<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HEALTHWORLD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7311 13-3922288
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
100 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10013
(212) 966-7640
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN GIRGENTI
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
HEALTHWORLD CORPORATION
100 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10013
(212) 966-7640
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
HOWARD S. JACOBS, ESQ. EDWARD D. SOPHER, ESQ.
ROSENMAN & COLIN LLP STEPHEN E. OLDER, ESQ.
575 MADISON AVENUE AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
NEW YORK, NEW YORK 10022-2585 590 MADISON AVENUE
TEL: (212) 940-8800 NEW YORK, NEW YORK 10022-4616
FAX: (212) 940-8776 TEL: (212) 872-1000
FAX: (212) 872-1002
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value(2)...... 2,415,000 $9.50 $22,942,500 $6,952.27
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(2) Includes 315,000 shares which may be purchased by the Underwriters to cover
over-allotments, if any.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE>
HEALTHWORLD CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND
HEADING IN FORM S-1 LOCATION IN PROSPECTUS
------------------------------------------------------ ------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Forepart; Outside Front Cover Page; Inside Cover Page;
Cross Reference Sheet
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Additional Information;
Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Outside Front Cover Page; Prospectus Summary; Risk
Factors
4. Use of Proceeds....................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price....................... Outside Front Cover Page; Underwriting
6. Dilution.............................................. Risk Factors; Dilution
7. Selling Security Holders.............................. *
8. Plan of Distribution.................................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered............ Description of Capital Stock
10. Interests of Named Experts and Counsel................ Legal Matters; Experts
11. Information with Respect to the Registrant............ Outside Front Cover Page; Prospectus Summary; The
Consolidation; Risk Factors; Dividend Policy;
Dilution; Capitalization; Selected Pro Forma
Combined Financial Information; Selected Financial
Information of GHB&M and Milton; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management; Certain
Relationships and Related Transactions; Principal
Stockholders; Description of Capital Stock; Shares
Eligible for Future Sale; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>
- ------------------
* Omitted because answer is not applicable or is negative.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
AUGUST 29, 1997
2,100,000 SHARES
[LOGO]
HEALTHWORLD CORPORATION
COMMON STOCK
------------------------------
Healthworld Corporation (the 'Company') is hereby offering 2,100,000 shares
of its common stock, $.01 par value per share (the 'Common Stock'). It is
currently estimated that the initial public offering price for the Common Stock
will be between $8.00 and $9.50 per share. Prior to the Offering, there has been
no public market for the Common Stock of the Company. See 'Underwriting' for a
discussion of the factors considered in determining the initial public offering
price of the Common Stock. The Company has applied for quotation of the Common
Stock on The Nasdaq National Market under the symbol 'HWLD.'
------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE 'RISK FACTORS' BEGINNING ON PAGE 6.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share....................... $ $ $
Total(3)........................ $ $ $
</TABLE>
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(1) Excludes a non-accountable expense allowance payable by the Company to
Unterberg Harris and Pennsylvania Merchant Group Ltd, the representatives
(the 'Representatives') of the several underwriters (the 'Underwriters'),
equal to 1% of the gross proceeds of the Offering. The Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
'Underwriting.'
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $ .
(3) The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to 315,000 additional
shares of Common Stock solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See 'Underwriting.'
The shares of Common Stock are offered by the Underwriters, subject to
receipt and acceptance of such shares by them. The Underwriters reserve the
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery in New York, New York, on or about ,
1997.
------------------------------
UNTERBERG HARRIS PENNSYLVANIA MERCHANT GROUP LTD
, 1997
<PAGE>
[Three page fold out containing the Healthworld name and logo, various
pictures of services provided by the Company and advertising campaigns and
campaign materials prepared by the Company, and the following textual
statements: 'The Company provides a wide array of marketing and communications
services to its clients, ranging from the execution of a discrete marketing
project, such as designing product packaging, to taking responsibility for the
overall marketing message, which enables the Company to incorporate a wide
variety of its services into one integrated marketing campaign' and 'Healthworld
B.V. is a worldwide network of licensed independent marketing and communications
agencies through which the Company utilizes the creative talents of proven
agencies that have expertise and knowledge of particular countries or geographic
regions to develop consistent integrated multinational campaigns for its
clients.']
<PAGE>
[CHART DEPICTING FUNCTIONAL STRUCTURE OF THE COMPANY]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
'Healthworld' and the Healthworld logo are registered trademarks for which
the Company holds a license. Trade names and trademarks of other companies
appearing in this Prospectus are the property of their respective holders.
2
<PAGE>
PROSPECTUS SUMMARY
On the effective date of the Offering made by this Prospectus, Healthworld
Corporation will acquire (the 'Consolidation'), in exchange for shares of its
Common Stock, all of the issued and outstanding common stock of each of
Girgenti, Hughes, Butler & McDowell, Inc. and its affiliated entities ('GHB&M')
and Milton Marketing Group Limited and its subsidiaries ('Milton'). Unless
otherwise indicated, all references herein to the 'Company' include GHB&M and
Milton and give effect to the Consolidation and all references herein to
'Healthworld' refer to Healthworld Corporation prior to the consummation of the
Consolidation. The following summary does not purport to be complete and is
qualified in its entirety by the more detailed information and financial
statements and the related notes appearing elsewhere in this Prospectus. Unless
otherwise indicated, all share, per share and financial information set forth
herein assume no exercise of the Underwriters' over-allotment option. All
statistical and financial information presented in this Prospectus with respect
to Milton has been converted into U.S. Dollars using an exchange rate as of June
30, 1997 of $1.67=pounds 1.00, except as otherwise provided herein and except
for such information contained in or derived from Milton's financial statements
included elsewhere herein. All references herein to industry financial and
statistical information are based on trade articles and industry reports that
the Company believes to be reliable, although there can be no assurance to that
effect.
THE COMPANY
The Company is a leading international marketing and communications
services company specializing in health care. The Company provides many of the
world's largest pharmaceutical and other health care companies with a
comprehensive range of integrated strategic marketing services designed to
accelerate the market acceptance of new products and to sustain marketability
throughout their life-cycles. The Company's communications services include
advertising and promotion, publishing, medical education, public relations,
consulting, interactive multimedia, database marketing and marketing research
services. The Company also offers contract sales services which are delivered
through dedicated and syndicated sales teams. The Company offers its clients
global reach and expertise through its operations in the United States and the
United Kingdom, and through Healthworld B.V., a world-wide network of licensed
independent communications agencies located in 12 other countries.
The Company believes that its understanding of the scientific and medical
issues relating to its clients' products and its in-depth knowledge of the
health care industry and regulatory environment are competitive advantages and
are critical for developing the most effective marketing and communications
campaigns and strategies. The Company relies on its creative talent and utilizes
new media and technologies to continually develop better ways to effectively
promote its clients' products. GHB&M, which has consistently been recognized in
the industry as one of the top health care communications agencies, was named
'Agency of the Year' in 1993 and 1996 by Med Ad News, a leading medical
advertising and communications trade publication, and was a finalist for such
award in 1992 and 1994. GHB&M was also named 'Most Creative Agency' by Med Ad
News in 1995. The Company was one of the first companies to develop a
direct-to-consumer marketing ('DTC') campaign for a prescription drug, and
believes it is an industry leader in the development of DTC campaigns, as well
as marketing strategies and campaigns for 'switching' a drug from prescription
to over-the-counter status.
Pharmaceutical and other health care companies have been increasing their
spending on marketing and communications services and, in response to
cost-containment pressures, are increasingly outsourcing certain labor
intensive, high cost services, including marketing and sales and research
functions. Worldwide spending by pharmaceutical and biotechnology companies on
promotional marketing and contract sales is estimated to reach $5.9 billion in
1997. The Company believes that these spending levels will continue to increase
as companies seek to recoup the high costs of product development, maximize
sales, develop brand loyalty and achieve a high market share in the shortest
possible time period due to a limited patent life on new products. In addition,
cost constraints imposed as a result of health care reform and the emergence of
managed care have forced pharmaceutical and other health care companies to spend
more on marketing and communications services to educate the market as to
cost-effectiveness as well as the safety and efficacy of their products.
3
<PAGE>
Furthermore, the use of DTC to promote prescription drugs has grown rapidly
and is expected to continue to grow in the future. In 1996, the first year in
which more money was spent on DTC than on advertising to physicians,
pharmaceutical companies spent approximately $600 million on DTC, which is twice
as much as was spent in 1995 and almost 10 times more than in 1991. Figures for
the first few months of 1997 suggest that the total may double again and exceed
$1.0 billion for the year.
The Company's contract sales teams form a network of trained professionals
that provides clients with substantial flexibility in selecting the extent and
costs of promoting products as well as such clients' level of involvement in
managing the sales effort. The Company believes that the speed of recruitment,
quality of training and management of sales representatives, supported by
advanced information technology, are key to providing clients with a sales force
tailored to meet their geographic and scheduling needs. Currently, the Company's
contract sales organization operates only in the United Kingdom and provides its
services primarily to consumer products companies, utilities and other
non-health care related companies. In the first quarter of 1997, the Company
began providing contract sales services in the United Kingdom to pharmaceutical
and other health care companies. The Company intends to expand its contract
sales organization into the United States. The Company believes that such
expansion will enable it to complement its existing communications services with
a flexible sales force designed to augment its clients' sales activities.
The Company's strategy is to capitalize on continued growth in marketing
and communications spending by pharmaceutical and other health care companies by
(i) maintaining and enhancing its creative excellence and technical expertise,
(ii) offering its clients a comprehensive range of integrated services, (iii)
continuing to specialize in health care, (iv) increasing its contract sales
services, and (v) further expanding globally. The Company intends to implement
its strategy through internal development and potential acquisitions.
The Company's principal executive offices are located at 100 Avenue of the
Americas, New York, New York 10013. The Company's telephone number is (212)
966-7640.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,100,000 shares
Common Stock to be outstanding immediately
after the Offering......................... 7,100,000 shares(1)(2)
Use of Proceeds.............................. For working capital and general corporate purposes, including
potential acquisitions. See 'Use of Proceeds.'
Nasdaq National Market Symbol................ HWLD
</TABLE>
- ------------------
(1) Includes 5,000,000 shares of Common Stock to be issued in connection with
the Consolidation.
(2) Excludes 710,000 shares of Common Stock reserved for issuance upon the
exercise of stock options which may be granted under the Company's 1997
Stock Option Plan (the 'Stock Option Plan'), none of which have been granted
to date. As of the effective date of the Offering, the Company will grant
options under the Stock Option Plan to purchase up to an aggregate of
shares of Common Stock, at an exercise price per share equal to the initial
public offering price. See 'Management--Stock Option Plan.'
4
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
The following summary pro forma combined financial information gives effect
to the Consolidation, among other events, as more fully described in 'The
Consolidation,' and should be read in conjunction with the Company's unaudited
Pro Forma Combining Financial Statements and notes thereto, the Combined
Financial Statements of GHB&M and notes thereto, the Consolidated Financial
Statements of Milton and notes thereto and 'Management's Discussion and Analysis
of Financial Condition and Results of Operations' contained elsewhere in this
Prospectus. The Consolidation will be accounted for as a 'pooling of interests.'
Such financial data covers periods when GHB&M and Milton were not under common
control or management and may not be indicative of results that would have been
reported had the Consolidation and the other pro forma adjustments occurred nor
may it be indicative of the Company's future financial position or operating
results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................................... $13,081 $16,767 $24,209 $11,322 $14,783
Operating expenses:
Salaries and related costs............................... 7,890 9,422 15,392 7,525 10,400
Other operating expenses................................. 3,727 4,904 5,615 2,797 3,000
------- ------- ------- ------- -------
11,617 14,326 21,007 10,322 13,400
------- ------- ------- ------- -------
Income from operations..................................... 1,464 2,441 3,202 1,000 1,383
Income before provision for income taxes................... 1,450 2,439 3,133 1,048 1,404
Net income(1).............................................. $ 837 $ 1,401 $ 1,828 $ 623 $ 820
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings per share......................................... $ 0.17 $ 0.28 $ 0.37 $ 0.12 $ 0.16
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Shares used in computing earnings per share................ 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
PRO FORMA
PRO FORMA AS ADJUSTED(2)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 48 $ 15,953
Total assets.......................................................................... 19,916 35,821
Long-term debt, including current portion............................................. 1,324 1,324
Stockholders' equity.................................................................. 5,557 21,462
</TABLE>
- ------------------
(1) Immediately upon consummation of the Consolidation, the status of the
companies comprising GHB&M as 'S Corporations' under Subchapter S of the
Internal Revenue Code of 1986, as amended (the 'Code'), will terminate. The
pro forma provision for income taxes reflects a provision for federal income
taxes as if each of such entities were a 'C Corporation' rather than an 'S
Corporation' for such periods. See 'The Consolidation.'
(2) Gives effect to the Offering at an assumed initial public offering price of
$8.75 per share and the application of the estimated net proceeds therefrom.
See 'Use of Proceeds.'
5
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk and immediate substantial dilution. In addition to the other information
contained in this Prospectus, prospective investors should carefully consider
the following considerations and risks in evaluating an investment in the
Company.
DEPENDENCE ON CERTAIN KEY CLIENTS. The Company's revenues are highly
dependent upon the advertising, sales and marketing expenditures of
pharmaceutical and other health care companies. Generally, clients are not bound
to an individual marketing and communications company, and any client of the
Company could at any time in the future and for any reason, including a
prolonged economic recession or regulatory problems with respect to a product,
reduce its marketing budget, transfer its business to another agency or take
in-house all or part of the business performed by the Company. The Company
develops long-term relationships with a select group of clients, and a large
portion of its revenues are concentrated among a small number of major clients
which may engage the Company to provide services only for specific products.
However, the Company generally is retained to provide marketing and
communications services with respect to multiple products from each of such
clients, and the loss of business with respect to any one product from any of
such clients would not necessarily affect the Company's business with respect to
other products for which the Company provides its services.
For the year ended December 31, 1996 and the six months ended June 30,
1997, the five largest clients of the Company represented an aggregate of 50%
and 46%, respectively, of the Company's pro forma combined revenues. For the
year ended December 31, 1996, Wyeth-Ayerst Laboratories, Ortho/McNeil
Pharmaceuticals (a division of Johnson & Johnson) and Kraft Jacobs Suchard
Limited accounted for an aggregate of approximately 25%, 9% and 6%,
respectively, of the Company's pro forma combined revenues. For the six months
ended June 30, 1997, Wyeth-Ayerst Laboratories, Ionica plc and Ortho/McNeil
Pharmaceuticals accounted for approximately 18%, 9% and 7%, respectively, of the
Company's pro forma combined revenues. The loss of any of these clients (none of
which has engaged the Company on an exclusive basis) or one or more of the
Company's other clients, the deterioration of the Company's relationships with
any of these clients, a decline in the business of any of such clients or a
decline in such clients' marketing and communications spending (either generally
or with respect to specific products for which the Company is engaged) could
have a material adverse effect on the Company's business, financial condition or
results of operations. See 'Business--Clients' and 'Business--Competition.'
ABSENCE OF COMBINED OPERATING HISTORY. Although GHB&M and Milton have been
operating in the advertising, marketing and communications industry since April
1986 and August 1978, respectively, and have been working together through their
affiliation with Healthworld B.V. since 1993, Healthworld, which was
incorporated in September 1996, has conducted no operations and generated no
revenues to date. In connection with the Consolidation, Healthworld will enter
into agreements to acquire GHB&M and Milton on the effective date of the
Offering. GHB&M and Milton have been operating as separate independent entities,
and there can be no assurance that the Company will be able to successfully
integrate the operations of these businesses, institute the necessary
Company-wide systems and procedures to successfully manage the combined
enterprise on a profitable basis, or effectively implement its growth strategy.
The unaudited pro forma combining historical financial results of the Company
cover periods when GHB&M, Milton and Healthworld were not under common control
or management and, therefore, may not be indicative of results that would have
been reported by the Company had such events occurred on the dates specified,
nor may they be indicative of the Company's future financial or operating
results. The inability of the Company to successfully integrate GHB&M and Milton
would have a material adverse effect on the Company's business, financial
condition and results of operations and would make it unlikely that the
Company's growth strategy will be successful. See 'The Consolidation,'
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' the Company's Pro Forma Combining Financial Statements, the
Combined Financial Statements of GHB&M and the related notes thereto, and the
Consolidated Financial Statements of Milton and the related notes thereto.
MANAGEMENT OF GROWTH; ACQUISITION RISKS. The Company's growth will depend
on a number of factors, including the Company's ability to maintain the high
quality of the services it provides to customers and to increase the number of
services it provides to existing clients, as well as to recruit, motivate and
retain highly skilled creative, technical and marketing personnel. Competition
for highly qualified personnel in the health care
6
<PAGE>
communications industry is intense and the inability to attract and retain key
personnel could have a material adverse effect upon the Company's business,
results of operations or financial condition.
The Company also intends to grow through the acquisition of businesses
specializing primarily in servicing the pharmaceutical and other health care
industries. Although the Company believes that opportunities for future
acquisitions are currently available, due to considerable acquisitions and
consolidations in the marketing and communications industry in recent years,
increased competition for acquisition candidates exists and may continue in the
future. Consequently, there may be fewer acquisition opportunities available to
the Company as well as higher acquisition prices. There can be no assurance that
the Company will be able to identify, acquire, manage or successfully integrate
acquired businesses without substantial costs, delays or operational or
financial problems. While the Company regularly evaluates and discusses
potential acquisitions, the Company currently has no understandings, commitments
or agreements with respect to any acquisitions. The Company may be required to
obtain additional financing to fund future acquisitions. The Company has no
current commitments or arrangements for such additional financing and there can
be no assurance that the Company will be able to obtain additional financing on
acceptable terms or at all. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources'
and 'Business--Strategy.'
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's results of
operations have been and can be expected to be subject to quarterly
fluctuations. Generally, the Company's revenues and profits are lowest in the
first quarter and highest in the fourth quarter. The Company's quarterly revenue
trends result from a number of factors, including, among other things, the
timing of commencement, completion or cancellation of major projects and
industry billing practices which are tied to clients' annual marketing budgets,
while the Company's communications services expenses generally remain constant.
The Company's quarterly results may fluctuate as a result of a number of
additional factors, including delays or costs associated with acquisitions,
government regulatory initiatives and conditions in the health care industry
generally. The Company believes that quarterly comparisons of its financial
results should not be relied upon as an indication of future performance. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Operating Results.'
COMPETITION; INDUSTRY CONSOLIDATION. The health care marketing and
communications industry throughout the United States and Europe is highly
competitive. The Company competes with other marketing and communications firms,
including international and local full-service and specialty marketing and
communications firms and, with respect to contract sales and marketing services,
with in-house sales departments of its clients and other contract sales and
marketing organizations. The Company has in the past and will in the future be
unable to pursue certain marketing and other potential business opportunities
because such opportunities would require the Company to provide services to
direct competitors of existing Company clients.
Consolidation within the pharmaceutical and health care industries as well
as a trend by pharmaceutical and health care companies to allocate outsourcing
of sales, marketing and communications services to fewer organizations, has
heightened the competition among such service providers for a smaller number of
clients. In addition, many of the larger consumer products marketing and
communications companies have acquired health care marketing and communications
companies, which themselves have been increasingly consolidating in recent
years. Many of these companies have substantially greater financial resources,
personnel and facilities than the Company. In addition, if the previously
described consolidation trends continue, the Company may face greater
competition for clients. Although the Company believes it is able to compete on
the basis of the quality of its creative product, service, reputation and
personal relationships with clients, there can be no assurance that the Company
will be able to maintain its competitive position in the industry. See
'Business--Competition.'
EXPANSION OF CONTRACT SALES SERVICES. Currently, the Company's contract
sales organization operates only in the United Kingdom and provides its services
primarily to consumer products companies, utilities and other nonhealth care
related companies. In March 1997, the Company began providing contract sales
services in the United Kingdom to pharmaceutical and other health care companies
to take advantage of the increased use by such companies in the United Kingdom
of contract sales forces to market their products. In addition, the Company
currently intends to develop a contract sales organization in the United States
to provide contract sales services to pharmaceutical and other health care
companies. The successful expansion of the Company's contract sales operations
in the United Kingdom and in the United States will be dependent on a number of
factors,
7
<PAGE>
including (i) its ability to effectively compete against the in-house sales
departments of pharmaceutical companies and contract sales organizations
specializing in pharmaceutical and other health care products; (ii) the hiring
and training of qualified management personnel; and (iii) the ability to
integrate such contract sales operations into the Company's current structure.
An inability to manage future growth, compete effectively, or successfully
integrate such contract sales operations could have a material adverse effect on
the Company's business, financial condition or results of operations. See
'Business--Strategy' and 'Business--Competition.'
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the efforts and
abilities of its senior management, including Steven Girgenti, its Chairman and
Chief Executive Officer, and William Leslie Milton, its Vice Chairman and
President. The loss of the services of either of Mr. Girgenti or Mr. Milton, or
any other key employee could have a material adverse effect on the Company.
Although the Company intends to obtain key person life insurance on the lives of
Messrs. Girgenti and Milton in the amounts of $4.0 million and $2.0 million,
respectively, as to which the Company will be the sole beneficiary, there can be
no assurance that such policies, if procured, would adequately compensate for
the loss of such individuals. Each of Messrs. Girgenti and Milton and certain
other executive officers of the Company will enter into employment agreements
with the Company upon the consummation of the Consolidation. Each member of the
Company's management and other key employees have or will have executed
confidentiality and non-solicitation agreements that restrict such persons from
misappropriating confidential information during such person's term of
employment and thereafter and from soliciting the Company's clients, prospects
or employees following termination of employment. Notwithstanding such
agreements, in the event of loss of any such personnel there can be no assurance
that the Company would be able to prevent the unauthorized disclosure or use of
its knowledge, practices, procedures or client lists. See 'Management.'
UNCERTAINTY IN HEALTH CARE INDUSTRY AND POSSIBLE HEALTH CARE REFORM. The
health care industry is subject to changing political, economic and regulatory
influences that may affect pharmaceutical and other health care companies,
particularly with respect to spending by such companies on marketing and
communications services to promote their products. Numerous governments have
undertaken efforts to control growing health care costs through legislation,
regulation and voluntary agreements with medical care providers and
pharmaceutical and other health care product companies. Implementation of
government health care reform may adversely affect marketing expenditures by
pharmaceutical and other health care companies which could decrease the business
opportunities available to the Company. Management is unable to predict the
likelihood of health care reform legislation being enacted or the effects such
legislation would have on the Company. In addition, the success of the Company's
growth strategy depends on its ability to take advantage of certain industry
trends, including continued increases in overall spending levels by
pharmaceutical and other health care companies for marketing and communications
services. Such growth in spending levels has evolved rapidly in recent years and
the Company is unable to predict whether such growth in spending will continue
at present levels or at all. The Company's results of operations could be
materially adversely affected in the event the Company is unable to respond
effectively to the enactment of health care reform legislation or changing
industry trends which may affect future spending levels by pharmaceutical and
other health care companies for marketing and communications services. See
'Business--Industry Background.'
INSURANCE AND POTENTIAL LITIGATION. The Company, as part of its business,
develops marketing and communications campaigns and materials with respect to
pharmaceutical and other health care products, including newly developed drugs
and other health care products. As a result, the Company may, in the future, be
subject to certain types of litigation, including claims arising from false or
misleading statements made with respect to the use or efficacy of such
pharmaceutical and health care products. Certain of the Company's contracts with
its clients provide for the client to indemnify the Company against such
liabilities. In addition, the Company maintains liability insurance covering
such liabilities, and the Company believes that such liability insurance
coverage is adequate. In certain limited circumstances, however, the Company is
obligated to indemnify its clients with respect to such claims and liabilities.
The Company could be materially and adversely affected if it were required to
pay damages or bear the costs of defending any claim outside the scope of or in
excess of a contractual indemnification provision or beyond the level of
insurance coverage or in the event that an indemnifying party does not fulfill
its indemnification obligations. Even if any such claim was without merit,
defending against such claim could result in adverse publicity and diversion of
management's time and attention and could have a material adverse effect on the
Company.
8
<PAGE>
CONTROL OF THE COMPANY. Upon completion of the Consolidation and the
Offering, certain directors and executive officers of the Company will
collectively own approximately 70% of the Company's outstanding Common Stock.
Consequently, such stockholders will be able to control the outcome of matters
submitted to a vote by the Company's stockholders, such as the election of the
Company's Board of Directors, and control the direction and future operations of
the Company. Such concentrations of share ownership may have the effect of
discouraging, delaying or preventing a change in control of the Company. See
'Principal Stockholders.'
DILUTION. Immediately upon issuance of the Common Stock offered hereby at
an assumed initial public offering price of $8.75 per share, purchasers of the
Common Stock will experience immediate and substantial dilution in the pro forma
net tangible book value per share of Common Stock of $6.24. See 'Dilution.'
FOREIGN EXCHANGE RATE RISKS. Exchange rates for some local currencies in
countries where the Company currently operates or may operate in the future may
fluctuate in relation to the U.S. Dollar and such fluctuations may have an
adverse effect on the Company's earnings or assets when local currencies are
translated into U.S. Dollars. In particular, because Milton currently operates
only in the United Kingdom, the Company is susceptible to foreign exchange rate
fluctuations between the British Pound Sterling and the U.S. Dollar. Any
weakening of the value of a local currency, including the British Pound
Sterling, against the U.S. Dollar could result in lower revenues and earnings
for the Company when such local currencies are translated into U.S. Dollars.
Therefore, there can be no assurance that currency exchange rates will not have
a material adverse effect on the Company. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations.'
NO PRIOR MARKET FOR THE COMMON STOCK; DETERMINATION OF OFFERING
PRICE. Prior to the Offering, there has been no public market for the Common
Stock of the Company. The initial public offering price for the Common Stock
will be determined through negotiations between the Company and the
Representatives based on such factors as the earnings prospects of the Company
and prevailing market conditions, and does not necessarily bear any relationship
to the Company's book value, past operating results or other established
criteria of value. Such price may not be indicative of the market price of the
Common Stock after the Offering has been consummated. The Company has applied
for the listing of the Common Stock on The Nasdaq National Market under the
symbol 'HWLD'. There can be no assurance that an active trading market for the
Common Stock will be established, or if so established, sustained. See
'Underwriting.'
After the Offering, the market price of the Common Stock may be subject to
significant fluctuations in response to numerous factors, including, but not
limited to, variations in the annual or quarterly financial results of the
Company, changes by financial research analysts in their estimates of the
earnings of the Company, conditions in the economy in general or in the
Company's industry in particular, unfavorable publicity or changes in applicable
laws and regulations (or judicial or administrative interpretations thereof)
affecting the Company or the health care communications industry. From
time-to-time, the stock market experiences significant price and volume
volatility, which may affect the market price of the Common Stock for reasons
unrelated to the Company's performance.
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, there
will be 7,100,000 shares of Common Stock outstanding, of which the 2,100,000
shares sold pursuant to the Offering will be tradeable without restriction by
persons other than 'affiliates' of the Company. The remaining 5,000,000 shares
of Common Stock will be issued in connection with the Consolidation and will be
'restricted' securities within the meaning of the Securities Act of 1933, as
amended (the 'Securities Act'), and may not be sold in the absence of
registration under the Securities Act or an exemption therefrom, including the
exemptions contained in Rule 144 under the Securities Act. No prediction can be
made as to the effect, if any, that future sales of shares of Common Stock will
have on the market price of the Common Stock prevailing from time to time. Sales
of substantial amounts of Common Stock, or the perception that these sales could
occur, could adversely affect prevailing market prices for the Common Stock and
could impair the ability of the Company to raise additional capital through the
sale of its equity securities or through debt financing. The Company and its
officers and directors and the stockholders of GHB&M and Milton have each agreed
to enter into agreements (the 'Lock-up Agreements') under which they will agree
not to offer, sell or otherwise dispose of any shares of Common Stock or other
securities of the Company for a period of 180 days commencing upon the date of
this Prospectus, without the prior written consent of Unterberg Harris, other
than sales or issuances by the Company pursuant to the exercise of the
Underwriters' over-allotment option or pursuant to the grants of stock options
under the Company's 1997
9
<PAGE>
Stock Option Plan. Thereafter, shares of Common Stock held by the stockholders
of GHB&M and Milton may be sold under Rule 144 under the Securities Act, subject
to the volume, manner of sale and other restrictions of Rule 144. In addition,
the Company has granted to such stockholders unlimited piggy-back registration
rights with respect to such shares, commencing one year from the date of this
Prospectus. See 'Shares Eligible for Future Sale' and 'Underwriting.'
CERTAIN ANTI-TAKEOVER PROVISIONS. The Company's Certificate of
Incorporation authorizes the Board of Directors of the Company to issue
preferred stock in one or more series with such rights and preferences as may be
determined from time-to-time by the Board of Directors. Accordingly, the Board
of Directors may, without stockholder approval, issue shares of preferred stock
with voting, dividend, liquidation, conversion or other rights which could
adversely affect the voting power or other rights of the holders of Common
Stock. Although the Company does not currently intend to issue any shares of
preferred stock, there can be no assurance that the Company will not do so in
the future. The ability to issue preferred stock as described above, as well as
certain applicable provisions of the Delaware General Corporation Law relating
to business combinations, may have the effect of rendering more difficult,
delaying, discouraging or preventing an acquisition of the Company or change in
control of the Company. See 'Description of Capital Stock.'
ABSENCE OF DIVIDENDS. The Company has no current intention to pay
dividends on its Common Stock and anticipates that, for the foreseeable future,
working capital and earnings, if any, will be retained to finance the expansion
of its business and for general corporate purposes. See 'Dividend Policy' and
'Description of Capital Stock.'
10
<PAGE>
THE CONSOLIDATION
Healthworld, which was incorporated in Delaware on September 12, 1996, was
formed to acquire GHB&M and Milton in the Consolidation, and has conducted no
operations to date. Prior to the consummation of the Offering, Healthworld will
enter into separate Agreements and Plans of Organization (the 'Consolidation
Agreements') with the stockholders of GHB&M and Milton pursuant to which, on the
effective date of the Offering, Healthworld will acquire all of the issued and
outstanding stock of each of GHB&M and Milton from the stockholders of GHB&M and
Milton in exchange for an aggregate of 5,000,000 shares of Common Stock of the
Company, at which time GHB&M and Milton will become wholly-owned subsidiaries of
Healthworld. See 'Principal Stockholders.'
The Consolidation will be accounted for as a pooling of interests, which
method of accounting assumes that GHB&M and Milton have been combined from the
Company's inception and restates the historical financial statements for the
Company for the periods prior to the consummation of the Consolidation as though
GHB&M and Milton had been combined from the Company's inception.
Pursuant to the Consolidation Agreements, the stockholders of GHB&M and
Milton will agree not to sell any of the Common Stock to be received by them in
the Consolidation in a 'Private Sale' without first offering to the stockholders
of GHB&M and Milton, respectively, and then to stockholders of Milton and GHB&M,
respectively, a right of first refusal to purchase such shares. Private Sales
are defined to include all transfers other than (i) sales of Common Stock
pursuant to Rule 144 under the Securities Act, (ii) sales pursuant to an
offering registered under the Securities Act, (iii) transfers in connection with
a merger, consolidation or sale of all or substantially all of the assets of the
Company, or (iv) permitted transfers to certain immediate family members and
other relatives. The stockholders of GHB&M and Milton also will agree not to
compete with the Company for a five-year period commencing on the effective date
of the Offering. In addition, members of the Company's management have or will
have entered into agreements pursuant to which they will not compete with the
Company during their employment with the Company and for a certain time period
thereafter. See 'Management--Employment Agreements.'
Prior to the consummation of the Consolidation, the companies comprising
GHB&M (other than Syberactive, Inc. ('Syberactive'), which is treated as a C
Corporation) elected to be treated as S Corporations under the Code, pursuant to
which income or loss of each of such companies was allocated to its stockholders
by inclusion in their respective individual income tax returns. Immediately upon
consummation of the Consolidation, the status of each of the companies
comprising GHB&M as S Corporations will terminate and each of the companies
comprising GHB&M will then be subject to Federal and state income taxes at
applicable corporate rates.
In connection with the termination of the status of each of the companies
comprising GHB&M as S Corporations, GHB&M is currently negotiating to enter into
an agreement which will provide that GHB&M will, prior to the consummation of
the Consolidation, sell approximately $2.5 million of its accounts receivable to
an unaffiliated financial institution at a negotiated discount rate (the
'Accounts Receivable Sale'). Immediately prior to the consummation of the
Consolidation, GHB&M will make distributions (the 'S Corporation Distributions')
to its stockholders of approximately $3.5 million in the aggregate from existing
cash balances for the payment by such stockholders of taxes due on S Corporation
earnings.
11
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 2,100,000 shares of Common Stock
offered hereby, at an assumed initial public offering price of $8.75 per share,
are estimated to be approximately $15.9 million, after deducting underwriting
discounts and commissions and other estimated expenses payable by the Company in
connection with the Offering (or approximately $18.4 million if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the net proceeds for working capital and general corporate purposes,
including (i) funding working capital needs which will result from the Accounts
Receivable Sale to be undertaken in connection with the S Corporation
Distributions of approximately $3.5 million, and (ii) for potential
acquisitions. The Company regularly evaluates and discusses potential
acquisitions. While the Company believes that opportunities for future
acquisitions are currently available, it currently has not entered into any
commitment, agreement or understanding with any third party with respect to any
possible acquisition, and there can be no assurance that the Company will be
able to identify or acquire suitable acquisition candidates, or that if
identified such acquisition candidate will be acquired by the Company or
successfully and profitably integrated into the Company. Pending use of the net
proceeds for the foregoing purposes, the Company intends to invest the net
proceeds in short-term, U.S. Dollar denominated, investment grade
interest-bearing securities. See 'The Consolidation,' 'Management's Discussions
and Analysis of Financial Condition and Results of Operations' and
'Business--Strategy--Growth Through Acquisitions.'
DIVIDEND POLICY
Healthworld has never declared or paid a dividend on its Common Stock. The
companies comprising GHB&M, as S Corporations (other than Syberactive, which is
treated as a C Corporation), made cash distributions on their common stock to
the stockholders of GHB&M of an aggregate of $209,000 in 1995, $1.5 million in
1996, $497,000 through June 30, 1997, and, immediately prior to the consummation
of the Consolidation, will make the S Corporation Distributions of approximately
$3.5 million. The companies comprising Milton made cash distributions on their
common stock to the stockholders of Milton of an aggregate of $101,000 in the
1995 fiscal year, none in the 1996 fiscal year and $55,000 through June 30,
1997.
After the consummation of the Consolidation, the Company intends to retain
all earnings, if any, to finance the expansion of its business and for general
corporate purposes, including future acquisitions, and does not anticipate
paying any cash dividends on its Common Stock for the foreseeable future. Any
future determination to pay cash dividends will be at the discretion of the
Board of Directors and will be dependent on the Company's financial condition,
results of operations, financial requirements and such other factors as the
Board of Directors deems relevant.
12
<PAGE>
DILUTION
At June 30, 1997, the Company had a pro forma net tangible book value of
$1.9 million, or $0.38 per share of Common Stock. Pro forma net tangible book
value per share is, after giving effect to the Consolidation and the S
Corporation Distributions, the Company's total pro forma tangible assets less
its pro forma total liabilities, divided by the number of shares of outstanding
Common Stock. Pro forma tangible assets are defined as the pro forma assets of
the Company, excluding intangible assets, such as goodwill. After giving effect
to the sale by the Company of 2,100,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $8.75 per share (and after deducting
underwriting discounts and commissions and Offering expenses payable by the
Company), the pro forma net tangible book value of the Company at June 30, 1997
would have been approximately $17.8 million or $2.51 per share. This represents
an immediate increase in pro forma net tangible book value of $2.13 per share to
existing stockholders and an immediate dilution of $6.24 per share to new
investors. Dilution represents the difference between the initial public
offering price paid by purchasers in the Offering and the net tangible book
value per share immediately after completion of the Offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share...................................... $8.75
Pro forma net tangible book value per share before the Offering............ $0.38
Increase in pro forma net tangible book value per share attributable to the
sale of the Common Stock offered hereby................................. 2.13
-----
Pro forma net tangible book value per share after the Offering............... 2.51
-----
Dilution per share to new investors.......................................... $6.24
-----
-----
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1997,
after giving effect to the Consolidation and the S Corporation Distributions, a
comparison of the number of shares of Common Stock acquired from the Company,
the total consideration paid to the Company and the respective average purchase
price per share paid by existing stockholders and new investors. The following
computations are based on an assumed initial public offering price of $8.75 per
share, before deducting the underwriting discounts and commissions and estimated
Offering expenses payable by the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
--------- ------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 5,000,000 70.4% $ 5,557,000(1) 23.2% $1.11
New investors........................... 2,100,000 29.6% 18,375,000 76.8% 8.75
--------- ------- ----------- -------
Total................................. 7,100,000 100.0% $23,932,000 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
- ------------------
(1) Represents the combined stockholders' equity of GHB&M and Milton before the
Offering. See 'The Consolidation.'
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997, which, pro forma, gives effect to the Consolidation and the S
Corporation Distributions, and pro forma as adjusted, gives effect to the
Consolidation, the S Corporation Distributions and the sale of 2,100,000 shares
of Common Stock offered hereby at an assumed initial public offering price of
$8.75 per share and the application of the estimated net proceeds therefrom. See
'The Consolidation,' 'Use of Proceeds' and 'Selected Pro Forma Financial
Information.' This table should be read in conjunction with the Pro Forma
Combining Financial Statements of the Company and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------
PRO FORMA
---------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C>
Long-term obligations, less current maturities................... $ 582
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
no shares outstanding(1).................................... --
Common Stock, $.01 par value, 20,000,000 shares authorized;
5,000,000 shares outstanding, pro forma; 7,100,000 shares
outstanding, pro forma as adjusted(1)....................... 50
Additional paid-in capital..................................... 4,581
Retained earnings.............................................. 926
-------
Total stockholders' equity.................................. 5,557
-------
Total capitalization........................................ $ 6,139
-------
-------
<CAPTION>
JUNE 30, 1997
---------------------------------
PRO FORMA
AS ADJUSTED
---------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C>
Long-term obligations, less current maturities................... $ 582
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
no shares outstanding(1).................................... --
Common Stock, $.01 par value, 20,000,000 shares authorized;
5,000,000 shares outstanding, pro forma; 7,100,000 shares
outstanding, pro forma as adjusted(1)....................... 71
Additional paid-in capital..................................... 20,465
Retained earnings.............................................. 926
----------
Total stockholders' equity.................................. 21,462
----------
Total capitalization........................................ $22,044
----------
----------
</TABLE>
- ------------------
(1) Healthworld changed its authorized capital stock on August 13, 1997 to
21,000,000 shares consisting of 1,000,000 shares of preferred stock, $.01
par value per share, and 20,000,000 shares of Common Stock, $.01 par value
per share. See 'Description of Capital Stock.'
14
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected pro forma combined financial information gives
effect to the Consolidation, among other events, as more fully described in 'The
Consolidation,' and should be read in conjunction with the Company's unaudited
Pro Forma Combining Financial Statements and notes thereto, the Combined
Financial Statements of GHB&M and notes thereto, the Consolidated Financial
Statements of Milton and notes thereto, and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' contained elsewhere
in this Prospectus. The Consolidation will be accounted for as a pooling of
interests. The selected pro forma combined statement of income data for the
years ended December 31, 1994, 1995 and 1996 and for the six months ended June
30, 1996 and 1997 and the selected pro forma combined balance sheet data as of
December 31, 1995 and 1996 and June 30, 1997 are derived from the Company's
unaudited Pro Forma Combining Financial Statements included elsewhere herein.
The selected pro forma combined statement of income data for the years ended
December 31, 1992 and 1993, and the selected pro forma combined balance sheet
data as of December 31, 1992, 1993 and 1994, is derived from the Company's
unaudited Pro Forma Combining Financial Statements not included herein. In the
opinion of management, all such financial data includes all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of such data. Such financial data covers periods when GHB&M and Milton were not
under common control or management and may not be indicative of results that
would have been reported had the Consolidation and the other pro forma
adjustments occurred nor may it be indicative of the Company's future financial
or operating results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues...................................... $10,569 $11,206 $13,081 $16,767 $24,209 $11,322 $14,783
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Salaries and related costs.................... 6,876 7,554 7,890 9,422 15,392 7,525 10,400
Other operating expenses...................... 2,596 3,321 3,727 4,904 5,615 2,797 3,000
------- ------- ------- ------- ------- ------- -------
9,472 10,875 11,617 14,326 21,007 10,322 13,400
------- ------- ------- ------- ------- ------- -------
Income from operations........................ 1,097 331 1,464 2,441 3,202 1,000 1,383
Interest expense, net......................... 7 8 14 2 69 (48) (21)
------- ------- ------- ------- ------- ------- -------
Income before provision for income taxes...... 1,090 323 1,450 2,439 3,133 1,048 1,404
Provision for income taxes(1)................. 436 106 613 1,038 1,305 425 584
------- ------- ------- ------- ------- ------- -------
Net income.................................... $ 654 $ 217 $ 837 $ 1,401 $ 1,828 $ 623 $ 820
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Earnings per share............................ $ 0.13 $ 0.04 $ 0.17 $ 0.28 $ 0.37 $ 0.12 $ 0.16
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Shares used in computing earnings
per share................................... 5,000 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996 JUNE 30, 1997
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 2,450 $ 1,835 $ 1,904 $ 3,904 $ 4,132 $ 48
Total assets................................. 11,327 13,792 13,848 18,703 22,597 19,916
Long-term debt, including current portion.... 1,216 838 662 1,223 1,419 1,324
Stockholders' equity......................... 3,501 2,914 3,880 7,339 8,576 5,557
</TABLE>
- ------------------
(1) Immediately upon the consummation of the Consolidation, the status of the
companies comprising GHB&M as S Corporations under the Code will terminate.
The pro forma provision for income taxes reflects a provision for federal
income taxes as if each of such entities were a C Corporation rather than an
S Corporation for such periods. See 'The Consolidation.'
15
<PAGE>
SELECTED FINANCIAL INFORMATION OF GHB&M AND MILTON
The following selected financial information for each of GHB&M and Milton
should be read in conjunction with the Combined Financial Statements of GHB&M
and the notes thereto, the Consolidated Financial Statements of Milton and the
notes thereto, and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' contained elsewhere in this Prospectus. The selected
combined statement of income data of GHB&M for the years ended December 31,
1994, 1995, 1996 and the selected combined balance sheet data as of December 31,
1995 and 1996 are derived from GHB&M's audited Combined Financial Statements
which are included elsewhere herein. The selected combined statement of income
data of GHB&M for the years ended December 31, 1992 and 1993 and the selected
combined balance sheet data as of December 31, 1992, 1993 and 1994 are derived
from GHB&M's unaudited Combined Financial Statements not included herein, and in
the opinion of management, include all adjustments necessary for a fair
presentation of such data. The selected combined statement of income data of
GHB&M for the six months ended June 30, 1996 and 1997 and the selected combined
balance sheet data as of June 30, 1997 are derived from GHB&M's unaudited
Combined Financial Statements included elsewhere herein which, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the combined financial position and results
of operations of GHB&M. The selected consolidated statement of income data of
Milton for the years ended November 30, 1994, 1995 and 1996 and the selected
consolidated balance sheet data as of November 30, 1995 and 1996 are derived
from Milton's audited Consolidated Financial Statements, which are included
elsewhere herein. The selected consolidated statement of income data of Milton
for the years ended November 30, 1992 and 1993 and the selected consolidated
balance sheet data as of November 30, 1992, 1993 and 1994 are derived from
Milton's audited Consolidated Financial Statements not included herein, and in
the opinion of management include all adjustments necessary for a fair
presentation of such data. The selected consolidated statement of income data of
Milton for the seven months ended June 30, 1996 and 1997 and the selected
consolidated balance sheet data as of June 30, 1997 are derived from Milton's
unaudited Consolidated Financial Statements included elsewhere herein which, in
the opinion of management, include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the consolidated
financial position and results of operations of Milton. The results of
operations of GHB&M for the six months, and of Milton for the seven months,
ended June 30, 1997 are not necessarily indicative of the results for the full
fiscal year.
<TABLE>
<CAPTION>
GHB&M
-------------------------------------------------------------------------------------
(IN THOUSANDS)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................... $ 9,036 $ 9,234 $10,415 $12,368 $14,314 $ 6,383 $ 7,459
Income from operations..... 991 16 1,088 1,927 2,183 378 991
Net income................. 927 11 1,067 1,816 2,049 423 1,006
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996 JUNE 30, 1997
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 2,606 $ 1,974 $ 2,455 $ 4,061 $ 4,668 $ 4,680
Total assets................................. 10,264 11,190 12,232 13,287 14,049 14,180
Long-term debt, including current portion.... 875 785 587 82 223 176
</TABLE>
<TABLE>
<CAPTION>
MILTON
-------------------------------------------------------------------------
(IN THOUSANDS)
SEVEN MONTHS ENDED
YEAR ENDED NOVEMBER 30, JUNE 30,
----------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................................... $ 1,533 $ 1,972 $ 2,666 $ 4,399 $ 9,895 $ 5,434 $ 8,147
Income from operations....................... 106 315 390 558 1,085 575 308
Net income................................... 64 230 222 316 502 257 29
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------------------------------------
1992 1993 1994 1995 1996 JUNE 30, 1997
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ (145) $ (140) $ (64) $ (157) $ (536) $(1,132)
Total assets................................. 1,063 2,602 1,681 3,401 6,487 7,300
Long-term debt, including current portion.... 92 53 75 1,141 1,196 1,148
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
unaudited Pro Forma Combining Financial Statements and notes thereto, the
Combined Financial Statements of GHB&M and notes thereto and the Consolidated
Financial Statements of Milton and notes thereto appearing elsewhere herein.
INTRODUCTION
Healthworld has conducted no operations to date and was formed to acquire
all of the outstanding capital stock of GHB&M and Milton in the Consolidation
concurrently with the consummation of the Offering. For a discussion of the
Consolidation and other related events, including the S Corporation
Distributions, see 'The Consolidation.'
The Company conducts all of its operations through GHB&M and Milton. GHB&M,
which is based in New York City, is comprised of the following affiliated
entities: (i) Girgenti, Hughes, Butler & McDowell, Inc. ('GH'), founded in 1986,
which through (x) its GHB&M Division, has been providing traditional advertising
and promotion services and public relations services since 1986, (y) Rubin
Ehrenthal & Associates, a division acquired through a merger with GH in 1991,
specializes in DTC campaigns, and (z) its Data Health Division, organized in
March 1996, provides database marketing services; (ii) Medical Education
Technologies, Inc., organized in 1986, which provides medical education
services; (iii) Syberactive, organized in January 1996, which provides
interactive multimedia services; (iv) Brand Research Corporation, organized in
1992, which provides marketing research services; and (v) Black Cat Graphics,
Inc., organized in 1986, which creates graphic designs and artwork for
advertising and promotion campaigns.
Milton, which is based in the United Kingdom, is comprised of the following
subsidiaries: (i) Milton Marketing Limited ('Milton Marketing'), organized in
1978, which provides traditional advertising and promotion services and
specializes in switching pharmaceutical products from prescription to 'over-the-
counter' status; (ii) Milton Headcount Limited ('Headcount'), originally formed
as a division of Milton Marketing in January 1994, which, along with Effective
Sales Personnel Limited ('ESP'), acquired in November 1995, provides contract
sales services; (iii) Milton Cater Limited ('Milton Cater'), organized in April
1996, which provides public relations services; and (iv) PDM Communications
Limited ('PDM'), acquired in November 1996, which provides direct marketing
services.
The following discussion relating to the pro forma combined historical
financial results of the Company covers periods prior to the Consolidation when
GHB&M and Milton were not under common control or management and, therefore, may
not be indicative of results that would have been reported had the Consolidation
and other pro forma adjustments occurred. Accordingly, the results of operations
for the Company discussed below may not be indicative of future financial or
operating results.
GENERAL
The Company is retained by its clients on assignments ranging in duration
from several months to several years. The Company offers a comprehensive range
of integrated services throughout a product's life-cycle, from the development
stage (pre-regulatory approval) to product launch and continuing through the
post-launch stage and, if applicable, such product's switch from prescription to
over-the-counter status.
The Company derives its revenues from fees generated from providing its
communications and contract sales services to its clients. Substantially all
revenues from creative fees are recognized when earned either under monthly
retainer agreements or on an actual time incurred basis. Fees for production are
earned when the production materials are completed. Advance production billings
represent project costs and fees that are billed to clients as projects
progress, and are recognized at completion. Income for field marketing support
is recognized as services are provided. In limited circumstances, the Company
derives revenues through commissions on media and production costs.
Milton operates only in the United Kingdom and, as a result, the Company is
susceptible to foreign exchange rate fluctuations between the British Pound
Sterling and the U.S. Dollar. The Company's financial statements are denominated
in U.S. Dollars, and accordingly, changes in the exchange rate between the
British
17
<PAGE>
Pound Sterling and the U.S. Dollar will affect the translation of Milton's
financial results into U.S. Dollars for purposes of reporting the Company's
consolidated financial results.
RESULTS OF OPERATIONS-THE COMPANY
The Company has provided communications services since 1978 and contract
sales services since January 1994. A significant portion of the Company's growth
in recent years is attributable to the expansion of the Company's contract sales
operations. The following table sets forth pro forma combined revenues for the
Company's communications and contract sales services.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Communications services revenues................. $12,948 $15,464 $17,632 $ 8,033 $ 8,756
Contract sales services revenues................. 133 1,303 6,577 3,289 6,027
------- ------- ------- ------- -------
Total.......................................... $13,081 $16,767 $24,209 $11,322 $14,783
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
The following table set forth certain pro forma combined income statement
data of the Company expressed as a percentage of revenues for the periods
indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues............................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries and related costs........................ 60.3 56.2 63.6 66.5 70.3
Other operating expenses.......................... 28.5 29.2 23.2 24.7 20.3
----- ----- ----- ----- -----
88.8 85.4 86.8 91.2 90.6
----- ----- ----- ----- -----
Income from operations.............................. 11.2 14.6 13.2 8.8 9.4
Interest expense, net............................... 0.1 -- 0.3 (0.5) (0.1)
----- ----- ----- ----- -----
Income before provisions for income taxes........... 11.1 14.6 12.9 9.3 9.5
Provision for income taxes.......................... 4.7 6.2 5.3 3.8 4.0
----- ----- ----- ----- -----
Net income.......................................... 6.4% 8.4% 7.6% 5.5% 5.5%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues for the first six months of 1997 were $14.8 million, an increase
of $3.5 million, or 30.6%, from $11.3 million for the first six months of 1996.
Of such increase, $2.7 million was attributable to the growth of the Company's
contract sales operations and the remainder was primarily attributable to the
growth of the Company's communications services in the United States, in
particular, advertising and promotion and consulting services.
Salaries and related costs include all compensation and related benefits
for all employees and contracted talent. Salaries and related costs for the
first six months of 1997 were $10.4 million, an increase of $2.9 million, or
38.2%, from $7.5 million for the first six months of 1996. Salaries and related
costs represented 70.3% of revenues in the first six months of 1997, compared to
66.5% in the first six months of 1996. Such increase, as a percentage of
revenues, was primarily attributable to growth of the Company's contract sales
operations and the corresponding increase in labor costs. Generally, labor costs
associated with contract sales operations are greater as a percentage of
corresponding revenues than those for communication services.
Other operating expenses primarily include occupancy, client development
and other related administrative costs. Other operating expenses for the first
six months of 1997 were $3.0 million, an increase of $203,000, or 7.3%, from
$2.8 million for the first six months of 1996. Other operating expenses
represented 20.3% of revenues in the first six months of 1997, compared to 24.7%
of revenues in the first six months of 1996. The decrease in other operating
expenses, as a percentage of revenues, was primarily attributable to such
expenses generally being fixed relative to increases in the Company's revenues.
18
<PAGE>
Income from operations for the first six months of 1997 was $1.4 million,
an increase of $383,000, or 38.3%, from $1.0 million for the first six months of
1996. Income from operations represented 9.4% of revenues in the first six
months of 1997, compared to 8.8% in the first six months of 1996.
The provision for income taxes for the first six months of 1997 was
$584,000, an increase of $159,000, or 37.4%, from $425,000 for the first six
months of 1996. Such increase was primarily attributable to higher income before
taxes in the first six months of 1997, as compared to the first six months of
1996. The effective tax rate was 41.6% for the first six months of 1997,
compared to 40.6% for the first six months of 1996. The provision for income
taxes reflects a provision for Federal income taxes as if each of the companies
comprising GHB&M were treated as C Corporations rather than S Corporations for
such periods.
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues for 1996 were $24.2 million, an increase of $7.4 million, or
44.4%, from $16.8 million for 1995. Of such increase, $5.4 million was primarily
attributable to the internal growth of the Company's contract sales operations
as well as revenues attributable to the operations of ESP (acquired in November
1995), and the remainder was attributable to growth in the Company's
communications services, in particular, advertising and promotion, medical
education and consulting services.
Salaries and related costs for 1996 were $15.4 million, an increase of $6.0
million, or 63.4%, from $9.4 million for 1995. Salaries and related costs
represented 63.6% of revenues in 1996, compared to 56.2% in 1995. Such increase,
as a percentage of revenues, was primarily attributable to the growth of the
Company's contract sales operations and the corresponding increase in labor
costs of such operations, and salaries and other costs related to the
establishment of the Company's public relations business in the United Kingdom.
Other operating expenses for 1996 were $5.6 million, an increase of
$711,000, or 14.5%, from $4.9 million for 1995. Other operating expenses
represented 23.2% of revenues in 1996, compared to 29.2% in 1995. The decrease
in other operating expenses, as a percentage of revenues, was primarily
attributable to such expenses generally being fixed relative to increases in the
Company's revenues.
Income from operations for 1996 was $3.2 million, an increase of $761,000,
or 31.2%, from $2.4 million for 1995. Income from operations represented 13.2%
of revenues in 1996, compared to 14.6% in 1995.
The provision for income taxes for 1996 was $1.3 million, an increase of
$267,000, or 25.7%, from $1.0 million for 1995. Such increase was primarily
attributable to higher income before taxes in 1996, as compared to 1995. The
effective tax rate was 41.7% in 1996, compared to 42.6% in 1995. The provision
for income taxes reflects a provision for Federal income taxes as if each of the
companies comprising GHB&M were treated as C Corporations rather than S
Corporations for such periods.
FISCAL 1995 COMPARED TO FISCAL 1994
Revenues for 1995 were $16.8 million, an increase of $3.7 million, or
28.2%, from $13.1 million for 1994. Of such increase, $1.2 million was
attributable to the expansion of the Company's contract sales operations, and
the remainder was attributable to growth in the Company's communications
services, in particular, advertising and promotion, medical education and
publishing services.
Salaries and related costs for 1995 were $9.4 million, an increase of $1.5
million, or 19.4%, from $7.9 million for 1994. Salaries and related costs
represented 56.2% of revenues in 1995, compared to 60.3% in 1994. Salaries and
related costs, as a percentage of revenues, decreased slightly in 1995 due to
improved operating efficiencies.
Other operating expenses for 1995 were $4.9 million, an increase of $1.2
million, or 31.6%, from $3.7 million for 1994. Other operating expenses, which
included additional occupancy costs in 1995, represented 29.2% of revenues in
1995, compared to 28.5% in 1994.
Income from operations for 1995 was $2.4 million, an increase of $977,000,
or 66.7%, from $1.5 million for 1995. Income from operations represented 14.6%
of revenues in 1995, compared to 11.2% in 1994.
The provision for income taxes for 1995 was $1.0 million, an increase of
$425,000, or 69.3%, from $613,000 for 1994. The increase was primarily
attributable to higher income before taxes in 1995, as compared to
19
<PAGE>
1994. The effective tax rate was 42.6% in 1995, compared to 42.3% in 1994. The
provision for income taxes reflects a provision for Federal income taxes as if
each of the companies comprising GHB&M were treated as C Corporations rather
than S Corporations for such periods.
QUARTERLY OPERATING RESULTS
The Company's results of operations have been and are expected to be
subject to quarterly fluctuations. Generally, the Company's revenues and profits
are lowest in the first quarter and highest in the fourth quarter. The Company's
quarterly revenue trends result from a number of factors including, among other
things, the timing of commencement, completion or cancellation of major projects
and industry billing practices which are tied to clients' annual marketing
budgets, while the Company's communications services expenses generally remain
constant. The Company's quarterly results may fluctuate as a result of a number
of additional factors, including delays or costs associated with acquisitions,
government regulatory initiatives and conditions in the health care industry
generally. The Company believes that because of such fluctuations, quarterly
comparisons of its financial results cannot be relied upon as an indication of
future performance.
The following table sets forth, on a quarterly basis, certain pro forma
combining financial information of the Company for the 1995 and 1996 fiscal
years and for the first two quarters of the 1997 fiscal year.
<TABLE>
<CAPTION>
1995 1996 1997
------------------------------------- ------------------------------------- -----------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH 1ST 2ND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... $3,387 $3,910 $4,235 $5,235 $4,705 $6,100 $5,954 $7,450 $6,628 $8,155
Operating expenses:
Salaries and related
costs................... 2,131 2,145 2,423 2,723 3,529 3,851 3,716 4,296 5,038 5,362
Other operating
expenses................ 810 1,147 1,434 1,513 1,372 1,481 1,436 1,326 1,397 1,603
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
2,941 3,292 3,857 4,236 4,901 5,332 5,152 5,622 6,435 6,965
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations...... $ 446 $ 618 $ 378 $ 999 $ (196 ) $ 768 $ 802 $1,828 $ 193 $1,190
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
GHB&M's cash provided by operations for the six months ended June 30, 1997
was $936,000 and was comprised of net income of $1.0 million and a decrease in
accounts receivable of $2.1 million, partially offset by (i) an increase in
unbilled production charges of $1.8 million, and (ii) an increase in other
assets of $618,000. GHB&M's cash used in investing activities for the six months
ended June 30, 1997 was $157,000 consisting of capital expenditures. GHB&M's
cash used in financing activities for the six months ended June 30, 1997 was
$944,000 and was primarily comprised of S Corporation distributions to
stockholders of $497,000 and the repayment of bank debt of $447,000, in the
aggregate.
Milton's cash used in operating activities for the seven months ended June
30, 1997 was $502,000 and was comprised of (i) an increase in accounts
receivable of $244,000, (ii) an increase in unbilled production charges of
$186,000, (iii) an increase in other current assets and other assets of
$379,000, and (iv) a net decrease in accounts payable and accrued expenses of
$93,000, partially offset by an increase in advance billings of $150,000.
Milton's cash used in investing activities for the seven months ended June 30,
1997 was $72,000, consisting of capital expenditures. Milton's cash provided by
financing activities for the seven months ended June 30, 1997 was primarily
comprised of additional bank overdraft borrowings of $805,000, partially offset
by repayment of bank loans and capital lease obligations of $140,000.
Cash provided by operations of the Company on a combined basis for 1996 was
$3.4 million and primarily consisted of net income for the period of $2.6
million, a reduction in unbilled production charges of $1.6 million, and an
increase in accrued liabilities of $885,000, partially offset by an increase in
accounts receivable of $2.1 million and a reduction in accounts payable of
$394,000. Cash used in investing activities of the Company on a combined basis
for 1996 was $913,000 and was primarily attributable to capital expenditures of
$721,000, the acquisition of PDM and an additional equity interest in Milton
Marketing for an aggregate of $242,000. Cash used in financing activities of the
Company on a combined basis for 1996 was $1.4 million and was primarily
comprised of S Corporation distributions to stockholders of $1.5 million and
repayment of long-term debt and
20
<PAGE>
capital lease obligations of $66,000, which were partially financed by net
proceeds from line of credit and bank overdraft borrowings of $109,000.
GHB&M's bank borrowings from Chase Manhattan Bank, N.A. (the 'GHB&M Credit
Facility') consist of (i) an uncommitted line of credit (the 'GHB&M Line of
Credit') which expired on July 31, 1997, pursuant to which GHB&M could request
borrowings of, but the bank was not obligated to lend, up to $3.5 million, (ii)
a term note in the principal amount of $300,000 (the 'GHB&M Term Note'), and
(iii) a letter of credit in the amount of $300,000 (the 'GHB&M Letter of
Credit'). The GHB&M Credit Facility is secured by a first security interest in
GHB&M's personal property and is personally guaranteed by certain of GHB&M's
stockholders. The GHB&M Term Note, which was provided to GHB&M to finance the
construction of additional office space, had $176,000 outstanding as of June 30,
1997 and bears interest at 7.75% per annum and is payable in 36 equal monthly
installments with the last installment due February 1999. No amounts were
outstanding under the GHB&M Line of Credit as of its expiration at July 31,
1997. GHB&M is negotiating an extension of the GHB&M Credit Facility as well as
a new revolving credit facility, although no assurance can be given that an
extension will be approved or that a new revolving credit facility will be
available on acceptable terms, or at all.
Milton's borrowings consist of a $672,000 overdraft facility (the 'Milton
Overdraft Facility') with The Bank of Scotland plc, which bears interest payable
at the United Kingdom base rate (7% as of June 30, 1997) plus 2% per annum (the
'Prevailing Rate'). As of June 30,1997, the bank has allowed Milton to exceed
the limit under the Milton Overdraft Facility, and Milton had an outstanding
balance of approximately $1.2 million under the facility at such time. Milton is
currently negotiating with the bank to increase the limit of such facility to
$1,245,000. In addition, as of June 30, 1997, Milton had the following
outstanding indebtedness: (i) a term loan from The Bank of Scotland plc (the
'Milton Term Loan') in the principal amount of $588,000 (of which $407,000 was
outstanding on June 30, 1997), which bears interest payable at the Prevailing
Rate with principal payable in installments of $58,000 each May and November
through November 2000; (ii) a term loan in the principal amount of $456,000 (all
of which was outstanding), which bears interest at the rate of 4% per annum,
originally issued in connection with Milton's acquisition of ESP, and under
which principal is payable in March 1998, and (iii) a term loan from National
Westminster Bank plc in the principal amount of $38,000 ($23,000 of which was
outstanding as of June 30, 1997), which bears interest at 10.5% per annum
payable in monthly installments, with the final payment due in April 1998.
Immediately upon consummation of the Consolidation, the status of the
companies comprising GHB&M (other than Syberactive) as S Corporations will
terminate and GHB&M will then be subject to Federal and state income taxes at
applicable corporate rates. In connection with the termination of the S
Corporation status of such companies, GHB&M is currently negotiating to enter
into an agreement with respect to the Accounts Receivable Sale, which will
provide that GHB&M will, prior to the consummation of the Consolidation, sell
approximately $2.5 million of its accounts receivable to an unaffiliated
financial institution at a negotiated discount rate. Immediately prior to the
consummation of the Consolidation, GHB&M will make the S Corporation
Distributions to its stockholders of approximately $3.5 million in the aggregate
from existing cash balances for payment by such stockholders of income taxes due
on S Corporation earnings. See 'The Consolidation.'
The Company anticipates that capital expenditures for 1997 and 1998 will
total approximately $500,000 and $1.3 million, respectively. Such expenditures
will primarily include spending associated with the expansion of the Company's
New York offices and the acquisition of additional office furniture and computer
equipment.
The Company's primary capital needs after the Offering will be for (i)
funding working capital requirements and general corporate purposes, including
working capital needs which will result from the Accounts Receivable Sale to be
undertaken in connection with the S Corporation Distributions of approximately
$3.5 million, (ii) potential acquisitions, (iii) the repayment of certain
outstanding indebtedness, and (iv) capital expenditures.
The Company believes that cash generated from operations, the net proceeds
received by the Company from the Offering and borrowings under the Company's
credit facilities will be sufficient to fund such capital needs for at least the
next 12 months.
21
<PAGE>
RESULTS OF OPERATIONS--GHB&M
To date, GHB&M has derived all of its revenues from providing
communications services to its clients.
Revenues for the first six months of 1997 were $7.5 million, an increase of
$1.1 million, or 16.9%, from $6.4 million for the first six months of 1996. This
increase was primarily attributable to growth in GHB&M's communications
services, in particular, advertising and promotion and consulting services.
Income from operations for the first six months of 1997 was $991,000, an
increase of $613,000, or 162.2%, from $378,000 for the first six months of 1996.
Income from operations represented 13.3% of revenues in the first six months of
1997, as compared to 5.9% in the first six months of 1996. The increase in
income from operations, as a percentage of revenues, resulted from an increase
in revenues, partially offset by an increase in operating expenses.
Revenues for 1996 were $14.3 million, an increase of $1.9 million, or
15.7%, from $12.4 million for 1995. This increase was attributable to growth in
GHB&M's communications services, in particular, advertising and promotion,
medical education and consulting services. Income from operations for 1996 was
$2.2 million, an increase of $256,000, or 13.3%, from $1.9 million for 1995.
Income from operations represented 15.3% of revenues in 1996, as compared to
15.6% in 1995.
Revenues for 1995 were $12.4 million, an increase of $2 million, or 18.8%,
from $10.4 million for 1994. This increase was attributable to growth in GHB&M's
communications services, in particular, advertising and promotion, medical
education and publishing services. Income from operations for 1995 was $1.9
million, an increase of $839,000, or 77.1%, from $1.1 million for 1994. Income
from operations represented 15.6% of revenues in 1995, as compared to 10.4% in
1994. The increase in income from operations, as a percentage of revenues,
resulted from an increase in revenues, partially offset by an increase in
salaries and related costs.
RESULTS OF OPERATIONS--MILTON
Revenues for the first seven months of fiscal 1997 were $8.1 million, an
increase of $2.7 million, or 49.9%, from $5.4 million for the first seven months
of 1996. Such increase was attributable to the growth of Milton's contract sales
operations, partially offset by a decline in the growth of Milton's
communications services. Income from operations for the first seven months of
1997 was $308,000, a decrease of $267,000, or 46.4%, from $575,000 for the first
seven months of 1996. Income from operations represented 3.8% of revenues for
the first seven months of 1997, compared to 10.6% in the first seven months of
1996. This decline was largely attributable to a reduction in the number of
products approved by the government for 'switching' a drug from prescription to
over-the-counter status. The Company has retained its talent pool in
anticipation of a reversal of such trend. Additionally, losses from the public
relations group added to the overall decline in income from operations. The
Company is in the process of reducing its overhead associated with public
relations to reflect current business activity.
Revenues for 1996 were $9.9 million, an increase of $5.5 million, or
124.9%, from $4.4 million for 1995. Of such increase, $4.9 million was primarily
attributable to the internal growth of Milton's contract sales operations
revenues attributable to the operations of ESP (acquired by Milton in November
1995), approximately $200,000 was attributable to Milton Cater, a joint venture
formed in May 1996, and the remainder was attributable to increased revenues
from Milton's communications services. Income from operations for 1996 was $1.1
million, an increase of $527,000, or 94.4%, from $558,000 for 1995. Income from
operations represented 11.0% of revenues in 1996, compared to 12.7% in 1995.
Such decrease, as a percentage of revenues, was primarily attributable to the
growth of Milton's contract sales operations, which generally have higher labor
costs as a percentage of corresponding revenues than those for communications
services.
Revenues for 1995 were $4.4 million, an increase of $1.7 million, or 65.0%,
from $2.7 million for 1994. Of such increase, approximately $1.0 million was
attributable to the expansion of Milton's contract sales operations, and
approximately $600,000 was attributable to the growth of Milton's communications
services. Income from operations for 1995 was $558,000, an increase of $168,000,
or 43.1%, from $390,000 for 1994. Income from operations represented 12.7% of
revenues in 1995, compared to 14.6% in 1994. Such decrease, as a percentage of
revenues, was primarily attributable to the growth of Milton's contract sales
operations.
22
<PAGE>
ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board (the 'FASB') issued
SFAS No. 128, 'Earnings Per Share.' This statement establishes standards for
computing and presenting earnings per share ('EPS'), replacing the presentation
of currently required Primary EPS with a presentation of Basic EPS. For entities
with complex capital structures, the statement requires the dual presentation
for both Basic EPS and Diluted EPS on the face of the statement of earnings.
Under this new standard, Basic EPS is computed based on weighted average common
shares outstanding and excludes any potential dilution; Diluted EPS reflects
potential dilution from the exercise or conversion of securities into common
stock, or from other contracts to issue common stock, and is similar to the
currently required Fully Diluted EPS. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods, and earlier application is not permitted. The adoption by the Company
of SFAS No. 128 will have no impact on the Company's reporting of EPS.
In October 1995, the FASB issued SFAS No. 123, 'Accounting for Stock Based
Compensation.' The statement encourages, but does not require, companies to
account for stock compensation awards based on their fair value at the date the
awards are granted. The resulting compensation award would be shown as an
expense on the statement of earnings. Alternatively, the statement allows for
the continued use of Accounting Principles Boards ('APB') Opinion No. 25,
'Accounting for Stock Issued to Employees,' which generally results in no
compensation cost for most fixed stock-option plans, with pro forma disclosure
of net income and earnings per share determined as if the fair value based
method had been applied in measuring compensation cost. The Company will adopt
SFAS No. 123 in fiscal 1997 by continuing to apply the provisions of APB Opinion
No. 25 while providing the required pro forma disclosures as if the fair value
method had been applied.
In March 1995, the FASB issued SFAS No. 121, 'Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of,' which is
effective for fiscal years beginning after December 15, 1995. SFAS No. 121
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. SFAS No. 121, which was adopted in fiscal 1996,
did not have a material impact on either GHB&M's or Milton's results of
operations, cash flows or financial position.
23
<PAGE>
BUSINESS
The following presentation contains forward looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under 'Risk Factors' and
elsewhere in this Prospectus.
OVERVIEW
The Company is a leading international marketing and communications
services company specializing in health care. The Company provides many of the
world's largest pharmaceutical and other health care companies with a
comprehensive range of integrated strategic marketing services designed to
accelerate the market's acceptance of new products and to sustain marketability
throughout their life-cycles. The Company's communications services include
advertising and promotion, publishing, medical education, public relations,
consulting, interactive multimedia, database marketing and marketing research
services. The Company also offers contract sales services which are delivered
through dedicated and syndicated sales teams.
INDUSTRY BACKGROUND
Pharmaceutical and other health care companies have been increasing their
spending on advertising, marketing and other communications services. Worldwide
spending by pharmaceutical and biotechnology companies on promotional marketing
and contract sales is estimated to reach $5.9 billion in 1997 and to increase by
$1.0 billion by 1999. Additionally, $3.0 billion is spent annually on continuing
medical education. The Company believes that such growth will continue due to a
number of factors, including the following:
NEED TO MAXIMIZE RETURNS ON NEW DRUGS. In response to the increasing costs
and time required to develop and commercialize a new pharmaceutical product,
pharmaceutical companies implement marketing and communications programs to
achieve rapid market penetration for newly developed products. The cost of
developing a new clinical drug is estimated to be approximately $500 million,
and the research and development process for a new clinical drug, from the
beginning stages of research to obtaining final regulatory approval in the
United States, is estimated to take approximately 12 years. As a result, once a
pharmaceutical company is ready to begin commercial introduction of a newly
developed drug, only approximately five to eight years of patent protection may
remain. In order to recoup their costs of development, maximize sales, develop
brand acceptance and loyalty and achieve a higher market share in the shortest
time period possible, pharmaceutical companies now begin their marketing efforts
for a new drug in its development stage and, upon regulatory approval and
commercialization, continue with sophisticated large-scale advertising and
marketing campaigns.
CHANGES IN THE HEALTH CARE INDUSTRY. In response to governmental and
market pressures to reduce the cost of health care services and products while
providing such services to a greater portion of the population, the health care
industry has undergone significant changes, including the emergence of managed
care as a primary means for delivery of and payment for such services and
products. Pharmaceutical and other health care companies and providers are being
forced to deliver a greater volume of services and products at reduced costs. In
addition to justifying health care services and products on the basis of safety
and efficacy, pharmaceutical and health care companies and providers must now
also focus increasingly on economic factors and cost-efficiency with respect to
their services and products. As a result, health care companies are spending
more money on marketing and communications services to educate health care
providers, consumers and managed care companies and other third party payor
organizations as to the cost-effectiveness, as well as safety and efficacy, of
their products.
GROWTH OF DIRECT-TO-CONSUMER MARKETING. During the last five years the use
of direct-to-consumer marketing ('DTC') to promote prescription drugs to
consumers has grown rapidly. Prior to the emergence of DTC, prescription drugs
were promoted almost exclusively to physicians. In 1996, the first year in which
more money was spent on DTC to promote prescription drugs than on advertising to
physicians, pharmaceutical companies spent approximately $600 million on DTC,
which is twice as much as they spent in 1995 and almost 10 times more than in
1991. Figures for the first few months of 1997 suggest that the total may double
again and may exceed $1.0 billion for the year.
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The Company believes that the tremendous growth in DTC in the United States
(DTC is currently prohibited in Europe by governmental regulations) evolved in
response to the increased costs of developing and commercializing new drugs and
the changes brought about by health care reform and managed care, as well as
increased consumer awareness of, and participation in, decisions concerning
health care treatment. As a result, DTC was developed to create brand awareness
and brand loyalty among consumers and to motivate the consumer to specifically
request more information from their physician with respect to a specific brand
of drug to determine its appropriateness for their treatment. In the past, DTC
has been primarily communicated through print media due to regulations imposed
by the United States Food and Drug Administration (the 'FDA') that controlled
the content of television advertisements. In August 1997, the FDA relaxed such
regulations by allowing televised DTC campaigns to promote the benefits of
specific brand-name drugs while only displaying the major side effects and risks
of such drugs in an easily understood format, as compared to the previously
required display of complex and lengthy data. The Company believes that the
relaxation of such FDA regulations will contribute to the rapid growth of DTC,
which the Company expects will continue, and that pharmaceutical companies will
increasingly rely primarily on marketing and communications firms with
particular expertise in DTC of prescription drugs.
INCREASED USE OF OUTSOURCED SALES AND MARKETING SERVICES. Pharmaceutical
and other health care companies, in response to cost-containment pressures, are
increasingly outsourcing labor intensive, high cost services, including
marketing and sales and research functions. For example, the introduction of a
new drug requires the immediate availability of a large number of specially
trained sales personnel. As a result, pharmaceutical and other health care
companies are increasingly relying on contract sales organizations to assemble,
train and provide them with the largest possible sales force covering numerous
locations to achieve rapid market penetration and increased sales volume.
NEW MEDIA. Advances in technology are dramatically influencing the
delivery of marketing information. Recent developments in digital technology
such as CD-ROM, the World Wide Web, the Internet, laptop PC presentations and
interactive kiosks are revolutionizing the marketing industry. For example,
interactive multimedia are increasingly being used for patient and physician
education, sales force training and public relations. The Company believes that
pharmaceutical and other health care companies will continue to seek to retain
progressive marketing and communications companies that have the resources and
expertise to develop and incorporate interactive multimedia and other new
technology in their programs and campaigns.
NEED FOR GLOBAL EXPERTISE. The Company believes globalization is
developing as a result of the recent surge of multinational consolidations in
the pharmaceutical industry, increased foreign protection of intellectual
property, the development of large multi-country trading blocks which may lead
to reduced barriers to foreign commerce, and world-wide access to common
information through the development and use of new media. The Company believes
that in the future, pharmaceutical and other health care companies will seek to
retain marketing and communications firms specializing in health care that have
international reach and experience and are capable of developing multinational
campaigns, or campaigns on a region-by-region basis, with consistent concepts.
STRATEGY
The Company's strategy is to capitalize on continued growth in marketing
and communications spending by pharmaceutical and other health care companies by
(i) maintaining and enhancing its creative excellence and technical expertise,
(ii) offering its clients a comprehensive range of integrated services, (iii)
continuing to specialize in health care, (iv) increasing its contract sales
services, and (v) further expanding globally. The Company intends to implement
its strategy through internal development and potential acquisitions.
MAINTAIN AND ENHANCE CREATIVE EXCELLENCE AND TECHNICAL EXPERTISE. The
Company seeks to recruit the best available creative talent to maintain its
creative excellence. The Company believes that its creative talent enables it to
develop new ways to effectively promote its clients' products. The Company
believes it is an industry leader in the development of DTC campaigns for
prescription drugs as well as marketing strategies and campaigns for 'switching'
a drug from prescription to over-the-counter (non-prescription) status. The
Company was one of the first firms to develop a DTC campaign for a prescription
drug and, currently, the Company has 12 DTC assignments. GHB&M, which has
consistently been recognized in the industry as one of the top health care
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communications agencies, was named 'Agency of the Year' in 1993 and 1996 by Med
Ad News, a medical advertising and communications trade publication, and was a
finalist for such award in 1992 and 1994. GHB&M was also named 'Most Creative
Agency' by Med Ad News in 1995. In addition, the Company maintains a high level
of technological expertise and utilizes new interactive multimedia and other new
technologies in its programs and campaigns.
OFFER A COMPREHENSIVE RANGE OF INTEGRATED SERVICES. The Company believes
that its clients are continuing to expand their sales and marketing efforts and
require marketing and communications companies that can provide a comprehensive
range of integrated services. The Company's communications services include
advertising and promotion, publishing, medical education, public relations,
consulting, interactive multimedia and database marketing services. The Company
also provides contract sales and marketing research services. Through such
diversification, the Company is able to provide a specific service or cross-sell
multiple services to its clients within a fully integrated campaign. The Company
believes that it will continue to realize significant benefits by capitalizing
on available opportunities which may arise to increase the number of services it
provides.
CONTINUED SPECIALIZATION IN HEALTH CARE. The Company will continue to
focus on providing its services primarily to pharmaceutical and other health
care companies. The Company believes that its expertise in and understanding of
the business, consumer, scientific, medical and regulatory issues relating to
the health care industry are critical in developing the most effective marketing
campaigns and strategies with respect to pharmaceutical and other health care
products and services. The Company's staff includes physicians, pharmacists,
biologists and other personnel with extensive experience in providing marketing
and communications services to health care companies. The Company intends to
continue to recruit experienced health care and scientific professionals to
ensure that its knowledge base remains up to date.
EXPANSION OF CONTRACT SALES SERVICES. Pharmaceutical and other health care
companies are increasingly outsourcing certain marketing and sales services to
contract sales organizations. Currently, the Company's contract sales
organization operates only in the United Kingdom and provides its services
primarily to consumer products companies, utilities and other non-health care
related companies. In March 1997, the Company expanded its contract sales
organization in the United Kingdom to enable it to provide services to
pharmaceutical and other health care companies in order to take advantage of the
increased use by such companies in the United Kingdom of contract sales forces
to market their products. The Company intends to expand its contract sales
operations into the United States by the end of the first quarter of 1998 and
anticipates that such operations will focus almost exclusively on pharmaceutical
and other health care products. The Company believes that contract sales will
enable it to complement its existing communications services with a flexible
sales force designed to augment its clients' sales activities.
EXTEND GLOBAL REACH. The Company believes that pharmaceutical and other
health care companies will increasingly seek to retain marketing and
communications companies with international reach and experience. The Company
believes that it is positioned to address such future demand through its
operations in the United States and the United Kingdom, and through Healthworld
B.V., a world-wide network of licensed independent advertising agencies located
in 12 other countries. Through Healthworld B.V., the Company can utilize the
creative talents of proven agencies that have expertise and knowledge of
particular countries or geographic regions in order to develop consistent and
integrated multinational campaigns for its clients. The Company currently
intends to continue to expand the Healthworld B.V. network and will regularly
evaluate opportunities to expand its business into other international
locations.
GROWTH THROUGH ACQUISITIONS. The Company intends to pursue acquisitions of
marketing and communications companies specializing in health care in its
existing markets and internationally, including possibly acquiring Healthworld
B.V. licensed agencies. The Company anticipates that it will apply a portion of
the net proceeds of the Offering to undertake such acquisitions if suitable
acquisition candidates are identified. While the Company regularly evaluates and
discusses potential acquisitions, the Company currently has no understandings,
commitments or agreements with respect to any such acquisitions. See 'Risk
Factors-- Management of Growth; Acquisition Risks,' 'Use of Proceeds' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
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SERVICES
The Company provides a wide array of marketing and communications services
to its clients ranging from the execution of a discrete marketing project, such
as designing product packaging, to taking responsibility for the overall
marketing message, which enables the Company to incorporate a wide variety of
its services into one integrated marketing campaign. The Company seeks to
develop brand loyalty and awareness for its clients at any stage of a product's
life-cycle and approaches each project by carefully evaluating the product, the
client's goals with respect to such product and industry and competitive
considerations.
The services provided by the Company include:
COMMUNICATIONS SERVICES
Advertising and Promotion. The Company's traditional advertising and
promotion services include developing creative concepts for advertising
campaigns for pharmaceutical and other health care products and applying such
creative concepts to the development and production of a wide variety of
marketing and promotional materials, including medical journal advertisements,
direct mail materials, sales force brochures, hospital displays, convention
exhibit panels, drug sample packages and reminder promotional items. Such
campaigns are targeted almost exclusively to physicians, nurses and other health
care providers and to wholesale distributors. The Company also analyzes
marketing research data, which is either developed by the Company (through
various methods including focus group studies, telephone interview studies and
mailings) or obtained from its clients and other third-party sources, to
determine the most appropriate audience to target as well as the types of
marketing and promotional materials to employ in a campaign.
In response to the rapid growth of DTC during the last five years, the
Company expanded its advertising and promotion services to include DTC. The
Company believes it has become an industry leader in developing DTC campaigns
for prescription drugs, having been one of the first firms to develop such a DTC
campaign. Through a dedicated team engaged exclusively in developing DTC
campaigns, the Company believes it offers more specialized and comprehensive
services to its clients than firms which focus primarily on the promotion of
consumer products generally or on non-DTC advertising and the promotion of
pharmaceutical products.
The Company also believes it is an industry leader in Europe in developing
campaigns for 'switching' a drug from prescription to over-the-counter status.
For example, in the United Kingdom, Regaine (Rogaine in the United States), a
product of Pharmacia & Upjohn, never achieved its sales expectations as a
prescription-only product despite being advertised and promoted to physicians by
other agencies. The Company believed that Regaine's lack of success was
primarily attributable to doctors' skepticism of the drug's effectiveness and a
general perception of hair loss being a cosmetic problem rather than a medical
disorder. In May 1995, the Company presented a comprehensive plan to Pharmacia &
Upjohn that included a new positioning and field marketing program emphasizing
the product's ability to stop further hair loss and relegated the regeneration
of hair to a secondary message. The Company developed and implemented an
integrated media plan which incorporated seven consumer advertisements, special
pharmacist programs (including in-store training manuals and display materials),
and a public relations launch in London.
Publishing. DTC publications are increasingly being employed as an
additional element of an integrated marketing campaign to promote disease
awareness, understanding of and compliance with treatment, and brand awareness
and loyalty. As part of a DTC campaign developed by the Company for Wyeth-Ayerst
Laboratories' drug Premarin, an estrogen replacement for menopausal women, the
Company developed and publishes Seasons, a bi-monthly magazine for women who are
on Premarin therapy, which is devoted to women's health care issues, including
issues concerning menopause and osteoporosis as well as the efficacy and
benefits of the drug and the means by which it can help improve overall quality
of life. The Company believes that the magazine's current per issue circulation
of 1.0 million Premarin patients makes it one of the most popular women's health
magazines ever published and that the Company's integrated marketing campaign
has contributed to Premarin becoming one of the world's leading drugs in terms
of prescription sales volume.
The Company is seeking to expand its publishing business by offering DTC
publications to pharmaceutical companies as a marketing tool with respect to
drugs used for long term therapy for chronic conditions or illnesses such as
asthma, arthritis, ulcers, heart disease, diabetes and obesity. In addition, the
Company believes that such
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DTC publications can be utilized by insurers and managed care companies as part
of a disease specific management program designed to educate a patient as to his
or her disease, including treatment options and lifestyle advice which may lead
to an overall reduction in the cost of treatment and care.
Medical Education. The Company develops medical educational programs
targeted primarily to health care providers that are tied closely to the
strategy and marketing goals for its clients, including continuing medical
education programs for which physicians obtain credit and are required to
complete to maintain their licenses. In addition to planning, implementing and
managing symposia, workshops and other conferences that commonly utilize a
multi-disciplinary faculty to address the full spectrum of care on featured
topics, the Company creates newsletters, articles, slide lecture kits and
posters. The Company also assists pharmaceutical and other health care companies
in developing, writing and placing journal articles and supplements, and offers
specialized training programs which incorporate new training technologies that
can be applied in selling pharmaceutical products to non-traditional purchasers,
including managed care organizations and public health officials. The Company
offers such services throughout a product's life-cycle, including prior to
regulatory approval, in order to create awareness and generate interest among
the health care community about such product prior to such approval.
Public Relations. The Company provides a broad range of public relations
services to its clients, including tactical development, media relations, crisis
management, special events, public sponsorship packages, professional and
patient association liaison, grant and fellowship initiatives, editorial
projects, graphic design and video production. The Company typically integrates
its public relations programs into its overall marketing campaign for a client.
The Company believes that its in-depth knowledge of professional trade and
consumer media and its strong media contacts provide it with ongoing
opportunities to place high impact stories publicizing client products and
services. The Company applies strict journalistic standards to all media contact
initiatives, including the development of news stories, research fact checking
and the production of press materials. In addition, the Company is responsive to
changing regulatory and business climates and works closely with the in-house
regulatory affairs departments and sales organizations of its clients.
Consulting. The Company's consulting services include strategic planning,
new product development, clinical and regulatory affairs and health economics.
Clients retain the Company to assist them in the development of strategic and
business plans. Typically, the Company investigates and studies the results of
clinical trials and marketing research studies to formulate a strategic
direction for a client's products. The Company may recommend to its clients,
among other things, conducting cost effectiveness clinical studies, extending
patent life protection through line extensions, considering various approaches
to dealing with the FDA, and developing pricing strategies and specific clinical
trials to support certain marketing objectives. The Company currently
subcontracts clinical and regulatory affairs and health economics consulting
services to independent companies specializing in such services. While the
Company is currently considering expanding to provide such regulatory affairs
and health economics consulting services 'in-house,' there can be no assurance
that the Company will, in the future, expand into such services.
Interactive Multimedia. The Company develops and incorporates interactive
multimedia and other new technologies into its programs and campaigns. The
Company has utilized virtually all existing digital formats, including laser
disc, kiosks, on-line and CD-ROM and owns an extensive archive of over 4,000
medical illustrations which it incorporates in such multimedia formats. The
Company also provides website design and updating, demographics targeting,
statistical measurement and list analysis. The Company believes that interactive
multimedia are particularly attractive to its clients because specific audiences
can be targeted. For example, the Company was retained by Sanofi Winthrop
Pharmaceuticals ('Sanofi') to create an interactive CD-ROM to educate a
specialty group of cardiologists who treat congestive heart failure with respect
to the features and benefits of Primacor. Sanofi believed that Primacor
possessed a novel mechanism of action which most physicians were unaware of or
did not understand. The Company determined that, in addition to the on-going
advertising and sales promotional efforts and the educational programs for the
brand, a CD-ROM program implemented as an educational tool would educate
physicians on the benefits of the brand. The CD-ROM program developed for
Primacor by clinicians presented specific case studies which illustrated the
broad utility and efficacy of Primacor. The interactive nature of CD-ROM allowed
physicians to gain a more comprehensive understanding of Primacor while having
an enjoyable learning experience. A study conducted by Sanofi's
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Marketing Research Department reported that participating doctors praised the
Primacor interactive CD-ROM program as providing an important and valuable
service to the medical community.
In another case, the Company was retained by Hoffmann-LaRoche Inc. to plan
and execute an integrated campaign for the launch of CellCept, a drug developed
to address the problem of organ transplant rejection. The Company's goal was to
develop an effective positioning for the brand that reflected the clinical
profile of the drug and to capture and convey information important to
physicians prescribing the drug, regardless of nationality. The Company's
involvement included naming the drug, developing a logo, conducting marketing
research to assist in creating a strategy, and developing product concepts and a
tactical plan. Since the transplant audience is relatively small and the client
lacked a presence in this closed community, the Company developed CenterSpan, a
restricted access website through which many of the major transplant centers
around the world could be linked in order to exchange data and information on
the drug. The sharing of important information through CenterSpan and the brand
positioning developed by the Company helped CellCept become one of the most
successful product launches in the history of the transplant field and made
Hoffman-La Roche a high-profile company among transplant physicians. The
CenterSpan program has been expanded and is now being run jointly by the
American Society of Transplant Physicians and the American Society of Transplant
Surgeons through a grant provided by Hoffmann-LaRoche.
Database Marketing. The Company frequently employs database technology in
developing marketing campaigns that are crafted to address a targeted audience.
The utilization by the Company of databases augments the Company's traditional
advertising and promotional services in which it analyzes marketing research
data for target audience profiling and segmentation. The Company utilizes its
own or its clients' databases as well as databases it leases from third parties
(including the American Medical Association). Through its direct marketing
division, the Company developed and manages a database of 1.5 million patients
generated from current and former patient readers per issue of Seasons. The
Company regularly evaluates other mechanisms that may enable it to collect data
to evaluate the effectiveness of its clients' marketing campaigns.
Marketing Research. The Company develops and offers its clients
specialized research programs to measure the 'return on investment' ('ROI') of
its DTC and other marketing programs. The ROI model utilized by the Company is a
proprietary model based on a consumer products research methodology that has
been adapted and modified for use with respect to prescription drugs. Through
the use of its ROI model, the Company has established normative data that it
will use as benchmarks for future ROI studies. The Company believes that data
from such programming assists the Company and its clients in determining the
most effective means of marketing a particular product.
CONTRACT SALES SERVICES
The Company offers a flexible range of contract sales services which are
delivered through dedicated and syndicated sales teams. The Company's contract
sales teams form a network of trained professionals that provides clients with
substantial flexibility in selecting the extent and costs of promoting products
as well as the clients' level of involvement in managing the sales effort.
Dedicated sales teams are comprised of sales representatives recruited by the
Company in accordance with client specifications to conduct sales efforts for a
particular client. Dedicated sales teams can be managed by the Company or can
report directly to the client, depending on client preference. Syndicated sales
teams promote a number of products for different clients and are generally
managed directly by the Company.
The Company believes that speed of recruitment, quality of training and
management of sales representatives, supported by advanced information
technology, are key to providing clients with a sales force tailored to meet
their geographic and scheduling needs. The Company's ability to assemble a sales
team quickly is a product of combining the talents of experienced personnel for
screening and interviewing candidates with the use of information technology,
such as scanning and resume tracking systems, to expedite recruitment. The
Company believes that it can recruit client-specific national sales force in as
few as eight to 12 weeks, depending on the assignment, whereas the Company
believes pharmaceutical and other health care product companies often take six
to nine months to build an internal sales force. Sound hiring procedures,
including background screenings and drug testing programs, supplemented by the
Company's internal training and development programs, help to ensure the quality
of recruited personnel.
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Currently, the Company provides its contract sales services in the United
Kingdom primarily to consumer product companies, utilities and other non-health
care related companies. The Company's contract sales organization, Headcount,
currently is the fifth largest contract sales company in the United Kingdom. The
Company hires sales personnel on a project-by-project basis, with the actual
number of representatives retained contingent upon a particular assignment. The
Company maintains a database listing approximately 5,000 sales personnel, and
typically employs, either on a part-time or full-time basis, approximately 1,000
sales persons at any given time.
In March 1997, the Company expanded its contract sales organization in the
United Kingdom to enable it to provide contract sales services to pharmaceutical
and other health care product companies. In addition, the Company currently
intends to begin providing contract sales services in the United States by the
end of the first quarter of 1998. The Company anticipates that its contract
sales operations in the United States will focus almost exclusively on
pharmaceutical and other health care products and services.
HEALTHWORLD B.V.
In August 1993, the Company organized Healthworld B.V., a world-wide
network of licensed independent marketing and communications agencies, in
response to the Company's belief that pharmaceutical and other health care
companies will increasingly seek to retain marketing and communications
companies with international reach and experience. Healthworld B.V. enables the
Company to utilize the creative talents of proven agencies that have expertise
and knowledge of particular countries or geographic regions to develop
consistent and integrated multinational campaigns for its clients.
Healthworld B.V. currently consists of 12 licensed independent
communications agencies (other than the Company) located in Belgium, Canada,
Denmark, Finland, France, Holland, Hungary, Italy, Norway, South Africa, Spain,
Sweden, the United Kingdom and the United States. Each member agency has entered
into a license agreement with Healthworld B.V. which provides, among other
things, that such agency will perform services for the clients of any other
member agency upon request by such other member agency.
Although to date Healthworld B.V. has not contributed materially to the
Company's results of operations, the Company believes that Healthworld B.V. has
enabled the Company to attract additional clients based upon the Company's
ability to offer global reach and expertise.
CLIENTS
The Company currently services approximately 45 clients. The Company's
clients are primarily pharmaceutical and other health care companies, including
health care service providers and manufacturers of diagnostic equipment, medical
equipment, medical devices and medical supplies. The Company's major clients
include five of the top ten pharmaceutical companies in the world today based on
global market share. The Company currently provides its contract sales services
in the United Kingdom primarily to consumer products companies, utilities and
other non-health care related companies. In 1996, the following clients of the
Company represented $300,000 or more of the Company's pro forma combined
revenues:
Alza Pharmaceuticals
Applied Microbiology, Inc.
Eli Lilly & Company
Forest Laboratories
The Hospital Saving Association
Johnson & Johnson Clinical Diagnostics
Kimberly-Clark Limited
Kraft Jacobs Suchard Limited
The Liposome Company
Muro Pharmaceuticals, Inc.
Ortho/McNeil Pharmaceuticals (a division of
Johnson & Johnson)
Roche Laboratories
Sanofi Winthrop Pharmaceuticals
SmithKline Beecham Pharmaceuticals
Whitehall, Inc
Wyeth-Ayerst Laboratories
Clients are not generally bound to an individual agency and may move their
accounts at any time from one agency to another. In addition, clients generally
tend to use more than one agency for their marketing requirements. The Company's
ability to compete for new advertising clients and assignments is limited by the
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Company's general practice (and the practice followed by many advertising
agencies) of not representing more than one client with competing product lines.
INTELLECTUAL PROPERTY
In 1997, the Company entered into a 50-year license agreement (the 'License
Agreement') with Healthworld B.V. pursuant to which Healthworld B.V. granted the
Company rights to use the 'Healthworld' and 'Healthworld Communications'
trademarks, the tradename 'Healthworld,' and the Healthworld logo, for $1.00 per
year. Under the License Agreement, Healthworld B.V. must obtain the Company's
prior written consent before further licensing such licensed property.
Healthworld B.V. has trademarks registered with the United States Patent and
Trademark Office for the words 'Healthworld' and 'Healthworld Communications'
which expire in March 2004 and for the Healthworld name together with its logo
which expires in May 2005. Healthworld B.V. also has trademarks registered or
applications for such registrations pending for the tradename 'Healthworld' and
the Healthworld logo in the United Kingdom and in each of the other countries in
which licensed Healthworld B.V. agencies are located, as well as several other
countries. The Company considers all of such United States and United Kingdom
trademarks to be material to its operations.
COMPETITION
The health care marketing and communications industry throughout the United
States and Europe is highly competitive. The Company competes with many other
marketing and communications firms, including international and regional
full-service and specialty marketing and communications firms. Consolidation
within the pharmaceutical and health care industries as well as a trend by
pharmaceutical and health care companies to limit outsourcing of sales,
marketing and communications services to fewer organizations has heightened the
competition among such service providers for a smaller number of clients. In
addition, many of the larger consumer product marketing and communications
companies have acquired specialty health care marketing and communications
companies, which themselves have been increasingly consolidating in recent
years. For instance, each of Bozell, Jacobs, Kenyon & Eckhardt, Grey
Advertising, Interpublic Group, Omnicom Group, Inc., Saatchi & Saatchi
Advertising Affiliates Holdings, Inc. and Young & Rubicam, Inc., has one or more
divisions specializing in health care marketing and communications. Many of
these companies have substantially greater financial resources, personnel and
facilities than the Company. If the previously described consolidation trends
continue, the Company may face greater competition for its clients and for
acquisition candidates. Although the Company believes it is able to compete on
the basis of the quality of its creative product, service, reputation and
personal relationships with clients, there can be no assurance that the Company
will be able to maintain its competitive position in the industry.
With respect to contract sales services provided to consumer products
companies in the United Kingdom, the Company currently competes against in-house
sales departments of such companies and contract sales organizations operating
in the United Kingdom, many of which are larger and have substantially greater
financial resources. With respect to contract sales services targeted to
pharmaceutical and medical devices, the Company currently competes in the United
Kingdom, and, if such services are expanded into the United States, will compete
in the United States, against the in-house sales departments of pharmaceutical
companies and local contract sales organizations specializing in pharmaceutical
and medical device products. The primary competitive factor affecting contract
sales and marketing services is the ability to quickly assemble, train and
manage large qualified sales forces to handle broad scale sales campaigns. The
Company believes that it competes favorably in these areas in the United Kingdom
with respect to its non-health care related contract sales services. However,
with respect to health care related contract sales services, there can be no
assurance that the Company will compete favorably in these areas in the United
Kingdom or in the United States.
While there are relatively low barriers to entry into the marketing and
communications industry as a whole, the Company believes that its specific
expertise with respect to the pharmaceutical and health care industry
distinguish it from prospective competitors attempting to develop health care
communications businesses. Notwithstanding the Company's expertise, it expects
that it will face additional competition from new entrants into the industry in
the future. There can be no assurance that existing or future competitors will
not develop or offer marketing communications services and products that provide
significant performance, creative, technical or other advantages over those
offered by the Company.
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GOVERNMENT REGULATION
While there are no laws that specifically regulate the health care
communications industry, the health care and pharmaceutical industries are
generally subject to a high degree of government regulation, and the trend is
toward regulation of increasing stringency. Federal, state and local laws and
regulations affect the permissible form, content and timing of marketing
activities involving pharmaceutical and other health care products. Some of
these laws relate to general considerations such as truthfulness, comparative
advertising and the relative responsibilities of clients and advertising firms.
Other laws, such as the Food, Drug and Cosmetics Act and the anti-fraud and
abuse laws and regulations affecting the Medicare, Medicaid and other
governmental health care programs, regulate the form, content and/or timing of
marketing activities involving pharmaceutical and other health care products,
including the permissible activities the Company may undertake to develop
markets for its clients' products. The Company has implemented a rigorous review
process, emphasizing the importance of compliance with regulatory matters. In
addition, the Company's clients generally follow a rigorous internal review
process.
PROPERTIES
The Company maintains corporate headquarters in New York in a leased
facility which occupies approximately 44,600 square feet of office space. The
lease for such office space is due to expire on December 31, 2009 and has
escalating rent currently at the base rate of $575,000 per annum which will
increase to $662,000 per annum in December 1997, $750,000 per annum in December
1998 and $970,000 per annum from December 2003 through the expiration of the
lease. The Company also leases small offices in Bellmore, New York and Chicago,
Illinois.
The Company leases approximately 2,850 square feet of office space in
London for its United Kingdom headquarters and approximately 5,218 square feet
of office space in Chertsey for its contract sales operations. The Company also
leases small offices located in Brighton and in two locations in each of
Berkshire and Surrey. The aggregate annual base rent for all of the Company's
United Kingdom facilities is approximately $393,000.
The Company believes that its existing facilities are adequate to meet its
current operating needs and that suitable additional space should be available
to the Company on reasonable terms should the Company require additional space
to accommodate future operations or expansion.
EMPLOYEES
As of August 1, 1997, the Company had four part-time employees and
approximately 190 full-time employees, 110 of which were employed in the
Company's United States operations and 80 of which were employed in the
Company's United Kingdom operations, excluding sales persons employed in the
Company's contract sales organization. In the United Kingdom, the Company
typically employs approximately 1,000 sales persons for its contract sales
organization at any given time, and such sales persons are employed both on a
full-time and part-time basis. The Company is not a party to any collective
bargaining agreement and the Company's employees are not represented by any
labor union. The Company considers its relationship with its employees to be
good. The Company's success depends in large part, upon its ability to attract,
develop, motivate and retain highly skilled creative and technical employees, of
which there can be no assurance.
LEGAL MATTERS
The Company is not a party to any pending litigation which, if decided
adversely to the Company, would have a material adverse effect on the business,
financial condition or results of operations of the Company, and the Company is
not aware of any material threatened litigation which might involve the Company.
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the Company's
directors and executive officers and those persons who will become directors
(each, a 'Director Nominee') immediately upon consummation of the Consolidation.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Steven Girgenti................................. 51 Chairman of the Board and Chief Executive
Officer
William Leslie Milton........................... 53 Vice Chairman of the Board and President
Stuart Diamond.................................. 36 Executive Vice President, Chief Financial
Officer and Secretary
William Butler.................................. 52 President--Global Communications Services
Herbert Ehrenthal............................... 61 President--U.S. Communications Services
Francis Hughes.................................. 59 Chief Creative Officer and Director
Michael Garnham................................. 42 Managing Director--Headcount
Peter Knight(1)(2).............................. 46 Director
Colin Lloyd(1)(2)(3)............................ 55 Director
Jonah Shacknai(1)(2)(3)......................... 40 Director
Alex Spizz(1)(3)................................ 49 Director
</TABLE>
- ------------------
(1) Director Nominee.
(2) Will become a member of the Compensation Committee immediately upon
consummation of the Consolidation.
(3) Will become a member of the Audit Committee immediately upon consummation of
the Consolidation.
Directors are elected annually. Each director holds office until the next
annual meeting of stockholders, or until his successor has been elected and
qualified. Executive officers are ordinarily elected annually and serve at the
discretion of the Board of Directors. See '--Employment Agreements' for a
description of certain employment agreements of executive officers.
STEVEN GIRGENTI has served as Chairman of the Board and Chief Executive
Officer of the Company since August 1997. Mr. Girgenti co-founded GH in April
1986 and has served as its President and Chief Executive Officer since then.
Beginning in 1969, Mr. Girgenti worked in the pharmaceutical industry for
advertising companies specializing in medical communications, including William
Douglas McAdams. Prior to that, Mr. Girgenti held a variety of positions with
pharmaceutical companies, including Director of Marketing Research and Product
Manager for DuPont Pharmaceuticals and Manager of Commercial Development for
Bristol-Myers Squibb Company.
WILLIAM LESLIE MILTON has served as Vice Chairman of the Board and
President of the Company since August 1997. Mr. Milton founded Milton Marketing
Limited in 1979 and has served as its Chairman of the Board and Chief Executive
Officer since such time. Prior to 1979, Mr. Milton held a variety of positions
with WarnerLambert Consumer Healthcare, Beecham Laboratories (South Africa),
Gillette Industries UK Limited, and Parke Davis Pty (South Africa) where he
developed an expertise in marketing management with respect to medical and
consumer health care products.
STUART DIAMOND has served as Executive Vice President, Chief Financial
Officer and Secretary of the Company since August 1997. Mr. Diamond was the Vice
President-Controller of the Licensing Division of Calvin Klein Inc., an apparel
company, from April 1996 to August 1997. He was the Vice President and Chief
Financial Officer of Fenway Partners Inc., a leveraged buyout firm, from April
1995 to April 1996. Mr. Diamond was the Senior Vice President and Chief
Financial Officer of Medicis Pharmaceutical Corp., a publicly traded
pharmaceutical company, from 1990 to April 1995.
33
<PAGE>
WILLIAM BUTLER will become President of the Company's Global Communications
Services upon consummation of the Consolidation. Mr. Butler has been President
and Chief Operating Officer of the GHB&M Division of GH. Mr. Butler co-founded
GH in April 1986 and has served as its Executive Vice President since such time.
Mr. Butler has worked for various medical communications firms, including Sudler
& Hennessey and William Douglas McAdams. Prior to that time, Mr. Butler worked
in a number of marketing positions at Pfizer Inc. and Continental Group.
HERBERT EHRENTHAL will become President of the Company's U.S.
Communications Services upon consummation of the Consolidation. Mr. Ehrenthal
has been President and Chief Operating Officer of Rubin Ehrenthal & Associates,
a division of GH, since 1991 when Rubin, Reid, Noto & Ehrenthal, Inc. ('Rubin
Ehrenthal') (of which he was a founding member) merged with GH. Prior to his
employment with Rubin Ehrenthal, Mr. Ehrenthal held a variety of senior
management positions with various advertising agencies, including BBDO Worldwide
Inc. and Ted Bates.
FRANCIS HUGHES has been a director of the Company since August 1997 and
will become Chief Creative Officer of the Company upon consummation of the
Consolidation. Mr. Hughes co-founded GH in April 1986 and has served as its
Secretary since then. In 1980, Mr. Hughes co-founded William J. Bologna
International, Inc., a health care communications company. Prior to that time,
Mr. Hughes worked in the medical divisions of various advertising companies,
including J. Walter Thompson Co., Compton and William Douglas McAdams.
MICHAEL GARNHAM has been the Managing Director of Headcount since August
1993. Prior to August 1993, Mr. Garnham was the Associate Director of FMCG Field
Marketing Ltd., a field marketing company.
PETER KNIGHT will become a director of the Company upon consummation of the
Consolidation. Mr. Knight has been a partner of the law firm of Wunder, Knight,
Levine, Thelen & Forsey since 1991. He was General Counsel and Secretary of
Medicis Pharmaceutical Corp. from 1989 to 1991. Mr. Knight is currently a
director of Comsat Corp., an international telecommunications and network
service company, Medicis Pharmaceutical Corp. and Whitman Education Group Inc.,
a private for-profit education company.
COLIN LLOYD will become a director of the Company upon consummation of the
Consolidation. Mr. Lloyd has been the Chief Executive Officer of Direct
Marketing Association (U.K.) Ltd., a direct marketing trade association, since
September 1993. Mr. Lloyd served as a consultant to and a director of various
companies from 1992 to 1993, and was President of Marketing Services Worldwide
of Roux, Seguile, Cyzak & Goudard, SA ('RSCG'), an international advertising
group, from February 1990 to August 1991. In 1969, Mr. Lloyd co-founded KLP
Group plc ('KLP'), a sales promotion and marketing services company in the
United Kingdom in which he served as the Chief Executive Officer until August
1991. KLP was acquired in 1990 by RSCG.
JONAH SHACKNAI will become a director of the Company upon consummation of
the Consolidation. Mr. Shacknai has been Chairman of the Board and Chief
Executive Officer of Medicis Pharmaceutical Corp. since 1988. From 1982 to 1988,
Mr. Shacknai was a senior partner in the law firm of Royer, Shacknai, and Mehle,
where he represented over 34 multinational pharmaceutical and medical device
companies. From 1983 to 1986, Mr. Shacknai was also an executive officer of Key
Pharmaceutical, Inc., prior to its acquisition by Schering-Plough Corp. From
1977 to 1982, Mr. Shacknai served as Chief Aide to a United States House of
Representatives committee with responsibility for health policy. Mr. Shacknai
serves as a member of the National Arthritis and Musculoskeletal and Skin
Diseases Advisory Council of the National Institute of Health, and the
U.S.-Israel Science and Technology Commission.
ALEX SPIZZ will become a director of the Company upon consummation of the
Consolidation. For more than the past five years, Mr. Spizz has been a senior
member of the law firm of Todtman, Young, Nachamie, Hendler & Spizz, P.C.,
counsel to the Company, GHB&M and Healthworld B.V. in connection with the
Consolidation and other corporate matters.
COMMITTEES OF THE BOARD
Upon consummation of the Offering, the Board of Directors will establish an
Executive Committee, Compensation Committee and Audit Committee. The Executive
Committee will be entrusted with the authority to exercise the powers of the
Board of Directors between meetings of the Board of Directors. The Compensation
Committee will review and recommend to the Board of Directors the compensation
and benefits of all officers of
34
<PAGE>
the Company, review general policy matters relating to compensation and benefits
of employees of the Company and administer the issuance of stock options to the
Company's officers, employees, directors and consultants. The Audit Committee
will be responsible for recommending annually to the Board of Directors the
independent auditors to be retained by the Company, and will meet with
management and the Company's independent auditors to determine the adequacy of
internal controls and other financial reporting matters.
EXECUTIVE COMPENSATION
Healthworld, which was incorporated on September 12, 1996 and has conducted
limited operations and generated no revenues to date, did not pay any
compensation to its executive officers in 1996. The following table sets forth
the cash compensation paid by GHB&M for the fiscal year ended December 31, 1996,
and by Milton for the fiscal year ended November 30, 1996, to the Chief
Executive Officers of each of GHB&M and Milton, respectively, and to each of the
four other most highly compensated executive officers of GHB&M and Milton whose
cash compensation exceeded $100,000 for such respective fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- ------------------------------------------------------- ------- ------- --------------- ---------------
<S> <C> <C> <C> <C>
Steven Girgenti
Chairman of the Board and
Chief Executive Officer.............................. -- -- $ 337,000(1) $ 981,500(2)
William Leslie Milton
Vice Chairman of the Board and President............. $98,280(3)(4) -- $ 32,340(3)(5) --
William Butler
President--Global Communications Services............ -- -- $ 275,000(1) $ 222,622(2)
Herbert Ehrenthal
President--U.S. Communications Services.............. -- -- $ 275,000(1) $ 231,211(2)
Francis Hughes
Chief Creative Officer............................... -- -- $ 225,000(1) $ 52,372(2)
Michael Garnham
Managing Director--Headcount......................... $92,301(3) -- -- $ 45,864(3)(6)
</TABLE>
- ------------------
(1) Represents consulting fees paid by certain of the companies comprising GHB&M
to certain companies wholly-owned by each respective officer.
(2) Represents distributions made to such individuals by certain of the
companies comprising GHB&M. A portion of such distributions were made to
cover each individual's 1995 and estimated 1996 tax liabilities associated
with the election of the companies comprising GHB&M to be treated as S
Corporations (other than Syberactive, which was treated as a C Corporation)
during such periods.
(3) Calculated using the 1996 average exchange rate of $1.56 = pounds 1.00.
(4) Compensation paid by Milton Marketing.
(5) Includes (i) a $15,600 contribution by Milton Marketing to Mr. Milton's
pension plan, and (ii) an aggregate of $10,952 for automobile expenses.
(6) Represents a cash distribution by one of the companies comprising Milton.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation policies and decisions, including those relating to salary,
bonuses and benefits of executive officers, have been set or made by Mr.
Girgenti, with respect to GHB&M, and Mr. Milton, with respect to Milton, since
the formation of such companies. Upon consummation of the Offering, the Board of
Directors of the Company will establish a Compensation Committee which will,
among other things, recommend to the Board of Directors the compensation to be
paid to the Company's officers. See '--Committees of the Board.'
35
<PAGE>
EMPLOYMENT AGREEMENTS
The Company will enter into a three-year employment agreement with each of
Messrs. Girgenti, Milton, Butler, Ehrenthal, Hughes and Garnham (the 'Executive
Employment Agreements'), which will provide that Messrs. Girgenti, Milton,
Butler, Ehrenthal, Hughes and Garnham (the 'Executives') will serve as the
Company's Chairman of the Board and Chief Executive Officer, Vice Chairman of
the Board and President, President--Global Communications Services,
President--U.S. Communications Services, Chief Creative Officer and Managing
Director--Headcount, respectively, at an annual salary of $360,000, $325,000,
$300,000, $300,000, $225,000 and $175,000, respectively, subject to annual
review and increase at the discretion of the Board of Directors of the Company.
Each Executive Employment Agreement is automatically renewable after the initial
three-year term for successive one year periods unless either the Company or the
Executive notifies the other at least 30 days prior to the expiration of any
term of its or his desire to terminate the agreement. Each Executive Employment
Agreement will also contain a confidentiality provision as well as a
noncompetition provision which will prohibit the Executive from competing with
the Company during the term of the applicable agreement and for a two year
period after the expiration of such term. Under Mr. Girgenti's Executive
Employment Agreement, in the event that the Company terminates Mr. Girgenti
without cause (as defined in the agreement) prior to the expiration of the
agreement, the Company will be obligated to pay Mr. Girgenti severance in an
amount equal to twice his then current base salary.
Furthermore, each Executive Employment Agreement (other than Mr. Hughes'
agreement) will provide that Messrs. Girgenti, Milton, Butler, Ehrenthal and
Garnham will be entitled to a bonus based on achieving or exceeding certain
profits and revenue performance goals set by the Company during the term of
their respective employment agreement. Mr. Ehrenthal's agreement will also
provide that he will be entitled to a two year consulting arrangement, at the
end of his employment term, for $120,000 per annum.
In August 1997, the Company entered into a three-year employment agreement
with Stuart Diamond (the 'Diamond Employment Agreement'), which provides that
Mr. Diamond will serve as the Company's Executive Vice President and Chief
Financial Officer at an annual base salary of $175,000, subject to annual review
and increase at the discretion of the Board of Directors of the Company. The
Diamond Employment Agreement also provides that Mr. Diamond will receive a
minimum bonus of $30,000 for the year ending December 31, 1997 and may be
entitled to additional annual bonuses as determined by the Board of Directors in
its sole discretion. The Diamond Employment Agreement is automatically renewable
after the initial three-year term for successive one year periods unless either
the Company or Mr. Diamond notifies the other at least 30 days prior to the
expiration of any term of its or his desire to terminate the agreement. The
Diamond Employment Agreement contains a confidentiality provision as well as a
non-competition provision which prohibits Mr. Diamond from competing with the
Company during the term of the agreement. Under the Diamond Employment
Agreement, the Company will be obligated to pay Mr. Diamond severance in an
amount equal to (i) six months base salary, in the event that the Company
terminates Mr. Diamond without cause (as defined in the agreement) prior to or
subsequent to the expiration of the agreement, and (ii) a minimum of three
months base salary (subject to increase at the discretion of the Board of
Directors) in the event that the Company is sold or a change of control in the
Company occurs.
