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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
Commission file number 1-14234
CARIBINER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3466655
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
16 West 61st Street, New York, NY 10023
(Address of principal executive offices) (Zip code)
(212) 541-5300
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Stock, par value $0.01 per share New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Registration S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of December 15, 1997, the aggregate market value of voting stock held by
non-affiliates of the registrant was $618,336,698.
As of December 15, 1997, the registrant had 23,488,815 shares of its common
stock, par value $0.01 per share (the "Common Stock"), issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) portions of the registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A) for the 1998 Annual Meeting of Stockholders
(the "Proxy Statement") are incorporated by reference into Part III hereof.
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Part I
Item 1. Business
Caribiner International, Inc. is a leading international producer of
meetings, events and training programs, a provider of audio visual equipment
rentals, sales and installations and related staging services, and a provider
of related corporate meeting services and business communications services that
enable businesses to inform, sell to and train, their sales forces, dealers,
franchisees, partners, stockholders and employees. As used herein, the terms
"Caribiner" or "Company" refer to Caribiner International, Inc. and its
subsidiaries and the references to a fiscal year are to the Company's fiscal
years ended September 30 in the referenced year.
Business activities and events that generate a need for business
communications and corporate meeting 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. 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. The 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.
Recent Acquisitions
One of the components of the Company's growth strategy has been to expand
its client base and service offerings by making acquisitions in the business
communications services industry. To this end, during the past four full fiscal
years Caribiner completed 18 acquisitions. Also, since October 1, 1997, the
Company has completed three additional acquisitions. The following provides a
brief summary of the acquisitions completed by Caribiner since September, 1996.
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In September, 1996, the Company acquired Total Audio Visual Services
("TAVS"), a leading provider of audio visual equipment rentals, sales and
installations and related staging services, including hotel audio visual
outsourcing services, in the United States. The acquisition of TAVS enabled
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. TAVS reported revenue of $45.9 million for the year
ended December 31, 1995.
In December, 1996, the Company acquired all of the outstanding capital
stock of Rome Network, Inc. ("Rome"), a regional provider of business
communications services in the San Francisco area. The Company integrated Rome
into the San Francisco office of its Caribiner Communications division
(sometimes hereinafter referred to as the "Communications division"), thereby
expanding and strengthening its presence in the business communications
services market in the geographic areas formerly served by Rome. Rome provided
business communications services to various corporate clients including Charles
Schwab & Co., Inc., SAP America and Sun Microsystems, Inc. Rome had revenue of
approximately $2.4 million for its fiscal year ended February 29, 1996.
In January, 1997, the Company acquired Video Supply Company, Inc. d/b/a
Projexions Video Supply, a provider of audio visual equipment rentals, including
hotel audio visual outsourcing services, and related staging services in the
southeastern U.S. The acquisition of Projexions, whose operations were
integrated with those of TAVS, strengthened the Company's position as a leading
provider of audio visual equipment rentals and related staging services,
including hotel audio visual outsourcing services, in its region. Projexions
reported revenue of $17.7 million for the year ended December 31, 1995 and
approximately $18.0 million for the ten months ended October 31, 1996.
In January, 1997, the Company acquired all of the outstanding capital stock
of Blumberg Communications Inc. ("Blumberg"), a provider of audio visual
equipment rentals, sales and related staging services, including hotel audio
visual outsourcing services, in the upper mid-west and southern U.S. The Company
integrated Blumberg's operations with its existing TAVS operations, thereby
expanding its presence in the geographic region which Blumberg served. Blumberg
reported revenue of $42.3 million for the year ended May 31, 1996.
In April, 1997, the Company acquired the assets of D&D Enterprises, Inc.
d/b/a Show Solutions ("Show Solutions"), a provider of staging and show
services based in Atlanta. The Company has integrated Show Solutions with its
TAVS operations and has used it to strengthen TAVS' service capabilities. Show
Solutions reported revenue of approximately $8.7 million for the year ended
December 31, 1996.
In May, 1997, the Company acquired substantially all of the assets
of Wavelength Corporate Communications Pty Limited ("Wavelength"), a provider
of business communications services in Australia and New Zealand. The
acquisition of Wavelength enabled the Company to develop further its
international presence and extend relationships with a number of existing
clients, as well as establish new relationships with several multi-national
companies. Wavelength had revenue of approximately $7.2 million for the year
ended December 31, 1996.
Also in May, 1997, the Company acquired all of the outstanding capital
stock of Watts/Silverstein, Inc. ("Watts"), a Seattle-based business
communications services company specializing in digial media consulting and
production. The acquisition resulted in the establishment of a digital media
group within Caribiner. The acquisition, which was integrated into the Company's
Communications division, has also served to expand the Company's operations on
the west coast and introduce it to several new clients. Watts had revenue of
approximately $4.1 million for its fiscal year ended December 31, 1996.
In June, 1997, the Company acquired all of the outstanding capital stock of
WCT Live Communication Limited ("WCT"), a provider of business communications
services in the United Kingdom. WCT reported revenue of approximately $22.7
million for the year ended May 31, 1997.
In July, 1997, the Company acquired all of the outstanding capital stock of
Bauer Audio Visual, Inc. ("Bauer"), a provider of audio visual equipment rentals
and hotel audio visual outsourcing services throughout the United States. The
acquisition of Bauer, which is being integrated into TAVS, allowed the Company
to enter several new markets, including Mexico. Bauer reported revenue of
approximately $42.4 million for the year ended December 31, 1996.
Also in July, 1997, the Company acquired all of the outstanding capital
stock of Envision Corporation ("Envision"), a Boston-based business
communications services provider. The Company integrated Envision into the
Boston office of the Communications division, thereby strengthening the
Company's resources and gaining exposure to a new group of clients. Envision had
revenue of approximately $7.4 million for its fiscal year ended December 31,
1996.
Subsequent to the end of fiscal 1997, in October, 1997, the Company
acquired all of the capital stock of Spectrum Data Systems, Inc. ("Spectrum"),
an Atlanta-based provider of audio visual presentation systems design,
installation and service with a primary customer base in the southeastern U.S.
Spectrum had revenue of approximately $10.0 million for the year ended December
31, 1996. The acquisition has enabled the Company to provide a more
comprehensive range of audio visual services to its clients in the southeastern
U.S.
In November, 1997, the Company acquired Visual Action Holdings plc ("Visual
Action"), a United Kingdom public company. Visual Action provides corporate
meeting services in the United States and the United Kingdom, including audio
visual and exhibition services, and video production equipment rentals in
the United States, United Kingdom and Southeast Asia. If adjusted for certain
subsequent acquisitions and dispositions, Visual Action would have reported
revenue, on a pro forma basis, of approximately $158.1 million for the year
ended December 31, 1996 assuming that such acquisitions and dispositions had
occurred as of the beginning of the year. Upon completion of the compulsory
acquisition process to acquire shares of Visual Action not tendered pursuant to
the Company's tender offer for such shares, the total cash acquisition price of
all of the outstanding capital shares of Visual Action is expected to be
approximately $253.0 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Recent Developments." (The
Company has announced that it intends to dispose of the video production
equipment rental operations of Visual Action as soon as practicable.)
In December, 1997, the Company completed the acquisition of Consumer Access
Limited ("Consumer Access"), a business communications services provider based
in Hong Kong. The Company is integrating Consumer Access into its Hong Kong
office, which was opened in June, 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
provides, through its TAVS division and through its Audio Visual Headquarters
("AVHQ"), Hospitality Resources ("HRI") and Blitz subsidiaries (which were
acquired upon the acquisition of Visual Action) (hereinafter sometimes referred
to, together with TAVS, as the "AV operations"), audio visual equipment rentals,
sales and installations and related staging services, as well as hotel audio
visual outsourcing services. In addition, the Company provides, through its
Melville Exhibition Services ("MES") subsidiary (which was acquired upon the
acquisition of Visual Action), exhibition services, principally in the United
Kingdom, to exhibition organizers, hall owners and exhibitors.
Specifically, Caribiner's services include:
Production of business meetings and events that introduce new products,
present newly designed corporate strategies to targeted audiences or honor a
company's leading contributors.
Audio visual equipment rentals, sales and installations and related
staging services, including the Company's being the preferred in-house provider
of audio visual equipment rentals in approximately 475 hotel properties
located throughout the U.S, Mexico and the Caribbean and is a supplier of such
equipment and services to production companies, other business communications
services companies and corporations for use at meetings, events, presentations
and training programs. The Company also acts as the preferred drop-off provider
to approximately 25 additional hotels.
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.
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Exhibition services, including the rental of modular stand fittings,
furniture, floor coverings and floral displays, the provision of electrical
contracting and visitor registration services.
Corporate communications programs used to disseminate management's message
to employees and others.
Exhibits and displays, which involves the design and development of a
company's trade show exhibit or a visitor's center/lobby display.
Clients
The Communications division targets clients with large or potentially
large recurring needs for business communications services. Caribiner
Communications' client list covers a number of industry sectors including
automotive, information technology, insurance, pharmaceuticals, financial
services, fast food, lodging and petroleum.
Caribiner Communications' 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 and Shell Oil
Company.
Caribiner Communications' 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 Communications division maintains a Detroit facility
with approximately 30 full-time employees to service the business
communications needs of numerous individual buyers from the various Ford
business units for whom Caribiner executes projects. 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.
The Company's operations target hotels with sizable conference space
whose guests' meetings and events utilize audio visual equipment, corporate
clients with significant audio visual equipment needs and production companies
and other business communications services companies that require audio visual
and staging services. With respect to hotel audio visual outsourcing, the
Company's AV operations serve members of various national hotel chains,
including those of Westin, Doubletree, Holiday Inn, Hyatt, Red Lion and
Sheraton. In addition to entering into agreements with hotels on an individual
basis, the Company has also entered into agreements with the Westin Hotel
Company and Doubletree Hotels Corporation pursuant to which such companies
promote the Company's AV operations to hotels operated or franchised under
their respective flags. The Company has also entered into an agreement with
Starwood Lodging Corporation ("Starwood") pursuant to which TAVS is the
preferred in-house audio visual services provider to various hotels owned by
Starwood.
MES' customers include exhibition and trade show organizers and conference
and convention center owners and/or operators, located principally in the United
Kingdom.
Among the ways the Company seeks to differentiate itself to clients from
other providers of business communications and corporate meeting services are by
its customer service, it 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. With
respect to the Communications division, when a new account is established, the
Company 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 Communications division
and international operations 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.
The Company's AV operations market their services by type of service
offered and by geographic region. As with the Communications division, personnel
are assigned to those accounts that are identified by management to be
strategically significant. In addition, the AV operations employ a full-time
sales and marketing staff to evaluate market opportunities and identify
potential clients. The Company's personnel also work with the sales and
marketing personnel of the various hotels in which the Company's AV operations
are the preferred in-house provider to promote the hotels' meeting and
conference capabilities, thereby creating additional selling opportunities for
the Company.
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Operations
General. Each of the Company's regional offices in the Communications
division 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 the
TAVS division (as well as in the AVHQ and HRI subsidiaries) the Company employs
on-site service representatives to serve hotel properties. In addition, the
Company's AV operations maintain regional inventory support and sales offices in
various locations throughout the U.S. Each 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, technical, 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 of the Company's office focuses primarily 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 ("IT") functions of the Company (except for
those of Visual Action, whose administrative and IT functions will be
centralized, as appropriate, as Visual Action is integrated with the Company) in
New York and Atlanta to minimize overhead and administrative expense.
Foreign Operations. During fiscal 1997, the Company's foreign operations,
which are predominantly located in the United Kingdom, generated revenue of
$52.8 million and operating income of $1.5 million and at September 30, 1997 had
identifiable assets, including goodwill, of $55.4 million.
Employees
As of December 15, 1997, Caribiner employed approximately 3,680 full-time
employees, of which 3,020 employees were located domestically and 660 were
located internationally.
Except for approximately 15 employees of the Company's Bauer Audio
Visual, Inc. subsidiary, whose terms of employment are covered by a collective
bargaining agreement with a union, the Company has no full-time employees
whose employment is covered by collective bargaining or similar agreements with
unions; however, the Company and its subsidiaries do from time to time
independently contract with or hire part-time union personnel, especially during
the production of a particular meeting or event, and, accordingly, the Company
and/or its subsidiaries, is a party to certain agreements with unions governing
the hiring and terms of employment of such personnel. 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.
Competition
Although no firm data exists with respect to the size of the business
communications and meeting 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 and meeting 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.
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Management believes that the competitive factors most important in the
business communications and meeting 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.
Item 2. Properties
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 its future space
requirements, but has not entered into any commitments.
The Company also leases offices and warehouse space in cities throughout
the United States, as well as in London, Sydney, Melbourne, Auckland,
Wellington, Glasgow and Hong Kong. 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.
The principal offices for the Company's TAVS division are located in
Atlanta in leased offices occupying approximately 73,500 square feet at 1990
Defoor Avenue, Atlanta, Georgia 30318. The lease for this space expires in 2000.
Item 3. 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.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 4A. Executive Officers and Directors of the Company
Name Age Position
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Raymond S. Ingleby ....... 34 Chairman of the Board and Chief Executive
Officer of Caribiner International, Inc.
Richard H. Vent .......... 56 President and Chief Operating Officer of
Caribiner International, Inc.
Arthur F. Dignam ......... 51 Executive Vice President and Chief Financial
and Administrative Officer of Caribiner
International, Inc.
Mark M. Cohen ............ 50 Executive Vice President-Strategic Planning and
Development of Caribiner International, Inc.
Lawrence P. Golen ........ 40 Executive Vice President of Caribiner
International, Inc. and President of Total
Audio Visual Services
Brian Shepherd ........... 40 Executive Vice President of Caribiner
International, Inc. and President of
Caribiner Communications
Errol M. Cook ........... 58 Director
Bryan D. Langton ........ 61 Director
Sidney Lapidus .......... 60 Director
David E. Libowitz ....... 34 Director
C. Anthony Wainwright ... 64 Director
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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 ("ICC"), 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.
Richard S. Vent has been President and Chief Operating Officer of the
Company since September, 1997. Prior to joining the Company, Mr. Vent was a
partner in New Century Equity Corporation, a buy-out fund serving corporate and
institutional pension funds from 1995 to 1997. Prior thereto, Mr. Vent served as
President of ARAMARK's leisure and international businesses from 1985 to 1995,
where he was responsible for ARAMARK's international food service operations in
13 countries, as well as its domestic leisure operation, including hotel
services and concessions.
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 the Company, 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.
Mark M. Cohen has been Executive Vice President-Strategic Planning and
Development of the Company since July, 1997. Prior thereto, Mr. Cohen served as
Executive Vice President of the Company and President of Caribiner
Communications from November, 1995 to June, 1997. Mr. Cohen joined Caribiner in
November, 1994 as Executive Vice President of Caribiner, Inc. and General
Manager of its New York office. Prior to joining the Company, 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 the Company after its
acquisition of TAVS from General Electric Capital Computer Leasing Corporation
("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.
Brian Shepherd has been Executive Vice President of the Company and
President of Caribiner Communications since July, 1997. From November, 1995
until July, 1997, Mr. Shepherd served as Executive Vice President of Strategic
Planning and International Operations, of the Company. Mr. Shepherd joined the
Company as Vice President of Caribiner, Inc. and General Manager of its Atlanta
office in July, 1995. Prior thereto, Mr. Shepherd was President and Chief
Executive Officer of Imagination (USA) Inc., a subsidiary of Imagination, UK, a
European-based business communications company, from December, 1992 to July,
1995.
Errol M. Cook has been a director of the Company since June, 1992. Mr.
Cook is a Managing Director of E.M. Warburg, Pincus & Co., LLC ("EMW LLC"). Mr.
Cook has been a Managing Director of EMW LLC or its predecessor 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 LLC. Mr. Lapidus has been associated with
EMW LLC or its predecessor since 1967. Mr. Lapidus serves on the board of
directors of Pacific Greystone Corporation, Knoll Inc., Grubb & Ellis 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 is a Vice President of EMW LLC and has been associated with EMW LLC
or its predecessor since July, 1991. Mr. Libowitz serves on the board of
directors of TV Filme, Inc., as well as certain privately held companies.
Anthony Wainwright has been a director of the Company since March, 1997.
Mr. Wainwright has served as Vice Chairman of McKinney & Silver, a
privately-held advertising agency, since April, 1997. Mr. Wainwright was
Chairman of Harris, Drury, Cohen, Inc., an advertising agency, from 1995 to
February, 1997. Prior thereto Mr. Wainwright was Chairman of Compton Partners,
Saatchi & Saatchi, a national advertising agency, from 1994 to 1995 and was Vice
Chairman of that company from 1989 to 1994. Mr. Wainwright serves on the Board
of Directors of All-Comm Media Co., American Woodmark Corporation, Del Webb
Corp., Gibson Greetings, Inc. and Advanced Polymer Systems.
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Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) 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 closing prices of the Common Stock as
reported by the New York Stock Exchange. (Such prices have been adjusted to
reflect the 2-for-1 stock split effected by the Company on June 20, 1997.) The
Common Stock was not publicly traded prior to March 11, 1996, the date of its
initial public offering. The number of stockholders of record of Common Stock on
December 1, 1997 was 152.
Price Range
-----------
High Low
---- ---
Fiscal 1997:
First Quarter ................................... $25 1/8 $20 7/8
Second Quarter .................................. 26 3/4 21 3/4
Third Quarter ................................... 35 22 15/16
Fourth Quarter .................................. 44 7/8 32 3/4
Fiscal 1996:
Second Quarter (from March 11, 1996) ............ 13 7/16 10 9/16
Third Quarter .................................. 18 3/8 12 1/4
Fourth Quarter .................................. 21 1/2 14
The closing price per share of the Common Stock on December 22, 1997 was
$38.00.
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. In addition, the terms of the
Company's credit facility pursuant to which The Chase Manhattan Bank acts as
agent contains limitations on the Company's ability to pay dividends.
The Company issued and sold the following unregistered securities during
the quarterly period ended September 30, 1997:
1. On July 1, 1997, the Company granted to one employee options to purchase
an aggregate of 7,000 shares of Common Stock at an exercise price per share of
$32.78125 pursuant to a stock option agreement under the Company's 1996 Stock
Option Plan. Pursuant to the terms of such option agreement, one third of such
options vest on July 1, 1998; one third of such options vest and become
exercisable on July 1, 1999, and one third of such options vest and become
exercisable on July 1, 2000.
2. On July 1, 1997, the Company issued and sold an aggregate of 10,152
shares of Common Stock to ten former stockholders of SCH International Limited
(the "Sellers") (the capital stock of which was purchased by the Company in
June, 1996) in connection with the settlement of any future obligations of
the Company to make contingent payments to the Sellers.
3. On July 3, 1997, the Company granted to four employees options to
purchase an aggregate of 12,000 shares of Common Stock at an exercise price per
share of $33.0625 pursuant to stock option agreements under the Company's 1996
Stock Option Plan. Pursuant to the terms of such option agreements, one third of
such options vest on July 3, 1998; one third of such options vest and become
exercisable on July 3, 1999, and one third of such options vest and become
exercisable on July 3, 2000.
4. On July 3, 1997, the Company issued and sold an aggregate of 167,762
shares of Common Stock to three former stockholders of Bauer Audio Visual, Inc.
("Bauer") in connection with the purchase of all of the outstanding capital
stock of Bauer.
5. On July 9, 1997, the Company granted to twenty-nine employees options to
purchase an aggregate of 42,100 shares of Common Stock at an exercise price per
share of $36.15625 pursuant to stock option agreements under the Company's 1996
Stock Option Plan. Pursuant to the terms of such option agreements, one third of
such options vest on July 9, 1998; one third of such options vest and become
exercisable on July 9, 1999, and one third of such options vest and become
exercisable on July 9, 2000.
6. On July 9, 1997, the Company issued and sold an aggregate of 42,372
shares of Common Stock to six former stockholders of Envision Corporation
("Envision") in connection with the purchase of all of the outstanding capital
stock of Envision.
7
<PAGE>
7. On September 29, 1997, the Company granted to four employees options to
purchase an aggregate of 68,500 shares of Common Stock at an exercise price per
share of $40.1875 pursuant to stock option agreements under the Company's 1996
Stock Option Plan. Pursuant to the terms of such option agreements, one third of
such options vest on September 29, 1998; one third of such options vest and
become exercisable on September 29, 1999, and one third of such options vest and
become exercisable on September 29, 2000.
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 of 1933, as
amended, 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.
(b) Not applicable to Company for fiscal year ended September 30,
1997.
8
<PAGE>
Item 6. Selected Financial Data
SELECTED FINANCIAL DATA
(In thousands, except share data)
The historical selected financial data presented below as of and for the
fiscal years ended September 30, 1993, 1994, 1995, 1996 and 1997, are derived
from, and are qualified by reference to, the financial statements that have been
audited by Ernst & Young LLP, independent auditors. The data presented below
should be read in conjunction with the Company's financial statements and
related notes thereto and other information included elsewhere in this Form
10-K.
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Service revenue .............................................. $ 50,107 $ 59,174 $ 81,131 $ 148,330 $212,393
Rental revenue .............................................. -- -- -- -- 129,865
--------- --------- --------- --------- ---------
Total revenue ............................................. 50,107 59,174 81,131 148,330 342,258
Cost of service revenue ...................................... 34,907 39,724 54,312 99,797 143,002
Cost of rental revenue ....................................... -- -- -- -- 83,764
--------- --------- --------- --------- ---------
Total revenue ............................................. 34,907 39,724 54,312 99,797 226,776
Gross profit ................................................. 15,200 19,450 26,819 48,533 115,492
Selling, general and administrative expenses ................. 12,551 14,349 19,306 30,442 71,270
Non-cash compensation expense(a) ............................. -- -- -- 1,072 --
Depreciation and amortization ................................ 3,852 2,137 2,330 3,142 11,180
Write-off of certain intangibles(b) .......................... 4,614 -- -- -- --
--------- --------- --------- --------- ---------
Total operating expenses ..................................... 21,017 16,486 21,636 34,656 82,450
--------- --------- --------- --------- ---------
Operating income (loss) ...................................... (5,817) 2,964 5,183 13,877 33,042
Interest expense with related parties ........................ 1,435 2,107 2,234 1,199 --
Interest expense, other ...................................... 222 502 1,259 387 2,429
--------- --------- --------- --------- ---------
Income (loss) before taxes ................................... (7,474) 355 1,690 12,291 30,613
Provision for taxes .......................................... 23 62 264 4,302 12,551
--------- --------- --------- --------- ---------
Net income (loss) ............................................ (7,497) 293 1,426 7,989 $ 18,062
Preferred stock dividends(c) ................................. (517) (582) (655) (327) --
--------- --------- --------- --------- ---------
Net income (loss) available to common stockholders ........... $ (8,014) $ (289) $ 771 $ 7,662 $ 18,062
--------- --------- --------- --------- ---------
Earnings per common share(d) ................................. $ 0.60 $ 0.25 $ 0.53 $ 0.83
--------- --------- --------- =========
<CAPTION>
Year ended September 30,
-----------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit) ........................... $ (1,349) $ (1,452) $ 352 $ 7,488 $ 36,151
Total assets ........................................ 15,182 31,266 45,298 126,322 313,877
Total debt, including accrued interest .............. 19,223 24,531 34,175 22,839 61,859
Stockholders' equity (deficit) ...................... (12,269) (13,249) (12,434) 53,468 171,434
</TABLE>
See Notes to Selected Financial Data
9
<PAGE>
NOTES TO SELECTED FINANCIAL DATA
(a) Non-cash compensation expense for the year ended September 30, 1996 of $1.1
million (or $0.06 per share) resulting primarily from the vesting of
non-voting common stock issued at a price lower than its fair market value
under the 1993 Management Stock Plan, which was terminated upon
consummation of the Company's initial public offering (the "Initial Public
Offering") of shares of Common Stock in March, 1996.
(b) Reflects adjustment to net realizable value of certain intangibles,
principally module and film libraries acquired in purchase business
transactions.
(c) All preferred stock was converted into Common Stock in connection with the
Initial Public Offering.
(d) Earnings per common share for the years ending September 30, 1994, 1995 and
1996 has been 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, 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, net income per common share reflects adjustments to eliminate
interest expense incurred on the Convertible Note during each of fiscal
1994, fiscal 1995 and fiscal 1996, and to eliminate accrued preferred stock
dividends.
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Certain statements contained herein are forward-looking statements that
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the Company's actual results in
future periods or plans for future periods to differ materially from what is
currently anticipated. Those risks include, among others, general competitive
factors, the Company's ability to successfully complete and integrate its
acquisitions and to implement operational improvements in its acquired
businesses and the seasonality and episodic nature of the Company's business.
