<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
/x/ AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number -14234
------------------------
CARIBINER INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-3466655
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16 WEST 61ST STREET, NEW YORK, NY 10023
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(212) 541-5300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
- -------------------------------------------------------- --------------------------------------------------------
Common Stock, par value $0.01 per share New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
As of December 27, 1999, the aggregate market value of voting stock held by
non-affiliates of the registrant was $93,244,026.
As of December 27, 1999, the registrant had 23,696,727 shares of its common
stock, par value $0.01 per share (the "Common Stock"), issued and outstanding.
The undersigned Registrant hereby amends its Annual Report on Form 10-K for
the fiscal year ended September 30, 1999, as set forth in the pages attached
hereto.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
Caribiner International, Inc.
We have audited the accompanying consolidated balance sheets of Caribiner
International, Inc. (the "Company") as of September 30, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company at
September 30, 1998 and 1999 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended September 30,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
New York, New York
December 28, 1999
1
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 15,117 $ 1,675
Trade accounts receivable, net of allowance for doubtful accounts of $2,150 in 1998 and
$4,693 in 1999....................................................................... 124,936 100,446
Deferred charges........................................................................ 12,923 8,301
Prepaid expenses and other current assets............................................... 11,610 20,173
-------- --------
Total Current Assets................................................................. 164,586 130,595
Property and equipment, net............................................................. 98,070 100,438
Goodwill, net........................................................................... 419,581 409,204
Taxes receivable........................................................................ 4,479 4,548
Deferred tax asset...................................................................... 362 --
Other assets............................................................................ 10,871 14,684
-------- --------
Total Assets.............................................................................. $697,949 $659,469
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt....................................................... $ 1,000 $ 1,299
Trade accounts payable.................................................................. 23,739 22,527
Accrued expenses and other current liabilities.......................................... 39,449 40,436
Accrued production costs................................................................ 25,331 20,259
Deferred income......................................................................... 18,093 11,617
-------- --------
Total Current Liabilities............................................................ 107,612 96,138
Long-term debt.......................................................................... 396,240 425,840
Deferred income......................................................................... 8,409 4,975
Deferred tax liability.................................................................. -- 7,892
Other liabilities....................................................................... 9,913 2,144
-------- --------
Total Liabilities......................................................................... 522,174 536,989
Stockholders' Equity:
Preferred stock, $.01 par value:
2,000 shares authorized, none issued and outstanding at 1998 and 1999................ -- --
Common stock, $.01 par value:
40,000 voting shares authorized, and 23,689 and 23,697 shares issued and outstanding
at 1998 and 1999, respectively...................................................... 236 236
Additional paid-in capital.............................................................. 167,608 167,677
Accumulated other comprehensive income (loss)........................................... (3,714) (4,785)
Retained earnings (deficit)............................................................. 11,645 (40,648)
-------- --------
Total Stockholders' Equity........................................................... 175,775 122,480
-------- --------
Total Liabilities and Stockholders' Equity................................................ $697,949 $659,469
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1997 1998 1999
-------- -------- --------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Service revenue.............................................................. $213,239 $296,393 $302,087
Rental revenue............................................................... 131,843 414,941 447,567
Intercompany eliminations.................................................... (2,824) (14,556) (23,650)
-------- -------- --------
Total revenue........................................................... 342,258 696,778 726,004
-------- -------- --------
Cost of service revenue...................................................... 144,980 204,511 211,576
Cost of rental revenue (note 4).............................................. 86,885 309,680 357,308
Intercompany eliminations.................................................... (2,824) (14,556) (23,650)
-------- -------- --------
Total cost of revenue................................................... 229,041 499,635 545,234
-------- -------- --------
Gross profit................................................................. 113,217 197,143 180,770
Operating expenses:
Selling, general and administrative expenses (note 4)...................... 71,270 143,408 149,147
Restructuring charge (note 3).............................................. -- 6,953 10,769
Loss on disposal of assets (note 5)........................................ -- -- 16,500
Depreciation and amortization.............................................. 8,905 21,586 27,347
-------- -------- --------
Total operating expenses................................................ 80,175 171,947 203,763
Equity in income of affiliated company (note 5).............................. -- 688 --
-------- -------- --------
Operating income (loss)...................................................... 33,042 25,884 (22,993)
Interest expense, net........................................................ 2,429 24,325 34,950
-------- -------- --------
Income (loss) before taxes and extraordinary charge.......................... 30,613 1,559 (57,943)
Provision (benefit) for taxes................................................ 12,551 624 (5,650)
-------- -------- --------
Income (loss) before extraordinary charge.................................... 18,062 935 (52,293)
Extraordinary charge on early extinguishment of debt (net of income taxes of
$403) (note 7)............................................................. -- 605 --
-------- -------- --------
Net income (loss)............................................................ $ 18,062 $ 330 $(52,293)
======== ======== ========
Basic and diluted earnings per common share:
Income (loss) before extraordinary charge.................................. $ 0.83 $ 0.04 $ (2.21)
Extraordinary charge....................................................... -- (0.03) --
-------- -------- --------
Net income (loss) per common share........................................... $ 0.83 $ 0.01 $ (2.21)
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------
1997 1998 1999
--------- --------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $ 18,062 $ 330 $ (52,293)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Restructuring charge, net of cash payments............................ -- 4,125 9,669
Loss on disposal of assets............................................ -- -- 16,500
Fixed asset write-offs................................................ -- -- 4,439
Extraordinary charge on early extinguishment of debt, net of tax...... -- 605 --
Depreciation and amortization......................................... 13,082 37,801 43,563
Change in assets and liabilities, net of amounts acquired:
(Increase) decrease in accounts receivable............................ (19,547) (11,158) 18,206
(Increase) decrease in deferred charges............................... 1,469 (1,880) 2,235
(Increase) decrease in prepaid expenses and other current assets...... (3,714) 1,280 (9,030)
(Increase) decrease in taxes receivable............................... 2,867 (11,935) 185
(Decrease) in other assets............................................ (1,646) (3,866) (1,503)
(Decrease) in accounts payable........................................ (450) (3,851) (290)
Increase (decrease) in deferred income................................ (5,165) 6,428 (9,582)
Increase (decrease) in accrued expenses and other liabilities......... 2,926 5,111 (7,260)
--------- --------- ---------
Net cash provided by operating activities............................. 7,884 22,990 14,839
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment.................................... (17,725) (46,454) (45,410)
Net proceeds from disposition of businesses........................... -- 48,892 --
Acquisition of intangibles and businesses, net of cash acquired....... (110,797) (305,411) (9,866)
--------- --------- ---------
Net cash used in investing activities................................. (128,522) (302,973) (55,276)
--------- --------- ---------
Cash flows from financing activities:
Net proceeds from issuance of common stock............................... 85,792 -- --
Proceeds from exercise of stock options.................................. -- 667 --
Net repayments of bank line of credit.................................... (6,000) -- --
Proceeds from long-term debt............................................. 135,870 759,122 174,550
Repayments of long-term debt............................................. (92,517) (470,478) (144,457)
Deferred financing fees.................................................. (1,032) (3,812) (2,836)
--------- --------- ---------
Net cash provided by financing activities............................. 122,113 285,499 27,257
--------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents............... 346 (652) (262)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents....................... 1,821 4,864 (13,442)
Cash and cash equivalents beginning of year................................ 8,432 10,253 15,117
--------- --------- ---------
Cash and cash equivalents end of year...................................... $ 10,253 $ 15,117 $ 1,675
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
CARIBINER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL RETAINED OTHER TOTAL
---------------- PAID-IN EARNINGS COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) INCOME (LOSS) EQUITY
------- ------ ---------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1996...................................... $19,197 $192 $ 59,937 $ (6,747) $ 86 $ 53,468
Net income.................................. -- -- -- 18,062 -- 18,062
Foreign currency translation adjustment..... -- -- -- -- (75) (75)
---------
Other comprehensive income.................. 17,987
Issuance of common stock under non-employee
directors' stock plan..................... 2 -- 37 -- -- 37
Issuance of common stock upon offering...... 3,744 37 85,754 -- -- 85,791
Issuance of common stock upon acquisitions
completed during fiscal 1997.............. 474 5 14,146 -- -- 14,151
------- ---- -------- -------- ------- ---------
Balance at September 30,
1997...................................... 23,417 234 159,874 11,315 11 171,434
Net income.................................. -- -- -- 330 -- 330
Foreign currency translation adjustment..... -- -- -- -- (3,725) (3,725)
---------
Other comprehensive (loss).................. (3,395)
Issuance of common stock upon acquisitions
completed during fiscal 1998.............. 239 2 7,042 -- -- 7,044
Issuance of common stock upon exercise of
stock options............................. 33 * 692 -- -- 692
------- ---- -------- -------- ------- ---------
Balance at September 30,
1998...................................... 23,689 236 167,608 11,645 (3,714) 175,775
Net loss.................................... -- -- -- (52,293) -- (52,293)
Foreign currency translation adjustment..... -- -- -- -- (1,071) (1,071)
---------
Other comprehensive (loss).................. (53,364)
Issuance of common stock.................... 8 * 69 -- 69
------- ---- -------- -------- ------- ---------
Balance at September 30,
1999...................................... 23,697 $236 $167,677 $(40,648) $(4,785) $ 122,480
======= ==== ======== ======== ======= =========
</TABLE>
* Less than $1 thousand
See accompanying notes to the consolidated financial statements.
5
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Caribiner International, Inc. (the "Company") is a producer of meetings,
events and training programs, a provider of audiovisual equipment rentals, sales
and installations and related staging services, and a provider of related
business communications and corporate meeting services that enable businesses to
inform, sell to and train their sales forces, dealers, franchisees, partners,
stockholders and employees. As used herein, the terms "Caribiner" or the
"Company" refer to Caribiner International, Inc. and its subsidiaries, and the
references to a fiscal year are to the Company's fiscal year ended September 30
in the referenced year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.
Certain reclassifications have been made to the fiscal 1997 and fiscal 1998
consolidated financial statements to conform to the current year presentation.
