<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, 2000
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 23,902,346 shares of Common Stock (par value $0.01 per share)
outstanding as of May 15, 2000.
<PAGE>
INDEX
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Review Report of Independent Accountants................... 2
Consolidated Balance Sheets as of
March 31, 2000 and September 30, 1999...................... 3
Consolidated Statements of Operations for
the six months ended March 31, 2000 and 1999............... 4
Consolidated Statements of Operations for
the three months ended March 31, 2000 and 1999............. 5
Consolidated Statements of Cash Flows for
the six months ended March 31, 2000 and 1999............... 6
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended March 31, 2000 and 1999.... 7
Notes to Consolidated Financial Statements................. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 11
PART II. Other Information
Item 1. Legal Proceedings.......................................... 16
Item 6. Exhibits and Reports on Form 8-K........................... 17
SIGNATURES................................................................... 19
-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, 2000, and the related consolidated
statements of operations for the three and six months ended March 31, 2000 and
1999, the consolidated statement of changes in stockholders' equity for the six
months ended March 31, 2000 and 1999 and the consolidated statements of cash
flows for the six months ended March 31, 2000 and 1999. 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, 1999, 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 28, 1999, 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, 1999, 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 12, 2000
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<PAGE>
Caribiner International, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, September 30,
ASSETS 2000 1999
(unaudited) (Note 1)
----------- --------
(amounts in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ - $ 1,675
Trade accounts receivable - net of allowance for doubtful
accounts of $2,027 and $4,693 at March 31, 2000 and
September 30, 1999, respectively 63,056 100,446
Deferred charges 1,568 8,301
Prepaid expenses and other current assets 11,779 20,173
Net assets held for sale 126,100 --
-------- --------
Total Current Assets 202,503 130,595
Property and equipment - net 68,876 100,438
Goodwill - net 276,733 409,204
Taxes receivable 5,753 4,548
Other assets 10,874 14,684
-- --
-------- --------
TOTAL ASSETS $564,739 $659,469
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 85,612 $ 1,299
Trade accounts payable 13,278 22,527
Accrued expenses and other current liabilities 49,162 40,436
Accrued production costs 743 20,259
Deferred income 1,925 11,617
-------- --------
Total Current Liabilities 150,720 96,138
Long-term debt 362,450 425,840
Deferred income 904 4,975
Deferred tax liability 8,432 7,892
Other liabilities 502 2,144
-------- --------
TOTAL LIABILITIES 523,008 536,989
Stockholders' Equity:
Preferred stock, $0.01 par value:
2,000 shares authorized, none issued and outstanding at
March 31, 2000 and September 30, 1999, respectively --- ---
Common stock, $0.01 par value:
40,000 voting shares authorized 23,697 shares
issued and outstanding at March 31, 2000 and
September 30, 1999 236 236
Additional paid-in capital 167,677 167,677
Accumulated other comprehensive loss (6,818) (4,785)
Accumulated deficit (119,364) (40,648)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 41,731 122,480
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $564,739 $659,469
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-3-
<PAGE>
Caribiner International, Inc.
Consolidated Statements of Operations
For the Six Months Ended
(unaudited)
<TABLE>
<CAPTION>
March 31,
---------------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenue $ 209,974 $ 199,568
Cost of revenue 172,154 158,069
------------- -------------
Gross profit 37,820 41,499
------------- -------------
Operating expenses:
Selling, general and administrative expenses 26,322 31,654
Depreciation and amortization 5,828 7,731
------------- -------------
Total operating expenses 32,150 39,385
------------- -------------
Operating income before corporate reorganization and other costs 5,670 2,114
------------- -------------
Corporate reorganization costs (note 3) 3,600 --
Loss on sale of assets (note 4) 3,000 --
------------ ------------
Operating income (loss) (930) 2,114
Interest expense, net 21,345 16,309
------------- -------------
Loss from continuing operations before taxes (22,275) (14,195)
Provision for taxes -- (5,678)
------------- -------------
Loss from continuing operations (22,275) (8,517)
Discontinued operations (note 2)
Income (loss) from operations (less income taxes of $331 in 2000, $4,112
in 1999) (16,128) 6,170
Loss on disposal of assets (40,313) --
------------- -------------
Income (loss) from discontinued operations (56,441) 6,170
------------- -------------
Net loss $ (78,716) $ (2,347)
============= =============
Basic and diluted earnings (loss) per common share:
Loss from continuing operations $ (0.94) $ (0.36)
Income (loss) from discontinued operations, net of tax (2.38) 0.26
------------- -------------
Net loss per common share $ (3.32) $ (0.10)
============= =============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-4-
<PAGE>
Caribiner International, Inc.
Consolidated Statements of Operations
For the Three Months Ended
(unaudited)
<TABLE>
<CAPTION>
March 31,
---------------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenue $ 111,207 $ 104,252
Cost of revenue 90,135 80,847
------------- -------------
Gross profit 21,072 23,405
------------- -------------
Operating expenses:
Selling, general and administrative expenses 15,176 15,418
Depreciation and amortization 3,011 3,670
------------- -------------
Total operating expenses 18,187 19,088
------------- -------------
Operating income before corporate reorganization and other costs 2,885 4,317
------------- -------------
Corporate reorganization costs (note 3) 3,600 --
Loss on sale of assets (note 4) 3,000 --
------------- -------------
Operating income (loss) (3,715) 4,317
Interest expense, net 10,742 8,715
------------- -------------
Loss from continuing operations before taxes (14,457) (4,398)
Provision for taxes -- (1,759)
------------- -------------
Loss from continuing operations (14,457) (2,639)
Discontinued operations (note 2)
Income (loss) from operations (less income taxes of $331 in 2000,
$4,218 in 1999) (9,814) 6,327
Loss on disposal of assets (40,313) --
------------- -------------
Income (loss) from discontinued operations (50,127) 6,327
------------- -------------
Net Income (Loss) $ (64,584) $ 3,688
============= =============
Basic and diluted earnings per common share:
Loss from continuing operations $ (0.61) $ (0.11)
Income (loss) from discontinued operations, net of tax (2.12) 0.27
------------- -------------
Net income (loss) per common share $ (2.73) $ 0.16
============= =============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-5-
<PAGE>
Caribiner International, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended
(unaudited)
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
(amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (78,716) $ (2,347)
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 24,236 21,333
Fixed asset write-off 2,500 --
Loss on disposition of assets 40,313 --
Change in assets and liabilities:
Increase in trade accounts receivable (7,195) (6,222)
Increase in deferred charges (8,735) (5,296)
Decrease (increase) in prepaid expenses and
other current assets 1,099 (2,250)
Increase in assets held for sale (6,082) --
Decrease (increase) in other assets 2,419 (4,356)
Increase in trade accounts payable 5,211 9,310
Increase in deferred income 15,563 2,628
Increase (decrease) in accrued expenses and
other liabilities 7,351 (14,324)
Decrease in taxes payable (821) (2,320)
-------- --------
Net cash used in operating activities (2,857) (3,844)
Cash flow used in investing activities:
Purchase of property and equipment (20,679) (21,521)
Acquisition of intangibles and businesses, net of
cash acquired (229) (5,571)
-------- --------
Net cash used in investing activities (20,908) (27,092)
Cash flow provided by financing activities:
Repayments of long-term debt (55,206) (78,797)
Proceeds from long-term debt 77,625 104,450
Payment of debt issuance fees -- (1,231)
-------- --------
Net cash provided by financing activities 22,419 24,422
Translation effect on cash and cash equivalents (329) 115
Net decrease in cash (1,675) (6,399)
Cash, beginning of period 1,675 15,117
-------- --------
Cash, end of period $ 0 $ 8,718
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 23,339 $ 17,320
======== ========
Income taxes paid $ 198 $ 270
======== ========
</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, 2000 and 1999
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
------------ Additional Other Total
Paid-in Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Income Equity
------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
For the six months ended March 31, 2000:
Balance at September 30, 1999 23,697 $236 $167,677 (40,648) (4,785) $122,480
Net loss -- -- -- (78,716) -- (78,716)
Foreign currency translation adjustment -- -- -- -- (2,033) (2,033)
-------
Comprehensive loss -- -- -- -- -- (80,749)
-------------------------------------------------------------------------
Balance at March 31, 2000 23,697 $236 $167,677 (119,364) (6,818) 41,731
=========================================================================
For the six months ended March 31, 1999:
Balance at September 30, 1998 23,689 $236 $167,608 $11,645 $(3,714) $175,775
Net loss (2,347) (2,347)
Foreign currency translation adjustment (1,719) (1,719)
------
Comprehensive loss (4,066)
Issuance of common stock 5 * 56 -- -- 56
-------------------------------------------------------------------------
Balance at March 31, 1999 23,694 $236 $167,664 $9,298 $(5,433) $171,765
=========================================================================
</TABLE>
*Amount less than $1 thousand
See accompanying notes to the unaudited consolidated financial statements.
-7-
<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 three and six months ended
March 31, 2000 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, 2000.
The balance sheet at September 30, 1999 has been derived from the
Company's audited financial statements at that date, but does not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
2. Discontinued Operations
On April 20, 2000, the Company sold substantially all of the assets of its
worldwide Communications Group (the "Communications Group"). On May 9,
2000, the Company sold its U.K.-based Melville Exhibition Services
subsidiary ("MES"). The Company recorded an aggregate loss on disposal of
these operations of $40.3 million at March 31, 2000. Operating results of
the Communications Group and MES have been segregated and reported as
discontinued operations in the Consolidated Statement of Operations for
the three and six months ended March 31, 2000 and 1999 (with the prior
year comparable periods restated). Net assets of the Communications Group
and MES have been separately classified in the Consolidated Balance Sheet
at March 31, 2000. Cash flow impacts of the discontinued operations have
not been segregated in the Consolidated Statement of Cash Flows.
Components of the income (loss) from discontinued operations reflected in
the Consolidated Statements of Operations are presented in the following
table.
<TABLE>
<CAPTION>
Three months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $80,410 $104,405 $138,946 $172,133
Cost of Revenue 54,826 71,027 94,943 116,132
Selling, general and administrative expenses 32,016 19,806 53,378 39,663
Depreciation and Amortization 3,322 3,162 6,671 6,257
------------ ----------- ----------- ------------
Operating Income (loss) (9,754) 10,410 (16,046) 10,081
Interest expense (income), net 60 (135) 82 (201)
------------ ----------- ----------- ------------
Income (Loss) from operations before tax (9,814) 10,545 (16,128) 10,282
------------ ----------- ----------- ------------
Tax provision -- 4,218 -- 4,112
------------ ----------- ----------- ------------
Income (Loss) from discontinued operations $(9,814) $6,327 $(16,128) $6,170
======== ====== ========= ======
</TABLE>
3. Corporate Reorganization and Other Costs
In connection with corporate office reorganization plans, a charge of $3.6
million was recorded during the three months ended March 31, 2000. Such
charge primarily includes severance payments to be paid in the third
fiscal quarter of 2000.
-8-
<PAGE>
4. Loss on Sale of Assets
During the three months ended March 31, 2000, the Company wrote off $3.0
million of assets relating to sold businesses.
5. Segment Information
In accordance with Financial Accounting Standards Board Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information, set
forth below is selected financial information about the Company's
reportable operating segments.
Description of Segments
The Company has three reportable segments in continuing operations: Hotel
Services, Staging and Meeting Services and Rental Services. Hotel
Services provides audiovisual equipment rental services to hotels via an
on-site presence of both equipment and technical support staff. The
Staging and Meeting Services Division is a provider of audiovisual
equipment, technical labor and related staging services to production
companies and other corporations for use during meetings, trade shows,
conventions and presentations. Rental Services is a remote full service
provider on an as-needed basis to local and national corporations,
convention centers and smaller hotels.
Measurement of Segment Profit or Loss
The Company evaluates performance based upon revenues, gross profit and
profit or loss from operations before interest, income taxes, depreciation
and amortization ("EBITDA"). Interdivision sales are recorded at the
Company's costs; there is no intercompany profit or loss on interdivision
sales.
Six Months Ended March 31, 2000 (Amounts in Thousands)
Staging &
Hotel Meeting Rentals
Services Services Services Total
-------- -------- -------- -----
Revenue $156,887 $44,595 $11,697 $213,179
Gross profit 33,850 4,244 2,175 40,269
EBITDA 23,966 6,502 382 30,850
-9-
<PAGE>
5. Segment Information (Continued)
Six Months Ended March 31, 1999 (Amounts in Thousands)
Staging &
Hotel Meeting Rentals
Services Services Services Other (a) Total
-------- -------- -------- --------- -----
Revenue $130,660 $47,978 $11,148 $15,214 $205,000
Gross profit 27,626 5,181 2,924 4,967 40,698
EBITDA 19,243 6,697 2,324 (1,774) 26,490
(a) Represents the results of the Company's design and installation
business disposed June, 1999.
Reconciliations to Consolidated Statement of Operations (Amounts in
Thousands)
Six Months Ended
March 31,
2000 1999
---- ----
Total external revenue for reportable segments $ 209,974 $ 199,568
Intradivision revenue for reportable segments 3,205 5,432
Elimination of intradivision revenue (3,205) (5,432)
------- -------
Total consolidated revenue $ 209,974 $ 199,568
======= =======
Total "EBITDA" for reportable segments $ 30,850 $ 26,490
Costs related to the former Atlanta-based
audiovisual headquarters -- 4,828
Corporate expenses 5,903 5,107
Fixed asset write off 2,500 --
Corporate reorganization and other costs 6,600 --
------- -------
Total consolidated operating income before
depreciation and amortization expense
and interest expense, net 15,847 16,555
Depreciation and amortization expenses,
including depreciation in cost of revenue 16,777 14,441
Interest expense, net 21,345 16,309
------- -------
Total consolidated operating income (loss)
from continuing operations before taxes $ (22,275) $ (14,195)
======= =======
Three Months Ended March 31, 2000
Staging &
Hotel Meeting Rental
Services Services Services Total
-------- -------- -------- ------
Revenue $82,413 $25,203 $5,162 $112,778
Gross profit 19,629 3,369 717 23,715
EBITDA 13,969 4,589 (431) 18,127
Three Months Ended March 31, 1999
Staging &
Hotel Meeting Rental
Services Services Services Other (a) Total
-------- -------- -------- --------- -----
Revenue $68,013 $27,491 $5,565 $6,825 $107,894
Gross profit 15,063 4,192 1,724 2,039 23,018
EBITDA 10,888 4,891 1,227 (1,348) 15,658
(a) Represents the results of the Company's design and installation
business disposed June, 1999.
