<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1997
REGISTRATION NO. 333-18327
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CARIBINER INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389 13-3466655
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
16 WEST 61ST STREET
NEW YORK, NEW YORK 10023-7604
(212) 541-5300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
----------------
ARTHUR F. DIGNAM
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL AND ADMINISTRATIVE OFFICER
CARIBINER INTERNATIONAL, INC.
16 WEST 61ST STREET
NEW YORK, NEW YORK 10023-7604
(212) 541-5300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
BURTON LEHMAN, ESQ. MICHAEL W. BLAIR, ESQ.
SCHULTE ROTH & ZABEL LLP DEBEVOISE & PLIMPTON
900 THIRD AVENUE 875 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(212) 758-0404 (212) 909-6000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continued basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 26, 1997
PROSPECTUS
1,878,200 SHARES
LOGO
COMMON STOCK
-----------
Of the 1,878,200 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Caribiner International, Inc. (together with its direct and
indirect wholly-owned subsidiaries, "Caribiner" or the "Company") offered
hereby (the "Offering"), 1,750,000 shares are being offered by the Company and
128,200 shares are being offered by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders.
The Common Stock is listed on the New York Stock Exchange under the trading
symbol "CWC." On February 6, 1997, the last reported sale price of the Common
Stock on the New York Stock Exchange was $47 1/8. See "Price Range of Common
Stock and Dividend Policy."
SEE "RISK FACTORS" COMMENCING ON PAGE 12 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF
COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2)(3) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share................................. $ $ $ $
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Total (3)................................. $ $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, including expenses of
Selling Stockholders (other than Underwriting Discount) estimated at
$1,200,000.
(3) The Company and one of the Selling Stockholders have granted to the several
Underwriters a 30-day option to purchase up to an aggregate of 281,730
additional shares of Common Stock to cover over-allotments, if any, of
which 81,730 shares of Common Stock will be offered by the Company if all
such additional shares are purchased. If all such additional shares are
purchased, the total Price to Public, Underwriting Discount, Proceeds to
Company and Proceeds to Selling Stockholders will be $ , $ , $
and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to the
approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made in New York,
New York on or about , 1997.
-----------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
FURMAN SELZ
SCHRODER WERTHEIM & CO.
-----------
The date of this Prospectus is , 1997.
<PAGE>
The photographs presented on the inside front cover and inside back cover of
this Prospectus depict events and projects produced by Caribiner International,
Inc. and are not necessarily indicative of future projects, if any, to be
produced for such clients.
[ONE PHOTO APPEARS HERE]
Caribiner designed and developed a Glove Box Video for each of the 1997 Ford
Expedition, Mercury Mountaineer and Lincoln Mark VIII. In each case Caribiner
handled virtually every aspect of the project from the initial concept through
final production. A video accompanies the sale of each new vehicle and
demonstrates the features, advantages and benefits of the vehicle to the buyer.
[ONE PHOTO APPEARS HERE]
Caribiner serves ARAMARK on-site at its corporate headquarters in Philadelphia.
Work produced for ARAMARK includes: trade-show design, training, interactive
technologies, video production, brochure design and printing, and on-going
communication services.
[ONE PHOTO APPEARS HERE]
Caribiner produced the 1995 MCDONALD'S Operations Road Tour that traveled to
five different locations in the U.S. and Canada and was performed 13 times for a
total audience of nearly 10,000 store managers and operations personnel. The
tour was designed to motivate, train, and inspire the attendees toward higher
levels of achievement. Caribiner developed creative concepts and all staging and
logistical support for the tour. Production elements included original video,
executive speech writing, casting and development of original music, comedy and
other theatrical components.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) included elsewhere in this Prospectus. As used in
this Prospectus, the terms "fiscal 1992," "fiscal 1993," "fiscal 1994," "fiscal
1995" and "fiscal 1996" refer to the Company's fiscal years ended September 30,
1992, 1993, 1994, 1995 and 1996, respectively. Except as otherwise indicated,
all information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option. Unless the context otherwise requires, as used in this
Prospectus, the terms "Company" and "Caribiner" mean Caribiner International,
Inc., together with its direct and indirect wholly-owned subsidiaries.
THE COMPANY
Caribiner is a leading international producer of meetings, events and
training programs and a provider of related business communications services
that enable businesses to inform, sell to and train their sales forces,
dealers, franchisees, partners, stockholders and employees. The Company
believes its principal strengths are the depth of its creative, production and
technical talent, its ability to consistently meet its clients' objectives and
expectations and its ability to manage effectively and reliably a number of
complex large-scale projects contemporaneously. Caribiner's clients are
typically large companies that have a business need to communicate with sizable
internal and external constituencies on a regular basis and include some of the
world's largest companies in diverse industries. Major clients include the Ford
Motor Co. (automotive), International Business Machines Corporation ("IBM")
(information technology), Parke-Davis (pharmaceuticals), Holiday Inn Worldwide
(lodging), Shell Oil Company (petroleum) and McDonald's Corporation (fast
food). The Company has offices throughout the United States, as well as in
London, Dubai and Hong Kong.
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through additional domestic and
international acquisitions. Caribiner's revenue has grown from $21.8 million in
fiscal 1992 to $81.1 million in fiscal 1995 and $148.3 million in fiscal 1996.
On a pro forma basis reflecting certain acquisitions, Caribiner's revenue was
$227.1 million in fiscal 1996. (See "Unaudited Pro Forma Consolidated Financial
Information.")
Business activities and events that generate a need for business
communications services include sales meetings, product launches, training and
education of employees and dealers, development of strategic and organizational
communications, conferences, stockholder meetings and other executive
management presentations that are used to convey important information about
the business and/or its products. Although no firm data exists with respect to
the size of the business communications services industry and the number and
size of competitors within the industry, management believes, based on its
experience in the industry, that the business communications services industry
in the United States and abroad is highly fragmented, that no one participant
or small number of participants is dominant in the industry and that its
competitors consist primarily of small, regional firms that do not have the
resources to provide the full range of services offered by the Company.
The Company offers a wide range of business communications services,
including conceptualizing, planning and producing corporate meetings and events
and providing audio visual equipment rentals, sales and related staging
services for such meetings and events, developing training and educational
materials relating to new job skills, products, systems and organizational
processes, handling internal corporate communications and creating interactive
trade show exhibits. The Company believes it has benefited from a trend among
major corporations toward increased corporate outsourcing of meetings, events,
training and communications. These services are delivered in all forms of
media, including film, interactive technologies (including CD-ROM), videotape,
slides, computer graphics and animation, print and multimedia. Examples of such
engagements include:
3
<PAGE>
. The production of the automobile introduction shows for the complete line
of 1997 Ford Motor Co. vehicles, which were attended by approximately
8,000 dealers and their guests and Ford employees in San Francisco over a
two-week period in August, 1996. Beginning eight months prior to the
introductions, the Company's personnel worked closely with Ford's
management and product teams to develop the messages and themes which the
automobile maker wanted to communicate to its dealers. Caribiner designed
and constructed all sets and stage layouts, drafted corporate speeches
made by Ford's management, choreographed the unveiling of the new 1997
vehicles to the dealers, produced several audio/visual presentations and
arranged for live entertainment.
. The introduction to approximately 1,400 sales people from two leading
pharmaceutical companies of a new jointly-promoted product in February,
1996 in Orlando, Florida. Within the span of two months, the Company
produced the entire event, which was designed to educate each of the
companies' sales forces regarding a new antihistamine product. The
Company custom-built and designed several meeting areas within a single
large convention center, designed an interactive computer video game to
test the sales persons' knowledge of the product, produced sketches to
demonstrate the product's advantages over competing products, produced
several videos, arranged for live entertainment and drafted speeches made
by the companies' senior managers.
. The development and delivery in October, 1995 of three interactive
multimedia CD-ROM-based courses for a retailer focusing on product
identification, customer service and technical equipment and procedures
specific to a cashier's job. The courses utilized digital audio, still
images, text and/or video and assessment questions.
. The design of a 3,200 square foot exhibit for Philip Morris Companies,
Inc. for use at the October, 1995 National Association of Convenience
Stores trade show, which was attended by approximately 14,000 people, as
well as the production of two videos and the design and supervision of
all on-site activities, including two interactive exhibits.
. The provision by Total Audio Visual Services ("TAVS") (a business
acquired by the Company in September, 1996) of over 5,000 pieces of audio
visual equipment (ranging from data projectors, video walls and concert
sound systems to overhead projectors and flip charts) to Computer
Associates International, Inc. in connection with its CA World '96 annual
users' conference in New Orleans in August, 1996, which was attended by
approximately 10,000 people. The Company also provided staging and
convention and trade show support services with approximately 150
technicians and other personnel on site.
COMPETITIVE POSITION
Market leader. The Company offers a full range of business communications
services and a depth and breadth of creative, production, technical and
organizational expertise that management believes, based on its experience in
the industry, most of its competitors generally lack. Caribiner has established
a track record of success in executing projects of various types and sizes,
including multi-million dollar events, in a number of industries. Caribiner's
projects are frequently high profile events where senior executives of a
client, often the CEO, are presenting new information to the audience. As a
result, Caribiner believes that confidence in a business communications
services provider and its ability to execute effectively are of critical
importance to clients. In addition, the Company believes that it has an
advantage over smaller competitors in that its resources permit it to seek out
and manage a number of large-scale projects contemporaneously. From fiscal 1993
to fiscal 1996, the number of clients to whom the Company provided services
during the year grew from 65 to over 300.
Strong client relationships. The Company's capabilities have resulted in its
developing long-standing relationships and significant levels of revenue with
numerous major clients. In fiscal 1996, Caribiner had revenue in excess of $1
million from each of 24 clients, many of which Caribiner has had relationships
with for several
4
<PAGE>
years, compared with nine such clients in fiscal 1993. These 24 clients
contributed revenue of $109.8 million in fiscal 1996. Such large accounts are
often developed as a result of the Company's efforts to penetrate a number of
different divisions and departments within a client. For example, for its
largest client, Ford Motor Co., in fiscal 1996 Caribiner executed 160 projects
of various sizes for numerous individual buyers of services in 21 Ford business
units, including Ford Corporate, Ford Division, Lincoln-Mercury Division, Ford
Fleet and Lease, Ford Export and Ford Credit.
Expanding national and international presence. As part of the Company's
strategy to expand its client base, increase its range of services and broaden
its geographic coverage, over the last three years Caribiner has opened new
offices in Boston, San Francisco, White Plains (NY) and Hong Kong, and acquired
offices throughout the United States and in London and Dubai internationally.
This expansion has provided strategic and operational benefits, which include
enabling the Company to service clients more effectively by being in closer
proximity to them, enabling the Company to serve the international needs of its
clients, expanding and diversifying the Company's client base, securing the
services of the acquired business' key executives and sales personnel, reducing
costs by centralizing finance, administration and information technology
functions and realizing purchasing advantages associated with increased
economies of scale. The Company has also expanded the business communications
services which it offers to clients to include the provision of audio visual
equipment rentals, sales and related staging services through its recent
acquisitions of TAVS and Video Supply Company, Inc. d/b/a Projexions Video
Supply ("Projexions").
GROWTH STRATEGY
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through domestic and
international acquisitions. To achieve this goal, Caribiner plans to
(i) increase penetration of existing accounts, (ii) develop new large accounts,
(iii) continue to diversify the range of services offered and (iv) continue
expansion domestically and internationally through acquisitions and the opening
of new offices.
Increase penetration of existing accounts. The Company believes that it has
demonstrated the ability to increase its penetration of existing accounts and
to solve a wide range of business communications needs for its clients. The
Company has identified and utilized a number of ways to establish and build a
client relationship with a large account including:
. securing a "blanket purchase order" or other agreement which enables
decision makers within a client to award business to Caribiner without
going through a bidding or selection process;
. establishing a local presence to be in close proximity to a client and to
ensure rapid response to clients; and
. establishing an outsourcing relationship with a client for specific
communications needs.
As a result, the Company has entered into agreements with several key accounts
for a variety of business communications services. The terms of these
agreements provide either specific event and service commitments or blanket
purchase order arrangements, though these agreements are generally terminable
by the client on short notice and do not provide for minimum levels of revenue.
The Company currently has seven such agreements in place with clients, as
compared to two such agreements at the end of fiscal 1994.
Develop new large accounts. The Company intends to develop new large accounts
by continuing to target clients that have significant or potentially
significant business communications needs. The Company utilizes a number of
techniques to develop new large accounts, including responding to requests for
proposals, becoming a part of a company's regular "bid" list, pursuing client
referrals, identifying prospects through research of a potential client's
business communications needs (e.g., the status of product launches) and
actively marketing to
5
<PAGE>
potential new clients. Sales and marketing personnel in each of Caribiner's
offices identify potential client relationship opportunities and promote
Caribiner's expertise and range of services.
Continue to diversify the range of services offered. Caribiner believes there
are significant opportunities to increase its penetration of accounts by
promoting its capabilities in areas such as employee training and education and
corporate communications, which can be utilized by clients either in
conjunction with meetings and events or separately from them. Revenue for the
Company's "non-meetings" business has increased from a relatively insignificant
amount in fiscal 1993 to $18.0 million in fiscal 1995 and $33.5 million in
fiscal 1996. Caribiner believes that continued efforts to promote its non-
meetings business will result in increased usage of the Company's wide range of
business communications services, strengthen ongoing client relationships and
further expand its revenue base. Caribiner also believes there are attractive
opportunities to continue expanding its position as a provider of audio visual
equipment rentals and related staging services through internal growth and
acquisitions. The Company believes that these services complement its other
"meetings-related" activities.
Continue expansion domestically and internationally. Caribiner intends to
continue to expand domestically and internationally by making acquisitions in
the business communications services industry and opening new offices to
service existing or potential new clients. In making acquisitions, the Company
will continue to focus on companies that have an existing or potential client
base that lends itself to increased penetration subsequent to acquisition and
that are in attractive markets. The Company believes that numerous acquisition
candidates are available as a result of the fragmented nature of the industry.
Since October, 1993, the Company opened four offices, made twelve acquisitions
and acquired a contractual client relationship with a major corporation from
another business communications services provider.
Caribiner believes that its future worldwide opportunities are significant as
a result of the global marketing approach undertaken by its clients as well as
the size of the international business communications market.
RECENT ACQUISITIONS
Since January, 1996, the Company has completed seven acquisitions. These
acquisitions have broadened the business communications services offered by the
Company, provided the Company with a significant international presence and
enabled the Company to obtain relationships with large new clients.
The TAVS Acquisition. In September, 1996, the Company acquired TAVS, a
leading provider of audio visual equipment rentals, sales and related staging
services, including hotel audio visual outsourcing services, in the United
States. The acquisition of TAVS enables the Company to offer its own audio
visual equipment and staging services for use at meetings and events serviced
by the Company and reduce the Company's reliance on third party vendors. The
Company also believes that since many TAVS clients are hotel properties whose
business customers tend to book hotel facilities well in advance of meetings
and events, and often prior to contacting a business communications services
provider, it will have opportunities to benefit from cross-referral of
customers. TAVS reported revenue of $45.9 million for the year ended December
31, 1995.
The Blumberg Acquisition. In January, 1997, the Company acquired 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 is integrating
Blumberg's operations with its existing operations, thereby expanding its
presence in the geographic regions which Blumberg serves. Blumberg reported
revenue of $42.3 million for the year ended May 31, 1996.
The Spectrum Acquisition. In June, 1996, the Company acquired SCH
International Limited ("Spectrum"), a leading London-based producer of meetings
and events and provider of other business communications services, with a
significant presence in the United Kingdom and Europe. Spectrum owns Spectrum
Communications Limited and Mark Wallace Associates Limited ("MWA") in London
and a joint venture
6
<PAGE>
interest in Spectrum Communications LLC in Dubai. The acquisition of Spectrum
allowed the Company to establish an international presence and will enable it
to serve the global needs of its domestic clients. Spectrum reported revenue of
$20.5 million for the nine months ended March 31, 1996.
The Projexions Acquisition. In January, 1997, the Company acquired
Projexions, a provider of audio visual equipment rentals and related staging
services, including hotel audio visual outsourcing services, in the
southeastern U.S. The Company is integrating Projexions into its TAVS division,
thereby strengthening the Company's position as a leading provider of hotel
audio visual outsourcing services in that region. Projexions reported revenue
of $17.7 million for the year ended December 31, 1995.
The Koors Perry Acquisition. In January, 1996, the Company acquired Koors
Perry & Associates, Inc. ("Koors Perry"), a regional business communications
services provider based in Atlanta, Georgia. The Company integrated Koors Perry
with its Atlanta office and has used it as a base from which to expand its
presence in the southeastern U.S. Koors Perry reported revenue of $8.9 million
for the nine months ended September 30, 1995.
The Lighthouse Acquisition. In June, 1996, the Company acquired Lighthouse,
Ltd. ("Lighthouse"), a leading midwestern business communications services
provider. The Company integrated its Chicago office with the Lighthouse
headquarters in Rolling Meadows, Illinois and such acquisition has enabled it
to further expand its presence in the midwestern U.S. Lighthouse reported
revenue of $10.4 million for the year ended December 31, 1995.
The Rome Acquisition. In December, 1996, the Company acquired Rome Network,
Inc. ("Rome"), a regional producer of meetings and events headquartered in San
Francisco. The Company is integrating Rome into its San Francisco office,
thereby expanding and strengthening its presence in the business communications
services industry in the Northern California market. Rome reported revenue of
$2.4 million for the year ended February 29, 1996.
BACKGROUND
The Company was founded in 1989 by its Chairman of the Board and Chief
Executive Officer, Raymond S. Ingleby, under the name Ingleby Enterprises Inc.
and adopted its present name in December, 1995. The Company became a leader in
the business communications market in June, 1992 when it acquired Caribiner,
Inc., which was founded in 1970.
In March, 1996, the Company consummated an initial public offering (the
"Initial Public Offering") of its Common Stock, which included the sale by the
Company of 2,878,014 shares of Common Stock. In connection with the Initial
Public Offering, certain stockholders of the Company sold an additional 646,963
shares of Common Stock.
RISK FACTORS
There are important risks associated with the Company's business, financial
results and ability to implement its growth strategy. These risks include (i)
uncertainties concerning the Company's ability to sustain, manage and finance
future growth, (ii) the Company's current reliance on a small number of clients
for a significant portion of its revenue, (iii) the Company's vulnerability to
quarterly fluctuations in revenue, operating income and net income as a result
of many factors, including the timing of clients' meetings and events and
delays in or cancellations of clients' product launches and events and (iv) the
dependence of the Company's success on its executive officers and other key
employees, in particular Raymond S. Ingleby, its Chairman of the Board and
Chief Executive Officer. Before purchasing shares of Common Stock offered
hereby, prospective investors should consider carefully all of the information
set forth in this Prospectus including, in particular, the information set
forth under "Risk Factors."
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
By the Company................... 1,750,000 shares
By the Selling Stockholders...... 128,200 shares
-----------------
Total.......................... 1,878,200 shares
=================
Common Stock to be outstanding
after the
Offering(a)....................... 11,394,091 shares
Use of Proceeds.................... The net proceeds to be received by the
Company in connection with the sale by the
Company of the shares of Common Stock
offered hereby will be used to repay all
outstanding bank borrowings (together with
accrued interest) to make additional
acquisitions of other companies in the
business communications services industry,
to fund working capital needs and for
general corporate purposes.
As of February 5, 1997, the Company had
outstanding approximately $59.7 million in
the aggregate in bank borrowings (including
accrued interest).
New York Stock Exchange Symbol..... "CWC"
</TABLE>
- --------
(a) Excludes (i) 14,503 shares of Common Stock reserved for future grant under
the Company's Non-Employee Directors' Stock Plan, (ii) 364,000 shares of
Common Stock reserved under the Company's 1996 Stock Option Plan, with
respect to which options to purchase 184,400 shares of Common Stock have
been granted and options to purchase 8,600 shares of Common Stock are
currently exercisable and (iii) 9,000 shares of Common Stock reserved
pursuant to other options to purchase shares of Common Stock granted by the
Company, all of which are currently exercisable. See "Capitalization,"
"Management--Director Compensation" and "Management--Incentive Plans."
8
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------- ----------------
1992(A) 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue............... $21,760 $50,107 $59,174 $81,131 $148,330 $20,407 $52,659
Cost of revenue....... 15,767 34,907 39,724 54,312 99,797 13,341 34,829
------- ------- ------- ------- -------- ------- -------
Gross profit.......... 5,993 15,200 19,450 26,819 48,533 7,066 17,830
Selling, general and
administrative
expenses............. 7,321 12,551 14,349 19,306 30,442 6,456 14,356
Non-cash compensation
expense(b)........... -- -- -- -- 1,072 93 --
Depreciation and
amortization......... 3,064 3,852 2,137 2,330 3,142 604 1,704
Write-off of certain -- 4,614 -- -- -- -- --
intangibles(c)....... ------- ------- ------- ------- -------- ------- -------
Total operating 10,385 21,017 16,486 21,636 34,656 7,153 16,060
expenses............ ------- ------- ------- ------- -------- ------- -------
Operating income
(loss)............... (4,392) (5,817) 2,964 5,183 13,877 (87) 1,770
Interest expense with
related parties...... 345 1,435 2,107 2,234 1,199 682 --
Interest expense, 173 222 502 1,259 387 412 543
other................ ------- ------- ------- ------- -------- ------- -------
Income (loss) before
taxes................ (4,910) (7,474) 355 1,690 12,291 (1,181) 1,227
Provision (benefit) 63 23 62 264 4,302 (283) 491
for taxes............ ------- ------- ------- ------- -------- ------- -------
Net income (loss)..... (4,973) (7,497) 293 1,426 7,989 (898) 736
Preferred stock (120) (517) (582) (655) (327) (176) --
dividends(d)......... ------- ------- ------- ------- -------- ------- -------
Net income (loss)
available to common $(5,093) $(8,014) $ (289) $ 771 $ 7,662 $(1,074) $ 736
stockholders......... ======= ======= ======= ======= ======== ======= =======
Net income (loss) per common share(e). $ 0.30 $ 0.49 $ 1.05 $ (0.07) $ 0.08
======= ======= ======== ======= =======
<CAPTION>
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Number of clients for the
period....................... 65 73 139 302
Number of clients providing
revenue in excess of
$1 million for the period.... 9 10 12 24
Number of offices at end of
period....................... 3 5 10 16
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1996(F) DECEMBER 31, 1996(G)
--------------------- --------------------
PRO FORMA, AS ADJUSTED, STATEMENT
OF OPERATIONS DATA:
<S> <C> <C>
Revenue.......................... $227,063 $52,659
Operating income................. 17,455 1,770
Interest expense................. 109 184
Net income....................... 10,907 952
Net income per common share...... 1.09(h) 0.09(i)
Weighted average shares
outstanding..................... 9,968(h) 10,145(i)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------
PRO
ACTUAL FORMA(J)
BALANCE SHEET DATA: ----------- ------------
<S> <C> <C>
Working capital...................................... $ 13,265 $ 67,616
Total assets......................................... 133,902 188,254
Total debt, including accrued interest............... 24,795 1,795
Stockholders' equity................................. 55,651 133,003
</TABLE>
See Notes to Summary Financial and Operating Data
9
<PAGE>
NOTES TO SUMMARY FINANCIAL AND OPERATING DATA
(a) Prior to August, 1993, the Company was wholly-owned by Ingleby
Communications Corporation ("ICC") and comprised substantially all of the
operations of ICC. On June 30, 1992, the Company completed a private
placement of securities to Warburg, the proceeds from which were used in
part to acquire Caribiner, Inc. On August 3, 1993, ICC was merged into a
wholly-owned subsidiary of the Company. See "The Company."
(b) Non-cash compensation expense for the year ended September 30, 1996 and for
the three months ended December 31, 1995 of $1.1 million (or $0.13 per
share) and $0.1 million (or $0.01 per share), respectively, resulted
primarily from the vesting of non-voting common stock issued at a price
lower than its fair market value under the Company's 1993 Management Stock
Plan (the "Management Stock Plan"), which was terminated upon consummation
of the Initial Public Offering.
(c) Reflects adjustment to net realizable value of certain intangibles,
principally module and film libraries acquired in purchase business
transactions.
(d) All preferred stock was converted into Common Stock in connection with the
Initial Public Offering.
(e) Net income (loss) per common share is calculated on a pro forma basis for
fiscal 1994, fiscal 1995 and fiscal 1996 and for the three months ended
December 31, 1995 using the weighted average number of shares of Common
Stock actually outstanding during the period, plus Common Stock issued
pursuant to the Management Stock Plan and warrants to purchase Common Stock
issued at prices below the Initial Public Offering price of $17.00 per
share during the twelve months immediately preceding December 15, 1995 (the
initial filing date of the Registration Statement relating to the Initial
Public Offering) assuming such Common Stock was outstanding for all periods
presented. In addition, pro forma net income per common share assumes
conversion of the Company's 11.5% Convertible Promissory Note (the
"Convertible Note") and the conversion of all outstanding shares of
preferred stock into shares of Common Stock (which, in each case, occurred
on March 15, 1996) as if such conversions occurred on October 1, 1993.
Accordingly, pro forma net income per common share reflects adjustments (i)
to eliminate the pre-tax interest expense of $1.7 million, $1.9 million,
$0.9 million and $0.5 million incurred on the Convertible Note during each
of fiscal 1994, fiscal 1995 and fiscal 1996 and for the three months ended
December 31, 1995, respectively, and the tax effects thereof and (ii) to
eliminate accrued preferred stock dividends. The pro forma weighted average
shares used in this calculation are 6,550,851 for fiscal 1994, 6,620,003
for fiscal 1995, 8,245,107 for fiscal 1996 and 6,620,003 for the three
months ended December 31, 1995.
(f) Adjusted to (i) decrease interest expense and preferred stock dividends by
$1.9 million resulting from the repayment of substantially all outstanding
bank borrowings and other long-term indebtedness of the Company from the
proceeds of the Initial Public Offering and conversion of preferred stock
to Common Stock as if such transactions occurred on October 1, 1995, (ii)
reflect the acquisitions of each of Spectrum and TAVS as of October 1, 1995
and (iii) decrease pro forma interest expense by $1.7 million resulting
from the repayment from the proceeds of the Offering of all bank borrowings
that would have been incurred in connection with the acquisition of TAVS as
if such acquisition had occurred on October 1, 1995. (See "Unaudited Pro
Forma Consolidated Financial Information.") No adjustments have been made
with respect to the acquisitions of Koors Perry, Lighthouse, Rome,
Projexions and Blumberg.
(g) Adjusted to decrease interest expense by $0.4 million resulting from the
repayment of all outstanding bank borrowings incurred in connection with
the acquisitions of TAVS and Rome from the proceeds of the Offering as if
such transactions occurred on October 1, 1996.
(h) Calculated using the weighted average number of shares of Common Stock
outstanding during fiscal 1996, assuming that (i) 2,877,985 shares of
Common Stock issued in connection with the Initial Public Offering and (ii)
433,236 shares of Common Stock issued in connection with the Offering,
representing only that number of shares which would be required to generate
net proceeds sufficient to repay indebtedness, including indebtedness
incurred in connection with the acquisition of TAVS, were outstanding as of
the beginning of the period.
10
<PAGE>
(i) Calculated using the weighted average number of shares of Common Stock
outstanding during the three months ended December 31, 1996, assuming that
512,364 shares of Common Stock issued in connection with the Offering,
representing only that number of shares which would be required to generate
net proceeds sufficient to repay indebtedness incurred in connection with
the acquisition of TAVS and Rome, were outstanding as of the beginning of
the period.
(j) Presented on a pro forma basis to give effect to the following transactions
as if they occurred on December 31, 1996: (i) the receipt by the Company of
net proceeds of approximately $77.4 million from the sale of 1,750,000
shares of Common Stock offered pursuant to the Offering at an assumed
public offering price of $47.125 per share and (ii) the repayment with the
proceeds of the Offering of bank borrowings that were incurred in
connection with the acquisitions of TAVS and Rome.
11
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business, before purchasing the shares of Common Stock offered
hereby. This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities
Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including statements regarding, among other items, (i) the
Company's growth strategies, including its intention to make acquisitions and
(ii) the Company's ability to control costs and maintain quality. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are
beyond the Company's control. Actual results could differ materially from
these forward-looking statements as a result of the factors described below,
or otherwise.
ABILITY TO MANAGE AND SUSTAIN GROWTH; GROWTH THROUGH DOMESTIC AND
INTERNATIONAL ACQUISITIONS
The Company's future growth will depend on the acquisitions of competitors
in new and existing markets, the opening of offices in new locations,
increased penetration by the Company of existing accounts, development of new
large accounts and diversification of services provided. Sustaining growth
will also require additional management, operational and financial resources.
With respect to the Company's plans to expand its business in part through
acquisitions and opening new offices, there can be no assurance that the
Company will have sufficient cash flow from operations or will be able to
obtain adequate financing to pursue this aspect of the Company's growth
strategy. Additionally, there can be no assurance that the Company will
successfully identify, complete or integrate acquisitions or that any
acquisitions or new offices, particularly those involving new services, such
as the provision of audio visual equipment rentals, sales and related staging
services, or new markets, such as those overseas, will perform as expected or
will contribute significant revenue or profits to the Company. Certain of the
businesses recently acquired by the Company reported net losses for their most
recent fiscal years prior to being acquired, and the Company's future
financial performance will in part depend on its ability to implement
operational improvements in, or exploit potential synergies with, these
acquired businesses. Since the Initial Public Offering, the Company has, in
certain cases, pursued acquisitions of companies larger than those it had
previously acquired. Such larger acquisitions may be more complex to integrate
with the Company's existing business. The Company's current, and any future,
overseas operations also are subject to currency fluctuations and other risks
including adverse developments in the foreign political and economic
environment, difficulties in staffing and managing foreign operations and
potentially adverse tax consequences. Consequently, there can be no assurance
that the Company will be able to sustain its rate of growth or that the
Company will be able to manage its growth effectively and profitably. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business."
RELIANCE ON LARGE CLIENTS; KEY INDUSTRIES
A significant portion of the Company's revenue is generated from a small
number of large clients. Accordingly, the loss of a large client or clients
could have a material adverse effect on the Company. The Company's ten largest
clients accounted for approximately 60% of the Company's revenue in fiscal
1996. The Company's three largest clients in fiscal 1996 were the Ford Motor
Co., IBM and State Farm Group which accounted for approximately 15%, 13% and
11%, respectively, of the Company's revenue during the fiscal year. The
Company's agreements with clients may generally be terminated by the clients
on short notice. The Company's revenue is generated in large part from
projects executed for clients in the automotive, information technology,
insurance, food services, telecommunications and pharmaceutical industries,
which accounted for approximately 75%, in the aggregate, of the Company's
revenue in fiscal 1996. Accordingly, a trend in any of these industries not to
use, or to reduce the use of, business communications services, whether due to
adverse business conditions in those industries or otherwise, including the
cyclical nature of the automobile industry, could have a material adverse
effect on the Company's business. In addition, due to competitive conditions
in certain relatively concentrated industries, the Company is in some cases
subject to contractual or practical limitations on its ability to perform
services for competitors of existing clients. See "Business--Clients."
12
<PAGE>
FLUCTUATIONS IN QUARTERLY AND ANNUAL OPERATING RESULTS; SEASONALITY
The Company experiences quarterly variations in revenue, operating income
and net income as a result of many factors, including the timing of clients'
meetings and events, delays in or cancellation of clients' product launches
and events, as well as changes in the Company's revenue mix among its various
services offered. The Company's reported results for a given quarter are
vulnerable to such fluctuation in part because the Company recognizes revenue
and production costs under the completed contract method of accounting. See
Note 2 of the Notes to Consolidated Financial Statements of the Company. The
Company must plan its operating expenditures based on revenue forecasts, and a
revenue shortfall below such forecast in any quarter would likely adversely
affect the Company's operating results for that quarter. Historically, the
Company's business has tended to be slower in the first quarter of its fiscal
year mainly due to the Thanksgiving and Christmas holidays when clients
traditionally stage fewer meetings and events. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview."
Finally, because some of the events produced for clients by the Company do not
occur on an annual or recurring basis, such as a significant corporate
anniversary or a product launch, the Company could also experience
fluctuations in annual revenue and operating and net income.
EPISODIC NATURE OF BUSINESS
The Company produces meetings, events, training programs and related
business communications services for its clients on a project-by-project basis
and does not have long term arrangements or agreements with its clients which
require clients to utilize Caribiner on an on-going basis for such clients'
business communications needs or which provide for minimum levels of revenue.
Although the Company has established some arrangements with clients pursuant
to which a client may, at its option, bypass its normal bidding process for a
project, generally the Company competitively bids for each project that it
produces. IBM has advised the Company that as a result of a change in internal
procedures, it intends to put up for bid certain projects previously awarded
to the Company without competitive bid. There can be no assurance that the
Company will maintain its present client relationships or that its clients
will retain the services of the Company for its business communications needs
even in the case of projects that the Company has in the past produced and
which a client may stage on a regular basis.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees and, in
particular, of Raymond S. Ingleby, Chairman of the Board and Chief Executive
Officer. There can be no assurance that the Company will be able to retain the
services of such officers and employees. The failure of the Company to retain
the services of Mr. Ingleby and other key personnel could have a material
adverse effect on the Company. Mr. Ingleby serves in his capacity with the
Company pursuant to an employment agreement expiring on October 1, 1998. The
Company has non-competition agreements with certain of its existing key
personnel. However, courts are at times reluctant to enforce such agreements.
In order to support its growth the Company will, from time to time, be
required to recruit, promote and develop additional qualified management
personnel. See "Management."
COMPETITIVE INDUSTRY
The business communications services industry is very competitive. Although
the business communications services industry is highly fragmented and the
Company competes primarily with small, generally regional firms offering a
limited range of services, there are several participants in the industry
whose business is national and full service in scope. Management believes that
certain competitors have capabilities and resources comparable to and in
certain respects greater than those of the Company. The Company also competes
with in-house communications staffs of many clients and potential clients.
There can be no assurance that, as the Company's industry continues to evolve,
additional competitors with greater resources than the Company will not enter
the industry (or particular segments of the industry) or that the Company's
clients will not choose to service more of their business communications needs
internally. See "Business--Competition."
13
<PAGE>
ECONOMIC CONDITIONS; CONCERN FOR TRAVEL SAFETY
The Company's business is dependent in part on the sale of services to
clients in connection with activities that may be decreased during prolonged
general economic downturns or significant declines in spending on marketing
and sales activities by clients. Accordingly, there can be no assurance that a
general economic recession would not have a material adverse effect on the
Company. In addition, because a significant portion of the Company's revenue
is generated from corporate meetings and events, terrorist threats or other
security concerns affecting commercial air travel may have a material adverse
effect on the Company.
CONTROL BY EXECUTIVE OFFICERS AND CURRENT STOCKHOLDERS
Upon completion of the Offering, Warburg, Pincus Investors, L.P. ("Warburg")
and executive officers of the Company will own or control approximately 36.3%
and 9.0%, respectively, of the Company's outstanding shares of Common Stock
(approximately 36.0% and 7.2%, respectively, if the Underwriters' (as defined
in "Underwriting") over-allotment option is exercised in full) and will
effectively have the ability, under normal circumstances if they act in
concert, to continue to elect the Company's Board of Directors and take other
corporate actions requiring stockholder approval, as well as effectively to
control the direction and policies of the Company. Moreover pursuant to a
stockholders agreement, dated as of March 15, 1996 (the "Stockholders
Agreement"), among Warburg, Raymond S. Ingleby and the Company, for so long as
Warburg beneficially owns at least 35%, 20% or 10% of the outstanding shares
of Common Stock, it will have the right to designate three nominees, two
nominees or one nominee, respectively, for director. The Board of Directors
consists of five persons. After completion of the Offering, the Company
intends to nominate and appoint one additional person as a director. So long
as Warburg has three nominees and the Board is composed of six or fewer
members, Warburg will have the ability to block any corporate action requiring
Board approval. The Stockholders Agreement also provides that, for so long as
Mr. Ingleby shall hold office as the Chairman and Chief Executive Officer of
the Company, Mr. Ingleby will have the right to designate one nominee for
director. There can be no assurance that Warburg and members of management
will not decide to sell all or a portion of their respective holdings at a
future date. In addition, there can be no assurance that in any transfer of a
controlling interest in the Company that any other holders of Common Stock
will be allowed to participate in any such transaction or will realize any
premium with respect to their shares of Common Stock. The foregoing may have
the effect of discouraging or preventing certain types of transactions
involving an actual or potential change of control of the Company. See
"Certain Relationships and Transactions with Related Persons" and "Principal
and Selling Stockholders."
EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company's Second Restated Certificate of Incorporation (the
"Certificate") and Second Amended and Restated By-laws (the "By-Laws") and
certain sections of the Delaware General Corporation Law contain certain
provisions that could discourage potential takeover attempts and make attempts
by the Company's stockholders to change management more difficult. The
Certificate and By-Laws require approval of the Chairman of the Board or at
least 50% of the members of the Board of Directors in order for a special
meeting of stockholders to be called, require advance notice by stockholders
of an intention to nominate persons for election to the Board of Directors or
to make stockholder proposals and prohibit the stockholders of the Company
from taking action by written consent in lieu of a meeting. In addition, the
Company's Certificate authorizes the Board of Directors to issue "blank check"
preferred stock without stockholder approval and upon such terms as the Board
of Directors may determine. The rights of the holders of Common Stock would be
subject to, and could be adversely affected by, the rights of the holders of
any preferred stock that may be issued by the Company in the future. While the
Company has no present intention to issue shares of preferred stock, any
issuance could have the effect of making it more difficult for a third party
to acquire a majority of the outstanding voting stock of the Company. See
"Description of Capital Stock."
14
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of the Common Stock in the public market after
the Offering could adversely affect the market price of the Common Stock. Upon
completion of the Offering, the Company will have outstanding 11,394,091
shares of Common Stock. The Common Stock offered hereby will be freely
tradeable (other than by an "affiliate" of the Company as such term is defined
in the Securities Act) without restriction or registration under the
Securities Act. In addition, the Common Stock offered pursuant to the Initial
Public Offering is freely tradeable (other than by an "affiliate" of the
Company) as such term is defined in the Securities Act, without restriction or
registration under the Securities Act. Of the remaining shares of Common
Stock, 5,095,581 shares may be sold under Rule 144 under the Securities Act,
subject to the volume limitations and manner of sale and other restrictions of
Rule 144. The Company, the Selling Stockholders, Warburg and all of the
Company's directors and executive officers have, subject to certain exceptions
in the case of the Company, agreed not to, directly or indirectly, sell, offer
to sell, grant any option for sale of, or otherwise dispose of, any capital
stock of the Company, or any security convertible or exchangeable into, or
exercisable for, such capital stock, or, in the case of the Company, file any
registration statement with respect to any of the foregoing, for a period of
90 days after the date of this Prospectus, without the prior written consent
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). The
Company intends to register on Form S-8 approximately 364,000 shares of Common
Stock reserved for issuance under the 1996 Stock Option Plan. See
"Management--Incentive Plans." The Company also intends to register on Form S-
3 (when it becomes so eligible, which is anticipated to be March, 1997) an
aggregate of 77,256 shares of Common Stock issued in connection with the
acquisitions of Lighthouse, Rome and Blumberg. See "Shares Eligible for Future
Sale." In addition, the Company has granted to Warburg and Mr. Ingleby certain
registration rights with respect to the Common Stock beneficially owned by
them. See "Management--Incentive Plans," "Certain Relationships and
Transactions with Related Persons," "Shares Eligible for Future Sale" and
"Underwriting."
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock has risen substantially since the
Initial Public Offering. Trading prices for the Common Stock could be subject
to significant fluctuations due to many factors, including the depth of the
market for the Common Stock, investor perception of the Company, fluctuations
in the Company's operating results and changes in conditions or trends in the
Company's industry or in the industries of any of the Company's significant
clients, changes in any securities analysts' estimates of the Company's future
performance or general market conditions. In addition, future sales of
substantial amounts of Common Stock by existing stockholders could also
adversely affect the prevailing market price of the Common Stock. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."
15
<PAGE>
THE COMPANY
Caribiner is a leading international producer of meetings, events and
training programs and a provider of related business communications services
that enable businesses to inform, sell to and train their sales forces,
dealers, franchisees, partners, stockholders and employees. The Company
believes its principal strengths are the depth of its creative, production and
technical talent, its ability to consistently meet its clients' objectives and
expectations and its ability to manage effectively and reliably a number of
complex, large-scale projects contemporaneously. Caribiner's clients are
typically large companies that have a business need to communicate with
sizable internal and external constituencies on a regular basis, including
some of the world's largest companies in diverse industries. Major clients
include the Ford Motor Co. (automotive), IBM (information technology), Parke-
Davis (pharmaceuticals), Holiday Inn Worldwide (lodging), Shell Oil Company
(petroleum) and McDonald's Corporation (fast food). The Company has offices
throughout the United States, as well as in London, Dubai and Hong Kong.
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through additional domestic
and international acquisitions. Caribiner's revenue has grown from $21.8
million in fiscal 1992 to $81.1 million in fiscal 1995 and $148.3 million in
fiscal 1996. On a pro forma basis reflecting certain acquisitions, Caribiner's
revenue was $227.1 million in fiscal 1996. (See "Unaudited Pro Forma
Consolidated Financial Information.")
The Company's principal executive offices are located at 16 West 61st
Street, New York, New York 10023-7604, and its telephone number at that
address is (212) 541-5300.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of Common Stock
offered hereby, after deducting underwriting discounts and estimated offering
expenses payable by the Company, are approximately $77.4 million ($81.0
million if the Underwriters exercise their over-allotment option in full),
based on an assumed public offering price equal to the closing price as
reported on February 6, 1997 on the New York Stock Exchange ($47.125 per
share). The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders.
The net proceeds to be received by the Company in connection with the
Offering will be used to repay all outstanding bank borrowings (together with
accrued interest) to make additional acquisitions of other companies in the
business communications services industry, to fund working capital needs and
for general corporate purposes. As of February 5, 1997, $59.7 million
(including accrued interest) was outstanding under the Company's six-year
reducing revolving credit facility (the "Reducing Revolver") (which amount was
incurred to finance acquisitions). The maturity date of the Reducing Revolver
is December 31, 2002 and the weighted average interest rate on the outstanding
amount thereunder is currently 6.6%. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources.")