Revenue Recognition
Service revenue is recorded principally on the completed contract method of
accounting. The recognition of revenue and cost of revenue is deferred until a
project is completed, usually within a three to six month time period. For those
projects which provide for multiple events, the contract revenue and costs are
apportioned and revenue and profit are recognized as each event occurs. If a
client cancels a project after production has begun, the client is billed for
work performed and expenses incurred through the date of cancellation, and there
are no provisions for non-payment by the client. Deferred income, which
represents advance billings on uncompleted jobs, is classified as long-term in
the same proportion that anticipated profit on such jobs bears to the related
contract price. Deferred charges represent costs incurred on uncompleted jobs.
Rental revenue is recognized over the related rental period.
Cost of Revenue
Cost of service revenue is comprised of production costs, including
salaries and benefits of production, creative and technical personnel involved
with the specific contracts, and other direct costs, including contracted
services, equipment rentals and costs associated with the production of
audio-visual effects. Such costs are deferred until project completion.
Cost of rental revenue is comprised principally of direct labor costs,
commissions, depreciation and equipment rentals.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets ranging
from five to seven years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or the estimated useful
life.
6
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Goodwill
Goodwill represents the excess of the cost over the fair value of net
assets of purchased businesses and is amortized on a straight-line basis over
periods ranging from 15 years to 40 years. Accumulated amortization of goodwill
was $20.0 million and $33.4 million at September 30, 1998 and 1999,
respectively.
The Company reviews the recoverability of intangible and other long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. A loss is recognized for the difference between
the carrying amount and the estimated fair value of the asset.
Deferred Financing Fees
Deferred financing fees are amortized on a straight-line basis over the
term of the related debt. The amortization of deferred financing fees is
reflected as a component of interest expense. Deferred financing fees amortized
during the years ending September 30, 1997, 1998 and 1999 were $0.3 million,
$0.9 million and $1.2 million, respectively.
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated into U.S.
dollars at current rates as of the balance sheet date, except for revenue, costs
and expenses which are translated at average current rates during each reporting
period. The gains or losses resulting from translation are included as a
component of accumulated other comprehensive income (loss) in stockholders'
equity. The gains and losses resulting from foreign currency transactions are
included in the Company's current results of operations. Transaction gains or
losses in the years ended September 30, 1997, 1998 and 1999 were not
significant.
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock Based Compensation
The Company grants to certain employees stock options for a fixed number of
shares with an exercise price equal to the fair value of the shares at the date
of grant. The Company accounts for stock option grants in accordance with APB
Opinion 25, "Accounting for Stock Issued to Employees," and, accordingly,
recognizes no compensation expense for such grants.
3. RESTRUCTURING CHARGE
During the third quarter of fiscal 1999 the Company determined that it was
necessary to reevaluate its strategic plan and to take steps to reduce its
outstanding long-term indebtedness with the overall objective of maximizing
shareholder value. In connection therewith, in May, 1999, the Company retained
Salomon Smith Barney as its financial advisor to assist it in reviewing its
existing operations and assessing strategic and financial alternatives. As a
result of these efforts, during the fourth quarter of 1999 the Company
concluded, among other matters, that it should further reorganize its
audiovisual services operations (the "Restructuring") and pursue the possible
sale of one or more of its business operations.
As a result, in the fiscal quarter ended September 30, 1999, the Company
recorded a pre-tax restructuring charge of $10.8 million. The charge included
$1.5 million of employee termination and severance costs associated with a
further reduction in the workforce of approximately 60 people, $4.0 million
related to lease
7
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. RESTRUCTURING CHARGE--(CONTINUED)
termination and other facility shut-down costs and $5.3 million of computer
software and equipment no longer usable as a result of the reorganization. The
remaining liability at September 30, 1999 was $2.7 million.
In fiscal 1998, the Company initiated a review of its operations, focusing
on the integration of its businesses as well as the overall management and
organizational structure, which resulted in the initiation of the Restructuring.
Accordingly, during the fiscal quarter ended March 31, 1998, the Company
recorded a pre-tax restructuring charge of $3.8 million. The charge included
$2.8 million related to employee termination and severance costs associated with
a reduction in the workforce of approximately 155 people and $1.0 million
related to lease termination and other costs. During the fiscal quarter ended
September 30, 1998, the Company recorded an additional pre-tax restructuring
charge of $3.2 million in connection with the continuation of the reorganization
plan begun in March 1998. The charge included $1.0 million related to the
severance and termination costs for approximately 330 people, $0.7 million of
lease termination costs, $1.5 million relating to the write-off of certain
assets and other termination and shut down costs to be incurred during the
Restructuring. The total remaining restructuring liability as of September 30,
1998 was $4.1 million and was fully utilized during fiscal 1999.
4. OTHER COSTS ASSOCIATED WITH REALIGNMENT OF BUSINESS
During fiscal 1999, the Company recorded additional charges of
$9.9 million related to the Restructuring described in Note 3 but which did not
satisfy the accounting criteria for inclusion in the restructuring charge. These
charges included $6.2 million of additional reserves and write-offs related to
the accounts receivable of the former Atlanta-based audio visual operations. The
accounts receivable charge related primarily to disruptions in certain billing
procedures which the Company believes arose from the Restructuring. Such
accounts receivable related charge is included in selling, general and
administrative expenses in the accompanying financial statements.
In addition, during fiscal 1999, the Company recorded a non-cash charge of
$3.7 million for audio visual rental equipment losses. The charge was identified
during the Company's reorganization of its audio visual businesses from its
former Atlanta-based audio visual headquarters to the respective business unit
facilities. In accordance with generally accepted accounting principles, as such
charge does not satisfy the criterion for inclusion in the restructuring charge,
it has been included in cost of rental revenue.
5. BUSINESS ACQUISITIONS/DISPOSITIONS
Fiscal 1997 Acquisitions
In January, 1997, the Company acquired substantially all of the assets of
Video Supply Company, Inc. d/b/a Projexions Video Supply and Projexions/Video
Supply Company (together, "Projexions"), a provider of audiovisual equipment
rentals and related staging services in the southeastern U.S., for approximately
$13.6 million in cash and $1.4 million in the repayment of certain indebtedness
at closing.
Also in January, 1997, the Company completed the acquisition of all of the
outstanding capital stock of Blumberg Communications Inc. ("Blumberg"), a
provider of audiovisual equipment rentals, sales and related staging services,
including hotel audiovisual equipment rentals, sales and related staging
services, including hotel audiovisual outsourcing services in the upper midwest
and southern U.S. The Company paid aggregate consideration of $18.0 million,
which consisted of approximately $16.6 million in cash and the issuance of
59,880 shares of the Company's common stock having a fair market value of
approximately $1.4 million. In addition, the Company repaid $3.9 million in
outstanding indebtedness of Blumberg at closing.
In April, 1997, the Company completed the acquisition of the assets of D&D
Enterprises, Inc., d/b/a Show Solutions ("Show Solutions"), a provider of
staging and show services based in Atlanta, for aggregate
8
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. BUSINESS ACQUISITIONS/DISPOSITIONS--(CONTINUED)
consideration of approximately $11.4 million, which consisted of $8.4 million in
cash paid at closing, $1.0 million placed in escrow to be paid at a later date
upon satisfaction of certain terms and conditions, and the issuance of 76,360
shares of the Company's common stock having a fair market value of approximately
$2.0 million. In addition, the Company repaid approximately $0.6 million in
outstanding indebtedness of Show Solutions at closing.
In June, 1997, the Company acquired all of the outstanding capital stock of
WCT Live Communication Limited ("WCT"), a London-based business communications
services provider, for aggregate consideration of approximately $12.0 million,
which consisted of $10.1 million in cash and the issuance of 53,818 shares of
the Company's common stock having a fair market value of $1.9 million.
In July, 1997, the Company acquired all of the outstanding capital stock of
Bauer Audiovisual, Inc. ("Bauer"), a provider of audiovisual equipment rentals
and audiovisual outsourcing services throughout the United States. Consideration
paid for the acquisition was $14.6 million in cash and the issuance of 167,762
shares of the Company's common stock with an aggregate fair market value of
approximately $5.3 million. In addition, the Company repaid approximately $7.0
million in outstanding long-term indebtedness of Bauer and $4.8 million in
outstanding short-term indebtedness of Bauer at closing.
In addition, during fiscal 1997, the Company made four additional
acquisitions with an aggregate purchase price of $17.3 million, consisting
principally of cash and shares of the Company's common stock.
All of the transactions described above were financed by additional
drawings on one of the Company's credit facilities, except for the acquisition
of Show Solutions, which was paid from the Company's cash on hand remaining from
the net proceeds of the issuance of common stock in March, 1997.
Fiscal 1998 Acquisitions/Dispositions
Effective December 1, 1997, the Company acquired the outstanding capital
stock of Visual Action for an aggregate purchase price of $253.0 million
(excluding transaction costs). In addition, the Company assumed approximately
$44.3 million in outstanding indebtedness of Visual Action. Visual Action
provides corporate meeting services, including audiovisual and exhibition
services, in the United States and United Kingdom. The goodwill resulting from
the acquisition of Visual Action is being amortized over 40 years. The cost of
the acquisition, including transaction costs, was financed through the Company's
loan agreement entered into in October, 1997 (see Note 7). Prior to December
1997, the Company had acquired a minority interest through open market purchases
resulting in the equity in income reflected for the period.
In January, 1998, the Company acquired Right Source, Inc. ("Right Source")
for an initial consideration of $17.0 million in cash, plus the repayment of
approximately $2.4 million in outstanding indebtedness. Right Source, with
offices in South Carolina and Connecticut and training centers in several other
states, is a marketing support and training services company, focusing primarily
on product launches and customer education for the information technology
industry.
In May, 1998, the Company completed the disposition of the broadcast video
services business of Visual Action for approximately $27.6 million in cash,
excluding transaction costs of $2.0 million. In July, 1998, the Company
completed the disposition of the U.K.-based audiovisual staging operations of
Visual Action for approximately $26.7 million in cash. The Company retained the
hotel audiovisual outsourcing services portion of this business, integrating it
with Visual Action's existing U.K. operations. The Company used the cash
proceeds from the sales of the businesses to repay outstanding bank debt. No
gain or loss was recognized on such disposition transactions.