Three Months Ended
March 31,
2000 1999
---- ----
Total external revenue for reportable segments $111,207 $104,252
Intradivision revenue for reportable segments 1,571 3,642
Elimination of intradivision revenue (1,571) (3,642)
--------- --------
Total consolidated revenue 111,207 104,252
========= ========
Total "EBITDA" for reportable segments 18,127 15,658
Costs related to the former Atlanta-based
audiovisual headquarters 4,025 2,075
Corporate expenses
Fixed asset write off 2,500 2,165
Corporate reorganization and other costs 6,600 --
--------- --------
Total consolidated operating income before
depreciation and amortization expense
and interest expense, net 5,002 11,418
Depreciation and amortization expenses,
including depreciation in cost of revenue 8,717 7,101
Interest expense, net 10,742 8,715
--------- --------
Total consolidated operating income (loss)
from continuing operations before taxes $(14,457) $ (4,396)
========= ========
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<PAGE>
Caribiner International, Inc.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Effective April 20, 2000 and May 9, 2000, the Company disposed of substantially
all of the assets of its worldwide Communications Group and its U.K.-based
Melville Exhibition Services subsidiary, respectively. The operating results of
each of the disposed businesses have been segregated and reported as
discontinued operations in the consolidated statements of operations for the
three and six months ended March 31, 2000. The operating results of the prior
year have been restated to conform to the current year's presentation. The
results of operations below are for the continuing operations of the Company's
audiovisual services businesses only (which are cmprised of its hotel services,
staging and meeting services and rental services divisions) and do not include
the results of operations of the disposed businesses.
Six Months Ended March 31, 2000 Compared to Six Months Ended March 31, 1999
Revenue. Excluding the effect of $15.2 million of revenue from the Company's
design and installation business ("Presentation Technologies") disposed of
effective June 30, 1999, revenue increased by $25.6 million, or 13.4%, to $210.0
million in the six months ended March 31, 2000 from $184.4 million in the six
months ended March 31, 1999. The increase was primarily due to growth in the
Company's hotel audiovisual services segment resulting from increased business
from existing hotel properties and a net increase in the number of total
properties under contract.
Gross profit. Excluding $5.0 million of gross profit of the Company's design and
installation business disposed of effective June 30, 1999, gross profit
increased $1.3 million, or 3.6%, to $37.8 million in the six months ended March
31, 2000 from $36.5 million in the six months ended March 31, 1999. Comparable
gross profit as a percentage of revenue was 18.0% for the six months ended March
31, 2000 compared to 20.0% in the prior year's comparable quarter. Profits from
the Company's combined audiovisual services businesses were slightly impacted by
an increase in commission rates in addition to increased costs related to the
rental of audio visual equipment used in operations, particularly in the hotel
audiovisual services segment. In addition, during the three months ended March
31, 2000, the Company wrote-off $2.5 million of fixed assets not being actively
used in its audiovisual businesses. The gross profit on rental revenue for the
six months ended March 31, 2000 and 1999 was also impacted by $10.9 million and
$6.8 million, respectively, of depreciation expense related to rental equipment
used in the audio visual services businesses. Such depreciation expense is
included in cost of rental revenue.
Selling, general and administrative expenses. Excluding the effect of
Presentation Technologies, selling, general and administrative expenses
increased $1.4 million from $24.9 million in the six months ended March 31, 1999
to $26.3 million in the six months ended March 31, 2000. During the six months
ended March 31, 1999, the Company incurred $4.8 million of costs related to the
former Atlanta based audio-visual headquarters. In addition, the selling,
general and administrative expenses of the Hotels Services segment decreased by
approximately $4.1 million in the six months ended March 31, 2000 from the prior
comparable quarter due to cost savings achieved in centralizing all operations
into one location. On a comparable basis, selling, general and administrative
expenses, as a percentage of total revenue, decreased from 13.5% during the six
months ended March 31, 1999 to 12.5% in the six months ended March 31, 2000.
Depreciation and amortization. Depreciation and amortization expense for the six
months ended March 31, 2000 was $5.8 million, a decrease of $1.9 million from
the corresponding period in the prior year. The decrease is primarily
attributable to the write-off of fixed assets related to the former
Atlanta-based audio visual headquarters, which occurred in the fourth quarter of
fiscal 1999.
Corporate reorganization costs. In connection with the corporate office
reorganization plans, during the three months ended March 31, 2000, the Company
recorded a charge of $3.6 million, primarily for severance payments to be paid
in the third fiscal quarter.
Loss on sale of assets. During the three months ended March 31, 2000, the
Company wrote off $3.0 million of assets relating to sold businesses.
Interest expense, net. Interest expense, net increased by $5.0 million due to
higher average outstanding indebtedness previously incurred to finance
acquisitions as well as higher borrowing costs.
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 40% for the six months ended March 31, 1999. There was
no income tax benefit for the six months ended March 31, 2000 in accordance with
generally accepted accounting principles.
-11-
<PAGE>
Net loss. The Company realized a net loss from continuing operations of $22.3
million in the six months ended March 31, 2000 compared to a net loss of $8.5
million in the six months ended March 31, 1999. The loss per common share from
continuing operations for the six months ended March 31, 2000 was $0.94 as
compared with a net loss per common share of $0.36 for the comparable period in
fiscal 1999.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Revenue. Excluding $6.8 million of revenue from Presentation Technologies
disposed of efective June 30, 1999, revenue increased $13.8 million, or 14.2%,
to $111.2 million in the six months ended March 31, 2000 from $97.4 million in
the six months ended March 31, 1999. The increase is primarily attributable to
the Company's Hotel Services outsourcing segment which increased its revenues by
$14.4 million in the three months ended March 31, 2000 from the prior year's
comparable quarter.
Gross profit. Excluding the effects of $2.0 million of gross profit from the
disposed Presentation Technologies business and a $2.5 million write-off which
was recorded in the three months ended March 31, 2000 relating to fixed assets
no longer being used in the Company's audiovisual services businesses, gross
profit increased $2.2 million to $23.6 million in the six months ended March 31,
2000 from $21.4 million in the six months ended March 31, 1999. Gross profit as
a percentage of revenue was 21% for the three months ended March 31, 2000
compared to 22% in the prior year's comparable quarter. Profits from the
Company's combined audiovisual services businesses were slightly impacted by an
increase in commission rates in addition to increased costs related to the
rental of audio visual equipment used in operations, particularly in the hotel
audiovisual services segment. The gross profit on rental revenue for the three
months ended March 31, 2000 and 1999 was also impacted by $5.7 million and $3.4
million, respectively, of depreciation expense related to rental equipment used
in the audio visual services businesses. Such depreciation expense is included
in cost of rental revenue.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $0.2 million, or 1.6%, from $15.4 million in
the three months ended March 31, 1999 to $15.2 million in the three months ended
March 31, 2000. During the three months ended March 31, 1999, the Company
incurred $2.1 million in costs related to the former Atlanta based audiovisual
headquarters and $3.4 million by the disposed Presentation Technologies
business. Selling, general and administrative expenses, as a percentage of
revenue, decreased from 14.8% during the three months ended March 31, 1999 to
13.6% in the three months ended March 31, 2000.
Depreciation and amortization. Depreciation and amortization expense for the
three months ended March 31, 2000 was $3.0 million, a decrease of $0.7 million
from the corresponding period in the prior year.
Corporate reorganization costs. In connection with the corporate office
reorganization plans, during the three months ended March 31, 2000, the Company
recorded a charge of $3.6 million, primarily for severance payments to be paid
in the third fiscal quarter.
Loss on sale of assets. During the three months ended March 31, 2000, the
Company wrote off $3.0 million of assets relating to sold businesses.
Interest expense, net. Interest expense, net increased by $2.0 million due to
higher average outstanding indebtedness previously incurred to finance
acquisitions as well as higher borrowing costs.
Provision for taxes. Taxes reflect an allocation based on the full year
anticipated effective tax rate. There was no income tax benefit for the three
months ended March 31, 2000 in accordance with generally accepted accounting
principles.
Net loss. The Company realized a net loss from continuing operations of $14.5
million in the three months ended March 31, 2000 compared to a net loss of $2.6
million in the three months ended March 31, 1999. The loss per common share from
continuing operations for the three months ended March 31, 2000 was $0.61 as
compared with a loss per common share of $0.11 for the comparable period in
fiscal 1999.
Liquidity and Capital Resources
The following discussion of liquidity and capital resources is for our combined
continuing and discontinued operations.
On October 28, 1997, the Company entered into a 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 three
year revolving line of credit (the "Revolving Facility") to be utilized in
connection with future acquisitions and for working capital and general
corporate purposes and a $250 million three year term loan (the "Term Facility"
and together with the Revolving Facility, the "Credit
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<PAGE>
Agreement"), which was fully utilized in connection with the acquisition of
Visual Action. Amounts outstanding under the Company's former credit facility
were repaid with the proceeds from the Credit Agreement. 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 credit facility.
Approximately $4.8 million in debt issuance fees were incurred in connection
with the Credit Agreement. Such fees are being amortized over the term of the
Credit Agreement.
In May, 1998, the Company repaid approximately $26 million under the Term
Facility thereby permanently reducing availability thereunder by such amount. In
December, 1998 and July, 1999, the terms of the Revolving Facility were amended
to reduce the aggregate availability thereunder from $300 million to $250
million, to amend certain financial covenants contained therein and to increase
the interest rate on amounts outstanding under the Credit Agreement.
At June 30, 1999, the Company did not achieve certain of the financial covenants
specified in the Credit Agreement. In connection with the amendments made to the
Credit Agreement in July 1999 (the "July 1999 Amendment"), the lenders waived
through March 30, 2000, all defaults that had arisen or might arise from the
failure to satisfy the specified financial covenants for June 30, 1999,
September 30, 1999 and December 31, 1999. As part of such amendment, the Company
agreed, among other things, to revised covenants regarding minimum consolidated
earnings before interest, taxes, depreciation and amortization ("EBITDA") as
defined in the Credit Agreement, for the twelve month periods ending June 30,
September 30 and December 31, 1999, and to restrictions on the amount of
permitted capital expenditures (as described in the Credit Agreement) for the
three month periods ending September 30 and December 31, 1999.
At September 30, 1999, the Company was not in compliance with the covenants set
forth in the July 1999 Amendment. In December, 1999, the Company obtained a
further amendment (the "December 1999 Amendment") to the Credit Agreement that,
among other things, extended the waivers under the July 1999 Amendment until
October 1, 2000, and waived through October 1, 2000 all defaults arising from
the failure at September 30, 1999 to satisfy the financial covenants specified
in the July 1999 Amendment. As part of the December 1999 Amendment, the Company
agreed to a minimum consolidated adjusted EBITDA covenant that was based on
post-September 30, 1999 consolidated EBITDA (as defined in the Credit
Agreement), and to restrictions on the amount of capital expenditures that could
be made by the Company during the fiscal year ending September 30, 2000. The
minimum required consolidated adjusted EBITDA, as defined, for fiscal 2000
exceeds levels achieved in fiscal 1999.
In addition to the waivers and revised financial covenants described above, the
December 1999 Amendment provided for the deferral through October 1, 2000 of the
principal payments due under the Term Facility on December 31, 1999 and March
31, 2000. The December 1999 Amendment also included a consent by the lenders
that would have allowed the Company to pursue the possible sale of its
audiovisual businesses, provided that certain timing requirements were met and
minimum net proceeds exceeded a specified amount.
In March, 2000, the Company entered into a further amendment (the "March 2000
Amendment") to the Credit Agreement, that, among other things, (i) amended the
maturity date of the Term Facility to eliminate the requirement to make any
installment payments thereon such that all amounts outstanding the Term Facility
are due and payable on October 1, 2001, (ii) reduced the amounts available to
the Company under the Credit Agreement for letters of credit, (iii) eliminated
altogether those financial covenants that the July 1999 Amendment and December
1999 Amendments previously had waived through October 1, 2000, (iv) amended the
covenant relating to minimum consolidated EBITDA for the three month period
ended December 31, 1999, the six month period ended March 31, 2000, the nine
month period ending June 30, 2000, the twelve month periods ending September 30
and December 31, 2000, and any period of four consecutive fiscal quarters ending
on or after March 31, 2001, (v) amended the covenant relating to restrictions on
the amount of permitted capital expenditures (as described in the Credit
Agreement) such that the Company may not permit capital expenditures to exceed
$25 million in any two consecutive fiscal quarters or $40 million in any four
consecutive fiscal quarters commencing with the fiscal quarter beginning January
1, 2000 and (vi) requires the Company to provide certain additional reports to
the lenders. In addition, pursuant to the terms of the March 2000 Amendment, the
lenders withdrew the consent granted to the Company in the December 1999
Amendment to pursue the possible sale of the Company's audiovisual businesses.