STOCK OPTION PLAN
Prior to the date of this Prospectus, the Board of Directors will adopt,
and the stockholders will approve, the Company's 1997 Stock Option Plan ('Stock
Option Plan'). The Stock Option Plan will provide for the grant of (i) options
that are intended to qualify as incentive stock options ('Incentive Stock
Options') within the meaning of Section 422 of the Code to certain employees
(including officers and directors who are employees) and (ii) options not
intended to so qualify to the Company's employees, officers, directors and
consultants. The total number of shares of Common Stock for which options may be
granted under the Stock Option Plan will be 710,000. To date, no stock options
have been granted under the Stock Option Plan. On the effective date of the
Offering, the Company will grant options under the Stock Option Plan to purchase
up to an aggregate of shares of Common Stock at an exercise price per
share equal to the initial public offering price.
The Stock Option Plan will be administered by the Compensation Committee,
which, under such plan, must be comprised of two or more non-employee directors
who will determine the terms of options to be granted under such plan, including
the exercise price, the number of shares subject to the option and the terms and
conditions of exercise. No option granted under the Stock Option Plan will be
transferable by the optionee other than by will or
36
<PAGE>
the laws of descent and distribution and each option will be exercisable during
the lifetime of the optionee only by such optionee.
The exercise price of all stock options granted under the Stock Option Plan
must be at least equal to the fair market value of such shares on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any Incentive Stock Option must be not less than 110% of the fair
market value on the date of grant. The term of each option granted pursuant to
the Stock Option Plan will be established by the Compensation Committee in its
sole discretion; provided, however, that the maximum term of each Incentive
Stock Option granted pursuant to the Stock Option Plan is ten years. With
respect to any Incentive Stock Option granted to a participant who owns stock
possessing more than 10% of the total combined voting power of all classes of
the Company's outstanding capital stock, the maximum term is five years. Except
as otherwise provided by the Compensation Committee at the time of grant,
options shall become exercisable ratably over five years commencing on the first
anniversary of the date of grant.
The Stock Option Plan also will provide for an automatic annual option
grant for the non-employee directors. Each non-employee director will
automatically receive an option grant for 2,500 shares of Common Stock on the
effective date of the Offering and on the date of each annual meeting of
stockholders thereafter. In addition, a non-employee director who becomes a
director subsequent to the effective date of the Offering and other than on the
date of any annual meeting of stockholders will receive an option grant for
2,500 shares of Common Stock on the date he or she becomes a director. Each
grant will be at an exercise price per share equal to the market price of the
Common Stock on the grant date, will become fully exercisable on the first
anniversary of the date of grant, and will have a term of ten years measured
from the grant date, subject to earlier termination if an optionee's service as
a Board member is terminated for cause.
COMPENSATION OF DIRECTORS
Each non-employee member of the Board of Directors will receive an annual
fee of $2,000 plus reimbursement of expenses incurred in attending meetings.
Additionally, each non-employee member of the Board of Directors will
automatically receive option grants, as provided in the Stock Option Plan. See
'Stock Option Plan.'
KEY PERSON LIFE INSURANCE
The Company intends to obtain $4 million and $2 million term life insurance
policies covering Mr. Girgenti and Mr. Milton, respectively. The Company will be
the sole beneficiary of such policies.
37
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the consummation of the Offering, Healthworld will enter into the
Consolidation Agreements with the stockholders of GHB&M and Milton pursuant to
which, on the effective date of the Offering, Healthworld will acquire all of
the issued and outstanding stock of each of GHB&M and Milton from the
stockholders of GHB&M and Milton in exchange for an aggregate of 5,000,000
shares of Common Stock of the Company, at which time GHB&M and Milton will
become wholly-owned subsidiaries of Healthworld. See 'The Consolidation.'
Immediately prior to the consummation of the Consolidation, GHB&M will make
the S Corporation Distributions to its stockholders of approximately $3.5
million in the aggregate from existing cash balances for the payment by such
stockholders of taxes due on S Corporation earnings. See 'The Consolidations.'
GHB&M has incurred indebtedness which is personally guaranteed by its
stockholders or by entities controlled by its stockholders. In particular, the
payment of all obligations under the GHB&M Credit Facility is guaranteed jointly
and severally by Messrs. Girgenti, Hughes, Butler and Ehrenthal, individually,
and by certain of the companies comprising GHB&M. At June 30, 1997, the
aggregate principal amount of indebtedness outstanding under the GHB&M Credit
Facility was $175,000. In addition, Mr. Milton has personally guaranteed
Milton's obligations under its lease for office space located in Windsor,
Berkshire. The lease expires in June 2004, and the current annual base rent
under the lease is approximately $127,000. Pursuant to the terms of the
Consolidation Agreements, the Company will use commercially reasonable efforts
to have such stockholders' personal guarantees on the balance of the
indebtedness and the obligations under the lease released within 120 days after
the consummation of the Consolidation and, in the event that the guarantee on
the indebtedness cannot be released, to repay the balance of such indebtedness
or to assume the obligations under the lease, as the case may be.
In 1991, each of the companies comprising GHB&M and each of their
stockholders entered into certain stockholders' agreements. Under the
Consolidation Agreements, GHB&M and its stockholders will agree to terminate
such agreements, concurrent with the consummation of the Consolidation.
Todtman, Young, Nachamie, Hendler & Spizz, P.C., of which Alex Spizz, a
Director Nominee, is a partner, represents GHB&M, Healthworld B.V. and the
Company in connection with the Consolidation and other corporate matters.
38
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of the date of this Prospectus, after
giving effect to the Consolidation, for (i) each director and Director Nominee;
(ii) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock; (iii) each executive officer of the
Company and (iv) all directors, Director Nominees and executive officers of the
Company as a group. Each stockholder has sole voting and investment power with
respect to the shares set forth opposite such stockholder's name. All persons
listed below have an address c/o the Company's principal executive offices in
New York.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED
------------------------------------
NAME NUMBER OF SHARES BEFORE OFFERING AFTER OFFERING
- ----------------------------------------------------------- ------------------- --------------- -----------------
<S> <C> <C> <C>
Steven Girgenti............................................ 2,195,925 43.9% 30.9%
William Leslie Milton...................................... 1,297,330 25.9% 18.3%
Stuart Diamond............................................. -- -- --
William B. Butler.......................................... 485,070 9.7% 6.8%
Herbert Ehrenthal.......................................... 596,505 11.9% 8.0%
Francis Hughes............................................. 172,500 3.5% 2.4%
Michael Garnham............................................ 188,571 3.8% 2.7%
Peter Knight............................................... -- -- --
Colin Lloyd................................................ -- -- --
Jonah Shacknai............................................. -- -- --
Alex Spizz................................................. -- -- --
All directors, Director Nominees and executive officers as
a group (11 persons)..................................... 4,935,901 98.7% 69.5%
</TABLE>
39
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary description of the Company's capital stock and
certain provisions of the Company's Certificate of Incorporation and Bylaws does
not purport to be complete and is qualified in its entirety by reference to the
Company's Certificate of Incorporation and Bylaws, copies of which have been
filed with the Securities and Exchange Commission (the 'Commission') as exhibits
to the Company's registration statement on Form S-1 (the 'Registration
Statement') of which this Prospectus forms a part.
GENERAL
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $.01 per share, and 1,000,000 shares of preferred stock,
par value $.01 per share (the 'Preferred Stock'). After giving effect to the
Consolidation, but prior to the consummation of the Offering, the Company will
have outstanding 5,000,000 shares of Common Stock and no shares of Preferred
Stock, and will have eight holders of record of Common Stock. Upon completion of
the Offering, the Company will have outstanding 7,100,000 shares of Common Stock
(7,415,000 shares if the Underwriters' over-allotment option is exercised in
full) and no shares of Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. Subject to the prior
rights of any series of Preferred Stock which may from time to time be
outstanding, holders of Common Stock are entitled to receive ratably, dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor and, upon the liquidation, dissolution, or winding up of the
Company, are entitled to share ratably in all assets remaining after payment of
liabilities and payment of accrued dividends and liquidation preferences on the
Preferred Stock, if any. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities. The
outstanding Common Stock is, and the shares of Common Stock to be issued
pursuant to the Consolidation and the Offering will be, upon payment therefor,
fully paid and nonassessable.
PREFERRED STOCK
The Preferred Stock may be issued from time-to-time by the Board of
Directors in one or more series. Subject to the provisions of the Company's
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue shares, to fix
the number of shares and to change the number of shares constituting any series
and to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any series of the Preferred
Stock, in each case without any further action or vote by the stockholders. The
Company has no current plans to issue any shares of Preferred Stock.
The issuance of Preferred Stock, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of rendering more difficult or discouraging an attempt to obtain
control of the Company by means of a tender offer, proxy contest, merger or
otherwise, thereby protecting the continuity of the Company's management. The
issuance of shares of the Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by the Company may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of Preferred Stock may discourage
bids for the Common Stock or may otherwise adversely affect the market price of
the Common Stock.
LIMITATION OF LIABILITY
The Company's Certificate of Incorporation and By-laws include provisions
which eliminate the personal liability of the Company's directors and officers
for monetary damages resulting from breaches of their fiduciary duty of care
(provided that such provision does not eliminate liability for breaches of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, violations of Section 174
of the Delaware General Corporation Law, or for any transaction from which the
director derived an
40
<PAGE>
improper personal benefit). These provisions do not limit or eliminate the right
of the Company or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
The Certificate of Incorporation also provides that the Company shall indemnify
its directors and officers to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. The Company believes that these
provisions are necessary to attract and retain qualified directors and officers.
It is the position of the Commission that indemnification for liabilities under
the Securities Act is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware General Corporation Law (the 'Delaware
anti-takeover law'), certain 'business combinations' are prohibited between a
Delaware corporation, the stock of which is generally publicly traded or held of
record by more than 2,000 stockholders, and an 'interested stockholder' of such
corporation for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation not to be governed by the Delaware anti-takeover
law (the Company has not made such an election), (ii) the business combination
is approved by the board of directors of the corporation before the other party
to the business combination became an interested stockholder, (iii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers or
held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan), or (iv) the business
combination was approved by the board of directors of the corporation and
ratified by 66 2/3% of the voting stock which the interested stockholder did not
own. The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors. The term 'business combination' is defined
generally to include mergers or consolidations between a Delaware corporation
and an interested stockholder, transactions with an interested stockholder
involving the assets or stock of the corporation or its majority-owned
subsidiaries, and transactions which increase an interested stockholder's
percentage ownership of stock. The term 'interested stockholder' is defined
generally as those stockholders who become beneficial owners of 15% or more of a
Delaware corporation's voting stock.
These provisions could delay or frustrate the removal of incumbent
directors or a change in control of the Company. The provisions also could
discourage, impede, or prevent a merger, tender offer or proxy contest, even if
such event would be favorable to the interests of stockholders.
TRANSFER AGENT
American Stock Transfer & Trust Company is the transfer agent and registrar
for the Common Stock.
41
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Consolidation and completion of the Offering, the
Company will have outstanding 7,100,000 shares of Common Stock. All of the
2,100,000 shares of Common Stock offered hereby (plus any additional shares sold
upon exercise of the Underwriters' over-allotment option) will be freely
tradeable without restriction or further registration under the Securities Act,
except for any shares purchased by any person who is or thereby becomes an
'affiliate' of the Company, which shares will be subject to the resale
limitations contained in Rule 144 promulgated under the Securities Act as
described below. The remaining 5,000,000 shares of Common Stock which will be
issued to the stockholders of GHB&M and Milton in the Consolidation, will be
'restricted securities' within the meaning of Rule 144 under the Securities Act
and, in general, if held for at least one year, will be eligible for sale in the
public market in reliance upon and subject to the limitations of Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
'affiliate' of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three month period, the number of shares
beneficially owned for at least one year that does not exceed the greater of (i)
one percent of the number of the then outstanding shares of Common Stock; or
(ii) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the date on which notice of the proposed sale is sent
to the Commission. Sales under Rule 144 are also subject to certain requirements
as to the manner of sale, notice and the availability of current public
information about the Company. Furthermore, a person who is deemed not to have
been an affiliate of the Company during the 90 days preceding a sale by such
person and who has beneficially owned such shares for at least two years is
entitled to sell such shares without regard to the volume, manner of sale or
notice requirement.
The Company and its officers and directors and the stockholders of GHB&M
and Milton will enter into Lock-up Agreements ('Lock-up Agreements') under which
they will agree not to offer, sell or otherwise dispose of any of their shares
of Common Stock or other securities of the Company for a period of 180 days,
commencing upon the date of this Prospectus, without the prior written consent
of Unterberg Harris, other than sales or issuances by the Company pursuant to
the exercise of the Underwriters' over-allotment option or pursuant to the grant
of stock options under the Company's Stock Option Plan.
The stockholders of GHB&M and Milton will, pursuant to the Consolidation
Agreements, be granted the right by the Company, commencing one year from the
effective date of the Offering, to require the Company, subject to certain
exceptions, to include their shares (up to 5,000,000 in the aggregate) in any
and all offerings in which the Company proposes to register shares of Common
Stock for its own account or for the account of others under the Securities Act,
subject to the right of any managing underwriter of any such offering to exclude
some or all of the shares for marketing reasons.
Prior to the Offering, no public market for the Company's securities has
existed. Following the Offering, no predictions can be made as to the effect, if
any, of future public sales of restricted shares or the availability of
restricted shares for sale in the public market. Nevertheless, the sale or
availability for sale of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices and the ability of the
Company to raise equity capital in the future.
42
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the 'Underwriting Agreement'), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Unterberg
Harris and Pennsylvania Merchant Group Ltd are acting as Representatives, have
severally agreed to purchase, the respective number of shares of Common Stock
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------------------------------------- ---------
<S> <C>
Unterberg Harris...........................................................................
Pennsylvania Merchant Group Ltd............................................................
---------
Total................................................................................. 2,100,000
---------
---------
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby if any such shares are purchased. In the
event of a default by an Underwriter, the Underwriting Agreement provides that,
in certain circumstances, such commitments of the non-defaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock offered hereby to the public at
the public offering price per share set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow,
a discount not in excess of $ per share on sales to certain other
dealers. After the public offering, the offering price, discount and reallowance
may be changed.
The Company has granted the Underwriters an option, which may be exercised
within 30 days after the date of this Prospectus, to purchase up to an
additional 315,000 shares of Common Stock to cover over-allotments, if any, at
the initial public offering price, less the underwriting discount. To the extent
that the Underwriters exercise the option, each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage of shares that the number of shares of Common Stock to be
purchased by it shown on the foregoing table bears to the total number of shares
initially offered hereby.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
The Company has agreed to pay the Representatives a non-accountable expense
allowance equal to 1% of the aggregate offering price of the shares of Common
Stock offered hereby (including any shares of Common Stock purchased pursuant to
the exercise of the Underwriters' over-allotment option).
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include (i)
over-allotment transactions, (ii) stabilizing transactions, consisting of
certain bids or purchases for the purpose of preventing or restraining a decline
in the market price of the Common Stock, and (iii) purchases to cover syndicate
short positions created in connection with the Offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the Common Stock sold in the
Offering for their account may be reclaimed by the
43
<PAGE>
syndicate if such shares of Common Stock are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock which may be higher
than the price that might otherwise prevail in the open market. These
transactions may be effected on The Nasdaq National Market or otherwise, and
these activities, if commenced, may be discontinued at any time.
The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
The Company has applied for quotation of the Common Stock on The Nasdaq
National Market under the symbol 'HWLD.'
The Company and its officers and directors and the stockholders of GHB&M
and Milton will enter into Lock-Up Agreements under which they will agree not to
offer, sell or otherwise dispose of any of their shares of Common Stock or other
securities of the Company for a period of 180 days after the date of this
Prospectus without the prior written consent of Unterberg Harris, other than
sales or issuances by the Company pursuant to the exercise of the Underwriters'
over-allotment option or pursuant to the grant of stock options under the
Company's Stock Option Plan.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock offered hereby will
be arbitrarily determined by negotiation between the Company and the
Representatives and will not necessarily be related to the Company's asset
value, net worth or other established criteria of value. In determining the
initial public offering price, the Representatives and the Company will
consider, among other things, market prices of similar securities of comparable
publicly traded companies, the financial conditions and operating information of
companies engaged in activities similar to those of the Company, the financial
condition and prospects of the Company and the general condition of the
securities market.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Rosenman & Colin LLP, New York, New York. Certain legal
matters in connection with the sale of the shares offered hereby will be passed
upon for the Underwriters by Akin, Gump, Strauss, Hauer & Feld, L.L.P., New
York, New York.
EXPERTS
The combined financial statements of GHB&M and the consolidated financial
statements of Milton included elsewhere in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
FORWARD LOOKING STATEMENTS
This Prospectus and the Registration Statement, of which this Prospectus is
a part, contain various forward-looking statements and information that are
based on management's beliefs as well as assumptions made by and information
currently available to management for the Company. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected. Among the key factors that may have a direct
bearing on the Company's operating results are fluctuations in the economy,
successful integration of future acquisitions and the impact of competition.
44
<PAGE>
ADDITIONAL INFORMATION
The Company is not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'). The Company has filed
with the Commission a Registration Statement, together with exhibits thereto,
relating to the shares of Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain of the
information set forth in the Registration Statement. For further information
with respect to the Company and to the shares of Common Stock offered hereby,
reference is made to such Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or other documents referred to are
not necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement and exhibits may be inspected and copied
at the public reference section at the Commission's principal office, 450 5th
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
Regional Offices located at the Northwestern Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661-2511, and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies may be obtained from the Commission's
principal office upon payment of the fees prescribed by the Commission. Copies
of such materials can be obtained from the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20545, at prescribed rates. In addition,
the Commission maintains a Website on the Internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Website is
http://www.sec.gov.
Following the Offering, the Company will be subject to the reporting and
other requirements of the Exchange Act and intends to furnish to its
stockholders annual reports containing audited financial statements and
quarterly reports containing unaudited consolidated summary financial
information for each of the first three quarters of each fiscal year.
45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HEALTHWORLD CORPORATION PRO FORMA COMBINING
Introduction to Unaudited Pro Forma Combining Financial Statements......................................... F-2
Pro Forma Combining Balance Sheets (unaudited)............................................................. F-3
Pro Forma Combining Statements of Income (unaudited)....................................................... F-6
Notes to Unaudited Pro Forma Combining Financial Statements................................................ F-11
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
Report of Independent Public Accountants................................................................... F-12
Combined Balance Sheets.................................................................................... F-13
Combined Statements of Income.............................................................................. F-14
Combined Statements of Stockholders' Equity................................................................ F-15
Combined Statements of Cash Flows.......................................................................... F-16
Notes to Combined Financial Statements..................................................................... F-17
MILTON MARKETING GROUP LIMITED AND SUBSIDIARIES
Report of Independent Public Accountants................................................................... F-22
Consolidated Balance Sheets................................................................................ F-23
Consolidated Statements of Income.......................................................................... F-24
Consolidated Statements of Stockholders' Equity............................................................ F-25
Consolidated Statements of Cash Flows...................................................................... F-26
Notes to Consolidated Financial Statements................................................................. F-27
</TABLE>
F-1
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combining financial statements give
effect to the contributions of the outstanding capital stock of Girgenti,
Hughes, Butler and McDowell, Inc. and its affiliated entities ('GHB&M') and
Milton Marketing Group Limited and its subsidiaries ('Milton') to Healthworld
Corporation (the 'Company') in exchange for an aggregate of 5,000,000 shares of
common stock of the Company (collectively, the 'Consolidation'). The
Consolidation will occur on the effective date of the Offering made by this
Prospectus and will be accounted for using the pooling of interests method of
accounting.
The unaudited pro forma combining balance sheets give effect to the
Consolidation, among other events, as if each event had occurred on the date of
each respective balance sheet. The unaudited pro forma combining statements of
income give effect to the Consolidation, among other events, as if each event
had occurred at the beginning of each period presented.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The pro forma financial data does not purport to represent
what the Company's financial position or results of operations would actually
have been if such transactions in fact had occurred on the dates indicated or to
project the Company's financial position or results of operations for any future
period. Since GHB&M and Milton were not under common control or management,
historical combined results may not be comparable to, or indicative of, future
performance. The unaudited pro forma combining financial statements should be
read in conjunction with the other financial statements and notes thereto
included elsewhere in this Prospectus. For a discussion of the risk factors
associated with the Company and its business, see 'Risk Factors' included
elsewhere in this Prospectus.
F-2
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ - --------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 627 $ 511 $ -- $ 1,138
Accounts receivable.............................................. 7,854 1,058 -- 8,912
Unbilled production charges...................................... 3,060 49 -- 3,109
Other current assets............................................. 242 147 -- 389
------- ------ ------- --------
Total current assets............................................... 11,783 1,765 -- 13,548
Furniture, equipment and leasehold improvements, net............... 1,136 634 -- 1,770
Goodwill, net...................................................... -- 994 2,015 3,009
Other assets....................................................... 368 8 -- 376
------- ------ ------- --------
$13,287 $3,401 $ 2,015 $18,703
------- ------ ------- -------
------- ------ ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit................................................... $ 600 $ -- $ -- $ 600
Bank loans and overdrafts........................................ -- 24 -- 24
Current portion of long-term debt................................ 82 107 -- 189
Current portion of capitalized lease obligation.................. -- 74 -- 74
Accounts payable................................................. 1,361 340 -- 1,701
Accrued expenses................................................. 110 936 -- 1,046
Advance billings................................................. 5,569 441 -- 6,010
------- ------ ------- -------
Total current liabilities.......................................... 7,722 1,922 -- 9,644
Long-term debt..................................................... -- 882 -- 882
Capitalized lease obligation....................................... -- 78 -- 78
Minority interests................................................. -- 89 (89) --
Deferred rent...................................................... 642 -- -- 642
Deferred income taxes.............................................. 118 -- -- 118
------- ------ ------- -------
Total liabilities.................................................. 8,482 2,971 (89) 11,364
------- ------ ------- -------
Stockholders' equity:
Common stock..................................................... 289 -- (239) 50
Additional paid-in capital....................................... -- 13 2,343 2,356
Retained earnings................................................ 4,516 423 -- 4,939
Cumulative foreign currency translation adjustments.............. -- (6) -- (6)
------- ------ ------- -------
Total stockholders' equity......................................... 4,805 430 2,104 7,339
------- ------ ------- -------
$13,287 $3,401 $ 2,015 $18,703
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-3
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,214 $ -- $ -- $ 2,214
Accounts receivable.............................................. 8,539 3,266 -- 11,805
Unbilled production charges...................................... 1,477 87 -- 1,564
Other current assets............................................. 122 415 -- 537
------- ------ ------- -------
Total current assets............................................... 12,352 3,768 -- 16,120
Furniture, equipment and leasehold improvements, net............... 1,242 870 -- 2,112
Goodwill, net...................................................... -- 1,800 2,061 3,861
Other assets....................................................... 455 49 -- 504
------- ------ ------- -------
$14,049 $6,487 $ 2,061 $22,597
------- ------ ------- -------
------- ------ ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans and overdrafts........................................ $ -- $ 406 $ -- $ 406
Current portion of long-term debt................................ 98 118 -- 216
Current portion of capitalized lease obligation.................. -- 125 -- 125
Accounts payable................................................. 1,327 1,144 -- 2,471
Accrued expenses................................................. 120 1,977 -- 2,097
Advance billings................................................. 5,739 534 -- 6,273
------- ------ ------- -------
Total current liabilities.......................................... 7,684 4,304 -- 11,988
Long-term debt..................................................... 125 825 -- 950
Capitalized lease obligation....................................... -- 128 -- 128
Minority interests................................................. -- 143 (143) --
Deferred rent...................................................... 665 -- -- 665
Deferred income taxes.............................................. 207 -- -- 207
Other liabilities.................................................. -- 83 -- 83
------- ------ ------- -------
Total liabilities.................................................. 8,681 5,483 (143) 14,021
------- ------ ------- -------
Stockholders' equity:
Common stock..................................................... 290 -- (240) 50
Additional paid-in capital....................................... -- 13 2,444 2,457
Retained earnings................................................ 5,078 925 -- 6,003
Cumulative foreign currency translation adjustments.............. -- 66 -- 66
------- ------ ------- -------
Total stockholders' equity......................................... 5,368 1,004 2,204 8,576
------- ------ ------- -------
$14,049 $6,487 $ 2,061 $22,597
------- ------ ----------- -------
------- ------ ----------- -------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-4
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEETS
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,049 $ 19 $(1,000) $ 1,068
Accounts receivable.............................................. 6,477 3,510 (2,500) 7,487
Unbilled production charges...................................... 3,307 273 -- 3,580
Other current assets............................................. 71 581 -- 652
------- ------ ------- -------
Total current assets............................................... 11,904 4,383 (3,500) 12,787
Furniture, equipment and leasehold improvements, net............... 1,203 948 -- 2,151
Goodwill, net...................................................... -- 1,707 1,936 3,643
Other assets....................................................... 1,073 262 -- 1,335
------- ------ ------- -------
$14,180 $7,300 $(1,564) $19,916
------- ------ ------- -------
------- ------ ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit................................................... $ -- $ -- $ -- $ --
Bank loans and overdrafts........................................ -- 1,211 -- 1,211
Current portion of long-term debt................................ 78 595 -- 673
Current portion of capitalized lease obligation.................. -- 69 -- 69
Accounts payable................................................. 1,076 1,538 -- 2,614
Accrued expenses................................................. 154 1,418 -- 1,572
Advance billings................................................. 5,916 684 -- 6,600
------- ------ ------- -------
Total current liabilities.......................................... 7,224 5,515 -- 12,739
Long-term debt..................................................... 98 291 -- 389
Capitalized lease obligation....................................... -- 193 -- 193
Minority interests................................................. -- 268 (268) --
Deferred rent...................................................... 715 -- -- 715
Deferred income taxes.............................................. 266 -- -- 266
Other liabilities.................................................. -- 57 -- 57
------- ------ ------- -------
Total liabilities.................................................. 8,303 6,324 (268) 14,359
------- ------ ------- -------
Stockholders' Equity:
Common stock..................................................... 290 -- (240) 50
Additional paid-in capital....................................... -- 13 4,568 4,581
Retained earnings................................................ 5,587 914 (5,624) 877
Cumulative foreign currency translation adjustments.............. -- 49 -- 49
------- ------ ------- -------
Total stockholders' equity......................................... 5,877 976 (1,296) 5,557
------- ------ ------- -------
$14,180 $7,300 $(1,564) $19,916
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-5
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $10,415 $2,666 $ -- $13,081
------- ------ ----- -------
Operating expenses:
Salaries and related costs.................................... 6,416 1,474 -- 7,890
Other operating expenses...................................... 2,911 802 14 3,727
------- ------ ----- -------
9,327 2,276 14 11,617
Income from operations............................................. 1,088 390 (14) 1,464
Interest expense, net.............................................. 2 12 -- 14
------- ------ ----- -------
Income before provision for income taxes and minority interests.... 1,086 378 (14) 1,450
Provision for income taxes......................................... 19 117 477 613
Minority interests in net earnings of subsidiaries................. -- 39 (39) --
------- ------ ------ -------
Net income......................................................... $ 1,067 $ 222 $(452) $ 837
------- ------ ------ -------
------- ------ ------ -------
Earnings per share................................................. $ 0.17
-------
-------
Shares used in computing earnings per share........................ 5,000
-------
-------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-6
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $12,368 $4,399 $ -- $16,767
------- ------ ----- -------
Operating expenses:
Salaries and related costs.................................... 6,891 2,531 -- 9,422
Other operating expenses...................................... 3,550 1,310 44 4,904
------- ------ ----- -------
10,441 3,841 44 14,326
Income from operations............................................. 1,927 558 (44) 2,441
Interest expense, net.............................................. (13) 15 -- 2
------- ------ ----- -------
Income before provision for income taxes and minority interests.... 1,940 543 (44) 2,439
Provision for income taxes......................................... 124 159 755 1,038
Minority interests in net earnings of subsidiaries................. -- 68 (68) --
------- ------ ----- -------
Net income......................................................... $ 1,816 $ 316 $(731) $ 1,401
------- ------ ----- -------
------- ------ ----- -------
Earnings per share................................................. $ 0.28
-------
-------
Shares used in computing earnings per share........................ 5,000
-------
-------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-7
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $14,314 $9,895 $ -- $24,209
------- ------ ----- -------
Operating expenses:
Salaries and related costs.................................... 8,599 6,793 -- 15,392
Other operating expenses...................................... 3,532 2,017 66 5,615
------- ------ ----- -------
12,131 8,810 66 21,007
Income from operations............................................. 2,183 1,085 (66) 3,202
Interest expense, net.............................................. (24) 93 -- 69
------- ------ ----- -------
Income before provision for income taxes and minority interests.... 2,207 992 (66) 3,133
Provision for income taxes......................................... 158 366 781 1,305
Minority interests in net earnings of subsidiaries................. -- 124 (124) --
------- ------ ----- -------
Net income......................................................... $ 2,049 $ 502 $(723) $ 1,828
------- ------ ------ -------
------- ------ ------ -------
Earnings per share................................................. $ 0.37
-------
-------
Shares used in computing earnings per share........................ 5,000
-------
-------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-8
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $ 6,383 $4,939 $ -- $11,322
------- ------ ----- -------
Operating expenses:
Salaries and related costs.................................... 4,174 3,351 -- 7,525
Other operating expenses...................................... 1,831 933 33 2,797
------- ------ ----- -------
6,005 4,284 33 10,322
Income from operations............................................. 378 655 (33) 1,000
Interest expense, net.............................................. (78) 30 -- (48)
------- ------ ----- -------
Income before provision for income taxes and minority interests.... 456 625 (33) 1,048
Provision for income taxes......................................... 33 231 161 425
Minority interests in net earnings of subsidiaries................. -- 69 (69) --
------- ------ ----- -------
Net income......................................................... $ 423 $ 325 $(125) $ 623
------- ------ ----- -------
------- ------ ----- -------
Earnings per share................................................. $ 0.12
-------
-------
Shares used in computing earnings per share........................ 5,000
-------
-------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-9
<PAGE>
HEALTHWORLD CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues........................................................... $ 7,459 $7,324 $ -- $14,783
------- ------ ----- -------
Operating expenses:
Salaries and related costs.................................... 4,789 5,611 -- 10,400
Other operating expenses...................................... 1,679 1,288 33 3,000
------- ------ ----- -------
6,468 6,899 33 13,400
Income from operations............................................. 991 425 (33) 1,383
Interest expense, net.............................................. (79) 58 -- (21)
------- ------ ----- -------
Income before provision for income taxes and minority interests.... 1,070 367 (33) 1,404
Provision for income taxes......................................... 64 135 385 584
Minority interests in net earnings of subsidiaries................. -- 126 (126) --
------- ------ ----- -------
Net income......................................................... $ 1,006 $ 106 $(292) $ 820
------- ------ ----- -------
------- ------ ----- -------
Earnings per share................................................. $ 0.16
-------
-------
Shares used in computing earnings per share........................ 5,000
-------
-------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combining financial statements.
F-10
<PAGE>
HEALTHWORLD CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. GENERAL
Healthworld Corporation (the 'Company') was incorporated in Delaware on
September 12, 1996. The Company has conducted no operations to date and will
acquire all of the outstanding common stock of Girgenti, Hughes, Butler and
McDowell, Inc. and its affiliated entities ('GHB&M') and Milton Marketing Group
Limited and its subsidiaries ('Milton') in exchange for an aggregate of 5,000
shares of common stock of the Company (the 'Consolidation') as of the effective
date of the Offering made by this Prospectus. The Consolidation will be
accounted for using the pooling of interests method of accounting.
The periods included in these unaudited pro forma combining financial
statements are as follows: GHB&M--combined balance sheets as of December 31,
1995 and 1996 and June 30, 1997, and combined income statements for the years
ended December 31, 1994, 1995 and 1996, and the six months ended June 30, 1996
and 1997; and Milton--consolidated balance sheets as of November 30, 1995 and
1996 and June 30, 1997, and consolidated income statements for the years ended
November 30, 1994, 1995 and 1996, and the six months ended June 30, 1996 and
1997.
2. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
The following pro forma adjustments have been made to the Company's pro
forma combining balance sheets to reflect:
a. the Consolidation;
b. an estimated $3,500 distribution to be made to the stockholders of the
companies comprising GHB&M (other than Syberactive, Inc.) immediately
prior to the consummation of the Consolidation from existing cash
balances for payment by such stockholders of income taxes on 'S'
Corporation earnings;
c. an increase in additional paid-in capital of $2,124 and a corresponding
decrease in 'S' Corporation retained earnings of GHB&M as if the 'S'
Corporation status of the companies comprising GHB&M was terminated on
June 30, 1997;
d. the purchase of minority interests of the companies comprising Milton
and the goodwill resulting therefrom; and
e. the sale of an estimated $2,500 of accounts receivable of GHB&M to an
unaffiliated financial institution at a negotiated discount rate prior
to the consummation of the Consolidation. Such sale will be undertaken
in connection with the termination of the status of each of the
companies comprising GHB&M as 'S' Corporations, which will occur as a
result of and upon consummation of the Consolidation.
3. UNAUDITED PRO FORMA STATEMENT OF INCOME ADJUSTMENTS
The following pro forma adjustments have been made to the Company's pro
forma combining statements of income to reflect:
a. a provision for federal and state income taxes as if each of the
companies comprising GHB&M were treated as 'C' Corporations rather than
'S' Corporations for such periods; and
b. the purchase of minority interests of the companies comprising Milton
and the goodwill amortization resulting therefrom.
F-11
<PAGE>
After the execution of definitive agreements to undertake the Consolidation
discussed in Note 9 to the combined financial statements of Girgenti, Hughes,
Butler & McDowell, Inc. and Affiliates, we expect to be in a position to render
the following audit report.
/s/ Arthur Andersen
--------------------------------
Arthur Andersen
August 29, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Girgenti, Hughes, Butler & McDowell, Inc.
and Affiliates:
We have audited the accompanying combined balance sheets of Girgenti, Hughes,
Butler & McDowell, Inc. (a New York corporation) and Affiliates as of December
31, 1995 and 1996, and the related combined statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Girgenti, Hughes, Butler &
McDowell, Inc. and Affiliates as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
Melville, New York
January 24, 1997
(except with respect to the matters
discussed in Note 9 as to which
the date is , 1997)
F-12
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 627 $ 2,214 $ 2,049
Accounts receivable.......................................................... 7,854 8,539 6,477
Unbilled production charges, at cost......................................... 3,060 1,477 3,307
Other current assets......................................................... 242 122 71
------- ------- -------
Total current assets........................................................... 11,783 12,352 11,904
Furniture, equipment and leasehold improvements, net........................... 1,136 1,242 1,203
Other assets................................................................... 368 455 1,073
------- ------- -------
$13,287 $14,049 $14,180
------- ------- -------
------- ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit............................................................... $ 600 $ 400 $ --
Current portion of long-term debt............................................ 82 98 78
Accounts payable............................................................. 1,361 1,327 1,076
Accrued expenses............................................................. 110 120 154
Advance production billings.................................................. 5,569 5,739 5,916
------- ------- -------
Total current liabilities...................................................... 7,722 7,684 7,224
Commitments (Note 7)
Long-term debt................................................................. -- 125 98
Deferred rent.................................................................. 642 665 715
Deferred income taxes.......................................................... 118 207 266
------- ------- -------
8,482 8,681 8,303
------- ------- -------
Stockholders' equity:
Common stock................................................................. 289 290 290
Retained earnings............................................................ 4,516 5,078 5,587
------- ------- -------
Total stockholders' equity..................................................... 4,805 5,368 5,877
------- ------- -------
$13,287 $14,049 $14,180
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these balance sheets.
F-13
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues..................................................... $10,415 $12,368 $14,314 $6,383 $7,459
------- ------- ------- ------ ------
Operating expenses:
Salaries and related costs................................. 6,416 6,891 8,599 4,174 4,789
Other operating expenses................................... 2,911 3,550 3,532 1,831 1,679
------- ------- ------- ------ ------
9,327 10,441 12,131 6,005 6,468
Income from operations....................................... 1,088 1,927 2,183 378 991
Interest expense, net........................................ 2 (13) (24) (78) (79)
------- ------- ------- ------ ------
Income before provision for income taxes..................... 1,086 1,940 2,207 456 1,070
Provision for income taxes................................... 19 124 158 33 64
------- ------- ------- ------ ------
Net income................................................... $ 1,067 $ 1,816 $ 2,049 $ 423 $1,006
------- ------- ------- ------ ------
------- ------- ------- ------ ------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-14
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS
------ --------
<S> <C> <C>
Balance, December 31, 1993................................................................... $289 $2,386
Net income................................................................................. -- 1,067
Stockholders' distributions................................................................ -- (544)
------ ------
Balance, December 31, 1994................................................................... 289 2,909
Net income................................................................................. -- 1,816
Stockholders' distributions................................................................ -- (209)
------ ------
Balance, December 31, 1995................................................................... 289 4,516
Net income................................................................................. -- 2,049
Stockholders' distributions................................................................ -- (1,487)
Issuance of common stock in new affiliate.................................................. 1 --
------ ------
Balance, December 31, 1996................................................................... 290 5,078
Net income (unaudited)..................................................................... -- 1,006
Stockholders' distributions (unaudited).................................................... -- (497)
------ ------
Balance, June 30, 1997 (unaudited)........................................................... $290 $5,587
------ ------
------ ------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-15
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income..................................................... $1,067 $1,816 $2,049 $ 423 $1,006
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 214 274 402 174 196
Deferred rent............................................. 80 200 23 12 50
Deferred income taxes..................................... -- 83 89 33 59
Changes in operating assets and liabilities:
Accounts receivable....................................... (1,652) 336 (685) 703 2,062
Unbilled production charges............................... 287 (719) 1,583 555 (1,830)
Other current assets...................................... 18 (88) 120 (108) 51
Other assets.............................................. 95 30 (88) (34) (618)
Accounts payable.......................................... (145) 253 (35) (798) (251)
Advanced production billing............................... 1,313 (1,653) 171 (1) 177
Accrued expenses.......................................... (125) 98 9 10 34
------ ------ ------ ------ ------
Net cash provided by operating activities........................ 1,152 630 3,638 969 936
------ ------ ------ ------ ------
Cash flows from investing activities:
Capital expenditures, net...................................... (258) (563) (507) (203) (157)
------ ------ ------ ------ ------
Net cash (used in) investing activities.......................... (258) (563) (507) (203) (157)
------ ------ ------ ------ ------
Cash flows from financing activities:
Distributions to stockholders.................................. (544) (209) (1,487) (621) (497)
Net (repayment) proceeds from line of credit................... (100) 200 (200) (100) (400)
Issuance of long-term debt..................................... -- -- 300 300 --
Repayment of long-term debt.................................... (97) (105) (158) (86) (47)
Issuance of common stock in new affiliate...................... -- -- 1 1 --
------ ------ ------ ------ ------
Net cash (used in) financing activities.......................... (741) (114) (1,544) (506) (944)
------ ------ ------ ------ ------
Net increase/(decrease) in cash and cash equivalents............. 153 (47) 1,587 260 (165)
Cash and cash equivalents at beginning of year................... 521 674 627 627 2,214
------ ------ ------ ------ ------
Cash and cash equivalents at end of year......................... $ 674 $ 627 $2,214 $ 887 $2,049
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Supplemental disclosure of cash flow information:
Cash paid for taxes............................................ $ 17 $ 45 $ 64 $ 45 $ 64
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Cash paid for interest......................................... $ 30 $ 31 $ 41 $ 31 $ 8
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-16
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BUSINESS
Girgenti, Hughes, Butler & McDowell, Inc. and Affiliates (the 'Company') is
a combined group of six affiliated companies: Girgenti, Hughes, Butler &
McDowell, Inc. ('GHB&M'); Black Cat Graphics, Inc. ('Black Cat'); Medical
Educational Technologies, Inc. ('MET'); Brand Research Corporation ('Brand');
GHBM, Inc. and Syberactive Inc. ('Syberactive'). Each of these companies is
owned in the same manner by a stockholder group consisting of four individuals.
The Company provides a broad range of integrated marketing and
communications services including advertising and promotion, publishing, medical
education, public relations, consulting, interactive multimedia, database
marketing and marketing research services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements include the accounts of the affiliated
companies. All inter-company balances and transactions have been eliminated.
Revenue Recognition
Substantially all revenues are derived from fees from clients for creative
concept development, production of advertising and marketing materials and the
communication of a client's product message to target markets through the use of
educational projects.
Substantially all revenues from creative fees are recognized when earned
either under monthly retainer agreements or on an actual time incurred basis.
Fees for production are earned when the production materials are completed.
Advanced production billings represent project costs and fees that are billed to
clients as projects progress, and are recognized at completion.
Accounts receivable include fees recognized, project costs, and media and
production costs incurred on behalf of clients, which are paid for by the
Company and rebilled to clients.
Concentration of Credit Risk
The Company provides communication, marketing, advertising and related
services to a wide range of clients who operate mainly in the health care and
food service industries. For the year ended December 31, 1996, the Company had
three clients which constituted approximately 40%, 13% and 9% of total revenues.
In addition, the Company's five largest clients represent 74% of combined
revenues for that period. The Company had three clients which constituted
approximately 37%, 13% and 11% of total 1995 revenues and 24%, 17% and 9% of
total 1994 revenues. As of December 31, 1995 and 1996, primarily all of the
Company's trade accounts receivable were concentrated in companies in the health
care industry. The Company extends credit to all qualified clients, but does not
believe that it is exposed to any undue concentration of credit risk to any
significant degree. The Company maintains reserves for potential credit losses,
but has not experienced any material losses to individual clients or groups of
clients.
Cash and Cash Equivalents
For purposes of the combined balance sheets and combined statements of cash
flows, the Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents, including
commercial paper and money market mutual funds.
F-17
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Unbilled Production Charges
Unbilled production charges consist principally of costs incurred in
producing advertisements and marketing communications for clients. Such amounts
are generally billed to clients when costs are incurred for radio and television
production and when print production is complete.
Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<S> <C>
Furniture................................. 5-7 years
Equipment................................. 5-7 years
Leasehold improvements.................... Lesser of lease term or useful life
</TABLE>
Income Taxes
The companies comprising the Company (other than Syberactive, which is
treated as a 'C Corporation'), with the consent of the stockholders, elected to
have their Federal and state income taxed as subchapter 'S Corporations.' In
lieu of Federal and certain state corporate income taxes, the shareholders are
taxed on their proportionate share of income, or receive the benefit of any
losses individually. New York City Corporation taxes are provided, if required,
at statutory rates.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
New Accounting Pronouncements
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS No. 121), 'Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of.' This statement requires the
Company to review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The effect of adoption was not material.
Recently Issued Accounting Standards
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 128, Earnings Per Share. This
Statement establishes standards for computing and presenting earnings per share
('EPS'), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of income. Under this new standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and earlier application is not
permitted.
F-18
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and equipment........................................... $1,607 $2,117 $2,188
Leasehold improvements............................................ 465 465 460
------ ------ ------
2,072 2,582 2,648
Less: Accumulated depreciation and amortization................... 936 1,340 1,445
------ ------ ------
$1,136 $1,242 $1,203
------ ------ ------
------ ------ ------
</TABLE>
Depreciation and amortization expense of furniture, equipment and leasehold
improvements for the years ended December 31, 1994, 1995 and 1996 amounted to
approximately $214, $274 and $402, respectively, and for the six months ended
June 30, 1996 and 1997 amounted to approximately $174 and $196, respectively
(unaudited).
4. RESTRICTED CASH
In connection with the lease for office space, the Company was required to
establish an Irrevocable Standby Letter of Credit with a face amount of $300.
The Company has set aside a Certificate of Deposit in the amount of $300 as
collateral for the Letter of Credit. The Certificate of Deposit has been
included within Other Assets due to the term of the underlying lease commitment.
5. BANK LOANS AND LINE OF CREDIT
The Company has in place a $4,100 credit facility with a bank. The facility
currently consists of: (i) an uncommitted $3,500 line of credit ('Line of
Credit'), (ii) a $300 term note ('Term Note'), and (iii) a $300 irrevocable
letter of credit. The facility is secured by a first security interest in the
Company's personal property and a personal guarantee of several of the
stockholders of the Company. Borrowings under the facility are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Line of Credit..................................................... $600(a) $400(a) $ --
Term Note/Loan..................................................... 82(b) 223(c) 176
------ ------ ------
682 623 176
Less: Current portion.............................................. 682 498 78
------ ------ ------
$ -- $125 $ 98
------ ------ ------
------ ------ ------
</TABLE>
- ------------------
a) Borrowings under the Line of Credit are limited to 80% of eligible trade
receivables, as defined in the agreement. The Line of Credit matures on July
31, 1997 and bears interest at prime (8.25% as of December 31, 1996) plus 1%
per annum. The Line of Credit requires the Company to maintain certain
financial ratios. As of December 31, 1996, the Company was in compliance with
all of the provisions of the Line of Credit.
b) This represented the outstanding principal balance of borrowings under a $400
term note to finance certain leasehold improvements. The note bore interest
at 7.5% per annum and was payable in 48 monthly installments commencing
October 1992. As of December 31, 1996, such note had been repaid.
F-19
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. BANK LOANS AND LINE OF CREDIT--(CONTINUED)
c) During February 1996, the bank provided a Term Loan of $300 to finance the
construction of additional office space. This Term Loan bears interest at
7.75% per annum and is payable in 36 monthly installments commencing March
1996.
At December 31, 1996, maturities of debt are as follows:
<TABLE>
<S> <C>
1997.............................................................. $498
1998.............................................................. 106
1999.............................................................. 19
</TABLE>
6. STOCKHOLDERS' EQUITY
The financial statements are presented on a combined basis. Since there is
no parent-subsidiary relationship, there is no basis for eliminating the equity
accounts of any of the entities. As of December 31, 1995 and 1996, and as of
June 30, 1997 (unaudited), stockholders' equity consisted of the following:
<TABLE>
<CAPTION>
RETAINED EARNINGS/
COMMON STOCK (ACCUMULATED DEFICIT)
--------------------------- -----------------------------------
SHARES JUNE 30, JUNE 30,
COMPANY ISSUED 1995 1996 1997 1995 1996 1997
- ------------------------------------- ------ ---- ---- ----------- ------ ------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
GHBM................................. 85.25 $192 $192 $ 192 $1,517 $1,540 $ 2,157
Black Cat............................ 120.90 89 89 89 2,434 2,655 2,654
MET.................................. 120.90 6 6 6 477 847 764
Brand................................ 120.90 1 1 1 88 43 49
GHBM, Inc............................ 120.90 1 1 1 -- (1) --
Syberactive.......................... 100.00 -- 1 1 -- (6) (37)
---- ---- ----------- ------ ------ -----------
$289 $290 $ 290 $4,516 $5,078 $ 5,587
---- ---- ----------- ------ ------ -----------
---- ---- ----------- ------ ------ -----------
</TABLE>
7. COMMITMENTS
Lease
In 1994, the Company entered into a fifteen year lease for office space in
New York City. The lease is payable in monthly installments which include
certain rent holidays and escalations, which have been accounted for on a
straight-line basis over the life of the lease. As a security deposit, the
Company put in place an Irrevocable Standby Letter of Credit (see Note 4) in the
amount of $300. This amount will decrease on November 1, 1997 to $200 and to
$132 on November 1, 1998. During 1996, the Company terminated a lease agreement
on another property. The cost to terminate the lease was insignificant.
The following is a schedule of the minimum annual lease payments due:
<TABLE>
<S> <C>
1997............................................................... $ 608
1998............................................................... 690
1999............................................................... 750
2000............................................................... 750
2001............................................................... 750
Thereafter......................................................... 7,337
</TABLE>
Total rent expense incurred for the years ended December 31, 1994, 1995 and
1996 was approximately $662, $759 and $814, respectively, and for the six months
ended June 30, 1996 and 1997 was approximately $414 and $394, respectively
(unaudited).
F-20
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
7. COMMITMENTS--(CONTINUED)
Employment Agreements
The Company has entered into employment agreements (the 'Agreements') with
certain key employees. The Agreements contain provisions for base salary and
incentives based upon certain performance measures, and are subject to
termination by either party. The aggregate annual minimum base compensation
required by the Agreements is approximately $880.
Employee Benefits
The Company maintains a '401 K' Plan for eligible employees, who have
completed the minimum service requirement of the plan. The Company matches up to
4% of salary for participating employees. For the years ended December 31, 1994,
1995 and 1996, the Company has contributed $64, $105 and $124, respectively, and
for the six months ended June 30, 1996 and 1997, the Company has contributed $60
and $90, respectively (unaudited), to the Plan.
8. INTERIM FINANCIAL STATEMENTS
The combined financial statements of Girgenti, Hughes, Butler & McDowell,
Inc. as of and for the six months ended June 30, 1996 and 1997, presented herein
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments (consisting of only normal recurring adjustments) which,
in the opinion of management, are necessary to present fairly the combined
financial position, results of operations and cash flows of the Company as of
June 30, 1996 and 1997, and for the periods ended. The Company's interim results
may fluctuate as a result of a number of factors and are not necessarily
indicative of the results to be obtained for the full year.
9. SUBSEQUENT EVENTS
Pursuant to a Letter of Intent between the Company and Milton Marketing
Group Limited and its subsidiaries ('Milton'), the Company and Milton have
agreed to cause their respective stockholders to enter into a definitive
agreement with Healthworld Corporation ('Healthworld') pursuant to which all
outstanding shares of common stock of each of the companies comprising the
Company and Milton will be exchanged for shares of Healthworld common stock as
of the effective date of the Offering (as defined below) (the 'Consolidation').
Upon consummation of the Consolidation, the entities comprising the Company
(other than Syberactive, which is already treated as a C Corporation) will no
longer be treated as S Corporations.
In connection with the termination of the status of each of the companies
comprising the Company as S Corporations, the Company is currently negotiating
to enter into an agreement which will provide that the Company will, prior to
the consummation of the Consolidation, sell an estimated $2,500 of its accounts
receivable to an unaffiliated financial institution at a negotiated discount
rate. Immediately prior to the consummation of the Consolidation, the Company
will make distributions to its stockholders of approximately $3,500 in the
aggregate from existing cash balances for the payment by such stockholders of
taxes due on S Corporation earnings.
Healthworld is pursuing an initial public offering of its securities (the
'Offering'). The Offering contemplates the sale of 2,100 shares of Healthworld's
common stock at an offering price between $8.00 and $9.50 per share before
underwriting commissions and Offering expenses. Healthworld plans to use the
proceeds of the Offering for working capital and general corporate purposes.
F-21
<PAGE>
After the execution of definitive agreements to undertake the Consolidation
discussed in Note 11 to the consolidated financial statements of Milton
Marketing Group Limited and Subsidiaries, we expect to be in a position to
render the following audit report.
/s/ Arthur Andersen
----------------------------
Arthur Andersen
August 29, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Milton Marketing Group Limited and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Milton Marketing
Group Limited (a United Kingdom corporation, formerly known as Siteinput
Limited) and Subsidiaries as of November 30, 1995 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended November 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Milton Marketing Group Limited
and Subsidiaries as of November 30, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1996 in conformity with generally accepted accounting principles.
Melville, New York
January 27, 1997
(except with respect to the matters
discussed in Note 11 as to which
the date is , 1997)
F-22
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 511 $ -- $ 19
Accounts receivable............................................................ 1,058 3,266 3,510
Unbilled production charges, at cost........................................... 49 87 273
Other current assets........................................................... 147 415 581
------ ------ -------
Total current assets........................................................ 1,765 3,768 4,383
Furniture, equipment and leasehold improvements, net............................. 634 870 948
Goodwill, net of accumulated amortization of $2, $44 and $79, respectively....... 994 1,800 1,707
Other assets..................................................................... 8 49 262
------ ------ -------
$3,401 $6,487 $ 7,300
------ ------ -------
------ ------ -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans and overdrafts...................................................... $ 24 $ 406 $ 1,211
Current portion of long-term debt.............................................. 107 118 595
Current portion of capitalized lease obligation................................ 74 125 69
Accounts payable............................................................... 340 1,144 1,538
Accrued expenses............................................................... 936 1,977 1,418
Advance billings............................................................... 441 534 684
------ ------ -------
Total current liabilities................................................... 1,922 4,304 5,515
Commitments (Note 9)
Long-term debt................................................................... 882 825 291
Capitalized lease obligation..................................................... 78 128 193
Minority interests............................................................... 89 143 268
Other liabilities................................................................ -- 83 57
------ ------ -------
2,971 5,483 6,324
------ ------ -------
Stockholders' equity:
Common stock, $1.68 par value, 10,000 shares authorized, and 2 shares issued
and outstanding............................................................. -- -- --
Additional paid-in capital..................................................... 13 13 13
Retained earnings.............................................................. 423 925 914
Cumulative foreign currency translation adjustments............................ (6) 66 49
------ ------ -------
Total stockholders' equity.................................................. 430 1,004 976
------ ------ -------
$3,401 $6,487 $ 7,300
------ ------ -------
------ ------ -------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-23
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED NOVEMBER 30, ENDED JUNE 30,
------------------------ ----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................................................... $2,666 $4,399 $9,895 $5,434 $8,147
------ ------ ------ ------ ------
Operating expenses:
Salaries and related costs..................................... 1,474 2,531 6,793 3,860 6,333
Other operating expenses....................................... 802 1,310 2,017 999 1,506
------ ------ ------ ------ ------
2,276 3,841 8,810 4,859 7,839
Income from operations........................................... 390 558 1,085 575 308
Interest expense, net............................................ 12 15 93 40 62
------ ------ ------ ------ ------
Income before provision for income taxes and minority
interests...................................................... 378 543 992 535 246
Provision for income taxes....................................... 117 159 366 197 91
Minority interests in net earnings of subsidiaries............... 39 68 124 81 126
------ ------ ------ ------ ------
Net income....................................................... $ 222 $ 316 $ 502 $ 257 $ 29
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-24
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL FOREIGN CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
------ ---------- -------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1993............................ $-- $ 13 $101 $ (1) $ 113
Net income.......................................... -- -- 222 -- 222
Dividends........................................... -- -- (130) -- (130)
Foreign currency translation adjustments............ -- -- -- 8 8
--- ---- ---- ---- -----
Balance, November 30, 1994............................ -- 13 193 7 213
Net income.......................................... -- -- 316 -- 316
Dividends........................................... -- -- (86) -- (86)
Foreign currency translation adjustments............ -- -- -- (13) (13)
--- ---- ---- ---- -----
Balance, November 30, 1995............................ -- 13 423 (6) 430
Net income.......................................... -- -- 502 -- 502
Foreign currency translation adjustments............ -- -- -- 72 72
--- ---- ---- ---- -----
Balance, November 30, 1996............................ -- 13 925 66 1,004
Net income (unaudited).............................. -- -- 29 -- 29
Dividends (unaudited)............................... -- -- (40) -- (40)
Foreign currency translation adjustments
(unaudited)...................................... -- -- -- (17) (17)
--- ---- ---- ---- -----
Balance, June 30, 1997 (unaudited).................... $-- $ 13 $914 $ 49 $ 976
--- ---- ---- ---- -----
--- ---- ---- ---- -----
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-25
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
NOVEMBER 30, ENDED JUNE 30,
----------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 222 $ 316 $ 502 $ 257 $ 29
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................... 114 136 225 100 121
Minority interest in net earnings................................ 39 68 124 81 126
(Gain)/loss on sale of fixed assets.............................. (24) 1 18 -- --
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable.............................................. 418 (138) (1,456) (2,197) (244)
Unbilled production charges...................................... 538 28 (21) (193) (186)
Other current assets............................................. -- (22) (166) (9) (166)
Other assets..................................................... -- -- -- -- (213)
Accounts payable................................................. (536) (614) (359) 640 394
Accrued expenses................................................. 7 763 876 833 (487)
Advance billings................................................. (502) 74 50 380 150
Other liabilities................................................ -- -- 18 60 (26)
----- ----- ------- ------- -----
Net cash provided by (used in) operating activities.................... 276 612 (189) (48) (502)
----- ----- ------- ------- -----
Cash flows from investing activities:
Net purchase price of acquisitions (Note 3).......................... -- (639) (242) (215) --
Capital expenditures, net............................................ (95) (203) (214) (66) (72)
Proceeds from the sale of fixed assets............................... 58 63 50 -- --
----- ----- ------- ------- -----
Net cash (used in) investing activities................................ (37) (779) (406) (281) (72)
----- ----- ------- ------- -----
Cash flows from financing activities:
Payment of majority stockholder dividends............................ (130) (86) -- -- --
Payment of minority interest shareholders dividends.................. (23) (15) -- -- (55)
Proceeds from bank overdraft......................................... -- -- 309 (23) 805
Repayment of bank loans.............................................. -- -- (131) (27) (57)
Proceeds from bank loans............................................. -- 613 -- -- --
Capital lease repayments............................................. (88) (152) (77) (21) (83)
----- ----- ------- ------- -----
Net cash (used in) provided by financing activities.................... (241) 360 101 (71) 610
----- ----- ------- ------- -----
Effect of exchange rate changes on cash................................ 12 (14) (17) 22 (17)
----- ----- ------- ------- -----
Net increase/(decrease) in cash and cash equivalents................... 10 179 (511) (378) 19
Cash and cash equivalents at beginning of year......................... 322 332 511 511 --
----- ----- ------- ------- -----
Cash and cash equivalents at end of year............................... $ 332 $ 511 $ -- $ 133 $ 19
----- ----- ------- ------- -----
----- ----- ------- ------- -----
Supplemental disclosure of cash flow information:
Cash paid for taxes.................................................. $ 113 $ 151 $ 67 $ -- $ 262
----- ----- ------- ------- -----
----- ----- ------- ------- -----
Cash paid for interest............................................... $ 21 $ 22 $ 88 $ 40 $ 62
----- ----- ------- ------- -----
----- ----- ------- ------- -----
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-26
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BUSINESS
In 1997, the company formerly known as Siteinput Limited changed its name
to Milton Marketing Group Limited. Milton Marketing Group Limited ('Milton'), a
United Kingdom corporation, was formed in October 1995. Through its predecessor,
Milton Marketing Limited, Milton, together with its subsidiaries (Milton and its
subsidiaries are collectively referred to as the 'Company'), provides a broad
range of integrated marketing services including strategic planning, product
positioning, database marketing, field marketing, new product development,
advertising, public relations, marketing research, and sales promotion. Milton
is comprised of its wholly-owned subsidiary Effective Sales Personnel Limited
('ESP') and its majority-owned subsidiaries, Milton Marketing Limited ('MML'),
Headcount Limited ('HL'), PDM Communications Limited ('PDM') and Milton Cater
Limited ('MCL').
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned and majority-owned subsidiaries. All
intercompany accounts and transactions have been eliminated.
Foreign Currency Translation
All assets and liabilities of the Company are translated into United States
dollars from United Kingdom Pound Sterling at period-end exchange rates. Income
and expense items are translated at average exchange rates prevailing during
each fiscal period. The resulting translation adjustments are recorded as a
separate component of stockholders' equity.
Revenue Recognition
Substantially all revenues are derived from fees from clients for creative
concept development, production of advertising and marketing materials,
consulting on the market positioning of pharmaceutical products, the supply of
long and short-term personnel for client promotional purposes and the provision
of public relations services to public health service institutions.
Substantially all revenues from creative fees are recognized when earned
either under monthly retainer agreements or on an actual time incurred basis.
Fees for production are earned when the production materials are completed.
Advanced production billings represent project costs and fees that are billed to
clients as projects progress and are recognized at completion. Income for field
marketing support is recognized as services are provided.
Accounts receivable include fees recognized, project costs, and media and
production costs incurred on behalf of clients, which are paid for by the
Company and billed to clients. The Company records gross contract revenues for
contract sales services and the related direct costs are included in salaries
and related costs on the accompanying consolidated statements of income.
Concentration of Credit Risk
The Company provides services to a range of clients operating mostly in the
healthcare, food and beverage and communication industries. For the year ended
November 30, 1996, the Company had one client which constituted approximately
13% of total revenues. In addition, the Company's five largest clients
represented 45% of total revenues for that period. The Company had one client
which constituted approximately 16% and 25% of total 1995 and 1994 revenues,
respectively. The Company extends credit to all qualified clients, but does not
believe that it is exposed to any undue concentration of credit risk to any
significant degree. The Company maintains reserves for potential credit losses,
but has not experienced any material losses to individual clients or groups of
clients.
F-27
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Cash and Cash Equivalents
For purposes of the consolidated balance sheets and consolidated statements
of cash flows, the Company considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents, including commercial paper and money market mutual funds.
Unbilled Production Charges
Unbilled production charges consists principally of costs incurred in
producing marketing communications for clients and field marketing personnel to
be billed. Such amounts will be billed to clients at either a defined stage of
the project or when production is complete.
Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using both accelerated and straight-line methods over the following
periods:
<TABLE>
<S> <C>
Furniture................................. 4-10 years
Equipment................................. 4-14 years
Motor Vehicles............................ 4-8 Years
Leasehold Improvements.................... Lesser of lease term or useful life
</TABLE>
Equipment Held under Capital Leases
Assets held under capital leases is accounted for in accordance with
Statement of Financial Accounting Standards No. 13, 'Accounting for Leases,' and
recorded in Property, Plant and Equipment. The present value of the related
liability is included in capitalized lease obligations.
Goodwill
Goodwill represents the Company's excess cost over net assets acquired and
is being amortized on a straight-line basis over the estimated useful life of
the assets. Amounts recognized to date have been amortized over 30 years from
the original date of acquisition. Amortization expense of goodwill for the years
ended November 30, 1994, 1995 and 1996 amounted to $0, $2 and $42, respectively,
and for the seven months ended June 30, 1996 and 1997 amounted to $23 and $35,
respectively (unaudited).
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (SFAS No. 121), 'Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of.' This statement requires the
Company to review long-lived assets, including certain intangibles and goodwill,
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The effect of adoption was
not material.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes.' This
statement requires a liability approach for measuring deferred taxes based on
temporary differences between the financial statement and income tax bases of
assets and liabilities existing at each balance sheet date using enacted rates
for the years in which the taxes are expected to be paid or recovered. The
Company has not recorded any deferred tax assets or liabilities as any
differences between book and income tax recognition are immaterial.
F-28
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affects the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Recently Issued Accounting Standards
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
('EPS'), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted DPS on
the face of the statement of income. Under this new standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and earlier application is not
permitted.
3. ACQUISITIONS OF BUSINESSES
Effective Sales Personnel Limited
In November 1995, the Company acquired all of the outstanding stock of ESP
for a purchase price of $1,130. The purchase price was funded by cash and a $462
note due March 1998.
Milton Cater Limited
MCL was formed in April 1996, and the Company acquired 51% of its equity in
May 1996. The remaining 49% of MCL's equity is owned by a key employee and must
be purchased by the Company on the earliest of May 23, 2001, the sale or
disposal of MCL or the Company, or the Company being the subject of an initial
public offering. The purchase price is set at 60% of defined average annual
Gross Profits of MCL, as defined in the agreement, in excess of $588 for the
three years prior to purchase, subject to a maximum purchase price of $504. At
November 30, 1996 the purchase price would be immaterial.
Milton Marketing Limited
In April 1996, the Company acquired an additional 7.5% interest in MML for
$234, which increased the Company's interest in MML to 92.5%.
PDM Communications Limited
In November 1996, the Company acquired a 75% interest in PDM for a cash
purchase price of $32.
The minority stockholder has a put option and the Company has a call option
with respect to the remaining 25% of PDM shares not owned by the Company. The
stockholder put option would require payment of 18.5% of Gross Income of PDM, as
defined in the agreement, for the period from November 26, 1996 to date of
exercise. The Company's call option would require payment on 25% of Gross Income
to date of exercise. The stockholder put option is exercisable at any time up to
November 30, 1998, provided that PDM has generated positive Gross Income, after
personnel costs during the period. The Company's call option is exercisable if a
certain key employee leaves PDM, or if PDM or the Company is sold or the subject
of an initial public offering.
F-29
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. ACQUISITIONS OF BUSINESSES--(CONTINUED)
As a result of the three acquisitions discussed above, goodwill was
recorded as follows:
<TABLE>
<CAPTION>
ESP MML PDM
------ ---- -------
<S> <C> <C> <C>
Assets...................................................................... $ 346 $ -- $ 717
Minority share of net assets acquired....................................... -- 46 --
Goodwill.................................................................... 1,027 188 523
Liabilities................................................................. (243) -- (1,208)
------ ---- -------
Total purchase price...................................................... $1,130 $234 $ 32
------ ---- -------
------ ---- -------
</TABLE>
Pro Forma Results of Operations
Summarized below are the unaudited pro forma results of operations of the
Company as though the ESP acquisition had occurred at the beginning of 1994 and
the MML and PDM acquisitions had occurred at the beginning of 1995. Adjustments
have been made for pro forma income taxes and amortization of goodwill related
to these transactions.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------
Pro Forma: 1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Revenues................................................................ $5,609 $6,634 $10,282
Net income.............................................................. 357 392 135
</TABLE>
These pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisitions been
made at the beginning of 1994 or 1995 or of results which may occur in the
future.
4. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Motor vehicles, furniture, equipment and leasehold improvements consist of
the following:
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Motor vehicles............................................... $ 204 $ 265 $ 265
Furniture and equipment...................................... 670 996 1,070
Leasehold improvements..................................... 126 163 163
Equipment held under capital leases.......................... 284 395 485
------ ------ -------
1,284 1,819 1,983
Less: Accumulated depreciation and amortization.............. 650 949 1,035
------ ------ -------
$ 634 $ 870 $ 948
------ ------ -------
------ ------ -------
</TABLE>
Depreciation and amortization expense of furniture, equipment and leasehold
improvements for the years ended November 30, 1994, 1995 and 1996 amounted to
approximately $114, $134 and $183, respectively, and for the seven months ended
June 30, 1996 and 1997 amounted to $84 and $106, respectively (unaudited).
F-30
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. ACCRUED EXPENSES
Major components of accrued expenses included:
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------ ----------
(UNAUDITED)
<S> <C> <C> <C>
Value added and payroll taxes................................ $ 445 $1,155 $ 836
Payroll...................................................... -- 356 387
Directors fees............................................... 130 -- --
Other........................................................ 361 466 195
------ ------ -------
$ 936 $1,977 $ 1,418
------ ------ -------
------ ------ -------
</TABLE>
6. BANK LOANS AND OVERDRAFT
The Company has the following loans outstanding:
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------ ----------
(UNAUDITED)
<S> <C> <C> <C>
Term loan(a)................................................. $ 535 $ 470 $ 407
Business development loan(b)................................. 57 38 23
Overdraft facility(c)........................................ -- 379 1,211
4% loan notes(d)............................................. 421 462 456
------ ------ -------
1,013 1,349 2,097
Less: Current portion........................................ 131 524 1,806
------ ------ -------
$ 882 $ 825 $ 291
------ ------ -------
------ ------ -------
</TABLE>
- ------------------
a) During November 1995, a bank provided a term loan of $588 to the Company
which bears interest at the UK base rate (6% as of November 30, 1996) plus 2%
per annum and is payable in installments of $58 every May and November with
the final installment due in November 2000. The term loan requires the
Company to maintain certain financial covenants. As of November 30, 1996, the
Company was in compliance with all of the provisions of the term loan.
b) This loan bears interest at 10.5% per annum and matures in April 1998.
c) The Company has in place a $672 overdraft facility with a bank which bears
interest at the UK base rate plus 2% per annum. As of November 30, 1996, the
outstanding balance was approximately $379. At June 30, 1997, the bank has
allowed the Company to exceed the overdraft facility limit. The Company is
currently negotiating with the bank to increase the limit of the facility
(unaudited).
d) In connection with the ESP acquisition the Company has issued a $462, 4%
unsecured note, which is payable in March 1998.
At November 30, 1996, maturities of debt are as follows:
<TABLE>
<S> <C>
1997........................................................... $524
1998........................................................... 593
1999........................................................... 116
2000........................................................... 116
</TABLE>
7. CAPITALIZED LEASE OBLIGATION
The Company enters into leases for computer equipment and motor vehicles.
The lease payments are payable monthly on a straight-line basis. The assets
relating to the leases are capitalized and amortized over a period approximating
the lease period.
F-31
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
7. CAPITALIZED LEASE OBLIGATION--(CONTINUED)
Minimum future lease payments under capital leases as of November 30 are as
follows:
<TABLE>
<S> <C>
1997................................................................. $141
1998................................................................. 101
1999................................................................. 44
----
Total minimum lease payments......................................... 286
Less: Amount representing interest................................... 33
----
Present value of minimum lease payments.............................. $253
----
----
</TABLE>
Interest rates on capitalized leases vary from 11% to 15% and are imputed
based on the lessor's implicit rate of return.
8. INCOME TAXES
The following table reconciles the U.K. Federal statutory rate to the
Company's effective income tax rate for the years ended November 30, 1994, 1995
and 1996:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory rate..................................................................... 33% 33% 33%
Nondeductible expenses............................................................. --- --- 4%
Small and marginal company rate relief............................................. (2%) (4%) ---
--- --- ---
Effective rate..................................................................... 31% 29% 37%
--- --- ---
--- --- ---
</TABLE>
The Company has not recorded any deferred tax assets or liabilities as any
differences between book and income tax recognition are immaterial.
9. COMMITMENTS
The Company has entered into various leases for property. All leases are
payable in quarterly installments, and are accounted for on a straight line
basis over the term of the lease.
The following is a schedule of the minimum annual lease payments due:
<TABLE>
<S> <C>
1997....................................................................... $ 393
1998....................................................................... 393
1999....................................................................... 393
2000....................................................................... 393
2001....................................................................... 393
Thereafter................................................................. 2,048
</TABLE>
Total rent expense incurred for the years ended November 30, 1994, 1995 and
1996 was approximately $116, $107 and $229, respectively, and for the seven
months ended June 30, 1996 and 1997 was approximately $118 and $225,
respectively (unaudited).
Employment Agreements
The Company has entered into employment agreements (the 'Agreements') with
certain key employees. The Agreements contain provisions for base salary and
incentives based upon certain performance measures, and are subject to
termination by either party. The aggregate annual minimum base compensation
required by the Agreements is approximately $200.
F-32
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
9. COMMITMENTS--(CONTINUED)
Employee Benefits
The Company makes non-contractual payments into the personal pension plans
of various directors and senior management. For the years ended November 30,
1994, 1995, and 1996, the Company has contributed $56, $74, and $41,
respectively, and for the seven months ended June 30, 1996 and 1997, the Company
has contributed $34 and $37, respectively (unaudited).
10. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of Milton Marketing Group Limited as
of and for the seven months ended June 30, 1996 and 1997, presented herein have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments (consisting of only normal recurring adjustments) which,
in the opinion of management, are necessary to present fairly the combined
financial position, results of operations and cash flows of the Company as of
June 30, 1996 and 1997, and for the periods then ended. The Company's interim
results may fluctuate as a result of a number of factors and are not necessarily
indicative of the results to be obtained for the full year.
11. SUBSEQUENT EVENTS
Pursuant to a Letter of Intent between the Company and Girgenti, Hughes,
Butler & McDowell, Inc. and its affiliated entities ('GHB&M'), the Company and
GHB&M have agreed to cause their respective stockholders to enter into
definitive agreements with Healthworld Corporation ('Healthworld') pursuant to
which all outstanding shares of common stock of each of the companies comprising
the Company and GHB&M will be exchanged for shares of Healthworld common stock
as of the effective date of the Offering (as defined below) (the
'Consolidation'). Concurrent with the Consolidation, the four stockholders
holding all of the minority interests in the entities comprising the Company
will contribute their interests in such respective companies to Healthworld in
exchange for shares of common stock of Healthworld.
Healthworld is pursuing an initial public offering of its securities (the
'Offering'). The Offering contemplates the sale of 2,100 shares of Healthworld's
common stock at an offering price between $8.00 and $9.50 per share before
underwriting commissions and Offering expenses. Healthworld plans to use the
proceeds of the Offering for working capital and general corporate purposes.
F-33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................ 3
Risk Factors...................................... 6
The Consolidation................................. 11
Use of Proceeds................................... 12
Dividend Policy................................... 12
Dilution.......................................... 13
Capitalization.................................... 14
Selected Pro Forma Combined Financial
Information..................................... 15
Selected Financial Information of GHB&M
and Milton...................................... 16
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 17
Business.......................................... 24
Management........................................ 33
Certain Relationships and Related
Transactions.................................... 38
Principal Stockholders............................ 39
Description of Capital Stock...................... 40
Shares Eligible for Future Sale................... 42
Underwriting...................................... 43
Legal Matters..................................... 44
Experts........................................... 44
Forward Looking Statement......................... 44
Additional Information............................ 45
Index to Financial Statements..................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,100,000 SHARES
[LOGO]
HEALTHWORLD
CORPORATION
COMMON STOCK
------------------------
PROSPECTUS
------------------------
UNTERBERG HARRIS
PENNSYLVANIA MERCHANT
GROUP LTD
, 1997
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Registrant in connection with the issuance and distribution of the Common Stock
pursuant to the Prospectus contained in this Registration Statement.
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-----------
<S> <C>
Securities and Exchange Commission registration fee......... $6,952.27
NASD filing fee............................................. 2,794.25
Nasdaq National Market listing fee.......................... *
Accountants' fees and expenses.............................. *
Blue Sky fees and expenses.................................. --
Legal fees and expenses..................................... *
Transfer Agent and Registrar fees and expenses.............. *
Printing and engraving expenses............................. *
Miscellaneous............................................... *
-----------
Total.................................................. $ *
-----------
-----------
</TABLE>
- ------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation and By-laws provide that the
Registrant shall indemnify its directors to the full extent permitted by the
General Corporation Law of the State of Delaware (the 'DGCL') and may indemnify
its officers and employees to such extent, except that the Registrant shall not
be obligated to indemnify any such person (i) with respect to proceedings,
claims or actions initiated or brought voluntarily by any such person and not by
way of defense, or (ii) for any amounts paid in settlement of an action
indemnified against by the Registrant without the prior written consent of the
Registrant without the prior written consent of the Registrant. The Registrant
intends to enter into indemnity agreements with each of its directors. These
agreements may require the Registrant, among other things, to indemnify such
directors against certain liabilities that may arise by reason of their status
or service as directors, and to advance expenses to them as they are incurred,
provided that they undertake to repay the amount advanced if it is ultimately
determined by a court that they are not entitled to indemnification, and to
obtain directors' liability insurance if available on reasonable terms.
In addition, the Registrant's Certificate of Incorporation provides that a
director of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of his or her fiduciary duty as
director, except for liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for willful or negligent conduct in paying dividends or repurchasing
stock out of other than lawfully available funds or (iv) for any transaction
from which the director derives an improper personal benefit.
Reference is made to Section 145 of the DGCL which provides for
indemnification of directors and officers in certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Consolidation, the Registrant will, as of the date
of this Registration Statement, issue an aggregate of 5,000,000 shares of Common
Stock to the stockholders of GHB&M and Milton in exchange for all of their stock
of GHB&M and Milton. Such transaction will be effected in reliance upon the
exemption from the registration of the Securities Act contained in Section 4(2)
of the Securities Act and the rules and regulations promulgated thereunder on
the basis that such transaction did not involve any public offering. No
underwriters
II-1
<PAGE>
were engaged with respect to such transaction and no underwriting discounts or
commissions will be paid in connection with the sale of such securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following documents are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.01 -- Form of Underwriting Agreement between the Registrant and Unterberg Harris and Pennsylvania
Merchant Group Ltd, as representatives of several underwriters.
2.01 -- Letter of Intent between Girgenti, Hughes, Butler & McDowell, Inc. ('GH') and its affiliated
entities and Milton Marketing Group Limited and its subsidiaries, dated November 14, 1996, as
amended July 24, 1997.
2.02 -- Form of Agreement and Plan of Organization by and among the Registrant, Steven Girgenti, Francis
Hughes, William Butler and Herbert Ehrenthal.
2.03 -- Form of Agreement and Plan of Organization between the Registrant and William Leslie Milton.
2.04 -- Form of Agreement and Plan of Organization by and between the Registrant and minority
stockholders.
3.01 -- Restated Certificate of Incorporation of the Registrant.
3.02 -- Amended and Restated Bylaws of the Registrant.
4.01* -- Specimen Common Stock Certificate.
5.01* -- Opinion of Rosenman & Colin LLP.
10.01 -- Term Loan Facility, dated November 6, 1995, by and between Siteinput Limited (n/k/a Milton
Marketing Group Limited) and The Bank of Scotland plc., as amended by letter dated July 23, 1997.
10.02 -- Line of Credit between The Chase Manhattan Bank, N.A. ('Chase') and GH and each of its affiliated
entities, dated January 22, 1996.
10.03 -- Line of Credit between Chase and GH and each of its affiliated entities, dated January 17, 1997.
10.04 -- Promissory Note made by GH and its affiliated entities for the benefit of Chase, dated January 31,
1996.
10.05* -- Registrant's 1997 Incentive Stock Option Plan.
</TABLE>
<TABLE>
<C> <C> <S>
10.06* -- Employment Agreement by and between the Registrant and Steven Girgenti.
10.07* -- Employment Agreement by and between the Registrant and William Leslie Milton.
10.08* -- Employment Agreement by and between the Registrant and William Butler.
10.09* -- Employment Agreement by and between the Registrant and Herbert Ehrenthal.
10.10* -- Employment Agreement by and between the Registrant and Francis Hughes.
10.11 -- Employment Agreement by and between the Registrant and Stuart Diamond.
10.12 -- License Agreement between the Registrant and Healthworld, B.V.
10.13 -- Lease for office space located at 100 Avenue of the Americas, New York, NY, between The Rector,
Church-Wardens and Vestrymen of Trinity Church in the City of New York and GH, dated July 15,
1994.
10.14 -- Agreement for the sale and purchase of share capital of Effective Sales Personnel Limited between
Gloria Olive Sargent and Siteinput Limited, dated November 8, 1995.
</TABLE>
- ------------------
* To be filed by amendment.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
10.15 -- Supplemental Agreement relating to the sale and purchase of share capital of Effective Sales
Personnel Limited between Gloria Olive Sargent and Siteinput Limited, dated November 29, 1996.
<C> <C> <S>
10.16 -- Agreement for the sale and purchase of shares in PDM Communications Limited among Leonard Moreton,
Lizabeth Jenny Moreton, Leonard Moreton & Co. and Siteinput Limited, dated November 26, 1996.
10.17 -- Agreement for the sale and purchase of shares in PDM Communications Limited between William
Annandale and Siteinput Limited, dated November 21, 1996.
10.18 -- Joint Venture Agreement between Siteinput Limited and Claire Denise Cater dated May 23, 1996.
10.19 -- Share Sale Agreement between Wendy Carter and Siteinput Limited dated April 4, 1996.
10.20 -- Overdraft Facility, dated November 6, 1995, between Siteinput Limited and The Bank of Scotland
plc.
21.01 -- Subsidiaries of the Registrant.
23.01 -- Consent of Arthur Andersen LLP.
23.02* -- Consent of Rosenman & Colin LLP (included in Exhibit 5.01).
24.01 -- Power of attorney (included on page II-4).
27.01 -- Financial Data Schedule.
27.02 -- Financial Data Schedule.
27.03 -- Financial Data Schedule.
27.04 -- Financial Data Schedule.
27.05 -- Financial Data Schedule.
27.06 -- Financial Data Schedule.
27.07 -- Financial Data Schedule.
27.08 -- Financial Data Schedule.
99.01 -- Consents of Nominee Directors.
</TABLE>
(b) Financial Statement Schedule
None.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To provide to the Underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the applicable provisions of the DGCL, or
II-3
<PAGE>
otherwise, the Registrant has been advised that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 29th day of August 1997.
HEALTHWORLD CORPORATION
By: ________/s/ STEVEN GIRGENTI_______
Steven Girgenti
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Steven Girgenti and William Leslie Milton and
each of them singly, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (including his capacity as a director and
officer of Healthworld Corporation) to sign any and all amendments (including
post-effective amendments) to this Registration Statement (and in addition, any
registration statement filed pursuant to 462(b) under the Securities Act of
1933, for the offering to which this Registration Statement relates) and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/s/ STEVEN GIRGENTI Chairman of the Board and Chief Executive August 29, 1997
- ------------------------------------------ Officer (principal executive officer)
Steven Girgenti
/s/ STUART DIAMOND Executive Vice President, Chief Financial August 29, 1997
- ------------------------------------------ Officer and Secretary (principal financial
Stuart Diamond and accounting officer)
/s/ WILLIAM LESLIE MILTON Vice Chairman of the Board and President August 29, 1997
- ------------------------------------------
William Leslie Milton
/s/ FRANCIS HUGHES Director August 29, 1997
- ------------------------------------------
Francis Hughes
</TABLE>
II-5
<PAGE>
AGSH&F Draft of August 22, 1997
HEALTHWORLD CORPORATION
2,100,000 Shares
Common Stock
($0.01 par value)
UNDERWRITING AGREEMENT
----------------------
___________, 1997
UNTERBERG HARRIS
PENNSYLVANIA MERCHANT GROUP LTD.
As Representatives of the
several underwriters,
c/o Unterberg Harris
10 East 50th Street, 22nd Floor
New York, New York 10022
Dear Sirs:
Healthworld Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell an aggregate of 2,100,000 shares (the
"Firm Shares") of the Company's common stock, par value $0.01 per share (the
"Common Stock"), to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives. The Company also proposes to grant to the Underwriters an
option to purchase up to 315,000 additional shares of Common Stock (the "Option
Shares"; the Option Shares, together with the Firm Shares, being hereinafter
referred to collectively as the "Shares").
For purposes of this Agreement, "Effective Time" with respect
to the initial registration statement or, if filed prior to the execution and
delivery of this Agreement, the additional registration statement means (i) if
the Company has advised the Representatives that it does not propose to amend
such registration statement, the date and time as of which such registration
statement, or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement, was declared effective
by the Commission or has become effective upon the filing pursuant to Rule
462(c), or (ii) if the Company has advised the Representatives that it proposes
to file an amendment or post-effective amendment to such registration
statement, the date and time as of which such registration statement, as
amended by such amendment or post-effective amendment, as the case may be, is
declared effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this Agreement but
the Company has advised the Representatives that it proposes to file one,
"Effective Time" with respect to such additional registration statement means
the date and time as of which such registration statement is filed and becomes
effective pursuant to Rule 462(b). "Effective Date" with respect to the initial
registration
<PAGE>
statement or the additional registration statement (if any) means the date of
the Effective Time thereof. The initial registration statement, as amended at
its Effective Time, including all information contained in the additional
registration statement (if any) and deemed to be part of the initial
registration statement as of the Effective Time of the additional registration
statement pursuant to the General Instructions of the Form on which it is filed
and including all information (if any) deemed to be a part of the initial
registration statement as of its Effective Time pursuant to Rule 430A(b)("Rule
430A(b)") under the Act is hereinafter referred to as the "Initial Registration
Statement." The additional registration statement, as amended at its Effective
Time, including all information (if any) deemed to be part of the additional
registration statement as of its Effective Time pursuant to Rule 430A(b), is
hereinafter referred to as the "Additional Registration Statement." The Initial
Registration Statement and the Additional Registration Statement are herein
referred to collectively as the "Registration Statements" and individually as a
"Registration Statement." The form of prospectus relating to the Shares, as
first filed with the Commission pursuant to and in accordance with Rule 424(b)
("Rule 424(b)") under the Act or (if no such filing is required) as included in
a Registration Statement, is hereinafter referred to as the "Prospectus."
1. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1
(Registration No. 333-______) and a related preliminary prospectus for
the registration of the Shares under the Securities Act of 1933, as
amended (the "Act"), has filed such amendments thereto, if any, and
such amended preliminary prospectuses as may have been required to the
date of this Agreement, and will file such additional amendments
thereto and such amended prospectuses as may hereafter be required.
The term "preliminary prospectus" as used herein means a preliminary
prospectus as contemplated by Rule 430 or Rule 430A of the rules and
regulations of the Commission under the Act (the "Rules and
Regulations") included at any time as part of the registration
statement. Copies of such registration statement and amendments and of
each related preliminary prospectus have been delivered to the
Representatives. If such registration statement has not become
effective, a further amendment to such registration statement,
including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by
the Company with the Commission. If such registration statement (the
"initial registration statement") has been declared effective, either
(i) an additional registration statement (the "additional registration
statement") relating to the Shares may have been filed with the
Commission pursuant to Rule 462(b) ("Rule 462(b)") under the Act and,
if so filed, has become effective upon filing pursuant to such Rule
and the Shares have been duly registered under the Act pursuant to the
initial registration statement and such additional registration
statement. If the Company does not propose to amend the initial
registration statement or if an additional registration statement has
been filed and the Company does not propose to amend it, and if any
post-effective amendment of either such registration statement has
been filed with the Commission prior to the execution and delivery of
this Agreement, the most
2
<PAGE>
recent amendment (if any) to each such registration statement has been
declared effective by the Commission or has become effective upon
filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act or, in
the case of the additional registration statement, Rule 462(b).
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any
preliminary prospectus, the Registration Statement or the Prospectus
or any part thereof and no proceedings for a stop order suspending the
effectiveness of the Registration Statement or any of the Company's
shares have been instituted or are pending or, to the Company's
knowledge, threatened. On the Effective Date, on the date the
Prospectus is first filed with the Commission pursuant to Rule 424(b)
(if required), on the Closing Date and when any post-effective
amendment to the Registration Statement becomes effective or any
amendment or supplement to the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus (as amended
or as supplemented if the Company shall have filed with the Commission
any amendment or supplement thereto), including the financial
statements included in the Prospectus, did or will comply with all
applicable provisions of the Act and the Rules and Regulations and
will contain all statements required to be stated therein in
accordance with the Act and the Rules and Regulations.
(c) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement
(the "Execution Time"): (i) on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement conformed
in all respects to the requirements of the Act and the Rules and
Regulations, and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) on
the Effective Date of the Additional Registration Statement (if any),
each Registration Statement conformed, or will conform, in all
respects to the requirements of the Act and the Rules and Regulations,
and did not include, or will not include, any untrue statement of a
material fact and did not omit, or will not omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) on the date of this
Agreement, the Initial Registration Statement and, if the Effective
Time of the Additional Registration Statement is prior to the
Execution Time, the Additional Registration Statement each conforms in
all respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. If the Effective Time of
the Initial Registration Statement is subsequent to the Execution
Time: on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement will conform in all respects to the
requirements of the Act and the Rules and Regulations, and it will not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do
not apply to statements in or omissions from a Registration Statement
3
<PAGE>
based upon written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein,
it being understood and agreed that the only such information is that
set forth in the third and seventh paragraphs under the heading
"Underwriting" in the Prospectus.
(d) If the Effective Time of the Initial Registration
Statement is prior to the Execution Time, at the time of filing of the
Prospectus pursuant to Rule 424(b) or (if no such filing is required)
at the Effective Date of the Additional Registration Statement in
which the Prospectus is included, the Prospectus will conform in all
respects to the requirements of the Act and the Rules and Regulations
and it will not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the Execution Time: on the
Effective Date of the Initial Registration Statement, the Prospectus
will conform in all respects to the requirements of the Act and the
Rules and Regulations and it will not include any untrue statement of
a material fact or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do
not apply to statements in or omissions from a Prospectus based upon
written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein, it being
understood and agreed that the only such information is that set forth
in the third and seventh paragraphs under the heading "Underwriting"
in the Prospectus.
(e) The Company, and each of the companies listed on Schedule
II, which companies shall comprise all of the Company's subsidiaries
as of the Closing Date (collectively, "Subsidiaries"), is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The Company and each of the Subsidiaries
has full power and authority (corporate and other) to conduct all the
activities conducted by it, to own or lease all the assets owned or
leased by it and to conduct its business as described in the
Registration Statement and the Prospectus. Each of the Company and the
Subsidiaries is duly licensed or qualified to do business and in good
standing in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it
makes such licensing or qualification necessary, except to the extent
that the failure to be so licensed or qualified or be in good standing
would not have a material adverse effect on the Company and the
Subsidiaries, taken as a whole. Except as set forth in the Prospectus,
neither the Company nor the Subsidiaries owns directly or indirectly,
any shares of stock or any other equity or long-term debt shares of
any corporation or have any equity interest in any firm, partnership,
joint venture, association or other entity.
(f) The Company's authorized capitalization as set forth in
the Prospectus, under "Capitalization" and "Description of Capital
Stock" and will have the adjusted capitalization set forth therein on
the Closing Date, based upon the assumptions set
4
<PAGE>
forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue
any capital stock, rights, warrants, options or other shares, except
for this Agreement and as described in the Prospectus. The Shares and
all other shares issued or issuable by the Company conform or, when
issued and paid for, will conform, to all statements with respect
thereto contained in the Registration Statement and the Prospectus.
(g) All of the outstanding shares of capital stock of, or
other ownership interests in, each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable
and as of the Closing Date will be owned directly or indirectly by the
Company free and clear of any lien, charge, claim, encumbrance,
security interest, defect or other restriction of any kind whatsoever.
(h) All financial statements, including the financial
statements of Girgenti, Hughes, Butler & McDowell, Inc., and its
affiliates (collectively, "GHB&M"), the financial statements of Milton
Marketing Group ("Milton"), and its subsidiaries (the "Milton
Affiliates"), and the related notes thereto included in the
Registration Statement and the Prospectus present fairly the
consolidated financial condition of the Company and the Subsidiaries
as of the dates indicated and the results of operations and cash flows
of the Company and the Subsidiaries for the periods specified, all in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the entire period involved, except as
otherwise disclosed in the Prospectus, and did not include at the time
of filing or at the time of any subsequent amendment any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. The
pro forma combined financial information of the Company and the
Subsidiaries, and the related notes thereto included in the
Registration Statement and the Prospectus have been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements, have been properly compiled on the
bases described therein and, in the opinion of the Company and the
Subsidiaries, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein. No
other financial statements or schedules of the Company or the
Subsidiaries are required by the Act, the Rules and Regulations, the
Exchange Act or the 1934 Act Rules and Regulations to be included in
the Registration Statement or the Prospectus. Arthur Andersen LLP, who
certified the financial statements and supporting schedules, are
independent public accountants as required by the Act and the Rules
and Regulations or the Exchange Act or the 1934 Act Rules and
Regulations.
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to
the Closing Date, except as otherwise stated therein, (i) there has
not been and will not have been any change in the capitalization of
the Company or the Subsidiaries, or any adverse change in the
business, properties, business prospects, condition (financial or
otherwise) or results of
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operations of the Company or the Subsidiaries, arising for any reason
whatsoever, (ii) neither the Company nor the Subsidiaries has incurred
nor will incur any material liabilities or obligations, direct or
contingent, nor has it entered into nor will it enter into any
material transactions other than pursuant to this Agreement and the
Agreements and Plan of Organization (the "Reorganization Agreements")
to be entered into by the Company with GHB&M, with Les Milton, as sole
shareholder of Milton, and with various minority shareholders of the
Milton Affiliates named therein, and the transactions referred to
herein and therein, and (iii) the Company has not and will not have
paid or declared any dividends or other distributions of any kind on
any class of its capital stock.
(j) The shares of Common Stock to be issued pursuant to the
Reorganization Agreements (the "Reorganization Shares") have been duly
authorized and, as of the Closing Date, validly issued and fully paid
and non-assessable, and the holders thereof will have no rights of
rescission with respect thereto, and will not be subject to personal
liability by reason of being such holders; and none of such
Reorganization Shares were issued in violation of the preemptive
rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The Shares to be issued
pursuant to the public offering are not, and will not be, subject to
any preemptive or other similar rights of any holders, have been duly
authorized and, when issued, paid for and delivered in accordance with
the terms hereof, will be validly issued, fully paid and
non-assessable; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be
taken for the authorization, issuance and sale of the Shares has been
duly and validly taken; and the certificates representing the Shares
will be in due and proper form pursuant to Section 158 of the Delaware
General Corporation Law. Upon the issuance, delivery and payment
pursuant to the terms hereof of the Shares to be sold by the Company
hereunder, each of the Underwriters will acquire good and indefeasible
title to such Shares free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction of
any kind whatsoever. Except as described in the Prospectus, the
Company does not have outstanding, and at the Closing Date will not
have outstanding, any options to purchase, or any rights or warrants
to subscribe for, or any shares or obligations convertible into, or
any contracts or commitments to issue or sell, any shares of common
stock, or any such rights, warrants, convertible shares or
obligations. The Company does not, and at the Closing Date will not
have outstanding any securities other than the Reorganization Shares.
Except as described in the Prospectus, the Subsidiaries do not have
outstanding, and at the Closing Date will not have outstanding, any
options to purchase, or any rights or warrants to subscribe for, or
any shares or obligations convertible into, or any contracts or
commitments to issue or sell, any shares of such Subsidiary's common
stock, or any such rights, warrants, convertible shares or
obligations.
(k) The Company and the Subsidiaries have timely filed all
necessary tax returns and notices that are required to have been filed
prior to the date hereof and have paid all foreign, Federal, state,
county and local taxes of any nature whatsoever
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(including, but not limited to, income, sales, unemployment, and
social security taxes) that have become due, whether pursuant to any
assessments, or otherwise, and there are no further liabilities
(whether or not disclosed on such returns) or assessments for any such
taxes (whether or not proposed), and no interest or penalties accrued
or accruing with respect thereto, except as may be set forth or
adequately reserved for in the financial statements included in the
Registration Statement; to the Company's best knowledge, the amounts
currently set up as provisions for taxes or others by the Company and
the Subsidiaries on their books and records are sufficient for the
payment of all their unpaid foreign, Federal, state, county and local
taxes accrued through the date hereof, and for which the Company and
the Subsidiaries may be liable in their own right, as a transferee of
the assets of, or as successor to any other corporation, association,
partnership, joint venture or other entity.
(l) The Company and the Subsidiaries each maintains insurance
of the types and in the amounts are adequate for its business and
consistent with insurance coverage maintained by similar companies in
similar businesses, including but not limited to, workers'
compensation insurance, insurance covering real and personal property
owned or leased by the Company or the Subsidiary against theft,
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(m) The Company is not an "investment company" or a company
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended.
(n) There is no action, suit, proceeding, claim or
investigation pending or threatened against or affecting the Company
or the Subsidiaries, or any of their respective officers in their
capacities as such, before or by any federal or state court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, which is required to be
disclosed in the Registration Statement or which might, individually
or in the aggregate, materially and adversely affect the Company or
the Subsidiaries, or their respective business, properties, business
prospects, condition (financial or otherwise) or results of operations
or might materially and adversely affect the ability of the Company to
perform its obligations under this Agreement or which is otherwise
material in the context of sale of the Shares.
(o) No consent, approval, authorization or order of, or
filing or declaration with, any court or governmental agency or body
is required for or in connection with this Agreement or the
Consolidations except such as have been obtained prior to the date
hereof under the Act, the Rules and Regulations, the Exchange Act, or
the 1934 Act Rules and Regulations, or as may be required under state
securities or Blue Sky laws, or the bylaws and rules of the NASD in
connection with the purchase and distribution by the Underwriters of
the Shares to be sold by the Company.
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<PAGE>
(p) The Company has full power and authority (corporate and
otherwise) to enter into this Agreement and the Reorganization
Agreements. This Agreement and the Reorganization Agreements have been
duly authorized, executed and delivered by the Company and constitute
valid and binding agreements of the Company and are enforceable
against the Company in accordance with the terms hereof and thereof.
The execution, delivery and performance of this Agreement and the
Reorganization Agreements and the consummation of the transactions
contemplated hereby and thereby will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets
of the Company or the Subsidiaries pursuant to the terms or provisions
of, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give any other party
a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, or result in the imposition of
an obligation on the Company or any of the Subsidiaries which the
Company or any of the Subsidiaries would otherwise not have (including
without limitation any payments to any existing and former
shareholders of the Company or any of the Subsidiaries) under, the
charter or bylaws of the Company or the Subsidiaries (as amended to
date) or any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or
instrument to which the Company or a Subsidiary is a party or by which
the Company or a Subsidiary or any of their respective properties is
bound or affected, or violate or conflict with any judgment, ruling,
decree, franchise, license or permit of any court or other
governmental agency or body or any order, statute, rule or regulation
applicable to the business or properties of the Company.
(q) The Company and the Subsidiaries each has good,
marketable and indefeasible title to all real properties and assets
owned by them, in each case free and clear of all liens, charges,
encumbrances or restrictions, that might materially affect the value
thereof or materially interfere with the use made or to be made
thereof by them. The Company and the Subsidiaries each has valid,
subsisting and enforceable leases for the properties described in the
Prospectus as leased by it, with such exceptions as are not material
and do not materially interfere with the use made and proposed to be
made of such properties by the Company or the Subsidiaries.
(r) There is no document or contract required to be described
in the Prospectus or Registration Statement or to be filed as an
exhibit to the Registration Statement which is not so described or
filed. Each such contract to which the Company or one of the
Subsidiaries is a party has been duly and validly authorized, executed
and delivered, is in full force and effect, constitutes a valid and
binding agreement of each of the parties thereto, and is enforceable
against each such party in accordance with its terms. No such contract
has been assigned by the Company or one of the Subsidiaries, and the
Company knows of no present condition or fact which would prevent
compliance by the Company or the Subsidiaries or any other party
thereto with the terms of any such contract in accordance with its
terms. Neither the Company nor any of the Subsidiaries has any present
intention to exercise any right that it may have to cancel any such
contract or otherwise to terminate its rights and obligations
thereunder,
8
<PAGE>
and does not have any knowledge that any other party thereto has any
intention not to render full performance as contemplated by the terms
thereof.
(s) No labor dispute with the employees of the Company or any
of the Subsidiaries exists or is imminent, and the Company is not
aware of any existing or imminent labor disturbance by such employees
or the employees of any of its suppliers which could have a material
adverse effect on the company and the Subsidiaries, taken as a whole.
(t) The Company and the Subsidiaries each owns or possesses
the patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names presently employed by them
in connection with the business now operated by them, and no
proceeding involving any claim of infringement of or conflict with
asserted rights of others with respect to any of the foregoing has
been instituted or is threatened, pending or contemplated.
(u) The Company and the Subsidiaries each possesses such
licenses, permits, consents, orders, approvals, certificates or
authorizations issued by the appropriate Federal, state or local
regulatory agencies or bodies necessary to conduct the business now
operated by each of them, and no proceeding relating to the revocation
or modification of any such licenses, permits, consents, orders,
certificates or authorizations has been instituted or is threatened,
pending or contemplated.
(v) Neither the Company nor any of the Subsidiaries is in
violation of its charter or bylaws or in default (nor has an event
occurred which with notice or lapse of time or both would constitute a
default or acceleration) in the performance of any obligation,
agreement or condition contained in any contract, indenture, mortgage,
note, lease, or other agreement or instrument to which the Company or
the Subsidiary, as the case may be, is a party or by which it or its
properties is bound or affected, and neither the Company nor any of
the Subsidiaries is in violation of any judgment, ruling, decree,
order, franchise, license or permit of any court or other governmental
agency or body or any statute, rule or regulation applicable to the
business or properties of the Company or the Subsidiary.
(w) No statement, representation, warranty or covenant made
by the Company in this Agreement or made in any certificate or
document required by this Agreement to be delivered to the
Representatives was or will be, when made, inaccurate, untrue or
incorrect.
(x) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action
designed, or which might reasonably be expected, to cause or result,
under the Act or otherwise, in, or which has constituted,
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
9
<PAGE>
(y) Except as set forth herein or in the Master Agreement
among Underwriters dated as of [ ], there are no claims,
payments, issuances, arrangements or understandings, whether oral or
written, for services in the nature of a finder's or origination fee
with respect to the sale of the Shares hereunder or any other
arrangements, agreements, understandings, payments or issuance with
respect to the Company, or any of its officers, directors,
shareholders, partners, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. (the "NASD").
(z) Neither the Company nor any of the Subsidiaries has since
its inception (i) made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or
permitted by the laws of the United States of any jurisdiction
thereof.
(aa) There are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between the Company, and any officer,
director, shareholder of the Company, or any affiliate or associate of
any of the foregoing persons or entities required to be disclosed by
Item 404 of Regulation S-K of the Rules and Regulations other than
those which are described in the Prospectus.
(bb) The Company and the Subsidiaries are (i) in compliance
in all material respects with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all authorizations required of them under
applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such
authorization, except where such noncompliance with Environmental
Laws, failure to receive required authorizations or failure to comply
with the terms and conditions of such authorizations would not, singly
or in the aggregate, have a material adverse effect on the Company and
the Subsidiaries, taken as a whole.
(cc) There are no persons with registration or other similar
rights to have any shares registered pursuant to the Registration
Statement or otherwise registered by the Company pursuant to the Act
which are required to be disclosed in the Registration Statement,
other than as disclosed therein.
(dd) The Company's Common Stock has been approved for
listing, subject to official notice of issuance, on The Nasdaq
National Market under the symbol "HWLD", and the Company is not aware
of any threatened or pending proceedings or action by the NASD to
prohibit, revoke or suspend such listing.
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<PAGE>
(ee) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
2. Agreements to Sell and Purchase.
(a) On the basis of the representations, warranties and
agreements contained herein, but subject to the terms and conditions
herein set forth, the Company hereby agrees to issue and sell the Firm
Shares to the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company at a price per
share of $________ (the "Purchase Price"), the respective number of
Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto.
(b) In addition, on the basis of the representations,
warranties and agreements contained herein, but subject to the terms
and conditions herein set forth, the Company hereby agrees to issue
and sell the Option Shares to the Underwriters and the Underwriters
shall have the right to purchase, severally and not jointly, up to
315,000 Option Shares from the Company at the Purchase Price. Option
Shares may be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm
Shares. The Underwriters may exercise their right to purchase Option
Shares in whole or in part from time to time by giving written notice
thereof to the Company within 30 days after the date of the
Prospectus. The Representatives shall give any such notice on behalf
of the Underwriters and such notice shall specify the aggregate number
of Option Shares to be purchased pursuant to such exercise and the
date for payment and delivery thereof. The date specified in any such
notice shall be a business day (i) no earlier than the Closing Date
(as hereinafter defined), (ii) no later than 10 business days after
such notice has been given and (iii) unless otherwise agreed by the
Company, no earlier than two business days after such notice has been
given. If any Option Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the
number of Option Shares (subject to such adjustments to eliminate
fractional shares as the Representatives may determine) which bears
the same proportion to the total number of Option Shares to be
purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares.
(c) Subject to the terms and conditions and in reliance upon
the representations and warranties set forth herein, on the Closing
Date, the Company agrees to pay the Representatives a non-accountable
expense allowance in the amount of $_______, which is equal to 1% of
the gross proceeds of the Offering.
3. Terms of Public Offering. The Company is advised by the
Representatives that the Underwriters propose to make a public offering of
their respective portions of the Shares upon the terms set forth in the
Prospectus.
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4. Delivery and Payment. Payment for the Firm Shares shall be
made to the Company by wire transfer of immediately available funds to a bank
account designated by the Company, against delivery to the Representatives of
certificates for the Shares. Delivery to the Underwriters of and payment for
the Firm Shares shall be made at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P. at 10:00 a.m., New York City time, on _______________, 1997 or at
such other time not later than seven full business days thereafter as Unterberg
Harris and the Company determine (the "Closing Date"). The Closing Date and the
location of delivery of and the form of payment for the Firm Shares may be
varied by agreement between the Representatives and the Company.
Payment for the Option Shares shall be made to the Company by
wire transfer of immediately available funds to a bank account designated by
the Company, against delivery to the Representatives of certificates for the
Shares. Delivery to the Underwriters of and payment for any Option Shares to be
purchased by the Underwriters shall be made at such place as the
Representatives shall designate at 10:00 a.m., New York City time, on the date
specified in the applicable exercise notice given by the Representatives
pursuant to Section 2 (the "Option Closing Date"). The Option Closing Date and
the location of delivery of and the form of payment for such Option Shares may
be varied by agreement between the Representatives and the Company.
Certificates for the Shares shall be registered in such names
and issued in such denominations as the Representatives shall request in
writing not later than two full business days prior to the Closing Date or the
Option Closing Date, as the case may be. Such certificates shall be made
available to the Representatives for inspection not later than 1:00 p.m., New
York City time, on the business day next preceding the Closing Date or the
Option Closing Date, as the case may be. Certificates in definitive form
evidencing the Shares shall be delivered to the Representatives on the Closing
Date or the Option Closing Date, as the case may be.
5. Agreements of the Company. The Company agrees with the
Representatives that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and
any amendment thereof, to become effective. Prior to the termination
of the offering of the Shares, the Company will not file any amendment
of the Registration Statement or supplement to the Prospectus without
the prior consent of the Representatives. Subject to the foregoing
sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule
424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. In
addition, if the Effective Time of the Initial Registration Statement
is prior to the Execution Time and an additional registration
statement is necessary to register a portion of the Shares under the
Act but the Effective
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<PAGE>
Time thereof has not occurred as of such execution and delivery, the
Company will file the additional registration statement or, if filed,
will file a post-effective amendment thereto with the Commission
pursuant to and in accordance with Rule 462(b) on or prior to 10:00
P.M., New York time, on the date of this Agreement or, if earlier, on
or prior to the time the Prospectus is printed and distributed to any
Underwriter, or will make such filing at such later date as shall have
been consented to by the Representatives. The Company will promptly
advise the Representatives (A) when the Registration Statement, if not
effective at the Execution Time, and any amendment thereto, shall have
become effective, (B) when the Prospectus, and any supplement thereto,
shall have been filed (if required) with the Commission pursuant to
Rule 424(b), (C) when, prior to termination of the offering of the
Shares, any amendment to the Registration Statement shall have been
filed or become effective, (D) of any request by the Commission for
any amendment of the Registration Statement or supplement to the
Prospectus or for any additional information, (E) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (F) of the receipt by the Company of
any notification with respect to the suspension of the qualification
of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company will use
its best efforts to prevent the issuance of any such stop order and,
if issued, to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if
it shall be necessary to amend the Registration Statement or
supplement the Prospectus to comply with the Act or the Rules and
Regulations thereunder, the Company promptly will notify Unterberg
Harris of such event and promptly will prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or effect such compliance. Neither
Unterberg Harris' consent to, nor the Underwriters' delivery of, any
such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6 hereof.
(c) As soon as practicable, but not later than the
"Availability Date" (as defined below), the Company will make
generally available to its security holders and to the Representatives
an earning statement or statements of the Company which will satisfy
the provisions of Section 11(a) of the Act and Rule 158 under the Act.
For purposes of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the
fiscal quarter that includes the Effective Date, except that, if such
fourth fiscal quarter is the last quarter of the Company's fiscal
year, "Availability Date" means the 90th day after the end of such
fourth fiscal quarter.
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(d) The Company will furnish to the Representatives and
counsel for the Underwriters, without charge, (A) signed copies of the
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto), (B) copies of each EDGAR filing of each Registration
Statement (and confirmations for each EDGAR filing of each
Registration Statement), and, (C) prior to 10:00 a.m., New York City
time, on the Business Day next succeeding the date of this Agreement
and from time to time so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act as many copies of
each Preliminary Prospectus and the Prospectus and any supplement
thereto as the Representatives may reasonably request. The Company
will pay the expenses of printing or other production of all documents
relating to the offering.
(e) The Company will arrange for the qualification of the
Shares for sale under the laws of such jurisdictions as the
Representatives may designate, will maintain such qualifications in
effect so long as required for the distribution of the Shares and will
pay the fees and expenses in connection with the review of the
offering by the NASD.
(f) The Company will use the net proceeds received by it from
the sale of the Shares in the manner specified in the Prospectus under
"Use of Proceeds."
(g) For five years after the date of this Agreement, the
Company will furnish to the Representatives and upon request to each
of the other Underwriters, (i) as soon as available, a copy of each
report or other publicly available information of the Company mailed
to the holders of Common Stock or filed with the Commission and (ii)
from time to time, such other publicly available information
concerning the Company and its subsidiaries as the Representatives may
reasonably request.
(h) The Company will use its best efforts to list the shares
and maintain the inclusion of the Common Stock on The Nasdaq National
Market (or on a national securities exchange) and to register the
Shares under the Exchange Act in accordance with the 1934 Act Rules
and Regulations.
(i) The Company will use its best efforts to do and perform
all things required or necessary to be done and performed under this
Agreement and the Reorganization Agreements by the Company prior to
the Closing Date or the Option Closing Date, as the case may be, and
to satisfy all conditions precedent to the delivery of the Shares.
(j) The Company will notify Unterberg Harris of any material
adverse change affecting any of its representations, warranties,
agreements and indemnities herein at any time prior to payment to the
Company for the Shares on the Closing Date or any Option Closing Date.
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<PAGE>
(k) During the period commencing on the date hereof and
continuing for 180 days, without Unterberg Harris' written permission,
the Company will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act relating to, any
additional shares of its Securities or Common Stock or securities
convertible into or exchangeable for or exercisable for any Shares of
its Common Stock, or publicly disclose of its intention to make any
such offer, sale, pledge, disposal or filing. Notwithstanding the
foregoing, during such period the Company may (i) issue and sell the
Shares to be sold hereunder, (ii) sell shares of Common Stock upon the
exercise of an option or warrant or the conversion of a security
outstanding on the date hereof, or (iii) grant stock options in the
ordinary course of business under the Company's 1997 incentive stock
option plan.
(l) The Company will cause each of its directors, officers
and shareholders to agree that during the period commencing on the
date hereof and continuing for 180 days, without Unterberg Harris'
written permission, such directors and officers will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any shares of Common Stock or securities
convertible into or exchangeable or exercisable for any shares of its
Common Stock, or publicly disclose its intention to make any such
offer, sale, pledge, disposal or filing.
(m) The Company will use its best efforts to consummate the
transactions contemplated by the "Consolidations" (as defined in the
Prospectus) at or prior to the Closing Date in accordance with the
terms of the Reorganization Agreements and as described in the
Prospectus.
(n) The Consolidations will qualify as a "pooling of
interests" under Accounting Practice Bulletin No. 16.
6. Conditions of Underwriters' Obligations. The obligations
of the several Underwriters to purchase the Firm Shares and the Option Shares,
as the case may be, under this Agreement are subject to the accuracy of the
representations and warranties on the part of the Company contained herein as
of the date of this Agreement, the Closing Date and the Option Closing Date, as
the case may be, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the satisfaction of each of the
following conditions:
(a) The Registration Statement shall have become effective
not later than 5:00 p.m. (and in the case of a registration statement,
if any, filed under Rule 462(b) of the Act, not later than 10:00 p.m.)
New York City time on the date of this Agreement; if filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule
424(b), the Prospectus, and any such supplement, shall have been filed
in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted or threatened.
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<PAGE>
(b) Each of the transactions contemplated in connection with
the Consolidations have been or will be, at or prior to the Closing
Date, consummated, in accordance with the terms of the Reorganization
Agreements and as described in the Prospectus.
(c) The Representatives shall have received an opinion dated
the Closing Date, and with respect to any Option Shares the Option
Closing Date, satisfactory in form and substance to the
Representatives from Rosenman & Colin, LLP, counsel for the Company,
to the effect set forth in Exhibit A.
(d) The Representatives shall have received an opinion dated
the Closing Date, and with respect to any Option Shares the Option
Closing Date, satisfactory in form and substance to the
Representatives from [ ], U.K. counsel for the Company,
to the effect set forth in Exhibit B.
(e) The Representatives shall have received an opinion dated
the Closing Date, and with respect to any Option Shares the Option
Closing Date, from Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel
for the Underwriters, which opinion shall be satisfactory in all
respects to the Underwriters, and the Company shall have furnished to
such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(f) Since the date of the most recent financial statements
included in the Prospectus, there has been no material adverse change
in the Company or the Subsidiaries or their respective business,
properties, business prospects, condition (financial or otherwise) or
results of operations, except as set forth in or contemplated in the
Prospectus.
(g) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company dated the Closing Date or the Option Closing Date, as the case
may be, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus, any
supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of the
Company in this Agreement are true and correct on and as of
the Closing Date or the Option Closing Date, as the case may
be, with the same effect as if made on the Closing Date or
the Option Closing Date and the Company has complied with all
the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to the Closing Date
or the Option Closing Date;
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(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus, there has been no
material adverse change in the Company or the Subsidiaries or
their respective business, properties, business prospects,
condition (financial or otherwise) or results of operations,
except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(h) At the Execution Time and at the Closing Date or the
Option Closing Date, as the case may be, Arthur Andersen LLP shall
have furnished to the Representatives a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, with
respect to treatment of the Consolidations as a pooling of interests
under Accounting Practice Bulletin No. 16, the financial statements
and certain financial information contained in the Registration
Statement and Prospectus in form and substance satisfactory to the
Representatives.
(i) The Shares to be sold by the Company on the Closing Date
shall have been duly listed on The Nasdaq National Market subject to
notice of issuance and shall have been registered under the Exchange
Act in accordance with the 1934 Act Rules and Regulations.
(j) At the Execution Time, the Company shall have furnished
to the Representatives a lock-up letter from each officer, director
[and each stockholder] of the Company substantially in the form set
forth in Exhibit C.