The management of the Company regularly reviews the operations of, and
discusses the possibility of acquisitions with, other domestic and
international companies in the business communications services industry.
However, there are currently no definitive agreements in effect with respect
to the acquisition of any such companies, and there is no probable acquisition
of any company whose acquisition would have a material affect on the
consolidated financial statements of the Company.
Pending application of the net proceeds of the Offering as described above,
the Company intends to invest such proceeds in United States government
securities and investment grade, interest-bearing instruments.
17
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed on the New York Stock Exchange under the symbol
"CWC." The following table sets forth on a per share basis, for the periods
indicated, the high and low closing prices of the Common Stock as reported by
the New York Stock Exchange. The Common Stock was not publicly traded prior to
the Initial Public Offering.
<TABLE>
<CAPTION>
PRICE
RANGE
------------
HIGH LOW
---- ----
<S> <C> <C>
Fiscal 1996:
Second Quarter (from March 11, 1996)................... $25 3/4 $22 1/4
Third Quarter.......................................... 36 3/4 24 7/8
Fourth Quarter......................................... 42 1/4 28 5/8
Fiscal 1997:
First Quarter.......................................... 50 1/4 41 3/4
Second Quarter (through February 6, 1997).............. 50 43 3/4
</TABLE>
The closing price as reported on February 6, 1997 on the New York Stock
Exchange is set forth on the cover page of this Prospectus.
The Company has not paid any dividends with respect to the Common Stock. The
Company presently intends to retain future earnings to finance its growth and
development and therefore does not anticipate any cash dividends in the
foreseeable future. Payment of future dividends, if any, will depend upon
future earnings and capital requirements of the Company and other factors
which the Board of Directors considers appropriate.
18
<PAGE>
CAPITALIZATION
The following table sets forth the actual and pro forma (giving effect to
the Offering) capitalization of the Company, on an unaudited basis, as of
December 31, 1996 (in thousands, except share data).
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1996
------------------
ACTUAL PRO FORMA
------- ---------
<S> <C> <C>
Short-term debt, including current portion of long-term
debt..................................................... $ 642 $ 642
======= ========
Long-term debt, including accrued interest, net of current
portion.................................................. $24,153 $ 1,153(a)
Stockholders' equity:
Preferred Stock, $.01 par value; 2,000,000 shares
authorized; none issued
or outstanding.......................................... -- --
Common Stock; 40,000,000 shares authorized, 9,614,151
shares issued and outstanding (actual) and 11,364,151
shares issued and outstanding on a
pro forma basis(b)...................................... 96 114
Additional paid-in capital............................... 60,796 138,130
Translation adjustment................................... 770 770
Accumulated deficit...................................... (6,011) (6,011)
------- --------
Total stockholders' equity.............................. 55,651 133,003
------- --------
Total capitalization.................................. $79,804 $134,156
======= ========
</TABLE>
- --------
(a) Gives effect to the application of a portion of the net proceeds to the
Company in connection with the Offering to the repayment of $23,000 of
indebtedness of the Company incurred in connection with the acquisitions
of TAVS and Rome. On a pro forma basis as of December 31, 1996, the
Company would have had cash of $61,302.
(b) The Company has reserved (i) 14,503 shares of Common Stock for future
grant under the Non-Employee Directors' Stock Plan and (ii) 364,000 shares
of Common Stock for future issuance under the Company's 1996 Stock Option
Plan, with respect to which options to purchase 151,400 shares of Common
Stock were granted prior to such date. See "Management--Director
Compensation" and "Management--Incentive Plans."
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following information sets forth the unaudited pro forma consolidated
financial information of the Company for the three months ended December 31,
1996 and the year ended September 30, 1996. The Unaudited Pro Forma
Consolidated Statements of Operations for the three months ended December 31,
1996 and for the year ended September 30, 1996 give effect to (a) the
acquisition of Spectrum which occurred as of June 1, 1996, (b) the acquisition
of TAVS which occurred on September 27, 1996 and (c) the Offering and the
Initial Public Offering, as if such events had occurred on October 1, 1995. No
adjustments have been made with respect to the acquisitions of Koors Perry,
Lighthouse, Rome, Projexions and Blumberg. The Unaudited Pro Forma
Consolidated Balance Sheet as of December 31, 1996 gives effect to the
Offering as if it occurred on December 31, 1996.
The unaudited pro forma consolidated financial information is based upon the
historical consolidated financial statements of each of the Company, Spectrum
and TAVS and should be read in conjunction with the financial statements and
the related notes thereto included elsewhere in this Prospectus. The
historical financial information of Spectrum has been adjusted for inclusion
in the Unaudited Pro Forma Consolidated Financial Information to conform to
United States generally accepted accounting principles and has been translated
into United States dollars based upon the applicable exchange rates. The
Company's historical results of operations for the year ended September 30,
1996 include the results of operations of Spectrum since June 1, 1996, its
effective date of acquisition. Spectrum's fiscal year end (June 30) differed
from the Company's fiscal year-end (September 30). The Unaudited Pro Forma
Consolidated Statement of Operations for the year ended September 30, 1996,
includes Spectrum's historical results of operations for the eight months
ended May 31, 1996. Certain amounts in Spectrum's Statement of Operations have
been reclassified to conform to the presentation of the Company's Statement of
Operations.
The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended September 30, 1996, includes TAVS' historical results of operations for
the twelve months ended September 27, 1996. TAVS' fiscal year end (December
31) differed from the Company's fiscal year end (September 30). Certain
amounts in TAVS' Statement of Operations have been reclassified to conform to
the presentation of the Company's Statement of Operations.
The pro forma financial information presented does not purport to be
indicative of the financial position or operating results which would have
been achieved had the transactions described above taken place at the dates
indicated and are not necessarily indicative of the Company's financial
position or results of operations for any future date or period.
20
<PAGE>
CARIBINER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL FOR THE PRO FORMA
CARIBINER OFFERING CARIBINER
---------- ----------- ---------
<S> <C> <C> <C>
Assets
Cash and cash equivalents................... $ 6,950 $ 54,352 (a) $ 61,302
--
Trade accounts receivable, net.............. 38,808 -- 38,808
Deferred charges............................ 9,598 -- 9,598
Prepaid expenses and other current assets... 3,990 -- 3,990
-------- -------- --------
Total Current Assets...................... 59,346 54,352 113,698
Property and equipment-net.................. 20,735 -- 20,735
Intangible assets-net....................... 53,430 -- 53,430
Other assets................................ 391 -- 391
-------- -------- --------
Total Assets.............................. $133,902 $ 54,352 $188,254
======== ======== ========
Liabilities and Stockholders' Equity
Bank line of credit......................... $ -- -- $ --
Current portion of long-term debt........... 642 -- 642
Trade accounts payable...................... 7,820 -- 7,820
Accrued expenses and other current
liabilities................................ 21,785 -- 21,785
Deferred income............................. 15,835 -- 15,835
-------- -------- --------
Total Current Liabilities................. 46,082 -- 46,082
Long-term debt.............................. 24,153 (23,000)(a) 1,153
Deferred income............................. 6,179 -- 6,179
Other liabilities........................... 1,837 -- 1,837
-------- -------- --------
Total Liabilities......................... 78,251 (23,000) 55,251
Common stock................................ 96 18 (a) 114
Additional paid-in capital.................. 60,796 77,334 (a) 138,130
Translation adjustment...................... 770 -- 770
Accumulated (deficit) earnings.............. (6,011) -- (6,011)
-------- -------- --------
Total Stockholders' Equity................ 55,651 77,352 133,003
-------- -------- --------
Total Liabilities and Stockholders'
Equity................................... $133,902 $ 54,352 $188,254
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
21
<PAGE>
CARIBINER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA,
---------- ----------- AS ADJUSTED
CARIBINER OFFERING CARIBINER
---------- ----------- -----------
<S> <C> <C> <C>
Revenue.................................. $52,659 $ -- $52,659
Cost of revenue.......................... 34,829 -- 34,829
------- ----- -------
Gross profit............................. 17,830 -- 17,830
Operating expenses:
Selling, general and administrative ex-
penses................................. 14,356 -- 14,356
Depreciation and amortization........... 1,704 -- 1,704
------- ----- -------
Total operating expenses................. 16,060 -- 16,060
------- ----- -------
Operating income ........................ 1,770 -- 1,770
Interest expense (income), net........... 543 (359)(b) 184
Income (loss) before taxes............... 1,227 359 1,586
Income tax expense....................... 491 143 634 (c)
------- ----- -------
Net income (loss)........................ $ 736 $ 216 $ 952
======= ===== =======
Pro forma, as adjusted, net income per common share............. $ 0.09 (d)
=======
Pro forma weighted average shares outstanding................... 10,145 (d)
=======
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
22
<PAGE>
CARIBINER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS PRO FORMA,
--------------------------- ------------------------------------ AS ADJUSTED
CARIBINER SPECTRUM TAVS IPO ACQUISITIONS(E) OFFERING CARIBINER
--------- -------- ------- ------- --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $148,330 $26,730 $52,003 $ -- $ -- $ -- $227,063
Cost of revenue......... 99,797 20,661 38,601 -- -- -- 159,059
-------- ------- ------- ------- ----- ------ --------
Gross profit............ 48,533 6,069 13,402 -- -- -- 68,004
Operating expenses:
Selling, general and
administrative
expenses.............. 30,442 4,322 7,981 -- -- -- 42,745
Non-cash compensation
expense............... 1,072 -- -- -- -- -- 1,072
Depreciation and
amortization.......... 3,142 231 3,319 -- (280)(g) --
461 (h) 6,873
-------- ------- ------- ------- ----- ------ --------
Total operating ex- 34,656 4,553 11,300 -- 181 -- 50,690
penses................. -------- ------- ------- ------- ----- ------ --------
Operating income (loss). 13,877 1,516 2,102 -- (181) -- 17,314
Interest expense (in-
come) with
related parties........ 1,199 -- -- (1,199)(f) -- -- --
Interest expense (in-
come), net............. 387 221 1,395 (719)(f) 557 (i) (1,732)(j) 109
Other (income) expense, -- (303) 53 -- -- -- (250)
net.................... -------- ------- ------- ------- ----- ------ --------
Income (loss) before
taxes.................. 12,291 1,598 654 1,918 (738) 1,732 17,455
Income tax expense...... 4,302 527 327 767 (68) 693 6,548 (k)
-------- ------- ------- ------- ----- ------ --------
Net income (loss)....... $ 7,989 $ 1,071 $ 327 $ 1,151 $(670) $1,039 $ 10,907
======== ======= ======= ======= ===== ====== ========
Pro forma, as adjusted, $ 1.09 (l)
net income per common share........................................................ ========
Pro forma weighted average 9,968 (l)
shares outstanding................................................................. ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(a) Reflects the receipt of net proceeds of $77,351 to be received by the
Company upon the sale of 1,750,000 shares of Common Stock in connection
with the Offering at an assumed public offering price per share of $47.125
and the repayment upon consummation of the Offering of all outstanding
bank borrowings, including accrued interest thereon.
(b) Adjusted to decrease interest expense by $0.4 million resulting from the
repayment of all outstanding bank borrowings incurred in connection with
the acquisitions of TAVS and Rome from proceeds of the Offering as if such
transactions occurred on October 1, 1995.
(c) The pro forma, as adjusted income tax expense for the three months ended
December 31, 1996 reflects statutory rates adjusted for book/tax
differences such as nondeductible expenses.
(d) Calculated using the weighted average number of shares of Common Stock
outstanding during the three months ended December 31, 1996, assuming that
512,364 shares of Common Stock issued in connection with the Offering,
representing only that number of shares which would be required to
generate net proceeds sufficient to repay indebtedness incurred in
connection with the acquisition on TAVS and Rome, were outstanding as of
the beginning of the period.
(e) Adjustments related to the acquisitions of Spectrum and TAVS.
(f) Gives effect to the Initial Public Offering and related transactions as if
such transactions had occurred on October 1, 1995 to (i) decrease interest
expense with related parties by $1,199, which consists of (a) $273
relating to the repayment of a $10 million Warburg loan facility (the
"Warburg Term Loan") and (b) $926 relating to the conversion of the
Convertible Note, and (ii) decrease other interest expense by $719
relating to the repayment of all bank borrowings.
(g) Adjustment to decrease depreciation expense by $280 resulting from an
adjustment to reduce the net carrying value of certain fixed assets of
TAVS to fair market value, assuming such adjustment occurred on October 1,
1995.
(h) Adjustment to reflect amortization of the goodwill of $8,313 resulting
from the acquisition of Spectrum for the eight months prior to the
effective date of such acquisition, and goodwill of $12,865 resulting from
the acquisition of TAVS for the twelve months prior to the effective date
of such acquisition, based upon the Company's estimated period of benefit
(i.e., 25 years), assuming each of the acquisitions occurred on October 1,
1995. The adjustment of $461 is net of $276 of amortization of goodwill
included in the historical results of operations of TAVS.
(i) Net adjustment to increase (decrease) interest expense as follows,
assuming the acquisitions of Spectrum and TAVS occurred on October 1,
1995.
<TABLE>
<S> <C>
Increase in interest expense resulting from the $21,000 of debt
incurred upon the acquisition of TAVS.............................. $1,890
Decrease in interest expense from repayment of debt incurred above,
from proceeds of the Initial Public Offering....................... (788)
Decrease in interest expense for debt not assumed upon acquisition
of TAVS............................................................ (1,395)
Increase in interest expense to support working capital requirements
of TAVS............................................................ 630
Decrease in interest expense for debt repaid in connection with the
acquisition of Spectrum............................................ (221)
Decrease in interest income earned on proceeds of the Initial Public 441
Offering........................................................... ------
Net increase in interest expense.................................... $ 557
======
</TABLE>
(j) Decreases interest expense by $1,102 resulting from the repayment of debt
incurred upon the acquisition of TAVS and $630 resulting from repayment of
debt incurred to support working capital requirements of TAVS.
(k) The pro forma, as adjusted income tax expense for fiscal 1996 reflects
statutory rates adjusted for book/tax differences such as nondeductible
expenses including the utilization of the remaining available net
operating loss carryforwards in the Caribiner historical statements.
(l) Pro forma, as adjusted net income per common share for the year ended
September 30, 1996 has been calculated using the weighted average number
of shares of Common Stock outstanding during the period assuming that (i)
2,877,985 shares of Common Stock issued upon consummation of the Initial
Public Offering and (ii) 433,236 shares of Common Stock issued upon
consummation of the Offering were outstanding as of the beginning of the
period. The calculation assumes the issuance and sale of only that number
of shares as would generate net proceeds sufficient (i) to repay
indebtedness, including that incurred in connection with the TAVS
acquisition and that required to fund TAVS working capital indebtedness
and (ii) to finance the acquisition of Spectrum, and the application of
such proceeds to make such payments as of the beginning of the period
presented.
24
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT SHARE AND OPERATING DATA)
The historical selected financial data presented below as of and for the
fiscal years ended September 30, 1992, 1993, 1994, 1995 and 1996 are derived
from, and are qualified by reference to, the financial statements that have
been audited by Ernst & Young LLP, independent auditors. Interim unaudited
data as of December 31, 1996 and for the three months ended December 31, 1995
and 1996 reflect, in the opinion of management of the Company, all adjustments
which are necessary for a fair presentation of such data. Results for the
three months ended December 31, 1996 are not necessarily indicative of the
results which may be expected for any other interim period or for the fiscal
year ending September 30, 1997 ("fiscal 1997"). The data presented below
should be read in conjunction with the Company's financial statements and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other information included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------------------ ---------------------
1992(A) 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue............... $ 21,760 $ 50,107 $ 59,174 $ 81,131 $148,330 $20,407 $ 52,659
Cost of revenue....... 15,767 34,907 39,724 54,312 99,797 13,341 34,829
-------- -------- -------- -------- -------- ------- --------
Gross profit.......... 5,993 15,200 19,450 26,819 48,533 7,066 17,830
Selling, general and
administrative
expenses............. 7,321 12,551 14,349 19,306 30,442 6,456 14,356
Non-cash compensation
expense(b)........... -- -- -- -- 1,072 93 --
Depreciation and
amortization......... 3,064 3,852 2,137 2,330 3,142 604 1,704
Write-off of certain -- 4,614 -- -- -- -- --
intangibles(c)....... -------- -------- -------- -------- -------- ------- --------
Total operating ex- 10,385 21,017 16,486 21,636 34,656 7,153 16,060
penses.............. -------- -------- -------- -------- -------- ------- --------
Operating income
(loss)............... (4,392) (5,817) 2,964 5,183 13,877 (87) 1,770
Interest expense with
related parties...... 345 1,435 2,107 2,234 1,199 682 --
Interest expense, 173 222 502 1,259 387 412 543
other................ -------- -------- -------- -------- -------- ------- --------
Income (loss) before
taxes................ (4,910) (7,474) 355 1,690 12,291 (1,181) 1,227
Provision (benefit) 63 23 62 264 4,302 (283) 491
for taxes............ -------- -------- -------- -------- -------- ------- --------
Net income (loss)..... (4,973) (7,497) 293 1,426 7,989 (898) 736
Preferred stock (120) (517) (582) (655) (327) (176) --
dividends(d)......... -------- -------- -------- -------- -------- ------- --------
Net income (loss)
available to common $ (5,093) $ (8,014) $ (289) $ 771 $ 7,662 $(1,074) $ 736
stockholders......... ======== ======== ======== ======== ======== ======= ========
Net income (loss) per common $ 0.30 $ 0.49 $ 1.05 $ (0.07) $ 0.08
share(e)............................... ======== ======== ======== ======= ========
OPERATING DATA:
Number of clients for the
period........................ 65 73 139 302
Number of clients providing
revenue in excess
of $1 million for the period.. 9 10 12 24
Number of offices at end of
period........................ 3 5 10 16
<CAPTION>
AS OF SEPTEMBER 30, AS OF
------------------------------------------------ DECEMBER 31,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit)............ $ (1,229) $ (1,349) $ (1,452) $ 352 $ 5,451 $ 13,265
Total assets.......... 27,852 15,182 31,266 45,298 126,321 133,902
Total debt, including
accrued interest..... 13,937 19,223 24,531 34,175 22,839 24,795
Stockholders' equity.. (1,273) (12,269) (13,249) (12,434) 53,467 55,651
</TABLE>
See Notes to Selected Financial and Operating Data
24--1
<PAGE>
NOTES TO SELECTED FINANCIAL AND OPERATING DATA
(a) Prior to August, 1993, the Company was wholly-owned by ICC and comprised
substantially all of the operations of ICC. On June 30, 1992, the Company
completed a private placement of securities to Warburg, the proceeds from
which were used in part to acquire Caribiner, Inc. On August 3, 1993, ICC
was merged into a wholly-owned subsidiary of the Company. See "The
Company."
(b) Non-cash compensation expense for the year ended September 30, 1996 and
for the three months ended December 31, 1995 of $1.1 million (or $0.13 per
share) and $0.1 million (or $0.01 per share), respectively resulting
primarily from the vesting of non-voting common stock issued at a price
lower than its fair market value under the Management Stock Plan, which
was terminated upon consummation of the Initial Public Offering.
(c) Reflects adjustment to net realizable value of certain intangibles,
principally module and film libraries acquired in purchase business
transactions.
(d) All preferred stock was converted into Common Stock in connection with the
Initial Public Offering.
(e) Net income (loss) per common share is calculated on a pro forma basis for
fiscal 1994, fiscal 1995 and fiscal 1996 and for the three months ended
December 31, 1995 using the weighted average number of shares of Common
Stock actually outstanding during the period, plus Common Stock issued
pursuant to the Management Stock Plan and warrants to purchase Common
Stock issued at prices below the Initial Public Offering price of $17.00
per share during the twelve months immediately preceding December 15, 1995
(the initial filing date of the Registration Statement relating to the
Initial Public Offering) assuming such Common Stock was outstanding for
all periods presented. In addition, pro forma net income per common share
assumes conversion of the Convertible Note and the conversion of all
outstanding shares of preferred stock into shares of Common Stock (which,
in each case, occurred on March 15, 1996) as if such conversions occurred
on October 1, 1993. Accordingly, pro forma net income per common share
reflects adjustments (i) to eliminate the pre-tax interest expense of $1.7
million, $1.9 million, $0.9 million and $0.5 million incurred on the
Convertible Note during each of fiscal 1994, fiscal 1995 and fiscal 1996
and for the three months ended December 31, 1995, respectively, and the
tax effects thereof and (ii) to eliminate accrued preferred stock
dividends. The pro forma weighted average shares used in this calculation
are 6,550,851 for fiscal 1994, 6,620,003 for fiscal 1995, 8,245,107 for
fiscal 1996 and 6,620,003 for the three months ended December 31, 1995.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion of the Company's historical results of operations
and of its liquidity and capital resources should be read in conjunction with
the Unaudited Pro Forma Consolidated Financial Information, the Selected
Financial and Operating Data and Consolidated Financial Statements of the
Company and related notes thereto included elsewhere in this Prospectus.
The Company's revenue has increased from $21.8 million in fiscal 1992 to
$81.1 million in fiscal 1995 and $148.3 million in fiscal 1996. On a pro forma
basis reflecting certain acquisitions, Caribiner's revenue was $227.1 million
in fiscal 1996. (See "Unaudited Pro Forma Consolidated Financial
Information.") This growth in revenue can be attributed to a number of factors
including (i) the increased penetration of existing accounts, (ii) the
development of new large accounts, (iii) the diversification of the range of
services offered and (iv) domestic and international expansion through
acquisitions and opening of new offices.
Caribiner's sales and marketing activities have focused on targeting clients
with significant recurring needs for business communications services. In
fiscal 1993, 1994, 1995 and 1996, Caribiner had 9, 10, 12 and 24 clients,
respectively, that generated in excess of $1 million of revenue ("million-
dollar clients") for the Company. While the composition of the Company's
million-dollar clients varies from year to year, in part because its clients'
needs for large corporate events and meetings depends on product launches and
other key corporate events, the timing of which may change from year to year,
the Company has significantly increased its revenue from its largest clients
over the past several years. In fiscal 1996, the 24 clients who were million-
dollar clients generated aggregate revenue of $109.8 million for the Company.
Of these 24 clients, Ford Motor Co., IBM and State Farm Group accounted for
approximately 15%, 13% and 11%, respectively, of the Company's revenue in
fiscal 1996. (See "Risk Factors--Reliance on Large Clients; Key Industries.")
The Company currently has seven corporate agreements with clients, some of
whom are million-dollar clients. Though these agreements may generally be
terminated by the clients on short notice and do not provide for minimum
levels of revenue, it has been the Company's experience that such arrangements
strengthen the Company's relationship with a client following the securing of
such arrangement. These arrangements range from one to ten years and cover
clients in four different industries: automotive, information technology,
lodging and petroleum.
The Company has broadened its product offerings over the past three years to
include services which are sold both in conjunction with and separately from
the Company's meetings business, such as training, education and corporate
communication programs. As a result, revenue generated from the Company's
"non-meetings" business has increased from a relatively insignificant amount
in 1993 to $18.0 million in fiscal 1995 and $33.5 million in fiscal 1996. In
addition, the Company has broadened its product offerings through recent
acquisitions to include the provision of audio visual equipment rentals, sales
and related staging services, including hotel audio visual outsourcing
services.
Since October, 1993, Caribiner has purchased twelve companies and acquired a
contractual relationship with a major corporation from another business
communications services provider. Certain of the businesses recently acquired
by the Company reported net losses for their most recent fiscal years prior to
being acquired, and the Company's future financial performance will in part
depend on its ability to implement operational improvements in, or exploit
potential synergies with, these acquired businesses. For additional
information regarding the Company's recent acquisitions, see "Business--Recent
Acquisitions." These transactions have contributed to its revenue growth and
have resulted in the Company's acquiring offices throughout the United States
and London and Dubai internationally, as well as expanding the client base and
operations of the Company's New York office. The acquisitions were structured
as purchases for accounting purposes with the excess of cost over the fair
value of net assets acquired being recorded as goodwill. See "Business."
In order to service the Company's outstanding client base more effectively,
as well as to locate in areas with attractive potential clients, during the
last three fiscal years the Company opened offices in White Plains
26
<PAGE>
(NY) (July, 1994), San Francisco (March, 1995), Boston (April, 1995) and Hong
Kong (June, 1996). The Company has been successful in either expanding
existing relationships or securing significant new accounts subsequent to the
opening of each of these offices.
The Company records revenue on the completed contract method of accounting.
See Note 2 to the Consolidated Financial Statements of the Company. The
recognition of revenue and production costs is deferred until a project is
completed, which is often within a one to six-month time period. Consequently,
while the Company may have recurring revenue from a client, the scheduling of
projects can affect the comparability of operating results from period to
period. The Company produces projects on fixed fee and "cost plus" bases and
provides audio visual equipment rentals based on published price lists. The
cost plus arrangements are primarily with Ford Motor Co. and are based on the
Company's arrangement with that client. See "--Billings and Collections."
The Company experiences quarterly variations in revenue, operating income
and net income as a result of several factors, including the timing of
clients' meetings and events, delays in or cancellation of clients' product
launches and events, as well as changes in the Company's revenue mix among its
various services offered. In addition, such variation also results from the
fact that the Company produces projects for its clients on a project-by-
project basis and does not have fixed, long term arrangements with clients.
The Company's revenue also has been affected by seasonal factors. In
particular, revenue has tended to be lower during the Company's first fiscal
quarter since meetings and events clients prefer not to schedule major events
close to the Thanksgiving and Christmas holidays. Accordingly, since the
Company's operating expenses are relatively stable from quarter to quarter,
the Company's results of operations have tended to be lower during the
Company's first fiscal quarter. The Company's reported results for a given
quarter are also vulnerable to fluctuation in part because the Company
recognizes revenue and production costs under the completed contract method of
accounting discussed above. See "Risk Factors--Fluctuations in Quarterly and
Annual Operating Results; Seasonality," "Risk Factors--Episodic Nature of
Business" and "--Quarterly Results" below.
For fiscal 1996, the Company incurred a non-cash compensation expense of
$1.1 million (or $0.13 per share) in connection with the stock issued pursuant
to the Management Stock Plan. See "Management--Incentive Plans."
27
<PAGE>
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>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------- ------------------------------
1994 1995 1996 1995 1996
------------- ------------- -------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $59,174 100.0% $81,131 100.0% $148,330 100.0% $20,407 100.0% $52,659 100.0%
Cost of revenue......... 39,724 67.1 54,312 66.9 99,797 67.3 13,341 65.4 34,829 66.1
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Gross profit............ 19,450 32.9 26,819 33.1 48,533 32.7 7,066 34.6 17,830 33.9
Selling, general and
administrative
expenses............... 14,349 24.3 19,306 23.8 30,442 20.5 6,456 31.6 14,356 27.3
Non-cash compensation
expense................ -- -- -- -- 1,072 0.7 93 0.5 -- --
Depreciation and amorti-
zation................. 2,137 3.6 2,330 2.9 3,142 2.1 604 2.9 1,704 3.2
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Total operating ex-
penses................. 16,486 27.9 21,636 26.7 34,656 23.4 7,153 35.0 16,060 30.5
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Operating income (loss). 2,964 5.0 5,183 6.4 13,877 9.4 (87) (0.4) 1,770 3.4
Interest expense with
related parties........ 2,107 3.6 2,234 2.8 1,199 0.8 682 3.4 -- --
Interest expense, other. 502 0.8 1,259 1.6 387 0.3 412 2.0 543 1.1
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Income (loss) before
taxes.................. 355 0.6 1,690 2.1 12,291 8.3 (1,181) (5.8) 1,227 2.3
Provision (benefit) for
taxes.................. 62 0.1 264 0.3 4,302 2.9 (283) (1.4) 491 0.9
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
Net income (loss)....... $ 293 0.5% $ 1,426 1.8% $ 7,989 5.4% $ (898) (4.4)% $ 736 1.4%
======= ===== ======= ===== ======== ===== ======= ===== ======= =====
</TABLE>
Three Months Ended December 31, 1996 Compared to Three Months Ended December
31, 1995
Revenue. Revenue increased $32.3 million, or 158%, from $20.4 million in the
three months ended December 31, 1995 to $52.7 million in the three months
ended December 31, 1996. Through a combination of internal growth and
acquisitions the Company increased its revenues from clients across a broad
range of industries. Approximately 30.7% of the increase represented revenue
from the rental of audio visual equipment through the Company's Total Audio
Visual Services division, which was acquired by the Company in late September,
1996. Increases in service revenue from clients in the telecommunications and
information technology industries accounted for 20.7% and 11.9%, respectively,
of the total revenue growth. Increases in service revenue from clients in the
food service and lodging industries accounted for an aggregate of 10.2% of the
total growth. The remainder of the increase in revenue was derived from
clients in several other industries.
Gross profit. The total gross profit increased $10.8 million, or 152%, from
$7.1 million in the three months ended December 31, 1995 to $17.8 million in
the three months ended December 31, 1996 as a result of the revenue growth
described above. Gross profit as a percentage of service revenue decreased to
32.0% for the three months ended December 31, 1996 from 34.6% for the
comparable period in fiscal 1996. Gross profit as a percentage of rental
revenue was 41.9%.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $7.8 million, or 119%, from $6.5 million in
the three months ended December 31, 1995 to $14.3 million in the three months
ended December 31, 1996. Salaries and related costs increased $5.1 million
primarily from increased personnel resulting from acquisitions and to support
the Company's overall growth, as well as normal annual inflationary increases.
Other general and administrative expenses, including rent and related
expenses, telephone, postage and other office supplies, as well as insurance
costs, increased $2.2 million due to acquisitions and to support the revenue
growth. Direct selling expenses, including travel, marketing and other costs
related to obtaining business, increased $0.5 million. Selling, general and
administrative expenses as a percentage of revenue declined from 32.1% in the
three months ended December 31, 1995 to 27.3% in the three months ended
December 31, 1996 as revenue increased more rapidly than such expenses.
28
<PAGE>
Depreciation and amortization. Depreciation and amortization expense
increased $1.1 million from $0.6 million in the three months ended December
31, 1995 to $1.7 million in the three months ended December 31, 1996. The
purchase of computer equipment and property and equipment acquired through
acquisitions resulted in increased depreciation expense of $0.7 million in the
three months ended December 31, 1996. Amortization expense resulting from
goodwill from acquisitions increased $0.4 million.
Interest expense. Interest expense with related parties decreased due to the
repayment and conversion of debt as of March 15, 1996 in connection with the
Initial Public Offering. Other interest expense, net, increased $0.1 million
due to increased borrowings incurred in connection with the consummation of
acquisitions.
Income (loss) before taxes. Income before taxes increased from a loss of
$1.2 million in the three months ended December 31, 1995 to income before
taxes of $1.2 million in the three months ended December 31, 1996 as revenue
growth from internal business and acquired businesses contributed to the
improved earnings of the Company.
Provision (benefit) for taxes. The tax provision (benefit) reflects an
allocation based on the full year anticipated tax provision. The provision for
taxes as a percentage of income before taxes was 24.0% and 40.0% for the three
months ended December 31, 1995 and 1996, respectively. The 1995 tax rate
reflects the utilization of net operating loss carryforwards.
Net income (loss). Net income increased to $0.7 million in the three months
ended December 31, 1996 from a loss of $0.9 million in the three months ended
December 31, 1995. Net income per share for the three months ended December
31, 1996 increased to $0.08 from a pro forma loss per share of $0.07 for the
comparable period in fiscal 1995. The net loss per share for the three months
ended December 31, 1995 was 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 consummation of the Initial Public Offering) as if such
conversions occurred on October 1, 1995. The pro forma loss per share
computation reflects adjustments to eliminate the interest expense incurred on
the Convertible Note and to eliminate accrued preferred stock dividends.
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 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 non-recurring non-
cash compensation expense of $1.1 million resulting from the vesting of common
stock sold pursuant to the Management Stock Plan at a price lower than its
fair market value.
29
<PAGE>
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 Initial Public Offering.
Other interest expense, net, 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 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.
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. Beginning with the fiscal
year ending September 30, 1997, the Company expects to reflect an effective
tax rate in accordance with statutory tax rates as adjusted for book/tax
differences such as nondeductible expenses.
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 $1.05 from $0.49 in fiscal 1995. Excluding the effect of the
non-recurring non-cash compensation charge of $1.1 million, pro forma net
income per common share would have been $1.18 for fiscal 1996.
Fiscal 1995 Compared to Fiscal 1994
Revenue. Revenue increased 37.1% from $59.2 million in fiscal 1994 to $81.1
million in fiscal 1995. Higher revenue from the Ford Motor Co. accounted for
approximately two-thirds of the revenue increase. Increased revenue from
clients in the information technology sector contributed approximately 25% of
the increase.
Gross profit. Gross profit increased 37.9% from $19.5 million in fiscal 1994
to $26.8 million in fiscal 1995. The $7.4 million increase resulted primarily
from the revenue growth described in the preceding paragraph. Gross profit as
a percentage of revenue rose slightly from 32.9% to 33.1%.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 34.5% from $14.3 million in fiscal 1994 to
$19.3 million in fiscal 1995. Salaries and related costs increased $3.1
million primarily as a result of acquisitions, new office openings and
additional personnel in connection with the Company's growth as well as annual
inflationary increases. Direct selling expenses increased $0.4 million to
support revenue growth. In addition, other general and administrative expenses
for new and additional offices increased $1.5 million. Selling, general and
administrative expenses as a percentage of revenue declined from 24.3% in
fiscal 1994 to 23.8% in fiscal 1995.
Depreciation and amortization. Depreciation and amortization expense
increased by $0.2 million from fiscal 1994 to fiscal 1995 due primarily to the
purchase of computer equipment and goodwill from acquisitions.
Interest expense. Interest expense with related parties increased $0.1
million due to compounding. Other interest expense increased $0.8 million due
to higher borrowing under the Company's then-existing bank facility to fund
acquisitions, office expansions and increased working capital requirements.
Income before taxes. Income before income taxes increased from $0.4 million
to $1.7 million as revenue growth both from internal business as well as
acquired businesses contributed to the improved earnings of the Company.
30
<PAGE>
Provision for taxes. The provision for taxes in fiscal 1995 reflects
federal, state and local minimum taxes after benefit from the utilization of
net operating loss carryforwards. The provision for taxes in fiscal 1994
reflects state and local minimum taxes. See "--Income Taxes."
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through internal cash flow
and bank financing, including the Company's new financing facilities (as
described below), its recently replaced line of credit (the "1994 Line of
Credit") (as described below) and its recently replaced term facility (the
"1994 Term Facility") (as described below). These sources of funds have been
used to fund the Company's efforts to grow both internally and through
acquisitions.
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
-------------------------- DECEMBER 31,
1994 1995 1996 1996
------- ------- -------- ------------ ---
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities............. $ 2,872 $ 442 $ 7,260 $ 805
Investing activities............. (6,601) (7,758) (46,205) (4,675)
Financing activities............. 3,572 7,256 47,078 1,956
</TABLE>
In fiscal 1994, the Company generated $2.9 million from its operating
activities. Net income plus depreciation and amortization provided $2.4
million. The net change in working capital provided $0.5 million, with
increases in accounts receivable resulting from increased revenue being more
than offset by increases in accounts payable, deferred income and accrued
liabilities. Investing activities required $6.6 million as a result of the
acquisition of businesses, purchase of property and equipment and additional
payments in connection with the merger with ICC. Financing activities provided
$3.6 million through use of the 1994 Line of Credit and 1994 Term Facility.
In fiscal 1995, the Company generated approximately $0.4 million from
operating activities compared to $2.9 million in fiscal 1994. The decrease was
the result of higher working capital requirements resulting from expansion of
operating activities and revenue growth. Investing activities included the
purchase of property and equipment and acquisitions of intangibles and
businesses that required approximately $7.8 million. Financing activities
provided approximately $7.3 million through use of the 1994 Line of Credit and
1994 Term Facility.
In fiscal 1996, the Company generated $7.3 million from its operating
activities. Net income plus depreciation and amortization and the non-cash
compensation expense 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 Common Stock and the exercise of warrants to purchase Common Stock, $18.0
million was provided by the 1994 Term Loan and net proceeds of $1.8 million
were provided by the 1994 Line of Credit. 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
dividends. In addition, $0.2 million was used to repurchase Common Stock in
fiscal 1996.
For the three months ended December 31, 1996, $0.8 million was provided by
operating activities. Net income adjusted for depreciation and amortization
provided $2.9 million. The net change in working capital used $2.1 million,
with an increase in deferred income, which was more than offset by increases
in accounts
31
<PAGE>
receivable, prepaid expenses and other current assets, and a decrease in
accrued expenses and other liabilities. Investing activities required $4.7
million due to acquisition-related expenditures and property and equipment
additions. Financing activities provided $2.0 million in the three months
ended December 31, 1996, of which $23.0 million was provided by drawings under
the Company's Reducing Revolver, offset by repayments on each of the 1996
Facilities.
The 1994 Line of Credit provided the Company with funds to satisfy working
capital requirements and the 1994 Term Facility was used primarily to finance
acquisitions. As of September 30, 1996, $6.0 million was outstanding under the
1994 Line of Credit and $15.0 million was outstanding under the 1994 Term
Facility. As of September 30, 1996, each of the 1994 Line of Credit and the
1994 Term Facility bore interest at the rate of 9.25% per annum, which was 1%
over the lender's prime rate. On December 4, 1996, the Company entered into a
new loan agreement with a syndicate of banks pursuant to which the Company
increased its aggregate available bank financing from $27 million to $100
million, consisting of 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 1994 Line of Credit and 1994 Term
Facility were repaid with proceeds from the 1996 Facilities. The maturity date
of each of the 1996 Facilities is December 31, 2002. Interest on outstanding
amounts under the 1996 Facilities is payable quarterly in arrears and, at the
option of the Company, interest accrues at either (i) LIBOR plus an applicable
margin or (ii) an alternate base rate based on the greatest of (a) the agent
bank's prime rate, (b) the three month secondary certificate of deposit rate
and (c) the federal funds rate. The weighted average interest rate on the
outstanding amount under the 1996 Facilities is currently 6.6%. The interest
rate will increase by 2.0% if principal or interest is not paid when due
(after applicable grace periods). Pursuant to the terms of the 1996
Facilities, the Company is required to reduce outstanding amounts under the
Revolving Line to less than $5.0 million for a period of not less than 30 days
during every 12-month period commencing on December 4, 1996.
All outstanding amounts under the Reducing Revolver and the Revolving Line,
as the case may be, will be repaid upon consummation of the Offering, and
accordingly, upon completion of the Offering and the application of the
proceeds therefrom, the Company expects to have no outstanding indebtedness
for money borrowed. (The Company will have indebtedness in connection with
commitments under certain finance lease arrangements.) See "Use of Proceeds"
and "Capitalization."
In January, 1996, the Company acquired substantially all of the assets of
Koors Perry. A payment of $2.5 million made at the closing of such acquisition
was funded by a drawing on the 1994 Term Facility. In June, 1996, the Company
acquired Lighthouse for $5.3 million in cash, $0.7 million in the repayment of
certain indebtedness and $1.0 million in shares of Common Stock (31,821 shares
of Common Stock). The cash payment was funded by proceeds from the Initial
Public Offering. Also in June, 1996, the Company acquired Spectrum. The
purchase price was $5.0 million in cash (including $2.6 million to repay
outstanding indebtedness) plus contingent cash payments in the event that
Spectrum meets certain performance goals. The cash payment was funded by
proceeds from the Initial Public Offering. In September, 1996, the Company
acquired TAVS for $26.6 million in cash, subject to adjustment in certain
circumstances. The cash payment was funded in part by proceeds from the
Initial Public Offering and drawings on the 1994 Line of Credit and the 1994
Term Facility. In January, 1997, the Company acquired Blumberg for $16.6
million in cash, repayment of $3.9 million of indebtedness and 29,940 shares
of Common Stock. The cash payment was funded by drawings on the Reducing
Revolver. In January, 1997, the Company acquired Projexions for $13.6 million
in cash and $1.4 million in the repayment of certain indebtedness. The cash
payment was funded by drawings on the Reducing Revolver. See "Business--Recent
Acquisitions" and "Business--Recently Announced Purchase Agreement."
Capital expenditures were $1.6 million in each of fiscal 1994 and fiscal
1995 and $2.2 million in fiscal 1996. For fiscal 1995 and fiscal 1996, the
purchase of additional personal computers and expanded capabilities for the
computer system were the largest areas of expenditure. Capital expenditures in
fiscal 1994 were incurred primarily in connection with the purchase of
personal computers, an IBM AS/400 mid-range computer, furniture and fixtures
and leasehold improvements. The Company depreciates its equipment over the
estimated useful lives of such assets ranging from five to seven years. The
Company believes that capital expenditure requirements
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<PAGE>
will increase to approximately $9.0 million in fiscal 1997 (including
Blumberg's anticipated capital expenditure requirements, but excluding capital
expenditure requirements of any additional businesses acquired) primarily as a
result of planned investments in audio visual and staging equipment which the
Company will rent to its clients.
The Company believes that cash flow from operations, the net proceeds from
the Offering and available credit under the New Facilities will be sufficient
to meet operating needs and capital spending requirements and fund reasonably
forseeable acquisition strategies for at least the next twelve months.
BILLINGS AND COLLECTIONS
Customers are normally billed on a per-project or per-rental basis.
Generally, the Company produces projects on a fixed-price basis. The
components of the fixed price are labor, both internal and external, outside
purchases and equipment utilization. The Company also produces projects priced
on a "cost-plus" basis, whereby the Company bills its employees' services to
the client at hourly or per diem rates, depending upon the employee, and then
charges for actual outside purchases plus an agreed upon mark-up. Like fixed
pricing, however, cost-plus pricing has a ceiling that cannot be exceeded
without written permission of the client. For both fixed-price and cost-plus
projects, the Company has a project change notice system to authorize all
production/price changes. TAVS provides audio visual equipment rentals to
customers based on published price lists. Generally, billing terms are one-
third due upon contract signing, one-third due during production and the
remainder due upon delivery and completion of the project. In the case of
TAVS, customers are billed upon completion of the staging service or rental.
