Loan
Parties under this Agreement and the other Loan Documents;
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(b) purchase money Indebtedness of the Parent and any of its
Subsidiaries (including Capital Leases) to the extent permitted under Section
6.03(f);
(c) Subordinated Indebtedness;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 6.02(d) and any refinancing, refunding, renewal or extension thereof,
provided that (i) the principal amount thereof is not increased above the
- --------
principal amount thereof outstanding immediately prior to such refinancing,
refunding, renewal or extension and (ii) the direct and contingent obligors with
respect to such Indebtedness are not changed;
(e) Indebtedness of (i) the Parent to any Subsidiary of the Parent
and (ii) any Subsidiary to the Parent or any other Subsidiary;
(f) Indebtedness in respect of Hedge Agreements;
(g) unsecured Indebtedness payable to the sellers of the Capital
Stock or assets acquired pursuant to Future Acquisitions; and
(h) additional Indebtedness of the Parent or its Subsidiaries not
contemplated by clauses (a) through (g) above, provided that the amount of
--------
Indebtedness incurred and remaining outstanding pursuant to this clause (h)
shall not at any time exceed $5,000,000.
SECTION 6.03. Limitation on Liens. Create, incur, assume or suffer
-------------------
to exist any Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, except for:
(a) Liens for Taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
--------
thereto are maintained on the books of the Parent or its Subsidiaries, as the
case may be, in conformity with GAAP (or, in the case of foreign Subsidiaries,
generally accepted accounting principles in effect from time to time in their
respective jurisdictions of incorporation);
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
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<PAGE>
(e) Liens in existence on the date hereof listed on Schedule 6.03(e),
securing Indebtedness permitted by Section 6.02(d);
(f) purchase money Liens of the Parent and its Subsidiaries granted
to the vendor or Person financing the acquisition of fixed or capital assets,
provided that (i) such Liens shall be created substantially simultaneously with
- --------
the acquisition of such fixed or capital assets, (ii) such Liens do not at any
time encumber any property other than the property financed by such Indebtedness
and the proceeds of such property in accordance with the instrument creating
such Lien, and (iii) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed 100% of the original purchase price of such
property;
(g) Liens on the property or assets of an entity which becomes a
Subsidiary after the date hereof securing Indebtedness permitted by Section
6.02(e), provided that (i) such Liens existed at the time such entity became a
--------
Subsidiary and were not created in anticipation thereof, (ii) any such Lien is
not spread to cover any property or assets of such corporation after the time
such entity becomes a Subsidiary (other than proceeds of the collateral
originally subject to such Lien in accordance with the instrument creating such
Lien) and (iii) the amount of Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its businesses taken as a
whole;
(j) Liens arising from judgments or decrees in circumstances not
constituting an Event of Default under Article VII, Subsection (h);
(k) any interest or title of a lessor or secured by a lessor's
interest under any lease permitted by this Agreement;
(l) leases or subleases granted to others not interfering in any
material respect with the business of the Parent and its Subsidiaries, taken as
a whole;
(m) the replacement, extension or renewal of any Lien permitted by
clauses (a) through (l) above upon or in the same assets theretofore subject to
such Lien or the replacement, extension or renewal (without increase in the
amount or change in any direct or contingent obligor) of the Indebtedness
secured thereby; and
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<PAGE>
(n) additional Liens securing Indebtedness of the Borrower or any
Subsidiary so long as the aggregate principal amount of the Indebtedness so
secured does not exceed $2,500,000 at any time outstanding.
SECTION 6.04. Limitation on Guarantees. Create, incur, assume or
------------------------
suffer to exist any Guarantee except:
(a) the Parent Guarantee or other Guarantees arising under the Loan
Documents;
(b) surety bonds issued in respect of the type of obligations
described in Section 6.03(d);
(c) Guarantees of Indebtedness and other obligations that are
permitted to be incurred under this Agreement; and
(d) Guarantees existing on the Closing Date and set forth on
Schedule 6.04 hereto, and any renewal or modification.
SECTION 6.05. Limitations on Fundamental Changes. Except as
----------------------------------
otherwise permitted by Section 6.06 or Section 6.07(e), enter into any
transaction of acquisition or merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, or make any
material change in its present method of conducting business, except that (i)
the Parent may liquidate, wind-up or dissolve or otherwise dispose of any
inactive Subsidiary and (ii) any Wholly Owned Subsidiary of the Parent may be
merged or consolidated with, or may convey, sell, lease, assign, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to, any other Wholly Owned Subsidiary of the Parent or the Parent;
provided that (a) in any merger or consolidation involving the Parent, the
- --------
Parent shall be the continuing or surviving entity, (b) if any such merger or
consolidation shall involve at least one entity of which less than 100% of the
Capital Stock has been pledged to the Administrative Agent for the benefit of
the Lenders, then the continuing or surviving entity shall be that entity in
which the greater percentage of Capital Stock has been so pledged, and (c) no
Subsidiary (for purposes of this clause (c), the "first Subsidiary") may convey,
----------------
sell, lease, assign, transfer or otherwise dispose of any or all of its assets
(other than sales and transfers of assets in the ordinary course or of assets
immaterial to the value of the first Subsidiary) or issue equity securities of
any type to any Subsidiary of which less than 100% of the Capital Stock has been
pledged to the Administrative Agent for the benefit of the Lenders (for purposes
of this clause (c), the "second Subsidiary"), unless the first Subsidiary is a
-----------------
Foreign Subsidiary and the second Subsidiary is a Subsidiary of the first
Subsidiary or of another Foreign Subsidiary.