(k) Prior to the Closing Date or the Option Closing Date, as
the case may be, the Company shall have furnished to the
Representatives such further information, certificates and documents
as the Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall
not have been fulfilled in when and as provided in this Agreement, or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be reasonably satisfactory in form and substance to the
Representatives and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the Representatives. Notice of such cancellation
shall be given to the Company in writing or by telephone or telegraph confirmed
in writing.
7. Reimbursement of Underwriters' Expenses. If the sale of
the Shares provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 is not satisfied,
because of any termination pursuant to Section 10 or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by any of
the Underwriters, the Company will reimburse the Underwriters severally upon
demand
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for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Shares.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the
meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act, the Exchange Act
or other Federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the
Shares as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof
or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any
Underwriter through the Representatives specifically for inclusion
therein. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company each of the Company's
directors, and each of the Company's officers who signs the
Registration Statement, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity to each Underwriter, but only with
reference to written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter through
the Representatives specifically for inclusion in the documents
referred to in the foregoing indemnity. The Company acknowledges that
the statements set forth in the third and seventh paragraphs under the
heading "Underwriting" in any Preliminary Prospectus and the
Prospectus constitute the only information furnished in writing by or
on behalf of the several Underwriters for inclusion in any Preliminary
Prospectus or the Prospectus, and the Representatives confirm that
such statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in
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<PAGE>
respect thereof is to be made against the indemnifying party under
this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying
party (i) will not relieve it from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided
in paragraph (a) or (b) above. The indemnifying party shall be
entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees
and expenses of any separate counsel retained by the indemnified party
or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel
to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. In the case of any
such separate firm for the Underwriters and such control persons of
the Underwriters, such firm shall be designated in writing by
Unterberg Harris. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
19
<PAGE>
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company and the
Underwriters agree to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more of the
Underwriters may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand
and by the Underwriters on the other from the offering of the Shares;
provided, however, that in no case shall any Underwriter (except as
may be provided in any agreement among underwriters relating to the
offering of the Shares) be responsible for any amount in excess of the
underwriting discount or commission applicable to the Shares purchased
by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
Company, and the Underwriters shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Company on the one hand and of the Underwriters
on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Underwriters shall be deemed
to be equal to the total underwriting discounts and commissions, in
each case as set forth on the cover page of the Prospectus. Relative
fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Company
or the Underwriters. The Company and the Underwriters agree that it
would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person who controls an Underwriter within the meaning
of either the Act or the Exchange Act and each director, officer,
employee and agent of an Underwriter shall have the same rights to
contribution as such Underwriter, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights
to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d). The remedies provided for
in this Section 9 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at
law or in equity.
The indemnity and contribution provisions contained in this
Section 8 and the representations and warranties of the Company
contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any
20
<PAGE>
person controlling any Underwriter or by or on person controlling the
Company and (iii) acceptance of and payment for any of the Shares.
9. Default by an Underwriter. If any one Underwriter shall
fail to purchase and pay for any of the Shares agreed to be purchased by such
Underwriter hereunder and such failure to purchase shall constitute a default
in the performance of its obligations under this Agreement, the remaining
Underwriters shall be obligated to take up and pay for the Shares which the
defaulting Underwriter agreed but failed to purchase; provided, however, that
in the event that the aggregate amount of Shares which the defaulting
Underwriter agreed but failed to purchase shall exceed 10% of the aggregate
amount of Shares set forth in Schedule I hereto, the remaining Underwriters
shall have the right to purchase all, but shall not be under any obligation to
purchase any, of the Shares, and if such nondefaulting Underwriters do not
purchase all the Shares, this Agreement will terminate without liability to any
nondefaulting Underwriters or the Company. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding seven days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company and any nondefaulting Underwriter for
damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Shares, if prior to
such time (a) trading in the Company's Common Stock shall have been suspended
by the Commission or The Nasdaq National Market or trading in securities
generally on the New York Stock Exchange or The Nasdaq National Market shall
have been suspended or limited or minimum prices shall have been established on
such Exchange or Market, (b) a banking moratorium shall have been declared
either by Federal or New York State authorities; or (c) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis the effect of
which on financial markets is such as to make it, in the judgment of the
Representatives, impracticable or inadvisable to proceed with the offering or
delivery of the Shares as contemplated by the Prospectus.
11. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities and other
statements of the Company or its officers, and of the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or the
Company or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive delivery of and payment for the Shares. The
provisions of Sections 9 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telegraphed and confirmed to them, care of Unterberg
Harris, 10 East 50th Street, 22nd Floor, New York,
21
<PAGE>
New York, 10022 with a copy to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590
Madison Avenue, New York, New York 10022, Attention: Edward D. Sopher, Esq. and
Stephen E. Older, Esq.; or, if sent to the Company, will be mailed, delivered
or telegraphed and confirmed to it at Healthworld Corporation, 100 Avenue of
the Americas, New York, New York 10013, with a copy to Rosenman & Colin, LLP,
575 Madison Avenue, New York, New York 10022-2585, Attention: Howard S. Jacobs,
Esq.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 9 hereof,
and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
[The remainder of this page is intentionally left blank.]
22
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.
Very truly yours,
HEALTHWORLD CORPORATION
By:
----------------------------------
Name:
Title:
UNTERBERG HARRIS
PENNSYLVANIA MERCHANT GROUP LTD.
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule II hereto
By: UNTERBERG HARRIS
By:
-------------------------
Name:
Title:
S-1
<PAGE>
SCHEDULE I
Number of Firm Shares
Underwriters to be Purchased
- ------------ ---------------------
Unterberg Harris.........................................
Pennsylvania Merchant Group Ltd..........................
[Other]
Total 2,100,000
<PAGE>
SCHEDULE II
[LIST OF SUBSIDIARIES]
[COMPANY TO PROVIDE]
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC.
100 Avenue of the Americas
New York, New York 10013
November 14, 1996
PERSONAL AND CONFIDENTIAL
The Milton Group
1 Thames Street
Windsor, Berkshire SL4 1PL, England
Proposed Reorganization and Public Offering - Letter of Intent
Dear Sirs:
This letter of intent states the proposal by Girgenti, Hughes, Butler &
McDowell, Inc., a Delaware corporation ("GHBM"), regarding your potential
participation in a proposed (i) reorganization ("Reorganization") whereby the
shareholders ("Shareholders") of GHBM and The Milton Group ("Milton"), would
exchange their stock in those companies for stock in a U.S. holding company to
be organized as a Delaware corporation and named "HealthWorld Corporation" or
another similar name ("HealthWorld"), and (ii) HealthWorld would simultaneously
effect an initial public offering ("Offering") of stock in the United States.
(GHBM and Milton are each referred to a "Company" and collectively as the
"Companies.")
GHBM would be willing to participate in a Reorganization and Offering
with you, if you agree to the following terms and conditions:
1. Offering and Reorganization. Upon your acceptance of this letter of intent,
the parties shall proceed diligently to prepare and execute definitive
agreements and related documents effecting the Reorganization ("Definitive
Reorganization Agreements") and the Offering. The Definitive Reorganization
Agreements shall provide as follows:
1.1 The Offering.
1.1.1 Based on presently available information, GHBM
anticipates that HealthWorld could raise approximately $20,000,000 in gross
offering proceeds by selling approximately 25% to 30% of its stock to public
investors.
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1.1.2 The cash proceeds of the Offering would be used, among
other things, for working capital and to finance the acquisition by HealthWorld
for stock and/or cash of one or more of the licensees of HealthWorld B.V. or of
other complementary companies in the United States or Europe.
1.1.3 Upon the execution and delivery of this Letter of
Intent, the parties hereto will negotiate in good faith towards the execution of
definitive underwriting agreements with a reputable underwriter to effect the
Offering on a firm commitment basis. Upon execution of the underwriting
agreements, the parties hereto will negotiate in good faith towards the
execution of Definitive Reorganization Agreements. and the parties, together
with the underwriter, shall commence the registration process.
1.1.4 HealthWorld will file a Registration Statement
(including a prospectus and any amendments or supplements, a "Registration
Statement") prepared in accordance with the rules and regulations of the United
States Securities and Exchange Commission ("SEC") as soon as practicable after
the preparation of audited financial statements for the 12-month period ending
December 31, 1996 with regard to each Company and any necessary prior periods,
and on a pro-forma combined basis with regard to all Companies ("Financial
Statements"). The Financial Statements will be reconciled to United States
generally accepted accounting principles. GHBM anticipates that the 1996
Financial Statements will be available in mid-February, 1997. GHBM anticipates
that the Registration Statement would be declared "effective" by the SEC on a
date ("Effective Date") on or prior to March 31, 1997.
1.2 Corporate Structure.
1.2.1 The Shareholders of the Companies would retain an
aggregate of approximately 70% to 75% of the stock in HealthWorld upon
completion of the Offering (taking into account the exercise of any
over-allotment option).
1.2.2 Based on the Shareholders' valuation of GHBM and Milton
as of the date hereof, the 75% of the HealthWorld stock to be retained by the
Shareholders would be allocated as follows:
GHBM Shareholders 69%
Milton Shareholders 31%
1.2.3 The amount of HealthWorld stock actually issued to the
Shareholders would be subject to adjustment based upon actual 1996 performances.
As long as each company meets the projection set forth in Sections 1.4.1 below
there shall be no adjustments to that company's Shareholders.
1.2.4 HealthWorld would own the stock of GHBM and Milton as
separate subsidiaries.
2
<PAGE>
1.2.5 All subsidiaries and affiliates of each Company will be
merged or consolidated into that Company prior to the Effective Date, unless tax
or other considerations dictate a different structure with regard to any
particular subsidiary or affiliate.
1.2.6 Each Company and its Shareholders, subsidiaries and
affiliates shall also effect any internal reorganization or other transactions
necessary to achieve the pro forma net-pre-tax-profits required by Section
1.4.1, and to address any other concerns regarding their corporate structure and
financial condition (including without limitation insolvency).
1.3 Corporate Governance.
1.3.1 The Board of Directors of HealthWorld would consist of
seven directors, including three director(s) designated by GHBM (initially
including Steven Girgenti), one director designated by Milton (initially Les
Milton), and three "outside" director(s) to be determined by the four "inside"
directors, one of which shall be from Europe.
1.3.2 The Board of Directors may establish an Executive
Committee and a Compensation Committee, each of which will include Steven
Girgenti and Les Milton, among others.
1.3.3 The Board of Directors of each Company would include at
least one director designated by each other Company.
1.3.4 The officers of HealthWorld would include the
following:
Steven Girgenti Chairman of the Board of Directors and CEO
Les Milton Vice Chairman, President and C.O.O.
1.3.5 The officers of each Company would remain unchanged,
except that Les Milton shall be Chairman of Healthworld, B.V.
1.3.6 It is anticipated subject to existing business
relationships, that Les Milton will be responsible for administering Healthworld
operations worldwide except for North and South America.
1.4 Executive Compensation.
1.4.1 Steven Girgenti, Les Milton, and the other principal
shareholders and key employees of each Company to be determined, would execute
Executive Employment Agreements with HealthWorld or its subsidiaries. The
compensation arrangements provided therein shall be subject to (i) the approval
of the managing underwriter of the Offering, and (ii) the need to reflect pro
forma net-pre-tax-profits for GHBM for the 12-month period
3
<PAGE>
ending December 31, 1996, and Milton for the 12 month period ending November 30,
1996 as follows:
GHBM 2,240,000 (- 10%)
1
Milton 1,150,000 (- 10%)
1.4.2 The respective Employment Agreements shall provide as
follows:
1.4.2.1 for an annual base salary denominated in
local currency. Such base salary shall equal the amount set forth below with
regard to the following Shareholders:
Steven Girgenti 350,000
Les Milton 350,000
William Butler 275,000
Herb Ehrenthal 275,000
Frank Hughes 225,000
1.4.2.2 for participation in a bonus pool to be
determined based on the annual financial performance of each Shareholder's
Company and/or HealthWorld as a whole.
1.4.2.3 subject to Section 1.4.1, vacation, medical,
insurance and other benefits and perquisites consistent with past practice.
1.4.3 HealthWorld shall adopt a Stock Option Plan allowing for
the grant of qualified and non-qualified stock options, shares of stock and
stock appreciation rights to eligible employees in the discretion of the
Compensation Committee of the Board of Directors.
1.5 Restrictions on Transfer; Registration Rights.
1.5.1 The Shareholders shall agree not to sell any of their
HealthWorld shares in any Private Sale without offering the other Shareholders
of the seller's Company a first right of refusal to purchase such shares and the
Shareholders of the other Companies a second right of refusal to purchase such
shares.
1.5.1.1 "Private Sales" include all transfers other
than (1) sales of stock pursuant to sales of stock in a broker's transaction
pursuant to Rule 144 under the Securities Act of 1933, as amended, or otherwise,
on the National Association of Securities Dealers Automated Quotation system or
any other national securities exchange or other public market on which the
HealthWorld stock is traded, (2) sales pursuant to an offering effected
- --------
1 Based on the rate of exchange of 1.6 between USD per BPS.
4
<PAGE>
pursuant to an effective registration statement filed with the SEC ("Secondary
Offering"), (3) transfers in connection with the merger or consolidation of
HealthWorld or sale of all or substantially all of its assets, and (4) permitted
transfers to certain immediate family members and other relatives.
1.5.2 The Shareholders may not participate in any Secondary
Offering prior to the first anniversary of the Effective Date. Thereafter, they
shall have "piggyback" registration rights only to the extent permitted by the
underwriter(s) managing any such offering. The Shareholders will have no
"demand" registration rights.
1.5.3 In addition, the Shareholders will agree not to sell any
of their HealthWorld Shares for a period of two (2) years following the
Offering.
1.6 Representations, Warranties and Indemnities.
1.6.1 The Shareholders and their respective Companies will
jointly and severally make such representations and warranties regarding the
business and affairs of the Companies and otherwise as are customary in
transactions of a similar nature. The representations and warranties will
survive the Effective Date for a period of two years.
1.6.2 After the Effective Date, the Shareholders will be
solely liable for, and shall indemnify HealthWorld against, any loss arising
from the breach of any such representations and warranties.
1.6.3 On the Effective Date the Shareholders will release all
claims they may have against the Companies for liabilities arising prior to the
Effective Date (other than accrued benefits and salary owed in accordance with
normal payroll practice).
1.6.4 The Definitive Reorganization Agreements will contain
such other terms and conditions as are customary in transactions of a similar
nature.
1.7 Professional Advisers.
1.7.1 Todtman, Young, Tunick, Nachamie, Hendler & Spizz, P.C.
will act as United States legal counsel to GHBM and HealthWorld in connection
with the Reorganization and Offering, and will be primarily responsible for
drafting the Definitive Reorganization Agreements and the Registration
Statement.
1.7.2 ______________________ will act as legal counsel to
Milton for the purpose of negotiating the Definitive Reorganization Agreements.
In addition they shall advise Milton on issues effecting Milton in the
Registration Statement and public offering, said advising fees shall be capped
at $15,000.00.
5
<PAGE>
1.7.3 A worldwide accounting firm will prepare the Financial
Statements and any related projections, and shall be retained as accountants by
HealthWorld after the Offering.
2. Prompt Response to Requests for Information. The parties acknowledge
that time is of the essence in attempting to simultaneously accomplish the
Reorganization and Offering. Each party therefore agrees to prepare and provide,
promptly upon request of the other party (and of its respective professional
advisers), any documents and financial statements reasonably related to the
negotiation of the terms and conditions of the proposed Reorganization and to
the preparation and filing of a Registration Statement by HealthWorld, and
otherwise to cooperate with the "due diligence" review of such party's business
and financial condition. The parties will also cooperate with, and make their
personnel available to the extent reasonably requested by, any underwriter or
selling agent in connection with its marketing efforts on behalf of HealthWorld.
2.1 The parties will prepare and provide financial statements for the
12-month period ending December 31, 1996 and any necessary prior periods as soon
as possible after that date so that the accountants can prepare financial
statements for such periods on a pro-forma combined basis with regard to all
Companies by mid-February, 1997.
2.2 After the date hereof, each of the parties will prepare and provide
to the other respective party and its advisers interim financials on a monthly
basis.
3. Conditions to Closing of Reorganization. The consummation of the
Reorganization will be subject to the execution and delivery of the Definitive
Reorganization Agreements and other necessary documentation and other
appropriate conditions, including:
3.1 the receipt of all approvals of all governmental and
regulatory authorities having jurisdiction over any party to the Reorganization,
to the extent any such approvals shall be necessary to consummate the
Reorganization and the Offering;
3.2 approval of the Board of Directors and, if necessary, the
shareholders of each party to the Reorganization;
3.3 no actual or anticipated statutory, regulatory or judicial
prohibition to the Reorganization;
3.4 a satisfactory legal, business, and financial review of each
party to the Reorganization;
3.5 no material adverse change in the financial condition or
business of any party to the Reorganization;
6
<PAGE>
3.6 subject to Section 4, the Registration Statement having been
declared effective by the SEC by the Effective Date.
4. Deadlines. If the Definitive Reorganization Agreements have not been
executed and delivered by 6:00 p.m. New York time on December 31, 1996 ("Drop
Dead Date"), then the obligation of the parties to go forward with negotiations
shall terminate unless extended in writing by mutual agreement. In addition, the
Definitive Reorganization Agreements will provide that, unless extended in
writing by mutual agreement, they shall terminate and be of no further force and
effect if the Registration Statement has not been declared effective by the SEC
by the Effective Date.
5. Suspension of Negotiations. By execution of this letter, each party
hereto agrees to suspend any discussions or negotiations with any third party
concerning any merger, acquisition, sale of a controlling interest in, or sale
of all or substantially all the assets, of such party, unless such party in good
faith believes that (i) the third party would be willing to participate in the
Reorganization and Offering on substantially the same terms set forth herein,
and (ii) that the inclusion of the third party in the Reorganization and
Offering would be advantageous to HealthWorld; provided, that if by 6:00 p.m.
New York time on the Drop Dead Date, the parties have not executed and delivered
the Definitive Reorganization Agreements then each party may resume any
discussions or negotiations that would be otherwise prohibited by this Section
5; but further provided, that if the Definitive Reorganization Agreements are
executed by the Drop Dead Date, the parties shall continue to suspend any
prohibited discussions or negotiations unless by 6:00 p.m. New York time on the
Effective Date, the SEC has not declared the Registration Statement to be
effective or the Reorganization has not been consummated, in which case each
party may resume such discussions or negotiations.
6. Confidentiality. Until the Drop Dead Date, and thereafter, if the
Definitive Reorganization Agreements have been signed, until the Effective Date,
each party at all times will hold and cause its employees and advisors to hold
in confidence all documents and information concerning the other parties hereto
which have been or will be furnished in connection with the transactions
contemplated hereby, except as may be necessary to facilitate negotiations with
any prospective underwriter of shares in HealthWorld or any regulatory agency or
authority (including the SEC). If such transactions are not consummated, such
confidence will be maintained, except to the extent such information (a) was
previously known to the receiving party prior to disclosure by the disclosing
party, (b) is in the public domain through no fault of the receiving party, (c)
is lawfully acquired by the receiving party from a third party under no
obligation of confidence to the disclosing party, or (d) is required by law to
be disclosed. Such documents and information will not be used to the detriment
of the disclosing party otherwise in any manner and all documents, materials and
other written information provided by the disclosing party to the receiving
party, including all copies and extracts thereof, will be returned to the
disclosing party promptly upon written request.
7
<PAGE>
7. Expenses.
7.1 Each party will be responsible for the payment of its respective
expenses and professional fees incurred in connection with and allocable to the
negotiation and preparation of the Definitive Reorganization Agreements.
7.2 Although it is anticipated that all costs, fees, and expenses
(including the fees and expenses of HealthWorld's, Milton's and GHBM's
attorneys, accountants, financial consultants and other advisers) arising in
connection with or allocable to the Offering will be paid or reimbursed from the
proceeds of the Offering, the Companies shall make any necessary cash advances,
and if the Offering is for any reason abandoned, withdrawn or otherwise
unsuccessful, they will share such costs, fees and expenses in the proportion
that the aggregate number of shares the Shareholders of each Company would own
in HealthWorld upon the consummation of the Reorganization bears to the total
number of shares the Shareholders of all Companies would own in HealthWorld upon
the consummation of the Reorganization. If any Company and its Shareholders
terminate their participation in the Reorganization and Offering, such Company
shall remain liable under this Section 7.2 for all costs, fees and expenses
incurred through the effective date of their termination.
8. Publicity/Regulatory Reports. All regulatory reports, permit
applications and filings, and all press releases, announcements or other
publicity pertaining to the Reorganization and Offering will be in mutually
agreeable form, subject to any applicable regulatory requirements.
9. Brokers/Finders. Mutual representations and cross-indemnifications will
be made concerning any obligation to pay brokers or finders fees in connection
with the transactions contemplated hereby, however the parties are unaware of
any obligation to Brokers or finders in connection with the transaction
contemplated herein.
10. Governing Law. This letter of intent shall be governed by and
construed in accordance with the laws of the State of New York, U.S.A., without
giving effect to any requirements thereof which might otherwise cause the
application of the law of another jurisdiction.
11. No Binding Obligation. Except as otherwise provided herein, in
paragraphs 2, 4, 5, 6 and 7, this letter is intended to serve only as a mutual
expression of the intentions of the parties, and the parties shall not be
legally obligated with respect to the Reorganization or the Offering unless and
until formal Definitive Reorganization Agreements in mutually satisfactory form
are agreed upon, approved by the respective Boards of Directors (and, if
necessary, shareholders) of the Companies, and executed and delivered by the
Companies and all of the Shareholders, whereupon the provisions of the
Definitive Reorganization Agreements will supersede this letter.
8
<PAGE>
12. Counterparts. This letter may be signed in two or more counterparts,
each of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
Please indicate your acceptance of this letter of intent by signing
four copies of the signature page of this letter and returning them to us at our
New York offices by hand, courier service or facsimile prior to 6:00 p.m. New
York time on November 6, 1996. This offer will expire if not accepted by you
before then. If you accept this offer, we will distribute fully executed
original counterparts of this letter to each accepting party.
Very truly yours,
GIRGENTI, HUGHES, BUTLER
& MCDOWELL, INC.
By:/s/ Steven Girgenti
--------------------------------------
Steven Girgenti, President
/s/ Steven Girgenti
-----------------------------------------
STEVEN GIRGENTI, individually
ACCEPTED AND AGREED:
THE MILTON GROUP
By:/s/ Les Milton
---------------------------------
Les Milton, President
/s/ Les Milton
---------------------------------
LES MILTON, individually
9
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC.
100 Avenue of the Americas
New York, New York 10013
July 24, 1997
Milton Marketing Group Limited
1 Thames Street
Windsor, Berkshier SL4
Re: Proposed Reorganization and Public Offering - Letter of Intent
Dear Sirs:
Reference is made to that certain Letter of Intent ("Letter of Intent")
dated November 14, 1996 between Girgenti, Hughes, Butler & McDowell, Inc.
("GHB&M") and The Milton Group ("Milton") relating to a proposed Reorganization
and Offering, as defined therein. All references to Milton and The Milton Group
in this letter shall mean Milton Marketing Group Limited and its subsidiaries.
Section 4 of the Letter of Intent provides that the obligations of
GHB&M and Milton under the Letter of Intent shall terminate if the Definitive
Reorganization Agreements (as defined in the Letter of Intent) are not executed
and delivered by 6:00 p.m. (New York time) on December 31, 1996 ("Drop Dead
Date"), unless extended in writing by mutual agreement. As you are aware, the
Drop Dead Date has been extended several times, most recently to May 1, 1997,
pursuant to the February 28, 1997 amendment to the Letter of Intent.
In light of the fact that the most recent Drop Dead Date has lapsed,
please indicate your agreement to extend to the "Drop Dead Date" to 5:00 p.m.
(New York time) on November 30, 1997, by signing four copies of this letter,
retaining two copies for your records and returning the other two executed
copies to our counsel, Rosenman & Colin LLP, 575 Madison Avenue, New York, New
York 10022, by August 5, 1997.
Very truly yours,
GIRGENTI, HUGHES, BUTLER &
MCDOWELL, INC.
By: /s/ Steven Girgenti
---------------------------------
Steven Girgenti, President
/s/ Steven Girgenti
--------------------------------
STEVEN GIRGENTI, Individually
ACCEPTED AND AGREED:
MILTON MARKETING GROUP LIMITED
By: /s/ Les Milton
---------------------------------
Les Milton, President
/s/ Les Milton
- ---------------------------------
LES MILTON, Individually
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the _________ day of September, 1997
by and between
HEALTHWORLD CORPORATION,
and
STEVEN GIRGENTI,
FRANCIS HUGHES,
WILLIAM BUTLER,
and
HERBERT EHRENTHAL
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1 The Organization..............................................................................-6-
1.1 Organization................................................................-6-
1.2 Directors and Officers......................................................-6-
2 Conversion of Stock...........................................................................-7-
2.1 Manner of Conversion........................................................-7-
2.2 Beneficial Ownership of Shares..............................................-7-
2.3 Allocation of Shares........................................................-7-
3 Delivery of Company Stock and Healthworld Stock...............................................-9-
4 Closing.......................................................................................-9-
5 Representations And Warranties of U.S. Stockholders...........................................-9-
5.1 Due Organization...........................................................-10-
5.2 Prohibited Activities......................................................-11-
5.3 Capital Stock of the Company...............................................-11-
5.4 Transactions in Capital Stock..............................................-12-
5.5 No Bonus Shares............................................................-12-
5.6 Subsidiaries...............................................................-12-
5.7 Predecessor Status; etc....................................................-13-
5.8 Spin-off by the Company....................................................-13-
5.9 Financial Statements.......................................................-13-
5.10 Liabilities and obligations................................................-13-
5.11 Accounts and Notes Receivable..............................................-14-
5.12 Permits and Intangibles....................................................-14-
5.13 Environmental Matters......................................................-15-
5.14 Personal Property..........................................................-15-
5.15 Significant Customers; Material Contracts and Commitments..................-16-
5.16 Real Property..............................................................-17-
5.17 Insurance..................................................................-17-
5.18 Compensation; Employment Agreements; Organized Labor
Matters....................................................................-17-
5.19 Employee Plans.............................................................-22-
5.20 Compliance with ERISA......................................................-23-
5.21 Conformity with Law; Litigation............................................-24-
5.22 Taxes......................................................................-25-
</TABLE>
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Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
5.23 No Violations..............................................................-28-
5.24 Government Contracts.......................................................-29-
5.25 Absence of Changes.........................................................-29-
5.26 Deposit Accounts; Powers of Attorney.......................................-31-
5.27 Brokers and Agents.........................................................-31-
5.28 Relations with Governments.................................................-31-
5.29 Disclosure.................................................................-31-
5.30 Authority; Ownership. ....................................................-32-
5.31 Preemptive Rights..........................................................-33-
5.32 No Intention to Dispose of Healthworld Stock...............................-33-
6 Representations of Healthworld...............................................................-33-
6.1 Due Organization...........................................................-33-
6.2 Authorization..............................................................-33-
6.3 Capital Stock of Healthworld...............................................-34-
6.4 Transactions in Capital Stock..............................................-34-
6.5 Liabilities and Obligations................................................-34-
6.6 Conformity with Law; Litigation............................................-34-
6.7 Validity of Obligations....................................................-35-
6.8 Limited Business Conducted.................................................-35-
7 Covenants Prior to Closing...................................................................-35-
7.1 Access and Cooperation; Due Diligence......................................-35-
7.2 Conduct of Business Pending Closing........................................-36-
7.3 Prohibited Activities......................................................-37-
7.4 No Shop....................................................................-38-
7.5 Further Assurances.........................................................-39-
7.6 Agreements.................................................................-39-
7.7 Notification of Certain Matters............................................-39-
7.8 Amendment of Schedules.....................................................-39-
7.9 Cooperation in Preparation of Registration Statement.......................-40-
8 Conditions Precedent to Obligations of U.S. Stockholders.....................................-40-
8.1 Representations and Warranties; Performance of Obligations.................-40-
8.2 Satisfaction...............................................................-41-
8.3 No Litigation..............................................................-41-
8.4 Opinions of Counsel........................................................-41-
8.5 Consents and Approvals.....................................................-41-
8.6 No Material Adverse Change.................................................-42-
8.7 Secretary's Certificates; Good Standing....................................-42-
8.8 Employment Agreements......................................................-42-
</TABLE>
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Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
8.9 Conformity With Girgenti/Milton Letter of Intent and
Underwriters' Engagement Letter............................................-42-
9 Conditions Precedent to Obligations of Healthworld...........................................-43-
9.1 Representations and Warranties; Performance of Obligations.................-43-
9.2 Satisfaction...............................................................-43-
9.3 No Litigation..............................................................-43-
9.4 Opinion of Counsel.........................................................-43-
9.5 Consents and Approvals.....................................................-43-
9.6 No Material Adverse Change.................................................-44-
9.7 Secretary's Certificates...................................................-44-
9.8 Employment Agreements......................................................-44-
9.9 U.S. Stockholders' Release.................................................-44-
9.10 Termination of Related Party Agreements....................................-44-
9.11 Closings...................................................................-45-
10 Covenants of Healthworld and the U.S. Stockholders after Closing.............................-45-
10.1 Release From Guarantees; Repayment of Certain
Obligations................................................................-45-
10.2 Preservation of Tax and Accounting Treatment...............................-45-
10.3 Preparation and Filing of Tax Returns......................................-45-
10.4 Directors..................................................................-47-
10.5 Distributions for Estimated Taxes..........................................-47-
11 Indemnification..............................................................................-47-
11.1 General Indemnification by the U.S. Stockholders...........................-47-
11.2 Indemnification by Healthworld.............................................-48-
11.3 Third Person Claims........................................................-49-
11.4 Exclusive Remedy...........................................................-51-
11.5 Limitations on Indemnification.............................................-51-
12 Termination of Agreement.....................................................................-52-
12.1 Termination................................................................-52-
12.2 Liabilities in Event of Termination........................................-53-
13 Non-Competition; Non-Disclosure..............................................................-53-
13.1 Non-Competition............................................................-53-
13.2 Nondisclosure..............................................................-55-
13.3 Injunctive Relief; Damages.................................................-56-
</TABLE>
-iii-
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Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
13.4 Reasonable Restraint.......................................................-56-
13.5 Severability; Reformation..................................................-57-
13.6 Independent Covenant.......................................................-57-
13.7 Survival...................................................................-57-
14 Federal Securities Act Representations.......................................................-57-
14.1 Compliance with Law........................................................-57-
14.2 Economic Risk; Sophistication..............................................-58-
15 Registration Rights..........................................................................-58-
15.1 Piggyback Registration Rights..............................................-58-
15.2 Registration Procedures....................................................-59-
15.3 Underwriting Agreement.....................................................-59-
15.4 Availability of Rule 144...................................................-60-
16 General......................................................................................-60-
16.1 Cooperation................................................................-60-
16.2 Successors and Assigns.....................................................-60-
16.3 Entire Agreement...........................................................-60-
16.4 Counterparts...............................................................-60-
16.5 Expenses...................................................................-60-
16.6 Notices....................................................................-61-
16.7 Governing Law..............................................................-62-
16.8 Survival of Representations and Warranties.................................-62-
16.9 Exercise of Rights and Remedies............................................-62-
16.10 Time.......................................................................-62-
16.11 Reformation and Severability...............................................-62-
16.12 Remedies Cumulative........................................................-62-
16.13 Captions...................................................................-62-
16.14 Amendments and Waivers.....................................................-63-
</TABLE>
-iv-
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the ____ day of September, 1997, by and between:
Healthworld Corporation, a Delaware corporation ("Healthworld"),
Steven Girgenti ("Girgenti") residing at 3312 Judith Drive, Bellmore,
New York 11710, Francis Hughes ("Hughes"), residing at Two Beekman
Place, Apartment 3C, New York, New York 10022, William Butler
("Butler") residing at Post Office Box 1430, Olive Bridge, New York
12461-0430, and Herbert Ehrenthal ("Ehrenthal"), residing at 1447
Sylvan Lane, East Meadow, New York 11554-4814 (Girgenti, Hughes, Butler
and Ehrenthal are hereafter referred to as the "U.S.
Stockholders").
WHEREAS, the U.S. Stockholders collectively own all of the issued and
outstanding shares of Girgenti, Hughes, Butler & McDowell, Inc. ("GHBM"), a New
York corporation, Black Cat Graphics, Inc. ("Black Cat"), a New York
Corporation, Medical Education Technologies, Inc. ("MET"), a New York
corporation, Brand Research Corporation ("Brand Research"), a New York
corporation, GHBM, Inc. ("GHBMINC"), a New York corporation and Syberactive,
Inc. ("Syberactive"), an Illinois corporation (each of GHBM, Black Cat, MET,
Brand Research, GHBMINC and Syberactive are hereafter referred to individually
as a "U.S. Company" and collectively as the "U.S. Companies"); and
WHEREAS, William Leslie Milton, (the "U.K. Stockholder") is the
registered and beneficial owner with full title guarantee of the entire issued
share capital of The Milton Marketing Group Limited, a company incorporated in
England and Wales with registered no. 3113109 (the "U.K. Company"); and
WHEREAS, various other individuals (the "Minority U.S. Stockholders")
own minority share interests in certain Subsidiaries of the U.K. Company; and
WHEREAS, the U.S. Stockholders are sometimes hereinafter referred to
individually as a U.S. Stockholder or collectively as the U.S. Stockholders; and
WHEREAS, the U.S. Companies are sometimes hereinafter referred to
individually as a Company and collectively as the Companies; and
-1-
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
WHEREAS, Healthworld was formed on September 12, 1996, in the State of
Delaware, for the purpose of effecting the Healthworld Plan of Organization; and
WHEREAS, the U.S. Stockholders desire to contribute all of their shares
of stock in the U.S. Companies into Healthworld in exchange for Healthworld
Stock, the U.K. U.S. Stockholder desires to contribute all of his shares of
stock in the U.K. Company into Healthworld in exchange for Healthworld Stock,
and the Minority U.S. Stockholders desire to contribute all of their shares of
stock in the relevant Subsidiaries of the U.K. Company into Healthworld in
exchange for Healthworld Stock, all of the foregoing to occur contemporaneously
with the Pricing of the IPO; and
WHEREAS, all of the foregoing contributions together with the Pricing
of the shares to be offered by Healthworld in the IPO constitute the
"Healthworld Plan of Organization"; and
WHEREAS, the parties intend that the Healthworld Plan of Organization
shall qualify as a tax-free reorganization under Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code") and, where applicable, as a
reorganization within the meaning of Section 368 of the Code; and
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any Schedule attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means any of the U.S. Companies and any Subsidiary
thereof.
"Affiliates" has the meaning set forth in Section 5.8.
"Aggregate Number of Founder Shares" has the meaning set forth in
Section 2.3.
"Butler" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Balance Sheet Date" shall mean December 31, 1996.
"Closing" has the meaning set forth in Section 4.2.
-2-
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Closing Date" has the meaning set forth in Section 4.2.
"Code" has the meaning set forth in the introductory paragraphs of this
Agreement.
"Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Company Stock" has the meaning set forth in Section 2.1.
"Ehrenthal" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Encumbrance" means a mortgage, charge (whether fixed or floating),
pledge, lien, option, restriction, right of first refusal, right of preemption,
third party right or interest, other encumbrance or security interest of any
kind and whether legal or equitable, or another type of preferential arrangement
(including, without limitation, a title transfer and retention arrangement)
having similar effect.
"ERISA" has the meaning set forth in Section 5.19.
"Expiration Date" has the meaning set forth in Section 5.
"Girgenti" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Girgenti/Milton Letter of Intent" means a certain letter of intent of
November 14, 1996 regarding a reorganization of the U.S. Companies and the U.K.
Company in connection with a contemplated IPO, executed by Girgenti, GHBM, the
U.K.
Stockholder and the U.K. Company.
"Healthworld" has the meaning set forth in the introductory paragraphs
of this Agreement.
"Healthworld License Agreement" means that certain License Agreement by
and between Healthworld and Healthworld, B.V. pursuant to which Healthworld has
licensed from Healthworld, B.V., among other things, the right to use the name
"Healthworld."
"Healthworld Plan of Organization" has the meaning set forth in the
introductory paragraphs of this Agreement.
-3-
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Healthworld Stock" means the common stock, par value $0.01 per share,
of Healthworld.
"Hughes" has the meaning set forth in the introductory paragraphs of
this Agreement.
"IPO" means the initial public offering of Healthworld Stock pursuant
to the Registration Statement.
"Key Consultant Agreement" means any agreement with a consultant
providing for the services of an individual and requiring payment to the
consultant of not less than $150,000 per annum.
"Key Employee" means any employee whose compensation is not less than
$150,000 per annum.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Minority U.S. Stockholders" has the meaning set forth in the
introductory paragraphs of this Agreement.
"Organization" means the contribution of all the shares of stock of the
Companies and all of its Subsidiaries (with the exception of Healthworld, B.V.)
to the capital of Healthworld in exchange for shares of Healthworld Stock.
"PBGC" has the meaning set forth in Section 5.20.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by Healthworld and the
Underwriters of the public offering price of the shares of Healthworld Stock in
the IPO.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on
Form S-1 (Registration No. 333 [ ]) and any amendments covering the shares of
Healthworld Stock to be issued in the IPO.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
-4-
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"U.S. Stockholders" has the meaning set forth in the introductory
paragraphs of this Agreement.
"Subsidiary" means any corporation or other entity of which the
relevant corporation or entity owns a controlling voting interest, and any other
corporation or other entity which is similarly controlled by a Subsidiary or
group of Subsidiaries of the relevant corporation or entity.
"Tax or Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Underwriters" means Unterberg Harris and Pennsylvania Merchant
Group Ltd.
"Underwriters' Engagement Letter" means the letter dated July 17, 1997,
pursuant to which the Underwriters were engaged by Healthworld.
"U.K. Company" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.K. Stockholder" has the meaning set forth in the introductory
paragraphs of this Agreement.
"U.S. Companies" has the meaning set forth in the introductory
paragraphs of this Agreement.
"U.S. Stockholders" means Girgenti, Hughes, Butler & Ehrenthal.
"Vote of a Majority in Interest of the U.S. Stockholders" means the
vote, by formal or informal meeting, in writing or otherwise, by U.S.
Stockholders having greater than 50% of the voting control of each of the U.S.
Companies.
-5-
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1 The Organization.
1.1 Organization. The Closing of this Agreement shall take place
as described in Section 4, and all of the issued and
outstanding shares of each of the U.S. Companies shall be
contributed by the U.S. Stockholders to the capital of
Healthworld in exchange for the number of shares of
Healthworld Stock set forth in Section 2.3. Simultaneously
with the contribution described in the immediately preceding
sentence, in exchange for shares of stock of Healthworld:
1.1.1 The U.K. Stockholder will be contributing all of the
issued and outstanding shares of the U.K. Company to
the capital of Healthworld, pursuant to an Agreement
of Organization of even date herewith (the "U.K.
Agreement of Organization"), and
1.1.2 The Minority U.S. Stockholders of all of the U.K.
Company's Subsidiaries (with the exception of
Healthworld, B.V.) will be contributing all of the
issued and outstanding shares of such U.K. Company's
Subsidiaries (with the exception of Healthworld,
B.V.) which are owned by them to the capital of
Healthworld, pursuant to separate Agreements of
Organization for each of the Subsidiaries of the U.K.
Company to which such contributions relate (the
"Minority Agreements of Organization").
The contributions made by the U.S. Stockholders pursuant to this Agreement, the
contribution made pursuant to the U.K. Agreement of Organization, the
contributions made pursuant to the Minority Agreements of Organization, and the
contributions of cash by the public and/or the Underwriter in connection with
the IPO shall be considered as a single integrated transaction intended to
qualify as tax-free under Code Section 351. The Closing will occur
contemporaneously with the Pricing of the IPO, and all of the steps of the
Closing and the completion of the IPO are an integrated series of steps in a
series of transactions, none of which would have occurred without the
expectation and anticipation that the other steps will occur or will have
occurred.
1.2 Directors and Officers. At the Closing, the directors and
officers of the Companies then holding office shall remain
unchanged.
-6-
<PAGE>
Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
2 Conversion of Stock.
2.1 Manner of Conversion. The manner of converting the shares of
outstanding capital stock (the "Company Stock") of each of the
U.S. Companies issued and outstanding immediately prior to the
Closing into shares of Healthworld Stock shall be as follows:
At the Closing all of the shares of Company Stock issued and
outstanding immediately prior to the Closing shall, by virtue
of the capital contributions described in Section 1.1, and
without any action on the part of the holders thereof,
automatically be deemed to represent the right to receive the
number of shares of Healthworld Stock set forth in the table
in Section 2.3 below.
2.2 Beneficial Ownership of Shares. All Healthworld Stock received
by the U.S. Stockholders pursuant to this Agreement shall have
the same rights as all other shares of Healthworld Stock by
reason of the provisions of the Certificate of Incorporation
of Healthworld or as otherwise provided by the Delaware
General Corporation Law. All voting rights of such Healthworld
Stock received by the U.S. Stockholders shall be fully
exercisable by the U.S. Stockholders and the U.S. Stockholders
shall not be deprived nor restricted in exercising those
rights. At the Closing, Healthworld shall have no class of
capital stock issued and outstanding other than the
Healthworld Stock.
2.3 Allocation of Shares. It is anticipated that the U.S.
Stockholders, the U.K. U.S. Stockholders and the Minority U.K.
Stockholders will own, in the aggregate, 5,000,000 shares (the
"Aggregate Number of Founder Shares") of Healthworld Stock
immediately following the Closing of the IPO. With respect to
Girgenti, who presently owns one hundred (100) shares of
Healthworld Stock, the conversion shall be made in such a
manner as to issue to him only that number of additional
shares of Healthworld Stock which are necessary to attain the
percentage of shares set forth below. The allocation of the
Aggregate Number of Founder Shares among all of the U.S.
Stockholders, the U.K. Stockholder and the Minority U.K.
Stockholders shall be made as follows:
2.3.1 69% of the Aggregate Number of Founder Shares shall
be allocated to the U.S. Stockholders (the "U.S.
Percentage") and 31% of the Aggregate Number of
Founder Shares shall be allocated to the U.K.
Stockholders and the Minority U.K. Stockholders (the
"U.K. Percentage").
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2.3.2 The number of shares of Healthworld Stock which
results from applying the U.S. Percentage against the
Aggregate Number of Founder Shares shall be divided
among the U.S. Stockholders in the following
proportions:
Girgenti 63.65%
Hughes 5.00%
Butler 14.06%
Ehrenthal 17.29%
--------------------------------
Total 100.00%
2.3.3 The number of shares of Healthworld Stock which
results from applying the U.K. Percentage against the
Aggregate Number of Founder Shares shall be divided
among the U.K. Stockholder and the Minority U.K.
Stockholders in the following manner:
2.3.3.1 Michael Garnham shall receive that number of
shares of Healthworld Stock having a value
of (pounds)1,000,000, based on the offering
price in the IPO and utilizing a conversion
rate of $1.65 dollars per pound sterling.
2.3.3.2 Michael Bourne shall receive that number of
shares of Healthworld Stock having a value
of (pounds)276,448.35, based on the offering
price in the IPO and utilizing a conversion
rate of $1.65 dollars per pound sterling.
2.3.3.3 Moreton shall receive that number of shares
having a value of (pounds)64,559 based on
the offering price of the IPO and utilizing
a conversion rate of $1.65 dollars per pound
sterling.
2.3.3.4 The U.K. Stockholder shall receive the
balance of the shares of Healthworld Stock.
2.3.3.5 Cater shall not receive any shares of
Healthworld stock.
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2.3.4 No Fractional Shares. No certificates or script
representing fractional shares of Healthworld shall
be issued upon the surrender and exchange of shares.
Each holder of shares who otherwise would have been
entitled to receive a fractional share of Healthworld
(after taking into account all certificates
surrendered by such holder) shall be entitled to
receive, in lieu thereof, a payment in the amount
(without interest) equal to such fractional part of a
share of Healthworld, multiplied by the offering
price in the IPO and, where appropriate, utilizing a
conversion rate of $1.65 dollars per pound sterling.
3 Delivery of Company Stock and Healthworld Stock.
At the Closing, the U.S. Stockholders shall deliver to Healthworld duly
executed stock transfer forms effective to transfer into the name of Healthworld
or its nominee the entire issued and outstanding Company Stock together with
definitive certificate(s) therefor. The U.S. Stockholders agree promptly to cure
any deficiencies with respect to the endorsement of the stock certificates or
other documents of conveyance with respect to such Company Stock or with respect
to the stock transfer form accompanying any Company Stock. Healthworld shall
issue in the name of the U.S. Stockholders and deliver to the U.S. Stockholders
that number of shares of its stock which results from applying the percentage as
is set forth in Section 2.3, dated the Closing Date.
4 Closing.
At or immediately prior to the Pricing, the parties shall take all
actions necessary to effect the Organization at the Closing, to effect the
conversion and delivery of shares referred to in Section 3 hereof, and to
consummate all transactions contemplated by this Agreement. The taking of such
actions shall occur at the offices of Todtman, Young, Nachamie, Hendler & Spizz,
P.C., 425 Park Avenue, New York, New York 10022. The date on which such actions
occur shall be referred to as the "Closing Date" and the consummation of the
transactions occurring on such date shall be referred to as the "Closing."
5 Representations And Warranties of U.S. Stockholders.
Preliminary Matters in Respect of Representations and Warranties:
Annexed hereto and made a part hereof is a disclosure schedule
(individually a "Disclosure Schedule" and collectively the "Disclosure
Schedules") for the U.K. Company and each of the Subsidiaries, setting forth all
exceptions and/or qualifications to the
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representations and warranties made herein. It is understood and agreed that any
disclosure made on any Disclosure Schedule delivered pursuant hereto shall be
deemed to have been disclosed for purposes of any other Disclosure Schedule
required hereby. The U.K. Stockholder shall make a good faith effort to cross
reference disclosure, as necessary or advisable, between related Disclosure
Schedules.
For purposes of this Section 5, the term Company shall mean and refer
to the U.S. Company and each of the Subsidiaries of the U.S. Company.
The representations and warranties made herein are being made for the
benefit of Healthworld, the U.K. Stockholder and the Minority U.K. Stockholders.
The U.S. Stockholders jointly and severally represent and warrant that
all of the following representations and warranties in this Section 5 are true
at the date of this Agreement and, subject to Section 7.8 hereof, shall be true
on the Closing Date. All representations and warranties contained in this
Section 5, subsection (A) shall survive the Closing Date for a period of twelve
(12) months (the last day of such period being the "Expiration Date"), except
that
(i) the warranties and representations set forth in Section
5.22 hereof (regarding "Taxes") shall survive until such time
as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which shall be deemed to be the
Expiration Date for Section 5.22;
(ii) the warranties and representations set forth in Section
5.30 hereof (regarding "Authority; Ownership") shall survive
forever; and
(iii) solely for purposes of determining whether a claim for
indemnification under Section 11.1.4 hereof has been made on a
timely basis, and solely to the extent that in connection with
the IPO, Healthworld actually incurs liability under the 1933
Act, the 1934 Act, or any other Federal or state securities
laws, the representations and warranties set forth herein
shall survive until the expiration of any applicable
limitations period, which shall be deemed to be the Expiration
Date for such purposes.
5.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and is duly authorized and
qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now
conducted
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except as set forth on Schedule 5.1 or where the failure to be
so authorized or qualified would not have a material adverse
effect on the business, operations, affairs, prospects,
properties, assets or condition (financial or otherwise), of
the Company, taken as a whole (as used herein with respect to
the Company, or with respect to any other person, a "Material
Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in
which the Company is incorporated and contains a list of all
such jurisdictions in which the Company is authorized or
qualified to do business. In all material respects, all
accounts, books, ledgers, financial and other records of
whatsoever kind of the Company have been fully, properly and
accurately maintained and are up to date, are in the
possession of the Company and contain true and accurate
records of all matters required by law to be entered therein
and do not contain or reflect any material inaccuracies or
discrepancies. No notice or allegation that any of the said
records is incorrect, or should be rectified, in any material
respects has been received by the Company. The most recent
minutes of the Company, which are dated no earlier than ten
business days prior to the date hereof, affirm and ratify all
prior acts of the Company, and of its officers and directors
on behalf of the Company.
Within the five (5) year period ending with the date hereof, no order
has been made or petition presented or resolution passed for the winding-up or
administration of the Company nor has any distress, execution or other process
been levied against the Company or action taken to repossess goods in the
Company's possession and the Company is not insolvent or unable to pay its
debts.
Within the five (5) year period ending with the date hereof, no
receiver, administrative receiver or administrator has been appointed of the
whole or any material part of the assets of the Company nor are the U.S.
Stockholders aware of any circumstances likely to give rise to the appointment
of any such receiver, administrative receiver or administrator.
5.2 Prohibited Activities. Except as set forth on Schedule 5.2,
the Company has not, between the Balance Sheet Date and the
date hereof, taken any of the actions set forth in Section
7.3.
5.3 Capital Stock of the Company. The authorized capital stock of
the Company is as set forth in Schedule 5.3. All of the issued
and outstanding shares of the capital stock of the Company are
owned by the U.S. Stockholders in the amounts set forth in
Schedule 5.3. Except as set forth on Schedule 5.3, all of such
shares are owned free and clear of all Encumbrances and claims
of every kind. All of the issued and outstanding
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shares of the capital stock of the Company have been duly
authorized and validly issued, are fully paid and
nonassessable, and are owned of record and beneficially by the
U.S. Stockholders. Such shares were offered, issued, sold and
delivered by the Company in compliance with all applicable
state and Federal laws concerning the issuance of securities.
None of such shares were issued in violation of the preemptive
rights of any past or present stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule
5.4, the Company has not acquired any Company Stock since
January 1, 1995. Except as set forth on Schedule 5.4,
5.4.1 No person has the right (whether exercisable now or
in the future and whether contingent or not) to call
for the allotment, issue, sale, redemption or
transfer of any share or loan capital of the Company
under any option or other agreement (including
conversion rights and rights of pre-preemption);
5.4.2 The Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire
any of its shares or any interests therein (or of any
of its Subsidiaries) or to pay any dividend or make
any distribution in respect thereof, nor do any of
the Subsidiaries have any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire
any of their respective shares or any interest
therein or to pay any dividend or make any
distribution in respect thereof;
5.4.3 The Company has no obligation (contingent or
otherwise) to sell any of its shares or any interests
therein; and
5.4.4 Neither the voting rights attaching to the shares in
the capital of the Company nor the relative ownership
of shares among any of their respective stockholders
has been altered or changed in contemplation of the
Organization and/or the Healthworld Plan of
Organization.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of
the shares of Company Stock was issued pursuant to awards,
grants or bonuses.
5.6 Subsidiaries. Except as set forth on Schedule 5.6, the Company
has no Subsidiaries. Except as set forth in Schedule 5.6 and
except for any
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corporations or entities with respect to which the Company
owns less than 10% of the issued and outstanding stock, the
Company does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in
any corporation, association or business entity nor is the
Company, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a
listing of all names of all predecessor companies of the
Company, including the names of any entities acquired by the
Company (by stock purchase, merger, or otherwise) or owned by
the Company or from whom the Company previously acquired
material assets, since the earliest date upon which any U.S.
Stockholder acquired his or her stock in any Company. Except
as disclosed on Schedule 5.7, the Company has not been, within
such period of time, a Subsidiary or division of another
corporation or a part of an acquisition which was later
rescinded.
5.8 Spin-off by the Company. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material
assets of either the Company or any other person or entity
that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, the Company ("Affiliates") since January
1, 1995.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are
copies of the following financial statements (the "Company
Financial Statements") of the Company: the Company's audited
Consolidated Balance Sheets as of December 31, 1996 (the "1996
Balance Sheet"), 1995 and 1994 and Statements of Income, Cash
Flows and Retained Earnings for each of the years in the
three-year period ended December 31, 1996, the financial
statements for the period between the Balance Sheet Date and
June 30, 1997, and the unaudited balance sheet as of June 30,
1997. Such Financial Statements have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated
(except as noted thereon or on Schedule 5.9). Except as set
forth on Schedule 5.9, such Consolidated Balance Sheets as of
December 31, 1996, 1995 and 1994 present fairly the financial
position of the Company as of the dates indicated thereon, and
the Company Financial Statements present fairly the results of
operations for the periods indicated thereon.
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5.10 Liabilities and Obligations. Except (i) as set forth on
Schedule 5.10, (ii) for liabilities to the extent reflected or
reserved against in the 1996 Balance Sheet and (iii) for
obligations required by this Agreement, since the Balance
Sheet Date the Company has not incurred any material
liabilities of any kind, character and description, whether
accrued, absolute, secured or unsecured, contingent or
otherwise, other than liabilities incurred in the ordinary
course of business. Schedule 5.10 also includes, in the case
of those contingent liabilities related to pending or
threatened litigation, or other liabilities which are not
fixed or otherwise accrued or reserved, a good faith and
reasonable estimate of the maximum amount which may be
payable. For each such contingent liability or liability for
which the amount is not fixed or is contested, Schedule 5.10
includes the following information:
5.10.1 A summary description of the liability together with
the following:
(i) copies of all relevant documentation
relating thereto;
(ii) amounts claimed and any other action or
relief sought; and
(iii) name of claimant and all other parties to
the claim, suit or proceeding;
5.10.2 The name of each court or agency before which such
claim, suit or proceeding is pending;
5.10.3 The date such claim, suit or proceeding was
instituted; and
5.10.4 A good faith and reasonable estimate of the maximum
amount, if any, which is likely to become payable
with respect to each such liability. If no estimate
is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 Accounts and Notes Receivable. Schedule 5.11 includes an
accurate list of the accounts and notes receivable of the
Company, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the
Balance Sheet Date, and including receivables from and
advances to employees and the U.S. Stockholders. The U.S.
Stockholders shall cause the Company to provide to
Healthworld, not later than the Closing Date:
5.11.1 an accurate list of all receivables obtained
subsequent to the Balance Sheet Date and
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5.11.2 an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories.
Such list and such aging report (the "A/R Aging Reports") shall be current as of
the end of the calendar month which immediately precedes the Closing Date.
5.12 Permits and Intangibles. The Company holds all licenses,
permits and other governmental authorizations the absence of
any of which could have a Material Adverse Effect on its
business. Schedule 5.12 contains an accurate list and summary
description of all such licenses, permits and other
governmental authorizations, including permits, titles
(including motor vehicle titles and current registrations),
licenses, certificates, trademarks, tradenames, patents,
patent applications and copyrights owned or held by the
Company (including interests in software or other technology
systems, programs and intellectual property other than
software generally available in retail markets). To the
knowledge of the U.S. Stockholders, (a) the licenses, permits
and other governmental authorizations listed on Schedules 5.12
are valid, and (b) the Company has not received any notice
that any governmental authority intends to cancel, terminate
or not renew any such license, permit or other governmental
authorization. The Company has conducted and is conducting its
business in compliance in all material respects with the
requirements, standards, criteria and conditions set forth in
the licenses, permits and other governmental authorizations
listed on Schedules 5.12 and is not in violation of any of the
foregoing except where such non-compliance or violation would
not have a Material Adverse Effect on the Company. Except as
specifically provided in Schedule 5.12, the transactions
contemplated by this Agreement will not result in a material
default under or a material breach or violation of, or
materially adversely affect the rights and benefits afforded
to the Company by, any such licenses, permits or government
authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13,
the Company has, in all material respects, complied with and
is in compliance with all Federal, state, local and foreign
statutes, laws, ordinances, regulations, rules, notices,
permits, judgments, orders and decrees applicable to it or any
of its respective properties, assets, operations and
businesses relating to environmental protection (collectively
"Environmental Laws"). The Company has no actual or contingent
liability in connection with any Environmental Laws which
would have a Material Adverse Effect.
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5.14 Personal Property. Schedule 5.14 contains an accurate
list of
5.14.1 all personal property with a value in excess of
$2,000 included (or that will be included) in
"depreciable plant, property and equipment" on the
1996 Balance Sheet,
5.14.2 all other personal property owned by the Company with
a value in excess of $2,000 as of the Balance Sheet
Date and acquired since the Balance Sheet Date and
5.14.3 all leases and agreements in respect of personal
property providing for payments of greater than
$1,000 per annum,
including, (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
U.S. Stockholders, relatives of U.S. Stockholders, or Affiliates of the Company.
Except as set forth on Schedule 5.14,
5.14.4 all personal property used by the Company in its
business is either owned by the Company or leased by
the Company pursuant to a lease included on Schedule
5.14,
5.14.5 all of the personal property listed on Schedule 5.14
is in good working order and condition, ordinary wear
and tear excepted and
5.14.6 all leases and agreements included on Schedule 5.14
are in full force and effect and constitute valid and
binding agreements of the parties (and their
successors) thereto in accordance with their
respective terms.
5.15 Significant Customers; Material Contracts and Commitments.
Schedule 5.15 contains an accurate list of all significant
customers, it being understood and agreed that a "significant
customer," for purposes of this Section 5.15, means any
customer (or person or entity) representing 5% or more of the
Company's annual revenues for the one-year period ending with
the Balance Sheet Date. Except to the extent set forth on
Schedule 5.15, none of the Company's significant customers
have canceled or substantially reduced or, to the knowledge of
the Company, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services
provided by the Company. Schedule 5.15 contains a list of all
material contracts, commitments and similar
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agreements to which the Company is a party or by which it or
any of its properties are bound (including, but not limited
to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor
organizations, strategic alliances and options to purchase
land), other than agreements listed on Schedule 5.10, 5.14 or
5.16, and in each case the U.S. Stockholders have delivered
true, complete and correct copies of such agreements to
Healthworld. The Company has complied with all material
commitments and obligations pertaining to it, and is not in
default in any material respect under any contracts or
agreements listed on Schedule 5.15 and no notice of default
under any such contract or agreement has been received which
default would have a Material Adverse Effect on the Company.
Also included in Schedule 5.15 is a summary description of all
material plans or projects involving the opening of new
operations, expansion of existing operations, or the
acquisition of any personal property, business or assets.
5.16 Real Property. Schedule 5.16 includes an accurate list of all
real property owned or leased by the Company as of the Balance
Sheet Date and acquired since the Balance Sheet Date, and all
other real property, if any, used by the Company in the
conduct of its business. The Company has good and insurable
title to the real property owned by it, subject to no
mortgage, pledge, lien, conditional sales agreement,
encumbrance or charge, except as set forth in Schedule 5.16.
The U.S. Stockholders have delivered true, complete and
correct copies of all leases and agreements in respect of real
property leased by the Company. Schedule 5.16 indicates which
such properties, if any, are currently owned, or were formerly
owned, by U.S. Stockholders or business or personal affiliates
of the Company or U.S. Stockholders. All of such leases
included on Schedule 5.16 are in full force and effect and
constitute valid and binding agreements of the parties (and
their successors) thereto in accordance with their respective
terms.
5.17 Insurance. Schedule 5.17 includes
5.17.1 an accurate list as of the Balance Sheet Date of all
insurance policies carried by the Company; and
5.17.2 an accurate list of all insurance loss runs or
workers compensation claims received for the past
three (3) policy years.
The U.S. Stockholders have delivered to Healthworld true, complete and correct
copies of all insurance policies currently in effect. Such insurance policies
evidence all of the
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insurance that the Company is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. Since January 1, 1995, no insurance carried
by the Company has been canceled by the insurer and the Company has not been
denied any requested coverage.
5.18 Compensation; Employment Agreements; Organized Labor Matters.
5.18.1 Schedule 5.18 contains an accurate list showing all
officers, directors and Key Employees of the Company,
listing all employment agreements with such officers,
directors and Key Employees and the rate of
compensation (and the portions thereof attributable
to salary, bonus and other compensation,
respectively) of each of such persons as of the
Balance Sheet Date and the date hereof. The U.S.
Stockholders have delivered true, complete and
correct copies of any employment agreements for
persons listed on Schedule 5.18.
5.18.2 Except as set forth in Schedule 5.18, since the
Balance Sheet Date, there have been no increases in
the compensation payable or any special bonuses to
any officer, director, Key Employee or other
employee, except ordinary salary increases
implemented on a basis consistent with past
practices.
5.18.3 Except as set forth on Schedule 5.18, the Company is
not bound by or subject to (and none of its
respective assets or properties is bound by or
subject to) any arrangement with any labor union, no
employees of the Company are represented by any labor
union or covered by any collective bargaining
agreement, no campaign to establish such
representation is in progress and there is no pending
or, to the best of the U.S. Stockholders' knowledge,
any threatened labor dispute involving the Company
and any group of its employees nor has the Company
experienced any labor interruptions over the past
three years.
5.18.4 The U.S. Stockholders believe that the Company's
relationship with its employees is good.
5.18.5 Except as set forth in Schedule 5.18, all appropriate
notices have been issued under all statutes,
regulations and codes of
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conduct relevant to the relations between the Company
and its employees or any recognized trade union,
except for notices the absence of which would not
have a Material Adverse Effect upon the Company and
the Company has maintained adequate and suitable
records regarding the service of its employees.
5.18.6 Except as set forth in Schedule 5.18, the Company has
not entered into any currently effective collective
agreement or arrangement (whether legally binding or
not) with a trade union, association of trade unions
or other body representing any of its employees nor
has it done within the two-year period ending with
the date hereof any act which might reasonably be
construed as recognition of such a union or body.
5.18.7 Schedule 5.18 contains a listing of each written
agreement and a summary of the terms and conditions
of each unwritten agreement pursuant to which any
officers, directors and Key Employees and Key
Consultants of the Company (and their dependents) are
engaged. The summary of unwritten agreements shall
include, without limitation, details of all
participation, profit sharing, incentive, bonus,
commission, share option, medical, permanent health
insurance, directors and officers insurance, travel,
car and other benefits, arrangements and
understandings and whether legally binding upon the
Company or not and of all Key Consultant Agreements
with the Company which are in place now or will be in
place at the Closing.
5.18.8 Except as set forth in Schedule 5.18, since January
1, 1997, there have been no increases in the fringe
benefits payable to or changes in the terms of
service of any officer, director or Key Employee of
the Company.
5.18.9 Except as set forth in Schedule 5.18, there is not in
existence any contract of employment with officers,
directors or employees of the Company (or any
contract for services with any individual) which
cannot be terminated by three months notice or less
or (where such a contract has not been reduced to
writing) by reasonable notice without giving rise to
a claim
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for damages or compensation (other than statutory
compensation for unfair dismissal).
5.18.10 Except as set forth in Schedule 5.18, no promise has
been made and the Company is not obliged to increase
the fringe benefits payable to or to vary the terms
of service of any of its directors, other officers
and employees.
5.18.11 Except as set forth in Schedule 5.18, there are not,
nor will there be at Closing, outstanding offers of
employment or consultancy made by the Company and
there is no one who has accepted an offer of
employment or consultancy made by the Company but who
has not yet taken up that employment or consultancy.
5.18.12 Except as set forth in Schedule 5.18, neither the
Company nor any of its employees is involved in any
industrial or trade union dispute and there are no
facts known to the Company which might suggest that
there may be any trade union or industrial dispute
involving the Company or that the disposition of the
Company Stock may lead to any trade union or
industrial dispute.
5.18.13 Except as set forth in Schedule 5.18, there are no
amounts owing or promised to any present or former
directors, employees or consultants of the Company
other than remuneration accrued due or for
reimbursement of business expenses and no directors,
employees or consultants of the Company have given or
been given notice terminating their contracts of
employment or consultancy.
5.18.14 Except as set forth in Schedule 5.18, no claim has
been made and no liability has been incurred by the
Company (a) for breach of any contract of service or
for compensation for wrongful dismissal or unfair
dismissal or for failure to comply with any order for
the reinstatement or re-engagement of any employee or
for the actual or proposed termination or suspension
of employment or variation of any terms of employment
of any present or former employee of the Company or
(b) in respect of any payment to be made or benefit
to be provided to any present or former director,
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employee or consultant of the Company in connection
with the consummation of the transactions
contemplated hereby, or (c) for the breach of or the
actual or proposed termination or variation of any
contract for services or consultancy agreement for
any present or former consultant to the Company.
5.18.15 Except as set forth in Schedule 5.18, no gratuitous
payment has been made or promised by the Company in
connection with the disposition of the Company Stock
or in connection with the actual or proposed
termination or suspension of employment or variation
of any contract or employment of any present or
former director or employee or in connection with the
proposed termination or suspension or variation of
any contract for services or consultancy agreement.
5.18.16 Except as set forth in Schedule 5.18, there are no
material claims pending or, to the knowledge of the
U.S. Stockholders, threatened against the Company:
(i) by a present or former employee, director,
consultant or third party, in respect of an
accident or injury which is not fully
covered by insurance; or
(ii) by a present or former employee, director or
consultant in relation to his terms and
conditions of employment or (as the case may
be) consultancy.
5.18.17 Except as set forth in Schedule 5.18, the Company has
in relation to each of its employees (and so far as
relevant to each of its former employees and persons
seeking employment) complied with in all material
respects:
(i) all laws and codes of conduct and practice
relevant to the relations between it and its
employees, prospective employees or any
trade union;
(ii) all collective agreements and customs and
practices for the time being dealing with
the terms and conditions of service of its
employees; and
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(iii) all relevant orders, declarations and awards
made under any relevant law or code of
conduct and practice affecting the
conditions of service of its employees.
5.18.18 Except as set forth in Schedule 5.18, no Key Employee
has ceased to be employed by the Company (other than
through death or retirement at normal retirement age)
during the twelve months prior to the date hereof and
the Company has no reason to believe that such
employees intend or are likely to leave their
employment otherwise than through retirement as
aforesaid within the twelve months following the
Closing.
5.18.19 Except as set forth in Schedule 5.18, there are no
agreements, arrangements or schemes in operation by
or in relation to the Company pursuant to which any
of its employees or officers and/or former employees
or officers and/or their relatives and dependents is
entitled to shares or a commission or remuneration of
any kind calculated by reference in whole or in part
to revenues, profits or sales.
5.18.20 Except as set forth in Schedule 5.18, there is no
liability whatsoever to make payment to or for the
benefit of any director or employee or ex-director or
ex-employee or the wife or widow or any other
relative of any director, ex- director, employee or
ex-employee of the Company in respect of past
service, retirement, death or disability by way of
pension contribution, pension, retirement benefit
lump sum, gratuity or otherwise.
5.18.21 Except as set forth in Schedule 5.18, the Company has
not within a period of one year preceding the date of
this Agreement started consultations with any
independent trade union or association of unions.
5.19 Employee Plans. Schedule 5.19 contains an accurate list and
summary of all employee benefit plans (the "Plans") maintained
by the Company ( or any member of the Company's Controlled
Group) or to which the Company or any member of its Controlled
Group contributes or is obligated to contribute, including all
employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and
deferred compensation agreements. The U.S. Stockholders
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have delivered true, complete and correct copies of each of
the Plans and any agreements or trusts related thereto. Except
for the Plans, the Company does not sponsor, maintain or
contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor has the
Company any obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement
account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit
plan" shall have the same meaning as is given that term in
Section 3(2) of ERISA and the term "Controlled Group" shall
mean the Company and each other corporation or other entity
aggregated within the Company under the provisions of Section
414(b), (c), (m) or (o) of the Code. The Company has not
sponsored, maintained or contributed to any employee pension
benefit plan other than the Plans, nor is the Company required
to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing
the terms and conditions or employment of any of Company's
employees. The Company is not now, nor can it as a result of
its past activities become, liable to the Pension Benefit
Guaranty Corporation (the "PBGC") or to any multi-employer
employee pension benefit plan under the provisions of Title IV
of ERISA. All Plans and the administration thereof are in
compliance in all material respects with their terms and all
applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal,
state and local statutes, ordinances and regulations. All
accrued contribution obligations of the Company with respect
to any Plan have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of
the Balance Sheet Date.
5.20 Compliance with ERISA. All the Plans that are intended to
qualify (the "Qualified Plans") under Section 401(a) of the
Code are, and have been so qualified and have been determined
by the Internal Revenue Service to be so qualified, and true,
correct and complete copies of such determination letters have
been delivered to Healthworld by the U.S. Stockholders. All
reports and other documents required to be filed with any
governmental agency or distributed to Plan participants or
beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or
distributed, and true, correct and complete copies thereof
have
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been delivered by the U.S. Stockholders. Neither the U.S.
Stockholders, any Plan, nor the Company has engaged in any
transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency (whether or not waived), as
defined in Section 412(a) of the Code and Section 302(l) of
ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor
any liability to the PBGC. The U.S. Stockholders further
represent that: there have been no terminations, partial
terminations or discontinuance of contributions to any
Qualified Plan without notice to and approval by the Internal
Revenue Service; no Plan subject to the provisions of Title IV
of ERISA has been terminated; there have been no "reportable
events" (as that phrase is defined in Section 4043 of ERISA)
with respect to any Plan; neither the Company nor any member
of its Controlled Group has incurred liability under Sections
4062 or 4069 of ERISA; and no circumstances exist pursuant to
which the Company could have any direct or indirect liability
whatsoever (including, but not limited to, any liability to
any multi-employer plan or penalty, or payment of any such
liability) with respect to any plan maintained by any member
of the Controlled Group. The Company is not subject to any
legal, contractual, equitable, or other obligation to (i)
establish as of any date any employee benefit plan of any
nature, including, without limitation, any pension, profit
sharing, welfare, post-retirement welfare, stock option, stock
or cash award, non-qualified deferred compensation or
executive compensation plan, policy or practice or (ii)
continue any employee benefit plan of any nature, including,
without limitation any employee benefit or any other pension,
profit sharing , welfare, or post-retirement welfare, plan, or
any stock option, stock or cash award, non-qualified deferred
compensation or executive compensation plan, policy or
practice (or to continue their participation in any such
benefit plan, policy or practice) on or after the Closing
Date; and (b) the Company may, in any manner, and without the
consent of any employee, beneficiary or other person,
terminate, modify or amend any such employee benefit plan or
any other plan, program or practice (or its participation in
such employee benefit plan or any other plan, program or
practice) effective as of any date before, on or after the
Closing Date.
5.21 Conformity with Law; Litigation. Except to the extent set
forth on Schedule 5.10 or 5.13, the Company is not in
violation or contravention of any law or regulation or any
order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which
would have a
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Material Adverse Effect; and except to the extent set forth on
Schedule 5.10 or 5.13, there are no material claims, actions,
suits or proceedings, commenced or, to the knowledge of the
Company, threatened, against or affecting the Company, at law
or in equity, or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over any of them
and no notice of any material claim, action, suit or
proceeding, whether pending or threatened, has been received.
The Company has conducted and is conducting its business in
compliance, in all material respects, with the requirements,
standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations,
including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 5.12 and 5.13,
and is not in violation of any of the foregoing which might
have a Material Adverse Effect.
5.22 Taxes. Except to the extent reflected or reserved against in
the 1996 Balance Sheet, full details of every matter or
circumstance which (whether of itself or by reason of any
connection with any other one or more transaction or events)
will or may give rise to any liability to Taxation for which
the Company is or will or may become liable is contained in
Schedule 5.22 and the following warranties are without
prejudice to the generality of the foregoing.
5.22.1 The Company's methods of accounting have not changed
in the past five years. The Company reports its
income on the cash basis of accounting. Upon the
consummation of the transactions contemplated hereby,
the Company will be required to change its method of
accounting to the accrual basis and will be required
to report an adjustment in its income pursuant to
Section 481 of the Code. Such adjustment will not
exceed $___________.
5.22.2 There have been properly completed and filed on a
timely basis and in correct form all Returns required
to be filed on or prior to the date hereof. As of the
time of filing, the foregoing Returns correctly
reflected the facts regarding the income, business,
assets, operations, activities, status or other
matters of the Company or any other information
required to be shown thereon. In particular, the
foregoing returns are not subject to penalties under
section 6662 of the Code,
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relating to accuracy-related penalties (or any
corresponding provision of the state, local or
foreign Tax law). An extension of time within which
to file any Return which has not been filed has not
been requested or granted.
5.22.3 With respect to all amounts in respect of Taxes
imposed upon the Company, or for which the Company is
or could be liable, with respect to all taxable
periods or portions of periods ending on or before
the Closing Date, all applicable tax laws and
agreements have been fully complied with, and all
such amounts required to be paid by the Company to
taxing authorities on or before the Closing Date
have, or shall have, been paid on or before the
Closing Date.
5.22.4 No issues have been raised (and are currently
pending) by any taxing authority in connection with
any of the Returns. No waivers of statutes of
limitation with respect to the Returns for any
taxable years for which the statute of limitations
has not yet expired have been given by or requested
from the Company. Schedule 5.22 sets forth (with
respect to taxable years for which the statute of
limitations has not yet expired, either by reason of
waiver or otherwise) those years for which
examinations have been completed, those years for
which examinations are presently being conducted,
those years for which examinations have not been
initiated, and those years for which required Returns
have not yet been filed. Except to the extent shown
on Schedule 5.22, all deficiencies asserted or
assessments made as a result of any examinations have
been fully paid, or are fully reflected as a
liability in the Financial Statements or the Company,
or are being contested and an adequate reserve
therefor has been established and is fully reflected
in the Financial Statements of the Company.
5.22.5 There are no outstanding liens for Taxes upon the
assets of the Company.
5.22.6 The Company has never been a member of an affiliated
group of corporations, within the meaning of section
1504 of the Code.
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5.22.7 All material elections with respect to Taxes
affecting the Company as of the date hereof are set
forth in Schedule 5.22. Schedule 5.22 sets forth the
date the Company commenced operations. For those
Companies which have elected to be treated as an S
Corporation, Schedule 5.22 sets forth the date of
such election for federal purposes and, where
applicable, for state purposes. Since such dates the
Companies which have made such elections have filed
all reports consistent with, and to maintain, their S
Corporation status for federal and state income tax
purposes. Further, neither the Company nor its
shareholders have revoked the S Corporation status of
the Company and neither the Company nor its
shareholders have done anything to cause a
termination of such status.
5.22.8 The Company has not filed a consent pursuant to the
collapsible corporation provisions of section 341(f)
of the Code (or any corresponding provision of state,
local or foreign income Tax law) or agreed to have
section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income Tax law)
apply to any disposition of any asset owned by it.
5.22.9 None of the assets of the Company is property which
the Company is required to treat as being owned by
any other person pursuant to the so-called "safe
harbor lease" provisions of former section 168(f)(8)
of the Code.
5.22.10 None of the assets of the Company directly or
indirectly secures any debt the interest on which is
tax exempt under section 103(a) of the Code.
5.22.11 None of the assets of the Company is "tax-exempt use
property" within the meaning of Section 168(h) of the
Code.
5.22.12 The Company has not participated in and will not
participate in) an international boycott within the
meaning of section 999 of the Code.
5.22.13 The Company is not a party to any agreement contract,
arrangement or plan that has resulted or would
result,
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separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of
section 280G of the Code.
5.22.14 The Company is not, and has not been a United States
real property holding corporation (as defined in
section 897(c)((2) of the Code) during the applicable
period specified in section 897(c)(1)(A)(ii) of the
Code.
5.22.15 None of the U.S. Stockholders is a person other than
a United States person within the meaning of the
Code.
5.22.16 The transaction contemplated herein is not subject to
the tax withholding provisions of Code section 3406,
or of subchapter A of Chapter 3 of the Code or of any
other provision of law.
5.22.17 The Company does not have and has not had a permanent
establishment in any foreign country, as defined in
any applicable Tax treaty or convention between the
United States of America and such foreign country.
5.22.18 Except as set forth in Schedule 5.22, the Company is
not a party to any joint venture, partnership, or
other arrangement or contract which could be treated
as a partnership for federal income tax purposes.
5.23 No Violations. Neither the Company nor, to the knowledge of
the Company, any other party thereto, is in default in any
material respect under any lease, instrument, agreement,
license, or permit set forth on Schedule 5.12, 5.13, 5.14,
5.15 or 5.16, or any other material agreement to which it is a
party or by which its properties are bound (the "Material
Documents"). Except as set forth in Schedule 5.23,
5.23.1 The rights and benefits of the Company under the
Material Documents will not be materially adversely
affected by the transactions contemplated hereby;
5.23.2 The execution of this Agreement and the performance
of the obligations hereunder and the consummation of
the transactions contemplated hereby will not result
in any material violation or breach or constitute a
material default under, any of the terms or
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provisions of the Material Documents or the Company's
certificate of incorporation or by-laws;
5.23.3 None of the Material Documents requires notice to or
the consent or approval of, any governmental agency
or other third party with respect to any of the
transactions contemplated hereby in order to remain
in full force and effect; and
5.23.4 Consummation of the transactions contemplated hereby
will not give rise to any right to termination,
cancellation or acceleration or loss of any right or
benefit.
Except as set forth on Schedule 5.23, none of the Material Documents prohibits
the use or publication by Healthworld or any of its Subsidiaries of the name of
any other party to such Material Document, and none of the Material Documents
prohibits or restricts the Company from freely providing services to any other
customer or potential customer of the Company, Healthworld, or any of their
respective Subsidiaries.
5.24 Government Contracts. Except as set forth on Schedule 5.24,
the Company is not now a party to any governmental contract
subject to price redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as
set forth on Schedule 5.25, there has not been:
5.25.1 any material adverse change in the financial
condition, assets, liabilities (contingent or
otherwise), income or business of the Company;
5.25.2 any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting
the properties or business of the Company;
5.25.3 any change in the authorized capital of the Company
or its outstanding securities or any change in its
ownership interests or any grant of any options,
warrants, calls, conversion rights or commitments;
5.25.4 any declaration or payment of any dividend or
distribution in respect of the capital stock or any
direct or indirect redemption, purchase or other
acquisition of any of the
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capital stock of the Company (except for dividends
which the Company may declare and pay pursuant to
Section hereof);
5.25.5 any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become
payable by the Company to any of its officers,
directors, stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and
salary increases for employees in accordance with
past practice;
5.25.6 any work interruptions, labor grievances or claims
filed, or any other event or condition of any
character materially adversely affecting the business
of the Company;
5.25.7 any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of
the Company to any person, including, without
limitation, the U.S. Stockholders and their
affiliates;
5.25.8 any cancellation, or agreement to cancel, any
material indebtedness or other obligation owing to
the Company, including without limitation any
material indebtedness or obligation of any U.S.
Stockholders or any affiliate thereof;
5.25.9 any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any
interest in any of the assets, property or rights of
the Company or requiring consent of any party to the
transfer and assignment of any such assets, property
or rights;
5.25.10 any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property,
rights or assets outside of the ordinary course of
the Company's business;
5.25.11 any waiver of any material rights or claims of the
Company;
5.25.12 any material breach, amendment or termination of any
material contract, agreement, license, permit or
other right to which the Company is a party;
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5.25.13 any transaction by the Company outside the ordinary
course of its respective businesses;
5.25.14 any cancellation or termination of a material
contract with a customer or client prior to the
scheduled termination date; or
5.25.15 any other distribution to or for the benefit of the
U.K. Stockholder of property or assets by the
Company.
5.26 Deposit Accounts; Powers of Attorney. Schedule 5.26 contains
an accurate schedule as of the date of the Agreement of:
5.26.1 the name of each financial institution in which the
Company has accounts or safe deposit boxes;
5.26.2 the names in which the accounts or boxes are held;
5.26.3 the type of account and account number; and
5.26.4 the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 Brokers and Agents. Except as disclosed on Schedule 5.27, the
U.S. Stockholders did not employ any broker or agent in
connection with this transaction.
5.28 Relations with Governments. Except for political contributions
made in a lawful manner which, in the aggregate, do not exceed
$10,000 per year for each year in which any U.S. Stockholder
has been a stockholder of the Company, the Company has not
made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for
government office nor has it otherwise taken any action which
would cause the Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended or any law of
similar effect. If political contributions made by the Company
have exceeded $10,000 per year for each year in which any U.S.
Stockholder has been a stockholder of the Company, each
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contribution in the amount of $5,000 or more shall be
described on Schedule 5.28.
5.29 Disclosure.
5.29.1 If, prior to the 25th day after the date of the final
prospectus of Healthworld utilized in connection with
the IPO, the U.S. Stockholders become aware of any
fact or circumstance which would change (or, if after
the Closing Date, would have changed) a
representation or warranty of the U.S. Stockholders
in this Agreement or would affect any document
delivered pursuant hereto in any material respect,
the U.S. Stockholders shall immediately give notice
of such fact or circumstance to Healthworld. However,
subject to the provisions of Section 7.8, such
notification shall not relieve the U.S. Stockholders
of their respective obligations under this Agreement.
5.29.2 The U.S. Stockholders each acknowledge and agree:
(i) that there exists no firm commitment,
binding agreement, or promise or other
assurance of any kind, whether express or
implied, oral or written, that a
Registration Statement will become effective
or that the IPO pursuant thereto will occur
at a particular price or within a particular
range of prices or occur at all;
(ii) that neither Healthworld nor any of its
officers, directors, agents or
representatives nor any Underwriter shall
have any liability to the Company, the U.S.
Stockholders or any other person affiliated
or associated with the Company for any
failure of the Registration Statement to
become effective, the IPO to occur at a
particular price or within a particular
range of prices or to occur at all; and
(iii) that the decision of the U.S. Stockholders
to enter into this Agreement, has been or
will be made independent of, and without
reliance upon, any statements, opinions or
other communications, or due diligence
investigations which have been or will be
made or performed by any prospective
underwriters, relative to Healthworld or the
prospective IPO.
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5.30 Authority; Ownership. Such U.S. Stockholder has the full legal
right, power and authority to enter into this Agreement. Such
U.S. Stockholder owns beneficially and of record all of the
shares of the Company Stock identified in Schedule 5.3 as
being owned by such U.S. Stockholder, and, except as set forth
on Schedule 5.30, such Company Stock is owned free and clear
of all Encumbrances and claims of every kind.
5.31 Preemptive Rights. Such U.S. Stockholder does not have, or
hereby waives, any preemptive or other right to acquire shares
of Company Stock or Healthworld Stock that such U.S.
Stockholder has or may have had other than rights of any U.S.
Stockholder to acquire Healthworld Stock pursuant to this
Agreement or any option granted by Healthworld.
5.32 No Intention to Dispose of Healthworld Stock. No U.S.
Stockholder is under any binding commitment or contract to
sell, exchange or otherwise dispose of shares of Healthworld
Stock received in connection with the Organization.
6 Representations of Healthworld.
Healthworld represents and warrants that all of the following
representations and warranties in this Section 6 are true at the date of this
Agreement and, subject to Section 7.8 hereof, shall be true on the Closing Date
and the Closing Date. All such representations and warranties shall survive the
Closing Date for a period of twelve (12) months (the last day of such period
being the "Expiration Date"), except that, solely for purposes of determining
whether a claim for indemnification under Section 11.2.4 hereof has been made on
a timely basis and solely to the extent that in connection with the IPO any
person claiming indemnification from Healthworld hereunder actually incurs
liability under the 1933 Act, the 1934 Act, or any other Federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 Due Organization. Healthworld is a corporation duly organized,
validly existing and in good standing under the laws of the
state of Delaware, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances
and orders of public authorities to carry on its business in
the places and in the manner as contemplated.
6.2 Authorization. The representatives of Healthworld executing
this Agreement have the authority to enter into and bind
Healthworld to the
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terms of this Agreement. Healthworld has the full legal right,
power and authority to enter into this Agreement.
6.3 Capital Stock of Healthworld. The authorized capital stock of
Healthworld is as set forth in Schedule 6.3. All of the issued
and outstanding shares of the capital stock of Healthworld are
owned by Girgenti in the amount set forth in Schedule 6.3. All
of such shares are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of Healthworld have
been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by
Girgenti. Such shares were offered, issued, sold and delivered
by Healthworld in compliance with all applicable state and
Federal laws concerning the issuance of securities. None of
such shares were issued in violation of the preemptive rights
of any past or present stockholder of Healthworld.
6.4 Transactions in Capital Stock. Except for the obligations
under the agreements which form a part of the Healthworld Plan
of Organization, no option, warrant, call, conversion right or
commitment of any kind exists which obligates Healthworld to
issue any of its authorized but unissued capital stock, and
Healthworld has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. At the time of
issuance thereof, the Healthworld Stock to be delivered to the
U.S. Stockholders pursuant to this Agreement will constitute
valid and legally issued shares of Healthworld, fully paid and
nonassessable. The shares of Healthworld Stock to be issued to
the U.S. Stockholders pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in Section
15 hereof.
6.5 Liabilities and Obligations. Healthworld does not have any
liabilities, contingent or otherwise, except as set forth in
or contemplated by this Agreement and the other agreements
forming a part of the Healthworld Plan of Organization,
including without limitation, the underwriting agreement to be
entered into between Healthworld and the Underwriters for fees
incurred in connection with the transactions contemplated
hereby and thereby, and any liabilities and obligations which
may exist under the Healthworld License Agreement, a copy of
which is annexed to Schedule 6.5.
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6.6 Conformity with Law; Litigation. Healthworld is not in
violation of any law or regulation or any order of any court
or Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over it which would have a Material Adverse
Effect; and there are no material claims, actions, suits or
proceedings pending or, to the knowledge of Healthworld,
threatened against or affecting Healthworld, at law or in
equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it and no notice of
any claim, action, suit or proceeding, whether pending or
threatened, has been received. Healthworld is not in violation
of its certificate of incorporation, its by-laws or any other
corporate governing instrument.
6.7 Validity of Obligations. The execution and delivery of this
Agreement by Healthworld and the performance of the
transactions contemplated herein have been duly and validly
authorized by the Board of Directors of Healthworld. This
Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding
obligation of Healthworld.
6.8 Limited Business Conducted. Healthworld was formed on
September 13, 1996 solely for the purpose of entering into and
consummating the Healthworld Plan of Organization. Healthworld
has not filed any Returns or extension requests in respect of
tax. Healthworld has not since its formation conducted any
business, acquired any assets, incurred any liabilities or
entered into any agreements, except Healthworld has entered
into the Healthworld License Agreement and has engaged in
other limited startup activities. It is anticipated that prior
to the Closing, Healthworld will institute an Incentive Stock
Option Plan; however, Healthworld covenants that no options
will be granted before the Closing.
7 Covenants Prior to Closing.
7.1 Access and Cooperation; Due Diligence. Between the date of
this Agreement and the Closing Date, the U.S. Stockholders
will cause the Companies to afford to the U.K. Stockholder and
his authorized representatives reasonable access to all of the
respective Companies' sites, properties, books and records
during normal business hours and will furnish such additional
financial and operating data and other information as to the
business and properties of the respective Companies as may
from
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time to time be reasonably requested. Each of the respective
U.S. Stockholders will cooperate, and will cause the Companies
to cooperate, in the preparation of any documents or other
material which may be reasonably required in connection with
any documents or materials required by this Agreement. Each
U.S. Stockholder and the Company or other person will treat
all information obtained in connection with the negotiation
and performance of this Agreement or the due diligence
investigations conducted as confidential in accordance with
the provisions of Section 13.2 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the U.S. Stockholders shall
cause the Companies to, except as set forth on Schedule 7.2 of
its respective Disclosure Schedule:
7.2.1 carry on its respective businesses in substantially
the same manner as it has heretofore been conducted
and not introduce any material new method of
management, operation or accounting;
7.2.2 maintain, in all material respects, its respective
properties and facilities, including those held under
leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
7.2.3 perform in all material respects all of its
respective obligations under agreements relating to
or affecting its respective assets, properties or
rights;
7.2.4 keep in full force and effect present insurance
policies or other comparable insurance coverage;
7.2.5 use its reasonable best efforts to maintain and
preserve its business organization intact, retain its
respective present key employees and maintain its
respective relationships with suppliers, customers
and others having business relations with the
Company;
7.2.6 maintain compliance with all material permits, laws,
rules and regulations, consent orders, and all other
orders of applicable courts, regulatory agencies and
similar governmental authorities;
7.2.7 maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments,
except in the ordinary course of business; and
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7.2.8 maintain or reduce present salaries and commission
levels for all officers, directors, employees and
agents except for ordinary and customary bonus and
salary increases for employees in accordance with
past practices.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3,
between the date hereof and the Closing Date, the U.S.
Stockholders will not permit the Company to:
7.3.1 make any change in its certificate of incorporation
or by-laws;
7.3.2 issue any securities, options, warrants, calls,
conversion rights or commitments relating to its
securities of any kind other than in connection with
the exercise of options or warrants listed in
Schedule 5.4;
7.3.3 declare or pay any dividend, or make any distribution
in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire
or retire for value any shares of its stock (provided
that the Company may declare and pay dividends
pursuant to Section 10.5 hereof);
7.3.4 enter into any contract or commitment or incur or
agree to incur any liability or make any capital
expenditures, except if it involves an amount not in
excess of $10,000;
7.3.5 create, assume or permit to exist any mortgage,
pledge or other lien or encumbrance upon any assets
or properties whether now owned or hereafter
acquired, except:
7.3.5.1 with respect to purchase money liens incurred
in connection with the acquisition of equipment with
an aggregate cost not in excess of $10,000 necessary
or desirable for the conduct of the businesses of the
Company,
7.3.5.2 liens for taxes either not yet due or being
contested in good faith and by appropriate
proceedings (and for which contested taxes adequate
reserves have been established and are being
maintained)
7.3.5.3 materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising
in the ordinary course of business, or
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7.3.5.4 liens set forth on Schedule 5.10 hereto;
7.3.6 sell, assign, lease or otherwise transfer or dispose
of any property or equipment except in the ordinary
course of business;
7.3.7 negotiate for the acquisition of any business or the
start-up of any new business;
7.3.8 merge or consolidate or agree to merge or consolidate
with or into any other corporation;
7.3.9 waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust
bills in the course of good faith disputes with
customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be
deemed to be included in Schedule 5.11 unless
specifically listed thereon;
7.3.10 commit a material breach or amend or terminate any
material agreement, permit, license or other right of
the Company; or
7.3.11 enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 No Shop. None of the U.S. Stockholders shall, and they shall
not permit any of the Companies, nor any agent, officer,
director, trustee or any representative of any of the
foregoing will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the
Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly, to:
7.4.1 solicit or initiate the submission of proposals or
offers from any person for,
7.4.2 participate in any discussions pertaining to, or
7.4.3 furnish any information to any person other than
Healthworld or its authorized agents relating to, any
acquisition or purchase of all or a material amount
of the assets of, or any equity interest in, the
Company, or a consolidation or business combination
of the Company.
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7.5 Further Assurances. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further
instruments or documents or take such other action as may be
reasonably necessary or convenient to carry out the
transactions contemplated hereby
7.6 Agreements. The U.S. Stockholders shall, and they shall cause
the Company to, terminate any stockholders agreements, voting
agreements, voting trusts, options, warrants and employment
agreements between the Company and any employee listed on
Schedule 9.10 on or prior to the Closing Date. Such
terminations shall be delivered to the Escrow Agent on the
Closing Date.
7.7 Notification of Certain Matters. The U.S. Stockholders shall
give prompt notice to Healthworld and the U.K. Stockholder of:
7.7.1 the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely
to cause any representation or warranty of the U.S.
Stockholders contained herein to be untrue or
inaccurate in any material respect at or prior to the
Closing; and
7.7.2 any material failure of any U.S. Stockholder or any
Company to comply with or satisfy any covenant,
condition or agreement to be complied with or
satisfied by such person hereunder.
The delivery of any notice pursuant to this Section 7.7 shall not be deemed to
7.7.3 modify the representations or warranties hereunder of
the party delivering such notice, which modification
may only be made pursuant to Section 7.8,
7.7.4 modify the conditions set forth in Sections 8 and
9, or
7.7.5 limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
7.8 Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party
contained in this Agreement, such party shall have the
continuing obligation until 24 hours prior to the anticipated
effectiveness of the Registration Statement to supplement or
amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at
the
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date of this Agreement, would have been required to be set
forth or described in the Schedules, provided however, that
supplements and amendments to Schedules 5.10, 5.11, 5.14 and
5.15 shall only have to be delivered at the Closing Date,
unless such Schedule is to be amended to reflect an event
occurring other than in the ordinary course of business.
7.9 Cooperation in Preparation of Registration Statement. The U.S.
Stockholders shall furnish or cause to be furnished to
Healthworld and the Underwriters all of the information
concerning the Companies and the U.S. Stockholders required
for inclusion in, and will cooperate with Healthworld and the
Underwriters in the preparation of, the Registration Statement
and the prospectus included therein (including audited and
unaudited financial statements, prepared in accordance with
generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). The U.S.
Stockholders agree promptly to advise Healthworld if at any
time during the period in which a prospectus relating to the
IPO is required to be delivered under the 1933 Act, any
information contained in the prospectus concerning the
Companies or the U.S. Stockholders becomes incorrect or
incomplete in any material respect, and to provide the
information needed to correct such inaccuracy. Insofar as the
information relates solely to each respective U.S. Stockholder
and the Companies respectively owned by them, each U.S.
Stockholder represents and warrants, as to such information
with respect to such Company and himself that the Registration
Statement will not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading;
provided, however, that the U.S. Stockholders shall not have
responsibility for any such inclusions or omissions to the
extent they relate to the U.K. Company or any of its
subsidiaries and do not relate to the U.S. Companies.
8 Conditions Precedent to Obligations of U.S. Stockholders.
The obligations of the U.S. Stockholders with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions.
8.1 Representations and Warranties; Performance of Obligations.
All representations and warranties of the U.K. Stockholder and
the Minority U.K. Stockholders contained in their respective
Organization Agreements shall be true and correct in all
material respects as of the Closing Date as
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though such representations and warranties had been made as of
that time. All of the terms, covenants and conditions of the
U.K. Stockholder and the Minority U.K. Stockholders contained
in their respective Organization Agreements shall have been
duly complied with and performed in all material respects.
Certificates to the foregoing effect dated the Closing Date,
signed by the U.K. Stockholder and each of the Minority U.K.
Stockholders, shall have been delivered to the U.S.
Stockholders.
8.2 Satisfaction. All actions, proceedings, instruments and
documents required to carry out this Agreement and the
respective Organization Agreements of the U.K. Stockholder and
the Minority U.K. Stockholders and any other agreement
incidental hereto or thereto and all other related legal
matters shall be satisfactory to the U.S. Stockholders and
their respective counsel. The U.S. Stockholders shall be
satisfied that the Registration Statement and the prospectus
forming a part thereof, including any amendments thereof or
supplements thereto, shall not contain any untrue statement of
a material fact, or omit to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that the condition
contained in this sentence shall be deemed satisfied if the
U.S. Stockholders shall have failed to inform Healthworld in
writing prior to the effectiveness of the Registration
Statement of the existence of an untrue statement of a
material fact or the omission of such a statement of a
material fact.
8.3 No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted
or threatened to restrain or prohibit the Organization or the
IPO and no governmental agency or body shall have taken any
other action or made any request of any of the Companies or
the U.S. Stockholders as a result of which the U.S.
Stockholders deem it inadvisable to proceed with the
transactions hereunder.
8.4 Opinions of Counsel. The U.S. Stockholders shall have received
an opinion from counsel for the U.K. Stockholder and counsel
for the Minority U.K. Stockholders, dated the Closing Date.
8.5 Consents and Approvals. All necessary consents of and filings
with any governmental authority or agency relating to the
consummation of the transaction contemplated herein shall have
been obtained and made.
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8.6 No Material Adverse Change. No event or circumstance shall
have occurred with respect to the U.K. Company or any of its
Subsidiaries which would constitute a Material Adverse Effect.
8.7 Secretary's Certificates; Good Standing. The U.S. Stockholders
shall have received (a) certificates, dated the Closing Date
and signed by the secretary of the U.K. Company and each of
its Subsidiaries, certifying the truth and correctness of
attached copies of the U.K. Company's and each of its
Subsidiaries' Memorandum and Articles of Association
(including amendments thereto) and such other matters as may
reasonably be requested by the U.S. Stockholders, (b) a
certificate dated the Closing Date and signed by the secretary
of Healthworld, certifying the truth and correctness of
attached copies of Healthworld's certificate of incorporation
(including amendments thereto) and by-laws (including
amendments thereto), and (c) a certificate of good standing
for Healthworld in the State of Delaware.
8.8 Employment Agreements. Each of the persons listed on Schedule
shall have entered into an employment agreement substantially
in the form of Exhibit hereto, for the annual compensation set
forth on Schedule 8.8.
8.9 Conformity With Girgenti/Milton Letter of Intent and
Underwriters' Engagement Letter.
8.9.1 Corporate governance of Healthworld shall be in
accord with Section 1.3 of the Girgenti/Milton Letter
of Intent;
8.9.2 An agreement shall have been executed by and among
the U.K. Stockholder and the U.S. Stockholders
providing for the rights of refusal upon private
sale, as contemplated by Section 1.5.1 of the
Girgenti/Milton Letter of Intent.
8.9.3 The Pricing shall have occurred.
8.9.4 The closing of the Organization agreements with
respect to the U.K. Stockholder and the Minority U.K.
Stockholders shall simultaneously occur with the
closing of the transactions contemplated by this
Agreement.
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9 Conditions Precedent to Obligations of Healthworld.
The obligations of Healthworld with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
9.1 Representations and Warranties; Performance of Obligations.
All the representations and warranties of the U.K.
Stockholders and the Company contained in this Agreement shall
be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and
warranties had been made on and as of such date; all of the
terms, covenants and conditions of this Agreement to be
complied with or performed by the U.S. Stockholders and the
Company on or before the Closing Date shall have been duly
performed or complied with in all material respects; and the
U.S. Stockholders shall have delivered to Healthworld
certificates dated the Closing Date and signed by them to such
effect.
9.2 Satisfaction. All actions, proceedings, instruments and
documents required to carry out this Agreement and the
respective Organization Agreements of the U.K. Stockholder and
the Minority U.K. Stockholders and any other agreement
incidental hereto or thereto and all other related legal
matters shall be satisfactory to Healthworld and its counsel.
Healthworld shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any
amendments thereof or supplements thereto, shall not contain
any untrue statement of a material fact, or omit to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading.
9.3 No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted
or threatened to restrain or prohibit the Organization or the
IPO and no governmental agency or body shall have taken any
other action or made any request of Healthworld as a result of
which the management of Healthworld deems it inadvisable to
proceed with the transactions hereunder.
9.4 Opinion of Counsel. Healthworld shall have received an opinion
from counsel to the U.K. Stockholders, dated the Closing Date,
in form and substance acceptable to Counsel for Healthworld.
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9.5 Consents and Approvals. All necessary consents of and filings
with any governmental authority or agency relating to the
consummation of the transaction contemplated herein shall have
been obtained and made and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the
Organization and no governmental agency or body shall have
taken any other action or made any request of any Company as a
result of which Healthworld deems it inadvisable to proceed
with the transactions hereunder.
9.6 No Material Adverse Change. No event or circumstance shall
have occurred with respect to any of the Companies which would
constitute a Material Adverse Effect, and none of the
Companies shall have suffered any material loss or damages to
any of its properties or assets, whether or not covered by
insurance, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business.
9.7 Secretary's Certificates. Healthworld shall have received
certificates, dated the Closing Date and signed by the
secretary of each of the Companies, certifying the truth and
correctness of attached copies of each of the Company's
Certificate of Incorporation (including amendments thereto),
By-Laws (including amendments thereto).
9.8 Employment Agreements. Each of the persons listed on Schedule
shall have entered into an employment agreement substantially
in the form of Exhibit hereto, for the annual compensation set
forth on Schedule 8.8.
9.9 U.S. Stockholders' Release. Each of the U.S. Stockholders
shall have delivered to Healthworld an instrument dated the
Closing Date releasing the Company from any and all claims of
such U.S. Stockholder against the Company and Healthworld and
obligations of the Company and Healthworld to such U.S.
Stockholder, except for (x) items specifically identified on
Schedules 5.10 and 5.15 as being claims of or obligations to
such U.S. Stockholder, (y) continuing obligations to such U.S.
Stockholder relating to his employment by the Company and (z)
obligations arising under this Agreement or the transactions
contemplated hereby.
9.10 Termination of Related Party Agreements. Except as set forth
on Schedule , all existing agreements between the Company and
the U.S. Stockholders shall have been canceled effective as of
the Closing Date.
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9.11 Closings. The closing of the Organization agreements with
respect to the U.K. Stockholder and the Minority U.K.
Stockholders shall simultaneously occur with the closing of
the transactions contemplated by this Agreement.
10 Covenants of Healthworld and the U.S. Stockholders after Closing.
10.1 Release From Guarantees; Repayment of Certain Obligations.
Healthworld shall use its best efforts to have the U.S.
Stockholders released from any and all guarantees on any
indebtedness that they personally guaranteed and from any and
all pledges of assets that they pledged to secure such
indebtedness for the benefit of the Company, with all such
guarantees on indebtedness being assumed by Healthworld. In
the event that Healthworld cannot obtain such releases from
the lenders of any such guaranteed indebtedness on or prior to
120 days subsequent to the Closing Date, Healthworld shall pay
off or otherwise refinance or retire such indebtedness. From
and after the Closing Date and until such time as all of such
indebtedness is paid off, refinanced or retired, Healthworld
shall maintain unencumbered funds in amounts sufficient to
provide for such pay off, refinancing or retirement, provided
that Healthworld may use such funds for other purposes, in its
sole discretion, with the prior written consent of each U.S.
Stockholder who has not as of that time been released from his
or her guarantee as described above and whose indebtedness as
described above has not as of that time been paid off,
refinanced or retired.
10.2 Preservation of Tax and Accounting Treatment. Except as
contemplated by this Agreement or the Registration Statement,
after the Closing Date, Healthworld shall not and shall not
permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the Organization.
10.3 Preparation and Filing of Tax Returns.
10.3.1 The U.S. Stockholders shall cause the Company shall,
if possible, file or cause to be filed all separate
Returns of any Acquired Party for all taxable periods
that end on or before the Closing Date.
Notwithstanding the foregoing, the U.S. Stockholders
shall file or cause to be filed all separate Federal
income Tax Returns (and any State and local Tax
Returns filed on the basis similar to that of S
Corporations under Federal income Tax rules) of any
Acquired Party for all taxable periods that end on or
before the Closing Date.
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Each U.S. Stockholder shall pay or cause to be paid
all Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or
reserved with respect thereto on the Company
Financial Statements) shown by such Returns to be
due.
10.3.2 Healthworld shall file or cause to be filed all
separate Returns of, or that include, any Acquired
Party for all taxable periods ending after the
Closing Date.
10.3.3 Each party hereto shall, and shall cause its
Subsidiaries and affiliates to, provide to each of
the other parties hereto such cooperation and
information as any of them reasonably may request in
filing any Return, amended Return or claim for
refund, determining a liability for Taxes or a right
to refund of Taxes or in conducting any audit or
other proceedings in respect of Taxes. Such
cooperation and information shall include providing
copies of all relevant portions of relevant Returns,
together with relevant accompanying schedules and
relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities
and relevant records concerning the ownership and Tax
basis of property, which such party may possess. Each
party shall make its employees reasonably available
on a mutually convenient basis at its cost to provide
explanation of any documents or information so
provided. Subject to the preceding sentence, each
party required to file Returns pursuant to this
Agreement shall bear all costs of filing such
Returns.
10.3.4 Each of the Companies, Healthworld and each U.S.
Stockholder shall comply with the Tax reporting
requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the
transaction as a tax-free contribution under Section
351(a) of the Code.
10.3.5 Without limiting the generality of the foregoing,
Healthworld shall retain, and shall cause the Company
to retain, and the U.S. Stockholders shall retain,
until the applicable statutes of limitations
(including any extensions) have expired, copies of
all Returns, supporting work schedules and other
records or information which may be relevant to such
Returns for all tax periods or portions thereof
ending before or including the Closing Date and shall
not destroy or otherwise dispose of any such records
without first
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providing the other party with a reasonable
opportunity to review and copy the same.
10.3.6 Each U.S. Stockholder shall furnish Healthworld with
an affidavit, stating, under penalty of perjury, the
transferor's United States taxpayer identification
number and that the transferor is not a foreign
person, pursuant to section 1445(b)(2) of the Code.
10.4 Directors. The persons named in the Registration Statement
shall be appointed as directors and elected as officers of
Healthworld, as and to the extent set forth in the
Registration Statement, promptly following the Closing Date.
10.5 Distributions for Estimated Taxes. The Company may, after the
Balance Sheet Date and on or before the Closing Date, pay to
each U.S. Stockholder the amount equal to the sum of his
estimated Federal, state and local income taxes on the
Company's S Corporation earnings taxable to such U.S.
Stockholder for (i) the period after the Balance Sheet Date
and ending with the Closing and (ii) for the fiscal year
ending with the Balance Sheet Date; provided, however, that
distributions described in clause (ii) immediately above may
be made only to the extent not made prior to the Balance Sheet
Date. Unless otherwise demonstrated by a U.S. Stockholder, it
shall be presumed that a combined effective tax rate of 45%
shall apply in determining the estimated taxes to be
distributed pursuant to this section.
11 Indemnification.
The U.S. Stockholders and Healthworld each make the following covenants
that are applicable to them, respectively:
11.1 General Indemnification by the U.S. Stockholders. The U.S.
Stockholders covenant and agree that they, jointly and
severally, will indemnify, defend, protect and hold harmless
Healthworld at all times, from and after the date of this
Agreement until the Expiration Date, from and against all
claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys'
fees and expenses of investigation) incurred by Healthworld as
a result of or arising from:
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11.1.1 any breach of the representations and warranties of
the U.S. Stockholders set forth herein or on the
Disclosure Schedules or certificates delivered in
connection herewith,
11.1.2 any breach of any covenant or agreement on the part
of the U.S. Stockholders under this Agreement,
11.1.3 any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any
untrue written statement or alleged untrue written
statement of a material fact relating to any of the
Companies or the U.S. Stockholders, and provided to
Healthworld or its counsel by the U.S. Stockholders
in the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon
any omission or alleged omission to state therein a
material fact relating to any of the Companies or the
U.S. Stockholders required to be stated therein or
necessary to make the statements therein not
misleading or
11.1.4 the matters described on Schedule 11.1.4,
provided, however, that no U.S. Stockholder shall be liable for any
indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other U.S. Stockholder. To the extent that any U.S.
Stockholder shall have indemnified Healthworld in an amount which exceeds his
proportionate share of the total amount indemnified, he shall have the right of
indemnification against the other U.S. Stockholders to the extent they have paid
less than their respective proportionate shares, with proportions being
determined in relation to relative stock ownership in the Company as of the date
hereof.
11.2 Indemnification by Healthworld. Healthworld covenants and
agrees that it will indemnify, defend, protect and hold
harmless the U.S. Stockholders at all times from and after the
date of this Agreement until the Expiration Date, from and
against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable
attorneys, fees and expenses of investigation) incurred by the
U.S. Stockholders as a result of or arising from:
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11.2.1 any breach by Healthworld of its representations and
warranties set forth herein or on the Disclosure
Schedules or certificates attached hereto,
11.2.2 any breach of any covenant or agreement .on the part
of Healthworld under this Agreement,
11.2.3 any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common
law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a
material fact relating to Healthworld or any of the
other company forming a part of the Healthworld Plan
of Organization contained in any preliminary
prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state
therein a material fact relating to Healthworld or
any other company forming a part of the Healthworld
Plan of Organization required to be stated therein or
necessary to make the statements therein not
misleading, or
11.2.4 the matters described on Schedule 11.2(iv).
11.3 Third Person Claims. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of
or has knowledge of any claim by a person not a party to this
Agreement ("Third Person"), or the commencement of any action
or proceeding by a Third Person, the Indemnified Party shall,
as a condition precedent to a claim with respect thereto being
made against any party obligated to provide indemnification
pursuant to Section 11.1 or 11.2 hereof (hereinafter the
"Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or
proceeding. Such notice shall state the nature and the basis
of such claim and a reasonable estimate of the amount thereof.
The Indemnifying Party shall have the right to defend and
settle, at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in
good faith and diligently, provided that the Indemnifying
Party shall not settle any criminal proceeding or any other
proceeding to the extent that relief other than the payment of
money is sought, without the written consent of the
Indemnified Party. If the Indemnifying Party undertakes to
defend or settle, it shall promptly notify the Indemnified
Party of its intention to do so, and the Indemnified Party
shall cooperate with the Indemnifying Party
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and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the
Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by
Indemnifying Party, provided that if counsel to the
Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing
Indemnified Party, Indemnified Party shall have the right to
participate in such matter through counsel of its own choosing
and Indemnifying Party shall reimburse the Indemnified Party
for the reasonable expenses of its counsel. After the
Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall
not be liable for any additional legal expenses incurred by
the Indemnified Party in connection with any defense or
settlement of such asserted liability, except as set forth in
the preceding sentence and to the extent such participation is
requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying
Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to
accept a final and complete settlement of any such Third
Person claim and the Indemnified Party refuses to consent to
such settlement, then the Indemnifying Party's liability under
this Section with respect to such Third Person claim shall be
limited to the amount so offered in settlement by said Third
Person. Upon agreement as to such settlement between said
Third Person and the Indemnifying Party, the Indemnifying
Party shall, in exchange for a complete release from the
Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement and the Indemnified Party
shall, from that moment on, bear full responsibility for any
additional costs of defense which it subsequently incurs with
respect to such claim and all additional costs of settlement
or judgment. If the Indemnifying Party does not undertake to
defend such matter to which the Indemnified Party is entitled
to indemnification hereunder, or fails diligently to pursue
such defense, the Indemnified Party may undertake such defense
through counsel of its choice, at the cost and expense of the
Indemnifying Party, and the Indemnified Party may settle such
matter, and the Indemnifying Party shall reimburse the
Indemnified Party for the amount paid in such settlement and
any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under
no circumstances shall the Indemnified Party settle any
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Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the
Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for insurance
proceeds in determining the amount of any indemnification
obligation under this Section.
11.4 Exclusive Remedy. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the
exclusive remedy in any action seeking damages or any other
form of monetary relief brought by any party to this Agreement
against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to
seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
11.5.1 Healthworld shall not assert any claim for
indemnification hereunder against any U.S.
Stockholders until such time as, and solely to the
extent that, the aggregate of all claims which
Healthworld may have against such U.S. Stockholder
shall exceed one-half (0.5%) percent of the value of
the Healthworld Stock delivered to such U.S.
Stockholder, calculated at the IPO price (the
"Indemnification Threshold"), provided, however, that
Healthworld may assert and shall be indemnified for
any claim under Section 11.1(iv) at any time,
regardless of whether the aggregate of all claims
which such persons may have against such U.S.
Stockholder exceeds the Indemnification Threshold, it
being understood that the amount of any such claim
under Section 11.1(iv) shall not be counted towards
the Indemnification Threshold.
11.5.2 None of the U.S. Stockholders shall assert any claim
for indemnification hereunder against Healthworld
until such time as, and solely to the extent that,
the aggregate of all claims which the U.S.
Stockholders may have against Healthworld shall
exceed $50,000, provided, however that the U.S.
Stockholders may assert and shall be indemnified for
any claim under Section 11.2(iv) at any time,
regardless of whether the aggregate of all claims
which the U.S. Stockholders may have against
Healthworld exceeds $50,000, it being understood that
the amount of any such claim under Section 11.2(iv)
shall not be counted towards such $50,000 amount.
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11.5.3 No person shall be entitled to indemnification under
this Section 11 if and to the extent that such
person's claim for indemnification is directly or
indirectly related to a breach by such person of any
representation, warranty, covenant or other agreement
set forth in this Agreement. Notwithstanding any
other term of this Agreement (except the proviso to
this sentence), no U.S. Stockholder shall be liable
under this Section 11 for an amount which exceeds the
value of the Healthworld Stock received by such U.S.
Stockholder in connection with the Organization,
provided that a U.S. Stockholder's indemnification
obligations pursuant to Section 11.1(iv) shall not be
limited. For purposes of calculating the value of the
Healthworld Stock received by a U.S. Stockholder,
Healthworld Stock shall be valued at its initial
public offering price as set forth in the
Registration Statement. It is hereby understood and
agreed that a U.S. Stockholder may satisfy an
indemnification obligation through payment of
Healthworld Stock, such satisfaction to be to the
extent of the then fair market value of Healthworld
Stock conveyed by the Indemnifying Party pursuant to
such indemnification.
12 Termination of Agreement.
12.1 Termination. This Agreement may be terminated at anytime prior
to the Closing Date solely:
12.1.1 by mutual consent of all of the U.S. Stockholders,
with the consent of the U.K. Stockholder;
12.1.2 by Vote of a Majority in Interest of the U.S.
Stockholders if the transactions contemplated by this
Agreement to take place at the Closing shall not have
been consummated by ______________, 1997, unless the
failure of such transactions to be consummated is due
to the willful failure of the party seeking to
terminate this Agreement to perform any of its
obligations under this Agreement to the extent
required to be performed by it prior to or on the
Closing Date;
12.1.3 by Vote of a Majority in Interest of the U.S.
Stockholders, on the one hand, or by Healthworld, on
the other hand, if a material breach or default shall
be made by the other party in the observance or in
the due and timely performance of any of the
covenants, agreements or conditions contained herein,
and the curing of such default shall not have been
made on or before the Closing Date;
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12.1.4 by either a Vote of a Majority in Interest of the
U.S. Stockholders or by Healthworld, if a material
breach or default shall be made by the U.K.
Stockholder or the Minority U.K. Stockholders in the
observance or in the due and timely performance of
any of the covenants, agreements or conditions
contained in their respective agreements, and the
curing of such default shall not have been made on or
before the Closing Date; or
12.1.5 pursuant to Section 4 hereof.