Billings prior to delivery date are carried as deferred income in the
Company's financial statements and costs incurred prior to the delivery date
are carried as deferred charges. The Company has not had any material
collection problems in connection with its business.
In the event a client cancels a project after production work has begun, the
client is billed for work performed and expenses incurred through the date of
cancellation.
INCOME TAXES
The Company's effective tax rates for fiscal 1994, fiscal 1995 and fiscal
1996 were 17.5%, 15.6% and 35.0%, respectively, which 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 the utilization of available NOL carryforwards which are not
subject to limitations. In future years the Company does not expect to
recognize any material benefit related to the utilization of NOL carryforwards
and expects to reflect a tax rate in accordance with statutory tax rates
adjusted for book/tax differences such as non-deductible expenses.
RECENT DEVELOPMENTS
Lighthouse Acquisition. The Company's historical results of operations for
fiscal 1996 include the results of operations of Lighthouse since June 1,
1996, the effective date of the acquisition. The acquisition of Lighthouse is
not reflected in the Unaudited Pro Forma Consolidated Financial Information
included herein. For its fiscal year ended December 31, 1995, Lighthouse had
revenue of $10.4 million, gross profit of $3.4 million, operating income of
$0.2 million and a net loss of $.04 million. At December 31, 1995, Lighthouse
had total assets of $3.3 million. The acquisition of Lighthouse resulted in an
increase of approximately $7.0 million in goodwill, which is reflected on the
Company's September 30, 1996 consolidated balance sheet. Management does not
believe that Lighthouse's historical financial results prior to being acquired
by the Company are necessarily indicative of Lighthouse's future contribution
to the results of operations of the Company. See "Business--Recent
Acquisitions."
Rome Acquisition. In December, 1996, the Company acquired Rome. The
acquisition of Rome is not reflected in the Unaudited Pro Forma Financial
Information included herein. For its fiscal year ended February 29, 1996, Rome
had revenue of $2.4 million. See "Business--Recent Acquisitions."
Projexions Acquisition. In January, 1997, the Company acquired Projexions.
The acquisition of Projexions is not reflected in the Unaudited Pro Forma
Consolidated Financial Information included herein. For its fiscal year ended
December 31, 1995, Projexions had revenue of $17.7 million. See "Business--
Recent Acquisitions."
33
<PAGE>
Blumberg Acquisition. In January, 1997, the Company acquired Blumberg. The
acquisition of Blumberg is not reflected in the Unaudited Pro Forma
Consolidated Financial Information included herein. For its fiscal year ended
May 31, 1996, Blumberg had revenue of $42.3 million. See "Business--Recent
Acquisitions."
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued two standards which
became applicable to the Company in fiscal 1997: No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
and No. 123, Accounting for Stock-Based Compensation. Neither standard is
expected to have a significant impact on the Company.
QUARTERLY RESULTS
The following table sets forth the unaudited quarterly results of operations
for each of the quarters in fiscal 1995 and fiscal 1996 and the quarter ended
December 31, 1996. In management's opinion, this unaudited quarterly
information includes all adjustments which are necessary for a fair
presentation of the information for the quarters presented. The operating
results in any quarter are not necessarily indicative of the results which may
be expected for any other interim period or for fiscal 1997.
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
-------------------------------- -------------------------------- -------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH 1ST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $11,399 $19,045 $21,641 $29,046 $20,407 $31,220 $48,150 $48,553 $52,659
Gross profit............ 3,912 5,861 7,528 9,518 7,066 10,190 15,576 15,701 17,830
Operating income (loss). (1,143) 938 2,242 3,146 (87) 1,576 6,556 5,831 1,770
Net income (loss)....... (1,593) 91 1,127 1,801 (898) 643 4,408 3,836 736
</TABLE>
For a discussion of factors affecting the Company's quarterly results, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
34
<PAGE>
BUSINESS
Caribiner is a leading international producer of meetings, events and
training programs and a provider of related business communications services
that enable businesses to inform, sell to and train, their sales forces,
dealers, franchisees, partners, stockholders and employees. The Company
believes its principal strengths are the depth of its creative, production and
technical talent, its ability to consistently meet its clients' business
objectives and expectations and its ability to manage effectively and reliably
a number of complex, large-scale projects contemporaneously. Caribiner's
clients are typically large companies that have a business need to communicate
with sizable internal and external constituencies on a regular basis and
include some of the world's largest companies in diverse industries. Major
clients include the Ford Motor Co. (automotive), IBM (information technology),
Parke-Davis (pharmaceuticals), Holiday Inn Worldwide (lodging), Shell Oil
Company (petroleum) and McDonald's Corporation (fast food). The Company has
offices throughout the United States, as well as in London, Dubai and Hong
Kong.
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through additional domestic
and international acquisitions. Caribiner's revenue has grown from $21.8
million in fiscal 1992 to $81.1 million in fiscal 1995 and $148.3 million in
fiscal 1996. On a pro forma basis reflecting certain acquisitions, Caribiner's
revenue was $227.1 million in fiscal 1996. (See "Unaudited Pro Forma
Consolidated Financial Information.")
Business activities and events that generate a need for business
communications services include sales meetings, product launches, training and
education of employees and dealers, development of strategic and
organizational communications, conferences, stockholder meetings and other
executive management presentations that are used to convey important
information about the business and/or its products. These business
constituencies are not typically communicated with by public relations firms,
which assist a business in communications with or through the news media, or
advertising agencies, which create advertising and marketing campaigns to
communicate with consumers. Large-scale events and programs to communicate
essential corporate messages are often not part of a company's core businesses
because of the unique skills necessary to develop, produce and successfully
stage such events. As a result, many companies look to engage outside firms to
perform these functions. In addition, large corporate events tend not to occur
regularly, depending, for example, on timing of product roll-outs, changing
competitive environments and shifts in corporate strategy, which makes it
relatively costly to maintain the internal resources to create and execute
these events.
The Company offers a wide range of business communications services,
including conceptualizing, planning and producing corporate meetings and
events and providing audio visual equipment rentals, sales and related staging
services for such meetings and events, developing training and educational
materials relating to new job skills, products, systems and organizational
processes, handling internal corporate communications and creating interactive
trade show exhibits. The Company believes it has benefited from a trend among
major corporations toward increased corporate outsourcing of meetings, events,
training and communications. These services can be delivered in all forms of
media, including film, interactive technologies (including CD-ROM), videotape,
slides, computer graphics and animation, print and multimedia. Examples of
such engagements include:
. The production of the automobile introduction shows for the complete line
of 1997 Ford Motor Co. vehicles, which were attended by approximately
8,000 dealers and their guests and Ford employees in San Francisco over a
two-week period in August, 1996. Beginning eight months prior to the
introductions, the Company's personnel worked closely with Ford's
management and product teams to develop the messages and themes which the
automobile maker wanted to communicate to its dealers. Caribiner designed
and constructed all sets and stage layouts, drafted corporate speeches
made by Ford's management, choreographed the unveiling of the new 1997
vehicles to the dealers, produced several audio/visual presentations and
arranged for live entertainment.
. The introduction to approximately 1,400 sales people from two leading
pharmaceutical companies of a new jointly-promoted product in February,
1996 in Orlando, Florida. Within the span of two months, the
35
<PAGE>
Company produced the entire event, which was designed to educate each of
the companies' sales forces regarding a new antihistamine product. The
Company custom-built and designed several meeting areas within a single
large convention center, designed an interactive computer video game to
test the sales persons' knowledge of the product, produced sketches to
demonstrate the product's advantages over competing products, produced
several videos, arranged for live entertainment and drafted speeches made
by the companies' senior managers.
. The development and delivery in October, 1995 of three interactive
multimedia CD-ROM-based courses for a retailer focusing on product
identification, customer service and technical equipment and procedures
specific to a cashier's job. The courses utilized digital audio, still
images, text and/or video and assessment questions.
. The design of a 3,200 square foot exhibit for Philip Morris Companies,
Inc. for use at the October, 1995 National Association of Convenience
Stores trade show, which was attended by approximately 14,000 people, as
well as the production of two videos and the design and supervision of
all on-site activities, including two interactive exhibits.
. The provision by TAVS of over 5,000 pieces of audio visual equipment
(ranging from data projectors, video walls and concert sound systems to
overhead projectors and flip charts) to Computer Associates
International, Inc. in connection with its CA World "96 annual users'
conference in New Orleans in August, 1996, which was attended by
approximately 10,000 people. The Company also provided staging and
convention and trade show support services with approximately 150
technicians and other personnel on site.
COMPETITIVE POSITION
Market leader. The Company offers a full range of business communications
services and a depth and breadth of creative, production, technical and
organizational expertise that management believes, based on its experience in
the industry, most of its competitors generally lack. Caribiner has
established a track record of success in executing projects of various types
and sizes, including multi-million dollar events, in a number of industries.
Caribiner's projects are frequently high profile events where senior
executives of a client, often the CEO, are presenting new information to the
audience. As a result, Caribiner believes that confidence in a business
communications services provider and its ability to execute effectively are of
critical importance to clients. In addition, the Company believes that its
resources permit it to seek out and manage a number of large-scale projects
contemporaneously. From fiscal 1993 to fiscal 1996 the number of clients to
whom the Company provided services during the year grew from 65 to over 300.
Strong client relationships. The Company's capabilities have resulted in its
developing long-standing relationships and significant levels of revenue with
numerous major clients. In fiscal 1996, Caribiner had revenue in excess of $1
million from each of 24 clients, many of which Caribiner has had relationships
with for several years, compared with nine such clients in fiscal 1993. These
24 clients contributed revenue of $109.8 million in fiscal 1996. Such large
accounts are often developed as a result of the Company's efforts to penetrate
a number of different divisions and departments within a client. For example,
for its largest client, Ford Motor Co., in fiscal 1996 Caribiner executed 160
projects of various sizes for numerous individual buyers of services in 21
Ford business units, including Ford Corporate, Ford Division, Lincoln-Mercury
Division, Ford Fleet and Lease, Ford Export and Ford Credit.
Expanding national and international presence. As part of the Company's
strategy to expand its client base, increase its range of services and broaden
its geographic coverage, over the last three years Caribiner has opened new
offices in Boston, San Francisco, White Plains (NY) and Hong Kong, and
acquired offices throughout the United States and in London and Dubai
internationally. This expansion has provided strategic and operational
benefits, which include enabling the Company to service clients more
effectively by being in closer proximity to them, expanding and diversifying
the Company's client base, securing the services of the acquired business' key
36
<PAGE>
executives and sales personnel, reducing costs by centralizing finance,
administration and information technology functions and realizing purchasing
advantages associated with increased economies of scale. The Company has also
expanded the business communications services which it offers to clients to
include the provision of audio visual equipment rentals, sales and related
staging services through its recent acquisitions of TAVS and Projexions.
GROWTH STRATEGY
The Company's strategy is to enhance its leading market position with
continued growth, generated both internally and through domestic and
international acquisitions. To achieve this goal, Caribiner plans to
(i) increase penetration of existing accounts, (ii) develop new large
accounts, (iii) continue to diversify the range of services offered and (iv)
continue expansion domestically and internationally through acquisitions and
the opening of new offices.
Increase penetration of existing accounts. The Company believes that it has
demonstrated the ability to increase its penetration of existing accounts and
to solve a wide range of business communications needs for its clients. The
Company has identified and utilized a number of ways to establish and build a
client relationship with a large account including:
. securing a "blanket purchase order" or other agreement which enables
decision makers within a client to award business to Caribiner without
going through a bidding or selection process;
. establishing a local presence to be in close proximity to a client and to
ensure rapid response to clients; and
. establishing an outsourcing relationship with a client for specific
communications needs.
As a result, the Company has entered into agreements with several key accounts
for a variety of business communications services. The terms of these
agreements provide either specific event and service commitments or blanket
purchase order arrangements, though these agreements are generally terminable
by the client on short notice and do not provide for minimum levels of
revenue. The Company currently has seven such agreements in place with
clients, as compared to two such agreements at the end of fiscal 1994.
Develop new large accounts. The Company intends to develop new large
accounts by continuing to target clients that have significant or potentially
significant business communication needs. The Company utilizes a number of
techniques to develop new large accounts, including responding to requests for
proposals, becoming a part of a company's regular "bid" list, pursuing client
referrals, identifying prospects through research of a potential client's
business communications needs (e.g., the status of product launches) and
actively marketing to potential new clients. Sales and marketing personnel in
each of Caribiner's offices identify potential client relationship
opportunities and promote Caribiner's expertise and range of services.
Continue to diversify the range of services offered. Caribiner believes
there are significant opportunities to increase its penetration of accounts by
promoting its capabilities in areas such as employee training and education
and corporate communications, which can be utilized by clients either in
conjunction with meetings and events or separately from them. Revenue for the
Company's "non-meetings" business has increased from a relatively
insignificant amount in fiscal 1993 to $18.0 million in fiscal 1995 and $33.5
million in fiscal 1996. Caribiner believes that continued efforts to promote
its non-meetings business will result in increased usage of the Company's wide
range of business communications services, strengthen ongoing client
relationships and further expand its revenue base. Caribiner also believes
there are attractive opportunities to continue expanding its position as a
provider of audio visual equipment rentals and related staging services
through internal growth and acquisitions. The Company believes that these
services complement its other "meetings-related" activities.
Continue expansion domestically and internationally. Caribiner intends to
continue to expand domestically and internationally by making acquisitions in
the business communications services industry and opening new offices to
service existing or potential new clients. In making acquisitions, the Company
will continue to focus
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on companies that have an existing or potential client base that lends itself
to increased penetration subsequent to acquisition and that are in attractive
markets. The Company believes that numerous acquisition candidates are
available as a result of the fragmented nature of the industry. Since October,
1993, the Company opened four offices, made seven acquisitions and acquired a
contractual client relationship with a major corporation from another business
communications services provider.
Caribiner believes that its future worldwide opportunities are significant
as a result of the global marketing approach undertaken by its clients as well
as the size of the international business communications services market.
RECENT ACQUISITIONS
One of the components of the Company's growth strategy is to expand its
client base by making acquisitions in the business communications services
industry. Caribiner's management believes that its acquisitions to date have
allowed the Company to (i) acquire additional large clients, further develop
its relationships with existing clients and acquire experienced personnel
needed to service such clients and (ii) enhance operating income by leveraging
the Company's existing infrastructure and industry knowledge.
During fiscal 1994 and 1995, Caribiner completed five acquisitions and
acquired a contractual client relationship with a major corporation from
another business communications services provider. Three such acquisitions
were business communications services providers located in New York City,
which permitted the Company to expand its client base and secure the services
of experienced executive management personnel of the acquired businesses. In
addition, during such fiscal years, the Company also completed three other
transactions through which it increased its client base and expanded into new
geographic regions by the addition of offices in Los Angeles, Atlanta, Dallas
and Houston. The total initial purchase cost of the acquisitions completed in
fiscal 1994 and 1995 was $4.5 million and $4.3 million, respectively. Several
such acquisitions also provide for contingent payments following their
purchase based upon achievement of gross profits above specified target
levels.
Effective as of January 1, 1996, the Company acquired substantially all of
the assets of Koors Perry, a regional business communications services
provider based in Atlanta, Georgia with revenue of $8.9 million for the nine
months ended September 30, 1995. The Company has integrated Koors Perry with
its Atlanta office and has used it as a base from which to expand its presence
in the southeastern U.S. In June, 1996, the Company acquired Lighthouse, a
leading midwestern business communications services provider, with revenue of
$10.4 million for the year ended December 31, 1995. The Company has integrated
its Chicago office with the Lighthouse headquarters in Rolling Meadows,
Illinois and has used it as a base from which to expand its presence in the
midwestern U.S. The acquisition of Lighthouse resulted in the Company's
establishing a relationship with, among other clients, Motorola, Inc. Also in
June, 1996, the Company acquired Spectrum, a leading London-based producer of
meetings and events and provider of other business communications services
with a significant presence in the United Kingdom and Europe with revenue of
$20.5 million for the nine months ended March 31, 1996. The acquisition of
Spectrum allowed the Company to establish an international presence, resulted
in the Company's establishing a relationship with, among other clients, the
European division of a large domestic automobile manufacturer and will enable
it to serve the global needs of its domestic clients.
In September, 1996, the Company acquired TAVS, a leading provider of audio
visual equipment rentals, sales and related staging services, including hotel
audio visual outsourcing services, in the United States. The acquisition of
TAVS enables the Company to offer its own audio visual equipment and staging
services for use at meetings and events serviced by the Company and reduce the
Company's reliance on third party vendors. The Company also believes that
since many TAVS' clients are hotel properties whose business customers tend to
book hotel facilities well in advance of meetings and events, and often prior
to contacting a business communications services provider, it will have
opportunities to benefit from cross-referral of customers. TAVS reported
revenue of $45.9 million for the year ended December 31, 1995.
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The total initial purchase price of the acquisitions completed during fiscal
1996 was approximately $43.9 million. Certain of such acquisitions also
included contingent payment provisions.
In December, 1996, the Company acquired Rome, a regional producer of
meetings and events headquartered in San Francisco. The Company is integrating
Rome into its San Francisco office, thereby expanding and strengthening its
presence in the business communications industry in the Northern California
market through the addition of established providers with synergistic service
capabilities. The Company believes that it will benefit from the experience,
reputation, management skills and business relationships of Jonathan Rome, the
former president and sole stockholder of Rome, with whom the Company has
entered into a multi-year employment contract. Rome has provided business
communications services to various corporate clients, including Charles Schwab
& Co., Inc., SAP and Sun Microsystems, Inc. Rome reported revenue of $2.4
million for the year ended February 29, 1996. In January, 1997, the Company
acquired Projexions, a provider of audio visual equipment rentals and related
staging services in the southeastern U.S. The acquisition of Projexions
strengthens 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. In January, 1997, the Company
acquired 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 is integrating Blumberg's
operations with its existing operations, thereby expanding its presence in the
geographic regions which Blumberg serves. Blumberg reported revenue of $42.3
million for the year ended May 31, 1996.
SERVICES
Caribiner offers a wide range of business communications services, including
conceptualizing, planning and producing corporate meetings and events,
developing training and educational materials relating to new job skills,
products, systems and organizational processes, handling internal corporate
communications and creating interactive trade show exhibits. The Company also,
through its TAVS division, provides audio visual equipment rentals and staging
services, as well as hotel audio visual outsourcing services.
Specifically, Caribiner's services include:
BUSINESS MEETINGS AND EVENTS that introduce new products, present newly
designed corporate strategies to targeted audiences or honor a company's
leading contributors. Examples of recent engagements include:
. The creation, production and staging in May, 1995 of IBM's Golden Circle
Meeting, an event held each year to recognize outstanding achievements
during the year by IBM employees and attended by over 2,000 people.
Caribiner created, produced and staged the corporate presentations,
produced several video presentations, drafted speeches, composed original
music and identified and hired motivational speakers.
. The creation, production, staging and logistical support of the 1995
McDonald's Corporation Operations Road Tour, a traveling event held in
five different locations in the U.S. and Canada and performed 13 times
for an audience of nearly 10,000 store managers and operations personnel.
Caribiner produced original video presentations, drafted speeches given
by management and cast and developed original music, comedy and other
theatrical components for the project, which was used by McDonald's to
communicate business objectives for the coming year and update and train
attendees on new developments in operations systems and procedures.
. The production in October, 1996 of the Holiday Inn Worldwide Annual
Conference in Las Vegas, Nevada. This four-day event was designed to
reward, educate and inform 2,200 delegates made up of hotel owners,
partners and franchise holders who came together from around the world.
Caribiner drafted speeches, provided speech training, created visual
support, produced videos that specifically supported the marketing
presentations and provided staging for the event.
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AUDIO VISUAL EQUIPMENT RENTAL, SALES AND STAGING SERVICES through its TAVS
division, which is the preferred in-house provider of audio visual equipment
rentals, sales and related staging services in approximately 170 hotel
properties primarily across the eastern U.S. and which also supplies such
equipment and services to production companies and corporations for use at
meetings, events and training programs. See "--Recent Acquisitions." In
December, 1996, the Company entered into a seven-year contract with Starwood
Lodging Corporation, an owner of various hotel properties throughout the
nation, that provides for the establishment over time of on-site audio visual
equipment rental and support services for, initially, up to 30 Starwood
properties. The agreement with Starwood also provides that the Company will be
a future provider of choice to new Starwood properties.
TRAINING PROGRAMS using interactive and technology-driven hardware designed
to improve employee productivity, in the areas of product knowledge, team
building, sales skills, personal skills and behavioral development. Some
examples include:
. The development in December, 1995 of computer-based training modules,
print-based quick reference tools, applications workshops and audio-based
reinforcement modules for Eastman Kodak Corporation to meet its need of
educating its sales representatives in connection with a new marketing
strategy.
. The development of a series of workshops for Sony USA Inc.'s National
Sales Meeting held in April, 1995 to achieve Sony's objectives of
reinforcing team-oriented concepts, educating its sales force about
products and services and instructing attendees about sales strategies
and applications. Caribiner designed several exercises, including a
computer-based quiz game in which a team of sales representatives were
required to demonstrate their mastery of important messages, information,
strategies and tactics supporting their marketing efforts and a team-
building exercise involving their construction of a tower from various
props, which was interspersed with various learning and discussion
activities.
. The design and production of a video-based learning module in connection
in November, 1995 with a training workshop to assist Chemical Bank in its
effort to integrate its various divisions in order to provide a more
comprehensive array of business services to its clients.
CORPORATE COMMUNICATIONS PROGRAMS used to disseminate management's message
to employees and others. Some examples include:
. The development of strategic communication programs in 1995 for the Ford
Motor Co. that orient and train employees in connection with Ford 2000,
the re-engineering initiative undertaken by the automobile maker. Working
with Ford management throughout the world, Caribiner has developed a new
global internal communications plan and developed and coordinated an
executive development program that provides communications tools and
logistical support to Ford executives in their effort to educate
personnel regarding the objectives of Ford 2000.
. The preparation and design in 1995 of printed brochures and the
production of audio and visual materials used by ARAMARK in both its
internal and external communications as well as consultation with company
management in connection with their overall communications strategy.
EXHIBITS AND DISPLAYS, which involves the design and development of a
company's trade show exhibit or a visitor's center/lobby display and the
provision of audio visual equipment to support such exhibits and displays. For
example:
. The development of all creative and production elements for a major
consumer electronics company exhibit at the 1995 COMDEX Show in Las
Vegas. Caribiner designed the exhibit, created and produced all of the
creative elements in the form of both videos and printed materials and
developed and scripted presentations designed to attract participants to
the exhibit.
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CLIENTS
Caribiner targets clients with large or potentially large recurring needs
for business communications services. Caribiner's client list covers a number
of industry sectors including automotive, information technology, insurance,
pharmaceuticals, financial services, fast food, lodging and petroleum.
Caribiner's clients include ARAMARK, Computer Associates International,
Inc., 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. During fiscal 1996, Ford Motor Co., IBM and
State Farm Group accounted for approximately 15%, 13% and 11%, respectively,
of Caribiner's revenues. From fiscal 1993 to fiscal 1996, the number of
clients to whom the Company provided services during the year grew from 65 to
over 300.
Caribiner's size and strategic focus on enhancing and establishing client
relationships with significant or potentially significant accounts permits it
to dedicate personnel to a single client to strengthen and build the
relationship and increase the opportunity for cross-selling to other divisions
or departments of the client. When the Company recognized significant
opportunities to expand relationships with Ford Motor Co. and IBM, management
decided to increase Company resources devoted to the servicing of these two
accounts. Accordingly, the Company maintains a Detroit facility with a total
of 27 full-time employees to service the business communications needs of
numerous individual buyers from the 21 Ford business units for whom Caribiner
executed projects in fiscal 1996. In addition, in July, 1995 Caribiner
dedicated personnel and facilities in its White Plains (NY) office to provide
services to IBM on a worldwide basis. Caribiner believes that the strategy it
has followed with the Ford Motor Co. and IBM to build and maintain these
accounts can be utilized to develop and build relationships with other clients
having a significant need for business communications services.
Among the ways the Company seeks to differentiate itself to clients from
other providers of business communications services are by its customer
service, its breadth of creative and technical expertise, its ability to
execute programs successfully, with complete "back-up" system technology, its
demonstrated ability to produce a broad range of projects, large and small,
across a number of industries, its full range of business communications
services, its continuous investment in new technology and equipment, its size
and its international presence.
SALES AND MARKETING
Historically, Caribiner has acquired new clients and marketed its services
primarily by cross-selling to existing clients, responding to requests for
proposals, pursuing client referrals, identifying prospects through research
of a potential client's business communications needs, actively marketing to
potential new customers and through acquisitions of other business
communications services providers. The Company solicits prospective accounts
through personal contacts by members of Caribiner's senior management as well
as through the Company's managers responsible for business development. When a
new account is established, the Company immediately assigns a sales executive
(an account manager) to the client to build the relationship and ensure that
the client's needs are being met and to seek out further opportunities to
penetrate this account. The Company employs a full-time sales and marketing
staff of over 100 persons, and has dedicated a senior group of sales and
marketing executives to identify potential client relationship opportunities
and promote Caribiner's expertise and range of services. Generally, account
managers are assigned a number of different accounts which may be comprised of
a number of businesses or a number of divisions, departments or groups within
the same business.
OPERATIONS
General. In the U.S., the Company is organized into two operating
divisions--Caribiner Communications and TAVS. In general, each of Caribiner
Communications' offices provides services to clients located in the geographic
region in which the office is located. Each of Caribiner Communications'
offices is run by a general
41
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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. Caribiner has
long-standing relationships with freelance contractors and part-time employees
in various production and creative disciplines, which gives it a competitive
advantage in being able to produce high quality events for its customers while
keeping overhead lower and utilizing resources more efficiently. TAVS is
organized both geographically and by the types of audio visual services it
offers. TAVS serves its hotel clients with personnel located in its regional
offices and through on-site service representatives at the hotels for which it
acts as preferred in-house provider. In addition, TAVS has dedicated personnel
in the staging service and equipment sales and service aspects of the
business, which personnel provide services to Company clients on a nationwide
basis. The Company's international operations are organized similarly to those
of Caribiner Communications. The Company generally supplements its staff with
independent contractors or part-time employees where needed.
Although each office focuses on serving the needs of clients located in its
geographic region, Caribiner's management emphasizes the coordination of
activities between offices and allocates, when necessary, resources from one
office in order to support another. This coordination of activities allows the
Company to serve its clients at a local level while at the same time providing
clients with resources and expertise of an international organization.
Caribiner has also centralized the accounting, finance, and information
technology functions of the Company in New York and Atlanta to minimize
overhead and administrative expense.
Foreign Operations. In June, 1996, the Company acquired Spectrum, a leading
London-based producer of meetings and events and provider of other business
communications services with a significant presence in the United Kingdom and
Europe. Spectrum owns Spectrum Communications Limited and MWA in London and a
joint venture interest in Spectrum Communications LLC in Dubai. In addition,
in June, 1996, the Company opened its Hong Kong office, primarily to better
serve its international clients in the Pacific Rim. During fiscal 1996, the
Company's foreign operations generated revenue of $7.0 million and an
operating loss of $0.1 million and at September 30, 1996 had identifiable
assets, including goodwill, of $16.2 million. Such financial information
reflects only four months of foreign operations, and the Company expects that
its foreign operations will be more material in the future.
EMPLOYEES AND FACILITIES
As of February 3, 1997, Caribiner employed approximately 1,400 full-time
employees, including approximately 1,300 in the United States and
approximately 100 internationally.
The Company has no collective bargaining or similar agreements with unions;
however, the Company does from time to time independently contract with or
hire part-time union personnel, especially during the production of a
particular meeting or event. Over the course of any given project period, the
Company evaluates the production personnel requirements and determines the
extent to which it must supplement its available employee base with the use of
freelance contractors or part time employees. Depending on the timing and
specific requirements of the events and the number of overlapping events in
any given planning period, the use of freelance contractors and part time
employees can vary significantly. The Company considers its relations with its
full-time employees, part-time employees and independent contractors to be
good.
Caribiner's corporate headquarters and New York office are located in leased
offices occupying approximately 40,000 square feet at 16 West 61st Street, New
York, New York 10023-7604. The lease for the Company's headquarters expires in
2000. The Company is presently reviewing expansion into additional space for
its New York office which it expects to require as it grows, but has not
entered into any commitments.
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.
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The Company also leases offices and warehouse space in certain of the cities
where its operations are located. The Company anticipates that as it expands,
it will require additional office space to support such growth and believes
that suitable additional or alternative space will be available as needed.
COMPETITION
Although no firm data exists with respect to the size of the business
communications services industry and the number and size of competitors within
the industry, management believes, based on its experience in the industry,
that the business communications services industry is highly fragmented.
Caribiner believes that no one participant or small number of participants is
dominant in the industry and that its competitors consist primarily of small,
generally regional firms which provide a limited range of services, although
there are several participants in the industry whose business, like that of
Caribiner, is full service in scope. Management believes that certain
competitors have capabilities and resources comparable to and in certain
respects greater than those of the Company. Caribiner also competes with in-
house communications staffs of existing and potential clients.
Management believes that the competitive factors most important in the
business communications services industry are organizational breadth,
creative, production and technical expertise, demonstrated ability to execute
projects, range of services offered, range of industries serviced, size,
geographical presence and price.
The Company believes its principal strengths are the depth of its creative,
production and technical talent, its ability to consistently meet its clients'
objectives and expectations, its focus on quality and customer service and its
ability to manage effectively and reliably several complex, large-scale
projects contemporaneously. The Company believes it is at a competitive
disadvantage in certain regions where it does not have local offices.
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incidental to its
business. In the opinion of the Company, no such litigation has had or is
likely to have a material adverse effect on the Company's results of
operations, financial condition or liquidity.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY MANAGEMENT PERSONNEL
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Raymond S. Ingleby............. 33 Chairman of the Board and Chief Executive
Officer of Caribiner International, Inc.
Arthur F. Dignam............... 50 Executive Vice President and Chief Financial
and Administrative Officer of Caribiner
International, Inc.
Mark M. Cohen.................. 49 Executive Vice President of Caribiner
International, Inc. and President of
Caribiner Communications
Lawrence P. Golen.............. 39 Executive Vice President of Caribiner
International, Inc. and President of Total
Audio Visual Services
Brian Shepherd................. 39 Executive Vice President, Strategic Planning
and International Operations, of Caribiner
International, Inc.
Errol M. Cook.................. 57 Director
Bryan D. Langton............... 60 Director
Sidney Lapidus................. 59 Director
David E. Libowitz.............. 34 Director
</TABLE>
RAYMOND S. INGLEBY has been a director and Chief Executive Officer of the
Company since its formation in 1989, and Chairman since June, 1993. From 1988
through 1993, Mr. Ingleby served as Chairman and Chief Executive Officer of
Ingleby Communications Corporation, which he founded in 1988. In 1985, Mr.
Ingleby, a British citizen, founded his own advertising company that was
engaged in the installation of advertising displays in hotels, which he sold
in 1988.
ARTHUR F. DIGNAM has been Executive Vice President and Chief Financial
Officer of the Company since February, 1994 and Chief Administrative Officer
since November, 1995. Prior to joining Caribiner, Mr. Dignam worked as an
independent consultant from August, 1993 to January, 1994, and was Vice
President and Chief Financial Officer for Panavision International, the
privately-held predecessor to Panavision Inc., a company that manufactures
high quality cameras and accessories for the film and television industry,
from February, 1989 to July, 1993. Prior thereto, Mr. Dignam served as chief
financial officer in both the news division and operations and technical
services division of the National Broadcasting Company.
MARK M. COHEN has been Executive Vice President of the Company and President
of Caribiner Communications since November, 1995. Mr. Cohen joined Caribiner
in November, 1993 as Executive Vice President of Caribiner, Inc. and General
Manager of its New York office. Prior to joining Caribiner, Mr. Cohen served
in various general management positions with Maritz Inc., a marketing service
and performance improvement company, from June, 1976 to November, 1993.
LAWRENCE P. GOLEN has been Executive Vice President of the Company and
President of TAVS since October, 1996, when he joined Caribiner after its
acquisition of TAVS from GECCLC. Prior thereto, Mr. Golen served as General
Manager of TAVS from September, 1994 to October, 1996 and as General Manager
of the Test Equipment Management Services division of GECCLC from May, 1994 to
October, 1996. Prior thereto, Mr. Golen served as Vice President-Marketing and
Sales of Douglas Manufacturing from January, 1993 to April, 1994 and Regional
Marketing Director of GE Plastics from November, 1991 to December, 1993.
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BRIAN SHEPHERD has been Executive Vice President, Strategic Planning and
International Operations, of Caribiner International, Inc. since November,
1995. Mr. Shepherd joined the Company as Vice President of Caribiner, Inc. and
General Manager of its Atlanta office in July, 1995. Mr. Shepherd was formerly
President and Chief Executive Officer of Imagination (USA) Inc., a subsidiary
of Imagination, UK, a large European-based business communications company,
from December, 1992 to July, 1995. Previously, he had been Managing Director
of the London office of Imagination, UK.
ERROL M. COOK has been a director of the Company since June, 1992. Mr. Cook
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 Renaissance Communications Corp., Pacific Greystone Corporation
and Panavision Inc., as well as several privately held companies.
DAVID E. LIBOWITZ has been a director of the Company since June, 1992. Mr.
Libowitz 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 certain privately held companies.
BOARD COMPOSITION; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION; OTHER COMMITTEES
At present, the Board of Directors of the Company is composed of five
directors. The Board intends to nominate and appoint one additional person to
serve as an independent director. Pursuant to the terms of the Stockholders
Agreement, subject to certain conditions, Warburg has the right to designate
up to three persons for nomination to the Board and Raymond S. Ingleby has the
right to be designated as a director for nomination to the Board. See "Risk
Factors--Control by Management and Current Stockholders" and "Certain
Relationships and Transactions with Related Persons--Stockholders Agreement."
The Compensation Committee of the Board of Directors of the Company
determines the salaries and bonuses of the Company's executive officers and
administers the 1996 Stock Option Plan. During the Company's last completed
fiscal year Errol M. Cook, David E. Libowitz and, following his appointment to
the Board of Directors, Bryan D. Langton served as members of the Compensation
Committee. The sole general partner of Warburg is Warburg, Pincus & Co., a New
York general partnership ("WP"). EMW LLC manages Warburg. The members of EMW
LLC are substantially the same partners of WP. Lionel I. Pincus is the
managing partner of WP and the managing member of EMW LLC and may be deemed to
control each of WP and EMW LLC. WP, as the sole general partner of Warburg,
has a 20% interest in the profits of Warburg. Mr. Cook is a Managing Director
and member of EMW LLC and a general partner of WP. Mr. Libowitz is an officer
of EMW LLC. See "Certain Relationships and Transactions with Related Persons."
The Audit Committee of the Board of Directors recommends the appointment of
auditors and oversees the accounting and audit functions of the Company. At
present, Bryan D. Langton serves as the Chairman and sole member of the Audit
Committee. The Board of Directors has indicated its intention to appoint to
the Audit Committee a second independent director when such director is
appointed to the Board. During the Company's last completed fiscal year Errol
M. Cook and David E. Libowitz also served as members of the Audit Committee
until their resignations from such committee upon Mr. Langton's appointment to
such committee in May, 1996.
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<PAGE>
DIRECTOR COMPENSATION
Directors who are not employees or officers of the Company receive cash
compensation of $12,500 per annum payable quarterly (other than directors
affiliated with Warburg, who have waived the right to receive any
compensation). Directors are also reimbursed for certain expenses in
connection with attendance at Board and committee meetings. Other than with
respect to reimbursement of expenses, directors who are employees or officers
of the Company do not receive additional compensation for services as a
director.
Effective March 11, 1996, the Company adopted the Non-Employee Directors'
Stock Plan, pursuant to which the Company awards directors (other than
directors affiliated with Warburg, who have waived the right to receive any
compensation, or directors who may be employees of the Company) upon their
becoming a director and on each anniversary thereof shares of Common Stock
having a market value of $12,500. The Non-Employee Directors' Stock Plan
provides that the maximum number of shares of Common Stock available for issue
under the plan is 15,000 shares (of which 497 shares have been issued),
subject to adjustment to prevent dilution or expansion of rights.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid or accrued by the Company for services rendered to the
Company and its subsidiaries in all capacities for the fiscal years ended
September 30, 1995 and 1996, by its Chief Executive Officer and each of the
Company's other executive officers whose total salary and bonus exceeded
$100,000 during such fiscal year (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL
COMPENSATION SECURITIES
----------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Raymond S. Ingleby
Chairman of the Board and Chief
Executive Officer of
Caribiner International, Inc.
1996.............................. $384,027 $187,500 -0- $2,200(1)
1995.............................. 325,000 162,500 -0- 2,200(1)
Arthur F. Dignam
Executive Vice President and Chief
Financial and Administrative Officer
of Caribiner International, Inc.
1996.............................. 215,851 52,000 3,000 -0-
1995.............................. 195,834 37,600 -0- -0-
Mark M. Cohen
Executive Vice President of Caribiner
International, Inc. and President of
Caribiner Communications
1996.............................. 227,728 41,783 3,000 -0-
1995.............................. 190,000 46,500 -0- -0-
Brian Shepherd
Executive Vice President, Strategic
Planning and International
Operations of Caribiner
International, Inc.
1996.............................. 220,001 48,600 3,000 -0-
1995.............................. 33,031 -0- -0- -0-
</TABLE>
- --------
(1) All Other Compensation consists of life insurance premiums paid by the
Company.
46
<PAGE>
Option Grants
The following table sets forth the grants of options with respect to Common
Stock during the year ended September 30, 1996, to the Named Executive
Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ---------------------------------------------------------------------- -----------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Raymond S. Ingleby...... -- -- -- -- -- --
Arthur F. Dignam........ 3,000(a) 2.0% $28.875 07/29/2006 $13,654 $23,432
Mark M. Cohen........... 3,000(a) 2.0% 28.875 07/29/2006 13,654 23,432
Brian Shepherd.......... 3,000(a) 2.0% 28.875 07/29/2006 13,654 23,432
</TABLE>
- --------
(a) Such options will vest one-third on July 29, 1997, one-third on July 29,
1998 and one-third on July 29, 1999.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Ingleby,
Dignam, Cohen, Shepherd and Golen. Mr. Ingleby's employment agreement expires
on October 1, 1998. The employment agreements of Messrs. Dignam and Cohen
expire on December 1, 1998. Mr. Shepherd's employment agreement expires on
July 25, 1998. Mr. Golen's employment agreement expires on October 14, 1999.
The Company is required to give Mr. Ingleby at least 12 months' notice if it
does not intend to renew or extend his contract, and otherwise must pay him
all compensation under the agreement for 12 months from delivery of such
notice. The employment agreement for each of Mr. Dignam and Mr. Cohen provides
that the Company is required to give such executive at least six months'
notice if it does not intend to renew or extend his contract. The employment
agreement for each of Mr. Dignam and Mr. Cohen provides for an option to renew
for an additional three years at the discretion of the Company.
The annual base salary of Mr. Ingleby, Mr. Dignam, Mr. Cohen, Mr. Shepherd
and Mr. Golen under their employment agreements currently is $400,000,
$229,000, $244,500, $229,000 and $210,000, respectively. Each executive is
also entitled to fringe benefits, and to an annual bonus based on Company
performance against targets established by the Board each year. Under each
agreement the Board is to review the employee's salary at least annually and
the salary amounts may be increased in the Board's discretion. Each executive
may be terminated for "cause" (as defined in the agreements), with all
compensation ceasing. Under Messrs. Ingleby, Dignam and Cohen's employment
agreements, if the executive is terminated without cause or, if the executive
terminates his employment for "good reason" (as defined), the executive is
entitled to full compensation for the remaining term of the agreement (or, if
longer, in the case of Mr. Ingleby, for 12 months). "Good reason" includes, in
the case of Mr. Ingleby, a change in control (as defined) of the Company. The
consummation of the Offering will not result in such a change in control. Each
employment agreement includes a two year non-competition and non-solicitation
of clients and employees provision. The employment agreements of Mr. Ingleby,
Mr. Dignam and Mr. Cohen provide that, in the event of the employee's death,
the employee's beneficiary will receive a payment equal to six months' base
salary. Each of Mr. Shepherd's and Mr. Golen's employment agreement provides
for a payment equal to one month's base salary in the event of his death.
47
<PAGE>
INCENTIVE PLANS
1996 STOCK OPTION PLAN
Effective January 1, 1996, the Company adopted the 1996 Stock Option Plan
(the "Option Plan"). The Option Plan is designed to provide employees with a
more direct stake in the Company's future welfare and an incentive to remain
with the Company. It is also expected that the Option Plan will encourage
qualified persons to seek employment with the Company.
The Option Plan provides for grants of "Incentive Stock Options," meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and "Non-qualified Stock Options." The Option Plan
provides that options for an aggregate of 364,000 shares of Common Stock shall
be available for award, subject to adjustment by the Committee (as hereinafter
defined) to prevent dilution or expansion of rights. Options may be granted to
employees of the Company or any of its subsidiaries, provided that no employee
may receive options for more than 200,000 shares of Common Stock in the
aggregate in any fiscal year. As of February 6, 1997, stock options to
purchase an aggregate of 184,400 shares of Common Stock (175,800 of which have
not yet vested) were outstanding.
The Option Plan is administered by the Compensation Committee of the Board
of Directors (the "Committee") and is comprised of not less than two
disinterested directors within the meaning of Rule 16b-3 of the Exchange Act.
The Option Plan permits the Committee to determine which employees shall
receive options and the times when options are to be granted. The Committee
also determines the purchase price of Common Stock covered by each option, the
term of each option, the number of shares of Common Stock to be covered by
each option and any performance objectives or vesting standards applicable to
each option. The Committee also designates whether the options shall be
Incentive Stock Options or Non-qualified Stock Options.
The purchase price per share under each Incentive Stock Option or Non-
qualified Stock Option is the "Market Price" (i.e., the average of the high
and low reported consolidated trading sales price for such day) of the Common
Stock on the date the option is granted, except that the exercise price for an
Incentive Stock Option granted to a 10% stockholder may not be less than 110%
of the Market Price of the Common Stock on the date of the grant. The
aggregate Market Price of the Common Stock exercisable under Incentive Stock
Options held by any optionee during any calendar year may not exceed $100,000.