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,
--------------------------------------------------------------------------
1995 1996 1997
---------------------- --------------------- ----------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service revenue .................................... $ 81,131 100.0% $148,330 100.0% $ 212,393 62.1%
Rental revenue ..................................... -- -- -- -- 129,865 37.9
-------- ----- -------- ----- -------- -----
Total revenue ................................... 81,131 100.0% 148,330 100.0% 342,258 100.0%
Cost of service revenue ............................ 54,312 66.9 99,797 67.3 143,002 41.8
Cost of rental revenue ............................. -- -- -- -- 83,764 24.5
-------- ----- -------- ----- -------- -----
Total cost of revenue ........................... 54,312 66.9 99,797 67.3 226,766 66.3
-------- ----- -------- ----- -------- -----
Gross profit ....................................... 26,819 33.1 48,533 32.7 115,492 33.7
Selling, general and administrative expenses ....... 19,306 23.8 30,442 20.5 71,270 20.8
Non-cash compensation expense ...................... -- -- 1,072 0.7 -- --
Depreciation and amortization ...................... 2,330 2.9 3,142 2.1 11,180 3.3
-------- ----- -------- ----- -------- -----
Total operating expenses ........................... 21,636 26.7 34,656 23.4 82,450 24.1
-------- ----- -------- ----- -------- -----
Operating income ................................... 5,183 6.4 13,877 9.4 33,042 9.6
Interest expense with related parties .............. 2,234 2.8 1,199 0.8 -- --
Interest expense, other ............................ 1,259 1.6 387 0.3 2,429 0.7
-------- ----- -------- ----- -------- -----
Income before taxes ................................ 1,690 2.1 12,291 8.3 30,613 8.9
Provision for taxes ................................ 264 0.3 4,302 2.9 12,551 3.7
-------- ----- -------- ----- -------- -----
Net income ......................................... $ 1,426 1.8% $ 7,989 5.4% $ 18,062 5.2%
======== ===== ======== ===== ======== =====
</TABLE>
Results of Operations
Fiscal 1997 Compared to Fiscal 1996
Revenue. Revenue increased $194.0 million, or 130.7%, from $148.3 million in
fiscal 1996 to $342.3 million in fiscal 1997. The increase resulted primarily
from expanded activities from existing clients, projects for new clients and the
acquisition of other business communications services and audio-visual and
rental, sales and companies. Approximately 67% of the increase represented
revenue from the rental of audio visual equipment through the Company's Total
Audio Visual Services ("TAVS") division, which includes the results from the
respective dates of acquisition of the following audio-visual companies acquired
in fiscal 1997: Video Supply Company, Inc. d/b/a Projexions Video Supply and
Projections/Video Supply Company (together "Projexions") (acquired in January,
1997), Blumberg Communications, Inc. ("Blumberg") (acquired in January, 1997),
D&D Enterprises, Inc. d/b/a Show Solutions ("Show Solutions") (acquired in
April, 1997) and Bauer Audio Visual, Inc. (acquired in July, 1997). Increases in
service revenue accounted for the remaining 33% of the total revenue growth due
primarily from clients in the automotive, consumer products, telecommunications,
information technologies and government industries. Service revenue from clients
in the financial services industry decreased primarily as a result of a
triennial sales meeting held by a financial services client in fiscal 1996.
Gross profit. Total gross profit increased $67.0 million, or 138%, from $48.5
million in fiscal 1996 to $115.5 million in fiscal 1997, primarily as a result
of the revenue growth described above. As a percentage of service revenue, gross
profit was 32.7% in each of fiscal 1996 and 1997. Gross profit as a percentage
of rental revenue was 35.5%.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $40.9 million, or 134%, from $30.4 million in
fiscal 1996 to $71.3 million in fiscal 1997. The increase resulted primarily
from the expansion of operations both organically and through acquisitions, as
well as from normal inflationary increases. Salaries and related costs increased
$23.8 million to support the Company's overall significant growth, as well as
increased personnel resulting from acquisitions. Other general and
administrative expenses, including rent and related costs, telephone, office
supplies, as well as insurance costs, and other miscellaneous expenses,
increased $12.9 million to support the significant revenue and acquisition
growth. Direct selling expenses such as travel, marketing and other costs
related to obtaining business increased $4.2 million. Selling, general and
administrative expenses, as a percentage of total revenue, were comparable in
both periods. The $1.1 million nonrecurring, non-cash compensation charge during
fiscal 1996 was the result of the vesting of common stock
11
<PAGE>
sold pursuant to the Company's 1993 Management Stock Plan at a price lower than
its fair market value.
Depreciation and amortization. Depreciation and amortization expense increased
to $11.2 million in fiscal 1997, an increase of $8.1 million as compared to $3.1
million in fiscal 1996. The continued investment in information technology, as
well as property and equipment acquired through acquisitions, resulted in
increased depreciation expense of $4.8 million. Amortization expense increased
$3.3 million resulting primarily from goodwill arising from acquisitions.
Interest expense. Net interest expense increased by $2.0 million from fiscal
1996 to fiscal 1997 primarily due to higher average borrowings to finance
acquisitions, operational expansion, capital expenditures and increased working
capital requirements. Interest expense with related parties decreased $1.2
million from fiscal 1996 due to the repayment and conversion of debt on March
15, 1996 in connection with the Company's initial public offering.
Income before taxes. Income before taxes increased from $12.3 million in fiscal
1996 to $30.6 million in fiscal 1997 as increased revenue from existing and new
accounts and acquired businesses contributed to the improved earnings of the
Company.
Provision for taxes. The provision for taxes as a percentage of income before
taxes was 35% and 41% for fiscal 1996 and fiscal 1997, respectively. The
increase in the effective tax rate is due to the fact that a portion of income
before tax in fiscal 1996 was offset by net operating loss carryforwards.
Net income. Net income increased to $18.1 million in fiscal 1997 from $8.0
million in fiscal 1996. Earnings per common share increased in fiscal 1997 to
$0.83 from $0.53 in fiscal 1996. Earnings per share in fiscal 1996 was computed
on a pro forma basis assuming conversion of the convertible promissory note and
all outstanding shares of preferred stock into common stock (which, in each
case, occurred on March 15, 1996 immediately prior to the consummation of the
Company's initial public offering) as if such conversions occurred on October 1,
1995. The pro forma earnings per share computation reflects adjustments to
eliminate the interest expense incurred on the convertible promissory note and
to eliminate accrued preferred stock dividends. Excluding the effect of the
nonrecurring non-cash compensation charge of $1.1 million, net income per common
share would have been $0.59 for fiscal 1996.
Fiscal 1996 Compared to Fiscal 1995
Revenue. Revenue increased $67.2 million, or 83%, from $81.1 million in fiscal
1995 to $148.3 million in fiscal 1996. Through a combination of internal growth
and acquisitions, the Company increased its revenues from clients across a broad
range of industries. Increases in telecommunications, food services and
information technology clients
12
<PAGE>
accounted for 14.6%, 12.3% and 12.3% of the revenue growth, respectively. In
addition, a new lodging client accounted for 8.7% of the increased revenue.
Approximately 25% of the increase was due to sales meetings in connection with a
triennial event held by an insurance client. The remainder of the increase in
revenue was spread among several other industries.
Gross profit. Gross profit increased 81% from $26.8 million in fiscal 1995 to
$48.5 million in fiscal 1996, primarily as a result of the revenue growth
described above. Gross profit as a percentage of revenue decreased slightly to
32.7% in fiscal 1996 from 33.1% in fiscal 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $11.1 million, or 58%, from $19.3 million in
fiscal 1995 to $30.4 million in fiscal 1996. Salaries and related costs
increased $6.9 million resulting primarily from the addition of new offices and
personnel resulting from acquisitions and in support of other revenue growth, as
well as normal inflationary increases. Other general and administrative
expenses, including rent, occupancy and telephone, increased $2.6 million
resulting from the Company's overall growth. Direct selling expenses, including
commissions, advertising, travel and other costs related to obtaining business,
increased $1.6 million. Selling, general and administrative expenses as a
percentage of revenue declined from 23.8% in fiscal 1995 to 20.5% in fiscal 1996
as revenue increased more rapidly than such expenses. In fiscal 1996, the
Company also recorded a nonrecurring non-cash compensation expenses of $1.1
million resulting from the vesting of common stock sold pursuant to the
Company's 1993 Management Stock Plan at a price lower than its fair market
value.
Depreciation and amortization. Depreciation and amortization expense increased
$0.8 million from $2.3 million in fiscal 1995 to $3.1 million in fiscal 1996.
This increase was primarily due to the purchase of computer equipment, fixed
assets acquired through acquisitions and goodwill resulting from such
acquisitions.
Interest expense. Interest expense with related parties decreased by $1.0
million from fiscal 1995 to fiscal 1996 due to the repayment and conversion of
debt as of March 15, 1996 in connection with the Company's initial public
offering. Net interest expense, decreased by $0.9 million from fiscal 1995 to
fiscal 1996 due to a lower average borrowing level, the repayment of outstanding
balances as of March 15, 1996 in connection with the Company's initial public
offering, and interest income earned on the proceeds from the initial public
offering.
Income before taxes. Income before taxes increased from $1.7 million in fiscal
1995 to $12.3 million in fiscal 1996 as revenue growth from internal business
and acquired businesses contributed to the improved earnings of the Company.
13
<PAGE>
Provision for taxes. The provision for taxes as a percentage of income before
taxes was 35.0% and 15.6% for fiscal 1996 and fiscal 1995, respectively. The
increase in the effective rate is due primarily to income before tax in excess
of the utilization of available net operating loss carryforwards which are not
subject to limitations.
Net income. Net income increased to $8.0 million in fiscal 1996 from net income
of $1.4 million in fiscal 1995, for the reasons set forth in the preceding
paragraphs. Pro forma net income per common share increased in fiscal 1996 to
$0.53 from $0.25 in fiscal 1995. Excluding the effect of the nonrecurring
non-cash compensation charge of $1.1 million, pro forma net income per common
share would have been $0.59 for fiscal 1996.
Liquidity and Capital Resources
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for periods indicated:
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1996 1997
----------------- ----------------- ----------------
<S> <C> <C> <C>
Net cash provided by (used in):
Operating activities $ 444 $ 7,260 $ 6,852
Investing activities (7,758) (46,204) (128,522)
Financing activities 7,255 47,077 123,145
</TABLE>
In fiscal 1995, the Company generated approximately $0.4 million from operating
activities. The expansion of operating activities and revenue growth resulted in
higher working capital requirements. 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 bank facilities in place during fiscal 1995.
In fiscal 1996, the Company generated $7.3 million from its operating
activities. Net income plus depreciation and amortization and the nonrecurring
non-cash compensation charge described above provided $12.2 million. The net
change in working capital used $4.9 million, with increases in accounts
receivable, prepaid expenses and other current assets as well as a decrease in
accrued interest payable, offset by a net increase in accrued expenses and
accounts payable. Investing activities required $46.2 million, resulting
primarily from the acquisition of businesses and the purchase of equipment.
Financing activities provided approximately $47.1 million, of which an aggregate
of $44.4 million of net proceeds were received in fiscal 1996 from the issuance
of the Company's common stock and the exercise of warrants to purchase the
Company's common stock, $19.8 million was provided by the Company's
then-existing bank facilities. Such amounts were offset by $16.9 million used to
repay certain outstanding bank borrowings and substantially all other long-term
indebtedness, and to pay accrued preferred stock
14
<PAGE>
dividends. In addition, $0.2 million was used to repurchase the Company's common
stock in fiscal 1996.
In fiscal 1997, the Company generated $6.9 million from its operating
activities. Net income plus amortization and depreciation provided $31.1
million. The net change in working capital used $24.3 million, with increases in
accounts receivable, prepaid expenses and other assets as well as decreases in
deferred income, offset by increases in accrued expenses and other liabilities
and a decrease in deferred charges. A total of $128.5 million was used for
investing activities, primarily for the acquisition of businesses and the
purchase of equipment. Financing activities provided $123.2 million, of which
$135.9 million was provided by the Company's existing banking facilities, $85.8
million of net proceeds were received in fiscal 1997 from the issuance of common
stock. In addition, $98.5 million was used to repay outstanding bank borrowings
during the period.
On December 4, 1996, the Company entered into a loan agreement with a syndicate
of banks pursuant to which the Company increased its aggregate available bank
financing from $27 million in fiscal 1996 to $100 million in fiscal 1997,
consisting of a $75 million six year reducing revolving credit facility (the
"Reducing Revolver") to be utilized in connection with the financing of
acquisitions and a $25 million six year revolving line of credit (the "Revolving
Line" and together with the Reducing Revolver, the "1996 Facilities"). Amounts
outstanding under the Company's former bank facilities were repaid with proceeds
from the 1996 Facilities. Interest on outstanding amounts under the 1996
Facilities was payable quarterly in arrears and, at the option of the Company,
interest accrued 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. Pursuant to the terms of the 1996 Facilities, the Company was
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.
On October 28, 1997, 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 $100 million to $550 million, consisting of a $300
million six year revolving line of credit to be used in connection with future
acquisitions and for working capital and general corporate purposes and a $250
million six year term loan ("the 1997 Facilities") to be utilized in connection
with the acquisition of Visual Action Holdings plc (See "--Recent
Developments). Amounts outstanding under the 1996 Facilities were repaid with
the proceeds from the 1997 Facilities. The Company will recognize an
extraordinary loss of $1.0 million in the quarter ending December 31, 1997
resulting from the write-off of the unamortized debt issuance fees relating to
the 1996 Facilities. Approximately $4.8 million in debt issuance fees were
incurred in connection with the 1997 Facilities. Such fees will be amortized
over the term of the 1997 Facilities. The maturity date of each of the 1997
Facilities is September 30, 2003. Interest on outstanding amounts under the 1997
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 upon 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 the 1997 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). As of December 12, 1997, the
Company had approximately $327.4 million outstanding under the 1997 Facilities.
Capital expenditures were $1.6 million in fiscal 1995, $2.2 million in fiscal
1996 and $17.7 million in fiscal 1997. During fiscal 1995 and 1996, the purchase
of additional personal computers and expanded capabilities for the computer
system accounted for the largest areas of expenditure. During fiscal 1997, the
purchase of audio-visual rental equipment and the
15
<PAGE>
continued investment in information technology comprised the major portion of
capital expenditures.
Quarterly Results
The following table sets forth the unaudited quarterly results of operations for
each of the quarters in the two years ended September 30, 1996 and 1997. 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 future period.
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1997
-------------------------------------------- --------------------------------------------
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>
Revenue .......................... $ 20,407 $ 31,220 $ 48,150 $ 48,553 $ 52,659 $ 77,435 $103,199 $108,965
Gross profit ..................... 7,066 10,190 15,576 15,701 17,830 26,085 35,377 36,200
Operating income (loss) .......... (87) 1,576 6,556 5,832 1,770 6,903 13,670 10,699
Net income (loss) ................ (898) 643 4,408 3,836 736 3,721 8,013 5,592
</TABLE>
Recent Developments
On October 29, 1997, pursuant to an offer document dated November 1, 1997, the
("Offer Document"), the Company announced a cash offer (the "Offer") by its
wholly-owned United Kingdom subsidiary, Caribiner Services Limited, to acquire
all of the outstanding capital shares of Visual Action Holdings plc, a United
Kingdom company ("Visual Action").
Visual Action provides corporate meetings services, including audio-visual and
exhibition, and broadcast video services in the United States and the United
Kingdom. The Company has announced that it intends to dispose of Visual Action's
broadcast video services unit as soon as practicable.
On November 25, 1997, the Company declared the offer to be unconditional in all
respects, thereby committing Caribiner Services Limited to purchase all Visual
Action shares validly tendered pursuant to the Offer. As of November 24, 1997,
by means of open market purchases and shares tendered pursuant to the Offer
Document, the Company, through Caribiner Services Limited, owned or had the
obligation to acquire a total of 46,680,682 shares of Visual Action (or
approximately 93.2% of the issued shares capital). Thereafter, Caribiner
Services Limited began the process of acquiring those shares of Visual Action
not tendered pursuant to the Offer by compulsory purchases pursuant to the
provisions of the UK Companies Act of 1985. Such compulsory purchases are
expected to be completed during February 1998.
16
<PAGE>
The total acquisition price for the shares is expected to be approximately
$253.0 million. In addition, the Company assumed approximately $44.3 million in
outstanding indebtedness of Visual Action. The Company expects to incur
transaction costs of approximately $3.0 million. All such costs will be financed
through the Company's 1997 Facilities.
17
<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. 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. TAVS provides audio
visual equipment rentals to customers based on published price lists. 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.
18
<PAGE>
Income Taxes
The Company's effective tax rates for fiscal 1995, fiscal 1996 and fiscal
1997 were 15.6%, 35.0% and 41.0%, respectively. In fiscal 1995, the lower
effective tax rate resulted from the utilization of federal net operating loss
("NOL") carryforwards. The increase in the effective tax rates for fiscal 1996
is due primarily to income before tax in excess of available NOL carryforwards.
The increase in the fiscal 1997 effective tax rate resulted from income before
taxes not being offset by NOLs. In future years, as in fiscal 1997, 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.
New Accounting Pronouncements
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share ("Statement 128"), which is required to be
adopted for the quarter ended December 31, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods. A dual presentation of basic and diluted
earnings per share will be required. The basic earnings per share, which will
replace primary earnings per share will exclude the dilutive effect of stock
options. The impact of Statement 128 on the calculation of the Company's primary
and fully diluted earnings per share is not expected to be material.
In June 1997, the Financial Accounting Standards Boards issued SFAS No.
131, Financial Reporting for Segments of a Business Enterprise ("Statement
131"), which applies to all public business enterprises. Statement 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. Statement 131 is effective for
financial statements for periods beginning after December 15, 1997. Management
is in the process of determining the effect of Statement 131 on its financial
statement disclosures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to Company for fiscal year ended September 30, 1997.
<PAGE>
Item 8. Financial Statements and Supplementary Data
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, 1996 and 1997, 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,
1997. 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, 1996 and 1997 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended September 30,
1997, in conformity with generally accepted accounting principles.
New York, New York
December 3, 1997
19
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
--------------------------
1996 1997
--------- ---------
(amounts in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents, including restricted cash of $852 in 1997 $ 8,432 $ 10,253
Trade accounts receivable, net of allowance for doubtful
accounts of $305 in 1996 and $740 in 1997 36,202 77,780
Deferred charges 8,989 10,229
Prepaid expenses and other current assets 3,395 9,128
--------- ---------
Total Current Assets 57,018 107,390
Property and equipment, net 21,181 45,714
Goodwill, net 47,723 157,154
Other assets 400 3,619
--------- ---------
TOTAL ASSETS $ 126,322 $ 313,877
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank line of credit $ 6,000 $ --
Current portion of long-term debt 649 1,217
Trade accounts payable 7,530 18,816
Accrued expenses and other current liabilities 8,503 23,200
Accrued production costs 11,355 11,055
Taxes payable 2,158 4,726
Deferred income 13,335 12,225
--------- ---------
Total Current Liabilities 49,530 71,239
Long-term debt 16,190 60,642
Deferred income 5,007 5,617
Deferred tax liability 410 715
Other liabilities 1,717 4,230
--------- ---------
TOTAL LIABILITIES 72,854 142,443
Stockholders' Equity:
Preferred stock, $.01 par value:
2,000 shares authorized, none issued and outstanding at 1996 and 1997 -- --
Common stock, $.01 par value:
40,000 voting shares authorized, 19,197 and 23,417 shares issued
and outstanding at 1996 and 1997, respectively 192 234
Additional paid-in capital 59,937 159,874
Translation adjustment 86 11
Retained earnings (deficit) (6,747) 11,315
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 53,468 171,434
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 126,322 $ 313,877
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
20
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended September 30,
--------------------------------------
(amounts in thousands)
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Service Revenue $ 81,131 $148,330 $212,393
Rental Revenue -- -- 129,865
-------- -------- --------
Total Revenue 81,131 148,330 342,258
-------- -------- --------
Cost of Service Revenue 54,312 99,797 143,002
Cost of Rental Revenue -- -- 83,764
-------- -------- --------
Total Cost of Revenue 54,312 99,797 226,766
-------- -------- --------
Gross profit 26,819 48,533 115,492
Operating expenses:
Selling, general and administrative expenses 19,306 30,442 71,270
Non-cash compensation expense -- 1,072 --
Depreciation and amortization 2,330 3,142 11,180
-------- -------- --------
Total operating expenses 21,636 34,656 82,450
-------- -------- --------
Operating income 5,183 13,877 33,042
Interest expense with related parties 2,234 1,199 --
Other interest expense, net 1,259 387 2,429
-------- -------- --------
Income before taxes 1,690 12,291 30,613
Provision for taxes 264 4,302 12,551
-------- -------- --------
Net income $ 1,426 $ 7,989 $ 18,062
======== ======== ========
Earnings per common share $ 0.25 $ 0.53 $ 0.83
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
21
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------------------------
(amounts in thousands)
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,426 $ 7,989 $ 18,062
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Non-cash compensation expense -- 1,072 --
Depreciation and amortization 2,330 3,142 13,082
Change in assets and liabilities, net of amounts acquired:
(Increase) in accounts receivable (6,407) (4,520) (19,547)
(Increase) decrease in deferred charges (2,559) (770) 1,469
(Increase) in prepaid expenses and other
current assets (262) (974) (3,928)
Decrease (increase) in other assets 151 443 (2,464)
(Decrease) in accounts payable (131) (1,650) (450)
Increase (decrease) in deferred income 2,875 (63) (5,165)
Increase in accrued expenses and other
liabilities 3,021 2,591 5,793
--------- --------- ---------
Net cash provided by operating activities 444 7,260 6,852
--------- --------- ---------
Cash flow used in investing activities:
Purchase of property and equipment (1,606) (2,222) (17,725)
Acquisition of intangibles and businesses, net of cash
acquired (6,152) (43,982) (110,797)
--------- --------- ---------
Net cash used in investing activities (7,758) (46,204) (128,522)
--------- --------- ---------
Cash flow provided by (used in) financing activities:
Net proceeds from issuance of common stock -- 42,480 85,792
Proceeds from exercise of warrants -- 1,691 --
Net proceeds from (repayments of) bank line of credit 2,550 1,780 (6,000)
Proceeds from long-term debt 6,000 18,000 135,870
Repayments of long-term debt (1,298) (14,669) (92,517)
Payment of preferred dividends -- (2,202) --
Proceeds from issuance of common stock under the
1993 Management Stock Plan 5 174 --
Repurchase of common stock (2) (177) --
--------- --------- ---------
Net cash provided by financing activities 7,255 47,077 123,145
--------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents -- 86 346
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents (59) 8,219 1,821
Cash and cash equivalents beginning of year 272 213 8,432
--------- --------- ---------
Cash and cash equivalents end of year $ 213 $ 8,432 $ 10,253
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
22
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the Three Years Ended September 30, 1997
(amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------------ ------------------------
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at October 1, 1994 4,903 $ 49 450 $ 5
Repurchase of 1993 Management Stock Plan shares by the
Company (50) * -- --
Issuance of warrants to purchase 588 shares of common
stock -- -- -- --
Issuance of common stock under the 1993 Management 150 1 -- --
Stock Plan
Accrued preferred stock dividends -- -- -- --
Net income -- -- -- --
-------- -------- -------- --------
Balance at September 30, 1995 5,003 50 450 5
Issuance of common stock under the 1993 Management
Stock Plan 174 2 -- --
Issuance of warrants to purchase 151 shares of common
stock -- -- -- --
Repurchase of common stock (62) * -- --
Accrued preferred stock dividends -- -- -- --
Conversion of Convertible Note into preferred stock -- -- 600 6
Conversion of preferred stock into common stock 7,193 72 (1,050) (11)
Exercise of warrants 1,069 11 -- --
Issuance of common stock upon consummation of initial
public offering 5,756 57 -- --
Issuance of common stock upon acquisition of
Lighthouse, Ltd. 64 * -- --
Non-cash compensation charge -- -- -- --
Translation adjustment -- -- -- --
Net income -- -- -- --
-------- -------- -------- --------
Balance at September 30, 1996 19,197 $ 192 -- --
Issuance of common stock under non-employee directors'
stock plan 2 -- -- --
Issuance of common stock upon offering 3,744 37 -- --
Issuance of common stock upon acquisitions completed
during fiscal 1997 474 5 -- --
<CAPTION>
Retained Total
Additional Earnings Translation Stockholders'
Paid in Capital (Deficit) Adjustment Equity (Deficit)
--------------- --------- ---------- ----------------
<S> <C> <C> <C> <C>
Balance at October 1, 1994 $ 1,878 ($15,180) -- ($13,248)
Repurchase of 1993 Management Stock Plan shares by the
Company (2) -- -- (2)
Issuance of warrants to purchase 588 shares of common
stock 40 -- -- 40
Issuance of common stock under the 1993 Management 5 -- -- 6
Stock Plan
Accrued preferred stock dividends -- (655) -- (655)
Net income -- 1,426 -- 1,426
-------- -------- -------- --------
Balance at September 30, 1995 1,921 (14,409) -- (12,433)
Issuance of common stock under the 1993 Management
Stock Plan 172 -- -- 174
Issuance of warrants to purchase 151 shares of common
stock 79 -- -- 79
Repurchase of common stock (177) -- -- (177)
Accrued preferred stock dividends -- (327) -- (328)
Conversion of Convertible Note into preferred stock 11,979 -- -- 11,985
Conversion of preferred stock into common stock (46) -- -- 15
Exercise of warrants 1,680 -- -- 1,691
Issuance of common stock upon consummation of initial
public offering 42,257 -- -- 42,315
Issuance of common stock upon acquisition of
Lighthouse, Ltd. 1,000 -- -- 1,000
Non-cash compensation charge 1,072 -- -- 1,072
Translation adjustment -- -- 86 86
Net income -- 7,989 -- 7,989
-------- -------- -------- --------
Balance at September 30, 1996 59,937 (6,747) 86 53,468
Issuance of common stock under non-employee directors'
stock plan 37 -- -- 37
Issuance of common stock upon offering 85,754 -- -- 85,791
Issuance of common stock upon acquisitions completed
during fiscal 1997 14,146 -- -- 14,151
</TABLE>
*Less than $1 thousand
23
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the Three Years Ended September 30, 1997
(amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------------ ------------------------
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Translation adjustment -- -- -- --
Net income -- -- -- --
=========================================================
Balance at September 30, 1997 23,417 $ 234 -- $ --
=========================================================
<CAPTION>
Retained Total
Additional Earnings Translation Stockholders'
Paid in Capital (Deficit) Adjustment Equity (Deficit)
--------------- --------- ---------- ----------------
<S> <C> <C> <C> <C>
Translation adjustment -- -- (75) (75)
Net income -- 18,062 -- 18,062
================================================================================
Balance at September 30, 1997 $ 159,874 $ 11,315 $ 11 $ 171,434
================================================================================
</TABLE>
*Less than $1 thousand
See accompanying notes to the consolidated financial statements.
24
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Caribiner International, Inc., (the "Company") is engaged in the production
of meetings, events and training programs, a provider of audio visual equipment
rentals, sales and installations and related staging services and a provider of
related business communications and corporate meeting 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 Corporation ("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 (the "Convertible Note") and $4
million Cumulative Redeemable Convertible Voting Preferred Stock, par value $.01
per share (the "Preferred Stock").