SECTION 6.06. Limitation on Sale of Assets. Convey, sell, lease,
----------------------------
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables), whether now owned or hereafter
acquired, or, in the case of any
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Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person other than the Parent or any Wholly Owned Subsidiary of the Parent,
except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale or other disposition of obsolete or worn out property in
the ordinary course of business;
(c) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof;
(d) as permitted by Section 6.05; and
(e) other sales of assets in any fiscal year having an aggregate book
value equal to less than 10% of Consolidated Total Assets as at the end of the
preceding fiscal year and contributing less than 10% of Consolidated Revenue for
such preceding fiscal year.
SECTION 6.07. Limitation on Investments, Loans and Advances. Make
---------------------------------------------
any advance, loan, extension of credit or capital contribution to, or purchase
any stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of the Parent or its Subsidiaries
not to exceed $500,000 at any time outstanding so long as the time of the making
of any loan or advance no Default or Event of Default shall have occurred and be
continuing;
(d) investments by the Parent in or loans or advances by the Parent
to its Subsidiaries and investments by such Subsidiaries in or loans or advances
by such subsidiaries to the Parent and in or to other Subsidiaries (including
the investment for creation of such Subsidiary); provided, however, that any
-------- -------
such investment, loan or advance by or to a Domestic Subsidiary of which less
than 100% of the Capital Stock has been pledged to the Administrative Agent for
the benefit of the Lenders shall be (i) in an amount immaterial in relation to
the value of the transferor, (ii) in the ordinary course of business of each
party thereto and (iii) upon fair and reasonable terms no less favorable to each
party than each party could obtain in a comparable arm's length transaction with
a Person not an Affiliate, and provided, further, that any such investment
-------- -------
constituting Indebtedness of any Subsidiary shall be permitted only if such
Indebtedness is permitted by Section 6.02(e);
(e) so long as no Event of Default has occurred and is continuing or
would result therefrom, the Parent and its Subsidiaries may engage in Future
Acquisitions; provided, that (i) any Future Material Acquisition shall not be
--------
made without the prior written consent of
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the Administrative Agent (which consent shall be made based upon an affirmative
vote of the Majority Lenders), after its satisfactory review (which it shall
promptly undertake after notice by the Borrower), in its reasonable discretion,
of documents required pursuant to Section 4.03(b); it being understood and
agreed that, if the Parent provides the Administrative Agent with the
information and documents as required by Sections 4.03(b)(i) and (ii), the
Administrative Agent shall advise the Parent whether or not it will consent to
such Future Material Acquisition on or before the fifth day prior to the
Acquisition Date and, if the Administrative Agent consents, such consent shall
be irrevocable unless there is a material change in the terms of such Future
Material Acquisition;
(f) extensions or renewals of existing investments on substantially
identical terms; and
(g) investments in the ordinary course of business not to exceed
$2,500,000 outstanding at any time.
SECTION 6.08. Limitation on Optional Payments and Modifications of
----------------------------------------------------
Subordinated Debt Instruments. (a) Make any optional payment or prepayment on
- -----------------------------
or redemption of any Subordinated Indebtedness or (b) amend, modify or change,
or consent or agree to any amendment, modification or change to any of the terms
relating to the payment or prepayment of principal of or interest on, any such
Subordinated Indebtedness (other than any such amendment, modification or change
which would extend the maturity or reduce the amount of any payment of principal
thereof or which would reduce the rate or extend the date for payment of
interest thereon).
SECTION 6.09. Limitation on Transactions with Affiliates. Enter into
------------------------------------------
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of business of the Parent or any of its Subsidiaries and (c)
upon fair and reasonable terms no less favorable to the Parent or such
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate; provided that any
--------
transaction which repatriates the earnings of a foreign Subsidiary to a domestic
Subsidiary shall be deemed to be permitted under this Agreement.
SECTION 6.10. Limitation on Sales and Leasebacks. Enter into any
----------------------------------
arrangement with any Person providing for the leasing by the Parent or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Parent or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Parent or such
Subsidiary; except those leases of property pursuant to which the aggregate
amount of all obligations of the Parent or any of its Subsidiaries as lessee or
guarantor is less than $500,000.
