<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
COMMISSION FILE NUMBER: 1-14234
Caribiner International, Inc.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3466655
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16 West 61st Street, New York, NY 10023
------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 541-5300
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The registrant had 23,602,165 shares of Common Stock (par value $0.01 per
share) outstanding as of May 1, 1998.
<PAGE>
INDEX
-----
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Review Report of Independent Accountants..................2
Consolidated Balance Sheets as of
September 30, 1997 and March 31, 1998.....................3
Consolidated Statement of Operations for
the six months ended March 31, 1997 and 1998..............4
Consolidated Statements of Operations for
the three months ended March 31, 1997 and 1998............5
Consolidated Statements of Cash Flows for
the six months ended March 31, 1997 and 1998..............6
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended March 31, 1998............7
Notes to Consolidated Financial Statements................8
Management's Discussion and Analysis of
Financial Condition and Results of Operations............12
PART II. Other Information
Item 2. Changes in Securities....................................18
Item 4. Submission of Matters to a Vote of Security Holders......19
Item 6. Exhibits and Reports on Form 8-K.........................21
SIGNATURES..................................................................23
- 1 -
<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 March 31, 1998, and the related consolidated
statements of operations for the three and six months ended March 31, 1997 and
1998, the consolidated statement of changes in stockholders' equity for the
six months ended March 31, 1998 and the consolidated statements of cash flows
for the six months ended March 31, 1997 and 1998. 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, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended, not presented
herein, and in our report dated December 3, 1997, 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, 1997, 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
May 8, 1998
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<PAGE>
Caribiner International, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, March 31,
ASSETS 1997 1998
(Note 1) (unaudited)
------------------ -----------------
(amounts in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 10,253 $ 11,272
Trade accounts receivable - net of allowance for doubtful
accounts of $1,497 and $3,610 at September 30, 1997 and
March 31, 1998, respectively 77,780 132,646
Deferred charges 10,229 19,029
Prepaid expenses and other current assets 9,128 18,131
Assets held for sale (Note 4) -- 26,975
------------------ -----------------
Total Current Assets 107,390 208,053
Property and equipment - net 45,714 93,565
Goodwill - net 157,154 435,279
Other assets 3,619 10,501
------------------ -----------------
TOTAL ASSETS $ 313,877 $ 747,398
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,217 $ 5,614
Trade accounts payable 18,816 23,632
Accrued expenses and other current liabilities 23,200 53,206
Accrued production costs 11,055 20,939
Taxes payable 4,726 8,132
Deferred income 12,225 23,487
------------------ -----------------
Total Current Liabilities 71,239 135,010
Long-term debt 60,642 415,978
Deferred income 5,617 11,018
Deferred tax liability 715 894
Other liabilities 4,230 3,646
------------------ -----------------
TOTAL LIABILITIES 142,443 566,546
Stockholders' Equity:
Preferred stock, $0.01 par value:
2,000 shares authorized, none issued and outstanding at
September 30, 1997 and March 31, 1998, respectively -- --
Common stock, $0.01 par value:
40,000 and 100,000 voting shares authorized at
September 30, 1997 and March 31, 1998, respectively;
23,417 and 23,591 shares issued and outstanding at
September 30, 1997 and March 31, 1998, respectively 234 236
Additional paid-in capital 159,874 166,182
Translation adjustment 11 (168)
Retained earnings 11,315 14,602
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 171,434 180,852
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 313,877 $ 747,398
================== =================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<PAGE>
Caribiner International, Inc.
Consolidated Statements of Operations
For the Six Months Ended
(unaudited)
<TABLE>
<CAPTION>
March 31,
1997 1998
----------------- ------------------
(amounts in thousands)
<S> <C> <C>
Service revenue $ 83,590 $ 119,119
Rental revenue 46,874 195,409
Intercompany eliminations (370) (4,701)
----------------- ------------------
Total revenue 130,094 309,827
Cost of service revenue 58,086 79,615
Cost of rental revenue 29,493 136,015
Intercompany eliminations (370) (4,701)
----------------- ------------------
Total cost of revenue 87,209 210,929
----------------- ------------------
Gross profit 42,885 98,898
Operating expenses:
Selling, general and administrative expenses 31,187 70,320
Restructuring charge (Note 3) -- 3,828
Depreciation and amortization 3,025 9,048
----------------- ------------------
Total operating expenses 34,212 83,196
----------------- ------------------
Equity in income of affiliated company (Note 4) -- 688
----------------- ------------------
Operating income 8,673 16,390
Interest expense, net 1,118 9,904
----------------- ------------------
Income before taxes and extraordinary charge 7,555 6,486
Provision for taxes 3,098 2,594
----------------- ------------------
Income before extraordinary charge 4,457 3,892
Extraordinary charge on early extinguishment of debt
(net of income taxes of $403) (Note 5) -- 605
----------------- ------------------
Net income $ 4,457 $ 3,287
================= ==================
Basic and diluted earnings per common share:
Income before extraordinary charge $ 0.22 $ 0.17
Extraordinary charge -- (0.03)
----------------- ------------------
Net income per common share $ 0.22 $ 0.14
================= ==================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<PAGE>
Caribiner International, Inc.
Consolidated Statements of Operations
For the Three Months Ended
(unaudited)
<TABLE>
<CAPTION>
March 31,
1997 1998
----------------- ------------------
(amounts in thousands)
<S> <C> <C>
Service revenue $ 45,284 $ 62,941
Rental revenue 32,522 126,967
Intercompany eliminations (370) (2,530)
----------------- ------------------
Total revenue 77,436 187,378
Cost of service revenue 31,671 41,741
Cost of rental revenue 20,960 86,708
Intercompany eliminations (370) (2,530)
----------------- ------------------
Total cost of revenue 52,261 125,919
----------------- ------------------
Gross profit 25,175 61,459
Operating expenses:
Selling, general and administrative expenses 16,831 38,958
Restructuring charge (Note 3) - 3,828
Depreciation and amortization 1,441 5,417
----------------- ------------------
Total operating expenses 18,272 48,203
----------------- ------------------
Operating income 6,903 13,256
Interest expense, net 576 6,981
----------------- ------------------
Income before taxes 6,327 6,275
Provision for taxes 2,607 2,510
----------------- ------------------
Net income $ 3,720 $ 3,765
================= ==================
Basic and diluted earnings per common share $ 0.18 $ 0.16
================= ==================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<PAGE>
Caribiner International, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended
(unaudited)
<TABLE>
<CAPTION>
March 31,
1997 1998
---------------- ------------------
(amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,457 $ 3,287
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 4,944 16,949
Extraordinary charge on early extinguishment of debt,
net of tax -- 605
Restructuring charge, net of cash payments -- 2,615
Change in assets and liabilities, net of amounts acquired:
(Increase) in trade accounts receivable (19,478) (13,096)
(Increase) in deferred charges (4,054) (7,210)
(Increase) in prepaid expenses and
other current assets (785) (6,734)
(Increase) in other assets (1,774) (6,502)
(Decrease) in trade accounts payable (771) (6,502)
Increase in deferred income 11,468 14,009
Increase in accrued expenses and
other liabilities 5,067 5,485
---------------- ------------------
Net cash (used in) provided by operating activities (926) 2,906
---------------- ------------------
Cash flow used in investing activities:
Purchase of property and equipment (4,952) (25,714)
Acquisition of businesses, net of
cash acquired (39,616) (291,758)
---------------- ------------------
Net cash used in investing activities (44,568) (317,472)
---------------- ------------------
Cash flow provided by financing activities:
Net proceeds from issuance of common stock 86,674 --
Proceeds from exercise of stock options -- 459
Repayments of long-term debt (73,578) (285,243)
Net (repayments) of bank line of credit (6,000) --
Proceeds from long-term debt 58,500 600,002
---------------- ------------------
Net cash provided by financing activities 65,596 315,218
---------------- ------------------
Translation effect on cash and cash equivalents 160 367
Net increase in cash 20,262 1,019
Cash, beginning of period 8,432 10,253
---------------- ------------------
Cash, end of period $ 28,694 $ 11,272
================ ==================
Supplemental disclosure of cash flow information:
Interest paid $ 1,033 $ 7,000
================ ==================
Income taxes paid $ 1,959 $ 4,276
================ ==================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
- 6 -
<PAGE>
Caribiner International, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended March 31, 1998
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Total
----------------------------- Additional Retained Translation Stockholders'
Shares Amount Paid in Capital Earnings Adjustment Equity
------------- ------------- --------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997 23,417 $234 $ 159,874 $11,315 $ 11 $171,434
Issuance of common stock upon
acquisitions 152 2 5,836 -- -- 5,838
Issuance of common stock upon
exercise of stock options 22 * 459 -- -- 459
Issuance of common stock under
nonemployee directors' stock
plan * * 13 -- -- 13
Translation adjustment -- -- -- -- (179) (179)
Net income -- -- -- 3,287 -- 3,287
------------- ------------- --------------- ------------ ------------ -------------
Balance at March 31, 1998 23,591 $236 $166,182 $14,602 $(168) $180,852
============= ============= =============== ============ ============ =============
</TABLE>
*Amount less than 1,000
See accompanying notes to the unaudited consolidated financial statements.
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<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 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 six months ended March 31,
1998 are not necessarily indicative of the results of operations that may
be expected for any other interim periods or for the fiscal year ending
September 30, 1998.
The balance sheet as of September 30, 1997 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.
Certain reclassifications have been made to the consolidated statement of
operations for the three and six months ended March 31, 1997 and 1998 to
conform presentation in each period.
2. Summary of Significant Accounting Policies
New Accounting Pronouncements
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which was required to be adopted on
December 31, 1997. At that time, the Company changed the method used to
compute earnings per share and has restated all prior periods. Under the
new requirements for calculating basic earnings per share, the dilutive
effect of stock options has been excluded.