In addition to the amendments and revised financial covenants described above,
the March 2000 Amendment also included a consent by the lenders to allow the
Company to proceed with its previously announced sale of its Communications
Division (the "Communications Sale") and to pursue the sale of MES (the "MES
Sale"), provided that, in each case, certain timing requirements were met,
minimum net proceeds exceeded a specific amount and 75% of the net proceeds of
each such disposition would be applied to the prepayment of the Term Facility
and the reduction of the commitment under the Revolving Facility. The Company
consummated the Communications Sale on April 20, 2000, and consummated the MES
Sale on May 9, 2000, and in connection therewith (i) repaid an aggregate of
$38.0 million under the Term Facility thereby permanently reducing availability
and outstanding amounts thereunder from $199.6 million to $161.6 million and
(ii) repaid an aggregate of $47.5 million under the Revolving Facility, which
resulted in a permanent reduction of the availability thereunder from $250.0
million to $202.5 million.
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<PAGE>
Pursuant to the terms of the March 2000 Amendment, the Company also agreed to
retain not later than June 1, 2001, an investment banking firm for the purposes
of evaluating strategic and debt reduction alternatives.
Fees of approximately $1.2 million, $1.4 million and $1.0 million were incurred
in connection with the amendments made to the Credit Agreement in December 1998,
July, 1999, and December 1999, respectively. Such fees will be amortized over
the remaining term of the Credit Agreement.
No fees were paid to the Company's lenders in connection with the March 2000
Amendment; however, pursuant to a deferred amendment fee letter entered into in
connection with the March 2000 Amendment, the Company will be required to pay a
fee equal to the greater of (A) not less than $2.5 million nor more than $12.5
million or (B) not less than 2.5% nor more than 12.5% of the net equity value
(as defined in the deferred amendment fee letter) of the Company upon the
occurrence of the earlier of (i) the maturity date of the Revolving Facility,
(ii) an event of default (as defined in the Credit Agreement), (iii) a sale of
all or substantially all of the Company's assets, (iv) a sale of substantially
all of the capital stock of the Company, or (v) the repayment of all amounts
outstanding under the Credit Agreement (such events being referred to as a
"Triggering Event"). The actual amount of such fee will be determined on the
date that a Triggering Event shall occur.
The maturity date of each of the Term Facility and the Revolving Facility is
October 1, 2001. Interest on outstanding amounts under the Credit Agreement is
payable monthly in arrears and at the option of the Company accrues at either
(i) LIBOR plus 3.00% 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 applicable margins are subject
to change based on the occurrence of certain events. Pursuant to the terms of
the March 2000 Amendment, outstanding amounts under each of the Term Facility
and Revolving Facility also accrue additional interest at the rate of 1% per
annum payable in arrears upon the termination of the Credit Agreement.
As stated above, pursuant to the terms of the March 2000 Amendment, the entire
principal on the Term Facility is payable on October 1, 2001.
The Credit Agreement is secured by substantially all of the assets of the
Company and its material subsidiaries, and the Company and its subsidiaries have
pledged the stock of their respective subsidiaries for the ratable benefit of
its lending banks. In addition to the financial covenants described above, the
Credit Agreement contains certain other covenants and restrictions customary for
credit facilities of a similar nature, including, without limitation,
restrictions on the ability of the Company to pay dividends.
The Company believes it will be able to satisfy the financial and other
covenants included in the Credit Agreement, as amended by the March 2000
Amendment.. Nevertheless, there can be no assurance that the Company will be
able remain in compliance with the financial covenants specified in the Credit
Agreement during the twelve months ending September 30, 2000. Unless further
amendments or waivers were to be obtained from the lenders, the failure to
satisfy the specified financial covenants or the occurrence of any other event
of default under the Credit Agreement, as amended, would entitle the lenders to,
among other things, accelerate the maturity of the outstanding borrowings under
the Credit Agreement, and exercise all or any of their other rights or remedies.
Any such acceleration or other exercise of rights and remedies would likely have
a material adverse effect on the Company.
As of May 12, 2000, the Company had approximately $346.4 million outstanding
under the Credit Agreement, of which $184.8 million was outstanding under the
Revolving Facility. Cash on hand as of such date was $11.7 million. The Company
believes that cash flow from operations and available credit under the Revolving
Facility will be sufficient to meet operating needs through the end of fiscal
2000.
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the six months ended March 31, 2000
and 1999:
Six months Ended March 31,
2000 1999
---- ----
Net cash provided by (used in):
Operating activities $(2,857) $(3,844)
Investing activities (20,908) (27,092)
Financing activities 22,419 24,422
For the six months ended March 31, 2000, $2.9 million was used in operating
activities. The net loss adjusted for depreciation and amortization, the fixed
asset write-offs and the loss on disposition of assets required $11.7 million.
The net change in working capital provided $8.8 million, with decreases in
prepaid and other current assets, other assets and increases in accounts
payable, deferred income and accrued expenses and other liabilities, which were
more than offset by increases in accounts receivable, deferred charges and
assets held for sale, and decreases in taxes payable. Investing activities
required $20.9 million due to property and equipment additions and
acquisition-related expenditures. Financing activities provided $22.4 million in
the three months ended March 31, 2000, of which $77.6 million was provided by
drawings under the Company's Credit Agreement, offset by repayments of $55.2
million.
Capital expenditures were $20.7 million and $21.5 million during the six months
ended March 31, 2000 and 1999, respectively.
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<PAGE>
During the three months ended March 31, 1999 and 2000, the purchase of audio
visual equipment used in operations comprised the major portion of capital
expenditures.
For the three months ended March 31, 1999, $3.8 million was used in operating
activities. The net loss adjusted for depreciation and amortization provided
$19.0 million. The net change in working capital used $22.8 million, with
decreases in accrued expenses and other liabilities and taxes payable, an
increase in accounts receivable, deferred charges, prepaid expenses and other
assets, offset by increases in accounts payable and deferred income. Cash used
in investing activities was $27.1 million due to property and equipment
purchases and acquisition-related expenditures. Financing activities provided
$24.4 million, of which was $104.5 million was drawn under the Company's Credit
Agreement, offset by debt repayments of $78.8 million. In addition, debt
issuance fees of $1.2 million were paid in connection with the amendments made
to the Credit Agreement in December, 1998.
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<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 25, 1999, a purported shareholder class action was filed in the United
States District Court for the Southern District of New York (the "Southern
District") against the Company and certain of its current and former officers
and one of its directors. On May 7, 1999, a purported shareholder class action
substantially identical to the March 25th action was filed in the Southern
District against the Company and the same individuals named in the March 25th
action. Both lawsuits allege, among other things, that defendants misrepresented
the Company's ability to integrate various companies it was acquiring and
alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 and various rules promulgated thereunder. The lawsuits seek unspecified
money damages, plus costs and expenses, including attorneys' fees and expert
fees. The Company believes it has meritorious defenses to this action and
intends to defend the lawsuit vigorously. In November, 1999, the court issued an
order consolidating the lawsuits into a single action and appointing lead
plaintiffs and lead counsel. The plaintiffs filed a consolidated amended
complaint in January 2000. In February, 2000, the Company filed a motion to
dismiss the consolidated amended complaint.
In addition to the litigation described above, from time to time the Company is
a party to various legal proceedings incidental to its business. Although the
ultimate disposition of these proceedings is not determinable, in the opinion of
the Company, none of such proceedings has had or is likely to have a material
adverse effect on the Company's results of operations, financial condition or
liquidity.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by Item 601 of Regulation S-K:
Exhibit
Number Description of Document
------ -----------------------
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 quarterly period 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 (filed as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1998 and
incorporated herein by reference).
3.3 Third Amended and Restated By-Laws of the Company (filed as
Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1998 and
incorporated herein by reference).
10.1 Credit Agreement, dated as of October 28, 1997 (the "Credit
Agreement"), among the Company, Caribiner, Inc., the
several lenders named therein and The Chase Manhattan Bank,
as Administrative Agent, and Merrill Lynch Capital
Corporation, as Syndication Agent (schedules and exhibits
omitted -- the Company agrees to furnish a copy of any
schedule or exhibit to the Commission upon request) (filed
as Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1997 and
incorporated herein by reference).
10.2 First Amendment and Agreement, dated as of March 31, 1998,
to the Credit Agreement (schedules and exhibits omitted --
the Company agrees to furnish a copy of any schedule or
exhibit to the Commission upon request) (filed as Exhibit
10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and incorporated
herein by reference).
10.3 Second Amendment and Waiver, dated as of December 18, 1998,
to the Credit Agreement (schedules and exhibits omitted --
the Company agrees to furnish a copy of any schedule or
exhibit to the Commission upon request) (filed as Exhibit
10.14 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and incorporated
herein by reference).
10.4 Third Amendment and Waiver, dated as of July 30, 1999, to
the Credit Agreement (schedules and exhibits omitted -- the
Company agrees to furnish a copy of any schedule or exhibit
to the Commission upon request) (filed as Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1999 and incorporated
herein by reference).
10.5 Fourth Amendment, Consent and Waiver, dated as of December
23, 1999, to the Credit Agreement (schedules and exhibits
omitted -- the Company agrees to furnish a copy of any
schedule or exhibit to the Commission upon request) (filed
as Exhibit 10.17 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1999 and
incorporated herein by reference).
10.6 Fifth Amendment, Consent and Agreement, dated as of March
31, 2000, to the Credit Agreement (schedules and exhibits
omitted -- the Company agrees to furnish a copy of any
schedule or exhibit to the Commission upon request).
10.7 Employment Agreement, dated as of April 5, 2000, by and
between the Company and Robert K. Ellis
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<PAGE>
10.8 Employment Agreement, dated as of April 5, 2000, by and
between the Company and Digby J. Davies
27 Financial Data Schedule
(b) Reports on Form 8-K: None.
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<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 15, 2000
By: /s/ Robert F. Burlinson
---------------------------
Robert F. Burlinson
Executive Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
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<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description of Document 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 quarterly period 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 (filed as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1998 and
incorporated herein by reference).
3.3 Third Amended and Restated By-Laws of the Company (filed as
Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1998 and
incorporated herein by reference).
10.1 Credit Agreement, dated as of October 28, 1997 (the "Credit
Agreement"), among the Company, Caribiner, Inc., the
several lenders named therein and The Chase Manhattan Bank,
as Administrative Agent, and Merrill Lynch Capital
Corporation, as Syndication Agent (schedules and exhibits
omitted -- the Company agrees to furnish a copy of any
schedule or exhibit to the Commission upon request) (filed
as Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1997 and
incorporated herein by reference).
10.2 First Amendment and Agreement, dated as of March 31, 1998,
to the Credit Agreement (schedules and exhibits omitted --
the Company agrees to furnish a copy of any schedule or
exhibit to the Commission upon request) (filed as Exhibit
10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and incorporated
herein by reference).
10.3 Second Amendment and Waiver, dated as of December 18, 1998,
to the Credit Agreement (schedules and exhibits omitted --
the Company agrees to furnish a copy of any schedule or
exhibit to the Commission upon request) (filed as Exhibit
10.14 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and incorporated
herein by reference).
10.4 Third Amendment and Waiver, dated as of July 30, 1999, to
the Credit Agreement (schedules and exhibits omitted -- the
Company agrees to furnish a copy of any schedule or exhibit
to the Commission upon request) (filed as Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1999 and incorporated
herein by reference).
10.5 Fourth Amendment, Consent and Waiver, dated as of December
23, 1999, to the Credit Agreement (schedules and exhibits
omitted -- the Company agrees to furnish a copy of any
schedule or exhibit to the Commission upon request) (filed
as Exhibit 10.17 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1999 and
incorporated herein by reference).
10.6 Fifth Amendment, Consent and Agreement, dated as of March
31, 2000, to the Credit Agreement (schedules and exhibits
omitted -- the Company agrees to furnish a copy of any
schedule or exhibit to the Commission upon request).
10.7 Employment Agreement, dated as of April 5, 2000, by and
between the Company and Robert K. Ellis
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<PAGE>
10.8 Employment Agreement, dated as of April 5, 2000, by and
between the Company and Digby J. Davies
27 Financial Data Schedule
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<PAGE>
EXECUTION VERSION
FIFTH AMENDMENT, CONSENT AND AGREEMENT, dated as of March 31, 2000
(this "Fifth Amendment"), to the Credit Agreement dated as of October 28, 1997
(as heretofore amended, supplemented or otherwise modified, the "Credit
Agreement"), among CARIBINER INTERNATIONAL, INC., a Delaware corporation (the
"Parent"), CARIBINER, INC., a New York corporation (the "Company"; together with
the Parent, the "Borrowers"), the several banks and other financial institutions
from time to time parties thereto (the "Lenders"), THE CHASE MANHATTAN BANK, as
Administrative Agent for the Lenders (in such capacity, the "Administrative
Agent") and MERRILL LYNCH CAPITAL CORPORATION, as Syndication Agent (in such
capacity, the "Syndication Agent"; collectively with the Administrative Agent,
the "Agents").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrowers, the Lenders and the Agents are parties to
the Credit Agreement, pursuant to which the Lenders have agreed to make, and
have made, certain loans and other extensions of credit to the Borrowers on the
terms and subject to the conditions thereof;
WHEREAS, pursuant to the Fourth Amendment to the Credit Agreement
dated as of December 23, 1999, the Lenders waived compliance with certain
financial covenants contained in the Credit Agreement and consented to the AV
Sale;
WHEREAS, the Borrowers have determined to defer the AV Sale
indefinitely and instead have proposed to Dispose of (a) certain assets of the
domestic Loan Parties and the Capital Stock of the Foreign Subsidiaries that
collectively comprise the communications businesses of the Parent and its
Subsidiaries (the "Communications Business") and (b) the Capital Stock of
Melville Exhibition Services Ltd. and certain assets of Corporate Technical
Services Ltd.;
WHEREAS, the Borrowers have requested that the Lenders consent to
such Dispositions, and in connection therewith, waive compliance by the Debtors
with certain covenants contained in the Credit Agreement and amend certain
provisions of the Credit Agreement; and
WHEREAS, the Lenders are willing to agree to the requested consents,
waivers and amendments, but only on the terms and subject to the conditions
contained herein;
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Borrowers, the Lenders and the Administrative Agent hereby agree as follows:
<PAGE>
2
SECTION 1. DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall have
their respective meanings set forth in the Credit Agreement.