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SECTION 6.11. Limitation on Changes in Fiscal Year. Permit the
------------------------------------
fiscal year of the Parent to end on a day other than September 30, provided that
the Parent may change its fiscal year end to December 31.
SECTION 6.12. Limitation on Negative Pledge Clauses. Enter into with
-------------------------------------
any Person any agreement, other than (a) this Agreement and (b) any purchase
money mortgages or Capital Leases permitted by this Agreement (in which cases,
any prohibition or limitation shall only be effective against the assets
financed thereby), which prohibits or limits the ability of the Parent or any of
its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired.
SECTION 6.13. Limitation on Lines of Business. Alter in any material
-------------------------------
respect the nature of the businesses of the Parent and its Subsidiaries taken as
a whole on the date of this Agreement or which are related thereto.
SECTION 6.14. Restrictions Affecting Subsidiaries. Enter into, or
-----------------------------------
suffer to exist, any indenture, agreement or other instrument with any Person
other than the Parent, which prohibits or limits the ability of any Subsidiary
to (a) pay dividends or make other distributions or pay any Indebtedness owed to
the Parent or any other Subsidiary, (b) make loans or advances to the Parent or
any other Subsidiary or (c) transfer any of its properties or assets to the
Parent or any other Subsidiary.
ARTICLE VII. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms thereof or hereof; or the Borrower shall fail to
pay any interest on any Loan, or any other amount payable hereunder, within five
Business Days after any such interest or other amount becomes due in accordance
with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) Any Loan Party shall default in the observance or performance of
any agreement contained in Sections 6.01, 6.02, 6.03, 6.04, 6.05, 6.06, 6.07,
6.08 or 6.10 of this Agreement; or
(d) Any Loan Party shall default in the observance or performance of
any other material agreement contained in this Agreement or any other Loan
Document (other than as provided in paragraphs (a) through (c) of this Article),
and such default shall continue
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unremedied for a period of 30 days after the Parent, the Borrower or such Loan
Party has knowledge of such default; or
(e) The Parent or any of its Subsidiaries shall (i) default in any
payment of principal of or interest (regardless of amount) of any Indebtedness
(other than the Loans) having an aggregate principal amount in excess of
$2,000,000 or in the payment of any Guarantee in excess of $2,000,000, beyond
the period of grace, if any, provided in the instrument or agreement under which
such Indebtedness or Guarantee was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to become due prior to its stated maturity or
such Guarantee to become payable; or
(f) (i) The Parent or any of its Significant Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Parent or any of its Significant Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Parent or any of its Significant Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the Parent or any of its
Significant Subsidiaries any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the Parent
or any of its Significant Subsidiaries shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Parent or any of its
Significant Subsidiaries shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(g) An ERISA Event shall have occurred that, in the opinion of the
Majority Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse Effect;
or
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(h) One or more judgments or decrees shall be entered against the
Parent or any of its Significant Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance from a licensed reputable
insurance company) of $2,000,000 or more, and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any reason
(other than by reason of the action of the Administrative Agent or any of the
Lenders), to be in full force and effect, or the Parent or any other Loan Party
which is a party to any of the Security Documents shall so assert in writing or
(ii) the Lien created by any of the Security Documents shall cease to be
enforceable and of the same effect and priority purported to be created thereby
(other than by reason of the action of Administrative Agent or any of the
Lenders); or
(j) The Parent Guarantee or the Subsidiaries Guarantee shall cease,
for any reason, to be in full force and effect or any of the Parent or the
Subsidiaries Guarantors shall so assert in writing; or
(k) A Change in Control shall occur; then, and in any such event,
(A) if such event is an Event of Default specified in clause (i) or (ii) of
paragraph (f) above with respect to the Borrower automatically the Commitments
shall immediately terminate and the Loans made hereunder (with accrued interest
thereon) and all other amounts owing by the Parent or the Borrower, as the case
may be, under this Agreement shall immediately become due and payable, and
(B) if such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Majority Lenders, the
Administrative Agent may, or upon the request of the Majority Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Commitments
to be terminated forthwith, whereupon such Commitments shall immediately
terminate; and (ii) with the consent of the Majority Lenders, the Administrative
Agent may, or upon the request of the Majority Lenders, the Administrative Agent
shall, by notice to the Borrower, declare the Loans made hereunder (with accrued
interest thereon) and all other amounts owing by the Parent or the Borrower, as
the case may be, under this Agreement to be due and payable forthwith, whereupon
the same shall immediately become due and payable.