Incentive Stock Options granted to employees under the Option Plan have a
maximum term of ten years. Incentive Stock Options granted to 10% stockholders
have a maximum term of five years. Options are not transferable except by will
or pursuant to the applicable laws of descent and distribution.
Notwithstanding the general restriction on transferability, in the sole
discretion of the Committee, Non-qualified Stock Options may be made
transferable subject to the requirements of Rule 16b-3.
In the event that an employee is terminated for any reason other than death,
Disability, Retirement or Cause (as such terms are defined in the Option
Plan), to the extent that the employee had the right to exercise an option,
such option will be exercisable until the earlier of the expiration date of
the option, or within 30 days of the date of such termination. Options held on
the date of Disability or Retirement, whether or not exercisable on such date,
are exercisable within one year of the date of Disability or Retirement.
Options held by an employee at the date of death, whether or not exercisable
on the date of death, are exercisable by the beneficiary of the employee
within one year from the date of death. The Committee may, in its sole
discretion, cause any option to be forfeited upon an employee's termination
for Cause (as defined in the Option Plan). In the event of a Change of Control
(as such term is defined in the Plan) of the Company, all outstanding options
will vest and appropriate provisions shall be made for the protection of
options by substitution on an equitable basis of appropriate stock of the
Company or appropriate stock of the merged, consolidated or otherwise
reorganized corporation, as the case may be.
The Board is permitted to suspend, terminate, modify or amend the Option
Plan, provided that any amendment that would (i) materially increase the
aggregate number of shares, (ii) materially increase benefits
48
<PAGE>
accruing to employees, or (iii) materially modify the eligibility requirements
for participation shall be subject to stockholder approval, provided, however,
that stockholder approval is not required for adjustments to the Option Plan
or to the number of shares available thereunder which are deemed appropriate
by the Committee to prevent dilution or expansion of rights.
401(K) PLAN
In December, 1994, Caribiner, Inc. adopted the Employee Profit Sharing Plan
and Trust For Employees of Caribiner, Inc. (the "401(k) Plan") to replace a
previously existing similar plan. Generally, any employee who has completed 3
months of service and is over 21 years of age is eligible to participate in
the 401(k) Plan. Each eligible employee may elect to contribute to the 401(k)
Plan, through payroll deductions, up to 10% of his or her compensation for
services rendered in any year, not to exceed a statutorily prescribed annual
limit. Participants in the 401(k) Plan are always fully vested in their own
contributions. The terms of the 401(k) Plan provide that the Company may make
matching contributions to the 401(k) Plan based on the company's net income
and at the discretion of the Board of Directors. Each participant becomes
fully vested in the Company's contributions allocated to his or her account
upon completion of five years of service. The Company's contributions are tax-
deductible to the Company. Company contributions to the 401(k) Plan for fiscal
1994, 1995 and 1996 were not significant, and no contributions were made by
the Company to the accounts of any of the Named Executive Officers. Effective
January 1, 1997, the Company began matching $0.25 for each dollar contributed
by an employee to his or her respective account in the 401(k) Plan, 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).
49
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RELATED PERSONS
INVESTMENT BY WARBURG, PINCUS INVESTORS, L.P.
Pursuant to a Securities Purchase Agreement, dated as of June 30, 1992,
Warburg purchased the Convertible Note for its principal amount of $12.0
million and purchased shares of preferred stock for $4.0 million. The proceeds
from the sale to Warburg of the Convertible Note and the preferred stock were
used in part to finance the Company's acquisition in June, 1992 of Caribiner,
Inc. Immediately prior to the consummation of the Initial Public Offering,
Warburg converted the Convertible Note and all the shares of its preferred
stock (including the shares of preferred stock which it received upon
conversion of the Convertible Note) into an aggregate of 3,596,250 shares of
Common Stock.
The Convertible Note accrued interest at the rate of 11.5% per annum on the
outstanding principal amount thereof, and interest was payable quarterly in
cash. Pursuant to the terms of the Convertible Note, the Company chose to
defer interest on such note, which deferred interest also accrued interest at
the rate of 11.5% per annum.
Pursuant to the terms of the preferred stock, Warburg was entitled to
receive, when and as declared by the Company's Board, a cash dividend at the
annual rate of 12% of the liquidation preference per share of the preferred
stock. Dividends on the preferred stock were cumulative, and unpaid dividends
(whether or not declared) accrued at the rate of 12% per annum.
Proceeds from the Initial Public Offering aggregating $8.5 million were used
to pay accrued interest on the Convertible Note and accumulated dividends on
the preferred stock.
WARBURG TERM LOAN AND WARRANTS
Pursuant to the Loan and Warrant Agreement, dated as of August 3, 1993 (the
"Loan and Warrant Agreement"), which governed the Warburg Term Loan, Warburg
had agreed to lend to the Company up to $10.0 million in loans for
acquisitions and other corporate purposes approved by the Board of Directors
of the Company. Amounts outstanding under the Warburg Term Loan accrued
interest at the rate of 11% per annum compounded semi-annually. As of December
31, 1995, there was approximately $3.0 million outstanding under the Warburg
Term Loan. The outstanding amount under the Warburg Term Loan, including
accrued interest of approximately $4.0 million, was repaid upon consummation
of the Initial Public Offering, and the Loan and Warrant Agreement was
terminated.
In partial consideration for making advances under the Warburg Term Loan,
Caribiner issued warrants to Warburg at the rate of 0.50% of the then fully
diluted Common Stock per each $1.0 million principal amount of an advance. In
addition, after the first anniversary of each advance and at the close of
every quarter thereafter, additional warrants were issuable to Warburg at the
rate of 0.375% of the fully diluted Common Stock per each $1.0 million in
outstanding principal amount of such advance. As of December 31, 1995,
warrants to purchase an aggregate 534,505 shares of Common Stock had been
issued to Warburg with a weighted average exercise price per share of $3.16.
Warburg exercised all of the warrants immediately prior to the completion of
the Initial Public Offering.
ADVANCES TO RAYMOND S. INGLEBY
As a result of a series of advances made from 1989 to 1992, Raymond S.
Ingleby, the Chairman of the Board and Chief Executive Officer of the Company,
became obligated to pay to the Company an aggregate amount of $362,630. Such
repayment obligations did not bear interest. The Company fully reserved
against such obligations in fiscal 1992. Mr. Ingleby repaid the full amount of
such obligations in connection with the Initial Public Offering.
STOCKHOLDERS AGREEMENT
Upon completion of the Initial Public Offering, the Company entered into the
Stockholders Agreement with Warburg and Raymond S. Ingleby. The Stockholders
Agreement contains, among other things, various terms
50
<PAGE>
regarding nominations for the Company's Board of Directors and certain
registration rights granted by the Company. Pursuant to the terms of the
Stockholders Agreement, for so long as Warburg beneficially owns at least 35%,
20% or 10% of the outstanding shares of Common Stock, it will have the right
to designate three nominees, two nominees or one nominee, respectively, for
director. The Stockholders Agreement also provides that for so long as Mr.
Ingleby shall hold office as the Chairman and Chief Executive Officer of the
Company, he will have the right to be designated as a nominee for director.
Additionally, the Stockholders Agreement provides that Warburg is entitled
to three "demand" registrations, which may be exercised at any time. The
Stockholders Agreement also provides that Raymond S. Ingleby will be entitled
to one "demand" registration with respect to not less than 50% of the number
of shares of Common Stock that he beneficially owned immediately prior to the
completion of the Initial Public Offering (i.e., 698,178 shares), provided
that Mr. Ingleby may not exercise such "demand" until the earliest of (i) six
months after the effective date of a registration statement filed by the
Company in respect of shares of Common Stock owned by Warburg, (ii) the
distribution by Warburg of shares of Common Stock to its partners and (iii)
March 15, 2001. In addition, in the event Mr. Ingleby is terminated from his
employment by the Company and he has not exercised his demand registration, he
will be entitled to one "demand" registration six months after the date of his
termination to the extent he would be required by law to effect such
registration in order to sell his shares. Mr. Ingleby is also entitled to
"piggyback" registration rights in the event that Warburg exercises a "demand"
registration. In addition, the Stockholders Agreement grants to Mr. Ingleby
certain co-sale rights in the event that Warburg sells, transfers or otherwise
disposes of any shares of its Common Stock.
51
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 6, 1997, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby with respect to
(i) each person known by the Company to be the beneficial owner of more than
5% of the Common Stock, (ii) each director of the Company, (iii) each of the
executive officers of the Company and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES NUMBER SHARES
BENEFICIALLY OF SHARES BENEFICIALLY
OWNED PRIOR TO BEING OWNED
OFFERING OFFERED AFTER OFFERING
NAME AND ADDRESS OF BENEFICIAL ----------------- --------- -----------------
OWNER NUMBER PERCENT NUMBER NUMBER PERCENT
- ------------------------------ --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Warburg, Pincus Investors,
L.P.(1).......................... 4,130,755 42.8% -- 4,130,755 36.3%
466 Lexington Avenue
10th Floor
New York, NY 10017
100,000
Raymond S. Ingleby(2)............. 1,047,266 10.9 947,266 8.3
c/o Caribiner International, Inc.
16 West 61st Street
New York, NY 10023
Arthur F. Dignam.................. 36,898 * 14,000 22,898 *
Mark M. Cohen..................... 35,508 * 14,200 21,308 *
Lawrence P. Golen(3).............. 7,300 * -- 7,300 *
Brian Shepherd.................... 23,611 * -- 23,611 *
36.3
Errol M. Cook(1).................. 4,130,755 42.8 -- 4,130,755
Bryan D. Langton(4)............... 13,497 * -- 13,497 *
36.3
Sidney Lapidus(1)................. 4,130,755 42.8 -- 4,130,755
David E. Libowitz(1).............. -- * -- -- *
All executive officers and
directors as a group
(9 persons)(5)................... 5,294,835 54.8% 128,200 5,166,635 45.3%
</TABLE>
- --------
* Less than 1%
(1) The sole general partner of WP. EMW LLC manages Warburg. The members of
EMW LLC are substantially the same partners of WP. Lionel I. Pincus is the
managing partner of WP and the managing member of EMW LLC and may be
deemed to control each of WP and EMW LLP. WP, as the sole general partner
of Warburg, has a 20% interest in the profits of Warburg. Messrs. Errol M.
Cook and Sidney Lapidus, each a director of the Company, are Managing
Directors and members of EMW LLC, and general partners of WP. As such,
Messrs. Cook and Lapidus may be deemed to have an indirect pecuniary
interest (within the meaning of Rule 16a-1 under the Exchange Act) in an
indeterminate portion of the shares of Common Stock beneficially owned by
Warburg. Mr. David E. Libowitz, a director of the Company, is an officer
of EMW LLC. Each of Messrs. Cook, Lapidus and Libowitz disclaims
"beneficial ownership" of the Common Stock owned by Warburg within the
meaning of Rule 13d-3 under the Exchange Act.
(2) In the event the over-allotment option is exercised in full and Mr.
Ingleby sells an additional 200,000 shares of Common Stock pursuant
thereto, Mr. Ingleby would beneficially own 747,266 shares of Common Stock
after the Offering, or 6.5%.
(3) Includes presently exercisable options to purchase 7,000 shares of Common
Stock at $44.75 per share, which expire in October, 2006.
(4) Includes presently exercisable options to purchase 9,000 shares of Common
Stock at $42.62 per share, which expire in November, 2006.
(5) In the event the over-allotment option is exercised in full and Mr.
Ingleby sells an additional 200,000 shares of Common Stock pursuant
thereto, all executive officers and directors as a group would be offering
an aggregate of 328,200 shares of Common Stock and would beneficially own
4,966,635 shares of Common Stock after the Offering, or 43.2%.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 42,000,000 shares,
of which 40,000,000 shares are shares of Common Stock and 2,000,000 shares are
shares of preferred stock. At February 6, 1997, there were 9,644,091 shares of
Common Stock outstanding, held of record by 75 shareholders, and no shares of
preferred stock outstanding.
The following summary description relating to the capital stock does not
purport to be complete. Reference is made to the Certificate which is filed as
an exhibit to the Registration Statement of which this Prospectus is a part,
for a detailed description of the provisions thereof summarized below.
COMMON STOCK
Holders of Common Stock are entitled to receive such dividends as may from
time to time be declared by the Board of Directors of the Company out of funds
legally available therefor. Holders of Common Stock are entitled to one vote
per share on all matters on which the holders of Common Stock are entitled to
vote and do not have any cumulative voting rights. Holders of Common Stock
have no preemptive, conversion, redemption or sinking fund rights. In the
event of a liquidation, dissolution or winding-up of the Company, holders of
Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all debts and liabilities of
the Company and the liquidation preference of any outstanding Preferred Stock.
The outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby when issued will be, fully paid and nonassessable. The rights,
preferences and privileges of holders of Common Stock are subject to, and may
be adversely affected by, the rights of the holders of any class or series of
Preferred Stock which the Company may issue in the future.
The Common Stock is listed on the New York Stock Exchange under the symbol
"CWC."
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of
Preferred Stock in one or more classes or series and to fix the number of
shares constituting any such class or series, and the voting powers,
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof,
including the dividend rights, dividend rate, terms of redemption, redemption
price or prices, conversion rights and liquidation preferences of the shares
constituting any class or series, without any further vote or action by the
stockholders of the Company. The issuance of Preferred Stock by the Board of
Directors could adversely affect the rights of holders of Common Stock. For
example, the issuance of Preferred Stock could result in a class of securities
outstanding that would have preferences over the Common Stock with respect to
dividends and in liquidation and that could (upon conversion or otherwise)
enjoy all of the rights appurtenant to Common Stock.
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control
of the Company through merger, tender offer, proxy, consent or otherwise by
making such attempts more difficult to achieve or more costly. The Board of
Directors may issue Preferred Stock without stockholder approval and with
voting and conversion rights which could adversely affect the voting power of
holders of Common Stock. At present, the Company has no plans to issue any
shares of Preferred Stock.
DELAWARE LAW, CHARTER AND BY-LAW PROVISIONS
Section 203 of the Delaware General Corporation Law (the "DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" (as defined in Section 203, generally, to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the
assets or stock of the corporation or its majority-owned subsidiaries and
transactions
53
<PAGE>
which increase an interested stockholder's percentage ownership of stock) with
a publicly-held Delaware corporation for three years following the time such
person became an interested stockholder unless (i) before such person became
an interested stockholder, the board of directors of the corporation approved
the transaction in which the interested stockholder became an interested
stockholder or approved the business combination, (ii) upon consummation of
the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding voting stock held by directors who are also officers of
the corporation and by employee benefit plans that do not provide employees
with the right to determine confidentially whether shares held by the plan
will be voted or tendered in a tender or exchange offer) or (iii) following
the transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the corporation
and ratified at a meeting of stockholders (and not by written consent) by the
affirmative vote of the holders of two-thirds of the outstanding voting stock
of the corporation not owned by the interested stockholder. The Board of
Directors of the Company approved the transactions in June, 1992 pursuant to
which Warburg became an interested stockholder.
The Certificate and By-Laws of the Company (i) require the approval of at
least 50% of the members of the Board of Directors in order for a special
meeting of stockholders to be called, (ii) prohibit the stockholders of the
Company from taking action by written consent in lieu of a meeting and (iii)
require advance notice by stockholders of an intention to nominate persons for
election to the Board of Directors. Such provisions could have the effect of
discouraging attempts by others to obtain control of the Company or delaying
changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
11,394,091 shares of Common Stock, of which 5,686,252 will be freely tradeable
(other than by an "affiliate" of the Company (as such term is defined in the
Securities Act)) without restriction or registration under the Securities Act.
The remaining 5,707,839 shares of Common Stock to be outstanding (the
"Restricted Shares") are held by officers, directors, employees and other
stockholders of the Company. The Restricted Shares were sold by the Company in
reliance on exemptions from the registration requirements of the Securities
Act, and include 394,838 Restricted Shares which were sold by the Company in
reliance on the exemption from the registration requirements of the Securities
Act contained in Rule 701 under the Securities Act. All of the Restricted
Shares are "restricted securities" within the meaning of Rule 144 and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemption contained in
Rule 144.
Approximately 5,095,581 Restricted Shares are presently eligible for sale in
the public market, subject to the provisions of Rule 144 (of which
approximately 4,604,123 shares are subject to the lock-up described below).
The Company, the Selling Stockholders, Warburg and all of the Company's
directors and executive officers have, subject to certain exemptions in the
case of the Company, agreed not to, directly or indirectly sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any capital stock
of the Company, or any security convertible or exchangeable into, or
exercisable for, such capital stock, or, in the case of the Company, file any
registration statement with respect to any of the foregoing, for a period of
90 days after the date of this Prospectus, without the prior written consent
of Merrill Lynch. The remainder of the Restricted Shares held by existing
stockholders will become eligible for sale at various times, subject to the
provisions of Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, is entitled to sell within any three-month period
a number of restricted securities that does not exceed the greater of 1% of
the then outstanding shares of Common Stock and the average weekly trading
volume on a national securities exchange and/or in the over-the-counter market
during the four calendar weeks preceding such sale, provided that at least two
years have elapsed since such shares were acquired from the Company and
certain manner of sale, notice requirements and requirements as to the
availability of current public information about the Company are satisfied.
Any person who is deemed to be an affiliate of the Company must comply with
the provisions of Rule 144 (other than the two-year holding period
requirement) in order to sell shares of Common Stock which are not restricted
securities (such as shares acquired by affiliates in the Offering). In
addition, under Rule 144(k), a person who is not an affiliate of the Company,
and who has not been an affiliate of the Company at any time during the 90
days preceding any sale, is entitled to sell such shares without regard to the
foregoing limitations, provided at least three years have elapsed since the
shares were acquired from the Company.
Securities issued in reliance on Rule 701 are deemed to be restricted
securities within the meaning of Rule 144 and (unless subject to the lock-up
agreements described above), may be sold by persons other than affiliates
without having to comply with the public-information, holding-period, volume-
limitation or notice provisions of Rule 144 and by affiliates without having
to comply with the minimum holding-period provision of Rule 144.
The Company has, in the past, issued shares of Common Stock as partial
consideration for certain of its acquisitions and may do so again in the
future.
Sales of substantial amounts of the Common Stock in the public market, or
the perception that such sales could occur, could have an adverse impact on
the market price.
REGISTRATION RIGHTS
Pursuant to the terms of the Stockholders Agreement, the Company granted to
Warburg and Raymond S. Ingleby certain registration rights regarding shares of
Common Stock owned by them. See "Certain Relationships and Transactions with
Related Persons--Stockholders Agreement."
In addition, the Company granted registration rights with respect to an
aggregate of 77,256 shares of Common Stock which it issued in connection with
the acquisitions of Lighthouse, Rome and Blumberg. In each case, the Company
has agreed to use its best efforts to effect the registration and sale of such
shares of Common Stock as soon as it becomes eligible to file a registration
statement on Form S-3, provided, that the Company may delay such filing for up
to 120 days in the event such filing would cause certain material adverse
events.
55
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company and each of the Selling Stockholders have
agreed to sell to each of the Underwriters named below (the "Underwriters")
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Alex. Brown & Sons Incorporated, Furman Selz LLC and Schroder Wertheim & Co.
Incorporated are acting as representatives (the "Representatives"), and each
of the Underwriters has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set
forth opposite its name below at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Purchase Agreement provides that, subject to the terms and conditions set
forth therein, the Underwriters are obligated to purchase all of the shares of
Common Stock being sold pursuant to the Purchase Agreement if any of the
shares of Common Stock are purchased. Under certain circumstances, under the
Purchase Agreement, the commitments of non-defaulting Underwriters may be
increased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................................
Alex. Brown & Sons Incorporated....................................
Furman Selz LLC....................................................
Schroder Wertheim & Co. Incorporated...............................
---------
Total......................................................... 1,878,200
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose initially to offer the shares of Common Stock to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share of Common Stock on sales to
certain other dealers. After the initial public offering of the shares of
Common Stock offered hereby, the public offering price, concession and
discount may be changed.
Mr. Ingleby and the Company have granted the Underwriters an option to
purchase up to an additional 200,000 shares of Common Stock and 81,730 shares
of Common Stock, respectively, at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discount. Such option,
which will expire 30 days after the date of this Prospectus, may be exercised
solely to cover over-allotments, if any, made in connection with the sale of
shares of Common Stock offered hereby. To the extent that the Underwriters
exercise this option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage
thereof which the number of shares of Common Stock to be purchased initially
by that Underwriter bears to the total number of shares of Common Stock to be
purchased initially by the Underwriters. If purchased, the Underwriters will
offer such additional shares of Common Stock on the same terms as those on
which the 1,878,200 shares of Common Stock are being offered hereby.
The Company, the Selling Stockholders, Warburg and all of the Company's
directors and executive officers have, subject to certain exemptions in the
case of the Company, agreed not to, directly or indirectly, sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any capital stock
of the Company, or any security convertible or exchangeable into, or
exercisable for, such capital stock, or file or cause the Company to file any
registration statement with respect to any of the foregoing, for a period of
90 days after the date of this Prospectus, without the prior written consent
of Merrill Lynch.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act or contribute to payments the Underwriters may be required
to make in respect thereof.
56
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain legal
matters will be passed upon for the Company by Schulte Roth & Zabel LLP, New
York, New York. Debevoise & Plimpton, New York, New York, has acted as counsel
for the Underwriters in connection with the Offering.
EXPERTS
The consolidated financial statements of Caribiner International, Inc. at
September 30, 1995 and 1996 and for each of the three years in the period
ended September 30, 1996 and the consolidated financial statements of Total
Audio Visual Services at December 31, 1995 and for the year then ended, and at
September 27, 1996 and for the period from January 1, 1996 to September 27,
1996, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting
and auditing. The consolidated financial statements of SCH International
Limited at March 31, 1996 and for the nine months then ended appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young,
Chartered Accountants, as set forth in their report thereon appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement")
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
certain items of which are omitted in accordance with the rules and
regulations of the Commission. The Company is subject to the informational
requirements of the Exchange Act, and in accordance therewith files reports,
proxy statements and other information with the Commission. Copies of all or
any portion of the Registration Statement and copies of such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and at its New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048 and its
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained at prescribed
rates. Such documents filed by the Company can also be inspected at the
offices of the New York Stock Exchange located at 20 Broad Street, New York,
New York 10005. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
Web site is http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent
accounting firm and quarterly reports containing unaudited consolidated
financial information for each of the first three fiscal quarters of each
fiscal year of the Company.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
57
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CARIBINER INTERNATIONAL, INC.
Report of Independent Auditors.......................................... F-2
Consolidated Balance Sheets as of September 30, 1995 and 1996........... F-3
For the Years Ended September 30, 1994, 1995 and 1996:
Consolidated Statements of Operations................................. F-4
Consolidated Statements of Cash Flows................................. F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit).. F-6
Notes to Consolidated Financial Statements.............................. F-7
Review Report of Independent Accountants................................ F-17
Consolidated Balance Sheets as of September 30, 1996 and December 31,
1996................................................................... F-18
For the Three Months Ended December 31, 1995 and 1996:
Consolidated Statements of Operations................................. F-19
Consolidated Statements of Cash Flows................................. F-20
Consolidated Statement of Changes in Stockholders' Equity ............ F-21
Notes to Consolidated Financial Statements.............................. F-22
SCH INTERNATIONAL LIMITED
Report of Independent Auditors.......................................... F-25
Consolidated Profit and Loss Account for the Nine Months Ended 31 March
1996................................................................... F-26
Consolidated Balance Sheet as of 31 March 1996.......................... F-27
Consolidated Cash Flow Statement for the Nine Months Ended 31 March
1996................................................................... F-28
Notes to the Accounts................................................... F-29
TOTAL AUDIO VISUAL SERVICES
Report of Independent Auditors ......................................... F-40
Balance Sheet as of December 31, 1995................................... F-41
For the Year Ended December 31, 1995:
Statement of Operations and Divisional Equity......................... F-42
Statement of Cash Flows............................................... F-43
Notes to Financial Statements........................................... F-44
Report of Independent Auditors.......................................... F-48
Balance Sheet as of September 27, 1996.................................. F-49
For the period from January 1, 1996 to September 27, 1996:
Statement of Operations and Divisional Equity......................... F-50
Statement of Cash Flows............................................... F-51
Notes to Financial Statements........................................... F-52
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Caribiner International, Inc.
We have audited the accompanying consolidated balance sheets of Caribiner
International, Inc. (the "Company") as of September 30, 1995 and 1996, 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,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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, 1995 and 1996 and the consolidated results of its operations
and its cash flows for each of the three years in the period ended September
30, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst &Young LLP
New York, New York
December 6, 1996
Except for Note 15 as to which the date is December 20, 1996
F-2
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1996
----------- ------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 212,612 $ 8,431,777
Trade accounts receivable, net of allowance for
doubtful accounts of
$81,600 in 1995 and $304,860 in 1996.............. 22,920,679 36,201,774
Deferred charges................................... 3,804,858 8,989,410
Prepaid expenses and other current assets.......... 607,494 3,394,951
----------- ------------
TOTAL CURRENT ASSETS........................... 27,545,643 57,017,912
Property and equipment, net........................ 6,383,975 21,180,982
Goodwill, net...................................... 10,288,503 46,681,520
Other intangibles, net............................. 340,251 1,041,280
Other assets....................................... 740,040 399,696
----------- ------------
TOTAL ASSETS................................... $45,298,412 $126,321,390
=========== ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
----------------------------------------------
CURRENT LIABILITIES:
Bank line of credit................................ $ 4,220,000 $ 6,000,000
Current portion of long-term debt.................. 4,677,054 648,696
Trade accounts payable............................. 4,581,165 7,529,536
Accrued expenses and other current liabilities..... 3,471,233 12,698,716
Accrued production costs........................... 3,483,084 11,355,416
Deferred income.................................... 6,761,589 13,334,965
----------- ------------
TOTAL CURRENT LIABILITIES...................... 27,194,125 51,567,329
Long-term debt..................................... 7,147,675 16,189,922
Convertible Note including accrued interest........ 17,346,397 --
Deferred income.................................... 3,275,023 5,007,183
Accrued preferred stock dividends.................. 1,874,135 --
Other liabilities.................................. 895,288 89,573
----------- ------------
TOTAL LIABILITIES.............................. 57,732,643 72,854,007
STOCKHOLDERS' (DEFICIT) EQUITY:
Preferred stock, $.01 par value:
1,150,000 shares authorized, 450,000 shares issued
and outstanding at 1995; 2,000,000 shares autho-
rized, none issued and outstanding at 1996........ 4,500 --
Common stock, $.01 par value:
12,330,000 voting shares authorized and 685,000
non-voting shares authorized, 1,924,240 voting
shares and 577,239 non-voting shares issued and
outstanding at 1995; 40,000,000 voting shares au-
thorized, 9,598,159 shares issued and
outstanding at 1996............................... 25,015 95,982
Additional paid-in capital......................... 1,945,272 60,032,954
Translation adjustment............................. -- 85,723
Accumulated deficit................................ (14,409,018) (6,747,276)
----------- ------------
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY........... (12,434,231) 53,467,383
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $45,298,412 $126,321,390
EQUITY............................................. =========== ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Revenue................................... $59,173,739 $81,131,219 $148,329,868
Cost of revenue........................... 39,723,994 54,312,550 99,797,490
----------- ----------- ------------
Gross profit.............................. 19,449,745 26,818,669 48,532,378
Operating expenses:
Selling, general and administrative
expenses................................ 14,348,904 19,305,899 30,442,235
Non-cash compensation expense........... -- -- 1,072,000
Depreciation and amortization........... 2,137,100 2,329,869 3,141,838
----------- ----------- ------------
Total operating expenses.................. 16,486,004 21,635,768 34,656,073
----------- ----------- ------------
Operating income.......................... 2,963,741 5,182,901 13,876,305
Interest expense with related parties..... 2,107,383 2,233,623 1,199,281
Other interest expense, net............... 501,509 1,259,315 385,909
----------- ----------- ------------
Income before taxes....................... 354,849 1,689,963 12,291,115
Provision for taxes....................... 62,257 264,430 4,301,890
----------- ----------- ------------
Net income.............................. $ 292,592 $ 1,425,533 $ 7,989,225
=========== =========== ============
Pro forma net income per common share... $0.30 $0.49 $1.05
===== ===== =====
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1994 1995 1996
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 292,592 $1,425,533 $ 7,989,225
Adjustments to reconcile net income to
net cash provided by
(used in) operating activities:
Non-cash compensation expense.......... -- -- 1,072,000
Depreciation and amortization.......... 2,137,100 2,329,869 3,141,838
Change in assets and liabilities:
(Increase) in accounts receivable.... (10,322,839) (6,407,492) (4,520,122)
(Increase) in deferred charges....... (256,856) (2,558,543) (769,988)
(Increase) in prepaid expenses and
other
current assets...................... (91,303) (261,873) (974,103)
Decrease in other assets............. 264,219 150,536 442,971
Increase (decrease) in accounts pay-
able................................ 2,766,666 (130,891) (1,650,337)
Increase (decrease) in deferred in-
come................................ 4,565,558 2,874,963 (64,800)
Increase in accrued expenses and
other liabilities................... 1,409,775 786,513 8,724,058
Increase (decrease) in accrued inter- 2,107,383 2,233,623 (6,130,397)
est payable......................... ----------- ---------- -----------
Net cash provided by operating activi- 2,872,295 442,238 7,260,345
ties.................................. ----------- ---------- -----------
Cash flow used in investing activities:
Purchase of property and equipment..... (1,592,848) (1,605,978) (2,222,395)
Acquisition of intangibles and busi-
nesses, net of cash acquired.......... (4,599,285) (6,151,649) (43,982,317)
Net cash paid in merger with ICC....... (408,938) -- --
----------- ---------- -----------
Net cash used in investing activities.. (6,601,071) (7,757,627) (46,204,712)
----------- ---------- -----------
Cash flow provided by (used in) financing
activities:
Net proceeds from issuance of common
stock................................. -- -- 42,480,447
Proceeds from exercise of warrants..... -- -- 1,690,500
Net proceeds from bank line of credit.. 660,000 2,550,000 1,780,000
Proceeds from long-term debt........... 3,000,000 6,000,000 18,000,000
Repayments of long-term debt........... (85,000) (1,297,574) (14,668,783)
Payment of preferred dividends......... -- -- (2,201,618)
Proceeds from issuance of common stock
under the
Management Stock Plan................. 2,050 5,383 174,167
Repurchase of common stock............. (4,899) (1,878) (176,904)
----------- ---------- -----------
Net cash provided by financing activi- 3,572,151 7,255,931 47,077,809
ties.................................. ----------- ---------- -----------
Effect of exchange rate changes on cash -- -- 85,723
and cash equivalents.................... ----------- ---------- -----------
Net (decrease) increase in cash.......... (156,625) (59,458) 8,219,165
Cash, beginning of year.................. 428,695 272,070 212,612
----------- ---------- -----------
Cash, end of year........................ $ 272,070 $ 212,612 $ 8,431,777
=========== ========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL TOTAL
------------------ ------------------- PAID IN DEFERRED ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT ADJUSTMENT EQUITY (DEFICIT)
--------- ------- ---------- ------- ----------- ------------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
October 1, 1993. 2,327,827 $23,278 450,000 $ 4,500 $ 1,951,833 $ -- ($14,885,787) -- ($12,906,176)
Issuance of
common stock
upon the
purchase of
MultiMedia
Holdings, Inc. . 54,714 547 -- -- (388) -- -- -- 159
Exchange offer
and merger...... (5,647) (57) -- -- (60,416) -- -- -- (60,473)
Repurchase of
common stock
under the
Management Stock
Plan............ (33,222) (332) -- -- (250) -- (4,317) -- (4,899)
Issuance of
common stock
under the
Management Stock
Plan............ 107,973 1,080 -- -- 811 -- -- -- 1,891
Issuance of
warrants to
purchase 71,435
shares of common
stock........... -- -- -- -- 9,907 -- -- -- 9,907
Accrued
preferred stock
dividends....... -- -- -- -- -- -- (581,997) -- (581,997)
Net income...... -- -- -- -- -- -- 292,592 -- 292,592
--------- ------- ---------- ------- ----------- ---------- ------------ ------- ------------
Balance at
September 30,
1994............ 2,451,645 24,516 450,000 4,500 1,901,497 -- (15,179,509) -- (13,248,996)
Repurchase of
Management Stock
Plan shares by
the company..... (24,916) (249) -- -- (1,629) -- -- -- (1,878)
Issuance of
warrants to
purchase 293,967
shares of common
stock........... -- -- -- -- 40,769 -- -- -- 40,769
Issuance of
common stock
under the
Management Stock
Plan............ 74,750 748 -- -- 4,635 -- -- -- 5,383
Accrued
preferred stock
dividends....... -- -- -- -- -- -- (655,042) -- (655,042)
Net income...... -- -- -- -- -- -- 1,425,533 -- 1,425,533
--------- ------- ---------- ------- ----------- ---------- ------------ ------- ------------
Balance at
September 30,
1995............ 2,501,479 25,015 450,000 4,500 1,945,272 -- (14,409,018) -- (12,434,231)
Issuance of
common stock
under the
Management Stock
Plan............ 87,210 872 -- -- 1,245,295 (1,072,000) -- -- 174,167
Issuance of
warrants to
purchase 75,593
shares of common
stock........... -- -- -- -- 79,456 -- -- -- 79,456
Repurchase of
common stock.... (31,091) (311) -- -- (176,593) -- -- -- (176,904)
Accrued
preferred stock
dividends....... -- -- -- -- -- -- (327,483) -- (327,483)
Conversion of
Convertible Note
into preferred
stock........... -- -- 600,000 6,000 11,979,450 -- -- -- 11,985,450
Conversion of
preferred stock
into common
stock........... 3,596,250 35,963 (1,050,000) (10,500) (10,913) -- -- -- 14,550
Exercise of
warrants........ 534,505 5,345 -- -- 1,685,155 -- -- -- 1,690,500
Issuance of
common stock
upon
consummation of
initial public
offering........ 2,877,985 28,780 -- -- 42,286,150 -- -- -- 42,314,930
Issuance of
common stock
upon acquisition
of Lighthouse,
Ltd. ........... 31,821 318 -- -- 999,682 -- -- -- 1,000,000
Non-cash
compensation
charge.......... -- -- -- -- -- 1,072,000 -- -- 1,072,000
Translation
adjustment...... 85,723 85,723
Net income...... -- -- -- -- -- -- 7,989,225 -- 7,989,225
--------- ------- ---------- ------- ----------- ---------- ------------ ------- ------------
9,598,159 $95,982 -- $ -- $60,032,954 $ -- ($ 6,747,276) $85,723 $ 53,467,383
========= ======= ========== ======= =========== ========== ============ ======= ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-6
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Caribiner International, Inc., formerly Business Communications Group, Inc.
(together with its direct and indirect wholly-owned subsidiaries, the
"Company"), is engaged in the production of meetings, events and training
programs and is a provider of related business communications services that
enable businesses to inform, sell to and train their sales forces, dealers,
franchisees, partners, stockholders and employees.
The Company 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 of Cumulative Redeemable Convertible Voting Preferred Stock, par value
$.01 per share (the "Preferred Stock"). Simultaneously with the Private
Placement, the Company and ICC entered into a Stockholders Agreement with
Warburg that gave Warburg significant control in current and future operations
of the Company and its subsidiaries.
On July 16, 1993, the Company entered into an agreement with certain
shareholders of ICC (the "Exchange Offer") to exchange shares of its voting
common stock, par value $.01 per share (the "Common Stock"), for shares of ICC
common stock held by such shareholders. As a result of these transactions, ICC
was merged into a wholly owned subsidiary of the Company in a manner similar
to a pooling of interests (the "Merger"). In addition, the Stockholders
Agreement was terminated in connection with the Exchange Offer and a new
stockholders agreement was entered into among the Company, Warburg and each of
the other stockholders of the Company.
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 approximately 2.9 million shares of Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.
Revenue Recognition
Revenue is recorded principally on the completed contract method of
accounting. The recognition of revenue and 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 obligated under contract to pay for services 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.
F-7
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cost of Revenue
Cost of revenue is comprised of production costs including salaries and
benefits of production, creative and technical personnel spent on specific
contracts, and other direct costs including contracted services, equipment
rentals and costs associated with the production of audio-visual effects. Such
costs are deferred until project completion.
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.
Property and Equipment
Property and equipment, including equipment under capital leases, 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 and Other Intangibles
Goodwill represents the excess of the cost over the fair value of net assets
of purchased businesses and is amortized on a straight-line basis over periods
ranging from 15 years to 25 years. Accumulated amortization of goodwill was
$1,608,612 and $2,617,295 at September 30, 1995 and 1996, respectively. The
cost of other acquired intangibles, consisting of non-compete agreements,
sales backlog, customer lists and film and module library is amortized on a
straight-line basis over their estimated useful lives ranging from one to six
years. The cost of the film and module library is amortized on a straight-line
basis over the five-year estimated useful lives. Accumulated amortization of
other acquired intangible assets was $1,975,095 and $1,998,636 at September
30, 1995 and 1996, 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 over the term of the related debt. The
amortization of deferred financing fees is reflected as a component of
interest expense. Accumulated amortization on deferred financing fees is
$505,200 and $662,656 at September 30, 1995 and 1996, 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 operations. There were no transaction gains or losses in
fiscal 1994 and 1995. Transaction gains or losses in fiscal 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.
F-8
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 No. 25, "Accounting for Stock Issued to Employees," and,
accordingly, recognizes no compensation expense for such grants.
New Accounting Pronouncements
The Financial Accounting Standards Board issued two standards which will be
applicable to the Company beginning in fiscal 1997: No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of and No. 123, Accounting for Stock-Based Compensation. The impairment
standard is not expected to have a significant impact on the Company. The
Company has not yet determined which of the acceptable approaches it will use
under the stock compensation standard. Adoption of certain approaches under
the stock compensation standard could result in non-cash charges which if
made, are not expected to be material. At a minimum, the standard will require
disclosures about the fair value of employee stock options.
3. ACQUISITIONS
During fiscal 1995 and fiscal 1996, the Company purchased six companies
engaged in providing business communication services and acquired a
contractual relationship with a major corporation from another business
communications services provider.
The Company acquired Decomas, Incorporated and Executive Support Systems,
Inc. (collectively, "Decomas") in October, 1994 for $1.2 million and Richard
Kidd Productions, Inc. in September, 1995 for $1.1 million. In addition, in
August, 1995, the Company acquired a contractual relationship with a major
corporation from another business communications company for $2.0 million.
These transactions were financed through bank borrowings.
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
June, 1996 the Company acquired Lighthouse, Ltd. for $7.3 million which
consisted of cash and the issuance of 31,821 shares of the Company's Common
Stock having a value of approximately $1.0 million. Also in June, 1996, the
Company acquired SCH International Limited ("Spectrum") for $5.1 million. 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.
The accounting for these acquisitions is in accordance with the purchase
method and, accordingly, operations of the acquired businesses are included in
the accompanying consolidated statements of operations from their respective
dates of acquisition.
The acquisitions of each of Weiss/Watson, Inc. (acquired October, 1993),
Decomas, Koors Perry and Spectrum 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. No significant contingent
payments were made or accrued during fiscal 1994. During fiscal 1995 and
fiscal 1996, $1.8 million and $1.4 million, respectively, were paid and/or
accrued as additional consideration with respect to certain acquisitions.
F-9
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited consolidated pro forma results of operations of the
Company for the years ended September 30, 1995 and 1996 give effect to the
following transactions as if they occurred on October 1, 1994: (i) the
acquisitions of Koors Perry, Lighthouse, Ltd., Spectrum and TAVS, (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 Initial Public Offering (see
Note 6) and (iii) the repayment with the proceeds of the Initial Public
Offering of a portion of bank borrowings that would have been incurred in
connection with the acquisition of TAVS as if such acquisition had occurred on
October 1, 1994.
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-----------------------
1995 1996
----------- -----------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenue............................................. $ 182.1 $ 236.6
Income before taxes................................. 5.4 15.7
Net income.......................................... 4.8 9.7
Pro forma net income per common share............... 0.50 1.02
</TABLE>
The above calculation of pro forma net income per common share assumes that
approximately 9.5 million and 9.6 million shares were outstanding during 1995
and 1996, 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 1995 or of results which
may occur in the future.
4. PROPERTY AND EQUIPMENT
At September 30, 1995 and 1996, property and equipment consisted of:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Furniture and equipment................................ $ 7,909,548 $23,571,968
Leasehold improvements................................. 2,354,692 2,782,271
Capital leases--equipment.............................. 307,188 705,333
----------- -----------
10,571,428 27,059,572
Less--accumulated depreciation and amortization........ 4,187,453 5,878,590
----------- -----------
$ 6,383,975 $21,180,982
=========== ===========
</TABLE>
The related depreciation and amortization expense for the years ended
September 30, 1995 and 1996 was $1,463,608 and $2,060,507, respectively.
5. DEBT
The Company has financed its operations primarily through internal cash flow
and bank financing, including the Company's new financing facilities, its
recently replaced line of credit (the "1994 Line of Credit") and its recently
replaced term facility (the "1994 Term Facility"). These sources of funds have
been used to fund the Company's efforts to grow both internally and through
acquisitions.
The 1994 Line of Credit provided the Company with funds to handle working
capital requirements and the 1994 Term Facility was used primarily to finance
acquisitions. As of September 30, 1996, $6.0 million was
F-10
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
outstanding under the 1994 Line of Credit and $15.0 million was outstanding
under the 1994 Term Facility. As of September 30, 1996, each of the 1994 Line
of Credit and the 1994 Term Facility bore interest at the rate of 9.25% per
annum, which was 1% over the lender's prime rate. On December 4, 1996, the
Company entered into a new loan agreement with a syndicate of banks pursuant
to which the Company increased its aggregate available bank financing from $27
million to $100 million, consisting of 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 1994 Line of
Credit and 1994 Term Facility were repaid with proceeds from the 1996
Facilities. The maturity date of each of the 1996 Facilities is December 31,
2002. Interest on outstanding amounts under the 1996 Facilities is payable
quarterly in arrears and, at the option of the Company, interest accrues at
either (i) LIBOR plus an applicable margin or (ii) an alternate base rate
based on the greatest of (a) the agent bank's prime rate, (b) the three month
secondary certificate of deposit rate and (c) the federal funds rate. The
interest rate will increase by 2.0% if principal or interest is not paid when
due (after applicable grace periods). Pursuant to the terms of the 1996
Facilities, the Company is required to reduce outstanding amounts under the
Revolving Line to less than $5.0 million for a period of not less than 30 days
during every 12-month period commencing on December 4, 1996. The 1996
Facilities require compliance with certain covenants including financial
performance ratios.