SECTION 2. AMENDMENTS.
2.1 Amendments to Section 1.01 of the Credit Agreement. (a) Section
1.01 of the Credit Agreement is hereby amended by (i) deleting in their entirety
the definitions of the terms "Applicable Margin", "Consultant", "Interest
Payment Date", "L/C Fee Payment Date" and "Majority Lenders" and (ii) adding the
following new definitions in their proper alphabetical order:
""Applicable Margin" means with respect to (a) Eurodollar Loans,
3.00% and (b) ABR Loans, 2.00%.
"Communications Business" means the communications businesses of the
Parent and its Subsidiaries.
"Consultant" means Policano & Manzo, LLC or another firm or
individual specializing in providing financial consulting and
advisory services that is reasonably satisfactory to the Borrowers
and the Administrative Agent.
"Deferred Amendment Fee Letters" shall mean the collective reference
to the letters from the Borrowers to each Lender, substantially in
the form of Exhibit A to the Fifth Amendment, as amended,
supplemented or otherwise modified from time to time.
"Fifth Amendment" shall mean the Fifth Amendment, Consent and
Agreement, dated as of March 31, 2000, to this Agreement.
"Fifth Amendment Effective Date" has the meaning assigned thereto in
the Fifth Amendment.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
last day of each month and (b) with respect to any Eurodollar Loan,
the last day of the Interest Period applicable to the Borrowing of
which such Loan is a part and, in the case of a Eurodollar Borrowing
with an Interest Period of more than one months' duration, each day
prior to the last day of such Interest Period that occurs at
intervals of one months' duration after the first day of such
Interest Period.
"L/C Fee Payment Date" means the last day of each month.
<PAGE>
3
"Majority Lenders" means, at any time, the holders of more than 66
2/3% of the sum of the Available Commitments, the Term Loan Exposure
and the Revolving Credit Exposure of all Lenders at such time.".
(b) Section 1.01 of the Credit Agreement is hereby further amended
by deleting the provisos to the definitions of the terms "Asset Sale" and
"Recovery Event".
(c) Section 1.01 of the Credit Agreement is hereby further amended
by (i) deleting the word "and" immediately following subsection (d) of
definition of the term "Consolidated Unadjusted EBITDA" and inserting a comma in
lieu thereof and (ii) inserting the following phrase immediately after
subsection (e) of said definition:
"and (f) corporate transition costs of the type described in the
definition of Net Cash Proceeds in an amount not to exceed
$3,000,000.".
(d) Section 1.01 of the Credit Agreement is hereby further amended
by inserting the word "further" immediately after the word "provided" in the
existing proviso to the definition of the term "Interest Period" and inserting
the following new proviso immediately before the existing proviso to said
definition:
"provided that the interest period for all Eurodollar Loans
borrowed, continued or converted at any time after the Fifth
Amendment Effective Date shall be one month;"
(e) Section 1.01 of the Credit Agreement is hereby further amended
by inserting in the definition of the term "Net Cash Proceeds" the following new
phrase immediately after the word "Subsidiaries" at the end of clause (a) of
said definition:
"and, in the case of Asset Sales relating to the Communications
Business, Asset Sales relating to Corporate Technical Services Ltd.
or the Capital Stock of Melville Exhibition Services Ltd., market
shutdown costs and corporate transition costs arising in connection
with such Asset Sales, in each case as described during the March
15, 2000 Lender meeting,".
(f) Section 1.01 of the Credit Agreement is hereby further amended
by inserting the following parenthetical after the word "fees" where it appears
in the eleventh line of the definition of the term "Obligations":
"(including all fees payable under the Deferred Amendment Fee
Letters)".
2.2 Amendment to Section 2.03 of the Credit Agreement. Section 2.03
of the Credit Agreement is hereby amended by inserting in the second line of
paragraph (a) of said Section the phrase "prior to the Fifth Amendment Effective
Date," immediately before the words "swingline loans".
<PAGE>
4
2.3 Amendment to Section 2.04 of the Credit Agreement. (a) Section
2.04 of the Credit Agreement is hereby amended by deleting paragraph (b) of said
Section in its entirety and inserting in lieu thereof the following new
paragraph (b):
"(b) The Term Loans of each Term Loan Lender shall be due and
payable on October 1, 2001.".
(b) Section 2.04 of the Credit Agreement is hereby further amended
by deleting paragraph (c) of said Section in its entirety and inserting in lieu
thereof the following new paragraph (c):
"(c) The Borrowers hereby, jointly and severally, unconditionally
promise to pay to the Administrative Agent for the account of the
each Term Loan Lender the principal amount of each Term Loan of such
Term Loan Lender when due and payable as set forth in paragraph (b)
above or on such other dates and in such other amounts as may be
required from time to time pursuant to this Agreement. The Borrowers
hereby, jointly and severally, further agree to pay interest on the
unpaid principal amount of the Term Loans from time to time
outstanding from the date hereof until payment in full thereof at
the rates per annum, and on the dates, set forth in Section 2.09.".
2.4 Amendment to Section 2.06 of the Credit Agreement. (a) Section
2.06 of the Credit Agreement is hereby amended by deleting paragraphs (d) and
(e) of said Section in their entirety and inserting in lieu thereof the
following new paragraphs (d) and (e):
"(d) [Intentionally Omitted.]
(e) [Intentionally Omitted.]".
(b) Section 2.06 of the Credit Agreement is hereby further amended
by deleting the phrases "first," and ", second," from paragraph (h) of said
Section.
(c) Section 2.06 of the Credit Agreement is hereby further amended
by deleting from paragraph (i) of said Section (i) the phrases "first," and ",
second," and (ii) the proviso to said paragraph.
(d) Section 2.06 of the Credit Agreement is hereby further amended
by inserting the following sentence at the beginning of paragraph (l) of said
Section:
"Any prepayments to the Term Loans or reductions of the Revolving
Credit Commitments required to be made pursuant to Section 2.06(h)
or (i) of this Agreement shall be applied ratably in accordance with
the Term Loans then
<PAGE>
5
outstanding and the Revolving Credit Commitments then in effect as
of the date of any such prepayment or reduction."
2.5 Amendment to Section 2.09 of the Credit Agreement. (a) Section
2.09 of the Credit Agreement is hereby amended by (i) deleting the word
"Accrued" at the beginning paragraph (d) of said Section and (ii) inserting in
lieu thereof the phrase "Except as otherwise provided under Section 2.09(f),
accrued".
(b) Section 2.09 of the Credit Agreement is hereby further amended
by deleting the existing paragraph (c) of said Section an inserting in lieu
thereof the following new paragraph (c):
"(c) Notwithstanding the foregoing, (i) at any time after the
occurrence and during the continuance of an Event of Default, the
Loans shall bear an interest rate per annum equal to 2% plus the
rate applicable to ABR Loans as provided above, and (ii) if any
interest on any Loan or any fee or other amount payable by the
Borrowers (other than principal) hereunder is not paid when due
(whether at stated maturity, by acceleration or otherwise), such
overdue amount shall bear interest at a rate per annum of 2% plus
the rate applicable to ABR Loans as provided above.".
(c) Section 2.09 of the Credit Agreement is hereby further amended
by inserting the following new paragraph (f) at the end of said Section:
"(f) In addition to the interest otherwise provided for under this
Section, the Loans shall bear additional interest at a rate per
annum equal to 1%. Accrued interest under this paragraph shall be
payable in arrears on the earliest to occur of (i) the Revolving
Credit Termination Date, (ii) the date the Loans become due and
payable in accordance with Section 8 hereof and (iii) the date on
which all of the Obligations shall have been paid in full and the
Commitments shall have been terminated.".
2.6 Amendment to Section 3.01 of the Credit Agreement. Section 3.01
of the Credit Agreement is hereby amended by inserting into paragraph (a) of
said Section the parenthetical "(or at any time after the consummation of the
Disposition of the Communications Business, $2,500,000)" at the end of
subsection (i) of the proviso.
2.7 Amendment to Section 4.04 of the Credit Agreement. Section 4.04
of the Credit Agreement is hereby amended by deleting paragraph (b) of said
Section in its entirety and inserting in lieu thereof the following new
paragraph (b):
"(b) Since the Fifth Amendment Effective Date, there has occurred no
event or circumstance which has had a Material Adverse Effect.".
<PAGE>
6
2.8 Amendment to Section 4.18 of the Credit Agreement. Section 4.18
of the Credit Agreement is hereby amended by deleting said Section in its
entirety and inserting in lieu thereof the following new Section 4.18:
"SECTION 4.18. [Intentionally Omitted.]".
2.9 Amendment to Section 6.01 of the Credit Agreement. Section 6.01
of the Credit Agreement is hereby amended by deleting paragraph (j) of said
Section in its entirety and inserting in lieu thereof the following new
paragraph (j):
"(j) [Intentionally Omitted.]".
2.10 Amendment to Section 6.15 of the Credit Agreement. Section 6.15
of the Credit Agreement is hereby amended by deleting said Section in its
entirety and inserting in lieu thereof the following new Section 6.15:
"SECTION 6.15. Consultant; Investment Banker; Management Reports.
(a) The Borrowers shall at all times continue the retention of a
Consultant on terms and with a scope of retention reasonably
satisfactory to the Borrowers and the Administrative Agent.
(b) Promptly following the delivery of the financial statements
referred to in Section 6.01(c), the Borrowers shall make their Chief
Financial Officer available to the Lenders on a mutually convenient
basis to provide a report on and to discuss such financial
statements.".
2.11 Amendments to Section 7.01 of the Credit Agreement. (a) Section
7.01 of the Credit Agreement is hereby amended by deleting paragraphs (a) and
(b) of said Section in their entirety and inserting in lieu thereof the
following new paragraphs (a) and (b):
"(a) [Intentionally Omitted.]
(b) [Intentionally Omitted.]".
(b) Section 7.01 of the Credit Agreement is hereby further amended
by deleting paragraph (c) of said Section in its entirety and inserting in lieu
thereof the following new paragraph (c):
"(c) Consolidated Unadjusted EBITDA. Permit Consolidated Unadjusted
EBITDA for any period set forth below to be less than the amount set
forth opposite such period:
<PAGE>
7
Period Amount
------ ------
10/01/99 - 12/31/99 $10,000,000
10/01/99 - 3/31/00 $23,000,000
10/01/99 - 6/30/00 $42,000,000
10/01/99 - 9/30/00 $50,000,000
1/01/00 - 12/31/00 $50,000,000
Any period of four consecutive fiscal $55,000,000;
quarters ending on or after 3/31/01
provided that for purposes of determining compliance with this
covenant Consolidated Unadjusted EBITDA shall be calculated without
reference to the Consolidated Unadjusted EBITDA of assets held for
sale (including the Communications Business, certain assets of
Corporate Technical Services Ltd. and the Capital Stock of Melville
Exhibition Services Ltd.), discontinued operations or assets or
operations similarly classified.".
(c) Section 7.01 of the Credit Agreement is hereby further amended
by deleting paragraph (d) of said Section in its entirety and inserting in lieu
thereof the following new paragraph (d):
"(d) Capital Expenditures. Permit Capital Expenditures to exceed
$25,000,000 in any period comprised of two consecutive fiscal
quarters or $40,000,000 in any period comprised of four consecutive
fiscal quarters commencing with fiscal quarter beginning January 1,
2000.".
2.12 Amendment to Section 7.02 of the Credit Agreement. (a) Section
7.02 of the Credit Agreement is hereby amended by deleting paragraph (f) of said
Section in its entirety and inserting in lieu thereof the following new
paragraph (f):
"(f) [Intentionally Omitted.]".
(b) Section 7.02 of the Credit Agreement is hereby further amended
by (i) inserting into paragraph (j) of said Section the phrase "incurred prior
to the Fifth Amendment Effective Date" immediately after the word "above" in the
second line of said paragraph and (ii) deleting the proviso to said paragraph.
2.13 Amendment to Section 7.03 of the Credit Agreement. Section 7.03
of the Credit Agreement is hereby amended (i) by inserting into paragraph (p) of
said Section the phrase "such Liens first arose and the related Indebtedness
first incurred prior to the Fifth Amendment Effective Date" immediately after
the word "as" in the second line of said paragraph and (ii)
<PAGE>
8
deleting the phrase "the aggregate principal amount of the Indebtedness so
secured does not exceed $5,000,000 at any time outstanding." from said
paragraph.
2.14 Amendment to Section 7.07 of the Credit Agreement. (a) Section
7.07 of the Credit Agreement is hereby amended by deleting paragraph (e) of said
Section in its entirety and inserting in lieu thereof the following new
paragraph (e):
"(e) [Intentionally Omitted.]".
(b) Section 7.07 of the Credit Agreement is hereby further amended
by (i) inserting into paragraph (h) of said Section the phrase "first made prior
to the Fifth Amendment Effective Date" immediately after the word "business" in
the second line of said paragraph and (ii) deleting the remainder of said
paragraph.
2.15 Amendment to Section 10.01 of the Credit Agreement. Section
10.01 of the Credit Agreement is hereby amended by inserting the following
phrase at the end of the proviso to the second sentence of said Section:
"or (iv) amend or modify Section 7.01(c), 7.06 or paragraph (k) of
Article VIII of the Credit Agreement or provide any consent or
waiver with respect to such Sections without the written consent of
Lenders holding at least 75% of the sum of the Available
Commitments, the Term Loan Exposure and the Revolving Credit
Exposure at the time of any such amendment, modification, consent or
waiver.".