ARTICLE VIII. GUARANTEE
SECTION 8.01. Guarantee. The Parent hereby unconditionally and
---------
irrevocably guarantees to the Administrative Agent and the Lenders, the prompt
and complete payment and performance by the Borrower when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations. This Parent
Guarantee shall remain in full force and effect until the Obligations are paid
in full and the Commitments are terminated, notwithstanding that from time to
time prior thereto the Borrower may be free from any Obligations. The Parent
agrees that whenever, at any time, or from time to time, it shall make any
payment to the Administrative Agent or any Lender on account of its liability
under this
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Parent Guarantee, it will notify the Administrative Agent and such Lender in
writing that such payment is made under this Parent Guarantee for such purpose.
No payment or payments made by the Borrower or any other Person or received or
collected by the Administrative Agent or any Lender from the Borrower or any
other Person by virtue of any action or proceeding or any offset or
appropriation or application, at any time or from time to time, in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Parent under this Parent Guarantee, which
shall remain obligated under this Parent Guarantee, notwithstanding any such
payment or payments until the Obligations are paid in full and the Commitments
are terminated.
SECTION 8.02. No Subrogation. Notwithstanding any payment or
--------------
payments made by the Parent under this Parent Guarantee or any set-off or
application of funds of the Parent by any Lender, the Parent shall not be
entitled to be subrogated to any of the rights of the Administrative Agent or
any Lender against the Borrower or any other guarantor or any collateral
security or guarantee or right of set-off held by the Administrative Agent or
any Lender for the payment of the Obligations, nor shall the Parent seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other guarantor in respect of payments made by the Parent hereunder, until all
amounts owing to the Administrative Agent and the Lenders by the Borrower on
account of the Obligations are paid in full and the Commitments are terminated.
If any amount shall be paid to the Parent on account of such subrogation rights
at any time when all of the Obligations shall not have been paid in full, such
amount shall be held by the Parent in trust for the Administrative Agent and the
Lenders, segregated from other funds of the Parent, and shall, forthwith upon
receipt by the Parent, be turned over to the Administrative Agent in the exact
form received by the Parent (duly indorsed by the Parent to the Administrative
Agent, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.
SECTION 8.03. Amendments, etc., with respect to the Obligations. The
-------------------------------------------------
Parent shall remain obligated under this Parent Guarantee notwithstanding that,
without any reservation of rights against the Parent, and without notice to or
further assent by the Parent, any demand for payment of any of the Obligations
made by the Administrative Agent or any Lender may be rescinded by the
Administrative Agent or such Lender, and any of the Obligations continued, and
the Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any Lender, and this Agreement, the
Notes and the other Loan Documents may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent or the Lenders (or
the Majority Lenders, as the case may be) may deem advisable from time to time
in accordance with the provisions of Section 10.01, and any collateral security,
guarantee or right of set-off at any time held by the Administrative Agent or
any Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Lender shall
have any obligation to protect, secure,
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perfect or insure any Lien at any time held by it as security for the
Obligations or for the obligations of the Parent under this Parent Guarantee or
any property subject thereto.
SECTION 8.04. Guarantee Absolute and Unconditional. The Parent
------------------------------------
waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon this Parent Guarantee or acceptance of this Parent
Guarantee; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Parent
Guarantee; and all dealings between the Borrower or the Parent, on the one hand,
and the Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Parent Guarantee. The Parent waives diligence, presentment, protest, notice of
intent to accelerate, notice of acceleration, demand for payment and notice of
default or nonpayment to or upon the Borrower or the Parent with respect to the
Obligations. This Parent Guarantee shall be construed as a continuing, absolute
and unconditional guarantee of payment without regard to (a) the validity or
enforceability of this Agreement, any Note, any other Loan Document, any of the
Obligations or any collateral security therefor or guarantee or right of set-off
with respect thereto at any time or from time to time held by the Administrative
Agent or any Lender, (b) any defense, offset or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by the Borrower against the Administrative Agent or any Lender or (c)
any other circumstance whatsoever (with or without notice to or knowledge of the
Borrower or the Parent) which constitutes, or might be construed to constitute,
an equitable or legal discharge of the Borrower for the Obligations of the
Borrower, or of the Parent under this Parent Guarantee, in bankruptcy or in any
other instance. When the Administrative Agent is pursuing its rights and
remedies hereunder against the Parent, the Administrative Agent or any Lender
may, but shall be under no obligation to, pursue such rights and remedies as it
may have against the Borrower or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the Administrative Agent or any Lender to pursue
such other rights or remedies or to collect any payments from the Borrower or
any such other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset or any release of the Borrower
or any such other Person or of any such collateral security, guarantee or right
of offset, shall not relieve the Parent of any liability under this Parent
Guarantee, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent
and the Lenders against the Parent.
SECTION 8.05. Reinstatement. This Parent Guarantee shall continue to
-------------
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower or any
substantial part of any of its property, or otherwise, all as though such
payments had not been made.
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SECTION 8.06. Payments. The Parent hereby agrees that the
--------
Obligations will be paid to the Administrative Agent for the benefit of the
Administrative Agent and the Lenders, as the case may be, without set-off or
counterclaim in dollars in immediately available funds at the office of the
Administrative Agent located at 270 Park Avenue, New York, New York 10017.