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 5.8 million shares of Common Stock, resulting in net proceeds of
$42.3 million, which were principally used to repay outstanding indebtedness and
to fund acquisitions. Immediately prior to the initial Public Offering, the
Convertible Note was converted into 0.6 million shares of Preferred Stock, which
were then immediately converted into 2.1 million shares of the Company's Common
Stock. Upon consumption of the Initial Public Offering, accrued interest of $6.3
million relating to the Convertible Note was paid to Warburg. In addition,
Warburg exercised its warrants to purchase 1.1 million shares of common stock at
a weighted average exercise price of $3.16.
Subsequently, in March, 1997, the Company consummated an offering of 4.1
million shares of its Common Stock, yielding net proceeds of approximately $85.8
million, of which approximately $64.5 million were used to repay all of the
Company's then outstanding bank borrowings. The remaining net proceeds were
available to make acquisitions, fund working capital needs and for general
corporate purposes.
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.
Certain reclassifications have been made to the September 30, 1996
consolidated balance sheet to conform to the current year's presentation.
Revenue Recognition
Revenue is recorded principally on the completed contract method of
accounting. The recognition of revenue and cost of revenue 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.
25
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cost of Revenue
Cost of service revenue is comprised of production costs, including
salaries and benefits of production, creative and technical personnel involved
with the 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.
Cost of rental revenue is comprised principally of direct labor costs,
commissions, depreciation and equipment rentals.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
In connection with certain of the acquisitions described in Note 3,
Business Acquisitions, the Company was contractually required to retain a
portion of the purchase price in segregated bank accounts. Such amounts will be
paid to certain of the sellers in future periods in accordance with the purchase
agreements and subject to any arising purchase price adjustments. At September
30, 1997, the Company held $0.9 million in cash which was restricted for such
purposes.
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.
Goodwill
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 $2.6 million and $6.8 million at September 30, 1996 and 1997, 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.
Deferred Financing Fees
Deferred financing fees are amortized on a straight-line basis over the
term of the related debt. The amortization of deferred financing fees is
reflected as a component of interest expense. Deferred financing fees amortized
during the years ending September 30, 1995, 1996 and 1997 were $0.2 million,
$0.2 million and $0.3 million, respectively.
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated into U.S.
dollars at current rates as of the balance sheet date, except for revenue, costs
and expenses which are translated at average current rates during each reporting
period. The gains or losses resulting from translation are included as a
separate component in stockholders' equity. The gains and losses resulting from
foreign currency transactions are included in the Company's current results of
26
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
operations. There were no transaction gains or losses in the year ended
September 30, 1995. Transaction gains or losses in the years ended September 30,
1996 and 1997 were not significant.
Foreign Operations
The Company's foreign operations, which are predominantly located in the
United Kingdom, had identifiable assets, including goodwill, of $55.4 million
at September 30, 1997. The revenue and operating profit of the Company's foreign
operations included in the results of operations for the year ended September
30, 1997 were $52.8 million and $1.5 million, respectively. The Company's
foreign operations during the years ended September 30, 1995 and 1996 were not
significant.
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock Based Compensation
The Company grants to certain employees stock options for a fixed number of
shares with an exercise price equal to the fair value of the shares at the date
of grant. The Company accounts for stock option grants in accordance with APB
Opinion 25, "Accounting for Stock Issued to Employees," and, accordingly,
recognizes no compensation expense for such grants.
New Accounting Pronouncements
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share ("Statement 128"), which is required to be
adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. A dual presentation of basic and diluted earnings per share
will be required. The basic earnings per share, which will replace primary
earnings per share, will exclude the dilutive effect of stock options. The
impact of Statement 128 on the calculation of the Company's primary and fully
diluted earnings per share is not expected to be material.
In June 1997, the Financial Accounting Standards Boards issued SFAS No.
131, Financial Reporting for Segments of a Business Enterprise, ("Statement
131"), which applies to all public business enterprises. Statement 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. Statement 131 is effective for
financial statements for periods beginning after December 15, 1997. Management
is in the process of determining the effect of Statement 131 on its financial
statement disclosures.
3. BUSINESS ACQUISITIONS
During fiscal 1996 and fiscal 1997, the Company purchased several companies
engaged in providing business communication services, as well as providing
audio-visual equipment rentals, sales and related staging services.
Fiscal 1996 Acquisitions
In January, 1996, the Company acquired substantially all of the assets of
Koors Perry & Associates, Inc. ("Koors Perry") for $4.8 million including the
issuance of a promissory note of $1.5 million as partial consideration. In
connection with the acquisition of Koors Perry, contingent payments were to be
made in each of the three years following the consummation of the transaction
based upon the achievement of certain performance goals. The contingent payments
relating to the years ending September 30, 1996 and 1997 have been paid and/or
accrued and have been appropriately treated as additional purchase price. In
November, 1997, the Company settled the contingent payment relating to the year
ending September 30, 1998 by granting the former sellers of Koors Perry
aggregate consideration of approximately $1.7 million, which consists of cash of
$1.2 million payable in March, 1999 and the issuance of 10,920 shares of the
Company's common stock having a fair market value of $0.5 million. The
settlement, which is accounted for as additional purchase price, has been
reflected as additional goodwill in the accompanying balance sheet at
September 30, 1997.
27
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In June, 1996, the Company acquired substantially all of the assets and
assumed certain of the liabilities of Lighthouse, Ltd. for $7.3 million, which
consisted of cash and the issuance of 63,642 shares of the Company's Common
Stock having a value of $1.0 million.
Also in June, 1996, the Company acquired SCH International Limited
("Spectrum") for $5.1 million, a London-based communications services company.
In connection with the acquisition of Spectrum, contingent payments were to be
made in each of three years following the closing of the transaction, based upon
the achievement of certain performance goals. Such contingent payments would be
accounted for as additional purchase price as they became known. In July, 1997,
the Company settled all future contingent payments by granting to the sellers of
Spectrum aggregate consideration consisting of approximately $8.8 million in
cash and the issuance of 10,152 shares of the Company's Common Stock having a
fair market value of approximately $0.3 million. The settlement was accounted
for as additional purchase price.
In September, 1996, the Company completed its acquisition of Total Audio
Visual Services ("TAVS"), a leading provider of audio visual equipment rentals,
sales and related staging services, including hotel audio visual outsourcing
services, for $26.6 million.
Except for the promissory note and the Common Stock issuance described
above, these transactions were financed through a combination of cash and bank
borrowings.
Fiscal 1997 Acquisitions
In December, 1996, the Company acquired all of the outstanding capital
stock of Rome Network, Inc. ("Rome"), a regional producer of meetings and events
headquartered in San Francisco, for aggregate consideration of $3.2 million,
which consisted of approximately $2.4 million in cash and the issuance of 30,990
shares of the Company's common stock having a fair market value of approximately
$0.8 million.
In January, 1997, the Company acquired substantially all of the assets of
Video Supply Company, Inc. d/b/a Projexions Video Supply and Projexions/Video
Supply Company (together, "Projexions"), a provider of audio visual equipment
rentals and related staging services in the southeastern U.S., for approximately
$13.6 million in cash and $1.4 million in the repayment of certain indebtedness
at closing.
Also in January, 1997, the Company completed the acquisition of all of the
outstanding capital stock of Blumberg Communications Inc. ("Blumberg"), a
provider of audio visual equipment rentals, sales and related staging services,
including hotel audio visual equipment rentals, sales and related staging
services, including hotel audio visual outsourcing services in the upper midwest
and southern U.S. The Company paid aggregate consideration of $18.0 million,
which consisted of approximately $16.6 million in cash and the issuance of
59,880 shares of the Company's common stock having a fair market value of
approximately $1.4 million. In addition, the Company repaid $3.9 million in
outstanding indebtedness of Blumberg at closing.
In April, 1997, the Company completed the acquisition of the assets of D&D
Enterprises, Inc., d/b/a Show Solutions ("Show Solutions"), a provider of
staging and show services based in Atlanta, for aggregate considerate of
approximately $11.4 million, which consisted of $8.4 million in cash paid at
closing, $1.0 million placed in escrow to be paid at a later date upon
satisfaction of certain terms and conditions, and the issuance of 76,360 shares
of the Company's common stock having a fair market value of approximately $2.0
million. In addition, the Company repaid approximately $0.6 million in
outstanding indebtedness of Show Solutions at closing.
In May, 1997, the Company acquired substantially all of the assets of
Wavelength Corporate Communications Pty Limited ("Wavelength"), a provider of
business communications services in Australia and New Zealand, for aggregate
28
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
consideration of approximately $2.0 million, which consisted of $1.9 million in
cash and the issuance of 2,998 shares of the Company's common stock having a
fair market value of approximately $0.1 million.
Also in May, 1997, the Company acquired all of the outstanding capital
stock of Watts/Silverstein, Inc. ("Watts/Silverstein"), a Seattle-based business
communications company. The Company paid approximately $4.1 million in cash,
which included the repayment at closing of approximately $0.7 million in
outstanding indebtedness of Watts/Silverstein, and the issuance of 30,826 shares
of the Company's common stock having a fair market value of approximately $0.9
million.
In June, 1997, the Company acquired all of the outstanding capital stock of
WCT Live Communication Limited ("WCT"), a London-based business communications
services provider, for aggregate consideration of approximately $12.0 million,
which consisted of $10.1 million in cash and the issuance of 53,818 shares of
the Company's common stock having a fair market value of $1.9 million.
In July, 1997, the Company acquired all of the outstanding capital stock of
Bauer Audio Visual, Inc. ("Bauer"), a provider of audio visual equipment rentals
and audio visual outsourcing services throughout the United States.
Consideration paid for the acquisition was $14.6 million in cash and the
issuance of 167,762 shares of the Company's common stock with an aggregate fair
market value of approximately $5.3 million. In addition, the Company repaid
approximately $7.0 million in outstanding long-term indebtedness of Bauer and
$4.8 million in outstanding short-term indebtedness of Bauer at closing.
Also, in July, 1997, the Company acquired all of the outstanding capital
stock of Envision corporation ("Envision"), a Boston-based business
communications services provider. Consideration paid for the acquisition was
$5.6 million in cash and the issuance of 42,372 shares of the Company's common
stock having a fair market value of approximately $1.5 million.
All of the transactions described above were financed by additional
drawings on one of the Company's credit facilities, except for the acquisition
of Show Solutions, which was paid from the Company's cash on hand remaining from
the net proceeds of the issuance of Common Stock in March, 1997.
29
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.
Certain of the Company's acquisitions provided for contingent payments
for three years following the purchase based upon the achievement of certain
performance goals relating to revenue, gross profit or earnings before interest,
taxes, depreciation and amortization. Contingent payments are accounted for as
additional purchase price as they become known. During the years ending
September 30, 1995, 1996 and 1997, $1.8 million, $1.4 million and $2.1 million,
respectively, were paid and/or accrued as additional consideration with respect
to these acquisitions for such fiscal years.
The following unaudited consolidated pro forma results of operations of the
Company for the years ended September 30, 1996 and 1997 give effect to the
following transactions as if they occurred on October 1, 1995: (i) the
acquisitions of Lighthouse, Ltd., Spectrum, TAVS, Projexions, Blumberg, Show
Solutions, WCT and Bauer (ii) decreased interest expense and preferred stock
dividends resulting from the repayment of substantially all outstanding bank
borrowings and other long-term indebtedness of the Company from proceeds of the
Company's Initial Public Offering and (iii) the repayment with the proceeds of
the initial public offering and the offering of common stock completed in March
1997 of the bank borrowings that would have been incurred in connection with the
acquisitions of Lighthouse, Spectrum, TAVS, Projexions and Blumberg as if such
acquisitions had occurred on October 1, 1995. The effect of the acquisitions of
Koors Perry, Rome, Wavelength, Watts Silverstein and Envision on the Company's
results of operations for the year ended September 30, 1996 and 1997 is
insignificant.
Year ended
September 30,
------------------------------
1996 1997
------------ -------------
(in millions,
except per share data)
Revenue ..................................... $ 370.0 $ 439.2
Income before taxes........................... 18.2 30.2
Net income.................................... 11.1 17.5
Pro forma net income per common share......... $ 0.51 $ 0.76
The above calculation of pro forma net income per common share assumes that
approximately 21,880,000 million and 23,065,000 million shares were outstanding
during 1996 and 1997, respectively.
The unaudited pro forma consolidated results of operations 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 1996 or of results which may
occur in the future.
30
<PAGE>
Subsequent Event
On October 29, 1997, pursuant to an offer document dated November 1, 1997,
the ("Offer Document"), the company announced a cash offer (the "Offer") by its
wholly-owned United Kingdom subsidiary, Caribiner Services Limited, to acquire
all of the outstanding capital shares of Visual Action Holdings plc, a United
Kingdom company ("Visual Action").
Visual Action provides corporate meeting service, including audio-visual
and exhibition, and broadcast video services in the United States and the United
Kingdom. The Company has announced that it intends to dispose of Visual Action's
broadcast video services unit as soon as practicable.
On November 25, 1997, the Company declared the offer to be unconditional in
all respects, thereby committing Caribiner Services Limited to purchase all
shares of Visual Action validly tendered pursuant to the Offer. As of November
24, 1997, by means of open market purchases and shares tendered pursuant to the
Offer Document, the Company, through Caribiner Services Limited, owned or had
the obligation to acquire a total of 46,680,682 shares of Visual Action (or
approximately 93.2% of the issued shares capital). Thereafter, Caribiner
Services Limited began the process of acquiring those shares of Visual Action
not tendered pursuant to the Offer by compulsory purchases pursuant to the
provisions of the UK Companies Act of 1985. Such compulsory purchases are
expected to be completed during February 1998.
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The total acquisition price for the shares is expected to be approximately
$253.0 million. In addition, the Company assumed approximately $44.3 million in
outstanding indebtedness of Visual Action. The Company expects to incur
transaction costs of approximately $3.0 million. All such costs will be financed
through the Company's bank facilities. (See Note 5.)
Assuming the acquisition of Visual Action had occurred on October 1, 1996,
revenue calculated on a pro forma basis for the Company would have been $610.7
million for the year ended September 30, 1997.
4. PROPERTY AND EQUIPMENT
At September 30, 1996 and 1997 property and equipment consisted of:
At September 30,
---------------------
1996 1997
(in thousands)
---------------------
Audio visual rental and production equipment $15,468 $32,644
Furniture and fixtures 4,180 8,208
Information systems 3,924 12,077
Leasehold improvements 2,782 5,447
Other 705 1,658
------- -------
27,059 60,034
Less--accumulated depreciation and amortization 5,878 14,320
------- -------
$21,181 $45,714
======= =======
The related depreciation and amortization expense for the years ended
September 30, 1996 and 1997 was $2.1 million and $8.5 million, respectively.
5. DEBT
At September 30, 1996 and 1997, long-term debt consisted of:
At September 30,
---------------------
1996 1997
(in thousands)
---------------------
Bank term loan $15,000 $58,800
Notes payable 1,243 2,294
Other 596 765
------- -------
16,839 61,859
Less--current portion of long-term debt 649 1,217
------- -------
$16,190 $60,642
======= =======
At September 30, 1997, the carrying amount of the above commitments
approximated fair value.
The aggregate payments of long-term debt outstanding at September 30, 1997,
for the next five years, are as follows: 1998--$1.2 million; 1999--$0.6
million; 2000--$0.3 million; 2001--$0.3 million; and 2002--$0.1 million;
thereafter--$59.4 million; totaling $61.9 million.
At September 30, 1996, $6.0 million was outstanding under the Company's
former line of credit and $15.0 million was outstanding under the former term
facility. As of September 30, 1996, each of the line of credit and the 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 a, $75 million reducing revolving credit facility to be utilized in
connection with the financing of acquisitions and a $25 million six year
revolving line of credit (the "Revolving Line" and together with the Reducing
Revolver, the "1996 Facilities"). Amounts outstanding under the then existing
bank facilities were repaid with proceeds from the 1996 Facilities. Interest on
outstanding amounts under the 1996 Facilities was payable quarterly in arrears
and, at the option of the Company, accrued interest at either (i) LIBOR plus an
applicable margin or (ii) an alternate base rate based on the
31
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 applicable rates
would increase by 2.0% if principal or interest was not paid when due (after
applicable grace periods). Pursuant to the terms of the 1996 Facilities, the
Company was 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. At September 30, 1997,
outstanding debt bore interest at a weighted average rate of 7.2%.
In connection with the acquisition of Koors Perry, a non-interest bearing
promissory note for $1.5 million, which was payable over three years, was
issued as partial consideration of the purchase price. At September 30, 1996 and
1997, approximately $1.2 million and $0.8 million was included in long-term debt
representing the present value of such promissory note.
Subsequent Event
On October 28, 1997, 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 $100 million to $550 million, consisting of a $300
million six year revolving line of credit and a $250 million six year term loan
(the "1997 Facilities") which were utilized in connection with the acquisition
of Visual Action Holdings plc. (Note 3, Business Acquisitions). Amounts
outstanding under the 1996 Facilities were repaid with the proceeds from the
1997 Facilities. An extraordinary loss of $0.9 million will be recognized in the
quarter ending December 31, 1997 relating to the write-off of the unamortized
debt issuance fees relating to the 1996 Facilities. The maturity date of each of
the 1997 Facilities is September 30, 2003. Interest on outstanding amounts under
the 1997 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 upon 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 the 1997 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).
6. CAPITAL STOCK
Stock Split
The Company declared a 2-for-1 split of its common stock effected by paying
a stock dividend of one new share for every share of the Company's common stock
outstanding. The stock dividend was paid on June 20, 1997 to stockholders of
record as of May 30, 1997. The accompanying consolidated financial statements,
including the earnings per common share calculation, have been restated to
reflect such stock split.
1993 Management Stock Plan
During the year ended September 30, 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 granted to employees awards of the
Company's Series A non-voting common stock, par value $.01 per share.
Prior to the Initial Public Offering in March, 1996, 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 thousand
at such time. Upon consummation of the Initial Public Offering, all shares of
non-voting common stock outstanding under the Management Stock Plan were
converted into 664,450 shares of voting common stock, and such Management Stock
Plan was then terminated. In addition, the Company incurred an additional
non-cash compensation charge of $1.1 million upon the immediate vesting of such
stock in connection with the Initial Public Offering.
32
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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. The Option Plan provides that options for an aggregate of
728,000 shares of the Company's Common Stock shall be available for grant,
subject to authorization by the Compensation Committee of the Board of
Directors. The purchase price per share under the Option Plan is the market
price of the Common Stock on the grant date. Options vest over a period of three
years from the grant date. As of September 30, 1997, stock options to purchase
an aggregate of 718,900 shares of Common Stock were outstanding, of which
options to purchase 116,974 shares of Common Stock were vested.
The Company applies the provisions of APB No. 25, Accounting for Stock
Issued to Employees, in accounting for its stock-based awards. Accordingly, no
compensation cost has been recognized for its stock option plans.
<PAGE>
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing made with the following assumptions: risk-free
interest rate of 7% and 5% in 1996 and 1997, respectively; a dividend yield of
0% in 1996 and 1997; volatility of 32.7% in 1996 and 1997 and an expected life
of 5 years in 1996 and 1997.
Had the Company elected to apply the provisions of Statement of Financial
Accounting Standards (SFAS No. 123), Accounting for Stock Based Compensation,
net income would have been reduced by $78,000, or $0.01 per share for fiscal
1996 and $675,000 or $0.03 per share for fiscal 1997 after accounting for
stock-based compensation effective for awards made after October 1, 1995 and
thereafter.
A summary of the status of the Company's Option Plan at September 30, 1997 and
activity during the years ended September 30, 1997 is as follows:
1996 1997
Weighted Weighted
average average
(in thousands of shares) Shares exercise price Shares exercise price
- -------------------------------------------------------------------------------
Outstanding at beginning of
year -- -- 303 $14.75
Options granted 303 14.75 461 28.38
Options exercised -- --
Options forfeited/expired -- -- (27) 16.14
Options outstanding
at end of year 303 14.75 737 23.22
_______ ________ ________ ________
Exercisable at end
of year 3 20.19 110 15.84
_______ ________ ________ ________
Weighted average fair
value of options
granted during
the year 6.08 10.67
________ ________
<PAGE>
A summary of information about stock options outstanding and options exercisable
at September 30, 1997 is as follows (in thousands of shares):
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Range of exercise Remaining Exercise Exercise
prices Shares Term Price Shares Price
- -------------------------------------------------------------------------------
$12.84 to $14.44 265 8.82 $14.41 88 $14.41
$20.19 to $29.28 284 9.35 $22.82 22 $21.58
$31.75 to $40.188 188 9.84 $36.22 -- --
$12.84 to $40.188 737 9.29 $20.86 -- --
7. 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 years ending September 30,
1995, 1996 and 1997, the Company paid such vendors approximately $1.3 million,
$1.6 million and $0.6 million respectively.
Rent paid to related parties during the years ending September 30, 1996 and
1997 was $0.1 million and $0.6 million, respectively. No rent was paid to
related parties during the year ended September 30, 1995.
8. 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. There were no Company contributions for fiscal 1995 and fiscal 1996.
Effective January 1, 1997, the Company began matching $0.25 for each dollar
contributed by an employee, up to a maximum of 3% of such employee's base
compensation (subject to applicable limits under the Internal Revenue Code of
1986, as amended). Company matching contributions during the year ending
September 30, 1997 totaled $0.1 million.
9. 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 certain assets for
financial reporting purposes.
33
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Significant components of the Company's deferred tax assets and liabilities
as of September 30, 1996 and September 30, 1997 are as follows:
1996 1997
------- -------
(in thousands)
--------------------
Deferred tax assets:
NOL and tax credit carryforwards $ 1,410 $ 973
Amortization of intangibles 192 --
Allowance for doubtful accounts 128 155
Other reserves 187 1,654
------- -------
Total deferred tax assets 1,917 2,782
Valuation allowance (1,317) (672)
------- -------
Net deferred tax assets $ 600 $ 2,110
------- -------
Deferred tax liabilities:
Tax over book depreciation and amortization 985 1,899
Amortization of intangibles -- 890
Other 25 36
------- -------
Total deferred tax liabilities $ 1,010 $ 2,825
------- -------
Net deferred tax liability $ 410 $ 715
------- -------
At September 30, 1997, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $1.6 million,
that expire in the years 2001 through 2007. All of these 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. The
Company has not recorded any future benefit related to the usage of these NOL
carryforwards. In addition, there are approximately $1.0 million of foreign NOL
carryforwards that may be carried forward indefinitely.
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
1995 1996 1997
-------- -------- --------
(in thousands)
--------------
Current:
Federal $ 42 $ 2,121 $ 7,224
State 222 1,736 2,150
Foreign -- 35 1,112
-------- -------- --------
Total current tax 264 3,892 10,486
Deferred:
Federal -- 281 1,758
State -- 129 352
Foreign -- -- (45)
-------- -------- --------
Total deferred tax -- 410 2,065
-------- -------- --------
Total provision for taxes $ 264 $ 4,302 $ 12,551
======== ======== ========
34
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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>
1995 1996 1997
-------- -------- --------
(in thousands)
--------------
<S> <C> <C> <C>
Tax expense at statutory rate $ 575 $ 4,302 $ 10,714
State income tax net of federal benefit 147 1,212 1,626
Non-cash compensation expense -- 375 --
Non-deductible expenses 163 264 596
Change in valuation allowance (900) (2,012) (645)
Other 279 161 260
-------- -------- --------
$ 264 $ 4,302 $ 12,551
======== ======== ========
</TABLE>
10. MAJOR CUSTOMERS
Revenue from two customers in the automotive and information technology
industries aggregated 34% and 16%, respectively, in fiscal 1995 and 15% and 13%,
respectively, in 1996. Revenue from a customer in the insurance industry
aggregated 11% in fiscal 1996. There was no revenue from this customer in 1995.
Amounts due from the two customers in the automotive and information technology
industries represented 46% and 17%, respectively, at September 30, 1995, and 24%
and 10%, respectively, at September 30, 1996, of accounts receivable. Amounts
due from the customer in the insurance industry represented 5% of accounts
receivable at September 30, 1996. In fiscal 1997, there was no single customer
which contributed more than 10% of the Company's total revenue or accounted for
more than 5% of accounts receivable at September 30, 1997.
11. COMMITMENTS AND CONTINGENCIES
Minimum annual rentals under noncancelable leases, excluding escalations
based upon increases in real estate taxes and operating expenses, are payable as
follows, for the year ended September 30: 1998--$5.0 million; 1999--$4.3
million; 2000--$3.4 million; 2001--$2.4 million; 2002 -- $1.5 million;
thereafter--$7.9 million; totaling $24.5 million.
Rent expense charged to operations in fiscal 1995, fiscal 1996 and fiscal
1997 was $2.0 million, $2.7 million, and $6.6 million, respectively.
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.
12. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid was $0.8 million, $7.9 million and $2.0 million during the
years ended September 30, 1995, 1996 and 1997, respectively. Taxes paid were
$0.3 million, $2.1 million and $8.1 million during the years ended September 30,
1995, 1996 and 1997, respectively.
35
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. EARNINGS PER COMMON SHARE
The weighted average number of shares of common stock outstanding during
the years ended September 30, 1995, 1996 and 1997, is 13,240,006, 16,490,214 and
21,719,333 respectively.
Earnings per common share for the years ended September 30, 1995 and 1996
has been computed on a pro forma basis assuming 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 Company's initial
public offering) as if such conversions occurred on October 1, 1995. The pro
forma earnings per share reflects adjustments to eliminate the interest expense
incurred on the convertible note and to eliminate accrued preferred stock
dividends. Pursuant to the requirements of the Securities and Exchange
Commission, common stock issued under the 1993 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
(registration no. 33-80481) have also been included in the calculation of common
shares, using the treasury stock method, as if they were outstanding for the
years ended September 30, 1995 and 1996.
Of the net proceeds from the sale of shares of common stock offered by the
Company in its public offering completed in March, 1997, approximately $64.5
million were used to repay aggregate outstanding bank borrowings. 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 $64.5 million, and
assuming that such indebtedness had been repaid as of October 1, 1996,
supplementary pro forma net income per share would have been $0.85. For purposes
of this computation, the weighted average number of shares of common stock
outstanding during the 22,845,000.