12.2 Liabilities in Event of Termination.
12.2.1 The termination of this Agreement will in no way
limit any obligation or liability of any party based
on or arising from a breach or default by such party
with respect to any of its representations,
warranties, covenants or agreements contained in this
Agreement including, but not limited to, legal and
audit costs and out of pocket expenses.
12.2.2 Upon termination of this Agreement, except as
otherwise provided for herein, any and all payments
required to be made by the U.S. Companies or the U.K.
Companies as provided for in the Underwriters'
Engagement Letter shall be paid 69% by the U.S.
Companies and 31% by the U.K. Company. The U.S.
Companies and the U.K. Company shall contribute to
(and, if necessary, reimburse each other for) any
such required payments in such proportions.
Notwithstanding the foregoing, in the event any
indemnity obligation arises to the Underwriters,
pursuant to any agreement between the Underwriters
and Healthworld, the U.K. Stockholder, the U.S.
Stockholders, the U.K. Company and/or the U.S.
Companies with respect to the Underwriters' services
in contemplation of the IPO, then the breaching party
shall be solely responsible for such indemnification
obligations and the non- breaching party shall be
entitled to reimbursement from the breaching party
for any payment made by the non-breaching party in
respect thereof.
13 Non-Competition; Non-Disclosure.
13.1 Non-Competition. Each of the U.S. Stockholders will not, for a
period (the "Restrictive Period") commencing with the date
hereof and concluding five (5) years following the Closing
Date, for any reason whatsoever, directly or
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indirectly, for himself or on behalf of or in conjunction with
any other person, persons, company, partnership, corporation
or business of whatever nature:
13.1.1 as an officer, director, shareholder, owner, partner,
joint venture, or in a managerial capacity, whether
as an employee, independent contractor, consultant or
advisor, or as a sales representative (except that a
U.S. Stockholder may be employed by any entity
engaged in the advertising business so long as he
does not have contact with or provide services to or
for the benefit of any such client):
13.1.1.1 anywhere in the world, engage in any
advertising business having as a client any
corporation or any other entity which was a
client of Healthworld or any of its
Subsidiaries at any time within the
Restrictive Period; or
13.1.1.2 anywhere in the world, engage in any mass
media communication of health-related
information, whether by means of publishing,
television, radio, the internet or
otherwise; or
13.1.1.3 within 200 miles (the "Territory") of where
Healthworld or any of its Subsidiaries
conducted any other business during the
Restrictive Period, engage in any such other
business;
13.1.2 call upon any person who is, at that time, an
employee of Healthworld (including the subsidiaries
thereof) in a sales representative or managerial
capacity for the purpose or with the intent of
enticing such employee away from or out of the employ
of Healthworld (including the subsidiaries thereof),
provided that the U.S. Stockholders shall be
permitted to call upon and hire any member of his or
her immediate family;
13.1.3 call upon any person or entity which is, at that
time, or which has been, at any time within the
Restrictive Period, a customer of Healthworld
(including the subsidiaries thereof) for the purpose
of soliciting or selling products or services in
direct competition with Healthworld within the
Territory;
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13.1.4 call upon any prospective acquisition candidate, on
the U.S. Stockholder's own behalf or on behalf of any
competitor in the advertising business or in the
business of communicating health information through
mass media, which candidate, to the actual knowledge
of the U.S. Stockholder after due inquiry, was called
upon by Healthworld (including the subsidiaries
thereof) or for which, to the actual knowledge of the
U.S. Stockholder after due inquiry, Healthworld (or
any subsidiary thereof) made an acquisition analysis,
for the purpose of acquiring such entity; or
13.1.5 disclose customers, whether in existence or proposed,
of Healthworld (or any subsidiary thereof) to any
person, firm, partnership, corporation or business
for any reason or purpose whatsoever except to the
extent that Healthworld (or any subsidiary thereof)
has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the any of the U.S. Stockholders from acquiring as an investment not
more than one percent (1%) of the capital stock of a competing business whose
stock is traded on a national securities exchange or over-the-counter.
13.2 Nondisclosure.
13.2.1 Definitions. Each of the U.S. Stockholders recognizes
and acknowledges that he has had in the past,
currently has, and in the future may possibly have,
access to certain confidential information of
Healthworld or any of its Subsidiaries, such as
operational policies, and pricing and cost policies
that are valuable, special and unique assets of
Healthworld and its Subsidiaries, and/or their
respective businesses (the "Confidential
Information"). Confidential Information shall not
include any information:
(i) which becomes known to the public generally
through no fault of the U.S. Stockholder,
(ii) as to which disclosure is required by law or
the order of any governmental authority
under color of law; provided, that prior to
disclosing any information pursuant to this
clause (b), the U.S. Stockholder shall give
prior written notice thereof to
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Healthworld and provide Healthworld with the
opportunity to contest such disclosure, or
(iii) as to which the disclosing party reasonably
believes that such disclosure is required in
connection with the defense of a lawsuit
against the disclosing party.
13.2.2 Covenant to Maintain Confidentiality. The U.S.
Stockholder agrees that until the later to occur of
(i) five (5) years following the Closing Date or (ii)
with respect to any portion of the Confidential
Information the date upon which such portion no
longer meets the definition of "Confidential
Information", he will not disclose Confidential
Information to any person, firm, corporation,
association or other entity for any purpose or reason
whatsoever, except
(i) to authorized representatives of
Healthworld,
(ii) during the course of the U.S. Stockholder's
employment by Healthworld or any of its
Subsidiaries, such information may be
disclosed by the U.S. Stockholder as is
required in the course of performing his
duties and
(iii) to counsel and other advisers, provided that
such advisers (other than counsel) agree to
the confidentiality provisions of this
Section 13.2.
13.3 Injunctive Relief; Damages. Because of the difficulty of
measuring economic losses to Healthworld as a result of a
breach of the foregoing covenants in this Section 13, and
because of the immediate and irreparable damage that could be
caused to Healthworld for which it would have no other
adequate remedy, each of the U.S. Stockholders agrees that the
foregoing covenants may be enforced by Healthworld in the
event of breach by him, by injunctions and restraining orders.
Nothing herein shall be construed as prohibiting Healthworld
from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
13.4 Reasonable Restraint. It is agreed by the parties hereto that
the foregoing covenants in this Section 13 impose a reasonable
restraint on the U.S. Stockholder in light of the activities
and business of Healthworld (including
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the subsidiaries thereof) on the date of the execution of this
Agreement and the current plans of Healthworld.
13.5 Severability; Reformation. The covenants in this Section are
severable and separate, and the unenforceability of any
specific covenant shall not affect the provisions of any other
covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it
is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
13.6 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other
provision in this Agreement, and the existence of any claim or
cause of action by a U.S. Stockholder against Healthworld
(including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by Healthworld of such covenants. It is
specifically agreed that the Restrictive Period stated at the
beginning of Section 13, during which the agreements and
covenants of the U.S. Stockholder made in Section 13 shall be
effective, shall be computed by extending the Restrictive
Period by the amount of time during which the U.S. Stockholder
is in violation of any provision of Section 13. The covenants
contained in this 13 shall not be affected by any breach of
any other provision hereof by any party hereto.
13.7 Survival. The obligations of the parties under this Section 13
shall survive the termination of this Agreement.
14 Federal Securities Act Representations.
The U.S. Stockholders acknowledge that the shares of Healthworld Stock
to be delivered to the U.S. Stockholders pursuant to this Agreement have not
been and will not be registered under the 1933 Act and therefore may not be
resold without compliance with the 1933 Act. The Healthworld Stock to be
acquired by such U.S. Stockholders pursuant to this Agreement is being acquired
solely for their own respective accounts, for investment purposes only, and with
no present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
14.1 Compliance with Law. The U.S. Stockholders covenant, warrant
and represent that none of the shares of Healthworld Stock
issued to such U.S. Stockholders will be offered, sold,
assigned, pledged, hypothecated,
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transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Act
and the rules and regulations of the SEC. All the Healthworld
Stock shall bear the following legend: THE SHARES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAW.
14.2 Economic Risk; Sophistication. The U.S. Stockholders are able
to bear the economic risk of an investment in the Healthworld
Stock acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment and have such
knowledge and experience in financial and business matters
that they are capable of evaluating the merits and risks of
the proposed investment in the Healthworld Stock. The U.S.
Stockholders party hereto have had an adequate opportunity to
ask questions and receive answers from the officers of
Healthworld concerning any and all matters relating to the
transactions described herein including, without limitation,
the background and experience of the current and proposed
officers and directors of Healthworld, the plans for the
operations of the business of Healthworld, the business,
operations and financial condition of the companies which are
entering into the Organization but are not owned by the
respective U.S. Stockholder, and any plans for additional
acquisitions and the like. The U.S. Stockholders have asked
any and all questions in the nature described in the preceding
sentence and all questions have been answered to their
satisfaction.
15 Registration Rights.
15.1 Piggyback Registration Rights. At any time commencing one (1)
year following the Closing, whenever Healthworld proposes to
register any Healthworld Stock for its own or others' account
under the 1933 Act for a public offering, other than any shelf
registration of shares to be used as consideration for
acquisitions of additional businesses by Healthworld and
registrations relating to employee benefit plans, Healthworld
shall give each of the U.S. Stockholders prompt written notice
of its intent to do so. Upon the written request of any of the
U.S. Stockholders given within 30 days after receipt of such
notice, Healthworld shall cause to be included in such
registration all of the Healthworld Stock issued to the U.S.
Stockholders pursuant to this Agreement (including any stock
issued as (or issuable upon the conversion or exchange of any
convertible security, warrant, right or
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other security which is issued by Healthworld as) a dividend
or other distribution with respect to, or in exchange for, or
in replacement of such Healthworld Stock) which any such U.S.
Stockholder requests, provided that Healthworld shall have the
right to reduce the number of shares included in such
registration to the extent that inclusion of such shares
could, in the opinion of counsel to Healthworld or its
independent auditors, jeopardize the status of the
transactions contemplated hereby and by the Registration
Statement as a tax-free organization or jeopardize the ability
of Healthworld to utilize pooling-of-interest accounting. In
addition, Healthworld shall have the right to reduce the
number of shares included in such registration if and to the
extent Healthworld is advised by the Underwriters of an
underwritten offering of the securities being offered pursuant
to any registration statement under this Section 15.1 that the
number of shares to be sold by persons other than Healthworld
is greater than the number of such shares which can be offered
without adversely affecting the offering. Any such reduction
shall be made pro rata based on the number of shares offered
for the accounts of such persons (based upon the number of
shares held by such person) to a number deemed satisfactory by
such the Underwriter.
15.2 Registration Procedures. All expenses incurred in connection
with the registrations under this Article (including all
registration, filing, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and
discounts), shall be borne by Healthworld. In connection with
registrations under Section 15.1, Healthworld shall use its
best efforts to prepare and file with the SEC as soon as
reasonably practicable, a registration statement with respect
to the Healthworld Stock and use its best efforts to cause
such registration to promptly become and remain effective for
a period of at least 90 days (or such shorter period during
which holders shall have sold all Healthworld Stock which they
requested to be registered); use its best efforts to register
and qualify the Healthworld Stock covered by such registration
statement under applicable state securities laws as the
holders shall reasonably request for the distribution for the
Healthworld Stock; and take such other actions as are
reasonable and necessary to comply with the requirements of
the 1933 Act and the regulations thereunder.
15.3 Underwriting Agreement. In connection with each registration
pursuant to Section 15.1 covering an underwritten registration
public offering, Healthworld and each participating holder
agree to enter into a written agreement with the underwriter
in such form and containing such provisions as are customary
in the securities business for such an arrangement between
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the underwriter and companies of Healthworld's size and
investment stature, including indemnification.
15.4 Availability of Rule 144. Healthworld shall not be obligated
to register shares of Healthworld Stock held by any U.S.
Stockholder at any time when the resale provisions of Rule
144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such U.S. Stockholder.
16 General.
16.1 Cooperation. The U.S. Stockholders and Healthworld shall each
deliver or cause to be delivered and the U.S. Stockholder
shall cause the Companies to deliver, to the other on the
Closing Date, and at such other times and places as shall be
reasonably agreed to, such additional instruments as the other
may reasonably request for the purpose of carrying out this
Agreement. The U.S. Stockholder shall cause the Companies to
cooperate and use their reasonable efforts to have their
respective present officers, directors and employees cooperate
with Healthworld on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in
connection with any Tax Return filing obligations, actions,
proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the
Closing Date.
16.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit
of the parties hereto, the successors of Healthworld, and the
heirs and legal representatives of the U.S. Stockholders.
16.3 Entire Agreement. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents
delivered pursuant hereto constitute the entire agreement and
understanding among the U.S. Stockholders and Healthworld and
supersede any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and
may be modified or amended only by a written instrument
executed by the U.S. Stockholders and Healthworld (acting
through its officers, duly authorized by its Board of
Directors).
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16.4 Counterparts. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one
and the same-instrument.
16.5 Expenses. If the transactions herein contemplated shall be
consummated, Healthworld will pay the fees, expenses and
disbursements of Healthworld and its agents, representatives,
accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by
Healthworld under this Agreement, including the fees and
expenses of Arthur Andersen, LP, Rosenman & Colin, LLP,
Todtman, Young, Nachamie, Hendler & Spizz, P.C. or any other
person or entity retained by Healthworld, and the costs of
preparing the Registration Statement. If the transactions
herein contemplated shall not be consummated, then such costs
and expenses shall be paid 69% by the U.S. Company and 31% by
the U.K. Company.
Each U.S. Stockholder shall pay his own costs and expenses. Each U.S.
Stockholder shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the Organization, other than Transfer Taxes,
if any, imposed by the State of Delaware. Each U.S. Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each U.S. Stockholder acknowledges that he, and not Healthworld, will
pay all taxes due upon receipt of the consideration payable pursuant to Section
2 hereof, and will assume all tax risks and liabilities of such U.S. Stockholder
in connection with the transactions contemplated hereby.
16.6 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing
the same in United States mail, addressed to the party to be
notified, postage prepaid and registered or certified with
return receipt requested, or by delivering the same in person
to an officer or agent of such party.
(a) If to Healthworld:
100 Avenue of the Americas
New York, New York 10013
Attn: Chairman of the Board and
Chief Executive Officer
With copies to:
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Rosenman & Colin LLP Todtman, Young, Nachamie,
575 Madison Avenue Hendler & Spizz, P.C.
New York, N.Y. 10024 425 Park Avenue
Attn: Howard Jacobs, Esq. New York, New York 10022
Attn: Alex Spizz, Esq.
If to any U.S. Stockholder, addressed to him at his address
first set forth hereinabove together with copies to:
Reid & Priest, LLP Rakisons
40 W. 57th St. 20 Chancery Lane
New York, N.Y. 10024 London WC2A INF
Attn: Burton K. Haimes, Esq. Attn: Jonathan Polin, Esq.
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 16.6 from time to time.
16.7 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect
to any requirements thereof which might otherwise cause the
application of the law of another jurisdiction, and the
parties consent to New York as the exclusive venue for
resolving any and all disputes that may arise concerning this
Agreement.
16.8 Survival of Representations and Warranties. Except as
otherwise specifically provided in this Agreement, the
representations, warranties, covenants and agreements of the
parties made herein and at the Closing Date or in writing
delivered pursuant to the provisions of this Agreement shall
survive the consummation of the transactions contemplated
hereby and any examination on behalf of the parties until the
Expiration Date.
16.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any
breach or default by any other party under this Agreement
shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or
default, or of any similar breach or default occurring later;
nor shall any waiver of any single breach or default be deemed
a waiver of any other breach or default occurring before or
after that waiver.
16.10 Time. Time is of the essence with respect to this Agreement.
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16.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it
shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly
retain the intent of the parties, and if such modification is
not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement
shall not in any way be affected or impaired thereby.
16.12 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each
shall be cumulative with all other rights, remedies an
elections available at law or in equity.
16.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this
Agreement or be used to construe or interpret any provision
hereof.
16.14 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may
be waived only by consent of Healthworld and persons to whom
is allocated pursuant to Section an aggregate of at least
2,500,001 shares of Healthworld Stock. Any amendment or waiver
effected in accordance with this Section shall be binding upon
each of the parties hereto, any other person receiving
Healthworld Stock in connection with the Organization and each
future holder of such Healthworld Stock.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HEALTHWORLD CORPORATION
By:
----------------------------------------
Steven Girgenti, Chairman and CEO
and By:
--------------------------------------
William Leslie Milton, President
- ---------------------------------- ------------------------------------
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Healthworld Agreement and Plan of Organization/US Draft of August 27, 1997
- -------------------------------------------------------------------------------
STEVEN GIRGENTI WILLIAM BUTLER
- ---------------------------------- -----------------------------------
FRANCIS HUGHES HERBERT EHRENTHAL
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the _______ day of September, 1997
by and between
HEALTHWORLD CORPORATION
and
LES MILTON
<PAGE>
Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1 The Organization..............................................................................-5-
1.1 Organization................................................................-5-
1.2 Directors and Officers......................................................-6-
2 Conversion of Stock...........................................................................-6-
2.1 Manner of Conversion........................................................-6-
2.2 Beneficial Ownership of Shares..............................................-6-
2.3 Allocation of Shares........................................................-7-
3 Delivery of U.K. Company Stock and Healthworld Stock..........................................-8-
4 Closing.......................................................................................-9-
5 Representations And Warranties of the U.K. Stockholder........................................-9-
5.1 Due Organization...........................................................-10-
5.2 Prohibited Activities......................................................-11-
5.3 Capital Stock of the Company...............................................-11-
5.4 Transactions in Capital Stock..............................................-11-
5.5 No Bonus Shares............................................................-12-
5.6 Subsidiaries...............................................................-12-
5.7 Predecessor Status; etc....................................................-12-
5.8 Spin-off by the Company....................................................-12-
5.9 Financial Statements.......................................................-13-
5.10 Liabilities and Obligations................................................-13-
5.11 Accounts and Notes Receivable..............................................-14-
5.12 Permits and Intangibles....................................................-14-
5.13 Environmental Matters......................................................-14-
5.14 Personal Property..........................................................-15-
5.15 Significant Customers; Material Contracts and Commitments..................-15-
5.16 Real Property..............................................................-16-
5.17 Insurance..................................................................-16-
5.18 Compensation; Employment Agreements; Organized Labor
Matters....................................................................-17-
5.19 Employee Benefits..........................................................-20-
5.20 Conformity with Law; Litigation............................................-21-
5.21 Taxes......................................................................-21-
</TABLE>
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
5.22 No Violations..............................................................-23-
5.23 Government Contracts.......................................................-24-
5.24 Absence of Changes.........................................................-24-
5.25 Deposit Accounts; Powers of Attorney.......................................-25-
5.26 Brokers and Agents.........................................................-26-
5.27 Relations with Governments.................................................-26-
5.28 Disclosure.................................................................-26-
5.29 Authority; Ownership.......................................................-27-
5.30 Preemptive Rights..........................................................-27-
5.31 No Intention to Dispose of Healthworld Stock...............................-27-
6 Representations of Healthworld...............................................................-28-
6.1 Due Organization...........................................................-28-
6.2 Authorization..............................................................-28-
6.3 Capital Stock of Healthworld...............................................-28-
6.4 Transactions in Capital Stock..............................................-28-
6.5 Liabilities and Obligations................................................-29-
6.6 Conformity with Law; Litigation............................................-29-
6.7 Validity of Obligations....................................................-29-
6.8 Limited Business Conducted.................................................-29-
7 Covenants Prior to Closing...................................................................-30-
7.1 Access and Cooperation; Due Diligence......................................-30-
7.2 Conduct of Business Pending Closing........................................-30-
7.3 Prohibited Activities......................................................-31-
7.4 No Shop....................................................................-32-
7.5 Further Assurances.........................................................-33-
7.6 Agreements.................................................................-33-
7.7 Notification of Certain Matters............................................-33-
7.8 Amendment of Schedules.....................................................-34-
7.9 Cooperation in Preparation of Registration Statement.......................-34-
8 Conditions Precedent to Obligations of the U.K. Stockholder..................................-34-
8.1 Representations and Warranties; Performance of Obligations
by U.S. Stockholders and Minority Stockholders.............................-34-
8.2 Satisfaction...............................................................-35-
8.3 No Litigation..............................................................-35-
8.4 Opinions of Counsel........................................................-35-
8.5 Consents and Approvals.....................................................-35-
8.6 No Material Adverse Change.................................................-35-
8.7 Secretary's Certificates; Good Standing....................................-36-
</TABLE>
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
8.8 Employment Agreements......................................................-36-
8.9 Conformity With Girgenti/Milton Letter of Intent and
Underwriters' Engagement Letter............................................-36-
8.10 Simultaneous Closings......................................................-36-
9 Conditions Precedent to Obligations of Healthworld...........................................-36-
9.1 Representations and Warranties; Performance of Obligations.................-36-
9.2 Satisfaction...............................................................-37-
9.3 No Litigation..............................................................-37-
9.4 Opinions of Counsel........................................................-37-
9.5 Consents and Approvals.....................................................-37-
9.6 No Material Adverse Change.................................................-37-
9.7 Secretary's Certificates...................................................-38-
9.8 Employment Agreements......................................................-38-
9.9 Stockholder's Release......................................................-38-
9.10 Termination of Related Party Agreements....................................-38-
9.11 Simultaneous Closings......................................................-38-
10 Covenants of Healthworld and the U.K. Stockholder after Closing..............................-38-
10.1 Release From Guarantees; Repayment of Certain
Obligations................................................................-38-
10.2 Preservation of Tax and Accounting Treatment...............................-39-
10.3 Preparation and Filing of Tax Returns......................................-39-
11 Indemnification..............................................................................-40-
11.1 General Indemnification by the U.K. Stockholder............................-40-
11.2 Indemnification by Healthworld.............................................-40-
11.3 Third Person Claims........................................................-41-
11.4 Exclusive Remedy...........................................................-42-
11.5 Limitations on Indemnification.............................................-43-
12 Termination of Agreement.....................................................................-44-
12.1 Termination................................................................-44-
12.2 Liabilities in Event of Termination........................................-44-
13 Non-Competition; Non-Disclosure..............................................................-45-
13.1 Non-Competition............................................................-45-
13.2 Nondisclosure..............................................................-46-
13.3 Injunctive Relief; Damages.................................................-47-
13.4 Reasonable Restraint.......................................................-48-
13.5 Severability; Reformation..................................................-48-
</TABLE>
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
13.6 Independent Covenant.......................................................-48-
13.7 Survival...................................................................-48-
14 Federal Securities Act Representations.......................................................-48-
14.1 Compliance with Law........................................................-48-
14.2 Economic Risk; Sophistication..............................................-49-
15 Registration Rights..........................................................................-49-
15.1 Piggyback Registration Rights..............................................-49-
15.2 Registration Procedures....................................................-50-
15.3 Underwriting Agreement.....................................................-50-
15.4 Availability of Rule 144...................................................-50-
16 General......................................................................................-50-
16.1 Cooperation................................................................-50-
16.2 Successors and Assigns.....................................................-51-
16.3 Entire Agreement...........................................................-51-
16.4 Counterparts...............................................................-51-
16.5 Expenses...................................................................-51-
16.6 Notices....................................................................-52-
16.7 Governing Law..............................................................-53-
16.8 Survival of Representations and Warranties.................................-53-
16.9 Exercise of Rights and Remedies............................................-53-
16.10 Time.......................................................................-53-
16.11 Reformation and Severability...............................................-53-
16.12 Remedies Cumulative........................................................-53-
16.13 Captions...................................................................-53-
16.14 Amendments and Waivers.....................................................-54-
</TABLE>
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the _______ day of September, 1997, by and between:
Healthworld Corporation, a Delaware corporation ("Healthworld"), and
William Leslie Milton (the "U.K. Stockholder"), residing at Ladslove
Dean Lane, Cookham Dean, Berkshire SL6 9BE, United Kingdom.
WHEREAS, the U.K. Stockholder is the registered and beneficial owner
with full title and guarantee of the entire issued share capital of Milton
Marketing Group Limited, a company incorporated in England and Wales with
registered no. 3113109 (the "U.K. Company"); and
WHEREAS, various other individuals (the "Minority Stockholders") own
minority share interests in certain Subsidiaries of the U.K. Company; and
WHEREAS, Healthworld was formed on September 12, 1996, in the State of
Delaware, for the purpose of effecting the Healthworld Plan of Organization; and
WHEREAS, the U.S. Stockholders collectively own all of the issued and
outstanding shares of Girgenti, Hughes, Butler & McDowell, Inc. ("GHBM"), a New
York corporation, Black Cat Graphics, Inc. ("Black Cat"), a New York
corporation, Medical Education Technologies, Inc. ("MET"), a New York
corporation, Brand Research Corporation ("Brand Research"), a New York
corporation, GHBM, Inc. ("GHBMINC"), a New York corporation and Syberactive,
Inc. ("Syberactive"), an Illinois corporation (each of GHBM, Black Cat, MET,
Brand Research, GHBMINC and Syberactive are hereafter referred to individually
as a "U.S. Company" and collectively as the "U.S. Companies"); and
WHEREAS, the U.S. Stockholders desire to contribute all of their shares
of stock in the U.S. Companies into Healthworld in exchange for Healthworld
Stock, the U.K. Stockholder desires to contribute all of his shares of stock in
the U.K. Company into Healthworld in exchange for Healthworld Stock, and the
Minority Stockholders desire to contribute all of their shares of stock in the
relevant Subsidiaries of the U.K. Company into Healthworld in exchange for
Healthworld Stock, all of the foregoing to occur contemporaneously with the
pricing of the IPO; and
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
WHEREAS, all of the foregoing contributions together with the Pricing
of the shares to be offered by Healthworld in the IPO constitute the
"Healthworld Plan of Organization"; and
WHEREAS, the parties intend that the Healthworld Plan of Organization
shall qualify as tax-free under Section 351 of the United States Internal
Revenue Code of 1986, as amended (the "Code") and , where applicable, as a
reorganization within the meaning of Section 368 of the Code; and
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any Schedule attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the United States Securities Act of 1933, as amended.
"1934 Act" means the United States Securities Exchange Act of 1934, as
amended.
"Acquired Party" means any of the U.K. Company and any Subsidiary
thereof.
"Affiliates" has the meaning set forth in Section 5.8.
"Aggregate Number of Founder Shares" has the meaning set forth in
Section 2.3.
"Balance Sheet Date" shall mean November 30, 1996.
"Butler" means William Butler, residing at Post Office Box 1430, Olive
Bridge, New York 12461-0430.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the introductory paragraphs of this
Agreement.
"Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Company Stock" has the meaning set forth in Section 2.1.
-2-
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Ehrenthal" means Herbert Ehrenthal, residing at 1447 Sylvan Lane, East
Meadow, New York 11554-4814.
"Encumbrance" means a mortgage, charge (whether fixed or floating),
pledge, lien, option, restriction, right of first refusal, right of preemption,
third party right or interest, other encumbrance or security interest of any
kind and whether legal or equitable, or another type of preferential arrangement
(including, without limitation, a title transfer and retention arrangement)
having similar effect.
"Expiration Date" has the meaning set forth in Section 6.
"Girgenti" means Steven Girgenti, residing at 3312 Judith Drive,
Bellmore, New York 11710.
"Girgenti/Milton Letter of Intent" means a certain letter of intent of
November 14, 1996, as amended, regarding a reorganization of the U.S. Companies
and the U.K. Company in connection with a contemplated IPO, executed by
Girgenti, the U.S. Companies, the U.K. Stockholder, the U.K. Company and the
Subsidiaries of the U.K. Company.
"Healthworld" has the meaning set forth in the introductory paragraphs
of this Agreement.
"Healthworld License Agreement" means that certain License Agreement by
and between Healthworld and Healthworld, B.V. pursuant to which Healthworld has
licensed from Healthworld, B.V., among other things, the right to use the name
"Healthworld."
"Healthworld Plan of Organization" has the meaning set forth in the
introductory paragraphs of this Agreement.
"Healthworld Stock" means the common stock, par value $0.01 per share,
of Healthworld.
"Hughes" means Francis Hughes, residing at Two Beekman Place, Apartment
3C, New York, New York 10022.
"IPO" means the initial public offering of Healthworld Stock pursuant
to the Registration Statement.
-3-
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Key Consultant Agreement" means any agreement with a consultant
providing for the services of an individual and requiring payment to the
consultant of not less than (pound)93,750 per annum.
"Key Employee" means any employee whose compensation is not less than
(pound)93,750 per annum.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Minority Stockholders" has the meaning set forth in the introductory
paragraphs of this Agreement.
"Organization" means the contribution of all the shares of stock of the
U.K. Company and all of its Subsidiaries (with the exception of Healthworld
B.V.) to the capital of Healthworld in exchange for shares of Healthworld Stock.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the time and date of determination by Healthworld and
the Underwriters of the public offering price of the shares of Healthworld Stock
in the IPO.
"Registration Statement" means that certain registration statement on
Form S-1 (Registration No. 333-[ ]) and any amendments thereto covering the
shares of Healthworld Stock to be issued in the IPO.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax or
Taxation.
"Disclosure Schedule" has the meaning set forth in Schedule 5.
"SEC" means the United States Securities and Exchange Commission.
"Subsidiary" has the meaning given thereto in Section 736 and 736A of
the United Kingdom Companies Act 1985 as substituted by Section 144 of the
United Kingdom Companies Act of 1989.
"Taxation or Tax" means all forms of tax, duty, levy or other
imposition whenever and by whatever authority imposed and whether of the United
Kingdom or elsewhere, including (without limitation) income tax, corporation
tax, advance corporation tax, capital gains tax, inheritance tax, value added
tax, customs duties, rates, stamp duty, stamp duty reserve tax, national
insurance and social security or other contributions, and any interest, penalty,
fine or surcharge in connection with any such taxation.
-4-
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Taxes Act" means the United Kingdom Income and Corporation Taxes Act
1988.
"Underwriters" means Unterberg Harris and Pennsylvania Merchant Group
Ltd.
"Underwriters' Engagement Letter" means the letter dated July 17, 1997,
pursuant to which the Underwriters were engaged by Healthworld.
"U.K. Company" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.K. Stockholder" has the meaning set forth in the introductory
paragraphs of this Agreement.
"U.S. Companies" has the meaning set forth in the introductory
paragraphs of this Agreement.
"U.S. Stockholders" means Girgenti, Hughes, Butler & Ehrenthal.
"U.S. Tax" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Vote of a Majority in Interest of the U.S. Stockholders" means the
vote, by formal or informal meeting, in writing or otherwise, by U.S.
Stockholders having greater than 50% of the voting control of each of the U.S.
Companies.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1 The Organization.
1.1 Organization. The Closing of this Agreement shall take place as
described in Section , and all of the issued share capital of the U.K. Company
shall be contributed by the U.K. Stockholder to the capital of Healthworld in
exchange for the number of shares of Healthworld Stock set forth in Section 2.3.
Simultaneously with the contribution described in the immediately preceding
sentence, in exchange for shares of stock of Healthworld:
-5-
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
1.1.1 the U.S. Stockholders will be contributing all of the
issued and outstanding shares of the U.S. Companies to the capital of
Healthworld, pursuant to an Agreement of Organization of even date herewith (the
"U.S. Agreement of Organization"), and
1.1.2 the Minority Stockholders of all of the U.K. Company's
Subsidiaries (with the exception of Healthworld, B.V.) will be contributing all
of the issued and outstanding shares of such U.K. Company's Subsidiaries which
are owned by them to the capital of Healthworld, pursuant to separate Agreements
of Organization for each of the Subsidiaries of the U.K. Company to which such
contributions relate (the "Minority Agreements of Organization").
The contributions made by the U.K. Stockholder pursuant to this Agreement, the
contributions made pursuant to the U.S. Agreement of Organization, the
contributions made pursuant to the Minority Agreements of Organization, and the
contributions of cash by the public and/or the Underwriters in connection with
the IPO shall be considered as a single integrated transaction intended to
qualify as tax-free under Code Section 351. The Closing will occur
contemporaneously with the Pricing of the IPO, and all of the steps of the
Closing and the completion of the IPO are an integrated series of steps in a
series of transactions, none of which would have occurred without the
expectation and anticipation that the other steps will occur or will have
occurred.
1.2 Directors and Officers. At the Closing, the directors and officers
of the U.K. Company and its Subsidiaries then holding office shall remain
unchanged.
2 Conversion of Stock.
2.1 Manner of Conversion. The manner of converting the share capital
(the "Company Stock") of the U.K. Company issued and outstanding immediately
prior to the Closing into shares of Healthworld Stock shall be as follows: At
the Closing all of the share capital of the U.K. Company issued and outstanding
immediately prior to the Closing shall, by virtue of the capital contributions
described in Section 1.1, and without any action on the part of the U.K.
Stockholder, automatically be deemed to represent the right to receive the
number of shares of Healthworld Stock set forth in the table in Section 2.3
below.
2.2 Beneficial Ownership of Shares. All Healthworld Stock received by
the U.K. Stockholder pursuant to this Agreement shall, except for restrictions
described in Section 14 hereof, have the same rights as all other shares of
Healthworld Stock by reason of the provisions of the Certificate of
Incorporation of Healthworld or as otherwise provided by the Delaware General
Corporation Law. All voting rights of such
-6-
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
- -------------------------------------------------------------------------------
Healthworld Stock received by the U.K. Stockholder shall be fully exercisable by
the U.K. Stockholder and the U.K. Stockholder shall not be deprived nor
restricted in exercising those rights. At the Closing, Healthworld shall have no
class of capital stock issued and outstanding other than the Healthworld Stock.
2.3 Allocation of Shares. Healthworld will issue to the U.S.
Stockholders, the U.K. Stockholder and the Minority Stockholders, in the
aggregate, 5,000,000 shares (the "Aggregate Number of Founder Shares") of
Healthworld Stock at the Closing. With respect to Girgenti, who presently owns
one hundred (100) shares of Healthworld Stock, the conversion shall be made in
such a manner as to issue to him only that number of additional shares of
Healthworld Stock which are necessary to attain the percentage of shares set
forth below. The allocation of the Aggregate Number of Founder Shares among all
of the U.S. Stockholders, the U.K. Stockholder and the Minority Stockholders
shall be made as follows:
2.3.1 69% of the Aggregate Number of Founder Shares shall be
allocated to the U.S. Stockholders (the "U.S. Percentage") and 31% of the
Aggregate Number of Founder Shares shall be allocated to the U.K. Stockholder
and the Minority Stockholders (the "U.K. Percentage").
2.3.2 The number of shares of Healthworld Stock which results
from applying the U.S. Percentage against the Aggregate Number of Founder Shares
shall be divided among the U.S. Stockholders in the following proportions:
Girgenti 63.65%
Hughes 5.00%
Butler 14.06%
Ehrenthal 17.29%
---------------------------------------
Total 100.00%
2.3.3 The number of shares of Healthworld Stock which results
from applying the U.K. Percentage against the Aggregate Number of Founder Shares
shall be divided among the U.K. Stockholder and the Minority Stockholders in the
following manner:
2.3.3.1 Michael Garnham shall receive that number of
shares of Healthworld Stock having a value
of (pounds)1,000,000, based on the offering
price in the IPO and utilizing a conversion
rate of $1.65 dollars per pound sterling.
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
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2.3.3.2 Michael Bourne shall receive that number of
shares of Healthworld Stock having a value
of (pounds)276,448.35, based on the offering
price in the IPO and utilizing a conversion
rate of $1.65 dollars per pound sterling.
2.3.3.3 Moreton shall receive that number of shares
having a value of (pounds)64,559 based on
the offering price of the IPO and utilizing
a conversion rate of $1.65 dollars per
pound.
2.3.3.4 The U.K. Stockholder shall receive the
balance of the shares of Healthworld Stock.
2.3.3.5 Cater shall not receive any shares of
Healthworld stock.
2.3.4 No Fractional Shares. No certificates or script
representing fractional shares of Healthworld shall be issued upon the surrender
and exchange of shares. Each holder of shares who otherwise would have been
entitled to receive a fractional share of Healthworld (after taking into account
all certificates surrendered by such holder) shall be entitled to receive, in
lieu thereof, a payment in the amount (without interest) equal to such
fractional part of a share of Healthworld, multiplied by the offering price in
the IPO and, where appropriate, utilizing a conversion rate of $1.65 dollars per
pound sterling.
3 Delivery of U.K. Company Stock and Healthworld Stock.
At the Closing, the U.K. Stockholder shall deliver to Healthworld duly
executed stock transfer forms effective to transfer into the name of Healthworld
or its nominee the entire issued share capital of the U.K. Company together with
definitive certificate(s) therefor. The U.K. Stockholder agrees promptly to cure
any deficiencies with respect to the endorsement of the share certificate(s) or
other documents of conveyance with respect to the U.K. Company Stock or with
respect to the stock transfer form accompanying any U.K. Company Stock. At the
Closing, Healthworld shall issue in the name of the U.K. Stockholder and deliver
to the U.K. Stockholder that number of shares of Healthworld Stock which results
from applying the percentage as is set forth in Section 2.3, dated the Closing
Date.
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
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4 Closing.
At or immediately prior to the Pricing, the parties shall take all
actions necessary to effect the Organization, to effect the conversion and
delivery of shares referred to in Section 3 hereof and to consummate all
transactions contemplated by this Agreement. The taking of such actions shall
occur at the offices of Todtman, Young, Nachamie, Hendler & Spizz, P.C., 425
Park Avenue, New York, New York 10022. The date on which such actions occur
shall be referred to as the "Closing Date" and the consummation of the
transactions occurring on such date shall be referred to as the "Closing."
5 Representations And Warranties of the U.K. Stockholder.
Preliminary Matters in Respect of Representations and Warranties:
Annexed hereto and made a part hereof is a disclosure schedule
(individually a "Disclosure Schedule" and collectively the "Disclosure
Schedules") for the U.K. Company and each of the Subsidiaries, setting forth all
exceptions and/or qualifications to the representations and warranties made
herein. It is understood and agreed that any disclosure made on any Disclosure
Schedule delivered pursuant hereto shall be deemed to have been disclosed for
purposes of any other Disclosure Schedule required hereby. The U.K. Stockholder
shall make a good faith effort to cross reference disclosure, as necessary or
advisable, between related Disclosure Schedules.
For purposes of this Section 5, the term Company shall mean and refer
to the U.K. Company and each of the Subsidiaries of the U.K. Company.
The representations and warranties made herein are being made for the
benefit of Healthworld and the U.S. Stockholders. The U.K. Stockholder
represents and warrants that all of the following representations and warranties
in this Section 5 are true with respect to the U.K. Company and each of the
Subsidiaries of the U.K. Company at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true on the Closing Date. All representations and
warranties contained in this Section 5 shall survive the Closing Date for a
period of twelve (12) months (the last day of such period being the "Expiration
Date"), except that
(i) the warranties and representations set forth in Section
hereof (regarding "Taxes") shall survive until such time as
the limitations period has run for all tax periods ended on or
prior to the Closing Date, which shall be deemed to be the
Expiration Date for Section 5.21;
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
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(ii) the warranties and representations set forth in Section
5.29 hereof (regarding "Authority; Ownership") shall survive
forever; and
(iii) solely for purposes of determining whether a claim for
indemnification under Section 11.1 hereof has been made on a
timely basis, and solely to the extent that in connection with
the IPO, Healthworld actually incurs liability under the 1933
Act, the 1934 Act, or any other Federal or state securities
laws, the representations and warranties set forth herein
shall survive until the expiration of any applicable
limitations period, which shall be deemed to be the Expiration
Date for such purposes.
5.1 Due Organization. The Company is a corporation duly incorporated
under the laws of the jurisdiction of its incorporation, and is duly authorized
and qualified under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the manner as
now conducted except as set forth on Schedule 5.1 or where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise), of the Company, taken as a whole (as used herein with
respect to the Company, or with respect to any other person, a "Material Adverse
Effect"). Schedule 5.1 sets forth the jurisdiction in which the Company is
incorporated and contains a list of all jurisdictions in which the Company is
authorized or qualified to do business. In all material respects, all accounts,
books, ledgers, financial and other records of whatsoever kind of the Company
have been fully, properly and accurately maintained and are up to date, are in
the possession of the Company and contain true and accurate records of all
matters required by law to be entered therein and do not contain or reflect any
material inaccuracies or discrepancies. No notice or allegation that any of the
said records is incorrect, or should be rectified, in any material respect, has
been received by the Company. The most recent minutes of the Company, which are
dated no earlier than ten business days prior to the date hereof, affirm and
ratify all prior acts of the Company, and of its officers and directors on
behalf of the Company.
Within the five (5) year period ending with the date hereof, no order
has been made or petition presented or resolution passed for the winding-up or
administration of the Company nor has any distress, execution or other process
been levied against the Company or action taken to repossess goods in the
Company's possession and the Company is not insolvent or unable to pay its debts
for the purposes of the Insolvency Act 1986.
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Within the five (5) year period ending with the date hereof, no
receiver, administrative receiver or administrator has been appointed of the
whole or any material part of the assets of the Company nor is the U.K.
Stockholder aware of any circumstances likely to give rise to the appointment of
any such receiver, administrative receiver or administrator.
The Company has complied in all material respects with the provisions
of the Companies Act 1985 and the European Communities Act 1972 and all Returns,
particulars, resolutions and other documents required under the legislation to
be delivered on behalf of the Company to the Registrar of Companies in the
United Kingdom have in all material respects been properly made and delivered.
5.2 Prohibited Activities. Except as set forth on Schedule 5.2, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3.
5.3 Capital Stock of the Company. The authorized and issued share
capital of each of the Companies is as set forth in Schedule 5.3. All of the
issued and outstanding shares of the U.K. Company are beneficially owned by and
registered in the name of the U.K. Stockholder with full title guarantee in the
amounts set forth in Schedule 5.3. All of the issued shares of each of the
Subsidiaries are beneficially owned by and registered in the name of the Company
or the Minority Stockholders in the amounts set forth in Schedule 5.3. Except as
set forth on Schedule 5.3, all of such shares are owned free and clear of all
Encumbrances and claims of every kind. All of the issued and outstanding shares
of capital stock of the Company have been properly issued and allotted and are
fully paid or credited as fully paid. Such shares were offered, issued, sold and
delivered by the Company in compliance with all applicable laws concerning the
issuance of securities. None of such shares were issued in violation of the
preemptive rights of any past or present stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
the Company has not acquired any Company Stock or any stock of any of the
Subsidiaries since January 1, 1995. Except as set forth on Schedule 5.4,
5.4.1 No person has the right (whether exercisable now or in
the future and whether contingent or not) to call for the allotment, issue,
sale, redemption or transfer of any share or loan capital of the Company under
any option or other agreement (including conversion rights and rights of
pre-preemption);
5.4.2 the Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of its shares or any interests
therein (or of
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any of its Subsidiaries) or to pay any dividend or make any distribution in
respect thereof, nor do any of the Subsidiaries have any obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of their respective
shares or any interest therein or to pay any dividend or make any distribution
in respect thereof;
5.4.3 the Company has no obligation (contingent or otherwise)
to sell any of its shares or any interests therein; and
5.4.4 neither the voting rights attaching to the shares in the
capital of the Company nor the relative ownership of shares among any of their
respective stockholders has been altered or changed in contemplation of the
Organization and/or the Healthworld Plan of Organization.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses.
5.6 Subsidiaries. Except as set forth on Schedule 5.6, the Company has
no Subsidiaries. Except as set forth in Schedule 5.6 and except for any
corporations or entities with respect to which the Company owns less than 10% of
the issued and outstanding stock, the Company does not presently own, of record
or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is the Company, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of
all names of all predecessor companies of the Company, including the names of
any entities acquired by the Company (by stock purchase, merger, or otherwise)
or owned by the Company or from whom the Company previously acquired material
assets, since the "Disclosure Date" (hereafter defined). The term "Disclosure
Date" means, in the case of the U.K. Company, Milton Marketing Limited or Milton
Headcount Limited, the date of their respective incorporations, and, in the case
of any of the other Subsidiaries, July 1, 1992. Except as disclosed on Schedule
5.7, the Company has not been, within such period of time, a Subsidiary or
division of another corporation or a part of an acquisition which was later
rescinded.
5.8 Spin-off by the Company. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Company ("Affiliates") since January 1, 1995.
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5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "Company Financial Statements") of the
Company: the Company's audited Consolidated Balance Sheets as of November 30,
1996 (the "1996 Balance Sheet"), 1995 and 1994 and Profit and Loss Accounts,
Directors' and Auditors' reports thereon and the notes thereto and all other
documents annexed thereto for each of the years in the three-year period ended
November 30, 1996, the financial statements for the period between the Balance
Sheet Date and June 30, 1997, and the unaudited balance sheet as of June 30,
1997. Such Financial Statements have been prepared in accordance with the
Companies Act 1985, generally accepted accounting principles including all
statements of Standard Accounting Practice and Financial Reporting Standards
applied on a consistent basis throughout the periods indicated (except as noted
thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such
Consolidated Balance Sheets as of November 30, 1996, 1995 and 1994 give a true
and fair view of the assets and liabilities and the financial position of the
U.K. Company and the Subsidiaries of the U.K. Company as of the dates indicated
thereon, and the Company Financial Statements give a true and fair view of the
profits and losses for the periods indicated thereon.
5.10 Liabilities and Obligations. Except (i) as set forth on Schedule
5.10, (ii) for liabilities to the extent reflected or reserved against in the
1996 Balance Sheet and (iii) for obligations required by this Agreement, since
the Balance Sheet Date the Company has not incurred any material liabilities of
any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business. Schedule 5.10 also includes, in the case of those
contingent liabilities related to pending or threatened litigation, or other
liabilities which are not fixed or otherwise accrued or reserved, a good faith
and reasonable estimate of the maximum amount which may be payable. For each
such contingent liability or liability for which the amount is not fixed or is
contested, Schedule 5.10 includes the following information:
5.10.1 a summary description of the liability together with
the following:
5.10.1.1 copies of all relevant documentation
relating thereto;
5.10.1.2 amounts claimed and any other action or
relief sought; and
5.10.1.3 name of claimant and all other parties to
the claim, suit or proceeding;
5.10.2 the name of each court or agency before which such
claim, suit or proceeding is pending;
5.10.3 the date such claim, suit or proceeding was instituted;
and
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5.10.4 a good faith and reasonable estimate of the maximum
amount, if any, which is likely to become payable with respect to each such
liability. If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 Accounts and Notes Receivable. Schedule 5.11 includes an accurate
list of the accounts and notes receivable of the Company, as of the Balance
Sheet Date, including any such amounts which are not reflected in the balance
sheet as of the Balance Sheet Date, and including receivables from and advances
to employees and the U.K. Stockholder. The U.K. Stockholder shall cause the
Company to provide to Healthworld, not later than the Closing Date, (i) an
accurate list of all receivables obtained subsequent to the Balance Sheet Date
and (ii) an aging of all accounts and notes receivable showing amounts due in 30
day aging categories. Such list and such aging report (the "A/R Aging Reports")
shall be current as of the end of the calendar month which immediately precedes
the Closing Date.
5.12 Permits and Intangibles. The Company holds all licenses, permits
and other governmental authorizations the absence of any of which could have a
Material Adverse Effect on its business. Schedule 5.12 contains an accurate list
and summary description of all such licenses, permits and other governmental
authorizations, including permits, titles (including motor vehicle titles and
current registrations), licenses, certificates, trademarks, tradenames, patents,
patent applications and copyrights owned or held by the Company (including
interests in software or other technology systems, programs and intellectual
property other than software generally available in retail markets). To the
knowledge of the U.K. Stockholder, (a) the licenses, permits and other
governmental authorizations listed on Schedule 5.12 are valid, and (b) the
Company has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, permit or other governmental
authorization. The Company has conducted and is conducting its business in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in the licenses, permits and other governmental
authorizations listed on Schedule 5.12 and is not in violation of any of the
foregoing except where such non-compliance or violation would not have a
Material Adverse Effect on the Company. Except as specifically provided in
Schedule 5.12, the transactions contemplated by this Agreement will not result
in a material default under or a material breach or violation of, or materially
adversely affect the rights and benefits afforded to the Company by, any such
licenses, permits or government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, the
Company has, in all material respects, complied with and is in compliance with
all material national, state, local and foreign statutes, laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it or any of its respective
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properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"). The Company has no actual or
contingent liability in connection with any Environmental Laws which would have
a Material Adverse Effect.
5.14 Personal Property. Schedule 5.14 contains an accurate list of
5.14.1 all personal property with a value in excess of
(pound)1,250 included (or that will be included) in "depreciable plant, property
and equipment" on the 1996 Balance Sheet,
5.14.2 all other personal property owned by the Company with a
value in excess of (pound)1,250 as of the Balance Sheet Date and acquired since
the Balance Sheet Date and
5.14.3 all leases and agreements in respect of personal
property providing for payments of greater than (pound)625 per annum,
including, (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
the U.K. Stockholder, relatives of the U.K. Stockholder, or Affiliates of the
Company. Except as set forth on Schedule 5.14,
5.14.4 all personal property used by the Company in its
business is either owned by the Company or leased by the Company pursuant to a
lease included on Schedule 5.14,
5.14.5 all of the personal property listed on Schedule 5.14 is
in good working order and condition, ordinary wear and tear excepted and
5.14.6 all leases and agreements included on Schedule 5.14 are
in full force and effect and constitute valid and binding agreements of the
parties (and their successors) thereto in accordance with their respective
terms.
5.15 Significant Customers; Material Contracts and Commitments.
Schedule 5.15 contains an accurate list of all significant customers, it being
understood and agreed that a "significant customer," for purposes of this
Section 5.15, means any customer (or person or entity) representing 5% or more
of the Company's annual revenues for the one-year period ending with the Balance
Sheet Date. Except to the extent set forth on Schedule 5.15, none of the
Company's significant customers have canceled or substantially reduced or, to
the knowledge of the Company, are currently
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attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company. Schedule 5.15 contains a
list of all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land), other than agreements listed on
Schedule 5.10, 5.14 or 5.16, and in each case the U.K. Stockholder has delivered
true, complete and correct copies of such agreements to Healthworld. The Company
has complied with all material commitments and obligations pertaining to it, and
is not in default in any material respect under any contracts or agreements
listed on Schedule 5.15 and no notice of default under any such contract or
agreement has been received which default would have a Material Adverse Effect
on the Company. Also included in Schedule 5.15 is a summary description of all
material plans or projects involving the opening of new operations, expansion of
existing operations, or the acquisition of any personal property, business or
assets.
5.16 Real Property. Schedule 5.16 includes an accurate list of all real
property owned or leased by the Company as of the Balance Sheet Date and
acquired since the Balance Sheet Date, and all other real property, if any, used
by the Company in the conduct of its business. The Company has good and
insurable title to the real property owned by it, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except as set
forth in Schedule 5.16. The U.K. Stockholder has delivered true, complete and
correct copies of all leases and agreements in respect of real property leased
by the Company. Schedule 5.16 indicates which such properties, if any, are
currently owned, or were formerly owned, by the U.K. Stockholder or business or
personal affiliates of the Company or the U.K. Stockholder. All of such leases
included on Schedule 5.16 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
5.17 Insurance. Schedule 5.17 includes
5.17.1 an accurate list as of the Balance Sheet Date of all
insurance policies carried by the Company; and
5.17.2 an accurate list of all insurance loss runs or workers
compensation claims received for the past three (3) policy years.
The U.K. Stockholder has delivered to Healthworld true, complete and correct
copies of all insurance policies currently in effect. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other
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agreements and pursuant to all applicable laws. All of such insurance policies
are currently in full force and effect and shall remain in full force and effect
through the Closing Date. Since January 1, 1995, no insurance carried by the
Company has been canceled by the insurer and the Company has not been denied any
requested coverage.
5.18 Compensation; Employment Agreements; Organized Labor Matters.
5.18.1 Schedule 5.18 contains an accurate list showing all
officers, directors and Key Employees of the Company, listing all employment
agreements with such officers, directors and Key Employees and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of the Balance Sheet Date
and the date hereof. The U.K. Stockholder has delivered true, complete and
correct copies of any employment agreements for persons listed on Schedule 5.18.
5.18.2 Except as set forth in Schedule 5.18, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, Key Employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
5.18.3 Except as set forth on Schedule 5.18, the Company is
not bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union, no employees of
the Company are represented by any labor union or covered by any collective
bargaining agreement, no campaign to establish such representation is in
progress and there is no pending or, to the best of the U.K. Stockholder's
knowledge, any threatened labor dispute involving the Company and any group of
its employees nor has the Company experienced any labor interruptions over the
past three years.
5.18.4 The U.K. Stockholder believes that the Company's
relationship with its employees is good.
5.18.5 Except as set forth in Schedule 5.18, all appropriate
notices have been issued under all statutes, regulations and codes of conduct
relevant to the relations between the Company and its employees or any
recognized trade union, except for notices the absence of which would not have a
Material Adverse Effect upon the Company and the Company has maintained adequate
and suitable records regarding the service of its employees.
5.18.6 Except as set forth in Schedule 5.18, the Company has
not entered into any currently effective collective agreement or arrangement
(whether legally binding
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or not) with a trade union, works counsel, staff association or association of
trade unions or other body representing any of its employees nor has it done
within the two-year period ending with the date hereof any act which might
reasonably be construed as recognition of such a union or body.
5.18.7 Schedule 5.18 contains a listing of each written
agreement and a summary of the terms and conditions of each unwritten agreement
pursuant to which any officers, directors, Key Employees and Key Consultants of
the Company (and their dependents) are engaged. The summary of unwritten
agreements shall include, without limitation, details of all participation,
profit sharing, incentive, bonus, commission, share option, medical, permanent
health insurance, directors and officers insurance, travel, car, redundancy and
other benefit schemes, arrangements and understandings and whether legally
binding upon the Company or not and of all Key Consultant Agreements with the
Company which are in place now or will be in place at the Closing.
5.18.8 Except as set forth in Schedule 5.18, since January 1,
1997, there have been no increases in the emoluments payable to or changes in
the terms of service of any officer, director or Key Employee of the Company.
5.18.9 Except as set forth in Schedule 5.18, there is not in
existence any contract of employment with officers, directors or employees of
the Company (or any contract for services with any individual) which cannot be
terminated by three months notice or less or (where such a contract has not been
reduced to writing) by reasonable notice without giving rise to a claim for
damages or compensation (other than a statutory redundancy payment or statutory
compensation for unfair dismissal).
5.18.10 Except as set forth in Schedule 5.18, no promise has
been made and the Company is not obliged to increase the emoluments payable to
or to vary the terms of service of any of its directors, other officers and
employees.
5.18.11 Except as set forth in Schedule 5.18, there are not,
nor will there be at Closing, outstanding offers of employment or consultancy
made by the Company and there is no one who has accepted an offer of employment
or consultancy made by the Company but who has not yet taken up that employment
or consultancy.
5.18.12 Except as set forth in Schedule 5.18, neither the
Company nor any of its employees is involved in any industrial or trade dispute
and there are no facts known to the Company which might suggest that there may
be any trade union or industrial dispute involving the Company or that the
disposition of the Company Stock may lead to any trade union or industrial
dispute.
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5.18.13 Except as set forth in Schedule 5.18, there are no
amounts owing or promised to any present or former directors, employees or
consultants of the Company other than remuneration accrued due or for
reimbursement of business expenses and no directors, employees or consultants of
the Company have given or been given notice terminating their contracts of
employment or consultancy.
5.18.14 Except as set forth in Schedule 5.18, no claim has
been made and no liability has been incurred by the Company (a) for breach of
any contract of service or for redundancy payments (including protective awards)
or for compensation for wrongful dismissal or unfair dismissal or for failure to
comply with any order for the reinstatement or re-engagement of any employee or
for the actual or proposed termination or suspension of employment or variation
of any terms of employment of any present or former employee of the Company or
(b) in respect of any payment to be made or benefit to be provided to any
present or former director, employee or consultant of the Company in connection
with the consummation of the transactions contemplated hereby, or (c) for the
breach of or the actual or proposed termination or variation of any contract for
services or consultancy agreement for any present or former consultant to the
Company.
5.18.15 Except as set forth in Schedule 5.18, no gratuitous
payment has been made or promised by the Company in connection with the
disposition of the Company Stock or in connection with the actual or proposed
termination or suspension of employment or variation of any contract of
employment of any present or former director or employee or in connection with
the proposed termination or suspension or variation of any contract for services
or consultancy agreement.
5.18.16 Except as set forth in Schedule 5.18, there are no
material claims pending or, to the knowledge of the U.K. Stockholder, threatened
against the Company:
5.18.16.1 by a present or former employee,
director, consultant or third party,
in respect of an accident or injury
which is not fully covered by
insurance; or
5.18.16.2 by a present or former employee,
director or consultant in relation
to his terms and conditions of
employment or (as the case may be)
consultancy.
5.18.17 Except as set forth in Schedule 5.18, the Company has
in relation to each of its employees (and so far as relevant to each of its
former employees and persons seeking employment) complied with, in all material
respects:
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5.18.17.1 all laws and codes of conduct and
practice relevant to the relations
between it and its employees,
prospective employees or any trade
union;
5.18.17.2 all collective agreements and
customs and practices for the time
being dealing with the terms and
conditions of service of its
employees; and
5.18.17.3 all relevant orders, declarations
and awards made under any relevant
law or code of conduct and practice
affecting the conditions of service
of its employees.
5.18.18 Except as set forth in Schedule 5.18, no Key Employee
has ceased to be employed by the Company (other than through death or retirement
at normal retirement age) during the twelve months prior to the date hereof and
the Company has no reason to believe that such employees intend or are likely to
leave their employment otherwise than through retirement as aforesaid within the
twelve months following the Closing.
5.18.19 Except as set forth in Schedule 5.18, there are no
agreements, arrangements or schemes in operation by or in relation to the
Company pursuant to which any of its employees or officers and/or former
employees or officers and/or their relatives and dependents is entitled to
shares of capital stock or a commission or remuneration of any kind calculated
by reference in whole or in part to turnover, profits or sales.
5.18.20 Except as set forth in Schedule 5.18 or as provided
for in the 1996 Balance Sheet, there is no liability whatsoever to make payment
to or for the benefit of any director or employee or ex-director or ex-employee
or the wife or widow or any other relative of any director, ex-director,
employee or ex-employee of the Company in respect of past service, retirement,
death or disability by way of pension contribution, pension, retirement benefit
lump sum, gratuity or otherwise.
5.18.21 Except as set forth in Schedule 5.18, the Company has
not within a period of one year preceding the date of this Agreement given
notice of any redundancies to the United Kingdom Secretary of State or started
consultations with any independent trade union or association of unions.
5.19 Employee Benefits. Except as set forth in Schedule 5.19, the
Company has no superannuation fund, retirement benefit or other pension schemes
or arrangements.
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In respect of any such funds, schemes or arrangements which are disclosed in
Schedule 5.19 ("Disclosed Schemes") the Company has no unfunded contingent
obligations and any such funds, schemes or arrangements which are funded are
solvent and are so funded at a level which a prudent employer acting on
actuarial advice would consider as being adequate to secure the benefits which
may be payable in respect of service prior to the Closing and (insofar as the
provision of any pension is concerned) having regard to probable future salary
increases, or in connection with which the Company is to become or may become
liable to make any payment and no undertakings or assurances have been given to
the employees of the Company as to the continuance or introduction or increase
or improvement of any pension rights or entitlement which the Company and/or
Healthworld would be required to implement in accordance with good industrial
relations practice and whether or not there is any legal obligation so to do.
5.20 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 5.10 or 5.13, the Company is not in violation or contravention of any
law or regulation or any order of any court or national, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth on Schedule 5.10 or 5.13,
there are no material claims, actions, suits or proceedings, commenced or, to
the knowledge of the Company, threatened, against or affecting the Company, at
law or in equity, or before or by any national, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them and no notice of any material claim,
action, suit or proceeding, whether pending or threatened, has been received.
The Company has conducted and is conducting its business in compliance, in all
material respects, with the requirements, standards, criteria and conditions set
forth in applicable national, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental approvals set forth on
Schedules 5.12 and 5.13, and is not in violation of any of the foregoing which
might have a Material Adverse Effect.
5.21 Taxes. Except as set forth in Schedule 5.21:
5.21.1 The provisions for Taxation, including provisions for
deferred tax included in the Financial Statements, have been made in accordance
with generally accepted accounting principles and will be sufficient (on the
basis of the rates of tax current at the date of this Agreement) to cover all
Taxation for which the Company was at the Balance Sheet Date liable or may after
that date become or have become liable for any period ended on or before the
Balance Sheet Date and in particular (but without prejudice to the generality of
the foregoing) will be sufficient to cover such Taxation on
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or in respect of or by reference to any profit, gains or income (including
deemed profits gains or income) for any period ended on or before the Balance
Sheet Date.
5.21.2 The Company has duly and punctually paid all Taxation
to the extent that the same ought to have been paid and is under no liability to
pay any fine, penalty or interest or to give any security in connection
therewith.
5.21.3 the Company has made under deduction of Taxation all
payments to any person which ought to have been made under deduction of Taxation
(with particular reference to Sections 134, 347 to 350 and 524 of the Taxes Act)
and has (if required by law to do so) accounted to the Inland Revenue for the
Taxation so deducted;
5.21.4 the Company has in all material respects properly
operated the P.A.Y.E. system, and all National Insurance Contributions and sums
payable to the Inland Revenue and the Department of Social Security under the
P.A.Y.E. system (including ex gratia payments and compensation for loss of
office) (Section 148 of the Taxes Act) (Sections 153 to 168G of the Taxes Act)
due and payable by the Company up to the date hereof have been paid;
5.21.5 the Company has duly paid all Taxation shown to be due
to the Inland Revenue by all Returns required to be made under Schedule 13 to
the Taxes Act (advance corporation tax);
5.21.6 the Company has correctly operated a statutory sick pay
scheme in accordance with the provisions of the United Kingdom Social Security
Contributions and Benefits Act 1992;
5.21.7 prior to the Closing all documents to which the Company
is a party and all documents in the enforcement of which the Company may be
interested or to the production of which the Company is entitled which are
necessary to establish the title of the Company to any asset and which attract
stamp duty in the United Kingdom or elsewhere have been properly stamped and the
appropriate stamp duty has been paid and all duty payable in respect of the
capital of the Company has been paid and the Company has duly paid any stamp
duty reserve tax for which it has at any time been liable.
5.21.8 The Company has and at Closing will have duly and
punctually made all Returns, given all notices and accounts and supplied all
other information which ought to have been made given or supplied for the
purpose of and in respect of Taxation in the United Kingdom and so far as the
U.K. Stockholder is aware, elsewhere, to the Inland Revenue, H.M. Commissioners
of Customs and Excise or to any other
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governmental authority (including any governmental authority of a foreign
jurisdiction) and has and at Closing will have kept and maintained all records,
invoices and other documents which ought to have been kept or maintained for
such purposes and:
5.21.8.1 all such information, Returns,
accounts, notices, records, invoices
and other documents were, are, and
at the Closing will be, in all
material respects, up-to-date,
accurate, and made on the proper
basis and are not, nor, is likely to
be, the subject of any dispute with
the Inland Revenue, H.M.
Commissioners of Customs and Excise
or other appropriate authorities
concerned;
5.21.8.2 the Company has not within the
preceding seven years been the
subject of a back duty, PAYE or
other audit or investigation by the
Inland Revenue or H.M. Commissioners
of Customs and Excise (or other
similar authority outside the United
Kingdom);
5.21.8.3 all clearances and consents obtained
from H.M. Treasury, the Inland
Revenue, H.M. Commissioners of
Customs and Excise or other
authority whether in the United
Kingdom or elsewhere have been
obtained after full, complete and
accurate disclosure of all material
facts and considerations and no such
clearances or consent is liable to
be withdrawn, modified or rendered
void and all such clearances and
consents have been disclosed to
Healthworld.
5.22 No Violations. Neither the Company nor, to the knowledge of the
Company, any other party thereto, is in default in any material respect under
any lease, instrument, agreement, license, or permit set forth on Schedule 5.12,
5.13, 5.14, 5.15 or 5.16, or any other material agreement to which it is a party
or by which its properties are bound (the "Material Documents"). Except as set
forth in Schedule 5.22,
5.22.1 the rights and benefits of the Company under the
Material Documents will not be materially adversely affected by the transactions
contemplated hereby;
5.22.2 the execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby
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will not result in any material violation or breach or constitute a material
default under, any of the terms or provisions of the Material Documents or the
Company's Memorandum and Articles of Association.
5.22.3 none of the Material Documents requires notice to or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect; and
5.22.4 consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any material right or benefit.
Except as set forth on Schedule 5.22, none of the Material Documents prohibits
the use or publication by Healthworld or any of its Subsidiaries of the name of
any other party to such Material Document, and none of the Material Documents
prohibits or restricts the Company from freely providing services to any other
customer or potential customer of the Company, Healthworld, or any of their
respective Subsidiaries.
5.23 Government Contracts. Except as set forth on Schedule 5.23, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.24 Absence of Changes. Since the Balance Sheet Date, except as set
forth on Schedule 5.24, there has not been:
5.24.1 any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of the
Company;
5.24.2 any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties or business of the
Company;
5.24.3 any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or any grant
of any options, warrants, calls, conversion rights or commitments;
5.24.4 any declaration or payment of any dividend or
distribution in respect of the shares in the capital of the Company or any
direct or indirect redemption, purchase or other acquisition of any of the
shares in the capital of the Company;
5.24.5 any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the Company to
any of its officers,
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directors, stockholders, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with past
practice;
5.24.6 any work interruptions, labor grievances or claims
filed, or any other event or condition of any character materially adversely
affecting the business of the Company;
5.24.7 any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any person,
including, without limitation, the U.K. Stockholder and his affiliates;
5.24.8 any cancellation, or agreement to cancel, any material
indebtedness or other obligation owing to the Company, including without
limitation any material indebtedness or obligation of the U.K. Stockholder or
any affiliate thereof;
5.24.9 any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the assets,
property or rights of the Company or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
5.24.10 any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of the Company's business;
5.24.11 any waiver of any material rights or claims of the
Company;
5.24.12 any material breach, amendment or termination of any
material contract, agreement, license, permit or other right to which the
Company is a party;
5.24.13 any transaction by the Company outside the ordinary
course of its respective businesses;
5.24.14 any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
5.24.15 any other distribution to or for the benefit of the
U.K. Stockholder of property or assets by the Company.
5.25 Deposit Accounts; Powers of Attorney. Schedule 5.25 contains an
accurate schedule as of the date of the Agreement of:
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5.25.1 the name of each financial institution in which the
Company has accounts or safe deposit boxes;
5.25.2 the names in which the accounts or boxes are held;
5.25.3 the type of account and account number; and
5.25.4 the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.25 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.26 Brokers and Agents. Except as disclosed on Schedule 5.26, the U.K.
Stockholder did not employ any broker or agent in connection with this
transaction.
5.27 Relations with Governments. Except for political contributions
made in a lawful manner which, in the aggregate, do not exceed (pound)6,250 per
year for each year in which the U.K. Stockholder has been a stockholder of the
Company, the Company has not made, offered or agreed to offer anything of value
to any governmental official, political party or candidate for government
office. If political contributions made by the Company have exceeded
(pound)6,250 per year for each year in which the U.K. Stockholder has been a
stockholder of the Company, each contribution in the amount of (pound)3,125 or
more shall be described on Schedule 5.27.
5.28 Disclosure.
5.28.1 If, prior to the 25th day after the date of the final
prospectus of Healthworld utilized in connection with the IPO, the U.K.
Stockholder becomes aware of any fact or circumstance which would change (or, if
after the Closing Date, would have changed) a representation or warranty of the
U.K. Stockholder in this Agreement or would affect any document delivered
pursuant hereto in any material respect, the U.K. Stockholder shall immediately
give notice of such fact or circumstance to Healthworld. However, subject to the
provisions of Section 7.8, such notification shall not relieve the U.K.
Stockholder of his obligations under this Agreement.
5.28.2 The U.K. Stockholder acknowledges and agrees:
5.28.2.1 that there exists no firm
commitment, binding agreement, or
promise or other assurance of any
kind,
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whether express or implied, oral or
written, that a Registration
Statement will become effective or
that the IPO pursuant thereto will
occur at a particular price or
within a particular range of prices
or occur at all;
5.28.2.2 that neither Healthworld nor any of
its officers, directors, agents or
representatives nor any Underwriter
shall have any liability to the
Company, the U.K. Stockholder or any
other person affiliated or
associated with the Company for any
failure of the Registration
Statement to become effective, the
IPO to occur at a particular price
or within a particular range of
prices or to occur at all; and
5.28.2.3 that the decision of U.K.
Stockholder to enter into this
Agreement, has been or will be made
independent of, and without reliance
upon, any statements, opinions or
other communications, or due
diligence investigations which have
been or will be made or performed by
any prospective underwriters,
relative to Healthworld or the
prospective IPO.
5.29 Authority; Ownership. The U.K. Stockholder has the full legal
right, power and authority to enter into this Agreement. The U.K. Stockholder is
the registered and beneficial owner with full title guarantee of the shares of
the Company Stock identified in Schedule 5.3 as being owned by the U.K.
Stockholder and neither owns nor has any right, title or interest in or to any
other Company Stock, and, except as set forth on Schedule 5.29, such Company
Stock is owned free and clear of all Encumbrances and claims of every kind.
5.30 Preemptive Rights. The U.K. Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
Healthworld Stock that the U.K. Stockholder has or may have had other than
rights of the U.K. Stockholder to acquire Healthworld Stock pursuant to this
Agreement or any option granted by Healthworld.
5.31 No Intention to Dispose of Healthworld Stock. The U.K. Stockholder
is not under any binding commitment or contract to sell, exchange or otherwise
dispose of shares of Healthworld Stock received in connection with the
Organization.
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6 Representations of Healthworld.
Healthworld represents and warrants that all of the following
representations and warranties in this Section 6 are true at the date of this
Agreement and, subject to Section 7.8 hereof, shall be true on the Closing Date.
All such representations and warranties shall survive the Closing Date for a
period of twelve (12) months (the last day of such period being the "Expiration
Date"), except that, solely for purposes of determining whether a claim for
indemnification under Section 11.2.4 hereof has been made on a timely basis and
solely to the extent that in connection with the IPO any person claiming
indemnification from Healthworld hereunder actually incurs liability under the
1933 Act, the 1934 Act, or any other Federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
6.1 Due Organization. Healthworld is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware,
and is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as contemplated.
6.2 Authorization. The representatives of Healthworld executing this
Agreement have the authority to enter into and bind Healthworld to the terms of
this Agreement. Healthworld has the full legal right, power and authority to
enter into this Agreement.
6.3 Capital Stock of Healthworld. The authorized capital stock of
Healthworld is as set forth in Schedule 6.3. All of the issued and outstanding
shares of the capital stock of Healthworld are owned by Girgenti in the amount
set forth in Schedule 6.3. All of such shares are owned free and clear of all
liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of Healthworld have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned of record and
beneficially by Girgenti. Such shares were offered, issued, sold and delivered
by Healthworld in compliance with all applicable state and Federal laws
concerning the issuance of securities. None of such shares were issued in
violation of the preemptive rights of any past or present stockholder of
Healthworld.
6.4 Transactions in Capital Stock. Except for the obligations under the
agreements which form a part of the Healthworld Plan of Organization, no option,
warrant, call, conversion right or commitment of any kind exists which obligates
Healthworld to issue any of its authorized but unissued capital stock, and
Healthworld
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has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. At the time of issuance
thereof, the Healthworld Stock to be delivered to the U.K. Stockholder pursuant
to this Agreement will constitute valid and legally issued shares of
Healthworld, fully paid and nonassessable. The shares of Healthworld Stock to be
issued to the U.K. Stockholder pursuant to this Agreement will not be registered
under the 1933 Act, except as provided in Section 15 hereof.
6.5 Liabilities and Obligations. Healthworld does not have any
liabilities, contingent or otherwise, except as set forth in or contemplated by
this Agreement and the other agreements forming a part of the Healthworld Plan
of Organization, including without limitation the underwriting agreement to be
entered into between Healthworld and the Underwriters, for fees incurred in
connection with the transactions contemplated hereby and thereby, and any
liabilities and obligations which may exist under the Healthworld License
Agreement, a copy of which is annexed to Schedule 6.5.
6.6 Conformity with Law; Litigation. Healthworld is not in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it which would have a Material Adverse
Effect; and there are no material claims, actions, suits or proceedings pending
or, to the knowledge of Healthworld, threatened against or affecting
Healthworld, at law or in equity, or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received.
Healthworld is not in violation of its certificate of incorporation, its by-laws
or any other corporate governing instrument.
6.7 Validity of Obligations. The execution and delivery of this
Agreement by Healthworld and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
Healthworld. This Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of
Healthworld.
6.8 Limited Business Conducted. Healthworld was formed on September 12,
1996 solely for the purpose of entering into and consummating the Healthworld
Plan of Organization. Healthworld has not filed any Returns or extension
requests in respect of Tax. Healthworld has not since its formation conducted
any business, acquired any assets, incurred any liabilities or entered into any
agreements, except Healthworld has entered into the Healthworld License
Agreement and has engaged in other limited startup activities. It is anticipated
that prior to the Closing, Healthworld will institute an
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Incentive Stock Option Plan; however, Healthworld covenants that no options will
be granted before the Closing.
7 Covenants Prior to Closing.
For purposes of this Section 7, the term Company shall mean and refer
to the U.K. Company and each of the Subsidiaries of the U.K. Company.
7.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the U.K. Stockholder will cause the Company to
afford to the U.S. Stockholder reasonable access to all of the Company's sites,
properties, books and records during normal business hours and will furnish such
additional financial and operating data and other information as to the business
and properties of the Company as may from time to time be reasonably requested.
The U.K. Stockholder will cooperate, and will cause the Company to cooperate, in
the preparation of any documents or other material which may be reasonably
required in connection with any documents or materials required by this
Agreement. The U.K. Stockholder and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement or
the due diligence investigations conducted as confidential in accordance with
the provisions of Section 13.2 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the U.K. Stockholder shall cause the Company to,
except as set forth on Schedule 7.2 of its respective Disclosure Schedule:
7.2.1 carry on its respective businesses in substantially the
same manner as it has heretofore been conducted and not introduce any material
new method of management, operation or accounting;
7.2.2 maintain, in all material respects, its respective
properties and facilities, including those held under leases, in as good working
order and condition as at present, ordinary wear and tear excepted;
7.2.3 perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective assets,
properties or rights;
7.2.4 keep in full force and effect present insurance policies
or other comparable insurance coverage;
7.2.5 use its reasonable best efforts to maintain and preserve
its business organization intact, retain its respective present key employees
and maintain its
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respective relationships with suppliers, customers and others having business
relations with the Company;
7.2.6 maintain compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
7.2.7 maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments, except in the ordinary
course of business; and
7.2.8 maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the U.K. Stockholder will not permit the
Company to:
7.3.1 make any change in its Memorandum and Articles of
Association;
7.3.2 issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind other
than in connection with the exercise of options or warrants listed in Schedule
5.4;
7.3.3 declare or pay any dividend, or make any distribution in
respect of its shares whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares;
7.3.4 enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it involves
an amount not in excess of (pound)6,250;
7.3.5 create, assume or permit to exist any mortgage, pledge
or other lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except:
7.3.5.1 with respect to purchase money liens
incurred in connection with the acquisition
of equipment with an aggregate cost not in
excess of (pound)6,250 necessary or
desirable for the conduct of the businesses
of the Company,
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7.3.5.2 liens for taxes either not yet due or being
contested in good faith and by appropriate
proceedings (and for which contested taxes
adequate reserves have been established and
are being maintained) or
7.3.5.3 materialmen's, mechanics', workers',
repairmen's, employees' or other like liens
arising in the ordinary course of business,
or
7.3.5.4 liens set forth on Schedule 5.10 hereto;
7.3.6 sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business;
7.3.7 negotiate for the acquisition of any business or the
start-up of any new business;
7.3.8 merge or consolidate or agree to merge or consolidate
with or into any other corporation;
7.3.9 waive any material rights or claims of the Company;
provided that the Company may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included in
Schedule 5.11 unless specifically listed thereon;
7.3.10 commit a material breach or amend or terminate any
material agreement, permit, license or other right of the Company; or
7.3.11 enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 No Shop. The U.K. Stockholder shall not, and he shall not permit
the U.K. Company or any of its Subsidiaries, nor any agent, officer, director,
trustee or any representative of any of the foregoing, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Closing Date or the termination of this Agreement in accordance with its
terms, directly or indirectly, to:
7.4.1 solicit or initiate the submission of proposals or
offers from any person for,
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7.4.2 participate in any discussions pertaining to, or
7.4.3 furnish any information to any person other than
Healthworld or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in, the
Company, or a consolidation or business combination of the Company.
7.5 Further Assurances. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
7.6 Agreements. The U.K. Stockholder shall and he shall cause the
Company and the Minority Stockholders, as applicable, to terminate any
stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the Company and any employee listed on Schedule
9.10 hereto on or prior to the Closing Date.
7.7 Notification of Certain Matters. The U.K. Stockholder shall give
prompt notice to Healthworld and the U.S. Stockholders of:
7.7.1 the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the U.K. Stockholder contained herein to be untrue
or inaccurate in any material respect at or prior to the Closing; and
7.7.2 any material failure of the U.K. Stockholder, the
Company or any of its Subsidiaries to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder.
The delivery of any notice pursuant to this Section 7.7 shall not be deemed to
7.7.3 modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 7.8,
7.7.4 modify the conditions set forth in Sections 8 and 9, or
7.7.5 limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
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7.8 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business.
7.9 Cooperation in Preparation of Registration Statement. The U.K.
Stockholder shall furnish or cause to be furnished to Healthworld and the
Underwriters all of the information concerning the Companies and the U.K.
Stockholder required for inclusion in, and will cooperate with Healthworld and
the Underwriters in the preparation of, the Registration Statement and the
prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement). The
U.K. Stockholder agrees promptly to advise Healthworld if at any time during the
period in which a prospectus relating to the IPO is required to be delivered
under the 1933 Act, any information contained in the prospectus concerning the
Companies or the U.K. Stockholder becomes incorrect or incomplete in any
material respect, and to provide the information needed to correct such
inaccuracy. The U.K. Stockholder represents and warrants that the Registration
Statement will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the U.K. Stockholder shall not have
responsibility for any such inclusions or omissions to the extent they relate to
the U.S. Companies and do not relate to the U.K. Companies.
8 Conditions Precedent to Obligations of the U.K. Stockholder.
The obligations of the U.K. Stockholder with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions.
8.1 Representations and Warranties; Performance of Obligations by U.S.
Stockholders and Minority Stockholders. All representations and warranties of
the U.S. Stockholders and the Minority Stockholders contained in their
respective Organization Agreements shall, if qualified as to materiality, be
true and correct in all material respects, and if not so qualified, be true and
correct, as of the Closing Date as though
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such representations and warranties had been made as of that time. All of the
terms, covenants and conditions of the U.S. Stockholders and the Minority
Stockholders contained in their respective Organization Agreements shall have
been duly complied with and performed in all material respects. Certificates to
the foregoing effect dated the Closing Date, signed by each of the U.S.
Stockholders and the Minority Stockholders, shall have been delivered to the
U.K. Stockholder.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement and the respective Organization Agreements
of the U.S. Stockholders and the Minority Stockholders and any other agreement
incidental hereto or thereto and all other related legal matters shall be
satisfactory to the U.K. Stockholder and his counsel. The U.K. Stockholder shall
be satisfied that the Registration Statement and the prospectus forming a part
thereof, including any amendments thereof or supplements thereto, shall not
contain any untrue statement of a material fact, or omit to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that the condition contained in this sentence
shall be deemed satisfied if the U.K. Stockholder shall have failed to inform
Healthworld in writing prior to the effectiveness of the Registration Statement
of the existence of an untrue statement of a material fact or the omission of
such a statement of a material fact.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Organization or the IPO and no governmental agency or body shall
have taken any other action or made any request of the U.K. Company or any of
its Subsidiaries or the U.K. Stockholder as a result of which the U.K.
Stockholder deems it inadvisable to proceed with the transactions hereunder.
8.4 Opinions of Counsel. The U.K. Stockholder shall have received an
opinion from counsel for the U.S. Stockholders and counsel for the Minority
Stockholders, dated the Closing Date.
8.5 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
8.6 No Material Adverse Change. No event or circumstance shall have
occurred with respect to any of the U.S. Companies which would constitute a
Material Adverse Effect.
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8.7 Secretary's Certificates; Good Standing. The U.K. Stockholder shall
have received (a) certificates, dated the Closing Date and signed by the
secretary of the U.S. Companies certifying the truth and correctness of attached
copies of the U.S. Companies' respective Certificates of Incorporation
(including amendments thereto) and By-Laws (including amendments thereto) and
such other matters as may reasonably be requested by the U.K. Stockholder, (b) a
certificate, dated the Closing Date and signed by the secretary of Healthworld,
certifying the truth and correctness of attached copies of Healthworld's
certificate of incorporation (including amendments thereto) and by-laws
(including amendments thereto) and such other matters as may reasonably be
requested by the U.K. Stockholder, and (c) a certificate of good standing for
Healthworld in the State of Delaware.
8.8 Employment Agreements. Each of the persons listed on Schedule 8.8
shall have entered into an employment agreement substantially in the form of
Exhibit 8.8 hereto, for the annual compensation set forth on Schedule 8.8.
8.9 Conformity With Girgenti/Milton Letter of Intent and Underwriters'
Engagement Letter.
8.9.1 Corporate governance shall be in accord with section 1.3
of the Girgenti/Milton Letter of Intent; and
8.9.2 An agreement shall have been executed by and among the
U.K. Stockholder and the U.S. Stockholders providing for the rights of refusal
upon private sale, as contemplated by Section 1.5.1 of the Girgenti/Milton
Letter of Intent; and
8.9.3 The Pricing shall have occurred.
8.10 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders and the Minority Stockholders
shall
have occurred simultaneously with the Closing hereunder.
9 Conditions Precedent to Obligations of Healthworld.
The obligations of Healthworld with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the U.K. Stockholder contained in this
Agreement shall, if qualified as to materiality, be true and correct in all
material respects, and if not
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so qualified, be true and correct, as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the U.K. Stockholder and the U.K. Company on or
before the Closing Date shall have been duly performed or complied with in all
material respects; and the U.K. Stockholder shall have delivered to Healthworld
certificates dated the Closing Date and signed by him to such effect.
9.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement and the respective Organization Agreements
of the U.S. Stockholders and the Minority Stockholders and any other agreement
incidental hereto or thereto and all other related legal matters shall be
satisfactory to Healthworld and its counsel. Healthworld shall be satisfied that
the Registration Statement and the prospectus forming a part thereof, including
any amendments thereof or supplements thereto, shall not contain any untrue
statement of a material fact, or omit to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading.
9.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Organization or the IPO and no governmental agency or body shall
have taken any other action or made any request of Healthworld or any Company as
a result of which the management of Healthworld deems it inadvisable to proceed
with the transactions hereunder.
9.4 Opinions of Counsel. Healthworld shall have received an opinion
from counsel to the U.K. Stockholder, dated the Closing Date, in form and
substance acceptable to counsel for Healthworld.
9.5 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
9.6 No Material Adverse Change. No event or circumstance shall have
occurred with respect to any of the Companies which would constitute a Material
Adverse Effect, and none of the Companies shall have suffered any material loss
or damages to any of its respective properties or assets, whether or not covered
by insurance, which change, loss or damage materially affects or impairs the
ability of any of the Companies to conduct their respective businesses.
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9.7 Secretary's Certificates. Healthworld shall have received
certificates, dated the Closing Date and signed by the secretary of each of the
Companies, certifying the truth and correctness of attached copies of each of
the U.K. Company's and the Subsidiaries' Certificate of Incorporation (including
amendments thereto), and Memorandum and Articles of Association (including
amendments thereto).
9.8 Employment Agreements. Each of the persons listed on Schedule shall
have entered into an employment agreement substantially in the form of Exhibit
hereto, for the annual compensation set forth on Schedule 8.8.
9.9 Stockholder's Release. The U.K. Stockholder shall have delivered to
Healthworld an instrument dated the Closing Date releasing the Company from any
and all claims of the U.K. Stockholder against the Company and Healthworld and
obligations of the Company and Healthworld to the U.K. Stockholder, except for
(x) items specifically identified on Schedules 5.10 and 5.15 as being claims of
or obligations to the U.K. Stockholder, (y) continuing obligations to the U.K.
Stockholder relating to his employment by Healthworld and (z) obligations
arising under this Agreement or the transactions contemplated hereby.
9.10 Termination of Related Party Agreements. Except as set forth on
Schedule , all existing agreements between any of the Companies, the U.K.
Stockholder and the Minority Stockholders shall have been canceled effective as
of the Closing Date.
9.11 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders and the Minority Stockholders
shall occur simultaneously with the Closing hereunder.
10 Covenants of Healthworld and the U.K. Stockholder after Closing.
10.1 Release From Guarantees; Repayment of Certain Obligations.
Healthworld shall use commercially reasonable efforts to have the U.K.
Stockholder released from any and all guarantees on any indebtedness that he
personally guaranteed and from any and all pledges of assets that he pledged to
secure such indebtedness for the benefit of the Company, with all such
guarantees on indebtedness being assumed by Healthworld. In the event that
Healthworld cannot obtain such releases from the lenders of any such guaranteed
indebtedness on or prior to 120 days subsequent to the Closing Date, Healthworld
shall pay off or otherwise refinance or retire such indebtedness. From and after
the Closing Date and until such time as all of such indebtedness is paid off,
refinanced or retired, Healthworld shall maintain unencumbered funds in amounts
sufficient to provide for such pay off, refinancing or retirement,
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provided that Healthworld may use such funds for other purposes, in its sole
discretion, with the prior written consent of the U.K. Stockholder.
10.2 Preservation of Tax and Accounting Treatment. Except as
contemplated by this Agreement or the Registration Statement, after the Closing
Date, Healthworld shall not and shall not permit any of its Subsidiaries to
undertake any act that would jeopardize the tax-free status of the Organization.
10.3 Preparation and Filing of Tax Returns.
10.3.1 The U.K Stockholder shall cause the Companies to file
or cause to be filed all required separate Returns of any Acquired Party for all
taxable periods that end on or before the Closing Date.
10.3.2 Healthworld shall file or cause to be filed all
required separate Returns of, or that include, any Acquired Party for all
taxable periods ending after the Closing Date.
10.3.3 Each party hereto shall, and shall cause its
Subsidiaries and affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in filing any
Return, amended Return or claim for refund, determining a liability for Taxes or
a right to refund of Taxes or in conducting any audit or other proceedings in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by taxing authorities and relevant records
concerning the ownership and tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Returns pursuant to this Agreement shall bear all costs of filing such
Returns.
10.3.4 Healthworld and the U.K. Stockholder shall comply with,
and the U.K. Stockholder shall cause the Companies to comply with, the Tax
reporting requirements of Section 1.351-3 of the Treasury Regulations
promulgated under the Code, and treat the transaction as a tax-free contribution
under Section 351(a) of the Code.
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11 Indemnification.
The U.K. Stockholder and Healthworld each make the following covenants
that are applicable to them, respectively:
11.1 General Indemnification by the U.K. Stockholder. The U.K.
Stockholder covenants and agrees he will indemnify, defend, protect and hold
harmless Healthworld at all times, from and after the date of this Agreement
until the Expiration Date, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by Healthworld as a result of or arising from:
11.1.1 any breach of the representations or warranties of the
U.K. Stockholder set forth herein or on the Disclosure Schedules or certificates
delivered by him in connection herewith,
11.1.2 any breach of any covenant or agreement on the part of
the U.K. Stockholder under this Agreement,
11.1.3 any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue written statement or alleged untrue written statement
of a material fact relating to any of the Companies or the U.K. Stockholder, and
provided to Healthworld or its counsel by the U.K. Stockholder in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to any of
the Companies or the U.K. Stockholder required to be stated therein or necessary
to make the statements therein not misleading or
11.1.4 the matters described on Schedule 11.1.4,
11.2 Indemnification by Healthworld. Healthworld covenants and agrees
that it will indemnify, defend, protect and hold harmless the U.K. Stockholder
at all times from and after the date of this Agreement until the Expiration
Date, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys, fees and expenses of
investigation) incurred by the U.K. Stockholder as a result of or arising from:
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11.2.1 any breach by Healthworld of its representations and
warranties set forth herein or on the Disclosure Schedules or certificates
delivered by it in connection herewith;
11.2.2 any breach of any covenant or agreement on the part of
Healthworld under this Agreement,
11.2.3 any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to Healthworld or any of the other company forming a part of the
Healthworld Plan of Organization contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to
Healthworld or any other company forming a part of the Healthworld Plan of
Organization required to be stated therein or necessary to make the statements
therein not misleading, or
11.2.4 the matters described on Schedule 11.2.4.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding or
any other proceeding to the extent that relief other than the payment of money
is sought, without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by Indemnifying Party,
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provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing
Indemnified Party, Indemnified Party shall have the right to participate in such
matter through counsel of its own choosing and Indemnifying Party shall
reimburse the Indemnified Party for the reasonable expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except as set forth in the preceding sentence and to the extent such
participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses. If the Indemnifying Party
desires to accept a final and complete settlement of any such Third Person claim
and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement and the Indemnified Party shall, from that
moment on, bear full responsibility for any additional costs of defense which it
subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 Exclusive Remedy. The indemnification provided for in this Section
11 shall be the exclusive remedy in any action seeking damages or any other form
of monetary relief brought by any party to this Agreement against another party,
provided that, nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
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11.5 Limitations on Indemnification.
11.5.1 Healthworld shall not assert any claim for
indemnification hereunder against the U.K. Stockholder until such time as, and
solely to the extent that, the aggregate of all claims which Healthworld may
have against the U.K. Stockholder shall exceed one-half (0.5%) percent of the
value of the Healthworld Stock delivered to the U.K. Stockholder, calculated at
the IPO price (the "Indemnification Threshold"), provided, however, that
Healthworld may assert and shall be indemnified for any claim under Section
11.1.4 at any time, regardless of whether the aggregate of all claims which such
persons may have against the U.K. Stockholder exceeds the Indemnification
Threshold, it being understood that the amount of any such claim under
Section 11.1.4 shall not be counted towards the Indemnification Threshold.
11.5.2 The U.K. Stockholder shall not assert any claim for
indemnification hereunder against Healthworld until such time as, and solely to
the extent that, the aggregate of all claims which the U.K. Stockholder may have
against Healthworld shall exceed (pound)31,250, provided, however that the U.K.
Stockholder may assert and shall be indemnified for any claim under Section
11.2.4 at any time, regardless of whether the aggregate of all claims which the
U.K. Stockholder may have against Healthworld exceeds (pound)31,250, it being
understood that the amount of any such claim under Section 11.2.4 shall not be
counted towards such (pound)31,250 amount.
11.5.3 No person shall be entitled to indemnification under
this Section 11 if and to the extent that such person's claim for
indemnification is directly or indirectly related to a breach by such person of
any representation, warranty, covenant or other agreement set forth in this
Agreement. Notwithstanding any other term of this Agreement (except the proviso
to this sentence), the U.K. Stockholder shall not be liable under this Section
11 for an amount which exceeds the value of the Healthworld Stock received by
the U.K. Stockholder in connection with the Organization, provided that the U.K.
Stockholder's indemnification obligations pursuant to Section 11.1.4 shall not
be limited. For purposes of calculating the value of the Healthworld Stock
received by the U.K. Stockholder, Healthworld Stock shall be valued at its
initial public offering price as set forth in the Registration Statement. It is
hereby understood and agreed that the U.K. Stockholder may satisfy an
indemnification obligation through payment of Healthworld Stock, such
satisfaction to be to the extent of the then fair market value of Healthworld
Stock conveyed by the Indemnifying Party pursuant to such indemnification.
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12 Termination of Agreement.
12.1 Termination. This Agreement may be terminated at anytime prior to
the Closing Date solely:
12.1.1 by request of the U.K. Stockholder, with the consent of
the U.S. Stockholders;
12.1.2 by the U.K. Stockholder if the transactions
contemplated by this Agreement to take place at the Closing shall not have been
consummated by _______, 1997, unless the failure of such transactions to be
consummated is due to the willful failure of the U.K. Stockholder to perform any
of his obligations under this Agreement to the extent required to be performed
by him prior to or on the Closing Date;
12.1.3 by the U.K. Stockholder, on the one hand, or by
Healthworld, on the other hand, if a material breach or default shall be made by
the other party in the observance or in the due and timely performance of any of
the covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Closing Date; or
12.1.4 by the U.K. Stockholder or by Healthworld, if a
material breach or default shall be made by any U.S. Stockholder or any Minority
Stockholder in the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained in their respective agreements,
and the curing of such default shall not have been made on or before the Closing
Date.
12.2 Liabilities in Event of Termination.
12.2.1 The termination of this Agreement will in no way limit
any obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
12.2.2 Upon termination of this Agreement, except as otherwise
provided for herein, any and all payments required to be made by the U.S.
Companies or the U.K. Companies as provided for in the Underwriters' Engagement
Letter shall be paid 69% by the U.S. Companies and 31% by the U.K. Company. The
U.S. Companies and the U.K. Company shall contribute to (and, if necessary,
reimburse each other for) any such required payments in such proportions.
Notwithstanding the foregoing, in the event any indemnity obligation arises to
the Underwriters pursuant to any agreement between the
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Underwriters and Healthworld, the U.K. Stockholder, the U.S. Stockholders, the
U.K. Company and/or the U.S. Companies with respect to the Underwriters'
services in contemplation of the IPO, then the breaching party shall be solely
responsible for such indemnification obligations and the non-breaching party
shall be entitled to reimbursement from the breaching party for any payment made
by the non-breaching party in respect thereof.
13 Non-Competition; Non-Disclosure.
13.1 Non-Competition. The U.K. Stockholder will not, for a period (the
"Restrictive Period") commencing with the date hereof and concluding five (5)
years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
13.1.1 as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative (except that the
U.K. Stockholder may be employed by an entity engaged in the advertising
business so long as the U.K. Stockholder does not have contact with or provide
services to or for the benefit of any such client):
13.1.1.1 anywhere in the world, engage in any
advertising business having as a
client any corporation or any other
entity which was a client of
Healthworld or any of its
Subsidiaries at any time within the
Restrictive Period; or
13.1.1.2 anywhere in the world, engage in any
mass media communication of
health-related information, whether
by means of publishing, television,
radio, the internet or otherwise; or
13.1.1.3 within 200 miles (the "Territory")
of where Healthworld or any of its
subsidiaries conducted any other
business during the Restrictive
Period, engage in any such other
business;
13.1.2 call upon any person who is, at that time, an employee
of Healthworld (including the subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of Healthworld (including the subsidiaries
thereof), provided that the U.K.
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Stockholder shall be permitted to call upon and hire any member of his or her
immediate family;
13.1.3 call upon any person or entity which is, at that time,
or which has been, at any time within the Restrictive Period, a customer of
Healthworld (including the subsidiaries thereof) for the purpose of soliciting
or selling products or services in direct competition with Healthworld within
the Territory;
13.1.4 call upon any prospective acquisition candidate, on the
U.K. Stockholder's own behalf or on behalf of any competitor in the advertising
business or in the business of communicating health information through mass
media, which candidate, to the actual knowledge of the U.K. Stockholder after
due inquiry, was called upon by Healthworld (including the subsidiaries thereof)
or for which, to the actual knowledge of the U.K. Stockholder after due inquiry,
Healthworld (or any subsidiary thereof) made an acquisition analysis, for the
purpose of acquiring such entity; or
13.1.5 disclose customers, whether in existence or proposed,
of Healthworld (or any subsidiary thereof) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except to the
extent that Healthworld (or any subsidiary thereof) has in the past disclosed
such information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the U.K. Stockholder from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 Nondisclosure.
13.2.1 Definitions. The U.K. Stockholder recognizes and
acknowledges that he has had in the past, currently has, and in the future may
possibly have, access to certain confidential information of Healthworld or any
of its Subsidiaries, such as operational policies, and pricing and cost policies
that are valuable, special and unique assets of Healthworld and its
Subsidiaries, and/or their respective businesses (the "Confidential
Information"). Confidential Information shall not include any information:
13.2.1.1 which becomes known to the public
generally through no fault of the
U.K. Stockholder,
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13.2.1.2 as to which disclosure is required
by law or the order of any
governmental authority under color
of law; provided, that prior to
disclosing any information pursuant
to this clause (b), the U.K.
Stockholder shall give prior written
notice thereof to Healthworld and
provide Healthworld with the
opportunity to contest such
disclosure, or
13.2.1.3 as to which the disclosing party
reasonably believes that such
disclosure is required in connection
with the defense of a lawsuit
against the disclosing party.
13.2.2 Covenant to Maintain Confidentiality. The U.K.
Stockholder agrees that until the later to occur of (i) five (5) years following
the Closing Date or (ii) with respect to any portion of the Confidential
Information the date upon which such portion no longer meets the definition of
"Confidential Information", he will not disclose Confidential Information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except
13.2.2.1 to authorized representatives of
Healthworld,
13.2.2.2 during the course of the U.K.
Stockholder's employment by
Healthworld or any of its
Subsidiaries, such information may
be disclosed by the U.K. Stockholder
as is required in the course of
performing his duties and
13.2.2.3 to counsel and other advisers,
provided that such advisers (other
than counsel) agree to the
confidentiality provisions of this
Section 13.2.
13.3 Injunctive Relief; Damages. Because of the difficulty of measuring
economic losses to Healthworld as a result of a breach of the foregoing
covenants in this Section 13, and because of the immediate and irreparable
damage that could be caused to Healthworld for which it would have no other
adequate remedy, the U.K. Stockholder agrees that the foregoing covenants may be
enforced by Healthworld in the event of breach by the U.K. Stockholder, by
injunctions and restraining orders. Nothing herein shall be construed as
prohibiting Healthworld from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
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13.4 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the U.K.
Stockholder in light of the activities and business of Healthworld (including
the Subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of Healthworld contained in the Registration Statement.
13.5 Severability; Reformation. The covenants in this Section are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.6 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action by the U.K.
Stockholder against Healthworld (including the subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Healthworld of such covenants. It is specifically agreed that the
Restrictive Period stated at the beginning of Section 13.1, during which the
agreements and covenants of the U.K. Stockholder made in Section 13.1 shall be
effective, shall be computed by extending the Restrictive Period by the amount
of time during which the U.K. Stockholder is in violation of any provision of
Section 13.1. The covenants contained in this Section 13 shall not be affected
by any breach of any other provision hereof by any party hereto.
13.7 Survival. The obligations of the parties under this Section 13
shall survive the termination of this Agreement.
14 Federal Securities Act Representations.
The U.K. Stockholder acknowledges that the shares of Healthworld Stock
to be delivered to him pursuant to this Agreement have not been and will not be
registered under the 1933 Act and therefore may not be resold without compliance
with the 1933 Act. The Healthworld Stock to be acquired by the U.K. Stockholder
pursuant to this Agreement is being acquired solely for his own account, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
14.1 Compliance with Law. The U.K. Stockholder covenants, warrants and
represents that none of the shares of Healthworld Stock issued to him will be
offered,
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Healthworld Agreement and Plan of Organization/UK Draft of August 27, 1997
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sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the Act
and the rules and regulations of the SEC. All the Healthworld Stock issued
pursuant to the transactions contemplated hereby shall bear the following
legend: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW.
14.2 Economic Risk; Sophistication. The U.K. Stockholder is able to
bear the economic risk of an investment in the Healthworld Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the proposed
investment in the Healthworld Stock. The U.K. Stockholder has had an adequate
opportunity to ask questions and receive answers from the officers of
Healthworld concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of Healthworld, the plans for
the operations of the business of Healthworld, the business, operations and
financial condition of the companies which are entering into the Organization
but are not owned by the U.K. Stockholder, and any plans for additional
acquisitions and the like. The U.K. Stockholder has asked any and all questions
in the nature described in the preceding sentence and all questions have been
answered to his satisfaction.
15 Registration Rights.
15.1 Piggyback Registration Rights. At any time commencing one
(1) year following the Closing, whenever Healthworld proposes to register any
Healthworld Stock for its own or others account under the 1933 Act for a public
offering (other than a registration statement on Form S-4, Form S-8, or any
successor form), Healthworld shall give the U.K. Stockholder prompt written
notice of its intent to do so. Upon the written request of the U.K. Stockholder
given within 30 days after receipt of such notice, Healthworld shall cause to be
included in such registration all of the Healthworld Stock issued to the U.K.
Stockholder pursuant to this Agreement (including any stock issued as (or
issuable upon the conversion or exchange of any convertible security, warrant,
right or other security which is issued by Healthworld as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of such
Healthworld Stock) which the U.K. Stockholder requests, provided that
Healthworld shall have the right to reduce the number of shares included in such
registration to the extent that inclusion of such shares could, in the opinion
of tax counsel to Healthworld or its independent auditors, jeopardize the status
of the transactions contemplated hereby and by the Registration
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Statement as a tax-free organization or jeopardize the ability of Healthworld to
utilize pooling-of-interest accounting. In addition, Healthworld shall have the
right to reduce the number of shares included in such registration if and to the
extent Healthworld is advised by the Underwriters of an underwritten offering of
the securities being offered pursuant to any registration statement under this
Section 15.1 that the number of shares to be sold by persons other than
Healthworld is greater than the number of such shares which can be offered
without adversely affecting the offering. Any such reduction shall be made pro
rata based on the number of shares offered for the accounts of such persons
(based upon the number of shares held by such person).
15.2 Registration Procedures. All expenses incurred in
connection with the registrations under this Article (including all
registration, filing, qualification, legal, printer and accounting fees, but
excluding underwriting commissions and discounts), shall be borne by
Healthworld. In connection with registrations under Section 15.1, Healthworld
shall use commercially reasonable efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with respect to the
Healthworld Stock and use its best efforts to cause such registration to
promptly become and remain effective for a period of at least 90 days (or such
shorter period during which holders shall have sold all Healthworld Stock which
they requested to be registered); use its best efforts to register and qualify
the Healthworld Stock covered by such registration statement under applicable
state securities laws as the holders shall reasonably request for the
distribution for the Healthworld
Stock; and take such other actions as are reasonable and necessary to comply
with the requirements of the 1933 Act and the regulations thereunder.
15.3 Underwriting Agreement. In connection with each
registration pursuant to Section 15.1 covering an underwritten registration
public offering, Healthworld and each participating holder agree to enter into a
written agreement with the underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between the underwriters and companies of Healthworld's size and investment
stature, including indemnification.
15.4 Availability of Rule 144. Healthworld shall not be
obligated to register shares of Healthworld Stock held by the U.K. Stockholder
at any time when the resale provisions of Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act are available to the U.K.
Stockholder.
16 General.
16.1 Cooperation. The U.K. Stockholder and Healthworld shall
each deliver or cause to be delivered, and the U.K. Stockholder shall cause the
Companies to
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deliver, to the other on the Closing Date, and at such other times and places as
shall be reasonably agreed to, such additional instruments as the other may
reasonably request for the purpose of carrying out this Agreement . The U.K.
Stockholder shall cause the Companies to cooperate and use their reasonable
efforts to have their respective present officers, directors and employees
cooperate with Healthworld on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Return filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
16.2 Successors and Assigns. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of Healthworld, and the heirs and legal representatives of the U.K.
Stockholder.
16.3 Entire Agreement. Except as otherwise provided herein,
this Agreement (including the schedules, exhibits and annexes attached hereto)
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among the U.K. Stockholder and Healthworld and supersede any prior
agreement and understanding relating to the subject matter of this Agreement.
This Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the U.K. Stockholder and
Healthworld (acting through its officers, duly authorized by its Board of
Directors).
16.4 Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the
same-instrument.
16.5 Expenses. If the transactions herein contemplated shall
be consummated, Healthworld will pay the fees, expenses and disbursements of
Healthworld and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by Healthworld under this Agreement, including
the fees and expenses of Arthur Andersen, LP, Rosenman & Colin LLP, Todtman,
Young, Nachamie, Hendler & Spizz, P.C., or any other person or entity retained
by Healthworld, and the costs of preparing the Registration Statement. If the
transactions herein contemplated shall not be consummated, then such costs and
expenses shall be paid 69% by the U.S. Companies and 31% by the U.K. Company.
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The U.K. Stockholder shall pay his own costs and expenses. The U.K.
Stockholder shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the Organization, other than Transfer Taxes,
if any, imposed by the State of Delaware. The U.K. Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, the U.K. Stockholder acknowledges that he, and not Healthworld, will
pay all Taxes due upon receipt of the consideration payable pursuant to Section
2 hereof, and will assume all Tax risks and liabilities of the U.K. Stockholder
in connection with the transactions contemplated hereby.
16.6 Notices. All notices of communication required or
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
16.6.1 If to Healthworld,
100 Avenue of the Americas
New York, New York 10013
Attn: Chairman of the Board and
Chief Executive Officer
With copies to:
Rosenman & Colin LLP Todtman, Young, Nachamie,
575 Madison Avenue Hendler & Spizz, P.C.
New York, New York 10022 425 Park Avenue
Attn: Howard Jacobs, Esq. New York, New York 10022
Attn: Alex Spizz, Esq.
16.6.2 If to the U.K. Stockholder, addressed to him at his
address first set forth hereinabove, together with copies to
Reid & Priest, LLP Rakisons
40 W. 57th St. 20 Chancery Lane
New York, New York 10024 London WC2A INF
Attn: Burton K. Haimes Attn: Jonathan Polin
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or to such other address or counsel as any party hereto shall specify pursuant
to this Section from time to time.
16.7 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without giving effect to any
requirements thereof which might otherwise cause the application of the law of
another jurisdiction, and the parties consent to New York as the exclusive venue
for resolving any and all disputes that may arise concerning this Agreement.
16.8 Survival of Representations and Warranties. Except as
otherwise specifically provided in this Agreement, the representations,
warranties, covenants and agreements of the parties made herein and at the
Closing Date or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the Expiration Date.
16.9 Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay of or omission in the exercise of any right, power or
remedy accruing to any party as a result of any breach or default by any other
party under this Agreement shall impair any such right, power or remedy, nor
shall it be construed as a waiver of or acquiescence in any such breach or
default, or of any similar breach or default occurring later; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or
default occurring before or after that waiver.
16.10 Time. Time is of the essence with respect to this
Agreement.
16.11 Reformation and Severability. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
16.12 Remedies Cumulative. No right, remedy or election given
by any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies an elections available at law or in
equity.
16.13 Captions. The headings of this Agreement are inserted
for convenience only, shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
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16.14 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived only
by consent of Healthworld and persons to whom is allocated pursuant to Section
2.3 an aggregate of a majority of the shares of Healthworld Stock which are
allocated pursuant to such Section. Any amendment or waiver effected in
accordance with this Section 16.14 shall be binding upon each of the parties
hereto, any other person receiving Healthworld Stock in connection with the
Organization and each future holder of such Healthworld Stock.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HEALTHWORLD CORPORATION
By:
-------------------------------------
Steven Girgenti, Chairman and CEO
And By:
---------------------------------
Les Milton, President
- ----------------------------------
LES MILTON
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AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the _______ day of September, 1997
by and between
HEALTHWORLD CORPORATION
and
MICHAEL GARNHAM
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1 The Organization..............................................................................-6-
1.1 Organization................................................................-6-
1.2 Directors and Officers......................................................-7-
2 Conversion of Stock...........................................................................-7-
2.1 Manner of Conversion........................................................-7-
2.2 Beneficial Ownership of Shares..............................................-7-
2.3 Allocation of Shares........................................................-7-
3 Delivery of U.K. Company Stock and Healthworld Stock; Disclaimer of Rights....................-9-
5 Representations And Warranties of the U.K. Stockholder.......................................-10-
5.1 Due Organization...........................................................-11-
5.2 Prohibited Activities......................................................-12-
5.3 Capital Stock of the Company...............................................-12-
5.4 Transactions in Capital Stock..............................................-12-
5.5 No Bonus Shares............................................................-13-
5.6 Subsidiaries...............................................................-13-
5.7 Predecessor Status; etc....................................................-13-
5.8 Spin-off by the Company....................................................-13-
5.9 Financial Statements.......................................................-13-
5.10 Liabilities and Obligations................................................-14-
5.11 Accounts and Notes Receivable..............................................-14-
5.12 Permits and Intangibles....................................................-15-
5.13 Environmental Matters......................................................-15-
5.14 Personal Property..........................................................-15-
5.15 Significant Customers; Material Contracts and Commitments..................-16-
5.16 Real Property..............................................................-17-
5.17 Insurance..................................................................-17-
5.18 Compensation; Employment Agreements; Organized Labor
Matters....................................................................-17-
5.19 Employee Benefits..........................................................-21-
5.20 Conformity with Law; Litigation............................................-22-
5.21 Taxes......................................................................-22-
5.22 No Violations..............................................................-24-
</TABLE>
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<TABLE>
<CAPTION>
Page No.
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<S> <C>
5.23 Government Contracts.......................................................-25-
5.24 Absence of Changes.........................................................-25-
5.25 Deposit Accounts; Powers of Attorney.......................................-26-
5.26 Brokers and Agents.........................................................-27-
5.27 Relations with Governments.................................................-27-
5.28 Disclosure.................................................................-27-
5.29 Authority; Ownership. ....................................................-28-
5.30 Preemptive Rights..........................................................-28-
5.31 No Intention to Dispose of Healthworld Stock...............................-28-
6 Representations of Healthworld...............................................................-29-
6.1 Due Organization...........................................................-29-
6.2 Authorization..............................................................-29-
6.3 Capital Stock of Healthworld...............................................-29-
6.4 Transactions in Capital Stock..............................................-29-
6.5 Liabilities and Obligations................................................-30-
6.6 Conformity with Law; Litigation............................................-30-
6.7 Validity of Obligations....................................................-30-
6.8 Limited Business Conducted.................................................-30-
7 Covenants Prior to Closing...................................................................-31-
7.1 Access and Cooperation; Due Diligence......................................-31-
7.2 Conduct of Business Pending Closing........................................-31-
7.3 Prohibited Activities......................................................-32-
7.4 No Shop....................................................................-33-
7.5 Further Assurances.........................................................-34-
7.6 Agreements.................................................................-34-
7.7 Notification of Certain Matters............................................-34-
7.8 Amendment of Schedules.....................................................-34-
7.9 Cooperation in Preparation of Registration Statement.......................-35-
8 Conditions Precedent to Obligations of the U.K. Stockholder..................................-35-
8.1 Representations and Warranties; Performance of Obligations
by U.S. Stockholders and Milton............................................-35-
8.2 Satisfaction...............................................................-36-
8.3 No Litigation..............................................................-36-
8.4 Opinions of Counsel........................................................-36-
8.5 Consents and Approvals.....................................................-36-
8.6 No Material Adverse Change.................................................-36-
8.7 Secretary's Certificates; Good Standing....................................-36-
8.8 Employment Agreements......................................................-37-
</TABLE>
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
8.9 Conformity With Girgenti/Milton Letter of Intent and
Underwriters' Engagement Letter............................................-37-
8.10 Simultaneous Closings......................................................-37-
9 Conditions Precedent to Obligations of Healthworld...........................................-37-
9.1 Representations and Warranties; Performance of Obligations.................-37-
9.2 Satisfaction...............................................................-38-
9.3 No Litigation..............................................................-38-
9.4 Opinions of Counsel........................................................-38-
9.5 Consents and Approvals.....................................................-38-
9.6 No Material Adverse Change.................................................-38-
9.7 Secretary's Certificates...................................................-38-
9.8 Employment Agreements......................................................-39-
9.9 Stockholder's Release......................................................-39-
9.10 Termination of Related Party Agreements....................................-39-
9.11 Simultaneous Closings......................................................-39-
10 Covenants of Healthworld and the U.K. Stockholder after Closing..............................-39-
10.1 Release From Guarantees; Repayment of Certain
Obligations................................................................-39-
10.2 Preservation of Tax and Accounting Treatment...............................-39-
10.3 Preparation and Filing of Tax Returns......................................-40-
11 Indemnification..............................................................................-40-
11.1 General Indemnification by the U.K. Stockholder............................-40-
11.2 Indemnification by Healthworld.............................................-41-
11.3 Third Person Claims........................................................-42-
11.4 Exclusive Remedy...........................................................-43-
11.5 Limitations on Indemnification.............................................-43-
12 Termination of Agreement.....................................................................-44-
12.1 Termination................................................................-44-
12.2 Liabilities in Event of Termination........................................-45-
13 Non-Competition; Non-Disclosure..............................................................-46-
13.1 Non-Competition............................................................-46-
13.2 Nondisclosure..............................................................-47-
13.3 Injunctive Relief; Damages.................................................-48-
13.4 Reasonable Restraint.......................................................-48-
13.5 Severability; Reformation..................................................-48-
13.6 Independent Covenant.......................................................-49-
</TABLE>
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
13.7 Survival...................................................................-49-
14 Federal Securities Act Representations.......................................................-49-
14.1 Compliance with Law........................................................-49-
14.2 Economic Risk; Sophistication..............................................-50-
15 Registration Rights..........................................................................-50-
15.1 Piggyback Registration Rights..............................................-50-
15.2 Registration Procedures....................................................-51-
15.3 Underwriting Agreement.....................................................-51-
15.4 Availability of Rule 144...................................................-51-
16 General......................................................................................-51-
16.1 Cooperation................................................................-51-
16.2 Successors and Assigns.....................................................-52-
16.3 Entire Agreement...........................................................-52-
16.4 Counterparts...............................................................-52-
16.5 Expenses...................................................................-52-
16.6 Notices....................................................................-53-
16.7 Governing Law..............................................................-53-
16.8 Survival of Representations and Warranties.................................-53-
16.9 Exercise of Rights and Remedies............................................-54-
16.10 Time.......................................................................-54-
16.11 Reformation and Severability...............................................-54-
16.12 Remedies Cumulative........................................................-54-
16.13 Captions...................................................................-54-
16.14 Amendments and Waivers.....................................................-54-
</TABLE>
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Healthworld Agreement and Plan of Organization/Garnham Draft of August 27, 1997
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the _______ day of September, 1997, by and between:
Healthworld Corporation, a Delaware corporation ("Healthworld"), and
Michael Garnham (the "U.K. Stockholder"), residing at ________________.