In addition, during fiscal 1998, the Company made seven additional
acquisitions with an aggregate purchase price of $24.7 million, consisting
principally of cash and shares of the Company's common stock.
9
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. BUSINESS ACQUISITIONS/DISPOSITIONS--(CONTINUED)
Fiscal 1999 Dispositions
During fiscal 1999, in connection with the Company's consolidation of hotel
audio visual outsourcing operations in Chicago, and as part of the Company's
periodic review of the purchase accounting accruals, approximately $2.6 million
of liabilities established in connection with certain of the acquisitions
completed in fiscal 1996 and 1997 were identified as excess and reversed.
Effective June 30, 1999, the Company disposed of its design and
installation business headquartered in Atlanta. A pre-tax loss of $16.5 million
was incurred upon the disposition of the related assets. Total net cash proceeds
of approximately $2.0-$3.0 million are expected upon final accounting of the
disposition.
The Company accounted for its acquisitions in accordance with the purchase
method and, accordingly, operations of the acquired businesses are included in
the accompanying consolidated statements of operations from their respective
dates of acquisition.
Certain of the Company's acquisitions have provided for contingent payments
for three years following the purchase based upon the achievement of certain
performance goals relating to revenue, gross profit or earnings before interest,
taxes, depreciation and amortization. Contingent payments are accounted for as
additional purchase price as they become known. During the years ending
September 30, 1997 and 1999, $2.1 million and $4.5 million was paid and/or
accrued as additional consideration with respect to these acquisitions. There
were no such payments made in fiscal 1998.
The following unaudited consolidated pro forma results of operations of the
Company for the years ended September 30, 1998 and 1999 give effect to the
acquisitions of Visual Action and Right Source, as well as the dispositions of
the Company's broadcast video services unit, its U.K. staging and equipment
rental services unit, and its Atlanta-based design and installation business and
reflect the extraordinary charge resulting from the write-off of unamortized
fees relating to the Company's former bank facilities (see Note 7), as if such
transactions had occurred in each case on October 1, 1997. The other
acquisitions completed by the Company would not have had or did not have, as the
case may be, a significant effect on the Company's results of operations during
the years ended September 30, 1998 and 1999.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1998 1999
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenue................................................. $ 695,290 $ 703,685
Income before taxes and extraordinary charge............ (18,527) (38,447)
Net income.............................................. (19,942) (39,231)
Pro forma basic and diluted earnings per common share... $ (0.84) $ (1.65)
</TABLE>
The above calculation of pro forma basic and diluted net income per common
share assumes that approximately 23,616,398 and 23,695,126 shares were
outstanding during 1998 and 1999, respectively.
The unaudited pro forma consolidated results of operations do not purport
to be indicative of the actual results of operations that would have occurred
had the acquisitions described above been made at the beginning of fiscal 1998
or of results which may occur in the future.
10
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. PROPERTY AND EQUIPMENT
At September 30, 1998 and 1999 property and equipment consisted of:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------
1998 1999
---------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Audiovisual rental and production equipment........................... $ 85,254 $ 97,274
Furniture and fixtures................................................ 13,280 9,363
Information systems................................................... 25,438 24,718
Leasehold improvements................................................ 11,670 12,293
Other................................................................. 2,065 10,349
-------- --------
137,707 153,997
Less--accumulated depreciation and amortization....................... 39,637 53,559
-------- --------
$ 98,070 $100,438
======== ========
</TABLE>
The related depreciation and amortization expense for the years ended
September 30, 1998 and 1999 was $25.7 million and $28.9 million, respectively.
7. DEBT
At September 30, 1998 and 1999, long-term debt consisted of:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------
1998 1999
---------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Credit Agreement...................................................... $394,500 $425,280
Notes payable......................................................... 1,825 1,415
Other................................................................. 915 444
-------- --------
397,240 427,139
Less--current portion of long-term debt............................... 1,000 1,299
-------- --------
$396,240 $425,840
======== ========
</TABLE>
At September 30, 1999, the carrying amount of the above commitments
approximated fair value.
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 six 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 six year term loan ( the "Term
Facility" and together with the Revolving Facility, the "Credit Agreement") to
be utilized in connection with the acquisition of Visual Action. (See Note 5,
Business Acquisitions/Dispositions). The Company recognized an extraordinary
loss of $0.6 million in the quarter ended December 31, 1997 resulting from the
write-off of the unamortized debt issuance fees relating to the Company's former
bank facilities. 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. Fees of
approximately $1.2 million and $1.4 million were incurred in connection with the
amendments made to the Credit Agreement in December, 1998 and July 1999,
respectively. Such fees will be amortized over the remaining term of the Credit
Agreement. As of December 21, 1999, the Company had
11
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT--(CONTINUED)
approximately $447.2 million outstanding under the Credit Agreement. Cash on
hand as of such date was $11.8 million.
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 have arisen or may 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 defined 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. On December 23, 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 to
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 is based on
post-September 30, 1999 consolidated EBITDA (as defined in the Credit
Agreement), and to restrictions on the amount of capital expenditures that may
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 provides 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 includes a consent by the
lenders that will allow the Company to pursue the possible sale of its
audiovisual businesses, provided that certain timing requirements are met and
minimum net proceeds exceed a specified amount. If such a transaction is
consummated, the Company would be obligated to use the net proceeds, subject to
certain adjustments, to pay down amounts outstanding under the Credit Agreement
and would be subject to revised financial covenants. There can be no assurance
that any such transaction will be entered into or consummated, or that it will
meet the parameters required by the December 1999 Amendment.
The Company believes it will be able to satisfy the financial and other
covenants included in the Credit Agreement, as amended. Further, the Company
continues to believe it necessary to take actions to reduce its indebtedness
under the Credit Agreement, including the possible sale of one or more of its
operations. In connection therewith, the Company's financial advisor, Salomon
Smith Barney, is assisting the Company in assessing strategic and financial
alternatives. There can be no assurance that the Company will be able to take
such actions or that it will be able to 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 December 29, 1999, the Company had approximately $437.2 million
outstanding under the Credit Agreement, of which $237.6 million was outstanding
under the Revolving Facility. Cash on hand at such date was $5.0 million.
12
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT--(CONTINUED)
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.
The maturity date of each of the Term Facility and the Revolving Facility
is October, 2001. Interest on outstanding amounts under the Credit Agreement is
payable quarterly in arrears and at the option of the Company accrues at either
(i) LIBOR plus an applicable margin or (ii) an alternate base rate based upon
the greatest of (a) the agent bank's prime rate, (b) the three-month secondary
certificate of deposit rate and (c) the federal funds rate. The applicable
margins are subject to change based on the occurrence of certain events. The
interest rate on the Credit Agreement is presently LIBOR plus 3.25%. The
applicable interst margin is subject to upward adjustment of 0.75% on March 1,
2000 if the Company has not entered into a definitive agreement to sell its
audiovisual businesses by such date and an additional 0.75% on June 1, 2000 if
such transaction has not been consummated by such date.
Principal on the Term Facility is payable in quarterly installments,
subject to the deferrals described above, with the final scheduled payment due
on October 1, 2001. Subject to reductions in such quarterly installments for any
prepayments made under the Term Facility, at present, the Company will be
required to repay an aggregate of: (i) $17.8 million in fiscal 2000,
(ii) $50.4 million in fiscal 2001 and (iii) 132.4 million in fiscal 2002. The
Company is permitted and intends (to the extent available) to draw on the
Revolving Facility to make certain of the above payments.
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 aggregate scheduled payments of all long-term debt outstanding at
September 30, 1999 (including amounts outstanding under the Term Facility), for
the next three fiscal years, are as follows: 2000--$19.1 million;
2001--$75.9 million; 2002--$332.1 million; totaling $427.1 million.
8. CAPITAL STOCK
1996 Stock Option Plan
Effective January 1, 1996, the Company adopted the 1996 Stock Option Plan
(the "Option Plan"). The Option Plan is designed to provide employees with a
more direct stake in the Company's future welfare and an incentive to remain
with the Company. The Option Plan provides that options for an aggregate of
2,500,000 shares of the Company's common stock shall be available for grant,
subject to authorization by the Compensation Committee of the Board of
Directors. The purchase price per share under the Option Plan is the market
price of the common stock on the grant date. Generally, options granted under
the Option Plan vest over a period of three years from the grant date.
In December, 1998, the Company permitted non-executive employees to forfeit
any outstanding options that they had been granted under the Option Plan and
exchange them for the same number of options with an exercise price equal to the
then current market price of the common stock (the "Repricing Plan"). Pursuant
to the terms of the Repricing Plan, participating employees were required to
consent to a new three-year vesting schedule for such newly-granted options.
The Sinclair Options
In connection with an employment agreement, dated as of December 21, 1998,
between Christopher A. Sinclair and the Company, the Board of Directors approved
the grant to Mr. Sinclair of options to purchase an
13
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL STOCK--(CONTINUED)
aggregate of 600,000 shares of common stock (the "Sinclair Options"), subject to
the approval of the stockholders of the Company.
The stockholders of the Company approved the grant of the Sinclair Options
at the Annual Meeting of Stockholders held on March 16, 1999. Of the Sinclair
Options, (i) 350,000 options have an exercise price per share of $8.5625, which
was the average of the high and the low reported sale prices of the common stock
on December 21, 1998 ("Option Grants A"), and (ii) 250,000 options have an
exercise price per share of the $15.00 ("Option Grant B"). The market price of
the Company's Common Stock on March 16, 1999, was less than the exercise price
of each of Option Grant A and Option Grant B.
The Board of Directors granted the Sinclair Options to Mr. Sinclair to
induce him to join the Company as its President and Chief Executive Officer and
to provide additional motivation and incentive for Mr. Sinclair in the
performance of his duties on behalf of the Company beyond the cash compensation
paid pursuant to the terms of his employment agreement with the Company.
Except for their respective exercise prices, the terms and conditions of
Option Grant A and Option Grant B are identical in all respects. In addition,
although the Sinclair Options were not granted under the 1996 Option Plan,
except for certain terms relating to the vesting and exercise of options upon
resignation or termination from employment, the terms and conditions of the
stock options granted under the 1996 Option Plan have been substantially
incorporated into the terms and conditions of the Sinclair Options.