Of the net proceeds from the sale of shares of common stock offered by the
Company in the initial public offering completed in March, 1996, approximately
$25.6 million were used to repay aggregate outstanding bank borrowings and other
long-term indebtedness, including accrued interest, and preferred stock
dividends. 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 October 1, 1995, supplementary pro forma net income per share would
have been $0.53 for the year ended September 30, 1996. For purposes of this
computation, the weighted average number of shares of common stock outstanding
during the year ended September 30, 1996 is 17,939,568.
36
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" to be contained in the Proxy Statement are hereby incorporated by
reference. See also "Executive Officers and Directors of the Company" set forth
in item 4A of Part I hereto.
Item 11. Executive Compensation
"Executive Compensation" to be contained in the Proxy Statement is hereby
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
"Security Ownership of Certain Beneficial Owners and Management" to be
contained in the Proxy Statement is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
"Certain Relationships and Transactions with Related Persons" to be
contained in the Proxy Statement is hereby incorporated by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
(1) The response to this portion of Item 14 is set forth in Item 8 of Part
II hereof.
(2) Financial Statement Schedules.
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
(3) Exhibits
See accompanying Index to Exhibits. The Company will furnish to any
stockholder, upon written request, any exhibit listed in the
accompanying Index to Exhibits upon payment by such stockholder of the
Company's reasonable expenses in furnishing any such exhibit.
(b) Reports on Form 8-K
The Company filed the following reports on Form 8-K (i) during the
three months ended September 30, 1997 and (ii) since October 1, 1997
through the date hereof:
Date of Filing Items Reported Subject of Report
- -------------- -------------- ----------------------------------
July 18, 1997 2, 7 Announcing the completion of the
acquisition of Bauer
August 25, 1997 7 Form 8-K/A containing financial
information in connection with the
acquisition of Bauer
December 9, 1997 2, 7 Announcing the completion of the
acquisition of VAH
(c) Reference is made to Item 14(a)(3) above.
(d) REference is made to Item 14(a)(2) above.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, on
December 22, 1997.
CARIBINER INTERNATIONAL, INC.
(Registrant)
By: /S/ ARTHUR F. DIGNAM
-------------------------------------------
Name: Arthur F. Dignam
Title: Executive Vice President, Chief
Financial and Administrative Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons on behalf of the
Registrant and 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 22, 1997
- ------------------------------------- Executive Officer and Director
Raymond S. Ingleby (Principal Executive Officer)
/S/ ARTHUR F. DIGNAM Executive Vice President, Chief December 22, 1997
- ------------------------------------- Financial and Administrative
Arthur F. Dignam Officer (Principal Financial and
Accounting Officer)
/S/ ERROL M. COOK Director December 22, 1997
- -------------------------------------
Errol M. Cook
/S/ BRYAN D. LANGTON Director December 22, 1997
- -------------------------------------
Bryan D. Langton
/S/ SIDNEY LAPIDUS Director December 22, 1997
- -------------------------------------
Sidney Lapidus
/S/ DAVID E. LIBOWITZ Director December 22, 1997
- -------------------------------------
David E. Libowitz
/S/ C. ANTHONY WAINWRIGHT Director December 22, 1997
- -------------------------------------
C. Anthony Wainwright
</TABLE>
S-1
<PAGE>
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this report:
Exhibit
Number Description of Document
- ------- -----------------------
2.1 Agreement of Purchase and Sale of Stock, dated December 19, 1996, by and
among the Company, Blumberg Communications, Inc. and each of the
Stockholders listed on schedule A thereto (schedules omitted--the
Company agrees to furnish a copy of any schedule to the Commission upon
request) (filed as Exhibit 2.1 to the Company's Current Report on Form
8-K filed with the Commission on February 12, 1997 and incorporated
herein by reference)
2.2 Agreement of Purchase and Sale of Assets, dated January 8, 1997, by and
among the Company, Video Supply Company, Inc., Projections/Video Supply
Company and Robert Haney (schedules omitted--the Company agrees to
furnish a copy of any schedule to the Commission upon request) (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the
Commission on January 24, 1997 and incorporated herein by reference)
2.3 Agreement of Purchase and Sale of Stock, dated May 29, 1997, by and
among the Company, Bauer Audio Visual, Inc. and each of the Stockholders
listed on schedule A thereto (schedules omitted--the Company agrees to
furnish a copy of any schedule to the Commission upon request) (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the
Commission on July 18, 1997 and incorporated herein by reference)
3.1 Restated Certificate of Incorporation of the Company filed March 15,
1996 with the Secretary of State of the State of Delaware (filed as
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1996 and incorporated herein by reference)
3.2 Second Amended and Restated By-Laws of the Company (filed as Exhibit
3.2(b) to the Company's Registration Statement on Form S-1 (Registration
No. 33-80481) and incorporated herein by reference)
4 Specimen of Certificate of Common Stock of the Company (filed as Exhibit
4 to the Company's Registration Statement on Form S-1 (Registration No.
33-80481) and incorporated herein by reference)
+10.1 1996 Stock Option Plan of the Company (filed as an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-80481)
and incorporated herein by reference)
+10.2 Form of Stock Option Agreement in connection with 1996 Stock Option Plan
of the Company (filed as Exhibit 10.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1996 and incorporated
herein by reference)
+10.3 Non-Employee Directors' Stock Plan of the Registrant (filed as an
exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-80481) and incorporated herein by reference)
+10.4 Employment Agreement, dated as of October 1, 1995, between the Company
and Raymond S. Ingleby (filed as an exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 33-80481) and
incorporated herein by reference)
<PAGE>
+10.5 Employment Agreement, dated as of December 1, 1995, between the Company
and Arthur F. Dignam (filed as an exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 33-80481) and incorporated
herein by reference)
+10.6 Employment Agreement, dated as of December 1, 1995, between the Company
and Mark M. Cohen (filed as an exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 33-80481) and incorporated
herein by reference)
+10.7 Employment Agreement, dated as of July 25, 1995, between Caribiner, Inc.
and Brian Shepherd (filed as Exhibit 10.7 to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1996 and
incorporated herein by reference)
+10.8 Employment Agreement, dated October 14, 1996, between the Company and
Lawrence P. Golen (filed as Exhibit 10.8 to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1996 and
incorporated herein by reference)
+10.9 Employment Agreement, dated September 22, 1997, between the Company and
Richard H. Vent
10.10 Credit Agreement, dated as of October 28, 1997, among the Company,
Caribiner, Inc., the several lenders named therein and the Chase
Manhattan Bank, as Administrative Agent, and Merrill Lynch Capital
Corporation, as Syndication Agent (schedules omitted--the Company agrees
to furnish a copy of any schedule to the Commission upon request)
10.11 Stockholders Agreement, dated as of March 15, 1996, among the Company,
Warburg, Pincus Investors, L.P. and Raymond S. Ingleby (filed as an
exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-80481) and incorporated herein by reference)
11.1 Statement Regarding Computation of Earnings Per Common Share
11.2 Statement Regarding Computation of Supplementary Pro Forma Income Per
Common Share
21 Subsidiaries of the Company
27 Financial Data Schedule
- ----------
+ Management contracts or compensatory plans or arrangements required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(a)(3).
<PAGE>
================================================================================
EMPLOYMENT AGREEMENT
By and Between
CARIBINER INTERNATIONAL, INC.
and
RICHARD VENT
================================================================================
As of September 22, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment ............................................ 1
2. Duties and Responsibilities of Employee ............... 1
3. Exclusivity of Service ................................ 2
4. Compensation; Bonus ................................... 2
5. Benefits .............................................. 2
6. Term of Employment .................................... 3
7. Confidentiality; Inventions; Product Development, Etc. 3
8. Non-Competition; Non-Solicitation ..................... 5
9. Termination ........................................... 6
(a) Cause ............................................ 6
(b) Incapacity ....................................... 7
(c) Death ............................................ 7
10. Violation of Other Agreements ......................... 7
11. Specific Performance; Damages ......................... 7
12. Notices ............................................... 8
13. Waivers ............................................... 8
14. Preservation of Intent ................................ 9
15. Entire Agreement ...................................... 9
16. Inurement; Assignment ................................. 9
17. Amendment ............................................. 9
18. Headings .............................................. 9
19. Counterparts .......................................... 9
20. Governing Law ......................................... 10
21. Arbitration ........................................... 10
- i-
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated as of September 22, 1997, by
and between CARIBINER INTERNATIONAL, INC., a Delaware corporation having an
office at 16 West 61st Street, New York, New York 10023 ("Employer"), and
RICHARD VENT, an individual residing at 930 Tahoe Boulevard, Suite 802-318,
Incline Village, Nevada 89451 ("Employee").
W I T N E S S E T H:
WHEREAS, Employer desires to engage Employee as an employee and Employee
desires to provide his services to Employer in connection with Employer's
business; and
WHEREAS, both parties desire to clarify and specify the rights and
obligations which each have with respect to the other in connection with
Employee's employment.
NOW, THEREFORE, in consideration of the agreements and covenants herein set
forth, the parties hereby agree as follows:
1. Employment
Employer hereby employs Employee as its President and Chief Operating
Officer and Employee hereby accepts such employment and agrees to render his
services as an employee of Employer, for the term of this Agreement (as set
forth in Section 6 hereof), all subject to and on the terms and conditions
herein set forth.
2. Duties and Responsibilities of Employee
Employee shall be employed as Employer's President and Chief Operating
Officer, subject to the other provisions of this Section 2. In the performance
of his duties, Employee shall report to Employer's Chief Executive Officer or,
in the discretion of Employer's Board of Directors (the "Board"), the Chairman.
Employee shall use his best efforts to maintain and enhance the business and
reputation of Employer. Employee's duties and responsibilities shall be
designated to Employee by the Board, its Chairman or Employer's Chief Executive
Officer. Upon Employer's request, Employee shall also perform similar services
in an identical capacity for any subsidiary or division of Employer (or a
subsidiary thereof) designated by Employer. Employee shall be available to
travel as the reasonable needs of Employer shall require. Employee shall be
based, at Employer's option, in Employer's offices located in either Atlanta,
Georgia (or the Atlanta metropolitan area) or New York, New York (or the New
York City metropolitan area), which offices Employee understands may be
relocated by Employer within a fifty (50) mile radius of their current
locations.
<PAGE>
3. Exclusivity of Service
Employee agrees to devote all of his business time, efforts and attention
to the business and affairs of Employer on an exclusive basis, and not to engage
in any other business activities for any person or entity, other than personal
investment activities, provided that such activities do not materially affect
the performance of Employee's duties hereunder.
4. Compensation; Bonus
(a) In consideration for his services to be performed under this Agreement
and as compensation therefor, Employee shall receive, in addition to all other
benefits provided in this Agreement, a base salary (the "Base Salary") at the
annual rate of three hundred twenty five thousand ($325,000) Dollars. All
payments of Base Salary shall be payable in bi-weekly installments or otherwise
in accordance with Employer's policies.
(b) In addition to the Base Salary, Employee shall be entitled to an annual
bonus (the "Bonus"), payable on approximately December 15 of each year
(commencing December 15, 1998), pursuant to a bonus compensation plan to be
formulated by Employer for Employee and its other senior executives. Such bonus
plan shall be tailored to Employee's particular skills and Employer's goals,
provided that any such bonus plan formulated for Employee shall be within
Employer's sole and absolute discretion. Notwithstanding anything to the
contrary contained herein, Employee's bonus compensation for Employer's fiscal
year ending September 30, 1998 (payable on approximately December 15, 1998)
shall not be less than $75,000.
5. Benefits
In addition to the Base Salary and Bonus provided for in Section 4 hereof,
Employee shall be entitled to the following benefits during and in respect of
the Term (as defined below):
(a) Employer shall provide Employee with the hospitalization, medical and
dental insurance coverage and other benefits (including long term disability and
life insurance) on the same basis as provided to the majority of the other
senior executive employees of Employer, in accordance with Employer's practices.
Employee shall be entitled to participate in Employer's 401(K) plan and other
similar plans adopted by Employer for similar employees.
(b) Employee shall be entitled to four (4) weeks paid vacation to be taken
by Employee at times mutually and reasonably agreed upon by Employer and
Employee in addition to all other holidays established as part of Employer's
standard practices.
- 2 -
<PAGE>
No payment shall be made to Employee for unused vacation days nor may such days
be carried over to future years.
(c) Employee shall be entitled to reimbursement for all reasonable travel,
entertainment and other reasonable expenses incurred in connection with
Employer's business, provided that such expenses are adequately documented and
vouchered in accordance with Employer's policies.
(d) Employee shall be entitled to an automobile allowance in the amount of
$500 per month, payable in equal installments during each payroll period, to
defray all costs incurred by Employee in connection with Employee's use of his
automobile in connection with the business of Employer (except for those which
Employee is entitled to reimbursement pursuant to Section 5 (c) hereof).
(e) Employer shall grant to Employee options to purchase sixty thousand
(60,000) shares of common stock (the "Common Stock") of Employer, par value
$0.01 per share, pursuant to Employer's 1996 Stock Option Plan (the "Plan") and
a Stock Option Agreement to be entered into by Employer and Employee in the form
adopted pursuant to the Plan promptly following the mutual execution and
delivery of this Agreement. All options so granted shall, subject to the terms
and conditions of the Plan, be exercisable at the price per share of the Common
Stock on the date of the issuance of such options.
6. Term of Employment
The term (the "Term") of employment shall be from the date hereof for a
period of two (2) years, unless terminated prior thereto in accordance with
Section 9 hereof. Employer agrees that no sooner than six (6) months prior to
the end of the Term and any renewal term (a "Renewal Term"), Employer will
confirm to Employee in writing, following Employee's written request therefor (a
"Renewal Indication"), whether Employer intends to extend the term of this
Agreement upon terms no less favorable than those contained herein. If such
Renewal Indication shall state that Employer intends to renew this Agreement at
the end of the Term, or a Renewal Term, as the case may be, subject to Section 9
hereof, this Agreement shall be extended for an additional two (2) year term
upon terms no less favorable than those contained herein, provided, however,
that it is contemplated that the parties will negotiate in good faith the terms
of such extended employment.
7. Confidentiality; Inventions; Product Development, Etc.
(a) Employee agrees and covenants that, at any time during employment by
Employer (which, for purposes of Sections 7 and 8 hereof shall include
Employer's subsidiaries and affiliates) or
- 3 -
<PAGE>
thereafter, he will not (without first obtaining the written permission of
Employer) (i) at any time during employment by Employer and for a period of
three (3) years thereafter, divulge to any person or entity, nor use (either
himself or in connection with any business) any "Confidential Information" (as
hereinafter defined in Section 7(c) hereof) and (ii) at any time during
employment by Employer and thereafter, divulge to any person or entity, nor use
(either himself or in connection with any business) any "Trade Secrets" (as
hereinafter defined in Section 7(c) hereof) to which he may have had access or
which had been revealed to him during the course of his employment unless such
disclosure is pursuant to a court order, disclosure in litigation involving the
Employer or in any reports or applications required by law to be filed with any
governmental agency.
(b) Employee hereby grants to Employer or its nominee all rights of every
kind whatsoever, exclusively and perpetually, in and to all services performed,
products created and product ideas conceived by Employee for Employer or its
nominee, and hereby agrees, upon Employer's request therefor, to assign and
transfer to Employer or its nominee, any and all inventions, Trade Secrets,
product ideas, improvements, processes, Confidential Information and "know how"
relating to the business or products of Employer or any subsidiary or division
thereof, including any thereof which Employee may learn, possess or acquire
during Employee's employment by Employer, and agrees that all such things and
such knowledge are, and will be, the sole and exclusive property of Employer or
its nominee, and are known or held by Employee only for the benefit of Employer
or its nominee. Any patent, trademark, servicemark or copyright applications and
patents, trademarks, servicemarks or copyrights developed, obtained or conceived
by Employee while employed or engaged by Employer which relate to the business
or product development activities of Employer or its nominee, as well as all
physical embodiments of Confidential Information, shall be and remain the sole
exclusive property of Employer, or its nominee. At Employer's request, Employee
will execute any and all applications, assignments or other instruments which
Employer or its nominee shall deem necessary to apply for and obtain Letters
Patent of the United States or any foreign country or to protect otherwise
Employer's interest therein.
(c) As used in this Agreement, the term "Confidential Information" shall
mean and include all information and data in respect of Employer's operations,
financial condition, products, customers and business (including, without
limitation, artwork, photographs, specifications, facsimiles, samples, business,
marketing or promotional plans, creative written material and information
relating to characters, concepts, names, trademarks and copyrights) which may be
communicated to Employee or to which Employee may have access in the course of
Employee's employment
- 4 -
<PAGE>
by Employer. Notwithstanding the foregoing, the term "Confidential Information"
shall not include information which:
(i) is, at the time of the disclosure, a part of the public domain through
no act or omission by Employee;
(ii) was otherwise in Employee's lawful possession prior to the disclosure;
or
(iii) is hereafter lawfully disclosed to Employee by a third party who or
which did not acquire the information under an obligation of
confidentiality to or through Employer.
As used in this Agreement, the term "Trade Secrets" shall mean and include
information, without regard to form, including, but not limited to, technical or
non-technical data, a formula, a pattern, a compilation, a program, a device, a
method, a technique, a drawing, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers which is
not commonly known by or available to the public and which information (i)
derives economic value, actual or potential, from not being known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use; and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Any combination of known information shall be within any of the foregoing
exclusions only if the combination as such is within such exclusions.
Nothing in this Section 7 shall limit any protection, definition or remedy
provided to Employer under any law, statute or legal principle relating to
Confidential Information or Trade Secrets.
(d) Employee agrees that at the time of leaving the employ of Employer he
will deliver to Employer and not keep or deliver to anyone else any and all
notes, notebooks, drawings, memoranda, documents, and in general, any and all
material relating to the business of Employer (except Employee's personal files
and records) or relating to any employee, officer, director, agent or
representative of Employer.
8. Non-Competition; Non-Solicitation
(a) Employee hereby agrees and covenants that commencing as of the date
hereof and for a period of two (2) years following the termination of his
employment with Employer (the "Limited Period") he will not directly or
indirectly engage in or become
- 5 -
<PAGE>
interested (whether as an owner, principal, agent, stockholder, member, partner,
trustee, venturer, lender or other investor, director, officer, employee,
consultant or through the agency of any corporation, limited liability company,
partnership, association or agent or otherwise) in any business or enterprise
that shall, at the time, be in whole or in substantial part competitive with any
material part of the business conducted by Employer during the period of
Employee's employment with Employer (except that ownership of not more than 1%
of the outstanding securities of any class of any entity that are listed on a
national securities exchange or traded in the over-the-counter market shall not
be considered a breach of this Section 8(a)).
(b) Employee agrees and covenants that for the Limited Period he will not
(without first obtaining the written permission of Employer) directly or
indirectly participate in the solicitation of any business of any type conducted
by Employer during the period of Employee's employment with Employer from any
person or entity which was a client or customer of Employer during the period of
Employee's employment with Employer, or was a prospective customer of Employer
from which Employee (or employees under Employee's supervision) solicited
business or for which a proposal for submission was prepared during the period
of Employee's employment with Employer.
(c) Employee agrees and covenants that for the Limited Period he will not
(without first obtaining the written permission of Employer) directly or
indirectly, recruit for employment, or induce or seek to cause such person to
terminate his or his employment with Employer, any person who then is an
employee of Employer.
9. Termination
(a) Cause. Notwithstanding the terms of this Agreement, Employer may
discharge Employee and terminate this Agreement in the event that (i) Employee
shall wilfully fail materially to perform his duties hereunder with reasonable
diligence or shall violate any covenant of his herein contained, (ii) Employee
shall engage in an act of dishonesty in connection with his duties hereunder or
theft, (iii) Employee shall unreasonably refuse to carry out the lawful order of
Employer commensurate with Employee's duties to be performed hereunder or (iv)
Employee shall be charged with a felony involving moral turpitude (which shall
include any felony relating to drugs) or shall be convicted of, or plead nolo
contendere (or make an equivalent plea) in respect of, any governmental
indictment, complaint or other formal allegation. Notwithstanding the foregoing
to the contrary, prior to discharging Employee pursuant to clauses (i) or (iii)
of the immediately preceding sentence, Employer shall give Employee ten (10)
days' prior written notice of any breach or failure and a reasonable opportunity
to cure any such breach
- 6 -
<PAGE>
or failure, or cease violating any covenant contained herein, to the extent
curable or ceasable; provided, however, that no notice shall be required to be
given in the event such breach, failure or violation is not curable or ceasable.
In the event Employee is discharged pursuant to this Section 9, Employee's Base
Salary and bonus under Section 4 hereof and all benefits under Section 5 hereof
shall terminate immediately upon such discharge (subject to applicable law such
as COBRA), and Employer shall have no further obligation to Employee except the
payment to and reimbursement to Employee for any monies due to Employee which
right to payment or reimbursement accrued prior to such discharge. In the event
Employee is terminated other than pursuant to this Section 9, Employee's Base
Salary and Bonus under Section 4 hereof and all benefits under Section 5 hereof
shall, notwithstanding such termination, be paid pursuant to the terms of this
Agreement.
(b) Incapacity. Should Employee, in the reasonable judgment of a physician
chosen by the Board, become incapacitated to the extent that he is unable to
perform his material duties pursuant to this Agreement for a period of two (2)
consecutive months by reason of illness, disability, or other incapacity,
Employer may terminate this Agreement upon one (1) month's notice after said two
(2) month period.
(c) Death. This Agreement shall terminate immediately upon the death of
Employee, in which case Employee's legal representatives shall be entitled to
receive promptly a payment equal to one (1) month's Base Salary.
10. Violation of Other Agreements
Employee represents and warrants to Employer that he is legally able to
enter into this Agreement and accept employment with Employer; that Employee is
not prohibited by the terms of any agreement, understanding or policy from
entering into this Agreement; and the terms hereof will not and do not violate
or contravene the terms of any agreement, understanding or policy to which
Employee is or may be a party, or by which Employee may be bound. Employee
agrees that, as it is a material inducement to Employer that Employee make the
foregoing representations and warranties and that they be true in all respects,
Employee shall forever indemnify and hold Employer harmless from and against all
liability, costs or expenses (including attorney's fees and disbursements) on
account of the foregoing representations being untrue.
11. Specific Performance; Damages
In the event of a breach or threatened breach of the provisions of Sections
7 or 8 hereof, Employee agrees that the injury which would be suffered by
Employer would be of a
- 7 -
<PAGE>
character which could not be fully compensated for solely by a recovery of
monetary damages. Accordingly, Employee agrees that in the event of a breach or
threatened breach of Section 7 or 8 hereof, in addition to and not in lieu of
any damages sustained by Employer and any other remedies which Employer may
pursue hereunder or under any applicable law, Employer shall have the right to
equitable relief, including issuance of a temporary or permanent injunction, by
any court of competent jurisdiction against the commission or continuance of any
such breach or threatened breach, without the necessity of proving any actual
damages or posting of any bond or other surety therefor. In addition to, and not
in limitation of the foregoing, Employee understands and confirms that, in the
event of a breach or threatened breach of Section 7 or 8 hereof, Employee may be
held financially liable to Employer for any loss suffered by Employer as a
result.
12. Notices.
Any and all notices, demands or requests required or permitted to be given
under this Agreement shall be given in writing and sent, by registered or
certified U.S. mail, return receipt requested, by hand, or by overnight courier,
addressed to the parties hereto at their addresses set forth above or such other
addresses as they may from time-to-time designate by written notice, given in
accordance with the terms of this Section, together with copies thereof as
follows:
In the case of Employer, with a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022-4728
Attention: Jeffrey D. Zukerman, Esq.
Notice given as provided in this Section shall be deemed effective: (i) on the
date hand delivered, (ii) on the first business day following the sending
thereof by overnight courier, and (iii) on the seventh calendar day (or, if it
is not a business day, then the next succeeding business day thereafter) after
the depositing thereof into the exclusive custody of the U.S. Postal Service.
13. Waivers
No waiver by any party of any default with respect to any provision,
condition or requirement hereof shall be deemed to be a waiver of any other
provision, condition or requirement hereof; nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
- 8 -
<PAGE>
14. Preservation of Intent
Should any provision of this Agreement be determined by a court having
jurisdiction in the premises to be illegal or in conflict with any laws of any
state or jurisdiction or otherwise unenforceable, Employer and Employee agree
that such provision shall be modified to the extent legally possible so that the
intent of this Agreement may be legally carried out.
15. Entire Agreement
This Agreement sets forth the entire and only agreement or understanding
between the parties relating to the subject matter hereof and supersedes and
cancels all previous agreements, negotiations, letters of intent,
correspondence, commitments and representations in respect thereof among them,
and no party shall be bound by any conditions, definitions, warranties or
representations with respect to the subject matter of this Agreement except as
provided in this Agreement.
16. Inurement; Assignment
The rights and obligations of Employer under this Agreement shall inure to
the benefit of and shall be binding upon any successor of Employer or to the
business of Employer, subject to the provisions hereof. Employer may assign this
Agreement to any person, firm or corporation controlling, controlled by, or
under common control with Employer. Neither this Agreement nor any rights or
obligations of Employee hereunder shall be transferable or assignable by
Employee.
17. Amendment
This Agreement may not be amended in any respect except by an instrument in
writing signed by the parties hereto.
18. Headings
The headings in this Agreement are solely for convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement.
19. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which when taken together shall
constitute one and the same instrument.
- 9 -
<PAGE>
20. Governing Law
This Agreement shall be governed by, construed and enforced in accordance
with the internal laws of the State of New York, without giving reference to
principles of conflict of laws.
21. Arbitration
Any dispute arising under this Agreement shall be resolved by arbitration
in the manner provided by this Section 21. Such disputes shall be resolved by
binding arbitration commenced and conducted in accordance with the then
applicable rules of commercial arbitration of the American Arbitration
Association in an arbitration commenced and held before a single arbitrator.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The location of the arbitration shall be in a
location mutually agreed upon by the parties. Notwithstanding the foregoing to
the contrary, Employer shall be entitled to seek equitable relief from a court
of competent jurisdiction in the event of a breach or threatened breach of the
provisions of Sections 7 or 8 hereof.