During fiscal 1995 and fiscal 1996, under the terms of the 1994 Line of
Credit, the Company had the availability of funds up to $12.0 million, bearing
interest at prime plus 1%, limited to 85% of trade receivables outstanding at
each month-end. At September 30, 1995, $750,000 of the outstanding borrowings
under the 1994 Line of Credit and, at September 30, 1996, $15.0 million under
the 1994 Term Facility were excluded from current liabilities since the
Company intended and had the ability to keep that amount outstanding under the
1994 Line of Credit or the 1994 Term Facility beyond one year from the balance
sheet date, or that any repayment of this amount would have been from sources
other than current assets as of their respective balance sheet dates, such as
new equity financing.
Long-term Debt and Convertible Note
At September 30, 1995 and 1996, long-term debt consisted of:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Bank term loan......................................... $ 7,750,000 $15,000,000
Bank line of credit.................................... 750,000 --
Loan payable to Warburg................................ 2,999,181 --
Promissory note payable................................ -- 1,243,476
Equipment lease commitments............................ 325,548 595,142
----------- -----------
11,824,729 16,838,618
Less--current portion of long-term debt................ 4,677,054 648,696
----------- -----------
$ 7,147,675 $16,189,922
=========== ===========
Convertible Note including accrued interest............ $17,346,397 $ --
=========== ===========
</TABLE>
At September 30, 1996, the fair value of the above commitments approximated
the carrying amounts.
On July 20, 1994 the Company entered into a credit agreement with a bank
providing for the 1994 Term Facility of up to $5.0 million. As of September
29, 1995 the Company had signed an amendment increasing the
F-11
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
availability of funds to $15.0 million of which $7.3 million was available for
working capital, general corporate purposes and for acquisitions.
Approximately $3.0 million of a $10.0 million Warburg loan facility (the
"Warburg Term Loan"), which accrued interest at 11% per annum, was outstanding
as of September 30, 1995. In addition, warrants were issued during the term
that the Warburg Term Loan was outstanding (see Note 6). The $3.0 million
outstanding under such loan facility, including accrued interest of $1.0
million, was repaid upon the consummation of the Initial Public Offering.
The $12.0 million Convertible Note, which bore interest at a rate of 11.5%
annually, was converted at the conversion price determined at the time of the
Private Placement into 600,000 shares of Preferred Stock immediately prior to
the Initial Public Offering. Such shares of Preferred Stock were immediately
converted at the conversion price determined at the time of the Private
Placement into 2,055,000 shares of the Company's Common Stock. No dividends
had been declared or paid on the Preferred Stock before such conversion.
Accrued interest of $6.3 million relating to the Convertible Note was paid to
Warburg upon consummation of the Initial Public Offering.
In connection with the acquisition of Koors Perry, a promissory note for
$1.5 million was issued as partial consideration of the purchase price.
Approximately $1.2 million included in long-term debt represents the present
value of such promissory note which bears an interest rate of 10% and which is
payable over three years.
After giving effect to the 1996 Facilities, the aggregate minimum payments
of long-term debt outstanding at September 30, 1996 and for the next five
years are as follows: 1997--$0.6 million; 1998--$0.6 million; 1999--$0.4
million; 2000--$0.2 million; 2001--$0.0, and thereafter--$15.0 million;
totaling $16.8 million.
6. CAPITAL STOCK
Preferred Stock
The Preferred Stock issued in connection with the Private Placement in June,
1992 bore a cumulative compounding 12% dividend through the date of the
Initial Public Offering. Immediately prior to the consummation of the Initial
Public Offering, all shares of Preferred Stock were converted into 1,541,250
shares of Common Stock and accrued preferred stock dividends of $2.2 million
were paid.
Warrants
In August, 1993, as a result of entering into the Warburg Term Loan (see
Note 5), the Company issued warrants to Warburg for the purchase of 93,509
shares of Common Stock at an aggregate exercise price of $3,000. In addition,
one year later, and for each quarter that the principal remained outstanding
thereafter, additional warrants were issued at the rate of .375% of fully
diluted Common Stock, as defined, per each $1 million in principal advanced.
Additional warrants for 71,435 and 293,967 shares in 1994 and 1995,
respectively, were issued. The fair values of the warrants of $9,907, $40,769,
and $79,456 were included in interest expense in fiscal 1994, fiscal 1995 and
fiscal 1996, respectively. In connection with the Initial Public Offering,
Warburg exercised its warrants to purchase 534,505 shares of Common Stock at a
weighted average exercise price per share of $3.16.
Common Stock
In connection with the Exchange Offer and Merger described in Note 1, a
total of 1,869,525 shares of Common Stock was issued in the exchange and a
total of $3,229,238 was paid for the remaining ICC shares of common stock and
options and related professional fees. In addition, the Company assumed net
liabilities of $280,872 of ICC. The excess of the consideration paid by the
Company over the net book value of ICC was charged to additional paid-in
capital.
F-12
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Management Stock Plan
During fiscal 1993, the Company adopted the 1993 Management Stock Plan (the
"Management Stock Plan"). Under the Management Stock Plan, a committee of the
Board of Directors 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 $93,000 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 $979,000 upon the immediate vesting of such stock in
connection with the Initial Public Offering.
Receivables of $5,020 from certain officers and employees pursuant to
management stock awards in fiscal 1993 were collected in fiscal 1994.
1996 Stock Option Plan
Effective January 1, 1996, the Company adopted the 1996 Stock Option Plan
(the "Option Plan"). The Option Plan provides that options for an aggregate of
364,000 shares of 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. Market price on any day is the average of the
high and low reported consolidated trading sales price of the Common Stock for
such day. Options vest over a period of three years from the grant date.
During fiscal 1996, stock options to purchase an aggregate of 179,400 shares
of Common Stock were granted with a range of exercise prices of $25.69 to
$40.38. Options to purchase 8,600 shares were exercisable as of September 30,
1996. There were no options exercised or cancelled during fiscal 1996. As of
September 30, 1996, 184,600 options are available for future grant.
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. In fiscal 1994 and fiscal
1995, the Company paid such vendors approximately $0.6 million and $1.3
million, respectively. During the year ended September 30, 1996, the Company
paid approximately $1.6 million to 14 such vendors.
As of September 30, 1995, the Company had a receivable from an officer of
$362,630 which was fully reserved in fiscal 1992. Such amount was repaid by
the officer following the consummation of the Initial Public Offering.
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. Company contributions for fiscal 1994, fiscal 1995 and fiscal 1996
were not significant. The Company's policy is to fund the costs accrued.
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
F-13
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
tax purposes resulted from the acquisition of certain business operations, the
difference between financial reporting recovery periods and tax reporting
recovery periods and the write-down of business assets for financial reporting
purposes.
Significant components of the Company's deferred tax assets and liabilities
as of September 30, 1995 and September 30, 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
NOL and tax credit carryforwards.................... $ 3,422,000 $ 1,409,798
Intangibles amortization............................ 574,975 192,387
Allowance for doubtful accounts..................... -- 127,932
Other reserves...................................... 221,513 187,241
----------- -----------
Total deferred tax assets......................... 4,218,488 1,917,358
Valuation allowance................................. (3,691,321) (1,317,464)
----------- -----------
Net deferred tax assets........................... $ 527,167 $ 599,894
----------- -----------
Deferred tax liabilities:
Tax over book depreciation and amortization......... 527,167 985,409
Other............................................... -- 24,500
----------- -----------
Total deferred tax liabilities.................... $ 527,167 $ 1,009,909
----------- -----------
Net deferred tax liability............................ $ -- $ 410,015
=========== ===========
</TABLE>
The valuation allowance represents a reduction of deferred tax assets for
future tax benefits that may not be realized.
At September 30, 1995 and 1996, the Company has net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $8.2 million
and $3.2 million, respectively, that expire in the years 2001 through 2007.
Approximately $3.2 million of NOL carryforwards may be subject to limitations
under the change in ownership and consolidated return provisions of the
Internal Revenue Code. The use of the NOL carryforwards, as adjusted, may also
be limited for state and local income tax purposes. The Company has not
recorded any future benefit related to the usage of the NOL carryforwards
since the amount of NOL that the Company will be permitted to use to offset
regular taxable income is not expected to be material.
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- ----------
<S> <C> <C> <C>
Current:
Federal.......................................... $ -- $ 42,150 $2,120,612
State............................................ 62,257 222,280 1,736,478
Foreign.......................................... -- -- 34,785
-------- -------- ----------
Total current tax.............................. 62,257 264,430 3,891,875
Deferred:
Federal.......................................... -- -- 281,207
State............................................ -- -- 128,808
-------- -------- ----------
Total deferred tax............................. -- -- 410,015
-------- -------- ----------
Total provision for taxes.......................... $ 62,257 $264,430 $4,301,890
======== ======== ==========
</TABLE>
F-14
<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>
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
Tax expense at statutory rate............. $ 120,469 $ 574,587 $ 4,301,890
State income tax net of federal benefit... 41,090 146,705 1,212,436
Nondeductible non-cash compensation
expense................................... -- -- 375,200
Other nondeductible expenses.............. 34,527 163,568 263,601
Change in valuation allowance............. -- (900,000) (2,012,202)
Other..................................... (133,829) 279,570 160,965
--------- --------- -----------
$ 62,257 $ 264,430 $ 4,301,890
========= ========= ===========
</TABLE>
10. MAJOR CUSTOMERS
A portion of the Company's total revenue was derived from three major
customers in the automotive, information technology and insurance industries.
Revenues from the two customers in the automotive and information technology
industries aggregated 21% and 19%, respectively, in fiscal 1994; 34% and 16%,
respectively, in fiscal 1995; and 15% and 13%, respectively, in fiscal 1996.
Revenues from the customer in the insurance industry aggregated 11% in fiscal
1996. There was no revenue from this customer in fiscal 1994 and fiscal 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.
11. FOREIGN OPERATIONS
During fiscal 1996, the Company's foreign operations located in the United
Kingdom and Hong Kong generated revenue of $7.0 million and an operating loss
of $0.1 million. Such financial information reflects only four months of
foreign operations, and the Company expects that its foreign operations will
be more significant in the future. Included in the Company's Consolidated
Balance Sheet at September 30, 1996 are total identifiable assets of $16.2
million of such foreign operations.
12. 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: 1997--$3.2 million; 1998--$2.5
million; 1999--$2.2 million; 2000--$1.8 million; 2001--$1.1 million;
thereafter--$6.6 million; totaling $17.4 million.
Rent expense charged to operations in fiscal 1994, fiscal 1995 and fiscal
1996, was $1.7 million, $2.0 million, and $2.7 million, respectively. Rent
expense charged to operations in fiscal 1996 with respect to related parties
was $0.1 million.
The Company has employment contracts with certain of its officers and key
employees expiring at various dates through 1999 with future minimum payments
as follows, for the year ended September 30: 1997--$1.3 million; 1998--$1.3
million; 1999--$0.3 million; totaling $2.9 million. Also, certain agreements
provide additional compensation based on performance.
The Company is, from time to time, a defendant in various lawsuits arising
in the ordinary course of business. In the opinion of management resolving
these actions will not have a material effect on the Company's financial
condition, results of operations or liquidity.
F-15
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid was $272,959, $807,475 and $7,884,839 in fiscal 1994, fiscal
1995 and fiscal 1996, respectively. Taxes paid were $62,257, $264,430 and
$2,077,829 in fiscal 1994, fiscal 1995 and fiscal 1996, respectively.
14. UNAUDITED PRO FORMA INFORMATION
Pro forma net income per common share is calculated using the weighted
average number of shares of Common Stock outstanding during the period, plus
Common Stock issued pursuant to the Management Stock Plan and warrants to
purchase Common Stock issued at prices below the Initial Public Offering price
of $17.00 per share during the twelve-month period immediately preceding
December 15, 1995 (the initial filing date of the Company's Registration
Statement for its Initial Public Offering), assuming such Common Stock was
outstanding for all periods presented. In addition, shares of Common Stock
issued upon the conversion of all shares of Preferred Stock into shares of
Common Stock are included in the calculation as if they were outstanding for
all periods presented. Accordingly, pro forma net income per common share
reflects adjustments to eliminate interest expense incurred on the Convertible
Note during the periods presented and to eliminate accrued preferred stock
dividends. The weighted average number of shares of Common Stock outstanding
during the years ended September 30, 1994, 1995 and 1996 is 6,550,851,
6,620,003 and 8,245,107, respectively.
Of the net proceeds from the sale of shares of Common Stock offered by the
Company in the Initial Public Offering, approximately $25.6 million were used
to repay aggregate bank borrowings and other long-term indebtedness, including
accrued interest and accrued preferred stock dividends. Assuming the issuance
and sale of only that number of shares of Common Stock which would generate
net proceeds sufficient to repay indebtedness of $25.6 million and assuming
that such indebtedness had been repaid as of October 1, 1994, supplementary
pro forma net income per common share for fiscal 1995 and fiscal 1996 would
have been $0.56 and $1.03, respectively. For purposes of this computation, the
weighted average number of shares of Common Stock outstanding during the
periods ended September 30, 1995 and 1996 is 8,338,106 and 8,969,784,
respectively.
15. SUBSEQUENT EVENTS
In December, 1996, the Company entered into a definitive purchase agreement
to acquire all of the outstanding capital stock of Blumberg Communications
Inc. ("Blumberg"), a provider of audio visual equipment rentals and sales,
production and staging services and hotel audio visual outsourcing services.
Consideration will consist of $16.6 million in cash, repayment of
approximately $5.5 million of indebtedness and shares of Common Stock having a
market value of $1.4 million (the actual number of shares of Common Stock to
be based on the average closing price per share of the Common Stock for the
five business days prior to closing). The closing of the Blumberg acquisition
(which is subject to certain conditions, including the expiration or early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended) is expected to occur in January, 1997.
For its fiscal year ended May 31, 1996, Blumberg had revenue of $42.3 million.
In addition, in December, 1996, the Company filed a registration statement
with the Securities and Exchange Commission offering 1,878,200 shares of its
Common Stock, of which 1,750,000 shares of Common Stock would be offered by
the Company.
F-16
<PAGE>
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors
Caribiner International, Inc.
We have reviewed the accompanying consolidated balance sheet of Caribiner
International, Inc. as of December 31, 1996, and the related consolidated
statements of operations for the three months ended December 31, 1995 and
1996, the consolidated statement of changes in stockholders' equity (deficit)
for the three months ended December 31, 1996 and the consolidated statements
of cash flows for the three months ended December 31, 1995 and 1996. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements in order
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Caribiner International, Inc. as
of September 30, 1996, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the year then ended, not
presented herein, and in our report dated December 6, 1996, except for Note 15
as to which the date is December 20, 1996, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information
set forth in the accompanying consolidated balance sheet as of September 30,
1996, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/S/ ERNST & YOUNG LLP
New York, New York
February 3, 1997
F-17
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1996
ASSETS (NOTE 1) (UNAUDITED)
------ ------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 8,431,777 $ 6,950,443
Trade accounts receivable--net of allowance for
doubtful accounts of $304,860...................... 36,201,774 38,807,972
Deferred charges.................................... 8,989,410 9,598,014
Prepaid expenses and other current assets........... 3,394,951 3,989,683
------------ ------------
TOTAL CURRENT ASSETS.............................. 57,017,912 59,346,112
Property and equipment--net......................... 21,180,982 20,734,887
Goodwill--net....................................... 46,681,520 52,439,305
Other intangibles--net.............................. 1,041,280 991,132
Other assets........................................ 399,696 390,310
------------ ------------
TOTAL ASSETS...................................... $126,321,390 $133,901,746
============ ============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Bank line of credit................................ $ 6,000,000 $ --
Current portion of long-term debt.................. 648,696 641,801
Trade accounts payable............................. 7,529,536 7,820,068
Accrued expenses and other current liabilities..... 12,698,716 12,816,708
Accrued production costs........................... 11,355,416 8,967,551
Deferred income.................................... 13,334,965 15,835,457
------------ ------------
TOTAL CURRENT LIABILITIES........................ 51,567,329 46,081,585
Long-term debt..................................... 16,189,922 24,152,960
Deferred income.................................... 5,007,183 6,179,303
Other liabilities.................................. 89,573 1,836,810
------------ ------------
TOTAL LIABILITIES................................ 72,854,007 78,250,658
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
2,000,000 shares authorized, none issued and out-
standing at September 30 and December 31, 1996,
respectively.................................... -- --
Common stock, $0.01 par value:
40,000,000 voting shares authorized, 9,598,159
and 9,614,151 shares issued and outstanding at
September 30 and December 31, 1996,
respectively.................................... 95,982 96,142
Additional paid-in capital......................... 60,032,954 60,795,252
Translation adjustment............................. 85,723 770,444
Accumulated deficit................................ (6,747,276) (6,010,750)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY....................... 53,467,383 55,651,088
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $126,321,390 $133,901,746
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-18
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Service revenue....................................... $20,407,367 $42,730,514
Rental revenue........................................ -- 9,927,990
----------- -----------
Total revenue......................................... 20,407,367 52,658,504
Cost of service revenue............................... 13,340,579 29,061,553
Cost of rental revenue................................ -- 5,766,487
----------- -----------
Total cost of revenue................................. 13,340,579 34,828,040
----------- -----------
Gross profit.......................................... 7,066,788 17,830,464
Operating expenses:
Selling, general and administrative expenses........ 6,548,994 14,355,831
Depreciation and amortization....................... 604,136 1,704,259
----------- -----------
Total operating expenses.............................. 7,153,130 16,060,090
----------- -----------
Operating income (loss)............................... (86,342) 1,770,374
Interest expense with related parties................. 681,784 --
Other interest expense, net........................... 412,290 542,830
----------- -----------
Income (loss) before taxes............................ (1,180,416) 1,227,544
Provision (benefit) for taxes......................... (282,728) 491,018
----------- -----------
Net income (loss)..................................... $ (897,688) $ 736,526
=========== ===========
Earnings (loss) per common share...................... $ (0.07) $ 0.08
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-19
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................... $ (897,688) $ 736,526
Adjustments to reconcile net income (loss) to net
cash provided by operating
activities:
Depreciation and amortization..................... 604,136 2,147,958
Non-cash compensation............................. 93,000 --
Change in assets and liabilities:
Decrease (increase) in trade accounts receivable.. 2,971,423 (2,368,971)
Decrease (increase) in deferred charges........... 2,144 (84,837)
(Increase) in prepaid expenses and other current
assets........................................... (763,316) (893,075)
(Increase) in other assets........................ (12,907) (48,109)
(Decrease) in trade accounts payable.............. (2,392,114) (69,322)
Increase in deferred income....................... 4,563,665 2,796,812
(Decrease) in accrued expenses and other liabili-
ties............................................. (2,158,584) (1,412,265)
Increase in accrued interest payable.............. 681,784 --
---------- -----------
Net cash provided by operating activities........... 2,691,543 804,717
---------- -----------
Cash flow used in investing activities:...............
Purchase of property and equipment.................. (600,998) (1,228,650)
Acquisition of intangibles and businesses, net of (129,988) (3,446,609)
cash acquired...................................... ---------- -----------
Net cash used in investing activities............... (730,986) (4,675,259)
---------- -----------
Cash flow provided by financing activities:
Repayments of long-term debt........................ (25,918) (15,043,857)
Net proceeds (repayments) of bank line of credit.... 3,240,000 (6,000,000)
Proceeds from long-term debt........................ -- 23,000,000
Net proceeds from issuance of common stock.......... 174,167 --
Repurchase of common stock.......................... (176,904) --
---------- -----------
Net cash provided by financing activities........... 3,211,345 1,956,143
---------- -----------
Translation effect on cash and cash equivalents....... -- 433,065
---------- -----------
Net increase (decrease) in cash....................... 5,171,902 (1,481,334)
Cash, beginning of period............................. 212,612 8,431,777
---------- -----------
Cash, end of period................................... $5,384,514 $ 6,950,443
========== ===========
Supplemental disclosure of cash flow information:
Interest paid..................................... $ 56,920 $ 344,998
========== ===========
Income taxes paid................................. $ 86,153 $ 1,631,634
========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-20
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
TOTAL
ADDITIONAL ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT PAID IN CAPITAL DEFICIT ADJUSTMENT EQUITY
--------- ------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1996................... 9,598,159 $95,982 $60,032,954 $(6,747,276) $ 85,723 $53,467,383
Issuance of common stock
under non-employee
directors' stock plan.. 497 5 12,495 -- -- 12,500
Issuance of common stock
upon acquisition of
Rome Network, Inc. 15,495 155 749,803 -- -- 749,958
Translation adjustment.. 684,721 684,721
Net income.............. -- -- -- 736,526 -- 736,526
--------- ------- ----------- ----------- -------- -----------
Balance at December 31, 9,614,151 $96,142 $60,795,252 $(6,010,750) $770,444 $55,651,088
1996................... ========= ======= =========== =========== ======== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-21
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-22
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements of Caribiner
International, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the consolidated financial statements contain
all adjustments, consisting of normal recurring adjustments, considered
necessary to present fairly the consolidated financial position, results of
operations and cash flows of the Company. The results of operations for the
three months ended December 31, 1996 are not necessarily indicative of the
results of operations that may be expected for any other interim period or for
the fiscal year ending September 30, 1997.
The balance sheet at September 30, 1996 has been derived from the Company's
audited financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Service revenue is recorded principally on the completed contract method of
accounting. The recognition of service revenue and cost of service 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 obligated under contract to pay for
services performed and expenses incurred through the date of cancellation, and
there are no provisions for nonpayment by the client.
The Company recognizes rental revenue over the rental period.
COST OF REVENUE
Cost of service revenue is comprised of production costs including salaries
and benefits of production, creative and technical personnel spent on specific
contracts, and other direct costs including contracted services, equipment
rentals and depreciation 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 and equipment depreciation and rentals.
3. BUSINESS ACQUISITIONS
In December, 1996, the Company acquired all of the outstanding common stock
of Rome Network, Inc. ("Rome"), a regional producer of meetings and events
headquartered in San Francisco, for $3.2 million, which consisted of
approximately $2.4 million in cash and the issuance of 15,495 shares of the
Company's common stock having a value of approximately $0.8 million. The cash
component of the purchase price was financed by a drawing on one of the
Company's credit facilities.
In December, 1996, the Company entered into a definitive purchase agreement
to acquire all of the outstanding capital stock of Blumberg Communications
Inc. ("Blumberg"), a provider of audio visual
F-23
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-24
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
equipment rentals, sales and related staging services, including hotel audio
visual outsourcing services, in the upper midwest and southern U.S. In
January, 1997, the Company completed such acquisition and paid consideration
of $18.0 million (subject to certain adjustments), which consisted of
approximately $16.6 million in cash and the issuance of 29,940 shares of the
Company's common stock having a value of approximately $1.4 million. In
addition, the Company repaid $3.9 million in outstanding indebtedness of
Blumberg at closing. The cash components of the transactions were financed by
a drawing on one of the Company's credit facilities.
Also, in January, 1997, the Company acquired Video Supply Company, Inc.
d/b/a Projexions Video Supply ("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. The transactions were financed by a drawing on one of
the Company's credit facilities.
The following unaudited consolidated pro forma results of operations of the
Company for the three months ended December 31, 1995 give effect to the
following transactions as if they occurred on October 1, 1995: (i) the
acquisitions of each of Koors Perry & Associates, Inc., Lighthouse, Ltd., SCH
International, Ltd., and the Total Audio Visual Services division from General
Electric Capital Computer Leasing Corporation ("TAVS") (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 initial public offering of common stock,
which was consummated on March 15, 1996 and (iii) the repayment with the
proceeds of such initial public offering of a portion of bank borrowings that
would have been incurred in connection with the acquisition of TAVS as if such
acquisition had occurred on October 1, 1995. The pro forma effect of the
acquisition of Rome on the Company's results of operations for the three
months ended December 31, 1995 and 1996 is insignificant.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, 1995
------------------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C>
Revenue................................................ $50.4
Income before taxes.................................... 2.1
Net income............................................. 1.3
Pro forma net income per common share.................. $0.13
</TABLE>
The above calculation of pro forma net income per common share assumes that
approximately 9.6 million shares were outstanding during the three months
ended December 31, 1995.
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.
4. STOCK OFFERING
In December, 1996, the Company filed a Registration Statement on Form S-1
(Registration no. 333-18327) with the Securities and Exchange Commission
offering 1,878,200 shares of its common stock, of which 1,750,000 shares of
common stock will be offered by the Company.
5. EARNINGS (LOSS) PER COMMON SHARE
The weighted average number of shares of common stock outstanding during the
three months ended December 31, 1996 is 9,632,959. The weighted average number
of shares of common stock outstanding during the three months ended December
31, 1995 is 6,620,003.
Loss per common share for the three months ended December 31, 1995 has been
computed on a pro forma basis assuming conversion of the convertible note and
all outstanding shares of preferred stock into common
F-25
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
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 loss 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 three months ended December 31, 1995.
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 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 loss per share would have been
$0.01 for the three months ended December 31, 1995. For purposes of this
computation, the weighted average number of shares of common stock outstanding
during the three months ended December 31, 1995 is 8,445,489.
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS
SCH INTERNATIONAL LIMITED
We have audited the accompanying consolidated balance sheet of SCH
International Limited as at March 31, 1996 and the related consolidated profit
and loss account and cash flows for the nine months ended March 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SCH International Limited at March 31, 1996 and the consolidated results of
its operations and its cash flows for the nine months ended March 31, 1996 in
conformity with accounting principles generally accepted in the United
Kingdom.
/s/ Ernst & Young
Chartered Accountants
London, England
December 18, 1996
F-27
<PAGE>
SCH INTERNATIONAL LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
9 MONTHS ENDED 31 MARCH 1996
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
NOTES (Pounds)'000 (Pounds)'000
----- ------------ ------------
<S> <C> <C> <C>
TURNOVER: 2 13,678
Cost of sales.................................. (9,669)
------
GROSS PROFIT................................... 4,009
------
Distribution costs............................. (515)
Administrative expenses:
Exceptional.................................... 3 (215)
Other.......................................... (3,766)
------
(3,981)
------
OPERATING LOSS (487)
------
Income from investment in associate company.... 37
Other income................................... 3
Interest payable............................... 4 (181)
Exceptional item--Disposal of fixed asset in- 72
vestment...................................... 3 ------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION.... (556)
Tax on loss on ordinary activities............. 5 85
------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION..... (471)
Minority interest.............................. (34)
------
RETAINED LOSS FOR THE FINANCIAL PERIOD......... (505)
Retained profit brought forward................ 10
------
RETAINED LOSS CARRIED FORWARD.................. (495)
======
</TABLE>
The operating loss is derived entirely from continuing operations.
There are no recognised gains and losses other than the loss for the period.
F-28
<PAGE>
SCH INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEET
31 MARCH 1996
<TABLE>
<CAPTION>
AT
31 MARCH
1996
NOTE (Pounds)'000 (Pounds)'000
---- ------------ ------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets................................. 10 795
Investments..................................... 11 --
------
795
CURRENT ASSETS
Stocks and work in progress..................... 12 2,907
Debtors......................................... 13 2,801
Cash at bank and in hand........................ 1,494
------
7,202
------
CREDITORS: amounts falling due within one year
Bank overdraft.................................. 704
Trade creditors................................. 1,409
Sundry creditors................................ 14 8,031
------
10,144
------
NET CURRENT LIABILITIES......................... (2,942)
------
TOTAL ASSETS LESS CURRENT LIABILITIES........... (2,147)
CREDITORS: amounts falling due after more than
one year....................................... 15 (1,100)
PROVISIONS FOR LIABILITIES AND CHARGES.......... 17 (4)
------
(3,251)
======
CAPITAL AND RESERVES
Called up share capital......................... 18 311
Share premium account........................... 19 14
Reserves:
Profit and loss account....................... 19 (495)
Goodwill...................................... 19 (3,238)
------
EQUITY SHAREHOLDERS' FUNDS...................... (3,408)
Equity minority interest........................ 157
------
TOTAL CAPITAL EMPLOYED.......................... (3,251)
======
</TABLE>
F-29
<PAGE>
SCH INTERNATIONAL LIMITED
CONSOLIDATED CASH FLOW STATEMENT
9 MONTHS ENDED 31 MARCH 1996
<TABLE>
<CAPTION>
9 MONTHS
ENDED 31
MARCH 1996
NOTES (Pounds)'000 (Pounds)'000
----- ------------ ------------
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES...... 6 1,486
RETURN ON INVESTMENTS AND SERVICING OF FINANCE:
Interest paid................................. (181)
Income from investment in associated company.. 37
----
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
SERVICING OF FINANCE.......................... (144)
TAXATION:
UK corporation tax paid....................... (127)
----
TAX PAID....................................... (127)
INVESTING ACTIVITIES
Purchase of tangible fixed assets.............. (98)
Sale of interests in associated company........ 150
----
NET CASH INFLOW FROM INVESTING ACTIVITIES...... 52
-----
NET CASH INFLOW BEFORE FINANCING............... 1,267
-----
FINANCING......................................
Purchase of shares by Employee Share Ownership
Plan trust.................................... (99)
Repayment of term loan......................... (200)
Repayment of loan stock........................ (93)
----
NET CASH OUTFLOW FROM FINANCING................ 392
-----
INCREASE IN CASH AND CASH EQUIVALENTS.......... 7 875
=====
</TABLE>
F-30
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
1. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are described
below:
CONVENTION
The financial statements are prepared under the historical cost convention.
NON-STATUTORY ACCOUNTS
The consolidated financial statements comprise non-statutory accounts.
TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is calculated to write down their cost or valuation to their
estimated residual values by equal annual installments over the period of
their estimated useful economic lives, which are considered to be:
<TABLE>
<S> <C>
Short leasehold buildings and improvements...................... Period of lease
Other leased assets............................................. Period of lease
Plant and machinery............................................. 2-5 years
Motor vehicles.................................................. 4 years
Fixtures, computer and office equipment......................... 4-8 years
</TABLE>
STOCKS AND WORK IN PROGRESS
Stocks and work in progress are stated at the lower of cost and net realisable
value.
Cost of stocks is calculated on a first-in, first-out basis. Work in progress
cost includes all production related overheads and the appropriate proportion
of indirect overhead expenditure.
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on timing
differences arising from the inclusion of items of income and expenditure in
taxation computations in periods different from those in which they are
included in the financial statements to the extent that it is probable that a
liability or asset will crystallise in the future.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities denominated in foreign currencies are translated
into sterling at the rates ruling at the balance sheet date. Transactions
denominated in foreign currencies are translated at the rates ruling at the
dates of the transactions. All exchange differences are dealt with through the
profit and loss account.
On consolidation, the temporal method is used to translate the foreign
currency balance sheets in view of the control exercised over these entities.
Exchange differences are dealt with through the profit and loss account.
BASIS OF CONSOLIDATION
The group financial statements consolidate the financial statements of the
company and all subsidiaries for the period ended 31 March 1996.
GOODWILL
Goodwill is written off to reserves when it arises.
INVESTMENTS
Investments held as fixed assets are stated at cost less any provision for
permanent diminution in value.
F-31
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
1. ACCOUNTING POLICIES (CONTINUED)
LEASED ASSETS
Assets held under finance leases and the related lease obligation are recorded
in the balance sheet at the fair value of the leased assets at the inception
of the leases. The amounts by which the lease payments exceed the recorded
lease obligation are treated as finance charges which are amortised over the
lease term to give a constant rate of charge on the remaining balance of the
obligation.
Rental costs under operating leases on occupied and unoccupied properties are
charged to profit and loss account in equal annual installments over the
period of the lease.
PENSIONS
The company's cost is charged to the profit and loss account so as to spread
the cost of pensions as incurred over members' working lives with the company.
2. TURNOVER
Turnover represents the amounts invoiced to customers in respect of completed
projects and is stated after deduction of trade discounts and value added tax.
3. EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Administrative expenses:
Contributions to the Employee Share Ownership Plan............... (80)
Specific bad debt................................................ (135)
----
(215)
====
Disposal of fixed asset investment................................. 72
====
</TABLE>
SCH International Limited disposed of its remaining 40% interest in Delegate
Management Services Limited during the period.
F-32
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
4. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Bank loans and overdrafts repayable within five years............. 116
Debenture loans................................................... 42
Other interest.................................................... 23
------
181
======
5. TAX ON LOSS ON ORDINARY ACTIVITIES
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Taxation based on the loss for the period comprises:
United Kingdom corporation tax (recoverable)/payable at 33% on (85)
taxable loss..................................................... ------
(85)
======
6. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Operating loss.................................................... (487)
Depreciation charges.............................................. 141
Provisions against investment..................................... 80
(Increase) in stocks and work in progress......................... (1,875)
Decrease in debtors............................................... 862
Increase in creditors............................................. 2,765
------
Net cash inflow from operating activities......................... 1,486
======
</TABLE>
F-33
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
7. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS IN THE YEAR
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Balance at 1 July 1995............................................. (85)
Net cash inflow.................................................... 875
---
Balance at 30 March 1996........................................... 790
===
</TABLE>
8. ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS AS SHOWN IN THE
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
CHANGE IN
1996 1995 YEAR
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
Cash at bank and in hand................. 1,494 58 1,436
Bank overdraft........................... (704) (143) (561)
----- ---- -----
790 (85) 875
===== ==== =====
</TABLE>
F-34
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
9. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
EMPLOYEES
AVERAGE NUMBER OF PERSONS EMPLOYED BY THE GROUP IN THE YEAR:
<TABLE>
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
------------
NO.
------------
<S> <C>
Production and design staff...................................... 59
Sales and distribution staff..................................... 14
Administration staff............................................. 20
------
93
======
STAFF COSTS DURING THE YEAR, INCLUDING DIRECTORS, IN RESPECT OF THESE EMPLOYEES
WERE:
<CAPTION>
9 MONTHS
ENDED
31 MARCH
1996
------------
(Pounds)'000
------------
<S> <C>
Wages and salaries............................................... 2,123
Social security costs............................................ 188
Pension costs.................................................... 61
------
2,372
======
DIRECTORS' EMOLUMENTS
Management remuneration including pension contributions.......... 380
Compensation for loss of office.................................. 5
------
385
======
Emoluments (excluding pension contributions) of the Chairman..... 84
======
Emoluments (excluding pension contributions) of the directors
fell within the following ranges: NUMBER
(Pounds)25,001 -- (Pounds)30,000................................. 1
(Pounds)65,001 -- (Pounds)70,000................................. 1
(Pounds)70,001 -- (Pounds)75,000................................. 1
(Pounds)85,001 -- (Pounds)90,000................................. 2
======
</TABLE>
F-35
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
10. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT
LEASEHOLD ASSETS
BUILDINGS FURNITURE, HELD
AND PLANT COMPUTER UNDER
IMPROVE- AND MOTOR AND OFFICE FINANCE
MENTS MACHINERY VEHICLES EQUIPMENT LEASES TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cost:
At 1 July 1995.......... 619 834 8 1,523 94 3,078
Additions............... 17 -- 6 75 -- 98
Disposals............... -- (11) -- (2) -- (13)
--- --- --- ----- --- -----
At 31 March 1996 636 823 14 1,596 94 3,163
--- --- --- ----- --- -----
Accumulated
depreciation:
At 1 July 1995.......... 162 809 2 1,167 88 2,228
Provided during the
period................. 33 12 2 88 6 141
Disposals............... -- -- -- (1) -- (1)
--- --- --- ----- --- -----
At 31 March 1996........ 195 821 4 1,254 94 2,368
--- --- --- ----- --- -----
Net book value:
At 31 March 1996........ 441 2 10 342 -- 795
=== === === ===== === =====
</TABLE>
The assets held under finance leases comprise furniture, computer and office
equipment.
The assets of SCH International Limited and its subsidiaries have been charged
in favour of GiroCredit Bank as security for loans outstanding to SCH
International Limited amounting to (Pounds)1,548,750.
11. FIXED ASSETS INVESTMENTS
<TABLE>
<CAPTION>
ASSOCIATED OWN
UNDERTAKINGS SHARES TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
Balance at 1 July 1995................... 44 153 197
Investments made during the period....... -- 59 59
Disposal in the period................... (44) (117) (161)
Provision................................ -- (95) (95)
--- ---- ----
-- -- --
=== ==== ====
</TABLE>
All investments are in unquoted companies.
F-36
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
11. FIXED ASSETS INVESTMENTS (CONTINUED)
The above investments are stated at cost less provisions for permanent
diminution in value and, in the opinion of the directors, the value of the
investments is not less than the value at which they are stated in the
accounts.
SCH International Limited disposed of its remaining 40% interest in Delegate
Management Services Limited on 11 March 1996.
The company operated an Employee Share Ownership Plan for the purpose of
purchasing shares in SCH International Limited from employees who leave the
group. The intention was to sell or distribute shares to new and existing
employees. Shares held by the trust were disclosed as investment in own shares
within fixed assets as the purchases had been financed by a loan from the
company. On 13 June 1996 the shares held by the trust were redistributed to
employees. The entire share capital of the company was disposed of to
Caribiner Holdings (UK) Limited on the same date.
Employees hold options to purchase 58,000 10p ordinary shares in SCH
International Limited at 31 March 1996.
The trust holds a total of 1,218,325 10p ordinary shares in SCH International
at 31 March 1996.
12. STOCKS AND WORK IN PROGRESS
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Raw materials...................................................... 11
Work in progress................................................... 2,896
-----
2,907
=====
13. DEBTORS
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Trade debtors...................................................... 2,419
Other debtors...................................................... 84
Prepayments and accrued income..................................... 185
Corporation tax recoverable........................................ 113
-----
2,801
=====
</TABLE>
F-37
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
14. SUNDRY CREDITORS
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Other creditors.................................................... 192
Corporation tax.................................................... 23
Other taxation and social security................................. 193
Bank loans......................................................... 900
Unsecured loan stock "B"........................................... 116
Accruals and deferred income....................................... 6,607
-----
8,031
=====
15. CREDITORS: amounts falling due after more than one year
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Debenture loans:
Unsecured loan stock "A".......................................... 104
Unsecured loan stock "B".......................................... 347
Bank loans......................................................... 649
-----
1,100
=====
16. BORROWINGS
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Analysis of loan repayments
</TABLE>
<TABLE>
<S> <C>
Bank loans and overdrafts
Within one year or on demand............................................. 1,604
Between one and two years................................................ 649
Between two and five years............................................... --
Unsecured loan stock "A"
Over one year............................................................ 104
Unsecured loan stock "B"
Within one year.......................................................... 116
Over one year............................................................ 347
-----
2,820
=====
</TABLE>
F-38
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
16. BORROWINGS (continued)
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Due within one year
Bank overdraft.................................................... 704
Unsecured loan stock "B".......................................... 116
Bank loans........................................................ 900
-----
1,720
-----
Due after more than one year
Unsecured loan stock "A".......................................... 104
Unsecured loan stock "B".......................................... 347
Bank loans........................................................ 649
-----
1,100
-----
2,820
=====
</TABLE>
The bank loans are secured by a fixed and floating charge on the assets of the
group.
Loan stock "A" and "B" is repayable at any time at the directors' discretion
and the option of the stockholders, subject to agreement with GiroCredit Bank.
Other than the amounts shown above due within one year, repayment of which has
been agreed, the directors understand that no other repayment of loan stock
"A" and "B" will be made before 30 June 1996.
Loan stock "A" bears interest at 15% per annum and is unsecured.
Loan stock "B" bears interest at a rate equivalent to the National Westminster
Bank PLC base rate on amounts outstanding after 1 December 1992 and is
unsecured.
17. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
(Pounds)'000
------------
<S> <C>
Deferred taxation:
At 1 July 1995..................................................... 4
---
At 31 March 1996................................................... 4
===
The amounts of deferred taxation provided in the financial statements are as
follows:
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Capital allowances in excess of depreciation....................... 4
===
</TABLE>
There was no deferred taxation unprovided in either the current or preceding
financial years.
F-39
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
18. SHARE CAPITAL
<TABLE>
<CAPTION>
AT 31 MARCH
1996
(Pounds)'000
------------
<S> <C>
Authorised:
5,000,000 ordinary shares of 10p each.............................. 500
===
Allotted and fully paid:
3,106,750 (1995--3,106,750) ordinary shares of 10p each............ 311
===
</TABLE>
GiroCredit Bank has rights under a warrant instrument to subscribe for 279,068
ordinary shares of the Company at 10.53p per share. The warrant is exercisable
by GiroCredit Bank at any time on or before 31 December 1999.
19. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
SHARE
SHARE PREMIUM PROFIT AND
CAPITAL ACCOUNT GOODWILL LOSS ACCOUNT TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at 1 July 1995.. 311 14 (3,238) 10 (2,903)
Loss for the period..... -- -- -- (505) (505)
--- --- ------ ---- ------
Balance at 31 March 311 14 (3,238) (495) (3,405)
1996................... === === ====== ==== ======
</TABLE>
20. FINANCIAL COMMITMENTS
At 31 March 1996 the group was committed to making the following payments
during the next year in respect of operating leases:
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHER
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Leases which expire:
Within one year...................................... -- 77
Within two to five years............................. -- 103
After five years..................................... 385 --
--- ---
385 180
=== ===
</TABLE>
F-40
<PAGE>
SCH INTERNATIONAL LIMITED
NOTES TO THE ACCOUNTS
9 MONTHS ENDED 31 MARCH 1996
21. CONTINGENT LIABILITIES
The company has entered into a cross guarantee arrangement with the following
group companies:
Spectrum Communications Limited
Mark Wallace Associates Limited
The overdraft facility of all the above companies subject to the cross
guarantee totalled (Pounds)150,000 at 31 March 1996.
A loan of (Pounds)1,548,750 advanced to SCH International Limited is secured on
all the assets of the group. The total facility available is (Pounds)1,775,000.