As of September 30, 1999, stock options to purchase an aggregate of
1,989,406 shares of Common Stock were outstanding, of which options to purchase
67,426 shares of Common Stock were vested.
The Company applies the provisions of APB No. 25, Accounting for Stock
Issued to Employees, in accounting for its stock-based awards. Accordingly, no
compensation cost has been recognized for its stock option plans.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
risk-free interest rate of 5%, 4% and 6% in 1997, 1998 and 1999, respectively; a
dividend yield of 0% in 1997, 1998 and 1999; volatility of 32.7% in 1997, 67.4%
in 1998 and 77.4% in 1999, respectively, and an expected life of 5 years in
1997, 1998 and 1999.
Had the Company elected to apply the provisions of Statement of Financial
Accounting Standards (SFAS No. 123), Accounting for Stock Based Compensation,
net income would have been reduced by $675,000, or $0.03 per share, $823,000, or
$0.03, and $1,372,000, or $.06 per share, for fiscal years 1997, 1998 and 1999,
respectively.
14
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL STOCK--(CONTINUED)
A summary of the status of the Company's option plans at September 30, 1999
and activity during the years ended September 30, 1999 is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------------------ ------------------------ ------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
------------------------ ------------------------ ------------------------
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
(IN THOUSANDS OF SHARES)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year......... 303 $14.75 737 $23.22 1,048 $21.75
Options granted.......................... 461 28.38 561 20.25 2,024 8.68
Options exercised........................ -- -- (30) 23.38 -- --
Options forfeited/expired................ (27) 16.14 (220) 23.10 (1,083) 16.06
---- ------ ------ ------ ------ ------
Options outstanding at end of year....... 737 23.22 1,048 21.75 1,989 9.23
---- ------ ------ ------ ------ ------
Exercisable at end of year............... 110 15.84 275 20.69 67 16.52
---- ------ ------ ------ ------ ------
Weighted average fair value of options
granted during the year................ 10.67 12.00 5.80
------ ------ ------
</TABLE>
A summary of information about stock options outstanding and options
exercisable at September 30, 1999 is as follows (In thousands of shares):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES SHARES REMAINING TERM EXERCISE PRICE SHARES EXERCISE PRICE
- ---------------------------------------- ------ ---------------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
$6.66 to $8.56.......................... 1,600 9.25 $ 7.81 -- --
$14.44 to $20.63........................ 384 8.90 $15.71 64 $16.24
$21.875 to $32.78....................... 5 7.48 $21.98 3 $21.94
------ ----
$6.66 to $32.78......................... 1,989 9.18 $ 9.23 67 $16.52
</TABLE>
9. RELATED PARTY TRANSACTIONS
In the normal course of producing projects for clients, the Company
periodically uses the services of individuals related to and/or companies owned
by relatives of certain of its employees. During the years ending September 30,
1997, 1998 and 1999, the Company paid such vendors approximately $0.6 million,
$1.4 million and $2.1 million, respectively.
Rent paid to related parties during the years ending September 30, 1997,
1998 and 1999 was $0.6 million, $0.6 million and $0.4 million, respectively.
During fiscal 1998, the Company made loans aggregating $0.3 million to an
executive officer of the Company. The loans were made in part in connection with
the relocation of such executive and for other personal purposes. The loans bear
an interest rate of 8% per annum and mature in annual installments over a period
of three years.
10. EMPLOYEE BENEFIT PLANS
The Company maintains several defined contribution plans covering all
qualified employees. Effective January 1, 1997, the Company began matching $0.25
for each dollar contributed by an employee, up to a maximum of 3% of such
employee's base compensation (subject to applicable limits under the Internal
Revenue Code of 1986, as amended. In addition, the Company continues to maintain
several existing defined contribution plans that it inherited in connection with
its acquisition of Visual Action in December, 1997. Under such plans, the
Company contributes varying amounts ranging from $0.25 to $0.50 for each dollar
contributed by an
15
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT PLANS--(CONTINUED)
employee to such plan up to a maximum of 4% of base salary. Company matching
contributions during the years ended September 30, 1998 and 1999 totaled
$1.0 million and $1.6 million, respectively.
11. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the carrying amounts used for income tax purposes which resulted
from the acquisition of certain business operations, the difference between
financial reporting recovery periods and tax reporting recovery periods and the
write-down of certain assets for financial reporting purposes.
Significant components of the Company's deferred tax assets and liabilities
as of September 30, 1998 and September 30, 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
------ --------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS:
NOL and tax credit carryforwards......................................... $1,776 $ 23,900
Accrued interest......................................................... 247 247
Allowance for doubtful accounts.......................................... 733 691
Restructuring and other reserves......................................... 4,351 1,791
------ --------
Total deferred tax assets................................................ 7,107 26,629
Valuation allowance...................................................... (653) (14,640)
------ --------
Net deferred tax assets.................................................. 6,454 11,989
DEFERRED TAX LIABILITIES:
Tax over book depreciation and amortization.............................. 5,293 8,003
Adjustments for differences in basis of acquired assets.................. -- 8,000
Amortization of intangibles.............................................. 389 3,653
Other.................................................................... 410 225
------ --------
Total deferred tax liabilities........................................... 6,092 19,881
------ --------
Net deferred tax liability/(asset)....................................... $ (362) $ 7,892
====== ========
</TABLE>
At September 30, 1999, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $54.3 million, of
which, $1.6 million expire in the years 2001 through 2007 and $52.7 million
expire in the year 2019. The Company also has tax loss carryforwards for state
and local tax purposes. A valuation allowance has been recorded to the extent
the Company believes the benefit from the tax loss carryforwards will not be
realized. In addition, approximately $1.6 million of the NOL carryforwards may
be subject to limitations under the change in ownership provisions of the
Internal Revenue Code and may also be limited for state and local income tax
purposes. The Company has not recorded any future benefit related to the usage
of these NOL carryforwards.
16
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES--(CONTINUED)
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................................... $ 7,224 $(2,041) $(6,052)
State................................................................. 2,150 831 (58)
Foreign............................................................... 1,112 280 206
------- ------- -------
Total current tax............................................. 10,486 (930) (5,904)
Deferred:
Federal............................................................... 1,758 1,345 (1,879)
State................................................................. 352 (992) 858
Foreign............................................................... (45) 1,201 1,275
------- ------- -------
Total deferred tax............................................ 2,065 1,554 254
------- ------- -------
Total provision for taxes............................................... $12,551 $ 624 $(5,650)
======= ======= =======
</TABLE>
For fiscal 1999, tax benefit has been recorded to the extent the current
year tax loss can be carried back and for a portion of the tax loss carried
forward.
The reconciliation of income tax attributable to operations computed at the
U.S. federal statutory tax rates to income tax expense is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax expense at statutory rate.......................................... $10,714 $ 546 $(20,280)
State income tax expense/(benefit) (net of federal tax)................ 1,626 (104) 521
Non-deductible goodwill amortization................................... 483 1,236 5,745
Non-deductible expenses................................................ 113 181 587
Losses without benefit................................................. (645) (19) 10,478
Rate differential related to foreign operations........................ -- (1,205) (2,760)
Other.................................................................. 260 (11) 59
------- ------- --------
$12,551 $ 624 $ (5,650)
======= ======= ========
</TABLE>
12. 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
During fiscal 1999, the Company had five reportable segments: the
Communications Division, Hotel Services, Staging and Meeting Services, Rental
Services and Melville Exhibition Services, Ltd. ("MES"). The Communications
Division produces meetings, events and training programs that enable businesses
to inform, sell to and train their sales forces, dealers, stockholders and
employees. 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
17
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SEGMENT INFORMATION--(CONTINUED)
corporations, convention centers and smaller hotels. MES provides exhibition
services in the United Kingdom, offering fully integrated services to exhibition
organizers, hall owners, exhibitors and other exhibition contractors.
During fiscal 1999, the Company reorganized its audiovisual services
businesses into separate operating units: Hotels Services, Staging and Meeting
Services and Rental Services. Prior to fiscal 1999, the Company operated the
audiovisual services businesses on a combined basis. It is impracticable to
furnish separate financial data relating to the fiscal years ended
September 30, 1997 and 1998 in conformity with the current reporting segments
within the audiovisual services group.
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"). The accounting policies of the reportable segments are
the same as those described in Note 2, Summary of Significant Accounting
Policies. Interdivision sales are recorded at the Company's costs; there is no
intercompany profit or loss on interdivision sales.
YEAR ENDED SEPTEMBER 30, 1999 (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
STAGING & TOTAL
HOTEL MEETING RENTALS AUDIO
SERVICES SERVICES SERVICES OTHER(b) VISUAL MES COMMUNICATIONS OTHER(c) TOTAL
-------- --------- -------- -------- -------- ------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue............... $261,597 $89,390 $ 22,212 22,319 $395,518 $52,049 $294,886 $6,539 $748,992
Gross Profit.......... 52,894 8,149 6,480 8,834 76,357 17,602 89,574 1,216 184,749
EBITDA................ 37,142 11,416 4,176 (2,607) 50,127(a) 5,856 22,653 69 78,705
Segment assets........ 87,192 32,161 12,771 -- 132,124 17,329 87,629 625 237,707
Capital expenditures.. 21,347 8,962 2,583 196 33,088 1,732 9,661 27 44,508
</TABLE>
(a) Excludes $8.4 million in costs incurred during fiscal 1999 related to the
Company's former Atlanta-based audio visual headquarters.
(b) Primarily represents the results of operations of the Company's design and
installation business which was disposed in June, 1999.
(c) Represents the results of the Company's travel and logistical services
business.
YEAR ENDED SEPTEMBER 30, 1998 (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AUDIO
VISUAL MES COMMUNICATIONS OTHER(a) TOTAL
-------- ------- -------------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue............................................ $361,153 $48,243 $295,077 $4,945 $709,418
Gross Profit....................................... 85,970 18,301 91,882 990 197,143
EBITDA............................................. 38,548 8,043 29,393 33 76,017
Segment assets..................................... 143,697 22,430 106,831 1,427 274,385
Capital expenditures............................... 30,791 1,545 14,118 -- 46,454
</TABLE>
(a) Represents the results of the Company's travel and logistical services
business.