ARTICLE IX. THE ADMINISTRATIVE AGENT
SECTION 9.01. Appointment. Each Lender hereby irrevocably designates
-----------
and appoints The Chase Manhattan Bank as the Administrative Agent of such Lender
under this Agreement and the other Loan Documents, and each Lender irrevocably
authorizes The Chase Manhattan Bank, as the Administrative Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Administrative Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
SECTION 9.02. Delegation of Duties. The Administrative Agent may
--------------------
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
SECTION 9.03. Exculpatory Provisions. Neither the Administrative
----------------------
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Parent, the
Borrower or any other Loan Party or any officer thereof contained in this
Agreement or any other Loan Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Administrative
Agent under or in connection with, this Agreement or any other Loan Document or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the Notes or any other Loan Document (except as
the effectiveness or enforceability of any Loan Document may be affected by the
due execution or delivery thereof by the Administrative Agent) or for any
failure of the Parent, the Borrower or any Loan Party to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or
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conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Parent or any of its Subsidiaries
(including, without limitation, the Borrower).
SECTION 9.04. Reliance by Administrative Agent. The Administrative
--------------------------------
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation reasonably and in good faith believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to the Loan Parties), independent accountants and other experts selected
by the Administrative Agent. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes unless a written notice
of assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Lenders (or as otherwise required by Section 10.01) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement, the Notes and the other Loan Documents in accordance with a
request of the Majority Lenders (or as otherwise required by Section 10.01), and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Notes.
SECTION 9.05. Notice of Default. The Administrative Agent shall not
-----------------
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless the Administrative Agent has received notice from a
Lender or the Parent referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders. The Administrative Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Majority Lenders (except as otherwise required by
Section 10.01); provided that unless and until the Administrative Agent shall
--------
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
SECTION 9.06. Non-Reliance on Administrative Agent and Other Lenders.
------------------------------------------------------
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Parent or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
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without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Parent, the Borrower
and the other Subsidiaries of the Parent and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Parent and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Parent and its Subsidiaries
which may come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION 9.07. Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Parent and without limiting the obligation of the Parent to do so), ratably
according to their pro rata shares of the Aggregate Commitment in effect on the
--- ----
date on which indemnification is sought under this Section 9.07 (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with their pro rata shares of the Aggregate Commitment immediately prior to such
--- ----
date), from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes) be imposed on, incurred by or asserted
against the Administrative Agent in its capacity as such in any way relating to
or arising out of this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
--------
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this Section
9.07 shall survive the payment of the Notes and all other amounts payable
hereunder.
SECTION 9.08. Administrative Agent in Its Individual Capacity. The
-----------------------------------------------
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any of the Parent and the
other Loan Parties as though the Administrative Agent were not the
Administrative Agent hereunder and under the other Loan Documents. With respect
to its Loans made or renewed by it and any Note issued to it, the Administrative
Agent shall have the same rights and powers under this Agreement and the
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other Loan Documents as any Lender and may exercise the same as though it were
not the Administrative Agent, and the terms "Lender" and "Lenders" shall include
the Administrative Agent in its individual capacity.
SECTION 9.09. Successor Administrative Agent. The Administrative
------------------------------
Agent may resign as Administrative Agent upon 20 days' notice to the Lenders.
If the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Majority Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall be approved by the Parent, whereupon such successor agent shall succeed to
the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Notes. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 9.09 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
ARTICLE X. MISCELLANEOUS
SECTION 10.01. Amendments and Waivers. Neither this Agreement, any
----------------------
Note or any other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section. With the written consent of the Majority Lenders, the Administrative
Agent may, from time to time, (a) enter into with the Parent and the Borrower
(and, in the case of any Loan Document other than this Agreement, any Loan Party
thereto) written amendments, supplements or modifications hereto and to the
Notes and the other Loan Documents for the purpose of adding any provisions to
this Agreement, the Notes or the other Loan Documents or changing in any manner
the rights of the Lenders or the Parent, the Borrower and the other Loan Parties
hereunder or thereunder or (b) waive any of the requirements of this Agreement,
the Notes or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
-------- -------
supplement or modification shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, or reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date of
any payment thereof or increase the amount or extend the expiration date of any
Lender's Commitment or modify the provisions of Section 2.05(c), in each case
without the consent of each Lender directly affected thereby, or (ii) amend,
modify or waive any provision of this Section 10.01 or reduce the percentage
specified in the definition of Majority Lenders, or consent to the assignment or
transfer by the Parent, the Borrower or any other Loan Party, of any of its
rights and obligations under this Agreement and the other Loan Documents or
release all or substantially all of the Collateral or release the Parent
Guarantee or Ingleby Guarantee, in each case without the written consent of all
the Lenders, or (iii) amend, modify or waive any provision of Article 9 without
the written consent of the then
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Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Parent, the other Loan Parties, the Lenders, the Administrative Agent
and all future holders of the Notes. In the case of any waiver, the relevant
Loan Parties, the Lenders and the Administrative Agent shall be restored to
their former position and rights hereunder and under the outstanding Notes and
any other Loan Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
SECTION 10.02. Notices. All notices, requests and demands to or upon
-------
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Parent, the Borrower and the
Administrative Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
The Parent: Caribiner International, Inc.