In June, 1997, the Financial Accounting Standards Board issued SFAS No.
131, Financial Reporting for Segments of a Business Enterprise
("Statement 131"), which applies to all public business enterprises.
Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued
to shareholders. Statement 131 is effective for financial statements for
periods beginning after December 15, 1997. Management is in the process
of determining the effect of Statement 131 on its financial statement
disclosures.
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<PAGE>
3. Restructuring Charge
During the three months ended March 31, 1998, the Company continued the
integration of its recent acquisitions, primarily in the audio visual
services businesses. These efforts included strategic evaluations of
operating infrastructures, personnel, facilities and equipment with the
goal of enhancing operational efficiency and improving gross profit and
operating income. As a result of these efforts, the Company has recorded
a non-recurring, pre-tax restructuring charge of $3.8 million. The charge
includes $2.8 million related to employee termination and severance costs
associated with a reduction in the workforce of approximately 155
employees. Also, included in the charge is $1.0 million relating to lease
termination costs and the write off of leasehold improvements of vacated
facilities. The restructuring liability remaining at March 31, 1998 was
$2.3 million.
4. Business Acquisitions
In October, 1997, the Company acquired all of the outstanding capital
stock of Spectrum Data Systems, Inc. ("Spectrum Data"), an Atlanta-based
provider of audiovisual presentation systems, design and installation
services with a primary customer base in the southeastern United States.
Aggregate consideration paid for the acquisition was $2.8 million in cash
and the issuance of 43,628 shares of the Company's common stock having a
then fair market value of $1.9 million.
Pursuant to an offer document dated November 1, 1997, (the "Offer
Document"), the Company announced a cash offer (the "Offer") by a wholly
owned United Kingdom subsidiary, Caribiner Services Limited, to acquire
all of the outstanding capital shares of Visual Action Holdings plc, a
United Kingdom company ("Visual Action").
As of November 24, 1997, by means of open market purchases and shares
tendered pursuant to the Offer Document, the Company owned or had the
obligation to acquire a total of 46,680,682 shares of Visual Action (or
approximately 93.2% of the issued shares capital). Thereafter, the
Company began the process of acquiring those shares of Visual Action not
tendered pursuant to the Offer by compulsory purchases pursuant to the
provisions of the UK Companies Act 1985. Such compulsory purchases
were completed during February 1998. Prior to November 24, 1997, the
Company acquired a minority interest of Visual Action through open market
purchases resulting in the equity income reflected for the period. The
Company consolidated the financial results of Visual Action as of
December 1, 1997. The goodwill resulting from the acquisition of Visual
Action is being amortized over 40 years.
The total acquisition price for the shares was approximately $265.0
million, including transaction costs of approximately $15.0 million. In
addition, the Company assumed approximately $44.3 million in outstanding
indebtedness of Visual Action. The cost of the acquisition, including
transaction costs, was financed through the Company's new loan agreement
(see Note 5).
Visual Action provides corporate meeting services, including audiovisual
and exhibition and broadcast video services in the United States and the
United Kingdom. At the time of its acquisition of Visual Action, the
Company announced its intention to dispose of Visual Action's broadcast
video services unit as soon as practicable. The assets of the broadcast
video services unit which the Company intended to sell have been reflected
separately in the accompanying consolidated balance sheet at their
estimated fair market value. Operating results relating to the broadcast
video services division since the date of acquisition which were accounted
for as additional goodwill in the accompanying balance sheet were not
material. (See Note 7).
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<PAGE>
In December, 1997, the Company acquired substantially all of the assets
and assumed certain of the liabilities of Consumer Access Limited
("Consumer Access"), a business communications services provider based in
Hong Kong. The Company paid aggregate consideration of $3.8 million,
consisting of cash of $2.8 million and the issuance of 22,859 shares
having a then fair market value of approximately $1.0 million.
In January, 1998, the Company acquired Right Source, Inc. for an initial
consideration of $17 million in cash, plus the repayment of approximately
$2.4 million in outstanding indebtedness. In addition, Caribiner will pay
additional consideration of up to $17 million in cash and common stock in
the event that the acquired business meets certain performance goals
during the fiscal year ending September 30, 1998. Right Source, Inc.,
with offices in South Carolina and Connecticut, is a marketing support
and training services company, focusing primarily on product launches and
customer education for the information technology industry.
In February, 1998, the Company acquired substantially all of the assets
and assumed certain of the liabilities of The Bridge Design Limited, a
Hong Kong-based provider of design services. The Company paid aggregate
consideration of approximately $6.2 million, which consisted of
approximately $4.4 million in cash and the issuance of 53,958 shares of
the Company's common stock having a then fair market value of
approximately $1.8 million.
The following unaudited consolidated pro forma results of operations of
the Company for the six months ended March 31, 1997 and 1998 give effect
to the acquisitions of Video Supply Company, Inc. d/b/a Projexions Video
Supply, Blumberg Communications, Inc., D&D Enterprises, Inc. d/b/a Show
Solutions, WCT Live Communication Limited, Bauer Audio Visual, Inc.,
Visual Action and Right Source, Inc., as if such transactions had
occurred on October 1, 1996. The acquisitions
of Spectrum Data, Consumer Access and Bridge Design would not have had or
did not have, as the case may be, a significant effect on the Company's
results of operations during the six months ended March 31, 1997 and 1998.
Six Months Ended
March 31,
1997 1998
--------------------------------------
(in millions, except per share data)
Revenue $ 309.6 $ 346.9
Income before taxes and
extraordinary charge 4.1 6.9
Net income (before
extraordinary charge) 2.5 4.1
Pro forma diluted earnings
per common share $ 0.11 $0.17
The above calculation of pro forma diluted earnings per common share
assumes that approximately 21,885,794 and 23,686,404 shares are
outstanding during the six months ended March 31, 1997 and 1998,
respectively.
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<PAGE>
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 described above been made on October 1,
1996 or of results which may occur in any future period.
5. Debt
On October 28, 1997, the Company entered into a new loan agreement with a
syndicate of banks pursuant to which the Company increased its aggregate
available bank financing from $100 million to $550 million, consisting of a
$300 million six year revolving line of credit to be used in connection
with future acquisitions and for working capital and general corporate
purposes and a $250 million six year term loan ("the 1997 Facilities")
which was utilized in connection with the acquisition of Visual Action
(see Note 4). Amounts outstanding under the Company's former bank
facilities were repaid with the proceeds from the 1997 Facilities. The
Company recognized an extraordinary charge of $0.6 million, net of taxes of
$0.4 million, in the quarter ended December 31, 1997 resulting from the
write-off of the unamortized debt issuance fees relating to the Company's
former bank facilities. The Company incurred approximately $5.0 million of
debt issuance fees relating to the 1997 Facilities. Such fees will be
amortized over the term of the 1997 Facilities. The maturity date of each
of the 1997 Facilities is September 30, 2003. Interest on outstanding
amounts under the 1997 Facilities is payable quarterly in arrears and, at
the option of the Company, accrues at either (i) LIBOR
plus an applicable margin or (ii) an alternate base rate based upon the
greatest of (a) the agent bank's prime rate, (b) the three-month
secondary certificate of deposit rate and (c) the federal funds rate. The
interest rate on the 1997 Facilities is currently LIBOR plus 1.125%. The
applicable interest rates will increase by 2.0% if principal or interest
is not paid when due (after applicable grace periods). As of April 30,
1998, the Company had approximately $418.4 million outstanding under the
1997 Facilities. In addition, as of April 30, 1998, approximately $16.3
million was outstanding under credit facilities assumed in connection
with the acquisition of Visual Action.
6. Earnings per Common Share
A reconciliation of the number of shares used for the calculation of basic
and dilutive earnings per common share is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1998 1997 1998
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding 20,682,520 23,543,999 19,933,800 23,508,286
Effect of stock options 68,338 157,365 66,472 178,118
------------- -------------- -------------- -------------
Weighted average number of
common shares outstanding,
including effect of dilutive
securities 20,750,858 23,701,364 20,000,272 23,686,404
</TABLE>
7. Subsequent Event
On May 12, 1998, the Company completed its disposition of the broadcast
video services division of Visual Action for approximately $27.6 million in
cash, excluding estimated transaction costs of $1.5 million. As described
in Note 4, the Company announced its intention to sell Visual Action's
broadcast video services unit when it acquired Visual Action in November,
1997. The difference between the net proceeds to be received from the
disposition and the book value of the assets held for resale will be
accounted for as additional goodwill.
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<PAGE>
Caribiner International, Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Six months Ended March 31, 1998 Compared to
Six months Ended March 31, 1997
Revenue. Revenue increased $179.7 million, or 138.2%, from $130.1 million in
the six months ended March 31, 1997 to $309.8 million in the six months ended
March 31, 1998. The increase resulted primarily from expanded activities from
existing clients, projects for new clients and the acquisition of other
business communications services companies. Approximately 82.6% of the
increase was attributable to revenue from the rental of audio visual equipment
through the Company's audio visual services division, including the impact of
the Company's acquisition in November, 1997 of Visual Action Holdings plc
("Visual Action"). Increases in service revenue primarily from clients in the
food services, petroleum, consumer products and government industries accounted
for the remainder of the total revenue growth.