WHEREAS, the U.K. Stockholder is the registered and beneficial owner
with full title and guarantee of a portion of the issued share capital of
Effective Sales Personnel Ltd. (f/k/a Milton Headcount Limited), a company
incorporated in England with registered no. 2998311 (the "Company"); and
WHEREAS, the remainder of the issued share capital of the Company is
owned by Milton Marketing Group Limited (the "U.K. Company"), which is
wholly-owned by William Leslie Milton ("Milton"); and
WHEREAS, Healthworld was formed on September 12, 1996, in the State of
Delaware, for the purpose of effecting the Healthworld Plan of Organization; and
WHEREAS, Michael Bourne ("Bourne") owns a portion of the issued share
capital of Milton Marketing Limited, a company incorporated in England with
registered no. 1385429 (the "Sister Company"); and
WHEREAS, Leonard Moreton ("Moreton") owns a portion of the issued share
capital of PDM Communications Limited, a company incorporated in England with
registered no. 1324588 ("PDM"); and
WHEREAS, Claire Cater ("Cater") owns a portion of the issued share
capital of Milton Cater Limited, a company incorporated in England with
registered no. 319839 ("MCL"); and
WHEREAS, the U.S. Stockholders collectively own all of the issued and
outstanding shares of Girgenti, Hughes, Butler & McDowell, Inc. ("GHBM"), a New
York corporation, Black Cat Graphics, Inc. ("Black Cat"), a New York
corporation, Medical Education Technologies, Inc. ("MET"), a New York
corporation, Brand Research Corporation ("Brand Research"), a New York
corporation, GHBM, Inc. ("GHBMINC"), a New York corporation and Syberactive,
Inc. ("Syberactive"), an Illinois corporation (each of GHBM, Black Cat, MET,
Brand Research, GHBMINC and
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Healthworld Agreement and Plan of Organization/Garnham Draft of August 27, 1997
- -------------------------------------------------------------------------------
Syberactive are hereafter referred to individually as a "U.S. Company" and
collectively as the "U.S. Companies"); and
WHEREAS, the U.S. Stockholders desire to contribute all of their shares
of stock in the U.S. Companies into Healthworld in exchange for Healthworld
Stock, the U.K. Stockholder desires to contribute all of his shares of stock in
the Company into Healthworld in exchange for Healthworld Stock, Milton desires
to contribute all of his shares of stock in the U.K. Company into Healthworld in
exchange for Healthworld Stock, and Bourne desires to contribute all of his
shares of stock in the Sister Company into Healthworld in exchange for
Healthworld Stock, all of the foregoing to occur contemporaneously with the
Pricing of the IPO; and
WHEREAS, all of the foregoing contributions together with the Pricing
of the shares to be offered by Healthworld in the IPO constitute the
"Healthworld Plan of Organization"; and
WHEREAS, the parties intend that the Healthworld Plan of Organization
shall qualify as tax-free under Section 351 of the United States Internal
Revenue Code of 1986, as amended (the "Code") and , where applicable, as a
reorganization within the meaning of Section 368 of the Code; and
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any Schedule attached hereto and not otherwise defined
shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the United States Securities Act of 1933, as amended.
"1934 Act" means the United States Securities Exchange Act of 1934, as
amended.
"Acquired Party" means any of the U.K. Company and any Subsidiary
thereof.
"Affiliates" has the meaning set forth in Section 5.8.
"Aggregate Number of Founder Shares" has the meaning set forth in
Section .
"Balance Sheet Date" shall mean November 30, 1996.
"Bourne" means Michael Bourne.
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Healthworld Agreement and Plan of Organization/Garnham Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Butler" means William Butler, residing at Post Office Box 1430, Olive
Bridge, New York 12461-0430.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the introductory paragraphs of this
Agreement.
"Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Company Stock" has the meaning set forth in Section 2.1.
"Ehrenthal" means Herbert Ehrenthal, residing at 1447 Sylvan Lane, East
Meadow, New York 11554-4814.
"Encumbrance" means a mortgage, charge (whether fixed or floating),
pledge, lien, option, restriction, right of first refusal, right of preemption,
third party right or interest, other encumbrance or security interest of any
kind and whether legal or equitable, or another type of preferential arrangement
(including, without limitation, a title transfer and retention arrangement)
having similar effect.
"Expiration Date" has the meaning set forth in Section 6.
"Girgenti" means Steven Girgenti, residing at 3312 Judith Drive,
Bellmore, New York 11710.
"Girgenti/Milton Letter of Intent" means a certain letter of intent of
November 14, 1996, as amended, regarding a reorganization of the U.S. Companies
and the U.K. Company in connection with a contemplated IPO, executed by
Girgenti, the U.S. Companies, the U.K. Stockholder, the U.K. Company and the
Subsidiaries of the U.K. Company.
"Healthworld" has the meaning set forth in the introductory paragraphs
of this Agreement.
"Healthworld License Agreement" means that certain License Agreement by
and between Healthworld and Healthworld, B.V. pursuant to which Healthworld has
licensed from Healthworld, B.V., among other things, the right to use the name
"Healthworld."
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Healthworld Agreement and Plan of Organization/Garnham Draft of August 27, 1997
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"Healthworld Plan of Organization" has the meaning set forth in the
introductory paragraphs of this Agreement.
"Healthworld Stock" means the common stock, par value $0.01 per share,
of Healthworld.
"Hughes" means Francis Hughes, residing at Two Beekman Place, Apartment
3C, New York, New York 10022.
"IPO" means the initial public offering of Healthworld Stock pursuant
to the Registration Statement.
"Key Consultant Agreement" means any agreement with a consultant
providing for the services of an individual and requiring payment to the
consultant of not less than (pound)93,750 per annum.
"Key Employee" means any employee whose compensation is not less than
(pound)93,750 per annum.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Milton" means Les Milton.
"Minority Stockholders" has the meaning set forth in the introductory
paragraphs of this Agreement.
"Organization" means the contribution of all the shares of stock of the
U.K. Company and all of its Subsidiaries (with the exception of Healthworld,
B.V.) to the capital of Healthworld in exchange for shares of Healthworld Stock.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the time and date of determination by Healthworld and
the Underwriters of the public offering price of the shares of Healthworld Stock
in the IPO.
"Registration Statement" means that certain registration statement on
Form S-1 (Registration No. 333 [ ]) and any amendments covering the shares of
Healthworld Stock to be issued in the IPO.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax or
Taxation.
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Healthworld Agreement and Plan of Organization/Garnham Draft of August 27, 1997
- -------------------------------------------------------------------------------
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Sister Company" has the meaning set forth in the introductory
paragraphs of this Agreement.
"Subsidiary" has the meaning given thereto in Section 736 and 736A of
the United Kingdom Companies Act 1985 as substituted by Section 144 of the
United Kingdom Companies Act of 1989.
"Taxation" means all forms of tax, duty, levy or other imposition
whenever and by whatever authority imposed and whether of the United Kingdom or
elsewhere, including (without limitation) income tax, corporation tax, advance
corporation tax, capital gains tax, inheritance tax, value added tax, customs
duties, rates, stamp duty, stamp duty reserve tax, national insurance and social
security or other contributions, and any interest, penalty, fine or surcharge in
connection with any such taxation.
"Taxes Act" means the United Kingdom Income and Corporation Taxes Act
1988.
"Underwriters" means Unterberg Harris and Pennsylvania Merchant Group
Ltd.
"Underwriters' Engagement Letter" means the letter dated July 17, 1997,
pursuant to which the Underwriters were engaged by Healthworld.
"U.K. Company" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.K. Stockholder" has the meaning set forth in the introductory
paragraphs of this Agreement.
"U.S. Companies" has the meaning set forth in the introductory
paragraphs of this Agreement.
"U.S. Stockholders" means Girgenti, Hughes, Butler & Ehrenthal.
"U.S. Tax" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on
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minimum, environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Vote of a Majority in Interest of the U.S. Stockholders" means the
vote, by formal or informal meeting, in writing or otherwise, by U.S.
Stockholders having greater than 50% of the voting control of each of the U.S.
Companies.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1 The Organization.
1.1 Organization. The Closing of this Agreement shall take place as
described in Section 4, and all of the issued share capital of the Company which
is owned by the U.K. Stockholder shall be contributed by the U.K. Stockholder to
the capital of Healthworld in exchange for the number of shares of Healthworld
Stock set forth in Section 2.3. Simultaneously with the contribution described
in the immediately preceding sentence, in exchange for shares of stock of
Healthworld:
1.1.1 the U.S. Stockholders will be contributing all of the
issued and outstanding shares of the U.S. Companies to the capital of
Healthworld, pursuant to an Agreement of Organization of even date herewith (the
"U.S. Agreement of Organization"),
1.1.2 Bourne and Moreton will be contributing all of the
issued and outstanding shares of the Sister Company and PDM which is owned by
them to the capital of Healthworld, pursuant to a separate Agreement of
Organization of even date herewith (the "Sister Company Agreements of
Organization"), and
1.1.3 The U.K. Company shall prior to the IPO purchase Cater's
shares owned by her in MCL pursuant to a certain Joint Venture Agreement dated
May 23, 1996, and
1.1.4 Milton will be contributing all of the issued and
outstanding shares of the U.K. Company which is owned by him to the capital of
Healthworld, pursuant to an Agreement of Organization of even date hereiwth (the
"U.K. Agreement of Organization"). The contributions made by the U.K.
Stockholder pursuant to this Agreement, the contributions made pursuant to the
U.S. Agreement of Organization, the contribution made pursuant to the Sister
Company Agreement of Organization, and the
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contributions of cash by the public and/or the Underwriters in connection with
the IPO shall be considered as a single integrated transaction intended to
qualify as tax-free under Code Section 351. The Closing will occur
contemporaneously with the Pricing of the IPO, and all of the steps of the
Closing and the completion of the IPO are an integrated series of steps in a
series of transactions, none of which would have occurred without the
expectation and anticipation that the other steps will occur or will have
occurred.
1.2 Directors and Officers. At the Closing, the directors and officers
of the U.K. Company then holding office shall remain unchanged.
2 Conversion of Stock.
2.1 Manner of Conversion. The manner of converting the share capital
(the "Company Stock") of the U.K. Company issued and outstanding immediately
prior to the Closing into shares of Healthworld Stock shall be as follows: At
the Closing all of the share capital of the U.K. Company issued and outstanding
immediately prior to the Closing shall, by virtue of the capital contributions
described in Section 1.1, and without any action on the part of the U.K.
Stockholder, automatically be deemed to represent the right to receive the
number of shares of Healthworld Stock set forth in the table in Section 2.3
below.
2.2 Beneficial Ownership of Shares. All Healthworld Stock received by
the U.K. Stockholder pursuant to this Agreement shall, except for restrictions
described in Section hereof, have the same rights as all other shares of
Healthworld Stock by reason of the provisions of the Certificate of
Incorporation of Healthworld or as otherwise provided by the Delaware General
Corporation Law. All voting rights of such Healthworld Stock received by the
U.K. Stockholder shall be fully exercisable by the U.K. Stockholder and the U.K.
Stockholder shall not be deprived nor restricted in exercising those rights. At
the Closing, Healthworld shall have no class of capital stock issued and
outstanding other than the Healthworld Stock.
2.3 Allocation of Shares. Healthworld will issue to the U.S.
Stockholders, the U.K. Stockholder, Milton, Bourne and Moreton, in the
aggregate, 5,000,000 shares (the "Aggregate Number of Founder Shares") of
Healthworld Stock at the Closing. With respect to Girgenti, who presently owns
one hundred (100) shares of Healthworld Stock, the conversion shall be made in
such a manner as to issue to him only that number of additional shares of
Healthworld Stock which are necessary to attain the percentage of shares set
forth below. The allocation of the Aggregate Number of Founder Shares among all
of the U.S. Stockholders, the U.K. Stockholder, Milton, Bourne and Moreton shall
be made as follows:
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2.3.1 69% of the Aggregate Number of Founder Shares shall be
allocated to the U.S. Stockholders (the "U.S. Percentage") and 31% of the
Aggregate Number of Founder Shares shall be allocated to the U.K. Stockholder
and the Minority Stockholders (the "U.K. Percentage").
2.3.2 The number of shares of Healthworld Stock which results
from applying the U.S. Percentage against the Aggregate Number of Founder Shares
shall be divided among the U.S. Stockholders in the following proportions:
Girgenti 63.65%
Hughes 5.00%
Butler 14.06%
Ehrenthal 17.29%
---------------------------------------
Total 100.00%
2.3.3 The number of shares of Healthworld Stock which results
from applying the U.K. Percentage against the Aggregate Number of Founder Shares
shall be divided among the U.K. Stockholder, Milton, Bourne and Moreton in the
following manner:
2.3.3.1 The U.K. Stockholder shall receive that
number of shares of Healthworld Stock having
a value of (pounds)1,000,000, based on the
offering price in the IPO and utilizing a
conversion rate of $1.65 dollars per pound
sterling.
2.3.3.2 Bourne shall receive that number of shares
of Healthworld Stock having a value of
(pounds)276,448.35, based on the offering
price in the IPO and utilizing a conversion
rate of $1.65 dollars per pound sterling.
2.3.3.3 Moreton shall receive that number of shares
having a value of (pounds)64,559 based on
the offering price of the IPO and utilizing
a conversion rate of $1.65 dollars per
pound.
2.3.3.4 Milton shall receive the balance of the
shares of Healthworld Stock.
2.3.3.5 Cater shall not receive any shares of
Healthworld stock.
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2.3.4 No Fractional Shares. No certificates or script
representing fractional shares of Healthworld shall be issued upon the surrender
and exchange of shares. Each holder of shares who otherwise would have been
entitled to receive a fractional share of Healthworld (after taking into account
all certificates surrendered by such holder) shall be entitled to receive, in
lieu thereof, a payment in the amount (without interest) equal to such
fractional part of a share of Healthworld, multiplied by the offering price in
the IPO and, where appropriate, utilizing a conversion rate of $1.65 dollars per
pound sterling.
3 Delivery of U.K. Company Stock and Healthworld Stock; Disclaimer of
Rights.
3.1 At the Closing, the U.K. Stockholder shall deliver to Healthworld
duly executed stock transfer forms effective to transfer into the name of
Healthworld or its nominee the entire issued share capital which he owns in the
Company together with definitive certificate(s) therefor. The U.K. Stockholder
agrees promptly to cure any deficiencies with respect to the endorsement of the
share certificate(s) or other documents of conveyance with respect to the
Company Stock or with respect to the stock transfer powers accompanying any
Company Stock. At the Closing, Healthworld shall issue in the name of the U.K.
Stockholder and deliver to the U.K. Stockholder that number of shares of
Healthworld Stock as is set forth in Section 2.3, dated the Closing Date.
3.2 Other than the rights described in this Agreement, the U.K.
Stockholder hereby disclaims and renounces, effective as of the Closing Date,
all rights and entitlements which he has or may have had with respect to his
ownership of share capital of the Company, including without limitation any
rights which he may have had pursuant to any shareholders agreements pertaining
to the Company. No further writing or action shall be required to effectuate
this renunciation and disclaimer, which shall take effect automatically upon the
Closing of the transactions contemplated hereunder.
4 Closing.
At or immediately prior to the Pricing, the parties shall take all
actions necessary to effect the Organization, to effect the conversion and
delivery of shares referred to in Section 3 hereof and to consummate all
transactions contemplated by this Agreement. The taking of such actions shall
occur at the offices of Todtman, Young, Nachamie, Hendler & Spizz, P.C., 425
Park Avenue, New York, New York 10022. The date on which such actions occur
shall be referred to as the "Closing Date" and the
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consummation of the transactions occurring on such date shall be referred to as
the "Closing."
5 Representations And Warranties of the U.K. Stockholder.
Preliminary Matters in Respect of Representations and Warranties:
Annexed hereto and made a part hereof is a disclosure schedule
(individually a "Disclosure Schedule" and collectively the "Disclosure
Schedules") for the Company, setting forth all exceptions and/or qualifications
to the representations and warranties made herein. It is understood and agreed
that any disclosure made on any Disclosure Schedule delivered pursuant hereto
shall be deemed to have been disclosed for purposes of any other Disclosure
Schedule required hereby. The U.K. Stockholder shall make a good faith effort to
cross reference disclosure, as necessary or advisable, between related
Disclosure Schedules.
For purposes of this Section 5, the term Company shall mean and refer
to the U.K. Company and each of the Subsidiaries of the U.K. Company and to any
other predecessor by way of merger or other business combination effectuated
within the past one (1) year.
The representations and warranties made herein are being made for the
benefit of Healthworld and the U.S. Stockholders. The U.K. Stockholder
represents and warrants that all of the following representations and warranties
in this Section 5 are true with respect to the U.K. Company and each of the
Subsidiaries of the U.K. Company at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true on the Closing Date. All representations and
warranties contained in this Section 5 shall survive the Closing Date for a
period of twelve (12) months (the last day of such period being the "Expiration
Date"), except that
(i) the warranties and representations set forth in Section
5.21 hereof (regarding "Taxes") shall survive until such time
as the limitations period has run for all tax periods ended on
or prior to the Closing Date, which shall be deemed to be the
Expiration Date for Section 5.21;
(ii) the warranties and representations set forth in Section
5.29 hereof (regarding "Authority; Ownership") shall survive
forever; and
(iii) solely for purposes of determining whether a claim for
indemnification under Section 11.1 hereof has been made on a
timely basis, and solely to the extent that in connection with
the IPO, Healthworld
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actually incurs liability under the 1933 Act, the 1934 Act, or
any other Federal or state securities laws, the
representations and warranties set forth herein shall survive
until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for such
purposes.
5.1 Due Organization. The Company is a corporation duly incorporated
under the laws of the jurisdiction of its incorporation, and is duly authorized
and qualified under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the manner as
now conducted except as set forth on Schedule 5.1 or where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise), of the Company, taken as a whole (as used herein with
respect to the Company, or with respect to any other person, a "Material Adverse
Effect"). Schedule 5.1 sets forth the jurisdiction in which the Company is
incorporated and contains a list of all jurisdictions in which the Company is
authorized or qualified to do business. In all material respects, all accounts,
books, ledgers, financial and other records of whatsoever kind of the Company
have been fully, properly and accurately maintained and are up to date, are in
the possession of the Company and contain true and accurate records of all
matters required by law to be entered therein and do not contain or reflect any
material inaccuracies or discrepancies. No notice or allegation that any of the
said records is incorrect, or should be rectified, in any material respect, has
been received by the Company. The most recent minutes of the Company, which are
dated no earlier than ten business days prior to the date hereof, affirm and
ratify all prior acts of the Company, and of its officers and directors on
behalf of the Company.
Within the five (5) year period ending with the date hereof, no order
has been made or petition presented or resolution passed for the winding-up or
administration of the Company nor has any distress, execution or other process
been levied against the Company or action taken to repossess goods in the
Company's possession and the Company is not insolvent or unable to pay its debts
for the purposes of the Insolvency Act 1986.
Within the five (5) year period ending with the date hereof, no
receiver, administrative receiver or administrator has been appointed of the
whole or any material part of the assets of the Company nor is the U.K.
Stockholder aware of any circumstances likely to give rise to the appointment of
any such receiver, administrative receiver or administrator.
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The Company has complied in all material respects with the provisions
of the Companies Act 1985 and the European Communities Act 1972 and all Returns,
particulars, resolutions and other documents required under the legislation to
be delivered on behalf of the Company to the Registrar of Companies in the
United Kingdom have in all material respects been properly made and delivered.
5.2 Prohibited Activities. Except as set forth on Schedule 5.2, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3.
5.3 Capital Stock of the Company. The authorized and issued share
capital of the Company is as set forth in Schedule 5.3. Except as set forth on
Schedule 5.3, all of such shares are owned free and clear of all Encumbrances
and claims of every kind. All of the issued shares of the Company have been
properly issued and allotted and are fully paid or credited as fully paid. Such
shares were offered, issued, sold and delivered by the Company in compliance
with all applicable laws concerning the issuance of securities. None of such
shares were issued in violation of the preemptive rights of any past or present
stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
the Company has not acquired any Company Stock or any stock of any of the
Subsidiaries since January 1, 1995. Except as set forth on Schedule 5.4,
5.4.1 No person has the right (whether exercisable now or in
the future and whether contingent or not) to call for the allotment, issue,
sale, redemption or transfer of any share or loan capital of the Company under
any option or other agreement (including conversion rights and rights of
pre-preemption);
5.4.2 the Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of its shares or any interests
therein (or of any of its Subsidiaries) or to pay any dividend or make any
distribution in respect thereof, nor do any of the Subsidiaries have any
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of their respective shares or any interest therein or to pay any dividend or
make any distribution in respect thereof;
5.4.3 the Company has no obligation (contingent or otherwise)
to sell any of its shares or any interests therein; and
5.4.4 neither the voting rights attaching to the shares in the
capital of the Company nor the relative ownership of shares among any of its
stockholders has been
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altered or changed in contemplation of the Organization and/or the Healthworld
Plan of Organization.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses.
5.6 Subsidiaries. Except as set forth on Schedule 5.6, the Company has
no Subsidiaries. Except as set forth in Schedule 5.6 and except for any
corporations or entities with respect to which the Company owns less than 10% of
the issued and outstanding stock, the Company does not presently own, of record
or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is the Company, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 Predecessor Status; etc. Set forth in Schedule 5.7 is a listing of
all names of all predecessor companies of the Company, including the names of
any entities acquired by the Company (by stock purchase, merger, or otherwise)
or owned by the Company or from whom the Company previously acquired material
assets, since the date of the Company's incorporation or the date of
incorporation of any predecessor by merger or other business combination,
whichever is earlier. Except as disclosed on Schedule 5.7, the Company has not
been, within such period of time, a Subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 Spin-off by the Company. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Company ("Affiliates") since January 1, 1995.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "Company Financial Statements") of the
Company: the Company's audited Consolidated Balance Sheets as of November 30,
1996 (the "1996 Balance Sheet"), 1995 and 1994 and Profit and Loss Accounts,
Directors' and Auditors' reports thereon and the notes thereto and all other
documents annexed thereto for each of the years in the three-year period ended
November 30, 1996, the financial statements for the period between the Balance
Sheet Date and June 30, 1997, and the unaudited balance sheet as of June 30,
1997. Such Financial Statements have been prepared in accordance with the
Companies Act 1985, generally accepted accounting principles including all
statements of Standard Accounting Practice and Financial Reporting Standards
applied on a consistent basis throughout the periods indicated (except as noted
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thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such
Consolidated Balance Sheets as of November 30, 1996, 1995 and 1994 give a true
and fair view of the assets and liabilities and the financial position of the
U.K. Company and the Subsidiaries of the U.K. Company as of the dates indicated
thereon, and the Company Financial Statements give a true and fair view of the
profits and losses for the periods indicated thereon.
5.10 Liabilities and Obligations. Except (i) as set forth on Schedule
5.10, (ii) for liabilities to the extent reflected or reserved against in the
1996 Balance Sheet and (iii) for obligations required by this Agreement, since
the Balance Sheet Date the Company has not incurred any material liabilities of
any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business. Schedule 5.10 also includes, in the case of those
contingent liabilities related to pending or threatened litigation, or other
liabilities which are not fixed or otherwise accrued or reserved, a good faith
and reasonable estimate of the maximum amount which may be payable. For each
such contingent liability or liability for which the amount is not fixed or is
contested, Schedule 5.10 includes the following information:
5.10.1 a summary description of the liability together with
the following:
5.10.1.1 copies of all relevant documentation
relating thereto;
5.10.1.2 amounts claimed and any other action
or relief sought; and
5.10.1.3 name of claimant and all other
parties to the claim, suit or
proceeding;
5.10.2 the name of each court or agency before which such
claim, suit or proceeding is pending;
5.10.3 the date such claim, suit or proceeding was instituted;
and
5.10.4 a good faith and reasonable estimate of the maximum
amount, if any, which is likely to become payable with respect to each such
liability. If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 Accounts and Notes Receivable. Schedule 5.11 includes an accurate
list of the accounts and notes receivable of the Company, as of the Balance
Sheet Date, including any such amounts which are not reflected in the balance
sheet as of the
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Balance Sheet Date, and including receivables from and advances to employees and
the U.K. Stockholder. The U.K. Stockholder shall cause the Company to provide to
Healthworld, not later than the Closing Date, (i) an accurate list of all
receivables obtained subsequent to the Balance Sheet Date and (ii) an aging of
all accounts and notes receivable showing amounts due in 30 day aging
categories. Such list and such aging report (the "A/R Aging Reports") shall be
current as of the end of the calendar month which immediately precedes the
Closing Date.
5.12 Permits and Intangibles. The Company holds all licenses, permits
and other governmental authorizations the absence of any of which could have a
Material Adverse Effect on its business. Schedule 5.12 contains an accurate list
and summary description of all such licenses, permits and other governmental
authorizations, including permits, titles (including motor vehicle titles and
current registrations), licenses, certificates, trademarks, tradenames, patents,
patent applications and copyrights owned or held by the Company (including
interests in software or other technology systems, programs and intellectual
property other than software generally available in retail markets). To the
knowledge of the U.K. Stockholder, (a) the licenses, permits and other
governmental authorizations listed on Schedule 5.12 are valid, and (b) the
Company has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, permit or other governmental
authorization. The Company has conducted and is conducting its business in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in the licenses, permits and other governmental
authorizations listed on Schedule 5.12 and is not in violation of any of the
foregoing except where such non-compliance or violation would not have a
Material Adverse Effect on the Company. Except as specifically provided in
Schedule 5.12, the transactions contemplated by this Agreement will not result
in a material default under or a material breach or violation of, or materially
adversely affect the rights and benefits afforded to the Company by, any such
licenses, permits or government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, the
Company has, in all material respects, complied with and is in compliance with
all material national, state, local and foreign statutes, laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it or any of its respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws"). The
Company has no actual or contingent liability in connection with any
Environmental Laws which would have a Material Adverse Effect.
5.14 Personal Property. Schedule 5.14 contains an accurate list of
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5.14.1 all personal property with a value in excess of
(pound)1,250 included (or that will be included) in "depreciable plant, property
and equipment" on the 1996 Balance Sheet,
5.14.2 all other personal property owned by the Company with a
value in excess of (pound)1,250 as of the Balance Sheet Date and acquired since
the Balance Sheet Date and
5.14.3 all leases and agreements in respect of personal
property providing for payments of greater than (pound)625 per annum, including,
(1) true, complete and correct copies of all such leases and (2) an indication
as to which assets are currently owned, or were formerly owned, by the U.K.
Stockholder, relatives of the U.K. Stockholder, or Affiliates of the Company.
Except as set forth on Schedule 5.14,
5.14.4 all personal property used by the Company in its
business is either owned by the Company or leased by the Company pursuant to a
lease included on Schedule 5.14,
5.14.5 all of the personal property listed on Schedule 5.14 is
in good working order and condition, ordinary wear and tear excepted and
5.14.6 all leases and agreements included on Schedule 5.14 are
in full force and effect and constitute valid and binding agreements of the
parties (and their successors) thereto in accordance with their respective
terms.
5.15 Significant Customers; Material Contracts and Commitments.
Schedule 5.15 contains an accurate list of all significant customers, it being
understood and agreed that a "significant customer," for purposes of this
Section 5.15, means any customer (or person or entity) representing 5% or more
of the Company's annual revenues for the one-year period ending with the Balance
Sheet Date. Except to the extent set forth on Schedule 5.15, none of the
Company's significant customers have canceled or substantially reduced or, to
the knowledge of the Company, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
Company. Schedule 5.15 contains a list of all material contracts, commitments
and similar agreements to which the Company is a party or by which it or any of
its properties are bound (including, but not limited to, contracts with
significant customers, joint venture or partnership agreements, contracts with
any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 5.10, 5.14 or 5.16, and in each case
the U.K. Stockholder has
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delivered true, complete and correct copies of such agreements to Healthworld.
The Company has complied with all material commitments and obligations
pertaining to it, and is not in default in any material respect under any
contracts or agreements listed on Schedule 5.15 and no notice of default under
any such contract or agreement has been received which default would have a
Material Adverse Effect on the Company. Also included in Schedule 5.15 is a
summary description of all material plans or projects involving the opening of
new operations, expansion of existing operations, or the acquisition of any
personal property, business or assets.
5.16 Real Property. Schedule 5.16 includes an accurate list of all real
property owned or leased by the Company as of the Balance Sheet Date and
acquired since the Balance Sheet Date, and all other real property, if any, used
by the Company in the conduct of its business. The Company has good and
insurable title to the real property owned by it, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except as set
forth in Schedule 5.16. The U.K. Stockholder has delivered true, complete and
correct copies of all leases and agreements in respect of real property leased
by the Company. Schedule 5.16 indicates which such properties, if any, are
currently owned, or were formerly owned, by the U.K. Stockholder or business or
personal affiliates of the Company or the U.K. Stockholder. All of such leases
included on Schedule 5.16 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
5.17 Insurance. Schedule 5.17 includes
5.17.1 an accurate list as of the Balance Sheet Date of all
insurance policies carried by the Company; and
5.17.2 an accurate list of all insurance loss runs or workers
compensation claims received for the past three (3) policy years.
The U.K. Stockholder has delivered to Healthworld true, complete and correct
copies of all insurance policies currently in effect. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws.
All of such insurance policies are currently in full force and effect and shall
remain in full force and effect through the Closing Date. Since January 1, 1995,
no insurance carried by the Company has been canceled by the insurer and the
Company has not been denied any requested coverage.
5.18 Compensation; Employment Agreements; Organized Labor Matters.
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5.18.1 Schedule 5.18 contains an accurate list showing all
officers, directors and Key Employees of the Company, listing all employment
agreements with such officers, directors and Key Employees and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of the Balance Sheet Date
and the date hereof. The U.K. Stockholder has delivered true, complete and
correct copies of any employment agreements for persons listed on Schedule 5.18.
5.18.2 Except as set forth in Schedule 5.18, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, Key Employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
5.18.3 Except as set forth on Schedule 5.18, the Company is
not bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union, no employees of
the Company are represented by any labor union or covered by any collective
bargaining agreement, no campaign to establish such representation is in
progress and there is no pending or, to the best of the U.K. Stockholder's
knowledge, any threatened labor dispute involving the Company and any group of
its employees nor has the Company experienced any labor interruptions over the
past three years.
5.18.4 The U.K. Stockholder believes that the Company's
relationship with its employees is good.
5.18.5 Except as set forth in Schedule 5.18, all appropriate
notices have been issued under all statutes, regulations and codes of conduct
relevant to the relations between the Company and its employees or any
recognized trade union, except for notices the absence of which would not have a
Material Adverse Effect upon the Company, and the Company has maintained
adequate and suitable records regarding the service of its employees.
5.18.6 Except as set forth in Schedule 5.18, the Company has
not entered into any currently effective collective agreement or arrangement
(whether legally binding or not) with a trade union, works counsel, staff
association or association of trade unions or other body representing any of its
employees nor has it done within the two-year period ending with the date hereof
any act which might reasonably be construed as recognition of such a union or
body.
5.18.7 Schedule 5.18 contains a listing of each written
agreement and a summary of the terms and conditions of each unwritten agreement
pursuant to which any
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officers, directors, Key Employees and Key Consultants of the Company (and their
dependents) are engaged. The summary of unwritten agreements shall include,
without limitation, details of all participation, profit sharing, incentive,
bonus, commission, share option, medical, permanent health insurance, directors
and officers insurance, travel, car, redundancy and other benefit schemes,
arrangements and understandings and whether legally binding upon the Company or
not and of all Key Consultant Agreements with the Company which are in place now
or will be in place at the Closing.
5.18.8 Except as set forth in Schedule 5.18, since January 1,
1997, there have been no increases in the emoluments payable to or changes in
the terms of service of any officer, director or Key Employee of the Company.
5.18.9 Except as set forth in Schedule 5.18, there is not in
existence any contract of employment with officers, directors or employees of
the Company (or any contract for services with any individual) which cannot be
terminated by three months notice or less or (where such a contract has not been
reduced to writing) by reasonable notice without giving rise to a claim for
damages or compensation (other than a statutory redundancy payment or statutory
compensation for unfair dismissal).
5.18.10 Except as set forth in Schedule 5.18, no promise has
been made and the Company is not obliged to increase the emoluments payable to
or to vary the terms of service of any of its directors, other officers and
employees.
5.18.11 Except as set forth in Schedule 5.18, there are not,
nor will there be at Closing, outstanding offers of employment or consultancy
made by the Company and there is no one who has accepted an offer of employment
or consultancy made by the Company but who has not yet taken up that employment
or consultancy.
5.18.12 Except as set forth in Schedule 5.18, neither the
Company nor any of its employees is involved in any industrial or trade dispute
and there are no facts known to the Company which might suggest that there may
be any trade union or industrial dispute involving the Company or that the
disposition of the Company Stock may lead to any trade union or industrial
dispute.
5.18.13 Except as set forth in Schedule 5.18, there are no
amounts owing or promised to any present or former directors, employees or
consultants of the Company other than remuneration accrued due or for
reimbursement of business expenses and no directors, employees or consultants of
the Company have given or been given notice terminating their contracts of
employment or consultancy.
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5.18.14 Except as set forth in Schedule 5.18, no claim has
been made and no liability has been incurred by the Company (a) for breach of
any contract of service or for redundancy payments (including protective awards)
or for compensation for wrongful dismissal or unfair dismissal or for failure to
comply with any order for the reinstatement or re-engagement of any employee or
for the actual or proposed termination or suspension of employment or variation
of any terms of employment of any present or former employee of the Company or
(b) in respect of any payment to be made or benefit to be provided to any
present or former director, employee or consultant of the Company in connection
with the consummation of the transactions contemplated hereby, or (c) for the
breach of or the actual or proposed termination or variation of any contract for
services or consultancy agreement for any present or former consultant to the
Company.
5.18.15 Except as set forth in Schedule 5.18, no gratuitous
payment has been made or promised by the Company in connection with the
disposition of the Company Stock or in connection with the actual or proposed
termination or suspension of employment or variation of any contract of
employment of any present or former director or employee or in connection with
the proposed termination or suspension or variation of any contract for services
or consultancy agreement.
5.18.16 Except as set forth in Schedule 5.18, there are no
material claims pending or, to the knowledge of the U.K. Stockholder, threatened
against the Company:
5.18.16.1 by a present or former employee,
director, consultant or third party,
in respect of an accident or injury
which is not fully covered by
insurance; or
5.18.16.2 by a present or former employee,
director or consultant in relation
to his terms and conditions of
employment or (as the case may be)
consultancy.
5.18.17 Except as set forth in Schedule 5.18, the Company has
in relation to each of its employees (and so far as relevant to each of its
former employees and persons seeking employment) complied with, in all material
respects:
5.18.17.1 all laws and codes of conduct and
practice relevant to the relations
between it and its employees,
prospective employees or any trade
union;
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5.18.17.2 all collective agreements and
customs and practices for the time
being dealing with the terms and
conditions of service of its
employees; and
5.18.17.3 all relevant orders, declarations
and awards made under any relevant
law or code of conduct and practice
affecting the conditions of service
of its employees.
5.18.18 Except as set forth in Schedule 5.18, no Key Employee
has ceased to be employed by the Company (other than through death or retirement
at normal retirement age) during the twelve months prior to the date hereof and
the Company has no reason to believe that such employees intend or are likely to
leave their employment otherwise than through retirement as aforesaid within the
twelve months following the Closing.
5.18.19 Except as set forth in Schedule 5.18, there are no
agreements, arrangements or schemes in operation by or in relation to the
Company pursuant to which any of its employees or officers and/or former
employees or officers and/or their relatives and dependents is entitled to
shares of capital stock or a commission or remuneration of any kind calculated
by reference in whole or in part to turnover, profits or sales.
5.18.20 Except as set forth in Schedule 5.18 or as provided
for in the 1996 Balance Sheet, there is no liability whatsoever to make payment
to or for the benefit of any director or employee or ex-director or ex-employee
or the wife or widow or any other relative of any director, ex-director,
employee or ex-employee of the Company in respect of past service, retirement,
death or disability by way of pension contribution, pension, retirement benefit
lump sum, gratuity or otherwise.
5.18.21 Except as set forth in Schedule 5.18, the Company has
not within a period of one year preceding the date of this Agreement given
notice of any redundancies to the United Kingdom Secretary of State or started
consultations with any independent trade union or association of unions.
5.19 Employee Benefits. Except as set forth in Schedule 5.19, the
Company has no superannuation fund, retirement benefit or other pension schemes
or arrangements. In respect of any such funds, schemes or arrangements which are
disclosed in Schedule 5.19 ("Disclosed Schemes") the Company has no unfunded
contingent obligations and any such funds, schemes or arrangements which are
funded are solvent and are so funded at a level which a prudent employer acting
on actuarial advice would consider as being
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adequate to secure the benefits which may be payable in respect of service prior
to the Closing and (insofar as the provision of any pension is concerned) having
regard to probable future salary increases, or in connection with which the
Company is to become or may become liable to make any payment and no
undertakings or assurances have been given to the employees of the Company as to
the continuance or introduction or increase or improvement of any pension rights
or entitlement which the Company and/or Healthworld would be required to
implement in accordance with good industrial relations practice and whether or
not there is any legal obligation so to do.
5.20 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 5.10 or 5.13, the Company is not in violation or contravention of any
law or regulation or any order of any court or national, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would have a Material
Adverse Effect; and except to the extent set forth on Schedule 5.10 or 5.13,
there are no material claims, actions, suits or proceedings, commenced or, to
the knowledge of the Company, threatened, against or affecting the Company, at
law or in equity, or before or by any national, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them and no notice of any such claim, action,
suit or proceeding, whether pending or threatened, has been received. The
Company has conducted and is conducting its business in compliance, in all
material respects, with the requirements, standards, criteria and conditions set
forth in applicable national, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental approvals set forth on
Schedules 5.12 and 5.13, and is not in violation of any of the foregoing which
might have a Material Adverse Effect.
5.21 Taxes. Except as set forth in Schedule 5.21:
5.21.1 The provisions for Taxation, including provisions for
deferred tax included in the Financial Statements, have been made in accordance
with generally accepted accounting principles and will be sufficient (on the
basis of the rates of tax current at the date of this Agreement) to cover all
Taxation for which the Company was at the Balance Sheet Date liable or may after
that date become or have become liable for any period ended on or before the
Balance Sheet Date and in particular (but without prejudice to the generality of
the foregoing) will be sufficient to cover such Taxation on or in respect of or
by reference to any profit, gains or income (including deemed profits gains or
income) for any period ended on or before the Balance Sheet Date.
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5.21.2 The Company has duly and punctually paid all Taxation
to the extent that the same ought to have been paid and is under no liability to
pay any fine, penalty or interest or to give any security in connection
therewith.
5.21.3 the Company has made under deduction of Taxation all
payments to any person which ought to have been made under deduction of Taxation
(with particular reference to Sections 134, 347 to 350 and 524 of the Taxes Act)
and has (if required by law to do so) accounted to the Inland Revenue for the
Taxation so deducted;
5.21.4 the Company has in all material respects properly
operated the P.A.Y.E. system, and all National Insurance Contributions and sums
payable to the Inland Revenue and the Department of Social Security under the
P.A.Y.E. system (including ex gratia payments and compensation for loss of
office) (Section 148 of the Taxes Act) (Sections 153 to 168G of the Taxes Act)
due and payable by the Company up to the date hereof have been paid;
5.21.5 the Company has duly paid all Taxation shown to be due
to the Inland Revenue by all Returns required to be made under Schedule 13 to
the Taxes Act (advance corporation tax);
5.21.6 the Company has correctly operated a statutory sick pay
scheme in accordance with the provisions of the United Kingdom Social Security
Contributions and Benefits Act 1992;
5.21.7 prior to the Closing all documents to which the Company
is a party and all documents in the enforcement of which the Company may be
interested or to the production of which the Company is entitled which are
necessary to establish the title of the Company to any asset and which attract
stamp duty in the United Kingdom or elsewhere have been properly stamped and the
appropriate stamp duty has been paid and all duty payable in respect of the
capital of the Company has been paid and the Company has duly paid any stamp
duty reserve tax for which it has at any time been liable.
5.21.8 The Company has and at Closing will have duly and
punctually made all Returns, given all notices and accounts and supplied all
other information which ought to have been made given or supplied for the
purpose of and in respect of Taxation in the United Kingdom and so far as the
U.K. Stockholder is aware, elsewhere, to the Inland Revenue, H.M. Commissioners
of Customs and Excise or to any other governmental authority (including any
governmental authority of a foreign jurisdiction) and has and at Closing will
have kept and maintained all records, invoices and other documents which ought
to have been kept or maintained for such purposes and:
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5.21.8.1 all such information, Returns,
accounts, notices, records, invoices
and other documents were, are, and
at the Closing will be, in all
material respects, up-to-date,
accurate, and made on the proper
basis and are not, nor, is likely to
be, the subject of any dispute with
the Inland Revenue, H.M.
Commissioners of Customs and Excise
or other appropriate authorities
concerned;
5.21.8.2 the Company has not within the
preceding seven years been the
subject of a back duty, PAYE or
other audit or investigation by the
Inland Revenue or H.M. Commissioners
of Customs and Excise (or other
similar authority outside the United
Kingdom);
5.21.8.3 all clearances and consents obtained
from H.M. Treasury, the Inland
Revenue, H.M. Commissioners of
Customs and Excise or other
authority whether in the United
Kingdom or elsewhere have been
obtained after full, complete and
accurate disclosure of all material
facts and considerations and no such
clearances or consent is, to the
knowledge of the U.K. Stockholder,
liable to be withdrawn, modified or
rendered void and all such
clearances and consents have been
disclosed to Healthworld.
5.22 No Violations. Neither the Company nor, to the knowledge of the
Company, any other party thereto, is in default in any material respect under
any lease, instrument, agreement, license, or permit set forth on Schedule 5.12,
5.13, 5.14, 5.15 or 5.16, or any other material agreement to which it is a party
or by which its properties are bound (the "Material Documents"). Except as set
forth in Schedule 5.22,
5.22.1 the rights and benefits of the Company under the
Material Documents will not be materially adversely affected by the transactions
contemplated hereby;
5.22.2 the execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
material default under, any of the terms or provisions of the Material Documents
or the Company's Memorandum and Articles of Association.
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5.22.3 none of the Material Documents requires notice to or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect; and
5.22.4 consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any material right or benefit.
Except as set forth on Schedule 5.22, none of the Material Documents prohibits
the use or publication by Healthworld or any of its Subsidiaries of the name of
any other party to such Material Document, and none of the Material Documents
prohibits or restricts the Company from freely providing services to any other
customer or potential customer of the Company, Healthworld, or any of their
respective Subsidiaries.
5.23 Government Contracts. Except as set forth on Schedule 5.23, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.24 Absence of Changes. Since the Balance Sheet Date, except as set
forth on Schedule 5.24, there has not been:
5.24.1 any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of the
Company;
5.24.2 any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties or business of the
Company;
5.24.3 any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or any grant
of any options, warrants, calls, conversion rights or commitments;
5.24.4 any declaration or payment of any dividend or
distribution in respect of the shares in the capital of the Company or any
direct or indirect redemption, purchase or other acquisition of any of the
shares in the capital of the Company;
5.24.5 any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the Company to
any of its officers, directors, stockholders, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
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5.24.6 any work interruptions, labor grievances or claims
filed, or any other event or condition of any character materially adversely
affecting the business of the Company;
5.24.7 any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any person,
including, without limitation, the U.K. Stockholder and his affiliates;
5.24.8 any cancellation, or agreement to cancel, any material
indebtedness or other obligation owing to the Company, including without
limitation any material indebtedness or obligation of the U.K. Stockholder or
any affiliate thereof;
5.24.9 any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the assets,
property or rights of the Company or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
5.24.10 any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of the Company's business;
5.24.11 any waiver of any material rights or claims of the
Company;
5.24.12 any material breach, amendment or termination of any
material contract, agreement, license, permit or other right to which the
Company is a party;
5.24.13 any transaction by the Company outside the ordinary
course of its respective businesses;
5.24.14 any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
5.24.15 any other distribution to or for the benefit of the
U.K. Stockholder of property or assets by the Company.
5.25 Deposit Accounts; Powers of Attorney. Schedule 5.25 contains an
accurate schedule as of the date of the Agreement of:
5.25.1 the name of each financial institution in which the
Company has accounts or safe deposit boxes;
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5.25.2 the names in which the accounts or boxes are held;
5.25.3 the type of account and account number; and
5.25.4 the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.25 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.26 Brokers and Agents. Except as disclosed on Schedule 5.26, the U.K.
Stockholder did not employ any broker or agent in connection with this
transaction.
5.27 Relations with Governments. Except for political contributions
made in a lawful manner which, in the aggregate, do not exceed (pound)6,250 per
year for each year in which the U.K. Stockholder has been a stockholder of the
Company, the Company has not made, offered or agreed to offer anything of value
to any governmental official, political party or candidate for government
office. If political contributions made by the Company have exceeded
(pound)6,250 per year for each year in which the U.K. Stockholder has been a
stockholder of the Company, each contribution in the amount of (pound)3,125 or
more shall be described on Schedule 5.27.
5.28 Disclosure.
5.28.1 If, prior to the 25th day after the date of the final
prospectus of Healthworld utilized in connection with the IPO, the U.K.
Stockholder becomes aware of any fact or circumstance which would change (or, if
after the Closing Date, would have changed) a representation or warranty of the
U.K. Stockholder in this Agreement or would affect any document delivered
pursuant hereto in any material respect, the U.K. Stockholder shall immediately
give notice of such fact or circumstance to Healthworld. However, subject to the
provisions of Section 7.8, such notification shall not relieve the U.K.
Stockholder of his obligations under this Agreement.
5.28.2 The U.K. Stockholder acknowledges and agrees:
5.28.2.1 that there exists no firm
commitment, binding agreement, or
promise or other assurance of any
kind, whether express or implied,
oral or written, that a Registration
Statement will become effective or
that the IPO pursuant thereto will
occur at a particular
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price or within a particular range
of prices or occur at all;
5.28.2.2 that neither Healthworld nor any of
its officers, directors, agents or
representatives nor any Underwriter
shall have any liability to the
Company, the U.K. Stockholder or any
other person affiliated or
associated with the Company for any
failure of the Registration
Statement to become effective, the
IPO to occur at a particular price
or within a particular range of
prices or to occur at all; and
5.28.2.3 that the decision of U.K.
Stockholder to enter into this
Agreement, has been or will be made
independent of, and without reliance
upon, any statements, opinions or
other communications, or due
diligence investigations which have
been or will be made or performed by
any prospective underwriters,
relative to Healthworld or the
prospective IPO.
5.29 Authority; Ownership. The U.K. Stockholder has the full legal
right, power and authority to enter into this Agreement. The U.K. Stockholder is
the registered and beneficial owner with full title guarantee of the shares of
the Company Stock identified in Schedule 5.3 as being owned by the U.K.
Stockholder and neither owns nor has any right, title or interest in or to any
other Company Stock, and, except as set forth on Schedule 5.29, such Company
Stock is owned free and clear of all Encumbrances and claims of every kind.
5.30 Preemptive Rights. The U.K. Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
Healthworld Stock that the U.K. Stockholder has or may have had other than
rights of the U.K. Stockholder to acquire Healthworld Stock pursuant to this
Agreement or any option granted by Healthworld.
5.31 No Intention to Dispose of Healthworld Stock. The U.K. Stockholder
is not under any binding commitment or contract to sell, exchange or otherwise
dispose of shares of Healthworld Stock received in connection with the
Organization.
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6 Representations of Healthworld.
Healthworld represents and warrants that all of the following
representations and warranties in this Section 6 are true at the date of this
Agreement and, subject to Section 7.8 hereof, shall be true on the Closing Date.
All such representations and warranties shall survive the Closing Date for a
period of twelve (12) months (the last day of such period being the "Expiration
Date"), except that, solely for purposes of determining whether a claim for
indemnification under Section 11.2.4 hereof has been made on a timely basis and
solely to the extent that in connection with the IPO any person claiming
indemnification from Healthworld hereunder actually incurs liability under the
1933 Act, the 1934 Act, or any other Federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
6.1 Due Organization. Healthworld is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware,
and is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as contemplated.
6.2 Authorization. The representatives of Healthworld executing this
Agreement have the authority to enter into and bind Healthworld to the terms of
this Agreement. Healthworld has the full legal right, power and authority to
enter into this Agreement.
6.3 Capital Stock of Healthworld. The authorized capital stock of
Healthworld is as set forth in Schedule 6.3. All of the issued and outstanding
shares of the capital stock of Healthworld are owned by Girgenti in the amount
set forth in Schedule 6.3. All of such shares are owned free and clear of all
liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of Healthworld have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned of record and
beneficially by Girgenti. Such shares were offered, issued, sold and delivered
by Healthworld in compliance with all applicable state and Federal laws
concerning the issuance of securities. None of such shares were issued in
violation of the preemptive rights of any past or present stockholder of
Healthworld.
6.4 Transactions in Capital Stock. Except for the obligations under the
agreements which form a part of the Healthworld Plan of Organization, no option,
warrant, call, conversion right or commitment of any kind exists which obligates
Healthworld to issue any of its authorized but unissued capital stock, and
Healthworld
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has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. At the time of issuance
thereof, the Healthworld Stock to be delivered to the U.K. Stockholder pursuant
to this Agreement will constitute valid and legally issued shares of
Healthworld, fully paid and nonassessable. The shares of Healthworld Stock to be
issued to the U.K. Stockholder pursuant to this Agreement will not be registered
under the 1933 Act, except as provided in Section hereof.
6.5 Liabilities and Obligations. Healthworld does not have any
liabilities, contingent or otherwise, except as set forth in or contemplated by
this Agreement and the other agreements forming a part of the Healthworld Plan
of Organization, including without limitation the underwriting agreement to be
entered into between Healthworld and the Underwriters, for fees incurred in
connection with the transactions contemplated hereby and thereby, and any
liabilities and obligations which may exist under the Healthworld License
Agreement, a copy of which is annexed to Schedule 6.5.
6.6 Conformity with Law; Litigation. Healthworld is not in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it which would have a Material Adverse
Effect; and there are no material claims, actions, suits or proceedings pending
or, to the knowledge of Healthworld, threatened against or affecting
Healthworld, at law or in equity, or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received.
Healthworld is not in violation of its certificate of incorporation, its by-laws
or any other corporate governing instrument.
6.7 Validity of Obligations. The execution and delivery of this
Agreement by Healthworld and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
Healthworld. This Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of
Healthworld.
6.8 Limited Business Conducted. Healthworld was formed on September 12,
1996 solely for the purpose of entering into and consummating the Healthworld
Plan of Organization. Healthworld has not filed any Returns or extension
requests in respect of Tax. Healthworld has not since its formation conducted
any business, acquired any assets, incurred any liabilities or entered into any
agreements, except Healthworld has entered into the Healthworld License
Agreement and has engaged in other limited startup activities. It is anticipated
that prior to the Closing, Healthworld will institute an
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Incentive Stock Option Plan; however, Healthworld covenants that no options will
be granted before the Closing.
7 Covenants Prior to Closing.
For purposes of this Section 7, the term Company shall mean and refer
to the U.K. Company and each of the Subsidiaries of the U.K. Company.
7.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the U.K. Stockholder will cause the Company to
afford to the U.S. Stockholder reasonable access to all of the Company's sites,
properties, books and records during normal business hours and will furnish such
additional financial and operating data and other information as to the business
and properties of the Company as may from time to time be reasonably requested.
The U.K. Stockholder will cooperate, and will cause the Company to cooperate, in
the preparation of any documents or other material which may be reasonably
required in connection with any documents or materials required by this
Agreement. The U.K. Stockholder and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement or
the due diligence investigations conducted as confidential in accordance with
the provisions of Section hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the U.K. Stockholder shall cause the Company to,
except as set forth on Schedule 7.2 of its respective Disclosure Schedule:
7.2.1 carry on its respective businesses in substantially the
same manner as it has heretofore been conducted and not introduce any material
new method of management, operation or accounting;
7.2.2 maintain, in all material respects, its respective
properties and facilities, including those held under leases, in as good working
order and condition as at present, ordinary wear and tear excepted;
7.2.3 perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective assets,
properties or rights;
7.2.4 keep in full force and effect present insurance policies
or other comparable insurance coverage;
7.2.5 use its reasonable best efforts to maintain and preserve
its business organization intact, retain its respective present key employees
and maintain its
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respective relationships with suppliers, customers and others having business
relations with the Company;
7.2.6 maintain compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
7.2.7 maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments, except in the ordinary
course of business; and
7.2.8 maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the U.K. Stockholder will not permit the
Company to:
7.3.1 make any change in its Memorandum and Articles of
Association;
7.3.2 issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind other
than in connection with the exercise of options or warrants listed in Schedule
5.4;
7.3.3 declare or pay any dividend, or make any distribution in
respect of its shares whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares;
7.3.4 enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it involves
an amount not in excess of (pound)6,250;
7.3.5 create, assume or permit to exist any mortgage, pledge
or other lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except:
7.3.5.1 with respect to purchase money liens
incurred in connection with the acquisition
of equipment with an aggregate cost not in
excess of (pound)6,250 necessary or
desirable for the conduct of the businesses
of the Company,
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7.3.5.2 liens for taxes either not yet due or being
contested in good faith and by appropriate
proceedings (and for which contested taxes
adequate reserves have been established and
are being maintained) or
7.3.5.3 materialmen's, mechanics', workers',
repairmen's, employees' or other like liens
arising in the ordinary course of business,
or
7.3.5.4 liens set forth on Schedule 5.10 hereto;
7.3.6 sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business;
7.3.7 negotiate for the acquisition of any business or the
start-up of any new business;
7.3.8 merge or consolidate or agree to merge or consolidate
with or into any other corporation;
7.3.9 waive any material rights or claims of the Company;
provided that the Company may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included in
Schedule 5.11 unless specifically listed thereon;
7.3.10 commit a material breach or amend or terminate any
material agreement, permit, license or other right of the Company; or
7.3.11 enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 No Shop. The U.K. Stockholder shall not, and he shall not permit
the U.K. Company, nor any agent, officer, director, trustee or any
representative of any of the foregoing, during the period commencing on the date
of this Agreement and ending with the earlier to occur of the Closing Date or
the termination of this Agreement in accordance with its terms, directly or
indirectly, to:
7.4.1 solicit or initiate the submission of proposals or
offers from any person for,
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7.4.2 participate in any discussions pertaining to, or
7.4.3 furnish any information to any person other than
Healthworld or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in, the
Company, or a consolidation or business combination of the Company.
7.5 Further Assurances. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
7.6 Agreements. The U.K. Stockholder shall and he shall cause the
Company to terminate any stockholders agreements, voting agreements, voting
trusts, options, warrants and employment agreements between the Company and any
employee listed on Schedule 9.10 hereto on or prior to the Closing Date.
7.7 Notification of Certain Matters. The U.K. Stockholder shall give
prompt notice to Healthworld and the U.S. Stockholders of:
7.7.1 the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the U.K. Stockholder contained herein to be untrue
or inaccurate in any material respect at or prior to the Closing; and
7.7.2 any material failure of the U.K. Stockholder, the
Company or any of its Subsidiaries to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder.
The delivery of any notice pursuant to this Section 7.7 shall not be deemed to
7.7.3 modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 7.8,
7.7.4 modify the conditions set forth in Sections 8 and 9, or
7.7.5 limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
7.8 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party
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shall have the continuing obligation until 24 hours prior to the anticipated
effectiveness of the Registration Statement to supplement or amend promptly the
Schedules hereto with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Schedules, provided however, that
supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall only
have to be delivered at the Closing Date, unless such Schedule is to be amended
to reflect an event occurring other than in the ordinary course of business.
7.9 Cooperation in Preparation of Registration Statement. The U.K.
Stockholder shall furnish or cause to be furnished to Healthworld and the
Underwriters all of the information concerning the Company and the U.K.
Stockholder required for inclusion in, and will cooperate with Healthworld and
the Underwriters in the preparation of, the Registration Statement and the
prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement). The
U.K. Stockholder agrees promptly to advise Healthworld if at any time during the
period in which a prospectus relating to the IPO is required to be delivered
under the 1933 Act, any information contained in the prospectus concerning the
Company or the U.K. Stockholder becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy. The
U.K. Stockholder represents and warrants that the Registration Statement will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
however, that the U.K. Stockholder shall not have responsibility for any such
inclusions or omissions to the extent they relate to the U.S. Companies and do
not relate to the Company.
8 Conditions Precedent to Obligations of the U.K. Stockholder.
The obligations of the U.K. Stockholder with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions.
8.1 Representations and Warranties; Performance of Obligations by U.S.
Stockholders and Milton. All representations and warranties of the U.S.
Stockholders and Milton contained in their respective Organization Agreements
shall, if qualified as to materiality, be true and correct in all material
respects, and if not so qualified, be true and correct, as of the Closing Date
as though such representations and warranties had been made as of that time. All
of the terms, covenants and conditions of the U.S. Stockholders and Milton
contained in their respective Organization Agreements shall
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have been duly complied with and performed in all material respects.
Certificates to the foregoing effect dated the Closing Date, signed by each of
the U.S. Stockholders and Milton, shall have been delivered to the U.K.
Stockholder.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement and the respective Organization Agreements
of the U.S. Stockholders and Milton and any other agreement incidental hereto or
thereto and all other related legal matters shall be satisfactory to the U.K.
Stockholder and his counsel. The U.K. Stockholder shall be satisfied that the
Registration Statement and the prospectus forming a part thereof, including any
amendments thereof or supplements thereto, shall not contain any untrue
statement of a material fact, or omit to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
provided that the condition contained in this sentence shall be deemed satisfied
if the U.K. Stockholder shall have failed to inform Healthworld in writing prior
to the effectiveness of the Registration Statement of the existence of an untrue
statement of a material fact or the omission of such a statement of a material
fact.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Organization or the IPO and no governmental agency or body shall
have taken any other action or made any request of the Company or the U.K.
Stockholder as a result of which the U.K. Stockholder deems it inadvisable to
proceed with the transactions hereunder.
8.4 Opinions of Counsel. The U.K. Stockholder shall have received an
opinion from counsel for the U.S. Stockholders and counsel for Milton, dated the
Closing Date.
8.5 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
8.6 No Material Adverse Change. No event or circumstance shall have
occurred with respect to any of the U.S. Companies which would constitute a
Material Adverse Effect.
8.7 Secretary's Certificates; Good Standing. The U.K. Stockholder shall
have received (a) certificates, dated the Closing Date and signed by the
secretary of the U.S. Companies certifying the truth and correctness of attached
copies of the U.S. Companies' respective Certificates of Incorporation
(including amendments thereto) and By-Laws (including amendments thereto) and
such other matters as may reasonably be requested by the U.K. Stockholder, (b) a
certificate, dated the Closing Date and signed
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by the secretary of Healthworld, certifying the truth and correctness of
attached copies of Healthworld's certificate of incorporation (including
amendments thereto) and by-laws (including amendments thereto) and such other
matters as may reasonably be requested by the U.K. Stockholder, and (c) a
certificate of good standing for Healthworld in the State of Delaware.
8.8 Employment Agreements. Each of the persons listed on Schedule shall
have entered into an employment agreement substantially in the form of Exhibit
hereto, for the annual compensation set forth on Schedule 8.8.
8.9 Conformity With Girgenti/Milton Letter of Intent and Underwriters'
Engagement Letter.
8.9.1 Corporate governance shall be in accord with section 1.3
of the Girgenti/Milton Letter of Intent; and
8.9.2 An agreement shall have been executed by and among the
U.K. Stockholder, Milton, Bourne, Moreton and the U.S. Stockholders providing
for the rights of refusal upon private sale, as contemplated by Section 1.5.1 of
the Girgenti/Milton Letter of Intent; and
8.9.3 The Pricing shall have occurred.
8.10 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders and Milton shall have occurred
simultaneously with the Closing hereunder.
9 Conditions Precedent to Obligations of Healthworld.
The obligations of Healthworld with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of the U.K. Stockholder contained in this
Agreement shall, if qualified as to materiality, be true and correct in all
material respects, and if not so qualified, be true and correct, as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and conditions
of this Agreement to be complied with or performed by the U.K. Stockholder and
the U.K. Company on or before the Closing Date shall have been duly performed or
complied with in all material respects; and the U.K. Stockholder
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shall have delivered to Healthworld certificates dated the Closing Date and
signed by him to such effect.
9.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement and the respective Organization Agreements
of the U.S. Stockholders and the Minority Stockholders and any other agreement
incidental hereto or thereto and all other related legal matters shall be
satisfactory to Healthworld and its counsel. Healthworld shall be satisfied that
the Registration Statement and the prospectus forming a part thereof, including
any amendments thereof or supplements thereto, shall not contain any untrue
statement of a material fact, or omit to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading.
9.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Organization or the IPO and no governmental agency or body shall
have taken any other action or made any request of Healthworld or any Company as
a result of which the management of Healthworld deems it inadvisable to proceed
with the transactions hereunder.
9.4 Opinions of Counsel. Healthworld shall have received an opinion
from counsel to the U.K. Stockholder, dated the Closing Date, in form and
substance acceptable to counsel for Healthworld.
9.5 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
9.6 No Material Adverse Change. No event or circumstance shall have
occurred with respect to any of the Companies which would constitute a Material
Adverse Effect, and none of the Companies shall have suffered any material loss
or damages to any of its respective properties or assets, whether or not covered
by insurance, which change, loss or damage materially affects or impairs the
ability of any of the Companies to conduct their respective businesses.
9.7 Secretary's Certificates. Healthworld shall have received
certificates, dated the Closing Date and signed by the secretary of the Company,
certifying the truth and correctness of attached copies of the Company's
Certificate of Incorporation (including amendments thereto), and Memorandum and
Articles of Association (including amendments thereto).
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9.8 Employment Agreements. Each of the persons listed on Schedule 8.8
shall have entered into an employment agreement substantially in the form of
Exhibit 8.8 hereto, for the annual compensation set forth on Schedule 8.8.
9.9 Stockholder's Release. The U.K. Stockholder shall have delivered to
Healthworld an instrument dated the Closing Date releasing the Company from any
and all claims of the U.K. Stockholder against the Company and Healthworld and
obligations of the Company and Healthworld to the U.K. Stockholder, except for
(x) items specifically identified on Schedules 5.10 and 5.15 as being claims of
or obligations to the U.K. Stockholder, (y) continuing obligations to the U.K.
Stockholder relating to his employment by Healthworld and (z) obligations
arising under this Agreement or the transactions contemplated hereby.
9.10 Termination of Related Party Agreements. Except as set forth on
Schedule , all existing agreements between any of the Companies, the U.K.
Stockholder, Milton, Bourne, Moreton and Cater shall have been canceled
effective as of the Closing Date.
9.11 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders, Milton, Bourne and Moreton
shall occur simultaneously with the Closing hereunder.
10 Covenants of Healthworld and the U.K. Stockholder after Closing.
10.1 Release From Guarantees; Repayment of Certain Obligations.
Healthworld shall use commercially reasonable efforts to have the U.K.
Stockholder released from any and all guarantees on any indebtedness that he
personally guaranteed and from any and all pledges of assets that he pledged to
secure such indebtedness for the benefit of the Company, with all such
guarantees on indebtedness being assumed by Healthworld. In the event that
Healthworld cannot obtain such releases from the lenders of any such guaranteed
indebtedness on or prior to 120 days subsequent to the Closing Date, Healthworld
shall pay off or otherwise refinance or retire such indebtedness. From and after
the Closing Date and until such time as all of such indebtedness is paid off,
refinanced or retired, Healthworld shall maintain unencumbered funds in amounts
sufficient to provide for such pay off, refinancing or retirement, provided that
Healthworld may use such funds for other purposes, in its sole discretion, with
the prior written consent of the U.K. Stockholder.
10.2 Preservation of Tax and Accounting Treatment. Except as
contemplated by this Agreement or the Registration Statement, after the Closing
Date, Healthworld
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shall not and shall not permit any of its Subsidiaries to undertake any act that
would jeopardize the tax-free status of the Organization.
10.3 Preparation and Filing of Tax Returns.
10.3.1 The U.K Stockholder shall cause the Companies to file
or cause to be filed all required separate Returns of any Acquired Party for all
taxable periods that end on or before the Closing Date.
10.3.2 Healthworld shall file or cause to be filed all
required separate Returns of, or that include, any Acquired Party for all
taxable periods ending after the Closing Date.
10.3.3 Each party hereto shall, and shall cause its
Subsidiaries and affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in filing any
Return, amended Return or claim for refund, determining a liability for Taxes or
a right to refund of Taxes or in conducting any audit or other proceedings in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by taxing authorities and relevant records
concerning the ownership and tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Returns pursuant to this Agreement shall bear all costs of filing such
Returns.
10.3.4 Healthworld and the U.K. Stockholder shall comply with,
and the U.K. Stockholder shall cause the Company to comply with, the Tax
reporting requirements of Section 1.351-3 of the Treasury Regulations
promulgated under the Code, and treat the transaction as a tax-free contribution
under Section 351(a) of the Code.
11 Indemnification.
The U.K. Stockholder and Healthworld each make the following covenants
that are applicable to them, respectively:
11.1 General Indemnification by the U.K. Stockholder. The U.K.
Stockholder covenants and agrees he will indemnify, defend, protect and hold
harmless Healthworld at all times, from and after the date of this Agreement
until the Expiration
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Date, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by Healthworld as a result of or arising from:
11.1.1 any breach of the representations or warranties of the
U.K. Stockholder set forth herein or on the Disclosure Schedules or certificates
delivered by him in connection herewith,
11.1.2 any breach of any covenant or agreement on the part of
the U.K. Stockholder under this Agreement,
11.1.3 any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue written statement or alleged untrue written statement
of a material fact relating to any of the Companies or the U.K. Stockholder, and
provided to Healthworld or its counsel by the U.K. Stockholder in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to any of
the Companies or the U.K. Stockholder required to be stated therein or necessary
to make the statements therein not misleading or
11.1.4 the matters described on Schedule 11.1.4,
11.2 Indemnification by Healthworld. Healthworld covenants and agrees
that it will indemnify, defend, protect and hold harmless the U.K. Stockholder
at all times from and after the date of this Agreement until the Expiration
Date, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys, fees and expenses of
investigation) incurred by the U.K. Stockholder as a result of or arising from:
11.2.1 any breach by Healthworld of its representations and
warranties set forth herein or on the Disclosure Schedules or certificates
delivered by it in connection herewith;
11.2.2 any breach of any covenant or agreement on the part of
Healthworld under this Agreement,
11.2.3 any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any
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untrue statement or alleged untrue statement of a material fact relating to
Healthworld or any of the other company forming a part of the Healthworld Plan
of Organization contained in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to Healthworld or any other
company forming a part of the Healthworld Plan of Organization required to be
stated therein or necessary to make the statements therein not misleading, or
11.2.4 the matters described on Schedule 11.2.4.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding or
any other proceeding to the extent that relief other than the payment of money
is sought, without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing
Indemnified Party, Indemnified Party shall have the right to participate in such
matter through counsel of its own choosing and Indemnifying Party shall
reimburse the Indemnified Party for the reasonable expenses of its counsel.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability,
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except as set forth in the preceding sentence and to the extent such
participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses. If the Indemnifying Party
desires to accept a final and complete settlement of any such Third Person claim
and the Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement and the Indemnified Party shall, from that
moment on, bear full responsibility for any additional costs of defense which it
subsequently incurs with respect to such claim and all additional costs of
settlement or judgment. If the Indemnifying Party does not undertake to defend
such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 Exclusive Remedy. The indemnification provided for in this Section
11 shall be the exclusive remedy in any action seeking damages or any other form
of monetary relief brought by any party to this Agreement against another party,
provided that, nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification.
11.5.1 Healthworld shall not assert any claim for
indemnification hereunder against the U.K. Stockholder until such time as, and
solely to the extent that, the aggregate of all claims which Healthworld may
have against the U.K. Stockholder shall exceed one-half (0.5%) percent of the
value of the Healthworld Stock delivered to the U.K. Stockholder, calculated at
the IPO price (the "Indemnification Threshold"), provided, however, that
Healthworld may assert and shall be indemnified for any claim
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under Section 11.1.4 at any time, regardless of whether the aggregate of all
claims which such persons may have against the U.K. Stockholder exceeds the
Indemnification Threshold, it being understood that the amount of any such claim
under Section shall not be counted towards the Indemnification Threshold.
11.5.2 The U.K. Stockholder shall not assert any claim for
indemnification hereunder against Healthworld until such time as, and solely to
the extent that, the aggregate of all claims which the U.K. Stockholder may have
against Healthworld shall exceed (pound)31,250, provided, however that the U.K.
Stockholder may assert and shall be indemnified for any claim under Section at
any time, regardless of whether the aggregate of all claims which the U.K.
Stockholder may have against Healthworld exceeds (pound)31,250, it being
understood that the amount of any such claim under Section 11.2.4 shall not be
counted towards such (pound)31,250 amount.
11.5.3 No person shall be entitled to indemnification under
this Section 11 if and to the extent that such person's claim for
indemnification is directly or indirectly related to a breach by such person of
any representation, warranty, covenant or other agreement set forth in this
Agreement. Notwithstanding any other term of this Agreement (except the proviso
to this sentence), the U.K. Stockholder shall not be liable under this Section
11 for an amount which exceeds the value of the Healthworld Stock received by
the U.K. Stockholder in connection with the Organization, provided that the U.K.
Stockholder's indemnification obligations pursuant to Section 11.1.4 shall not
be limited. For purposes of calculating the value of the Healthworld Stock
received by the U.K. Stockholder, Healthworld Stock shall be valued at its
initial public offering price as set forth in the Registration Statement. It is
hereby understood and agreed that the U.K. Stockholder may satisfy an
indemnification obligation through payment of Healthworld Stock, such
satisfaction to be to the extent of the then fair market value of Healthworld
Stock conveyed by the Indemnifying Party pursuant to such indemnification.
12 Termination of Agreement.
12.1 Termination. This Agreement may be terminated at anytime prior to
the Closing Date solely:
12.1.1 by request of the U.K. Stockholder, with the consent of
Milton and the U.S. Stockholders;
12.1.2 by the U.K. Stockholder if the transactions
contemplated by this Agreement to take place at the Closing shall not have been
consummated by _______, 1997, unless the failure of such transactions to be
consummated is due to the willful
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failure of the U.K. Stockholder to perform any of his obligations under this
Agreement to the extent required to be performed by him prior to or on the
Closing Date;
12.1.3 by the U.K. Stockholder, on the one hand, or by
Healthworld, on the other hand, if a material breach or default shall be made by
the other party in the observance or in the due and timely performance of any of
the covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Closing Date; or
12.1.4 by the U.K. Stockholder or by Healthworld, if a
material breach or default shall be made by any U.S. Stockholder or Milton in
the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained in their respective agreements, and the
curing of such default shall not have been made on or before the Closing Date.
12.2 Liabilities in Event of Termination.
12.2.1 The termination of this Agreement will in no way limit
any obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
12.2.2 Upon termination of this Agreement, except as otherwise
provided for herein, any and all payments required to be made by the U.S.
Companies or the U.K. Companies as provided for in the Underwriters' Engagement
Letter shall be paid 69% by the U.S. Companies and 31% by the U.K. Company. The
U.S. Companies and the U.K. Company shall contribute to (and, if necessary,
reimburse each other for) any such required payments in such proportions.
Notwithstanding the foregoing, in the event any indemnity obligation arises to
the Underwriters pursuant to any agreement between the Underwriters and
Healthworld, the U.K. Stockholder, the U.S. Stockholders, the U.K. Company
and/or the U.S. Companies with respect to the Underwriters' services in
contemplation of the IPO, then the breaching party shall be solely responsible
for such indemnification obligations and the non-breaching party shall be
entitled to reimbursement from the breaching party for any payment made by the
non-breaching party in respect thereof.
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13 Non-Competition; Non-Disclosure.
13.1 Non-Competition. The U.K. Stockholder will not, for a period (the
"Restrictive Period") commencing with the date hereof and concluding five (5)
years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
13.1.1 as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative (except that the
U.K. Stockholder may be employed by an entity engaged in the advertising
business so long as the U.K. Stockholder does not have contact with or provide
services to or for the benefit of any such client):
13.1.1.1 anywhere in the world, engage in any
advertising business having as a
client any corporation or any other
entity which was a client of
Healthworld or any of its
Subsidiaries at any time within the
Restrictive Period; or
13.1.1.2 anywhere in the world, engage in any
mass media communication of
health-related information, whether
by means of publishing, television,
radio, the internet or otherwise; or
13.1.1.3 within 200 miles (the "Territory")
of where Healthworld or any of its
subsidiaries conducted any other
business during the Restrictive
Period, engage in any such other
business;
13.1.2 call upon any person who is, at that time, an employee
of Healthworld (including the subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of Healthworld (including the subsidiaries
thereof), provided that the U.K. Stockholder shall be permitted to call upon and
hire any member of his or her immediate family;
13.1.3 call upon any person or entity which is, at that time,
or which has been, at any time within the Restrictive Period, a customer of
Healthworld (including the subsidiaries thereof) for the purpose of soliciting
or selling products or services in direct competition with Healthworld within
the Territory;
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13.1.4 call upon any prospective acquisition candidate, on the
U.K. Stockholder's own behalf or on behalf of any competitor in the advertising
business or in the business of communicating health information through mass
media, which candidate, to the actual knowledge of the U.K. Stockholder after
due inquiry, was called upon by Healthworld (including the subsidiaries thereof)
or for which, to the actual knowledge of the U.K. Stockholder after due inquiry,
Healthworld (or any subsidiary thereof) made an acquisition analysis, for the
purpose of acquiring such entity; or
13.1.5 disclose customers, whether in existence or proposed,
of Healthworld (or any subsidiary thereof) to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except to the
extent that Healthworld (or any subsidiary thereof) has in the past disclosed
such information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the U.K. Stockholder from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 Nondisclosure.
13.2.1 Definitions. The U.K. Stockholder recognizes and
acknowledges that he has had in the past, currently has, and in the future may
possibly have, access to certain confidential information of Healthworld or any
of its Subsidiaries, such as operational policies, and pricing and cost policies
that are valuable, special and unique assets of Healthworld and its
Subsidiaries, and/or their respective businesses (the "Confidential
Information"). Confidential Information shall not include any information:
13.2.1.1 which becomes known to the public
generally through no fault of the
U.K. Stockholder,
13.2.1.2 as to which disclosure is required
by law or the order of any
governmental authority under color
of law; provided, that prior to
disclosing any information pursuant
to this clause (b), the U.K.
Stockholder shall give prior written
notice thereof to Healthworld and
provide Healthworld with the
opportunity to contest such
disclosure, or
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13.2.1.3 as to which the disclosing party
reasonably believes that such
disclosure is required in connection
with the defense of a lawsuit
against the disclosing party.
13.2.2 Covenant to Maintain Confidentiality. The U.K.
Stockholder agrees that until the later to occur of (i) five (5) years following
the Closing Date or (ii) with respect to any portion of the Confidential
Information the date upon which such portion no longer meets the definition of
"Confidential Information", he will not disclose Confidential Information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except
13.2.2.1 to authorized representatives of
Healthworld,
13.2.2.2 during the course of the U.K.
Stockholder's employment by
Healthworld or any of its
Subsidiaries, such information may
be disclosed by the U.K. Stockholder
as is required in the course of
performing his duties and
13.2.2.3 to counsel and other advisers,
provided that such advisers (other
than counsel) agree to the
confidentiality provisions of this
Section 13.2.
13.3 Injunctive Relief; Damages. Because of the difficulty of measuring
economic losses to Healthworld as a result of a breach of the foregoing
covenants in this Section 13, and because of the immediate and irreparable
damage that could be caused to Healthworld for which it would have no other
adequate remedy, the U.K. Stockholder agrees that the foregoing covenants may be
enforced by Healthworld in the event of breach by the U.K. Stockholder, by
injunctions and restraining orders. Nothing herein shall be construed as
prohibiting Healthworld from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
13.4 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the U.K.
Stockholder in light of the activities and business of Healthworld (including
the Subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of Healthworld contained in the Registration Statement.
13.5 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent
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jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed.
13.6 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action by the U.K.
Stockholder against Healthworld (including the subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Healthworld of such covenants. It is specifically agreed that the
Restrictive Period stated at the beginning of Section 13, during which the
agreements and covenants of the U.K. Stockholder made in Section 13 shall be
effective, shall be computed by extending the Restrictive Period by the amount
of time during which the U.K. Stockholder is in violation of any provision of
Section 13. The covenants contained in this Section 13 shall not be affected by
any breach of any other provision hereof by any party hereto.
13.7 Survival. The obligations of the parties under this Section 13
shall survive the termination of this Agreement.
14 Federal Securities Act Representations.
The U.K. Stockholder acknowledges that the shares of Healthworld Stock
to be delivered to him pursuant to this Agreement have not been and will not be
registered under the 1933 Act and therefore may not be resold without compliance
with the 1933 Act. The Healthworld Stock to be acquired by the U.K. Stockholder
pursuant to this Agreement is being acquired solely for his own account, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
14.1 Compliance with Law. The U.K. Stockholder covenants, warrants and
represents that none of the shares of Healthworld Stock issued to him will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the Healthworld Stock
issued pursuant to the transactions contemplated hereby shall bear the following
legend: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW.
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14.2 Economic Risk; Sophistication. The U.K. Stockholder is able to
bear the economic risk of an investment in the Healthworld Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the proposed
investment in the Healthworld Stock. The U.K. Stockholder has had an adequate
opportunity to ask questions and receive answers from the officers of
Healthworld concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of Healthworld, the plans for
the operations of the business of Healthworld, the business, operations and
financial condition of the companies which are entering into the Organization
but are not owned by the U.K. Stockholder, and any plans for additional
acquisitions and the like. The U.K. Stockholder has asked any and all questions
in the nature described in the preceding sentence and all questions have been
answered to his satisfaction.
15 Registration Rights.
15.1 Piggyback Registration Rights. At any time commencing one
(1) year following the Closing, whenever Healthworld proposes to register any
Healthworld Stock for its own or others account under the 1933 Act for a public
offering (other than a registration statement on Form S-4, Form S-8, or any
successor form), Healthworld shall give the U.K. Stockholder prompt written
notice of its intent to do so. Upon the written request of the U.K. Stockholder
given within 30 days after receipt of such notice, Healthworld shall cause to be
included in such registration all of the Healthworld Stock issued to the U.K.
Stockholder pursuant to this Agreement (including any stock issued as (or
issuable upon the conversion or exchange of any convertible security, warrant,
right or other security which is issued by Healthworld as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of such
Healthworld Stock) which the U.K. Stockholder requests, provided that
Healthworld shall have the right to reduce the number of shares included in such
registration to the extent that inclusion of such shares could, in the opinion
of tax counsel to Healthworld or its independent auditors, jeopardize the status
of the transactions contemplated hereby and by the Registration Statement as a
tax-free organization or jeopardize the ability of Healthworld to utilize
pooling-of-interest accounting. In addition, Healthworld shall have the right to
reduce the number of shares included in such registration if and to the extent
Healthworld is advised by the Underwriters of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 15.1 that the number of shares to be sold by persons other than
Healthworld is greater than the number of such shares which can be offered
without adversely affecting the offering. Any such reduction shall be made pro
rata based on the number of shares offered for the accounts of such persons
(based upon the number of shares held by such person).
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15.2 Registration Procedures. All expenses incurred in
connection with the registrations under this Article 15 (including all
registration, filing, qualification, legal, printer and accounting fees, but
excluding underwriting commissions and discounts), shall be borne by
Healthworld. In connection with registrations under Section 15.1, Healthworld
shall use commercially reasonable efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with respect to the
Healthworld Stock and use its best efforts to cause such registration to
promptly become and remain effective for a period of at least 90 days (or such
shorter period during which holders shall have sold all Healthworld Stock which
they requested to be registered); use its best efforts to register and qualify
the Healthworld Stock covered by such registration statement under applicable
state securities laws as the holders shall reasonably request for the
distribution for the Healthworld Stock; and take such other actions as are
reasonable and necessary to comply with the requirements of the 1933 Act and the
regulations thereunder.
15.3 Underwriting Agreement. In connection with each
registration pursuant to Section 15.1 covering an underwritten registration
public offering, Healthworld and each participating holder agree to enter into a
written agreement with the underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between the underwriters and companies of Healthworld's size and investment
stature, including indemnification.
15.4 Availability of Rule 144. Healthworld shall not be
obligated to register shares of Healthworld Stock held by the U.K. Stockholder
at any time when the resale provisions of Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act are available to the U.K.
Stockholder.
16 General.
16.1 Cooperation. The U.K. Stockholder and Healthworld shall
each deliver or cause to be delivered, and the U.K. Stockholder shall cause the
Company to deliver, to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement .
The U.K. Stockholder shall cause the Company to cooperate and use its reasonable
efforts to have their respective present officers, directors and employees
cooperate with Healthworld on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Return filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
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16.2 Successors and Assigns. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of Healthworld, and the heirs and legal representatives of the U.K.
Stockholder.
16.3 Entire Agreement. Except as otherwise provided herein,
this Agreement (including the schedules, exhibits and annexes attached hereto)
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among the U.K. Stockholder and Healthworld and supersede any prior
agreement and understanding relating to the subject matter of this Agreement.
This Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the U.K. Stockholder and
Healthworld (acting through its officers, duly authorized by its Board of
Directors).
16.4 Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the
same-instrument.
16.5 Expenses. If the transactions herein contemplated shall
be consummated, Healthworld will pay the fees, expenses and disbursements of
Healthworld and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by Healthworld under this Agreement, including
the fees and expenses of Arthur Andersen, LP, Rosenman & Colin LLP, Todtman,
Young, Nachamie, Hendler & Spizz, P.C., or any other person or entity retained
by Healthworld, and the costs of preparing the Registration Statement. If the
transactions herein contemplated shall not be consummated, then such costs and
expenses shall be paid 69% by the U.S. Companies and 31% by the U.K. Company.
The U.K. Stockholder shall pay his own costs and expenses. The U.K.
Stockholder shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the Organization, other than Transfer Taxes,
if any, imposed by the State of Delaware. The U.K. Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, the U.K. Stockholder acknowledges that he, and not Healthworld, will
pay all Taxes due upon receipt of the consideration payable pursuant to Section
2 hereof, and will assume all Tax risks and liabilities of the U.K. Stockholder
in connection with the transactions contemplated hereby.
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16.6 Notices. All notices of communication required or
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
16.6.1 If to Healthworld,
100 Avenue of the Americas
New York, New York 10013
Attn: Chairman of the Board and
Chief Executive Officer
With copies to:
Rosenman & Colin LLP Todtman, Young, Nachamie,
575 Madison Avenue Hendler & Spizz, P.C.
New York, New York 10022 425 Park Avenue
Attn: Howard Jacobs New York, New York 10022
Attn: Alex Spizz
16.6.2 If to the U.K. Stockholder, addressed to him at his
address first set forth hereinabove, together with copies to
Reid & Priest, LLP Rakisons
40 W. 57th St. 20 Chancery Lane
New York, New York 10024 London WC2A INF
Attn: Burton K. Haimes Attn: Jonathan Polin
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 16.6 from time to time.
16.7 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without giving effect to any
requirements thereof which might otherwise cause the application of the law of
another jurisdiction, and the parties consent to New York as the exclusive venue
for resolving any and all disputes that may arise concerning this Agreement.
16.8 Survival of Representations and Warranties. Except as
otherwise specifically provided in this Agreement, the representations,
warranties, covenants and agreements of the parties made herein and at the
Closing Date or in writing delivered
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pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties until the Expiration Date.
16.9 Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay of or omission in the exercise of any right, power or
remedy accruing to any party as a result of any breach or default by any other
party under this Agreement shall impair any such right, power or remedy, nor
shall it be construed as a waiver of or acquiescence in any such breach or
default, or of any similar breach or default occurring later; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or
default occurring before or after that waiver.
16.10 Time. Time is of the essence with respect to this
Agreement.
16.11 Reformation and Severability. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
16.12 Remedies Cumulative. No right, remedy or election given
by any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies an elections available at law or in
equity.
16.13 Captions. The headings of this Agreement are inserted
for convenience only, shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
16.14 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived only
by consent of Healthworld and persons to whom is allocated pursuant to Section
2.3 an aggregate of a majority of the shares of Healthworld Stock which are
allocated pursuant to such Section. Any amendment or waiver effected in
accordance with this Section 16.14 shall be binding upon each of the parties
hereto, any other person receiving Healthworld Stock in connection with the
Organization and each future holder of such Healthworld Stock.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
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HEALTHWORLD CORPORATION
By:
---------------------------------------
Steven Girgenti, Chairman and CEO
And By:
-----------------------------------
William Leslie Milton, President
- ----------------------------------
Michael Garnham
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RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHWORLD CORPORATION
(Pursuant to Section 245 of the General
Corporation Law of Delaware)
HEALTHWORLD CORPORATION, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. That the Certificate of Incorporation of the Corporation was filed
under the name Healthworld Corporation by the Secretary of State of Delaware on
the 12th day of September, 1996.
2. That as of the date hereof the Corporation has not received any
payment for any of its capital stock.
3. That the Board of Directors of the Corporation adopted resolutions,
pursuant to Sections 241 and 245 of the General Corporation Law of the State of
Delaware, authorizing the amendment and restatement of the Certificate of
Incorporation of the Corporation as follows:
FIRST: Name. The name of the Corporation is:
Healthworld Corporation
SECOND: Registered Office. The registered office of the Corporation is
to be located in the City of Wilmington, County of New Castle, in the State of
Delaware. The name of its registered agent is the Corporation Trust Company,
whose address is Corporation Trust Center, 1209 Orange Street, Wilmington,
<PAGE>
Delaware.
THIRD: Purposes. The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: Capital Stock.
(a) Authorized Shares. The total number of shares of all
classes of stock which the Corporation shall have authority to issue is
21,000,000 shares of capital stock, consisting of (i) 1,000,000 shares
of Preferred Stock, $.01 par value per share ("Preferred Stock") and
(ii) 20,000,000 shares of Common Stock, $.01 par value per share
("Common Stock").
(b) Provisions Relating to Preferred Stock. Shares of
Preferred Stock may be issued from time to time in one or more series,
and the Board of Directors of the Corporation is hereby authorized,
subject to the limitations provided by law, to establish and designate
one or more series of Preferred Stock, to fix the number of shares
constituting each series, and to fix the designation, powers,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of
each series and the variations and the relative rights, preferences and
limitations as between series, and to increase and to decrease the
number of shares constituting each series. The authority of the Board
of Directors of the Corporation with respect to each series shall
include, but shall not be limited to, the authority to determine the
following:
(i) The designation of such series, which may be by
distinguishing number or letter;
(ii) The number of shares initially constituting such
series;
(iii) The increase, and the decrease to a number not
less than the number of the then outstanding shares of such
series, of the number of shares constituting such series
theretofore fixed;
(iv) The rate or rates, and the conditions upon and
the times at which dividends on the shares of such series
shall be paid, the preference or relation which such dividends
shall
2
<PAGE>
bear to the dividends payable on any other class or classes or
on any other series of stock of the Corporation, and whether
or not such dividends shall be cumulative, and, if such
dividends shall be cumulative, the date or dates from and
after which they shall accumulate;
(v) Whether or not the shares of such series shall be
redeemable and, if such shares shall be redeemable, the terms
and conditions of such redemption, including, but not limited
to, the date or dates upon or after which such shares shall be
redeemable and the amount per share which shall be payable
upon such redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) The rights to which the holders of the shares of
such series shall be entitled upon the voluntary or
involuntary liquidation, dissolution or winding up of, or upon
any distribution of the assets of, the Corporation, which
rights may be different in the case of a voluntary
liquidation, dissolution or winding up than in the case of
such an involuntary event;
(vii) Whether or not the shares of such series shall
have voting rights, in addition to the voting rights provided
by law and, if such shares shall have such voting rights, the
terms and conditions thereof, including, but not limited to,
the right of the holders of such shares to vote as a separate
class either alone or with the holders of shares of one or
more other series of Preferred Stock and the right to have
more than one vote per share;
(viii) Whether or not a sinking or a purchase fund
shall be provided for the redemption or purchase of the shares
of such series and, if such a sinking fund or purchase fund
shall be provided, the terms and conditions thereof;
(ix) Whether or not the shares of such series shall
be convertible into, or exchangeable for, shares of any other
class or classes or any other series of the same or any other
class or classes of stock or any other security of the
Corporation or any other entity and, if provision be made for
conversion or exchange, the terms and conditions of conversion
or exchange, including, but not
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limited to, any provision for the adjustment of the conversion
or exchange rate or price; and
(x) Any other relative rights, preferences and
limitations.
(c) Provisions Relating to Common Stock.
(i) Subject to any preferential dividend rights
applicable to shares of Preferred Stock, as determined by the
Board of Directors of the Corporation pursuant to the
provisions of Section (b) of this Article FOURTH, the holders
of shares of Common Stock shall be entitled to receive such
dividends as may be declared by the Board of Directors of the
Corporation.
(ii) Subject to any preferential liquidation rights
applicable to shares of Preferred Stock, as determined by the
Board of Directors of the Corporation pursuant to the
provisions of Section (b) of this Article FOURTH, in the event
of any voluntary or involuntary liquidation, dissolution, or
winding up of, or any distribution of the assets of, the
Corporation, the holders of shares of Common Stock shall be
entitled to receive all of the assets of the Corporation
available for distribution to its stockholders ratably in
proportion to the number of shares of Common Stock held by
them.
(iii) The holders of shares of Common Stock shall be
entitled to vote on all matters at all meetings of the
stockholders of the Corporation, and shall be entitled to one
vote for each share of Common Stock entitled to vote at any
such meeting.
FIFTH: Directors and By-Laws. In furtherance and not in limitation of
the powers conferred by law, subject to any limitations contained elsewhere in
this Certificate of Incorporation, By-laws of the Corporation may be adopted,
amended or repealed by the Board of Directors of the Corporation, provided that
any By-laws adopted by the Board of Directors may be amended or repealed by the
stockholders entitled to vote thereon. Election of directors need not be by
written ballot.
SIXTH: Board of Directors. Subject to any rights of shares of Preferred
Stock, as determined by the Board of Directors of the Corporation pursuant to
the provisions of Section (b) of Article FOURTH, to elect additional directors
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under specified circumstances, the number of directors of the Corporation shall
be fixed by the By-laws of the Corporation and may be increased or decreased
from time to time in such a manner as may be prescribed by the By-laws.
SEVENTH: Indemnification. Each person who is or was or had agreed to
become a director or officer of the Corporation, or each such person who is or
was serving or who had agreed to serve at the request of the Board of Directors
or an officer of the Corporation as an employee or agent of the Corporation or
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person), shall be indemnified by the
Corporation to the full extent permitted from time to time by the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment) or any
other applicable statutory or decisional laws as currently or hereafter in
effect. Without limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person or adopt
provisions or policies pursuant to the By-laws of the Corporation or otherwise
which provide for indemnification greater or different than that provided in
this Article SEVENTH. Any amendment or repeal of this Article SEVENTH shall not
adversely affect any right or protection existing hereunder immediately prior to
such amendment or repeal.
EIGHTH: Limited Liability. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended, or (iv) for any transaction from which the director derived an improper
personal benefit. Any amendment or repeal of this Article EIGHTH shall not
adversely affect any right or protection of a director of the Corporation
existing immediately prior to such amendment or repeal.
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4. That the amendment and restatement of the Certificate of
Incorporation was duly authorized and adopted by the Board of Directors of the
Corporation in accordance with the provisions of Sections 241 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said HEALTHWORLD CORPORATION has caused this
Certificate to be signed by Steven Girgenti, its Chairman of the Board and Chief
Executive Officer, this 11 day of August, 1997.
HEALTHWORLD CORPORATION
By:/s/ Steven Girgenti
---------------------------
Steven Girgenti, Chairman
of the Board and Chief
Executive Officer
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AMENDED AND RESTATED BY-LAWS OF
HEALTHWORLD CORPORATION
(a Delaware corporation)
-----------------------------------------
ARTICLE I
Meetings of Stockholders
SECTION 1. Annual Meeting. The annual meeting of the stockholders of
HEALTHWORLD CORPORATION (the "Corporation") for the election of directors and
for the transaction of such other business as may properly come before the
meeting shall be held on such date and at such time as may be fixed by the Board
of Directors (the "Board") or if no date and time are so fixed, on the second
Tuesday, in May of each year, if not a legal holiday, and if a holiday, then on
the next succeeding day not a legal holiday, at the office of the Corporation or
at such other place and at such hour as shall be designated by the Board, or, if
no such time be fixed, then at 10:00 o'clock in the forenoon.
SECTION 2. Special Meetings. Special meetings of the stockholders,
unless otherwise prescribed by statute, may be called at any time by the Board
or by the holder or holders on the date of the call of not less than a majority
of the issued and outstanding shares of capital stock entitled to vote at such
special meeting.
SECTION 3. Notice of Meetings. Notice of the place, date and hour of
each annual and special meeting of the stockholders and the purpose or purposes
thereof shall be given personally or by mail in a postage prepaid envelope, not
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than ten or more than 60 days before the date of such meeting, to each
stockholder entitled to vote at such meeting, and, if mailed, it shall be
directed to such stockholder at his address as it appears on the record of
stockholders, unless he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address. Any such
notice for any meeting other than the annual meeting shall indicate that it is
being issued at the direction of the Board. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy and shall not, prior to the conclusion
of such meeting, protest the lack of notice thereof, or who shall, either before
or after the meeting, submit a signed waiver of notice, in person or by proxy.
Unless the Board shall fix a new record date for an adjourned meeting, notice of
such adjourned meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which the
adjournment is taken.
SECTION 4. Quorum. At all meetings of the stockholders, the holders of
the majority of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote shall be present in person or by proxy to
constitute a quorum for the transaction of business. In the absence of a quorum,
the holders of a majority of the shares of the capital stock present in person
or by proxy and entitled to vote may adjourn the meeting from time to time. At
any such
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adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally called.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 5. Organization. At each meeting of the stockholders, the
Chairman of the Board, or, if none or in the Chairman's absence, the Chief
Executive Officer, or, if none or in the absence of the Chief Executive Officer,
the Vice Chairman of the Board, or, if none or in the absence of the Vice
Chairman of the Board, the President, or, if none or in the President's absence
any Vice President of the Corporation, shall act as chairman of the meeting or,
if no one of the foregoing officers is present, a chairman shall be chosen at
the meeting by the stockholders entitled to vote who are present in person or by
proxy. The Secretary, or in his absence or inability to act, the person whom the
chairman of the meeting shall appoint secretary of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 6. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 7. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each holder of record of shares of stock of the
Corporation having voting power
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shall be entitled at each meeting of the stockholders to one vote for every
share of such stock standing in his name on the record of stockholders of the
Corporation:
(a) on the date fixed pursuant to the provisions of Section 5
of Article V of these By-laws as the record date for the determination
of the stockholders who shall be entitled to notice of and to vote at
such meeting; or
(b) if such record date shall not have been so fixed, then at
the close of business on the day next preceding the day on which notice
thereof shall be given.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him by a proxy signed by such stockholder
or his attorney-in-fact. Any such proxy shall be delivered to the secretary of
such meeting at or prior to the time designated in the order of business for so
delivering such proxies. Except as otherwise required by statute or by the
Certificate of Incorporation, any corporate action to be taken by vote of the
stockholders shall require the vote of a majority of the votes cast at a meeting
of the holders of the capital stock of the Corporation entitled to vote thereon.
Unless required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question need not be by ballot. On a vote by ballot,
each ballot shall be signed by the
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stockholder voting or by his proxy, if there be such proxy, and shall state the
number of shares voted.
SECTION 8. List of Stockholders. A list of stockholders as of the
record date, certified by the Secretary of the Corporation or by the transfer
agent for the Corporation, shall be produced at any meeting of the stockholders
upon the request of any stockholder made at or prior to such meeting.
SECTION 9. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting shall appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors shall
make a report in
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writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
SECTION 10. Consent of Stockholders in Lieu of Meeting. Any action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders, if
any, who have not consented in writing.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by or under the direction of, the Board. The Board
may exercise all such authority and powers of the Corporation and do all such
lawful acts and things as are not by statute or the Certificate of Incorporation
directed or required to be exercised or done by the
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stockholders.
SECTION 2. Number, Increase or Decrease Thereto and Term of Office. The
Board shall consist of seven directors, or such other number as may be fixed
from time to time by action of the Board, which number may be increased and
decreased as provided in this Section 2 of this Article II, one of whom may be
selected by the Board to be its Chairman. Directors need not be stockholders.
The Board, by the vote of a majority of the entire Board, may increase
the number of directors and may elect directors to fill the vacancies created by
any such increase in the number of directors until their successors are duly
elected and qualified. The Board, by the vote of a majority of the entire Board,
may decrease the number of directors, but any such decrease shall not affect the
term of office of any director. Vacancies occurring by reason of any such
increase or decrease shall be filled in accordance with Section 13 of this
Article II.
SECTION 3. Place of Meeting. Meetings of the Board shall be held at the
principal office of the Corporation in the State of New York or at such other
place, within or without such state, as the Board may from time to time
determine or as shall be specified in the notice of any such meeting.
SECTION 4. Annual Meeting. The Board shall meet for the purpose of
organization, the election of officers and the transaction of other business, as
soon as practicable after each annual meeting of the stockholders, on the same
day and at the
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same place where such annual meeting shall be held. Notice of such meeting need
not be given. Such meeting may be held at any other time or place (within or
without the State of Delaware) which shall be specified in a notice thereof
given as hereinafter provided in Section 7 of this Article II.
SECTION 5. Regular Meeting. Regular meetings of the Board shall be held
at such times and places as the Board shall from time to time fix. If any day
fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board need not be given except as otherwise required
by statute or these By-laws.
SECTION 6. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board, the Chief Executive Officer, the Vice
Chairman of the Board, the President or by a majority of the entire Board.
SECTION 7. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary as hereinafter provided in this Section 7, in which
notice shall be stated the time and place of the meeting. Except as otherwise
required by these By-laws, such notice need not state the purposes of such
meeting. Notice of each such meeting shall be mailed, postage prepaid, to each
director, addressed to him at his residence or usual place of business, by first
class mail, at
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least two days before the day on which such meeting is to be held, or shall be
sent addressed to him at such place by facsimile telegraph, telex, cable or
wireless, or be delivered to him personally or by telephone, at least 24 hours
before the time at which such meeting is to be held. A written waiver of notice,
signed by the director entitled to notice, whether before or after the time
stated therein shall be deemed equivalent to notice. Notice of any such meeting
need not be given to, any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to him.
SECTION 8. Quorum and Manner of Acting. Except as hereinafter provided,
a majority of the entire Board shall be present in person or by means of a
conference telephone or similar communications equipment which allows all
persons participating in the meeting to hear each other at the same time at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting; and, except as otherwise required by statute or the
Certificate of Incorporation, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn such meeting to another time and place. Notice of
the time and place of any such adjourned meeting shall be given to the directors
who
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were not present at the time of the adjournment and, unless such time and place
were announced at the meeting at which the adjournment was taken, to the other
directors. At any adjourned meeting at which a quorum is present, any business
may be transacted which might have been transacted at the meeting as originally
called. The directors shall act only as a Board and the individual directors
shall have no power as such.
SECTION 9. Action Without a Meeting. Any action required or permitted
to be taken by the Board at a meeting may be taken without a meeting if all
members of the Board consent in writing to the adoption of the resolutions
authorizing such action. The resolutions and written consents thereto shall be
filed with the minutes of the Board.
SECTION 10. Telephonic Participation. One or more members of the Board
may participate in a meeting by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
SECTION 11. Organization. At each meeting of the Board, the Chairman
or, in his absence, the Vice Chairman or, in his absence, the Chief Executive
officer or, in his absence, the President or, in his absence, another director
chosen by a majority of the directors present shall act as chairman of the
meeting and preside thereat. The Secretary (or, in his absence, any person who
shall be an Assistant Secretary, if any of them
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shall be present at such meeting, or in the absence of an Assistant Secretary,
such person as shall be appointed by the Chairman) shall act as secretary of the
meeting and keep the minutes thereof.
SECTION 12. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Board, the Chief
Executive Officer, the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 13. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. If there are no directors in office, then a
special meeting of stockholders for the election of directors may be called and
held in the manner provided by statute. If, at the time of filling any vacancy
or any newly created directorship, the directors then in office shall constitute
less than a majority of the whole Board (as constituted immediately prior-to any
such increase), the Court of Chancery may, upon application of any stockholder
or stockholders holding at least ten percent of the total number of the shares
at the time outstanding having
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the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office, in the manner provided by
statute. When one or more directors shall resign from the Board, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office until their successors
shall be elected and qualified.
SECTION 14. Removal of Directors. Except as otherwise provided in the
Certificate of Incorporation or in these By-laws, any director may be removed,
either with or without cause, at any time, by the affirmative vote of the
holders of record of a majority of the issued and outstanding stock entitled to
vote for the election of directors of the Corporation given at a special meeting
of the stockholders called and held for the purpose; and the vacancy in the
Board caused by such removal may be filled by such stockholders at such meeting,
or, if the stockholders shall fail to fill such vacancy, as in these By-laws
provided.
SECTION 15. Compensation. The Board shall have authority to fix the
compensation, including fees and reimbursement of expenses, of directors for
services to the Corporation in any capacity.
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ARTICLE III
Executive and Other Committees
SECTION 1. Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution shall have and may
exercise the powers of the Board in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; provided, however, that in the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Each committee shall keep written minutes of its proceedings and shall
report such minutes to the Board when required. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.
SECTION 2. General. A majority of any committee may determine its
action and fix the time and place of its meetings,
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unless the Board shall otherwise provide. Notice of such meeting shall be given
to each member of the committee in the manner provided for in Article II,
Section 7. The Board shall have any power at any time to fill vacancies in, to
change the membership of, or to dissolve any such committee. Nothing herein
shall be deemed to prevent the Board from appointing one or more committees
consisting in whole or in part of persons who are not directors of the
Corporation; provided, however, that no such committee shall have or may
exercise any authority of the Board.
SECTION 3. Action Without a Meeting. Any action required or permitted
to be taken by any committee at a meeting may be taken without a meeting if all
of the members of the committee consent in writing to the adoption of the
resolutions authorizing such action. The resolutions and written consents
thereto shall be filed with the minutes of the committee.
SECTION 4. Telephone Participation. One or more members of a committee
may participate in a meeting by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation
shall include a Chairman of the Board, a
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President, each of whom shall be chosen from among the directors, and a
Secretary and may include a Vice Chairman of the Board, who shall be chosen from
among the directors, and one or more Executive Vice Presidents, one or more Vice
Presidents, a Chief Executive Officer, a Chief Financial Officer, and a
Treasurer. Any two or more offices may be held by the same person, except that
no person shall hold at one time the offices of President and Secretary;
provided that when all of the issued and outstanding stock of the Corporation is
held by one person, such person may hold all or any combination of offices. Such
officers shall be elected from time to time by the Board, each to hold office
until the meeting of the Board following the next annual meeting of the
stockholders, or until his successor shall have been duly elected and shall have
qualified or until his death, or until he shall have resigned, or have been
removed, as hereinafter provided in these By-laws. The Chairman of the Board or
the President shall have the power to appoint such other officers (including one
or more Assistant Treasurers and one or more Assistant Secretaries) and such
agents, as may be necessary or desirable for the business of the Corporation.
Such other officers and agents shall have such duties and shall hold their
offices for such terms as may be prescribed by the Board or by the appointing
authority.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board, the Chairman
of the Board, the
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Chief Executive Officer, the Vice Chairman of the Board, the President or the
Secretary. Any such resignation shall take effect at the time specified therein
or, if the time when it shall become effective shall not be specified therein,
immediately upon its receipt; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 3. Removal. Any officer or agent of the corporation may be
removed, either with or without cause, at any time, by the Board at any meeting
of the Board or, except in the case of an officer or agent elected or appointed
by the Board, by the Chairman of the Board or the President.
SECTION 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these By-laws for the regular election or appointment to such
office.
SECTION 5. Chief Executive officer. The Board of Directors may from
time to time, by a majority vote of the whole Board of Directors, designate
either the Chairman of the Board or the President as the Chief Executive Officer
of the Corporation. The Chief Executive Officer shall have general and active
supervision over the business and affairs of the Corporation, subject, however,
to the control of the Board. He shall see that all orders and resolutions of the
Board are carried into effect. He may sign, with the Chief Financial Officer,
the Treasurer, or
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the Secretary or Assistant Secretary, certificates of stock of the Corporation.
He may sign, execute and deliver in the name of the Corporation, all deeds,
mortgages, bonds, contracts or other instruments authorized by the Board, except
in cases where the signing, execution or delivery thereof shall be expressly
delegated by the Board or by these By-laws to some other officer or agent of the
Corporation or where any of them shall be required by law or otherwise to be
signed, executed or delivered.
SECTION 6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board, at which he is
present, and shall perform such other duties as from time to time may be
prescribed by the Board of Directors.
SECTION 7. The President. The President may sign, with the Chief
Financial Officer, the Treasurer or the Secretary or an Assistant Treasurer or
Assistant Secretary, certificates of stock of the Corporation and in general, he
shall perform all duties incident to the office of President and such other
duties as from time to time may be assigned to him by the Board.
SECTION 8. Vice Chairman of the Board. The Vice Chairman of the Board
shall perform such duties as from time to time may be prescribed by the Board of
Directors or the Chairman of the Board.
SECTION 9. The Vice Presidents. Each Executive Vice President and each
other Vice President shall have such powers and perform such duties as the
Board, the Chief Executive Officer
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or the President may from time to time prescribe and shall perform such other
duties as may be prescribed by the By-laws. Any Executive Vice President or
other Vice President may sign, with the Chief Financial Officer or the Treasurer
or the Assistant Treasurer or the Secretary or an Assistant Secretary,
certificates of stock of the Corporation. At the request of the Chief Executive
Officer or the President, or in case of either officer's disability or other
inability to act, the Board of Directors may, by a majority vote of the entire
Board, designate any one of the Executive Vice Presidents or other Vice
Presidents to perform the duties of the Chief Executive Officer or the President
for such time and subject to such conditions and limitations as the Board may
determine.
SECTION 10. Chief Financial Officer. The Chief Financial Officer shall
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of
the Corporation in such depositories as may be designated by the Board
or pursuant to its direction;
(d) receive, and give receipts for, moneys due
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and payable to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board, whenever the Board may require, an
account of the financial condition of the corporation;
(g) have active control of and shall be responsible for all
matters pertaining to the accounts of the Corporation and its
subsidiaries, including: the supervision of the auditing of all
payrolls and vouchers of the Corporation and its subsidiaries and the
direction of the manner of certifying the same; the supervision of the
manner of keeping all vouchers for payments by the Corporation and its
subsidiaries, and all other documents relating to such payments; the
receiving, auditing and consolidation of all operating and financial
statements of the Corporation, its various departments, divisions and
subsidiaries; the supervision of the books of account of the
Corporation and its subsidiaries, their arrangement and classification;
and the supervision of the account and auditing practices of the
Corporation and its subsidiaries; and
(h) shall perform such other duties as from time
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to time may be assigned to him by the Chief Executive Officer or the
Board.
SECTION 11. Treasurer. The Treasurer shall in general have all duties
incident to the position of Treasurer and such other duties as may be assigned
by the Board or the President.
SECTION 12. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board and of the
stockholders, and, if requested, of the committees of the Board;
(b) see that all notices are duly given in accordance with the
provisions of the By-laws and as required by law;
(c) be custodian of the seal of the Corporation and affix and
attest the seal to all documents to be executed on behalf of the
Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to
him by the Board.
SECTION 13. Assistant Officers. Any assistant officer shall have such
powers and duties of the officer such assistant officer assists as such officer
or the Board shall from time to
20
<PAGE>
time prescribe.
SECTION 14. Officers' Bonds or Other Security. If required by the
Board, any officer of the Corporation shall give a bond or other security for
the faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
SECTION 15. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board; provided, however, that the Board may delegate to the Chairman of
the Board, the Chief Executive Officer or the President the power to fix the
compensation of officers and agents appointed by him. An officer of the
Corporation shall not be prevented from receiving compensation by reason of the
fact that he is also a director of the Corporation, but any such officer who
shall also be a director (except in the event that there is only one director of
the Corporation) shall not have any vote in the determination of the amount of
compensation paid to him.
ARTICLE V
Shares, Etc.
SECTION 1. Stock Certificates. Each owner of stock of the Corporation
shall be entitled to have a certificate, in such form as shall be approved by
the Board, certifying the number of shares of stock of the Corporation owned by
him. The certificates representing shares of stock shall be signed in the
21
<PAGE>
name of the Corporation by the Chairman or the Vice Chairman of the Board, or
the President or any Executive Vice President, Senior Vice President or other
Vice President and by the Treasurer or the Assistant Treasurer or the Secretary
or an Assistant Secretary and sealed with the seal of the Corporation (which
seal may be a facsimile, engraved or printed). In case any officer who shall
have signed such certificates shall have ceased to be such officer before such
certificates shall be issued, they may nevertheless be issued by the Corporation
with the same effect as if such officer were still in office at the date of
their issue.
SECTION 2. Books of Account and Record of Stockholders. There shall be
kept correct and complete books and records of account of all the business and
transactions of the Corporation. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any other officer or
agent designated by the Board of Directors.
SECTION 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary or
with a transfer agent or transfer clerk, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The person in whose
name shares of
22
<PAGE>
stock shall stand on the record of stockholders of the Corporation shall be
deemed the owner thereof for all purposes as regards the Corporation. Whenever
any transfers of shares shall be made for collateral security and not absolutely
and written notice thereof shall be given to the Secretary or to such transfer
agent or transfer clerk, such fact shall be stated in the entry of the transfer.
SECTION 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
SECTION 5. Fixing of Record Date. The Board may fix, in advance, a date
not more than sixty nor less than ten days before the date then fixed for the
holding of any meeting of the stockholders or before the last day on which the
consent or dissent of the stockholders may be effectively expressed for any
purpose without a meeting, as the time as of which the stockholders entitled to
notice of and to vote at such meeting or whose consent or dissent is required or
may be expressed for any purpose, as the case may be, shall be determined, and
all persons who were stockholders of record of voting stock at such time, and
23
<PAGE>
no others, shall be entitled to notice of and to vote at such meeting or to
express their consent or dissent, as the case may be. The Board may fix, in
advance, a date not more than sixty nor less than ten days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidence of rights or evidences of interest arising out of any
change, conversion or exchange of capital stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.
SECTION 6. Lost, Destroyed or Mutilated Certificate. The holder of any
certificate representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal representative
to give to the Corporation a bond in such sum, limited or unlimited, and in such
form and with such surety or sureties as the Board in its absolute discretion
shall determine, to indemnify the Corporation against
24
<PAGE>
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or the issuance of such new certificate.
Anything herein to the contrary notwithstanding, the Board, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Delaware.
ARTICLE VI
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Contracts. Except as otherwise required by
statute, the Certificate of Incorporation or these By-laws, any contract or
other instrument may be executed and delivered in the name and on behalf of the
Corporation by such officer or officers (including any assistant officer) of the
Corporation as the Board may from time to time direct. Such authority may be
general or confined to specific instances as the Board may determine. Unless
authorized by the Board or expressly permitted by these By-laws, no officer or
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it pecuniarily
liable for any purpose or to any amount, except in the ordinary course of
business and within the scope of his authority as set forth in these By-laws.
SECTION 2. Loans. Unless the Board shall otherwise determine, the
Chairman of the Board, the Chief Executive Officer, the Vice Chairman of the
Board, the President, the Chief
25
<PAGE>
Financial Officer or any Executive Vice President may effect loans and advances
at any time for the Corporation from any bank, trust company or other
institution, or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
certificates or evidences of indebtedness of the Corporation, but no officer or
officers shall mortgage, pledge, hypothecate or transfer any securities or other
property of the Corporation other than in connection with the purchase of
chattels for use in the Corporation's operations, except when authorized by the
Board.
SECTION 3. Checks, Drafts. etc. All checks, drafts, bills of exchange
or other orders for the payment of money out of the funds of the Corporation,
and all notes or other evidence of indebtedness of the Corporation, shall be
signed in the name and on behalf of the Corporation by such persons and in such
manner as shall from time to time be authorized by the Board.
SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may from time
to time designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may from time to time be delegated
by the Board. For the purpose of deposit and for the purpose of collection for
the account of the Corporation, checks, drafts and other orders for the payment
of money which are payable to the order of the Corporation may be endorsed,
assigned
26
<PAGE>
and delivered by any officer or agent of the Corporation.