Section 21 Agreed to:
/s/ Richard H. Vent /s/ Raymond S. Ingleby
- ------------------------- -----------------------------
Employee Employer
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
EMPLOYEE:
/s/ Richard H. Vent
------------------------------
Richard Vent
EMPLOYER:
CARIBINER INTERNATIONAL, INC.
By: /s/ Raymond S. Ingleby
---------------------------
Raymond S. Ingleby
Chairman and Chief
Executive Officer
- 10 -
<PAGE>
EXECUTION VERSION
================================================================================
$550,000,000
CREDIT AGREEMENT
among
CARIBINER INTERNATIONAL, INC.,
CARIBINER, INC.,
The Several Lenders from Time to Time Parties Hereto
THE CHASE MANHATTAN BANK,
as Administrative Agent
and
MERRILL LYNCH CAPITAL CORPORATION,
as Syndication Agent
Dated as of October 28, 1997
================================================================================
<PAGE>
CREDIT AGREEMENT, dated as of October 28, 1997, among CARIBINER
INTERNATIONAL, INC., a Delaware corporation (the "Parent"), CARIBINER, INC., a
New York corporation (the "Company"; together with the Parent, "Borrowers"), the
several banks and other financial institutions from time to time parties to this
Agreement (the "Lenders"), THE CHASE MANHATTAN BANK, as Administrative Agent for
the Lenders hereunder (in such capacity, the "Administrative Agent")and MERRILL
LYNCH CAPITAL CORPORATION, as Syndication Agent (in such capacity, the
"Syndication Agent").
W I T N E S S E T H:
WHEREAS, the Company is party to the Credit Agreement, dated as of December
4, 1996 (the "Existing Credit Agreement"), with the several banks and other
financial institutions party thereto and The Chase Manhattan Bank, as
administrative agent;
WHEREAS, the Company, through Caribiner Services Limited, a Wholly Owned
Subsidiary incorporated under the laws of England ("Target Acquisition Corp."),
intends to acquire (the "Target Acquisition") Visual Action Holdings plc, a
company incorporated under the laws of England (the "Target");
WHEREAS, the Target Acquisition will be accomplished by means of (i) a
tender offer (the "Tender Offer") to be made by Target Acquisition Corp. for
100% (but in any event not less than the Minimum Number of Shares) of the issued
and outstanding ordinary shares of the Target (the "Target Shares") and (ii)
subject to the terms and conditions hereof, open market purchases of outstanding
Target Shares which may be effected by Target Acquisition Corp. after the
issuance of the Press Release, followed by a compulsory acquisition of any
remaining Target Shares not owned by Target Acquisition Corp. after consummation
of the Tender Offer;
WHEREAS, in order to finance the Target Acquisition, to refinance all
outstanding indebtedness under the Existing Credit Agreement and other existing
indebtedness of the Borrowers and the Target, to pay fees and expenses in
connection with the Target Acquisition and the financing thereof, to provide for
the working capital and general corporate needs of the Borrowers and their
Subsidiaries prior to and following the Target Acquisition and to fund certain
Future Acquisitions by the Borrowers, the Borrowers have requested the Lenders
to establish senior credit facilities aggregating $550,000,000; and
WHEREAS, the Lenders are willing to establish such credit facilities upon
and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
<PAGE>
2
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.
"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" has the meaning assigned to such term 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 Term Loan 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.
<PAGE>
3
"Applicable Margin" means, with respect to each Type of Loan, the
percentage determined in accordance with the Pricing Grid; provided, that (i)
for the period from the Effective Date until the Tender Closing Date, the
Applicable Margin with respect to (a) Eurodollar Loans shall be 1.125% and (b)
ABR Loans shall be .125% and (ii) for the period from the Tender Closing Date
until the date of delivery of the financial statements described in Section
6.01(b) for the fiscal quarter of the Parent ending on December 31, 1997, the
Applicable Margin shall be determined in accordance with the Pricing Grid based
on the documents delivered pursuant to Section 6.01(c); provided, further, that
at any time after the Transition Date, the Applicable Margin with respect to (i)
Eurodollar Loans shall be .875% and (ii) ABR Loans shall be 0.
"Application" means an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
"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.
"Asset Sale" means any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by clauses
(a), (b), (c) and (d) of Section 7.06); provided, that an "Asset Sale" shall be
deemed to have occurred only to the extent that the aggregate gross proceeds to
the Parent or any of its Subsidiaries (valued at the initial principal amount
thereof in the case of non-cash proceeds consisting of notes or other debt
securities and valued at fair market value in the case of other non-cash
proceeds) of all such Dispositions in any fiscal year of the Parent plus the
aggregate amount received by the Parent or any of its Subsidiaries on account of
any Recovery Event (without giving effect to the proviso contained in the
definition of such term) in any such fiscal year exceed $10,000,000.
"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, as to each Borrower, the Chief Financial
Officer of such Borrower or any individual designated as such in writing by such
Chief Financial Officer.
<PAGE>
4
"Available Commitments" means, collectively, the Available Term Loan
Commitment and Available Revolving Credit Commitment.
"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) the amount of such Lender's Revolving
Credit Exposure.
"Available Term Loan 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 Term Loan
Commitment over (b) the aggregate outstanding principal amount of such Lender's
Term 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.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America.
"Borrowers" has the meaning assigned to such term in the preamble hereof.
"Borrowing" means a borrowing consisting of Loans of the same Class and
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 a Borrower requests the Lenders to make Loans to such
Borrower hereunder.
"Borrowing Request" means a borrowing request submitted by one of the
Borrowers pursuant to Section 2.02 or Section 2.03 containing the applicable
information prescribed by such Sections.
"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
<PAGE>
5
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 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 the United Kingdom or
any agency or instrumentality thereof (provided that the full faith and credit
of the applicable country is pledged in support thereof) having maturities of
not more than twelve months from the date of acquisition ("Government
Obligations"), (ii) U.S. dollar or Sterling denominated (or foreign currency
fully hedged) time deposits, demand deposits, certificates of deposit,
Eurodollar time deposits and Eurodollar certificates of deposit of (y) any
United States of America or United Kingdom commercial bank of recognized
standing having capital and surplus in excess of $250,000,000 (or equivalent) 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
United States of America or United Kingdom 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 (or equivalent) for direct obligations issued by or fully
guaranteed by the United States of America or the United Kingdom, (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 or
Sterling denominated time and demand deposit accounts with any United States of
America or United Kingdom commercial banks insured by the
<PAGE>
6
Federal Deposit Insurance Corporation (or equivalent United Kingdom agency) with
an aggregate balance not to exceed $100,000 (or equivalent) in the aggregate at
any time at any such bank, (viii) investments in money market mutual funds in
the United States of America (or equivalent or similar vehicle in the United
Kingdom) having assets in excess of $2,500,000,000 (or equivalent) and (ix)
federally tax exempt securities rated A or better by either S&P or Moody's.
"CEL" means Caribiner Europe Limited, a company incorporated under the laws
of England.
"CEL Pledge Agreement" means the Mortgage of Shares to be executed and
delivered by the Parent and the Administrative Agent, substantially in the form
of Exhibit D-2, pursuant to which the Capital Stock of CEL shall be pledged, as
the same may be amended, supplemented or otherwise modified from time to time.
"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 35% (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 Company.
"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 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 II" means Caribiner Holdings (UK) No. 2 Ltd., a company incorporated
under the laws of England.
"CHUK II Pledge Agreement" means the Mortgage of Shares to be executed and
delivered by CEL and the Administrative Agent, substantially in the form of
Exhibit D-3, pursuant to which 65% of the Capital Stock of CHUK II shall be
pledged, 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 Term Loans or Revolving
Credit Loans.
<PAGE>
7
"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.
"Commitment Fee Rate" means the commitment fee rate from time to time
determined pursuant to the Pricing Grid.
"Commitments" means, collectively, the Term Loan Commitments and the
Revolving Credit Commitments.
"Compulsory Acquisition" means the acquisition by Target Acquisition Corp.,
pursuant to Sections 428 to 430F of the Companies Act 1985, of England, of all
of the issued and outstanding Target Shares not then owned by Target Acquisition
Corp.
"Consolidated Cash Interest Expense" means, for any period, the amount of
interest expense (other than capitalized, accreted or pay-in-kind interest and
fees, to the extent any such fees would be deemed to be interest) deducted from
earnings in determining Consolidated Net Income for such period.
"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; provided, that for purposes of calculating Consolidated EBITDA for any
period, (1) the Consolidated EBITDA of any Person acquired by the Parent or its
Subsidiaries during such period shall be included on a pro forma basis for such
period (assuming the consummation of each such acquisition and the incurrence or
assumption of any Indebtedness in connection therewith occurred on the first day
of such period) if (i) the consolidated balance sheet of such acquired Person
and its consolidated Subsidiaries as at the end of the fiscal quarter of the
Parent preceding the acquisition of such Person and the related consolidated
statements of income and stockholders' equity and of cash flows for the period
in respect of which Consolidated EBITDA is to be calculated (A) have been
provided to the Administrative Agent and the Lenders and (B) either (x) have
been reported on without a qualification arising out of the scope of the audit
(other than a "going concern" or like qualification or exception) by independent
certified public accountants of nationally recognized standing or (y) have been
found acceptable by the Administrative Agent and (ii) such financial statements,
when delivered to the Administrative Agent, are accompanied by calculations, in
reasonable detail acceptable to the Administrative Agent, demonstrating the pro
forma inclusion of the consolidated EBITDA of the Acquiree in Consolidated
EBITDA, including all pro forma expense adjustments, which calculations and
adjustments shall have been acknowledged and
<PAGE>
8
agreed to by the Administrative Agent and (2) the Consolidated EBITDA of any
Person Disposed of by the Parent or its Subsidiaries during such period shall be
excluded on a pro forma basis for such period (assuming the consummation of each
such Disposition and the repayment of any Indebtedness in connection therewith
occurred on the first day of such period). For purposes of this definition the
"consolidated EBITDA of the Acquiree" shall mean, for any period, the sum of
(aa) net income of the Acquiree and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP (excluding, to the extent
included in such consolidated net income, (I) any non-cash income or expense
other than the items covered in (bb), (cc) or (dd) 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 of the Acquiree and its Subsidiaries (bb) income taxes
accrued during such period, (cc) depreciation and amortization for such period,
(dd) interest accrued in such period, as computed on the accrual method in
accordance with GAAP and (ee) any other non-cash charges.
"Consolidated Funded Debt" means, as of any date, all Indebtedness of the
Parent and its Subsidiaries on such date, determined on a consolidated basis in
accordance with GAAP (including the current portion 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, (a) 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 (b) all Subordinated
Indebtedness.
"Consolidated Indebtedness" means, as of any date, all Indebtedness of the
Parent and its Subsidiaries on such date, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Leverage Ratio" means, as of the last day of any period of
four consecutive fiscal quarters of the Parent, the ratio of (a) Consolidated
Funded Debt on such day to (b) Consolidated EBITDA for such period.
"Consolidated Net Income" means, for any period, net income of the Parent
and its Subsidiaries for such period, 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, for any 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 for such period.
"Consolidated Total Assets" means, as of any date, the sum of all amounts
which would, in conformity with GAAP, be set forth opposite the caption "assets"
(or any
<PAGE>
9
like caption) on a consolidated balance sheet of the Parent and its Subsidiaries
as at such date.
"Continuing Directors" means the directors of the Parent on the Effective
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 4.07.
"Disposition" means, with respect to any Property, any sale, lease, sale
and leaseback, assignment, conveyance, transfer or other disposition thereof;
and the terms "Dispose" and "Disposed of" shall have correlative meanings.
"dollars" or "$" refers to lawful money of the United States of America.
"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" has the meaning assigned to such term in Section 5.01.
"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)
<PAGE>
10
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 (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 VIII.
"Excluded Subsidiaries" means, collectively, Ingleby Marketing Corp.,
Marketing Trademark Consultants, Sports Marketing Group, Ingleby Communications
Corp., Mark Wallace Associates Limited, Spectrum Communications Limited and SCH
International Limited.
"Excluded Foreign Subsidiary" means any Foreign Subsidiary if the pledge of
more than 65% of the Capital Stock of such Foreign Subsidiary or the execution
by such Foreign Subsidiary of the Master Guarantee would, in the good faith
judgment of the
<PAGE>
11
Borrowers, result in adverse tax consequences to the Parent or would be unlawful
for such Foreign Subsidiary.
"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 Borrowers 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 2.13(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 Borrowers with respect to
such withholding tax pursuant to Section 2.13(a).
"Existing Credit Agreement" has the meaning assigned to such term in the
recitals hereto.
"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.
"Fee Letter" means the Fee Letter, dated October 17, 1997, among the
Borrowers, the Administrative Agent and the Syndication Agent.
"Financial Officer" means, as to each Borrower, the chief financial
officer, principal accounting officer, treasurer or controller of such 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 of the Parent other than a
Domestic Subsidiary.
"Foreign Subsidiary Guarantee" means the Foreign Subsidiary Guarantee to be
executed and delivered by Target Acquisition Corp. and CEL, substantially in the
form of Exhibit F-2, as the same may be amended, supplemented or otherwise
modified.
<PAGE>
12
"Future Acquisition" means any future acquisition by the Parent or any of
its Subsidiaries of assets and/or businesses of other entities (other than the
Target Acquisition), 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 and (b) 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 the
consideration for which is comprised of, in whole or in part, Indebtedness of at
least $100,000,000, or at any time after the Transition Date, $75,000,000.
"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 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.
<PAGE>
13
"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 or its Subsidiaries
against fluctuations in interest rates or currency rates and not for speculative
purposes.
"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.
"Initial Revolving Credit Funding Date" has the meaning assigned to such
term in Section 5.02.
"Initial Term Loan Funding Date" has the meaning assigned to such term in
Section 5.04.
"Intellectual Property" has the meaning assigned to such term in Section
4.06.
"Interest Election Request" means a request by one of the Borrowers to
convert or continue a Borrowing of such Borrower in accordance with Section
2.07(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.
<PAGE>
14
"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 applicable
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 applicable
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 Term Loans or Revolving Credit
Loans that would otherwise extend beyond the Term Loan Maturity Date or the
Revolving Credit Termination Date, as the case may be, shall end on the
Term Loan Maturity Date or 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 applicable Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest
Period for such Loan.
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as issuer of
any Letter of Credit.
"L/C Fee Payment Date" means the last day of each March, June, September
and December.
"L/C Obligations" means at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.05(a).
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15
"L/C Participants" means the collective reference to all the Revolving
Credit Lenders other than the Issuing Bank.
"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.
"Letters of Credit" has the meaning assigned to such term in Section 3.01.
"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
Applications, the Subsidiaries Guarantees, the Syndication Letter Agreement and
the Security Documents.
"Loan Parties" means, collectively, the Parent, the Company and each other
Subsidiary of the Parent which is a party to a Loan Document.
"Loans" means the Term Loans and Revolving Credit Loans made by the Lenders
to the Borrowers pursuant to this Agreement.
"Majority Lenders" means, at any time, the holders of more than 50% of the
sum of the Available Commitments, the Term Loan Exposure and the Revolving
Credit Exposure of all Lenders at such time.
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16
"Majority Revolving Credit Lenders" means, at any time, the holders of more
than 50% of the sum of the Available Revolving Credit Commitments and the
Revolving Credit Exposure of all Lenders at such time.
"Majority Term Loan Lenders" means, at any time, the holders of more than
50% of the sum of the Available Term Loan Commitments and the Term Loan Exposure
of all Lenders at such time.
"Master Guarantee" means the Master Guarantee to be executed and delivered
by certain Subsidiaries of the Parent parties thereto, substantially in the form
of Exhibit F-1, as the same may be amended, supplemented or otherwise modified
from time to time.
"Master Pledge Agreement" means the Master Pledge Agreement to be executed
and delivered by the Borrowers and certain of their Subsidiaries parties
thereto, substantially in the form of Exhibit D-1, as the same may be amended,
supplemented or otherwise modified from time to time.
"Master Security Agreement" means the Master Security Agreement to be
executed and delivered by the Borrowers and certain of their Subsidiaries
parties thereto, substantially in the form of Exhibit E, as the same may be
amended, supplemented or otherwise modified from time to time.
"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 Borrowers to
perform their payment or other material obligations hereunder, or the ability of
the Loan Parties to perform their material obligations under 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.
"Minimum Number of Shares" means not less than 90% in nominal value of the
Target Shares (or such lesser percentage as may be agreed to by the Lenders (it
being understood that if Target Acquisition Corp. decides that it wishes to
reduce the minimum acceptance condition to 75% in nominal value of such Shares,
the Lenders would consider the Borrowers' request to such effect but would not
be obligated to agree to such request)) which have been issued or alloted and
fully paid on or before the date the Tender Offer is made and unconditionally
issued or alloted and fully paid after such date but before the Tender Closing
Date, but excluding any Target Shares which, on the date the Tender Offer is
made, are held or (otherwise than under such a contract as described in Section
428(5) of the Companies Act 1985 of England) contracted to be acquired by Target
Acquisition Corp. and/or its associates (as such term is defined in Section 430E
of the Companies Act 1985 of England).
"Moody's" means Moody's Investors Service, Inc.
"Moody's Rating" means, on any date, the rating by Moody's of the Loans in
effect on such date.
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17
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Cash Proceeds" means (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset which is the subject of such
Asset Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), including any taxes resulting from
the transfer of the proceeds of such sale to the Parent or any of its
Subsidiaries and (b) in connection with any issuance or sale of debt securities
or instruments or the incurrence of loans, the cash proceeds received from such
issuance or incurrence, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith.
"Notes" means, collectively, the Term Loan Notes and the Revolving Credit
Notes.
"Obligations" means, collectively, (i) the unpaid principal of and interest
on the Loans and all other obligations and liabilities of the Borrowers 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
either 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 Borrowers pursuant to the terms of this Agreement or any other Loan
Document) (ii) the obligations and liabilities under the Hedge Agreements to
which any Lender or any Affiliate of any Lender is a party, and (iii)
reimbursement obligations of either Borrower to The Chase Manhattan Bank in
respect of letters of credit issued for the account of either such Borrower
(other than pursuant to Article III of this Agreement).
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18
"Offer Documents" means the Press Release and the Tender Offer
documentation subsequently to be posted by Tender Acquisition Corp. setting out
the detailed terms of the Tender Offer.
"Optionholders" means the holders of Options.
"Options" means options outstanding on the date hereof to purchase up to
1,840,380 Target Shares.
"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.
"Panel" means The Panel of Take-overs and Mergers in the City of London.
"Parent" has the meaning assigned to such term in the preamble hereof.
"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 Master Pledge Agreement, the
CHUK II Pledge Agreement, the Target Acquisition Corp. Pledge Agreement, the
Target Pledge Agreement, the Wavelength 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.
"Pledged Securities" means the securities to be pledged pursuant to the
Pledge Agreements.
"Posting Date" means the date on which the offer materials in respect of
the Tender Offer are mailed to the Target Shareholders.
"Press Release" means the press announcement to be released by or on behalf
of Target Acquisition Corp. publicly announcing a firm intention to make the
Tender Offer.
"Pricing Grid" means the pricing grid attached hereto as Annex A.
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19
"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.
"Pro Forma Balance Sheet" has the meaning assigned to such term as defined
in Section 4.01(c).
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible,
including without limitation, Capital Stock.
"Recovery Event" means any payment in respect of any property or casualty
insurance claim or any condemnation proceeding relating to any Property of the
Parent or any of its Subsidiaries; provided, that a "Recovery Event" shall be
deemed to have occurred only to the extent that all such payments in any fiscal
year of the Parent, plus the aggregate amount received by the Parent or any of
its Subsidiaries on account of any Disposition of Property in any such fiscal
year exceed $10,000,000.
"Register" has the meaning assigned to such term in Section 10.06.
"Reimbursement Obligation" means the obligation of the Borrowers to
reimburse the Issuing Bank pursuant to Section 3.05(a) for amounts drawn under
Letters of Credit.
"Reinvestment Deferred Amount" means, with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by the Parent or any of its
Subsidiaries in connection therewith which are not applied to prepay the Term
Loans pursuant to Section 2.06(i) as a result of the delivery of a Reinvestment
Notice.
"Reinvestment Event" means any Asset Sale or Recovery Event in respect of
which the Parent has delivered a Reinvestment Notice.
"Reinvestment Notice" means a written notice executed by an Authorized
Officer of the Parent stating that no Event of Default has occurred and is
continuing and that the Parent (either directly or indirectly through a
Subsidiary) intends and expects to use all or a specified portion of the Net
Cash Proceeds of an Asset Sale or Recovery Event to acquire assets useful in its
business or in the business of such Subsidiary.
"Revolving Credit Commitment" means, as to any Lender, the obligation of
such Lender to make Revolving Credit Loans to and/or issue or participate in
Letters of Credit issued on behalf of the Borrowers 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 2.06(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
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20
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 Initial Revolving Credit Funding Date to but not including the Revolving
Credit Termination Date.
"Revolving Credit Exposure" means, with respect to any Lender at any time,
the sum of the outstanding principal amount of such Lender's Revolving Credit
Loans, such Lender's Revolving Credit Commitment Percentage of the L/C
Obligations at such time and such Lender's Swingline Exposure at such time.
"Revolving Credit Lender" means each Lender having a Revolving Credit
Commitment or Revolving Credit Exposure.
"Revolving Credit Loans" has the meaning assigned to such term in Section
2.01(b).
"Revolving Credit Notes" has the meaning assigned to such term in Section
2.02(g).
"Revolving Credit Termination Date" means (a) September 30, 2003, provided,
that if the Tender Closing Date shall not have occurred on or before the Term
Loan Termination Date, the "Revolving Credit Termination Date" shall be the date
which is eighteen (18) months after the Effective Date, or (b) such earlier date
on which the Revolving Credit Commitments shall terminate as provided herein.
"S&P" means Standard & Poor's Rating Service.
"S&P Rating" means, on any date, the actual or implied rating by S&P of the
Loans in effect on such date.
"SEC" means the Securities and Exchange Commission of the United States.
"Security Documents" means, collectively, the Pledge Agreements, the Master
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 Borrowers hereunder and under any
of the other Loan Documents or to secure any guarantee of any such obligations
and liabilities.
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21
"Security Trustee" has the meaning assigned to such term in Section 9.11.
"Significant Subsidiary" shall mean, as at any time, any Subsidiary of the
Parent that (a) has assets in excess of $5,000,000 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 $5,000,000
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.
"Sterling" means the lawful currency from time to time of the United
Kingdom.
"Subordinated Indebtedness" means Indebtedness of the Parent (a) maturing
at least 181 days after the Term Loan Maturity Date and having terms and
conditions 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.
"Subsidiaries Guarantees" means, collectively, the Master Guarantee, the
Foreign Subsidiaries Guarantee and the Guarantees to be executed and delivered
by the Subsidiaries of the Parent in accordance with the provisions of Sections
6.10(b) and (c), as the same may be amended, supplemented or otherwise modified
from time to time.
"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
<PAGE>
22
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent, provided, that for purposes of Article IV of this Agreement (other than
Section 4.11) none of the Excluded Subsidiaries shall be deemed to be a
Subsidiary of the Parent or any other Loan Party.
"Swingline Exposure" means, at any time, the aggregate principal amount of
all Swingline Loans outstanding at such time. The Swingline Exposure of any
Lender at any time shall be its Revolving Credit Commitment Percentage of the
total Swingline Exposure at such time.
"Swingline Lender" means The Chase Manhattan Bank, in its capacity as
lender of Swingline Loans hereunder.
"Swingline Loan" has the meaning assigned to such term in Section 2.03(a).
"Syndication Agent" has the meaning given to such term in the recitals
hereto.
"Syndication Letter Agreement" means the Syndication Letter Agreement,
dated October 28, 1997, among the Borrowers, the Administrative Agent and the
Syndication Agent.
"Takeover Code" means the City Code on Takeovers and Mergers in effect in
England.
"Target" has the meaning assigned to such term in the recitals hereto.
"Target Acquisition" has the meaning assigned to such term in the recitals
hereto.
"Target Acquisition Corp." has the meaning assigned to such term in the
recitals hereto.
"Target Acquisition Corp. Pledge Agreement" means the Mortgage of Shares to
be executed and delivered by the Company and the Administrative Agent,
substantially in the form of Exhibit D-4, pursuant to which the Capital Stock of
Target Acquisition Corp. shall be pledged, as the same may be amended,
supplemented or otherwise modified from time to time.
"Target Pledge Agreement" means the Mortgage of Shares to be executed and
delivered by Target Acquisition Corp. and the Administrative Agent,
substantially in the form of Exhibit D-5, pursuant to which 65% of the Capital
Stock of the Target shall be pledged, as the same may be amended, supplemented
or otherwise modified from time to time.
"Target Shareholders" means the holders of the Target Shares.
"Target Shares" has the meaning assigned to such term in the recitals
hereto.
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23
"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.
"Tender Closing Date" means the date on which Target Acquisition Corp. has
acquired or has become unconditionally obligated to purchase the Minimum Number
of Shares, each of the other conditions to the Tender Offer has been fulfilled
or waived and the Tender Offer has become, or is declared by Target Acquisition
Corp. to be, unconditional in all respects.
"Tender Offer" has the meaning assigned to such term in the recitals
hereto.
"Term Loan" has the meaning assigned to such term in Section 2.01(a).
"Term Loan Commitment" means, as to any Lender, the obligation of such
Lender to make Term Loans to the Parent hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Term Loan Exposure
hereunder, as such obligation may be (a) reduced from time to time pursuant to
Section 2.06(b) 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 Term Loan Commitment is set forth on Schedule 1, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Term Loan Commitment, as applicable.
"Term Loan Commitment Percentage" means, as to any Lender at any time, the
percentage which such Lender's Term Loan Commitment then constitutes of the
aggregate Term Loan Commitments (or, at any time after the Term Loan Commitments
shall have expired or terminated, the percentage which the aggregate principal
amount of such Lender's Term Loans then outstanding constitutes of the aggregate
principal amount of the Term Loans then outstanding).