Gross profit. Total gross profit increased $56.0 million, or 130.6%, from
$42.9 million in the six months ended March 31, 1997 to $98.9 million in the
same period of 1998, primarily as a result of the revenue growth described
above. As a percentage of service revenue, the gross profit margin increased
from 30.5% in the six months ended March 31, 1997 to 33.2% in the six months
ended March 31, 1998, before considering intercompany eliminations. The
increased gross profit margin is due to the specific production requirements
of the contracts completed during the period. Gross profit as a percentage of
rental revenue was 30.4% for the six months ended March 31, 1998 compared to
37.1% in the prior comparable period, before considering intercompany
eliminations. The decrease in the gross margin resulted primarily from a
higher level of equipment sales and installations revenue, which generates a
lower gross margin, the impact of acquired rental businesses which have
historically operated at lower gross margins, increased costs relating to the
strengthening of the rental infrastructure enabling it to handle future
revenue growth and the inclusion of Visual Action for the month of December, a
period with fixed costs but lower revenue due to the holidays. Gross profit on
rental revenue for the six months ended March 31, 1997 and 1998 is impacted by
approximately $1.7 million and $7.9 million, respectively, of depreciation
expense related to rental equipment used in the audio visual businesses. Such
depreciation expense is included in cost of rental revenue.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $39.1 million, or 125.5%, from $31.2 million
in the six months ended March 31, 1997 to $70.3 million in the six months
ended March 31, 1998. The increase was due primarily to acquisitions and to
support other revenue growth, as well as to normal inflationary increases.
Salaries and related costs increased $23.8 million from increased personnel
resulting from acquisitions and to support the Company's overall
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<PAGE>
significant growth, as well as normal inflationary increases. Other general and
administrative expenses, including rent and related costs, telephone, office
supplies, as well as other miscellaneous expenses, increased $12.5 million due
to acquisitions and to support the revenue growth. Direct selling expenses such
as travel, marketing and other costs related to obtaining business increased
$2.8 million. Selling, general and administrative expenses, as a percentage of
total revenue, decreased from 24% during the six months ended March 31, 1997 to
22.7% in the six months ended March 31, 1998 as a result of cost management
controls and leveraging the Company's existing core infrastructure.
Restructuring Charge. During the three months ended March 31, 1998, the
Company continued the integration of its recent acquisitions, primarily in the
audio visual services businesses. These efforts included strategic evaluations
of operating infrastructures, personnel, facilities and equipment with the
goal of enhanced operational efficiency and improved gross profit and
operating income. As a result of these plans, the Company has recorded a
non-recurring, pre-tax restructuring charge of $3.8 million. The charge
included $2.8 million related to employee termination and severance costs
associated with a reduction in the workforce of approximately 155 employees.
Also included in the charge was $1.0 million related to lease termination
costs and the write off of leasehold improvements of vacated facilities. The
restructuring liability remaining at March 31, 1998 was $2.3 million.
Depreciation and amortization. Depreciation and amortization expense for the
six months ended March 31, 1998 was $9.0 million, an increase of $6.0 million
as compared to $3.0 million for the corresponding period in the prior year.
Property and equipment acquired through acquisitions and the continued
investment in information technology resulted in increased depreciation
expense of $1.4 million. Amortization expense increased $4.6 million resulting
primarily from goodwill arising from acquisitions.
Equity in Income of Visual Action. Prior to November 24, 1997, the Company
acquired a minority interest in Visual Action through open market purchases
resulting in the equity in income reflected for the period. The Company
consolidated the financial results of Visual Action as of December 1, 1997.
Interest expense, net. Interest expense, net increased $8.8 million in the six
months ended March 31, 1998 from $1.1 million due to higher average borrowings
to finance acquisitions and increased working capital requirements.
Provision for taxes. Taxes reflect an allocation based on the full year
anticipated effective tax rate. The provision for taxes as a percentage of
income before taxes was 41% and 40% for the six months ended March 31, 1997
and 1998, respectively.
Extraordinary Charge on Early Extinguishment of Debt. In connection with the
acquisition of Visual Action, the Company entered into a new credit facility
in October, 1997. As a result, during the three months ended December 31,
1997, the Company wrote off approximately $0.6 million (net of taxes of $0.4
million) of the remaining unamortized debt issuance costs related to its
former bank facilities.
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<PAGE>
Net income. Net income was $3.3 million in the six months ended March 31, 1998
compared to net income of $4.5 million in the six months ended March 31, 1997.
Basic and diluted earnings per common share after the non-recurring
restructuring charge and the extraordinary charge on early extinguishment of
debt were $0.14 for the six months ended March 31, 1998 as compared with an
earnings per common share of $0.22 for the comparable period in fiscal 1997.
Earnings per common share before the non-recurring restructuring charge and
the extraordinary charge on early extinguishment of debt were $0.26 for the six
months ended March 31, 1998.
Three months Ended March 31, 1998 Compared to
Three months Ended March 31, 1997
Revenue. Revenue increased $110.0 million, or 142.0%, from $77.4 million in the
three months ended March 31, 1997 to $187.4 million in the three months ended
March 31, 1998. The increase resulted primarily from expanded activities from
existing clients, projects for new clients and the acquisition of other business
communications services companies. Approximately 85.9% of the increase was
attributable to revenue from the rental of audio visual equipment through the
Company's audio visual services division, including the impact of the Company's
acquisition of Visual Action. Increases in service revenue primarily from
clients in the food services, consumer products, petroleum and lodging
industries accounted for the remainder of the total revenue growth.
Gross profit. Total gross profit increased $36.3 million, or 144.1%, from
$25.2 million in the three months ended March 31, 1997 to $61.5 million in the
same period of 1998, primarily as a result of the revenue growth described
above. As a percentage of service revenue, the gross profit margin increased
from 30.1% in the three months ended March 31, 1997 to 33.7% in the three
months ended March 31, 1998, before considering intercompany eliminations. The
increased gross profit margin is due to the specific production requirements
of the contracts completed during the period. Gross profit as a percentage of
rental revenue was 31.7% for the three months ended March 31, 1998 compared to
35.6% in the prior comparable quarter, before considering intercompany
eliminations. The decrease in the gross margin resulted primarily from a
higher level of equipment sales and installations revenue, which generates a
lower gross margin, the impact of acquired rental businesses which have
historically operated at lower gross margins and increased costs relating to
the strengthening of the rental infrastructure enabling it to handle future
revenue growth. Gross profit on rental revenue for the three months ended
March 31, 1997 and 1998 is impacted by approximately $1.2 million and $5.1
million, respectively, of depreciation expense related to rental equipment
used in the audio visual business. Such depreciation expense is included in
cost of rental revenue.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $22.1 million, or 131.5%, from $16.8 million
in the three months ended March 31, 1997 to $38.9 million in the three months
ended March 31, 1998. The increase was due primarily to acquisitions and to
support other revenue growth, as well as to normal inflationary increases.
Salaries and related costs increased $13.4 million from increased personnel
resulting from acquisitions and to support the Company's overall significant
growth, as well as normal inflationary increases. Other general and
administrative expenses, including rent and related costs, telephone, office
supplies, as well as other miscellaneous expenses, increased $7.4 million due
to acquisitions and to
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<PAGE>
support the revenue growth. Direct selling expenses such as travel, marketing
and other costs related to obtaining business increased $1.3 million. Selling,
general and administrative expenses, as a percentage of total revenue,
decreased from 21.7% during the three months ended March 31, 1997 to 20.8% in
the three months ended March 31, 1998 as a result of cost management controls
and leveraging the Company's existing core infrastructure.
Restructuring Charge. During the three months ended March 31, 1998, the Company
continued the integration of its recent acquisitions, primarily in the audio
visual services businesses. These efforts included strategic evaluations of
operating infrastructures, personnel, facilities and equipment with the goal of
enhanced operational efficiency and improved gross profit and operating income.
As a result of these plans, the Company has recorded a non-recurring, pre-tax
restructuring charge of $3.8 million. The charge included $2.8 million related
to employee termination and severance costs associated with a reduction in the
workforce of approximately 155 employees. Also, included in the charge was $1.0
million related to lease termination costs and the write off of leasehold
improvements of vacated facilities. The restructuring liability remaining at
March 31, 1998 was $2.3 million.
Depreciation and amortization. Depreciation and amortization expense for the
three months ended March 31, 1998 was $5.4 million, an increase of $4.0 million
as compared to $1.4 million for the corresponding period in the prior year.
Property and equipment acquired through acquisitions and the continued
investment in information technology resulted in increased depreciation expense
of $1.2 million. Amortization expense increased $2.8 million resulting
primarily from goodwill arising from acquisitions.
Interest expense, net. Interest expense, net increased primarily due to higher
average borrowings to finance acquisitions and increased working capital
requirements.
Provision for taxes. Taxes reflect an allocation based on the full year
anticipated effective tax rate. The provision for taxes as a percentage of
income before taxes was 41% and 40% for the three months ended March 31, 1997
and 1998, respectively.
Net income. Net income was $3.8 million in the three months ended March 31,
1998 compared to net income of $3.7 million in the three months ended March
31, 1997. Basic and diluted earnings per common share after the non-recurring
restructuring charge were $0.16 for the three months ended March 31, 1998 as
compared to earnings per common share of $0.18 for the comparable period in
fiscal 1997. Earnings per common share before the non-recurring restructuring
charge were $0.26 for the three months ended March 31, 1998.
- 15 -
<PAGE>
Liquidity and Capital Resources
On October 28, 1997, the Company entered into a new loan agreement with a
syndicate of banks pursuant to which the Company increased its aggregate
available bank financing from $100 million to $550 million, consisting of a
$300 million six year revolving line of credit to be used in connection with
future acquisitions and for working capital and general corporate purposes and
a $250 million six year term loan (the "1997 Facilities") which was utilized in
connection with the acquisition of Visual Action. Amounts
outstanding under the Company's former bank facilities were repaid with the
proceeds from the 1997 Facilities. The Company recognized an extraordinary
loss of $0.6 million, net of taxes of $0.4 million, in the quarter ended
December 31, 1997 resulting from the write-off of the unamortized debt issuance
fees relating to the Company's former bank facilities. The Company incurred
approximately $5.0 million of debt issuance fees relating to the 1997
Facilities. Such fees will be amortized over the term of the 1997 Facilities.