SECTION 5. General and Special Bank Accounts. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be delegated by the
Board. The Board may make such special rules and regulations with respect to
such bank accounts, not inconsistent with the provisions of these By-laws, as it
may deem expedient.
ARTICLE VII
Offices
SECTION 1. Registered office. The registered office of the Corporation
shall be as specified in the Certificate of Incorporation.
SECTION 2. Other Offices. The Corporation may also have such offices,
both within or without the State of Delaware, as the Board may from time to time
determine or the business of the Corporation may require.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall be subject
to change, by the Board. Unless otherwise fixed by the Board, the fiscal year of
the Corporation shall end on
27
<PAGE>
December 31 of each calendar year.
ARTICLE IX
Seal
The seal of the Corporation shall be circular in form, shall bear the
name of the Corporation and shall include the words and numbers "Corporate
Seal", "Delaware" and the year of incorporation.
ARTICLE X
Indemnification
Any person made or threatened to be made a party to or involved in any
action, suit or proceeding, whether civil or criminal, administrative or
investigative (hereinafter, "Proceeding") by reason of the fact that he, his
testator or intestate, is or was a director, officer or employee of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended (but in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment) against all
28
<PAGE>
expense, loss and liability (including, without limitation, judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees),
actually and necessarily incurred or suffered by him in connection with the
defense of or as a result of such Proceeding, or in connection with any appeal
therein. The Corporation shall have the power to purchase and maintain insurance
for the indemnification of such directors, officers and employees to the full
extent permitted under the laws of the State of Delaware from time to time in
effect. Such right of indemnification shall not be deemed exclusive of any other
rights of indemnification to which such director, officer or employee may be
entitled.
The right to indemnification conferred in this By-Law shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such Proceeding in advance of its final
disposition; provided, however, that if the General Corporation Law of the State
of Delaware requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any other
capacity in which services was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a Proceeding, shall be made only upon
delivery to the Corporation of an undertaking by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such
29
<PAGE>
director or officer is not entitled to be indemnified under this By-Law or
otherwise.
ARTICLE XI
Amendment
The By-laws may be amended, repealed or altered by vote of the holders
of a majority of the shares of stock at the time entitled to vote in the
election of directors, except as otherwise provided in the Certificate of
Incorporation. The By-laws may also be amended, repealed or altered by the
Board, but any By-law adopted by the Board may be amended, repealed or altered
by the stockholders entitled to vote thereon as herein provided.
30
<PAGE>
[BANK OF SCOTLAND LETTERHEAD]
PRIVATE & CONFIDENTIAL
The Directors
Siteinput Limited
1 Thames Street
Windsor
Berkshire
SL4 1PL
Term Loan
6th November, 1995
The Bank is pleased to offer a facility to the undernoted Borrower on the
following terms and conditions ("this Offer"):
1. Main Financial Provisions
1.1. Name and Address of Borrower:
Siteinput Limited
1 Thames Street
Windsor
Berkshire
SL4 1PL
1.2. Amount of the facility: (Pound)350,000( the "facility")
1.3. Period of the facility: 60 months from the date of the drawing under
the facility.
1.4. An Arrangement Fee of (Pound)3,500 is payable on acceptance of this
Offer and will be debited to the Servicing Account unless otherwise
agreed.
1.5. The Servicing Account is Account Number 00 with the Bank. The
Borrower must ensure that at all times there are sufficient funds
available in the Servicing Account to pay the capital and interest
payments as and when they are due and payable under the facility.
1.6. Interest will be calculated by the Bank on a day-to-day basis on the
outstanding balance of the facility owing to the Bank. Interest
accruing will be debited to the Servicing Account on the last
business day of each month. The interest rate will be 2% per annum
over the Bank's Base Rate, as fluctuating from time to time.
1.7 The Bank's Base Rate at the date of this Offer is 6.75% per annum.
Changes are notified in national newspapers and all the Bank's
Branches.
1.8. The amount drawn under the facility must be repaid as follows:
Number of repayments: Ten
<PAGE>
- 2 -
Amount of each repayment: (Pound)35,000
Repayments will be debited to the Servicing Account at intervals of
six months commencing six months after the date of the drawing under
the facility.
2. Use of Facility
The facility may be used only for the funding of the acquisition of the
shares of Effective Sales Personnel Limited.
3. Early repayment of the Facility
3.1. The facility may be repaid in whole or in part earlier than as
specified in paragraph 1.8 of this Offer provided repayment takes
place on the last business day of a calendar month and the
Borrower shall:
(a) give at least 30 days' prior notice to the Bank;
(b) at the time of early repayment, pay an additional amount
equal to three months' interest (at the rate then applicable
to the facility) on the amount of the early repayment; and
(c) pay an administration fee to the Bank; the minimum such fee
at the date of this Offer is (Pound)50.00.
3.2. If only part of the facility is repaid early the Borrower shall
ensure that the repayments required under this Offer shall
continue to be paid until all sums due under this Offer have been
paid.
3.3. Any sums repaid early may not be redrawn.
3.4. Paragraphs 3.1 to 3.3 also apply where a Borrower is required to
repay all or part of the facility early because an asset purchased
by using the facility has been sold.
4. Financial Information
Throughout the period the facility is available (including any extension
of the facility) the Borrower must provide the Bank with the following
financial information relating to the Borrower and each of its
subsidiaries:
Annual financial statements, within 120 days after the end of the
financial year to which they relate;
Annual budget and cash flow projections, not less than one month
before the start of the period to which they relate;
<PAGE>
-3-
Monthly management accounts, within one month after the end of the
period to which they relate;
5. Events of Default
5.1. The Bank may declare that an event of default has occurred upon or
at any time after the happening of any of the following events:
(a) if the Borrower fails to pay any sum on the due date for
payment under this Offer or any other sum due and payable to
the Bank (unless the payment was not made due to a technical
error in the transmission of funds beyond the control of the
Borrower, and the payment is then made within two Business
Days of the due date);
(b) if the Borrower fails to comply with any other undertaking
or obligation on its part contained in this Offer or in any
security document and, if such failure is capable of remedy,
such failure is not remedied to the satisfaction of the Bank
within 14 days after the Bank has given written notice;
(c) if the Borrower fails to pay any of its indebtedness on the
due date or within any applicable grace period or following
a demand for repayment;
(d) if a petition is presented or an order is made or resolution
is passed for the bankruptcy, sequestration, winding-up or
administration of the Borrower or (in Scotland) the
appointment of a judicial factor to the Borrower other than
as a result of an action which can be reasonably proven to
the Bank is of a frivolous or vexatious nature;
(e) if any distress, execution, sequestration or other legal
process is levied or enforced or sued out against any of
the assets of the Borrower;
(f) if any person takes possession of, or a receiver is
appointed over, the whole or any part of the assets of the
Borrower;
(g) if the Borrower ceases or suspends payment of sums due or is
unable to pay debts as they fall due or is deemed unable to
pay sums due or is deemed apparently insolvent under
insolvency legislation;
(h) if any consent required to make any or all of the terms of
this Offer or any security document legal, valid and
binding, or to enable the Borrower to perform its
obligations under this Offer or any security document,
ceases to be in full force and effect unless such cessation
is remedied to the satisfaction of the Bank within 14 days;
(i) where the Borrower carries on a business if the Borrower
shall cease or suspend all or a substantial part of its
operations, otherwise as part of a reorganization approved
in writing by the Bank, or shall enter into any unrelated
business;
<PAGE>
-4-
(j) there occurs any other event or series of events whether
related or not (including without limitation any material
adverse change in the business, assets or financial condition
of the Borrower) which the Bank may reasonably deem, and will
notify the Borrower in writing of such, would be likely to be
materially adverse (i) to the ability of the Borrower to
perform its obligations under this Agreement or under the
Security Documents or (ii) to the business, assets or
financial condition of the Borrower as a whole, unless, in
either case, the Borrower can remedy, to the Bank's
satisfaction, the situation within 14 days of the Bank's
notice to the Borrower;
(k) if the Borrower is a limited company and control of the
Borrower passes to any person without the Bank's prior
consent;
(l) if notice of withdrawal of any guarantee or security
provided by any third party is served on the Bank or if a
guarantor or provider of third party security (in the case of
an individual) shall die, unless alternative security,
acceptable to the Bank, is provided to the Bank; or if any of
the events specified in clauses (a) to (k) inclusive above
happen in regard to a guarantor or any subsidiary of the
Borrower (unless alternative security, acceptable to the Bank,
is provided to the Bank); or
(m) if, in the Bank's opinion, at any time after the date of this
Offer (i) a risk of the Bank incurring any environmental
protection liability or cost becomes evident under or
arising from any legislation (including delegated
legislation), any consent made or given under any legislation,
and any notice, order or correspondence related to such
legislation or consent and having the force of law (a
"Statutory Control") or as a result of its having taken
security from the Borrower or its subsidiaries (if any) or any
third party, (ii) the value of any assets of the Borrower or
its subsidiaries (if any) is diminished by (or by any matter
arising from) or as a consequence of any Statutory Control, or
(iii) the Borrower or its subsidiaries (if any) does not
comply with the terms of any order, consent or authorisation
under environmental protection legislation or any other
environmental protection regulation affecting the conduct and
continuance of its business, unless within 14 days of these
occurring they are remedied to the satisfaction of the Bank.
5.2. If the Bank declares that an event of default has occurred the
Bank may at (or at any time after) the time of making the
declaration:
(a) by notice in writing to the Borrower cancel the facility;
and/or
(b) by notice in writing to the Borrower demand immediate payment
of the sums outstanding (in which case the sums outstanding
shall become immediately due and payable by the Borrower) or
declare that the sums outstanding shall become due and payable
on demand; and/or
(c) elect that interest at the default rate (being 2% over the
rate specified in this Offer) will apply in which case
interest under the facility will become payable at that rate
before or after any court decree or judgement; and/or
(d) charge an administration fee to compensate it for the
additional time spent in administering the facility.
<PAGE>
-5-
6. General Administrative Provisions
6.1. The Bank can withdraw this Offer at any time prior to acceptance.
However, unless it is withdrawn, this Offer is open for acceptance
which must reach the Bank within one calendar month of the date of
this Offer. If this Offer, duly signed, is not received by the Bank
within that period then, unless the Bank agrees otherwise, this
Offer shall lapse.
6.2. If the facility remains undrawn three months from the date of this
Offer (or such longer period as the Bank may agree) then it shall
automatically cease to be available.
6.3. A statement of the sums outstanding at any time and/or interest
and/or charges due to the Bank at any time, duly certified by a
Bank authorised official, shall (except where the Bank has made
an obvious error) be final and conclusive.
6.4. No delay by the Bank in exercising any right, power or privilege
under this Offer shall prevent the Bank from exercising it at a
later date and the Bank can exercise any of the powers conferred on
more than one occasion.
6.5. Unless the Bank otherwise agrees in this Offer, this Offer will be
governed by the law of the country in which the branch of the Bank
specified in this Offer is situated and the courts of that country
will have jurisdiction in relation to any matter relating to this
Offer.
6.6. Any notice from the Bank shall be effectively given if sent by post
to the Registered Office/place of business/residence of the
addressee last known to the Bank. Any notice shall be deemed to
have been given and received forty eight hours after being sent by
first class post.
7. Additional Conditions
7.1 Conditions Precedent Documents and Evidence required as Conditions
Precedent:
(a) A copy, certified as a true, complete and up-to-date copy by
a Director or the Secretary of each Group Company of the
Certificate of Incorporation of the Borrower and each Group
Company;
(b) A copy, certified as a true copy by a Director or the
Secretary of the Borrower and each relevant Group Company,
of resolutions of the Board of Directors of the Borrower
and each Group Company approving the Facilty and the giving
of the Security to which the Borrower or such Group Company
is a party and authorising certain of its officers to
execute and deliver the form of acceptance of this
Agreement and the Security (if appropriate) and to give
all notices and take all other action required of the
Borrower and each Group Company under the same;
(c) A copy, certified as a true copy by a Director or
Secretary of each relevant Group Company of resolutions of
the Board of Directors of such Group Company confirming
that the giving of financial assistance to the Borrower
will cause no reduction in the net assets of such Group
Company or, to the extent that there is a reduction, the
assistance can be provided out of distributable profits
and in determining whether there has been any reduction in
net assets each such Board of Directors shall consider
whether any liability is likely to be incurred in giving
the
<PAGE>
-6-
Security and also confirm that no borrowing limit of such
Group Company will be exceeded by any borrowing under this
Facility and/or any other facility made or to be made
available by the Bank to such Group Company or any other
Banking Documents or the execution of the Security and that
the giving of the Security is in the commercial interest of
such Group Company and each such Board of Directors shall
state the reason for their conclusion;
(d) Certified copies of the relevant shareholder's resolutions
approving the financial assistance to be given by each
relevant Group Company thereunder;
(e) Certified copies of the statutory declaration of the
Directors of each relevant Group Company and the report of the
Auditors for the purposes of Section 156(4) of the Companies
Act 1985 and a non-statutory report of the Auditors for the
purposes of Section 155(2) of the Companies Act 1985
addressed to the Bank and such Group Company in the form
required by the Bank;
(f) Specimen signatures authenticated by a Director or the
Secretary of each relevant Group Company of the persons
authorised in the resolutions of the Boards of Directors
referred to in 2. above;
(g) A letter from the Borrower, signed by the Secretary of the
Borrower, listing the Directors of each Group Company and
confirming that those persons are all of its existing
Directors;
(h) Evidence satisfactory to the Bank that:-
i. the Banking Documents have been completed and delivered
in accordance with all their terms;
ii. all charges and securities (other than the Security)
created over all or any of each Group Company's assets
and undertaking and presently existing will be fully
discharged on or before Drawdown.
(i) Confirmation that insurance policies of the Group as required
pursuant to the terms of the Security Documents are in terms
satisfactory to the Bank and are in full force on Drawdown;
(j) A certificate of a duly authorised officer of the Borrower
confirming that at Drawdown the aggregate of the Borrowings of
the Borrower (including borrowings under any Banking
Documents) do not or, as the case may be would not, if fully
drawn, exceed any borrowing limit contained in the Borrower's
Memorandum and Articles of Association or in any trust deed or
other agreement or instrument.
7.2 Financial Covenants:
During the period of the facility and thereafter while any sum
remains owing to the Bank under this Offer the Borrower shall
ensure that:
(a) Tangible Net Worth:
Tangible Net Worth shall not at any time be less than
(Pound)350,000.
<PAGE>
-7-
(b) Interest Cover for all Borrowings:
The ratio which EBIT for each 3 month period in the Borrower's
financial year bears to Total Interest for that period
shall not be less than 5:1.
(c) Net Debtor Cover:
The ratio which Trade Debtors bear to Borrowings due to the
Bank shall not at any time be less than 1.75:1.
7.3 Financial Definitions
"Borrowings" means all obligations and liabilities in the nature of
indebtedness (whether present or future, actual or contingent)
including (a) money borrowed or raised and capitalised interest
thereon (b) liabilities under any bond, note, debenture, loan stock
or other instrument or security (c) liabilities in respect of
acceptance or documentary credits or discounted instruments (d)
liabilities in respect of the acquisition cost of assets or services
to the extent payable on deferred payment terms (e) liabilities
under guarantees or indemnities (except product warranties) (f)
liabilities under debt purchase, factoring and similar agreements
and capital amounts owing under finance leases, hire purchase or
conditional sale agreements;
"GAAP" means generally accepted accounting practice in the United
Kingdgom;
"Group" means, at any time, each Borrower and its Subsidiaries, each
Borrower's Holding Company and each such Holding Company's
Subsidiaries. "Holding Company" and "Subsidiary" shall have the
meanings given in s.736 of the Companies Act 1985; and "Group
Company" shall be construed accordingly as any one of these;
"Total Interest" means, in relation to any specified period, the
aggregate amount of interest, commission and other recurrent
financial expenses attributable to Borrowings of the Group charged
or accrued for that period;
"EBIT" means, in relation to any specified period, the earnings of
the Group attributable to such period before deduction of taxation
and interest with such adjustments as the Bank, acting reasonably,
shall from time to time consider to be appropriate in the context of
each Group Company's business and the facility;
"Tangible Net Worth" means the aggregate of the amount from time to
time paid up on the issued share capital of the Group's parent
company and the amount standing to the credit of its consolidated
capital and reserves including any share premium account or capital
redemption reserve, but excluding any revaluation reserve, goodwill
and/or intangible assets which have not been approved by the Bank
but specifically including any goodwill arising from the acquisition
of Effective Sales Personnel Limited) plus or minus the amount
standing to the credit or debit of the consolidated profit and loss
account of the Group all as shown in the latest annual audited
financial statements or the latest management accounts approved by
the Bank;
"Trade Debtors" means debts due to each Group Company which arise
out of and are due and owing in the ordinary course of business,
which have not been outstanding for more than ninety days from the
date of the applicable invoice (or such other period as may be
agreed with the Bank) and which are not bad or doubtful or
determined by the Bank to be
<PAGE>
-8-
bad or doubtful (and the Bank shall act reasonably in making such
determination) but excluding (a) any debt owed by a Group Company,
(b) any debt owed by any person who is also a creditor of a Group
Company to the extent of the amount owed by that Group Company to
that creditors and (c) any debt which has been assigned to or is
held in trust for any third party or is subject to any factoring or
invoice discounting or similar agreement, with such adjustments as
the Bank, acting reasonably, shall from time to time consider to be
appropriate in the context of each Group Company's business and the
facility.
8. Security
The Borrower will grant or cause to be granted to the Bank security in a
form acceptable to the Bank (which, unless otherwise stated below, must be
first-ranking and cover not only the amounts owing to the Bank under this
Offer but also all other sums due and to become due to the Bank) as
follows:
a) Debentures, in the Bank's standard format, constituting first
fixed and floating charges over the assets of the Borrower
and its subsidiaries, present and future ("the Group");
b) Guarantees from each member of the Group in respect of all
moneys and liabilities owing or incurred by each member of the
Group to the Bank.
Any security which may subsequently be held by the Bank shall be available
to secure the amounts owing to the Bank under this Offer and all other sums
due to the Bank, to the full extent that the terms of such security permit.
A charge of (Pound)250 will be made to cover the Bank's security
administration costs and will be debited on acceptance of this Offer.
9. Time Limit for Acceptance of Offer
To accept this Offer, the Borrower should please sign below where
indicated, and the completed Offer should be returned to the Bank at the
above address within one calendar month from the date of this Offer. A
duplicate of this Offer is enclosed for the Borrower to keep.
/s/ (illegible)
- ------------------------------------- Date of Offer: 6th November, 1995
For and on behalf of the Bank
We accept the above Offer.
Signed: /s/ (illegible)
-----------------------------
- -------------------------------------
- -------------------------------------
For and on behalf of Siteinput Limited
Date: 8th November 1995
--------------------------------
<PAGE>
[LETTERHEAD OF BANK OF SCOTLAND]
The Directors
Milton Marketing Group Limited
(formerly known as Siteinput Limited)
1 Thames Street
Windsor
Berkshire
SL4 1PL
23rd July 1997
Dear Sirs
Supplemental Letter to a (Pound)350,000 Term Loan Facility
This letter is a first supplemental to the facility letter dated 6th November
1995 (the "Facility Letter") and made between Milton Marketing Group Limited
(the "Borrower") and the Bank of Scotland (the "Bank") under the terms of which
the Bank agreed to make available to the Borrower a secured term loan facility
in an aggregate principal sum not exceeding (Pound)350,000 (the "Original
Facility") in reliance on, the security as specified in the Facility Letter.
Whereas, the Borrower has requested and the Bank is willing to amend certain
provisions of the Facility Letter (as hereinafter set out) upon and subject to
the following terms and conditions:
1. DEFINITIONS
In this Letter, expressions and definitions used in the Facility Letter
shall, unless otherwise defined herein or the context otherwise requires,
have the same meanings herein and all references to Clauses shall be to
Clauses in the Facility Letter.
2. AMENDMENTS TO THE FACILITY LETTER
Forthwith upon the satisfaction of the conditions set out in Clause 3 below
the following amendments shall be made to the Facility Letter with effect
as of and from the date of this Letter and the Facility Letter shall be
read and construed accordingly:-
(a) Clause 1.5 of the Facility Letter shall be amended by inserting the
Account Number of Clause 1.5 into the first sentence;
(b) Clauses 7.2 and 7.3 of the Facility Letter shall be deleted and
replaced by the following new clauses 7.2 and 7.3 which shall read as
follows:-
"7.2 During the period of the facility and thereafter whilst any
sum remains owing to the Bank under the Offer the Borrower
shall ensure that:-
(i) Tangible Net Worth of the Group shall not at any time be
less than (Pound)500,000;
<PAGE>
(ii) The ratio of Trade Debtors to Borrowings due to the Bank
shall not at any time be less than 1.75:1.0;
(iii) The ratio of EBIT to Bank Interest shall not be less
than 5.0:1.0;
These covenants shall be measured at the end of each month
with reference to montly management accounts and annual
audited accounts except (iii) which shall be measured on a
quarterly 12 month rolling basis."
"7.3 Financial Definitions
"Borrowings" means all obligations and liability in the nature
of indebtedness (whether present or future, actual or
contingent) including (a) money borrowed or raised and
capitalised interest thereon (b) liabilities under any bond,
note, debenture, loan stock or other instrument or security
(c) liabilities in respect of acceptance or documentary
credits or discounted instruments (d) liabilities in respect
of the acquisition cost of assets or services to the extent
payable on deferred payment terms (e) liabilities under
guarantee or indemnities (except product warranties) (f)
liabilities under debt purchase, factoring and similar
agreements and capital amounts owing under finance leases,
hire purchase or conditional sale agreements;
"Group" means, at any time, each Borrower and its
Subsidiaries, each Borrower's Holdings Company and each such
Holding Company's Subsidiaries. "Holding Company" and
"Subsidiary" shall have the meanings given in Section 736 of
the Companies Act 1985; and "Group Company" shall be construed
accordingly as any one of these;
"Bank Interest" means, in relation to any specified period,
the aggregate amount of interest, commission and other
recurrent financial expenses attributable to Borrowings of the
Group from the Bank charged or accrued for that period;
"EBIT" means, in relation to any specified period, the
earnings of the Group attributable to such period before
deduction of taxation and interest with such adjustments as
the Bank, acting reasonably, shall from time to time consider
to be appropriate in the context of each Group Company's
business and the facility;
"Tangible Net Worth" means the aggregate of the amount from
time to time paid up on the issued share capital of the
Group's parent company and the amount standing to the credit
of its consolidated capital and reserves (including any share
premium account or capital redemption reserve, but excluding
any revaluation reserve, goodwill and/or intangible assets
which have not been approved by the Bank) plus or minus the
amount standing to the credit or debit of the consolidated
profit and loss account of the Group all as shown in the
latest annual audited financial statements or the latest
management accounts approved by the Bank;
2
<PAGE>
"Trade Debtors" means debts due to each Group Company which
arise out of and are due and owing in the ordinary course of
business, which have not been outstanding for more than ninety
days from the date of the applicable invoice (or such other
period as may be agreed with the Bank) and which are not bad
or doubtful or determined by the Bank to be bad or doubtful
(and the bank shall act reasonably in making such
determination) but excluding (a) any debt owed by a Group
Company, (b) any debt owed by any person who is also a
creditor of a Group Company to the extent of the amount owed
by that Group Company to that creditor and (c) any debt which
has been assigned to or is held in trust for any third party
or is subject to any factoring or invoice discounting or
similar agreement, with such adjustments as the Bank, acting
reasonably, shall from time to time consider to be appropriate
in the context of each Group Company's business and the
facility."
3. CONDITIONS PRECEDENT
The provisions of Clause 2 shall not come into force and effect until the
Bank has received from the Borrower in form and substance satisfactory to
the Bank, all of the following:-
(i) a copy, certified by a Director or Secretary of the Borrower of
minutes of the meeting of the Board of Directors of the Borrower at
which valid resolutions were adopted approving this Letter and all
other documents relating to this Letter and authorising a person or
persons to sign and deliver this Letter and all other documents
relating to this Letter on behalf of the Borrower, and to sign and
deliver or despatch all notices, communications or documents to be
given by the Borrower pursuant to or in connection with this letter;
and
(ii) the enclosed copy of this Letter together with the form of
acceptance thereon duly signed on the Borrower's behalf by persons
authorised to do so;
(iii) such other documents or information as the Bank may reasonably
require; and
4. CONFIRMATION BY THE BORROWER
The acceptance of this Letter shall be deemed for all purposes to
constitute the Borrower's confirmation that (other than such matters in
respect of which a deferral has been granted in writing by the Bank or
agreed by the Bank in writing) no Event of Default and/or other event
which, with the giving of notice and/or lapse of time would constitute an
Event of Default, has occurred and is continuing or would result by reason
of the execution and delivery of this Letter.
5. SECURITY
In consideration of the Bank agreeing to the amendments set out herein the
Borrower irrevocably and unconditionally confirms and reaffirms that the
benefit of the Security shall extend to and shall apply to all the
obligations and liabilities of the Borrower under the Facility Letter as
amended by this Letter and accordingly the Security shall, subject as
aforesaid, be interpreted and construed as referring to the Facility Letter
as amended by this Letter and the obligations of the Borrower thereunder
shall not be deemed to have been discharged by the acceptance of this
Letter. The Borrower undertakes to perform
3
<PAGE>
all its obligations under the Security and confirms that the Security
remains in full force and effect and enforceable against it.
6. INCORPORATION
Upon the amendments hereby made coming into force, this letter shall be
construed as one with the Facility Letter. Accordingly, the Facility Letter
shall, where the context so requires, be read and construed throughout so
as to incorporate such amendments. Save as otherwise provided herein the
Facility Letter shall remain in full force and effect.
7. FEES, EXPENSES AND TAXES
(A) The Borrower will pay to the Bank, on demand, all reasonable costs
and expenses incurred by the Bank in connection with the negotiation,
preparation and execution of this letter (including but not limited
to, the reasonable fees and expenses of legal advisers and any Value
Added Tax). The Borrower shall also reimburse the Bank on demand for
all charges and expenses incurred in connection with the enforcement
of, or the preservation of any rights under this Letter and the legal
charges (including, but not limited to, the reasonable fees and
expenses of its legal advisers and any Value Added Tax).
(B) The Borrower shall pay all documentary and other like duties and
taxes, if any, to which this Letter or the security may be subject or
give rise and shall indemnify the Bank against any and all
liabilities with respect to or resulting from any delay or omission
on the part of the Borrower to pay any such duties.
8. GOVERNING LAW
This Letter shall be governed by and construed in accordance with English
law and the Borrower irrevocably submits and unconditionally submits to the
non-exclusive jurisdiction of the English courts.
Please signify your acceptance of this Letter by returning the attached
duplicate of this Letter, duly signed.
Yours faithfully,
Signed for and on behalf of
the Governor and Company of
the Bank of Scotland
/s/ K Hughes
- -----------------------
K Hughes
Manager
[LETTERHEAD OF CHASE MANHATTAN BANK]
January 22, 1996
Steven Girgenti
President
Girgenti, Hughes, Butler & McDowell, Inc.
100 Avenue of the Americas
New York, NY 10013
Dear Mr. Girgenti:
I am pleased to inform you that The Chase Manhattan Bank, N.A.
("Chase"), has approved a $3,500,000.00 secured line of credit in favor of
Girgenti, Hughes, Butler & McDowell, Inc., Black Cat Graphics, Inc., Brand
Research Corp., GHBM Midwest, Inc., RE&A, Inc. and Medical Educational
Technologies, Inc. (collectively the "Company") to be used for working capital,
subject to the terms set forth in this letter.
Any advances which Chase may extend under this uncommitted facility
will be on the terms and conditions as the Bank may require at the time the
Company requests an advance. The continued availability of the line of credit is
subject to Chase remaining satisfied with the Company's financial condition and
economic prospects, prompt advice of any circumstances which might materially or
adversely affect the Company, and the Company's maintenance of a satisfactory
relationship with Chase.
All borrowings outstanding under this arrangement will bear interest
at Chase's Prime Rate plus one percent (Prime + 1%). Interest is to be computed
on an actual/360 day basis and is payable monthly. Payments will be debited from
the Company's deposit account with Chase when due.
Prior to any credit Chase may grant, Chase must have received the
following support which must remain in place as long as any credit is
outstanding:
1. A perfected first priority security interest in all the Company's
personal property.
2. The unlimited guaranty of payment of Steven Girgenti and William
Butler and the limited guaranty of Herbert Ehrenthal of all loans under the line
of credit. Additionally, the bank will require the personal guaranty of any and
all individuals who may in the future acquire an ownership interest of 10% or
more in the Company.
<PAGE>
Additional Conditions:
1. Borrowing Base: All advances under this line of credit to be limited
to a borrowing base formula of
A) 80% of eligible trade receivables defined as those
receivables less than sixty (60) days past due, with no value given to
intercompany receivables or prebilled media receivables.
In the event the aggregate amount advanced at any time exceeds the
Borrowing Base, such excess shall be immediately due and payable by Company to
Chase.
2. Cross-Default Provision: The occurrence of an event of default under any
other credit facility or credit arrangement between Chase and the Company shall
entitle Chase, at its option, to terminate the availability of advances under
the line of credit specified herein and/or to demand payment in full of all
outstanding advances hereunder; and the failure by the Company to observe,
perform or comply with any term, condition or requirement contained in this
letter shall, at Chase's option, constitute an event of default under any or all
other such credit facilities or credit arrangements between Chase and the
Company.
3. Mergers, Etc.: Without the prior approval of Chase, the Company will not
engage in any mergers, acquisitions or consolidations where the target company
has annual sales in excess of 50% of the Company's annual sales for the most
recent fiscal year.
Financial Covenants
The Company shall maintain:
1. The ratio of its Consolidated Current Assets to its Consolidated Current
Liabilities at not less than a ratio of 1.25 to 1.
2. The ratio of its Consolidated Liabilities to its Consolidated Tangible
Net Worth at not more than a ratio of 2.5 to 1.
3. The Cash Flow Coverage Ratio at not less than a ratio of 1.25 to 1.
To enable Chase to carry out its ongoing credit review, the Company and
Guarantors shall furnish to Chase:
<PAGE>
1. Within 120 days after and as at the close of each fiscal year, a
combined (and combining) balance sheet of Company and its consolidated
subsidiaries, and combined (and combining) statements of earnings and retained
earnings and statement of cash flows of Company and its consolidated
subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied, each accompanied by a statement that they have
been audited by Strauss & Comas, P.C., or other independent public accounting
firm satisfactory to Chase, and the report of such accountants shall not contain
any qualification or disclaimer or opinion by reason of audit limitations
imposed by Company.
2. Within 90 days after and as at the close of each fiscal quarter, a
combined (and combining) balance sheet of Company and its consolidated
subsidiaries as at the end of each fiscal quarter and related combined (and
combining) statements of earnings and retained earnings and statement of cash
flows of Company and its consolidated subsidiaries for the fiscal quarter and
from the beginning of such fiscal year to the end of such fiscal quarter,
together with comparisons to the previous year, if appropriate, prepared in
accordance with generally accepted accounting principles consistently applied,
each accompanied by a statement that they have been reviewed by Strauss & Comas,
P.C., or other independent public accounting firm satisfactory to Chase.
3. Within 120 days after the close of the Company's fiscal year, an updated
Personal Financial Statement of each personal guarantor in form and substance
satisfactory to Chase.
4. Within 45 days of filing, the Federal Tax Return of each personal
guarantor.
5. Within 15 days after the end of each month, a monthly Borrowing Base
Certificate and a monthly aging schedule of accounts receivable during all
periods of line usage. A sample Borrowing Base Summary is attached, but a
similar report providing the same information is also acceptable.
Definitions:
"Cash Flow Coverage Ratio" means, in respect of the period for which the
computation is being made, and which period shall in each case consist of a
twelve month period ending on the last day of a Fiscal Year, the ratio of (i)
Measured Cash Flow (as defined herein) to (ii) the sum of all payments of
principal and interest, including sinking fund payments, redemptions, and all
obligations under interest rate swap agreements, which the Borrower is
contractually required to pay during such period.
"Consolidated Current Assets" means, in respect of a Person, all assets of
such Person and its Subsidiaries (if any) on a consolidated basis which should
in accordance with GAAP be classified as current assets after eliminating
inter-company items, prepaid expenses and prebilled media accounts receivable,
but in any event excluding any assets which are pledged or deposited as security
for, or for the purpose of paying, any Indebtedness.
"Consolidated Current Liabilities" means, in respect of a Person, all
Indebtedness of such Person and its Subsidiaries (if any) on a consolidated
basis which should, in accordance with GAAP, be classified as current
liabilities after eliminating inter-company items, prebilled media accounts
payable and excluding Subordinated Debt.
"Consolidated Liabilities" means, in respect of a Person, all Indebtedness
of such Person and its Subsidiaries (if any) on a consolidated basis which
should, in accordance with GAAP, be classified as liabilities after eliminating
inter-company items, prebilled media accounts payable and excluding Subordinated
Debt.
"Consolidated Tangible Net Worth" means, in respect of a Person, the
consolidated stockholders' equity in such Person and its Subsidiaries determined
in accordance with GAAP, except that there shall be deducted therefrom all
intangible assets (other than leasehold improvements) of such Person and its
Subsidiaries, such as organization costs, unamortized debt discount and expense,
goodwill, patents, trademarks, copyrights, contractual franchises, and research
and development expenses, and excluding all loans to officers, affiliates and
shareholders of Company.
"Fiscal Quarter" means each quarter-year period of the Company's Fiscal
Year.
"Fiscal Year" means the Company's fiscal year consisting of a twelve month
period ending on each December 31.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the date hereof and from time to time hereafter,
applied on a basis consistent with those used in the preparation of the Initial
Financial Statements (except for changes concurred in by the Company's
independent public accountants).
"Measured Cash Flow" means the sum of the following items measured on a
consolidated basis for the Company and its Subsidiaries, if any, for any twelve
month period ending on the last day of Company's Fiscal Year:
(i) net income,
plus (ii) depreciation and all other non-cash charges to
income not affecting working capital,
minus (iii) all cash or asset dividends on capital stock,
<PAGE>
"Person" means an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
"Subordinated Debt" means indebtedness of the Company which shall be
subordinated to the loan in a form satisfactory to Chase in its sole discretion
reasonably exercised and to which Chase shall have given its express written
consent.
"Subsidiary" means any corporation or other entity of which at least a
majority of the securities or other ownership interests having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company.
Chase reserves the right to request, and the Company agrees to provide,
such other information as Chase may determine necessary in order to exercise its
discretion in honoring requests for advances under this line of credit.
This line of credit shall be further subject to the requirement that for 30
consecutive days during each twelve month period or during the term hereof,
whichever is shorter, there shall be no loans outstanding hereunder.
As part of its review process, Chase will review the Company's line of
credit upon receipt of the Company's financial statements. Unless renewed or
extended in writing by Chase at the time of the annual review, the line of
credit will automatically expire on July 31, 1996.
The Borrower agrees to pay a line origination fee of $2,000.00 to cover
Chase's costs associated with preparation of this line of credit.
Please acknowledge your understanding of the foregoing by signing and
returning the enclosed copy of this letter along with the origination fee to the
undersigned no later than February 2, 1996.
We appreciate the opportunity to be of service to you.
Very truly yours,
THE CHASE MANHATTAN BANK, N.A.
/s/ Kevin J. Anderson
------------------------------
Kevin J. Anderson
Second Vice President
(212)539-6967
<PAGE>
ACKNOWLEDGED AND AGREED:
Girgenti, Hughes, Butler & McDowell, Inc.
By: /s/ Steven Girgenti Date: January 24, 1996
------------------------
Its: President
Black Cat Graphics, Inc.
By: /s/ Steven Girgenti Date: January 24, 1996
------------------------
Its: President
Brand Research Corp.
By: /s/ Steven Girgenti Date: January 24, 1996
------------------------
Its: President
GHBM Midwest, Inc.
By: /s/ Steven Girgenti Date: January 24, 1996
------------------------
Its: President
ADDITIONAL SIGNATURES ON FOLLOWING PAGE
<PAGE>
RE&A, Inc.
By: /s/ Steven Girgenti Date: January 24, 1996
------------------------
Its: President
Medical Educational Technologies, Inc.
By: /s/ Steven Girgenti Date: January 24, 1996
------------------------
Its: President
<PAGE>
[LETTERHEAD OF CHASE MANAHATTAN BANK]
January 17, 1997
Mr. Steven Girgenti
President
Girgenti, Hughes, Butler & McDowell, Inc.
100 Avenue of the Americas
New York, NY 10013
Dear Mr. Girgenti:
I am pleased to inform you that The Chase Manhattan Bank ("Chase"
or the "Bank") has approved a $3,500,000.00 secured line of credit in favor of
Girgenti, Hughes, Butler & McDowell, Inc., Black Cat Graphics, Inc., Brand
Research Corp., Syberactive, Inc., RE&A, Inc. and Medical Education
Technologies, Inc. (individually and collectively, the "Company") to be used
for working capital, subject to the terms set forth in this letter, including
the Borrowing Base set forth below.
Any advances which Chase may extend under this uncommitted facility
will be on the terms and conditions as the Bank may require at the time the
Company requests an advance. The continued availability of the line of credit is
subject to Chase remaining satisfied with the Company's financial condition and
economic prospects, prompt advice of any circumstances which might materially or
adversely affect the Company, and the Company's maintenance of a satisfactory
relationship with Chase.
All borrowings outstanding under this arrangement will bear
interest at Chase's Prime Rate plus one percent (Prime + 1%) in effect from
time to time. Interest is to be computed on an actual/360 day basis and is
payable monthly. Payments will be debited from the Company's deposit account
with Chase when due.
Prior to any credit Chase may grant, Chase must have received the
following support which must remain in place as long as any credit is
outstanding:
1. A perfected first priority security interest in all the Company's personal
property.
2. The unlimited guaranty of payment of Steven Girgenti and William Butler
and the limited guaranty of payment of Herbert Ehrenthal of all loans
under the line of credit. Additionally, the Bank will require the personal
guaranty of any and all individuals who may in the future acquire an
ownership interest of 10% or more in the Company.
<PAGE>
Additional Conditions:
1. Borrowing Base: All amounts outstanding under this line of credit are to be
limited to a Borrowing Base formula of:
80% of eligible accounts receivable, to include those accounts
receivable that are under sixty (60) days from the invoice
date, with no value given to intercompany receivables or to
pre-billed media service receivables.
In the event the aggregate amount advanced at any time exceeds the Borrowing
Base, such excess shall be immediately due and payable by Company to Chase.
2. Cross-Default Provision: In addition to the right of Chase to terminate
this line of credit in its sole discretion, the occurrence of an event of
default under any other credit facility or credit arrangement between Chase
and the Company shall entitle Chase, at its option, to terminate the
availability of advances under the line of credit specified herein and/or to
demand payment in full of all outstanding advances hereunder; and the failure
by the Company to perform, observe or comply with any term, condition or
requirement contained in this letter shall, at Chase's option, constitute an
event of default under any or all other such credit facilities or credit
arrangements between Chase and the Company.
3. Mergers, Etc.: Without the prior approval of Chase, the Company will not
engage in any merger, acquisition or consolidation where the target company
has annual sales in excess of 50% of the Company's annual sales for the most
recent fiscal year.
Financial Covenants
The Company shall maintain:
1. The ratio of its Consolidated Current Assets to its Consolidated Current
Liabilities at not less than a ratio of 1.25 to 1.
2. The ratio of its Consolidated Liabilitics to its Consolidated Tangible Net
Worth at not more than a ratio of 2.5 to 1.
3. The Cash Flow Coverage Ratio at not less than a ratio of 1.25 to 1.
To enable Chase to carry out its ongoing credit review, the Company and
Guarantors shall furnish to Chase:
<PAGE>
1. Within 120 days after and as at the close of each Fiscal Year, a
combined (and combining) balance sheet of Company and its consolidated
subsidiaries, and combined (and combining) statements of earnings and retained
earnings and statement of cash flows of Company and its consolidated
subsidiaries, prepared in accordance with generally accepted accounting
principles consistently applied, each accompanied by a statement that they have
been audited by Strauss & Comas, P.C., or other independent certified public
accounting firm satisfactory to Chase, and the report of such accountants shall
not contain any qualification or disclaimer or opinion by reason of audit
limitations imposed by Company.
2. Within 90 days after and as at the close of each fiscal quarter,
a combined (and combining) balance sheet of Company and its consolidated
subsidiaries as at the end of each fiscal quarter and related combined (and
combining) statements of earnings and retained earnings and statement of cash
flows of Company and its consolidated subsidiaries for the fiscal quarter and
from the beginning of such fiscal year to the end of such fiscal quarter,
together with comparisons to the previous year, if appropriate, prepared in
accordance with generally accepted accounting principles consistently applied,
each accompanied by a statement that they have been reviewed by Strauss &
Comas, P.C., or other independent certified public accounting firm
satisfactory to Chase.
3. Within 120 days after the close of the Company's Fiscal Year, an
updated Personal Financial Statement of each personal guarantor in form and
substance satisfactory to Chase.
4. Within 45 days of filing, the Federal Tax Return of each
personal guarantor.
5. Within 15 days after the end of each month, a monthly Borrowing
Base Certificate and a monthly aging schedule of accounts receivable during all
periods of line usage. A sample Borrowing Base Summary is attached.
Definitions: As used herein,
"Cash Flow Coverage Ratio" means, in respect of the period for which the
computation is being made, and which period shall in each case consist of a
twelve month period ending on the last day of a Fiscal Year, the ratio of (i)
Measured Cash Flow (as defined herein) to (ii) the sum of all payments of
principal and interest, including sinking fund payments, redemptions, and all
obligations under interest rate swap agreements, which the Borrower is
contractually required to pay during such period.
"Measured Cash Flow" means the sum of the following items measured on a
consolidated basis for the Company and its Subsidiaries, if any, for any twelve
month period ending on the last day of Company's Fiscal Year:
(i) net income,
<PAGE>
plus (ii) depreciation and all other non-cash charges
to income not affecting working capital,
minus (iii) all cash or asset dividends on capital stock.
Chase reserves the right to request, and the Company agrees to provide,
such other information as Chase may determine necessary in order to exercise its
discretion in honoring requests for advances under this line of credit.
This line of credit shall be further subject to the requirement that for 30
consecutive days during each twelve month period or during the term hereof,
whichever is shorter, there shall be no loans outstanding hereunder.
Chase will consider requests for advances hereunder until July 31, 1997
unless this discretionary line of credit is earlier terminated by Chase in its
sole discretion.
This line of credit does not constitute a commitment or in any way obligate
Chase to lend whether or not the Borrower satisfies the conditions stated in
this letter, and is issued subject to Chase in its sole discretion, continuing
to be satisfied with the Borrower's financial condition and economic prospects,
prompt advice to Chase of any circumstances which might materially or adversely
affect the Borrower, and the Borrower's maintenance of a satisfactory
relationship with Chase.
Please acknowledge your understanding of the foregoing by signing and
returning the enclosed copy of this letter along with the origination fee to the
undersigned no later than January 31, 1997.
We appreciate the opportunity to be of service to you.
Very truly yours,
THE CHASE MANHATTAN BANK
/s/ Kevin J. Anderson
- ------------------------------
Kevin J. Anderson
Assistant Vice President
(212) 403-5020
<PAGE>
ACKNOWLEDGED AND AGREED:
Girgenti, Hughes, Butler & McDowell, Inc.
By: /s/ Steven Girgenti Date: January 31, 1997
-------------------------
Its: President
Black Cat Graphics, Inc.
By: /s/ Steven Girgenti Date: January 31, 1997
-------------------------
Its: President
Brand Research Corp
By: /s/ Steven Girgenti Date: January 31, 1997
-------------------------
Its: President
Syberactive, Inc.
By: /s/ Steven Girgenti Date: January 31, 1997
-------------------------
Its: President
Medical Education Technologies, Inc.
By: /s/ Steven Girgenti Date: January 31, 1997
-------------------------
Its: President
<PAGE>
PROMISSORY NOTE
$300,000
January 31, 1996
New York, New York
FOR VALUE RECEIVED, each of the undersigned, Girgenti, Hughes, Butler &
McDowell, Inc. ("GHBM"); Black Cat Graphics, Inc. ("BCG"); Brand Research Corp.
("Brand"); GHBM Midwest, Inc. ("Midwest"); RE&A, Inc; and Medical Educational
Technologies, Inc.("Medical"), each a New York corporation, (individually a
"Borrower" and collectively the "Borrowers") hereby jointly and severally
unconditionally promise to pay to the order of The Chase Manhattan Bank, N.A.
("Chase") at its office located at One Chase Manhattan Plaza, New York, N.Y.,
the principal amount of Three Hundred thousand and 00/100 Dollars ($300,000) in
immediately available funds, in thirty six monthly payments of principal and
interest, each in the amount of $9,366.35, on the first day of each month
beginning March 1, 1996, provided that the final payment shall include the
amount of the remaining unpaid principal and interest.
This Note shall bear interest on the unpaid principal amount from and including
the date of this Note to but excluding the date of repayment in full of such
amount, at an interest rate per annum equal at all times to 7 3/4%. Any
principal not paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest from and including the date due to but excluding
the date paid in full at 2% plus the interest rate set forth above. Interest
shall be calculated on the basis of a year of 360 days for the actual days
elapsed. Whenever any payment to be made under this Note shall be due on a
Saturday, Sunday or a public holiday or the equivalent for banks generally
under the laws of the State of New York, such payment may be made on the next
succeeding business day, and such extension of time shall be included in the
computation of interest.
The Borrower hereby authorizes Chase, if and to the extent payment is not made
when due under this Note to charge from time to time against any account of the
Borrower with Chase, any amount so due.
PAYMENTS
(a) Payments Generally. All payments under this Note shall be made in U.S.
Dollars in immediately available funds not later than 1:00 p.m. New York City
time on the relevant date (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Banking Day) at the
Bank's principal office at 1 Chase Manhattan Plaza, New York, New York. The
Bank may (but shall not be obligated to) debit the amount of any such payment
which is not made by such time to any ordinary deposit account of any of the
Borrowers with the Bank. If the due date of any payment under this Note would
otherwise fall on a day which is not a banking day, such date shall be
extended to the next succeeding banking day and interest shall be payable for
any principal so extended for the period of such extension. Payments shall be
applied first to interest and then to principal.
(b) Prepayments and Prepayment Compensation.
(i) This Note may be prepaid; provided, that the Borrowers shall give the Bank
notice of each such prepayment at the address provided for notices under this
Note, at least two Banking Days prior to such prepayment; and
(ii) Any prepayment of this Note (whether by voluntary prepayment, acceleration
or otherwise) must be accompanied by a payment equal to the sum of (a) accrued
interest on the principal amount prepaid to the prepayment date and (b) a
prepayment charge equal to the sum of (i) the amount, if any, by which (A)
the present value of all future scheduled principal and interest payments
discounted to the date of prepayment at a rate equal to the average yield of
U.S. Treasury securities having maturities matching the average life of the loan
remaining on the prepayment date, exceeds (B) the present value of all future
scheduled principal and interest payments discounted to the date of prepayment
at a rate
<PAGE>
equal to the average yield of U.S. Treasury securities having maturities
matching the average life of the loan both calculated on the original closing
date. In the event of a partial prepayment, the amount referred to in (i) above
shall be prorated by multiplying said amount by a fraction, the numerator of
which is the principal amount prepaid and the denominator of which is the
unpaid principal amount of the Loan immediately prior to the prepayment.
As used herein, the "average life of the loan on the prepayment date" means a
period of days equal to the quotient of (x) the sum of the products obtained by
multiplying each portion (as determined below) of the amount prepaid by the
number of days from the date of prepayment to the installment date for such
portion, divided by (y) the amount prepaid. The portion of the amount prepaid
applicable to each installment date for purposes of this calculation shall be
the portion of the principal amount prepaid that would be applied on such
installment date in the amount prepaid were applied to the installments in the
inverse order of maturities.
As used herein, the "average life of the loan on the closing date" means a
period of days equal to the quotient of (x) the sum of the products obtained by
multiplying each scheduled installment of principal by the number of days from
the closing date to the installment date, divided by (y) the original amount of
the loan.
A determination of Chase as the amounts payable pursuant to this provision
shall be conclusive absent manifest error.
All partial payments shall be applied to the reduction and payment of principal
in the inverse order of maturity.
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to Chase that:
(a) it is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation, has the power and authority
to own its assets and to transact the business in which it is now engaged or
proposes to be engaged in, and it is duly qualified and in good standing under
the laws of any other jurisdiction in which such qualification is required;
(b) This Note and each of the Security Agreements (as defined below) is, or
when delivered will be, a legal, valid and binding obligation of the Borrowers
enforceable against the Borrower in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally;
(c) the execution, delivery and performance by the Borrower of this Note and the
Security Agreements has been duly authorized by all necessary corporate action
and does not and will not: (i) require any additional consent or approval of
the shareholders of the Borrower, (ii) contravene its organizational documents,
(iii) violate any provision of any law, rule, regulation (including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Borrower; (iv) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is
a party or by which it or its properties may be bound or affected, and the
Borrower is not in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument.
(d) Financial Statements. The combined and combininq balance sheet of the
Borrowers as at December 31, 1994, and the related statement of earnings and
retained earnings and statement of cash flows for the fiscal year then ended,
are complete and correct and fairly present the financial condition of the
2
<PAGE>
Borrowers as at such date and the results of the operations of for the period
covered by such statements. There are no liabilities of the Borrowers, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of business since the date of such statements. No information, exhibit or
report furnished by the Borrowers to the Bank in connection with the
negotiation of this Note or the other Facility Documents contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not materially misleading. Since
December 31, 1994, there has been no material adverse change in the condition
(financial or otherwise), business, operations or prospects of the Borrowers.
(e) No Litigation. There are no actions, suits or proceedings pending, or to
the knowledge of the Borrower, threatened against or affecting any Borrower,
before any court, governmental agency or arbitrator, which involve forfeiture
of any assets of any Borrower (a "Forfeiture Proceeding") or which may
materially adversely affect the financial condition, operations, properties
or business of any Borrower or the ability of any Borrower to perform its
obligations under this Agreement or the Note;
(f) Partnerships. Neither the Borrower nor any of its Subsidiaries is a
partner in any partnership.
(g) Employee Benefit Plans. The Borrower is in compliance in all material
respects with the applicable provisions of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA") and the regulations and published
interpretations thereunder. No Reportable Event (as defined in Section 4043(b)
of ERISA) has occurred with respect to any Plan (as defined in ERISA)
administered by the Borrower or any administrator by it.
SECURITY AND GUARANTY
As security and support for the payment of the amounts outstanding under this
Note and all other indebtedness, obligations and liabilities of any kind of the
Borrowers to Chase.
(a) each Borrower has executed or will execute one or more security agreements
and assignments (together with any amendments and additional documents the
"Security Agreements") pursuant to which the Borrower assigns, transfers and
pledges to Chase security interests in all its personal property;
(b) each holder of 10% or more of the common stock of any Borrower (each a
"Guarantor") has executed or will execute an unconditional guaranty (a
"Guaranty") of the Obligations of the Borrowers to Chase.
This Note, the Security Agreements, each Guaranty and any other document
executed in connection herewith shall be referred to as the "Facility
Documents".
AFFIRMATIVE COVENANTS
So long as this Note shall remain unpaid, each Borrower will:
(a) Maintenance of Properties and Existence. Preserve and maintain its
existence and good standing in the jurisdiction of its organization and each
other jurisdiction where such good standing is required, maintain all of its
properties, necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted.
(b) Books And Records. Keep adequate records and books of account.
(c) Insurance. At its own expense, maintain insurance with respect to its real
and personal properties against such risks, in such form and with such
insurers, as shall be reasonably satisfactory to the Bank
3
<PAGE>
from time to time
(d) Right of Inspection. At any reasonable time and from time to time, permit
Chase or representative thereof, to examine and make copies and abstracts from
the records account of, and visit the properties of, the Borrower and to
discuss its affairs, finances with any of its officers and directors and
independent accountants.
(e) Environmental Compliance. Obtain, and comply in all material respects with,
any and all licenses, approvals, registrations or permits required as to its
operations by any and all federal, state, or local laws, regulations, statutes,
ordinances, codes, relating to or imposing liability or standards of conduct
concerning any hazardous materials, hazardous waste, asbestos or asbestos-
containing material, hazardous or toxic substance, or petroleum products.
(f) Reporting Requirements. Furnish to Chase
(i) annually, as soon as available and in any event within 120 days after
the end of each fiscal year of the Borrowers, combined and combining
balance sheets of the Borrowers as of the end of such fiscal period and
related statement of earnings and retained earnings and statement of cash
flows for such fiscal period, all in reasonable detail and stating in
comparative form the figures for the corresponding date and period in the
prior fiscal year, all prepared in accordance with GAAP consistently
applied and certified by the chief financial officer of the Borrower. Such
statements to be accompanied by an opinion thereon acceptable to the Bank
by Strauss & Comas PC, or other independent accountants acceptable to
Chase selected by the Borrower;
(ii) quarterly as soon as available and in any event within 90 days after
the end of each fiscal quarter of the Borrowers, a combined balance sheet
of the Borrowers as of the end of fiscal quarter and a statement of
earnings and statements of changes in financial position and in equity for
such fiscal period, all in reasonable detail and stating in comparative
form the figures for the corresponding date and period in the prior
fiscal year, reviewed by Strauss & Comas PC, or other independent
accountants acceptable to Chase selected by the Borrowers;
(iii) annually as soon as available, but not later than the delivery of
the annual financial statements to be delivered under (i) above, copies of
updated personal financial statements of each Guarantor, in form and
substance acceptable to Chase;
(iv) annually within 45 days of filing, copies of each Guarantor's
federal income tax return, together with the schedules thereto.
(v) promptly after the commencement thereof, notice of all actions, suits,
and proceedings before any court or govenmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting
any Borrower which, if determined adversely to such Borrower, could have a
material adverse effect on the financial condition, properties, or
operations of the Borrowers;
(vi) such other information respecting the condition or operations,
financial or otherwise, of the Borrowers as Chase may from time to time
reasonably request.
(g) Additional Guaranty. Cause each new shareholder of 10% or more of the
common stock of any Borrower to execute and deliver a guaranty (in form and
substance reasonably satisfactory to Chase) of all obligations of the Borrowers
to Chase.
(h) Employee Benefit Plans. (a) Comply in all material respects with the
applicable provisions of ERISA, and (b) furnish to the Bank (i) as soon as
possible, and in any event within 5 business days after
4
<PAGE>
any executive officer of any Borrower knows that any Reportable Event with
respect to any Plan has occurred, a statement of a financial officer of such
Borrower setting forth details as to such Reportable Event and the action which
such Borrower proposes to take with respect thereto, together with a copy of
the notice of such Reportable Event, if any, given to the Pension Benefit
Guaranty Corporation ("PBGC"), and (ii) promptly after receipt thereof, a copy
of any notice such Borrower may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or to appoint a trustee to
administer any Plan.
NEGATIVE COVENANTS.
So long as the Note shall remain unpaid the Borrowers shall not:
(a) Indebtedness, Guarantees Etc.. Create, incur, assume or suffer to exist, or
permit any of its subsidiaries to create, incur, assume or suffer to exist any
indebtedness for (i) borrowed money; (ii) for the deferred purchase price of
property or services (except trade payables in the ordinary course of business);
(iii) unfunded pension benefit liabilities; (iv) letters of credit; (v) arising
under acceptance facilities; (vi) guaranties, endorsements (other than for
collection in the ordinary course of business) and other contingent obligations
to purchase, to provide funds for payment, to supply funds to invest in any
entity, or otherwise to assure a creditor against loss, (vii) obligations as
lessee under captal leases, other than:
(a) that provided under this Note or otherwise owing to or consented to
by Chase in writing, which consent shall not be unreasonably withheld;
(b) accounts payable to trade creditors for goods or services which are
not aged more than 90 days from billing date;
(c) indebtedness secured by purchase money liens permitted by this
Aqreement; and indebtedness secured by purchase money liens permitted
by this Agreement: and
(d) additional indebtedness in connection with any merger or
acquisition permitted by Section 6(c) hereof, provided that prior to any after
incurring such indebtedness the Bonowers are in compliance with all the
provisions hereof and no default would be caused by incurring such indebtedness:
(b) Liens. Create, incur, assume or suffer to exist, any lien (statutory or
otherwise), security interest, mortgage, pledge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the forgoing (a "Lien"), upon or with
respect to any of its properties, now owned or hereafter acquired, except:
(i) Liens granted to Chase;
(ii) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or if due and payable if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(iii) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar
Liens, securing obligations incurred in the ordinary course of
business which are not past due for more than 30 days, or which are
being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established;
(iv) Liens under worker's compensation, unemployment insurance, social
security or similar legislation (other than ERISA);
5
<PAGE>
(v) Liens, deposits or pledges to secure the performance of bids,
tenders, [TO COME] contracts for the payment of money), leases
(permitted under the terms of [TO COME] public or statutory
obligations, surety, stay, appeal, indemnity, performance [TO COME]
bonds, or other similar obligations arising in the ordinary course of
business; [TO COME]
(vi) judgment and other similar Liens arising in connection with court
proceedings; provided [TO COME] the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby are
being actively contested in good faith and by appropriate proceedings;
(vii) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use and employment by any Borrower of the property or
assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
(c) Mergers, Etc. Without the prior approval of Chase, merge or consolidate
with, or sell, assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to, any person or entity, or acquire all or
substantially all of the assets or the business of any person or entity (or
enter into any agreement to do any of the foregoing), provided that if a
Borrower is the surviving entity, the Borrower(s) may in any fiscal year, merge
with or acquire companies which in the aggregate have annual sales less than
50% of the aggregate annual sales of the Borrowers' for tbe most recent fiscal
year.
SECTION 7. FINANCIAL COVENANTS
So long as the Note shall remain unpaid:
(a) Leverage Ratio. Borrower on a combined basis, shall maintain at all times a
ratio of total liabilities less prebilled media accounts payable to Tangible Net
Worth of not greater than 2.5 to 1.0.
("Tangible Net Worth: is defined as (1) the aggregate amount at which all assets
of Borrowers would be shown on a combined balance sheet at such date after
deducting capitalized interest, goodwill, patents, trademarks, copyrights,
franchises, licenses and such other assets as are properly classified as
"intangible assets" under GAAP, less (2) the aggregate amount of all
indebtedness, liabilities (including tax and other proper accruals).
(b) Current Ratio. The Borrowers on a combined basis shall maintain at all
times, a ratio of current assets less prepaid expenses and less prebilled
media accounts receivable to current liabilities less prebilled media accounts
payable of not less than 1.25 to 1.0.
(c) Debt Service Ratio. The Borrowers on a combined basis, shall have at the end
of each fiscal year for the prior twelve months then ended a ratio of
(1) the sum of (a) not profit after taxes and distributions to shareholders,
plus (b) interest expense, plus (c) depreciation, plus (d) amortization, to
(2) the sum of (a) prior year's payments of the current portion of long term
debt, plus (b) interest expense, of not less than 1.25 to 1.00.
EVENTS OF DEFAULT
If any one of the following events shall occur:
(a) failure to pay when due any amount of principal or interest due under this
Note and as to interest such failure to pay shall continue for more than five
days;
(b) any statement, representation or warranty made in this Note or in the
Facility Documents by the
6
<PAGE>
Borrowers or which is contained in any certificate, document, opinion, financial
or other statement furnished under or in connection with this Note or the
Facility Documents by the Borrowers shall be found to have been incorrect or
breached in any material respect;
(c) a default occurs in the performance of any other term, covenant or agreement
contained in this Note, in the Facility Documents or in the payment or
performance of any other obligation of the Borrowers to Chase and as to the
Affirmative Covenants contained in this Note, such non-compliance shall continue
for more than 30 days;
(d) the Borrowers shall: fail to pay any indebtedness (except for trade
indebtedness being contested in good faith), including any indebtedness for
borrowed money (other than this Note) or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise); or fail to perform or observe any term, covenant, or
condition on its part to be performed or observed under any agreement or
instrument relating to such indebtedness, when required to be performed or
observed, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration after the giving of notice or passage of time,
or both, of the maturity of such indebtedness, whether or not such failure to
perform or observe shall be waived by the holder of such indebtedness, or any
such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof;
(e) any Borrower shall generally not, or shall be unable to, or shall admit in
writing its inability to pay its debts as such debts become due; or shall make
an assignment for the benefit of creditors, petition or apply to any tribunal
for the appointment of a custodian, receiver, or trustee for it or a substantial
part of its assets; or shall commence any proceeding under any bankruptcy,
reorganization, arrangements, readjustment of debt, dissolution, or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or shall
have any such petition or application filed or any such proceeding commenced
against it in which an order for relief is entered or adjudication or
appointment is made; or by any act of omission shall indicate its consent to,
approval of, or acquiescence in any such petition, application, proceeding,
receiver, or trustee for all or any substantial part of its properties; or shall
suffer any such custodianship, receivership, or trusteeship; or such Borrower
shall discontinue its operations;
(f) one or more judgments, decrees or orders for the payment of money in excess
of $300,000 in the aggregate shall be rendered against the Borrowers and such
judgments, decrees or orders shall continue unsatisfied and in effect for a
period of 30 consecutive days without being vacated, discharged, satisfied or
stayed or bonded pending appeal, or any Forfeiture Proceeding shall have been
commenced;
(g) any of the Security Agreements shall at any time after its execution and
delivery and for any reason cease: (a) to create a valid and perfected first
priority security interest in and to the property covered therein (except to the
extent that Chase shall have consented in writing); or (b) to be in full force
and effect or shall be declared null and void, or shall be terminated, or the
validity or enforceability thereof shall be contested by the Borrower or shall
deny it has any further liability or obligation under any of the Security
Agreements, or any Borrower shall fail to perform any of its obligations under
any of the Security Agreements;
(h) any guaranty of any Borrower's obligations executed in favor of Chase shall
at any time after its execution and delivery and for any reason cease to be in
full force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the guarantor, or the guarantor,
shall deny he has any further liability or obligation thereunder or shall fail
to perform his obligations thereunder;
then, and in any such event, Chase may, in its sole discretion, by notice to the
Borrower, declare the
7
<PAGE>
outstanding balance under this Note and all interest thereon to be immediately
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrowers.
MISCELLANEOUS
Reservation of Rights. No failure on the part of Chase to exercise, and no delay
in exercising, any right, power or remedy under this Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right under this
Note preclude any other or further exercise thereof or the exercise of any other
right. The remedies provided in this Note are cumulative and not exclusive of
any remedies provided by law.
Successors and Assigns. This Note shall be binding upon and inure to the
benefit of the Borrowers and Chase and their respective successors and assigns,
except that no Borrower may assign or transfer any of its rights or obligations
under this Note without the prior written consent of Chase.
Costs, Expenses and Taxes. The Borrowers agree to pay on demand all reasonable
costs, expenses, and charges (including, without limitation, fees and charges
of external legal counsel for Chase and costs allocated by its internal legal
department) incurred by Chase in connection with the preparation, performance,
or enforcement of this Note or the Security Agreements. In addition, the
Borrowers shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of this Note and any of the Security Agreements, and agrees to save
Chase harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
Right of Set-off. Upon the occurrence and during the continuance of any Event of
Default Chase is hereby authorized at any time and from time to time, upon
contemporaneous written notice to the Borrowers (fax notice permitted), to set
off and apply any and all deposits (general or special, time or demand,
provisional or final at any time held and other indebtedness at any time owing
by Chase to or for the credit or the account of any Borrower against any and
all of the obligations of the Borrowers now or hereafter existing under this
Note, irrespectve of whether or not Chase shall have made any demand under this
Note and although such obligations may be unmatured. Chase agrees promptly to
notify the Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of Chase under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which Chase may have.
Governing Law. This Note shall be governed by and construed in accordance with
the laws of the State of New York, provided that the foregoing is not intended
to limit the maximum rate of interest which may be charged or collected by
Chase hereon if, under the law applicable to it, Chase may charge or collect
such interest at a higher rate than is permissible under the law of said State.
In no case shall the interest hereon exceed the maximum amount which Chase may
charge or collect under such law applicable to it.
Jurisdiction. The Borrowers consent to the nonexclusive jurisdiction and venue
of the state or federal courts located in New York County, New York. Service of
process by Chase in connection with any dispute shall be binding on the
Borrowers if sent to any Borrower by registered or certified mail at the
address specified below.
Notices. Unless notice of a different address is otherwise given in writing,
notices shall be given to Chase at 786 Broadway, New York, N.Y. 10003 and to the
Borrower at its address on the signature page of this Note by ordinary mail or
courier. Notices shall be effective: (a) if given by mail, 72 hours after
deposit in the mails with first class postage prepaid, addressed as aforesaid;
and (b) if given by courier, when received; provided that notices to the Chase
shall be effective upon receipt
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<PAGE>
Headings. Article and Section are included for the convenience of reference
only and shall not constitute a part of this Note for any other purpose.
Girgenti, Hughes, Butler Black Cat Graphics, Inc.
& McDowell, Inc.
By: /s/ Steven Girgenti By: /s/ Steven Girgenti
------------------------- ----------------------------
Title: President Title: President
Brand Research Corp. GHBM Midwest, Inc.
By: /s/ Steven Girgenti By: /s/ Steven Girgenti
------------------------- ----------------------------
Title: President Title: President
RE&A, Inc Medical Educational Technologies, Inc.
By: /s/ Steven Girgenti By: /s/ Steven Girgenti
------------------------- ----------------------------
Title: President Title: President
Address for Notices for each Borrower:
100 Avenue of the Americas,
New York, N.Y
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<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of the 18 day of August, 1997, between
HEALTHWORLD CORPORATION, a Delaware corporation, with offices at 100 Avenue of
the Americas, New York, New York 10013 (the "Company"), and STUART DIAMOND,
residing at 22 Woodland Place, Great Neck, New York 11021 (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company wishes to employ the Employee and the Employee
wishes to accept such employment, subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of the premises and
mutual promises contained herein and for other good and valuable consideration,
receipt of which is hereby acknowledged, agree as follows:
1. EMPLOYMENT; TERM.
The Company hereby agrees to employ the Employee, and the Employee
hereby agrees to serve as the Company's Executive Vice President and Chief
Financial Officer until August 31, 2000 (the "Initial Term") unless sooner
terminated in accordance with Section 7 hereof. The Initial Term shall be
extended automatically for additional successive one year periods, unless
either party notifies the other, in writing, of its desire to terminate this
Agreement, at least thirty (30) days prior to the end of the Initial Term or
any annual period thereafter. The Initial Term together with the period of any
extension or renewal of such employment, is referred to herein as the
"Employment Period."
2. DUTIES.
During the Employment Period, the Employee shall perform such services
as are generally performed by a Executive Vice President and Chief Financial
Officer, and shall assist the Chairman and Chief Executive Officer, Chief
Operating Officer and President of the Company with the day-to-day management of
the Company, as shall be requested. In addition, the Employee shall perform such
further duties as shall, from time to time, be reasonably delegated or assigned
to him by the Chairman and Chief Executive Officer and Chief Operating Officer
and President of the Company and the Company's Board of Directors, which are
consistent with his position.
<PAGE>
3. MANNER OF PERFORMANCE; OTHER BUSINESS COMMITMENTS.
3.1 The Employee shall serve the Company and devote his best efforts
and all his skill and ability in the performance of his duties hereunder. The
Employee shall carry out his duties in a competent and professional manner,
shall work with other employees of the Company and its affiliates and generally
promote the best interests of the Company and its clients. The Employee shall
not, in any capacity, engage in any activity which is, or may be, contrary to
the welfare, interest or benefit of the business now or hereafter conducted by
the Company.
4. COMPENSATION.
4.1 The Employee shall be paid base compensation, payable in
accordance with the Company's normal payroll practices, at an initial per annum
rate ("Base Salary") of One Hundred Seventy Five Thousand Dollars ($175,000). On
January 1, 1998 and each January 1 during the Employment Period, the Company
shall review the Employee's performance for the purpose of determining an
increase in his Base Salary. The Company agrees to review the Employee's
performance not less than once each year thereafter, if and for as long as this
Agreement is renewed.
4.2 In addition to the Base Salary payable to the Employee pursuant
to the provisions of Section 4.1 hereof, the Employee shall also be entitled
to such bonuses, from time to time, as shall be determined in the discretion
of the Company's Board of Directors, or Compensation Committee. Provided that
the Employee fulfills the terms of this Agreement he shall receive a minimum
bonus of $30,000, for the period ending December 31, 1997.
4.3 The Employee shall also be entitled to receive awards under any
plans established by the Company (e.g. stock options, restricted stock awards,
stock appreciation rights, etc.), as such may be granted, from time to time, in
the discretion of the Company's Board of Directors or Compensation Committee.
5. REIMBURSEMENT OF EXPENSES; ADDITIONAL BENEFITS.
5.1 The Company shall pay directly, or reimburse the Employee for,
all other reasonable and necessary expenses and disbursements incurred by him
for and on behalf of the Company in the performance of his duties under this
Agreement. For such purposes, the Employee shall submit to the Company itemized
reports of such expenses in accordance with the Company's policies.
2
<PAGE>
5.2 The Employee shall also be entitled to a monthly allowance of
$500.00 for the reimbursement of expenses in connection with the use of one
automobile.
5.3 The Employee shall be entitled to paid vacations during the
Employment Period in accordance with the Company's then prevalent practices for
executive officers; provided, however, that the Employee shall be entitled to
such paid vacations for not less than four (4) weeks per annum.
5.4 The Employee shall be entitled to participate in, and to receive
benefits under, any employee benefit plans of the Company (including, without
limitation, pension, profit sharing, group life insurance and group medical
insurance plans) as may exist from time to time for the Company's executive
officers. The Company shall also pay the Employee's COBRA premiums until such
time as the Employee is covered by the Company's health plan.
6. Restrictive Covenants.
6.1 During the term of this Agreement and thereafter, the Employee
shall not reveal, divulge or make known to any person, firm, corporation or
other business organization, and shall not directly or indirectly use for his
own benefit, or for the benefit of anyone else, any secret or confidential
information used by the Company in its business, including, without limitation,
(i) pricing information, (ii) the terms of the Company's existing contracts with
suppliers, distributors or vendors (iii) any information pertaining to the
Company's customers and their requirements and (iv) any other of the Company's
trade secrets, all of which shall be collectively referred to hereafter as the
"Confidential Information."
6.2 The Employee agrees that he will not at any time during the term
of this Agreement, without the prior written approval of the Board of Directors
of the Company, directly or indirectly, (i) own an interest in any business
which is competitive with the business of the Company or (ii) engage in any
business activity which is competitive with the business of the Company. For the
purposes of this Agreement any business which is engaged in Healthcare
Communications through any medium will constitute a business activity
competitive with the business of the Company. Furthermore, the Employee agrees
that, during such period, he shall not solicit, directly or indirectly, or
affect to the Company's detriment any relationship of the Company with any
customer, supplier, vendor, distributor or employee of the Company or cause any
customer, supplier, distributor or vendor to refrain from entrusting additional
business to the Company. Notwithstanding anything to the contrary contained
herein, the Employee shall be permitted to acquire up to five percent (5%) of
the outstanding securities of any company whose
3
<PAGE>
securities are publicly traded, provided that such acquisitions are for
investment purposes only.
6.3 In the event that any of the provisions of subsections 6.1 and
6.2 hereof shall be adjudicated to exceed the time, geographic or other
limitations permitted by applicable law in any jurisdiction, then such provision
shall be deemed reformed in any such jurisdiction to the maximum time,
geographic or other limitations permitted by applicable law.
6.4 As used in this Section 6, the term "Company" shall mean and
include any and all corporations affiliated with the Company, which either now
exist or which may hereafter be organized.
6.5 The Employee hereby acknowledges and agrees that, in the event
he shall violate any provisions of this Section 6 the Company will be without
an adequate remedy at law and accordingly, will be entitled to enforce such
restrictions by temporary or permanent injunctive or mandatory relief obtained
in any action or proceeding instituted in any court of competent jurisdiction
without the necessity of proving damages and without prejudice to any other
remedies which it may have at law or in equity.
6.6 The provisions of this Section 6 shall survive the termination or
earlier expiration of this Agreement, for a period of six months.
7. TERMINATION.
7.1 The Employee's employment hereunder shall automatically be
terminated upon the death of the Employee or the Employee's voluntarily leaving
the employ of the Company. The Employee's employment may also be terminated by
the Company upon thirty (30) days' prior written notice by the Company, in the
event of the Employee's disability as set forth in subsection 7.2 below.
7.2 The Employee shall be deemed disabled hereunder, if in the
opinion of the Board of Directors of the Company, as confirmed by one physician
chosen by the Company and one physician chosen by the Employee (and if both
physicians do not agree then the advice of a third physician chosen by both
physicians), the Employee shall become physically or mentally unable to perform
his duties for the Company hereunder and such incapacity shall have continued
for any period of three (3) consecutive months.
7.3 The Employee's employment hereunder shall also be terminated upon
thirty (30) days' prior written notice by the
4
<PAGE>
Company for cause. For purposes hereof, "cause" shall mean: (i) the conviction
of, guilty plea or confession by the Employee to any felony; (ii) the commission
by the Employee of any crime involving moral turpitude that causes material harm
to the Company; or (iii) the Employee's continued breach of any of the
provisions of Section 6 hereof.
7.4 The Employee shall have the right to terminate this Agreement
and his relationship with the Company hereunder, upon thirty (30) days' prior
written notice by the Employee of the Company's breach of any material
representation, warranty, covenant or agreement made by it hereunder, and the
Company's failure to cure such conduct within such thirty (30) day notice
period.
7.5 Upon the termination of the Employee by the Company without cause
either prior to or subsequent to the expiration of this Agreement, for any
reason whatsoever, the Employee shall be entitled to the payment of all
compensation payable to him hereunder, whether or not accrued, up to and
including the date of termination plus an additional six (6) months Base
Salary, and thereafter the parties shall have no further obligations to each
other hereunder, except with respect to those provisions which survive the
expiration or earlier termination of this Agreement.
7.6 In the event the Company is sold or a change of control occurs
that results in the termination of the Employee, then the Employee shall be
entitled to a minimum of three (3) months base salary in addition to that set
forth in Paragraph 7.5 above. Any amount in addition to the minimum is at the
discretion of the Board of Directors.
8. ASSIGNMENT.
This Agreement, may not be sold, transferred, assigned, pledged or
hypothecated by either party, without the express prior written consent of the
other party, except as otherwise set forth herein. This Agreement shall inure to
the benefit of and be binding upon the Company and the Employee, and each of
their heirs, successors and assigns, including without limitation, any
corporation or other entity into which the Company is merged or which acquires
all of the outstanding shares of the Company's capital stock, or all or
substantially all of the assets of the Company.
5
<PAGE>
9. NOTICES.
Any notice required or permitted to be given pursuant to this Agreement
shall be deemed given (i) upon receipt by personal delivery, (ii) one (1)
business day after personally delivered or delivered by a nationally recognized
overnight courier or (iii) three (3) business days after such notice is mailed
by certified mail, return receipt requested, addressed to the parties at each of
their addresses set forth at the beginning of this Agreement, or at such other
address as such party shall designate by written notice to the other party.
Copies of all notices shall also be provided to Todtman, Young, Nachamie,
Hendler & Spizz, P.C., 425 Park Avenue, New York, New York 10022, Attn:: Alex
Spizz, Esq.
10. GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of New York, without regard to its conflict-of-laws
rules.
11. ARBITRATION.
The parties agree that any dispute arising from this Agreement shall be
submitted to the American Arbitration Association in New York, whose
determination shall be final, and may be enforced in the Courts of the State of
New York.
12. WAIVER.
Waiver by either party of a breach of any provision of this Agreement by
the other shall not operate or be construed as a waiver of any subsequent breach
by such other party. The failure of either party hereto to take any action by
reason of such breach shall not deprive such party of the right to take action
at any time while such breach continues.
13. INVALIDITY AND SEVERABILITY.
If any provisions of this Agreement are held invalid or unenforceable
by a court of competent jurisdiction, such invalidity or unenforceability
shall not affect the other provisions of this Agreement, and, to that extent,
the provisions of this Agreement are intended to be and shall be deemed
severable.
6
<PAGE>
14. ENTIRE AGREEMENT; AMENDMENT.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and there are no representations,
warranties or commitments except as set forth herein. This Agreement supersedes
any other prior and contemporaneous agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
transactions contemplated by this Agreement. This Agreement may be amended only
in a writing executed by the parties hereto affected by such amendment.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
HEALTHWORLD CORPORATION
By: /s/ Steve Girgenti
----------------------------
Steve Girgenti
Chairman and CEO
/s/ Stuart Diamond
----------------------------
STUART DIAMOND
7
<PAGE>
LICENSE AGREEMENT
LICENSE dated as of __________________, 1997, between HEALTHWORLD, B.V, a
Netherlands corporation with an address at Herengracht 268, 1016 BW, Amsterdam,
Netherlands (the "Licensor") and THE HEALTHWORLD CORPORATION, a Delaware
corporation with an address at 100 Avenue of the Americas, New York, New York
10013 (the "Licensee").
W I T N E S S E T H :
WHEREAS, the Licensor is the owner of certain trademarks/service marks,
logos and other related proprietary information and materials which are used in
connection with advertising agency and related services; and
WHEREAS, the Licensee desires to license from the Licensor the right to use
such trademarks/service marks, logos and other related proprietary information
and materials; and
WHEREAS, the Licensor is willing to grant such license to the Licensee upon
the terms and conditions set forth herein;
NOW, THEREFORE, the parties in consideration of the mutual representations
and covenants contained herein hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 "Calendar Quarter" shall mean the four three month periods of each year
as follows: January 1st to March 31st; April 1st to June 30th; July 1st to
September 30th; and October 1st to December 31st.
1.2 "Calendar Year" shall mean each annual period commencing on January 1st
and ending on December 31st.
1.3 "Licensed Property" shall mean the trademarks/service marks and logos
and trade names set forth in Schedule A annexed hereto, including, without
limitation, all Registered Marks, and all information and materials relating to
trademarks/service marks and logos, including, without limitation, all designs,
drawings, illustrations and other art.
1.4 "Permitted Sublicensee" shall mean any subsidiary or affiliate of the
Licensee.
1.5 "Registered Marks" shall mean the Licensor's trademarks/service marks,
which have been registered or for which registration has been applied for, a
list, including a description of each, which is set forth on Schedule B annexed
hereto.
<PAGE>
1.6 "Term" shall mean the term of this License as set forth in Article 3
hereafter.
1.7 "Territory" shall mean worldwide.
ARTICLE 2. GRANT OF RIGHTS
2.1 Grant of License. The Licensor hereby grants to the Licensee the
exclusive right, during the Term, to use the Licensed Property for any lawful
purpose for which the Licensed Property may be used. The scope of the license
granted hereunder shall be applicable throughout the Territory.
2.2 Corporate Name. The Licensor also grants to the Licensee the exclusive
right to use the name HEALTHWORLD or any other trademark/service mark or trade
name licensed to the Licensee hereunder, as the Licensee's corporate or business
name.
2.3 Sublicense or Assignment. The Licensee shall have the right to grant a
sublicense or to assign any and all of its rights under this License to a
Permitted Sublicensee upon written notice to the Licensor. The Licensee shall
not be permitted to sublicense or assign its rights hereunder to any other
person, without the prior written consent of the Licensor.
2.4 Reserved Rights. Subject to the provisions hereof, the Licensee hereby
acknowledges and agrees that the Licensor shall retain the sole and exclusive
right of ownership of the Licensed Property. Notwithstanding such ownership, the
Licensor agrees that due to the exclusivity provided by this License and the
consideration payable hereunder, the Licensor, during the Term, shall not
license the Licensed Property to any third party for any reason whatsoever, nor
use the Licensed Property for any purpose, without the prior written consent of
the Licensee, which it may withhold, in its absolute discretion, for any reason.
2.5 Third Party Manufacturing. In the event that the Licensee uses the
Licensed Property in connection with its sale or distribution of any product,
the Licensee shall be entitled to engage third party manufacturers, of its
choice, to make and produce any such products.
ARTICLE 3. TERM
The term of this License shall commence on the date of this License and,
subject to the provisions of Article 9 hereafter, shall continue for a period of
fifty (50) years thereafter (hereinafter referred to as the "Term").
2
<PAGE>
ARTICLE 4. SAMPLES
The Licensee agrees to furnish the Licensor for its written approval, as to
quality and style, samples of all material used by the Licensee which contain
any of the Licensed Property, as well as all products which contain any of the
Licensed Property. The Licensee agrees to refrain from using any of such
materials and/or distributing any such products, until such approval shall have
been given by the Licensor. Any such approval shall not be unreasonably withheld
by the Licensor. The Licensor shall give the Licensee written notice of its
approval or rejection, within two (2) business days of its receipt of any of
such samples. The Licensee's failure to respond within such two (2) day period
shall be deemed its approval.
ARTICLE 5. ARTWORK AND REFERENCE MATERIALS
The Licensor will supply to the Licensee, without charge, all reference
materials or other materials, including artwork depicting the Licensed Property.
ARTICLE 6. ROYALTIES
Royalties. The Licensee shall pay to the Licensee the following royalties
in connection with its use of the Licensed Property: One Dollar ($1.00) per
year.
ARTICLE 7. TRADEMARK AND INTELLECTUAL PROPERTY
PROTECTION
7.1 Licensed Property. The Licensee periodically, upon the Licensor's
request, but not more than once during each Calendar Quarter, shall provide up
to five (5) samples of up to an aggregate of any three (i) materials used in
connection with the Licensee's services and (ii) products containing any of the
Licensed Property to the Licensor so that it can monitor the Licensee's
compliance with any trademark/service mark protections required hereunder.
7.2 Notices. All trademarks/service marks licensed hereunder, which are
used by the Licensee, shall bear trademark notices and any other legal notices
as the Licensor from time to time may direct for the protection of its rights in
such trademarks/service marks.
7.3 Ownership of Licensed Property. The Licensee acknowledges that the
Licensed Property is the sole property of the Licensor and that the Licensor has
the right to license the Licensed Property to the Licensee in the Territory and
the Licensee agrees that it will not at any time during the Term or
3
<PAGE>
thereafter dispute or contest or impair directly or indirectly the Licensor's
interest therein. It is agreed that all use of the Licensed Property by the
Licensee is on behalf of and accrues to the benefit of the Licensor.
7.4 Additional Registrations. In the event that the Licensee desires to use
any trademarks/service marks licensed hereunder in any country in the Territory
where the Licensor has not obtained a registration for such trademarks/service
marks and/or in connection with any services or goods for which the Licensor has
not obtained a registration, the Licensor agrees that, upon written notice from
the Licensee, it shall file all appropriate applications and other documents
necessary to obtain a registration for any such trademarks/service marks, as may
be required by the Licensee to protect its use of such trademarks/service marks
in the applicable Territory. The Licensor agrees to use its best efforts to
effect any such registration and the Licensee agrees to assist the Licensor, as
required, and to be named as a registered user, where required. The parties
agree to share all costs in connection with such registrations equally. The
Licensor shall be the owner of any such registrations.
7.5 Protection of Licensed Property.
(a) Action by the Licensor. The Licensee shall not commence any action
with respect to any infringement or apparent infringement relating to any
of the Licensed Property, unless the Licensor first elects not to institute
such action, at its own cost and expense. If the Licensor, elects to bring
any such infringement litigation involving or affecting the Licensed
Property, the Licensee may be joined as a party at the Licensor's expense.
If the Licensor includes the Licensee as a party in legal proceedings
pursuant to the provisions of this subsection 7.5(a) the Licensor shall
indemnify and hold the Licensee harmless from any claims, suits, judgments,
damages and reasonable expenses, costs or attorneys' fees arising out of or
related to any such legal proceedings.
(b) Action by the Licensee. In the event that the Licensor elects not
to bring any such action, the Licensee shall have the right to institute
such action hereunder, at its own cost and expense. If the Licensee elects
to commence any such action, the Licensor may be joined as a party at the
Licensee's expense. If the Licensee includes the Licensor as a party in
legal proceedings pursuant to the provisions of this subsection 7.5(b), the
Licensee shall indemnify and hold the Licensor harmless from any claims,
suits, judgments, damages and reasonable expenses, costs or attorneys' fees
arising out of or related to any such legal proceedings.
4
<PAGE>
ARTICLE 8. REPRESENTATIONS AND WARRANTIES: INDEMNIFICATIONS
8.1 Representations and Warranties of the Licensor. The Licensor represents
and warrants to the Licensee that (i) it has the requisite authority to enter
into this License, (ii) it has not granted rights to any third party which would
restrict or in any way limit the license granted to the Licensee hereunder,
(iii) the Registered Marks listed on Schedule B annexed hereto are currently in
full force and effect, and no third party has opposed the Licensor's use of any
of the Registered Marks or instituted or threatened any action for infringement
with respect to any of the Licensed Property, except as otherwise provided in
Schedule C annexed hereto and (iv) subject to the resolution of any actions set
forth on Schedule C, it owns full title and right to the Licensed Property and
the use of any of the Licensed Property by the Licensee, as authorized
hereunder, will not infringe upon the patents, trademarks, copyrights or other
intellectual property rights of any person, firm or corporation.
8.2 Indemnification by the Licensor. Subject to the provisions of Section
8.5 hereafter, the Licensor shall indemnify and hold harmless the Licensee, its
directors, officers, employees and agents from and against all claims, damages,
losses, liabilities, suits and expenses (including reasonable attorneys' fees)
arising out of or in connection with the Licensor's breach or alleged breach of
any of the representations, warranties or agreements made by it hereunder.
8.3 Representations and Warranties of the Licensee. The Licensee represents
and warrants that (i) it has the requisite authority to enter into this License
and (ii) it will not use the Licensed Property in any manner other than as
authorized pursuant to the terms and conditions of this License.
8.4 Indemnification by the Licensee. Subject to the provisions of Section
8.5 hereafter, the Licensee shall indemnify the Licensor, its directors,
officers, employees and agents and hold each of them harmless from and against
any and all claims, demands, losses, damages, liabilities, costs and expenses
(including reasonable attorneys' fees) arising out of or by reason of any breach
or alleged breach by the Licensee of any of the representations, warranties or
agreements made by it hereunder.
8.5 Obligation to Indemnify. Any claim or liability for which
indemnification is provided under this License shall be referred to as a
"Claim". An indemnified party will give the indemnifying party notice of any
Claim as soon as practicable and in any event within ten (10) days after such
indemnified party shall have had actual written notice thereof, unless a
response is required in any such action in less than ten (10) days, in
5
<PAGE>
which case such notice shall be provided not later than three (3) business days
prior to the date on which such response is due. The indemnifying party shall be
entitled at its expense to defend such Claim provided it gives such indemnified
party written notice of its election to do so within thirty (30) days after
receiving written notice from such indemnified party to defend it. Such
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be borne by such
indemnified party.
ARTICLE 9. TERMINATION
9.1 Licensor's Right to Terminate this License. The Licensor shall have the
right to terminate this License (without prejudice to any rights which it may
have either under the provisions of this License or otherwise), effective as of
the date of receipt by the Licensee of written notice (unless provided otherwise
herein) of such termination by the Licensor, upon the occurrence of any of the
following events:
(a) If the Licensee files a voluntary petition in bankruptcy, a
receiver or trustee of any of the Licensee's property is appointed and such
appointment is not vacated within sixty (60) days thereafter, or any order
shall be made or resolution passed for the winding up of the Licensee
(other than for the purpose of bona fide reconstruction or amalgamation),
which order is not released within sixty (60) days; or
(b) If the Licensee defaults in the performance of any of its material
obligations provided for in this License; provided, however, that the
Licensee shall be entitled to thirty (30) days prior written notice from
the Licensor of such default, and this License shall not be terminated if
the default is cured within such thirty (30) day period or if such default
is not capable of being cured within such thirty (30) day period, if the
Licensee has taken reasonable steps, within such period, to cure such
default.
9.2 Licensee's right to Terminate this License. The Licensee shall have the
right to terminate this License (without prejudice to any rights which it may
have either under the provisions of this License or otherwise), effective as of
the date of receipt by the Licensor of written notice (unless provided otherwise
herein) of such termination by the Licensee, upon the occurrence of any of the
following events:
(a) If the Licensor files a voluntary petition in bankruptcy, a
receiver or trustee of any of its property is appointed and such
appointment is not vacated within sixty (60) days thereafter, or any order
shall be made or
6
<PAGE>
resolution passed for the winding up the Licensor (other than for the
purpose of bona fide reconstruction or amalgamation), which order is not
released within sixty (60) days; or
(b) If the Licensor defaults in the performance of any of its material
obligations provided for in this License; provided, however, that the
Licensor shall be entitled to thirty (30) days prior written notice from
the Licensee of such default, and this License shall not be terminated if
the default is cured within such thirty (30) day period or if such default
is not capable of being cured within such thirty (30) day period, if the
Licensor has taken reasonable steps, within such period, to cure such
default.
ARTICLE 10. MISCELLANEOUS
10.1 Notices. All notices and statements shall be in writing and shall
together with any payments be delivered personally or by overnight courier
service or sent registered or certified mail, return receipt requested, postage
prepaid to the intended party at the address set forth at the beginning of this
License (unless notification of a change of address is given in writing), with a
copy by regular mail to Todtman, Young, Tunick, Nachamie, Hendler & Spizz, P.C.,
425 Park Avenue, New York, New York 10022, Attention: Martin Todtman, Esq.
Notice shall be deemed given upon delivery, if personally delivered, one day
after depositing with an overnight courier service and three days after mailing
by registered or certified mail.
10.2 Waiver, Modification. The terms of this License may not be waived or
modified except by an agreement in writing executed by the parties hereto. The
waiver by either party of any breach of this License must be in writing and
shall not be deemed to be a waiver of any prior or succeeding breach.
10.3 Relationship of the Parties. Nothing herein contained shall be
construed to place the parties in the relationship of partners or joint
venturers and neither of the parties shall have the power to obligate or bind
the other in any manner whatsoever.
10.4 No Assignment. This License may not be assigned by either party,
except as specifically provided for herein, or upon the prior written consent of
the other party.
10.5 Governing Law. This License shall be construed in accordance with the
laws of the State of New York applicable to agreements executed and to be wholly
performed therein.
10.6 Arbitration. Any dispute which arises between the parties which
pertains in any manner to this License, shall be
7
<PAGE>
resolved through binding arbitration in New York City, New York, by one
arbitrator, pursuant to the then existing rules of the American Arbitration
Association. Judgment upon any award by such arbitrator may be entered by any
state or federal court having proper jurisdiction. The parties hereto
irrevocably submit to the jurisdiction of said courts and waive any rights to
object to or challenge the appropriateness of said forums.
10.7 Captions. Captions of paragraphs appearing herein are inserted for
reference and convenience only and do not define or limit the scope or intent of
any provision hereof.
10.8 Entire Agreement. There are no representations, warranties or
covenants, with respect to the subject matter contained herein, other than those
set forth in this License which sets forth the entire understanding and
agreement among the parties hereto.
10.9 Survival. The provisions of Article 8 of this License shall survive
the expiration or earlier termination of this License.
10.10 Severability. In the event that any provision of this License should
be found by any court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties have executed this License as of the date
first above written.
HEALTHWORLD, B.V
By: /s/ L. Milton
------------------------------
Name: L. Milton
Title: Chairman
THE HEALTHWORLD CORPORATION
By: /s/ Steven Girgenti
------------------------------
Name: Steven Girgenti
Title: Chairman & CEO
8
<PAGE>
SCHEDULE A
Licensed Property
Trademarks/Service Marks: HEALTHWORLD COMMUNICATIONS; HEALTHWORLD, HEALTHWORLD
and logo; ______________________________________________________________.
Trade Names: HEALTHWORLD; _____________________________________________.
9
<PAGE>
SCHEDULE B
Registered and Pending Trademarks/Service Marks and Logos
<TABLE>
<CAPTION>
Mark Country Reg. No. Goods/Services Expiration
- ---- ------- -------- -------------- ----------
<S> <C> <C> <C> <C>
HEALTHWORLD United States 1,825,405 Advertising March 8, 2004
COMMUNICATIONS Agency
Services
HEALTHWORLD United States 1,825,404 Advertising March 8, 2004
Agency
Services
HEALTHWORLD United States 1,825,412 Advertising May 30, 2005
and Logo Agency
Services
HEALTHWORLD United States Pending Medical Not
Application Information Applicable -
- Serial No. Services, namely, Publication
75/067,463 providing Date of the
physician and Mark is
patient November 12,
educational 1996
information
concerning health
and medical
related issues via
computer databases
supplied either
on-line or
through computer
disc or a CD-ROM
</TABLE>
<PAGE>
Lease
dated as of
July 15, 1994 between
The Rector, Church-Wardens, and Vestrymen
of Trinity Church
in the City of New-York, Landlord
and
Girgenti, Hughes, Butler
& McDowell, Inc., Tenant
--------------------------
100 Avenue of the Americas
--------------------------
<PAGE>
TABLE OF CONTENTS
Page
FIRST: Use ................................................... 2
SECOND: Rent .................................................. 2
THIRD: Repairs ............................................... 2
FOURTH: Alterations and Fixtures .............................. 3
FIFTH: Compliance with Governmental
Rules and Regulations ................................. 5
SIXTH: Compliance with Landlord's Rules ...................... 5
SEVENTH: Landlord's Access to the
Premises .............................................. 6
EIGHTH: Electric Current ...................................... 6
NINTH: Condemnation .......................................... 7
TENTH: Mechanic's Liens ...................................... 8
ELEVENTH: Subordination ......................................... 9
TWELFTH: Liquors ............................................... 10
THIRTEENTH: Fire and Fire Insurance ............................... 10
FOURTEENTH: Change in Use of Premises, Subletting
and Assignment ........................................ 11
FIFTEENTH: Waiver and Surrender; Remedies
Cumulative ............................................ 16
SIXTEENTH: Representations as to Premises,
Certificate of Occupancy and Use ...................... 17
SEVENTEENTH: Limitation of Landlord's
Liability ............................................. 18
EIGHTEENTH: Indemnity by Tenant ................................... 19
NINETEENTH: Insolvency ............................................ 19
TWENTIETH: Remedies of the Landlord on Default;
Performance by the Landlord ........................... 20
(a) Remedies of the Landlord
on Default; Performance
by the Landlord .................................. 20
(b) Performance by the Land-
lord Not an Exclusive
Remedy ........................................... 20
(c) Dispossess Termination
of Lease ......................................... 20
TWENTY-FIRST: Surrender at Expiration ............................... 22
TWENTY-SECOND: Tenant's Deposit ...................................... 22
TWENTY-THIRD: Building Services ..................................... 24
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TWENTY-FOURTH: Water; HVAC ........................................... 25
TWENTY-FIFTH: Work to be Done by Landlord ........................... 26
TWENTY-SIXTH: Real Estate Tax, Operating Expense and
Fuel Oil Escalation ................................... 26
TWENTY-SEVENTH: Construction of Office
Improvements .......................................... 29
TWENTY-EIGHTH: Broker ................................................ 33
TWENTY-NINTH: Notices; Miscellaneous ................................ 33
THIRTIETH: Quiet Enjoyment ....................................... 33
THIRTY-FIRST: Headings .............................................. 34
THIRTY-SECOND: Additional Fourth Floor Premises ...................... 34
THIRTY-THIRD: Free Rent ............................................. 34
THIRTY-FOURTH: Termination of Existing Lease ......................... 35
THIRTY-FIFTH: Option Space .......................................... 35
THIRTY-SIXTH: Additional Space ...................................... 37
THIRTY-SEVENTH: Successors ............................................ 39
EXHIBIT A: Portion of Fourth Floor Premises Constituting
Initial Fourth Floor Premises
EXHIBIT B: Portion of Fourth Floor Premises Constitutlng
Additional Fourth Floor Premises
EXHIBIT C: 8th Floor Premises
EXHIBIT D: Basement Premises
EXHIBIT E: Additional Space on Seventh Floor (Option
Space)
EXHIBIT F: Operating Expense Increase Schedule
EXHIBIT G: Written Request for Payment
EXHIBIT H: Work Letter
SCHEDULE A: Cleaning Specifications
SCHEDULE B: Rules and Regulations
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<PAGE>
THIS LEASE made as of the 15th day of July, 1994, between THE RECTOR,
CHURCH-WARDENS AND VESTRYMEN OF TRINITY CHURCH IN THE CITY OF NEW-YORK, a
religious corporation (hereafter referred to as the "Landlord"), having its
offices at 74 Trinity Place, Borough of Manhattan, City, County and State of New
York, and GIRGENTI, HUGHES, BUTLER & McDOWELL, INC. (hereinafter referred to as
the "Tenant"), a New York corporation, having its place of business at 100
Avenue of the Americas, Borough of Manhattan, City, County and State of New
York.
W I T N E S S E T H :
That the Landlord hereby lets and leases to the Tenant, and the Tenant
hereby takes and hires from the Landlord, the following described space
(hereafter referred to as the "premises"):
Commencing on December 1, 1994:
(i) a portion of the 4th floor as indicated by the cross-hatching on
the diagram attached hereto as Exhibit "A";
(ii) the entire 8th floor as indicated by the cross-hatching on the
diagram attached hereto as Exhibit "C"; and
(iii) a portion of the basement as indicated by the cross-hatching on
the diagram attached hereto as Exhibit "D";
Commencing on December 1, 1997 (or sooner as contemplated by the provisions of
Article Thirty-Second hereof):
(i) a portion of the 4th floor as indicated by the cross-hatching on
the diagram attached hereto as Exhibit "B";
in the building of the Landlord known by street number as 100 Avenue of the
Americas, in the Borough of Manhattan, City, County and State of New York
(hereafter referred to as the "building") and the Tenant is hereby granted the
nonexclusive right to use all common areas of the building and the necessary
entrances and appurtenances to the premises (subject to the rules and
regulations annexed hereto and such further rules and regulations of which
Tenant is given notice as the Landlord shall from time to time prescribe),
reserving to the Landlord all other portions of the building not herein
specifically demised, for a term to commence at noon, Standard Time, on December
1, 1994 and to expire at noon Standard Time on December 31, 2009 or until such
term shall sooner cease and expire or be terminated as hereafter provided at the
rent at the annual rate or rates as follows:
During the period commencing on December 1, 1994 and ending on
November 30, 1997, the annual rent shall be Five Hundred Seventy-Five
Thousand Ten Dollars ($575,010.00);
During the period commencing on December 1, 1997 and ending on
November 30, 1998, the annual rent shall be Six Hundred Sixty-One Thousand
Eight Hundred Dollars ($661,800.00);
During the period commencing on December 1, 1998 and ending on
November 30, 2003, the annual rent shall be Seven Hundred Forty-Nine
Thousand Eight Hundred Dollars ($749,800.00); and
During the period commencing on December 1, 2003 and ending on
December 31, 2009, the annual rent shall be Nine Hundred Sixty-Nine
Thousand Eight Hundred Dollars ($969,800.00);
<PAGE>
payable at the offices of the Landlord in equal monthly payments equal to
1/12th of the rent at the annual rates as above prescribed for the
respective periods in which they are payable, in advance without demand
therefor and an installment equal to the amount of the rent payable under
this lease for the first month of the term for which rent is payable shall
be paid upon the execution of this Lease, and thereafter, on the first day
of each month during said term, in lawful money of the United States, plus,
when due or demanded, such items as shall be provided hereafter are payable
by the Tenant as additional rent.
THE ABOVE LETTING IS UPON THE FOLLOWING COVENANTS, TERMS AND
CONDITIONS, each and every one of which the Tenant covenants and agrees
with the Landlord to keep and perform, and the Tenant agrees that the
covenants herein contained on the part of the Tenant to be performed, shall
be deemed conditional limitations, as well as covenants and conditions:
FIRST: Use. The Tenant shall use the premises only for general and
executive offices in connection with Tenant's advertising business and
other uses generally ancillary to the advertising business (including art
departments, public relations, media editing and similar uses), except that
the basement space shall be used for storage purposes only.
SECOND: Rent. (a) The Tenant shall pay the rent and additional rent as
provided in this lease.
(b) If any installment or installments of rent or additional rent or
any service charge shall not be paid within fifteen (15) days following the
date on which the same shall be due and payable pursuant to this lease
then, in addition to, and without waiving or releasing, any other rights
and remedies of the Landlord, the Tenant shall pay to the Landlord a late
charge of one and one-half (1-1/2%) percent per month computed (on the
basis of a 30-day month) from the date on which each such installment
became due and payable to the date of payment of the installment on the
amount of each such installment or installments, as liquidated damages for
Tenant's failure to make prompt payment, and the same may be collected on
demand or as additional rent in accordance with the provisions of Article
TWENTY-FIRST of this lease.
THIRD: Repairs. (a) The Tenant shall take good care of the premises
and the fixtures, appurtenances, equipment and facilities therein and shall
make, as and when needed, all repairs in and about the premises required to
keep them in good order and condition; such repairs to be equal in quality
to the original work; provided, that the Tenant shall not be obligated for
structural or exterior repairs to the building or for repairs to the
systems and facilities of the building for the use or service of tenants
generally (including the plumbing, heating and electrical systems), other
than fixtures, appurtenances, equipment and facilities in the premises,
except where structural or exterior repairs or repairs to such systems and
facilities are made necessary by reason of one or more of the occurrences
described below in clauses (i) through (iv) of this Article THIRD (a).
Should the Tenant fail to repair any condition in or about the premises or
the fixtures, appurtenances, equipment and facilities therein which is of
such a nature that its neglect would be reasonably likely to result in
damage or danger to the building, its fixtures, appurtenances, facilities
and equipment, or to its occupants (of which nature the Landlord shall be
the sole judge) or, in the case of repairs of any other nature, should the
Tenant have failed to make the required repairs or to have begun, in good
faith, the work necessary to make them within five (5) days after notice
from the Landlord of the condition requiring repair, then in either case,
the Landlord may (but shall have no obligation to) immediately enter the
premises and make the required repairs at the expense of the Tenant. The
Landlord may (but shall have no obligation to) make, at the expense of the
Tenant, any repairs to
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<PAGE>
the building or to its fixtures, appurtenances, facilities or equipment,
whether of a structural or any other nature, which are required by reason
of damage or injury due (i) to the negligence or the wilful acts of the
Tenant or Tenant's employees, agents, contractors, licensees or visitors;
(ii) to the moving, into or out of the building, of property being
delivered to or taken from the premises by Tenant, Tenant's agents,
employees, contractors, licensees or visitors; (iii) to the installation,
repair or removal of the property of the Tenant in the premises by Tenant
or Tenant's agents, employees, contractors, licensees or visitors; or (iv)
to the negligent or willfully incorrect operation of any machinery
equipment, or facility installed in the premises by or for the Tenant. The
Tenant will pay the actual and reasonable cost of any repairs made by the
Landlord pursuant to this paragraph upon presentation of bills therefor, or
the Landlord may, at its option, add such amounts to any installment or
installments of rent due under this lease and collect the same as
additional rent. The liability of the Tenant under this Article THIRD shall
survive the expiration or other termination of this lease. Except for the
repairs which are the Tenant's obligations under the first sentence of this
Article THIRD (a), the Landlord, at Landlord's cost and expense, will, upon
notice of the need therefor, make the repairs required and perform all
maintenance necessary to keep the building and its fixtures, appurtenances,
facilities, equipment and systems (including the plumbing, heating and
electrical systems) in good working order.
(b) Machinery. If the Tenant shall install or maintain any business
machinery or other apparatus of any description in the premises (other than
personal computers, photocopying machines, paper collating machines,
telephones and telephone systems generally used in offices), the operation
of which produces noise or vibration which is transmitted beyond the
premises and the Landlord deems it necessary that the noise or vibration of
such machinery or apparatus be diminished, eliminated, prevented or
confined to the premises, the Landlord may give written notice to the
Tenant, requiring that the Tenant provide and install rubber or other
approved settings for absorbing, preventing or decreasing the noise or
vibration of such machinery or apparatus within fifteen (15) days. The
judgment of the Landlord of the necessity of such installation shall be
conclusive, and the installation shall be made in such manner and of such
material as the Landlord may direct. Should the Tenant fail to comply with
such request within fifteen (15) days, the Landlord may do the work
necessary to absorb, prevent or decrease the noise or vibration of such
machinery or equipment and the Tenant will pay to the Landlord the cost of
such work upon demand or such cost may, at the option of the Landlord, be
added to any installment or installments of rent under this lease and shall
be payable by the Tenant as additional rent.
(c) Maintenance. Landlord shall at all times maintain the building in
the manner in which buildings of similar quality and character are
maintained.
FOURTH: Alterations and Fixtures. (a) The Tenant shall not make any
alteration, addition or improvement in or upon the premises, nor incur any
expense therefor, without having first obtained the written consent of the
Landlord therefor. If the Tenant shall desire to make alterations,
additions or improvements to the premises which will not adversely affect
the structure of the building or the operation of any of the systems or
facilities of the building for the use of all tenants or violate the
requirements of government hereafter referred to and if the Tenant shall
furnish the Landlord with the Tenant's plans and specifications for the
proposed alteration, addition or improvement in sufficient detail to permit
the Landlord to determine that the same will comply with the requirements
of this subdivision (a), the Landlord's approval will not be unreasonably
withheld or delayed. (The Tenant agrees to reimburse the Landlord for its
reasonable fees, expenses and charges for reviewing any such plans or
specifica-
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<PAGE>
tions.) Notwithstanding the foregoing, Tenant shall have no obligation to
submit such plans and specifications in connection with the mere painting
of the premises or the performance of any non-structural alteration,
addition or improvement, provided such have no effect on the building's
systems and the cost thereof, in the Tenant's reasonable estimate, will not
exceed $50,000, either individually or in the aggregate with other
alterations, additions or improvements in the twelve (12) month period
immediately preceding, and provided that (i) Tenant gives Landlord at least
ten (10) days' prior notice describing such work in reasonable detail
(including Tenant's reasonably detailed estimate of the cost thereof) and
setting forth the name(s) and address(es) of the contractor(s) whom Tenant
desires to perform such work, and (ii) Tenant shall obtain all building or
other governmental permits required for such work and Landlord will not be
required to execute any documents in connection with such work or such
permits. Whenever any alterations, decorations, additions or improvements
of the premises are made by the Tenant, the Tenant shall not knowingly,
employ or permit to be employed therein any labor which will cause strikes
or labor troubles with other employees in the building employed by the
Landlord or its contractors. All alterations, decorations, additions or
improvements shall be made and installed in a good and workmanlike manner
and shall comply with all requirements, by law, regulation or rule, of the
Federal, State and City Governments and all subdivisions and agencies
thereof, and with the requirements of the New York Fire Insurance Exchange,
New York Board of Fire Underwriters and all other bodies exercising similar
functions, and shall conform to any particular requirements of the Landlord
expressed in its consent for the making of any such alterations,
decorations, additions, and improvements. Any such work once begun shall be
completed with all reasonable dispatch, but shall be done at such time and
in such manner as not to interfere with the occupancy of any other tenant
or the progress of any work being performed by or on account of the
Landlord. At Tenant's request, within ten (10) days of receipt of Tenant's
request for Landlord's approval of any alteration, addition or improvement,
the Landlord will notify the Tenant whether the alteration, addition or
improvement will be required to be removed by the Tenant at the expiration
or earlier termination of this lease or may remain upon the premises to
become the property of the Landlord. If such request is made by Tenant but
no such notice is given by the Landlord, the provisions of subdivision (b)
of this Article shall apply.
(b) All alterations, additions or improvements, which may be made or
installed in or upon the premises (whether made during or prior to the term
of this lease or during the term of any prior lease of the premises by the
Landlord, the Tenant or any previous tenant), except the furniture and
trade fixtures of the Tenant shall be conclusively deemed to be part of the
freehold and the property of the Landlord, and shall remain upon the
premises, and upon any termination of this lease, be surrendered therewith
as part thereof; Tenant shall remove all of Tenant's personal property, at
its own cost and expense, at or prior to the expiration of the term and
shall restore and repair, at its own cost and expense, any damage or
disfigurement of the premises occasioned by such removal or remaining after
such removal so as to leave the premises in as good order and condition as
they were at the time of the making of this lease or, the Landlord at its
option, may make such restoration and repair and the Tenant will pay the
cost thereof upon demand. If any furniture or trade fixtures and other
personal property of the Tenant shall not be removed at the expiration or
any other termination of this lease, they shall, at the Landlord's option,
be deemed to have been irrevocably abandoned to the Landlord, and the
Tenant shall have no further right, title or interest therein, and the
Landlord may remove the same from the premises, disposing of them in any
way which the Landlord sees fit to do, and the Tenant shall, on demand, pay
to the Landlord the expense incurred by the Landlord for the removal
thereof, as well as the cost of any restoration of the premises above
provided. The
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<PAGE>
Tenant's obligations under this subdivision (b) of this Article FOURTH
shall survive the expiration of this lease.
(c) Notwithstanding anything to the contrary in paragraph (b) above,
it is understood and agreed that upon the expiration or early termination
of this lease, the Tenant shall be under no obligation to remove the
Improvements to be made to the premises pursuant to Article TWENTY-SEVENTH
hereof.
(d) The Landlord may at any time during the term of this lease change
the arrangement or location of the entrances or passageways, doors and
doorways, and the corridors, elevators, stairs, toilets or other parts of
the building used by the public or in common by the Tenant and other
Tenants (including, without limitation, the conversion of elevators from a
manually operated to an automatic self-service basis). In the event that,
after the construction of the Improvements, the Landlord changes the
location of the passenger or service elevators or makes any change to any
lobby or public area on the 4th floor and the 8th floor of the building
which (in either case) materially adversely affects the Tenant's
utilization of the premises, then the Landlord will reimburse Tenant for
the reasonable costs incurred by Tenant to rectify or minimize the
consequences of such change. The Landlord agrees that in performing any
work permitted by this paragraph, it will, to the extent practicable,
attempt to minimize any interference or disruption of the Tenant's business
and operation. The Landlord may alter the staffing of the building and the
scale and manner of the operation thereof, provided that the services to
which the Tenant is entitled as specified in this lease are not diminished,
and may alter the facilities, fixtures, appurtenances and equipment of the
building as it may deem the same advisable, or as it may be required so to
do by any governmental authority, law, rule or regulation. The Landlord
may, after reasonable notice, change the name, street number or designation
by which the building is commonly known.
FIFTH: Compliance with Governmental Rules and Regulations. The Tenant
shall promptly comply, at the Tenant's own expense, with all laws,
ordinances, regulations and requirements of the City, State and Federal
Governments, and all subdivisions and agencies thereof, and of the New York
Fire Insurance Exchange, the New York Board of Fire Underwriters, and of
any fire insurance rating organization, and of all other departments,
bureaus, officials, boards and commissions with regard to the premises, or
the use thereof by the Tenant, provided that the Tenant shall not be
required to make any structural alterations to the premises (which shall be
the responsibility of the Landlord), except where the same are required by
reason of the Tenant's negligence or the negligence of Tenant's employees,
agents, contractors, visitors or licensees. The Tenant will not permit the
maintenance of any nuisance upon the premises or permit its employees,
agents, contractors, licensees or visitors to do any illegal act therein,
or in and about the building after notice thereof from the Landlord. If any
such law, ordinance, regulation or requirement shall not be promptly
complied with by the Tenant within a reasonable time after notice thereof
from the Landlord, then the Landlord may, at its option, enter upon the
premises to comply therewith, and should any fine or penalty be imposed for
failure to comply therewith or by reason of any such illegal act, the
Tenant agrees that the Landlord may, at its option, pay such fine or
penalty, which the Tenant agrees to repay to the Landlord, with interest
from the date of payment, as additional rent. Landlord will not
discriminate against Tenant in enforcing the rules and regulations
promulgated by Landlord for the building.
SIXTH: Compliance with Landlord's Rules. The Tenant and the Tenant's
employees, and any other persons subject to the control of the Tenant,
shall well and faithfully observe all the rules and regulations annexed
hereto, and also any and all reasonable rules and regulations affecting the
premises, the building or the equipment, appurtenances, facilities and
services
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<PAGE>
thereof, hereafter promulgated by the Landlord, all of which shall be
applied and enforced by the Landlord without discrimination. The Landlord
may at any time, and from time to time, prescribe and regulate the placing
of safes, machinery, quantities of supplies and other things, and, subject
to the provisions of Article 4(d) hereof, may reasonably regulate which
elevator and entrance shall be used for the Tenant's shipping and
receiving; and may make such other and further rules and regulations as in
its judgment may, from time to time, be needed or desirable for the safety,
care or cleanliness of the building and for the preservation of good order
therein.
SEVENTH: Landlord's Access to the Premises. (a) The Tenant shall,
without in any way affecting the Tenant's obligations hereunder, and
without constituting any eviction, permit the Landlord and its agents: (i)
at all reasonable hours and upon reasonable notice, to enter the premises
and have access thereto, for the purpose of inspecting or examining them
and to show them to other persons; and (ii) to enter the premises to make
repairs (including specifically access to the air conditioning equipment
rooms), and to do any work on the premises and any work in connection with
excavation or construction on any adjoining premises or property
(including, but not limited to, the shoring up of the building) and to take
in any of the foregoing instances, any space needed therefor. The Tenant
shall permit the Landlord to erect and maintain ducts, pipes and conduits
in and through the premises. In the exercise of the rights of the Landlord
reserved under clause (ii) or under the sentence of this subdivision (a) of
Article SEVENTH immediately preceding this one, the Landlord will do so in
a manner which minimizes the interference with the Tenant's use of the
premises so far as practicable and where ducts, pipes or conduits are to be
erected through the premises will locate them along walls or ceilings
wherever practicable and in locations which will not materially adversely
affect Tenant's use of the premises.