18
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SEGMENT INFORMATION--(CONTINUED)
YEAR ENDED SEPTEMBER 30, 1997 (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AUDIO
VISUAL MES COMMUNICATIONS TOTAL
-------- -------- -------------- --------
<S> <C> <C> <C> <C>
Revenue..................................................... $131,843 $ -- $212,524 $344,367
Gross Profit................................................ 44,959 -- 68,258 113,217
EBITDA...................................................... 23,237 -- 24,065 47,302
Segment assets.............................................. 80,386 -- 75,524 155,910
Capital expenditures........................................ 13,779 -- 3,946 17,725
</TABLE>
RECONCILIATIONS TO CONSOLIDATED STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Total external revenue for reportable segments............................... $726,004 $696,778 $342,257
Interdivision revenue for reportable segments................................ 22,988 12,640 2,110
Intradivision revenue for reportable segments................................ 662 1,916 715
Elimination of interdivision revenue......................................... (23,650) (14,556) (2,824)
-------- -------- --------
Total consolidated revenue................................................. $726,004 $696,778 $342,258
======== ======== ========
Total "EBITDA" for reportable segments....................................... $ 78,705 $ 76,017 $ 47,302
Rental equipment write-downs included in cost of rental revenue.............. (3,700) -- --
Restructuring charge......................................................... (10,769) (6,953) --
Loss on disposal of assets................................................... (16,500) -- --
Reserves/write-offs relating to accounts receivable.......................... (6,167) -- --
Costs related to the former Atlanta-based audiovisual headquarters........... (8,407) -- --
Corporate expenses........................................................... (12,592) (5,378) (1,178)
-------- -------- --------
Total consolidated operating income before depreciation and amortization
expense.................................................................... 20,570 63,686 46,124
Depreciation and amortization expense,
including depreciation in cost of revenue.................................. (43,563) (37,802) (13,082)
-------- -------- --------
Total consolidated operating income (loss)................................. $(22,993) $ 25,884 $ 33,042
======== ======== ========
</TABLE>
RECONCILIATIONS TO CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Total assets for reportable segments......................................... $237,707 $274,385 $155,910
Goodwill, net................................................................ 409,204 419,581 157,154
Corporate and other assets................................................... 12,558 3,983 813
-------- -------- --------
Total consolidated assets.................................................. $659,469 $697,949 $313,877
======== ======== ========
</TABLE>
RECONCILIATIONS TO CONSOLIDATED CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Total capital expenditures for reportable segments............................... $44,508 $46,454 $17,725
Corporate capital expenditures................................................... 902 -- --
------- ------- -------
Total consolidated capital expenditures........................................ $45,410 $46,454 $17,725
======= ======= =======
</TABLE>
19
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SEGMENT INFORMATION--(CONTINUED)
Foreign Operations
The Company's foreign operations, principally located in the United
Kingdom, had long-lived assets, excluding goodwill, of $4.0 million,
$11.4 million and $15.6 million at September 30, 1997, 1998 and 1999,
respectively. Revenues of $52.8 million, $143.9 million and $153.9 million, and
operating profits of $1.5 million, $12.1 million and $10.7 million, related to
the Company's foreign operations are included in the results of operations for
the years ended September 30, 1997, 1998 and 1999, respectively.
13. COMMITMENTS AND CONTINGENCIES
Minimum annual rentals under noncancelable leases, excluding escalations
based upon increases in real estate taxes and operating expenses, are payable as
follows, for the year ended September 30, 2000--$16.1 million; 2001--$13.8
million; 2002--$12.4 million; 2003--$11.2 million; 2004--$9.8 million;
thereafter--$19.7 million; totaling $83.0 million.
Rent expense charged to operations in fiscal 1997, fiscal 1998 and fiscal
1999 was $6.6 million, $9.4 million and $11.0 million, respectively.
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. It is anticipated that an amended consolidated
complaint will be filed by the plaintiffs in early 2000.
In addition to the litigation described above, from time to time, the
Company is a party to various in 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.
14. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid was $2.0 million, $21.9 million and $33.5 million during the
years ended September 30, 1997, 1998 and 1999, respectively. Taxes paid were
$8.1 million and $12.2 million during the years ended September 30, 1997 and
1998 respectively. No taxes were paid during the year ended September 30, 1999.
15. EARNINGS PER COMMON SHARE
Effective October 1, 1997, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 128, Earnings per Share. The standard
requires a change in the method used to compute earnings per share, a dual
presentation of basic earnings per common share and diluted earnings per common
share and the restatement of prior periods presented.
20
<PAGE>
CARIBINER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. EARNINGS PER COMMON SHARE--(CONTINUED)
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- --------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income for basic and diluted earnings per share:
Income before taxes and extraordinary charge....................... $ 30,613 $ 1,559 $(57,943)
Tax provision...................................................... (12,551) (624) (5,650)
-------- ------- --------
Net income before extraordinary charge............................. 18,062 935 (52,293)
Extraordinary charge............................................... -- (605) --
-------- ------- --------
Net income......................................................... $ 18,062 $ 330 $(52,293)
======== ======= ========
Weighted average shares of common stock outstanding:
Weighted average shares of common stock outstanding for basic
earnings per share.............................................. 21,719 23,616 23,695
Effect of stock options............................................ -- -- --
-------- ------- --------
Weighted average shares of common stock outstanding for diluted
earnings per share.............................................. 21,719 23,616 23,695
======== ======= ========
Basic and diluted earnings per share:
Net income before extraordinary charge............................. $ 0.83 $ 0.04 $ (2.21)
Extraordinary charge............................................... -- (0.03) --
-------- ------- --------
Net income......................................................... $ 0.83 $ 0.01 $ (2.21)
======== ======= ========
</TABLE>
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See "Executive Officers and Directors of the Company" set forth in Item 4A of
Part I hereto.
Based solely upon review of the Forms 3, 4 and 5 and any amendments thereto
furnished to the Company pursuant to Rule 16a-3(c) promulgated under the
Exchange Act, the Company is not aware of any failure of any officer, director
or beneficial owner of more than 10% of the Common Stock to timely file with the
Securities and Exchange Commission any Form 3, 4 or 5 in respect of the Company
during fiscal 1999, except for Richard R. Gros, who did not file a report on
Form 3 and consequently made the disclosures required on such form on a Form 5.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid or accrued by the Company for services rendered to the Company
and its subsidiaries in all capacities for the fiscal years ended September 30,
1997, 1998 and 1999, by its Chief Executive Officer and each of the Company's
other executive officers whose total salary and bonus exceeded $100,000 during
such fiscal year (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
- ----------------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Christopher A. Sinclair(1)
Chairman of the Board, President and Chief Executive
Officer of the Company
1999............................................... $326,923 $250,000 600,000 -0-
Raymond S. Ingleby(2)
Former President and Chief Executive Officer of the
Company
1999............................................... 442,307 -0- 200,000 $ 8,000(3)
1998............................................... 409,112 -0- -0- 7,500(3)
1997............................................... 399,712 -0- -0- 6,040(3)
Robert F. Burlinson(4)
Executive Vice President and Chief Financial Officer
of the Company
1999............................................... 225,000 75,000 25,000 8,000(3)
1998............................................... 63,204 -0- 50,000 25,000(5)
Richard R. Gros(6)
Executive Vice President-Human Resources of the
Company
1999............................................... 158,654 125,000 75,000 278,523(7)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION
- ----------------------------------------------------- -------- -------- ------------ ------------
Brian Shepherd
<S> <C> <C> <C> <C>
Executive Vice President of the Company and Chief
Executive Officer-Communications Division
1999............................................... $322,636 $ 30,000 50,000 -0-
1998............................................... 254,713 129,439 13,000 -0-
1997............................................... 228,827 35,330 -0- -0-
John C. Voaden(8)
Executive Vice President of the Company and Chief
Executive Officer-Hospitality Resources Division
1999............................................... 93,819 50,000 75,000 -0-
</TABLE>
(1) Mr. Sinclair commenced his employment with the Company on December 21,
1998.
(2) Mr. Ingleby served as Chief Executive Officer of the Company until
December 21, 1998.
(3) All Other Compensation consists of life insurance premiums paid by the
Company.
(4) Mr. Burlinson commenced his employment with the Company on July 15,
1998.
(5) All Other Compensation consists of payments made to Mr. Burlinson upon
the commencement of his employment with the Company.
(6) Mr. Gros commenced his employment with the Company in February, 1999.
(7) All other compensation consists of payments made by the Company in
connection with Mr. Gros's relocation to the Company's New York
headquarters.
(8) Mr. Voaden commenced his employment with the Company on May 3, 1999.
OPTION GRANTS
The following table sets forth the grants of options with respect to Common
Stock during the year ended September 30, 1999, to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- -------------------------------- ------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Christopher A. Sinclair......... 350,000(a) 17.3% $ 8.5625 12/21/08 $1,885,034 $4,777,019
250,000(a) 12.3 15.00 12/21/08 2,358,750 5,977,500
Raymond S. Ingleby.............. 200,000(b) 9.9 7.625 12/15/08 959,225 2,430,850
Robert F. Burlinson............. 25,000(b) 1.2 7.625 12/15/08 119,903 303,856
Richard R. Gros................. 75,000(c) 3.7 8.25 4/12/09 389,194 986,288
Brian Shepherd.................. 50,000(b) 2.5 7.625 12/15/08 143,884 364,628
John C. Voaden.................. 75,000(d) 3.7 6.65625 5/3/09 313,950 795,605
</TABLE>
(a) Such options vested one-third on December 21, 1999, and will vest one-third
on December 21, 2000 and one-third on December 21, 2001.
(b) Such options vested one-third on December 15, 1999, and will vest one-third
on December 15, 2000 and one-third on December 15, 2001.
(Footnotes continued on next page)
23
<PAGE>
(Footnotes continued from previous page)
(c) Such options will vest one-third on April 12, 2000, one-third on April 12,
2001 and one-third on April 12, 2002.