The maturity date of each of the 1997 Facilities is September 30, 2003. Interest
on outstanding amounts under the 1997 Facilities is payable quarterly in arrears
and at the option of the Company accrues at either (i) LIBOR plus an applicable
margin or (ii) an alternate base rate based upon the greatest of (a) the agent
bank's prime rate, (b) the three-month secondary certificate of deposit rate and
(c) the federal funds rate. The interest rate on the 1997 Facilities is
currently LIBOR plus 1.125%. The applicable interest rates will increase by 2.0%
if principal or interest is not paid when due (after applicable grace periods).
As of April 30, 1998, the Company had approximately $418.4 million outstanding
under the 1997 Facilities. In addition, as of April 30, 1998, approximately
$16.3 million was outstanding under credit facilities assumed in connection with
the acquisition of Visual Action.
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the six months ended March 31, 1997
and 1998:
Six months Ended March 31,
1997 1998
---------------------- ------------------
(in thousands)
Net cash provided by (used in):
Operating activities $ (926) $ 2,906
Investing activities (44,568) (317,472)
Financing activities 65,596 315,218
For the six months ended March 31, 1998, $2.9 million was provided by operating
activities. The net income adjusted for depreciation and amortization and the
extraordinary and restructuring charges provided $23.5 million. The net change
in working capital used $20.6 million, with an increase in deferred income and
accrued expenses and other liabilities, which was more than offset by increases
in accounts receivable, deferred charges, prepaid expenses and other assets, and
a decrease in trade accounts payable. Investing activities required $317.5
million due to acquisition-related expenditures and property and equipment
additions. Financing activities provided $315.2 million in the six months ended
March 31, 1998, of which $600.0 million was provided by drawings under the
Company's existing credit facilities, offset by repayments of $285.3 million. In
addition, the Company received $0.5 million from the exercise of employee stock
options.
- 16 -
<PAGE>
For the six months ended March 31, 1997, $0.9 million was used in operating
activities. The net income adjusted for depreciation and amortization provided
$9.4 million. The net change in working capital used $10.3 million, with an
increase in deferred income and accrued expenses and other liabilities, which
was more than offset by increases in trade accounts receivable, deferred
charges, prepaid expenses and other assets, and a decrease in trade accounts
payable. Investing activities required $44.6 million due to acquisition-related
expenditures and property and equipment additions. Financing activities
provided $65.6 million in the six months ended March 31, 1997, of which $86.7
million of net proceeds were received during the period from the issuance of
common stock and $58.5 million was provided by drawings under the Company's
then existing credit facilities, offset by repayment of $79.6 million.
Capital expenditures were $5.0 million and $25.7 million during the six months
ended March 31, 1997 and 1998, respectively. During the six months ended March
31, 1997, the purchase of additional personal computers and expanded
capabilities for the computer system accounted for the largest areas of
expenditure. During the six months ended March 31, 1998, the majority of the
capital expenditures related to the purchase of audio visual equipment needed to
support the Company's expanded audio visual businesses, as well as the continued
investment in information technology.
The Company believes that cash flow from operations and net available credit
under existing bank facilities will be sufficient to meet operating needs and
capital spending requirements and to fund its acquisition strategies for the
foreseeable future.
Year 2000
- ---------
The Company has determined that it will need to modify or replace some
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and beyond. Furthermore, certain
systems are being replaced as part of the Company's ongoing systems
development projects which will be Year 2000 compliant. The costs for Year
2000 modifications are not expected to have a material impact on the Company's
results of operations or financial position.
- 17 -
<PAGE>
PART II
-------
OTHER INFORMATION
- -----------------
ITEM 2. CHANGES IN SECURITIES
a) Not Applicable
b) Not Applicable
c) The Company issued and sold the following unregistered securities during
the three months ended March 31, 1998:
1. In February, 1998, the Company issued and sold an aggregate of 53,958
shares of Common Stock to Paulus J. Zimmerman in connection with the
purchase of substantially all of the assets and the assumption of certain
of the liabilities of The Bridge Design Limited.
2. In March, 1998, the Company issued and sold an aggregate of 6,065 shares
of Common Stock to Michael K. Trovalli in connection with the purchase of
substantially all of the assets and the assumption of certain of the
liabilities of Michael K. Trovalli d/b/a The Tomannex Group.
3. In March, 1998, the Company issued to C. Anthony Wainwright, a Director of
the Company, 393 shares of Common Stock at a price per share of $31.75
pursuant to the Company's Non-Employee Directors' Stock Plan (the "Plan").
Pursuant to the Plan, the number of shares of Common Stock issued was
determined by dividing $12,500 by 31.75 (the average of the high and low
sales price per share of the Common Stock on the anniversary date of Mr.
Wainwright's appointment to the Board of Directors (March 24, 1997)).
- 18 -
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
a) Annual Meeting of Stockholders
Date held: February 27, 1998
b) Directors elected:
Errol M. Cook
Raymond S. Ingleby
Bryan D. Langton
Sidney Lapidus
David E. Libowitz
C. Anthony Wainwright
c) Matters Voted Upon:
1. Election of Directors
Nominee Votes For Votes Withheld
------- --------- --------------
Errol M. Cook 21,265,981 10,255
Raymond S. Ingleby 21,265,981 10,255
Bryan D. Langton 21,265,979 10,257
Sidney Lapidus 21,265,981 10,255
David E. Libowitz 21,265,981 10,255
C. Anthony Wainwright 21,265,981 10,255
2.Amendment to Increase Number of Shares of Common Stock
Available for Grant under the Company's 1996 Stock Option
Plan from 728,000 Shares to 1,928,000 Shares
Votes for: 20,439,479
Votes against: 34,537
Votes abstaining: 5,054
Broker non-votes: 797,166
3.Amendment to the Company's Restated Certificate of
Incorporation to Increase the Number of Authorized Shares
of Common Stock from 40,000,000 Shares to 100,000,000 Shares
- 19 -
<PAGE>
Votes for: 18,822,625
Votes against: 2,447,165
Votes abstaining: 6,446
4. Approval and Ratification of Appointment of Ernst & Young LLP
as Independent Auditors for the Fiscal Year Ending September
30, 1998
Votes for: 21,274,341
Votes against: 700
Votes abstaining: 1,195
- 20 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits Required by Item 601 of Regulation S-K:
3.1 Restated Certificate of Incorporation of the Company filed
March 15, 1996 with the Secretary of State of the State of
Delaware (filed as Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the three months ended March 31,
1996 and incorporated herein by reference).
3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company filed March 30, 1998 with the
Secretary of State of the State of Delaware.
3.3 Second Amended and Restated By-Laws of the Company (filed
as Exhibit 3.2 (b) to the Company's Registration Statement
on Form S-1 (Registration No. 33-80481) and incorporated
herein by reference).
10.1 Caribiner International, Inc. 1996 Stock Option Plan, as
amended.
10.2 Caribiner International, Inc. 1998 Stock Option Plan.
27.1 Financial Data Schedule.
- 21 -
<PAGE>
(b) Reports on Form 8-K:
The Company filed the following report on Form 8-K during the
three months ended March 31, 1998:
Date of Filing Item Reported Subject of Report
-------------- ------------- -----------------
February 6, 1998 7 Form 8-K/A containing
financial information in
connection with the
acquisition of Visual
Action Holdings plc
- 22 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARIBINER INTERNATIONAL, INC.
(Registrant)
Date: May 14, 1998 By: /s/ Raymond S. Ingleby
--------------------------------
Raymond S. Ingleby
Chairman of the Board and
Chief Executive Officer
By: /s/ Arthur F. Dignam
--------------------------------
Arthur F. Dignam
Executive Vice President and
Chief Financial and Administrative Officer
(Principal Financial Officer and
Chief Accounting Officer)
- 23 -
<PAGE>
EXHIBIT INDEX
-------------
Page Number
-----------
3.1 Restated Certificate of Incorporation of the Company
filed March 15, 1996 with the Secretary of State of
the State of Delaware (filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1996 and incorporated herein by
reference).
3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company filed March 30, 1998 with
the Secretary of State of the State of Delaware.
3.3 Second Amended and Restated By-Laws of the Company (filed
as Exhibit 3.2 (b) to the Company's Registration Statement
on Form S-1 (Registration No. 33-80481) and incorporated
herein by reference).
10.1 Caribiner International, Inc. 1996 Stock Option Plan,
as amended.
10.2 Caribiner International, Inc. 1998 Stock Option Plan
27.1 Financial Data Schedule.
- 24 -
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF CARIBINER INTERNATIONAL, INC.
(Under Section 242 of the Delaware General Corporation Law)
Pursuant to the provisions of Section 242 of the General Corporation
Law of the State of Delaware (the "DGCL"), Caribiner International, Inc. (the
"Corporation") hereby certifies as follows:
FIRST: The name of the Corporation is CARIBINER INTERNATIONAL, INC.
The Corporation's original Certificate of Incorporation was filed with the
Secretary of State on December 1, 1989 under the name Ingleby Enteprises Inc. An
amendment to the original Certificate of Incorporation was filed with the
Secretary of State on December 29, 1992, to change the Corporation's name to
Business Communications Group, Inc. A Restated Certificate of Incorporation was
filed with the Secretary of State on July 2, 1993, under the name Business
Communications Group, Inc. An amendment to the Restated Certificate of
Incorporation was filed with the Secretary of State on December 12, 1995 to
change the Corporation's name to its present name. A second Restated Certificate
of Incorporation was filed with the Secretary of State on March 15, 1996 to
restate, integrate and further amend the Restated Certificate of Incorporation.