The company has given a debenture creating charges over its entire assets in
order to secure the obligations of the company under the guarantee.
The company is grouped for VAT purposes with certain other group companies.
Consequently the company is contingently liable for the VAT liabilities of
those other companies.
22. RELATED PARTY TRANSACTIONS
The lease to the premises at 32 Berrymade Road, Chiswick is held by a director
of the company. The annual rental under this lease is (Pounds)25,000.
23. ADDITIONAL INFORMATION ON SUBSIDIARY AND ASSOCIATE COMPANIES
<TABLE>
<CAPTION>
COUNTRY OF PERCENTAGE
INCORPORATION/ OF ORDINARY
REGISTRATION SHARES HELD
---------------------- -----------
<S> <C> <C> <C>
Spectrum Communications Limited.... England and Wales 100%
Spectrum Communications
(Birmingham) Limited.............. England and Wales 100%* Dormant
Mark Wallace Associates Limited.... England and Wales 80%
Spectrum Communications GmbH....... Germany 100%
Spectrum Communications LLC........ Dubai 49%*
Spectrum Communications
International BVI, Limited........ British Virgin Islands 100% Dormant
</TABLE>
The subsidiary companies are engaged in the production and stage management
of conferences.
* Held by subsidiary company.
During the year the company sold its remaining 40% share of Delegate
Management Services Limited.
F-41
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholder of General Electric Capital Computer Leasing Corporation
We have audited the accompanying balance sheet of Total Audio Visual
Services (a division of General Electric Capital Computer Leasing Corporation)
as of December 31, 1995, and the related statements of operations and
divisional equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Total Audio Visual
Services as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
November 15, 1996
F-42
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................. $ 995,514
Accounts receivable, less allowance for doubtful accounts of
$123,000........................................................ 7,644,557
Resale inventory................................................. 345,566
Prepaid expenses and other assets................................ 399,935
Deferred tax asset............................................... 170,800
-----------
Total current assets........................................... 9,556,372
Property and equipment, net........................................ 10,600,031
Goodwill, net of accumulated amortization of $376,864.............. 3,781,769
Purchased software................................................. 176,130
-----------
Total assets................................................... $24,114,302
===========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable................................................. $ 737,323
Sales tax payable................................................ 376,015
Accrued payroll.................................................. 497,160
Vacation accrual................................................. 396,304
Other liabilities................................................ 296,654
Accrued rental expense........................................... 115,742
Accrued hotel commission......................................... 94,019
-----------
Total current liabilities...................................... 2,513,217
Deferred tax liability............................................. 820,689
Due to GECCLC...................................................... 19,764,975
Divisional equity.................................................. 1,015,421
-----------
Total liabilities and divisional equity........................ $24,114,302
===========
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENT OF OPERATIONS AND DIVISIONAL EQUITY
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Total revenue...................................................... $45,923,658
Cost of equipment sales............................................ 2,757,492
-----------
Gross Profit....................................................... 43,166,166
-----------
Operating Expenses:
Payroll and related expenses..................................... 15,603,445
Rental expense................................................... 2,320,224
Commission expense............................................... 7,104,104
Other operating expenses......................................... 6,269,230
Depreciation and amortization expense............................ 2,609,470
General and administrative expenses.............................. 6,914,737
-----------
Total operating expenses....................................... 40,821,210
-----------
Operating income................................................... 2,344,956
Other expense:
Interest expense, net............................................ 1,200,000
Other expense.................................................... 211,770
-----------
Income before provision for income taxes........................... 933,186
Provision for income taxes......................................... 428,003
-----------
Net income......................................................... 505,183
Divisional equity, beginning of year............................... 510,238
-----------
Divisional equity, end of year..................................... $ 1,015,421
===========
</TABLE>
See accompanying notes to financial statements.
F-44
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................................... $ 505,183
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense.......................... 2,609,470
Deferred tax expense........................................... 428,003
Changes in operating assets and liabilities:
Increase in accounts receivable, net......................... (330,418)
Decrease in resale inventory................................. 153,579
Increase in prepaid expenses and other assets................ (199,326)
Decrease in accounts payable................................. (309,365)
Increase in sales tax payable................................ 206,576
Increase in accrued payroll.................................. 4,378
Increase in vacation accrual................................. 19,149
Decrease in other liabilities................................ (270,358)
-----------
Net cash provided by operating activities........................ 2,816,871
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of software............................................ (161,130)
Purchases of property and equipment.............................. (5,719,623)
-----------
Net cash used in investing activities............................ (5,880,753)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from GECCLC......................................... 3,825,272
-----------
Net cash provided by financing activities........................ 3,825,272
-----------
Net increase in cash............................................. 761,390
Cash at beginning of year........................................ 234,124
-----------
Cash at end of year.............................................. $ 995,514
===========
</TABLE>
See accompanying notes to financial statements.
F-45
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Total Audio Visual Services ("TAVS" or the "Company") is a division of
General Electric Capital Computer Leasing Corporation ("GECCLC"), which is an
indirect wholly-owned subsidiary of General Electric Company ("GE"). TAVS is a
provider of audio visual equipment rentals and staging services to companies,
as well as hotel audio visual outsourcing services in the United States. TAVS
enters into short-term rentals of equipment on a daily, weekly and monthly
basis. TAVS also sells equipment to customers.
GECCLC acquired TAVS in September 1994 for a purchase price of approximately
$15,000,000. The acquisition was accounted for under the purchase method of
accounting. The excess of the purchase price over the fair value of net assets
of the business acquired was recorded as goodwill and is being amortized
straight-line over 15 years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue for rental and service agreements over the
rental period. Sales of equipment are recognized in the period sold.
Accounts Receivable
The December 31, 1995 accounts receivable balance includes unbilled revenue
of approximately $750,000.
Resale Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out method.
Property and Equipment
Property and equipment is recorded at cost, net of accumulated depreciation
and amortization. Depreciation is computed on the straight-line method over
the estimated useful lives of related assets. The estimated useful lives of
the assets are five years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or the estimated life.
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121 ("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS No.
121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company plans to adopt SFAS No. 121 in 1996; however, they
do not believe the adoption will have a significant impact on the Company.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of
businesses acquired and is amortized over a 15 year period using the straight-
line method. Amortization expense for 1995 totaled approximately $278,000.
F-46
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Advertising
Advertising costs are expensed as incurred and totaled $34,000 for 1995.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and accounts
receivable. The Company maintains cash with various financial institutions.
The Company performs periodic evaluations of the relative credit standing of
those financial institutions to minimize credit risk. Concentrations of credit
risk with respect to trade accounts receivable are limited due to the large
number of entities comprising the Company's customer base. The Company
performs periodic evaluations of its customers' financial condition and
generally does not require collateral. At December 31, 1995, accounts
receivable from hotel and convention centers approximated $4,359,000.
The carrying amounts reported in the balance sheet for cash, accounts
receivable and accounts payable approximate their fair values.
Statement of Cash Flows
Taxes and interest paid in 1995 were settled through the "Due to GECCLC"
account and thus no cash was remitted by the Company for these items.
3. RELATED PARTY TRANSACTIONS
The amount payable to GECCLC represents a net amount due to various entities
of GECCLC for services provided or expenses paid by GECCLC on behalf of the
Company offset by cash remitted to GECCLC. GECCLC charged interest to TAVS
based upon their monthly budgeted net investment in TAVS using an interest
rate of approximately 7.25%.
GECCLC and several of its divisions provide substantial services to the
Company, including treasury, tax, financial reporting, legal, payroll,
marketing, and information systems. GECCLC charged the Company $180,000 for
these services in 1995. These charges are allocated based upon headcount,
direct cost or the number of transactions processed. In addition, certain
employees of GECCLC, work exclusively for the Company. As a result, the
payroll and related benefits for these employees are rebilled to TAVS.
Management believes that the basis used for allocating these services is
reasonable. However, the terms of these transactions may differ from those
that would result from transactions among unrelated parties.
Certain employees are eligible for GE benefits related to health care,
pension and a savings and security plan. GECCLC charges the Company a
percentage of labor costs for these benefits. Payroll expenses in 1995
includes approximately $2,800,000 of charges for these benefits.
F-47
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
The components of property and equipment as of December 31, 1995 consists
of:
<TABLE>
<S> <C>
Equipment leased to others.................................... $10,105,581
Furniture and fixtures........................................ 1,621,236
Leasehold improvements........................................ 1,606,474
Vehicles...................................................... 153,682
-----------
Total property and equipment.................................. 13,486,973
Accumulated depreciation and amortization..................... (2,886,942)
-----------
$10,600,031
===========
</TABLE>
5. LEASE ARRANGEMENTS
TAVS leases office space for periods up to 5 years under operating lease
agreements. These leases are subject to price escalations for certain costs.
TAVS leases space at hotels for lease periods less than one year which are
cancelable. Total rent expense for all such leases was approximately $644,000
in 1995.
Future minimum lease payments under the noncancelable operating leases at
December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996.............................. $ 281,988
1997.............................. 256,136
1998.............................. 266,948
1999.............................. 204,928
2000.............................. 101,185
Thereafter........................ --
----------
$1,111,185
==========
</TABLE>
6. INCOME TAXES
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
<TABLE>
<S> <C>
Deferred tax assets:
Current:
Accrued expenses........................................... $ 121,600
Allowance for doubtful accounts............................ 49,200
---------
170,800
Non-current:
Net operating loss......................................... 124,862
---------
295,662
Deferred tax liability:
Property and equipment....................................... (945,551)
---------
Net deferred tax liability..................................... $(649,889)
=========
</TABLE>
The provision for income taxes consists of the following components:
<TABLE>
<S> <C>
Current........................................................... $ --
Deferred.......................................................... 428,003
--------
$428,003
========
</TABLE>
F-48
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is as follows:
<TABLE>
<S> <C>
Tax expense at statutory rate.................................... $317,283
State income tax net of federal benefit.......................... 55,991
Non-deductible expenses.......................................... 54,729
--------
$428,003
========
</TABLE>
7. SUBSEQUENT EVENTS
On September 12, 1996, GECCLC signed an Agreement of Purchase and Sale of
Assets to sell certain of the assets of TAVS to Caribiner International, Inc.
("Caribiner") for total consideration of $26.6 million in cash which is subject
to certain post-closing adjustments. The transaction closed on September 27,
1996. The December 31, 1995 financial statements do not include any adjustments
as a result of this transaction.
F-49
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholder of General Electric
Capital Computer Leasing Corporation
We have audited the accompanying balance sheet of Total Audio Visual
Services (a division of General Electric Capital Computer Leasing Corporation)
as of September 27, 1996 and the related statements of operations and
divisional equity and cash flows for the period from January 1, 1996 to
September 27, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Total Audio Visual
Services as of September 27, 1996, and the results of its operations and its
cash flows for the period from January 1, 1996 to September 27, 1996, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
December 13, 1996
F-50
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
BALANCE SHEET
SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash.............................................................. $ 248,846
Accounts receivable, less allowance for doubtful accounts of
$123,974......................................................... 7,467,173
Resale inventory.................................................. 523,102
Prepaid commissions............................................... 657,360
Prepaid expenses and other assets................................. 55,457
Deferred tax asset................................................ 254,916
-----------
Total current assets......................................... 9,206,854
Property and equipment, net........................................ 13,104,254
Goodwill, net of accumulated amortization of $576,489.............. 3,574,232
Purchased software................................................. 773,678
-----------
Total assets................................................. $26,659,018
===========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable................................................... $ 929,000
Sales tax payable.................................................. 381,725
Accrued payroll.................................................... 544,871
Vacation accrual................................................... 513,290
Accrued rental expense............................................. 255,374
Accrued hotel commissions.......................................... 187,735
Other liabilities.................................................. 809,902
-----------
Total current liabilities.................................... 3,621,897
Deferred tax liability............................................. 868,514
Due to GECCLC...................................................... 21,336,469
Divisional equity.................................................. 832,138
-----------
Total liabilities and divisional equity...................... $26,659,018
===========
</TABLE>
See accompanying note to financial statements.
F-51
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENT OF OPERATIONS AND DIVISIONAL EQUITY
FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 27, 1996
<TABLE>
<S> <C>
Total revenues..................................................... $39,599,366
Cost of equipment sales............................................ 1,811,243
-----------
Gross profit....................................................... 37,788,123
-----------
Operating expenses:
Payroll and related expenses..................................... 13,098,248
Rental expense................................................... 2,169,536
Commission expense............................................... 6,605,180
Other operating expenses......................................... 6,333,905
Depreciation and amortization expense............................ 2,710,956
General and administrative expenses.............................. 6,163,315
-----------
Total operating expenses........................................... 37,081,140
-----------
Operating income................................................... 706,983
Other income (expense):
Interest expense, net............................................ (1,094,693)
Other income..................................................... 168,136
-----------
Loss before income tax benefit..................................... (219,574)
Income tax benefit................................................. (36,291)
-----------
Net loss........................................................... (183,283)
Divisional equity, beginning of period............................. 1,015,421
-----------
Divisional equity, end of period................................... $ 832,138
===========
</TABLE>
See accompanying note to financial statements.
F-52
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 TO SEPTEMBER 27, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss......................................................... $ (183,283)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization expense.......................... 2,710,956
Deferred tax benefit........................................... (36,291)
Changes in operating assets and liabilities:
Decrease in accounts receivable, net......................... 177,384
Increase in resale inventory................................. (177,536)
Increase in prepaid commissions.............................. (305,989)
Increase in prepaid expenses and other assets................ (6,893)
Increase in accounts payable................................. 191,677
Increase in sales tax payable................................ 5,710
Increase in accrued payroll.................................. 47,711
Increase in vacation accrual................................. 116,986
Increase in accrued rental expense........................... 139,632
Increase in accrued hotel commissions........................ 93,716
Increase in other liabilities................................ 513,248
-----------
Net cash provided by operating activities........................ 3,287,028
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of software............................................ (597,548)
Purchases of property and equipment.............................. (5,007,642)
-----------
Net cash used in investing activities............................ (5,605,190)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from GECCLC......................................... 1,571,494
-----------
Net cash provided by financing activities........................ 1,571,494
-----------
Net decrease in cash............................................. (746,668)
Cash at beginning of period...................................... 995,514
-----------
Cash at end of period............................................ $ 248,846
===========
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Total Audio Visual Services ("TAVS" or the "Company") is a division of
General Electric Capital Computer Leasing Corporation ("GECCLC"), which is an
indirect wholly-owned subsidiary of General Electric Company ("GE"). TAVS is a
provider of audio visual equipment rentals and staging services to companies,
as well as hotel audio visual outsourcing services in the United States. TAVS
enters into short-term rentals of equipment on a daily, weekly and monthly
basis. TAVS also sells equipment to customers.
GECCLC acquired TAVS in September 1994 for a purchase price of approximately
$15,000,000. The acquisition was accounted for under the purchase method of
accounting. The excess of the purchase price over the fair value of net assets
of the business acquired was recorded as goodwill and is being amortized
straight-line over 15 years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes revenue for rental and service agreements over the
rental period. Sales of equipment are recognized in the period sold.
ACCOUNTS RECEIVABLE
The September 27, 1996 accounts receivable balance includes unbilled revenue
of approximately $1,300,000.
RESALE INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost, net of accumulated depreciation
and amortization. Depreciation is computed on the straight-line method over
the estimated useful lives of related assets. The estimated useful lives of
the assets are five years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or the estimated life.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS
TO BE DISPOSED OF
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121 ("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS No.
121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company adopted SFAS No. 121 in 1996; however, the
adoption did not have a significant impact on the Company.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of
businesses acquired and is amortized over a 15 year period using the straight-
line method. Amortization expense for 1996 totaled approximately $208,000.
F-54
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
Advertising costs are expensed as incurred and totaled approximately $22,000
for the period from January 1, 1996 to September 27, 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and accounts
receivable. The Company maintains cash with various financial institutions.
The Company performs periodic evaluations of the relative credit standing of
those financial institutions to minimize credit risk. Concentrations of credit
risk with respect to trade accounts receivable are limited due to the large
number of entities comprising the Company's customer base. The Company
performs periodic evaluations of its customers' financial condition and
generally does not require collateral. At September 27, 1996, accounts
receivable from hotel and convention centers approximated $2,909,000.
The carrying amounts reported in the balance sheet for cash, accounts
receivable and accounts payable approximate their fair values.
STATEMENT OF CASH FLOWS
Taxes and interest paid in 1996 were settled through the "Due to GECCLC"
account and thus no cash was remitted by the Company for these items.
3. RELATED PARTY TRANSACTIONS
The amount payable to GECCLC represents a net amount due to various entities
of GECCLC for services provided or expenses paid by GECCLC on behalf of the
Company offset by cash remitted to GECCLC. GECCLC charged interest to TAVS
based upon their monthly budgeted net investment in TAVS using an interest
rate of approximately 7.25%.
GECCLC and several of its divisions provide substantial services to the
Company, including treasury, tax, financial reporting, legal, payroll,
marketing, and information systems. GECCLC charged the Company $550,000 for
these services in the period from January 1, 1996 to September 27, 1996. These
charges are allocated based upon headcount, direct cost or the number of
transactions processed. In addition, certain employees of GECCLC work
exclusively for the Company. As a result, the payroll and related benefits for
these employees are rebilled to TAVS.
Management believes that the basis used for allocating these services is
reasonable. However, the terms of these transactions may differ from those
that would result from transactions among unrelated parties.
Certain employees are eligible for GE benefits related to health care,
pension and a savings and security plan. GECCLC charges the Company a
percentage of labor costs for these benefits. Payroll expenses in 1996
includes approximately $2,200,000 of charges for these benefits.
F-55
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
The components of property and equipment as of September 27, 1996 consists
of:
<TABLE>
<S> <C>
Equipment leased to others................................... $14,611,446
Furniture and fixtures....................................... 1,999,938
Leasehold improvements....................................... 1,615,645
Vehicles..................................................... 145,860
-----------
Total property and equipment................................. $18,372,889
Accumulated depreciation and amortization.................... (5,268,635)
-----------
$13,104,254
===========
</TABLE>
5. LEASE ARRANGEMENTS
TAVS leases office space for periods up to 5 years under operating lease
agreements. These leases are subject to price escalations for certain costs.
TAVS leases space at hotels for lease periods less than one year which are
cancelable. Total rent expense for all such leases was approximately $340,000
for the period from January 1, 1996 to September 27, 1996.
Future minimum lease payments under the noncancelable operating leases at
September 27, 1996, are as follows:
<TABLE>
<S> <C>
Twelve months ended September 27,
1997 ........................................................... $255,467
1998............................................................ 264,239
1999............................................................ 228,529
2000 ........................................................... 144,550
Thereafter...................................................... --
--------
$892,785
========
</TABLE>
6. INCOME TAXES
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss......................................... $ 395,469
Accrued expenses........................................... 205,316
Allowance for doubtful accounts............................ 49,600
-----------
$ 650,385
Deferred tax liability:
Property and equipment..................................... $(1,263,983)
-----------
Net deferred tax liability.................................. $ (613,598)
===========
</TABLE>
Deferred tax assets related to the net operating loss are netted against the
long-term deferred tax liability in the accompanying financial statements.
F-56
<PAGE>
TOTAL AUDIO VISUAL SERVICES
(A DIVISION OF GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The income tax benefit consists of the following components:
<TABLE>
<S> <C>
Current......................................................... --
Deferred........................................................ $(36,291)
--------
$(36,291)
========
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to the income tax benefit is as follows:
<TABLE>
<S> <C>
Tax expense at statutory rate.................................. $(74,655)
State income tax net of federal benefit........................ (5,600)
Non-deductible expenses........................................ 43,964
--------
$(36,291)
========
</TABLE>
7. SUBSEQUENT EVENTS
On September 12, 1996, GECCLC signed an Agreement of Purchase and Sale of
Assets to sell certain of the assets of TAVS to Caribiner International, Inc.
("Caribiner") for total consideration of approximately $26.6 million in cash
which is subject to certain post-closing adjustments. The transaction closed
on September 27, 1996. The September 27, 1996 financial statements do not
include any adjustments as a result of this transaction.
F-57
<PAGE>
[TWO PHOTOGRAPHS APPEAR HERE]
In October, 1995, Caribiner produced the HOLIDAY INN Worldwide Annual Conference
in San Antonio, Texas. This four-day event was designed to reward, educate and
inform 2,200 delegates made up of hotel owners, partners and franchise holders
who came together from around the world. Caribiner drafted speeches, provided
speech training, created visual support, produced videos that specifically
supported the marketing presentations and provided staging for the event.
[ONE PHOTOGRAPH APPEARS HERE]
Caribiner designed the structure and all visual elements for PHILIP MORRIS'
exhibit at the July, 1995 AWMA (American Wholesale Markets Association) trade
show. The 30' X 40' booth featured light-boxes, motion message signs, a video
wall and interactive kiosks. Attendees were able to access information about
Philip Morris' incentive program and their current status in it.
In March, 1995, Caribiner designed and developed a series of training tools for
KEY PHARMACEUTICALS' UNI-DUR(Registered Trademark) product launch. The training
began in the field before the launch event and continued through activities at
the on-site product launch meeting. Training tools included computer based
learning modules, a series of video presentations and a continuous computer
based learning competition which required the sales representatives to
demonstrate their mastery of the UNI-DUR(Registered Trademark) product platform.
[TWO PHOTOGRAPHS APPEAR HERE]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HERE-
OF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 12
The Company............................................................... 16
Use of Proceeds........................................................... 17
Price Range of Common Stock and Dividend Policy........................... 18
Capitalization............................................................ 19
Unaudited Pro Forma Consolidated Financial Information.................... 20
Selected Financial and Operating Data..................................... 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Business.................................................................. 35
Management................................................................ 44
Certain Relationships and Transactions with Related Persons............... 50
Principal and Selling Stockholders........................................ 52
Description of Capital Stock.............................................. 53
Shares Eligible for Future Sale........................................... 55
Underwriting.............................................................. 56
Legal Matters............................................................. 57
Experts................................................................... 57
Additional Information.................................................... 57
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,878,200 SHARES
LOGO
[OF CARIBINER INTERNATIONAL, INC.]
COMMON STOCK
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
FURMAN SELZ
SCHRODER WERTHEIM & CO.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder
other than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 31,459
NASD filing fee............................................... 10,882
New York Stock Exchange listing fee........................... 30,000
Blue sky fees and expenses.................................... 5,000
Printing and engraving expenses............................... 250,000
Legal fees and expenses....................................... 350,000
Accounting fees and expenses.................................. 150,000
Transfer agent and registrar fees............................. 15,000
Miscellaneous fees and expenses............................... 357,659
----------
Total..................................................... $1,200,000
</TABLE>
The Company will bear all of the foregoing fees and expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), Article Seventh of the Certificate) (filed as Exhibit 3.1 to
this Registration Statement) eliminates the liability of the Company's
directors to the Company and its stockholders, except for liabilities related
to a breach of duty of loyalty to the Company and its stockholders, acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, any transaction from which the director derives an
improper personal benefit and certain other liabilities and, in the event of
an amendment to the DGCL, eliminates such personal liability of the Company's
directors to the fullest extent permitted by the DGCL, as so amended.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees), judgments, fines,
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation except that no indemnification may be
made in respect of any claim, issue, or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in
II-1
<PAGE>
which such action or suit was brought shall determine that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee, or agent of a corporation has been successful in the
defense of any action, suit, or proceeding referred to in subsections (a) and
(b) or in the defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 of the DGCL shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of any person acting
in any of the capacities set forth in the second preceding paragraph against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have
the power to indemnify him against such liabilities under Section 145 of the
DGCL.
The By-Laws (filed as Exhibit 3.2 to this Registration Statement) require
the Company, under certain circumstances, to indemnify any person who is, was
or has agreed to become a director, officer, employee or agent against
expenses, liability and loss actually and reasonably incurred by him. The By-
laws also provide that expenses incurred in connection with a civil, criminal,
administrative or investigative action, suit or proceeding, or threat thereof,
may be paid by the Company in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in the By-laws.
In addition, the Registrant has obtained directors' and officers'
reimbursement and liability insurance which insures against liabilities that
directors and officers of the Registrant may incur in such capacities. The
risks covered by such policies do not exclude liabilities under the Securities
Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1993, the Company has issued and sold the following
unregistered securities:
1. From May, 1993 to May, 1994, the Company issued and sold an aggregate of
602,156 shares of Series A Non-Voting Common Stock, par value $.01 per share
(the "Non-Voting Common Stock"), to 21 officers and employees of the Company
for an aggregate purchase price of $10,549 in cash pursuant to award
agreements under the Company's 1993 Management Stock Plan (the "Management
Stock Plan").
2. Pursuant to an exchange offer consummated on July 16, 1993, with certain
shareholders of Ingleby Communications Corp. ("ICC"), the Company exchanged
shares of Common Stock for shares of the common stock of ICC. An aggregate of
1,869,525 shares of Common Stock were issued to 24 holders of ICC common stock
in exchange for an aggregate of 4,753,287 shares of ICC common stock.
3. From August, 1993 through November, 1995 the Company issued to Warburg as
further inducement to make a term loan to the Company of up to $10 million,
warrants to purchase an aggregate of 534,505 shares of Common Stock with a
weighted average exercise price per share of $3.16.
4. From October, 1994 through July, 1995 the Company issued and sold an
aggregate of 33,222 shares of Non-Voting Common Stock to two officers and
employees of the Company for an aggregate purchase price of $8,730 in cash
pursuant to award agreements under the Management Stock Plan.
5. In November, 1995, the Company issued and sold an aggregate of 87,210
shares of Non-Voting Common Stock to 35 officers and employees of the Company
for an aggregate purchase price of $130,625 in cash pursuant to award
agreements under the Management Stock Plan.
II-2
<PAGE>
6. In April, 1996, the Company granted to an employee options to purchase
2,500 shares of Common Stock at an exercise price per share of $25.6875
pursuant to a stock option agreement under the Company's 1996 Stock Option
Plan. Pursuant to the terms of such stock option agreement, one-third of such
options vest and become exercisable in April, 1997; one-third of such options
vest and become exercisable in April, 1998 and one-third of such options vest
and become exercisable in April, 1999.
7. On June 6, 1996 the Company issued an aggregate of 31,821 shares of
Common Stock to Mark P. Fitzgerald, Warren F. Moore II and Richard C. Hunt in
connection with the purchase of substantially all of the assets, and the
assumption of certain of the liabilities, of Lighthouse, Ltd. at a price per
share of the Common Stock of $31.425, which represented the average of the
closing price of the Common Stock for the five business days preceding June 5,
1996.
8. In July, 1996, the Company granted to 112 employees options to purchase
an aggregate of 140,000 shares of Common Stock at an exercise price per share
of $28.875 pursuant to stock option agreements under the Company's 1996 Stock
Option Plan. Pursuant to the terms of such stock option agreements, one-third
of such options vest and become exercisable in July, 1997; one-third of such
options vest and become exercisable in July, 1998 and one-third of such
options vest and become exercisable in July, 1999.
9. In September, 1996, the Company granted to two employees options to
purchase an aggregate of 8,900 shares of Common Stock at an exercise price per
share of $40.375 pursuant to stock option agreements under the Company's 1996
Stock Option Plan. Pursuant to the terms of such option agreements, options to
purchase 1,600 shares of Common Stock are presently exercisable. In addition,
pursuant to the terms of such stock option agreements, options to purchase the
remaining 7,300 shares vest and become exercisable one-third in September,
1997, one-third in September, 1998 and one-third in September, 1999; provided,
however, that options to purchase 4,800 of such 7,300 shares vest and become
exercisable only upon the satisfaction of certain performance criteria to be
established by the Board of Directors of the Company.
10. In October, 1996, the Company granted to an employee options to purchase
28,000 shares of Common Stock at an exercise price per share of $44.75 under
the Company's 1996 Stock Option Plan.
11. In November, 1996, the Company issued 497 shares of Common Stock at a
price per share of $25.125 to Mr. Langton pursuant to the Non-Employee
Directors Stock Plan. Pursuant to such Plan, the number of shares of Common
Stock issued was determined by dividing $12,500 by $25.125 (the average of the
high and low sales price per share of the Common Stock on the date of Mr.
Langton's appointment to the Board of Directors (April 11, 1996)). In
addition, in November, 1996, the Company issued to Mr. Langton options to
purchase 9,000 shares of Common Stock at an exercise price per share of
$42.625.
12. In November, 1996, the Company granted to an employee options to
purchase 5,000 shares of Common Stock at an exercise price per share of
$42.625.
13. On December 20, 1996, the Company issued an aggregate of 15,495 shares
of Common Stock to Jonathan Rome in connection with the purchase of all of the
common stock of Rome Network, Inc. at a price per share of the Common Stock of
$48.40, which represented the average of the closing price of the Common Stock
for the five business days preceding December 19, 1996.
14. On January 31, 1997, the Company issued an aggregate of 29,940 shares of
Common Stock to Donald D. Blumberg, David L. Blumberg, Denise L. Tendle and
Deborah Meehan in connection with the purchase of all of the common stock of
Blumberg Communications Inc. at a price per share of the Common Stock of
$48.09, which represented the average of the closing price of the Common Stock
for the thirty business days preceding January 30, 1997.
Except as set forth above, since January 1, 1993, the Company has made no
offers or sales of its unregistered securities.
II-3
<PAGE>
There were no underwriters employed in connection with any of the
transactions set forth above.
Other than the transactions described above in Items 1, 2, 4 and 5, all of
the transactions described above were effected in reliance upon an exemption
from the registration requirements of the Securities Act pursuant to Section
4(2) of the Securities Act on the basis that such transactions did not involve
any public offering. The transactions described in Items 1, 4 and 5 were
effected in reliance upon the exemption from the registration requirements
pursuant to Rule 701 promulgated under the Securities Act. The transaction
described in Item 2 was effected in reliance upon the exemption from the
registration requirements pursuant to Rule 506 of Regulation D promulgated
under the Securities Act. The recipients of securities in each of the
transactions described above 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 all such transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Purchase Agreement
****3.1 Second Restated Certificate of Incorporation of the Registrant
filed March 15, 1996 with the Secretary of State of the State
of Delaware
*****3.2 Second Amended and Restated By-Laws of the Registrant
*****4 Specimen of Certificate of Common Stock of the Registrant
5 Opinion of Schulte Roth & Zabel LLP (including the consent of
such firm) regarding the legality of the securities being
offered
*****10.1 1996 Stock Option Plan of the Registrant
***10.2 Form of Stock Option Agreement
*****10.3 Non-Employee Directors' Stock Plan of the Registrant
*****10.4 Employment Agreement, dated as of October 1, 1995, between the
Registrant and Raymond S. Ingleby
*****10.5 Employment Agreement, dated as of December 1, 1995, between
the Registrant and Arthur F. Dignam
*****10.6 Employment Agreement, dated as of December 1, 1995, between
the Registrant and Mark M. Cohen
***10.7 Employment Agreement, dated as of July 25, 1995, between the
Registrant and Brian Shepherd
***10.8 Employment Agreement, dated October 14, 1996, between the
Registrant and Lawrence P. Golen
**10.9 Credit Agreement, dated as of December 4, 1996, among the
Registrant, Caribiner, Inc., the lenders named therein and the
Chase Manhattan Bank, as agent (schedules and exhibits
omitted--the Registrant agrees to furnish a copy of any such
schedule and exhibit to the Securities and Exchange Commission
upon request)
*****10.10 Stockholders Agreement, dated as of March 15, 1996, among the
Registrant, Warburg, Pincus Investors, L.P. and Raymond S.
Ingleby
***11.1 Statement Regarding Computation of Pro Forma Net Income Per
Common Share (for the years ended September 30, 1994, 1995 and
1996)
***11.2 Statement Regarding Computation of Supplementary Pro Forma Net
Income Per Common Share (for the years ended September 30,
1995 and 1996)
**11.3 Statement Regarding Computation of Earnings (Loss) Per Common
Share (for the three months ended December 31, 1995 and 1996)
**11.4 Statement Regarding Computation of Supplementary Pro Forma Net
(Loss) Income Per Common Share (for the three months ended
December 31, 1995 and 1996)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
**21 Subsidiaries of the Registrant
23.1 Consent of Schulte Roth & Zabel LLP (included as part of Exhibit
5 hereto)
23.2 Consent of Ernst & Young LLP (New York, New York), independent
auditors
23.3 Consent of Ernst & Young (London, England), Chartered Accountants
23.4 Consent of Ernst & Young LLP (Atlanta, Georgia), independent
auditors
</TABLE>
- --------
** Previously filed as an exhibit to this Registration Statement on Form S-1
(No. 333-18327).
*** Included as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended September 30, 1996, as amended, and incorporated herein by
reference.
**** Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the three months ended March 31, 1996 and incorporated herein by
reference.
***** Included as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-80481) and incorporated herein by reference.
(b) SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES:
The Supplemental Financial Statement Schedules have been intentionally
omitted because they are either not required or the information has been
included in the Notes to the Consolidated Financial Statements included as part
of this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
1. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
2. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(b) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will
be deemed to be the initial bona fide offering thereof.
(c) It will provide to the Underwriters at the closing specified in
the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 4 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York, on February 26, 1997.
CARIBINER INTERNATIONAL, INC.
/s/ Raymond S. Ingleby
By___________________________________
Name: Raymond S. Ingleby
Title: Chairman of the Board
andChief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Raymond S. Ingleby Chairman of the Board, Chief February 26, 1997
____________________________________ Executive Officer and
Raymond S. Ingleby Director
* Executive Vice President, February 26, 1997
____________________________________ Chief Financial and
Arthur F. Dignam Administrative Officer and
Secretary (Principal
Financial and Accounting
Officer)
* Director February 26, 1997
____________________________________
Errol M. Cook
* Director February 26, 1997
____________________________________
Sidney Lapidus
* Director February 26, 1997
____________________________________
David E. Libowitz
* Director February 26, 1997
____________________________________
Bryan D. Langton
</TABLE>
/s/ Raymond S. Ingleby
By:____________________________
Raymond S. Ingleby
Attorney-in-Fact
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S> <C>
1.1 Form of Purchase Agreement
****3.1 Second Restated Certificate of Incorporation of the
Registrant filed March 15, 1996 with the Secretary of State
of the State of Delaware
*****3.2 Second Amended and Restated By-Laws of the Registrant
*****4 Specimen of Certificate of Common Stock of the Registrant
5 Opinion of Schulte Roth & Zabel LLP (including the consent
of such firm) regarding the legality of the securities
being offered
*****10.1 1996 Stock Option Plan of the Registrant
***10.2 Form of Stock Option Agreement
*****10.3 Non-Employee Directors' Stock Plan of the Registrant
*****10.4 Employment Agreement, dated as of October 1, 1995, between
the Registrant and Raymond S. Ingleby
*****10.5 Employment Agreement, dated as of December 1, 1995, between
the Registrant and Arthur F. Dignam
*****10.6 Employment Agreement, dated as of December 1, 1995, between
the Registrant and Mark M. Cohen
***10.7 Employment Agreement, dated as of July 25, 1995, between
the Registrant and Brian Shepherd
***10.8 Employment Agreement, dated October 14, 1996, between the
Registrant and Lawrence P. Golen
**10.9 Credit Agreement, dated as of December 4, 1996, among the
Registrant, Caribiner, Inc., the lenders named therein and
the Chase Manhattan Bank, as agent (schedules and exhibits
omitted--the Registrant agrees to furnish a copy of any
such schedule and exhibit to the Securities and Exchange
Commission upon request)
*****10.10 Stockholders Agreement, dated as of March 15, 1996, among
the Registrant, Warburg, Pincus Investors, L.P. and Raymond
S. Ingleby
***11.1 Statement Regarding Computation of Pro Forma Net Income Per
Common Share (for the years ended September 30, 1994, 1995
and 1996)
***11.2 Statement Regarding Computation of Supplementary Pro Forma
Net Income Per Common Share (for the years ended September
30, 1995 and 1996)
**11.3 Statement Regarding Computation of Earnings (Loss) Per
Common Share (for the three months ended December 31, 1995
and 1996)
**11.4 Statement Regarding Computation of Supplementary Pro Forma
Net (Loss) Income Per Common Share (for the three months
ended December 31, 1995 and 1996)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
**21 Subsidiaries of the Registrant
23.1 Consent of Schulte Roth & Zabel LLP (included as part of Exhibit
5 hereto)
23.2 Consent of Ernst & Young LLP (New York, New York), independent
auditors
23.3 Consent of Ernst & Young (London, England), Chartered Accountants
23.4 Consent of Ernst & Young LLP (Atlanta, Georgia), independent
auditors
</TABLE>
- --------
** Previously filed as an exhibit to this Registration Statement on Form S-1
(No. 333-18327).
*** Included as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended September 30, 1996, as amended, and incorporated herein by
reference.
**** Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the three months ended March 31, 1996 and incorporated herein by
reference.
***** Included as an exhibit to the Registrant's Registration Statement on
Form S-1 (No. 33-80481) and incorporated herein by reference.
<PAGE>
EXHIBIT 1.1
Draft--February 7, 1997
[1,878,200 Shares]
CARIBINER INTERNATIONAL, INC.
(a Delaware corporation)
Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
------------------
[Date]
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
ALEX. BROWN & SONS INCORPORATED
FURMAN SELZ LLC
SCHRODER WERTHEIM & CO. INCORPORATED
as Representatives of the several
Underwriters named in Schedule A hereto
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, NY 10281-1209
Dear Sirs:
Caribiner International, Inc., a Delaware corporation (the
"Company") and the indirect beneficial owner of all of the outstanding capital
stock of Caribiner, Inc., a New York corporation ("Caribiner"), and the selling
stockholders listed on Schedule B hereto (collectively, the "Selling
Stockholders," and each, a "Selling Stockholder"), confirm their respective
agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Alex. Brown & Sons Incorporated ("Alex. Brown"), Furman Selz LLC
("Furman Selz"), and Schroder Wertheim & Co. Incorporated ("Schroder Wertheim")
and each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10), for whom Merrill Lynch, Alex. Brown, Furman
Selz, and Schroder Wertheim are acting as representatives (in such capacity,
Merrill Lynch, Alex. Brown, Furman Selz and Schroder Wertheim shall hereinafter
be referred to as the "Representatives"), with respect to (i) the sale by the
Company and the purchase by the Underwriters, acting severally and not jointly,
of the number of shares of Common Stock, par value
<PAGE>
$.01 per share, of the Company (the "Common Stock") set forth in Schedule B
hereto opposite the name of the Company, (ii) the sale by the Selling
Stockholders and the purchase by the Underwriters, acting severally and not
jointly, of the number of shares of Common Stock set forth in said Schedule B
hereto opposite the name of each Selling Stockholder, and (iii) the grant by the
Company and Raymond S. Ingleby ("Ingleby") to the Underwriters, acting severally
and not jointly, of the options described in Section 2(b) hereof to purchase all
or any part of the Underwriters' pro rata portion of [81,730] and [200,000]
additional shares of Common Stock from the Company and Ingleby, respectively, to
cover over-allotments, if any. The aforesaid shares of Common Stock (the
"Initial Securities") to be purchased by the Underwriters and all or any part of
the [281,730] shares of Common Stock subject to the options described in Section
2(b) hereof (the "Option Securities") that may be purchased by the Underwriters
are collectively hereinafter called the "Securities."
Prior to the purchase and public offering of the Securities by the
several Underwriters, the Company, the Selling Stockholders and the
Representatives, acting on behalf of the several Underwriters, shall enter into
an agreement substantially in the form of Exhibit A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written telecommunication among the Company, the Selling
Stockholders (or their attorney-in-fact) and the Representatives and shall
specify such applicable information as is indicated in Exhibit A hereto. The
offering of the Securities will be governed by this Agreement, as supplemented
by the Pricing Agreement. From and after the date of the execution and delivery
of the Pricing Agreement (the "Representation Date"), this Agreement shall be
deemed to incorporate the Pricing Agreement.
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No. 333-
18327), including the related preliminary prospectus for the registration of the
Securities under the Securities Act of 1933, as amended (the "1933 Act"), and
has filed such amendments thereto and such amended preliminary prospectuses as
may have been required to the date hereof, and will file such additional
amendments thereto and such amended prospectuses as may hereafter be required.
Such registration statement (as amended, if applicable) at the time it becomes
effective and the prospectus constituting a part thereof (including in each case
the information, if any, deemed to be part thereof pursuant to Rule 430A(b) or
Rule 434(d) of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations")), as from time to time amended or supplemented
2
<PAGE>
pursuant to the 1933 Act, are hereinafter referred to as the "Registration
Statement" and the "Prospectus", respectively, except that if any revised
prospectus shall be provided to the Underwriters by the Company for use in
connection with the offering of the Securities which differs from the Prospectus
on file at the Commission at the time the Registration Statement becomes
effective (whether or not such revised prospectus is required to be filed by the
Company pursuant to Rule 424(b) of the 1933 Act Regulations), the term
"Prospectus" shall refer to each such revised prospectus from and after the time
it is first provided to the Underwriters for such use. If the Company files a
registration statement to register a portion of the Securities and relies on
Rule 462(b) for such registration statement to become effective upon filing with
the Commission (the "Rule 462(b) Registration Statement"), then any reference to
the "Registration Statement" herein shall be deemed to include both the
registration statement referred to above (No. 333-18327) and the Rule 462(b)
Registration Statement, as each such registration statement may be amended
pursuant to the 1933 Act.
The Company and the Selling Stockholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after the Registration Statement becomes
effective and the Pricing Agreement has been executed and delivered. The price
per share for the Securities to be purchased by the Underwriters pursuant to
this Agreement will be determined in the manner set forth in the Pricing
Agreement.
SECTION 1. Representations and Warranties. (a) Each of the Company
and Caribiner represents and warrants to each of the Underwriters as of the date
hereof and as of the Representation Date as follows:
(i) At the time the Registration Statement becomes effective and at
the Representation Date, the Registration Statement, including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. The Prospectus, at the Representation Date
(unless the term "Prospectus" refers to a prospectus that has been provided
to the Underwriters by the Company for use in connection with the offering
of the Securities
3
<PAGE>
that differs from the Prospectus on file at the Commission at the time the
Registration Statement becomes effective, in which case at the time such
prospectus is first provided to the Underwriters for such use) and at
Closing Time (as hereinafter defined) and at each Date of Delivery referred
to in Section 2 hereof, will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and
warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and
in conformity with information furnished to the Company in writing by any
Underwriter through the Representatives expressly for use in the
Registration Statement or the Prospectus (the "Underwriters' Information").