16 West 61st Street
New York, New York 10023
Attention: Arthur Dignam
Telecopy: 212-489-1644
The Borrower: Caribiner, Inc.
16 West 61st Street
New York, New York 10023
Attention: Arthur Dignam
Telecopy: 212-489-1644
with copies to:
Caribiner, Inc.
16 West 61st Street
New York, New York 10023
Attention: Hal Schwartz, Esq.
Telecopy: 212-582-6873
The Administrative
Agent: The Chase Manhattan Bank
Loan and Agency Services
One Chase Manhattan Plaza
New York, New York 10081
Attention: Sunita Vora
Telecopy: (212) 552-5650
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with copies to:
The Chase Manhattan Bank
Middle Market Banking Group
Westside Region
600 Fifth Avenue, 5th Floor
New York, New York 10020
Attention: Tom Cox
Telecopy: (212) 332-4370
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders pursuant to Section 2.03, 2.05, 2.06 or 2.13 shall not be
effective until received.
SECTION 10.03. No Waiver; Cumulative Remedies. No failure to
------------------------------
exercise and no delay in exercising, on the part of the Administrative Agent or
any Lender, any right, remedy, power or privilege hereunder or under the other
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
SECTION 10.04. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans hereunder.
SECTION 10.05. Payment of Expenses and Taxes. The Borrower agrees
-----------------------------
(a) to pay or reimburse the Administrative Agent for all its reasonable out-of-
pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement, the Notes and the other Loan Documents and any other documents
prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Administrative
Agent for all its reasonable costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the Notes, the
other Loan Documents and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent and to the several Lenders (including the allocated fees
and expenses of in-house counsel), and (c) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and all recording and
filing fees and
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any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes similar in nature, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the Notes, the other Loan Documents and any such
other documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective directors, officers, employees and
agents) harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
Notes, the other Loan Documents and any such other documents, including, without
limitation, the use or proposed use of proceeds of Loans hereunder (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
-----------------------
provided, that the Borrower shall have no obligation hereunder to the
- --------
Administrative Agent or any Lender with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of the Administrative
Agent or any such Lender, respectively. The agreements in this Section 10.05
shall survive repayment of the Loans and all other amounts payable hereunder.
SECTION 10.06. Successors and Assigns; Participations and
------------------------------------------
Assignments. (a) This Agreement shall be binding upon and inure to the benefit
- -----------
of the Parent, the Borrower, the Lenders, the Administrative Agent, all future
holders of the Notes and their respective successors and assigns, except that
(subject to Section 6.05) neither the Parent nor the Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
------------
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents. In the event of any such sale by a Lender of a participating interest
to a Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Note for all purposes under this Agreement and the other Loan
Documents, and the Parent, the Borrower, the other Loan Parties, and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. In no event shall a Lender that sells a participation
agree with the Participant to take or refrain from taking any action hereunder
or under any other Loan Document except that such Lender may agree with the
Participant that it will not, without the consent of the Participant, agree to
(i) extend the term of such Lender's related Commitment or extend the amount or
date of any scheduled reduction of such Commitment pursuant to Section 2.01
hereof, (ii) extend the date fixed for the payment of principal of or interest
on the related Loan or Loans or any portion of any fee hereunder payable to the
participant, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable thereon, or any fee hereunder
payable to the
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<PAGE>
participant, to a level below the rate at which the participant is entitled to
receive such interest or fee or (v) consent to any modification, supplement or
waiver hereof or of any of the other Loan Documents to the extent that the same,
under Section 10.01 hereof, requires the consent of each Lender. Each of the
Parent and the Borrower agrees that if amounts outstanding under this Agreement
and the Notes are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note, provided that, in purchasing
--------
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in Section 10.07(a) as
fully as if it were a Lender hereunder. Each of the Parent and the Borrower
also agrees that each Participant shall be entitled to the benefits of Sections
2.10 and 2.12 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender; provided that, in the case
--------
of Section 2.12 such Participant shall have complied with the requirements of
said Section and provided, further, that no Participant shall be entitled to
-------- -------
receive any greater amount pursuant to any such Section than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it); provided that (i)
--------
except in the case of an assignment to a Lender, each of the Parent and the
Administrative Agent must give their prior written consent to such assignment
(which consent shall not be unreasonably withheld), (ii) except in the case of
an assignment to a Lender or an assignment of the entire remaining amount of the
assigning Lender's Commitment, the amount of the Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Parent and the Administrative Agent otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations under this Agreement, (iv) the parties
to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500 (such fee shall be waived if such assignment is made between the
assigning Lender and any of its Affiliates), and (v) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; provided further that any consent of the Parent otherwise
-------- -------
required under this paragraph shall not be required if an Event of Default under
clause (f) of Article VII has occurred and is continuing. Upon acceptance and
recording pursuant to paragraph (e) of this Section, from and after the
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement,
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<PAGE>
such Lender shall cease to be a party hereto but shall continue to be entitled
to the benefits of Sections 2.10, 2.11, 2.12 and 10.05). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this paragraph shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (b) of this Section.