SECOND: The Board of Directors of the Corporation, at a meeting duly
called and held in accordance with the Second Amended and Restated Bylaws of the
Corporation and Section 141 of the DGCL, duly adopted resolutions proposing and
declaring advisable the amendment to the Restated Certificate of Incorporation.
THIRD: The Restated Certificate of Incorporation, as amended or
supplemented heretofore, is hereby further amended as follows:
The first sentence of Article 4.1 of the Restated Certificate of
Incorporation is hereby deleted in its entirety and the following
substituted in lieu thereof:
"The aggregate number of shares that the Corporation shall have
authority to issue is 102,000,000 shares of capital stock of which (a)
100,000,000 shares shall be of a class of voting common stock, par
value $0.01 per share (the "Common Stock"); and (b) 2,000,000 shares
shall be of a class of preferred stock, par value $0.01 per share (the
"Preferred Stock"), for which the Board of Directors (the "Board") is
authorized hereby, subject to the limitations prescribed by law and the
provisions of this Article to provide for the issuance of shares of
Preferred Stock in
<PAGE>
series, and by filing a certificate pursuant to the DGCL to establish
from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of
the shares of each such series of Preferred Stock and the
qualifications, limitations or restrictions thereof."
FOURTH: The foregoing amendment to the Restated Certificate of
Incorporation was duly adopted in accordance with the provisions of Section 242
of the DGCL pursuant to a duly adopted resolution of the Board of Directors of
the Corporation, an annual meeting of the stockhoders of the Corporation was
duly called and held, upon notice in accordance with Section 222 of the DGCL, at
which meeting a majority of the outstanding stock entitled to vote thereon was
voted in favor of the amendment.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Raymond S. Ingleby, its Chairman and Chief Executive Officer, and
attested by Harold E. Schwartz,its Secretary, as of this 30th day of March,
1998.
CARIBINER INTERNATIONAL, INC.
By /s/ Raymond S. Ingleby
-----------------------------------
Raymond S. Ingleby
Chairman of the Board and Chief
Executive Officer
ATTEST:
By: /s/ Harold E. Schwartz
------------------------
Harold E. Schwartz
Secretary
<PAGE>
CARIBINER INTERNATIONAL, INC.
(Formerly known as Business Communications Group, Inc.)
1996 STOCK OPTION PLAN
(As amended as of February 27, 1998)
ARTICLE 1
Establishment and Purpose
1.1 Establishment and Effective Date. Caribiner International, Inc., a
Delaware corporation (the "Corporation"), hereby establishes a stock incentive
plan to be known as the Caribiner International, Inc. 1996 Stock Option Plan
(the "Plan"). The Plan shall become effective as of January 1, 1996, subject to
the approval of the Corporation's stockholders. In the event that such
stockholder approval is not obtained, any awards made hereunder shall be
canceled and all rights of employees with respect to such awards shall thereupon
cease. Upon approval by the Board of Directors of the Corporation (the
"Board") and the Board's Compensation Committee (the "Committee"), awards may
be made as provided herein.
1.2 Purpose. The purpose of the Plan is to encourage and enable
employees (subject to such requirements as may be prescribed by the Committee)
of the Corporation and its subsidiaries to acquire a proprietary interest in the
Corporation through the ownership of the Corporation's common stock, par value
$0.01 per share ("Common Stock"). Such ownership will provide such employees
with a more direct stake in the future welfare of the Corporation and encourage
them to remain with the Corporation and its subsidiaries. It is also expected
that the Plan will encourage qualified persons to seek and accept employment
with the Corporation and its subsidiaries.
ARTICLE 2
Awards
2.1 Form of Awards. Awards under the Plan may be granted in incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") or
non-qualified stock options ("Non-qualified Stock Options") (unless otherwise
indicated, references in the Plan to "Options" shall include both Incentive
Stock Options and Non-qualified Stock Options).
2.2 Maximum Shares Available. The maximum aggregate number of shares
of Common Stock available for award under the Plan is 1,928,000, subject to
adjustment pursuant to Article 8 hereof. Shares of Common Stock issued pursuant
to the Plan may be either authorized but unissued shares or issued shares
reacquired by the Corporation. In the event that prior to the end of the period
during which Options may be granted under the Plan, any Option under the Plan
expires unexercised or is terminated, surrendered or canceled, then such shares
shall be available for subsequent awards under the Plan, upon such terms as the
Committee may determine.
2.3 Return of Prior Awards. As a condition to any subsequent award,
the Committee shall have the right at its discretion, to require employees to
return to the Corporation awards previously granted under the Plan. Subject to
the provisions of the Plan, such new award shall be
<PAGE>
upon such terms and conditions as are specified by the Committee at the time
the new award is granted.
ARTICLE 3
Administration
3.1 Committee. Awards shall be determined, and the Plan shall be
administered, by the Committee as appointed from time to time by the Board,
which Committee shall consist of not less than two (2) members of the Board.
Except as permitted by Rule 16b-3 of the Securities Exchange Age of 1934, as
amended (the "Act"), and by Section 162(m) of the Code (or Regulations
promulgated thereunder), no member of the Board may serve on the Committee if
such member: (i) is or has been granted or awarded stock options, pursuant to
the Plan or any other plan of the Corporation or its affiliates either while
serving on the Committee or during the one year period prior to being appointed
to the Committee; (ii) is an employee or former employee of the Corporation; or
(iii) receives remuneration from the Corporation, either directly or
indirectly, in any capacity other than as a director.
3.2 Powers of Committee. Subject to the express provisions of the
Plan, the Committee shall have the power and authority (i) to grant Options and
to determine the purchase price of the 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; (ii) to designate Options as Incentive Stock Options or Non-qualified
Stock Options; and (iii) to determine the employees to whom and the time or
times at which Options shall be granted.
3.3. Delegation. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may
deem advisable; provided, however, that the Committee may not delegate any of
its responsibilities hereunder if such delegation would cause the Plan to fail
to comply with the "disinterested administration" rules under Section 16 of the
Act. The Committee may also employ attorneys, consultants, accountants or other
professional advisors and shall be entitled to rely upon the advice, opinions
or valuations of any such advisors.
3.4 Interpretations. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees who have received awards under the Plan and
all other interested persons.
3.5 Liability; Indemnification. No member of the Committee, nor any
person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Corporation with respect to any
- 2 -
<PAGE>
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's Restated Certificate of Incorporation and Second
Amended and Restated Bylaws, as amended from time to time, or under any
agreement between any such member and the Corporation.
ARTICLE 4
Eligibility
Awards may be made to employees of the Corporation or any of its
subsidiaries (subject to such requirements as may be prescribed by the
Committee); provided, however, that no employee may receive awards of or
relating to more than 200,000 shares of Common Stock in the aggregate in any
fiscal year of the Corporation. Awards may be made to a director of the
Corporation who is not also a member of the Committee, provided that the
director is also an employee who is not part of senior management. In
determining the employees to whom awards shall be granted and the number of
shares to be covered by each award, the Committee shall take into account the
nature of the services rendered by such employees, their present and potential
contributions to the success of the Corporation and its subsidiaries and such
other factors as the Committee in its sole discretion shall deem relevant.
As used herein, the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Corporation owns,
directly or indirectly, 50% or more of the economic interests. Notwithstanding
the foregoing, only employees of the Corporation and any present or future
corporation which is or may be a "subsidiary corporation" of the Corporation
(as such term is defined in Section 424(f) of the Code) shall be eligible to
receive Incentive Stock Options.
ARTICLE 5
Option Terms
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 Designation as Non-qualified Stock Option or Incentive Stock
Option. In connection with any grant of Options, the Committee shall designate
in the written agreement required pursuant to Article 10 hereof whether the
Options granted shall be Incentive Stock Options or Non-qualified Stock
Options, or in the case both are granted, the number of shares of each.
5.3 Option Price. The purchase price per share under each Incentive
Stock Option or Non-qualified Stock Option shall be the Market Price (as
hereinafter defined) (the "Exercise
- 3 -
<PAGE>
Price"), of the Common Stock on the date the Option is granted. In the case of
an Incentive Stock Option granted to an employee owning (actually or
constructively under Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Corporation or of a
subsidiary (a "10% Stockholder"), the Exercise Price shall not be less than
110% of the Market Price of the Common Stock on the date of grant.
The "Market Price" of the Common Stock on any day shall be determined
as follows (i) if the Common Stock is listed on a national securities exchange
or quoted through the Nasdaq Stock Market/Nasdaq National Market, the Market
Price on any day shall be the average of the high and low reported consolidated
trading sales prices, or if no such sale is made on such day, the average of
the closing bid and asked prices reported on the consolidated trading listing
for such day; (ii) if the Common Stock is quoted through the Nasdaq
inter-dealer quotation system, the Market Price on any day shall be the average
of the representative bid and asked prices at the close of business for such
day; or (iii) if the Common Stock is not listed on a national stock exchange or
quoted through Nasdaq, the Market Price on any day shall be the average of the
high bid and low asked prices reported by the National Quotation Bureau, Inc.
for such day. In no event shall the Market Price of a share of Common Stock
subject to an Incentive Stock Option be less than the fair market value as
determined for purposes of Section 422(b)(4) of the Code.
5.4 Limitation on Amount of Incentive Stock Options. In the case of an
Incentive Stock Option, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Corporation and any
subsidiary) shall not exceed $100,000.
5.5 Limitation on Time of Grant. No grant of an Incentive Stock Option
shall be made under the Plan more than ten (10) years after the date the Plan
is approved by stockholders of the Corporation.