(b) In the event that the premises shall, in the Landlord's judgment,
become substantially vacated before the expiration of this lease, or in the
event that the Tenant shall be removed by summary proceedings, or in the
event that, during the last month of the term, the Tenant shall have
removed all or substantially all of the Tenant's property therefrom, the
Landlord, upon not less than twenty (20) days prior notice to Tenant, may
enter into and upon said premises for the purpose of decorating, renovating
or otherwise preparing the same for a new tenant, without thereby causing
any abatement of rent or liability on the Landlord's part for other
compensation, and such acts shall have no effect upon this lease.
(c) In the event of an emergency or if the Tenant shall not permit the
Landlord to have access to the premises as required by paragraph (a) above,
then when for any reason access shall be necessary or permissible
hereunder, the Landlord or the Landlord's agents, may enter the same by a
master key, or, in the case of an emergency, may forcibly enter the same
without rendering the Landlord or such agents liable therefor (if during
such entry the Landlord shall accord reasonable care to the Tenant's
property) and without in any manner affecting the obligations and covenants
of this lease, and in no event shall any such entry by the Landlord or its
agents be deemed an acceptance of a surrender of this lease, either
expressed or implied, nor a waiver by the Landlord of any covenant of this
lease on the part of the Tenant to be performed.
EIGHTH: Electric Current. (a) Electric current is initially to be
supplied by the Landlord and measured by one or more submeters solely
serving the premises. The Tenant covenants and agrees to purchase the
Tenant's requirements therefor at the premises from the Landlord or the
Landlord's designated agent at 110% of the rates set forth in the rate
schedule of Consolidated Edison Company of New York, Inc. then applicable
to the building, plus any sales or use tax or other governmental charge or
levy;
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<PAGE>
provided, however, that if such rate schedule includes any adjustment for
time-of-day for either demand or consumption, the rate applicable to the
Tenant's demand for and consumption of electricity, shall be that specified
for the peak period. The calculation of the rate shall include the effect
of all direct and indirect charges which affect the cost of the
electricity, including without limitation, consumption charges, demand
charges and fuel cost escalation charges.
(b) Should the Landlord at any time, be prevented from furnishing the
foregoing service due to a change of rate or a regulation of the Public
Service Commission or due to any rate or regulation of the public utility
corporation serving the building, or if the Landlord for any other reason
determines to discontinue the service, the Landlord may do so, and will
give the Tenant not less than ninety (90) days' notice of the date on which
the service will be discontinued. Beginning with the date on which such
service by the Landlord is discontinued, the Tenant shall purchase its
requirements for electric current from the public utility serving the area
directly. The Landlord shall permit the Landlord's wires and conduits, to
the extent to which they are safely available for such use and the extent
to which they may be so used under any applicable regulations (including
those of such public utility) to be used for the purpose. Should any
additional or other wiring, conduits, meters or distribution equipment be
required in order to permit the Tenant to receive such direct service, the
same will be installed by the Landlord at the sole cost and expense of the
Tenant in respect to the wiring, conduits, meters and distribution
equipment. Landlord may, at its sole option, determine that a single meter
will be utilized for the premises for electric billing purposes. In the
event the Landlord uses two meters for the premises, the electric charges
will be calculated on a conjunctional billing basis. Tenant's electric
current charges will be billed separately from other charges due under this
lease.
NINTH: Condemnation. (a) If the whole of the building or of the
premises shall be taken by condemnation or in any other manner for any
public or quasi-public use or purpose (other than for temporary use or
occupancy), the term of this Lease ("Lease Term") shall forthwith cease and
terminate as of the date of vesting of title by reason of such taking
(which date is hereinafter referred to as the "date of the taking"), and
the rent shall be apportioned as of such date. If a portion of the building
shall be so taken so that substantial structural alterations or
reconstruction of the building (as reasonably determined by Landlord) shall
be necessary as a result of such taking (whether or not the premises be
affected), which alterations or reconstruction Landlord reasonably
determines will take at least 120 days to complete, or if 50% or more of
the common areas of the building are taken, Landlord or the Tenant by
notifying the other party in writing of such termination within sixty (60)
days following the date of the taking may, at its option, terminate this
Lease and the Lease Term and estate hereby granted will terminate sixty
(60) days after receipt of such termination notice.
(b) If any part, but less than all, of the premises shall be so taken
and this Lease shall not be terminated pursuant to Paragraph (a) of this
Article NINTH, then the part so taken shall no longer constitute part of
the premises but this Lease shall otherwise remain unaffected by such
taking; provided, however, that Tenant may elect to terminate the Lease
Term in the event of:
(i) a taking of more than 30% of the rentable area of the total
premises then actually leased hereunder, or
(ii) a taking that has a material adverse effect on Tenant's
access to the building or the premises, if Landlord determines that it
will be unable to provide or in fact fails
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<PAGE>
to provide adequate alternative access to the building and the
premises within 120 days thereafter,
by giving notice of such election to Landlord not later than sixty (60)
days after Tenant's receipt from Landlord of notice of such taking or the
date of such taking (such notice to provide Tenant with all information
reasonably necessary to determine the extent of the taking and effect on,
in and to the premises), whichever first occurs, or not later than thirty
(30) days after such one hundred twentieth day, as the case may be. If
notice of termination of this Lease shall be given pursuant to this
Section, then upon such date as may be specified by Tenant by notice to
Landlord, which date shall be not earlier than thirty (30) and not later
than sixty (60) days after the date of Tenant's notice, the Lease Term
shall terminate as of the date specified in such notice and the rent shall
be apportioned as of such date of termination. Upon a partial taking and
this Lease continuing in force as to any part of the premises:
(x) the fixed rent and additional rent shall be equitably reduced
for the remainder of the Lease Term, according to the nature and
extent of the loss of use of the premises suffered by Tenant; and
(y) Landlord shall, at its expense, restore with reasonable
diligence the remaining portions of the premises as nearly as
practicable to the same condition as it was in prior to such
condemnation or taking.
(c) In the event of any condemnation or taking hereinabove mentioned
of all or a part of the building (whether or not the premises be affected),
Landlord shall be entitled to receive the entire award in the condemnation
proceeding, Tenant shall have no claim for the value of any unexpired term
of the Lease, and Tenant hereby expressly assigns to Landlord any and all
right, title and interest of Tenant now or hereafter arising in or to any
such award or any part thereof, and Tenant shall be entitled to receive no
part of such award. The foregoing, however, shall not be deemed to preclude
Tenant from seeking to recover a separate award for Tenant's moving
expenses and Tenant's personal property (including the Improvements and any
additional improvements made to premises leased to Tenant pursuant to
Article THIRTY-FOURTH hereof), but only provided that such award does not
reduce and is not payable out of the amount for the land and the building.
TENTH: Mechanic's Liens. The Tenant will not permit, during the term
hereby granted, any mechanic's or other lien or order for payment of work,
labor, services, or materials furnished or to be furnished to attach to or
affect the premises or any portion thereof, and agrees that it will not
cause or permit any such lien or order to attach to or affect the fee,
leasehold or other estate of the Landlord herein, or the building. The
Tenant's obligation to keep the premises in repair, and its right to make
alterations therein, if any, shall not be construed as the consent of the
Landlord to the furnishing of any such work, labor or materials within the
meaning of any present or future lien law. Notice is hereby given that the
Tenant has no power, authority or right to do any act or to make any
contract which may create, or be the foundation for, any lien upon the fee
or leasehold estate of the Landlord in the premises or upon the land or
buildings of which they are a part or the improvements now erected or
hereafter to be erected upon the premises or the land or building of which
the premises are a part; and if any such mechanic's or other lien or order
shall be filed against the premises or the land or building of which the
premises are a part, the Tenant shall, within thirty (30) days after the
Tenant has notice thereof, discharge said lien or order by payment, deposit
or by bond fixed in a proper proceeding according to law. If the Tenant
shall fail to take such action, or shall not cause such lien or order to be
discharged within forty-five (45) days after the filing thereof, the
Landlord may pay the amount of such lien or discharge the same by deposit
or
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by bond or in any other manner according to law, and pay any judgment
recovered in any action to establish or foreclose such lien or order, and
any amount so paid, together with the expenses incurred by the Landlord,
including all attorneys, fees and disbursements incurred in any defense of
any such action, bonding or other proceeding, shall be deemed additional
rent. Any reasonable expenses incurred by Landlord in connection with the
examination of title to the premises in order to ascertain the existence of
any lien or encumbrance and the discharge of record thereof, shall be
payable by Tenant to Landlord on demand, together with interest as
aforesaid, as additional rent.
ELEVENTH: Subordination. (a) Subject to the Landlord's causing the
delivery, if appropriate, of the agreements required by paragraph (b)
below, this lease, and all the rights of the Tenant hereunder, are and
shall be subject and subordinate to any and all mortgages now or hereafter
liens either in whole or in part on the building, or the land on which it
stands, and also to any and all other mortgages covering other lands or
lands and buildings, which may now or hereafter be consolidated with any
mortgage or mortgages upon the buildings and the land on which it stands or
which may be consolidated and spread to cover the building and such land
and any such other land or lands and buildings, and any extension, renewal
or modification of any such mortgages, and to any and all underlying leases
on record, or hereafter to be recorded, against the building or the land on
which it stands, and any extensions, renewals or modifications thereof. The
Tenant hereby constitutes and irrevocably appoints the Landlord the
Tenant's attorney in fact to execute any instrument or certificate
evidencing such subordination for and on behalf of the Tenant.
(b) The Tenant hereby agrees that, in the event that any mortgagee
shall succeed to the rights of the Landlord herein named, or if any
landlord of any underlying lease shall succeed to the position of the
Landlord under this lease, then the Tenant will recognize such successor
Landlord as the Landlord of this lease and pay the rent and attorn to and
perform the provisions of this lease for the benefit of any such successor
Landlord. No documentation other than this lease shall be necessary to
evidence such attornment but Tenant nevertheless agrees to execute any
documentation reasonably requested by the successor Landlord to confirm
such attornment or to otherwise carry out the intent and purposes of the
provisions of this Article ELEVENTH but the Landlord will pay all of
Tenant's reasonable counsel fees and expenses incurred in connection with
the review and execution of such documentation.
(c) Anything herein to the contrary notwithstanding, the Landlord
represents and warrants to Tenant that as of the date of this lease there
is no mortgage or superior lease encumbering the premises.
(d) If, in connection with obtaining temporary or permanent financing
for the land and/or building, or any underlying lease, any lender shall
request reasonable modifications of this lease as a condition to such
financing, Tenant will not unreasonably withhold, delay or defer the
execution of an agreement of modification of this Lease provided such
modifications do not increase the monetary obligations of Tenant hereunder
or adversely affect (in the Tenant's reasonable judgment) the leasehold
interest hereby created, or Tenant's rights hereunder.
TWELFTH: Liquors. Neither the Tenant nor any occupant of the premises,
or of any part thereof, shall at any time during the continuance of the
term, sell, traffic in, expose for sale, dispense or give away, upon any
part of the premises, any strong or spirituous liquor, wine, ale or beer,
or take or have a license for such sale, except that it is understood that
as a part of the Tenant's customer relations in its business, the Tenant
may from time to time serve alcoholic beverages to customers at the
premises. No charge will be made for such dispensation or service. Such
service of alcoholic beverages will not be deemed a default or
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violation under paragraph TWELFTH hereof. In no event shall Tenant dispense
or give away any alcoholic beverage to any employee of the Landlord.
THIRTEENTH: Fire and Fire Insurance. (a) If the premises shall be
damaged by fire, action of the elements or other casualty or cause which is
within the risks or the insurance carried by the Landlord, the Tenant shall
give immediate notice thereof to the Landlord, and said damage (unless the
same shall be due to the negligence or other willful acts of the Tenant or
its employees) shall be repaired by the Landlord, to a condition as close
as possible as existed prior to such fire or casualty, at the Landlord's
expense, with all reasonable speed, making due allowance for delay due to
labor troubles, settlement of loss and other causes beyond the control of
the Landlord, and the Tenant shall, in every reasonable way, facilitate the
making of such repairs, and (unless the same shall be due to the negligence
or other fault of the Tenant or its employees) the rent shall be suspended
during such period as the premises shall have been rendered wholly
untenantable. In the event that the premises are rendered partially
untenantable, the rent shall be abated during such period, in the
proportion which the area of the premises which is rendered untenantable
bears to the area of the whole premises, but no damage to the premises or
the building by fire, or other cause, however extensive, shall terminate
this lease, or give the Tenant the right to quit and surrender the
premises, or impair any obligation of the Tenant hereunder, (except, to the
extent permitted in the preceding sentence, with respect to the payment of
rent). Notwithstanding the preceding (i) if the damage shall be so
extensive that the Landlord shall determine to demolish or substantially
alter the building, the Landlord may at any time within sixty (60) days
following the occurrence of the damage give to the Tenant thirty (30) days'
notice of intention to terminate this lease; (ii) if the damage to the
premises is substantial so that in excess of 30% of the rentable area of
the total premises then actually leased hereunder is rendered untenantable
or if 50% or more of the common areas of the building are destroyed or
substantially damaged and the Landlord does not within sixty (60) days
following the occurrence of the damage notify the Tenant of the Landlord's
intention to repair the damage to the premises so that the premises are
again useable by the Tenant, or if the premises are not, in fact, usable
within a period of not more than 120 days following the occurrence of the
damage (subject to unavoidable delays), the Tenant may cancel this lease by
notice given within thirty (30) days following the expiration of the said
60-day period for the Landlord's notice of election to repair or sixty (60)
days after the expiration of the 120 day period, as the case may be; and
(iii) in the event of the occurrence of damage to the premises of the
degree described above in clause (ii) of this paragraph (a), the Landlord
may also elect to terminate this lease by notice of election to do so given
within sixty (60) days following the occurrence of the damage. If notice of
election to terminate this lease shall be given as above provided, then,
upon the date for termination designated in any such notice this lease and
the term hereby granted shall terminate and the rent shall be apportioned
as of the date of the damage or as of such later date as the Tenant may
actually surrender possession. Nothing herein contained shall be deemed to
obligate the Landlord to restore the Tenant's trade fixtures, stocks,
furnishings or other personal property of the Tenant.
(b) The Tenant shall conduct its business and use the premises in such
a manner so as not to increase the rate of insurance applicable to the
building or the property of other tenants, and the Tenant shall install and
maintain all its furniture, fixtures, equipment, stocks and materials in
such a manner as to accomplish the foregoing purposes. The Tenant further
agrees not to permit any act to be done or anything brought into or kept
upon the premises which will void or avoid the insurer's liability under
any contract of fire insurance on the building or its contents (containing
normal and usual exemptions) or any
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actions which will substantially increase the Landlord's cost of such
insurance and in the event of such increase due to any action of the
Tenant, Tenant's employees, agents, contractors, visitors or licensees, the
Tenant agrees to pay to the Landlord, on demand, the additional cost of
such insurance, or, at the option of the Landlord, the same may be added to
any installment of rent and be payable as additional rent. The schedule of
the makeup of a rate issued by an authorized rating organization shall be
conclusive evidence of the facts therein stated and of the items in the
rate applicable to the premises. During the term of this Lease Landlord
will carry insurance against such risks and in amounts as it, in its
reasonable business judgment, deems necessary.
(c) The Landlord, as to the premises, and the Tenant as to the
improvements made therein at the Tenant's expense and all of the Tenant's
stock, trade fixtures and other property in the premises, hereby release
one another from all liability for any loss or damage caused by fire or any
of the risks enumerated in standard extended coverage insurance. This
release is conditioned upon the inclusion in their respective policies of
insurance, if any, of a provision stating that such release shall not
adversely affect said policies or prejudice any right of the insured to
recover thereunder. The Landlord and Tenant agree that their respective
insurance policies will include a waiver of subrogation provision so long
as the same is obtainable without extra cost or if extra cost be charged,
so long as the party for whose benefit the clause is obtained shall pay
such extra cost. If extra cost shall be chargeable therefor the party so
affected shall advise the other of the amount or the extra cost and the
other party at its election may pay the same or decline to so pay in which
event the release from liability given to said party by this Article
THIRTEENTH (c) shall be deemed to be withdrawn and of no force and effect.
FOURTEENTH: Change in Use of Premises: Subletting and Assignment. (a)
The use to be made of the premises by the Tenant and the identity of the
Tenant being among the inducements to the making of this lease by the
Landlord, the Tenant shall not, except in accordance with the terms of this
Article, (i) use or permit the premises or any part thereof to be used for
any purposes other than those specified in the lease, (ii) sublet or
underlet the premises or any part thereof, (iii) permit the premises or any
part thereof to be occupied by anyone other than the Tenant or its officers
or employees, (iv) mortgage or encumber this lease or any interest therein,
(v) assign or transfer, by operation of law or otherwise, this lease or any
interest therein.
(b) The Tenant shall not, without having first obtained the Landlord's
prior written consent thereto, (i) use or permit the premises or any part
thereof to be used for any purposes other than those specified in the lease
and, solely in connection with a sublease executed in accordance with the
terms of this Article FOURTEENTH, for such other general office use as is
reasonably acceptable to Landlord (giving consideration to the fact that
Landlord is a religious institution), or (ii) mortgage or encumber this
lease or any interest therein.
(c) The Tenant shall not, except in accordance with the provisions of
paragraphs (d) through (n) and paragraph (r) of this Article FOURTEENTH,
(i) assign or transfer, by operation of law or otherwise, this lease or any
part therein, (ii) sublet or underlet the premises or any part thereof, or
(iii) permit the premises or any part thereof to be occupied by anyone
other than the Tenant or its officers or employees.
(d) If the Tenant shall desire to assign this lease or to sublet the
whole or any part of the premises or to permit the premises to be occupied
by any person other than the Tenant, the Tenant will notify the Landlord as
to (i) the action which the Tenant proposes; (ii) the portion of the
premises with respect to which the tenant proposes to take such action
(the "Affected
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Premises"); (iii) the name and business address of the proposed assignee,
sublessee or occupant (the "Proposed Undertenant"), (iv) the name and
residence address of the officers and principal stockholders of the
Proposed Undertenant, if a corporation is involved or the names and
residence addresses of the partners thereof if a partnership or joint
venture is involved; (v) the information, in reasonable detail, as to the
Proposed Undertenant which is required to permit the Landlord to make the
determinations described in paragraphs (f), (g) or (h) below; (vi) the
terms upon which the Tenant proposes to assign this lease or sublet the
premises or permit the premises to be occupied by the Proposed Undertenant
(including the terms under which any additions, alterations or decorations
are to be made to the Affected Premises and the terms on which the Proposed
Undertenant is to buy or lease any fixtures, leasehold improvements,
equipment, furniture, furnishings or other personal property from the
Tenant; and (vii) the name and address of any real estate broker or other
person to whom a commission may be owed by any person in connection with
such assignment, subleasing or occupation. (The Tenant's notice of desire
to assign, sublease or permit the occupancy of the Affected Premises by
others, with the information prescribed above is hereafter referred to as a
"Tenant's Subleasing Notice")
(e) By written notice executed by the Landlord and delivered to the
Tenant within thirty (30) days following receipt of the Tenant's Subleasing
Notice (for the purposes hereof such notice shall not be deemed to have
been received by the Landlord until all of the information required by
paragraph (d) above shall have been furnished to the Landlord), the
Landlord shall have the absolute right to select one of the alternatives
set forth in paragraphs (f), (g) or (h) below.
(f) In the event of a proposed assignment of this lease or the
subleasing or occupation of the entire premises subject to this lease and
such sublease or occupation is for a term which will expire at any time
during the last three (3) years of the term of this lease, (i) the Landlord
may elect to require the Tenant to surrender the premises to the Landlord
and terminate this lease with respect to the premises on the last day of
the second complete calendar month following the Tenant's Subleasing Notice
and comply with the provisions of this lease respecting surrender at the
end of the term not later than such date or (ii) the Landlord may give its
consent to any such assignment, sublease or occupation. Any subletting or
occupancy by a third party as a consequence of which 25% or less in an area
of the Premises shall remain in occupancy by the Tenant herein named may,
at the Landlord's option, be considered a subleasing of the whole of the
Premises.
(g) In the event of a proposed subleasing or occupation of less than
the entire premises subject to this lease or the entire premises for less
than the then remaining balance term of this lease, (i) the Landlord may
elect to require the Tenant to surrender to the Landlord and vacate the
Affected Premises not later than the date upon which the proposed
subleasing or occupation is proposed to commence and comply on such date
with the provisions of this lease as to surrender on the Expiration Date
with respect to the Affected Premises, and the Tenant shall, at its
expense, erect the partitioning required to separate the Affected Premises
from the remainder of the premises, create any doors required to provide an
independent means of access to the affected Premises from elevators and
lavatories and to segregate the wiring and meters and electric current
facilities, so that the Affected Premises may be used as a unit for
commercial purposes, separate from the remainder of the premises remaining
in occupation of the tenant; in which event the rent and all additional
rent payable under this lease shall be reduced proportionately with the
diminution in the area of the premises upon surrender of the Affected
Premises; of (ii) the Landlord may give its consent to any such sublease or
occupation and thereupon the provision of paragraphs (1), (p) and (q)
below, will be implemented.
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(h) Notwithstanding any other provision herein, in the event that
Landlord does not select one or more of the alternatives set forth in
paragraphs (f) or (g) of this Article following receipt of Tenant's
Subleasing Notice, then Landlord agrees not to unreasonably withhold or
delay its consent to any proposed subleasing or assignment, provided,
however, that the Landlord shall have the right to condition its consent to
any proposed sublease of all or a portion of the premises on the following:
(i) The Tenant shall not be in default in the payment of rent or
in the performance of any other of its obligations under this lease,
the time to cure having expired.
(ii) The Tenant shall have delivered to the Landlord a Tenant's
Subleasing Notice as required by subparagraph (d) above.
(iii) The Tenant shall assign to the Landlord, and grant the
Landlord a security interest in, the sublease and the rents payable
thereunder and shall take all necessary steps required to perfect such
assignment and security interest.
(iv) The sublease shall include provisions to the effect that (x)
if the Landlord shall notify the sublessee that the Tenant is in
default in the payment of rent or in the performance of its other
obligations under this lease, the sublessee shall, if so requested by
the Landlord, pay all rent and other amounts due under the sublease
directly to the landlord, (y) notwithstanding any such payment by the
sublessee directly to the Landlord, the term of the sublease shall
terminate simultaneously with the termination of the term of this
lease and the sublessee shall surrender the subleased premises upon
such termination, and (z) it is subject and subordinate to this lease
and to all matters to which this lease is or shall be subordinate.
(v) The proposed subtenant shall have a financial standing, be of
a character, be engaged in a business, and propose to use the premises
or portion thereof to be sublet in a manner, which in the Landlord's
reasonable judgment, is in keeping with the Landlord's standards in
such respect of the other office tenancies in the building
(vi) The proposed subtenant shall not then be a tenant, subtenant
or assignee of any space in the building, nor shall the proposed
subtenant be a person or entity with whom the Landlord is then
actively negotiating to lease space in the building.
(vii) The character of the business to be conducted or the
proposed use of the premises by the proposed subtenant shall not (x)
be likely to increase the Landlord's operating expenses beyond that
which would be incurred for use by the Tenant or for use in accordance
with the standards of use of other tenancies in the building, (y)
increase the burden on elevators over the burden prior to such
proposed subletting, or (z) violate or be likely to violate any
provisions or restrictions contained herein relating to the use or
occupancy of this lease.
(viii) Any proposed sublease shall provide that it is subject and
subordinate to this lease and in the event of the termination of this
lease, or the re-entry or dispossession of the Tenant by the Landlord
under this lease, such subtenant shall, at the Landlord's option,
attorn to the Landlord as its sublessor pursuant to the then
applicable terms of such sublease for the remaining term thereof,
except that the Landlord shall not be (x) liable for any previous act
or omission of Tenant as sublessor under such sublease, (y) subject to
any offset which theretofore accrued to such subtenant against the
Tenant, or (z) bound by any previous
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modification of such sublease nor consented to in writing by the
Landlord or by any previous prepayment of rent more than one month in
advance.
(ix) Tenant shall pay all of Landlord's reasonable costs
(including attorneys fees and expenses) related to Landlord's review
of proposed sublease or assignment and the preparation, review and
approval of any assignment of rents, financing statement and other
documents related to such sublease or assignment. Tenant shall also
pay the cost of recording or filing any assignment of rents and
financing statements.
(j) if the Landlord's Subleasing Notice shall be to the effect that
the Landlord elects that the Affected Premises be surrendered, then the
Affected Premises shall be surrendered in accordance with clause (i) of
paragraph (f) or (g) above, as the case may be, and any work required to be
done to separate the Affected Premises from the remainder shall be
commenced promptly following the Tenant's receipt of the Landlord's
Subleasing Notice and carried on with diligence and conformity.
(k) Provided Tenant is in compliance with all other provisions of this
lease, the Tenant is authorized to sublease portions of the premises to a
subsidiary corporation or corporations or to a corporation affiliated with
the Tenant, and the provisions of paragraph (e) through (j) of this Article
and the provisions of paragraph (1) of this Article shall not apply to such
subleasing. A subsidiary corporation means a corporation of which the
Tenant owns and holds at least a majority of each class of stock which is
authorized to vote at the time when the sublease is executed. An affiliated
corporation shall mean a corporation which is owned and controlled by the
corporation which owns and controls the Tenant by ownership of at least a
majority of each such class of stock. Before making any sublease to any
such subsidiary or affiliated corporation, the Tenant shall certify to the
Landlord the manner in which such subsidiary or affiliated corporation is
related to and controlled by the Tenant and the purposes for which the
subleased premises will be used.
(1) In the event the Landlord, in its sole discretion, authorizes
Tenant to sublet (other than the subleasing authorized by paragraph (k)
above) or assign all or a portion of the premises, the Tenant shall pay to
the Landlord, monthly, as additional rent, fifty (50%) percent of all
Subleasing Profit. "Subleasing Profit" shall mean all consideration
received by the Tenant (other than rental received by Tenant under a
sublease entered into pursuant to paragraph (k) of this Article), less (i)
the rent, additional rent payable by the Tenant under this lease for the
period in question (exclusive of any amount payable by the Tenant under
this subparagraph (1)), (ii) the unamortized cost of improving the premises
for subtenant, (iii) any amounts paid by Tenant to subtenant as a cash or
rental concession and (iv) reasonable advertising and legal fees related to
the subleasing of the space to subtenant (but not brokerage fees).
(m) No consent given by the Landlord shall be deemed to permit any act
except the act to which it specifically refers, or to render unnecessary
any subsequent consent, and any assignment or subletting of the premises
shall not relieve the Tenant or any mesne assignee from any obligations,
duty or covenant under this lease, and in all cases a violation of any of
the covenants or duties or obligations under this lease by a subtenant or
assignee shall, in addition, be deemed to be the act of the Tenant herein.
No assignment, transfer, mortgage, encumbrance, subletting or arrangement
in respect of the occupancy of the premises shall create any right in the
assignee, transferee, mortgagee, subtenant or occupant, unless the consent
of the Landlord shall first have been obtained, and unless, if an
assignment is involved, the transferee or assignee shall have delivered an
agreement duly executed by the assignee or transferee wherein the assignee
or transferee assumes and agrees to pay or otherwise keep and perform
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the obligations of the Tenant in this lease or, if a sublease is involved
wherein the sublessee agrees that any act or omission by the sublessee
which, if performed or omitted by the Tenant under this lease would be a
default thereunder, shall also be a default under the provisions of the
sublease. Any assignee by accepting an assignment shall nevertheless be
conclusively deemed to have assumed this lease and all obligations already
accrued or to accrue thereunder and further to have agreed to fully and
duly perform all the Tenant's covenants herein contained. If the Tenant
shall, at any time, be in default in the payment of rent, the Landlord
shall have the right to collect rent from any assignee, undertenant or
occupant, and credit the same to the account of the Tenant, and no such
collection shall constitute a waiver of the foregoing covenant or the
acceptance of anyone other than the Tenant, as Tenant, or shall otherwise
release, impair or otherwise affect any obligation of the Tenant under this
lease. Immediately following the execution and delivery of any assignment
of this lease or any subleasing of the premises or an agreement as to the
occupancy thereof, the Tenant will furnish a duplicate of the instrument in
question to the Landlord.
(n) Anything herein to the contrary notwithstanding, the Tenant may
not assign this lease or sublet or permit the occupancy by any other party
of all or any part of the demised premises at any time when the Tenant has
not paid any rent and additional rent when it is payable. The Tenant shall
furnish Landlord with an original counterpart of each sublease, assignment
or agreement of occupancy made hereunder within ten (10) days after the
date of its execution. Tenant shall remain fully liable for the performance
of all of Tenant's obligations hereunder notwithstanding anything provided
for herein, and without limiting the generality of the foregoing, shall
remain fully responsible and liable to Landlord for all acts and omissions
of any subtenant, assignee or occupant or anyone claiming under or through
any such person which shall be in violation of any of the obligations of
this lease and any such violation shall be deemed to be a violation by
Tenant. Tenant shall pay Landlord on demand any cost or expense (including
attorneys' fees and expenses) which Landlord may be required to incur in
acting upon any request for consent pursuant to this Article.
(o) At the request of the Landlord, the Tenant will furnish to the
Landlord, within ten (10) days of a receipt of a request therefor, a
certificate executed in the name and on behalf of the Tenant, confirming
that, except as previously consented to in writing by the Landlord or as
otherwise specifically set forth in such certificate or permitted herein,
the Tenant has not (i) used or permitted the premises or any part hereof to
be used for any purposes other than those specified in this lease, (ii)
mortgaged or encumbered this lease or any interest therein, (iii) assigned
or transferred, by operation of law or otherwise, this lease or any
interest, therein, (iv) sublet or underlet the premises or any part
thereof, or (v) permitted the premises or any part thereof to be occupied
by anyone other than the Tenant or its officers or employees. With respect
to any exception to clauses (i) through (v) above to which the Landlord has
not previously consented in writing, the Landlord, in its sole discretion,
may either consent thereto (which consent may be subject to any conditions
specified by the Landlord) or exercise the rights and remedies available to
the Landlord under the terms of this lease.
(p) Tenant assumes and shall be responsible for and liable to
Landlord, for all acts and omissions on the part of any present or future
subtenant, and any violation of any of the terms, provisions or conditions
of this Lease, whether by act or omission by any subtenant, shall
constitute a violation by Tenant. Upon any termination of this lease, it is
expressly agreed that Tenant shall deliver to Landlord all subleases,
security deposits (including interest), contracts, documents, rent rolls
and other records used in the operation of the premises and, unless the
sublease shall have previously terminated and the security deposit returned
to
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subtenant or applied as provided by the sublease, all security deposits
held by Tenant.
(q) With respect to any present or future subleases Tenant shall not
accept prepayment of rent prior to its due date in excess of one month (but
the provisions of the foregoing shall not prohibit Tenant from collecting
from any subtenant a security deposit provided such security deposit is
delineated in the sublease as being not advance rent, but security,
returnable to the subtenant after the termination of the term of the
sublease). Tenant agrees to indemnify and save Landlord harmless from and
against any claim or lien against Landlord or the demised premises for the
return of any securities under any leases with subtenants which were not
previously delivered to Landlord and agrees further that all leases
hereafter made with subtenants shall provide that the lease security
deposited by the subtenant shall not be a lien or claim against the
interest of the Landlord.
(r) Provided Tenant is in compliance with all other provisions of this
lease, the Landlord shall consent to sublease of space within the premises,
to one or more unaffiliated third party, which space may not exceed, in the
aggregate, 10% of the premises, and the provisions of paragraph (e), (f),
(g) and (j) of this Article and the provisions of paragraph (l) of this
Article shall not apply to such subleasing but Tenant shall provide to
Landlord all information detailed in (i), (ii), (iii) and (iv) of paragraph
(d) hereof, together with an original counterpart of the sublease or
occupancy agreement which satisfies the provisions of subsections (iv),
(vii) and (viii) of paragraph (h) hereof.
(s) Provided Tenant is in compliance with all other provisions of this
lease, the Landlord shall consent to the assignment by the Tenant of its
interest in this Lease in connection with sale of all or substantially all
of the assets and business operations as a going concern and the provisions
of paragraph (e), (f), (g) and (j) of this Article and the provisions of
paragraph (l) of this Article shall not apply to such assignment but Tenant
shall provide to Landlord all information detailed in paragraph (d) hereof,
together with an original counterpart of the assignment and assumption
agreement. The rights of the Tenant and obligations of the Landlord
pursuant to this paragraph shall be subject to the following conditions and
limitations: (i) the assignee of the Tenant's rights in this Lease shall be
the purchaser, transferee and operator of all or substantially all the
assets and business operations of the Tenant; (ii) the net worth of such
assignee/transferee shall be no less than the net worth of the Lessee
immediately preceding such sale of assets and assignment; and (iii) the
Lessee (or any successor or transferee of the Lessee) may assign its rights
in this Lease pursuant to this paragraph once (and only once).
FIFTEENTH: Waiver and Surrender: Remedies Cumulative. No consent or
waiver of any provision hereof or acceptance of any surrender shall be
implied from any act or forbearance by the Landlord. No agreement
purporting to accept a surrender of this lease, or to modify, alter, amend
or waive any term or provision thereof, shall have any effect or validity
whatever, unless the same shall be in writing, and executed by the Landlord
and by the Tenant, and be duly delivered, nor shall the delivery of any
keys to anyone have any legal effect, any rule or provision of law to the
contrary notwithstanding. Any consent, waiver or acceptance of surrender,
in writing, and properly executed and delivered as aforesaid, shall be
limited to the special instance for which it is given, and no
superintendent or employee, other than an officer of the Landlord or of its
managing agent, and no renting representative shall have any authority to
accept a surrender of the premises, or to make any agreement or
modification of this lease, or any of the terms and provisions hereof. No
provision of any lease made by the Landlord to any other tenant of the
building shall be taken into consideration in any manner whatever in
determining the rights of the Tenant herein. No payment by the
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Tenant or receipt by the Landlord of a lesser amount than the monthly rent
herein stipulated shall be deemed to be other than on account of the
stipulated rent, nor shall any endorsement on any check, nor any letter
accompanying any such payment of rent be deemed an accord and satisfaction
(unless an agreement to accept a lesser amount be signed by the Landlord),
but the Landlord may accept such payment without prejudice to the
Landlord's full right to recover the balance of such rent and to institute
summary proceedings therefor. The receipt by the Landlord of any rent, or
additional rent or of any other sum of money which may be payable under
this lease, or of any portion thereof, shall not be deemed a waiver of the
right of the Landlord to enforce the payment of any sum of any kind
previously due or which may thereafter become due under this lease, or of
the right to forfeit this lease by such remedies as may be appropriate, or
to terminate this lease or to exercise any of the rights and remedies
reserved to the Landlord hereunder, and the failure of the Landlord to
enforce any covenant or condition (although the Tenant shall have
repeatedly or continuously broken the same without objection from the
Landlord) shall not estop the Landlord at any time from taking any action
with respect to such breach which may be authorized by this lease, or by
law, or from enforcing said covenant or any other covenant or condition on
the occasion of any subsequent breach or default. In the event of any
continuing or threatened breach by the Tenant, the Landlord shall have the
right of injunction. The various rights, remedies, powers and elections of
the Landlord, as provided in this lease or created by law, are cumulative,
and none of them shall be deemed to be exclusive of the others, or of such
other rights, remedies, powers or elections as are now or may hereafter be
conferred upon the Landlord by law.
SIXTEENTH: Representations as to Premises. Certificate of Occupancy
and Use. (a) The Tenant represents to the Landlord that the Tenant has
made, or caused to be made, a careful inspection of the premises and that
the Tenant has made an examination of the building and that the area and
present condition of the premises are in all respects satisfactory to the
Tenant, except as may herein otherwise be expressly stated in the Work
Letter attached to this lease and in Article TWENTY-SEVENTH hereof. The
Tenant acknowledges that no representations or promises have been made by
the Landlord or the Landlord's agents with respect to the premises or the
building or the certificate of occupancy thereof, except as in this lease
set forth. The statements contained in this lease regarding the use of the
premises by the Tenant shall not be deemed a representation or warranty by
the Landlord that such use is lawful or permitted by the certificate of
occupancy of the building.
(b) The Tenant shall immediately discontinue any use of the demised
premises, which may, at any time, be claimed or declared by the City or
State of New York or other governmental authority to be in violation of or
contrary to the certificate of occupancy of the building, or by reason of
which any attempts may be made to penalize the Landlord or require the
Landlord to secure any certificate of occupancy other than the one now
issued for the building.
(c) The Landlord has applied for an amendment to the existing
Certificate of Occupancy for the building (the "Certificate of Occupancy")
covering the premises and agrees to use all reasonable commercial efforts
to obtain an amendment to the Certificate of Occupancy applicable to the
premises to permit the premises to be used for office purposes. It is
understood and agreed that in the event that the Landlord fails to obtain
an amendment to the Certificate of Occupancy providing that the premises
may be used for offices, then the Tenant shall have the right, in the
circumstances set forth below (but in no other circumstances), to terminate
and cancel this lease upon not less than thirty (30) days prior written
notice:
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(i) if the City of New York or an agency thereof either
commences, or notifies the Tenant in writing that it intends to
commence, a court proceeding seeking to impose criminal sanctions
against the Tenant because of its occupancy of the premises;
(ii) if the City of New York or any agency thereof either
commences, or notifies the Tenant in writing that it intends to
commence, a court proceeding seeking to fine or assess a monetary
penalty against a Tenant because of its occupancy of the premises,
unless the Landlord agrees in writing to indemnify and hold the Tenant
harmless from and against any such fine or penalty; or
(iii) if the City of New York or any agency thereof obtains a
judgment in the Supreme Court of the State of New York (or in any
other court with jurisdiction) preventing (or takes other action
actually preventing) the Tenant from utilizing the premises for
offices or evicting the Tenant from the premises.
SEVENTEENTH: Limitation of Landlord's Liability. (a) The Tenant shall
make no claim upon the Landlord for abatement of rent, constructive
eviction, rescission, or otherwise, and the Landlord shall be exempt from
all liability, except for injuries to the Tenant's person or property which
are due to the negligence of the Landlord, its agents, servants or
employees in the management of the premises or the real property of which
the demised premises are a part, for or on account of any annoyance,
inconvenience, interference with business, or other damage, caused by: (i)
any interruption, malfunction or curtailment of the operation of the
elevator service, heating plant, sprinkler system, gas, water, sewer or
steam supply, plumbing, machinery, electric equipment or other
appurtenances, facilities, equipment and conveniences in the building,
whether such interruption, malfunction or curtailment be due to breakdowns,
or repairs, or strikes or inability to obtain electricity, fuel or water
due to any such cause or any other cause beyond the Landlord's control;
(ii) any work of repair or restoration done by or on behalf of the Landlord
or the Tenant, pursuant to the provisions of this lease; (iii) any water,
rain, snow, steam, gas, electricity or other element, which may enter, flow
from or into the premises or any part of the building, or any noise or
vibration audible in, or transmitted to the premises; (iv) any vermin; (v)
any falling paint, plaster or cement; (vi) any interference with light or
with other easements or incorporeal hereditaments; (vii) any latent defect
or deterioration in the building or the appurtenances thereof, whether or
not the Landlord shall have been notified of any condition allegedly
causing same; (viii) any zoning ordinance or other acts of governmental or
public authority now or hereafter in force; and (ix) any act or omission of
any other occupant of the building or other person temporarily therein. The
Tenant will not hold the Landlord liable for any loss or theft of, or
damage to, any property in the premises done or caused by any employee,
servant, or agent of the Landlord who is invited into the premises by the
Tenant, nor for the loss, damage or theft of any property stored or left in
the basement or in any other part of the building, which is not enclosed
within the premises or of any property left with any employee of the
Landlord, notwithstanding such theft, loss or damage may occur through
carelessness or negligence of the Landlord's employees; and the Tenant
agrees that any employee in entering the premises at the invitation of the
Tenant or accepting custody of property shall be then deemed agent of the
Tenant or other person at whose instance he may be acting, and not agent of
the Landlord. Employees are not permitted to receive or accept packages or
property for account of Tenants. Storerooms or storage space for personal
property (if provided) are provided gratuitously by the Landlord, and the
use of same shall be at the Tenant's risk and the Tenant will not hold the
Landlord liable for any loss of or damage to person or property therein or
thereby. Nothing in this lease contained shall impose any obligation upon
the Landlord with respect to any real property
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other than the building, whether said other real property be owned by the
Landlord or otherwise, or shall in any way limit the Landlord's right to
build upon or otherwise use said other real property in such manner as the
Landlord may see fit. The Tenant shall make no claim upon the Landlord for
abatement of rent, constructive eviction or rescission, and the Landlord
shall have no liability by reason of the Landlord's failure to enforce the
provisions of the lease to any other tenant against such other tenant.
Notwithstanding anything herein to the contrary, no partner, officer, agent
or employee of Landlord shall be liable for Landlord's obligations under
this lease and Tenant shall not look to any other property or assets of the
Landlord or the property or assets of any partner, officer, agent or
employee of Landlord in seeking to enforce landlord's obligations under
this lease or to satisfy a judgment for Landlord's failure to perform such
obligations.
(b) Any right and authority reserved by and granted to the Landlord
under this lease, to enter upon and make repairs in the premises shall not
be taken as obligating the Landlord to inspect and to repair the premises
and the Landlord hereby assumes no responsibility or liability for the
care, inspection, maintenance, supervision, alteration or repair of the
premises, except as herein specifically provided. The Tenant assumes
possession and control of the premises and exclusively the whole duty of
care and repair thereof, except as herein specifically provided, and the
duty of care, if any, owed by the Tenant to persons on the sidewalk and in
the corridors of the building.
EIGHTEENTH: Indemnity by Tenant. The Tenant hereby indemnifies and
agrees forever to save harmless the Landlord against any and all
liabilities, penalties, claims, damages, expenses (including attorneys, and
counsel fees and disbursements) or judgments, arising from injury to person
or property of any kind, to the extent occasioned by the Tenant's failure
to perform or abide by any of the covenants of this lease or the negligent
or wilful misconduct of the Tenant or Tenant's employees, customers,
agents, contractors, licensees, visitors, assigns or under-tenants of the
Tenant, or to the extent based on any matter or thing growing out of the
Tenant's use or occupation of the premises or any part of the building.
NINETEENTH: Insolvency. If, at any time after the execution and
delivery of this lease, the Tenant shall be adjudicated a bankrupt, or if
the Tenant shall make any assignment for the benefit of creditors, or
attempt to take the benefit of any insolvency law, or if a petition or
answer to reorganize the Tenant shall be approved by any court or judge, or
if a petition or answer for a composition or extension shall be filed by
the Tenant, or if a receiver or trustee shall be appointed for the Tenant's
property, or if the Tenant's interest in this lease shall be attached or
levied upon or shall devolve upon or pass to any party other than the
Tenant (whether such event occurs prior or subsequent to the commencement
of the term or Tenant's entry into possession) such event shall be
conclusively deemed a default hereunder, and the Landlord shall have the
right to terminate this lease in the manner hereinafter provided, as if
such event were a breach by the Tenant of one of the covenants of this
lease. In the event of such termination, the Tenant or any person claiming
under, by or through the Tenant, by virtue of any statute or of any order
of any court, shall not be entitled to possession or to remain in
possession of the demised premises but shall forthwith quit and surrender
same. Exclusive of and in addition to any other rights or remedies the
Landlord may have through any other portion or provision of this lease or
by virtue of any rule of law or statute, said Landlord may keep and retain,
as liquidated damages, any rent, security, deposit or other moneys or
consideration received by the Landlord from the Tenant, or others on behalf
of the Tenant. Also, in the event of termination of this lease as
aforesaid, the Landlord shall be entitled, as and for liquidated damages
from the Tenant for breach of the unexpired term of this lease, to an
amount equal to the
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difference between the rental value of the remainder of the term at the
time of termination and the actual rent reserved, both discounted to
present worth at the rate of twelve percent (12%) per annum. If at any time
within a reasonable period following the date of the termination of the
lease, as aforesaid, the premises should be re-rented by the Landlord, the
rent realized by any reletting shall be deemed prima facie evidence of the
rental value. In the event of the occurrence of any of the above-mentioned
events of default occasioned solely through the invocation by the Tenant or
by third parties of the laws of the State of New York, judicial or
statutory, as distinguished from the invocation of Federal laws relating to
bankruptcy, reorganization, or otherwise, the Landlord, in addition to the
foregoing, may accelerate the full amount of rent reserved for the
remainder of the lease, and the same shall forthwith become due and payable
to the Landlord. Nothing herein provided shall be deemed to prevent or
restrict the Landlord from proving and receiving as liquidated damages
herein the maximum permitted by any rule of law or statute prevailing when
such damages are to be proved, whether they be greater or less than those
referred to above.
TWENTIETH: (a) Remedies of the Landlord on Default: Performance by the
Landlord. If the Tenant shall default in the full and due performance of
any covenant of this lease, the Landlord shall have the right, upon thirty
(30) days' notice to the Tenant (unless a shorter period of notice or
provision for the performance of such work without notice is elsewhere
established in this lease), to perform the same for the account of the
Tenant, and in such event all workmen employed by the Landlord shall be
deemed the agents of the Tenant, and any reasonable payment made, and
expense incurred, by the Landlord in this connection, shall forthwith
become due and payable by the Tenant to the Landlord with interest thereon
at a rate of twelve per centum (12%) per annum. If the Landlord incurs any
expenses, including reasonable attorneys, fees and disbursements in
instituting, prosecuting or defending any action or proceeding instituted
by reason of any default of the Tenant hereunder, the sum or sums so
incurred by the Landlord with all interest, costs and damages, shall be
deemed immediately due to the Landlord upon demand. Any and all sums
payable by the Tenant to the Landlord shall bear interest at the rate of
twelve per centum (12%) per annum from the due date to the date of actual
payment, and any and all such sums (except the rent hereinabove expressly
reserved) shall be deemed to be additional rent for the period prior to
such due date, and the Landlord shall have the same remedies for default in
the payment of such additional rent as for default in the payment of the
rent expressly reserved.
(b) Performance by the Landlord Not an Exclusive RemedY. In the event
that under the provisions of this lease the Landlord shall have the
privilege of performing any covenant in respect of which the Tenant may be
in default and of recovering the expenses so involved from the Tenant as
additional rent or otherwise, such remedy shall not be the exclusive remedy
of the Landlord but the Landlord may, at its option, treat such default as
a breach of a substantial obligation of this lease and shall have all the
other remedies in respect thereof provided in this or any other Article of
this lease.
(c) Dispossess Termination of Lease. If at any time prior to or during
the term of this lease, one or more of the following events occurs:
(i) if Tenant shall default in the payment of fixed rent or in
the payment of any additional rent, as and when due, and such default
shall continue for a period of five (5) days after notice by Landlord
to Tenant of such default; or
(ii) if Tenant shall default in the observance or performance of
its obligations under any term, covenant or provision of this lease
(other than the covenants for the
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payment of fixed rent and additional rent) and Tenant shall fail to
remedy such default within thirty (30) days after notice by Landlord
to Tenant of such default, or if such default is of such a nature that
it cannot be completely remedied within said period of thirty (30)
days and Tenant shall not commence within said period of thirty (30)
days, or shall not thereafter diligently prosecute to completion, all
steps necessary to remedy such default; or
(iii) if any of the events specified in the Article of this lease
numbered NINETEENTH and headed "Insolvency" shall occur; or
(iv) if Tenant shall desert or abandon the premises; or
(v) if Tenant shall default in its obligations (after expiration
of all applicable grace periods) under that certain loan agreement,
dated as of the date hereof, between Tenant, as borrower, and Landlord
(the "Loan Agreement") or any note evidencing any amounts payable by
Tenant to Landlord pursuant to the Loan Agreement or other agreements
between the parties (individually, a "Note" and collectively, the
"Notes"),
then, upon such occurrence, Landlord, at any time thereafter, at Landlord's
option, may give to Tenant ten (10) days' notice of its intention to
terminate this lease, and, in such event, on the tenth day following the
giving of such notice this lease and the term hereby granted shall
terminate and expire as fully and completely as if that day were the date
herein expressly fixed for the expiration of the term, and the Tenant shall
thereupon quit and surrender the premises into the possession of the
Landlord, but the Tenant shall nevertheless remain liable for deficiency in
future rent and for any other defaults hereunder, as hereinafter provided.
Notwithstanding any other provisions herein, if the Tenant shall
default in the payment of the rent, or any additional rent herein
mentioned, or of any part of either, or if this lease shall be terminated
by the ten (10) day notice above provided for, the Landlord may
immediately, or at any time thereafter, re-enter the premises and remove
all persons and property therefrom, either by summary dispossess
proceeding, or by any suitable action or proceeding at law, or by force, or
otherwise, without being liable to indictment, prosecution or damages
therefor, and re-possess and enjoy the premises, together with all
additions, alterations, installations and improvements, and no entry by the
Landlord shall be deemed an acceptance of surrender. Upon any such
re-entry, the Landlord may re-let the premises or any part or parts
thereof, and for such term or terms as to the Landlord may seem wise, even
though the same extend beyond the date herein expressly fixed for the
expiration of the term. Any such re-letting shall, at the Landlord's
option, be either for the Landlord's own account, or as the agent for the
Tenant. If the Landlord shall re-let as the agent of the Tenant, the
Landlord shall receive the rents and apply the same, first, to the payment
of all expenses which the Landlord shall have incurred by reason of the
Tenant's default and in connection with such re-entry and re-letting,
including, but not by way of limitation, legal expenses, brokers'
commissions, and the cost of reasonable repairs, redecoration and
alterations, and, secondly, to the fulfillment of the covenants of the
Tenant herein contained, and the surplus, if any, existing at the date
herein expressly fixed for the expiration of the term, shall be paid to the
Tenant, but the Tenant shall be entitled to no such payment until said
date. So long as the premises, or any part thereof, shall not be re-let, or
shall be re-let by the Landlord as the agent of the Tenant, the Tenant
shall remain liable for the full and due performance of all the covenants
of this lease, and the Tenant hereby agrees to pay to the Landlord, as
damages for any default hereunder, until the date herein expressly fixed
for the expiration of the term, the equivalent of the amount of all the
rent and additional rent reserved herein, less the net avails of
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re-letting, as hereinbefore defined, if any, and the same shall be due and
payable by the Tenant to the Landlord on the several rent days above
specified, that is, upon each of the said rent days the Tenant shall pay to
the Landlord the amount of deficiency then existing, and shall not be
entitled to withhold any such payment until the date herein expressly fixed
for the expiration of the term. The liability of the Tenant shall survive
the issuance of a final order and warrant of dispossess, and re-entry by
the Landlord, and any other termination of this lease for default of the
Tenant, and the granting by the Landlord of a new lease of the premises to
another tenant, and the Tenant hereby waives any defense which might be
predicated upon any of said acts or events.
The Tenant hereby expressly waives (i) any and all right co regain
possession of said premises or to reinstate or redeem this lease as
provided by the Real Property Actions & Proceedings Law (and as said law
may be amended), or any such right which is or may be given by any other
statute, law or decision now or hereafter in force; (ii) the service of any
notice demanding rent or stating an intention to re-enter; or any similar
right which is or may be given by any statute, law or decision now or
hereafter in force; (iii) any and all rights of redemption and all other
rights to regain possession or to reinstate this lease (in case the Tenant
shall be dispossessed or ejected by, or pursuant to judgment, order,
execution or warrant of any court or judge). Except as provided in Section
259-c of the Real Property Law with respect to an action for personal
injury or property damage between the parties hereto, the Tenant waives and
will waive all right to trial by jury in any summary proceedings and in any
other proceeding or action at law hereafter instituted by the Landlord
against the Tenant in respect of this lease, and also in any action or
proceeding between the parties hereto for any cause; and it is hereby
agreed, that in any of such events, the matter in dispute shall be tried
before a judge without a jury. In the event the Landlord shall commence any
action or summary proceeding for nonpayment of rent or other breach of
covenant or condition, the Tenant hereby agrees not to interpose any
counterclaim for whatever nature or description in any such action or
proceeding. The words "re-enter" and "re-entry" as used in this lease are
not restricted to their technical legal meaning.
TWENTY-FIRST: Surrender at Expiration. Upon the expiration of the term
of this lease or in the event of termination by reason of casualty or
condemnation, the Tenant shall quit and surrender the demised premises,
together with any fixtures, equipment or appurtenances installed in the
premises at the commencement of this lease, and any alterations,
decorations, additions and improvements which are not to be removed in
compliance with the provisions of Article FOURTH hereof, to the Landlord,
broom clean, in good order and condition, ordinary wear excepted. If the
last day of the term of this lease falls on Sunday, this lease shall expire
on the business day immediately preceding. The Tenant's obligation to
observe and perform this covenant shall survive the expiration or other
termination of the term of this lease.
TWENTY-SECOND: Tenant's Deposit. (a) Upon execution of this Lease, the
Tenant shall deposit with the Landlord the sum of Three Hundred Thousand
Dollars ($300,000) to secure the faithful performance by the Tenant of all
the terms, conditions, covenants and agreements of this lease, and to make
good to the Landlord any damage which it may sustain by reason of any act
or omission of the Tenant (such $300,000 or other amount from time to time
on hand with the Landlord, hereafter the "Deposit"). If, during the term of
this lease, the Landlord shall sell, exchange or lease the entire building,
subject to this lease, or, being the lessee thereof, shall assign its
Lease, the Landlord shall have the right to pay or transfer the said
Deposit to such grantee, lessee, or assignee, as the case may be, and, in
such event, upon notice of such transfer to Tenant, the Landlord shall be
released from all responsibility and liability in connection therewith, and
the
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Tenant will look solely to said grantee, lessee, or assignee for its
return. If the Deposit is in cash, it shall be deposited with a bank or
trust company, savings bank or savings and loan association and the
Landlord shall advise the Tenant of the name and address thereof. The
Tenant shall not be entitled to the payment of any interest earned upon
such Deposit unless earned and any interest earned shall be added to the
Deposit and Landlord shall have the right to deduct from such Deposit an
amount equal to 1% of the Deposit, which 1% shall be payable to Landlord to
defray the cost of administering such Deposit. The Tenant's interest in
said Deposit shall not be assigned or encumbered without the written
consent of the Landlord, and within thirty (30) days after the expiration
(or termination pursuant to paragraph (c) of Article SIXTEENTH) of the
term, the amount of said Deposit shall be repaid to the Tenant, less any
proper charges against the same, as hereinabove or hereinafter provided. If
the Tenant shall fail to make any payment of rent or of additional rent or
of any other payment due from the Tenant to the Landlord under this lease
beyond all applicable grace periods, or if the Landlord shall be damaged by
any act or omission of the Tenant which is a default hereunder for
something other than the non-payment of rent, additional rent or other
amounts and such default is not cured (or diligent efforts to cure such
default not begun) within thirty (30) days, the Landlord may, at its
option, apply such portion of the Deposit as may be adequate to cure such
default or to make good such damage, including, but not by way of
limitation, interest, reasonable costs, fees and other expenses, paid or
incurred by the Landlord, but excluding any amount which might be due as
the result of the acceleration of future rent payable hereunder or the
acceleration of the Notes and thereafter such portion so applied shall be
free from any claim by the Tenant for its return. If the Landlord shall
re-enter, pursuant to the provisions of this lease (other than in the event
of insolvency in which event the provisions of Article NINETEENTH of the
lease shall apply), and shall re-let the premises for its own account, the
entire Deposit shall immediately be and become the absolute property of the
Landlord, as fixed, liquidated and agreed damages, and not as a penalty, it
being impossible in such event to ascertain the exact amount of the damage
which the Landlord may thus sustain, but unless the Landlord shall so
re-let the premises for its own account, the Landlord shall continue to
hold the Deposit, as security for the performance of the Tenant's
obligations, until the date herein expressly fixed for the expiration of
the term, and apply the same from time to time to the unpaid obligations of
the Tenant, under the same terms and conditions as if the said lease were
still in full force and effect. No termination of this lease or re-entry by
the Landlord for default of the Tenant shall entitle the Tenant to the
return of any part of the Deposit, nor shall the retention of such Deposit,
after such re-entry, impair or otherwise affect the Tenant's liability to
the Landlord during the balance of the term originally provided for. If, at
any time, the Deposit shall be diminished below the amounts required by
this paragraph (a) or paragraph (c) of this Article TWENTY-SECOND, as
applicable, by reason of the Landlord's having applied any part thereof in
accordance with the provisions of this paragraph, the Tenant shall pay over
to the Landlord, upon demand, the equivalent of such decrease, to be added
to the Deposit and to be held and applied in accordance with the provisions
of this paragraph.
(b) In lieu of delivering cash as the Deposit, the Tenant may deliver
to Landlord an unconditional, irrevocable, letter of credit (the "Letter of
Credit") issued by a New York Clearing House bank and having a term
expiring no earlier than October 31, 1997 and in substance satisfactory to
the Landlord, which Letter of Credit is to be held by Landlord in
accordance with the terms described in paragraph (a) above. In the event
that the Landlord receives notice from the Bank or Tenant that the Letter
of Credit is not being renewed or in the event that Tenant has not
delivered a replacement Deposit or a similar Letter of Credit to Landlord
by ten (10) days before the expiration of the Letter of Credit, then
Landlord shall be entitled to present the Letter of
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Credit for immediate payment of the then potential amount available
pursuant to the Letter of Credit, and such amount of the Letter of Credit
shall become the Deposit hereunder and shall be held, applied and returned
by Landlord in accordance with the terms provided by the Lease for the
holding, application and return of the Deposit. If the Letter of Credit is
not being renewed but Tenant does deliver a replacement Deposit or a
similar Letter of Credit by ten (10) days before expiration of the Letter
of Credit, then Landlord shall not thereafter be entitled to present the
expiring Letter of Credit for payment of any amounts.
(c) In the event that (i) Tenant delivers to the Landlord a financial
statement (signed by the Tenant's President and Chief Financial Officer)
which shows that the Tenant's net worth as of the date in question is not
less than One Million Two Hundred Thousand ($1,200,000.00) Dollars, and
(ii) the Landlord has not previously drawn on any Letter of Credit in
connection with a failure by the Tenant to pay rent hereunder or pay any
amounts due on the Notes, then the aggregate amount of the Deposit and
Letter of Credit may be reduced on November 1, 1997 to $200,000 and further
reduced on November 1, 1998 to $132,000. In such event, the Tenant shall be
entitled to deliver to the bank issuing the Letter of Credit (if any) a
document, certified by Tenant's President and Chief Financial Officer,
which states that (x) Tenant's net worth as of the date in question is no
less than One Million Two Hundred Thousand ($1,200,000.00) Dollars and (y)
the Landlord has not previously drawn on the Letter of Credit in connection
with a failure by the Tenant to pay rent hereunder or pay any amounts due
on the Notes, and the amount of any Letter of Credit shall thereupon
automatically be reduced to $200,000 on November 1, 1997 and $132,000 on
November 1, 1998.
(d) At Tenant's request, any cash or cash equivalent held by Landlord
as part of the Deposit, which is in excess of that required to be held by
Landlord pursuant to paragraph (c) or this paragraph (d) and which has not
been or is not in the process of being applied pursuant to the provisions
of paragraph (a) of this Article TWENTY-SECOND, shall be returned promptly
to Tenant. If Landlord is holding a letter of credit as part of the Deposit
and provided Landlord has not presented for payment such letter of credit,
upon delivery of a substitute letter of credit in the appropriate amount
and which otherwise satisfies the requirements of paragraph (b) of this
Article, the Landlord shall deliver to Tenant the letter of credit being
replaced.
TWENTY-THIRD: Building Services. (a) Except on Saturdays and Sundays,
and on holidays recognized as legal holidays by State or Federal
Government, the Landlord shall furnish, between the hours of eight a.m. and
six p.m., elevator service with elevators now in the building, and during
the cold season (October 15th through April 15th), sufficient heat to heat
the premises. The Landlord may suspend any such services, if it should
become necessary so to do, at any time. The Landlord shall restore such
suspended service promptly, making due allowance for labor troubles, acts
of God, or any cause beyond the Landlord's control.
(b) In addition to the elevator service described in (a) above, the
Landlord will maintain in service and available for the use of the Tenant,
one passenger elevator at all times on all days of the week, including
Saturdays, Sundays and the legal holidays referred to in paragraph (a)
above. In the event that the Tenant requires freight elevator service, or
heat on Saturdays, Sundays or any legal holiday referred to in paragraph
(a) above, or during hours in addition to those prescribed under (a) above,
the Landlord will furnish the additional elevator service or heat or both,
as the case may be, upon notice of the Tenant's need therefor. Such notice
may be written or oral and shall be given as long a time as practicable
prior to the time when the additional heat or freight elevator service is
required. The Tenant will pay for any additional freight elevator service
and heat furnished after the hours prescribed in (a) above at the
respective prevailing rates
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per hour as established from time to time by the Landlord for such services
at the building or in the buildings of the Landlord generally, for each
hour during which the additional service is supplied. All charges for
additional freight elevator service and heat shall be payable when billed
and in the event of default of payment therefor, Landlord may refuse
further service and the amount unpaid (plus interest thereon at the rate of
twelve per centum (12%) per annum) shall be deemed additional rent for
which the Landlord shall have all the remedies for collection herein
specified with respect to rent. The failure on the part of the Landlord to
furnish such additional elevator service or heat, if due to breakdowns,
repairs, maintenance, strikes, or other causes beyond the control of the
Landlord, shall involve no liability on the part of the Landlord nor shall
it constitute an eviction. Notwithstanding any other provision in this
Article TWENTY-THIRD, during the construction of the Improvements pursuant
to Article TWENTY-SEVENTH of this lease and during the period that Tenant
is moving into the demised premises, Landlord shall furnish freight
elevator service to Tenant between the hours of eight a.m. and six p.m.,
without charge; in the event Tenant requires such freight elevator service
at other times, Tenant shall give Landlord notice of such requirement as
above provided and Tenant will pay for such additional freight elevator
service at the prevailing rates per hour, as established from time to time
by the Landlord, for each hour during which the additional service is
provided during such period.
(c) The Landlord shall furnish the cleaning services referred to in
Schedule A to this lease, such cleaning to be done after five-thirty p.m.
and prior to eight a.m. Tenant shall keep all windows on the premises clean
in accordance with all of Landlord's Rules and Regulations, and Landlord
shall have no obligation to keep the interior or exterior of such windows
clean.
(d) The main entry to the building shall be open and staffed by a
doorman, security guard or other employee or agent of the Landlord from
8:00 a.m. to 7:30 p.m. on business days. At all other times the Tenant and
its employees and their invitees shall have access to the building at any
time and without notice to the Landlord by ringing a security bell provided
for after hours service and properly identifying themselves (by building
passes or such other security arrangement as the Landlord shall institute)
to the building staff at that time.
TWENTY-FOURTH: Water; HVAC. (a) The Landlord shall furnish cold water
for ordinary lavatory use so long as the premises are used only for office
uses. The Tenant will, at its own expense, heat the cold water supplied by
the Landlord in order to furnish hot water for lavatory or office uses. In
order to permit the Tenant to heat water for lavatory or office use, the
Landlord will provide, at Landlord's expense, one electric "instantaneous"
water heater, which shall be repaired and, if necessary, replaced by the
Landlord. The Tenant will pay the cost of any electricity utilized in
heating water. In the event that the Tenant shall use water for any
industrial purpose or any purpose other than usual lavatory purposes, the
Tenant shall, at its own expense, install a meter or meters for the
measurement of the quantity of water thus consumed and keep the same in
good working order and the Tenant will pay for the water so shown to have
been used. All payments for water shall be due when billed to the Tenant.
In the event that the Tenant defaults in the payment for any water, the
amount not paid shall forthwith be payable as additional rent and the
Landlord may also, without incurring any liability or disability thereby or
constituting a constructive eviction, discontinue the Tenant's supply of
water.
(b) The Tenant shall pay all electric costs incurred in the operation
of all air conditioning equipment in the premises, in accordance with
Article EIGHTH of this Lease; furthermore, Tenant, at its cost and expense,
shall be responsible for maintaining all service contracts on such
equipment and for the maintenance and
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repair of the air conditioning system, including without limitation, all
duct work and dampers; provided, however, repair is covered by warranty
held by the Landlord, the Landlord will make the benefits of such warranty
available to the Tenant.
TWENTY-FIFTH: Work to be Done by Landlord. The Landlord shall not be
required to furnish any work or materials to the premises, except as
expressly provided in (i) paragraph (a) of Article THIRD and (ii) the Work
Sheet attached as Exhibit "H" to this Lease. In case the Landlord is
prevented from making any repairs, improvements, decorations or
alterations, installing any fixtures or articles of equipment, furnishing
any services or performing any other covenant herein contained to be
performed on the Landlord's part, due to the Landlord's inability to
obtain, or difficulty in obtaining, labor or materials necessary therefor,
or due to any governmental rules and regulations relating to the priority
of national defense requirements, or due to labor troubles, or due to any
other cause beyond the Landlord's control, the Landlord shall not be liable
to the Tenant for damages resulting therefrom, nor except as expressly
otherwise provided in Article FOURTEENTH hereof (in respect of damage to
the premises due to fire), shall the Tenant be entitled to any abatement or
reduction of rent by reason thereof, nor shall the same give rise to a
claim in the Tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the premises. Upon
substantial completion of the Landlord's work, Landlord shall tender
possession of the premises to Tenant.
TWENTY-SIXTH: Real Estate Taxes. Operating Expense and Fuel Oil
Escalations.
(a) Real Estate Taxes Escalation. In order to adjust, during the term
of this lease, for increases in the expenses of the Landlord for Real
Estate Taxes, the Tenant, commencing on (i) December 1, 1995 with respect
to the Initial Premises (as defined in paragraph (c)(9) of this Article)
and (ii) December 1, 1998 with respect to the Additional Fourth Floor
Premises, and in each year thereafter, shall pay to the Landlord, as
additional rent, the Tenant's Proportionate Share of any Increase in such
Real Estate Taxes, all in accordance with paragraphs (c) through (g) below.
(b) Operating Expenses Escalation. In order to adjust, during the term
of this lease, for increases in the expenses of the Landlord in operating
the building, the Tenant shall pay to Landlord, as additional rent,
commencing on (i) December 1, 1995 with respect to the Initial Premises and
(ii) December 1, 1998 with respect to the Additional Fourth Floor Premises,
and in each year thereafter, the amount stated opposite the appropriate
year in Exhibit F, attached hereto and made a part hereof (the "Operating
Expense Payment"), all in accordance with paragraphs (c) through (g) below.
(c) Definitions. As used in this Article the following capitalized
words or expressions shall have the meaning ascribed to them below:
1. "Real Estate Taxes" shall mean and include all expenditures of the
Landlord for taxes or assessments payable by the Landlord, as finally
determined, upon or with respect to the building and the land upon which it
is located, imposed by Federal, State or local government (plus all
expenditures for fees and expenses incurred in the course of obtaining a
reduction in any tentative assessed valuation), but shall not include
income, franchise, inheritance or capital stock or like taxes.
2. "Increase in Real Estate Taxes" shall mean the amount by which Real
Estate Taxes in any Subsequent Year, exceed Real Estate Taxes assessed for
the year commencing July 1, 1994 and ending June 30, 1995.
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3. "Projected Real Estate Taxes" shall mean the Landlord's reasonable
estimate of Real Estate Taxes for the particular subsequent year.
4. "Comparative Statement" shall mean a statement, in writing signed
by the Landlord or, on its behalf by an officer of any corporation acting
as its managing agent, showing (i) a comparison of (a) Real Estate Taxes
for the Base Year with (b) Projected Real Estate Taxes for the upcoming
Subsequent Year, (ii) if the Tenant paid additional rent pursuant to this
Article with respect to the immediately preceding Subsequent Year as a
result of Increase in Real Estate Taxes, any adjustment necessitated by a
variance between Projected Real Estate Taxes for such immediately preceding
Subsequent Year (as shown in the last Comparative Statement) and the actual
Real Estate Taxes for such immediately preceding Subsequent Year (as shown
in the current Comparative Statement), (iii) the Operating Expense Payment
for the 12-month period beginning on the November 1st in question and (iv)
the Fuel Oil Escalation for the 12-month period beginning on the November
1st in question. At the request of the Tenant, the Comparative Statement
shall be accompanied by a copy of the most recent statement for real estate
taxes for the premises received by Landlord from the City of New York.
5. "Base Year" shall mean the period of July 1, 1994 to June 30, 1995.
6. "Tenant's Proportionate Share" shall mean the percentage obtained
by dividing the number of Rentable Square Feet of Area of the premises by
the total number of Rentable Square Feet of Area in the entire building,
that is, (i) for the period December 1, 1995 through November 30, 1997,
0.1197 (as such figure may be increased to reflect the Tenant's occupancy
of any Additional Fourth Floor Premises prior to December 1, 1997, as
contemplated by Article Thirty-Second hereof), and (ii) for the period
December 1, 1997 through December 31, 2009, 0.1378.
7. "Rentable Square Feet of Area" shall mean, as to ground floor
space, the number of net square feet of the area thereof and, as to all
floors above the ground floor, shall mean the number of rentable feet of
the area thereof.
8. "Subsequent Year" shall mean each calendar year during the term of
this lease commencing with the year beginning January 1, 1995.
9. "Initial Premises" shall mean the portion of the premises indicated
on Exhibits "A", "C" and "D" hereto.
10. "Additional Fourth Floor Premises" shall mean the portion of the
premises indicated on Exhibit "B" hereto.
(d) Statements for the Tenant. Prior to November 1, 1995, and on or
before that day in each Subsequent Year, the Landlord will furnish a
Comparative Statement to the Tenant. The failure of the Landlord to furnish
a Comparative Statement shall be without prejudice to the right of the
Landlord to furnish a Comparative Statement at any time in the future.
Every Comparative Statement Furnished by the Landlord pursuant to this
Article shall be conclusive and binding upon Tenant unless (i) within
thirty (30) days after the receipt of such Comparative Statement Tenant
shall notify Landlord that it disputes the correctness thereof, specifying
the particular respects in which such Comparative Statement is claimed to
be incorrect. Pending the determination of such dispute, Tenant shall pay
additional rent in accordance with such Comparative Statement and such
payment shall be without prejudice to Tenant's position and to the Tenant's
rights to a refund of any overpayment. If the dispute shall be determined
in Tenant's favor, Landlord shall within five (5) business days after
Landlord's receipt of the notice of such
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determination, pay Tenant the amount of Tenant's overpayment of additional
rent resulting from compliance with such Comparative Statement.
(e) Computation of Increases in Rent Payable by Tenant. When the
Landlord shall furnish the Tenant with any Comparative Statement in
accordance with this Article which shall show an Increase in Projected Real
Estate Taxes and/or a Fuel Oil Escalation, if any, then commencing on
December 1, of the year in question, in addition to the increase in rent
attributable to the Operating Expense Payment for the 12-month period then
commencing, the rent payable under the lease shall be increased by the
Tenant's Proportionate Share of the increase in the Projected Real Estate
Taxes and the Fuel Oil Escalation. Such increases shall be payable (with
payment on account of such increases) as follows: on the first day for the
payment of rent under this lease following the receipt of the Comparative
Statement, the Tenant shall pay to the Landlord the sum equal to (1) the
aggregate of one-twelfth of the Tenant's Proportionate Share of the
increase in Projected Real Estate Taxes, (plus or minus, as the case may
be), (2) any adjustment necessitated by a variance between (x) the
Projected Real Estate Taxes for such immediately preceding Subsequent Year
and (y) the actual Real Estate Taxes for such immediately preceding
Subsequent Year, plus (3) one-twelfth of the Tenant's Operating Expenses
Payment for the 12-month period then commencing plus (4) one-twelfth of the
Fuel Oil Escalation for the 12-month period then ended. Until a different
Comparative Statement shall be submitted as above provided, the monthly
installments or rent payable under this lease due to an Increase in
Projected Real Estate Taxes and Fuel Oil Escalation shall continue to be
increased by such amount; however, notwithstanding any other provision
herein, the failure of the Landlord to submit a Comparative Statement in
any Subsequent Year shall not affect the amounts payable by Tenant as
Operating Expense Payment in such Subsequent Year.
With respect to the Comparative Statement furnished to the Tenant in
the Subsequent Year following the year in which the term of this lease
terminates, if such Comparative Statement shall indicate an adjustment
necessitated by a variance of the type referred to in clauses (x) and (y)
in the immediately preceding paragraph, then the Tenant shall promptly pay
to the Landlord, or the Landlord promptly shall pay to the Tenant, as the
case may be, the amount of any such adjustment as indicated in such
Comparative Statement.
(f) Inspection of Books. The Tenant or its authorized representative
shall have a right to examine the books of the Landlord showing the Real
Estate Taxes and Fuel Oil Escalations with respect to the building during
regular business hours for the purpose of verifying the information set
forth in any Comparative Statement relating to any Increase in Real Estate
Taxes and Fuel Oil Escalation shown in such Comparative Statement; provided
that a written request for such inspection is made by the Tenant within 120
days of the receipt of any such Comparative Statement.
(g) Decreases in Real Estate Taxes or Fuel Oil Costs. In no event
shall any decrease in the Real Estate Taxes or fuel oil costs in any way
reduce the fixed rent payable by the Tenant under this lease, except to the
extent to which a decrease in Real Estate Taxes shall result in a decrease
in the additional rent payable pursuant to paragraph (a) of this Article;
provided, however, that no decrease in Real Estate Taxes or fuel oil costs
shall in any way reduce any additional rent payable on account of any
Operating Expense Payment.
(h) Fuel Oil Escalation. In the event that in any 12 month period
commencing on October 1, and ending on September 30 (a "Fuel Oil Year") the
average tank wagon delivery price for fuel oil (expressed in cents per
gallon) of the grade utilized in the oil burners installed in the building,
as cited in the Amerada Hess Schedule for New York City as published in
"The Journal of
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Commerce" (or, if such schedule is no longer available, such similar
published schedule as the Landlord shall deem reasonably appropriate)
(hereinafter called the "Adjusted Fuel Cost") exceeds the Base Fuel Cost
(hereafter defined), then commencing on the next December 1, the Tenant
shall pay to the Landlord, in the manner herein provided, as additional
rent, the amount (the "Fuel Oil Escalation") obtained by multiplying (x)
the product obtained by multiplying (i) the Base Fuel Cost by (ii) the
total amount of fuel oil used for the building during the preceding Fuel
Oil Year to September 30, 1994 by (y) a fraction, the numerator of which
shall be (i) the Adjusted Fuel Cost, less (ii) the Base Fuel Cost, and the
denominator of which shall be the Base Fuel Cost, and by (z) the Tenant's
Proportionate Share. Payment of any Fuel Oil Escalation shall be made in
accordance with paragraph (e) of this Article TWENTY-SIXTH. As used in this
paragraph (h) the term "Base Fuel Cost" shall mean the average cost
(expressed in cents per gallon) for fuel oil in November, 1994, as cited in
the Amerada Hess Schedule for New York City as published in "The Journal of
Commerce" (or, if such schedule is no longer available, such similar
published schedule as the Landlord shall deem reasonably appropriate).
If the Landlord changes the grade or type of fuel oil presently used
in the building and such change results in an inequity to either the
Landlord or the Tenant, then the appropriate adjustment will be made to the
foregoing. Appropriate adjustments will also be made to prorate any amount
payable hereunder with respect to the first and last years of the term of
this lease.
(i) Notwithstanding any other provision herein, in no event shall the
amount payable by Tenant in any Subsequent Year for Fuel Oil Escalation and
Operating Expense Payment exceed 5% of the fixed rent payable in such
Subsequent Year.
TWENTY-SEVENTH: Construction of Office Improvements. It is agreed that
the Tenant will arrange for the modification and improvement of the
premises to make them suitable for office use, and that the Landlord will
pay the cost thereof up to a maximum of $847,000, of which $749,087 may be
utilized at any time and $97,913 may only be utilized after the earlier of
(i) November 1, 1997 or (ii) the date specified in any notice from the
Tenant pursuant to Article THIRTY-SECOND as the date on which the Tenant's
lease term with respect to the Additional Fourth Floor Premises will
commence; all in accordance with, and subject to the limitations set forth
in subparagraphs (a) through (e) below:
(a) The Tenant will select an architect to design office installation
improvements for the premises (the "Improvements"). The Improvements shall
not include any furniture, or telephone, computer or other office systems
or equipment.
(b) As soon as possible, but in all events within four weeks after the
execution and delivery of this lease, the Tenant shall submit to the
Landlord for Landlord's review and approval, complete and final plans and
specifications (including all necessary mechanical, electrical, engineering
and working drawings) (the "Final Plans") for the Improvements to the
Landlord and such plans and specifications shall be sufficient (i) to
comply with all applicable rules, regulations and requirements of any
governmental authority having jurisdiction over the building, (ii) to
permit Tenant to apply for and obtain all necessary permits, licenses and
approvals necessary in connection with the Improvements, and (iii) to
permit the contractor to commence and complete the work relating to the
Improvements. The Landlord will review and approve or comment on any plans
and specifications submitted by the Tenant within fifteen (15) days of
receipt thereof. As soon as practical following any comment by the
Landlord, the Tenant shall submit to the Landlord for approval revised
plans and specifications for the Improvements, sufficient to meet the
requirements in clauses (i) through (iii) above (such plans, as finally
approved by the Landlord, shall be initialed by the Landlord and the
Tenant, and
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are hereinafter referred to as the "Final Plans"). The Tenant agrees to
reimburse the Landlord for its reasonable fees and expenses for reviewing
any preliminary plans and specifications, as well as the Final Plans.
(c) All professional fees (including those for architectural and
design costs and appraisals) and the cost of all permits, licenses and
approvals required in connection with the construction and installation of
the Improvements shall be borne solely by the Tenant and shall not be
included in the $847,000 to be advanced by Landlord pursuant to this
Article TWENTY-SEVENTH for the construction and installation of the
Improvements. In the event that the Landlord advances any such fees or
costs, the Tenant shall reimburse the Landlord for such amount within three
(3) days of receipt of any invoice from the Landlord for such an amount. No
work shall be commenced unless and until Tenant delivers to Landlord all
necessary permits, consents, certificates, and governmental approvals
necessary or applicable for the construction and installation of the
Improvements.
(d) Within fifteen (15) days of the Landlord's approval of the Final
Plans, the Tenant will inform the Landlord of the cost of constructing and
installing the Improvements. In the event that such cost exceeds the
portion of the $847,000 then available pursuant to the provisions of this
Article (the "Available Amount"), the Tenant, will elect one of the
following options:
(x) elect to proceed with the construction and installation of
the Improvements and to pay such excess cost, in which event the
Tenant will immediately deliver to Landlord the full amount by which
such cost exceeds the Available Amount; such deposit may be in a form
of a letter of credit issued by a New York Clearinghouse bank, having
a term of one year and otherwise in form satisfactory to Landlord, the
letter of credit will be presented for payment by the Landlord once
Landlord has been presented with invoices equal to or in excess of the
Available Amount and in the event the proceeds thereof are
insufficient to pay the excess costs, the Tenant will deposit the
balance of such excess amount with the Landlord within seven (7) days
of receipt from Landlord of an invoice for such amount; if the
proceeds of such letter of credit exceed the excess costs, Landlord
will deliver any excess proceeds to Tenant promptly after payment of
all invoices related to the Improvements; or
(y) cause the Tenant's architects to revise the plans and
specifications for the Improvements so that the total cost thereof
does not exceed the Available Amount;
(z) without changing the plans and specifications for the
Improvements from those set forth in the Final Plans, either
renegotiate the bids submitted by one or more subcontractors or
vendors whose bids were utilized in calculating the total cost of
constructing and installing the Improvements, or obtain bids of
additional subcontractors or vendors with respect to particular
elements of the Improvements, in either case with a view toward
lowering the total cost of constructing and installing the
Improvements.
The Tenant agrees to exercise the foregoing election within three (3)
business days of giving Landlord the notice required by paragraph (d),
above. It is understood and agreed that notwithstanding the Tenant's
exercising either or both of the options referred to in (y) and (z) above,
in the event that the total cost of constructing and installing the
Improvements shall, nevertheless, exceed the Available Amount, the Landlord
shall be under no obligation to proceed with the funding of such
construction and installation unless and until the Tenant shall deposit
with the Landlord the full amount of such excess. The Tenant shall commence
constructing and installing the Improvements not later than the
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tenth business day following Tenant's exercise of the options set forth
above (and the deposit of funds with the Landlord, if required) (the
"Improvements Construction Date"). In the event that during the course of
the construction and installation of the Improvements, the Tenant makes any
change, addition or modification from the Improvements as detailed on the
Final Plans, Tenant shall give Landlord notice of such change addition or
modification and, if as a result of such change, addition or modification,
the cost of the Improvements shall be increased, then the Tenant shall
immediately deposit the full amount of such increase with the Landlord
which shall utilize such funds to pay such increase cost. The Tenant shall
be responsible for the cost of any change which would increase the cost of
the Improvements. In the event that during the course of constructing and
installing the Improvements, the Tenant wishes to authorize overtime work
in order to reduce the time necessary to construct and install the
Improvements, then it will so advise the Landlord and Landlord will
authorize such overtime work provided the Tenant shall undertake to pay the
additional cost resulting from the utilization of overtime work and shall
deposit with the Landlord, at the time of such request, an amount equal to
the Landlord's reasonable estimate of the additional cost of such overtime
work. All deposits for excess costs required pursuant to this paragraph (d)
may be in the form of a letter of credit satisfying the provisions of
subparagraph (x) hereof.
(e) In the event that the total cost of the Improvements is less than
$847,000 the Landlord shall pay the total cost of the Improvements;
however, no additional amount shall be payable to the Tenant or any other
person as a result of such fact, nor shall Landlord pay any of the fees or
costs referred to in paragraph (c). The Tenant shall pay any cost of the
Improvements in excess of $847,000.
(f) The Tenant warrants to the Landlord that the Improvements shall
conform to the Final Plans and shall be of good quality and workmanship.
(g) Tenant's selection of the construction manager, contractors,
subcontractors, vendors, and suppliers are subject to the approval of
Landlord. All construction contracts shall be a stipulated sum or cost plus
(with an upset price) contract or other form of contract approved by
Landlord. All contracts shall be assignable to Landlord and will provide
for the completion of the Improvements in accordance with the Final Plans.
(h) At Landlord's request, Tenant shall, from time to time, provide
Landlord with a list of all contractors, subcontractors, vendors, workers
and all other persons performing any labor or supplying any material in
connection with the construction and installation of the Improvements and
will provide Landlord evidence, satisfactory to Landlord, that Tenant's
contractors, and all subcontractors, vendors and workers have all licenses,
permits and approvals required under applicable law and carry liability,
workmen's compensation and other insurance in amounts and with insurance
carriers reasonably satisfactory to the Landlord.
(i) It is understood and agreed that the Landlord shall have no
responsibility for the performance of the contractor installing the
Improvements (including matters of quality or timeliness), and in the event
that for any reason the Improvements are not completed in a timely fashion
and/or there is any delay on the date on which the premises are ready for
occupancy by the Tenant for the purposes of conducting business by that
date, this lease shall nevertheless continue in full force and effect and
the Tenant waives any and all claims against the Landlord, including
without limitation, any claims for actual, punitive or consequential
damages.
(j) The Landlord shall only be required to pay Tenant or the
contractor, subcontractor or party providing the goods or
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services for the construction and installation of the Improvements upon the
satisfaction of the following conditions:
(i) The amount then requested when added to all amounts
previously requested would not exceed the Available Amount;
(ii) Landlord has received from Tenant the deposit required by
paragraph (d)(x) of this Article, if applicable;
(iii) The Improvements conform to the design set forth in the
Final Plans and are of good quality and workmanship; and
(iv) The Tenant submits to Landlord a written request for such
payment, substantially in the form of Exhibit "G" hereof, or in such
other form as the Landlord may reasonably required together with
(x) invoices from the vendor, supplier, or contractor
evidencing the amount to be paid, (y) a written waiver from
the contractor and all of the vendors pursuant to such
request waiving, with respect to the materials or services
delivered or performed through the date of such invoice, any
right to assert any vendor's, mechanic's or other lien on
the building, the premises or any fixtures, machinery,
equipment or other installation therein.
The Tenant shall seek payments pursuant to this paragraph (j) not more than
twice in any calendar month. No payment shall be sought for material not
yet installed or incorporated in to the premises or for work not yet
performed.
(k) Materials to be incorporated into the Improvements shall,
effective upon their payment and at all times thereafter, constitute the
property of the Landlord, and upon construction of the Improvements or the
incorporation of such materials therein, title thereto shall continue in
Landlord. However, Landlord shall not be liable in any manner for payment
or otherwise to any contractor, subcontractor, vendor, worker or supplier
of materials and all construction contracts shall so provide.
(1) The Landlord agrees that if so requested by the Tenant, and
subject to the conditions set forth below, the Landlord will permit
contractors, vendors and workmen retained by the Tenant to enter the
premises prior to the completion of the construction and installation of
the work to be performed by Landlord pursuant to the Work Letter for
purposes of constructing the Improvements on the premises, provided, in
Landlord's reasonable judgment
(i) such contractors, vendors and workmen do not substantially
delay, hinder or interfere with Landlord's completion of the work
described in the Work Letter; and
(ii) Landlord has no reason to believe that the presence of such
contractor vendor or worker may result in labor difficulties or
interfere with, hinder, delay or otherwise adversely affect the
construction or installation of the work described in the Work Letter.
The Landlord may at any time terminate such access if the Landlord
reasonably concludes that the conditions set forth in the clauses (i) and
(ii) above are not being satisfied.
(m) In the event the term of this lease shall commence prior to
Landlord's completion of the work described in the Work Letter, the Tenant
shall provide Landlord access to the premises to
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complete such Work and shall take all action necessary to ensure that
Tenant's contractors, vendors and workers do not interfere with, hinder,
delay or otherwise adversely affect the construction or installation of the
work described in the Work Letter.
TWENTY-EIGHTH: Broker. The Tenant represents and warrants to the
Landlord that all of the Tenant's negotiations respecting this lease which
were conducted with or through any person, firm or corporation, were
conducted through Julien J. Studley, Inc., real estate brokers. The
Landlord agrees to pay the commission due to such broker pursuant to the
terms of a separate agreement. Landlord and Tenant agree to indemnify and
hold one another harmless from and against all demands, liabilities,
losses, causes of action, damages, costs and expenses (including without
limitation attorneys' fees and disbursements) suffered or incurred in
connection with any claims for a brokerage commission or consultation fees
arising out of any conversations or negotiations had by the party against
whom indemnification is claimed with any broker or finder except for Julien
J. Studley, Inc.
TWENTY-NINTH: Notices; Miscellaneous. (a) Any notice which is to be
given by either party to the other pursuant to this lease shall be in
writing and shall be given personally as follows: (i) if such notice is to
be given by the Landlord to the Tenant such notice shall be given by mail
in the following manner: (x) notice may be given personally, by delivering
the same to the Tenant or, if the Tenant be a corporation or partnership,
to any officer of such corporation or member of the partnership, at the
premises or at any other place; or (y) notice may also be given personally
at the premises by delivering same to the Tenant or any officer or partner
of the Tenant; or (z) notice may also be given by registered or certified
mail by depositing the notice, enclosed in an envelope addressed to the
Tenant at its address given in this lease or at the premises, in any United
States Post Office, postage and registry or certification fees prepaid;
(ii) if such notice is to be given by the Tenant to the Landlord, the
notice shall be given by registered or certified mail, by depositing the
notice, enclosed in an envelope, addressed to the Landlord at 74 Trinity
Place, New York, N.Y., or at such other place as the Landlord shall
hereafter designate in writing, in any United States Post Office, postage
and registry or certification fees prepaid. Any notice shall be deemed to
have been given on the date when the same is delivered as above provided
or, if given by mail, on the date when it is deposited as above provided in
the United States Post Office.
(b) If Tenant is a corporation, partnership or trust, it shall keep in
effect its existence and rights as a corporation or partnership or trust
under the law of the state of its incorporation or formation and its right
to own and lease property and transact business in the state in which the
premises are situated during the entire time that it has any interest in
the premises.
THIRTIETH: Quiet Enjoyment. The Landlord covenants that, if the Tenant
shall duly keep and perform all the terms and conditions hereof, the Tenant
shall peaceably and quietly have, hold and enjoy the premises for the term
aforesaid, subject, however, to ground leases, underlying leases and
mortgages as hereinbefore described, and to the lien, rights and estate by
virtue of unpaid taxes of any government having jurisdiction of the
premises of which the herein demised premises are a part. If the Landlord
shall hereafter sell, exchange or lease the entire building or the land and
the building wherein the premises are located, subject to this lease, or,
being the lessee thereof, shall assign its lease, the grantee, lessee, or
assignee thereof, as the case may be, shall, without further agreement by
any party, be conclusively deemed to be the Landlord of this lease and to
have assumed and undertaken to carry out all of the obligations hereof on
the part of the Landlord to be performed, and the Tenant does hereby
release the above named Landlord from any claim or liability arising or
accruing hereunder subsequent to such transfer of
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ownership, for breach of the covenant of quiet enjoyment, or otherwise.
THIRTY-FIRST: Headings. The headings or titles of the various Articles
or paragraphs of this lease are for reference and index purposes only, and
none of them shall be taken into consideration or given any effect whatever
in determining the meaning or scope of the paragraph to which any of them
applies. The use of any pronoun referring to either of the parties to this
lease shall be construed to include any or no gender and any number.
THIRTY-SECOND: Additional Fourth Floor Premises. As provided on the
first page of this lease, the Tenant's leasing of the portion of the fourth
floor premises indicated on Exhibit "B" hereto (the "Additional Fourth
Floor Premises") commences on December 1, 1997; however, the Tenant shall
have the right to begin leasing the Additional Fourth Floor Premises at any
time prior to December 1, 1997 by giving the Landlord not less than thirty
(30) days prior written notice of the date on which the Tenant elects to
commence its leasing of such premises (The date on which the Tenant's
leasing of the Additional Fourth Floor Premises commences (that is,
December 1, 1997 or such earlier date as the Tenant may elect pursuant
hereto) is hereby referred to as the "Additional Fourth Floor Premises
Commencement Date"). In the event that the Additional Fourth Floor Premises
Commencement Date is prior to December 1, 1997, then, during the period
commencing with the Additional Fourth Floor Premises Commencement Date and
ending with November 30, 1997, the fixed rent indicated on the first page
of this lease shall be increased by $7,232.50 per month, so that the
aggregate fixed rent payable pursuant to this lease during such period
shall be at the rate of $55,150 per month, subject to the provisions of
Article THIRTY-THIRD of this lease.
THIRTY-THIRD: (a) The Tenant is hereby granted the privilege of
occupying the portion of the fourth floor premises indicated on Exhibit "A"
hereto (the "Initial Fourth Floor Premises"), subject to all of the terms,
covenants and conditions of this lease, including but not limited to, the
payment of any service charges for electric current, water, sprinkler
maintenance and any overtime elevator or heat service and to the payment of
any additional rent payable pursuant to the provisions of Paragraph
TWENTY-SIXTH of this lease but otherwise free of the payment of the fixed
rent applicable to the Initial Fourth Floor Premises (that is, $20,267.50
per month) during the following periods:
(i) During the period beginning with the tender of possession of
the premises by the Landlord to the Tenant at any time prior to the
commencement of the term of this lease and ending on November 30,
1994, the date prior to the commencement of the term;
(ii) During the period of the term of this lease commencing on
December 1, 1994 and ending on May 31, 1995.
(b) The Tenant is hereby granted the privilege of occupying the
Additional Fourth Floor Premises (as defined in Article THIRTY-SECOND
hereof) subject to all of the terms, covenants and conditions of this
lease, including but not limited to, the payment of any service charges for
electric current, water, sprinkler maintenance and any overtime elevator or
heat service and to the payment of any additional rent payable pursuant to
the provisions of Paragraph TWENTY-SIXTH of this lease but otherwise free
of the payment of the fixed rent applicable to the Additional Fourth Floor
Premises (that is, $7,232.50 per month) during the period commencing with
the Additional Fourth Floor Premises Commencement Date (as defined in
Article THIRTY-SECOND hereof) and ending on the earlier of (i) 270 days
after such date or (ii) the date on which the Tenant moves employees into
the Additional Fourth Floor Premises or otherwise uses any substantial
portion of the
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<PAGE>
Additional Fourth Floor Premises in connection with the Tenant's
advertising business.
(c) The right to occupy the Initial Fourth Floor Premises and the
Additional Fourth Floor Premises free of rent during the periods set forth
in paragraphs (a) and (b) of this Article shall be subject to the condition
that the Tenant shall not default in the payment of any other fixed rent,
or any additional rent or any other charge due under this lease or in the
performance of the other terms, covenants and conditions set forth in this
lease. In the event of any such default, then fixed rent at the monthly
rate set forth in this Article shall be payable during the period in which
the Tenant would otherwise be entitled to the use of such premises free of
fixed rent. Any such payment shall be paid within ten (10) days following
demand and shall constitute additional rent under this lease.
THIRTY-FOURTH: Termination of Existing Lease. Effective at noon on
December 1, 1994, the Lease dated as of September 10, 1991 (the "Lease")
between the Landlord and the Tenant shall be modified so that the term of
the Tenant in the Premises, under the Lease, shall terminate and come to an
end, as if said date were the date originally specified for the expiration
of the term of the Lease.
THIRTY-FIFTH: Option Space. (a) The Landlord currently leases the
entire seventh floor of the building indicated by the cross-hatching on the
diagram attached hereto as Exhibit "E" (the "Option Space") to Maritz
Communications Company ("Maritz") pursuant to a lease dated as of July 1,
1992 (the "Maritz Lease") for a term to expire on September 30, 1998. The
Tenant shall, upon the expiration or termination of the Maritz Lease
(subject to the condition subsequent set forth in paragraph (b) of this
Article) have the right and option to lease the Option Space. In order to
exercise such option, the Tenant shall give the Landlord written notice of
its exercise of such option not later than (x) September 1, 1997 or (y) in
the event that the Maritz Lease is terminated prior to September 30, 1997,
30 days after written notice from the Landlord to the Tenant that the
Maritz Lease has been terminated. Promptly, upon receipt of such notice and
provided that the Tenant is not in default in the payment of rent or the
performance of its other obligations under this lease, the Landlord shall
send the Tenant a proposed lease amendment with respect to the Option
Space, pursuant to which the Landlord shall offer to lease the Option Space
to the Tenant on the terms and conditions as set forth below:
(i) the annual fixed rent payable by Tenant with respect to the
Option Space shall be as follows:
Period Annual Fixed Rent
------ -----------------
December 1, 1994 to
November 30, 1998 ............... $330,000
December 1, 1998 to
November 30, 2003 ............... $374,000
December 1, 2003 to
December 31, 2009 ............... $484,000;
(ii) the Tenant shall be obligated to pay as additional rent with
respect to the Option Space escalations with respect to real estate
taxes, operating expense and fuel oil, all on the terms set forth in
Article TWENTY-SIXTH hereof, and the dates to be utilized in the
definitions of "Increases In Real Estate Taxes", Base Year", and "Base
Fuel Cost" in such proposed lease amendment shall be the
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<PAGE>
same dates as those contained in the definitions of such terms in this
lease;
(iii) the term of the proposed lease of the Option Space shall
end concurrently with the term of this lease;
(iv) if necessary, Tenant will arrange for the modification and
improvement of the Option Space to be leased pursuant to such proposed
lease amendment to make them suitable for office use, all in a manner
and to the extent provided in Article TWENTY-SEVENTH hereof, and the
Landlord will reimburse the Tenant for the cost thereof up to a
maximum of $220,000;
(v) the Tenant shall deposit an additional $66,000 to be held by
the Landlord as security pursuant to Article Twenty-Second of this
lease;
(vi) the Tenant will agree to indemnify and hold harmless the
Landlord against any and all claims that a real estate commission is
due in connection with the Tenant's leasing of the Option Space;
(vii) the Landlord will agree in the lease amendment to
rehabilitate the air conditioning system servicing the Option Space
and the lavatories on the seventh floor, in both cases to building
standard; and
(viii) in the case of a lease amendment pursuant to which the
Tenant's lease term for the Option Space is to commence on or after
September 1, 1998, such lease amendment shall provide that the
obligations of the landlord shall be subject to the condition
subsequent that the Landlord shall not have elected to extend or renew
the Maritz Lease or entered into a new lease with Maritz or any
successor to Maritz, including any corporation, partnership or other
entity to which the Maritz Lease has been assigned in connection with
the sale of all or substantially all the assets and business of
Maritz, all as contemplated by paragraph (b) of this Article.
The Tenant shall then have ninety (90) days to execute and return such
lease to the Landlord. If the Tenant is in default in the payment of rent
or the performance of its other obligations under this lease, or if the
Tenant does not execute and return an offered lease to the Landlord within
ninety (90) days, the Landlord may thereafter lease the Option Space to a
third-party free of any right of the Tenant to lease the Option Premises.
(b) Notwithstanding anything in this Article, the Landlord and the
Tenant understand and agree that the Tenant's option to lease the Option
Space and the obligations of the Landlord pursuant to this Article and
pursuant to any amendment of lease executed in accordance with the terms of
this Article shall be subject to the right of the Landlord to extend or
renew the Maritz Lease or to enter into a new lease with Maritz or any
successor to Maritz (including any corporation, partnership or other entity
to which the Maritz Lease has been assigned in connection with the sale of
all or substantially all assets and business of Maritz) (collectively a
"Maritz Lease Extension"); provided, however, that the Landlord shall not
enter into a new lease for the Option Space with any sublessee of Maritz,
unless and until the Tenant has elected not to exercise the option set
forth
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<PAGE>
in this Article. The Landlord agrees that in the event that the Tenant has
exercised the option set forth in this Article and the Landlord and the
Tenant have executed an amendment of lease, as contemplated by paragraph
(a) above, and, subsequent thereto, the Landlord elects to enter into a
Maritz Lease Extension, then the Landlord will notify the Tenant of such
fact as soon as practical and upon the giving of such notice, such
amendment of lease shall be of no further force or effect, and each of the
Landlord and the Tenant shall be released from all obligations and
liabilities thereunder.
THIRTY-SIXTH: Additional Space.
(a) In the event that at any time prior to June 1, 1998, the Tenant
shall send the Landlord a Letter Requesting Additional Space (as defined in
paragraph (d) below), and, if (x) there is then Available For Lease (as
defined in paragraph (e) below), or (y) there becomes Available For Lease
within six months of the date of receipt of such letter from the Tenant, a
unit of space on a single floor of the building which shall be
substantially equal in size to, or not exceeding 120% of the size of, the
Desired Square Footage (as defined in paragraph (d) below), then the
Landlord shall offer to lease such premises to the Tenant, such offer to be
made by the Landlord sending the Tenant a proposed lease reflecting the
terms set forth in paragraph (b) below. In the event that there shall be
Available For Lease more than one unit of space which is substantially
equal in size to, or not exceeding 120% of the size of, the Desired Square
Footage, then the Landlord shall advise Tenant of such fact and Tenant
shall, within 10 days of such notice, select the unit of space to be
offered to the Tenant for lease and, within 30 days after such selection,
Landlord will forward to Tenant the proposed lease for Tenant's execution
and delivery.
(b) The proposed lease pursuant to which the Landlord shall offer to
lease to the Tenant space of the Desired Square Footage shall contain
substantially the same terms as set forth in this lease wherever possible,
except that:
(i) the term of the proposed lease shall end concurrently with
the term of this lease;
(ii) the initial fixed rent payable by Tenant pursuant to the
proposed lease shall be equal to the area of the premises subject
thereto multiplied by the following amounts per square foot:
Period Annual Fixed Rent
------ -----------------
December 1, 1994 to
November 30, 1998 ........... $15.00 per square foot
December 1, 1998 to
November 30, 2003 ........... $17.00 per square foot
December 1, 2003 to
December 31, 2009 ........... $22.00 per square foot
Such proposed lease shall also include provisions increasing the fixed
rent payable thereunder to the rates indicated above as of the dates;
(iii) the Tenant shall be obligated to pay as additional rent
escalations with respect to real estate taxes, operating expense and
fuel oil, all on the terms set forth in Article TWENTY-SIXTH hereof,
and the dates to be utilized in the definitions of "Increases In
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<PAGE>
Real Estate Taxes", Base Year", and "Base Fuel Cost" in such proposed
lease shall be the same dates as those contained in the definitions of
such terms in this lease; and
(iv) if necessary, Tenant will arrange for the modification and
improvement of the premises to be leased pursuant to such proposed
lease to make them suitable for office use, all in a manner and to the
extent provided in Article TWENTY-SEVENTH hereof, and the Landlord
will reimburse the Tenant for the cost thereof up to an amount equal
to the Reimbursement Amount as defined in paragraph (f) below).
The Tenant shall have fifteen days after receipt of the proposed lease from
Landlord to execute and return such lease to the Landlord.
(c) In the event that at any particular time the Tenant has not sent
the Landlord a Letter Requesting Additional Space within the immediately
prior six months, the Tenant shall have no right to lease additional space
pursuant to this Article unless and until the Tenant shall thereafter send
the Landlord a Letter Requesting Additional Space. In the event that after
sending the Landlord a Letter Requesting Additional Space, the Tenant fails
to execute and return, within fifteen days of receipt thereof, a proposed
lease which complies with the requirements set forth in paragraph (b) of
this Article, then the Tenant's right to send the Landlord any future
Letter Requesting Additional Space or any other rights of the Tenant under
this Article shall cease and be of no further force or effect.
(d) For the purposes of this Article THIRTY-SIXTH, the term "Letter
Requesting Additional Space" shall mean a letter from the Tenant to the
Landlord stating that (i) the Tenant desires to lease additional space
consisting of approximately the number of square feet specified in such
letter (the "Desired Square Footage") (but in no event less than 8,000
square feet) and (ii) agreeing in principle that if premises in the
building containing the Desired Square Footage are then available (or
become available within six months of the date of such letter) the Tenant
will lease premises if offered to the Tenant pursuant to a lease meeting
the requirements set forth in paragraph (b) of this Article. Any letter
which does not satisfy the requirements set forth in both clauses (i) and
(ii) above shall not be deemed a "Letter Requesting Additional Space" and
shall be of no force or effect under this Article.
(e) For the purposes of this Article THIRTY-SIXTH, the term "Available
For Lease" shall mean space which, at the time in question satisfies the
following conditions:
(i) such space is above the ground floor and is not leased or
occupied;
(ii) no other tenant of the Landlord shall have any right or
option to lease or occupy space pursuant to a lease or other agreement
with Landlord;
(iii) the Landlord shall not then be negotiating the leasing area
or occupancy of such space with an unaffiliated third-party; and
(iv) if it would be necessary to subdivide such space in order to
be able to offer to lease to the Tenant premises containing the
Desired Square Footage, then the area of the space remaining (after
such subdivision) (that is, the portion of the space not being offered
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<PAGE>
to the Tenant for lease pursuant to this Article) shall be no smaller
than the typical unit of space leased by the Landlord on the floor of
the building in question.
(f) For the purposes of this Article THIRTY-SIXTH, the term
"Reimbursement Amount" shall mean the amount determined by multiplying the
area of the premises to be leased pursuant to any proposed lease delivered
by the Landlord pursuant to paragraph (b) of this Article by (i) if the
proposed lease is executed and delivered on or before the first anniversary
of the Rent Commencement Date of this lease, $35 per square foot, or (ii)
if the lease is executed and delivered after the first anniversary of the
Rent Commencement Date, the sum of (x) $35 per square foot, and (y) $1.05
per square foot for each completed period of 12 months which has elapsed
since date which is the first anniversary of the Rent Commencement Date of
this lease.
THIRTY-SEVENTH: Successors. All of the terms, covenants and conditions
contained in this lease shall be binding on, and shall inure to the benefit
of the parties hereto, and their respective legal representatives,
successors, and assigns, but no assignment made or purported to be made in
violation of the provisions of this lease shall vest in such assignee any
right or title in or to this lease or in or to the estate hereby created.
IN WITNESS WHEREOF, this agreement has been signed and sealed by the
parties hereto, the day and year first above written.
Attest: THE RECTOR, CHURCH-WARDENS AND
As to Landlord: VESTRYMEN OF TRINITY CHURCH
IN THE CITY OF NEW-YORK
/s/ Carol Stevenson By /s/ Daniel Paul Matthews
- --------------------- ---------------------------
Daniel Paul Matthews,
Rector
By /s/ Joseph T. Palombi
---------------------------
Joseph T. Palombi,
Executive Vice President
of Real Estate
By /s/ Walter F. Spardel
---------------------------
Walter F. Spardel
Managing Director of
Commercial Real Estate
Attest: GIRGENTI, HUGHES,
As to Tenant: BUTLER & McDOWELL, INC.
By /s/ Steven Girgenti
- --------------------- ---------------------------
Name: Steven Girgenti
Title: President
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<PAGE>
DATED 8 November 1995
(1) GLORIA OLIVE SARGENT
- and -
(2) SITEINPUT LIMITED
---------------------------------
AGREEMENT
for the sale and purchase of the
share capital of
Effective Sales Personnel Limited
---------------------------------
RAKISONS
27 Chancery Lane
London WC2A 1 NF
Tele: 0171 404 5212
Fax: 0171 831 1926
Ref: JMP\10891\SAPAGMT.04
<PAGE>
CONTENTS
Clause Heading Page No.
- -------------- --------
1 Definitions 1
2 Agreement for sale 11
3 Purchase consideration 11
4 Adjustments to purchase consideration 11
5 Deferred Consideration 14
6 Completion 15
7 Retention and Joint Account 17
8 Warranties and indemnity by the Vendor 18
9 Indemnity 19
10 Assignment and successions 20
11 Restrictive agreement 21
12 Announcements 22
13 Costs 22
14 Communications 22
15 Invalidity 23
16 Counterparts 23
17 Proper Law 24
18 General Matters 24
Schedule 1 - Details of the Company
Schedule 2 - Warranties
Schedule 3 - Properties
Schedule 4 - Employees
Schedule 5 - Earnout Undertakings
Schedule 6 - Limitations on the Vendor's liability
Appendix 1 Lists of ESP and Headcount Clients
<PAGE>
Agreed Form documents
1 Deed of Indemnity
2 Deed of Release
3 Executive Service Contract
4 Loan Note
<PAGE>
DATED: 8 November 1995
PARTIES:
1. "Vendor": Gloria Olive Sargent of Twyford House, Winterbourne Grove,
Weybridge, Surrey KT13 OPP;
2. "Purchaser": Siteinput Limited (registered no. 3113109) whose
registered office is at 1 Thames Street, Windsor, Berkshire SL4 1PL.
OPERATIVE PROVISIONS
1 Definitions
1.1 In this agreement, including the Schedules other than Schedule 3, the
following words and expressions have the meanings stated, unless they
are inconsistent with the context:
"Accounts"
the audited balance sheet of the Company and the audited profit and
loss account and the director's and auditors' respective reports and
notes.
"Agreed Form"
a form agreed between the parties, a copy of which has been initialled
for the purpose of identification by their respective solicitors.
"Associate"
(a) (in relation to an individual):
(i) any relative, that is any issue, spouse, brother, sister or
parent;
(ii) any company which is, or may be, directly or indirectly
controlled (within the meaning given in ICTA s840) by the
individual or any relative, or by any two or more of them;
(b) (in relation to a company) any subsidiary or holding company of
the company, and any other subsidiary of any holding company of
the company, "subsidiary" and "holding company" having the same
meaning as in CA s736;
and for this purpose a company is controlled by one or more persons if
he or
1
<PAGE>
they can exercise more than fifty per cent of the voting rights in it.
"CA"
Companies Act 1985.
"CAA"
Capital Allowances Act 1990.
"Companies Acts"
CA, the former Companies Acts (within the meaning of CA s735(1)) and
the Companies Act 1989.
"Company"
Effective Sales Personnel Limited
"Completion"
completion of the purchase of the Shares in accordance with clause 6.
"Completion Accounts"
the audited balance sheet of the Company as at the date of Completion
and the audited profit and loss account for the period from the Last
Accounts Date to Completion.
"Completion Balance Sheet"
the balance sheet of the Company prepared from the Completion Accounts
in accordance with clause 4.1 and adjusted in accordance with clauses
4.3 or 4.4 (as the case may be).
"Consideration"
the aggregate of the Initial Consideration and the Deferred
Consideration.
"Deed of Indemnitv"
a deed in the Agreed Form.
"Deed of Release"
a deed in the Agreed Form to be executed by the Landlord (1) the
Company (2) and the Purchaser (3).
"Deferred Consideration"
that part of the Consideration payable in accordance with clause 5.1.
"Disclosure Letter"
the disclosure letter, of today's date, from the Vendor to the
Purchaser.
2
<PAGE>
"Employees"
the persons details of whom are set out in Schedule 4 who at
Completion are employed by the Company.
"ESP Accounts"
internal accounts and books of the Company and/or Headcount relating
to ESP Projects and (to the extent that they relate to the ESP Revenue
and ESP Costs) Mixed Projects.
"ESP Clients"
the persons referred to in Part I of Annexure 1 EXCEPT THAT:
(i) reference to Ionica shall be deemed to be deleted from Part 1 of
Annexure I in the event that Ionica enters into a binding
contract with Headcount for work described in proposals made by
Headcount to Ionica prior to Completion before Ionica enters into
a binding contract with the Company for work described in
proposals made by the Company to Ionica prior to Completion as
may be amended from time to time: and
(ii) reference to Hawaiian Tropic shall be deemed to be deleted from
Part 1 of Annexure 1 in the event that Hawaiian Tropic enters
into a binding contract with Headcount for work described in
proposals made by Headcount to Hawaiian Tropic prior to
Completion before Hawaiian Tropic enters into a binding contract
with the Company for work described in proposals made by the
Company to Hawaiian Tropic prior to completion as may be amended
from time to time.
"ESP Costs"
the costs (adjusted for work in progress) incurred by the Company
and/or Headcount from time to time of:
(i) engaging field staff; and/or
(ii) purchasing other goods or services not (from time to time)
ordinarily purchased as part of the direct overhead of the
Company and/or Headcount (as appropriate);
but only to the extent that they are attributable to ESP Projects.
3
<PAGE>
"1996 ESP Costs"
the aggregate ESP Costs for the year ending 30 June 1996.
"1997 ESP Costs"
the aggregate ESP Costs for the year ending 30 June 1997.
"ESP Gross Profit"
the amount calculated using the following formula:
1996 Gross Profit + 1997 Gross Profit
-------------------------------------
2
"ESP Projects"
(i) any field marketing business generated from and/or carried out
for any of the ESP Clients by the Company and/or Headcount;
and/or
(ii) any business generated from and/or carried out for any person by
the Company and/or Headcount in the travel industry.
"ESP Revenue"
the aggregate of the VAT exclusive amounts invoiced by the Company or
Headcount pursuant to the field marketing business of the Company or
Headcount from time to time but only to the extent that they are
attributable to ESP Projects.
"1996 ESP Revenue"
the ESP Revenue for the year ending 30 June 1996 (which includes
invoices issued by the Company or Headcount after 30 June 1996 and
prior to 31 July 1996 but attributable to work completed and, in the
ordinary course of business, would or should have been invoiced in
that year but excludes invoices issued before 30 June 1996 but
attributable to work carried out after that date).
"1997 ESP Revenue"
the ESP Revenue for the year ending on 30 June 1997 (which includes
invoices issued by the Company or Headcount after 30 June 1997 and
prior to 31 July 1997 but attributable to work completed and, in the
ordinary course of business, would or should have been invoiced in
that year but excludes invoices issued before 30 June 1997 but
attributable to work carried out after that date).
"1996 ESP Staff Budget"
subject to the control of the board of directors of the Company, a
notional
4
<PAGE>
budget of (pound)245,000.00 for the year ending 30 June 1996 to cover
the Staff Costs.
"1997 ESP Staff Budget"
subject to the control of the board of directors of the Company, a
notional budget of (pound)252,000.00 for the year ending 30 June 1997
to cover the Staff Costs.
"ESP Team"
head office staff (other than field staff) employed or engaged by the
Company from time to time, the first such persons being those persons
listed in Schedule 4.
"Executive Scheme"
the executive pension plan of the Vendor which was effected with
Scottish Equitable Life Assurance Society under policy number 1977401.
"Executive Service Contract"
the service agreement of even date between the Company (1) and the
Vendor (2) in the Agreed Form.
"FA"
Finance Act.
"Final Dividend"
a final dividend due and payable by the Company for the year ended 30
June -1995 of (pound)76,000.00.
"FRS"
a financial reporting standard issued or adopted by The Accounting
Standards Board Limited.
"Gross Profit"
means the amount calculated using the following formula: (ESP Revenue
+ Mixed Revenue) - (ESP Costs + Mixed Costs)
"1996 Gross Profit"
means the amount calculated using the following formula: (1996 ESP
Revenue + 1996 Mixed Revenue) - (1996 ESP Costs + 1996 Mixed Costs)
5
<PAGE>
"1997 Gross Profit"
means the amount calculated using the following formula: (1997 ESP
Revenue + 1997 Mixed Revenue) - (1997 ESP Costs + 1997 Mixed Costs)
"Guarantee"
the guarantee by the Vendor and Louise Fournier (jointly the
"Guarantors") granted to the Landlord in the teens of the licence
dated 28 March 1990 made between the Landlord (1), Unicliffe Limited
(2), the Company (3) and the Guarantors (4).