(d) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
--------
conclusive absent manifest error, and the Parent, the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (c) of
this Section and any written consent to such assignment required by paragraph
(c) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(f) Subject to Section 10.16, the Parent authorizes each Lender to
disclose to any Participant or Assignee (each, a "Transferee") and any
----------
prospective Transferee any and all financial information in such Lender's
possession concerning the Parent and the Borrower and their Affiliates which has
been delivered to such Lender by or on behalf of the Parent and the Borrower
pursuant to this Agreement or which has been delivered to such Lender by or on
behalf of the Parent and the Borrower in connection with such Lender's credit
evaluation of the Parent and the Borrower and their Affiliates prior to becoming
a party to this Agreement.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
SECTION 10.07. Adjustments; Set-off. (a) If any Lender (a
--------------------
"benefitted Lender") shall at any time receive any payment of all or part of the
---------- ------
Loans owing to it, or interest thereon, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in clause (f) of Article VII or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans,
as the case may be, or interest thereon, such benefitted Lender shall purchase
for cash from such other Lenders a participating interest in such portion of
each such other Lender's Loans or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be
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<PAGE>
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
- -------- -------
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Parent or the
Borrower, any such notice being expressly waived by the Parent and the Borrower
to the extent permitted by applicable law, upon any amount becoming due and
payable by the Parent or the Borrower hereunder or under the Notes (whether at
the stated maturity, by acceleration or otherwise) to set-off and appropriate
and apply against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Parent or the Borrower, as the case may be. Each Lender agrees
promptly to notify the Parent and the Administrative Agent after any such set-
off and application made by such Lender, provided that the failure to give such
--------
notice shall not affect the validity of such set-off and application.
SECTION 10.08. Counterparts. This Agreement may be executed by one
------------
or more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Parent and the
Administrative Agent.
SECTION 10.09. Severability. Any provision of this Agreement which
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 10.10. Integration. This Agreement and the other Loan
-----------
Documents represent the entire agreement of the Parent, the Borrower, the other
Loan Parties, the Administrative Agent and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Administrative Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
SECTION 10.11. GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE
-------------
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
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<PAGE>
SECTION 10.12. Submission To Jurisdiction; Waivers. Each of the
-----------------------------------
Parent and the Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the Parent
and the Borrower, as the case may be, at its address set forth in Section
10.02 or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
SECTION 10.13. Acknowledgements. Each of the Parent and the Borrower
----------------
hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Parent or the Borrower, as the case may
be, arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Administrative Agent and
the Lenders, on one hand, and the Parent or the Borrower, as the case may
be, on the other hand, in connection herewith or therewith is solely that
of creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or between the Parent or the Borrower, as the case may be, and
the Lenders.
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<PAGE>
SECTION 10.14. WAIVERS OF JURY TRIAL. THE PARENT, THE BORROWER, THE
---------------------
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 10.15. Headings. Article and Section headings and the Table
--------
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 10.16. Confidentiality. Each Lender agrees to keep the
---------------
information obtained by it pursuant hereto and the other Loan Documents
identified as confidential in writing at the time of delivery to such Lender
confidential in accordance with such Lender's customary practices and agrees
that it will only use such information in connection with the transactions
contemplated by this Agreement and not disclose any of such information other
than (a) to such Lender's directors, employees, representatives, attorneys,
accountants, agents or Affiliates who are advised of the confidential nature of
such information and agree to be bound by the provision of this Section 10.16,
(b) to the extent such information presently is or hereafter becomes available
to such Lender on a non-confidential basis from any source or such information
that is in the public domain at the time of disclosure, (c) to the extent
disclosure is required by law, regulation, subpoena or judicial order or process
(provided that notice of such requirement or order shall be promptly furnished
to the Parent unless such notice is legally prohibited) or requested or required
by bank regulators or auditors or any administrative body or commission to whose
jurisdiction such Lender may be subject, (d) to Transferees or potential
Transferees who agree to be bound by the provisions of this Section 10.16, (e)
to the extent required in connection with any litigation between the Parent or
the Borrower, as the case may be, and any Lender with respect to the Loans or
this Agreement or any other Loan Document, (f) to the Administrative Agent or
any other Lender, (g) in connection with the exercise of any remedy hereunder or
under the other Loan Documents or (h) with the Parent's prior written consent.