"Term Loan Commitment Period" means the period from and including the
Tender Closing Date to but not including the Term Loan Termination Date.
"Term Loan Exposure" means, with respect to any Lender at any time, the
outstanding principal amount of such Lender's Term Loan at such time.
"Term Loan Lender" means each Lender having a Term Loan Commitment or Term
Loan Exposure.
"Term Loan Maturity Date" means September 30, 2003 or such earlier date on
which the Term Loans shall become due and payable in accordance with the terms
of this Agreement.
"Term Loan Notes" has the meaning assigned to such term in Section 2.04(g).
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24
"Term Loan Termination Date" means the earliest of (a) the date which is
six months after the Posting Date, (b) the date on which the Tender Offer lapses
or is withdrawn by Target Acquisition Corp. and (c) May 1, 1998.
"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, the use of the proceeds thereof by the
Borrowers and the commencement and consummation of the Tender Offer and the
Compulsory Acquisition.
"Transferee" shall have the meaning ascribed to such term in Section
10.06(f).
"Transition Date" means the Term Loan Termination Date if the Tender
Closing Date shall not have occurred on or prior thereto.
"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.
"U.K. Pledge Agreements" has the meaning assigned to such term in Section
9.11.
"Uniform Customs" means the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"Warburg" means Warburg Pincus Investors, L.P., a Delaware limited
partnership.
"Wavelength" means Caribiner Wavelength Pty. Limited, a corporation
organized under the laws of Australia.
"Wavelength Pledge Agreement" means the Mortgage of Shares to be executed
and delivered by the Parent and the Administrative Agent, in a form to be agreed
upon by
<PAGE>
25
such parties, pursuant to which 65% of the Capital Stock of Wavelength shall be
pledged, as the same may be amended, supplemented or otherwise modified from
time to time.
"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 "Revolving
Credit Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g.,
a "Eurodollar Revolving Credit Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Revolving Credit Borrowing") or by Type (e.g., a
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving
Credit 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 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
Borrowers that the Majority Lenders request an amendment to any provision hereof
for
<PAGE>
26
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. Term Loan Commitments; Revolving Credit Commitments. (a)
Subject to the terms and conditions hereof, each Term Loan Lender severally
agrees to make term loans ("Term Loans") to the Parent from time to time during
the Term Loan Commitment Period in an aggregate principal amount not exceeding
such Lender's Term Loan Commitment.
(b) Subject to the terms and conditions hereof, each Lender severally
agrees to make revolving credit loans ("Revolving Credit Loans") to the
Borrowers 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; provided
that the sum of the Revolving Credit Exposures of all Lenders may not exceed
$175,000,000 prior to the Tender Closing Date. During the Revolving Credit
Commitment Period the Borrowers 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.
(c) The Term 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 2.02 and 2.07; provided that no Revolving Credit Loans shall be
made as a Eurodollar Loan after the day that is one month prior to the Revolving
Credit Termination Date.
(d) Notwithstanding any other provision of this Agreement, the Borrowers
shall not be entitled to request, or to elect to convert or continue, any
Eurodollar Term Loan Borrowing or Eurodollar Revolving Credit Borrowing if the
Interest Period requested with respect thereto would end after the Term Loan
Maturity Date or the Revolving Credit Termination Date, as the case may be.
SECTION 2.02. Borrowing Procedure for Term Loans and Revolving Credit
Loans. (a) The Company may borrow under the Term Loan Commitments during the
Term Loan Commitment Period on any Business Day, provided that an Authorized
Officer of the Company 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 Term Loans are to be initially
Eurodollar Loans, or (ii) one Business Day prior to the requested Borrowing
Date, otherwise), specifying (A) the aggregate amount to be borrowed, (B) the
requested Borrowing Date, (C) whether the borrowing is to be of Eurodollar
Loans, ABR
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27
Loans or a combination thereof, (D) 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 (E) the location and number of the Company's
account to which funds are to be disbursed. 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 Term
Loan, then the Company shall be deemed to have selected an Interest Period of
one month's duration. Each borrowing under the Term Loan Commitments shall be
(I) in the case of ABR Loans, in an amount equal to $5,000,000 or a whole
multiple of $1,000,000 in excess thereof (or if the then Available Term Loan
Commitments are less than $5,000,000, such lesser amount) or (II) in the case of
Eurodollar Loans, in an amount equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof. Upon receipt of any such notice from the Company,
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 Company 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 Company in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Company by 2:00 P.M. New York City time on such day by the
Administrative Agent transferring to an account of the Company with the
Administrative Agent and thereafter as directed by the Company 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) Each 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 requesting a Borrowing 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 (A) the amount to be
borrowed, (B) the requested Borrowing Date, (C) whether the borrowing is to be
of Eurodollar Loans, ABR Loans or a combination thereof, (D) 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 (E) the location and number of the Borrower's account to which funds are to
be disbursed. 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
such Borrower shall be deemed to have selected an Interest Period of one month's
duration. Each borrowing under the Revolving Credit Commitments shall be (I) 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 (II) in the case of
Eurodollar Loans, in an amount equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof. Upon receipt of any such notice from one of the
Borrowers, the Administrative Agent shall promptly notify each Lender thereof.
Each Lender will make
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28
the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of such 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 such Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to such Borrower by 2:00 P.M. New York City time on such day by the
Administrative Agent transferring to an account of such Borrower with the
Administrative Agent and thereafter as directed by such 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 2.03. Swingline Loans. (a) Subject to the terms and conditions set
forth herein, the Swingline Lender agrees to make swingline loans ("Swingline
Loans") to each Borrower from time to time during the Revolving Credit
Commitment Period, in an aggregate principal amount at any time outstanding that
will not result in (i) the aggregate principal amount of outstanding Swingline
Loans exceeding $10,000,000 or (ii) the sum of the total Revolving Credit
Exposures exceeding the total Revolving Credit Commitments (or at any time prior
to the Tender Closing Date, $175,000,000); provided that the Swingline Lender
shall not be required to make a Swingline Loan to refinance an outstanding
Swingline Loan. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow
Swingline Loans.
(b) To request a Swingline Loan, the applicable Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such
notice received from such Borrower. The Swingline Lender shall make each
Swingline Loan available to such Borrower by means of a credit to the general
deposit account of such Borrower with the Swingline Lender by 3:00 p.m., New
York City time, on the requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the Administrative
Agent not later than 10:00 a.m., New York City time, on any Business Day require
the Lenders to acquire participations on such Business Day in all or a portion
of the Swingline Loans outstanding. Such notice shall specify the aggregate
amount of Swingline Loans in which Lenders will participate. Promptly upon
receipt of such notice, the Administrative Agent will give notice thereof to
each Lender, specifying in such notice such Lender's Revolving Credit Commitment
Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Lender's
Revolving Credit Commitment Percentage of such Swingline Loan or Loans. Each
Lender acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Revolving Credit
Commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever. Each Lender shall
<PAGE>
29
comply with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.02(b) with respect
to Revolving Credit Loans made by such Lender (and Section 2.02(b) shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Swingline Lender the amounts so
received by it from the Lenders. The Administrative Agent shall notify the
Borrowers of any participations in any Swingline Loan acquired pursuant to this
paragraph, and thereafter payments in respect of such Swingline Loan shall be
made to the Administrative Agent and not to the Swingline Lender. Any amounts
received by the Swingline Lender from the Borrowers (or other party on behalf of
the Borrowers) in respect of a Swingline Loan after receipt by the Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrowers of any default in the payment thereof.
SECTION 2.04. Repayment of Loans; Evidence of Debt. (a) The Borrowers
hereby, jointly and severally, unconditionally promise to pay to the
Administrative Agent for the account of each Revolving Credit Lender and the
Swingline Lender the then unpaid principal amount of each Revolving Credit Loan
and Swingline Loan of such Revolving Credit Lender or Swingline Lender on the
Revolving Credit Termination Date or on such other dates and in such other
amounts as may be required from time to time pursuant to this Agreement. The
Borrowers hereby, jointly and severally, further agree to pay interest on the
unpaid principal amount of the Revolving Credit Loans and Swingline Loans from
time to time outstanding until payment thereof in full at the rates per annum,
and on the dates, set forth in Section 2.09.
(b) The Term Loans of each Term Loan Lender shall mature in 20 consecutive
quarterly installments, commencing on December 31, 1998, each of which shall be
in an amount equal to such Lender's Term Loan Commitment Percentage multiplied
by the amount set forth below opposite such installment (provided, that if less
than $250,000,000 in aggregate principal amount of Term Loans is outstanding on
the Term Loan Termination Date, each of the installments set forth below shall
be proportionately reduced):
Installment Principal Amount
----------- ----------------
December 31, 1998 $6,250,000
March 31, 1999 $6,250,000
June 30, 1999 $6,250,000
September 30, 1999 $6,250,000
December 31, 1999 $9,375,000
March 31, 2000 $9,375,000
June 30, 2000 $9,375,000
September 30, 2000 $9,375,000
December 31, 2000 $12,500,000
<PAGE>
30
March 31, 2001 $12,500,000
June 30, 2001 $12,500,000
September 30, 2001 $12,500,000
December 31, 2001 $15,625,000
March 31, 2002 $15,625,000
June 30, 2002 $15,625,000
September 30, 2002 $15,625,000
December 31, 2002 $18,750,000
March 31, 2003 $18,750,000
June 30, 2003 $18,750,000
September 30, 2003 $18,750,000
(c) The Borrowers hereby, jointly and severally, unconditionally promise to
pay to the Administrative Agent for the account of the each Term Loan Lender the
principal amount of each Term Loan of such Term Loan Lender in installments
according to the amortization schedule set forth in paragraph (b) above or on
such other dates and in such other amounts as may be required from time to time
pursuant to this Agreement. The Borrowers hereby, jointly and severally, further
agree to pay interest on the unpaid principal amount of the Term Loans from time
to time outstanding from the date hereof until payment in full thereof at the
rates per annum, and on the dates, set forth in Section 2.09.
(d) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrowers to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time in
respect of such Loans under this Agreement.
(e) The Administrative Agent, on behalf of the Borrowers, shall maintain
the Register pursuant to Section 10.06(d), and a subaccount therein for each
Lender, in which shall be recorded (i) the amount of each Loan made hereunder
and any Note evidencing such Loan, the Type thereof and each Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Borrowers to each Lender hereunder and
(iii) both the amount of any sum received by the Administrative Agent hereunder
from the Borrowers and each Lender's share thereof.
(f) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.04(d) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrowers to repay (with applicable interest) the Loans by
such Lender in accordance with the terms of this Agreement.
(g) The Borrowers agree that, upon the request to the Administrative Agent
by any Lender, the Borrowers will execute and deliver to such Lender promissory
notes
<PAGE>
31
evidencing any Term Loans, Revolving Credit Loans or Swingline Loans, as the
case may be, of such Lender, substantially in the forms of Exhibits A-1, A-2 and
A-3, respectively, with appropriate insertions as to date and principal amount
(a "Term Loan Note", "Revolving Credit Note" or "Swingline Note", respectively).
(h) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of the Company in respect of the Loans
and other extensions of credit made to the Parent hereunder and the other Loan
Documents shall in no event exceed the amount for which the Company can be held
liable under applicable federal and state laws relating to the insolvency of
debtors.
SECTION 2.05. Fees. (a) The Borrowers, jointly and severally, agree 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 Term Loan Commitment Period
to the Term Loan Termination Date, computed at the Commitment Fee Rate on the
average daily amount of the Available Term Loan 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 Term Loan Termination
Date or such earlier date on which the Term Loan Commitments shall terminate as
provided herein, commencing on the first of such dates to occur after the date
hereof.
(b) The Borrowers, jointly and severally, agree 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 Commitment Fee
Rate 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 Borrowers, jointly and severally, agree to pay to each of the
Administrative Agent and the Syndication Agent, for their own respective
accounts, fees payable in the amounts and at the times separately agreed upon in
writing between the Borrowers and the Administrative Agent and the Syndication
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, to the Lenders. Fees paid shall not be refundable under any
circumstances.
SECTION 2.06. Optional Prepayments; Mandatory Prepayments; Termination or
Mandatory Reduction of Commitments. (a) Unless previously terminated, the Term
Loan Commitments shall terminate on the Term Loan Termination Date. Unless
previously terminated, the Revolving Credit Commitments shall terminate on the
Revolving Credit Termination Date.
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32
(b) Subject to prior notice in accordance with Section 2.06(f), the
Borrowers shall have the right to terminate the Term Loan Commitments or, from
time to time, to reduce the amount of the Term Loan Commitments without
incurring any fee or penalty, provided, that, without regard to the notice
requirements of Section 2.06(f), the Term Loan Commitments shall be
automatically reduced simultaneously with each payment or prepayment of the Term
Loans in an amount equal to such payment or prepayment. Except as provided in
the proviso to the preceding sentence, any such reduction shall be in an amount
equal to $500,000 or a whole multiple thereof and shall reduce permanently the
Term Loan Commitments then in effect.
(c) Subject to prior notice in accordance with Section 2.06(f), the
Borrowers 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 such reduction shall be
accompanied by the prepayment of the Revolving Credit Loans and/or Swingline
Loans to the extent, if any, that the sum of the aggregate outstanding Revolving
Credit Exposure of all Lenders exceeds the amount of the Revolving Credit
Commitments as so reduced; provided, that the Revolving Credit Commitments may
not be reduced to an amount that is less than the then outstanding L/C
Obligations.
(d) On each of September 30, 2001 and September 30, 2002, the Revolving
Credit Commitments shall be reduced by $25,000,000.
(e) The Revolving Credit Commitments shall be reduced permanently to
$175,000,000 on the Transition Date.
(f) The Borrowers shall notify the Administrative Agent of any election to
terminate or permanently reduce the Term Loan Commitments or the Revolving
Credit Commitments, as the case may be, under paragraph (b) or (c) of this
Section 2.06 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 Borrowers pursuant to this Section 2.06(f)
shall be irrevocable. Each reduction of the Term Loan Commitments or Revolving
Credit Commitments, as the case may be, shall be made ratably among the Lenders
in accordance with their respective Term Loan 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 2.12.
(g) The Borrowers 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
<PAGE>
33
prepayment and whether the prepayment is of Revolving Credit Loans or Term
Loans, and of Eurodollar Loans or 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 Borrowers shall also pay any amounts owing
pursuant to Section 2.12. Upon receipt of any such notice the Administrative
Agent shall promptly notify each Lender thereof. Optional prepayments of Loans
shall be in an aggregate principal amount of $500,000 or a whole multiple of
$100,000 in excess thereof.
(h) Unless the Majority Lenders and the Majority Term Loan Lenders shall
otherwise agree, if any Indebtedness (other than Indebtedness permitted by
paragraphs (a) through (h) of Section 7.02) shall be incurred by the Parent or
any of its Subsidiaries, (i) at any time prior to the Initial Term Loan Funding
Date, the Term Loan Commitments shall be reduced in an amount equal to 100% of
such Net Cash Proceeds on the date of such issuance or incurrence and (ii) at
any time after the Initial Term Loan Funding Date, an amount equal to 100% of
the Net Cash Proceeds thereof shall be applied on the date of such issuance or
incurrence toward the prepayment of the Term Loans.
(i) Unless the Majority Lenders and the Majority Term Loan Lenders shall
otherwise agree, if on any date the Parent or any of its Subsidiaries shall
receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a
Reinvestment Notice shall be delivered in respect thereof, (i) at any time prior
to the Initial Term Loan Funding Date, the Term Loan Commitments shall be
reduced in an amount equal to 100% of the Net Cash Proceeds thereof and (ii) at
any time after the Initial Term Loan Funding Date, an amount equal to 100% of
the Net Cash Proceeds thereof shall be applied on the date of such issuance or
incurrence toward the prepayment of the Term Loans.
(j) Each prepayment of Loans pursuant to Section 2.06(h) or (i) shall be
accompanied by accrued and unpaid interest on the amount prepaid to the date of
prepayment and any amounts payable under Section 2.12 in connection with such
prepayment.
(k) Prepayments of any Class of Loans pursuant to Section 2.06(h) or (i)
shall be applied, first, to prepay ABR Loans of such Class then outstanding and,
second, to prepay Eurodollar Loans of such Class then outstanding.
(l) Prepayments of the Term Loans shall be applied to the installments
thereof ratably in accordance with the then outstanding amounts thereof.
SECTION 2.07. Interest Elections. (a) Each Borrowing initially shall be of
the Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, a 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.
A 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
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34
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 applicable 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:
(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 such Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(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 a Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing of such Borrower 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 Borrowers, 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
<PAGE>
35
an ABR Borrowing at the end of the Interest Period applicable thereto. No Term
Loan or Revolving Credit Loan may be converted into a Eurodollar Loan after the
date that is one month prior to the Term Loan Maturity Date or Revolving Credit
Termination Date, as the case may be.
(f) Swingline Loans shall be ABR Loans. Swingline Loans may not be
converted to Eurodollar Loans.
SECTION 2.08. 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
relevant 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 Borrowers, jointly and 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 relevant 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 Borrowers, 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 2.09. 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 Borrowers 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 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 2.09(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 Revolving
Credit Loan or Swingline Loan prior to the end of the Revolving Credit
Commitment Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment, (iii) in the
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36
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 Revolving
Credit Loans and Swingline Loans shall be payable upon termination of the
Revolving Credit Commitments.
(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 2.10. 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 Term Loan
Lenders or the Majority Revolving Credit Lenders, as the case may be, 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 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 2.11. 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
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37
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 issuing or participating
in Letters of Credit (or of maintaining its obligation to make any such Loan or
to issue or to participate in any such Letter of Credit) or to reduce the amount
of any sum received or receivable by such Lender hereunder (whether of
principal, interest or otherwise), then the Borrowers, jointly and severally,
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, the Loans made or Letters of Credit participated
in 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 Borrowers,
jointly and severally, 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
Borrowers and shall be conclusive and binding absent manifest error. The
Borrowers, jointly and severally, shall pay such Lender the amount shown as due
on any such certificate within 15 days after receipt thereof.
(d) The Borrowers 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 Borrowers for such
compensation.
SECTION 2.12. 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 Borrowers, jointly and
severally, 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
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38
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 Borrowers and shall
be conclusive absent manifest error. The Borrowers shall pay such Lender the
amount shown as due on any such certificate within 15 days after receipt
thereof.
SECTION 2.13. Taxes. (a) Any and all payments by or an account of any
obligation of the Borrowers hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrowers 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 Borrowers, jointly and severally,
shall make such deductions and (iii) the Borrowers shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
(b) In addition, the Borrowers, jointly and severally, 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.
(c) The Borrowers, jointly and severally, 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 Borrowers under Section 2.13(a) or (b) (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) paid by the Administrative 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
Borrowers 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 Borrowers to a Governmental Authority, the Parent shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by
such
<PAGE>
39
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 Borrowers (with a copy to the Administrative Agent), at the
time or times prescribed by applicable law or reasonably requested by the
Borrowers, 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 2.14. Payments Generally; Pro Rata Treatment. (a) Each of the
Borrowers shall make each payment required to be made by it hereunder (whether
of principal, interest or fees, or under Section 2.11, 2.12 or 2.13, 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 2.11, 2.12, 2.13 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.
(c) Unless the Administrative Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders hereunder that the Borrowers will not make
such payment, the Administrative Agent may assume that the Borrowers have 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
Borrowers have 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.
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40
(d) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.08 or 2.14(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.
ARTICLE III. LETTERS OF CREDIT
SECTION 3.01. L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Bank, in reliance on the agreements of the other Lenders set
forth in Section 3.04(a), agrees to issue letters of credit ("Letters of
Credit") for the account of either Borrower on any Business Day during the
Revolving Credit Commitment Period in such form as may be reasonably approved
from time to time by the Issuing Bank; provided that the Issuing Bank shall have
no obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed $10,000,000 or (ii) the sum of
the total Revolving Credit Exposures would exceed the total Revolving Credit
Commitments (or, at any time prior to the Tender Closing Date, $175,000,000).
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be a standby letter of credit
issued to support obligations of the Parent or any of its Subsidiaries,
contingent or otherwise, incurred in connection with the operation of their
respective businesses; and
(ii) expire no later than the Revolving Credit Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform Customs and, to
the extent not inconsistent therewith, the laws of the State of New York.
(d) The Issuing Bank shall not at any time be obligated to issue any Letter
of Credit hereunder if such issuance would conflict with, or cause the Issuing
Bank or any L/C Participant to exceed any limits imposed by, any applicable
Requirement of Law.
SECTION 3.02. Procedure for Issuance of Letters of Credit. Each Borrower
may from time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may reasonably request. Upon receipt of any Application, the
Issuing Bank will process such Application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Bank be required to
issue any Letter of Credit earlier than three Business Days after its receipt of
the Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed by the
Issuing Bank
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41
and such Borrower. The Issuing Bank shall furnish a copy of such Letter of
Credit to such Borrower promptly following the issuance thereof.
SECTION 3.03. Fees, Commissions and Other Charges. (a) The Borrowers,
jointly and severally, shall pay to the Agent, for the account of the Issuing
Bank and the L/C Participants, a letter of credit commission with respect to
each Letter of Credit, computed for the period from the date of such payment to
the date upon which the next such payment is due hereunder at the rate of (i)
prior to the Transition Date, 1.00% per annum and (ii) after the Transition
Date, 1.25% per annum, in each case calculated on the basis of a 365 (or 366-,
as the case may be) year, of the aggregate amount available to be drawn under
such Letter of Credit on the date on which such fee is calculated. Prior to the
Transition Date, .125% of such fee shall be payable to the Issuing Bank, and the
remaining .875% of such fee shall be payable to the L/C Participants; after the
Transition Date, .25% of such fee shall be payable to the Issuing Bank, and the
remaining 1.00% of such fee shall be payable to the L/C Participants, in each
case to be shared ratably among them in accordance with their respective
Commitment Percentages. Such commissions shall be payable in advance on the date
of issuance of each Letter of Credit and on each L/C Fee Payment Date to occur
thereafter and shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, the Borrowers,
jointly and severally, shall pay or reimburse the Issuing Bank for such normal
and customary costs and expenses as are incurred or charged by the Issuing Bank
in issuing, effecting payment under, amending or otherwise administering any
Letter of Credit.
(c) The Agent shall, promptly following its receipt thereof, distribute to
the Issuing Bank and the L/C Participants all fees and commissions received by
the Agent for their respective accounts pursuant to this subsection.
SECTION 3.04. L/C Participations. (a) The Issuing Bank irrevocably agrees
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Bank to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Bank, on the terms and conditions hereinafter stated, for such L/C Participant's
own account and risk an undivided interest equal to such L/C Participant's
Commitment Percentage in the Issuing Bank's obligations and rights under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit
for which the Issuing Bank is not reimbursed in full by the Borrowers in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Bank upon demand at the Issuing Bank's address for notices specified
herein an amount equal to such L/C Participant's Commitment Percentage of the
amount of such draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the Issuing
Bank pursuant to Section 3.04(a) in respect of any unreimbursed portion of any
payment made by the Issuing Bank under any Letter of Credit is paid to the
Issuing Bank within three Business Days after the date such payment is due, such
L/C Participant shall pay to the
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42
Issuing Bank on demand an amount equal to the product of such amount, times the
daily average Federal funds rate, as quoted by the Issuing Bank, during the
period from and including the date such payment is required to the date on which
such payment is immediately available to the Issuing Bank, times a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to Section 3.04(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from such
due date at the rate per annum applicable to ABR Loans hereunder. A certificate
of the Issuing Bank submitted to any L/C Participant with respect to any amounts
owing under this subsection shall be conclusive in the absence of manifest
error.
(c) Whenever, at any time after the Issuing Bank has made payment under any
Letter of Credit and has received from any L/C Participant its pro rata share of
such payment in accordance with Section 3.04(a), the Issuing Bank receives any
payment related to such Letter of Credit (whether directly from the Borrowers or
otherwise, including proceeds of collateral applied thereto by the Issuing
Bank), or any payment of interest on account thereof, the Issuing Bank will
distribute to such L/C Participant its pro rata share thereof; provided,
however, that in the event that any such payment received by the Issuing Bank
shall be required to be returned by the Issuing Bank, such L/C Participant shall
return to the Issuing Bank the portion thereof previously distributed by the
Issuing Bank to it.
SECTION 3.05. Reimbursement Obligation of the Borrowers. (a) The Borrowers,
jointly and severally, agree to reimburse the Issuing Bank on each date on which
the Issuing Bank notifies the Borrowers of the date and amount of a draft
presented under any Letter of Credit and paid by the Issuing Bank for the amount
of such draft so paid and any taxes, fees, charges or other costs or expenses
incurred by the Issuing Bank in connection with such payment. Each such payment
shall be made to the Issuing Bank at its address for notices specified herein in
lawful money of the United States of America and in immediately available funds.
(b) Interest shall be payable on any and all amounts remaining unpaid by
the Borrowers under this subsection from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding ABR Loans which were then
overdue.
(c) Each drawing under any Letter of Credit shall constitute a request by
the Borrowers to the Agent for a borrowing pursuant to Section 2.04(b) of ABR
Loans in the amount of such drawing. The Borrowing Date with respect to such
borrowing shall be the date of such drawing.
SECTION 3.06. Obligations Absolute. (a) The Borrowers' obligations under
this Article III shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Bank or any
beneficiary of a Letter of Credit.
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43
(b) The Borrowers also agree with the Issuing Bank that the Issuing Bank
shall not be responsible for, and the Borrowers' Reimbursement Obligations under
Section 3.05(a) shall not be affected by, among other things, (i) the validity
or genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any
dispute between or among the Borrowers and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of the Borrowers against any beneficiary of such
Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Bank's gross negligence or willful
misconduct.
(d) The Borrowers agree that any action taken or omitted by the Issuing
Bank under or in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the Uniform Commercial
Code of the State of New York, shall be binding on the Borrowers and shall not
result in any liability of the Issuing Bank to either Borrower.