(d) Such options will vest one-third on May 3, 2000, one-third on May 3, 2001
and one-third on May 3, 2002.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Sinclair,
Burlinson, Shepherd, Gros and Voaden. Mr. Sinclair's employment agreement
expires on January 31, 2002. Mr. Burlinson's employment agreement expires on
July 15, 2000. Mr. Shepherd's employment agreement has been extended by the
Company until January 25, 2000. Messrs. Gros and Voaden are employed by the
Company on an "at will" basis, with Mr. Voaden being terminable by the Company
upon 30 days' notice. The employment agreements for Messrs. Sinclair and
Burlinson provide for an option to renew for an additional two years at the
discretion of the Company.
The annual base salary of Messrs. Sinclair, Burlinson, Shepherd, Gros and
Voaden currently is $500,000, $225,000, $325,000, $250,000 and $250,000,
respectively. Each executive is also entitled to fringe benefits, and to an
annual bonus based on Company performance against targets and the fulfillment of
certain management objectives established by the Board each year. Pursuant to
the terms of their respective employment agreements, the Company was required to
pay to Messrs. Sinclair, Burlinson, Gros and Voaden a minimum bonus of $250,000,
$50,000, $125,000 and $50,000, respectively, for the fiscal year ended
September 30, 1999. Under each agreement the Board is to review the employee's
salary at least annually and the salary amounts may be increased in the Board's
discretion.
Each executive may be terminated for "cause" (as defined in the
agreements), with all compensation ceasing. Under the employment agreement for
Mr. Sinclair, if he is terminated without cause or, if he resigns from his
employment for "good reason" (as defined), he is entitled to full compensation
and benefits for the remaining term of the agreement. "Good reason" includes a
change in control (as defined) of the Company. Under the employment agreement
for Mr. Gros, if he is terminated without cause or if he resigns his employment
upon a change of control of the Company or for "good reason" (as defined), he is
entitled to one year's base salary and bonus in respect of the fiscal year in
which such termination occurs (prorated by reference to the number of days he
worked in such fiscal year). In the case of Mr. Gros' employment agreement,
"good reason" means Mr. Sinclair's ceasing to be the most senior executive
officer of the Company. Under the employment agreement for Mr. Voaden, if he is
terminated without cause, he is entitled to one year's base salary and, in the
sole discretion of the Company's Board of Directors, bonus in respect of the
fiscal year in which such termination occurs.
Each employment agreement includes a two year non-competition and
non-solicitation of clients and employees provision. Mr. Sinclair's employment
agreement provides that in the event of the employee's death the employee's
beneficiary will receive a payment equal to four months' base salary. Each of
Messrs. Burlinson's and Shepherd's employment agreement provides for a payment
equal to one month's base salary in the event of death.
INCENTIVE PLANS
Description of the 1996 Stock Option Plan
The Caribiner International, Inc. 1996 Stock Option Plan, as amended (the
"1996 Option Plan"), was authorized and adopted by the stockholders and the
directors of the Company effective January 1, 1996. The purpose of the Option
Plan is to encourage and enable employees of the Company and its subsidiaries to
acquire a proprietary interest in the Company through the ownership of the
Company's Common Stock. The 1996 Option Plan is designed to provide employees
with a more direct stake in the Company's future welfare and an incentive to
remain with the Company. It is also expected that the 1996 Option Plan will
encourage qualified persons to seek employment with the Company.
24
<PAGE>
The 1996 Option Plan provides for grants of "Incentive Stock Options,"
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and "Non-qualified Stock Options." The 1996 Option Plan
currently provides that options for an aggregate of 2,500,000 shares of Common
Stock shall be available for award, subject to adjustment by the Compensation
Committee (as hereinafter defined) to prevent dilution or expansion of rights.
(As of January 10, 2000 options to purchase 1,423,609 shares of Common Stock had
been granted (net of forfeitures and cancellations) to the Company's employees
pursuant to the 1996 Option Plan.) Options may be granted to employees of the
Company or any of its subsidiaries, provided that no employee may receive
options for more than 750,000 shares of Common Stock in the aggregate in any
fiscal year. The 1996 Option Plan is administered by the Compensation Committee
of the Board of Directors (the "Compensation Committee"), which committee is
comprised of not less than two non-employee directors within the meaning of Rule
16b-3 of the Exchange Act. The 1996 Option Plan permits the Compensation
Committee to determine which employees shall receive options and the times when
options are to be granted. The Compensation Committee also determines the
purchase price of Common Stock covered by each option, the term of each option,
the number of shares of Common Stock to be covered by each option and any
performance objectives or vesting standards applicable to each option. The
Compensation Committee also designates whether the options shall be Incentive
Stock Options or Non-qualified Stock Options.
The purchase price per share under each Incentive Stock Option or
Non-qualified Stock Option is the "Market Price" (i.e., the average of the high
and low reported consolidated trading sales price for such day) of the Common
Stock on the date the option is granted, except that the exercise price for an
Incentive Stock Option granted to a 10% stockholder may not be less than 110% of
the Market Price of the Common Stock on the date of the grant. The aggregate
Market Price of the Common Stock exercisable under Incentive Stock Options held
by any optionee during any calendar year may not exceed $100,000. Incentive
Stock Options granted to employees under the 1996 Option Plan have a maximum
term of ten years. Incentive Stock Options granted to 10% stockholders have a
maximum term of five years. Options are not transferable except by will or
pursuant to the applicable laws of descent and distribution. Notwithstanding the
general restriction on transferability, in the sole discretion of the
Compensation Committee, Non-qualified Stock Options may be made transferable
subject to the requirements of Rule 16b-3.
In the event that an employee is terminated for any reason other than
death, Disability, Retirement or Cause (as such terms are defined in the 1996
Option Plan), to the extent that the employee had the right to exercise an
option, such option will be exercisable until the earlier of the expiration date
of the option, or within 30 days of the date of such termination. Options held
on the date of Disability or Retirement, whether or not exercisable on such
date, are exercisable within one year of the date of Disability or Retirement.
Options held by an employee at the date of death, whether or not exercisable on
the date of death, are exercisable by the beneficiary of the employee within one
year from the date of death. The Compensation Committee may, in its sole
discretion, cause any option to be forfeited upon an employee's termination for
Cause (as defined in the 1996 Option Plan). In the event of a Change of Control
(as such term is defined in the Plan) of the Company, all outstanding options
will vest and appropriate provisions shall be made for the protection of options
by substitution on an equitable basis of appropriate stock of the Company or
appropriate stock of the merged, consolidated or otherwise reorganized
corporation, as the case may be.
The Board is permitted to suspend, terminate, modify or amend the 1996
Option Plan, provided that any amendment that would (i) materially increase the
aggregate number of shares, (ii) materially increase benefits accruing to
employees, or (iii) materially modify the eligibility requirements for
participation shall be subject to stockholder approval, provided, however, that
stockholder approval is not required for adjustments to the 1996 Option Plan or
to the number of shares available thereunder which are deemed appropriate by the
Compensation Committee to prevent dilution or expansion of rights.
Federal Income Tax Consequences
To Optionees
For federal income tax purposes, an optionee is not subject to tax upon the
grant of an option. If the option is a Non-Qualified Stock Option, the optionee
will generally recognize ordinary income at the time of exercise of the option
in an amount equal to the difference between the fair market value of the shares
received and the
25
<PAGE>
exercise price. Such optionee's basis in any shares acquired upon such exercise
will equal their fair market value on the exercise date. A subsequent sale of
shares will result in a capital gain or loss equal to the difference between the
amount realized and such basis. If the option is an Incentive Stock Option, the
optionee will generally not recognize income until the sale of the shares. If
the shares are held for the requisite holding periods, all gain on the sale will
be treated as long-term capital gain. If the requisite holding periods are not
satisfied (a "disqualifying disposition"), then the portion of the gain equal to
the difference between the market value of the shares at the time of exercise
and the exercise price will generally be treated as ordinary income.
To the Company
The Company will generally be entitled to a deduction for federal income
tax purposes at the same time and in the same amount as an optionee is required
to recognize ordinary income as described above. To the extent an optionee
realizes capital gain as described above, the Company will not be entitled to
any tax deduction for federal income tax purposes. Therefore, the Company will
not be entitled to any tax deduction in connection with Incentive Stock Options
with respect to which there is no disqualifying disposition.
The Company believes that compensation attributable to options granted
under the 1996 Option Plan at a price at least equal to the fair market value of
the underlying option shares at the date of grant should be treated as
performance-based compensation and will not be subject to the limitations
contained in Section 162(m) of the Code on the deductibility of non-performance
related compensation paid to certain corporate executives in excess of $1
million in any taxable year. The 1996 Option Plan is not qualified under Section
401(a) of the Code.
Options Granted to Christopher A. Sinclair
In connection with the Employment Agreement, dated as of December 21, 1998,
between Christopher A. Sinclair and the Company, the Board of Directors approved
the grant to Mr. Sinclair of options to purchase an aggregate of 600,000 shares
of Common Stock (the "Sinclair Options"). Such grant was approved by the
stockholders of the Company at the Annual Meeting of Stockholders of the Company
held on March 16, 1999. Of the Sinclair Options, (i) 350,000 options have an
exercise price per share of $8.5625, which was the average of the high and low
reported sale prices of the Common Stock on December 21, 1998 ("Option Grant
A"), and (ii) 250,000 options have an exercise price per share of $15.00
("Option Grant B").
The Board of Directors granted the Sinclair Options to Mr. Sinclair to
induce him to join the Company as its President and Chief Executive Officer and
to provide additional motivation and incentive for Mr. Sinclair in the
performance of his duties on behalf of the Company beyond the cash compensation
paid pursuant to the terms of his employment agreement with the Company. (See
"Employment Agreements" for a description of the terms of Mr. Sinclair's
employment agreement with the Company.) Because the Sinclair Option Agreements
contain certain terms and conditions relating to vesting and exercise upon
resignation or termination from employment with the Company that are different
from their analogous provisions contained in the 1996 Option Plan, it would not
have been possible to grant the Sinclair Optoins under the 1996 Option Plan
without having to propose amendments to the 1996 Option Plan.
Except for their respective exercise prices, the terms and conditions of
Option Grant A and Option Grant B, which are summarized below, are identical in
all respects. In addition, although the Sinclair Options were not granted under
the 1996 Option Plan, except for certain terms relating to the vesting and
exercise of options upon resignation or termination from employment, the terms
and conditions of the stock options granted under the 1996 Option Plan have been
substantially incorporated into the terms and conditions of the Sinclair
Options.