The agreements in this Section 10.16 shall survive repayment of the Notes and
all other amounts payable hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CARIBINER INTERNATIONAL, INC.
By: /s/ Arthur Dignam
------------------
Name: Arthur Dignam
Title: Executive Vice President and Chief
Financial Officer
CARIBINER, INC.
By: /s/ Arthur Dignam
------------------
Name: Arthur Dignam
Title: Executive Vice President and Chief
Financial Officer
THE CHASE MANHATTAN BANK, individually and as
Administrative Agent
By: /s/ Tom Cox
------------
Name: Tom Cox
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Maura Wadlinger
--------------------
Name: Maura Wadlinger
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Brian S. Allen
-------------------
Name: Brian S. Allen
Title: Senior Relationship Manager
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<PAGE>
THE BANK OF NEW YORK
By: /s/ Ted Ryan
-------------
Name: Ted Ryan
Title: Senior Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Michael Richards
---------------------
Name: Michael Richards
Title: Vice President
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<PAGE>
EXHIBIT 11.1
Caribiner International, Inc.
Computation of Pro Forma Net Income Per Common Share
For the nine months ended June 30,
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Weighted average common stock outstanding during the period (1) 3,715,972 2,588,689
Conversion of Convertible Note into shares of preferred stock
and the subsequent conversion of such shares into shares
of Common Stock 2,055,000 2,055,000
Conversion of all outstanding shares of preferred stock into shares
of Common Stock 1,541,250 1,541,250
Exercise of warrants 534,505 534,505
Effect of exercise of warrants computed in accordance with the
treasury stock method (39,922) (99,441)
---------- ---------
Total weighted average common stock outstanding during the period 7,806,805 6,620,003
========== =========
(Loss) income before taxes $6,393,389 ($445,568)
Plus: reduction in interest expense from the conversion of the
Convertible Note 926,248 1,374,533
---------- ---------
Pro forma income before taxes 7,319,637 928,965
Pro forma income tax expense 2,561,873 79,090
---------- ---------
Pro forma net income $4,757,764 $ 849,875
========== =========
Pro forma net income per common share $0.61 $0.13
========== =========
</TABLE>
(1) Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common stock and common stock equivalents issued at prices
below the assumed initial public offering price per share during the twelve
month period immediately preceding the initial filing date of the Company's
Registration Statement for its public offering have been included as
outstanding for all periods presented prior to the initial public offering.
<PAGE>
EXHIBIT 11.2
Caribiner International, Inc.
Computation of Supplementary Pro Forma Net Income Per Common Share
For the nine months ended June 30,
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Weighted average common stock outstanding during the period (1) 3,715,972 2,588,689
Common stock issued to repay current & long-term indebtedness (2) 967,999 1,617,267
Conversion of Convertible Note into shares of preferred stock and
the subsequent conversion of such shares into shares
of Common Stock 2,055,000 2,055,000
Conversion of all outstanding shares of preferred stock into shares
of Common Stock 1,541,250 1,541,250
Exercise of warrants 534,505 534,505
Effect of exercise of warrants computed in accordance with the
treasury stock method (39,922) (99,441)
---------- ---------
Total weighted average common stock outstanding during the period 8,774,804 8,237,270
========== =========
(Loss) income before taxes $6,393,389 ($445,568)
Plus: reduction in interest expense from the conversion of the
Convertible Note and repayment of all other indebtedness from proceeds
of the initial public offering 1,915,871 2,480,885
---------- ---------
Pro forma income before taxes 8,309,260 2,035,317
Pro forma income tax expense (2,908,241) (150,724)
---------- ----------
Pro forma net income $5,401,019 $1,884,593
========== ==========
Pro forma net income per common share $0.62 $0.23
========== ==========
</TABLE>
(1) Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common stock and common stock equivalents issued at prices
below the assumed initial public offering price per share during the twelve
month period immediately preceding the initial filing date of the Company's
Registration Statement for its public offering have been included as
outstanding for all periods presented prior to the initial public offering.
(2) Supplementary earnings per share reflects the number of shares of common
stock upon consummation of the initial public offering used to repay
current and long-term indebtedness as if such issuance had occurred at the
beginning of each period presented.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated November 22, 1995 with respect to the Consolidated
Financial Statements of Caribiner International, Inc., our report dated
November 15, 1996 with respect to the Financial Statements of Total Audio
Visual Services a division of General Electric Capital Computer Leasing
Corporation) and our report dated December 18, 1996 with respect to the
Consolidated Financial Statements of SCH International Limited in the
Registration Statement (Form S-1 No. 333-00000) and related Prospectus of
Caribiner International, Inc. for the registration of 2,159,930 shares of its
common stock.
/s/ Ernst & Young LLP
New York, NY
December 19, 1996