5.6 Exercise and Payment. Options may be exercised in whole or in
part. Common Stock purchased upon the exercise of Options shall be paid for in
full at the time of purchase. Such payment shall be made in cash or, in the
discretion of the Committee, through delivery of shares of Common Stock or a
combination of cash and Common Stock, in accordance with procedures to be
established by the Committee. Any shares so delivered shall be valued at their
Market Price on the date of exercise. Upon receipt of notice of exercise and
payment in accordance with procedures to be established by the Committee, the
Corporation or its agent shall deliver to the person exercising the Option (or
his or her designee) a certificate for such shares.
5.7 Term. The term of each Option granted hereunder shall be
determined by the Committee; provided, however, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or
in the case of an Incentive Stock Option granted to a 10% Stockholder, five (5)
years from the date it is granted.
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5.8 Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable
upon exercise thereof until the date a stock certificate is issued to such
recipient representing such shares.
5.9 General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
The Board or the Committee may, in connection with the granting of any
Option, require the individual to whom the Option is to be granted to enter
into an agreement with the Corporation stating that as a condition precedent to
each exercise of the Option, in whole or in part, such individual shall if then
required by the Corporation represent to the Corporation in writing that such
exercise is for investment only and not with a view to distribution, and also
setting forth such other terms and conditions as the Board or the Committee may
prescribe.
ARTICLE 6
Nontransferability of Options
No Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void and without effect. An Option may be
exercised by the recipient only during his or her lifetime, or following his or
her death pursuant to Section 7.3 hereof.
Notwithstanding anything to the contrary in the preceding paragraph,
the Committee may, in its sole discretion, cause the written agreement relating
to any Non-qualified Stock Options granted hereunder to provide that the
recipient of such Non-qualified Stock Options may transfer any of such
Non-qualified Stock Options other than by will or the laws of descent and
distribution in any manner authorized under applicable law; provided, however,
that in no event may the Committee permit any transfers which would cause this
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the
Act, or would cause any recipient of awards hereunder to fail to be entitled to
the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Act
or be subject to liability thereunder.
ARTICLE 7
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Effect of Termination of Employment, Disability,
Retirement or Death
7.1 General Rule. If the services of an employee of the Corporation
(the "Employee") who holds an unexercised Option are terminated for any reason
other than death, Disability, Retirement or Cause (each as defined below), an
Option shall be exercisable by the Employee at any time prior to the expiration
date of the Option or within 30 days after the date of such termination,
whichever is earlier, but only to the extent the Employee had the right to
exercise such Option on the date of termination. The Option shall not be
affected by any change of employment as long as the Employee continues to be
employed by either the Corporation or a subsidiary.
7.2 Disability or Retirement. Except as otherwise expressly provided
in the written agreement relating to any Option granted under the Plan, in the
event of the Disability or Retirement of a recipient of Options, the Options
which are held by such recipient on the date of such Disability or Retirement,
whether or not otherwise exercisable on such date, shall be exercisable one (1)
year from the date of Disability or Retirement; provided, however, that any
Incentive Stock Option of such recipient shall no longer be treated as an
Incentive Stock Option unless exercised within three (3) months of the date of
such Disability or Retirement (or within one (1) year in the case of an
employee who is "disabled" within the meaning of Section 22(e)(3) of the Code).
"Disability" shall mean any termination of employment with the
Corporation or a subsidiary because of a long-term or total disability, as
determined by the Committee in its sole discretion. "Retirement" shall mean a
termination of employment with the Corporation or a subsidiary either (i) on a
voluntary basis by a recipient who is at least 65 years of age or (ii)
otherwise with the written consent of the Committee in its sole discretion.
The decision of the Committee shall be final and conclusive.
7.3 Death. In the event of the death of a recipient of Options while
an employee of the Corporation or any subsidiary, Options which are held by
such employee at the date of death, whether or not otherwise exercisable on the
date of death, shall be exercisable by the beneficiary designated by the
employee for such purpose (the "Designated Beneficiary") or if no Designated
Beneficiary shall be appointed or if the Designated Beneficiary shall
predecease the employee, by the employee's personal representatives, heirs or
legatees at any time within one (1) year from the date of death (subject to the
limitation in Section 5.7 hereof), at which time such Options shall terminate;
provided, however, that any Incentive Stock Option of such recipient shall no
longer be treated as an Incentive Stock Option unless exercised within three
(3) months of the date of the recipient's death.
In the event of the death of a recipient of Options following a
termination of employment due to Retirement or Disability, if such death
occurs before the Options are exercised, the Options which are held by such
recipient on the date of termination of employment, whether or not otherwise
exercisable on such date, shall be exercisable by such recipient's Designated
Beneficiary, or if no Designated Beneficiary shall be appointed or if the
Designated Beneficiary
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<PAGE>
shall predecease such recipient, by such recipient's personal representatives,
heirs or legatees to the same extent such Options were exercisable by the
recipient following such termination of employment.
7.4. Cause. The Committee may, in its sole discretion, cause any
Option to be forfeited upon an employee's termination of employment if the
employee was terminated for one (or more) of the following reasons ("Cause"):
(i) the employee's conviction, or plea of guilty or nolo contendere to the
commission of a felony, (ii) the employee's commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the employee
resulting or intended to result, directly or indirectly, in gain or personal
enrichment at the expense of the Corporation or a subsidiary, (iv) any breach
of the employee's fiduciary duties to the Corporation as an employee or officer
or (v) any other serious violation of a Corporation policy. It shall be within
the sole discretion of the Committee to determine whether the employee's
termination was for one of the foregoing reasons, and the decision of the
Committee shall be final and conclusive.
7.5 Change of Control. If there should be a Change of Control of the
Corporation (as defined below), the Corporation shall give the employee written
notice of such Change of Control as promptly as practicable and the Option,
whether or not currently exercisable, shall become immediately exercisable as
of the effective date of such Change of Control.
Notwithstanding the foregoing, in the case that the
Corporation is merged or consolidated with another corporation, or the assets
or stock of the Corporation is acquired by another corporation, or a
separation, reorganization or liquidation of the Corporation occurs, the Board
of Directors of the Corporation, or the Board of Directors of any corporation
assuming the obligations of the Corporation hereunder, shall make appropriate
provisions for the protection of the Option by substitution on an equitable
basis of appropriate stock of the Corporation, or appropriate stock of the
merged, consolidated, or otherwise reorganized corporation, provided only that
the excess of the aggregate Market Price of the shares subject to the Option
immediately after such substitution over the Exercise Price thereof is not less
than the excess of the aggregate Market Price of the shares subject to the
Option immediately before such substitution over the Exercise Price thereof.
For purposes of this Section 7.5, a "Change of Control" shall be
deemed to have occurred if, at any time following the effective date of the
Plan, (i) any person or "group" (other than Warburg, Pincus Investors, L.P. or
any affiliate thereof) acquires, in a single transaction or series of related
transactions 50% or more of the outstanding Common Stock of the Corporation;
(ii) during any period of two consecutive years, individuals that at the
beginning of such period constitute the Board of Directors of the Corporation
cease for any reason to constitute a majority thereof, unless the election, or
the nomination for election by the shareholders, of each such new director was
approved by a vote of at least two-thirds of the directors then still in
office which were directors at the beginning of the period; or (iii) the sale
of all or substantially all of the assets of the Corporation (other than a
wholly-owned subsidiary of the Company).
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<PAGE>
7.6 Leave of Absence. In the case of an employee on an approved leave
of absence, the Options of such employee shall not be affected unless such
leave is longer than 13 weeks. The date of exercisability of any Options of an
employee which are unexercisable at the beginning of an approved leave of
absence lasting longer than 13 weeks shall be postponed for a period equal to
the length of such leave of absence. Notwithstanding the foregoing, the
Committee may, in its sole discretion, waive in writing any such postponement
of the date of exercisability of any Options due to a leave of absence.
ARTICLE 8
Adjustments Upon Changes In Capitalization
Notwithstanding any other provision of the Plan, the Committee may,
(i) at any time, make or provide for such adjustments to the Plan or to the
number and class of shares available thereunder or (ii) at the time of grant of
any Options, provide for such adjustments to such Options as the Committee
shall deem appropriate to prevent dilution or enlargement of rights, including
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, restructurings, mergers, consolidations, combinations or
exchanges of shares, separations, spin-offs, reorganizations, liquidations and
the like.
ARTICLE 9
Amendment and Termination
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Corporation's stockholders, except that any such increase
or modification
that may result from adjustments authorized by Article 8 hereof shall not
require such stockholder approval. If the Plan is terminated, the terms of the
Plan shall, notwithstanding such termination, continue to apply to awards
granted prior to such termination. No suspension, termination, modification or
amendment of the Plan may, without the consent of the employee to whom an award
shall theretofore have been granted, adversely affect the rights of such
employee under such award.
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<PAGE>
ARTICLE 10
Written Agreement
Each award of Options shall be evidenced by a written agreement
containing such restrictions, terms and conditions, if any, as the Committee
may require. In the event of any conflict between a written agreement and the
Plan, the terms of the Plan shall govern.
ARTICLE 11
Miscellaneous Provisions
11.1 Tax Withholding. The Corporation shall have the right to require
employees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local
withholding tax requirements. The Committee may, in its sole discretion, permit
an employee to satisfy his or her tax withholding obligation either by (i)
surrendering shares owned by the employee or (ii) having the Corporation
withhold from shares otherwise deliverable to the employee. Shares surrendered
or withheld shall be valued at their Market Price as of the date on which
income is required to be recognized for income tax purposes.
11.2 Compliance with Section 16(b). In the case of employees who are
or may be subject to Section 16 of the Act, it is the intent of the Corporation
that the Plan and each award granted hereunder satisfy and be interpreted in a
manner that satisfies the applicable requirements of Rule 16b-3, so that such
persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Act and will not be subjected to liability thereunder.