The terms of the stock option agreements (the "Sinclair Option Agreements")
entered into in respect of the Sinclair Options provide that the Sinclair
Options are administered by the Compensation Committee, which is comprised of
not less than two non-employee directors within the meaning of Rule 16b-3 of the
Exchange Act. The terms of the Sinclair Option Agreements also provide that the
Sinclair Options are non-qualified stock options ("NQSOs") that become
exercisable ratably over a period of three years, with the first installment
exercisable beginning on December 21, 1999. Similar to stock options granted
under the 1996 Option Plan, the number of Sinclair Options is subject to
adjustment to prevent dilution or expansion of rights. The Sinclair Options are
not transferable except by will or pursuant to the applicable laws of descent
and distribution.
26
<PAGE>
Subject to the provisions summarized below, the Sinclair Options will
expire on December 21, 2008. In the event that Mr. Sinclair is terminated for
any reason other than death, Disability, Retirement, termination with or without
Cause, or resignation for Good Reason (each as defined in Sinclair Option
Agreements), to the extent that he had the right to exercise any portion of the
Sinclair Options, such options will be exercisable until the earlier of the
expiration date of the Sinclair Options or within 30 days of the date of
Mr. Sinclair's termination. Options held by Mr. Sinclair on the date of
Disability or Retirement, whether or not exercisable on such date, are
exercisable within one year of the date of Disability or Retirement. Options
held by Mr. Sinclair at the date of death, whether or not exercisable on the
date of death, are exercisable by Mr. Sinclair's beneficiary within one year
from the date of death. In the event Mr. Sinclair is terminated for Cause, that
portion of the Sinclair Options that are exercisable as of the date of such
termination may be exercised until the earlier of the expiration date of the
Sinclair Options or the date that is 60 days after such termination. In the
event Mr. Sinclair is terminated without Cause or he resigns for Good Reason,
any unexercised portion of the Sinclair Options will become fully exercisable
until the earlier of the expiration date of the Sinclair Options or the second
anniversary of such termination or resignation, as the case may be.
In the event of a Change of Control (as such term is defined in the
Sinclair Options Agreements) of the Company, all outstanding Sinclair Options
will vest and appropriate provisions will be made for the protection of the
Sinclair Options by substitution on an equitable basis of appropriate stock of
the Company or appropriate stock of the merged, consolidated, or otherwise
reorganized corporation, as the case may be.
Federal Income Tax Consequences
To Mr. Sinclair
For federal income tax purposes, Mr. Sinclair was not subject to tax upon
the grant of the Sinclair Options. Because of the Sinclair Options are NQSOs, he
will generally recognize ordinary income at the time of exercise of the option
in the amount equal to the difference between the fair market value of the share
received and the exercise price. Mr. Sinclair's basis in any shares acquired
upon exercise will equal to their fair market value on the exercise date. A
subsequent sale of shares will result in a capital gain or loss equal to the
difference between the amount realized and such basis.
To the Company
The Company believes that because the grant of the Sinclair Options has
been ratified and approved by the stockholders of the Company, the compensation
attributable to the Sinclair Options should be treated as performance-based
compensation and will not be subject to the deduction limitations contained in
Section 162(m) of the Code. The Sinclair Options are not qualified under Section
401(a) of the Code. Accordingly, the Company should be entitled to a full
deduction in respect of Mr. Sinclair's compensation in the year of such options'
exercise (including compensation earned by Mr. Sinclair as a result of the
exercise of all or part of the Sinclair Options). To the extent that
Mr. Sinclair realizes capital gain as described above, the Company will not be
entitled to any tax deduction for federal income tax purposes.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors has an audit committee and a compensation committee.
The Board of Directors does not presently have a nominating committee or other
committee performing a similar function.
At present, the Board of Directors of the Company is composed of seven
directors. Pursuant to the terms of a stockholders agreement, dated as of
March 15, 1996 (the "Stockholders Agreement"), subject to certain conditions,
Warburg, Pincus Investors, L.P. ("Warburg") currently has the right to designate
up to two persons for nomination to the Board. See "Certain Relationships and
Transactions with Related Persons--Stockholders Agreement." The designees of
Warburg are Messrs. Lapidus and Libowitz. In addition, Mr. Cook, a director of
the Company since 1992, is a Senior Adviser to EMW LLC and a former Managing
Director of EMW LLC. The Board of Directors held eight meetings during fiscal
1999.
The Compensation Committee of the Board of Directors of the Company
determines the salaries and bonuses of the Company's executive officers and
administers the Company's 1996 Option Plan. During the
27
<PAGE>
Company's last completed fiscal year Errol M. Cook served as Chairman of the
Compensation Committee, and each of Bryan D. Langton, David E. Libowitz and
C. Anthony Wainwright served as members of the Compensation Committee. The
Compensation Committee held four meetings during fiscal 1999.
The Audit Committee of the Board of Directors recommends the appointment of
auditors and oversees the accounting and audit functions of the Company. During
the Company's last completed fiscal year Bryan D. Langton served as Chairman of
the Audit Committee, and C. Anthony Wainwright served as a member of the Audit
Committee. The Audit Committee held four meetings during fiscal 1999.
None of the members of the Board of Directors (other than Mr. Ingleby)
failed during fiscal 1999 to attend at least 75 percent of the aggregate of:
(1) the total number of meetings of the Board of Directors held during the
period for which he was a director; and (2) the total number of meetings held by
all committees of the Board of Directors on which he served during the periods
that he served.
Compensation of Directors
Directors who are not employees or officers of the Company receive cash
compensation of $12,500 per annum payable quarterly in arrears. In addition,
non-employee directors receive $1,000 for each meeting of the Board or meeting
of a committee of the Board that they attend in person and $750 for each meeting
of the Board or meeting of a committee of the Board that they attend
telephonically. Messrs. Lapidus and Libowitz have waived their right to receive
any compensation. Directors are also reimbursed for certain expenses in
connection with attendance at Board and committee meetings. Other than with
respect to reimbursement of expenses, directors who are employees or officers of
the Company do not receive additional compensation for services as a director.
Effective March 11, 1996, the Company adopted the Non-Employee Directors'
Stock Plan, pursuant to which the Company awards directors (other than directors
affiliated with Warburg, who have waived their right to receive any
compensation, or directors who are employees of the Company) upon their becoming
a director and on each anniversary thereof shares of Common Stock having a
market value of $12,500. The Non-Employee Directors' Stock Plan provides that
the maximum number of shares of Common Stock available for issue under the plan
is 30,000 shares (of which 6,005 shares have been issued), subject to adjustment
to prevent dilution or expansion of rights.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
28
<PAGE>
SECURITIES BENEFICIALLY OWNED BY
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of January 10, 1999 with respect to (i) each
person known by the Company to be the beneficial owner of more than 5% of the
Common Stock, (ii) each director of the Company, (iii) each of the executive
officers of the Company and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP(1)
--------------------------------
NUMBER OF
SHARES OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- -------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
5% HOLDERS
Warburg, Pincus Investors, L.P.(2)........................................ 6,664,236(3) 28.1%
466 Lexington Avenue
10th Floor
New York, New York 10017
State of Wisconsin Investment Board....................................... 3,319,500(4) 14.0
P.O. Box 7842
Madison, Wisconsin 53707
Lord, Abbett & Co.
767 Fifth Avenue
New York, New York 10153................................................ 2,459,052(5) 10.4
Directors and Executive Officers
Raymond S. Ingleby........................................................ 1,724,549(3)(6) 7.3
c/o Caribiner International, Inc.
16 West 61st Street
New York, New York 10023
Christopher A. Sinclair................................................... 205,501(7) *
Robert F. Burlinson....................................................... 25,001(8) *
Richard R. Gros........................................................... -0- *
Brian Shepherd............................................................ 54,223(9) *
John C. Voaden............................................................ -0- *
Errol M. Cook(2).......................................................... 1,625 *
Bryan D. Langton.......................................................... 28,354(10) *
Sidney Lapidus(2)......................................................... 6,677,236(3)(11) 28.2
David E. Libowitz(2)...................................................... 6,664,236(3) 28.1
C. Anthony Wainwright..................................................... 2,651 *
All executive officers and directors as a group (11 persons).............. 8,324,140 34.6
</TABLE>
- ------------------
* Less than 1%
(1) Except where otherwise indicated, the Company believes that all parties
listed in the table, based on information provided by such persons, have
sole voting and dispositive power over the securities beneficially owned by
them, subject to community property laws, where applicable. For purposes of
this table, a person or group of persons is deemed to be the "beneficial
owner" of any shares that such person or group of persons has the right to
acquire within 60 days. For purposes of computing the percentage of
outstanding shares held by each person or group of persons named above on a
given date, any security that such person or group of persons has the right
to acquire within 60 days is deemed to be outstanding, but is not deemed to
be outstanding for the purpose of computing the percentage ownership of any
other person.
(2) The sole general partner of Warburg, Pincus Investors, L.P. ("Warburg") is
Warburg Pincus & Co., a New York general partnership ("WP"). EMW LLC
manages Warburg. The members of EMW LLC are substantially the same as the
partners of WP. Lionel I. Pincus is the managing partner of WP and the
(Footnotes continued on next page)
29
<PAGE>
(Footnotes continued from previous page)
managing member of EMW LLC and may be deemed to control each of WP and EMW
LLC. Messrs. Sidney Lapidus and David E. Libowitz, each a director of the
Company, are Managing Directors and members of EMW LLC, and general
partners of WP. As such, Messrs. Lapidus and Libowitz may be deemed to have
an indirect pecuniary interest (within the meaning of Rule 16a-1 under the
Exchange Act) in an indeterminate portion of the shares of Common Stock
beneficially owned by Warburg. Mr. Errol M. Cook, a director of the
Company, is a Senior Adviser to EMW LLC. Each of Messrs. Cook, Lapidus and
Libowitz disclaims "beneficial ownership" of the Common Stock owned by
Warburg within the meaning of Rule 13d-3 under the Exchange Act.