2.16 Amendment to Section 10.06 of the Credit Agreement. Section
10.06 of the Credit Agreement is hereby amended by deleting from paragraph (c)
of said Section (i) the phrase "each of the Parent and" from the fifth and
twelfth lines of said paragraph and (ii) the second proviso to the first
sentence of said paragraph.
SECTION 3. CONSENTS.
3.1 Consent to Communications Sale. The Lenders hereby consent under
Sections 2.06, 7.05, 7.06 and 7.13 of the Credit Agreement to the Disposition of
the Communications Business; provided that (a) such consent shall automatically
terminate and be of no force or effect on May 15, 2000, unless on or prior to
such date the Borrowers (or their applicable Subsidiaries) shall have
consummated such Disposition on terms that generate not less than $79,000,000 of
Net Cash Proceeds, and (b) notwithstanding anything to the contrary contained in
Section 2.06(i) of the Credit Agreement, 75% of the Net Cash Proceeds of such
Disposition (determined without regard to any amounts deposited into any escrow
required pursuant to the definitive documentation relating to such Disposition
and which amounts are payable to the Borrowers upon release), are applied to the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments in accordance with Sections 2.06(i) and (l) of the Credit Agreement.
<PAGE>
9
3.2 Consent to Melville Sale. The Lenders hereby consent under
Sections 2.06, 7.05, 7.06 and 7.13 of the Credit Agreement to the Disposition of
the Capital Stock of Melville Exhibition Services Ltd. and certain assets of
Corporate Technical Services Ltd.; provided that (a) such consent shall
automatically terminate and be of no force or effect on May 15, 2000, unless on
or prior to such date the Borrowers (or their applicable Subsidiaries) shall
have consummated such Disposition on terms that generate not less than
$35,000,000 of Net Cash Proceeds, and (b) notwithstanding anything to the
contrary contained in Section 2.06(i) of the Credit Agreement, 75% of the Net
Cash Proceeds of such Disposition are applied to the prepayment of the Term
Loans and the reduction of the Revolving Credit Commitments in accordance with
Sections 2.06(i) and (l) of the Credit Agreement.
3.3 Withdrawal of Consent to A/V Sale. The consent for the A/V Sale,
as granted under the Fourth Amendment to the Credit Agreement, is hereby
withdrawn and of no further force or effect.
SECTION 4. AGREEMENTS.
4.1 Engagement of an Investment Banker. The Borrowers hereby agree
(a) to retain no later than June 1, 2001, Salomon Smith Barney, or another firm
or individual specializing in providing investment banking services that is
reasonably satisfactory to the Borrowers and the Administrative Agent, on terms
reasonably satisfactory to the Borrowers and the Administrative Agent, for the
purposes of evaluating the Borrowers' strategic and debt reduction alternatives
and (b) to cause such investment banker to prepare and deliver to the Lenders a
written report and make an oral presentation thereon to the Lenders no later
than August 31, 2001.
4.2 Limitation on Optional Prepayments and Commitment Reductions.
The Borrowers hereby agree that, notwithstanding anything to the contrary
contained in the Credit Agreement, from and after the Fifth Amendment Effective
Date, the Borrower shall not have the right to, and shall not, make any
voluntary prepayments of the Term Loans or permanent reductions of the Revolving
Credit Commitments except to the extent that any such prepayment of the Term
Loans or reduction of the Revolving Credit Commitments is accompanied by a
prepayment or reduction of the other, as the case may be, with such prepayment
and reduction being in amounts that reflect equal percentages of the Revolving
Credit Commitment in effect and the Term Loans outstanding as of the date of any
such prepayment and reduction; provided that nothing herein shall be deemed to
prevent the Borrowers from borrowing, prepaying and reborrowing Revolving Credit
Loans in accordance with, and subject to the terms and conditions of, the Credit
Agreement.
4.3 Cash Management. (a) From and after the Fifth Amendment
Effective Date, the Borrowers shall maintain a system of cash management that
concentrates available funds on a daily basis in an account or accounts
maintained with the Administrative Agent. In connection with such cash
management system, the Borrowers shall deliver to the Administrative Agent as
soon as available, but in any event by May 15, 2000, (x) a duly executed cash
collateral and administration agreement, in form and substance reasonably
satisfactory to the Administrative
<PAGE>
10
Agent, governing, among other things, the matters described in the preceding
sentence, (y) lockbox agreements with respect to accounts maintained by the
Borrowers and their domestic Subsidiaries into which domestic accounts
receivable are initially deposited, in form and substance reasonably
satisfactory to the Administrative Agent, duly executed by the respective
bank(s) at which such accounts are maintained and the applicable Loan Party
having an interest in such account and (z) such other agreements and documents,
in form and substance reasonably satisfactory to the Administrative Agent, that
the Administrative Agent reasonably determines are necessary or advisable in
order to evidence or perfect the Administrative Agent's interests in such
accounts and the amounts on deposit therein.
(b) From and after the Fifth Amendment Effective Date, the Borrowers
shall not permit the aggregate amount on deposit in all accounts and lockboxes
maintained by the Borrowers and their domestic Subsidiaries, other than the
accounts described in paragraph (a) this Section, any other account maintained
with the Administrative Agent and any payroll account, to be greater than
$500,000 at any time.
4.4 Cash Flow Forecasts. From and after the Fifth Amendment
Effective Date, the Borrowers shall deliver to the Administrative Agent and each
of the Lenders on the second Wednesday of each month, commencing on July 12,
2000, a forecast of the cash flows, cash balances and line availability of the
Borrowers and their Subsidiaries for the period of twelve consecutive calendar
weeks beginning in the week in which the applicable Wednesday occurs.
4.5 Release. Each of the Borrowers hereby releases and discharges
the Administrative Agent, the Lenders and all of the directors, officers,
employees, agents, attorneys, financial advisors, legal representatives,
successors and assigns of the Administrative Agent or any Lender, from all
claims, counterclaims, setoffs, action and causes of action of any kind or
nature whatsoever, whether known or unknown, that, directly or indirectly, arise
out of, are based upon or in any manner connected with any transaction, event,
circumstances, action, failure to act or occurrence of any sort or type, whether
known or unknown, which occurred, existed, was taken, permitted or begun prior
to the Fifth Amendment Effective Date, in each case, relating to the Credit
Agreement or any other Loan Document, including without limitation any approval
or acceptance given or denied.
SECTION 5. MISCELLANEOUS.
5.1 Representations and Warranties; No Default. (a) After giving
effect to this Fifth Amendment, the Borrowers hereby represent and warrant that
all representations and warranties contained in the Credit Agreement are true
and correct in all material respects as of the date hereof (unless stated to
relate to a specific earlier date, in which case, such representations and
warranties shall be true and correct in all material respects as of such earlier
date) and that no Default or Event of Default shall have occurred and be
continuing or would result from the execution and delivery of this Fifth
Amendment.
<PAGE>
11
(b) The Borrowers further represent and warrant that as of March 29,
2000, each of the Borrowers and the other Loan Parties are truly and justly
indebted to the Agents and the Lenders pursuant to the Loan Documents, in the
principal amount of $450,000,000 plus accrued interest, fees and other amounts
payable pursuant to the Loan Documents, without defense, counterclaim or offset
of any kind.
5.2 Conditions to Effectiveness of this Fifth Amendment. This Fifth
Amendment shall be effective as of the date first set forth above (the "Fifth
Amendment Effective Date") upon the satisfaction of the following conditions:
(a) receipt by the Administrative Agent of counterparts hereof duly
executed and delivered by the Borrowers, each Term Loan Lender and Majority
Lenders and consented to by the Loan Parties (other than the Borrowers);
(b) receipt by the Administrative Agent of counterparts of
Deferred Amendment Fee Letters for the Lenders, duly executed and delivered
by the Borrowers,
(c) the payment by the Borrowers of the costs and expenses of the
Administrative Agent owing under Section 10.05 of the Credit Agreement and for
which invoices have been submitted.
5.3 Limited Effect. Except as expressly amended by this Fifth
Amendment, the Credit Agreement is and shall continue to be in full force and
effect in accordance with its terms, and this Fifth Amendment shall not
constitute the Lenders' consent or indicate their willingness to consent to any
other amendment, modification or waiver of the Credit Agreement or the other
Loan Documents.
5.4 GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
5.5 Counterparts. This Fifth Amendment may be executed by the
parties hereto on one or more counterparts, and all of such counterparts shall
be deemed to constitute one and the same instrument. This Fifth Amendment may be
delivered by facsimile transmission of the relevant signature pages hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be executed and delivered by their respective duly authorized
officers as of the date first above written.
CARIBINER INTERNATIONAL, INC.
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: EVP & CFO
CARIBINER, INC.
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: EVP & CFO
<PAGE>
Each of the undersigned hereby consents to the foregoing Fifth
Amendment and hereby confirms, reaffirms and restates that its obligations under
or in respect of the Credit Agreement and the documents related thereto to which
it is a party are and shall remain in full force and effect after giving effect
to the foregoing Fifth Amendment.
CARIBINER INTELLECTUAL PROPERTY
MANAGEMENT, INC.
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: EVP & CFO
CARIBINER AUDIO VISUAL SERVICES, INC.
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: EVP & CFO
HRI, V.I., INC.
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: EVP & CFO
<PAGE>
VISUAL ACTION HOLDINGS, INC.
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: EVP & CFO
CARIBINER SERVICES LIMITED
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: CFO
CARIBINER EUROPE LIMITED
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: CFO
VISUAL ACTION HOLDINGS LIMITED
By: /s/ Robert F. Burlinson
----------------------------
Name: Robert F. Burlinson
Title: Director
<PAGE>
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent
By: /s/ Wendy Weinsier
----------------------------
Name: Wendy Weinsier
Title: Vice President
MERRILL LYNCH CAPITAL CORPORATION,
individually and as Syndication Agent
By: /s/ Carol J.E. Feeley
----------------------------
Name: Carol J.E. Feeley
Title: Vice President
FLEET NATIONAL BANK
(f/k/a BankBoston, N.A.)
By: /s/ Peter Haley
----------------------------
Name: Peter Haley
Title: Vice President
BANKERS TRUST COMPANY
By: /s/ Gina S. Thompson
----------------------------
Name: Gina S. Thompson
Title: Vice President
<PAGE>
BANK OF AMERICA, N.A.
By: /s/ Fred A. Zagar
----------------------------
Name: Fred A. Zagar
Title: Managing Director
BANK OF HAWAII
By: /s/ Heather Piper
----------------------------
Name: Heather Piper
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Edward J. DeSalvio
----------------------------
Name: Edward J. DeSalvio
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Daniel A. Costigan
----------------------------
Name: Daniel A. Costigan
Title: Director
BANK POLSKA KASA OPIEKI S.A.
PEKAO S.A. GROUP, NEW YORK BRANCH
By: /s/ Barry W. Henry
----------------------------
Name: Barry W. Henry
Title: Vice President
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By: /s/ Richard Manix
----------------------------
Name: Richard Manix
Title: First Vice President
By: /s/ Craig Welch
----------------------------
Name: Craig Welch
Title: First Vice President
FIRST UNION NATIONAL BANK
By: /s/ Mark B. Felker
----------------------------
Name: Mark B. Felker
Title: Senior Vice President
FIR TREE INSTITUTIONAL VALUE FUND
By: /s/ Illegible
----------------------------
Name:
Title:
FIR TREE VALUE PARTNERS, LLC
By: /s/ Illegible
----------------------------
Name:
Title:
FIR TREE VALUE FUND
By: /s/ Illegible
----------------------------
Name:
Title:
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Jeffrey Blakemore
----------------------------
Name: Jeffrey Blakemore
Title: Senior Vice President
THE CHASE MANHATTAN BANK
By: CHASE SECURITIES, INC., as Agent
By: /s/ Eric S. Rosen
----------------------------
Name: Eric S. Rosen
Title: Authorized Signatory
MORGENS WATERFALL HOLDING L.L.C.
By:
----------------------------
Name:
Title:
VAN KAMPEN PRIME RATE INCOME TRUST
By: Van Kampen Investment Advisory Corp.
By: /s/ Darvin D. Pierce
----------------------------
Name: Darvin D. Pierce
Title: Vice President
VAN KAMPEN SENIOR INCOME TRUST
By: Van Kampen Investment Advisory Corp.
By: /s/ Darvin D. Pierce
----------------------------
Name: Darvin D. Pierce
Title: Vice President
<PAGE>
================================================================================
EMPLOYMENT AGREEMENT
By and Between
CARIBINER INTERNATIONAL, INC.
and
ROBERT ELLIS
================================================================================
As of April 5, 2000
<PAGE>
TABLE OF CONTENTS
Page
1. EMPLOYMENT..........................................................1
2. DUTIES AND RESPONSIBILITIES OF EMPLOYEE.............................1
3. EXCLUSIVITY OF SERVICE..............................................2
4. COMPENSATION; BONUS.................................................2
5. BENEFITS............................................................2
6. TERM OF EMPLOYMENT..................................................3
7. CONFIDENTIALITY; INVENTIONS; PRODUCT DEVELOPMENT, ETC...............4
8. NON-COMPETITION; NON-SOLICITATION...................................5
9. TERMINATION.........................................................6
(a) Cause......................................................6
(b) Incapacity.................................................6
(c) Death......................................................6
(d) Termination Without Cause; Good Reason.....................7
10. VIOLATION OF OTHER AGREEMENTS.......................................7
11. SPECIFIC PERFORMANCE; DAMAGES.......................................8
12. NOTICES.............................................................8
13. WAIVERS.............................................................9
14. PRESERVATION OF INTENT..............................................9
15. ENTIRE AGREEMENT....................................................9
16. INUREMENT; ASSIGNMENT...............................................9
17. AMENDMENT...........................................................9
18. HEADINGS............................................................9
i
<PAGE>
19. COUNTERPARTS.......................................................10
20. GOVERNING LAW......................................................10
ii
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated as of April 5, 2000 by
and between CARIBINER INTERNATIONAL, INC., a Delaware corporation having an
office at 16 West 61st Street, New York, New York 10023 ("Employer"), and ROBERT
ELLIS ("Employee").