If any provision of the Plan or any award would otherwise conflict with the
intent expressed herein, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall be
deemed void as applicable to employees who are or may be subject to Section 16
of the Act.
11.3 Successors. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the assets and business of
the Corporation. In the event of any of the foregoing, the Committee may, at
its discretion prior to the consummation of the transaction and subject to
Article 9 hereof, cancel, offer to purchase, exchange, adjust or modify any
outstanding awards, at such time and in such manner as the Committee deems
appropriate and in accordance with applicable law.
11.4 General Creditor Status. Employees shall have no right, title, or
interest whatsoever in or to any investments which the Corporation may make to
aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship
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between the Corporation and any employee or beneficiary or legal representative
of such employee. To the extent that any person acquires a right to receive
payments from the Corporation under the Plan, such right shall be no greater
than the right of an unsecured general creditor of the Corporation. All
payments to be made hereunder shall be paid from the general funds of the
Corporation and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth in the Plan.
11.5 No Right of Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 10 hereof, nor the grant of any
award, shall confer upon any employee any right to continue in the employ of
the Corporation or a subsidiary or to be entitled to any remuneration or
benefits not set forth in the Plan or such written agreement or interfere with
or limit the right of the Corporation or a subsidiary to modify the terms of or
terminate such employee's employment at any time.
11.6 Notices. Notices required or permitted to be made under the Plan
shall be sufficiently made if personally delivered to the employee or sent by
regular mail addressed (a) to the employee at the employee's address as set
forth in the books and records of the Corporation or its subsidiary, or (b) to
the Corporation or the Committee at the principal office of the Corporation
clearly marked "Attention: Compensation Committee."
11.7 Severability. In the event that any provision of the Plan shall
be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision shad not been included.
11.8 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreement hereunder, shall be construed in accordance with and
governed by the laws of the State of New York.
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CARIBINER INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
ARTICLE 1
Establishment and Purpose
1.1 Establishment and Effective Date. Caribiner International, Inc., a
Delaware corporation (the "Corporation"), hereby establishes a stock incentive
plan to be known as the Caribiner International, Inc. 1998 Stock Option Plan
(the "Plan"). Upon approval by the Board of Directors of the Corporation
(the "Board") and the Board's Compensation Committee (the "Committee"), awards
may be made as provided herein.
1.2 Purpose. The purpose of the Plan is to encourage and enable
employees (subject to such requirements as may be prescribed by the Committee)
of the Corporation and its subsidiaries (with the exception of senior management
of the Corporation) to acquire a proprietary interest in the Corporation through
the ownership of the Corporation's common stock, par value $0.01 per share
("Common Stock"). Such ownership will provide such employees with a more direct
stake in the future welfare of the Corporation and encourage them to remain with
the Corporation and its subsidiaries. It is also expected that the Plan will
encourage qualified persons to seek and accept employment with the Corporation
and its subsidiaries.
ARTICLE 2
Awards
2.1 Form of Awards. Awards under the Plan shall be granted in the form
of non-qualified stock options ("Non-qualified Stock Options") (references in
the Plan to "Options" shall refer to Non-qualified Stock Options).
2.2 Maximum Shares Available. The maximum aggregate number of shares
of Common Stock available for award under the Plan is 500,000, subject to
adjustment pursuant to Article 8 hereof. Shares of Common Stock issued pursuant
to the Plan may be either authorized but unissued shares or issued shares
reacquired by the Corporation. In the event that prior to the end of the period
during which Options may be granted under the Plan, any Option under the Plan
expires unexercised or is terminated, surrendered or canceled, then such shares
shall be available for subsequent awards under the Plan, upon such terms as the
Committee may determine.
<PAGE>
2.3 Return of Prior Awards. As a condition to any subsequent award,
the Committee shall have the right at its discretion, to require employees to
return to the Corporation awards previously granted under the Plan. Subject to
the provisions of the Plan, such new award shall be upon such terms and
conditions as are specified by the Committee at the time the new award is
granted.
ARTICLE 3
Administration
3.1 Committee. Awards shall be determined, and the Plan shall be
administered, by the Committee as appointed from time to time by the Board,
which Committee shall consist of not less than two (2) members of the Board.
Except as permitted by Rule 16b-3 of the Securities Exchange Age of 1934, as
amended (the "Act"), and by Section 162(m) of the Code (or Regulations
promulgated thereunder), no member of the Board may serve on the Committee if
such member: (i) is or has been granted or awarded stock options, pursuant to
the Plan or any other plan of the Corporation or its affiliates either while
serving on the Committee or during the one year period prior to being appointed
to the Committee; (ii) is an employee or former employee of the Corporation; or
(iii) receives remuneration from the Corporation, either directly or
indirectly, in any capacity other than as a director.
3.2 Powers of Committee. Subject to the express provisions of the
Plan, the Committee shall have the power and authority (i) to grant Options and
to determine the purchase price of the 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; and (ii) to determine the employees to whom and the time or
times at which Options shall be granted.
3.3. Delegation. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may
deem advisable; provided, however, that the Committee may not delegate any of
its responsibilities hereunder if such delegation would cause the Plan to fail
to comply with the "disinterested administration" rules under Section 16 of the
Act. The Committee may also employ attorneys, consultants, accountants or other
professional advisors and shall be entitled to rely upon the advice, opinions
or valuations of any such advisors.
3.4 Interpretations. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees who have received awards under the Plan and
all other interested persons.
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<PAGE>
3.5 Liability; Indemnification. No member of the Committee, nor any
person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Corporation with respect to any liability he
or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's Restated Certificate of Incorporation and Second
Amended and Restated Bylaws, as amended from time to time, or under any
agreement between any such member and the Corporation.
ARTICLE 4
Eligibility
Awards may be made to employees (with the exception of senior
management of the Corporation) of the Corporation or any of its subsidiaries
(subject to such requirements as may be prescribed by the Committee); provided,
however, that no employee may receive awards of or relating to more than 200,000
shares of Common Stock in the aggregate in any fiscal year of the Corporation.
Awards may be made to a director of the Corporation who is not also a member of
the Committee, provided that the director is also an employee. In determining
the employees to whom awards shall be granted and the number of shares to be
covered by each award, the Committee shall take into account the nature of the
services rendered by such employees, their present and potential contributions
to the success of the Corporation and its subsidiaries and such other factors as
the Committee in its sole discretion shall deem relevant.
As used herein, the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Corporation owns,
directly or indirectly, 50% or more of the economic interests.
ARTICLE 5
Option Terms
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
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<PAGE>
5.2 Option Price. The purchase price per share under each Option
shall be the Market Price (as hereinafter defined) (the "Exercise Price")
of the Common Stock on the date the Option is granted.
The "Market Price" of the Common Stock on any day shall be determined
as follows (i) if the Common Stock is listed on a national securities exchange
or quoted through the Nasdaq Stock Market/Nasdaq National Market, the Market
Price on any day shall be the average of the high and low reported consolidated
trading sales prices, or if no such sale is made on such day, the average of
the closing bid and asked prices reported on the consolidated trading listing
for such day; (ii) if the Common Stock is quoted through the Nasdaq
inter-dealer quotation system, the Market Price on any day shall be the average
of the representative bid and asked prices at the close of business for such
day; or (iii) if the Common Stock is not listed on a national stock exchange or
quoted through Nasdaq, the Market Price on any day shall be the average of the
high bid and low asked prices reported by the National Quotation Bureau, Inc.
for such day.
5.3 Exercise and Payment. Options may be exercised in whole or in
part. Common Stock purchased upon the exercise of Options shall be paid for in
full at the time of purchase. Such payment shall be made in cash or, in the
discretion of the Committee, through delivery of shares of Common Stock or a
combination of cash and Common Stock, in accordance with procedures to be
established by the Committee. Any shares so delivered shall be valued at their
Market Price on the date of exercise. Upon receipt of notice of exercise and
payment in accordance with procedures to be established by the Committee, the
Corporation or its agent shall deliver to the person exercising the Option (or
his or her designee) a certificate for such shares.
5.4 Term. The term of each Option granted hereunder shall be
determined by the Committee.
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5.5 Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable
upon exercise thereof until the date a stock certificate is issued to such
recipient representing such shares.
5.6 General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
The Board or the Committee may, in connection with the granting of any
Option, require the individual to whom the Option is to be granted to enter
into an agreement with the Corporation stating that as a condition precedent to
each exercise of the Option, in whole or in part, such individual shall if then
required by the Corporation represent to the Corporation in writing that such
exercise is for investment only and not with a view to distribution, and also
setting forth such other terms and conditions as the Board or the Committee may
prescribe.
ARTICLE 6
Nontransferability of Options
No Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void and without effect. An Option may be
exercised by the recipient only during his or her lifetime, or following his or
her death pursuant to Section 7.3 hereof.
Notwithstanding anything to the contrary in the preceding paragraph,
the Committee may, in its sole discretion, cause the written agreement relating
to any Non-qualified Stock Options granted hereunder to provide that the
recipient of such Non-qualified Stock Options may transfer any of such
Non-qualified Stock Options other than by will or the laws of descent and
distribution in any manner authorized under applicable law; provided, however,
that in no event may the Committee permit any transfers which would cause this
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the
Act, or would cause any recipient of awards hereunder to fail to be entitled to
the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Act
or be subject to liability thereunder.
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<PAGE>
ARTICLE 7
Effect of Termination of Employment, Disability,
Retirement or Death
7.1 General Rule. If the services of an employee of the Corporation
(the "Employee") who holds an unexercised Option are terminated for any reason
other than death, Disability, Retirement or Cause (each as defined below), an
Option shall be exercisable by the Employee at any time prior to the expiration
date of the Option or within 30 days after the date of such termination,
whichever is earlier, but only to the extent the Employee had the right to
exercise such Option on the date of termination. The Option shall not be
affected by any change of employment as long as the Employee continues to be
employed by either the Corporation or a subsidiary.