[
(3) Includes 400,000 shares of Common Stock pledged to Warburg by Raymond S.
Ingleby in connection with loan made by Warburg to Mr. Ingleby.
Mr. Ingleby has sole voting power in respect of such pledged shares.
(4) As disclosed in Amendment No. 1, dated January 10, 2000, to Schedule 13G.
(5) As disclosed in Schedule 13G, dated October 7, 1999.
(6) Includes (i) 85,000 shares held of record by the Raymond and Leigh Ingleby
Foundation, Inc. and (ii) presently exercisable options to purchase 66,667
shares of Common Stock at $7.625 per share, which expire in December, 2008.
(7) Includes presently exercisable options to purchase 116,667 shares of Common
Stock at $8.5625 per share and 83,334 shares of Common Stock at $15.00 per
share, which expire in December, 2008.
(8) Includes presently exercisable options to purchase (i) 16,667 shares of
Common Stock at $14.53125 per share, which expire in July, 2008, and
(ii) 8,334 shares of Common Stock, at $7.625 per share which expire in
December, 2008.
(9) Includes presently exercisable options to purchase (i) 6,000 shares of
Common Stock at $14.4375 per share, which expire in July, 2006, (ii) 4,334
shares of Common Stock at $20.625 per share, which expire in May, 2008, and
(iii) 16,667 shares of Common Stock, which expire in December, 2008.
(10) Includes presently exercisable options to purchase 18,000 shares of Common
Stock at $21.3125 per share, which expire in November, 2006.
(11) Includes 13,000 shares owned directly by Mr. Lapidus.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RELATED PERSONS
STOCKHOLDERS AGREEMENT
Upon completion of the initial public offering of the Company's Common
Stock in March, 1996, the Company entered into the Stockholders Agreement with
Warburg and Raymond S. Ingleby. The Stockholders Agreement contains, among other
things, various terms regarding nominations for the Company's Board of Directors
and certain registration rights granted by the Company. Pursuant to the terms of
the Stockholders Agreement, for so long as Warburg beneficially owns at least
20% or 10% of the outstanding shares of Common Stock, it will have the right to
designate two nominees or one nominee, respectively, for director. The
Stockholders Agreement also provides that for so long as Mr. Ingleby shall hold
office as the Chairman and Chief Executive Officer of the Company, he will have
the right to be designated as a nominee for director. In December, 1998,
Mr. Ingleby resigned from the position of Chief Executive Officer of the
Company. Accordingly, notwithstanding his nomination as a director, he no longer
has the automatic right to such nomination.
Additionally, the Stockholders Agreement provides that Warburg is entitled
to three "demand" registrations, which may be exercised at any time. The
Stockholders Agreement also provides that Raymond S. Ingleby will be entitled to
one "demand" registration with respect to not less than 50% of the number of
shares of Common Stock that he beneficially owned immediately prior to the
completion of the Initial Public Offering (i.e., 1,396,356 shares), provided
that Mr. Ingleby may not exercise such "demand" until the earliest of (i) six
months after the effective date of a registration statement filed by the Company
in respect of shares of Common Stock owned by Warburg, (ii) the distribution by
Warburg of shares of Common Stock to its partners and
30
<PAGE>
(iii) March 15, 2001. In July, 1997, Warburg made a distribution of shares of
Common Stock to its partners, thereby triggering Mr. Ingleby's right to exercise
such "demand." In addition, in the event Mr. Ingleby is terminated from his
employment by the Company and he has not exercised his demand registration, he
will be entitled to one "demand" registration six months after the date of his
termination to the extent he would be required by law to effect such
registration in order to sell his shares. Mr. Ingleby is also entitled to
"piggyback" registration rights in the event that Warburg exercises a "demand"
registration. In addition, the Stockholders Agreement grants to Mr. Ingleby
certain co-sale rights in the event that Warburg sells, transfers or otherwise
disposes of any shares of its Common Stock.
LOANS TO BRIAN SHEPHERD
During fiscal 1998 the Company made loans aggregating approximately
$255,000 to Brian Shepherd, Executive Vice President of the Company and Chief
Executive Officer of the Company's Communications division. The loans were made
in part in connection with the relocation of Mr. Shepherd and for other personal
purposes. The loans bear an interest rate of 8% per annum and mature in
approximately equal annual installments over a period of three years, beginning
in August, 1999. Mr. Shepherd repaid the first installment of such loan when
due.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
(1) The response to this portion of Item 14 is set forth in Item 8 of
Part II hereof.
(2) Financial Statement Schedules.
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
(3) Exhibits
See accompanying Index to Exhibits. The Company will furnish to any
stockholder, upon written request, any exhibit listed in the
accompanying Index to Exhibits upon payment by such stockholder of the
Company's reasonable expenses in furnishing any such exhibit.
(b) Reports on Form 8-K
None.
31
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON
JANUARY 25, 2000.
CARIBINER INTERNATIONAL, INC.
(Registrant)
By: /s/ ROBERT F. BURLINSON
----------------------------------
Robert F. Burlinson
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------------------- -----------------
<S> <C> <C>
/s/ CHRISTOPHER A. SINCLAIR Chairman of the Board, President and Chief January 25, 2000
- ------------------------------------------ Executive Officer (Principal Executive Officer)
Christopher A. Sinclair
/s/ ROBERT F. BURLINSON Executive Vice President and Chief Financial January 25, 2000
- ------------------------------------------ Officer (Principal Financial and Accounting
Robert F. Burlinson Officer)
/s/ RAYMOND S. INGLEBY Director January 25, 2000
- ------------------------------------------
Raymond S. Ingleby
/s/ ERROL M. COOK Director January 25, 2000
- ------------------------------------------
Errol M. Cook
/s/ BRYAN D. LANGTON Director January 25, 2000
- ------------------------------------------
Bryan D. Langton
/s/ SIDNEY LAPIDUS Director January 25, 2000
- ------------------------------------------
Sidney Lapidus
/s/ DAVID E. LIBOWITZ Director January 25, 2000
- ------------------------------------------
David E. Libowitz
/s/ C. ANTHONY WAINWRIGHT Director January 25, 2000
- ------------------------------------------
C. Anthony Wainwright
</TABLE>
32
<PAGE>
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this report
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ------------------------------------------------------------------------------------------------
<S> <C>
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).
4 -- Specimen of Certificate of Common Stock of the Company (filed as Exhibit 4 to the Company's
Registration Statement on Form S-1 (Registration No. 33-80481) and incorporated herein by
reference).
+10.1 -- 1996 Stock Option Plan of the Company, as amended (filed as exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999 and incorporated
herein by reference).
+10.2 -- Form of Stock Option Agreement in connection with 1996 Stock Option Plan of the Company (filed
as Exhibit 10.2 to the Company's Annual Report on Fork 10-K for the fiscal year ended September
30, 1996 and incorporated herein by reference).
+10.3 -- Non-Employee Directors' Stock Plan of the Registrant (filed as an exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 33-80481) and incorporated herein by
reference).
+10.4 -- Employment Agreement, dated as of October 1, 1995 (the "Ingleby Employment Agreement"), by and
between the Company and Raymond S. Ingleby (filed as Exhibit 10.5 to the Company's Registration
Statement on Form S-1 (Registration No. 33-80481) and incorporated herein by reference).
+10.5 -- Amendment No.1, dated as of October 1, 1998, to the Ingleby Employment Agreement (filed as Exhibit
10.5 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 -- Amendment No. 2, dated as of May 13, 1999, to the Ingleby Employment Agreement (filed as Exhibit
10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1999 and
incorporated herein by reference).
+10.7 -- Employment Agreement, dated as of December 21, 1998, by and between the Company and Christopher
A. Sinclair (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1998 and incorporated herein by reference).
+10.8(a) -- Stock Option Agreement, dated as of December 21, 1998, between the Company and Christopher A.
Sinclair in respect of the grant to Mr. Sinclair of options to purchase an aggregate of 350,000
shares of common stock of the Company (filed as Exhibit 10.2(a) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 1998 and incorporated herein by
reference).
+10.8(b) -- Stock Option Agreement, dated as of December 21, 1998, between the Company and Christopher A.
Sinclair in respect of the grant to Mr. Sinclair of options to purchase an aggregate of 250,000
shares of common stock of the Company (filed as Exhibit 10.2(a) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 1998 and incorporated herein by
reference).
+10.9 -- Employment Agreement, dated as of July 25, 1995, by and between Caribiner, Inc. and Brian
Shepherd (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996 and incorporated herein by reference).
+10.10 -- Employment Agreement, dated June 9, 1998, by and between the Company and Robert F. Burlinson
(filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1998 and incorporated herein by reference).
+10.11 -- Letter Agreement, dated April 1, 1999, by and between the Company and Richard R. Gros (filed as
Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1999 and incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ------------------------------------------------------------------------------------------------
<S> <C>
+10.12 -- Letter Agreement, dated April 29, 1999, by and between the Company and John C. Voaden (filed as Exhibit
10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1999 and
incorporated herein by reference).
10.13 -- 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).
10.14 -- 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).
10.15 -- 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).
10.16 -- 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).
10.17 -- 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).
10.18 -- Stockholders Agreement, dated as of March 15, 1996, among the Company, Warburg, Pincus
Investors, L.P. and Raymond S. Ingleby (filed as an exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 33-80481) and incorporated herein by reference).
21 -- Subsidiaries of the Company (filed as Exhibit 21 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1999 and incorporated herein by reference).
23 -- Consent of Ernst & Young LLP.
27 -- Financial Data Schedule (filed as Exhibit 27 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1999 and incorporated herein by reference).
</TABLE>
- ------------------
+ Management contracts or compensatory plans or arrangements required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(a) (3) of the
requirements to Form 10-K.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-37923 and 333-11264) pertaining to the 1996 Stock Option Plan
and the Registration Statement (Form S-8 No. 333-90757) pertaining to the
Sinclair Option Agreements of Caribiner International, Inc. of our report dated
December 28, 1999, with respect to the consolidated financial statements of
Caribiner International, Inc. included in Amendment No. 1 to the Annual Report
(Form 10-K/A) for the year ended September 30, 1999.
/s/ Ernst & Young LLP
New York, NY
January 25, 2000