SECTION 3.07. Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Bank shall promptly notify
the Borrowers of the date and amount thereof. The responsibility of the Issuing
Bank to the Borrowers in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
SECTION 3.08. Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Article III, the provisions of this Article III shall apply.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
To induce the Syndication Agent, the Administrative Agent, the Issuing Bank
and the Lenders to enter into this Agreement and to make Loans and issue or
participate in the Letters of Credit, each of the Borrowers represents and
warrants to the Syndication Agent, the Administrative Agent, the Issuing Bank
and each Lender, on and as of the applicable date or dates set forth in Article
V, that:
SECTION 4.01. 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
provided, that Watts Silverstein Inc. and Blumberg Communications of Florida
Inc. are not in good standing in the State of Washington and the State of
Florida, respectively, as of the Effective Date and the
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44
representation and warranty contained in this clause (a) shall be true with
respect to Watts Silverstein Inc. and Blumberg Communications of Florida Inc. no
later than the date that is 60 days after the Effective Date, (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 be so qualified could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 4.02. Authorization; Enforceability. The Transactions are within
the corporate powers of the Loan Parties and Target Acquisition Corp. 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 4.03. 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 and except for (i) actions required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(which actions the Borrowers will take before acquiring more than that amount of
Target Shares which may be lawfully acquired prior to completing such actions)
and (ii) actions required under the Takeover Code or other merger and monopoly
laws of the United Kingdom and/or the European Community and any other approvals
set forth in the Offer Documents as conditions to the Tender Offer (all of which
actions or approvals referred to in this clause (ii), whether or not taken or
obtained by the Borrowers, could not reasonably be expected to have a Material
Adverse 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 4.04. Financial Condition; No Material Adverse Change. (a) The
Parent has heretofore furnished to the Lenders its consolidated balance sheet
and statements of income, stockholders equity and cash flows (i) as of and for
the fiscal year ended September 30, 1996, reported on by Ernst & Young LLP,
independent certified public
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45
accountants, and (ii) as of and for the fiscal quarter and the portion of the
fiscal year ended June 30, 1997, 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, 1996, there has occurred no event or circumstance
which has had a Material Adverse Effect.
(c) The unaudited pro forma consolidated balance sheet of the Parent and
its consolidated Subsidiaries as at June 30, 1997 (including the notes thereto)
(the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished
to each Lender, has been prepared giving effect (as if such events had occurred
on such date) to (i) the consummation of the Target Acquisition, (ii) the Loans
to be made hereunder and the use of proceeds thereof and (iii) the payment of
fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet
has been prepared on a reasonable basis using reasonable assumptions as of the
initial date of delivery thereof, and, assuming the accuracy of such
assumptions, presents fairly on a pro forma basis the estimated financial
position of the Parent and its consolidated Subsidiaries as at June 30, 1997,
assuming that the events specified in the preceding sentence had actually
occurred at such date.
(d) Except to the extent that the failure to satisfy the following
representation and warranty could not reasonably be expected to have a Material
Adverse Effect: (i) the consolidated balance sheets of the Target and its
consolidated Subsidiaries as at December 31, 1995 and December 31, 1996,
respectively, and the related consolidated statements of earnings, cash flows
and shareholders' equity for the fiscal years ended on such dates, reported on
by Coopers & Lybrand, L.L.P., copies of which have heretofore been furnished to
each Lender, are complete and correct in all material respects and present
fairly the consolidated financial condition of the Target and its consolidated
Subsidiaries as at such dates, and the consolidated results of their operations
and their consolidated cash flows for the fiscal years then ended; and (ii) the
unaudited consolidated balance sheet of the Target and its consolidated
Subsidiaries as at June 30, 1997 and the related unaudited consolidated
statements of earnings and of cash flows for the six-month period ended on such
date, copies of which have heretofore been furnished to each Lender, are
complete and correct and present fairly the consolidated financial condition of
the Target and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the six-month period then ended (subject to normal year-end audit adjustments).
SECTION 4.05. 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 7.03.
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46
(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 4.06. 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
Effective 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 4.07. 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 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 4.08. Compliance with Laws and Agreements. (a) 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,
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47
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
(b) Each of the Target 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 instruments binding upon it or its
property other than any restriction contained in any indenture, agreement or
instrument relating to any Indebtedness which is to be refinanced as part of the
Target Acquisition and except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect (assuming for the purposes of this representation and warranty that the
Target is a Subsidiary of the Parent).
SECTION 4.09. Investment Company Act; Other Regulations. None of the
Parent, the Company or Target Acquisition Corp. 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 4.10. 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 Effective 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 4.11. Subsidiaries. The Subsidiaries listed on Schedule 4.11
constitute all of the Subsidiaries of the Parent at the date hereof. Each of the
Excluded Subsidiaries is an inactive corporation and does not conduct any
business. The Excluded Subsidiaries do not have aggregate assets in excess of
$500,000.
SECTION 4.12. Purpose of Loans. The proceeds of the Term Loans shall be
used by the Borrowers to finance the Target Acquisition, to repay Revolving
Credit Loans used to finance the purchase of Target Shares, to pay fees and
expenses related to the Target Acquisition and to refinance existing
Indebtedness of the Company and the Target and its Subsidiaries. The proceeds of
the Revolving Credit Loans and Swingline Loans shall be used (i) to finance the
Transaction and to pay related fees and expenses (provided, that Revolving
Credit Loans used for the purchase of Target Shares may not exceed $77,000,000
in aggregate principal amount at any time outstanding), (ii) to finance the
working capital needs of the Company and its Subsidiaries, (iii) to fund certain
permitted acquisitions, (iv) to refinance outstanding Indebtedness of the
Company under the Existing Credit Agreement and (v) for general corporate
purposes of the Company and its Subsidiaries in the ordinary course of business.
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48
SECTION 4.13. 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 4.14. 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 Borrowers will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case
may be.
SECTION 4.15. 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 4.16. Security Documents. (a) When executed and delivered, the
Master Pledge Agreement is, and, following the performance of the covenants set
forth in Sections 6.12(b), 6.13 and 6.14, the Target Pledge Agreement, the
Wavelength Pledge Agreement and each of the Target Acquisition Corp., CEL and
CHUK II Pledge Agreements, respectively, will be, 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 in such Pledge
Agreements and proceeds thereof and, when the Pledged Securities described in
such Pledge Agreements are delivered to the Administrative Agent and the other
perfection actions described in such Pledge Agreements have been taken, each
such Pledge Agreement shall grant a fully perfected first priority Lien on, and
security interest in, all right,
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49
title and interest of the relevant Loan Party in such Pledged Securities and the
proceeds thereof as security for the Obligations.
(b) The Master 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 4.16(b), the Master 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 7.03.
SECTION 4.17. 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 4.18. 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 V. CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent Effective Date. This Agreement shall
become effective on the date of satisfaction of the conditions precedent set
forth in this
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50
Section 5.01, which shall in any event be on or before November 30, 1997 (the
date on which such conditions are satisfied, the "Effective Date"):
(a) Credit Agreement. The Administrative Agent shall have received this
Agreement, executed and delivered by a duly authorized officer of each Borrower,
with a counterpart for each Lender.
(b) Due Diligence Documents. The Administrative Agent shall have received
and reviewed to its satisfaction, schedules, certified as to accuracy by an
Authorized Officer of the Parent, listing (i) all contingent liabilities of the
Parent and its Subsidiaries in an amount in excess of $250,000 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 $250,000 and (iii) all operating leases
and Capital Leases of the Parent and its Subsidiaries requiring annual payments
in excess of $250,000.
(c) Closing Certificates. The Administrative Agent and each Lender shall
have received a certificate of the Parent, dated the Effective Date,
substantially in the form of Exhibit G, with appropriate insertions and
attachments, reasonably satisfactory in form and substance to the Administrative
Agent, executed by the Chief Financial Officer of the Parent.
(d) Corporate Proceedings. The Administrative Agent shall have received,
with a counterpart for each Lender, a copy of the resolutions, in form and
substance reasonably satisfactory to the Administrative Agent, of the Board of
Directors or shareholders, as applicable, 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 Borrowers, the
Borrowings contemplated hereunder, certified by the Secretary or an Assistant
Secretary or other appropriate officer of such Loan Party as of the Effective
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 reasonably
satisfactory to the Administrative Agent, a certificate of each Loan Party,
dated the Effective Date, as to the incumbency and signature of the officers of
such Loan Party executing any Loan Document, executed by the 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 (or other organic documents) of each Loan Party,
certified as of the Effective Date as complete and correct copies thereof by the
Secretary or an Assistant Secretary of such Loan Party.
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51
(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 Effective Date referred to in Section 2.05 or in the Fee Letter
and (ii) without affecting the obligations of the Borrowers 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, for which an
invoice has been delivered to Parent.
(i) Representations and Warranties. Except for the representations and
warranties contained in Section 4.16, each of the representations and warranties
contained in Article IV shall be true and correct in all material respects as if
made on and as of such date, except if any such representation and warranty
relates to an earlier date, in which case any such representation and warranty
shall be true and correct in all material respects as of such earlier date. The
Administrative Agent shall have received a certificate of a Responsible Officer
of the Company to the foregoing effect, to which shall be attached copies of any
governmental or third party approvals theretofore obtained.
(j) Legal Opinions. The Administrative Agent shall have received, with a
counterpart for each Lender, the executed legal opinion of Schulte Roth & Zabel
LLP, counsel to the Loan Parties, substantially in the form of Exhibit C-1. Such
legal opinion shall cover such other matters incident to the Transactions as the
Administrative Agent may reasonably require.
(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 respect to personal property of the Parent and its Domestic
Subsidiaries in each jurisdiction where their assets are located, and the
results of such searches shall be reasonably satisfactory to the Administrative
Agent.
(l) Business Plan. The Lenders shall have received a reasonably
satisfactory business plan for fiscal years 1997-2003, without giving effect to
the Target Acquisition, and a reasonably satisfactory summary of the assumptions
underlying such business plan.
(m) Business Plan. Each Lender shall have received a reasonably
satisfactory business plan for fiscal years 1997-2003, after giving effect to
the Target Acquisition, and a reasonably satisfactory summary of the assumptions
underlying any such business plan, pro forma for the Acquisition, for the period
from the Effective Date through the final maturity of the Term Loans.
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52
(n) Due Diligence. The Administrative Agent (i) shall have received a copy
of, and be reasonably satisfied with, all due diligence materials relating to
the Target Acquisition received by the Borrowers and (ii) shall be reasonably
satisfied with the scope and results of all due diligence relating to the Target
Acquisition.
(o) Syndication Letter Agreement. Each of the Administrative Agent and the
Syndication Agent shall have received the Syndication Letter Agreement, executed
and delivered by a duly authorized officer of each Borrower.
(p) 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.
After the conditions set forth above in this Section have been satisfied,
the Administrative Agent will, at the request of the Borrowers, provide to the
Borrowers written confirmation that the Effective Date has occurred.
SECTION 5.02. Conditions Precedent to Initial Revolving Credit Funding
Date. The obligation of each Revolving Credit Lender to make its initial
Revolving Credit Loan (all of the proceeds of which shall be used only to repay
outstanding indebtedness under the Existing Credit Agreement and to pay fees and
expenses in connection with this Agreement) is subject to the satisfaction of
the following conditions precedent on the date of such Loans (the date on which
such conditions are satisfied, the "Initial Revolving Credit Funding Date").
(a) Date. The Effective Date shall have occurred (or shall occur
contemporaneously with the Initial Revolving Credit Funding Date).
(b) Loan Documents. The Administrative Agent shall have received (i) 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, (ii) the Master Security Agreement, executed and delivered by a duly
authorized officer of the grantors thereunder, with a counterpart or a conformed
copy for each Lender, (iii) the Master Guarantee, executed and delivered by a
duly authorized officer of the parties thereto, with a counterpart or a
conformed copy for each Lender and (iv) the Foreign Subsidiaries Guarantee,
executed and delivered by a duly authorized officer of the parties thereto, with
a counterpart or a conformed copy for each Lender.
(c) Fees. The Administrative Agent shall have received the fees to be
received on the date of the initial Loans referred to in Section 2.05 or in the
Fee Letter.
(d) Legal Opinions. The Administrative Agent shall have received, with a
counterpart for each Lender, the following executed legal opinions:
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53
(i) the executed legal opinion of Schulte Roth & Zabel LLP, counsel to
the Loan Parties, substantially in the form of Exhibit C-2; and
(ii) the executed legal opinion of Allen & Overy, special English
counsel to the Administrative Agent, substantially in the form of Exhibit
C-3.
(e) Pledged Securities; Stock Powers. (i) 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 the Master
Pledge Agreement, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof and all
other perfection actions specified in the Master Pledge Agreement shall have
been taken.
(f) 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 7.03 shall be in proper form for filing, registration or
recordation in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested and shall have been received by
the Administrative Agent.
(g) Refinancing of Existing Credit Agreement. All outstanding Indebtedness
under the Existing Credit Agreement shall have been repaid in full (which shall
be with the proceeds of the initial Revolving Credit Loans hereunder) and the
commitments thereunder shall have been terminated.
(h) Representations and Warranties. The representations and warranties
contained in Sections 4.01, 4.02, 4.03 (except as related to the Target, Target
Acquisition Corp. or the Target Acquisition), 4.08(a), 4.09, 4.12, 4.14 and 4.16
shall be true and correct in all material respects as if made on and as of such
date.
(i) No Default. No Default or Event of Default shall have occurred and be
continuing under (x) paragraph (a) of Article VIII or (y) paragraph (f) of
Article VIII (only to extent such paragraph (f) relates to the Borrower, the
Parent or Target Acquisition Corp.).
(j) Illegality. The making of such Loans and the use of the proceeds
thereof shall not violate any Requirement of Law of the United States or the
United Kingdom.
(k) Certificate. The Administrative Agent shall have received a certificate
of a Responsible Officer of the Parent to the effect set forth in paragraphs (h)
through (j) above.
SECTION 5.03. Conditions Precedent to Revolving Credit Loans for Purchase
of Target Shares. The obligation of each Revolving Credit Lender to make any
Revolving Credit Loan requested to be made by it for the purchase of Target
Shares is subject to the satisfaction of the following conditions precedent:
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54
(a) Date. The Initial Revolving Credit Funding Date shall have occurred (or
shall occur contemporaneously with the making of any such Revolving Credit
Loan).
(b) Representations and Warranties. Except for the representations and
warranties contained in Sections 4.03, 4.04(c) (in each case, solely to the
extent related to the Target, Target Acquisition Corp. or the Target
Acquisition), 4.04(d) and 4.08(b), each of the representations and warranties
contained in Article IV shall be true and correct in all material respects as if
made on and as of such date, except if any such representation and warranty
relates to an earlier date, in which case any such representation and warranty
shall be true and correct in all material respects as of such earlier date.
(c) No Default. No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(d) Recommendation of Target Board. The Tender Offer shall have been made
with the recommendation of the Board of Directors of the Target.
(e) Offer Documents; Terms of Tender Offer. The terms of the Tender Offer
as set forth in the Press Release shall have been approved by each of the
Administrative Agent and the Syndication Agent prior to the public announcement
thereof by or on behalf of Target Acquisition Corp.
(f) The Tender Offer. There shall not have been any amendment, supplement,
modification or waiver of the material terms of or material conditions to the
Tender Offer contained in the Press Release not consented to by (i) in the case
of the amendment or waiver of aggregate purchase price or minimum acceptance
conditions (including, without limitation, the Minimum Number of Shares), the
Lenders, and (ii) in the case of the amendment or waiver of the material terms
of or material conditions to the Tender Offer other than aggregate purchase
price or minimum acceptance conditions, Majority Lenders except for waivers, in
respect of matters other than aggregate purchase price or minimum acceptance
conditions, required by the Panel.
(g) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents 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.
(h) Certificate. The Administrative Agent shall have received a certificate
of a Responsible Officer of the Parent to the effect set forth in paragraph (b)
through (f) above.
The borrowing of each such Revolving Credit Loan shall constitute a
representation and warranty by the Borrowers as of the date of such Loan that
the conditions contained in this Section have been satisfied.
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55
SECTION 5.04. Conditions Precedent to each Term Loan. The obligation of
each Term Loan Lender to make each Term Loan (the date on which the initial Term
Loans are made, the "Initial Term Loan Funding Date"), to be made by it is
subject to the satisfaction of the following conditions precedent on the date of
any such Loan:
(a) Date. The Effective Date and the Initial Revolving Credit Funding Date
shall have previously occurred (or shall occur contemporaneously with the
Initial Term Loan Funding Date).
(b) Representations and Warranties. The representations and warranties
contained in Sections 4.01, 4.02, 4.03(a) and (b), 4.08(a), 4.09, 4.12, 4.14 and
4.16 shall be true and correct in all material respects as if made on and as of
such date.
(c) No Default. No Default or Event of Default shall have occurred and be
continuing under (x) paragraph (a) of Article VIII or (y) paragraph (f) of
Article VIII (only to extent such paragraph (f) relates to the Borrower, the
Parent or Target Acquisition Corp.).
(d) Recommendation of Target Board. The Tender Offer shall have been made
with the recommendation of the Board of Directors of the Target.
(e) Offer Documents; Terms of Tender Offer. The terms of the Tender Offer
as set forth in the Press Release shall have been approved by each of the
Administrative Agent and the Syndication Agent prior to the public announcement
thereof by or on behalf of Target Acquisition Corp. Each of the Administrative
Agent and the Syndication Agent shall have received copies of the Offer
Documents and of all other documents and materials filed or released publicly by
the Borrowers or Target Acquisition Corp. in connection with the Tender Offer,
certified as true and correct copies thereof as of the Initial Term Loan Funding
Date by an Authorized Officer of the Parent, and the conditions set forth in
such documents shall conform to the conditions set forth in the Press Release as
approved by each of the Administrative Agent and the Syndication Agent prior to
the release thereof.
(f) The Tender Offer. There shall not have been any amendment, supplement,
modification or waiver of the material terms of or material conditions to the
Tender Offer contained in the Press Release not consented to by (i) in the case
of the amendment or waiver of aggregate purchase price or minimum acceptance
conditions (including, without limitation, the Minimum Number of Shares), the
Lenders, and (ii) in the case of the amendment or waiver of the material terms
of or material conditions to the Tender Offer other than aggregate purchase
price or minimum acceptance conditions, Majority Lenders except for waivers, in
respect of matters other than aggregate purchase price or minimum acceptance
conditions, required by the Panel.
(g) The Tender Closing Date. The Tender Closing Date shall have occurred.
(h) Illegality. The making of such Loans and the use of the proceeds
thereof shall not violate any Requirement of Law of the United States or the
United Kingdom.
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56
(i) No Injunction, etc. There shall not be in effect any injunction or
restraining order of any Governmental Authority having jurisdiction to issue
such injunction or restraining order prohibiting the making of the Term Loans
made on such date, the use of the proceeds thereof or the consummation of the
Tender Offer or the Acquisition.
(j) Certificate. The Administrative Agent shall have received a certificate
of a Responsible Officer to the effect set forth in paragraphs (b) through (i)
above.
The borrowing of each Term Loan shall constitute a representation and warranty
by the Borrowers as of the date of such Loans that the conditions contained in
this Section have been satisfied.
SECTION 5.05. Conditions Precedent to Each Extension of Credit Under the
Revolving Credit Commitments (Other than the Initial Revolving Credit Loans and
Revolving Credit Loans Used For the Purchase of Target Shares). The obligation
of each Revolving Credit Lender to make any Revolving Credit Loan requested to
be made by it (other than the initial Revolving Credit Loans and Revolving
Credit Loans used for the purchase Target Shares) is subject to the satisfaction
of the following conditions precedent:
(a) Representations and Warranties. With respect to the making of any such
extension of credit under the Revolving Credit Commitments (i) before the Tender
Closing Date or after the Transition Date, each of the representations and
warranties contained in Article IV shall be true and correct in all material
respects as if made on and as of such date, except if any such representation
and warranty relates to an earlier date, in which case any such representation
and warranty shall be true and correct in all material respects as of such
earlier date, except for the representations and warranties contained in
Sections 4.03, 4.04(c) (in each case, solely to the extent related to the
Target, Target Acquisition Corp. or the Target Acquisition), 4.04(d) and
4.08(b), and (ii) after the Tender Closing Date, each of the representations and
warranties contained in Article IV shall be true and correct in all material
respects as if made on and as of such date, except if any such representation
and warranty relates to an earlier date, in which case any such representation
and warranty shall be 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 extension of credit
requested to be made on such date.
(c) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents 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 5.06. Conditions Precedent to Each Loan for Future Material
Acquisition. In addition to the satisfaction of the conditions in Section 5.05,
the obligation of
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57
each Revolving Credit Lender to make a Revolving Credit Loan to finance, in
whole or in part, 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
7.01(a) and (b);
(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 or before the date which is five days after 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 clause (ii) of this
paragraph (b); (B)
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58
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 6.09 and 6.10
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 VI. AFFIRMATIVE COVENANTS
The Borrowers hereby agree that, until the Commitments have expired or been
terminated and the principal of and interest on each Loan and other Obligations
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 6.01. Financial Statements and Other Information. Furnish to the
Syndication Agent, 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 6.01(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 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
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59
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 6.01(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) on or before the date that is three Business Days prior to the
anticipated Tender Closing Date, a pro forma consolidated balance sheet of the
Parent and its Subsidiaries as of such anticipated Tender Closing Date (after
giving effect to the Target Acquisition), and a certificate of the Chief
Financial Officer or Chief Executive Officer of the Parent setting forth (i) an
estimate of the Indebtedness of the Parent and its Subsidiaries and (ii)
reasonably detailed calculations of Consolidated EBITDA for the 12 months ended
September 30, 1997.
(d) concurrently with any delivery of financial statements under clause (a)
or (b) above, a certificate of the Chief Financial 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 7.01(a) and (b) and the
calculation of Consolidated EBITDA 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 4.04 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
7.01 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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60
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 5.06; 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 6.02. Notices of Material Events. Furnish promptly, but in no event
later than ten days after the occurrence thereof, to the Syndication Agent, 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.
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 6.03. 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
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61
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 7.05.
SECTION 6.04. 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 6.05. 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 6.06. 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 Syndication Agent, 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 6.07. 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, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 6.08. 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.
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(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 6.09. 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 6.10. Additional Collateral. (a) With respect to any assets
acquired after the Effective 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 7.03,
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 or any Foreign Subsidiary other
than an Excluded Foreign Subsidiary which is or becomes a Significant Subsidiary
after the Effective 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 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 7.03 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 security agreement substantially in
the form of Exhibit E and (B) to take such actions necessary or advisable to
grant to the Administrative Agent for the benefit of the Lenders a perfected
first
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63
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 7.03 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 or any Foreign Subsidiary other
than an Excluded Foreign Subsidiary which is or becomes a Significant Subsidiary
after the Effective Date (i) promptly upon the request of the Administrative
Agent, cause such Subsidiary to become a party to a guarantee substantially in
the form of Exhibit F 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 an Excluded Foreign Subsidiary
after the Effective 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.
SECTION 6.11. Use of Proceeds. Use the proceeds of the Loans only as
provided in Section 4.12.
SECTION 6.12. Consummation of Compulsory Acquisition. (a) As promptly as
reasonably practicable after Target Acquisition Corp. is permitted to do so
under the Companies Act, 1985 of England, cause Target Acquisition Corp. to
consummate the Compulsory Acquisition in respect of the Target Shares not
already owned by Target Acquisition Corp.
(b) Cause Target Acquisition Corp. to take all steps required pursuant to
the Target Pledge Agreement to perfect the security interest granted to the
Administrative Agent thereunder within 60 days after Target Acquisition Corp.'s
acquisition of any Target Shares that are Pledged Securities.
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SECTION 6.13. Wavelength Pledge Agreement. As soon as practicable, but in
any event within 60 days after the Effective Date, (a) the Administrative Agent
shall have received (i) with a counterpart or copy for each Lender, the
Wavelength Pledge Agreement, executed and delivered by a duly authorized officer
of the Parent, and (ii) such other documents reasonably requested in connection
therewith, including, without limitation, an opinion of counsel, from counsel
and in a form reasonably satisfactory to the Administrative Agent, and (b) all
reasonable actions necessary or advisable to perfect the security interest
granted to the Administrative Agent pursuant to the Wavelength Pledge Agreement
as a first priority Lien on the Pledged Securities described therein shall have
been taken.
SECTION 6.14. Target Acquisition Corp. Pledge Agreement. As soon as
practicable, but in any event within 14 days after the Effective Date, the
Administrative Agent shall have received (a) share certificates for the Capital
Stock of (i) Target Acquisition Corp. pledged pursuant to the Target Acquisition
Corp. Pledge Agreement (ii) CEL pledged pursuant to the CEL Pledge Agreement and
(iii) CHUK II pledged pursuant to the CHUK II Pledge Agreement, each registered
in the name of the Administrative Agent or its nominee, and (b) a copy of the
Shareholder Registry of (i) Target Acquisition Corp., (ii) CEL and (iii) CHUK
II, in each case, showing the Administrative Agent or its nominee as the
registered owner of such pledged shares, certified as true and correct by a duly
authorized officer of each such pledgor.
ARTICLE VII. NEGATIVE COVENANTS
The Borrowers hereby agree that, in the case of the covenants contained in
this Article VII (other than the covenants contained in Sections 7.03, 7.12,
7.14 and 7.16), during the period from the Effective Date and, in the case of
the covenants contained in Sections 7.03, 7.12, 7.14 and 7.16, during the period
from the Initial Revolving Credit Funding Date, until, in either such case, the
Commitments have expired or terminated and the principal of and interest on each
Loan and all other obligations hereunder shall have been paid in full, the
Parent shall not, and (except with respect to Section 7.01) shall not permit any
of its Subsidiaries to, directly or indirectly:
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SECTION 7.01. Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio on
the last day of any fiscal quarter ending during any period set forth below to
be greater than the ratio set forth below opposite the period in which such
fiscal quarter ends:
Period Ratio
------ -----
Initial Revolving Funding Date - Tender
Closing Date 3.50 to 1.00
Tender Closing Date - 9/30/98 4.75 to 1.00
10/01/98 - 9/30/99 4.25 to 1.00
10/01/99 - 9/30/00 3.75 to 1.00
10/01/00 - 9/30/01 3.50 to 1.00
10/01/01 - 9/30/92 3.25 to 1.00
10/01/02 - thereafter 3.00 to 1.00
Notwithstanding the foregoing, at any time after the Transition Date the
Consolidated Leverage Ratio shall not exceed 3.50 to 1.00.