W I T N E S S E T H:
WHEREAS, Employer desires to engage Employee as an employee and
Employee desires to provide his services to Employer in connection with
Employer's business; and
WHEREAS, both parties desire to clarify and specify the rights and
obligations which each have with respect to the other in connection with
Employee's employment.
NOW, THEREFORE, in consideration of the agreements and covenants herein
set forth, the parties hereby agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee as Chief Executive Officer of
Employer's Caribiner Audio Visual Services, Inc. subsidiary ("CAVS"), and
Employee hereby accepts such employment and agrees to render his services as an
employee of CAVS, for the term of this Agreement (as set forth in Section 6
hereof), all subject to and on the terms and conditions herein set forth.
2. DUTIES AND RESPONSIBILITIES OF EMPLOYEE
Employee shall be employed as the Chief Executive Officer of CAVS,
subject to the other provisions of this Section 2. Employee's duties shall be
commensurate with those of a Chief Executive Officer of a company engaged in the
business engaged in by CAVS. In the performance of his duties, Employee shall
report to the Chief Executive Officer of Employer. Employee shall use his best
efforts to maintain and enhance the business and reputation of CAVS. Employee's
duties and responsibilities shall be designated to Employee by Employer's Chief
Executive Officer and Employer's Board of Directors (the "Board"). Upon
Employer's request, Employee shall also perform similar services in an identical
capacity for (and, if requested, shall hold directorships with) any subsidiary
or division of Employer (or a subsidiary thereof) designated by the Board.
Employee shall be available to travel as the reasonable needs of Employer shall
require. Employee shall initially be based in CAVS's offices located in New
York, New York (or the New York City metropolitan area, which for purposes
hereof shall mean within a fifty (50) mile radius of CAVS's current offices) and
shall thereafter be based in Employer's offices to be located in Southern
California.
1
<PAGE>
3. EXCLUSIVITY OF SERVICE
Employee agrees to devote all of his business time, efforts and
attention to the business and affairs of CAVS on an exclusive basis, and not to
engage in any other business activities for any person or entity, other than
personal investment activities and, subject to Employer's prior written
approval, directorships, provided that such activities do not materially affect
the performance of Employee's duties hereunder.
4. COMPENSATION; BONUS
(a) In consideration for his services to be performed under this
Agreement and as compensation therefor, Employee shall receive, in addition to
all other benefits provided in this Agreement, a base salary (the "Base Salary")
at the annual rate of five hundred thousand ($500,000) Dollars. All payments of
Base Salary shall be payable monthly in arrears.
(b) In addition to the Base Salary, Employee shall be entitled to a
bonus (the "Bonus") during the first eighteen (18) months of the Initial Term
(as defined in Section 6 below) at a rate of $250,000 per annum (the "Guaranteed
Bonus"). During the first eighteen (18) months of the Initial Term, in the
aggregate, the Guaranteed Bonus shall equal $375,000 payable monthly in arrears
(commencing May 5, 2000). Each monthly payment shall equal $20,833.33.
Subsequent to the first eighteen (18) months of the Initial Term, the Bonus
shall be paid pursuant to an executive bonus plan to be mutually agreed upon
between Employer and Employee.
(c) Employee's Base Salary and Bonus shall be reviewed annually by the
Board and increased in the Board's discretion.
5. BENEFITS
In addition to the Base Salary and Bonus provided for in Section 4
hereof, Employee shall be entitled to the following benefits during and in
respect of the Term (as defined below):
(a) Employer shall provide Employee and his immediate family with the
hospitalization, medical and dental insurance coverage and other benefits
(including long term disability and life insurance) on the same basis as
provided to the majority of the other senior executive employees of Employer, in
accordance with Employer's practices. Employee shall be entitled to participate
in any plan of Employer relating to vacation, sick leave, stock options, stock
purchases, stock grants, pension, thrift, profit sharing, insurance, medical
coverage, education or other retirement or employee benefits that Employer has
adopted or may adopt for the benefit of its executive officers, officers and/or
employees.
(b) Employee shall be entitled to twenty-five (25) working days paid
vacation to be taken by Employee at times mutually and reasonably agreed upon by
Employer and Employee in
2
<PAGE>
addition to all other holidays established as part of Employer's standard
practices. No payment shall be made to Employee for unused vacation days nor may
such days be carried over to future years without Employer's consent.
(c) Employee shall be entitled to reimbursement for all reasonable
travel, entertainment and other reasonable expenses incurred in connection with
Employer's business, provided that such expenses are adequately documented and
vouchered in accordance with Employer's policies.
(d) Employee shall be entitled to an automobile allowance in the amount
of $1,200 per month, payable in equal installments during each payroll period,
to defray all costs incurred by Employee in connection with Employee's use of
his automobile in connection with the business of Employer (except for those
which Employee is entitled to reimbursement pursuant to Section 5(c) hereof).
(e) Employee shall be entitled to reimbursement for the reasonable
expenses incurred by Employee in connection with moving his household goods to
the United States from the United Kingdom and back to the United Kingdom
following the termination of the term of this Agreement other than pursuant to
Section 9(a) hereof (the "Moving Expenses").
(f) Employee shall also be entitled to reimbursement for reasonable
legal and accounting fees incurred by Employee in connection with U.S.
Immigration and taxation matters relating to his relocation to the United
States, and advice in connection with this Agreement.
6. TERM OF EMPLOYMENT
The initial term (the "Initial Term") of employment shall commence on
April 5, 2000 and shall terminate two (2) years thereafter, unless terminated
prior thereto in accordance with Section 9 hereof. Subsequent to the Initial
Term, the term of this Agreement shall be extended for successive periods of one
(1) year (each, a "Renewal Term") unless, at least one (1) year prior to the end
of the Initial Term or the then current Renewal Term, as the case may be, either
party has given the other party written notice of its election to terminate this
Agreement as of the end of the Initial Term or the then current Renewal Term, as
the case may be. For purposes of this Agreement, "Term" shall mean the Initial
Term plus any Renewal Terms.
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7. CONFIDENTIALITY; INVENTIONS; PRODUCT DEVELOPMENT, ETC.
(a) Employee agrees and covenants that, at any time during employment
by Employer (which, for purposes of Sections 7 and 8 hereof shall include
Employer's subsidiaries and affiliates) or thereafter, he will not (without
first obtaining the written permission of Employer) (i) at any time during
employment by Employer and thereafter divulge to any person or entity, nor use
(either himself or in connection with any business) any "Confidential
Information" (as hereinafter defined in Section 7(c) hereof) and (ii) at any
time during employment by Employer and thereafter, divulge to any person or
entity, nor use (either himself or in connection with any business) any "Trade
Secrets" (as hereinafter defined in Section 7(c) hereof) to which he may have
had access or which had been revealed to him during the course of his employment
unless such disclosure is pursuant to a court order, disclosure in litigation
involving the Employer or in any reports or applications required by law to be
filed with any governmental agency.
(b) Employee hereby grants to Employer or its nominee all rights of
every kind whatsoever, exclusively and perpetually, in and to all services
performed, products created and product ideas conceived by Employee for Employer
or its nominee, and hereby agrees, upon Employer's request therefor, to assign
and transfer to Employer or its nominee, any and all inventions, Trade Secrets,
product ideas, improvements, processes, Confidential Information and "know how"
relating to the business or products of Employer or any subsidiary or division
thereof, including any thereof which Employee may learn, possess or acquire
during Employee's employment by Employer, and agrees that all such things and
such knowledge are, and will be, the sole and exclusive property of Employer or
its nominee, and are known or held by Employee only for the benefit of Employer
or its nominee.
(c) As used in this Agreement, the term "Confidential Information"
shall mean and include all information and data in respect of Employer's
operations, financial condition, products, customers and business (including,
without limitation, artwork, photographs, specifications, facsimiles, samples,
business, marketing or promotional plans, creative written material and
information relating to characters, concepts, names, trademarks and copyrights)
which may be communicated to Employee or to which Employee may have access in
the course of Employee's employment by Employer. Notwithstanding the foregoing,
the term "Confidential Information" shall not include information which:
(i) is, at the time of the disclosure, a part of the public domain
through no act or omission by Employee;
(ii) was otherwise in Employee's lawful possession prior to the
disclosure; or
(iii) is hereafter lawfully disclosed to Employee by a third party
who or which did not acquire the information under an
obligation of confidentiality to or through Employer.
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As used in this Agreement, the term "Trade Secrets" shall mean and
include information, without regard to form, including, but not limited to,
technical or non-technical data, a formula, a pattern, a compilation, a program,
a device, a method, a technique, a drawing, a process, financial data, financial
plans, product plans, or a list of actual or potential customers or suppliers
which is not commonly known by or available to the public and which information
(i) derives economic value, actual or potential, from not being known to, and
not being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use; and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Any combination of known information shall be within any of the
foregoing exclusions only if the combination as such is within such exclusions.
Nothing in this Section 7 shall limit any protection, definition or
remedy provided to Employer under any law, statute or legal principle relating
to Confidential Information or Trade Secrets.
(d) Employee agrees that at the time of leaving the employ of Employer
he will deliver to Employer and not keep or deliver to anyone else any and all
notes, notebooks, drawings, memoranda, documents, and in general, any and all
material relating to the business of Employer (except Employee's personal files
and records) or relating to any employee, officer, director, agent or
representative of Employer.
8. NON-COMPETITION; NON-SOLICITATION
(a) Employee hereby agrees and covenants that commencing as of the date
hereof and for a period of one (1) year following the termination of his
employment with Employer (the "Limited Period") he will not directly or
indirectly engage in or become interested (whether as an owner, principal,
agent, stockholder, member, partner, trustee, venturer, lender or other
investor, director, officer, employee, consultant or through the agency of any
corporation, limited liability company, partnership, association or agent or
otherwise) in any business or enterprise that shall, at the time, be in whole or
in substantial part competitive with any material part of the business conducted
by Employer during the period of Employee's employment with Employer (except
that ownership of not more than 1% of the outstanding securities of any class of
any entity that are listed on a national securities exchange or traded in the
over-the-counter market shall not be considered a breach of this Section 8(a)).
(b) Employee agrees and covenants that for the Limited Period he will
not (without first obtaining the written permission of Employer) directly or
indirectly participate in the solicitation of any business of any type conducted
by Employer during the period of Employee's employment with Employer from any
person or entity which was a client or customer of Employer during the period of
Employee's employment with Employer, or was a prospective customer of Employer
from which Employee (or employees under Employee's supervision)
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<PAGE>
solicited business or for which a proposal for submission was prepared during
the period of Employee's employment with Employer.
(c) Employee agrees and covenants that for the Limited Period he will
not (without first obtaining the written permission of Employer) directly or
indirectly, recruit for employment, or induce or seek to cause such person to
terminate his or his employment with Employer, any person who then is an
employee of Employer.
9. TERMINATION
(a) Cause. Notwithstanding the terms of this Agreement, Employer may
discharge Employee and terminate this Agreement in the event that (i) Employee
shall continually fail substantially to perform his duties hereunder with
reasonable diligence, other than by reason of incapacity, or shall violate any
material covenant of his herein contained, (ii) Employee shall engage in an act
of fraud, theft or embezzlement in connection with his employment hereunder,
(iii) Employee shall engage in a material act or omission involving wilful
misconduct or gross negligence in the performance of Employee's duties, (iv)
Employee shall engage in a material act of dishonesty, (v) Employee shall
unreasonably refuse to carry out the lawful order of Employer commensurate with
Employee's duties to be performed hereunder or (vi) Employee shall be convicted
of a felony involving moral turpitude, (which shall include any felony relating
to drugs) or shall plead nolo contendere (or make an equivalent plea) in respect
of, any governmental indictment, complaint or other formal allegation.
Notwithstanding the foregoing to the contrary, prior to discharging Employee
pursuant to clauses (i) or (v) of the immediately preceding sentence, Employer
shall give Employee ten (10) days' prior written notice of any breach or failure
and a reasonable opportunity to cure any such breach or failure, or cease
violating any covenant contained herein, to the extent curable or ceasable;
provided, however, that no notice shall be required to be given in the event
such breach, failure or violation is not curable or ceasable. In the event
Employee is discharged pursuant to this Section 9, except as otherwise set forth
herein, employee's Base Salary and Bonus under Section 4 hereof and all benefits
under Section 5 hereof shall terminate immediately upon such discharge (subject
to applicable law such as COBRA), and Employer shall have no further obligation
to Employee except the payment to and reimbursement to Employee for any monies
due to Employee which right to payment or reimbursement accrued prior to such
discharge.
(b) Incapacity. Should Employee, in the reasonable judgment of a
physician chosen by the Board, become incapacitated to the extent that he is
unable to perform his material duties pursuant to this Agreement for a period of
five (5) consecutive months by reason of illness, disability, or other
incapacity, Employer may terminate this Agreement upon one (1) month's notice
after said five (5) month period.
(c) Death. This Agreement shall terminate immediately upon the death of
Employee, in which case Employee's legal representatives shall be entitled to
receive promptly a payment equal to four (4) months Base Salary.