The Company and each of the Selling Stockholders acknowledge for all
purposes under this Agreement that the statements set forth in the first
and second sentences of the last paragraph of text on the cover page of the
Prospectus and the first paragraph of text (but only as it relates to the
Underwriters), the chart following the first paragraph of text, and the
second, third and fifth paragraphs of text appearing under the caption
"Underwriting" in the Prospectus constitute the entirety of the
Underwriters' Information and that the Underwriters shall not be deemed to
have provided any information (and therefore are not responsible for any
statement or omission) pertaining to any arrangement with any party other
than the Underwriters.
(ii) The accountants who certified the financial statements (and
supporting schedules, if any) included in the Registration Statement are
independent public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iii) The financial statements, including the notes thereto (and
supporting schedules, if any), included in the Registration Statement and
the Prospectus comply as to form with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations and present
fairly the financial position of the Company and its consolidated
subsidiaries, SCH International Limited ("SCH") and its consolidated
subsidiaries, and Total Audio Video Services ("TAVS") at the dates
indicated and the statements of operations, changes in stockholders' equity
and cash flows of the Company and its consolidated subsidiaries, profit and
loss account and cash flow
4
<PAGE>
statement of SCH and its consolidated subsidiaries, and statement of
operations and divisional equity and statement of cash flows of TAVS for
the periods specified (subject, in the case of unaudited financial
statements, to customary year-end adjustments); said financial statements,
in the case of the Company and its consolidated subsidiaries, and TAVS,
have been prepared in conformity with accounting principles generally
accepted in the United States ("GAAP") applied on a consistent basis
throughout the periods involved and, in the case of SCH and its
consolidated subsidiaries have been prepared in conformity with accounting
principles generally accepted in the United Kingdom applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The pro forma financial
statements and the related notes thereto included in the Registration
Statement and the Prospectus present fairly the information shown therein,
have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and have been properly
compiled on the bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred
to therein.
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein or contemplated thereby, (A) there has been no Material Adverse
Effect (as defined in clause (d) of this Section 1), whether or not arising
in the ordinary course of business, (B) there have not been any
transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one enterprise,
and (C) except as disclosed in the Registration Statement and the
Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(v) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware and
has corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and to enter
into and perform its obligations under this Agreement and the Pricing
Agreement; the
5
<PAGE>
Company is duly qualified as a foreign corporation to transact business and
is in good standing in the State of New York, and the Company is duly
registered or qualified as a foreign corporation to transact business and
is in good standing in each other jurisdiction in which such registration
or qualification or good standing is required, whether by reason of the
ownership or leasing of property, the conduct of business or otherwise,
except where the failure to so register or qualify or be in good standing
would not have a Material Adverse Effect.
(vi) Each of Caribiner, Ingleby Holding Corp. ("IHC"), Entertainment
Trademark Consultants, Inc. ("ETC"), Caribiner Holdings (UK) Limited
("CHUK"), SCH, Spectrum Communications Limited ("SCL") and Mark Wallace
Associates ("MWA," and together with Caribiner, IHC, CHUK, SCH and SCL,
the "Material Subsidiaries") has been duly organized and is validly
existing as a corporation or limited liability company, as the case may be,
in good standing under the laws of the jurisdiction of its incorporation,
has corporate power and authority to own, lease and operate its properties
and to conduct its business as may be described in the Prospectus, and is
duly registered or qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such registration or
qualification or good standing is required, whether by reason of the
ownership or leasing of property, the conduct of business or otherwise,
except where the failure to so register or qualify or be in good standing
would not have a Material Adverse Effect; and all of the issued and
outstanding capital stock or limited liability company interests, as the
case may be, of each of the Material Subsidiaries has been duly authorized
and validly issued, is fully paid and nonassessable and is owned directly
by the Company, except in the case of (i) Caribiner, which is owned by the
-
Company 83% through ETC and IHC and 17% directly, (ii) IHC, which is owned
--
by the Company 7% through ETC and 93% directly, (iii) SCH, which is owned
---
by the Company through CHUK, and (iv) MWA and SCL which are owned by the
--
Company through CHUK and its wholly-owned subsidiary SCH, free and clear of
any security interests, mortgages, pledges, liens, encumbrances, claims or
equities; none of the outstanding shares of capital stock or limited
liability company interests, as the case may be, of any of the Material
Subsidiaries was issued in violation of the preemptive or similar rights,
if any, of any stockholder of any such corporation or limited liability
company, as the case may be, arising by operation of law, under the charter
or by-laws or equivalent organizational documents of any such Material
Subsidiary or under any
6
<PAGE>
agreement to which the Company or such Material Subsidiary is a party. The
only subsidiaries of the Company are the subsidiaries listed on Schedule D
attached hereto. Except for the shares of capital stock or limited
liability company interests, as the case may be, of each of the
subsidiaries owned by the Company and such subsidiaries, neither the
Company nor any such subsidiary owns any shares of stock or any other
equity securities of any corporation or has any equity interest in any
firm, partnership, association or other entity, except as described in the
Prospectus. None of the subsidiaries of the Company other than the Material
Subsidiaries has assets or liabilities or conducts business, which singly
or in the aggregate are material to the condition, financial or otherwise,
or the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise; and the Company conducts
substantially all of its business and derives substantially all of its
revenue through Caribiner, MWA, and SCL.
(vii) Caribiner has the corporate power and authority to enter into
and perform its obligations under this Agreement.
(viii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to this
Agreement); the shares of issued and outstanding Common Stock, including
the Securities to be purchased by the Underwriters from the Selling
Stockholders, have been duly authorized and validly issued and are fully
paid and nonassessable; none of the outstanding shares of Common Stock was
issued in violation of the preemptive or other similar rights, if any, of
any securityholder of the Company arising by operation of law, under the
charter or by-laws of the Company, or under any agreement to which the
Company or any of its subsidiaries is a party. The Securities to be
purchased by the Underwriters from the Company have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement, and,
when issued and delivered by the Company pursuant to this Agreement,
against payment of the consideration set forth in the Pricing Agreement,
will be validly issued and fully paid and non-assessable; the Common Stock
of the Company conforms to all statements relating thereto contained in the
Prospectus; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities being sold by the Company hereunder is not subject to
7
<PAGE>
preemptive or other similar rights of any securityholder of the Company
arising by operation of law, under the charter and by-laws of the Company
or under any agreement to which the Company or any of its subsidiaries is a
party.
(ix) Neither the Company nor any of its subsidiaries is in violation
of its charter or by-laws, or in default (the term "default", as used in
this Agreement, includes an actual default and an event or circumstance
which with notice or lapse of time or both would constitute a default) in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, license, lease or other instrument or agreement to which
the Company or any of its subsidiaries is a party or by which it or any of
them may be bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject, which default could reasonably be
expected to have a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and (in the case of the Company) the Pricing
Agreement, the issuance and delivery by the Company of the Securities and
the consummation of the transactions contemplated herein, therein and in
the Registration Statement, and compliance by the Company and Caribiner
with their obligations hereunder and thereunder (including the use of the
proceeds from the sale of the Securities by the Company as described in the
Prospectus under the caption "Use of Proceeds") have been duly authorized
by all necessary corporate action of the Company and Caribiner and do not
and will not conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any tax, lien, charge or other encumbrances (together,
"Encumbrances") upon the Securities or any revenues, property or assets of
the Company or any of its subsidiaries (including, without limitation,
Caribiner) pursuant to any treaty, law, rule, administrative regulation,
judgment or order of any governmental agency or body or any administrative
or court decree or any contract, indenture, mortgage, loan agreement, note,
license, lease or other instrument or agreement to which the Company or any
of its subsidiaries (including, without limitation, Caribiner) is a party
or by which it or any of them may be bound, or to which any of the property
or assets of the Company or any of its subsidiaries (including, without
limitation, Caribiner) is subject, which conflict, breach, default or
Encumbrance could reasonably be expected to have a Material Adverse Effect,
nor will such action result in
8
<PAGE>
any violation of the provisions of the instruments providing for the
organization or governance of the Company or any of its Material
Subsidiaries (including, without limitation, Caribiner) or any of their
respective assets or properties or any treaty, law, rule, administrative
regulation, judgment or order of any governmental agency or body or any
administrative or court decree, which violation could reasonably be
expected to have a Material Adverse Effect. As used herein, a "Repayment
Event" means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any of
its subsidiaries.
(x) There is no action, suit, proceeding or rule-making before or by
any court or governmental agency or body in any jurisdiction, now pending,
or, to the knowledge of the Company and Caribiner, threatened, against or
affecting the Company or any of its subsidiaries (including, without
limitation, Caribiner), that is required to be disclosed in the
Registration Statement (other than as may be disclosed therein), or which,
alone or taken together with all such actions, suits, proceedings and rule-
makings, could reasonably be expected to have a Material Adverse Effect or
which could reasonably be expected to materially and adversely affect the
properties or assets thereof or which could reasonably be expected to
materially and adversely affect the consummation of the transactions
contemplated by this Agreement, (and in the case of Company) the Pricing
Agreement or the performance by the Company and Caribiner of their
respective obligations hereunder or thereunder; the aggregate of all
pending legal or governmental proceedings to which the Company or any of
its subsidiaries is a party or of which any of their respective properties
or assets is the subject that are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to have a Material Adverse
Effect. There are no contracts, licenses, loan agreements, leases or other
instruments or documents that are required to be described in or filed as
exhibits to the Registration Statement by the 1933 Act or by the 1933 Act
Regulations that have not been described in or filed as exhibits to the
Registration Statement as so required (including filings deemed made by
incorporation by reference).
9
<PAGE>
(xi) The Company and its subsidiaries own, possess, or are licensed
or otherwise have the full right to use, or can acquire on reasonable
terms, the material trademarks, service marks, trade names, patents, patent
rights, licenses, inventions, copyrights and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) presently employed by them
in connection with the business as now operated by them or reasonably
necessary in order to conduct such business; neither the Company nor any of
its subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any of the foregoing, or of invalidity or inadequacy, which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to have a Material Adverse Effect.
(xii) The Company and its subsidiaries possess such licenses,
certificates, authorities, permits, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate regulatory agencies or bodies of each and every applicable
jurisdiction as are necessary to conduct the business as now operated by
them except for such Governmental Licenses the lack of which could not be
reasonably expected to have a Material Adverse Effect; all such
Governmental Licenses are in full force and effect and the Company and its
subsidiaries are in all material respects complying therewith except where
the failure so to comply could not, singly or in the aggregate, be
reasonably expected to have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Governmental
License, which singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could be reasonably expected to have a
Material Adverse Effect.
(xiii) The Company and its subsidiaries are in compliance with all
applicable laws, statutes, ordinances, rules or regulations of any
applicable jurisdiction, the enforcement of which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(xiv) The Company and its subsidiaries have good and marketable
title to all real property and good and valid title to all other property
and assets owned by them free and clear of all mortgages, pledges,
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Encumbrances and defects, except such as do not, singly or in the
aggregate, materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company or any of its subsidiaries; and all properties
(real and personal) and premises held under lease by the Company or its
subsidiaries are held under valid, subsisting and enforceable leases, in
each case free and clear of all Encumbrances and defects, except such
Encumbrances and defects as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to
be made of such properties by the Company or any of its subsidiaries.
(xv) The Company and its subsidiaries have filed all material
federal, state, local and foreign tax returns required to have been filed
by them or appropriate extensions for such filings have been obtained as
required by law, and have paid all taxes required to be paid by any of them
and all assessments, fines, penalties and other governmental charges or
levies made against them, except any such tax, assessment, fine or penalty
as is not yet due or is being contested in good faith and by appropriate
proceedings; and adequate charges, accruals and reserves have been provided
for in the financial statements referred to in Section 1(a)(iii) above in
respect of all material federal, state, local and foreign taxes for all
periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined or remains open to examination
by applicable taxing authorities.
(xvi) No labor dispute with any group of employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of the principal suppliers,
manufacturers or contractors of the Company or any of its subsidiaries
which could be reasonably expected to have a Material Adverse Effect.
(xvii) No filing with, or consent, approval, authorization, license,
order, registration, qualification or decree of, any governmental
authority, agency or body is necessary or required for the performance by
the Company and Caribiner of their respective obligations hereunder or the
consummation of the transactions contemplated by this Agreement and (in
the case of the Company) the Pricing Agreement, except such as may be
required under the 1933 Act or the 1933 Act Regulations, and which have
been obtained or made or will have been obtained or
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made prior to Closing Time and are or will be at Closing Time in full force
and effect or foreign or state securities or Blue Sky laws (as to which no
representation or warranty is made).
(xviii) Except as disclosed in the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance of,
and no commitments, plans or arrangements to issue, any shares of capital
stock of the Company or any shares of capital stock or limited liability
company interests, as the case may be, of any of its subsidiaries or any
security convertible into or exchangeable for capital stock of the Company
or capital stock or limited liability company interests, as the case may
be, of any of its subsidiaries.
(xix) The Company is not, and upon the issuance and sale by the
Company of the Securities as herein contemplated and the application of
the net proceeds therefrom as described in the Prospectus under the caption
"Use of Proceeds" will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Except as may be described in the Registration Statement, (A)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign laws or regulations relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or to
the manu facture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), except such violations as could not, singly or in
the aggregate, be reasonably expected to have a Material Adverse Effect,
and (B) to the best of the Company's knowledge, there are no events or
circumstances that could form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of its
subsidiaries relating to any Hazardous Materials or the violation of any
Environmental Laws in any jurisdiction, which, singly or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
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(xxi) The Common Stock is listed on the New York Stock Exchange, Inc.
(the "NYSE"). The Company has been advised that the Securities have been
approved for listing on the NYSE, upon official notice of issuance
thereof.
(xxii) The Company and its subsidiaries carry or are entitled to the
benefits of insurance in such amounts and covering such risks as it
reasonably believes are sufficient to cover potential losses or damages,
and all such insurance is in full force and effect.
(xxiii) The Company and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
and specific authorizations; (ii) transactions are recorded as necessary to
permit preparations of financial statements in conformity with GAAP and
to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxiv) Other than as contemplated by this Agreement, there is no
broker, finder or other party that is entitled to receive from the Company
or any of its subsidiaries any brokerage or finder's fee or any other
similar fee, commission or payment as a result of the transactions
contemplated by this Agreement.
(xxv) Neither the Company nor any of its subsidiaries (i) has taken
or will take, directly or indirectly, any action designed to cause or to
result in, or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities or (ii)
has since the initial filing of the Registration Statement (A) sold, bid
for, purchased or paid anyone any compensation for soliciting purchases of,
the Securities, or (B) paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.
(xxvi) Except as described in the Registration Statement and the
Prospectus, no person has registration or similar rights to have any
securities of the Company
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registered by the Company under the 1933 Act pursuant to the filing of the
Registration Statement or otherwise.
(xxvii) The Company has not distributed and, prior to the later to
occur of (i) the Closing Time and (ii) completion of the distribution of
the Securities, will not distribute any offering material in connection
with the offering and sale of the Securities other than the Registration
Statement, any preliminary prospectus, the Prospectus or other materials,
if any, permitted by the 1933 Act or by the 1933 Act Regulations and
approved by the Representatives.
(xxviii) The Company has obtained and delivered to the
Representatives the agreements of the persons and entities named in
Schedule C annexed hereto to the effect that each such person or entity, as
the case may be, will not, for a period of 90 days from the date of the
Prospectus and except as otherwise provided therein, without Merrill
Lynch's prior written consent, directly or indirectly sell, offer or
contract to sell, grant any option for the sale of, or otherwise dispose
of, any shares of capital stock of the Company (including, without
limitation, Common Stock) or any security that represents or is convertible
or exchangeable into or exercisable for or that otherwise represents the
right (contingent or otherwise) to receive capital stock of the Company
(including, without limitation, Common Stock) owned by such person or
entity or with respect to which such person or entity has the power of
disposition, or cause the Company to file a registration statement under
the 1933 Act with respect to any of the foregoing.
(xxix) This Agreement has been, and on the Representation Date the
Pricing Agreement will have been, duly authorized, executed and delivered
by the Company; and this Agreement has been duly authorized, executed and
delivered by Caribiner.
(b) Each Selling Stockholder, severally and not jointly, represents
and warrants to, and agrees with, each Underwriter as of the date hereof and as
of the Representation Date as follows:
(i) All authorizations, approvals and consents necessary for the
execution and delivery by such Selling Stockholder of this Agreement and
the Pricing Agreement, and the sale and delivery of the shares of Common
Stock to be sold by such Selling
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Stockholder hereunder and thereunder (other than the issuance of the order
of the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state
securities or Blue Sky laws or the securities laws of other applicable
jurisdictions), have been obtained and are in full force and effect; and
such Selling Stockholder has the full right, power and authority to enter
into this Agreement and the Pricing Agreement, a Power of Attorney and
Custody Agreement and to sell, transfer and deliver the shares of Common
Stock to be sold by such Selling Stockholder hereunder and thereunder.
(ii) The execution and delivery of this Agreement and the Pricing
Agreement, the sale and delivery of the shares of Common Stock to be sold
by such Selling Stockholder and the consummation by such Selling
Stockholder of the transactions contemplated herein and thereby have been
duly authorized by all necessary action, corporate or otherwise, of such
Selling Stockholder and will not conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any
Encumbrances upon the shares of Common Stock to be sold by such Selling
Stockholder pursuant to, any contract, indenture, mortgage, loan agreement,
note, license, lease or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder may be bound,
or to which any of the property or assets of such Selling Stockholder is
subject, nor will such action result in any violation of the provisions of
the charter or by-laws or other organizational instrument or constituent
documents of such Selling Stockholder, if any, or any treaty, law,
administrative regulation, judgement or order of any governmental agency or
body or any administrative or court decree applicable to such Selling
Stockholder.
(iii) Such Selling Stockholder has and will have at the Closing Time
referred to in Section 2 hereof good and marketable title to the shares of
Common Stock to be sold by such Selling Stockholder hereunder, free and
clear of any security interest, mortgage, pledge, Encumbrances, claim or
equity other than pursuant to this Agreement; such Selling Stockholder has
full right, power and authority to sell, transfer and deliver the shares of
Common Stock to be sold by such Selling Stockholder under this Agreement;
and upon delivery of such shares of Common Stock and payment of the
purchase price therefor as herein contemplated, each of the Underwriters
will receive good and marketable title to the shares of Common Stock
purchased by it from such Selling Stockholder, free
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and clear of any security interest, mortgage, pledge, Encumbrances, claim
or equity.
(iv) Certificates in negotiable form for all shares of Common Stock
to be sold by such Selling Stockholder hereunder have been placed in
custody with the Custodian by or for the benefit of such Selling
Stockholder for the purpose of effecting delivery by such Selling
Stockholder hereunder.
(v) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.
(vi) No filing with, or consent, approval, authorization, order,
registration, qualification or decree of, any governmental authority or
body is necessary or required under the law of any applicable jurisdiction
for the performance by such Selling Stockholder of its obligations
hereunder or in connection with the issuance and sale of the Securities
hereunder, or the consummation of the transactions contemplated by this
Agreement and the Pricing Agreement, except such as may have previously
been made or obtained or as may be required under the 1933 Act or the 1933
Act Regulations or foreign or state securities or Blue Sky laws (as to
which no representation or warranty is made).
(vii) Such Selling Stockholder and its obligations under this
Agreement are subject to civil and commercial law and to suit and neither
it nor any of its properties, assets or revenues has any right of immunity,
from any legal action, suit or proceeding, from the giving of any relief in
any such legal action, suit or proceeding, from setoff or counterclaim,
from the jurisdiction of any court, from service of process, attachment
upon or prior to judgment, or attachment in aid of execution of judgment,
or from execution of a judgment, or other legal process or proceeding for
the giving of any relief or for the enforcement of a judgment, in any
jurisdiction, with respect to its obligations, liabilities or any other
matter under or arising out of or in connection with this Agreement, the
Pricing Agreement and the Power of Attorney and Custody Agreement, and to
the extent that such Selling Stockholder or any of its properties, assets
or revenues may have or may hereafter become entitled to any such right of
immunity in any jurisdiction in which
16
<PAGE>
proceedings may at any time be commenced, such Selling Stockholder has
effectively waived such right and consented to such relief and enforcement
pursuant to Section 14 of this Agreement.
(viii) No stamp duty or similar tax or duty is payable by or on
behalf of the Underwriters in connection with the sale and delivery by such
Selling Stockholder of the Securities to be sold by such Selling
Stockholder to the Underwriters as contemplated by this Agreement and the
Pricing Agreement.
(ix) The information furnished by or on behalf of such Selling
Stockholder to the Company in writing expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), which consists solely
of the information with respect to such Selling Stockholder set forth in
the table and the footnotes under the caption "Principal and Selling
Stockholders," in the Prospectus and, in the case of Ingleby, also consists
of the information with respect to Ingleby under the captions "Management"
and "Certain Relationships and Related Transactions -- Advances to Raymond
S. Ingleby" in the Prospectus, does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein in the light of the circumstances under which they
were made, not misleading; and such Selling Stockholder is not prompted to
sell the Securities to be sold by such Selling Stockholder hereunder by any
information concerning the Company or any subsidiary of the Company which
is not set forth in the Prospectus.
(x) During a period of 90 days from the date of the Prospectus, such
Selling Stockholder will not, without the prior written consent of Merrill
Lynch, directly or indirectly, sell, offer or contract to sell, grant any
option for the sale of, or otherwise dispose of, any capital stock of the
Company (including, without limitation, Common Stock) or any security
convertible or exchangeable into, or exercisable for, capital stock of the
Company (including, without limitation, Common Stock) owned by such Selling
Stockholder or with respect to which such Selling Stockholder has the power
of disposition, other than to the Underwriters pursuant to this Agreement,
and will not cause the Company to file a registration statement under the
1933 Act with respect to any of the foregoing.
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(c) Any certificate signed by any officer of the Company and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by the
Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of any Selling Stockholder as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling Stockholder to each Underwriter as to the matters covered thereby.
(d) As used in this Agreement, the term "Material Adverse Effect"
means any material adverse effect on (i) the Company's ability to perform its
obligations under this Agreement and the Pricing Agreement or (ii) the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise.
SECTION 2. Sale and Delivery to the Underwriters; Closing. (a) On
the basis of the representations and warranties herein contained and subject to
the terms and conditions herein set forth, (1) the Company agrees to sell to
each Underwriter, severally and not jointly, and each Underwriter, severally and
not jointly, agrees to purchase from the Company, at the price per share set
forth in the Pricing Agreement, that portion of the number of Initial Securities
set forth in Schedule B opposite the name of the Company which the number of
Initial Securities set forth in Schedule A opposite the name of such Underwriter
(plus any additional number of Initial Securities which such Underwriter may
become obligated to purchase pursuant to the provisions of Section 10 hereof)
bears to the total number of Initial Securities; and (2) each Selling
Stockholder agrees, severally and not jointly, to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from each Selling Stockholder, at the price per share set
forth in the Pricing Agreement, that portion of the number of Initial Securities
set forth in Schedule B opposite the name of each Selling Stockholder which the
number of Initial Securities set forth in Schedule A opposite the name of such
Underwriter (plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof) bears to the total number of Initial Securities subject, in
each case, to such adjustments as the Underwriters in their sole discretion
shall make to eliminate any sales or purchases of fractional securities.
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<PAGE>
(i) If the Company and the Selling Stockholders have elected not to
rely upon Rule 430A under the 1933 Act Regulations, the initial public
offering price per share and the purchase price per share to be paid by the
several Underwriters for the Securities have each been determined and set
forth in the Pricing Agreement, dated the date hereof, and an amendment to
the Registration Statement and the Prospectus containing such information
will be filed before the Registration Statement becomes effective.
(ii) If the Company and the Selling Stockholders have elected to rely
upon Rule 430A under the 1933 Act Regulations, the initial public offering
price and the purchase price per share to be paid by the several
Underwriters for the Securities shall be determined by agreement among the
Company, the Selling Stockholders and the Representatives and, when so
determined, shall be set forth in the Pricing Agreement. In the event that
such prices have not been agreed upon and the Pricing Agreement has not
been executed and delivered by all parties thereto by the close of business
on the fourteenth business day following the date of this Agreement, this
Agreement shall terminate forthwith, without liability of any party to any
other party, unless otherwise agreed to by the Company, the Selling
Stockholders and the Representatives, except that Sections 6 and 7 hereof
shall remain in effect. For purposes of this Agreement, the term "business
day" means a day on which the NYSE is open for business and the trading of
securities thereon is permitted.
(b) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and Ingleby hereby grant options to the Underwriters, severally and not
jointly, to purchase up to an additional [81,730] and [200,000] shares,
respectively, of Common Stock at the price per share set forth in the Pricing
Agreement, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable on
the Option Securities. The options hereby granted will expire 30 days after the
later of (i) the date the Registration Statement becomes effective, if the
Company and such Selling Stockholders have elected not to rely on Rule 430A
under the 1933 Act Regulations, or (ii) the Representation Date, if the
Company and such Selling Stockholders have elected to rely upon Rule 430A under
the 1933 Act Regulations, and may be exercised in whole or in part from time to
time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the
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Initial Securities upon notice by the Representatives to the Company setting
forth the number of Option Securities as to which the several Underwriters are
exercising the options and the time and date of payment for and delivery of such
Option Securities. Such time and date of delivery for the Option Securities
(the "Date of Delivery") shall be determined by the Representatives, but shall
not be, unless otherwise agreed upon by the Representatives and the Company,
later than seven full business days after the exercise of said options, and in
no event prior to Closing Time, as hereinafter defined. If the options are
exercised as to all or any portion of the Option Securities, the Company and
Ingleby will sell an aggregate number of Option Securities to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly, will
purchase an aggregate number of Option Securities from the Company and Ingleby,
that portion of the total number of Option Securities as to which options are
exercised that the number of Initial Securities set forth in Schedule A opposite
the name of such Underwriter (plus any additional number of Initial Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof) bears to the total number of Initial
Securities, subject, in each case, to such adjustments as the Underwriters in
their discretion shall make to eliminate any sales or purchases of fractional
Securities.
(c) Payment of the purchase price for, and delivery of certificates
for, the Initial Securities to be purchased by the Underwriters shall be made at
the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022,
or at such other place as shall be agreed upon by the Company and the
Representatives, at 9:00 A.M. on the third or fourth business day (as permitted
under Rule 15c6-1 under the Securities Exchange Act of 1934 (the "1934 Act")
(unless postponed in accordance with the provisions of Section 10 hereof)
following the date the Registration Statement becomes effective (or, if the
Company and the Selling Stockholders have elected to rely upon Rule 430A under
the 1933 Act Regulations, the third or fourth business day (as permitted under
Rule 15c6-1 under the 1934 Act) after execution of the Pricing Agreement), or
such other time not later than ten business days after such date as shall be
agreed upon by the Company, the Selling Stockholders and the Representatives
(such time and date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are purchased
by the Underwriters, payment of the purchase price, and delivery of
certificates, for such Option Securities shall be made at the above-mentioned
offices of Debevoise & Plimpton, or at such other place as shall be agreed upon
by the Company and the Representatives, on the Date of Delivery as specified in
the
20
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notice from the Representatives to the Company. Payment for the Initial
Securities shall be made to the Company and the Selling Stockholders by wire
transfer of immediately available funds to bank accounts designated by the
Company and the Selling Stockholders, respectively, in each case against
delivery to the Representatives for the respective accounts of the Underwriters
of certificates for such Initial Securities to be purchased by them hereunder.
Payment for the Option Securities, if any, shall be made to the Company and
Ingleby by wire transfer of immediately available funds to bank accounts
designated by the Company and Ingleby against delivery to the Representatives
for the accounts of the Underwriters of certificates for such Option Securities
to be purchased by them hereunder. Certificates for the Initial Securities and
the Option Securities, if any, shall be in such denominations and registered in
such names as the Representatives may request in writing delivered to the
Company and such Selling Stockholder at least two business days before Closing
Time or the relevant Date of Delivery, as the case may be.
(d) It is understood that each Underwriter has authorized the
Representatives, for its account, to accept delivery of, give a receipt for, and
make payment of the purchase price for, the Initial Securities and the Option
Securities which it has agreed to purchase. Merrill Lynch, Alex. Brown, Furman
Selz, and Schroder Wertheim, individually and not as Representatives, may (but
shall not be obligated to) make payment of the purchase price for the Initial
Securities or the Option Securities, if any, to be purchased by any Underwriter
whose payment has not been received by Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such
Underwriter from its obligations hereunder. The certificates for the Initial
Securities and the Option Securities, if any, will be made available in The City
of New York, New York for examination and packaging by the Representatives not
later than 10:00 A.M. on the last business day prior to Closing Time or the
relevant Date of Delivery, as the case may be.
SECTION 3. Covenants. The Company covenants with each Underwriter as
follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective (as and when requested by the
Representatives) and, if the Company and the Selling Stockholders elect to
rely upon Rule 430A, and subject to Section 3(b), will comply with the
requirements of Rule 430A, and will notify the Representatives immediately,
and confirm the notice in writing, (i) of the effectiveness of the
Registration
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Statement or any post-effective amendment thereto or of the filing of any
supplement to the Prospectus or of any amended Prospectus, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment
or supplement to the Prospectus or for additional information, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use
of any preliminary prospectus, or the initiation of any proceedings for
that purpose and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or the initiation or threatening of
any proceedings for any such purpose. The Company will make every
reasonable effort to prevent the issuance of any stop order or any order
preventing or suspending the use of any preliminary prospectus or the
Prospectus or suspending such qualification and, in the event of the
issuance of a stop order or any order preventing or suspending the use of
any preliminary prospectus or the Prospectus or suspending such
qualification, to obtain the lifting thereof at the earliest possible
moment.
(b) The Company will give the Representatives notice of its intention
to file or prepare any amendment to the Registration Statement (including
any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus that the Company proposes for
use by the Underwriters in connection with the offering of the Securities
which differ from the Prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act
Regulations), will furnish the Representatives with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Representatives or
counsel for the Underwriters shall reasonably object.
(c) The Company has furnished or will deliver to each of the
Representatives and counsel for the Underwriters without charge manually
executed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated
by reference therein and copies of all consents and certificates of
experts) and will
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also deliver to each of the Representatives as many conformed copies of the
Registration Statement originally filed and of each amendment thereto
(without exhibits) as the Representatives may reasonably request. If
applicable, the copies of the Registration Statement and each amendment
thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) The Company will deliver to each Underwriter, without charge, from
time to time until the effective date of the Registration Statement (or, if
the Company and the Selling Stockholders have elected to rely upon Rule
430A, until such time that the Pricing Agreement is executed and
delivered), as many copies of each preliminary prospectus as such
Underwriter may reasonably request, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company
will furnish to each Underwriter without charge, by 12:00 p.m. on the day
following the Representation Date and from time to time during the period
when the Prospectus is required to be delivered under the 1933 Act or the
1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request for the purposes
contemplated by the 1933 Act or the 1934 Act or the respective applicable
rules and regulations of the Commission thereunder.
(e) If any event shall occur as a result of which it is necessary, in
the opinion of counsel for the Underwriters or for the Company, to amend
the Registration Statement or to amend or supplement the Prospectus in
order to ensure that the Prospectus does not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of such counsel, at any time to amend or
supplement the Prospectus in order to comply with the 1933 Act and the 1933
Act Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b) hereof, such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus, as the case may be, comply with
such requirements, and the Company will furnish to the Underwriters such
number of copies of such amendment or supplement as the Underwriters may
reasonably request.
23
<PAGE>
(f) The Company will use its best efforts, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions as the
Representatives may designate; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
otherwise not so subject. In each jurisdiction in which the Securities
have been so qualified, the Company will file such statements and reports
as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement.
(g) The Company generally will make available to its security holders
as soon as practicable, but not later than 60 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the 1933 Act Regulations) covering a twelve-month
period beginning not later than the first day of the Company's fiscal
quarter next following the "effective date" (as defined in said Rule 158)
of the Registration Statement.
(h) If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule
430A or Rule 434 of the 1933 Act Regulations, then immediately following
the execution of the Pricing Agreement, the Company will prepare, and file
with the Commission in accordance with such Rule 430A or Rule 434 and Rule
424(b) of the 1933 Act Regulations, copies of the amended Prospectus, or,
if required by such Rule 430A or Rule 434, a post-effective amendment to
the Registration Statement (including the amended Prospectus), containing
all information so omitted and will use its best efforts to cause any such
post-effective amendment to be declared effective as promptly as
practicable.
(i) The Company will use every reasonable effort to maintain the
listing of the Common Stock on the NYSE and to effect the listing of the
Securities on the NYSE.
(j) During the period of 90 days from the date hereof, the Company
will not, without Merrill Lynch's prior written consent, directly or
indirectly sell, offer or contract to sell, grant any option (other than
options
24
<PAGE>
pursuant to the Company's 1996 Stock Option Plan) for the sale of, or
otherwise dispose of, any Common Stock or any security that represents or
is convertible or exchangeable into or exercisable for or that otherwise
represents the right (contingent or otherwise) to receive capital stock of
the Company (including, without limitation, Common Stock, except for Common
Stock issued pursuant to this Agreement or pursuant to the Company's "Non-
Employee Directors' Stock Plan" (as described in the Prospectus under the
caption "Management - Director Compensation"), or file any registration
statement under the 1933 Act with respect to any of the foregoing (other
than a registration statement (i) on Form S-8 for the shares of Common
Stock reserved for issuance under the Company's 1996 Stock Option Plan, and
(ii) on Form S-3 for up to the [77,256] shares of Common Stock issued in
connection with the acquisition by the Company of Lighthouse, Rome and
Blumberg (each as defined in the Registration Statement)).
(k) The Company will use the net proceeds received by it from the sale
of the Securities in the manner specified in the Prospectus under "Use of
Proceeds".
(l) The Company, during the period when the Prospectuses are required
to be delivered under the 1933 Act or the 1934 Act, will file all documents
required to be filed with the Commission pursuant to Sections 13, 14 or 15
of the 1934 Act within the time periods required by the 1934 Act and the
rules and regulations of the Commission under the 1934 Act.
SECTION 4. Payment of Expenses. The Company will pay, or will cause
Caribiner to pay, all expenses incident to the performance of the respective
obligations of the Company and Caribiner under, and the consummation of the
transactions contemplated by, this Agreement, including (i) the printing and
filing of the Registration Statement (including financial statements and
exhibits) as originally filed with the Commission and of each amendment thereto,
(ii) the copying and distribution to the Underwriters of this Agreement, the
Pricing Agreement, any Agreement among Underwriters and such other documents as
may be required in connection with the offering, purchase, sale and delivery of
the Securities, (iii) the preparation, issuance and delivery of the certificates
for the Securities to the Underwriters, including any stamp duties, capital
duties and stock or other transfer taxes, if any, payable upon the sale of the
Securities to the Underwriters, and their transfer between the Underwriters
pursuant to an agreement between such Underwriters, (iv) the fees and
disbursements of the Company's and Caribiner's
25
<PAGE>
counsel, accountants and other advisors, (v) the qualification of the Securities
under state or foreign securities or Blue Sky laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of the
Registration Statement as originally filed and of each amendment thereto, of the
preliminary prospectuses, and of the Prospectus and any amendments or
supplements thereto, (vii) the printing and delivery to the Underwriters of
copies of the Blue Sky Survey, (viii) the filing fees incident to, and the fees
and disbursements of counsel to the Underwriters in connection with, the review
by the NASD of the terms of the sale of the Securities, (ix) the fees and
expenses incurred in connection with listing the Securities on the NYSE, and (x)
the fees and expenses of any registrar or transfer agent. The Company and
Caribiner will indemnify and hold harmless the Underwriters against any expenses
incurred by or on behalf of the Selling Stockholders.
If this Agreement is terminated by the Representatives in accordance
with the provisions of Section 5, Section 9(a)(i) or Section 11 hereof, the
Company shall, and the Company shall cause Caribiner to, reimburse the
Underwriters for all of their reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Company, Caribiner and the Selling
Stockholders herein contained, to the performance by the Company, Caribiner and
the Selling Stockholders of their respective obligations hereunder in all
material respects, and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date hereof (and in the case of the Rule 462(b)
Registration Statement, if applicable, not later than 10:00 p.m. on the
date hereof), or with the consent of the Representatives, at a later time
and date, not later, however, than 5:30 P.M. on the first business day
following the date hereof, or at such later time and date as may be
approved by a majority in interest of the Underwriters; and at Closing Time
no stop order suspending the effectiveness of the Registration Statement
shall have been issued under the 1933 Act or proceedings
26
<PAGE>
therefor initiated or, to the knowledge of the Company, threatened by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the Underwriters. If the Company and the Selling Stockholders
have elected to rely upon Rule 430A or Rule 434 of the 1933 Act
Regulations, the price of the Securities and any price-related information
previously omitted from the effective Registration Statement pursuant to
such Rule 430A or Rule 434 shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the 1933 Act Regulations within the
prescribed time period, and prior to Closing Time, the Company shall have
provided evidence satisfactory to the Representatives of such timely
filing, or a post-effective amendment providing such information shall have
been filed as promptly as practicable and declared effective in accordance
with the requirements of Rule 430A under the 1933 Act Regulations.
(b) At Closing Time, the Representatives shall have received:
(1) The favorable opinion, dated as of Closing Time, of Schulte Roth
& Zabel, LLP, special counsel for the Company, Caribiner and the Selling
Stockholders, in form and substance reasonably satisfactory to counsel for
the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
state of Delaware.
(ii) The Company has the corporate power and authority to
own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectus and
to enter into and perform its obligations under this Agreement
and the Pricing Agreement.
(iii) The Company is duly qualified as a foreign
corporation to transact business and is in good standing as a
foreign corporation in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not have a
Material Adverse Effect.
27
<PAGE>
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption
"Capitalization" (except for subsequent issuances, if any,
pursuant to this Agreement); the shares of issued and outstanding
capital stock of the Company (including, without limitation, the
Common Stock), including the Securities to be purchased by the
Underwriters from the Selling Stockholders, have been duly
authorized and validly issued and are fully paid and
non-assessable; no holder of Common Stock is or will be subject
to personal liability by reason of being such a holder; and none
of the outstanding shares of capital stock of the Company was
issued in violation of the preemptive or other similar rights, if
any, of any stockholder or warrantholder of the Company arising
by operation of law, under the charter or by-laws of the Company
or any of its subsidiaries or, to the best of such counsel's
knowledge, under any agreement to which the Company or any of its
subsidiaries is a party.
(v) The Securities to be purchased by the Underwriters from
the Company have been duly authorized for issuance and sale to
the Underwriters pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement against
payment of the consideration set forth in the Pricing Agreement,
will be validly issued and fully paid and non-assessable and no
holder of the Securities is or will be subject to personal
liability by reason of being such a holder.
(vi) The issuance and sale of the Securities by the Company
and the sale of the Securities by the Selling Stockholders are
not subject to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Company
or, to the best of such counsel's knowledge, any agreement to
which the Company is a party.
(vii) Each of Caribiner, IHC and ETC (collectively, the "US
Material Subsidiaries") has been duly incorporated and is
validly existing as a corporation or limited liability company,
as
28
<PAGE>
the case may be, in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Registration Statement and, in
the case of Caribiner, to enter into and perform its obligations
under this Agreement, and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not have a Material Adverse Effect; all of the
issued and outstanding capital stock or limited liability company
interests, as the case may be, of each such US Material
Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned, by the Company, directly or
through subsidiaries, free and clear of any security interest,
mortgage, pledge, Encumbrances, claim or equity; and no holder of
any capital stock of any subsidiary is or will be subject to
personal liability by reason of being such a holder and none of
such shares was issued in violation of the preemptive rights of
any stockholder or warrantholder of such US Material Subsidiary
arising by operation of law, under the charter or by-laws of such
US Material Subsidiary or, to the best of such counsel's
knowledge, under any agreement to which the Company or any US
Material Subsidiary is a party.
(viii) Except as disclosed in or specifically contemplated
by the Prospectus, to the best of such counsel's knowledge, there
are no outstanding options, warrants or other rights calling for
the issuance by the Company or any US Material Subsidiary of, and
no commitments, obligations, plans or arrangements to which the
Company or any US Material Subsidiary is a party to issue, any
shares of capital stock of the Company or capital stock or
limited liability company interests, as the case may be, of any
US Material
29
<PAGE>
Subsidiary or any security convertible into or exchangeable for
capital stock of the Company or capital stock or limited
liability company interests, as the case may be, of any US
Material Subsidiary.
(ix) To the best of such counsel's knowledge, except as
disclosed in or specifically contemplated by the Prospectus,
there are no persons with registration or other similar rights to
have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the 1933
Act; and, to the best knowledge of such counsel, neither the
filing of the Registration Statement nor the offering of the
Securities as contemplated by this Agreement gives rise to any
rights relating to the registration of any securities of the
Company.
(x) Each of this Agreement and (in the case of the Company)
the Pricing Agreement has been duly authorized, executed and
delivered by the Company and Caribiner.
(xi) The Registration Statement is effective under the 1933
Act; any required filing of the Prospectus pursuant to Rule
424(b) under the 1933 Act has been made in the manner and within
the time period required by Rule 424(b), and, to the best of such
counsel's knowledge and information, no stop order suspending the
effectiveness of the Registration Statement has been issued under
the 1933 Act or proceedings therefor initiated or threatened by
the Commission.
(xii) At the time the Registration Statement became
effective and at the Representation Date, the Registration
Statement and the Prospectus (other than the financial statements
and supporting schedules, if any, and other financial information
included therein, as to which no opinion need be rendered)
complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations; and,
to the best of such counsel's knowledge, all material contracts,
licenses, loan agreements, leases or other agreements or
instruments which are required to be described in or filed
30
<PAGE>
as exhibits to the Registration Statement by the 1933 Act or by
the 1933 Act Regulations have been described in or filed as
exhibits to the Registration Statement as so required.