(b) Ratio of Consolidated EBITDA less Capital Expenditures to Consolidated
Cash Interest Expense. Permit the ratio of (i) Consolidated EBITDA less Capital
Expenditures for any period of four consecutive fiscal quarters ending during
any period set forth below to (ii) Consolidated Cash Interest Expense for such
period, to be less than the ratio set forth below opposite such period:
Period Ratio
------ -----
Initial Revolving Funding Date - Tender
Closing Date 2.00 to 1.00
Tender Closing Date - 9/30/98 1.50 to 1.00
10/01/98 - 9/30/00 1.75 to 1.00
10/01/00 - thereafter 2.00 to 1.00
Notwithstanding the foregoing, at any time after the Transition Date the ratio
of (i) Consolidated EBITDA less Capital Expenditures for any period of four
consecutive fiscal quarters to (ii) Consolidated Cash Interest Expense for any
such period shall not be less than 2.00 to 1.00.
SECTION 7.02. 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 Borrowers and the other Loan Parties under this
Agreement and the other Loan Documents;
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66
(b) purchase money Indebtedness of the Parent and any of its Subsidiaries
(including Capital Leases) to the extent permitted under Section 7.03(f);
(c) Indebtedness outstanding on the date hereof and listed on Schedule
7.02(c) 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;
(d) Indebtedness of (i) the Parent to any Subsidiary of the Parent which is
a party to a Subsidiaries Guarantee or in respect of which the requirements of
Section 6.10 have been complied with and (ii) any Subsidiary to the Parent or
any other Subsidiary;
(e) Indebtedness in respect of Hedge Agreements;
(f) unsecured Indebtedness payable to the sellers of the Capital Stock or
assets acquired pursuant to Future Acquisitions;
(g) Indebtedness of the Target and its Subsidiaries outstanding on the
Tender Closing Date;
(h) Indebtedness outstanding under the Existing Credit Agreement as of the
Effective Date, provided, that such Indebtedness shall not be permitted
hereunder from and after the Initial Revolving Credit Funding Date;
(i) Subordinated Indebtedness; and
(j) additional Indebtedness of the Parent or its Subsidiaries not
contemplated by clauses (a) through (i) above, provided that the amount of
Indebtedness incurred and remaining outstanding pursuant to this clause (i)
shall not at any time exceed $10,000,000.
SECTION 7.03. 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;
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(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;
(e) Liens in existence on the date hereof listed on Schedule 7.03(e),
securing Indebtedness permitted by Section 7.02(c);
(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 Sections 7.02(d) or
(g), 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 paragraph (h) of Article VIII;
(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;
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(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;
(n) Liens securing the Indebtedness under the Existing Credit Agreement;
(o) Liens securing the Indebtedness described in Section 7.02(g); and
(p) 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 $5,000,000 at any time outstanding.
SECTION 7.04. Limitation on Guarantees. Create, incur, assume or suffer to
exist any Guarantee except:
(a) the Guarantees arising under the Loan Documents and the Existing Credit
Agreement;
(b) surety bonds issued in respect of the type of obligations described in
Section 7.03(d);
(c) Guarantees by the Parent or the Company of Indebtedness and other
obligations of Subsidiaries that are permitted to be incurred under this
Agreement; and
(d) Guarantees existing on the Effective Date and set forth on Schedule
7.04 hereto, and any renewal or modification.
SECTION 7.05. Limitations on Fundamental Changes. Except as otherwise
permitted by Section 7.06 or Section 7.07(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, (ii) any Wholly Owned
Subsidiary of the Parent (other than the Company) 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 and (iii) subject to clause
(d) below, Parent may transfer 100% of the stock of CEL to Target Acquisition
Corp.; 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, (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
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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 an Excluded Foreign
Subsidiary and the second Subsidiary is a Subsidiary of the first Subsidiary or
of another Excluded Foreign Subsidiary and (d) as a condition precedent to
Parent's transfer of 100% of the stock of CEL to Target Acquisition Corp.,
Parent shall cause Target Acquisition Corp. (I) to execute and deliver to the
Administrative Agent a new pledge agreement, substantially in the form of the
CEL Pledge Agreement, or such amendments to the CEL 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 100% of the Capital Stock of CEL, (II) to deliver to the
Administrative Agent share certificates representing such Capital Stock,
registered in the name of the Administrative Agent or its nominee (III) to take
all other actions necessary or advisable to grant to the Administrative Agent,
for the benefit of the Lenders, a perfected first priority security interest in
such Capital Stock, and (IV) to deliver to the Administrative Agent a legal
opinion relating to the matters described in the preceding clauses (I) through
(III), which opinion shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
SECTION 7.06. 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 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 which is party to a Subsidiaries Guarantee or a
Significant Subsidiary in respect of which the requirements of Section 6.10 have
been complied with, 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 7.05; 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 7.07. 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:
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(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 or to
Persons who are not Affiliates not to exceed $1,000,000 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 Subsidiary other than a Significant
Subsidiary in respect of which the requirements of Section 6.10 have been
complied with 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 7.02(e);
(e) so long as no Event of Default has occurred and is continuing or would
result therefrom, the Parent and its Subsidiaries may make Future Acquisitions;
provided, that until such time as the aggregate amount of payments and
prepayments of the Term Loans pursuant to Sections 2.04(b), 2.06(g), 2.06(h) or
2.06(i) shall equal $200,000,000, any Future Material Acquisition shall not be
made without the prior written consent of the Majority Lenders after their
satisfactory review (which they shall promptly undertake after notice by the
Borrower), in their reasonable discretion, of documents required pursuant to
Section 5.06(b); it being understood and agreed that, if the Parent provides the
Administrative Agent with the information and documents as required by Sections
5.06(b)(i) and (ii), the Administrative Agent shall advise the Parent whether or
not the Majority Lenders will consent to such Future Material Acquisition on or
before the fifth day prior to the Acquisition Date and, if the Majority Lenders
so consent, 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;
(g) the Target Acquisition; and
(h) investments in the ordinary course of business not to exceed $5,000,000
outstanding at any time.
SECTION 7.08. 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
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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 7.09. 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 7.10. 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 $2,000,000.
SECTION 7.11. 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 7.12. 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 to secure the
Obligations upon any of its property, assets or revenues, whether now owned or
hereafter acquired.
SECTION 7.13. 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 and after giving effect to the Target
Acquisition or which are related thereto.
SECTION 7.14. 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
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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.
SECTION 7.15. Restrictions on Target Acquisition. Prior to the Tender
Closing Date, (a) spend more than $77,000,000 for the purchase of Target Shares
or (b) acquire more than 29.9% of the issued and outstanding Target Shares.
SECTION 7.16. Limitation on Dividends. Declare any dividends on any shares
of any class of Capital Stock of the Parent or any of its Subsidiaries, or make
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, retirement or other acquisition of any
shares of any class of Capital Stock of the Parent or any of its Subsidiaries,
or any warrants or options to purchase such Capital Stock, whether now or
hereafter outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of any
Loan Party, except that:
(a) any Subsidiary may pay dividends to the Parent or to any other
Wholly Owned Subsidiary of the Parent; and
(b) in any fiscal year, the Parent may declare dividends or make any
other distributions in respect of shares of any class of its Capital Stock
in an aggregate amount not in excess of 25% of Consolidated Net Income for
such fiscal year.
ARTICLE VIII. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrowers shall fail to pay any principal of any Loan when due in
accordance with the terms thereof or hereof; or the Borrowers 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 6.14, 7.01, 7.02, 7.03, 7.04, 7.05, 7.06, 7.07,
7.08 or 7.10 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 either 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, any of its Significant Subsidiaries or Target
Acquisition Corp. 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, administrator or other similar official for it or for
all or any substantial part of its assets, or the Parent, any of its Significant
Subsidiaries or Target Acquisition Corp. shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the Parent,
any of its Significant Subsidiaries or Target Acquisition Corp. 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, any of its
Significant Subsidiaries or Target Acquisition Corp. 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, any of its Significant Subsidiaries or Target
Acquisition Corp. 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, 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 Syndication Agent, 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 the Syndication Agent,
the Administrative Agent or any of the Lenders); or
(j) The Subsidiaries Guarantees shall cease, for any reason, to be in full
force and effect or any of 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 either Borrower,
automatically the Commitments shall immediately terminate and the Loans made
hereunder (with accrued interest thereon) and all other amounts owing by the
Borrowers under this Agreement (including, without limitation, all amounts of
L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) 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 Borrowers, 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 Borrowers,
declare the Loans made hereunder (with accrued interest thereon) and all other
amounts owing by the Borrowers under this Agreement (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable; provided, that, notwithstanding the
foregoing, during the Term Loan Commitment Period (x) if the conditions
precedent to any Term Loan set forth in Section 5.04 are satisfied, no such
declaration under clause (B)(i) or (B)(ii) above shall relieve the Lenders of
their obligations to make such Term Loan, (y) no acceleration of the Loans under
clause (B)(i) or (B)(ii) above shall apply to any outstanding Term Loans until
the end of the Term Loan Commitment Period and, in any event, no acceleration of
the Loans under clause (B)(i) or (B)(ii) above shall apply to any amount of
outstanding Term Loans (whether such Term Loans were made before or after such
acceleration) to the extent that the proceeds thereof have not been disbursed to
pay Target Shareholders or Optionholders for the purchase of Target Shares or
Options pursuant
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to the Tender Offer (such undisbursed proceeds, "Acquisition Funds") and (z)
neither the Administrative Agent nor any Lender will take any enforcement action
against any Acquisition Funds to pay Target Shareholders or Optionholders for
the purchase of Target Shares or Options pursuant to the Tender Offer.
With respect to the acceleration of all L/C Obligations comprised of
Letters of Credit with respect to which presentment for honor shall not have
occurred at the time of an acceleration pursuant to the preceding paragraph, the
Borrowers' obligations in respect thereof shall be to deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrowers hereby grant to the Administrative Agent, for the benefit of the
Issuing Bank and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrowers under this Agreement and
the other Loan Documents. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrowers hereunder. After all such Letters of
Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other obligations of the Borrowers
hereunder shall have been paid in full, the balance, if any, in such cash
collateral account shall be returned to the Borrowers. The Borrowers shall
execute and deliver to the Administrative Agent, for the account of the Issuing
Bank and the L/C Participants, such further documents and instruments as the
Administrative Agent may request to evidence the creation and perfection of the
within security interest in such cash collateral account.
Except as expressly provided above in this Article, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
ARTICLE IX. THE AGENTS
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.
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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 Borrowers 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 either
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 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.
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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
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 Borrowers and the
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,
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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 and with respect to
any Letter of Credit issued or participated in by it, the Administrative Agent
shall have the same rights and powers under this Agreement and the 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.
SECTION 9.10 Syndication Agent. The Syndication Agent, in its capacity as
such, shall have no duties or responsibilities, and shall incur no liability,
under this Agreement and the other Loan Documents.
SECTION 9.11 The Administrative Agent as Security Trustee. (a) The
Administrative Agent, as security trustee under the CHUK II Pledge Agreement,
the Target Acquisition Corp. Pledge Agreement and the Target Pledge Agreement
(collectively, the "U.K. Pledge Agreements"; the Administrative Agent, as
security trustee thereunder, the
<PAGE>
79
"Security Trustee") in its capacity as trustee or otherwise shall not be liable
for any failure, omission, or defect in perfecting the security constituted or
created by any U.K. Pledge Agreement including, without limitation, any failure
to (i) register the same in accordance with the provisions of any of the
documents of title of any Loan Party to any of the assets thereby charged, (ii)
effect or procure registration of or otherwise protect the security created by
any U.K. Pledge Agreement under any registration laws in any jurisdiction, or
(iii) protect such security in any other way.
(b) The Security Trustee in its capacity as trustee or otherwise may accept
without inquiry such title as a Loan Party may have to any asset.
(c) The Security Trustee in its capacity as trustee or otherwise shall not
be under any obligation to hold any title deed, U.K. Pledge Agreement, or any
other document in connection with the U.K. Pledge Agreements or any other
document in connection with the property charged by any U.K. Pledge Agreement or
any other such security in its own possession or to take any steps to protect or
preserve the same. The Security Trustee may permit a Loan Party to retain all
such title deeds, U.K. Pledge Agreements, and other documents in its possession.
(d) Except as otherwise provided in the Loan Documents, all moneys which
under the trusts therein contained are received by the Security Trustee in its
capacity as trustee or otherwise may be invested in the name of or under the
control of the Security Trustee in any investment for the time being authorized
by English law for the investment by trustees or trust money or in any other
investments which may be selected by the Security Trustee. Additionally, the
same may be placed on deposit in the name of or under the control of the
Security Trustee at such bank or institution (including the Security Trustee)
and upon such terms as the Security Trustee may think fit.
(e) Each Lender hereby confirms its approval of the Loan Documents and any
security created or to be created pursuant thereto and hereby authorizes,
empowers and directs the Security Trustee (by itself or by such person(s) as it
may nominate) to execute and enforce the same as trustee or as otherwise
provided (and whether or not expressly in the Lenders' names) on its behalf.
(f) The provisions of this Section 9.11 are in addition to, and not in
limitation of, the other provisions of this Article IX.
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 Borrowers (and, in the
case of any Loan Document other than this Agreement, any Loan Party thereto)
written amendments, supplements or modifications hereto
<PAGE>
80
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 Borrowers 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 2.06(d), in each
case without the consent of each Lender directly affected thereby, or (ii)
amend, modify or waive Section 5.03(f)(i) or any provision of this Section 10.01
or reduce the percentage specified in the definitions of Majority Lenders,
Majority Revolving Credit Lenders or Majority Term Loan Lenders, or consent to
the assignment or transfer by the Parent, the Company 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 any
Subsidiaries 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 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 Borrowers, 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 Company, the
Administrative Agent and the Syndication 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
<PAGE>
81
The Company: 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, 8th Floor
New York, New York 10081
Attention: Mary Fong
Telecopy: (212) 552-5650
with copies to:
The Chase Manhattan Bank
Middle Market Banking Group
Westside Region
600 Fifth Avenue, 5th Floor
New York, New York 10020
Attention: Thomas J. Cox
Telecopy: (212) 332-4370
The Syndication
Agent: Merrill Lynch Capital Corporation
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Attention: Chris Birosak
Telecopy: (212) 449-8230
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Section 2.02, 2.03, 2.06, 2.07 or 2.14 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,
<PAGE>
82
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 Borrowers agree (a) to
pay or reimburse the Syndication Agent and the Administrative Agent for all
their 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, including, without
limitation, the reasonable fees and disbursements of counsel to the Syndication
Agent and the Administrative Agent (limited to one United States counsel, one
English counsel and one counsel in any other jurisdiction relevant to the
Transactions), (b) to pay or reimburse each Lender, the Syndication Agent and
the Administrative Agent for all its 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 fees and disbursements of counsel to the Syndication Agent, 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, the Syndication Agent and the Administrative Agent harmless from, any
and all recording and filing fees and 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, the Syndication Agent 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 Borrowers
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 Syndication Agent, the Administrative Agent or any
such Lender, respectively. The
<PAGE>
83
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
Company, the Lenders, the Administrative Agent, all future holders of the Notes
and their respective successors and assigns, except that neither the Parent nor
the Company 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 Borrowers, 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 2.06 (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
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 Company 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. The Borrowers also agree that each
Participant shall be entitled to the benefits of Sections 2.11, 2.12 and 2.13
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
2.13 such Participant shall have complied with the requirements of said Section
and provided, further, that no Participant shall be entitled to
<PAGE>
84
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 or any Affiliate thereof or an assignment
by the Administrative Agent or the Syndication Agent in connection with the
syndication of the Loans, 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
any Affiliate thereof, an assignment of the entire remaining amount of the
assigning Lender's Commitment or an assignment by the Administrative Agent or
the Syndication Agent in connection with the syndication of the Loans, 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 VIII 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, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.11,
2.12, 2.13 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 Company, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the
<PAGE>
85
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 Company and their Affiliates which has been
delivered to such Lender by or on behalf of the Parent and the Company pursuant
to this Agreement or which has been delivered to such Lender by or on behalf of
the Parent and the Company in connection with such Lender's credit evaluation of
the Parent and the Company 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 or
L/C Participating Interests 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 VIII 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 or L/C Participating Interests, 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
L/C Participating Interests or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be 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
Company, any such notice being expressly waived by the Parent and the Company to
the extent permitted by applicable law, upon any amount becoming due and payable
by the Parent or the Company 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,
<PAGE>
86
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 Company, 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 Company, 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.
SECTION 10.12. Submission To Jurisdiction; Waivers. Each of the Parent and
the Company 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;
<PAGE>
87
(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 Company, 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 Company 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 Company, 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 Company, 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 Company, as the case may be, and
the Lenders.
SECTION 10.14. WAIVERS OF JURY TRIAL. THE PARENT, THE COMPANY, THE
ADMINISTRATIVE AGENT, THE SYNDICATION 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
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88
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 Company, 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.
<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 F. Dignam
-----------------------------------
Name: Arthur F. Dignam
Title: Executive Vice President
CARIBINER, INC.
By:/s/ Arthur F. Dignam
-----------------------------------
Name: Arthur F. Dignam
Title: Executive Vice President
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent
By:/s/ Thomas J. Cox
-----------------------------------
Name: Thomas J. Cox
Title: Vice President
MERRILL LYNCH CAPITAL CORPORATION,
individually and as Syndication Agent
By:/s/ Christopher Birosak
-----------------------------------
Name: Christopher Birosak
Title: Managing Director
<PAGE>
Annex A
PRICING GRID
So long as the Transition Date shall not have occurred, the Applicable
Margin and Commitment Fee Rate will be determined in accordance with the
following Ratings Grid; provided, that (i) if the Moody's Rating and the S&P
Rating are at different levels, the higher of the two Ratings will apply and
(ii) if (A) the Moody's Rating and the S&P Rating are below the Ratings set
forth in Level III of the Ratings Grid set forth below, (B) there is no Moody's
Rating and no S&P Rating or (C) the Leverage Grid set forth below would provide
lower pricing, the Applicable Margin and Commitment Fee Rate will be determined
in accordance with the Leverage Grid set forth below.
Ratings Grid
<TABLE>
<CAPTION>
=====================================================================================================
Level I Level II Level III
S&P Rating/ S&P Rating/ S&P Rating/
Moody's Rating Moody's Moody's
of BBB-/Baa3 Rating of Rating of
or higher BB+/Ba1 BB/Ba2
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commitment 0.15% 0.225% 0.25%
Fee Rate
- -----------------------------------------------------------------------------------------------------
Applicable 0.50% 0.625% 0.875%
Margin --
Eurodollar
Loans
=====================================================================================================
Applicable 0% 0% 0%
Margin --
ABR Loans
=====================================================================================================
</TABLE>
<PAGE>
2
Leverage Grid
<TABLE>
<CAPTION>
====================================================================================================================================
If the If the If the If the If the If the
Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated
Leverage Leverage Leverage Leverage Leverage Leverage
Ratio is less Ratio is less Ratio is less Ratio is less Ratio is less Ratio is
than 2.0 to than 2.5 to than 3.0 to than 3.5 to than 4.0 to greater than
1.0 1.0 but 1.0 but 1.0 but 1.0 but or equal to
greater than greater than greater than greater than 4.0 to 1.0
or equal to or equal to or equal to or equal to
2.0 to 1.0 2.5 to 1.0 3.0 to 1.0 3.5 to 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commitment 0.20% 0.225% 0.225% 0.25% 0.30% 0.35%
Fee Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Applicable 0.50% 0.625% 0.75% 0.875% 1.125% 1.375%
Margin --
Eurodollar
Loans
====================================================================================================================================
Applicable
Margin -- 0% 0% 0% 0% .125% .375%
ABR Loans
====================================================================================================================================
</TABLE>
Changes in the Applicable Margin or in the Commitment Fee Rate resulting from
changes in the Consolidated Leverage Ratio shall become effective on the date
(the "Adjustment Date") on which financial statements are delivered to the
Lenders pursuant to Section 6.01 (but in any event not later than the 50th day
after the end of each of the first three quarterly periods of each fiscal year
or the 120th day after the end of each fiscal year, as the case may be) and
shall remain in effect until the next change to be effected pursuant to this
paragraph. If any financial statements referred to above are not delivered
within the time periods specified above, then, until such financial statements
are delivered, the Consolidated Leverage Ratio as at the end of the fiscal
period that would have been covered thereby shall for the purposes of this
definition be deemed to be greater than 4.0 to 1. Each determination of the
Consolidated Leverage Ratio pursuant to this definition shall be made with
respect to the period of four consecutive fiscal quarters of the Parent and its
Subsidiaries ending at the end of the period covered by the relevant financial
statements.
<PAGE>
EXHIBIT 11.1
CARIBINER INTERNATIONAL, INC.
Computation of Earnings Per Common Share
(in thousands, except earnings per share)
<TABLE>
<CAPTION>
For the year ended September 30,
--------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Weighted average common stock outstanding
during the period 5,177(a) 8,318(a) 21,719
Conversion of Convertible Note into shares
of preferred stock and the subsequent
conversion of such shares into shares
of Common Stock 4,110 4,110 --
Conversion of all outstanding shares of
preferred stock into shares of Common
Stock 3,083 3,083 --
Exercise of Warrants 1,069 1,069 --
Effect of exercise of warrants computed
in accordance with the treasury stock
method (199) (90) --
-------- -------- -----------
Total weighted average common stock
outstanding during the period 13,240 16,490 21,719
======== ========= ===========
Income before taxes $ 1,690 $ 12,291 $ 30,613
Plus: reduction in interest expense from
the conversion of the Convertible Note 1,859 926 --
------- --------- -----------
Income before taxes 3,549 13,217 30,613
Income tax expense 302 4,600 12,551
-------- --------- -----------
Net income $ 3,247 $ 8,617 $ 18,062
======== ========= ===========
Earnings per common share 0.25(b) 0.53(b) $ 0.83
======== ========= ===========
</TABLE>
(a) 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.
(b) Computed on a pro forma basis assuming 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, 1995. Pro forma earnings
per common share reflects adjustments to eliminate the interest expense on the
convertible note and to eliminate accrued preferred stock dividends.
<PAGE>
EXHIBIT 11.2
CARIBINER INTERNATIONAL, INC.
Computation of Supplementary Earnings Per Common Share
(in thousands, except earnings per share)
<TABLE>
<CAPTION>
For the year ended September 30,
--------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Weighted average common stock outstanding
during the period 5,177(a) 8,318(a) 21,720
Common stock issued to repay current
and long-term indebtedness (b) 3,436 1,450 1,125
Conversion of Convertible Note into shares
of preferred stock and the subsequent
conversion of such shares into shares
of Common Stock 4,110 4,110 --
Conversion of all outstanding shares of
preferred stock into shares of Common
Stock 3,083 3,083 --
Exercise of Warrants 1,069 1,069 --
Effect of exercise of warrants computed
in accordance with the treasury stock
method (199) (90) --
-------- -------- -----------
Total weighted average common stock
outstanding during the period 16,676 17,940 22,845
======== ========= ===========
Income before taxes $ 1,690 $ 12,291 $ 30,613
Plus: reduction in interest expense 3,321 1,916 2,245
------- --------- -----------
Income before taxes 5,011 14,207 32,858
Income tax expense 366 4,972 13,472
-------- --------- -----------
Net income $ 4,645 $ 9,235 $ 19,386
======== ========= ===========
Earnings per common share 0.28 0.52 $ 0.85
======== ========= ===========
</TABLE>
(a) 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.
(b) Supplementary earnings per share reflects the number of shares of common
stock upon consummation of the offering used to repay current and long-term
indebtedness as if such issuance had occurred at the beginning of the periods
presented.
<PAGE>
Exhibit 21
Subsidiaries of the Company
Jurisdiction Names Under Which
Subsidiary of Incorporation Subsidiary Does Business
- ---------- ---------------- ------------------------
Ingleby Holding Corp. Delaware
Caribiner, Inc. New York Caribiner Communications
Total Audio Visual Services
Show Solutions
Spectrum Data Systems
Entertainment Trademark New York
Consultants, Inc.
Bauer Audio Visual, Inc. Texas Total Audio Video Services
Caribiner Europe Limited United Kingdom
Caribiner Holdings (UK) United Kingdom
No. 2 Limited
Caribiner Holdings (UK) United Kingdom Spectrum Communications
Limited Mark Wallace Associates (MWA)
WCT Live Communication
Caribiner Services United Kingdom
Limited
Visual Action Holdings United Kingdom
plc
Visual Action Holdings Audio Visual Headquarters
Inc. Hospitality Resources
Cinevideo Ltd. United Kingdom
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND THE AUDITED CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED SEPTEMBER 30, 1997 OF CARIBINER
INTERNATIONAL, INC. AS SET FORTH IN THIS FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 10,253
<SECURITIES> 0
<RECEIVABLES> 77,780
<ALLOWANCES> 740
<INVENTORY> 0
<CURRENT-ASSETS> 107,390
<PP&E> 45,714
<DEPRECIATION> 14,320
<TOTAL-ASSETS> 313,877
<CURRENT-LIABILITIES> 71,239
<BONDS> 0
0
0
<COMMON> 234
<OTHER-SE> 171,434
<TOTAL-LIABILITY-AND-EQUITY> 315,638
<SALES> 342,258
<TOTAL-REVENUES> 342,258
<CGS> 226,766
<TOTAL-COSTS> 226,766
<OTHER-EXPENSES> 82,450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,429
<INCOME-PRETAX> 30,613
<INCOME-TAX> 12,551
<INCOME-CONTINUING> 30,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,062
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