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(d) Termination Without Cause; Good Reason. If Employee is discharged
and this Agreement is terminated without Cause (Cause being defined as a reason
for termination as set forth in Section 9(a) above) or by reason other than as
set forth in Sections 9(b) or 9(c) hereof, or if Employee resigns for Good
Reason (as hereinafter defined) Employer shall pay to Employee (i) for the
remainder of the Initial Term or the remainder of the then current Renewal Term,
as the case may be, the Base Salary provided for in Section 4 hereof as such
sums become due (or, at Employer's election, in a lump sum giving effect to the
present value of such payments); and (ii) the Bonus payable in equal monthly
installments over the remainder of such Renewal Term or Initial Term, as the
case may be (or, at Employer's election, in a lump sum giving effect to the
present value of such payments utilizing a discount factor of 5%). For purposes
of this Agreement, "Good Reason" shall mean (i) a relocation of Employee,
without his prior written consent, outside of the New York City metropolitan
area (which shall mean within a fifty (50) mile radius of such current offices)
or, at such time when Employer relocates to Southern California, a relocation of
Employee more than fifty (50) miles outside of Employer's offices in Southern
California, or (ii) a failure to maintain Employee as Chief Executive Officer,
or (iii) a material diminution by Employer of Employee's responsibilities, which
change would cause Employee's position with Employer to become one of
significantly less responsibility or scope from that contemplated by Section 2
hereof, or (iv) a wilful failure in bad faith to pay the Base Salary or Bonus to
Employee when due or another material breach of this Agreement by Employer that
has a material adverse effect on Employee, or (v) a Change of Control of
Employer (as defined below) during the Initial Term. For purposes of this
Agreement, a "Change of Control" shall mean have the meaning given to such term
in CII's 1996 Stock Option Plan, as amended.
10. VIOLATION OF OTHER AGREEMENTS
Employee represents and warrants to Employer that he is legally able to
enter into this Agreement and accept employment with Employer; that Employee is
not prohibited by the terms of any agreement, understanding or policy from
entering into this Agreement; and the terms hereof will not and do not violate
or contravene the terms of any agreement, understanding or policy to which
Employee is or may be a party, or by which Employee may be bound. Employee
agrees that, as it is a material inducement to Employer that Employee make the
foregoing representations and warranties and that they be true in all respects,
Employee shall forever indemnify and hold Employer harmless from and against all
liability, costs or expenses (including attorney's fees and disbursements) on
account of the foregoing representations being untrue.
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11. SPECIFIC PERFORMANCE; DAMAGES
In the event of a breach or threatened breach of the provisions of
Sections 7 or 8 hereof, Employee agrees that the injury which would be suffered
by Employer would be of a character which could not be fully compensated for
solely by a recovery of monetary damages. Accordingly, Employee agrees that in
the event of a breach or threatened breach of Section 7 or 8 hereof, in addition
to and not in lieu of any damages sustained by Employer and any other remedies
which Employer may pursue hereunder or under any applicable law, Employer shall
have the right to equitable relief, including issuance of a temporary or
permanent injunction, by any court of competent jurisdiction against the
commission or continuance of any such breach or threatened breach, without the
necessity of proving any actual damages or posting of any bond or other surety
therefor. In addition to, and not in limitation of the foregoing, Employee
understands and confirms that, in the event of a breach or threatened breach of
Section 7 or 8 hereof, Employee may be held financially liable to Employer for
any loss suffered by Employer as a result.
12. NOTICES
Any and all notices, demands or requests required or permitted to be
given under this Agreement shall be given in writing and sent, by registered or
certified U.S. mail, return receipt requested, by hand, or by overnight courier,
addressed to the parties hereto at their addresses set forth above or such other
addresses as they may from time-to-time designate by written notice or, in the
case of Employee, which Employer maintains as Employee's address, given in
accordance with the terms of this Section, together with copies thereof as
follows:
In the case of Employer, with a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022-4728
Attention: Jeffrey D. Zukerman, Esq.
Notice given as provided in this Section shall be deemed effective: (i) on the
date hand delivered, (ii) on the first business day following the sending
thereof by overnight courier, and (iii) on the seventh calendar day (or, if it
is not a business day, then the next succeeding business day thereafter) after
the depositing thereof into the exclusive custody of the U.S. Postal Service.
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13. WAIVERS
No waiver by any party of any default with respect to any provision,
condition or requirement hereof shall be deemed to be a waiver of any other
provision, condition or requirement hereof; nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
14. PRESERVATION OF INTENT
Should any provision of this Agreement be determined by a court having
jurisdiction in the premises to be illegal or in conflict with any laws of any
state or jurisdiction or otherwise unenforceable, Employer and Employee agree
that such provision shall be modified to the extent legally possible so that the
intent of this Agreement may be legally carried out.
15. ENTIRE AGREEMENT
This Agreement sets forth the entire and only agreement or
understanding between the parties relating to the subject matter hereof and
supersedes and cancels all previous agreements, negotiations, letters of intent,
correspondence, commitments and representations in respect thereof among them,
and no party shall be bound by any conditions, definitions, warranties or
representations with respect to the subject matter of this Agreement except as
provided in this Agreement.
16. INUREMENT; ASSIGNMENT
The rights and obligations of Employer under this Agreement shall inure
to the benefit of and shall be binding upon any successor of Employer or to the
business of Employer, subject to the provisions hereof. Employer may assign this
Agreement to any person, firm or corporation controlling, controlled by, or
under common control with Employer. Neither this Agreement nor any rights or
obligations of Employee hereunder shall be transferable or assignable by
Employee.
17. AMENDMENT
This Agreement may not be amended in any respect except by an
instrument in writing signed by the parties hereto.
18. HEADINGS
The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
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19. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which when taken together shall
constitute one and the same instrument.
20. GOVERNING LAW
This Agreement shall be governed by, construed and enforced in
accordance with the internal laws of the State of California, without giving
reference to principles of conflict of laws.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
EMPLOYEE:
/s/ Robert Ellis
------------------------------
Robert Ellis
EMPLOYER:
CARIBINER INTERNATIONAL, INC.
By: /s/ Christopher A. Sinclair
---------------------------
Name: Cristopher A. Sinclair
Title: Chairman of the Board and
Chief Executive Officer
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================================================================================
EMPLOYMENT AGREEMENT
By and Between
CARIBINER INTERNATIONAL, INC.
and
DIGBY DAVIES
================================================================================
As of April 5, 2000
<PAGE>
TABLE OF CONTENTS
Page
1. EMPLOYMENT..........................................................1
2. DUTIES AND RESPONSIBILITIES OF EMPLOYEE.............................1
3. EXCLUSIVITY OF SERVICE..............................................2
4. COMPENSATION; BONUS.................................................2
5. BENEFITS............................................................2
6. TERM OF EMPLOYMENT..................................................3
7. CONFIDENTIALITY; INVENTIONS; PRODUCT DEVELOPMENT, ETC...............4
8. NON-COMPETITION; NON-SOLICITATION...................................5
9. TERMINATION.........................................................6
(a) Cause......................................................6
(b) Incapacity.................................................6
(c) Death......................................................6
(d) Termination Without Cause; Good Reason.....................7
10. VIOLATION OF OTHER AGREEMENTS.......................................7
11. SPECIFIC PERFORMANCE; DAMAGES.......................................8
12. NOTICES.............................................................8
13. WAIVERS.............................................................9
14. PRESERVATION OF INTENT..............................................9
15. ENTIRE AGREEMENT....................................................9
16. INUREMENT; ASSIGNMENT...............................................9
17. AMENDMENT...........................................................9
18. HEADINGS............................................................9
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19. COUNTERPARTS.......................................................10
20. GOVERNING LAW......................................................10
ii
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated as of April 5, 2000 by
and between CARIBINER AUDIO VISUAL SERVICES, INC., a Delaware corporation having
an office at 16 West 61st Street, New York, New York 10023 ("Employer"), and
DIGBY DAVIES ("Employee").
W I T N E S S E T H:
WHEREAS, Employer desires to engage Employee as an employee and
Employee desires to provide his services to Employer in connection with
Employer's business; and
WHEREAS, both parties desire to clarify and specify the rights and
obligations which each have with respect to the other in connection with
Employee's employment.
NOW, THEREFORE, in consideration of the agreements and covenants herein
set forth, the parties hereby agree as follows:
1. EMPLOYMENT
Employer hereby employs Employee as its Chief Operating Officer of
Employer's Caribiner Audio Visual Services, Inc. subsidiary ("CAVS"), and
Employee hereby accepts such employment and agrees to render his services as an
employee of CAVS, for the term of this Agreement (as set forth in Section 6
hereof), all subject to and on the terms and conditions herein set forth.
2. DUTIES AND RESPONSIBILITIES OF EMPLOYEE
Employee shall be employed as the Chief Operating Officer of CAVS,
subject to the other provisions of this Section 2. Employee's duties shall be
commensurate with those of a Chief Operating Officer of a company engaged in the
business engaged in by CAVS. In the performance of his duties, Employee shall
report to Employer's Chief Executive Officer. Employee shall use his best
efforts to maintain and enhance the business and reputation of CAVS. Employee's
duties and responsibilities shall be designated to Employee by Employer's Chief
Executive Officer and by the Board of Directors of Employer (the "Board"). Upon
Employer's request, Employee shall also perform similar services in an identical
capacity for (and, if requested, shall hold directorships with) any subsidiary
or division of Employer (or a subsidiary thereof) designated by the Board.
Employee shall be available to travel as the reasonable needs of Employer shall
require. Employee shall initially be based in CAVS's offices located in New
York, New York (or the New York City metropolitan area, which for purposes
hereof shall mean within a fifty (50) mile radius of CAVS's current offices) and
shall thereafter be based in Employer's offices to be located in Southern
California.
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3. EXCLUSIVITY OF SERVICE
Employee agrees to devote all of his business time, efforts and
attention to the business and affairs of CAVS on an exclusive basis, and not to
engage in any other business activities for any person or entity, other than
personal investment activities and, subject to Employer's prior written
approval, directorships, provided that such activities do not materially affect
the performance of Employee's duties hereunder.
4. COMPENSATION; BONUS
(a) In consideration for his services to be performed under this
Agreement and as compensation therefor, Employee shall receive, in addition to
all other benefits provided in this Agreement, a base salary (the "Base Salary")
at the annual rate of four hundred thousand ($400,000) Dollars. All payments of
Base Salary shall be payable monthly in arrears.
(b) In addition to the Base Salary, Employee shall be entitled to a
bonus (the "Bonus") during the first eighteen (18) months of the Initial Term
(as defined in Section 6 below) at a rate of $200,000 per annum (the "Guaranteed
Bonus"). During the first eighteen (18) months of the Initial Term, in the
aggregate, the Guaranteed Bonus shall equal $300,000 payable monthly in arrears
(commencing May 5, 2000). Each monthly payment shall equal $16,666.66.
Subsequent to the first eighteen (18) months of the Initial Term, the Bonus
shall be paid pursuant to an executive bonus plan to be mutually agreed upon
between Employer and Employee.
(c) Employee's Base Salary and Bonus shall be reviewed annually by the
Board and increased in the Board's discretion.
5. BENEFITS
In addition to the Base Salary and Bonus provided for in Section 4
hereof, Employee shall be entitled to the following benefits during and in
respect of the Term (as defined below):
(a) Employer shall provide Employee and his immediate family with the
hospitalization, medical and dental insurance coverage and other benefits
(including long term disability and life insurance) on the same basis as
provided to the majority of the other senior executive employees of Employer, in
accordance with Employer's practices. Employee shall be entitled to participate
in any plan of Employer relating to vacation, sick leave, stock options, stock
purchases, stock grants, pension, thrift, profit sharing, insurance, medical
coverage, education or other retirement or employee benefits that Employer has
adopted or may adopt for the benefit of its executive officers, officers and/or
employees.
(b) Employee shall be entitled to twenty-five (25) working days paid
vacation to be taken by Employee at times mutually and reasonably agreed upon by
Employer and Employee in
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addition to all other holidays established as part of Employer's standard
practices. No payment shall be made to Employee for unused vacation days nor may
such days be carried over to future years without Employer's consent.
(c) Employee shall be entitled to reimbursement for all reasonable
travel, entertainment and other reasonable expenses incurred in connection with
Employer's business, provided that such expenses are adequately documented and
vouchered in accordance with Employer's policies.
(d) Employee shall be entitled to an automobile allowance in the amount
of $1,200 per month, payable in equal installments during each payroll period,
to defray all costs incurred by Employee in connection with Employee's use of
his automobile in connection with the business of Employer (except for those
which Employee is entitled to reimbursement pursuant to Section 5(c) hereof).
(e) Employee shall be entitled to reimbursement for the reasonable
expenses incurred by Employee in connection with moving his household goods to
the United States from the United Kingdom and back to the United Kingdom
following the termination of the term of this Agreement other than pursuant to
Section 9(a) hereof (the "Moving Expenses").
(f) Employee shall also be entitled to reimbursement for reasonable
legal and accounting fees incurred by Employee in connection with U.S.
Immigration and taxation matters relating to his relocation to the United
States, and advice in connection with this Agreement.
6. TERM OF EMPLOYMENT
The initial term (the "Initial Term") of employment shall commence on
April 5, 2000 and shall terminate two (2) years thereafter, unless terminated
prior thereto in accordance with Section 9 hereof. Subsequent to the Initial
Term, the term of this Agreement shall be extended for successive periods of one
(1) year (each, a "Renewal Term") unless, at least one (1) year prior to the end
of the Initial Term or the then current Renewal Term, as the case may be, either
party has given the other party written notice of its election to terminate this
Agreement as of the end of the Initial Term or the then current Renewal Term, as
the case may be. For purposes of this Agreement, "Term" shall mean the Initial
Term plus any Renewal Terms.
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7. CONFIDENTIALITY; INVENTIONS; PRODUCT DEVELOPMENT, ETC.