7.2 Disability or Retirement. Except as otherwise expressly provided
in the written agreement relating to any Option granted under the Plan, in the
event of the Disability or Retirement of a recipient of Options, the Options
which are held by such recipient on the date of such Disability or Retirement,
whether or not otherwise exercisable on such date, shall be exercisable one (1)
year from the date of Disability or Retirement.
"Disability" shall mean any termination of employment with the
Corporation or a subsidiary because of a long-term or total disability, as
determined by the Committee in its sole discretion. "Retirement" shall mean a
termination of employment with the Corporation or a subsidiary either (i) on a
voluntary basis by a recipient who is at least 65 years of age or (ii)
otherwise with the written consent of the Committee in its sole discretion.
The decision of the Committee shall be final and conclusive.
7.3 Death. In the event of the death of a recipient of Options while
an employee of the Corporation or any subsidiary, Options which are held by
such employee at the date of death, whether or not otherwise exercisable on the
date of death, shall be exercisable by the beneficiary designated by the
employee for such purpose (the "Designated Beneficiary") or if no Designated
Beneficiary shall be appointed or if the Designated Beneficiary shall
predecease the employee, by the employee's personal representatives, heirs or
legatees at any time within one (1) year from the date of death (subject to the
limitation in Section 5.7 hereof), at which time such Options shall terminate.
In the event of the death of a recipient of Options following a
termination of employment due to Retirement or Disability, if such death occurs
before the Options are exercised, the
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<PAGE>
Options which are held by such recipient on the date of termination of
employment, whether or not otherwise exercisable on such date, shall be
exercisable by such recipient's Designated Beneficiary, or if no Designated
Beneficiary shall be appointed or if the Designated Beneficiary shall
predecease such recipient, by such recipient's personal representatives, heirs
or legatees to the same extent such Options were exercisable by the recipient
following such termination of employment.
7.4. Cause. The Committee may, in its sole discretion, cause any
Option to be forfeited upon an employee's termination of employment if the
employee was terminated for one (or more) of the following reasons ("Cause"):
(i) the employee's conviction, or plea of guilty or nolo contendere to the
commission of a felony, (ii) the employee's commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the employee
resulting or intended to result, directly or indirectly, in gain or personal
enrichment at the expense of the Corporation or a subsidiary, (iv) any breach
of the employee's fiduciary duties to the Corporation as an employee or officer
or (v) any other serious violation of a Corporation policy. It shall be within
the sole discretion of the Committee to determine whether the employee's
termination was for one of the foregoing reasons, and the decision of the
Committee shall be final and conclusive.
7.5 Change of Control. If there should be a Change of Control of the
Corporation (as defined below), the Corporation shall give the employee written
notice of such Change of Control as promptly as practicable and the Option,
whether or not currently exercisable, shall become immediately exercisable as
of the effective date of such Change of Control.
Notwithstanding the foregoing, in the case that the Corporation is
merged or consolidated with another corporation, or the assets
or stock of the Corporation is acquired by another corporation, or a
separation, reorganization or liquidation of the Corporation occurs, the Board
of Directors of the Corporation, or the Board of Directors of any corporation
assuming the obligations of the Corporation hereunder, shall make appropriate
provisions for the protection of the Option by substitution on an equitable
basis of appropriate stock of the Corporation, or appropriate stock of the
merged, consolidated, or otherwise reorganized corporation, provided only that
the excess of the aggregate Market Price of the shares subject to the Option
immediately after such substitution over the Exercise Price thereof is not less
than the excess of the aggregate Market Price of the shares subject to the
Option immediately before such substitution over the Exercise Price thereof.
For purposes of this Section 7.5, a "Change of Control" shall be deemed
to have occurred if, at any time following the effective date of the Plan, (i)
any person or "group" (other than Warburg, Pincus Investors, L.P. or any
affiliate thereof) acquires, in a single transaction or series of related
transactions 50% or more of the outstanding Common Stock of the Corporation;
(ii) during any period of two consecutive years, individuals that at the
beginning of such period constitute the Board of Directors of the Corporation
cease for any reason to constitute a majority thereof, unless the election, or
the nomination for election by the shareholders, of each such new director was
approved by a vote of at least two-thirds of the directors then still in office
which
- 7 -
were directors at the beginning of the period; or (iii) the sale of all or
substantially all of the assets of the Corporation (other than a wholly-owned
subsidiary of the Company).
<PAGE>
7.6 Leave of Absence. In the case of an employee on an approved leave
of absence, the Options of such employee shall not be affected unless such
leave is longer than 13 weeks. The date of exercisability of any Options of an
employee which are unexercisable at the beginning of an approved leave of
absence lasting longer than 13 weeks shall be postponed for a period equal to
the length of such leave of absence. Notwithstanding the foregoing, the
Committee may, in its sole discretion, waive in writing any such postponement
of the date of exercisability of any Options due to a leave of absence.
ARTICLE 8
Adjustments Upon Changes In Capitalization
Notwithstanding any other provision of the Plan, the Committee may,
(i) at any time, make or provide for such adjustments to the Plan or to the
number and class of shares available thereunder or (ii) at the time of grant of
any Options, provide for such adjustments to such Options as the Committee
shall deem appropriate to prevent dilution or enlargement of rights, including
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, restructurings, mergers, consolidations, combinations or
exchanges of shares, separations, spin-offs, reorganizations, liquidation's and
the like.
ARTICLE 9
Amendment and Termination
The Board may suspend, terminate, modify or amend the Plan. If the Plan
is terminated, the terms of the Plan shall, notwithstanding such termination,
continue to apply to awards granted prior to such termination. No suspension,
termination, modification or amendment of the Plan may, without the consent of
the employee to whom an award shall theretofore have been granted, adversely
affect the rights of such employee under such award.
- 8 -
<PAGE>
ARTICLE 10
Written Agreement
Each award of Options shall be evidenced by a written agreement
containing such restrictions, terms and conditions, if any, as the Committee
may require. In the event of any conflict between a written agreement and the
Plan, the terms of the Plan shall govern.
ARTICLE 11
Miscellaneous Provisions
11.1 Tax Withholding. The Corporation shall have the right to require
employees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local
withholding tax requirements. The Committee may, in its sole discretion, permit
an employee to satisfy his or her tax withholding obligation either by (i)
surrendering shares owned by the employee or (ii) having the Corporation
withhold from shares otherwise deliverable to the employee. Shares surrendered
or withheld shall be valued at their Market Price as of the date on which
income is required to be recognized for income tax purposes.
11.2 Compliance with Section 16(b). In the case of employees who are
or may be subject to Section 16 of the Act, it is the intent of the Corporation
that the Plan and each award granted hereunder satisfy and be interpreted in a
manner that satisfies the applicable requirements of Rule 16b-3, so that such
persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Act and will not be subjected to liability thereunder.
If any provision of the Plan or any award would otherwise conflict with the
intent expressed herein, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall be
deemed void as applicable to employees who are or may be subject to Section 16
of the Act.
11.3 Successors. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the assets and business of
the Corporation. In the event of any of the foregoing, the Committee may, at
its discretion prior to the consummation of the transaction and subject to
Article 9 hereof, cancel, offer to purchase, exchange, adjust or modify any
outstanding awards, at such time and in such manner as the Committee deems
appropriate and in accordance with applicable law.
11.4 General Creditor Status. Employees shall have no right, title, or
interest whatsoever in or to any investments which the Corporation may make to
aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship
- 9 -
<PAGE>
between the Corporation and any employee or beneficiary or legal representative
of such employee. To the extent that any person acquires a right to receive
payments from the Corporation under the Plan, such right shall be no greater
than the right of an unsecured general creditor of the Corporation. All
payments to be made hereunder shall be paid from the general funds of the
Corporation and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth in the Plan.
11.5 No Right of Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 10 hereof, nor the grant of any
award, shall confer upon any employee any right to continue in the employ of
the Corporation or a subsidiary or to be entitled to any remuneration or
benefits not set forth in the Plan or such written agreement or interfere with
or limit the right of the Corporation or a subsidiary to modify the terms of or
terminate such employee's employment at any time.
11.6 Notices. Notices required or permitted to be made under the Plan
shall be sufficiently made if personally delivered to the employee or sent by
regular mail addressed (a) to the employee at the employee's address as set
forth in the books and records of the Corporation or its subsidiary, or (b) to
the Corporation or the Committee at the principal office of the Corporation
clearly marked "Attention: Compensation Committee."
11.7 Severability. In the event that any provision of the Plan shall
be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision shad not been included.
11.8 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreement hereunder, shall be construed in accordance with and
governed by the laws of the State of New York.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1998 OF
CARIBINER INTERNATIONAL, INC. AS SET FORTH IN THIS FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,272
<SECURITIES> 0
<RECEIVABLES> 136,256
<ALLOWANCES> 3,610
<INVENTORY> 0
<CURRENT-ASSETS> 208,053
<PP&E> 172,099
<DEPRECIATION> 78,534
<TOTAL-ASSETS> 747,398
<CURRENT-LIABILITIES> 135,010
<BONDS> 0
0
0
<COMMON> 236
<OTHER-SE> 180,616
<TOTAL-LIABILITY-AND-EQUITY> 747,398
<SALES> 187,378
<TOTAL-REVENUES> 187,378
<CGS> 125,919
<TOTAL-COSTS> 125,919
<OTHER-EXPENSES> 42,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,981
<INCOME-PRETAX> 6,275
<INCOME-TAX> 2,510
<INCOME-CONTINUING> 6,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,765
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