(xiii) The Common Stock conforms, in all material respects,
as to matters of law to the description thereof in the
Registration Statement and the Prospectus and the form of
certificate used to evidence the Common Stock complies with all
applicable statutory requirements, with any applicable
requirements of the certificate of incorporation and by-laws of
the Company and with the requirements of the NYSE.
(xiv) No filing with, or consent, approval, authorization,
order, registration, qualification or decree of, any court or
governmental authority or body in the United States, or any state
or territory thereof, is necessary or required to be obtained by
the Company or Caribiner or (to the best of such counsel's
knowledge, without independent inquiry) any of the Selling
Stockholders for the performance by the Company, Caribiner and
each of the Selling Stockholders of its respective obligations
hereunder, or in connection with the offer or sale of the
Securities hereunder or the consummation of the transactions
contemplated by this Agreement and (in the case of the Company
and each of the Selling Stockholders) the Pricing Agreement,
except such as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws.
(xv) The execution, delivery and performance of this
Agreement and (in the case of the Company) the Pricing Agreement,
the issuance and delivery of the Securities and the consummation
of the transactions contemplated herein, therein and in the
Registration Statement have been duly authorized by the Company
and Caribiner and will not conflict with or constitute a breach
of, or default under, or result in the creation or imposition of
any Encumbrances upon the Securities or any revenues, property or
assets of the Company or any of the US Material Subsidiaries
pursuant to any
31
<PAGE>
applicable treaty, law, rule, administrative regulation,
judgement or order of any governmental agency or body or any
administrative or court decree or to the best of such counsel's
knowledge (in the case of the Selling Stockholders, without
independent inquiry) any contract, indenture, mortgage, loan
agreement, note, license, lease or other instrument or agreement
to which the Company or any of the US Material Subsidiaries or
any of the Selling Stockholders is a party or by which any of
them may be bound, or to which any of the property or assets of
the Company or any of the US Material Subsidiaries or any of the
Selling Stockholders is subject, nor will such actions result in
any violation of the provisions of the charter or by-laws of the
Company or any applicable treaty, law, rule, administrative
regulation, judgment or order of any governmental agency or body
or any administrative or court decree known to such counsel to be
applicable to the Company, in each case (except in the case of
the Securities) where the conflict, breach, default, imposition,
Encumbrances or violation, consid ered alone or taken together
with all such other conflicts, breaches, defaults, imposi tions,
Encumbrances or violations, could be reasonably expected to have
a Material Adverse Effect.
(xvi) To the best of such counsel's knowledge, there is not
pending or threatened any action, suit, proceeding, inquiry or
investigation, to which the Company or any of its subsidiaries is
a party, or to which the property of the Company or any of its
subsidiaries is subject, before or brought by any court or
governmental agency or body, which, singly or in the aggregate,
could reasonably be expected to result in any Material Adverse
Effect or adversely affect the consummation of the transactions
contemplated by this Agreement and the Pricing Agreement or the
performance by the Company of its obligations hereunder or
thereunder.
(xvii) The information in the Registration Statement and
Prospectus under the captions "Description of Capital Stock,"
"Management" (except "Management-Executive
32
<PAGE>
Officers, Directors and Key Management Personnel" and "--
Executive Compensation)", "Certain Relationships and Transactions
with Related Persons" (except that with respect to "Certain
Relationships and Related Transactions with Related Persons--
Advances to Raymond S. Ingleby" such opinion may be to the best
of such counsel's knowledge) and "Shares Eligible for Future
Sale" and, in the Registration Statement under item 14, to the
extent that it constitutes matters of law, summaries of legal
matters, legal documents or legal proceedings, or legal
conclusions, has been reviewed by them and is correct in all
material respects; to the best of such counsel's knowledge, there
are no statutes or regulations, and no legal or governmental
actions, suits or proceedings pending or threatened against the
Company or any of its subsidiaries that are required to be
described in the Prospectus that are not described as required.
(xviii) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the 1940 Act.
(xix) Each of the Selling Stockholders has duly executed
and delivered this Agreement and the Pricing Agreement; each of
this Agreement and the Pricing Agreement is a legally valid and
binding obligation of each of the Selling Stockholders,
enforceable in accordance with its terms, subject to the effect
of (a) applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and
(b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law), and except that rights to indemnity thereunder may be
limited by applicable law and public policy.
33
<PAGE>
(xx) The shares of Common Stock to be sold by each Selling
Stockholder under this Agreement (i) are owned of record as set
-
forth on Schedule B to this Agreement and (ii) to such counsel's
--
knowledge, are beneficially owned as set forth on Schedule B to
this Agreement, (with respect to clause (ii) of this paragraph
(xxi)) free and clear of all Encumbrances, equities or adverse
claims within the meaning of the Uniform Commercial Code, other
than the interests of the Underwriters hereunder.
(xxi) Immediately prior to the Closing Time, the Selling
Stockholders were the registered owners of the shares of Common
Stock to be sold by such Selling Stockholders. Upon transfer of
the shares of Common Stock to be sold by the Selling Stockholders
pursuant to the Purchase Agreement to Merrill Lynch, as
representative of the Underwriters, and, assuming the
Underwriters have purchased such shares of Common Stock for
value, in good faith and without notice of any adverse claim,
then the Underwriters will have acquired such shares of Common
Stock free and clear of any adverse claim (within the meaning of
Section 8-302 of the New York Uniform Commercial Code). The
owner of such shares of Common Stock, if other than such Selling
Stockholder, is precluded from asserting against Merrill Lynch,
as representative of the Underwriters, the ineffectiveness of any
unauthorized endorsement.
(2) In giving their opinion required by subsection (b)(1) of this
Section 5, Schulte Roth & Zabel, LLP shall additionally state that no
facts have come to its attention which cause it to believe that the
Registration Statement (including the information deemed to be a part
of the Registration Statement at such time of effectiveness pursuant
to Rule 430A(b) or Rule 434) (other than the financial statements and
other financial information contained therein, as to which it may
express no belief) at the time it became effective contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
contained therein not misleading, or that the Prospectus (other than
the financial
34
<PAGE>
statements and other financial information contained therein, as to
which it may express no belief), at the Representation Date and
Closing Time, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(3) In giving their opinion required by subsection (b)(1)(iv) of
this Section 5, Schulte Roth & Zabel, LLP may rely upon the opinion,
in form and substance reasonably satisfactory to the Underwriters, of
Richards, Layton & Finger, P.A., in which case the opinion shall state
that they believe the Underwriters and such counsel are entitled to so
rely.
(4) The favorable opinion, dated the Closing Time, of Richards,
Layton & Finger, P.A., special Delaware counsel for the Company, in
form and substance reasonably satisfactory to counsel for the
Underwriters. In giving their opinion, such counsel may state that,
insofar as such opinion involves factual matters, they have relied, to
the extent they deem proper, upon certificates of officers or
directors (past or present) of the Company, in form and substance
reasonably satisfactory to counsel for the Underwriters; provided that
--------
copies of such certificates have been delivered to the Underwriters.
(5) The favorable opinion, dated as of Closing Time, of Debevoise
& Plimpton, counsel for the Underwriters, with respect to the matters
set forth in paragraphs (i), (v), (x), (xi), (xiii) (solely as to
whether the Common Stock conforms as to matters of law in all material
respects with the description thereof set forth in the Prospectus) and
the first clause only of paragraph (xii) of subsection (b)(1) of this
Section 5. Debevoise & Plimpton shall also make a statement to the
same effect as is required by subsection (b)(2) of this Section 5.
(6) The favorable opinion, dated the Closing Time, of Wacks
Caller Solicitors, special United Kingdom counsel for the Company, in
form and substance reasonably satisfactory to counsel for the
Underwriters, addressing the matters set forth in paragraphs (vii),
(viii) and (xv) of Subsection (b)(1) of this Section 5, with respect
to CHUK, SCH, SCL and MWA.
(c) At Closing Time, there shall not have been, since the date hereof
or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries
35
<PAGE>
considered as one enterprise, whether or not arising in the ordinary course
of business, and the Representatives shall have received (i) a certificate
of the Chief Executive Officer of the Company and of the chief financial or
chief accounting officer of the Company, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) are true and correct with
the same force and effect as though expressly made at and as of Closing
Time, (iii) the Company has complied with all agreements contained herein
and satisfied all conditions on its part contained herein to be performed
or satisfied at or prior to Closing Time, and (iv) no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or, to the best of such
officer's knowledge, threatened by the Commission. As used in this Section
5(c), the term "Prospectus" means the Prospectus in the form used by the
Underwriters to confirm sales of the Securities.
(d) At Closing Time, the Representatives shall have received a
certificate of each of the Selling Stockholders, dated as of Closing Time,
to the effect that (i) the representations and warranties of the Selling
Stockholders contained in Section 1(b) are true and correct with the same
force and effect as though expressly made at and as of Closing Time and
(ii) each of the Selling Stockholders has complied in all material respects
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time.
(e) At the time of the execution of this Agreement, the
Representatives shall have received from Ernst & Young LLP a letter (the
"First Accounting Letter"), dated such date, in form and substance
satisfactory to the Representatives, substantially in the form of Exhibit B
hereto.
(f) At Closing Time, the Representatives shall have received from
Ernst & Young LLP a letter, dated as of Closing Time, to the effect that
they reaffirm the statements made in the letter furnished pursuant to
subsection (e) of this Section, except that the specified date referred to
shall be the day prior to Closing Time and, if the Company has elected to
rely on Rule 430A of the 1933 Act Regulations, to the further effect that
they have carried out procedures as specified in paragraph 9 of Exhibit
B hereto, with respect to certain amounts, percentages and financial
information specified
36
<PAGE>
by the U.S. Representative(s) and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages
and financial information to be in agreement with the records specified in
such paragraph [7].
(g) At Closing Time the Representatives shall have received from the
Company the agreements of the persons and entities named in Schedule C
annexed hereto to the effect set forth in Section 1(a)(xxviii) above.
(h) In the event the Underwriters exercise the options granted in
Section 2(b) hereof to purchase all or any portion of the Option
Securities, the representations and warranties of the Company and the
Selling Stockholders contained herein and the statements in any
certificates furnished by the Company and the Selling Stockholders
hereunder shall be true and correct as of the Date of Delivery, and the
Representatives shall have received:
(i) a certificate, dated the Date of Delivery, of the Chief
Executive Officer of the Company and of the chief financial or chief
accounting officer of the Company confirming that the certificate
delivered at Closing Time pursuant to Section 5(c) remains true and
correct as of the Date of Delivery;
(ii) a certificate, dated the Date of Delivery, of each of the
Selling Stockholders confirming that the certificate delivered at
Closing Time pursuant to Section 5(d) remains true and correct as of
the Date of Delivery;
(iii) the favorable opinion of Schulte Roth & Zabel, LLP, special
counsel for the Company, Caribiner and the Selling Stockholders, in
form and substance reasonably satisfactory to counsel for the
Underwriters, dated the Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinions required by Section 5(b)(1) (including
the additional statement required by Section 5(b)(2)) and 5(b)(3),
respectively;
(iv) the favorable opinion of Richards, Layton & Finger, P.A.,
special Delaware counsel for the Company, in form and substance
reasonably satisfactory to counsel for the Underwriters, dated
37
<PAGE>
the Date of Delivery and otherwise to the same effect as the opinions
required by Section 5(b)(4).
(v) the favorable opinion of Debevoise & Plimpton, counsel for
the Underwriters, dated the Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion required by
Section 5(b)(5); and
(vi) the favorable opinion of Wacks Caller Solicitors, special
United Kingdom counsel to the Company, dated the Date of Delivery, and
otherwise to the same effect as the opinion required by Section
5(b)(6).
(vii) a letter from Ernst & Young LLP in form and substance
reasonably satisfactory to the Underwriters and dated the Date of
Delivery, substantially the same in scope and substance as the letter
furnished to the Underwriters pursuant to Section 5(f) except that any
"specified date" in the letter furnished pursuant to this Section
5(h)(vii) shall not be more than five (5) days prior to the Date of
Delivery.
(i) At Closing Time and at the Date of Delivery, if any, counsel for
the Underwriters shall have been furnished with such documents and opinions
as they may reasonably require for the purpose of enabling them to pass
upon the sale of the Securities as contemplated herein, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the agreements or conditions, herein contained; and
all proceedings taken by the Company and the Selling Stockholders in
connection with the issuance and sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(j) The Securities shall have been approved for listing upon notice of
issuance on the NYSE.
(k) At or prior to Closing Time, the Representatives shall have
received from each Selling Stockholder a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form
statement specified by Treasury Department regulations in lieu thereof).
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representatives by notice to the Company and the Selling Stockholders at
any time at or prior to Closing Time or the applicable Date of Delivery, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided
38
<PAGE>
in Section 4 hereof, and provided further that Sections 6 and 7 hereof shall
survive such termination.
SECTION 6. Indemnification. (a) Each of the Company and Caribiner
agrees, jointly and severally, to indemnify and hold harmless each Underwriter,
its directors, officers and employees, and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act to the extent and in the manner set forth in clauses (i), (ii) and
(iii) below. In addition, Ingleby agrees to indemnify and hold harmless each
Underwriter, its directors, officers and employees, and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act to the extent and in the manner set forth in clauses
(i), (ii) and (iii) below; provided, however, that Ingleby shall not be
responsible for the payment of an amount, pursuant to this Section 6, which
exceeds the net proceeds received by Ingleby from the sale of the Securities
sold by Ingleby pursuant to this Agreement.
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant
to Rule 430A(b) or Rule 434 of the 1933 Act Regulations, if
applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that subject to Section 6(e) below any
39
<PAGE>
such settlement is effected with the written consent of the Company
(not to be unreasonably withheld); and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 6(d) hereof, the reasonable fees and
disbursements of counsel chosen by the Representatives), reasonably
incurred, in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
provided, however, that the indemnity agreement in this Section 6(a) shall not
- -------- -------
apply to any loss, liability, claim, damage or expense (i) to the extent that
-
such loss, liability, claim, damage or expense arises out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with Underwriters' Information and (ii) with respect to
--
any preliminary prospectus to the extent that any such loss, liability, claim,
damage or expense of such Underwriter results solely from the fact that such
Underwriter sold Securities to a person as to whom the Company shall establish
that there was not sent by commercially reasonable means, at or prior to the
written confirmation of such sale, a copy of the Prospectus in any case where
such delivery is required by the 1933 Act, if the Company has previously
furnished copies thereof in sufficient quantity to such Underwriter and the
loss, claim, damage or liability of such Underwriter results from an untrue
statement or omission of a material fact contained in the preliminary prospectus
that was corrected in the Prospectus.
In making a claim for indemnification under this Section 6 (other than
pursuant to clause (a)(iii) of this Section 6), or contribution under Section 7,
by the Company, Caribiner or Ingleby, the indemnified parties may proceed
against either (i) the Company, Caribiner and Ingleby or (ii) the Company and
Caribiner only, but may not proceed solely against Ingleby. In the event that
the indemnified parties are entitled to seek indemnity or contribution hereunder
against any loss, liability, claim, damage and expense incurred with respect to
a final judgment from a trial court, then, as a precondition to any indemnified
party obtaining indemnification or contribution from Ingleby, the indemnified
parties shall first obtain a final judgment from a trial court that such
indemnified parties are entitled to indemnity or
40
<PAGE>
contribution under this Agreement with respect to such loss, liability, claim,
damage or expense (the "Final Judgment") from the Company, Caribiner and Ingleby
and shall seek to satisfy such Final Judgment in full from the Company and
Caribiner by making a written demand upon the Company and Caribiner for such
satisfaction. Only in the event such Final Judgment shall remain unsatisfied in
whole or in part 45 days following the date of receipt by the Company and
Caribiner of such demand shall any indemnified party have the right to take
action to satisfy such Final Judgment by making demand directly on Ingleby (but
only if and to the extent the Company and Caribiner have not already satisfied
such Final Judgment, whether by settlement, release or otherwise). The
indemnified parties may exercise this right to first seek to obtain payment from
the Company and Caribiner and thereafter obtain payment from Ingleby without
regard to the pursuit by any party of its rights to the appeal of such Final
Judgment. The indemnified parties shall, however, be relieved of their
obligation to first obtain a Final Judgment, seek to obtain payment from the
Company and Caribiner with respect to such Final Judgment or, having sought such
payment, to wait such 45 days after failure by the Company and Caribiner to
immediately satisfy any such Final Judgment if (i) the Company or Caribiner
files a petition for relief under the United States Bankruptcy Code (the
"Bankruptcy Code"), (ii) an order for relief is entered against the Company or
Caribiner in an involuntary case under the Bankruptcy Code, (iii) the Company or
Caribiner makes an assignment for the benefit of its creditors, or (iv) any
court orders or approves the appointment of a receiver or custodian for the
Company or Caribiner or a substantial portion of either of their assets. The
foregoing provisions of this paragraph are not intended to require any
indemnified party to obtain a Final Judgment against the Company, Caribiner or
Ingleby before obtaining reimbursement of expenses pursuant to clause (a)(iii)
of this Section 6. However, the indemnified parties shall first seek to obtain
such reimbursement in full from the Company and Caribiner by making a written
demand upon the Company and Caribiner for such reimbursement. Only in the event
such expenses shall remain unreimbursed in whole or in part 45 days following
the date of receipt by the Company and Caribiner of such demand shall any
indemnified party have the right to receive reimbursement of such expenses from
Ingleby by making written demand directly on Ingleby (but only if and to the
extent the Company and Caribiner have not already satisfied the demand for
reimbursement, whether by settlement, release or otherwise). The indemnified
parties shall, however, be relieved of their obligation to first seek to obtain
such reimbursement in full from the Company and Caribiner or, having made
written demand therefor, to wait such 45 days after failure by the Company and
Caribiner to immediately
41
<PAGE>
reimburse such expenses if (i) the Company or Caribiner files a petition for
relief under the Bankruptcy Code, (ii) an order for relief is entered against
the Company or Caribiner in an involuntary case under the Bankruptcy Code, (iii)
the Company or Caribiner makes an assignment for the benefit of its creditors,
or (iv) any court orders or approves the appointment of a receiver or custodian
for the Company or Caribiner or a substantial portion of either of their
assets.]
(b) Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter, its directors, officers and
employees, and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against (i)
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but, in the
case of each Selling Stockholder, only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with information furnished to the Company in writing by or on behalf
of such Selling Stockholder expressly for use therein; provided, however, that
-------- -------
this indemnity agreement shall not apply to any loss, liability, claim, damage
or expense (i) to the extent that such loss, liability, claim, damage or expense
-
arises out of any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with Underwriters' Information
and (ii) with respect to any preliminary prospectus to the extent that any such
--
loss, liability, claim, damage or expense of such Underwriter results solely
from the fact that such Underwriter sold Securities to a person as to whom the
Company shall establish that there was not sent by commercially reasonable
means, at or prior to the written confirmation of such sale, a copy of the
Prospectus in any case where such delivery is required by the 1933 Act, if the
Company has previously furnished copies thereof in sufficient quantity to such
Underwriter and the loss, claim, damage or liability of such Underwriter results
from an untrue statement or omission of a material fact contained in the
preliminary prospectus that was corrected in the Prospectus; and provided
--------
further, that no Selling Stockholder shall be required to indemnify any
- -------
Underwriter for any amount in excess of the net proceeds received by such
Selling Stockholder from the Underwriters in connection with the sale of such
Selling Stockholder's Common Stock as contemplated by this Agreement.
(c) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its
42
<PAGE>
directors, each of its officers who signed the Registration Statement, each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act and each of the Selling Stockholders
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto) or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with Underwriters' Information.
(d) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure so to notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying party
may participate at its own expense in the defense of any such action. In no
event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, which consent
shall not be unreasonably withheld (provided, that for purposes of this
paragraph only, reasonableness shall be evaluated in light of the factors
identified in clauses (i) and (ii) below), settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 6 or Section 7 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
43
<PAGE>
(e) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 6(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party specifying the basis for its claim that the unpaid balance is
unreasonable, in each case prior to the date of such settlement.
(f) The provisions of this Section shall not affect any agreement between
the Company, Caribiner and Ingleby and the other Selling Stockholders with
respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, Caribiner
and Ingleby and each of the other Selling Stockholders on the one hand and the
Underwriters on the other hand from the offering of the Securities pursuant to
this Agreement (if such indemnified party is an Underwriter) or by the
indemnifying parties on the one hand and such indemnified party on the other
from the offering of the Securities (if such indemnified party is not an
Underwriter) or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, Caribiner, Ingleby and each of the other Selling Stockholders
44
<PAGE>
on the one hand and of the Underwriters on the other hand (if such indemnified
party is an Underwriter) or of the indemnifying parties on the one hand and such
indemnified party on the other (if such indemnified party is not an Underwriter)
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company,
Caribiner and Ingleby and each of the other Selling Stockholders on the one hand
and the Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company, Caribiner and Ingleby and each of the other Selling Stockholders
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus or as calculated by reference to
Schedule B to this Agreement and the cover of the Prospectus, as the case may
be, bear to the aggregate initial public offering price of the Securities as set
forth on such cover. The relative fault of the Company, Caribiner, and Ingleby
and each of the other Selling Stockholders on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, Caribiner, or Ingleby or any of the other Selling
Stockholders or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, Caribiner, Ingleby and each of the other Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 7, (i) no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and
45
<PAGE>
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission, and
(ii) no Selling Stockholder shall be required to contribute any amount in excess
of the amount of the net proceeds received by it from the Underwriters in
connection with the sale of such Selling Stockholder's Common Stock as
contemplated by this Agreement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth opposite
their respective names in Schedule A hereto and not joint.
The provisions of this Section 7 shall not affect any agreement among the
Company, Caribiner and Ingleby and each of the other Selling Stockholders with
respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement and the Pricing Agreement, or contained in certificates (i) of
officers of the Company or (ii) of any of the Selling Stockholders (or their
Attorney-In-Fact) submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company or any of
the Selling Stockholders and shall survive delivery of the Securities to the
Underwriters.
SECTION 9. Termination of Agreement. (a) The Representatives may
terminate this Agreement, by notice to the Company and each of the Selling
Stockholders, at any time at or prior to Closing Time (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
any material adverse change in the condition, financial or otherwise, or in the
earnings,
46
<PAGE>
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or any outbreak of major hostilities or
escalation of any existing major hostilities or other national or international
calamity or crisis, or any change or development involving a material and
adverse prospective change in national or international political, financial or
economic conditions, in each case the effect of which is such as to make it, in
the judgment of the Representatives, impracticable or inadvisable to proceed
with completion of the sale of or payment for the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in the Common
Stock has been suspended or limited by the Commission or the NYSE, or if trading
generally on the American Stock Exchange or the NYSE or in the over-the-counter
market has been suspended or limited, or minimum or maximum prices for trading
have been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the NASD or any other
governmental authority, or (iv) if a banking moratorium has been declared by any
of the Federal or New York authorities. As used in this Section 9(a), the term
"Prospectus" means the Prospectus in the form first used by the Underwriters to
confirm sales of the Securities.
(b) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof, and provided further that Sections 6 and 7 hereof
shall survive such termination.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it is or they are obligated to purchase under this
Agreement and the Pricing Agreement (the "Defaulted Securities"), the
Representatives shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Representatives shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
Securities to be purchased by the Underwriters on such date, each of the
non-defaulting Underwriters, severally and not jointly, shall be obligated
to purchase the full amount thereof in the proportions that their
respective underwriting
47
<PAGE>
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the Securities
to be purchased by the Underwriters on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, the Representatives, the Company or any of the Selling
Stockholders shall have the right to postpone Closing Time or the Date of
Delivery for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or the Prospectus or in any other
documents or agreements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.
SECTION 11. Default by the Selling Stockholders or the Company. If the
Company or any of the Selling Stockholders shall fail at Closing Time or on a
Date of Delivery to sell and deliver the number of Securities which the Company
or any of the Selling Stockholders is obligated to sell hereunder, then the
Underwriters may, at their option, by notice from the Representatives to each of
the Selling Stockholders and the Company, either (a) terminate this Agreement
without any liability on the fault of any non-defaulting party or (b) elect to
purchase the Securities which the non-defaulting parties have agreed to sell
hereunder.
In the event of a default by any of the Selling Stockholders or the
Company as referred to in this Section 11, the Representatives or the non-
defaulting sellers shall have the right to postpone Closing Time or the Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.
No action taken pursuant to this Section 11 shall relieve any of the
Selling Stockholders or the Company so defaulting from liability, if any, in
respect of such default.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
48
<PAGE>
Underwriters shall be directed to the Representatives c/o Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, North Tower, World Financial
Center, New York, N.Y. 10281-1201, attention Syndicate Operations, with a copy
to Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, attention
of Michael W. Blair; notices to the Company shall be directed to it at Caribiner
International, Inc., 16 West 61st Street, New York, New York 10023-7604
attention of Arthur F. Dignam, with a copy to Schulte Roth & Zabel, 900 Third
Avenue, New York, New York 10022, attention of Burton Lehman; and notices to any
of the Selling Stockholders shall be directed to them c/o Caribiner
International, Inc., 16 West 61st Street, New York, New York 10023-7604.
SECTION 13. Parties. This Agreement and the Pricing Agreement shall
each inure to the benefit of and be binding upon the Underwriters, the Company,
the Selling Stockholders and their respective successors, heirs and legal
representatives. Nothing expressed or mentioned in this Agreement or the
Pricing Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Stockholders and their respective successors, heirs and legal representatives
and the controlling persons and officers and directors referred to in Sections 6
and 7 hereof and their respective successors, heirs and legal representatives,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or the Pricing Agreement or any provision herein or therein contained.
This Agreement and the Pricing Agreement and all conditions and provisions
hereof and thereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Stockholders and their respective
successors, heirs and legal representatives, and said controlling persons and
officers and directors and their respective successors, heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
SECTION 14. Waiver of Immunities. To the extent that any of the Selling
Stockholders or any of their properties, assets or revenues may have or may
hereafter become entitled to, or have attributed to any of the Selling
Stockholders, any right of immunity, on the grounds of sovereignty or otherwise,
from any legal action, suit or proceeding, from the giving of any relief in any
such legal action, suit or proceeding, from setoff or counterclaim, from the
jurisdiction of any court, from service of process, from attachment upon or
prior to judgment, from attachment in aid of execution of judgment, or from
execution of judgment, or other legal process or proceeding for the giving of
any relief
49
<PAGE>
or for the enforcement of any judgment, in any jurisdiction in which proceedings
may at any time be commenced, with respect to the obligations and liabilities of
the Selling Stockholders, or any other matter under or arising out of or in
connection with this Agreement, each of the Selling Stockholders hereby
irrevocably and unconditionally waives, and agrees not to plead or claim, any
such immunity and consents to such relief and enforcement.
SECTION 15. GOVERNING LAW AND TIME. THIS AGREEMENT AND THE PRICING
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID
STATE. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 16. Counterparts. This Agreement may be executed in one or
more counterparts and, when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to each of the Company, Caribiner, Raymond S.
Ingleby, Arthur F. Dignam and Mark M. Cohen a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Underwriters, the Company, Caribiner and each of the Selling Stockholders in
accordance with its terms.
Very truly yours,
CARIBINER INTERNATIONAL, INC.
By:
---------------------------------
Name:
Title:
CARIBINER, INC.
By:
---------------------------------
Name:
Title:
-------------------------------------
Mark M. Cohen
-------------------------------------
Arthur F. Dignam
50
<PAGE>
______________________________
Raymond S. Ingleby
51
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
ALEX. BROWN & SONS INCORPORATED
FURMAN SELZ LLC
SCHRODER WERTHEIM & CO. INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ____________________________________________
Name:
Title:
For themselves and as Representatives of the
other Underwriters named in Schedule A hereto.
52
<PAGE>
SCHEDULE A
Number of Initial
Securities
Name of Underwriter to Be Purchased
- ------------------- -----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................
Alex. Brown & Sons Incorporated................
Furman Selz LLC................................
Schroder Wertheim & Co. Incorporated...........
-----------
Total....................................... [1,878,200]
===========
<PAGE>
SCHEDULE B
Number of Maximum
Initial Number of
Securities Option
to Securities
Be Sold to Be Sold
----------- ----------
Caribiner International, Inc. [1,750,000] [81,730]
SELLING STOCKHOLDERS
Record Owner Beneficial Owner
- ------------------- -------------------
Mark M. Cohen Mark M. Cohen [14,200] [0]
Arthur F. Dignam Arthur F. Dignam [14,000] [0]
Raymond S. Ingleby Raymond S. Ingleby [100,000] [200,000]
----------- ---------
Total [1,878,200] [281,730]
=========== =========
<PAGE>
SCHEDULE C
Stockholders, Directors and Officers of
the Company Who Have
Agreed to Lock-Up
Pursuant to Section 1(a)(xxviii)
of the Purchase Agreement
------------------------------
Warburg, Pincus Investors, L.P.
Raymond S. Ingleby
Arthur F. Dignam
Mark M. Cohen
Lawrence P. Golen
Errol M. Cook
Bryan D. Langton
Sidney Lapidus
David Libowitz
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EXHIBIT A
[1,878,200] Shares
CARIBINER INTERNATIONAL, INC.
(a Delaware corporation)
Common Stock
(Par Value $.01 Per Share)
PRICING AGREEMENT
-----------------
[Date]
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
ALEX. BROWN & SONS INCORPORATED
FURMAN SELZ LLC
SCHRODER WERTHEIM & CO. INCORPORATED
as Representatives of the several Underwriters
named in the within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, NY 10281-1209
Ladies and Gentlemen:
Reference is made to the Purchase Agreement, dated ___________________
(the "Purchase Agreement"), relating to the purchase by the several Underwriters
named in Schedule A thereto, for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Alex. Brown & Sons Incorporated, Furman Selz LLC, and Schroder
Wertheim & Co. Incorporated are acting as representatives (the
"Representatives"), of the above shares of Common Stock (the "Initial
Securities"), of Caribiner International, Inc. (the "Company").
Pursuant to Section 2 of the Purchase Agreement, the Company and each
Selling Stockholder agrees with each Underwriter as follows:
1. The initial public offering price per share for the Initial
Securities, determined as provided in said Section 2, shall be $______.
A-1
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2. The purchase price per share for Initial Securities to be paid by
the several Underwriters shall be $_____, being an amount equal to the initial
public offering price set forth above less $____ per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to each of the Company, Raymond S. Ingleby,
Mark M. Cohen and Arthur F. Dignam a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Underwriters, the Company and the Selling Stockholders in accordance with
its terms.
Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed to such term in the Purchase Agreement.
Very truly yours,
CARIBINER INTERNATIONAL, INC.
By: ____________________________
Name:
Title:
_________________________________
Mark M. Cohen
_________________________________
Arthur F. Dignam
_________________________________
Raymond S. Ingleby
A-2
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CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
ALEX. BROWN & SONS INCORPORATED
FURMAN SELZ LLC
SCHRODER WERTHEIM & CO. INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: _________________________________________
Name:
Title:
For themselves and as Representatives of the other Underwriters
named in Schedule A to the Purchase Agreement.
A-3
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EXHIBIT B
---------
[FORM OF COMFORT LETTER]
We have audited the consolidated balance sheets of the Company as of September
30, 1996 and 1995, the consolidated statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended September 30,
1996, the balance sheets of TAVS as of December 31, 1995 and September 27, 1996,
and the statements of operations and divisional equity and cash flows for the
year ended December 31, 1995 and the nine-month period ended September 27, 1996
and the balance sheet of SCH as of March 31, 1996, and the consolidated profit
and loss account and cash flow statement for the nine-month period ended March
31, 1996, all included in the Registration Statement (No. 333-18327) on Form S-1
filed by the Company under the Securities Act of 1933 (the "Act"); our reports
with respect thereto are also included in such Registration Statement as amended
as of [date], herein referred to as the "Registration Statement".
In connection with the Registration Statement:
1. We are independent auditors with respect to the Company within the meaning
of the Act and the applicable published rules and regulations thereunder.
2. In our opinion, the consolidated financial statements of the Company and
SCH and the financial statements of TAVS, audited by us and included in the
Registration Statement, comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations thereunder.
3. We have not audited, in accordance with generally accepted auditing
standards, any consolidated financial statements of the Company as of any
date or for any period subsequent to September 30, 1996. The purpose (and
therefore the scope) of our audit for the year ended September 30, 1996 was
to enable us to express our opinion on the consolidated financial
statements at September 30, 1996, and for the year then ended, but not on
the consolidated financial statements for any interim period within that
year. Therefore, we are unable to and do not express an opinion on the
unaudited consolidated balance sheets as of December 31, 1995 and 1996, and
the unaudited consolidated statements of income, stockholders' equity, and
cash flows for the three-month periods ended December 31, 1995 and 1996,
included in the Registration Statement, or the financial position, results
of operations, or cash flows as of any date or for any period subsequent to
September 30, 1996.
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4. For purposes of this letter, we have read the minutes of meetings of the
Board of Directors and Audit Committee of the Company as set forth in the
minute books through [a date not more than five days prior to the date of
this agreement] officials of the Company having advised us that the minutes
of all such meetings through that date were set forth therein. There were
no formal minutes available for any meetings held after [date] and through
the date of this letter. With respect to meetings held after [date], we
have obtained from the Company a summary of topics discussed at the
meetings. We also have carried out other procedures to [a date not more
than five days prior to the date of this agreement] as follows (our work
did not extend to the period from [a date not more than five days prior to
the date of this agreement] to [the date of this agreement], inclusive):
With respect to the three-month periods ended December 31, 1996 and 1995,
we have:
(1) Performed the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, Interim Financial Information,
on the unaudited consolidated balance sheet as of December 31, 1996,
and the unaudited consolidated statements of income, stockholders'
equity and cash flows for the three-month periods ended December 31,
1995 and 1996 included in the Registration Statement.
(2) Inquired of certain officials of the Company who have responsibility
for financial and accounting matters whether the unaudited
consolidated financial statements referred to in 4.(1) above comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related rules and regulations.
The foregoing procedures do not constitute an audit conducted in accordance
with generally accepted auditing standards. Also, they would not
necessarily reveal matters of significance with respect to the comments in
the following paragraph. Accordingly, we make no representations as to the
sufficiency of the foregoing procedures for your purposes.
5. Nothing came to our attention as a result of the foregoing procedures,
however, that caused us to believe that:
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(1) Any material modifications should be made to the unaudited
consolidated financial statements described in 4.(1) above, included
in the Registration Statement, for them to be in conformity with
generally accepted accounting principles.
(2) The unaudited consolidated financial statements described in 4.(1)
above do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations.
6. Company officials have advised us that no consolidated financial statements
as of any date or for any period subsequent to December 31, 1996 are
available; accordingly, the procedures carried out by us with respect to
changes in financial statement items after December 31, 1996, have, of
necessity, been even more limited than those with respect to the periods
referred to in 4.(1) above. We have inquired of certain officials of the
Company who have responsibility for financial and accounting matters as to
whether (i) at [a date not more than 2 days prior to the date of this
agreement] there was nay change in the capital stock, increase in
consolidated long-term debt of the Company, or any decrease in working
capital or stockholders' equity as compared with the amounts shown on the
December 31, 1996 unaudited consolidated balance sheet included in the
Registration Statement or (ii) during the period from January 1, 1997 to [a
date not more than 2 days prior to the date of this agreement], there were
any decreases, as compared with the corresponding period in the preceding
year, in consolidated revenues, operating income, net income or net income
available to common stockholders of the Company. On the basis of these
inquiries, nothing came to our attention that caused us to believe that
there was any such change, increase, or decrease, except in all instances
for changes, increases or decreases which the Registration Statement
discloses have occurred or may occur.
7. At your request, we have:
(1) Read the unaudited pro forma consolidated balance sheet as of December
31, 1996, and the unaudited pro forma condensed consolidated
statements of income for the year ended September 30, 1996, and the
three-month period ended December 31, 1996, included in the
Registration Statement.
3
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(2) Inquired of certain officials of the Company and of SCH and TAVS who
have responsibility for financial and accounting matters about:
(i) The basis for their determination of the pro forma adjustments,
and
(ii) Whether the unaudited pro forma condensed consolidated financial
statements referred to in 7(1) comply as to form in all material
respects with the applicable accounting requirements of rule
11-02 of Regulation S-X.
(3) Proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the unaudited pro forma condensed
consolidated financial statements.
The foregoing procedures are substantially less in scope than an
examination, the objective of which is the expression of an opinion on
management's assumptions, the pro forma adjustments, and the application of
those adjustments to historical financial information. Accordingly, we do
not express such an opinion. The foregoing procedures would not
necessarily reveal matters of significance with respect to the comments in
the following paragraph. Accordingly, we make no representation about the
sufficiency of such procedures for your purposes.
8. Nothing came to our attention as a result of the procedures specified in
paragraph 7, however, that caused us to believe that the unaudited pro
forma condensed consolidated financial statements referred to in 7(1)
included in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of rule 11-02
of Regulation S-X and that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those statements.
Had we performed additional procedures or had we made an examination of the
pro forma condensed consolidated financial statements, other matters might
have come to our attention that would have been reported to you.
9. At your request, we have also performed other procedures, not constituting
an audit, with respect to certain amounts, percentages, numerical data and
financial information appearing in the Registration Statement, which are
specified herein, and have compared certain of such items with, and have
found
4
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such items to be in agreement with, the accounting and financial records of
the Company.
We compared the executive compensation information and the information
included under the heading "Executive Compensation" and "Selected Financial
Data" with the requirements of Item 402 and Item 301, respectively, of
Regulation S-K. We also inquired of certain officials of the Company who
have responsibility for financial and accounting matters whether this
information conforms in all material respects with the disclosure
requirements of Item 402 and Item 301 of Regulation S-K. Nothing came to
our attention as a result of the foregoing procedures that caused us to
believe that this information does not conform in all material respects
with the disclosure requirements of Item 402 and Item 301, respectively, of
Regulation S-K. Also, we make no legal representations as to questions of
legal interpretation regarding the completeness or appropriateness of the
Company's determination of what constitutes executive compensation for
purposes of the SEC disclosure requirements on executive compensation.
10. Our audits of the consolidated financial statements of the Company for the
periods referred to in the introductory paragraph of this letter comprised
audit tests and procedures deemed necessary for the purpose of expressing
an opinion on such financial statements taken as a whole. For none of the
periods referred to therein, or any other periods, did we perform audit
tests for the purpose of expressing an opinion on individual balances of
accounts, amounts, percentages, or summaries of selected transactions such
as those enumerated in the Registration Statement attached hereto and
referred to in 9 above and, accordingly, we do not express an opinion
thereon.
11. It should be understood that we make no representations as to questions of
legal interpretation or as to the sufficiency for your purposes of the
procedures referred to in 9 above; also, such procedures would not
necessarily reveal any material misstatement of the information identified
in 9 above. Further, we have addressed ourselves solely to the foregoing
data as set forth in the Registration Statement, and make no
representations as to the adequacy of disclosure or as to whether any
material facts have been omitted.
12. This letter is solely for the information of the addressees and to assist
the underwriters in conducting and documenting their investigation of the
affairs of
5
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the Company in connection with the offering of the securities covered by
the Registration Statement, and is not to be used, circulated, quoted, or
otherwise referred to within or without the underwriting group for any
other purpose, including, but not limited to, the registration, purchase,
or sale of securities, nor is it to be filed with or referred to in whole
or in part in the Registration Statement or any other document, except that
a reference may be made to it in the underwriting agreement or any list of
closing documents pertaining to the offering of the securities covered by
the Registration Statement.
6
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EXHIBIT 5
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
February 26, 1997
Caribiner International, Inc.
16 W. 61st Street
New York, New York 10023
Ladies and Gentlemen:
We have acted as special counsel for Caribiner International, Inc., a
Delaware corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-1, as amended (Registration No. 333-18327) (the
"Registration Statement"), relating to the registration under the Securities Act
of 1933, as amended (the "Securities Act"), of shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), being sold in connection
with the offering described in the Registration Statement. As stated therein,
an aggregate of 2,159,930 shares of Common Stock are being sold by the Company
and by certain stockholders of the Company to the Underwriters named in the
Registration Statement (the "Underwriters") pursuant to a purchase agreement
(the "Purchase Agreement").
As special counsel to the Company, in connection with this opinion, we
have examined and relied upon such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to form the basis
for the opinions set forth herein. In our examinations, we have assumed the
genuineness of all signatures, the legal capacity of natural persons signing or
delivering any instrument, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified or photostatic copies and the authenticity of the originals of such
latter documents.
We are attorneys admitted to practice in the State of New York, and
the opinions set forth below and any reference to statutes, rules or regulations
herein are limited to the laws of
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Caribiner International, Inc.
February 26, 1997
Page 2
the United States of America and the State of New York, and the General
Corporation Law of the State of Delaware.
Based upon the foregoing, we are of the opinion that the shares of
Common Stock to be issued and sold by the Company pursuant to the Purchase
Agreement will, when issued in accordance with the terms of the Purchase
Agreement and against payment therefor as set forth therein, be validly issued,
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm appearing under the
heading "Legal Matters" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the General Rules and Regulations of
the Commission thereunder.
Very truly yours,
/s/ Schulte Roth & Zabel LLP
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial and Operating Data" and "Experts" and to the use of our report dated
December 6, 1996, except for Note 15 as to which the date is December 20,
1996, with respect to the Consolidated Financial Statements of Caribiner
International, Inc. in the Registration Statement (Form S-1 No. 333-18327) and
related Prospectus of Caribiner International, Inc. for the registration of
2,159,930 shares of its common stock.
/s/ Ernst & Young LLP
New York, NY February 26, 1997
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EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 18, 1996, with respect to the
Consolidated Financial Statements of SCH International Limited in the
Registration Statement (Form S-1 No. 333-18327) and related Prospectus of
Caribiner International, Inc. for the registration of 2,159,930 shares of its
common stock.
/s/ Ernst & Young
Chartered Accountants
London, England February 26, 1997
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EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated November 15, 1996 and December 13, 1996 with
respect to the Financial Statements of Total Audio Visual Services, a division
of General Electric Capital Computer Leasing Corporation, in the Registration
Statement (Form S-1 No. 333-18327) and related Prospectus of Caribiner
International, Inc. for the registration of 2,159,930 shares of its common
stock.
/s/ Ernst & Young LLP
Atlanta, GA February 26, 1997