(a) Employee agrees and covenants that, at any time during employment
by Employer (which, for purposes of Sections 7 and 8 hereof shall include
Employer's subsidiaries and affiliates) or thereafter, he will not (without
first obtaining the written permission of Employer) (i) at any time during
employment by Employer and thereafter divulge to any person or entity, nor use
(either himself or in connection with any business) any "Confidential
Information" (as hereinafter defined in Section 7(c) hereof) and (ii) at any
time during employment by Employer and thereafter, divulge to any person or
entity, nor use (either himself or in connection with any business) any "Trade
Secrets" (as hereinafter defined in Section 7(c) hereof) to which he may have
had access or which had been revealed to him during the course of his employment
unless such disclosure is pursuant to a court order, disclosure in litigation
involving the Employer or in any reports or applications required by law to be
filed with any governmental agency.
(b) Employee hereby grants to Employer or its nominee all rights of
every kind whatsoever, exclusively and perpetually, in and to all services
performed, products created and product ideas conceived by Employee for Employer
or its nominee, and hereby agrees, upon Employer's request therefor, to assign
and transfer to Employer or its nominee, any and all inventions, Trade Secrets,
product ideas, improvements, processes, Confidential Information and "know how"
relating to the business or products of Employer or any subsidiary or division
thereof, including any thereof which Employee may learn, possess or acquire
during Employee's employment by Employer, and agrees that all such things and
such knowledge are, and will be, the sole and exclusive property of Employer or
its nominee, and are known or held by Employee only for the benefit of Employer
or its nominee.
(c) As used in this Agreement, the term "Confidential Information"
shall mean and include all information and data in respect of Employer's
operations, financial condition, products, customers and business (including,
without limitation, artwork, photographs, specifications, facsimiles, samples,
business, marketing or promotional plans, creative written material and
information relating to characters, concepts, names, trademarks and copyrights)
which may be communicated to Employee or to which Employee may have access in
the course of Employee's employment by Employer. Notwithstanding the foregoing,
the term "Confidential Information" shall not include information which:
(i) is, at the time of the disclosure, a part of the public domain
through no act or omission by Employee;
(ii) was otherwise in Employee's lawful possession prior to the
disclosure; or
(iii) is hereafter lawfully disclosed to Employee by a third party
who or which did not acquire the information under an
obligation of confidentiality to or through Employer.
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As used in this Agreement, the term "Trade Secrets" shall mean and
include information, without regard to form, including, but not limited to,
technical or non-technical data, a formula, a pattern, a compilation, a program,
a device, a method, a technique, a drawing, a process, financial data, financial
plans, product plans, or a list of actual or potential customers or suppliers
which is not commonly known by or available to the public and which information
(i) derives economic value, actual or potential, from not being known to, and
not being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use; and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Any combination of known information shall be within any of the
foregoing exclusions only if the combination as such is within such exclusions.
Nothing in this Section 7 shall limit any protection, definition or
remedy provided to Employer under any law, statute or legal principle relating
to Confidential Information or Trade Secrets.
(d) Employee agrees that at the time of leaving the employ of Employer
he will deliver to Employer and not keep or deliver to anyone else any and all
notes, notebooks, drawings, memoranda, documents, and in general, any and all
material relating to the business of Employer (except Employee's personal files
and records) or relating to any employee, officer, director, agent or
representative of Employer.
8. NON-COMPETITION; NON-SOLICITATION
(a) Employee hereby agrees and covenants that commencing as of the date
hereof and for a period of one (1) year following the termination of his
employment with Employer (the "Limited Period") he will not directly or
indirectly engage in or become interested (whether as an owner, principal,
agent, stockholder, member, partner, trustee, venturer, lender or other
investor, director, officer, employee, consultant or through the agency of any
corporation, limited liability company, partnership, association or agent or
otherwise) in any business or enterprise that shall, at the time, be in whole or
in substantial part competitive with any material part of the business conducted
by Employer during the period of Employee's employment with Employer (except
that ownership of not more than 1% of the outstanding securities of any class of
any entity that are listed on a national securities exchange or traded in the
over-the-counter market shall not be considered a breach of this Section 8(a)).
(b) Employee agrees and covenants that for the Limited Period he will
not (without first obtaining the written permission of Employer) directly or
indirectly participate in the solicitation of any business of any type conducted
by Employer during the period of Employee's employment with Employer from any
person or entity which was a client or customer of Employer during the period of
Employee's employment with Employer, or was a prospective customer of Employer
from which Employee (or employees under Employee's supervision)
5
<PAGE>
solicited business or for which a proposal for submission was prepared during
the period of Employee's employment with Employer.
(c) Employee agrees and covenants that for the Limited Period he will
not (without first obtaining the written permission of Employer) directly or
indirectly, recruit for employment, or induce or seek to cause such person to
terminate his or his employment with Employer, any person who then is an
employee of Employer.
9. TERMINATION
(a) Cause. Notwithstanding the terms of this Agreement, Employer may
discharge Employee and terminate this Agreement in the event that (i) Employee
shall continually fail substantially to perform his duties hereunder with
reasonable diligence, other than by reason of incapacity, or shall violate any
material covenant of his herein contained, (ii) Employee shall engage in an act
of fraud, theft or embezzlement in connection with his employment hereunder,
(iii) Employee shall engage in a material act or omission involving wilful
misconduct or gross negligence in the performance of Employee's duties, (iv)
Employee shall engage in a material act of dishonesty, (v) Employee shall
unreasonably refuse to carry out the lawful order of Employer commensurate with
Employee's duties to be performed hereunder or (vi) Employee shall be convicted
of a felony involving moral turpitude, (which shall include any felony relating
to drugs) or shall plead nolo contendere (or make an equivalent plea) in respect
of, any governmental indictment, complaint or other formal allegation.
Notwithstanding the foregoing to the contrary, prior to discharging Employee
pursuant to clauses (i) or (v) of the immediately preceding sentence, Employer
shall give Employee ten (10) days' prior written notice of any breach or failure
and a reasonable opportunity to cure any such breach or failure, or cease
violating any covenant contained herein, to the extent curable or ceasable;
provided, however, that no notice shall be required to be given in the event
such breach, failure or violation is not curable or ceasable. In the event
Employee is discharged pursuant to this Section 9, except as otherwise set forth
herein, employee's Base Salary and Bonus under Section 4 hereof and all benefits
under Section 5 hereof shall terminate immediately upon such discharge (subject
to applicable law such as COBRA), and Employer shall have no further obligation
to Employee except the payment to and reimbursement to Employee for any monies
due to Employee which right to payment or reimbursement accrued prior to such
discharge.
(b) Incapacity. Should Employee, in the reasonable judgment of a
physician chosen by the Board, become incapacitated to the extent that he is
unable to perform his material duties pursuant to this Agreement for a period of
five (5) consecutive months by reason of illness, disability, or other
incapacity, Employer may terminate this Agreement upon one (1) month's notice
after said five (5) month period.
(c) Death. This Agreement shall terminate immediately upon the death of
Employee, in which case Employee's legal representatives shall be entitled to
receive promptly a payment equal to four (4) months Base Salary.
6
<PAGE>
(d) Termination Without Cause; Good Reason. If Employee is discharged
and this Agreement is terminated without Cause (Cause being defined as a reason
for termination as set forth in Section 9(a) above) or by reason other than as
set forth in Sections 9(b) or 9(c) hereof, or if Employee resigns for Good
Reason (as hereinafter defined) Employer shall pay to Employee (i) for the
remainder of the Initial Term or the remainder of the then current Renewal Term,
as the case may be, the Base Salary provided for in Section 4 hereof as such
sums become due (or, at Employer's election, in a lump sum giving effect to the
present value of such payments); and (ii) the Bonus payable in equal monthly
installments over the remainder of such Renewal Term or Initial Term, as the
case may be (or, at Employer's election, in a lump sum giving effect to the
present value of such payments utilizing a discount factor of 5%). For purposes
of this Agreement, "Good Reason" shall mean (i) a relocation of Employee,
without his prior written consent, outside of the New York City metropolitan
area (which shall mean within a fifty (50) mile radius of such current offices)
or, at such time when Employer relocates to Southern California, a relocation of
Employee more than fifty (50) miles outside of Employer's offices in Southern
California, or (ii) a failure to maintain Employee as Chief Operating Officer,
or (iii) a material diminution by Employer of Employee's responsibilities, which
change would cause Employee's position with Employer to become one of
significantly less responsibility or scope from that contemplated by Section 2
hereof, or (iv) a wilful failure in bad faith to pay the Base Salary or Bonus to
Employee when due or another material breach of this Agreement by Employer that
has a material adverse effect on Employee, or (v) a Change of Control of
Employer (as defined below) during the Initial Term. For purposes of this
Agreement, a "Change of Control" shall mean have the meaning given to such term
in Caribiner International Inc.'s 1996 Stock Option Plan, as amended.
10. VIOLATION OF OTHER AGREEMENTS
Employee represents and warrants to Employer that he is legally able to
enter into this Agreement and accept employment with Employer; that Employee is
not prohibited by the terms of any agreement, understanding or policy from
entering into this Agreement; and the terms hereof will not and do not violate
or contravene the terms of any agreement, understanding or policy to which
Employee is or may be a party, or by which Employee may be bound. Employee
agrees that, as it is a material inducement to Employer that Employee make the
foregoing representations and warranties and that they be true in all respects,
Employee shall forever indemnify and hold Employer harmless from and against all
liability, costs or expenses (including attorney's fees and disbursements) on
account of the foregoing representations being untrue.
7
<PAGE>
11. SPECIFIC PERFORMANCE; DAMAGES
In the event of a breach or threatened breach of the provisions of
Sections 7 or 8 hereof, Employee agrees that the injury which would be suffered
by Employer would be of a character which could not be fully compensated for
solely by a recovery of monetary damages. Accordingly, Employee agrees that in
the event of a breach or threatened breach of Section 7 or 8 hereof, in addition
to and not in lieu of any damages sustained by Employer and any other remedies
which Employer may pursue hereunder or under any applicable law, Employer shall
have the right to equitable relief, including issuance of a temporary or
permanent injunction, by any court of competent jurisdiction against the
commission or continuance of any such breach or threatened breach, without the
necessity of proving any actual damages or posting of any bond or other surety
therefor. In addition to, and not in limitation of the foregoing, Employee
understands and confirms that, in the event of a breach or threatened breach of
Section 7 or 8 hereof, Employee may be held financially liable to Employer for
any loss suffered by Employer as a result.
12. NOTICES
Any and all notices, demands or requests required or permitted to be
given under this Agreement shall be given in writing and sent, by registered or
certified U.S. mail, return receipt requested, by hand, or by overnight courier,
addressed to the parties hereto at their addresses set forth above or such other
addresses as they may from time-to-time designate by written notice or, in the
case of Employee, which Employer maintains as Employee's address, given in
accordance with the terms of this Section, together with copies thereof as
follows:
In the case of Employer, with a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022-4728
Attention: Jeffrey D. Zukerman, Esq.
Notice given as provided in this Section shall be deemed effective: (i) on the
date hand delivered, (ii) on the first business day following the sending
thereof by overnight courier, and (iii) on the seventh calendar day (or, if it
is not a business day, then the next succeeding business day thereafter) after
the depositing thereof into the exclusive custody of the U.S. Postal Service.
8
<PAGE>
13. WAIVERS
No waiver by any party of any default with respect to any provision,
condition or requirement hereof shall be deemed to be a waiver of any other
provision, condition or requirement hereof; nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
14. PRESERVATION OF INTENT
Should any provision of this Agreement be determined by a court having
jurisdiction in the premises to be illegal or in conflict with any laws of any
state or jurisdiction or otherwise unenforceable, Employer and Employee agree
that such provision shall be modified to the extent legally possible so that the
intent of this Agreement may be legally carried out.
15. ENTIRE AGREEMENT
This Agreement sets forth the entire and only agreement or
understanding between the parties relating to the subject matter hereof and
supersedes and cancels all previous agreements, negotiations, letters of intent,
correspondence, commitments and representations in respect thereof among them,
and no party shall be bound by any conditions, definitions, warranties or
representations with respect to the subject matter of this Agreement except as
provided in this Agreement.
16. INUREMENT; ASSIGNMENT
The rights and obligations of Employer under this Agreement shall inure
to the benefit of and shall be binding upon any successor of Employer or to the
business of Employer, subject to the provisions hereof. Employer may assign this
Agreement to any person, firm or corporation controlling, controlled by, or
under common control with Employer. Neither this Agreement nor any rights or
obligations of Employee hereunder shall be transferable or assignable by
Employee.
17. AMENDMENT
This Agreement may not be amended in any respect except by an
instrument in writing signed by the parties hereto.
18. HEADINGS
The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
9
<PAGE>
19. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which when taken together shall
constitute one and the same instrument.
20. GOVERNING LAW
This Agreement shall be governed by, construed and enforced in
accordance with the internal laws of the State of California, without giving
reference to principles of conflict of laws.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
EMPLOYEE:
/s/ Digby Davies
-------------------------------
Digby Davies
EMPLOYER:
CARIBINER INTERNATIONAL, INC.
By: /s/ Christopher A. Sinclair
----------------------------
Name: Christopher A. Sinclair
Title: Chairman of the Board
and Chief Executive
Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 OF
CARIBINER INTERNATIONAL, INC. AS SET FOURTH IN THIS FORUM 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-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 65,083
<ALLOWANCES> 2,027
<INVENTORY> 202,503
<CURRENT-ASSETS> 142,646
<PP&E> 73,770
<DEPRECIATION> 150,720
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
236
41,495
<COMMON> 564,739
<OTHER-SE> 209,974
<TOTAL-LIABILITY-AND-EQUITY> 209,974
<SALES> 172,154
<TOTAL-REVENUES> 172,154
<CGS> 38,750
<TOTAL-COSTS> 21,345
<OTHER-EXPENSES> (22,275)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (56,441)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (56,441)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,716)
<EPS-BASIC> (3.32)
<EPS-DILUTED> (3.32)
</TABLE>