"Headcount"
Milton Headcount Limited (registered in England no. 2998311)
"Headcount Clients"
the persons referred to in Part 2 of Annexure I EXCEPT THAT:
(i) reference to Ionica shall be deemed to be deleted from Part 2 of
Annexure I in the event that Ionica enters into a binding
contract with Headcount for work described in proposals made by
Headcount to Ionica prior to Completion before Ionica enters into
a binding contract with Headcount for work described in proposals
made by Headcount to Ionica prior to Completion as may be amended
from time to time; and
(ii) reference to Hawaiian Tropic shall be deemed to be deleted from
Part 2 of Annexure 1 in the event that Hawaiian Tropic enters
into a binding contract with Headcount for work described in
proposals made by Headcount to Hawaiian Tropic prior to
Completion before Hawaiian Tropic enters into a binding contract
with Headcount for work described in proposals made by Headcount
to Hawaiian Tropic prior to Completion as may be amended from
time to time.
"ICTA"
Income and Corporation Taxes Act 1988.
"IHTA"
Inheritance Tax Act 1984.
"Initial Consideration"
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that part of the Consideration payable in accordance with clause 3.1.
"Joint Account"
the joint account to be opened pursuant to clause 7.1 at Coutts & Co,
Fleet Street Branch, 188 Fleet Street, London EC4A 2HT.
"Landlord"
Hurst Park Automobiles (W.R.) Limited
"Last Accounts"
the audited balance sheet, as at the Last Accounts Date, and audited
profit and loss account for the year ended on the Last Accounts Date
of the Company, and the directors' report and notes.
"Last Accounts Date"
30 June 1995 (being the date to which the Last Accounts were
prepared).
"Life Cover Scheme"
the ESP Staff Life Assurance Scheme which is constituted by a trust
deed and rules dated 16 September 1993 and secured by a group life
policy effected with Phoenix Assurance plc.
"Loan Note"
a loan note instrument to be issued in the Agreed Form.
"Managing Director"
the managing director of the Company from time to time, the first such
person being Michael Garnham.
"Mixed Costs"
50% of the costs (adjusted for work in progress) incurred by the
Company and/or Headcount from time to time of:
(i) engaging field staff; and/or
(ii) purchasing other goods or services not (from time to time)
ordinarily purchased as part of the direct overhead of the
Company and/or Headcount (as appropriate);
but only to the extent that they are attributable to Mixed Projects.
"1996 Mixed Costs"
the aggregate Mixed Costs for the year ending 30 June 1996.
"1997 Mixed Costs"
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the aggregate Mixed Costs for the year ending 30 June 1997.
"Mixed Projects"
any field marketing business conducted by the Company or Headcount and
generated from persons not being ESP Clients or Headcount Clients
other than field marketing business generated in the travel industry.
"Mixed Revenue"
50% of the aggregate of the VAT exclusive amounts invoiced by the
Company or Headcount pursuant to the field marketing business of the
Company or Headcount from time to time but only to the extent that
they are attributable to Mixed Projects.
"1996 Mixed Revenue"
Mixed Revenue for the period commencing on the date of Completion and
ending on 30 June 1996 (inclusive) (which includes invoices issued by
the Company or Headcount after 30 June 1996 and prior to 31 July 1996
but attributable to work completed and, in the ordinary course of
business, would or should have been invoiced in that year but excludes
invoices issued before 30 June 1996 but attributable to work carried
out after that date).
"1997 Mixed Revenue"
the Mixed Revenue for the year ending on 30 June 1997 (which includes
invoices issued by the Company or Headcount after 30 June 1997 and
prior to 31 July 1997 but attributable to work completed and, in the
ordinary course of business, would or should have been invoiced in
that year but excludes invoices issued before 30 June 1977 but
attributable to work carried out after that date).
"Net Assets"
the issued share capital of the Company plus or minus the amount
standing to the credit of or debited to reserves (including profit and
loss account), as shown in the Completion Balance Sheet.
"PHI Scheme"
a group arrangement securing benefits on sickness or disability all
benefits of which are insured with Lincoln National plc under policy
no. 1161 (formerly 101787).
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"Planning Acts"
as defined in the Town and Country Planning Act 1990, s336.
"Properties"
the properties of the Company shortly described in Schedule 3.
"Purchaser's Accountants"
Turnbull Associates, 48 The Broadway, Maidenhead, Berks SL6 lLU.
"Purchaser's Solicitors"
Rakisons, 27 Chancery Lane, London, WC2A 1NF
"Relevant Period"
the two financial years ending on 30 June 1997.
"Retention"
the sum specified in clause 3.1.1, as reduced by payments made in
accordance with this agreement, but excluding interest.
"Shares"
the 100 issued ordinary shares of (pound)1 each of the Company.
"Staff Costs"
the costs of the Company relating to the employment or engagement of
the ESP Team except costs which relate to medical insurance, pension
contributions, agency recruitment fees and claims for redundancy,
wrongful dismissal or unfair dismissal or the salary and benefit costs
referred to in the Executive Service Contract.
"Staff Scheme"
the Effective Sales Personnel Limited Group Personal Pension Scheme
which was effected with Scottish Equitable Life Assurance Society for
the persons set out below under the respective policy numbers:
Lyn Fassom - 3683123
Valerie Figueira - 3683126
Karen Ridgewell - 3683127
Sylvia Rudley - 3683129
Jeanette Steeden - 3683130
Samantha Coop - 3930875.
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"Taxation"
the same meaning as in the Deed of Indemnity.
"TCGA"
Taxation of Chargeable Gains Act 1992.
"TMA"
Taxes Management Act 1970.
"VATA"
Value Added Tax Act 1994.
"Vendor's Accountants"
Wellden Legg & Co, 19a High Street, Cobham, Surrey KT11 3DH.
"Vendor's Schemes"
the Life Cover Scheme, the PHI Scheme and the Staff Scheme.
"Vendor's Solicitors"
Laytons, 76 Bridge Road, Hampton Court, Surrey KT8 9HF.
"Warranties"
the agreements, obligations, warranties, representations and
undertakings of the Vendor contained in this agreement including the
warranties set out in Schedule 2 but excluding the indemnity set out
in clause 9.
"Warranty Claim"
a claim made by the Purchaser for breach of any of the Warranties or a
claim made by the Purchaser or the Company under the Deed of
Indemnity.
1.2 Unless it is inconsistent with the context a reference to a statutory
provision includes a reference to:
1.2.1 any statutory amendment, modification, consolidation or re-enactment
(whether before or after the date of this agreement);
1.2.2 statutory instruments or subordinate legislation or orders made
pursuant to the statutory provision;
1.2.3 statutory provisions of which the statutory provision is an amendment,
modification, consolidation or re-enactment; but does not include a
substituted provision.
1.3 A reference to the Vendor includes, where appropriate, her personal
representatives.
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1.4 A reference to an SSAP is a reference to a statement of standard
accounting practice adopted by The Accounting Standards Board Limited
before the date of this agreement.
1.5 Words denoting the singular include the plural and vice versa; words
denoting one gender include all genders; words denoting persons
include corporations and includes a reference to any body corporate or
unincorporated and vice versa.
1.6 Unless otherwise stated, a reference to a clause, sub-clause or
Schedule is a reference to a clause or sub-clause of, or Schedule to,
this agreement.
1.7 Clause headings in this agreement and in the Schedules are for ease of
reference only and do not affect the construction of any provision.
2 Agreement for sale
2.1 Subject to the terms and conditions of this agreement, the Vendor
shall sell with full title guarantee and the Purchaser shall purchase
the Shares with all rights attaching to them with effect from the date
of this agreement.
3 Purchase consideration
3.1 The Initial Consideration for the Shares shall (subject to adjustment
in accordance with the provisions of clause 4) be the sum of
(pound)375,000 which shall be paid:
3.1.1 as to the sum of (pound)50,000, being the Retention;
3.1.2 as to the balance in cash at Completion.
4 Adjustments to purchase consideration
4.1 The Vendor shall use its best endeavours to procure, as soon as
practicable and in any event within 30 days after Completion, the
preparation of the Completion Accounts on the basis of the same
accounting standards and principles as the Last Accounts and in
accordance with generally accepted accounting principles. The Vendor
shall instruct the Vendor's Accountants to review and deliver the
Completion Accounts and to calculate the Net Assets.
4.2 The Vendor's Accountants shall as soon as practicable and in any event
within
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30 days after Completion deliver to the parties and the Purchaser's
Accountants a draft of the Completion Accounts and their calculation
of the Net Assets.
4.3 The Purchaser's Accountants shall review the drafts delivered by the
Vendor's Accountants pursuant to clause 4.2 and shall, within 10
business days of the delivery of those drafts to them (or such longer
period as the Vendor and the Purchaser may agree in writing), deliver
to the Vendor, the Vendor's Accountants and the Purchaser a report
setting out any matters of disagreement with the drafts in sufficient
detail to enable them to consider them and, in the absence of any such
report within that period, the drafts referred to in clause 4.2 shall
be deemed to be agreed by all parties.
4.4 In the event that, within 10 business days of the delivery of any
report referred to in clause 4.3, there remains any outstanding
disputes with respect to the Completion Accounts or the calculation of
the Net Assets such dispute shall be referred to final settlement to
an independent firm of chartered accountants nominated jointly by the
Vendor and the Purchaser or, failing nomination within 5 business days
after request by either the Vendor or the Purchaser, nominated at the
request of either party by the President for the time being of the
Institute of Chartered Accountants in England and Wales. The firm
shall be instructed to report whether the draft Completion Accounts
delivered by the Vendor's Accountants pursuant to clause 4.2 have been
prepared in accordance with the provisions of this agreement and if
not make such adjustments thereto as they shall consider necessary and
requisite to comply therewith and determine the Net Assets and to
prepare as soon as practicable a written report and opinion on the
matter or matters in dispute, all of which shall be provided to the
parties and their respective Accountants. The firm shall act as
experts and not as arbitrators and their decision (in the absence of
manifest error) shall be final and binding on the parties. Their fees
shall be payable by the Vendor and the Purchaser in such proportions
as the firm determines.
4.5 The parties shall disclose to the Vendor's Accountants, the
Purchaser's Accountants and, as appropriate, any independent firm of
chartered accountants nominated pursuant to clause 4.4, all
information relevant for the purposes of preparing the Completion
Accounts and shall procure that any such persons
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<PAGE>
shall be given access to all such information.
4.6 The Vendor warrants that the Net Assets will be at least (pound)50,000
plus the pre tax profits of the Company from 1 July 1995 to the date
of Completion.
4.7 If the Net Assets are less than the amount calculated in accordance
with clause 4.6, the Initial Consideration shall be reduced by the
amount of the shortfall. The amount of the reduction shall be limited
to the amount of the Consideration.
4.8 Forthwith after the agreement, deemed approval or determination
pursuant to clauses 4.3 or 4.4 that the Net Assets are less than
(pound)50,000.00 plus the pre-tax profits of the Company from 1 July
1995 to the date of Completion the Vendor and the Purchaser shall
instruct their respective Solicitors to pay as soon as practicable
from the Joint Account.
4.8.1 the amount of any such shortfall to the Purchaser (the "Shortfall");
4.8.2 the balance of the Joint Account (if any) following the payment of the
Shortfall and less any accrued interest and bank charges to the
Vendor; and
4.8.3 any accrued interest in accordance with clause 7.2.
4.9 To the extent that the Shortfall exceeds (pound)50,000.00 then the
Vendor shall forthwith pay to the Purchaser a sum equal to the
difference between the Shortfall and (pound)50,000.00.
4.10 If payment in full is not made to either party (as required in clauses
4.8 or 4.9) within a period of 14 days from the date of agreement,
deemed approval or determination of the Net Assets pursuant to clauses
4.3 or 4.4 other than as a result of the wilful default or omission of
the other party or their respective Solicitors, the amount outstanding
shall bear interest from that date until actual payment at the rate of
three per cent. (3%) above the base rate of Coutts & Co from time to
time.
4.11 The Vendor undertakes that the Company has not between 1 July 1995 and
the date of Completion:
4.11.1 paid or agreed to pay any of its directors, officers or Employees any
increased remuneration or other or additional emolument or benefit
(other than as disclosed in the Disclosure Letter);
4.11.2 declared, made or paid any dividend or other distribution other than
the Final
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<PAGE>
Dividend;
4.11.3 made any change in the nature of or ceased carrying its business.
5 Deferred Consideration
5.1 Subject as provided in clauses 4.7 and 5.8 if the ESP Gross Profit
determined in accordance with clause 5.2 exceeds (pound)665,000 the
Purchaser shall pay additional consideration calculated on the basis
of (pound)3.50 for every (pound)1 by which the ESP Gross Profit
exceeds (pound)665,000 subject always to a maximum amount of
additional consideration of (pound)275,000.
5.2 The determination of the 1996 ESP Gross Profit and the 1997 ESP Gross
Profit shall be made and certified by the Purchaser's Accountants and
reviewed by the Vendor's Accountants in accordance with the accounting
principles and policies used in the preparation of the Last Accounts
and in accordance with generally accepted accounting principles. The
Purcllaser shall procure, as soon as practicable and in any event
within 45 days after 30 June 1996 and 30 June 1997 the preparation of
a certificate of the 1996 ESP Gross Profit and 1997 ESP Gross Profit
respectively. The provisions of clauses 4.2, 4.3, 4.4 and 4.5 shall
apply for determining the amount of the 1996 ESP Gross Profit and the
1997 ESP Gross Profit (as appropriate) and for this purpose the
references to (i) "Vendor's Accountants", (ii) "Purchaser's
Accountants", (iii) "Completion", (iv) "Completion Accounts" and/or
"calculation of the Net Assets" and (v) "10 business days" (but only
in clause 4.3) shall be replaced by references to (i) "Purchaser's
Accountants", (ii) "Vendor's Accountants" (iii) "30 June 1996" or "30
June 1997" (as appropriate), (iv) "calculation of the 1996 ESP Gross
Profit" or "calculation of the 1997 ESP Gross Profit" (as appropriate)
and (v) "20 business days" respectively.
5.3 The Purchaser shall use its reasonable endeavours to ensure that,
subject to the terms of this clause 5, payment is made to the Vendor
of the Deferred Consideration in the form of the Loan Note as soon as
reasonably practicable and in any event on or before 31 October 1997.
5.4 In the event that the Vendor shall cease to be employed by the Company
or by any Associate of the Purchaser or the Company on or before 31
August 1996 then, unless the Vendor has ceased to be employed for one
of the reasons
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<PAGE>
specified in clause 5.5 she shall not be entitled to any of the
Deferred Consideration.
5.5 The specified reasons referred to in clause 5.4 are:
5.5.1 death;
5.5.2 illness or personal injury or mental instability;
5.5.3 it being finally decided in proceedings from which there is no appeal
or where the parties have agreed to waive their right to such appeal
that the Vendor has been wrongfully dismissed from her employment.
5.6 In the event that the Vendor shall cease to be employed by the Company
or by any Associate of the Purchaser or the Company within the period
commencing 1 September 1996 and ending on 30 June 1997 (inclusive) for
any reason other than a reason specified in clause 5.5 the amount of
the Deterred Consideration payable by the Purchaser in accordance with
clause 5.2 shall be calculated using the following formula:
100 - (25 x d)/303) x DC
------------------------
100
where "d" is the number of days remaining of the Relevant Period; and
"DC" is the Deferred Consideration.
5.7 The Purchaser undertakes to the Vendor in the terms of the
undertakings contained in Part I of Schedule 5 and the Vendor
undertakes to the Purchaser in the terms of the undertakings contained
in Part 2 of Schedule 5.
5.8 If, prior to payment of any sum due under the Loan Note the Purchaser
makes a Warranty Claim, it may set off the aggregate amount claimed
against the outstanding part of that sum. A set-off in or towards
satisfaction of a claim made by the Purchaser shall not prejudice or
affect any other rights or remedies for the purpose of recovering any
amount due to it from the Vendor.
6 Completion
6.1 Completion shall take place at the offices of the Purchaser's
Solicitors immediately after the execution of this agreement.
6.2 The Vendor shall deliver to the Purchaser:
6.2.1 a duly completed and signed transfer in favour of the Purchaser, or as
it directs
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<PAGE>
of the Shares, together with the relevant share certificate;
6.2.2 the Deed of Indemnity duly executed by the Vendor;
6.2.3 the resignation of Michael Major as the secretary from his office in
the Company, with a written acknowledgement from him, executed as a
deed in such form as the Purchaser requires, that he has no claim
against the Company in respect of breach of contract, compensation for
loss of office, redundancy or unfair dismissal or on any other
grounds;
6.2.4 the resignation of the auditors of the Company confirming that they
have no outstanding claims and containing a statement under CA s394
(1) that there are no such circumstances as are mentioned in that
section;
6.2.5 a power of attorney executed by the Vendor in favour of the Purchaser
empowering the Purchaser to exercise the Vendor's rights as a
shareholder of the Company pending the stamping and registration of
the transfers referred to in clause 6.2.1;
6.2.6 the statutory books and its certificates of incorporation and common
seal;
6.2.7 the title deeds relating to each of the Properties;
6.2.8 all the current cheque books of the Company, together with current on
line computer generated statements of all its bank accounts with a
reconciliation to Completion, and the appropriate forms to amend, in
such manner as the Purchaser requires, the Mandates given to the bank;
and
6.2.9 written confirmation from the Vendor that there are no subsisting
guarantees given by the Company in favour of the Vendor or any of her
Associates and that, after compliance with clause 6.4, neither the
Vendor nor her Associates will be indebted to the Company;
6.2.10 the Deed of Release duly executed and delivered by the Company.
6.3 The Vendor shall make available to the Purchaser at the offices of the
Company books of account and documents of record (including a list of
sales deposits) of the Company, complete and up-to-date, and its
database of field staff.
6.4 The Vendor shall repay, or procure to be repaid, all monies owing at
Completion to the Company from her and her Associates and to the
Vendor and her Associates, whether due for payment or not.
6.5 The Vendor shall enter into the Executive Service Contract.
16
<PAGE>
6.6 A board meeting of the Company shall be held at which:
6.6.1 such persons as the Purchaser nominates are appointed additional
directors and company secretary;
6.6.2 the transfer referred to in clause 6.2.1 is approved (subject to
stamping);
6.6.3 the resignations referred to in clauses 6.2.3 and 6.2.4 are submitted
and accepted;
6.6.4 the registered office address is changed to 1 Thames Street, Windsor,
Berkshire S L4 1PL; and
6.6.5 an extraordinary general meeting is convened to approve the adoption
of new articles of association in a form required by the Purchaser.
6.7 Upon completion of the matters referred to in clauses 6.2 to 6.6 the
Purchaser shall deliver:
6.7.1 to the Vendor's Solicitors (whose receipt shall be a sufficient
discharge therefor) by way of telegraphic transfer or bankers draft as
notified to the Purchaser's Solicitors not less than 48 hours prior to
Completion the sum of (pound)325,000;
6.7.2 a banker's draft for the Retention to be dealt with as provided in
clause 7;
6.7.3 copies of the Deed of Release duly executed by the Purchaser and the
Landlord;
6.7.4 the Deed of Indemnity duly executed and delivered by the Purchaser.
7 Retention and Joint Account
7.1 The Retention shall on Completion be paid into the Joint Account,
which shall be opened in the names of the Vendor's Solicitors and the
Purchaser's Solicitors.
7.2 The interest accrued on the Retention shall belong to the Vendor and
the Purchaser in proportion to the respective amounts of the Retention
released to each of them from time to time, having regard to the
period for which each amount was retained.
7.3 The Vendor and the Purchaser shall, as and when necessary, give
instructions to the Vendor's Solicitors and the Purchaser's Solicitors
respectively to procure compliance with clauses 4.8 and 7.2. The
Vendor's Solicitors and the Purchaser's Solicitors shall not be
required to take any action with respect to
17
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the Joint Account except on the written instructions of the Vendor and
the Purchaser.
8 Warranties and indemnity by the Vendor
8.1 The Vendor represents and warrants to the Purchaser in the terms of
the Warranties as qualified by reference to such matters as are fully
and fairly disclosed in the Disclosure Letter and acknowledges that
the Purchaser has entered into this agreement in reliance upon the
Warranties.
8.2 The Vendor warrants to the Purchaser that:
8.2.1 the Vendor has full power and authority to enter into and perform this
agreement and the Deed of Indemnity which constitute binding
obligations on her in accordance with their respective terms;
8.2.2 the Shares constitute the whole of the issued and allotted share
capital of the Company;
8.2.3 there is no pledge, lien or other encumbrance on, over or affecting
the Shares and there is no agreement or arrangement to give or create
any such encumbrance and no claim has been made by any person to be
entitled to any of the foregoing;
8.2.4 the Vendor is able to transfer the Shares with full title guarantee to
the Purchaser on the terms of this agreement without the consent of a
third party;
8.2.5 the information in Schedule 1 is accurate;
8.2.6 save as fully and fairly set out in the Disclosure Letter, the
Warranties are accurate.
8.3 Each of the Warranties is without prejudice to any other Warranty and,
except where expressly stated otherwise, no clause governs or limits
the extent or application of any other clause.
8.4 The rights and remedies of the Purchaser in respect of a breach of the
Warranties shall not be affected by Completion, by investigations made
by or on behalf of the Purchaser into the affairs of the Company, by
the Purchaser rescinding, or failing to rescind, this agreement, or
failing to exercise or delaying the exercise of any right or remedy,
or by any other event or matter, except a specific and duly authorised
written waiver or release, and no single
18
<PAGE>
or partial exercise of any right or remedy shall preclude any further
or other exercise.
8.5 None of the information supplied by the Company or its professional
advisers to the Vendor, or her agents, representatives or advisers, in
connection with the Warranties and the contents of the Disclosure
Letter, or otherwise in relation to the business or affairs of the
Company, shall be deemed a representation, warranty or guarantee of
its accuracy by the Company to the Vendor, and the Vendor waives any
claims against the Company which she might otherwise have in respect
of it.
8.6 The Vendor undertakes, in relation to any Warranty which refers to the
knowledge, information or belief of the Vendor, that (except as stated
in paragraph 8.5 of Schedule 2) she has made all reasonable enquiries
into the subject matter of that Warranty and that she does not have
the knowledge, information or belief in question.
8.7 Schedule 6 shall operate to limit or exclude (as the case may be) the
liability of the Vendor for Warranty Claims
9 Indemnity
9.1 The Vendor agrees to indemnify and keep indemnified the Purchaser and
the Company against all claims, losses, payments, proceedings,
damages, costs and expenses arising from or in connection with:
9.1.1 the Executive Scheme by any person; and
9.1.2 a claim brought by or on behalf of an Employee relating to:
(a) sexual discrimination in the provision by the Vendor's Schemes of
benefits for and in respect of male and female Employees, whether
brought in connection with Article 119 of the Treaty of Rome or
otherwise; and
(b) the exclusion from or limitation of benefits under the Vendor's
Schemes on grounds of indirect or direct sex' discrimination in
respect of any Employee; and
9.1.3 a claim by any person in respect of the treatment of field staff
operatives as Schedule D staff rather than Schedule E employees;
19
<PAGE>
9.1.4 a claim by Lyn Fassom in respect of holiday entitlements or money in
lieu of such entitlements in respect of 14.5 working days' paid
holiday.
9.2 The provisions of Schedule 6 do not apply to limit or exclude (as the
case may be) the liability of the Vendor under clause 9.1.
10 Assignment and successions
10.1 The Purchaser shall be entitled to assign all or any of its rights
under the agreement without the need for consent if the assignment is
in favour of an Associate of the Purchaser ("the transferee") and the
parties accordingly agree that in the event that the Purchaser shall
proceed to so assign the benefit of the agreement, the transferee
shall for the purposes of establishing the extent and amount of any
claim against the Vendor pursuant to the agreement be deemed to have
acquired the Shares at the same price and on the same basis and
expectations as respectively paid and adopted by the Purchaser in
agreeing to make its purchase of the Shares under this agreement (so
far as they would be relevant in determining the claims) with the
intent that in such event the basis of any Warranty Claim against the
Vendor by the transferee shall be established with reference to
criteria (including, without limitation, liability to Taxation)
identical in all respects to those which would apply in respect of
such a Warranty Claim made by the Purchaser had it not so transferred
the Shares and the same provisions as to the extent and amount of a
claim shall apply mutatis mutandis in the case of a claim by any other
permitted assignee of the Purchaser's rights under the agreement.
10.2 An Associate of the Purchaser shall be entitled to assert rights under
the agreement as assignee only if and so long as it remains an
Associate of the Purchaser.
10.3 This agreement binds each party's successors and assigns and personal
representatives (as the case may be).
10.4 Except as expressly provided in clauses 10.1 and 10.2, none of the
rights of the parties under this agreement or the Warranties may be
assigned or transferred.
10.5 The Purchaser agrees that on assigning all or any of its rights under
this agreement pursuant to clause 10.1 it shall procure that the
transferee covenants
20
<PAGE>
with the Purchaser not to assign all or any of the assigned rights to
any other person other than the Purchaser or an Associate of the
Purchaser who shall, in such an event, be bound by the provisions of
this clause 10.5
11 Restrictive agreement
11.1 To assure to the Purchaser the full benefit of the business and
goodwill of the Company, the Vendor undertakes by way of further
consideration for the obligations of the Purchaser under this
agreement, as separate and independent agreements, that she will not:
11.1.1 disclose to any person, or herself use for any purpose, and shall use
all reasonable endeavours to prevent the publication or disclosure of,
information concerning the business, accounts or finances of the
Company or its clients' or customers' transactions or affairs, of
which she has knowledge;
11.1.2 for two years after Completion or until the expiry or termination of
the restrictions imposed on her by her service agreement (as extended
or varied from time to time), whichever is the longer, either on her
own account or for another person, directly or indirectly solicit,
interfere with or endeavour to entice away from the Company a person
who, to her knowledge, is, or has during the past two years been, a
client, customer or employee of, or in the habit of dealing with, the
Company;
11.1.3 for two years after Completion or until the expiry or termination of
the restrictions imposed on her by her service agreement (as extended
or varied from time to time), whichever is the longer, either alone or
jointly with, or as manager, agent for or employee of, another person,
directly or indirectly carry on or be engaged, concerned or interested
in the area of the United Kingdom (a) in the business of professional
field marketing services; or (b) in any other business similar to any
business now carried on by the Company in which she shall have been
actively involved in the twelve months prior to Completion but so that
this sub-clause sha11 not come into effect until full details of this
agreement have been provided to the Director General of Fair Trading
in accordance with the Restrictive Trade Practices Act 1976.
11.2 The Vendor agrees that the covenants and undertakings contained in
clause 11.1
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<PAGE>
are reasonable and are entered into for the purpose of protecting the
goodwill of the business of the Company and that accordingly the
benefit of the covenants and undertakings may be assigned by the
Purchaser and its successors in title without the consent of the
Vendor.
11.3 Each covenant and/or undertaking contained in clause 11.1 shall be
construed as a separate covenant or undertaking. If one or more of the
covenants and/or undertakings is held to be against the public
interest or unlawful or in any way an unreasonable restraint of trade,
the remaining covenants and undertakings shall continue to bind the
Vendor.
11.4 If any covenant or undertaking contained in clause 11.1 were void but
would be valid if the period of application were reduced or if some
part of the covenant or undertaking were deleted, the covenant or
undertaking in question shall apply with such modification as is
necessary to make it valid.
12 Announcements
12.1 No announcement shall be made in respect of the subject matter of this
agreement, except as specifically agreed between the parties, unless
an announcement is required by law.
13 Costs
13.1 All expenses incurred by or on behalf of the parties, including all
fees of agents, representatives, solicitors and accountants employed
by any of them in connection with the negotiation, preparation or
execution of this agreement and the preparation and agreement of the
Completion Accounts (other than the costs of the independent firm
which may be appointed pursuant to clause 4.4 whose costs shall be
determined in accordance with that clause), shall be borne solely by
the party who incurred the liability, and the Company shall not have
any liability in respect of them.
14 Communications
14.1 All communications between the parties with respect to this agreement
shall:
14.1.1 be delivered by hand, or sent by post to, the address of the addressee
as set out
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in this agreement or to such other address (being in Great Britain) as
the addressee notifies for the purpose of this clause; or
14.1.2 be sent by facsimile transmission to the facsimile transmission
numbers stated below or as notified for the purpose of this clause.
14.2 Communications shall be deemed to have been received as follows:
14.2.1 if sent by post - 2 business days after posting;
14.2.2 if delivered by hand - on the day of delivery, if delivered at least 2
hours before the close of business hours on a business day, and
otherwise on the next business day;
14.2.3 if sent by facsimile transmission - at the time of transmission, if
received at least 2 hours before the close of business hours on a
business day, and otherwise on the next business day. For this
purpose, a "business day" means a day on which the clearing banks in
the City of London are open for business and "business hours" mean
between the hours of 09.00 and 18.00 inclusively local time.
14.3 Communications addressed to the Purchaser shall be marked for the
attention of Les Milton.
14.4 The facsimile transmission numbers referred to in clause 14.1 are:
for the Vendor - 0181 979 2604
for the Purcllaser - 01753 853178
15 Invalidity
15.1 If a term in or provision of this agreement is held to be illegal or
unenforceable, in whole or in part, under an enactment or rule of law,
it shall to that extent be deemed not to form part of this agreement
and the enforceability of the remainder of this agreement shall not be
affected.
16 Counterparts
16.1 This agreement may be executed in any number of separate counterparts,
each of which when executed and delivered shall be an original, but
all the counterparts shall together constitute one and the same
instrument.
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17 Proper law
17.1 The construction, validity and performance of this agreement shall be
governed by the laws of England and the parties submit to the
non-exclusive jurisdiction of the English Courts.
18 General matters
18.1 This agreement supersedes any previous agreement between the parties
in relation to the matters dealt with and represents the entire
understanding between the parties in that respect. Without prejudice
to the generality of the foregoing, the Purchaser agrees that except
in relation to a Warranty Claim it shall have no claim for damages
and/or no right to rescind this agreement for any pre-contractual
misrepresentation made to it by the Vendor or any person on behalf of
the Vendor before this agreement unless such misrepresentation was
made fraudulently.
Executed by the parties as a deed on the date of this agreement.
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SCHEDULE 1
DETAILS OF THE. COMPANY
Company number: 1425412
Date of incorporation: 4 June 1979
Share Capital: Authorised Issued
(pound)1,000 divided into (pound)100 divided into
1,000 ordinary shares 100 ordinary shares
of (pound)1 each (pound)1 each
Registered office: Hurst House, 157-169 Walton Road, East Molesey, Surrey
KT8 0DX
Directors: Vendor
Secretary: Michael Evelyn Major
Subsidiaries: None
Charges: None
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SCHEDULE 2
WARRANTIES
1 ACCOUNTS
1.1 The Last Accounts
1.1.1 The Last Accounts were prepared in accordance with the historical cost
convention; and the bases and policies of accounting, adopted for the
purpose of preparing them, are the same as those adopted in preparing
the audited accounts of the Company in respect of the three last
preceding accounting periods.
1.1.2 The Last Accounts:
(a) give a true and fair view of the assets and liabilities of the
Company at the Last Accounts Date and its profits for the
financial period ended on that date;
(b) comply with the requirements of the Companies Acts and other
relevant statutes;
(c) comply with the current FRSs applicable to a United Kingdom
company;
(d) are not affected by extraordinary, exceptional or non-recurring
items;
(e) properly reflect the financial position of the Company as at
their date;
(f) disclose, to the full extent required by normal accounting
standards, all the assets of the Company as at their date;
(g) fully provide or reserve tor all liabilities and capital
commitments of the Company outstanding at the Last Accounts Date,
including contingent, unquantified or disputed liabilities;
(h) provide or reserve, in accordance with the principles set out in
the notes included in the Last Accounts, tor all Taxation liable
to be assessed on the Company, or for which it may be
accountable, in respect of the period ended on the Last Accounts
Date.
1.1.3 In calculating the provision or reserve for Taxation in the Last
Accounts (including deterred Taxation which has been noted as not
having been provided for in the Last Accounts), there has not been
taken into account any indexation
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allowance under TCGA s53 (The indexation allowance etc) which as a
result of FA 1994 s93 (indexation losses) is not available or is less
than it would otherwise have been.
1.2 Depreciation of fixed assets
In the Last Accounts and in the accounts of the Company for the three
preceding financial years, fixed assets have been depreciated in
accordance with SSAP 12.
1.3 Deferred taxation
Where provision for deferred taxation is not made in the Last
Accounts, full details of the amounts of deferred taxation are
disclosed in the Disclosure Letter.
1.4 Accounting reference date
The accounting reference date of the Company for the purposes of CA
s224 is 30 June and has always been that date.
1.5 Book debts
1.5.1 No part of the amounts included in the Last Accounts, or subsequently
recorded in the books of the Company, as owing by debtors is overdue
by more than twelve weeks, or has been released on terms that the
debtor pays less than the full book value of his debt, or has been
written off, or has proved to any extent to be irrecoverable, or is
regarded by the Company as irrecoverable in whole or in part.
1.5.2 The amounts due from debtors as at Completion (less the amount of any
relevant provision or reserve, determined on the same basis as that
applied in the Last Accounts and disclosed in the Disclosure Letter)
will be recoverable in full in the ordinary and normal course of
business.
1.6 Books and records
All the accounts, books, ledgers, financial and other records, of the
Company:
(a) are in its possession;
(b) have been fully properly and accurately kept;
(c) do not contain material inaccuracies;
(d) show a true and flair view of its trading transactions, and its
financial, contractual and trading position.
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2 CORPORATE MATTERS
2.1 Directors and shadow directors
2.1.1 The only director of the Company is the Vendor.
2.1.2 No person is a shadow director (within the meaning of CA s741) of the
Company but is not treated as one of its directors for all the
purposes of the Companies Acts.
2.2 Options over the Company's capital Except as required by this
agreement there are no agreements or arrangements in force which
provide for the issue, allotment or transfer of or grant to any person
the right (whether conditional or otherwise) to call for the issue,
allotment or transfer of share or loan capital of the Company
(including an option or right of pre-emption or conversion).
2.3 Issues of capital
2.3.1 None of the Shares were issued at a discount.
2.4 Commissions
No one is entitled to receive from the Company a finder's fee,
brokerage or other commission in connection with the sale and purchase
of the Shares under this agreement.
2.5 Memoranda and articles of association, statutory books and resolutions
2.5.1 The copy of the memorandum and articles of association of the Company
attached to the Disclosure Letter is accurate and complete and has
embodied in it or annexed to it. A copy of every resolution which is
referred to in CA s380.
2.5.2 The register of members and other statutory books of the Company have
been properly kept and contain an accurate and complete record of the
matters with which they should deal.
2.5.3 No notice or allegation has been received that the statutory books of
the Company are incorrect or should be rectified.
2.5.4 Since the Last Accounts Date no alteration has been made to the
memorandum or articles of association of the Company and no resolution
of the shareholder of the Company has been passed (other than
resolutions relating to routine business at annual general meetings).
2.5.5 The Company has not passed an elective resolution under CA s379A,
which
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remains in force.
2.5.6 Notice of any written resolution passed or to be passed by the Company
on or after 1 April 1990 was duly given to its auditors in accordance
with CA s381 and no notice of objection was given by the auditors.
2.6 Documents filed
2.6.1 All returns, particulars, resolutions and documents required by the
Companies Acts or any other legislation to be filed with the Registrar
of Companies, or other authority, in respect of the Company have been
duly filed and were correct; and the Company has complied with the
Companies Acts, and other legal requirements, in connection with their
formation, the allotment or issue of shares, debentures and other
securities, the payment of dividends and the conduct of their
business.
2.7 Possession of documents
2.7.1 All title deeds relating to the assets of the Company, and an executed
copy of all written agreements to which the Company is a party, and
the original copies of all other documents which are owned by, or
which ought to be in the possession of, the Company are in its
possession or in the possession of its professional advisers.
2.8 Investigations
No investigations or enquiries by, or on behalf of, any governmental
or other body in respect of the affairs of the Company are taking
place or pending.
2.9 Information disclosed to Purchaser correct
2.9.1 All information given by the Vendor, the Vendor's Solicitors or the
Vendor's Accountants to the Purchaser, the Purchaser's Solicitors or
the Purchaser's Accountants or HW Fisher & Company relating to the
business, activities, affairs, or assets or liabilities of the Company
was, when given, and remains complete and accurate.
2.9.2 There are no material facts or circumstances, in relation to the
assets, business or financial condition of the Company, which have not
been fully and fairly disclosed in writing to the Purchaser or the
Purchaser's Solicitors, and which, if disclosed, might reasonably have
been expected to affect the decision of the Purchaser to enter into
this agreement.
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3 TAXATION
3.1 Administration
3.1.1 All returns, notifications, computations and payments which should
have been made or given by the Company for Taxation purpose were made
or given within the requisite periods and are up-to-date, correct and
on a proper basis; and none of them is, or is likely to be, the
subject of a dispute with the Inland Revenue or other Taxation
authorities.
3.1.2 All particulars furnished to the Inland Revenue or other Taxation
authorities, in connection with the application for a consent or
clearance on behalf of the Company, or affecting the Company, fully
and accurately disclosed all material facts and circumstances; the
consent or clearance is valid and effective; and the transaction, for
which consent or clearance was obtained, has been carried into effect
(if at all) only in accordance with the terms of the relative
application and consent or clearance.
3.1.3 The Company has not taken any action which has had, or might have, the
result of altering or prejudicing, tor a period commencing after the
Last Accounts Date, an arrangement or agreement which it has with a
Taxation authority.
3.1.4 The Company has not paid or, since the Last Accounts Date, become
liable to pay a penalty or interest charged under a Taxation statute.
3.1.5 The Company has properly operated the PAYE system, by duly deducting
tax from all payments made, or treated as made, to the Employees or
former employees, and accounting to the Inland Revenue for all tax
deducted and for all tax chargeable on benefits provided for the
Employees or former employees.
3.1.6 No person is or has acted as the Company's intermediary and has made a
payment of or on account of assessable income of an Employee in
circumstances where it has not deducted income tax from the payment or
accounted for tax in accordance with PAYE regulations (within the
meaning of ICTA s 203L (s203B to s203K: interpretation etc)).
3.1.7 No direction has been given and no circumstances exist or have existed
in which a direction could be given under ICTA s203E (PAYE: mobile UK
workforce) in relation to which the Company is or could be the
relevant person
30
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for the purposes of that section.
3.1.8 The Company does not provide nor has it provided nor has it agreed to
provide:
(a) assessable income of an employee in the form of tradeable assets
within the meaning of ICTA s203F (PAYE: tradeable assets);
(b) for an employee by reason of his employment non-cash vouchers to
which ICTA s203G (PAYE: non-cash vouchers) applies, credit-tokens
to which ICTA s203H (PAYE: credit-tokens) applies or cash
vouchers to which ICTA s203I (PAYE: cash vouchers) applies.
3.1.9 The Company has sufficient records relating to past events to
calculate the liability to Taxation or relief from Taxation which
would arise on a disposal or realisation of any of its assets or a
discharge of any of its liabilities.
3.1.10 The Company has complied in all respects with the following sections,
and the regulations made under them, and has made and accounted for
the deductions and retentions which they specify or require:
(a) TMA s78 (Method of charging non-residents) and s79 (Profits from
branch or agency);
(b) ICTA s43 (Non-residents);
(c) ICTA s123 (Foreign dividends);
(d) ICTA s349 (Payments not out of profits or gains brought into
charge to income tax and annual interest);
(e) ICTA s524 (Taxation as income of capital sums received for sale
of patent rights);
(f) ICTA s536 (Taxation of copyright royalties where owner's usual
place of abode is abroad);
(g) ICTA Part XIII Chapter III (Entertainers and Sportsmen);
(h) ICTA Part XIII Chapter IV (Payments to certain sub-contractors in
construction industry);
(i) ICTA s777 (Provisions supplementary to sections 775 and 776).
3.1.11 The Company has not received a notice under ICTA s23 (Collection from
lessees and agents) which is outstanding.
3.2 Taxation claims, liabilities and reliefs
3.2.1 The Disclosure Letter contains full and accurate details of all
matters relating
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to Taxation in respect of which the Company (either alone or jointly
with another person) is entitled:
(a) to make a claim (including a supplementary claim) for, disclaimer
of or election for relief under a Taxation statute;
(b) to appeal against an assessment to or a determination affecting
Taxation;
(c) to apply for the postponement of Taxation;
(d) to require the postponement or reduction of an allowance;
(e) to elect to treat machinery or plant as a short-life asset within
CAA s 37 (Election for certain machinery or plant to be treated
as short-life assets).
3.2.2 The Company has not made a claim under TCGA s24(2) (Disposals where
assets lost or destroyed, or whose value becomes negligible) or s280
(Consideration payable by instalments) or under TCGA Sched 4 (Deferred
charges on gains before 31 March 1982).
3.2.3 The Company is not, nor will it become, liable to pay, or to reimburse
or indemnify any person in respect of, Taxation (or an amount
corresponding to Taxation) in consequence of the failure by another
person to discharge that Taxation or amount, where the Taxation or
amount relates to a profit, income or gain, transaction, event,
omission or circumstance arising or occurring or deemed to have arisen
or occurred (whether wholly or partly) prior to Completion.
3.2.4 No relief from Taxation has been claimed or given to the Company, or
was taken into account in determining the provision tor Taxation in
the Last Accounts, and which could be withdrawn, postponed or
restricted as a result of an act, omission, event or circumstance
arising or occurring at or after Completion.
3.3 Distributions and deductibility of payments
3.3.1 The Company has not repaid, nor has it agreed to repay, or redeemed,
or agreed to redeem, shares, or capitalised, or agreed to capitalise
profits or reserves in the form of redeemable shares or debentures.
3.3.2 No outstanding security (within the meaning of ICTA s254(1) (Company
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distributions, tax credits etc.: interpretation)), of the Company was
issued in such circumstances that the interest payable on it, or any
other payment in respect of it, falls to be treated as a distribution
under ICTA s209 (Meaning of "distribution").
3.3.3 No rents, interest, annual payments or other sums of an income nature
paid, or payable, since the Last Accounts Date by the Company, or
which the Company is under an obligation to pay are or may be wholly
or partially disallowable as deductions in computing profits or as
charges against profits for the purposes of corporation tax by reason
of ICTA s74 (General rules as to deductions not allowable), ICTA sl25
(Annual payments for non-taxable consideration), ICTA s338 (Allowance
of charges on income and capital), ICTA s770 (Sales etc at an
undervalue or overvalue), ICTA s5779 to 785 (Leased assets), ICTA s787
(Restriction of relief for payments of interest) or otherwise.
3.3.4 The Company has not received a capital distribution to which ICTA s346
(Capital distribution of chargeable gains: recovery of tax from
shareholder) could apply.
3.3.5 The Company has not incurred expenditure which was not or will not be
wholly deductible in computing, or against, profits as a trading
expense or expense of management, or as a charge on income, or in
computing income for the purposes of Schedule A, except for
expenditure on the acquisition of an asset to be held otherwise than
as stock-in-trade, details of which are set out in the Disclosure
Letter.
3.4 Carry forward of losses and ACT
Nothing has been done, and no event or series of events has occurred,
which might cause in relation to the Company the disallowance of the
carry forward or carry back of losses, excess charges or advance
corporation tax under ICTA s393 (Losses other than terminal losses),
s768 (Change in ownership of company: disallowance of trading losses),
s768A (Change in ownership: disallowance of carry back of trading
losses) or ICTA s245 (Calculation etc. of ACT on change of ownership
of company).
3.5 Close companies
The Company is not, nor was it at any time during the six years ended
on the
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Last Accounts Date, a close investment-holding company as defined in
ICTA s13A.
3.6 Groups
The Company is not and has not since its incorporation been a member
of a group of companies for any taxation purpose.
3.7 Capital allowances
3.7.1 All expenditure which the Company has incurred or may incur under a
subsisting commitment on the provision of machinery or plant has
qualified or will qualify (if not deductible as a trading expense of a
trade carried on by the Company) for writing-down allowances under CAA
s24 (Writing-down allowances and balancing adjustments).
3.7.2 All capital allowances made or to be made to the Company in respect of
capital expenditure incurred, or to be incurred under a subsisting
commitment, have been made, or will be made, in taxing its trade.
3.7.3 Since the Last Accounts Date the Company has not done, omitted to do,
agreed to do or permitted to be done anything as a result of which a
disposal value may be brought into account under CAA s24 (Writing-down
allowances and balancing adjustments), or there may be any recovery of
excess relief under CAA s46 (Recovery of excess relief: new
expenditure).
3.7.4 No event has occurred since the Last Accounts Date which may be
treated as a notional sale by the Company of machinery or plant
pursuant to CAA s26 (The disposal value).
3.7.5 The Company is not nor may it be in dispute with another person as to
the entitlement to capital allowances under CAA s51 (Application and
interpretation of Chapter VI: Fixtures).
3.7.6 No capital expenditure incurred or to be incurred by the Company has
been or will be deemed under CAA s159 (Capital expenditure, capital
sums and time when capital expenditure is incurred) to have been or be
incurred on a date other than that upon which the obligation to pay
the expenditure became or becomes unconditional.
3.7.7 No election has been made by the Company under CAA s53 (Expenditure
incurred by equipment lessor) or s55 (Expenditure incurred by incoming
lessee:
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transfer of allowances) in relation to fixtures.
3.8 Transactions not at arm's length
3.8.1 The Company has not carried out, or been engaged in, a transaction or
arrangement to which ICTA s770 (Sale etc. at an undervalue or
overvalue) has been or may be applied.
3.8.2 The Company does not own, nor has it agreed to acquire, an asset, or
has received or agreed to receive services or facilities (including
the benefit of licences or agreements), the consideration for the
acquisition or provision of which was or will be in excess of its
market value or determined otherwise than on an arm's length basis.
3.8.3 The Company has not disposed of nor acquired an asset in such
circumstances that TCGA s17 (Disposals and acquisitions treated as
made at market value) could apply.
3.9 Base values and acquisition costs
3.9.1 If each of the capital assets of the Company was disposed of at
Completion for a consideration equal to its book value in or adopted
tor the purpose of the Last Accounts, no liability to corporation tax
on chargeable gains or balancing charge under CAA (if each asset was
treated as if used for the purpose of a separate trade) would arise;
and, to the purpose of determining the liability to corporation tax on
chargeable gains, there shall be disregarded reliefs and allowances
available to the Company other than amounts falling to be deducted
under TCGA s38 (Acquisition and disposal costs etc).
3.9.2 The Company has not made an election under TCGA s35 (Assets held on
31st March 1982 (including assets held on 6th April 1965)).
3.9.3 The Company has not, since the Last Accounts Date, engaged in a
transaction in respect of which there may be substituted for Taxation
purposes, a consideration which is different trom the actual
consideration given or received by it.
3.10 Tax avoidance
3.10.1 The Company has not, since the Last Accounts Date, engaged in, or been
a party to a scheme or arrangement of which the main purpose, or one
of the
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main purposes, was the avoidance of, or a reduction in liability to,
Taxation.
3.10.2 The Company has not, since the Last Accounts Date, been a party to a
transaction to which any of the following has been or could be applied
other than transactions in respect of which all necessary consents or
clearances have been obtained:
(a) ICTA ss703 to 709 (Cancellation of tax advantages from certain
transactions in securities);
(b) ICTA s765 (Migration etc. of companies);
(c) ICTA s776 (Transactions in land: taxation of capital gains);
(d) TCGA ss135 to 138 (Company reconstructions and amalgamations);
(e) TCGA s139 (Reconstruction or analgamation involving transfer of
business).
3.11 Depreciatory transactions and value shifting:
3.11.1 No allowable loss, which may accrue on the disposal by the Company of
an asset is likely to be reduced by reason of TCGA s176 (Depreciatory
transactions within a group) or s177 (Dividend stripping).
3.11.2 No chargeable gain or allowable loss arising on a disposal by the
Company is likely to be adjusted in accordance with TCGA s30 (Value
shifting: Tax-free benefits).
3.12 Foreign income and gains
3.12.1 The Company has not either received or become entitled to income which
is "unremittable income", within the meaning of ICTA s584 (Relief for
unremittable overseas income), or a gain to which TCGA s279 (Foreign
assets: delayed remittances) could apply.
3.12.2 The Company has not made an election under ICTA s246A (Election by
company paying dividend) nor has it received a dividend treated as a
foreign income dividend for the purposes of ICTA Part VI Chapter VA
(Foreign income dividends).
3.13 Demergers and purchase of own shares
3.13.1 The Company has not been engaged in, nor been a party to, any of the
transactions set out in ICTA 213 to 218 (Demergers) or has made or
received
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a chargeable payment as defined in s214 (Chargeable payments connected
with exempt distributions).
3.13.2 The Company has not redeemed, repaid or purchased or agreed to redeem,
repay or purchase any of its own shares.
3.14 Transfer of overseas trade The Company has not transferred a trade,
which it carried on outside the United Kingdom through a branch or
agency, to a company not resident in the United Kingdom, in
circumstances such that a chargeable gain may be deemed to arise at a
date after such transfer under TCGA s140 (Postponement of charge on
transfer of assets to non-resident company).
3.15 Sale and leaseback of land The Company has not, since the Last
Accounts Date, entered into a transaction to which ICTA s780 (Sale and
lease-back: taxation of consideration received) has been or could be
applied.
3.16 Stock dividends and deep discount securities
3.16.1 The Company has not issued or owns share capital to which ICTA s249
(Stock dividends treated as income) or TCGA s141 (Stock dividends:
consideration for new holding) could apply.
3.16.2 The Company has not since 13 March 1984 owned or issued a deep
discount security within the meaning of ICTA s57 and Sched 4 (Deep
discount securities).
3.17 Foreign companies
3.17.1 No notice of the making of a direction under ICTA s747 (Imputation of
chargeable profits and creditable tax of controlled foreign companies)
has been received by the Company and no circumstances exist which
would entitle the Inland Revenue to make a direction and to apportion
profits of a controlled foreign company to the Company under ICTA s752
(Apportionment of chargeable profits and creditable tax).
3.17.2 The Company, which is incorporated and resident in~the United Kingdom
for corporation tax purposes, has not ceased to be so resident in
accordance with a Treasury consent.
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3.18 Chargeable gains
3.18.1 In determining the liability to corporation tax on chargeable gains in
respect of an asset which has been acquired by the Company, or which
the Company has agreed to acquire (whether conditionally, contingently
or otherwise):
(a) the sums allowable as a deduction will be determined solely in
accordance with TCGA s38 (Acquisition and disposal costs etc) and
s53 (The indexation allowance and interpretative provisions);
(b) the amount or value of the consideration, determined in
accordance with TCGA s38(1)(a), will not be less than the amount
or value of the consideration actually given by it for the asset;
(c) the amount of expenditure on enhancing the value of the asset,
determined in accordance with TCGA s38(1)(b), will not be less
than the amount or value of all expenditure actually incurred by
it on that asset.
3.18.2 No asset owned or agreed to be acquired by the Company (other than
plant and machinery in respect of which it is entitled to capital
allowances) is a wasting asset within the meaning of TCGA s44 (Meaning
of "wasting asset").
3.18.3 The Company is not owed a debt (not being a debt on a security), upon
the disposal or satisfaction of which a liability to corporation tax
on chargeable gains will arise by reason of TCGA s251 (Debts: General
provisions).
3.18.4 The Company has not claimed nor is it entitled to claim under TCGA
s253 (Relief for loans to traders) that an allowable loss has accrued
in respect of a loan made by it.
3.18.5 No part of the consideration given by the Company for a new holding of
shares (within the meaning of TCGA s77 (Reorganisation or reduction of
share capital: Application of Sections 127 to 131)) will be
disregarded by virtue of TCGA s128(2) (Consideration given or received
by holder).
3.19 Losses
3.19.1 The Company has not incurred a capital loss to which TCGA s18(3)
(Transactions between connected persons) is applicable.
3.19.2 The Company is not treated as a limited partner under ICTA s118
(Restriction on relief: companies)
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3.20 Replacement of business assets
The Company has not made a claim under TCGA ss23 (Receipt of
compensation and insurance money not treated as a disposal), 152
(Replacement of business assets: Roll-over relief, 153 (Assets only
partly replaced), 154 (New assets which are depreciating assets), 175
(Replacement of business assets by members of a group) or 247
(Rollover relief on compulsory acquisition) which would affect the
amount of the chargeable gain or allowable loss which would, but for
the claim, have arisen on a disposal of any of its assets.
3.21 Gifts involving the Company
3.21.1 The Company has not held and does not hold shares in a company which
has made a transfer to which TCGA s125 (Shares in close company
transferring assets at an undervalue) applies.
3.21.2 The Company has not received an asset by way of gift as mentioned in
TCGA s282 (Recovery of tax from donee).
3.22 Gains accruing to non-resident companies
No gain has accrued in respect of which the Company may be liable to
corporation tax on chargeable gains by virtue of TCGA sl3 (Attribution
of gains to members of non-resident companies).
3.23 Interest rate and currency contracts
The Company is not a party to an interest rate contract or option, or
a currency contract or option, which is a qualifying contract or a
quasi-qualifying contract within the meaning of FA1994 s147
(Qualifying contracts) or s148 (Contracts which may become qualifying
contracts).
3.24 Value added tax
3.24.1 The Company:
(a) has duly registered and is a taxable person for the purposes of
value added tax;
(b) has complied in all material respects with all statutory
requirements, orders, provisions, directions or conditions
relating to value added tax;
(c) maintains complete, correct and up-to-date records for the
purposes of the relevant legislation.
3.24.2 The Company:
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(a) has not applied for treatment as a member of a group;
(b) is not nor has it agreed to become an agent, manager or factor
(for the purposes of VATA s32 (Agents, etc.)) of any person who
is not resident in the United Kingdom.
(c) is not in arrears with a payment or return, or liable to an
abnormal or non-routine payment, or a forfeiture or penalty, or
to the operation of a penal provision;
(d) has not been required by the Commissioners of Customs and Excise
to give security.
3.24.3 The Disclosure Letter contains full particulars of claims for bad debt
relief made, or which may be made, by the Company under VATA s36 (Bad
debts).
3.24.4 No document has left the possession of the Company which, if
improperly used by a third party, would lead to a liability on its
part to pay an amount of value added tax under VATA Sched 11 para 5
(Recovery of VAT, etc.) which, but for the use, would not have been
payable by it.
3.24.5 The Company has not within the past twelve months received a surcharge
liability notice under VATA s59 (The default surcharge).
3.24.6 The Company has not received a penalty liability notice under VATA s64
(Repeated misdeclarations) or has made a return which contains a
material inaccuracy within the meaning of that section.
3.24.7 The Company has not given a certificate for value added tax purposes
falling within VATA s62 (Incorrect certificates as to zero rating etc)
which is incorrect.
3.24.8 The Company has not made a claim for repayment of value added tax
under VATA s80 (Recovery of overpaid VAT) which has not been satisfied
and in respect of which the Commissioners of Customs and Excise have
raised or could raise the defence of unjust enrichment.
3.24.9 The Company and no other body corporate which is or has been a
relevant associate (as defined in VATA Sched 10 para 3 (Election to
waive exemption)) has not made an election to waive exemption under
VATA Sched 10 para 2 (Election to waive exemption); and no such
company owns (or has agreed to acquire, whether conditionally or
otherwise, or granted an option to another
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person to require it to acquire) an interest in, right over or licence
to occupy building or land which is or will be granted to the Company
by another person who has made or, so far as the Company is aware,
will make in relation to all or any part of the building or land an
election to waive exemption under para 2.
3.24.10 The Company is not a developer (within the meaning of VATA Sched 10
para 5 (Developers of certain non-residential buildings etc)) in
relation to a building or civil engineering work (but excluding a
building or work construction of which was commenced before 1 August
1989 or a building or work in which the fee simple was granted before
the date of this agreement where that grant was a taxable supply
(other than a zero rated supply)) for value added tax purposes,
otherwise than by reason of an election under VATA Sched 10 para 2
(Election to waive exemption).
3.24.11 The Company has not acquired or brought into use on or after 1 April
1990 a computer or item of computer equipment costing (pound)50,000 or
more or land or buildings (or parts of buildinus) costing
(pound)250,000 or more.
3.24.12 The net total of all errors required by law to be corrected in VAT
returns submitted by the Company (adding up all under declarations and
subtracting all over declarations) as at the date of this agreement
does not exceed (pound)500.
3.25 Inheritance tax
3.25.1 The Company has not made a transfer of value (as defined in ITA s3
(Transfers of value)).
3.25.2 No Inland Revenue charge for unpaid inheritance tax (as provided by
ITA ss237 and 238 (Inland Revenue charge for unpaid tax)) is
outstanding over an asset of the Company or in relation to shares in
the capital of the Company.
3.25.3 There are not in existence any circumstances whereby any power
mentioned in ITA s212 (Powers to raise tax) could be exercised in
relation to any shares, securities or other assets of the Company, or
could be exercised but for ITA s264(6) (Limitation of liability).
3.26 Stamp duty
3.26.1 Within the past tive years the Company has not made a claim for relief
or
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exemption under FA 1930 s42 (Relief from transfer stamp duty in case
of transfer of property as between associated companies).
3.26.2 The Company is not a party to a document held outside the United
Kingdom which, if brought into the United Kingdom, would be liable to
stamp duty under Stamp Act 1891 s14(4) (Terms upon which instruments
not duly stamped may be received in evidence).
3.27 Air passenger duty
The Company is not nor has it been (a) registered or liable to be
registered for the purposes of air passenger duty under FA 1994 s33
(Registration of aircraft operators) or (b) a fiscal representative of
an aircraft operator within FA 1994 s34 (Fiscal representatives) who
is or is liable to be registered or (c) a handling agent of another
person within FA 1994 s37 (Handling agents).
3.28 Insurance premium tax
The Company:
(a) is nor has it been registered or liable to be registered for the
purposes of insurance premium tax under FA 1994 sS3 (Registration
of insurers);
(b) has not given nor is it liable to give notification to the
Commissioners of Customs and Excise under FA 1994 s53(2);
(c) has not been nor is it or has it agreed to become an insurer's
tax representative within FA 1994 s57 (Tax representatives);
(d) is not nor has it been treated as a member of a group for the
purposes of insurance premium tax within FA 1994 s63 (Groups of
companies); or
(e) has not received nor could it receive a liability notice within
FA 1994 s65 (Liability of insured in certain cases).
4 FINANCE
4.1 Capital commitments
There were no commitments on capital account outstanding at the Last
Accounts Date and, since the Last Accounts Date, the Company has not
made nor has it agreed to make capital expenditure, or incurred or
agreed to incur capital
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commitments or disposed of or realised capital assets or an interest
in capital assets.
4.2 Dividends and distributions
4.2.1 Since the Last Accounts Date no dividend or other distribution (as
defined in ICTA Part VI Chapter II as extended by ICTA s418) has been,
or is treated as having been, declared, made or paid by the Company.
4.2.2 All dividends or distributions declared, made or paid by the Company
were declared, made or paid in accordance with its articles of
association and the applicable provisions of the Companies Acts.
4.3 Bank and other borrowings
4.3.1 The Company has no bank overdraft facilities.
4.3.2 The Company has not, since the Last Accounts Date, repaid or become
liable to repay any loan or indebtedness in advance of its stated
maturity.
4.3.3 The Company has not received notice (whether formal or informal) from
a lender of money, requiring repayment or intimating the enforcement
of a security; and there is nothing likely to give rise to a notice.
4.4 Loans by and debts due to Company
4.4.1 The Company has not lent money which has not been repaid to it, nor
does it own the benefit of any debt (whether or not due for payment),
other than debts which have arisen in the ordinary course of its
business.
4.4.2 The Company has not made a loan or quasi-loan contrary to the
Companies Acts.
4.4.3 The Company has not made a loan, which remains outstanding, on terms
entitling it to receive either a rate of interest varying with, or a
share of, the profits of a business.
4.5 Liabilities
4.5.1 There are no liabilities (including contingent liabilities) of the
Company except as disclosed in the Last Accounts or incurred, in the
ordinary and proper course of its business, since the Last Accounts
Date.
4.5.2 There has been no exercise, purported exercise or claim for a charge,
lien, encumbrance or equity over fixed assets of the Company.
4.5.3 There is no dispute directly or indirectly relating to fixed assets of
the
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Company.
4.5.4 The Company has not been the tenant of, or a guarantor in respect of,
leasehold property other than the Properties.
4.6 Bank accounts
4.6.1 Full and accurate statements of the credit or debit balances of the
Company contained within its bank accounts as at the Completion Date
have been supplied to the Purchaser.
4.6.2 Since the date of each statement, there have been no payments out of
the account to which the statement relates, except for payments in the
ordinary course of business; and the balances on current accounts are
not substantially different from the balances shown in the statements
4.7 Continuation of facilities
In relation to all debentures, acceptance credits, overdrafts, loans
or other financial facilities outstanding or available to the Company
(referred to in this clause as "facilities"):
(a) the Disclosure Letter sets out full and accurate details and
there are attached to it accurate copies of all documents
relating to the facilities;
(b) there has been no contravention of, or non-compliance with, the
provisions of the facilities;
(c) no steps for the early repayment of indebtedness have been taken
or threatened;
(d) there have not been, nor are there, circumstances known to the
Vendor whereby the continuation of any of the facilities might be
prejudiced, or which might give rise to any alteration in its
terms;
(e) none of the facilities is dependent on the guarantee or indemnity
of, or security provided by, a person other than the Company;
(f) the Vendor has no knowledge, information or belief that, as a
result of the acquisition of the Shares by the Purchaser or any
other thing contemplated in this agreement, any of the facilities
might be terminated or mature prior to its stated maturity
4.8 Creditors
There is no amount owing by the Company to a creditor which has been
due
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for more than six weeks.
4.9 Government grants
4.9.1 The Company has not applied for or received a grant or subsidy or
financial assistance from a government department or agency or a local
or other authority.
5 TRADING
5.1 Changes since Last Accounts Date
5.1.1 Since the Last Accounts Date:
(a) the business of the Company has been continued in the normal
course;
(b) there has been no deterioration in the turnover, or in the
financial or trading position or prospects, of the Company;
(c) the Company has not, by doing or omitting to do anything,
prejudiced its goodwill;
(d) no part of the business of the Company has been affected by
abnormal factors not affecting similar businesses to a like
extent;
(e) the Company has paid its creditors in accordance with their
respective credit terms.
5.1.2 The value of the net realisable assets of the Company is not less than
at the Last Accounts Date.
5.1.3 The Vendor has no knowledge that the trading prospects of the Company
have been adversely affected as a result of events or circumstances
arising since the Last Accounts Date.
5.2 Vendor's other interests and liabilities to the Company
5.2.1 The Vendor and her Associates, do not have rights or interests,
directly or indirectly, in businesses other than those now carried on
by the Company, which are or are likely to be, or become, competitive
with the businesses of the Company, except as registered holder or
owner with full title guarantee of securities listed on the Stock
Exchange and in respect of which the Vendor, with her Associates,
holds with full title guarantee less than 5 per cent of any single
class of the securities in that company.
5.2.2 There is no outstanding indebtedness of the Vendor or her Associates,
to the Company.
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5.3 Effect of sale of Shares
5.3.1 The Vendor has no knowledge, information or belief that after H
Completion (whether by reason of an existing agreement or arrangement
or otherwise) or as a result of the proposed acquisition of the
Company by the Purchaser:
(a) a supplier of the Company will cease, or be entitled to cease,
supplying it or may substantially reduce its supplies to it;
(b) a client of the Company will cease, or be entitled to cease, to
deal with it or may substantially reduce its existing level of
business with it;
(c) the Company will lose the benefit of a right or privilege which
it enjoys;
(d) an Employee is likely to leave.
5.3.2 Compliance with the terms of this agreement does not and will not:
(a) conflict with, or result in the breach of, or constitute a
default under an agreement or arrangement to which the Company is
a party, or a provision of the memorandum or articles of
association of the Company or an encumbrance, order, judgement,
award, injunction, regulation or other restriction or obligation
by which or to which an asset of the Company is bound or subject;
(b) relieve another person from an obligation to the Company (whether
contractual or otherwise), or enable another person to determine
such an obligation, or a right or benefit enjoyed by the Company,
or to exercise a right, whether under an agreement with, or
otherwise in respect of, the Company;
(c) result in the creation, imposition, crystallisation or
enforcement of an encumbrance on assets of the Company;
(d) result in present or future indebtedness of the Company becoming
due and payable, or capable of being declared due and payable,
prior to its stated maturity.
5.4 Conduct of businesses in accordance with memoranda and articles of
association
5.4.1 The Company has carried on business and conducted its affairs in
accordance
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with its memorandum and articles of association from time to time and
all other documents to which it is or has been a party.
5.4.2 The Company is empowered and duly qualified to carry on business in
all jurisdictions in which it carries on business.
5.5 Joint ventures and partnership
5.5.1 The Company is not, nor has it agreed to become, a participant in or
member of a joint venture, consortium, partnership or other
unincorporated association.
5.5.2 The Company is not, nor has it agreed to become, a party to an
agreement or arrangement for sharing commissions or other income.
5.6 Agency agreements and agreements restricting business
5.6.1 The Company is not a party to an agency, distributorship, marketing,
purchasing, manufacturing or licensing agreement or arrangement, or a
restrictive trading or other agreement or arrangement pursuant to
which its business is carried on, or which restricts its freedom to
carry on its business in the United Kingdom or elsewhere in such
manner as it thinks fit.
5.6.2 The Company is not bound by an undertaking or assurances given to a
court or governmental agency.
5.7 Unfair trade and restrictive practices
5.7.1 The Company has not committed, or omitted to do, anything which could
give rise to a fine or penalty.
5.7.2 The Company is not a party to an agreement, practice or arrangement
which:
(a) contravenes the Trade Descriptions Act 1968;
(b) contravenes the Fair Trading Act 1973 Part XI;
(c) would, or might, result in a reference of a "consumer trade
practice", within the meaning of the Fair Trading Act 1973 s13,
or be liable to reference to the Consumer Protection Advisory
Committee under Part II of the said Act;
(d) contravenes the Consumer Credit Act 1974;
(e) contravenes, or is invalidated (in whole or in part) by, or is
subject to registration under, the Restrictive Trade Practices
Acts 1976 and 1977;
(f) contravenes, or is invalidated by, the Resale Prices Act 1976;
(g) contravenes the Treaty of Rome;
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(h) contravenes any other anti-trust, anti-monopoly or anti-cartel
legislation or regulations.
5.7.3 The Company has not engaged in an anti-competitive practice as defined
in the Competition Act 1980.
5.8 Litigation, disputes and winding up
5.8.1 The Company is not engaged in litigation or arbitration proceedings,
as plaintiff or defendant; there are no proceedings pending or
threatened by the Company; there are no proceedings pending or
threatened in writing against the Company; the Vendor has no knowledge
of any proceedings threatened against the Company of which it has
received written notification; and the Vendor has no knowledge of
anything which on the balance of probabilities will give rise to
litigation or arbitration.
5.8.2 There is no dispute with a revenue or other official department in the
United Kingdom or elsewhere in relation to the affairs of the Company,
and the Vendor has no knowledge, information or belief of anything
which may give rise to a dispute.
5.8.3 There are no claims pending or threatened, or capable of arising,
against the Company, by an employee or third party in respect of an
accident or injury, which are not fully covered by insurance.
5.8.4 No order has been made, or petition presented, or resolution passed
for the winding up of the Company; no distress, execution or other
process has been levied in respect of the Company which remains
undischarged; and there is no unfulfilled or unsatisfied judgment or
court order outstanding against the Company.
5.8.5 The Company has not stopped payment or is insolvent or unable to pay
its debts within the meaning of Insolvency Act 1986 s123 (but omitting
any requirement to prove anything to the satisfaction of the court).
5.9 Compliance with statutes
5.9.1 The Company, and its officers, agents or employees (during the course
of their duties in relation to it), has not committed, or omitted to
do, an act or thing, the commission or omission of which is, or could
be, in contravention of an
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act, order, regulation or the like (whether of the United Kingdom or
elsewhere) giving rise to a fine, penalty, default proceeding or other
liability on its part;
5.9.2 The Company has conducted and is conducting its business in accordance
with all applicable laws and regulations, whether of the United
Kingdom or elsewhere.
5.10 Data protection
5.10.1 The Company has complied with all relevant requirements of the Data
Protection Act 1984 including:
(a) the data protection principles established in the Act;
(b) requests from data subjects for access to data held by it;
(c) the requirements relating to the registration of data users.
5.10.2 The Company has not received a notice or allegation from either the
data protection registrar or a data subject alleging non-compliance
with the data protection principles or prohibiting the transfer of
data to a place outside the United Kingdom.
5.10.3 No individual has claimed, or will have the right to claim,
compensation from the Company under the Act for loss, or unauthorised
disclosure, of data.
5.11 Documents stamped
All documents which affect the right, title or interest of the Company
in or to any of its properties, undertaking or assets, or to which the
Company is a party, and which attract stamp duty have been duly
stamped within the requisite period for stamping.
5.12 Business names
The Company does not use a name for any purpose other than its full
corporate name.
5.13 Transactions involving directors
The Company has not been a party to a transaction to which CA s320 or
s330 may apply.
5.14 Powers of attorney and authority
5.14.1 No power of attorney given by the Company is in force.
5.14.2 No authorities (express or implied) by which another person may enter
into a contract or commitment to do anything on behalf of the Company
are
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outstanding.
5.15 Licences and consents
5.15.1 The Company has obtained all necessary licences and consents for the
proper carrying on of its business (short particulars of each lieenee
and consent being set out in the Disclosure Letter); all the licences
and consents are valid and subsisting; the Company is not in breach of
any of the licences or consents; and there is nothing that might
prejudice their continuation or renewal.
5.16 Subsisting contracts
5.16.1 The Disclosure Letter contains complete and accurate particulars of
all subsisting contracts, whether written or oral, to which the
Company is a party.
5.16.2 The Company is not a party to a subsisting agreement or arrangement
which is or may be material in relation to its business or affairs.
5.16.3 The Company is not a party to a contract, transaction, arrangement or
liability which:
(a) is of an unusual or abnormal nature, or outside the ordinary and
proper course of business;
(b) is for a fixed term of more than six months;
(c) is of a long-term nature (that is, unlikely to have been fully
performed, in accordance with its terms, more than six months
after the date on which it was entered into or undertaken);
(d) cannot be terminated by it, in accordance with its terms, on
sixty days' notice or less;
(e) is of a loss-making nature (that is, known to be likely to result
in a loss to it on completion of performance);
(f) cannot readily be fulfilled or performed by it on time without
undue or unusual expenditure or commitment of money, effort or
personnel;
(g) involves payment by it of amounts determined by reference to
fluctuations in the index of retail prices, or another index, or
in the rate of exchange for a currency; ~
(h) involves an aggregate outstanding expenditure by it of more than
(pound)5,000;
(i) involves, or is likely to involve, the supply of services the
aggregate
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sales value of which will represent in excess of 10 per cent of
its turnover for the preceding financial year;
(j) is a contract for hire or rent, hire purchase, or purchase by way
of credit sale or periodical payment;
(k) involves, or is likely to involve, obligations or liabilities
which, by reason of their nature or magnitude, ought reasonably
to be made known to an intending purchaser of the Shares.
5.17 Defaults under agreements by the Company
5.17.1 The Company is not nor will it, due to the lapse of time, become:
(a) in default under an agreement or arrangement to which it is a
party, or in respect of another obligation or restriction by
which it is bound;
(b) in default under an obligation existing by reason of membership
of an association or body;
(c) liable in respect of a representation or warranty (whether
express or implied), or a matter giving rise to a duty of care,
on its part.
5.17.2 No threat or claim of default under an agreement, obligation or
arrangement has been made, and is outstanding, against the Company;
and the Vendor has no knowledge, information or belief of anything
whereby an obligation, right, benefit or entitlement may be
prematurely terminated or rescinded by any other party, or by which
the terms may be worsened.
5.18 Other party's defaults
The Vendor has no knowledge, information or belief of any party to an
agreement or arrangement with, or under an obligation to, the Company
being in default under it, any such default being material in the
context of the Company's financial or trading position; and the Vendor
has no knowledge, information or belief of anything which is likely to
give rise to such a default.
5.19 Outstanding offers
No offer, tender or the like is outstanding which may be converted
into an obligation of the Company by acceptance, or other act of,
another person other than offers, tenders or the like made by or to
the Company in the ordinary course of business.
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5.20 Sales from or to one party
Not more than 25 per cent of the aggregate amount of all the sales of
the Company are obtained, or made, to the same client and no material
client is or is likely to be in jeopardy.
5.21 Guarantees and indemnities
No guarantee, or agreement for indemnity or for sureryship given by
the Company or for its accommodation is outstanding.
5.22 Insider contracts
5.22.1 No agreement or arrangement to which the Company is a party and which
the Vendor, or an Associate of the Vendor, is or has been interested,
whether directly or indirectly, is outstanding or existed during the
past three years.
5.22.2 The Company is not a party to, and its profits or financial position
during the past three years have not been affected by, an agreement or
arrangement which was or is not at arm's length.
5.23 Management reports
There have been no reports, concerning the Company by financial or
management consultants during the past three years.
6 Employment
6.1 Employees and terms of employment
6.1.1 Complete and accurate particulars of the identities, dates of
commencement of employment, or appointment to office, and terms of
employment of all the Employees and officers of the Company, including
profit sharing, commission or discretionary bonus arrangements, are
contained in the Disclosure Letter.
6.2 Bonus schemes
6.2.1 There are no schemes in operation entitling an Employee to a
commission or remuneration calculated by reference to the whole or
part of the turnover, profits or sales of the Company.
6.2.2 The Company has not registered a profit-related pay scheme under the
provisions of ICTA Part V Chapter III.
6.3 Changes in remuneration
6.3.1 Since the Last Accounts Date or (where employment or holding of office
commenced after the beginning of the period) since the commencing date
of the
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employment or holding of office:
(a) no change has been made in the rate of remuneration, emoluments
or pension benefits, of an officer, ex-officer or senior
executive of the Company (a senior executive being a person in
receipt of remuneration in excess of (pound)12,000 per annum);
(b) no change has been made in any other terms of employment of an
officer or senior executive.
6.3.2 The Company is not obliged or accustomed to pay anything other than in
respect of remuneration or pension benefits, to or for the benefit of
an officer of the Company or Employee, or their Associates.
6.3.3 No negotiations for an increase in the remuneration or benefits of an
officer of the Company or Employee are current or likely to take place
within six months after Completion.
6.4 Termination of contracts of employment
6.4.1 All contracts of service to which the Company is a party are
determinable at any time on three months' notice or less without
compensation (other than compensation in accordance with the
Employment Protection (Consolidation) Act 1978).
6.4.2 No executive of the Company, who is in receipt of remuneration in
excess of (pound)15,000 per annum, and no officer of the Company has
given or received notice terminating his employment, except as
expressly contemplated in this agreement, or will be entitled to give
notice as a direct result of the provisions of this agreement
6.5 Redundancies
No Employee will become redundant and be entitled to a redundancy
payment as a direct result of the provisions of this agreement.
6.6 Pensions
6.6.1 Save as disclosed by the Vendor or the Vendor's Solicitors prior to
Completion and except for the Vendor's Schemes there are no
agreements, arrangements, customs or practice (whether legally
enforceable or not) in operation for the provision of, or payment or
contribution towards, any pensions, allowances, lump sums or other
like benefits on, or after, retirement or death or during
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periods of sickness or disablement for the benefit of any employee or
his dependents, nor has any proposal been announced or promise made to
establish any such agreement, arrangement or practice.
6.6.2 All particulars of the Vendor's Schemes reasonably required to permit
the Purchaser to form a true and fair view of the Vendor's Schemes,
the benefits provided or to be provided (including contingent
benefits) under the Vendor's Schemes, the contributions required from
the Company and the Employees and the membership of the Vendor's
Schemes have been disclosed to the Purchaser or the Purchaser's
Solicitors prior to Completion.
6.6.3 All material information disclosed to the Purchaser or to its advisers
by the Vendor or its advisers relating to the Vendor's Schemes was
when provided and now remains complete and accurate in all material
respects and is not misleading whether because of any omission,
ambiguity or for any other reason.
6.6.4 There are no outstanding contributions due to the Vendor's Schemes
from the Company or the Employee.
7 ASSETS
7.1 Ownership of assets
7.1.1 The Company owned at the Last Accounts Date, and had good and
marketable title to, all the assets included in the Last Accounts and
(except for current assets subsequently sold or realised in the
ordinary course of business) still own and have good and marketable
title to them (excluding the Properties) and to all assets acquired
since the Last Accounts Date.
7.2 Assets sufficient for the business
The assets owned by the Company, together with assets held under the
hire purchase, leasing or rental agreements listed in the Disclosure
Letter, comprise all assets necessary for the continuation of its
business as now carried on.
7.3 Insurance
7.3.1 All the assets and undertakings of the Company of an insurable nature
(excluding the Properties), are, and have at all material times been,
insured in amounts representing their full replacement or
reinstatement value against fire and other risks normally insured
against by persons carrying on the same business as that carried on by
it.
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7.3.2 The Company is, and has at all material times been, adequately covered
against accident, damage, injury, third party loss (including product
liability), loss of profits and other risks normally insured against
by persons carrying on the same kind of business.
7.3.3 All insurance is in full force, and nothing has been done or omitted
to be done which could make any policy of insurance void or voidable,
or which is likely to result in an increase in premium.
7.3.4 None of the policies is subject to any special or unusual terms or
restrictions or to the payment of any premium in excess of the normal
rate.
7.3.5 No claim is outstanding, or may be made, under any of the policies and
no circumstances exist which are likely to give rise to a claim.
7.4 Leased assets
No circumstance has arisen or is likely to arise in relation to an
asset held by the Company under a lease or similar agreement as a
result of which the rental payable has been, or is likely to be,
increased and, in particular, all the assets have at all relevant
times been used tor a qualifying purpose within the meaning of CAA
s39.
7.5 Vehicles and other equipment in working order
7.5.1 The vehicles and other equipment used in connection with the business
of the Company:
(a) are in a good state of repair and condition and in satisfactory
working order and have been regularly and properly maintained;
(b) are not in excess of requirements:
(c) are in its possession and control, and are its absolute property,
except for the items which are the subject of the hire purchase,
leasing or rental agreements listed in the Disclosure Letter, or
in respect of which the outstanding payments do not exceed
(pound)1,000;
(d) are not expected to require replacements or additions at a cost
in excess of (pound)10,000 within the next six months;
(e) are all capable, and (subject to normal wear and tear) will
remain capable, throughout the period of time during which they
are each written down to a nil value in the accounts of the
Company (in
55
<PAGE>
accordance with the accounting principles disclosed in the Last
Accounts) of doing the work for which they were designed or purchased.
7.5.2 Maintenance contracts are in full force in respect of all assets of
the Company which it is normal or prudent to have maintained by
independent or specialist contractors, and in respect of all assets
which the Company is obliged to maintain or repair under a leasing or
similar agreement; and all those assets have been regularly maintained
to a good technical standard, and in accordance with safety
regulations usually observed in relation to assets of that
description, and in accordance with the terms and conditions of any
applicable leasing or similar agreement
7.6 Trade secrets and intellectual property rights
7.6.1 The Company has not (otherwise than in the ordinary and normal course
of business) disclosed, or permitted to be disclosed, or undertaken or
arranged to disclose, to a person other than the Purchaser any of its
know-how, technical information, trade secrets, confidential
information, price lists or lists of clients or suppliers.
7.6.2 The Company is not a party to a secrecy agreement or agreement which
may restrict the use or disclosure of information.
7.6.3 The Company does not own and is not the registered proprietor of any
trade or service mark, patent, registered design, design right,
copyright or other similar intellectual, industrial or commercial
right.
8 PROPERTIES
8.1 Title
8.1.1 The Properties comprise all the properties owned, occupied or
otherwise used by the Company in connection with its business.
8.1.2 The Property first described in Schedule 3 (for the purposes of this
paragraph 8, "First Property") is occupied or otherwise used by the
Company in connection with its business is occupied or is used by
right of ownership) or under lease or licence, the terms of which
permit the occupation or use.
8.1.3 The Company is the owner of the First Property with full title
guarantee.
8.1.4 The Company has an informal licence to occupy the Property secondly
56
<PAGE>
described in Schedule 3 (for the purposes of this paragraph 8, "Second
Property") such licence capable of being determined by the licensor or
the landlord of the Properties at any time.
8.1.5 The information contained in Schedule 4 as to the tenure of each of
the Properties, the principal terms of the leases or licences held by
the Company, and the principal terms of the tenancies and licences
subject to and with the benefit of which the Properties are held is
complete and accurate.
8.1.6 The Company has a good and marketable title to each of the Properties.
8.2 Encumbrances
8.2.1 The Properties are free from any mortgage, debenture, charge,
rent-charge, lien or other encumbrance securing the repayment of
monies or other obligation or liability of the Company, or another
party.
8.2.2 Save tor tenants' covenants in leases or licences of the Properties
demised or licensed to the Company, the Properties are not subject to
outgoings, other than business rates, water rates, insurance premiums,
rent and service charges.
8.2.3 The Properties are not subject to options, rights of pre-emption or
rights of first refusal.
8.3 Planning matters
8.3.1 Since 28 March 1990 the First Property has been used by the Company
for office purposes. The Vendor has no knowledge that the Company
having received any written notification from Elmbridge Borough
Council that the First Property may not be used as offices on the
grounds that such user does not enjoy a valid planning permission.
8.3.2 The Company has not paid value added tax on the rent payable to the
Landlord in respect of the First Property and has not paid value added
tax on the licence fee payable for the Second Property.
8.3.3 The Company has not received any written notification from the
Landlord that the Landlord has exercised its option to charge value
added tax on the rent payable under the lease of the First Property.
57
<PAGE>
8.4 Statutory obligations
8.4.1 The Company has complied and is complying with applicable statutory
and by-law requirements with respect to the Properties.
8.4.2 There is no unperformed obligation with respect to the Properties
necessary to comply with the requirements (whether formal or informal)
of a competent authority exercising statutory or delegated powers.
8.4.3 No licences are required, whether under the Licensing Act 1988 or
otherwise, in relation to the Properties.
8.5 Adverse orders
So far as the Vendor is aware without having made any searches or
enquiries:
8.5.1 There are no compulsory purchase notices, orders or resolutions
affecting the Properties, and there are no circumstances likely to
lead to any being made.
8.5.2 There are no closing, demolition or clearance orders, enforcement
notices or stop notices affecting the Properties, and there are no
circumstances likely to lead to any being made.
8.6 Condition of the Properties
8.6.1 The Vendor has not been served with notice that there are disputes
with any neighbouring owners with respect to boundary walls and
fences, or with respect to easements, right or means of access to the
Properties.
8.6.2 Each of the Properties enjoys the main services of water, drainage and
electricity.
8.7 Leasehold properties
8.7.1 The Company has paid the rent and observed and perfomed the covenants
on the part of the tenant and the conditions contained in the lease
under which the First Property is held, and the last demand for rent
(or receipt, if issued) was unqualified, and such lease is in full
force.
8.7.2 The licences, consents and approvals required from the Landlord under
the lease of the First Property has been obtained, and the covenants
on the part of the tenant contained in the licences, consents and
approvals have been duly performed.
8.7.3 There are no rent reviews in progress under the lease of the First
Property held by the Company.
58
<PAGE>
8.7.4 No obligation necessary to comply with a notice given by or other
requirement of the landlord under a lease of any of the Properties is
outstanding or unperformed.
8.7.5 There is no obligation to reinstate any of the Properties by removing
or dismantling an alteration made to it by the Company or a
predecessor in title.
59
<PAGE>
SCHEDULE 3
Properties
1 Premises on the Mezzanine Floor, Hurst House, 157-169 (odd numbers)
Walton Road, East Molesey, Surrey as the same are more particularly
described in a lease dated 30 December 1982 between the Landlord (1)
and Unicliffe Limited (2) and Pfizer Limited (3).
2 Office space supplemental to the above occupied pursuant to a
purported "informal arrangement" set out in a letter from Garners to
the Vendor dated 8 November 1995
60
<PAGE>
SCHEDULE 4
List of Emplovees
<TABLE>
<CAPTION>
Name Commencement Date Annual Salary Notice Period
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gloria Sargent 01.07.79 (pound)70,000.00
Valerie Figueira 01.05.86 (pound)12,825.00 One month
Karen Ridgewell 20.08.84 (pound)29,775.00 One month
Sarah Peacock 09.10.89 (pound)15,100.00 One month
Jeanette Steeden 05.06.89 (pound)24,000.00 One month
Lyn Fassom 30.03.87 (pound)28,500.00 One month
Samantha Coop 10.02.92 (pound)12,650.00 One month
Sylvia Rudley 16.07.90 (pound)14,000.00 One month
Kerry Sullivan 05.09.94 (pound) 7,800.00 One week
Sylvia Giangolini 22.05.95 (pound)15,500.00 One month
Sam Kortenbout 15.06.95 (pound)10,750.00 One month
Lisa Smyth 01.08.95 (pound)14,220.00 One week
Susan Farquharson-Baines 21.12.90 (pound)15,100.00 One month
Luis Figueira 08.10.90 (pound) 2,550.00 One month
</TABLE>
61
<PAGE>
SCHEDULE 5
Earn out provisions
Part 1
1 The Purchaser's Undertakings
1.1 The Purchaser undertakes that it shall not and shall procure that its
Associates (other than Headcount) shall not undertake any operations
or activities which directly compete with the Company from the date of
Completion until the expiry of the Relevant Period.
1.2 The Purchaser undertakes that it shall not and shall procure that its
Associates (including Headcount and the Company) shall not do or omit
to do any act (of whatsoever nature) the doing or omission of which is
calculated or is likely to unreasonably interfere with the Vendor's
ability to efficiently carry out ESP Projects and Mixed Projects
and/or all or any administrative work relating to ESP Projects and/or
Mixed Projects
1.3 Notwithstanding anything in the Executive Service Contract the
Purchaser shall procure that the Company shall delegate day-to-day
operational control and responsibility to the Vendor (subject to the
overall control by the board of directors of the Company) over:
1.3.1 subject to paragraph 2.2 below, the nomination and the employment or
engagement by the Company of the ESP Team;
1.3.2 the supervision, training, suspension and/or dismissal of any and all
members of the ESP Team;
1.3.3 the nomination and the employment or engagement of field staff to work
on ESP Projects and Mixed Projects carried out or to be carried out by
the Company;
1.3.4 the management, supervision, training, suspension and/or dismissal of
any of the field staff referred to in paragraph 1.3.3 above;
1.3.5 subject to paragraph 2.3 below, the setting up or changing of
administrative systems to record ESP Costs and ESP Revenue and the
compiling of the ESP Accounts;
62
<PAGE>
1.3.6 subject to paragraph 2.4 below, the invoicing of all work relating to
ESP Projects and Mixed Projects carried out or to be carried out by
the Company.
Part 2
2 The Vendor's Undertakings
2.1 The Vendor shall exercise all or any of the powers delegated to her
pursuant to paragraph 1 above in a reasonable and proper manner and
with a view to ensuring that maximum profitability is achieved during
the Relevant Period and thereafter.
2.2 The Vendor shall consult with the Managing Director or Les Milton
before employing or engaging any person on behalf of the Company
(other than field staff) and will not employ or engage any such person
if the Managing Director or Les Milton has served written notice on
the Vendor within fourteen days of being informed in writing by the
Vendor of a proposed recruitment objecting to their employment or
engagement and setting out his reasons for so objecting.
2.3 The Vendor shall consult with the Managing Director or Les Milton
before changing any of the administrative systems set up by the Vendor
to record ESP Costs and ESP Revenue and will not implement changes to
those systems if the Managing Director or Les Milton has served
written notice on the Vendor within fourteen days of written
notification by the Vendor of a proposed change to those systems
objecting to those changes and setting out his reasons for so
objecting.
2.4 The Vendor shall forward to the Managing Director or Les Milton copies
of all invoices of the Company and the Managing Director or Les Milton
shall have the right to review and upon written notice served on the
Vendor to object to their invoicing.
2.5 The Vendor shall allow the Purchaser or the Company or their
accountants to inspect the ESP Accounts at any time.
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<PAGE>
SCHEDULE 6
Limitations on the Vendor's liability
Definitions used in this Schedule
"Event"
the same meaning as in the Deed of Indemnity
"Relevant Claim"
any claims (whether in contract, tort or otherwise) by the Purchaser in respect
of breach of any of the Warranties or, if expressly referred to in this
Schedule, under the Deed of Indemnity
"Relief"
the same meaning as in the Deed of Indemnity
"Sum Recovered"
an amount equal to the aggregate of the amount recovered from a third party plus
any repayment supplement actually received by the Company in respect of the
amount recovered from that third party under section 825 ICTA plus any interest
in respect of the amount recovered from that third party less any Taxation
computed by reference to the amount recovered from that third party payable by
the Purchaser or any Associate of the Purchaser and less all costs and expenses
reasonably incurred by the Purchaser or any Associate of the Purcllaser in
recovering the amount from the third party
"Tax Warranties"
the Warranties relating to Taxation, namely paragraphs 3.1. 1 to 3.28 inclusive
of Schedule 2
1 The Vendor shall have no liability whatsoever in respect of any
individual Relevant Claim (including claims under the Deed of
Indemnity) unless the amount that would be recoverable from the Vendor
(but for this paragraph) in respect of that Relevant Claim exceeds
(pound)1,000.00 in respect of a single item and the amount of that
Relevant Claim when aggregated with the amount of the liability for
such other Relevant Claim(s) then or previously made against the
Vendor under this Agreement or the
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<PAGE>
Deed of Indemnity (if any) exceeds (pound)5,000.00 in which event the
Vendor will be liable for all of such Relevant Claim or Relevant
Claims.
2 The aggregate liability of the Vendor in respect of all Relevant
Claims including claims under the Deed of Indemnity shall not exceed
an amount equal to the Consideration actually received by the Vendor.
3 The Vendor shall have no liability for any Relevant Claim unless
notice in writing of the Relevant Claim (stating such detail of which
the Purchaser is or ought reasonably to be aware which is reasonably
sufficient to establish the nature of the Relevant Claim and, so far
as practicable, the amount claimed) has been given to the Vendor:
3.1 on or prior to the earlier of the second anniversary of Completion or
completion of the audit for the year ended 30 June 1997 in respect of
any breach of the Warranties (other than the Tax Warranties); and
3.2 on or prior to the sixth anniversary of Completion in respect of any
breach of the Tax Warranties or the Deed of Indemnity.
4 Any Relevant Claim which has been made against the Vendor and which
has not been previously satisfied, settled or withdrawn shall be
deemed to have been withdrawn and shall become fully barred and
unenforceable on the expiry of the period of twelve months commencing
on the date on which notice of the Relevant Claim was given to the
Vendor in accordance with paragraph 3, unless proceedings in respect
of the Relevant Claim shall have been issued and served on the Vendor.
5 The Vendor shall have no liability whatsoever in respect of any
Relevant Claim (other than a claim under the Tax Warranties);
5.1 to the extent that the matter giving rise to the Relevant Claim would
not have arisen but for:
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<PAGE>
5.1.1 any Event occurring after Completion by or involving the Purchaser or
any Associate of the Purchaser or any director, employee or duly
authorised agent of the Purchaser or any Associate of the Purchaser
other than an Event occurring in the ordinary course of business or
pursuant to a legally binding commitment binding on the Company and in
force at Completion and of which any of them was aware or ought to
have been aware would or could give rise to a Relevant Claim;
5.1.2 the passing of, or any change in, after the date of this agreement any
law, rule, regulation, interpretation of the law or administrative
practice of any government, governmental department, agency or
regulatory body or any increase in the rates of Taxation or any
imposition of Taxation, in any such case made or implemented after the
date of this agreement and with retrospective effect;
5.2 to the extent that the matter giving rise to the Relevant Claim arises
wholly or partially from any Event occurring before Completion at the
written request or written direction of, or with the written consent
of, the Purchaser or any Associate of the Purchaser or any director of
the Purchaser or any Associate of the Purchaser (other than the
Vendor);
5.3 to the extent that the matter giving rise to the Relevant Claim
relates to an amount for which the Company or any Associate of the
Company has a right to make recovery or is entitled to claim
indemnity, from any person other than the Vendor, whether under any
provision of applicable law, insurance policy or otherwise howsoever
and the amount is recovered or received by the Company or the relevant
Associate of the Company;
5.4 if the Purchaser or any Associate of the Purchaser tails in any
material respect to act in accordance with paragraph 8 in connection
with the matter giving rise to the Relevant Claim;
5.5 to the extent of the amount by which any liability (including any
provision against
66
<PAGE>
liabilities) included in the Last Accounts is overstated;
5.6 to the extent that the Relevant Claim is a claim under the Tax
Warranties, which if made under the Deed of Indemnity would be
excluded by virtue of any of any of the circumstances referred to in
clause 3 of the Deed of Indemnity.
6 The Purchaser shall as soon as reasonably practicable notify the
Vendor in writing of any matter giving rise to a Relevant Claim which
is or might be covered by paragraph 5.3 and shall, if reasonably
required by the Vendor in writing within 21 days following service of
such notice, use all reasonable endeavours to enforce its rights to
recover any amounts referred to in paragraph 5.3 or procure that the
Company or the relevant Associate of the Company (as appropriate) uses
all reasonable endeavours to enforce its rights to recover any amounts
in paragraph 5.3 (as appropriate)
PROVIDED THAT in the event that the full amount of the claim including
all costs liabilities losses and expenses incurred in enforcing its
rights against the third party is not recovered from the relevant
third party the Vendor shall indemnify the Company and/or any
Associate of the Company against any losses, liabilities, expenses and
costs reasonably incurred by the Company and/or any Associate of the
Company (as appropriate) in enforcing such rights.
7 The Purchaser shall not be entitled to recover damages in respect of
any one matter giving rise to a Relevant Claim (including claims under
the Deed of Indemnity) more than once to the extent and in respect of
the same damage suffered.
8 If the Purchaser or any Associate of the Purchaser becomes aware of
any matter which on the balance of probabilities will give rise to a
Relevant Claim (other than a claim under the Tax Warranties), the
following provisions shall apply:
8.1 the Purchaser shall as soon as reasonably practicable give notice to
the Vendor of the matter and shall consult with the Vendor with
respect to the matter;
8.2 the Purchaser shall provide, and shall procure that each relevant
Associate of the
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<PAGE>
Purchaser will provide, to the Vendor and the Vendor's professional
advisers reasonable access to premises and personnel and to any
relevant assets, documents and records within the power, possession or
control of the Purchaser or any Associate of the Purchaser for the
purpose of investigating the matter and enabling the Vendor to take
such action as is referred to in paragraph 8.4.1(a);
8.3 the Vendor, at her cost shall be entitled to take copies of any of the
documents or records, and photograph any premises or assets, referred
to in paragraph 8.2;
8.4 the Purchaser shall and shall procure that each Associate of the
Purchaser will:
8.4.1 take such action and institute such proceedings, and give such
information and assistance, as the Vendor may reasonably request to:
(a) dispute, resist, appeal, compromise, defend, remedy or mitigate
the matter; or
(b) enforce against any person (other than the Vendor) the rights of
the Purchaser or any Associate of the Purchaser in relation to the
matter; and
8.4.2 in connection with any proceedings related to the matter (other than
against the Vendor) use professional advisors nominated by the Vendor
and approved by the Purchaser and, it the Vendor so requests within 21
days of service of the notice referred to in paragraph 8 1 above,
allow the Vendor the exclusive conduct of the proceedings;
AND in each case on the basis that the Vendor shall fully indemnify
the Purchaser and each Associate of the Purchaser for all liabilities,
losses, costs and expenses reasonably incurred as a result of any
reasonable request or nomination by the Vendor;
AND the Vendor shall not take any action which the Purchaser or any
Associate of the Purchaser reasonably considers would prejudice any of
its rights or interests and which the Purchaser shall notify to the
Vendor in writing;
68
<PAGE>
8.5 the Purchaser shall not, and shall procure that no Associate of the
Purchaser will, admit liability in respect of or compromise or settle
the matter without the prior written consent of the Vendor, such
consent not to be unreasonably withheld or delayed.
9 In assessing any damages or other amounts recoverable for any Relevant
Claim there shall be taken into account any corresponding savings by,
or net benefit to, the Purchaser or any Associate of the Purchaser and
in particular, but without prejudice to the generality of the
foregoing, the provisions of clauses 8 ("Provisions") and 9
("Reliefs") of the Deed of Indemnity shall apply to any claim under
the Tax Warranties.
10 If the Vendor pays to the Purchaser or any Associate of the Purchaser
an amount in respect of a Relevant Claim and the Purchaser or any
Associate of the Purchaser subsequently recovers from a third party an
amount which is referrable to the matter giving rise to the Relevant
Claim then:
10.1 if the amount paid by the Vendor in respect of the Relevant Claim is
more than the Sum Recovered, the Purchaser shall immediately pay to
the Vendor the Sum Recovered; and
10.2 if the amount paid by the Vendor in respect of the Relevant Claim is
less than or equal to the Sum Recovered, the Purchaser shall
immediately pay to the Vendor an amount equal to the net amount paid
by the Vendor.
11 Nothing in this Schedule 7 shall in any way restrict or limit the
general obligation at law of the Purchaser to mitigate any loss or
damage which it may suffer in consequence of any matter giving rise to
any Relevant Claim.
12 If at any time after the date of this Agreement the Vendor wishes to
take out insurance against its liabilities in respect of Relevant
Claims, the Purchaser shall provide (at the cost of the Vendor) such
information as any prospective insurer may
69
<PAGE>
reasonably require before effecting the insurance.
13 The Purchaser shall and shall procure that the Company will preserve
for the relevant limitation period as referred to in paragraph 3 above
all documents, records, correspondence, accounts and other information
whatsoever relevant to a matter which on the balance of probabilities
will give rise to a Relevant Claim.
14 If the Purchaser or any Associate of the Purchaser becomes aware of
any matter which might give rise to a claim under the Tax Warranties
then the provisions of clause 10 ("Conduct of Claims") of the Deed of
Indemnity shall apply thereto.
15 Any payment made by the Vendor in respect of a Relevant Claim shall be
treated by the Vendor and the Purchaser as a reduction in the
Consideration to the extent of such payment.
16 The Purchaser shall have no right to rescind or terminate this
agreement as a result of any Relevant Claim or any matter giving rise
to a Relevant Claim.
17 The Purchaser warrants and represents to the Vendor that it has not
already formulated and does not presently contemplate making any
Relevant Claim against the Vendor.
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<PAGE>
SIGNED and DELIVERED )
as a DEED on the date of )
this agreement by ) /s/ G L Sargent
GLORIA OLIVE SARGENT )
in the presence of: )
Witness signature /s/ M. J. Phillips
..................................................
Witness name M. J. Phillips
..................................................
Witness address 115 Acre Road
..................................................
Kingston upon Thames
..................................................
Surrey
..................................................
Witness occupation Solicitor
..................................................
DELIVERED as a DEED by )
SITEINPUT LIMITED )
/s/ MG
Director /s/ L. Milton
Secretary /s/ M. Garnham
71
<PAGE>
DATED 29 NOVEMBER 1996
(1) GLORIA OLIVE SARGENT
- and -
(2) SITEINPUT LIMITED
----------------------------------------
SUPPLEMENTAL AGREEMENT
relating to the sale and purchase
of the share capital of
Effective Sales Personnel Limited
----------------------------------------
R A K I S O N S
S O L I C I T O R S
27 Chancery Lane, London WC2A 1NF
TELEPHONE: 0171-404 521 2
FAX: 0171-831 1926
REF: JMP 11208 suppagmt.01
Last Amended On: 12 November 1996
Draft Number: 03
<PAGE>
DATED: 29 NOVEMBER 1996
PARTIES:
(1) "Vendor": Gloria Olive Sargent of Twyford House, Winterbourne Grove,
Weybridge, Surrey KT13 OPP;
(2) "Purchaser": Siteinput Limited (registered no. 3113109) whose
registered office is at 1 Thames Street, Windsor, Berkshire SL4 1PL.
RECITAL:
This agreement is supplemental to an agreement for the sale and
purchase of the share capital of Effective Sales Personnel Limited
dated 8 November 1995 made between (1) the Vendor and (2) the
Purchaser ("Share Purchase Agreement") and the Executive Service
Contract (as defined in the Share Purchase Agreement).
OPERATIVE PROVISIONS:
1 Defined terms
1.1 Words and expressions defined in the Share Purchase Agreement have the
same meaning in this agreement except where the context otherwise
requires.
1.2 References to clauses or paragraphs of schedules are to clauses of or
paragraphs of schedules to the Share Purchase Agreement and, where
appropriate, the Executive Service Contract.
2 Amendments to definitions
2.1 The following definitions shall be amended as set out below:
2.1.1 in the definitions "1997 ESP Revenue" and "1997 Mixed
Revenue" the words "for the year ending on 30 June 1997" to
the end of each definition shall be deleted and replaced by
"for the sixteen months from 1 August 1996
1
<PAGE>
to 30 November 1997 (which includes invoices issued by the
Company or Headcount after 30 November 1997 and prior to 31
December 1997 but attributable to work completed and, in the
ordinary course of business, would or should have been
invoiced in that period but excludes invoices issued before
30 November 1997 but attributable to work carried out after
that date).";
2.1.2 in the definitions "1997 ESP Costs" and "1997 Mixed
Costs" the words "for the year ending 30 June 1997" shall be
deleted and replaced by "for the sixteen month period from 1
August 1996 ending 30 November 1997.";
2.1.3 the definition "1997 ESP Staff Budget" shall be deleted and
replaced by:
""1997 ESP Staff Budget"
------------------------
subject to the control of the board of directors of the
Company, a notional budget of (pound)336,000 for the sixteen
month period from 1 August 1996 ending 30 November 1997 to
cover the Staff Costs.";
2.1.4 the definition "1997 Gross Profit" shall be amended so that
the product of the formula shall be subject to a reduction
on a 12/16ths basis;
2.1.5 the definition "Relevant Period" shall be deleted and
replaced by:
""Relevant Period"
------------------
the financial year ending on 30 June 1996 together with the
period from 1 July 1996 to 30 November 1997."
3 Deferred Consideration
3.1 The reference in clauses 5.2 and 5.6 to "30 June 1997" shall be
deleted and replaced by "30 November 1997".
3.2 The reference in clause 5.3 to "31 October 1997" shall be deleted and
replaced by "31 March 1998".
2
<PAGE>
3.3 The formula contained in clause 5.6 shall be deleted and replaced by:
"100 - (25 x d)/456 x DC
------------------------
100"
4 Executive Service Contract
The reference in clause 2.2 of the Executive Service Contract to "20
months until 30 June 1997" shall be deleted and replaced by "25 months
until 30 November 1997".
5 General
5.1 Subject to the amendments set out in this agreement, the provisions of
the Share Purchase Agreement and the Executive Service Contract shall
continue to be and shall remain in full force and effect.
5.2 This deed shall be governed by and construed in accordance with the
laws of England.
EXECUTED and delivered as a deed on the date of this agreement.
SIGNED and DELIVERED as a Deed )
by GLORIA OLIVE SARGENT ) /s/ G.O. Sargent
in the presence of: )
Witness signature /s/ T.C. Harding
.............................................
Witness name T.C. HARDING
.............................................
Witness address TWYFORD HOUSE
.............................................
WINTERBOURNE GROVE
.............................................
WEYBRIDGE, SY KT130PP
.............................................
Witness occupation PUBLISHER
.............................................
EXECUTED and DELIVERED as a )
DEED by SITEINPUT LIMITED )
Director /s/ L. Milton
Director/Secretary /s/ AJ Turnbull
3
<PAGE>
DATED 26 November 1996
(1) LEONARD MORETON and LIZABETH JENNY MORETON
- and -
(2) LEONARD MORETON & CO
(3) SITEINPUT LIMITED
--------------------------------------------
AGREEMENT
for the sale and purchase of shares in
PDM Communications Limited
--------------------------------------------
R A K I S O N S
S O L I C I T O R S
27 Chancery Lane, London WC2A 1NF
TELEPHONE: 0171-404 5212
FAX: 0171-831 1926
REF: JMP\11714\moreton2.sap
<PAGE>
DATED: 26 November 1996
PARTIES:
1 "Vendors": the persons who names and addresses are set out in column 1
of the Schedule
2 "LM": Leonard Moreton & Co, a sole trader of South Croft, Copsem Lane,
Oxshott, Surrey, KT22 0NT
3 "Milton": Siteinput Limited (registered in England under company
number 3113109) whose registered office is at 1 Thames Street,
Windsor, Berkshire SL4 1PL
OPERATIVE PROVISIONS:
1 Definitions
1.1 In this agreement the following words and expressions have the
meanings stated:
"agreed form"
a form agreed between the parties, a copy of which has been initialled
for the purposes of identification by or on behalf of the parties;
"Company"
PDM Communications Limited (registered in England under number
1324588);
"Completion"
completion of the purchase of the Shares in accordance with clause 4;
"Guarantee"
the guarantee given by Mr Moreton to Midland Bank plc in respect of
the Company's indebtedness;
"Loan Account"
the loan account opened by the Company in the name of Mr Moreton on
which Mr Moreton owes to the Company (pound)14,616.58 as at the date
of this agreement;
"Shares"
27 ordinary shares of (pound)1 each in the Company;
1
<PAGE>
"Warranties"
the warranties and representations by the Vendors set out in clause 5.
1.2 Clause headings in this agreement are for ease of reference only and
do not affect the construction of any provision.
2 Agreement for sale
Subject to the terms and conditions of this agreement the Vendors
shall sell with full title guarantee and Milton shall purchase the
Shares, free from all liens, charges and encumbrances and with all
rights attaching to them, with effect from the date of this agreement.
3 Purchase consideration
The purchase consideration for the Shares shall be the aggregate sum
of (pound)12,600 (of which (pound)10,000 has been paid as a deposit in
advance of this agreement) and the balance of which shall be satisfied
on Completion in the amounts set opposite the respective names of the
Vendors in columns 3 and 4 of the Schedule.
4 Completion
4.1 Completion shall take place at the offices of Milton on the execution
of this agreement.
4.2 The Vendors shall deliver to Milton:
4.2.1 duly completed and signed transfers in favour of Milton, or as it may
direct, of the Shares;
4.2.2 service and employment agreements in the agreed forms duly executed by
each of them;
4.2.3 an invoice addressed to the Company from LM in the sum
of (pound)12,000 (excluding VAT);
4.2.4 a resignation as director and the secretary of the Company from Mrs
Moreton with a written acknowledgment from her, executed as a deed in
such form as Milton requires, that she has no claim against the
Company on any grounds whatsoever.
4.3 The parties to this agreement shall take or cause to be taken the
following steps at a board meeting of the Company:
2
<PAGE>
4.3.1 the approval of the transfers (subject to stamping) referred to in
clauses 4.2.1;
4.3.2 the submission and acceptance of the resignation referred to in clause
4.2.4;
4.3.3 the appointment of William Leslie Milton and Andrew John Turnbull as
additional directors of the Company;
4.3.4 the appointment of Andrew John Turnbull as secretary of the Company;
4.3.5 the changing of the Company's registered office to 1 Thames Street,
Windsor, Berkshire SL4 1PL;
4.3.6 the convening of an extraordinary general meeting of the Company on
short notice to adopt new articles of association of the Company in
the agreed form.
4.4 Upon completion of the matters referred to in clauses 4.2 and 4.3
Milton shall or shall procure:
4.4.1 the partial satisfaction of the Loan Account by the sum shown in
column 4 of the Schedule;
4.4.2 the delivery to each of the Vendors of their respective service
agreements in the agreed forms duly executed by the Company;
4.4.3 the payment of the invoice referred to in clause 4.2.3;
4.5 The Purchaser shall use all reasonable endeavours to procure the
release of the Guarantee as soon as practicable following Completion.
5 Warranties and indemnity by the Vendors
5.1 The Vendors jointly and severally warrant to Milton that the
warranties set out below are true and accurate in all material
respects and are not misleading at the date of this agreement:
5.1.1 each of the Vendors has full power and authority to transfer the
Shares with full title guarantee to Milton free from any lien, charge
or encumbrance whatsoever;
5.1.2 the Vendors have full power to enter into and perform this agreement
and this agreement constitutes binding obligations on each of them in
accordance with the terms of this agreement;
5.1.3 there are no agreements or arrangements in force, other than this
agreement, which grant to any person other than Milton the right to
call for the issue, allotment or transfer of any share or loan capital
of the Company;
3
<PAGE>
5.1.4 Jerry Kinally of Brooklands, Baynards Park, Cranley, Surrey, GU6 8EQ
has no claim whatsoever against the Company.
5.2 Mr Moreton shall indemnify and keep indemnified on a continuing basis
Milton and the Company from and against all losses, costs, damages,
liabilities, fines, judgments, expenses, proceedings and demands which
Milton and/or the Company may suffer, incur or pay as a result of any
claim (including, but not limited to, claims for redundancy payments,
protective awards, or compensation for unfair dismissal but excluding
damages for wrongful dismissal) by Mrs Moreton as an employee of the
Company.
6 Limitation of Warranty liability
6.1 The provisions of this paragraph shall operate to limit the liability
of the Vendors under or in connection with the Warranties and
references to "such liabilities" shall be construed accordingly. The
parties agree as follows:
6.1.1 no such liabilities shall attach to the Vendors unless the aggregate
amount of such liabilities shall exceed the total sum of (pound)1,000
but if such liabilities shall exceed that sum the Vendors shall be
liable for the whole of such liabilities and not merely for the
excess;
6.1.2 the aggregate amount of such liabilities shall not exceed
(pound)24,600;
6.1.3 claims against the Vendors in relation to the Warranties shall be
wholly barred and unenforceable unless written particulars of such
claims (giving reasonable details of the specific matter or claim in
respect of which such claims are made so far as then known to Milton)
shall have been given to the Vendors prior to the first anniversary of
this agreement; and
6.1.4 if the Vendors make any payment by way of damages for breach of the
Warranties and within twelve months of the making of the relevant
payment the Company or Milton receives any benefit otherwise than from
the Vendors which would not have been received but for the
circumstances giving rise to the claim in respect of which the damages
payment was made, Milton shall, once it or the Company, as the case
may be, has received such benefit, forthwith repay to the Vendors an
amount equal to the lesser of (a) the amount of such benefit and (b)
the damages payment in question.
4
<PAGE>
7 No other representations
Milton admits that it has not entered into this agreement in reliance
upon any representation or promise other than those incorporated in
this agreement.
8 Loan facility to LM
Milton agrees to procure that the Company provides an interest free
loan of up to (pound)5,000 to LM for the purpose of payment of taxes
incurred by Mr Moreton subject to the production by him of such
evidence (as Milton may from time to time reasonably require) of a
demand or requirement for payment by LM of income tax, capital gains
tax or value added tax and provided that any loan shall be subject to
the provisions of the Companies Act 1985 and dependent on the relevant
circumstances may be reduced by the Company in its entire discretion
to such amount as is permissible to be loaned to a director
accordingly.
9 Put and call options
9.1 For the purposes of this clause the following words and expressions
shall have the meanings stated:
"Business Day"
a day on which banks in the City of London are open for business other
than a Saturday or Sunday;
"Gross Income"
Sales Revenues less Sales Costs;
"Option Period"
the period commencing on the date of this agreement and expiring at
close of business on the second anniversary of this agreement or, if
the latter is not a Business Day, close of business on the Business
Day immediately following such anniversary;
"PDM Shares"
28 ordinary shares of (pound)1 each in the Company;
5
<PAGE>
"Personnel Costs"
the aggregate cost to the Company of employing or engaging staff in
the operation of its business from the date of this agreement as shown
in the Company's management accounts;
"Prescribed Price"
(i) if the Milton Put Option is exercised, 18.5% of Gross Income; and
(ii) if the Milton Call Option is exercised, 25% of Gross Income;
"Sales Costs"
the aggregate expenditure of the Company excluding Personnel Costs and
overheads from the date of this agreement as shown in the Company's
management accounts;
"Sales Revenue"
the aggregate income of the Company from the date of this agreement as
shown in the Company's management accounts;
9.2 In consideration of the sum of (pound)1 (receipt of which Milton
acknowledges) Milton grants to Mr Moreton the right to require Milton
(or as it may direct) ("Moreton Put Option") to purchase all (but not
some only) of the PDM Shares.
9.3 In consideration of the sum of (pound)1 (receipt of which Mr Moreton
acknowledges) Mr Moreton grants to Milton the right for Milton (or as
it may direct) ("Milton Call Option") to purchase all (but not some
only) of the PDM Shares.
9.4 The Moreton Put Option and Milton Call Option are either or both known
as the "P/C Option".
9.5 The Moreton Put Option may be exercised at any time during the Option
Period provided that the Sales Revenue exceeds the aggregate of the
Sales Costs and the Personnel Costs at the date of the latest
published management accounts.
9.6 The Milton Call Option shall be exercisable at any time (and in the
case of clauses 9.6.2 and 9.6.3, prior to any of those events) if:
9.6.1 Mr Moreton ceases to be employed by the Company for whatever reason;
9.6.2 the sale or other disposal of the undertaking of the Company or Milton
or its holding company;
6
<PAGE>
9.6.3 the equity share capital of Milton or its holding company being
admitted to a listing or quotation on any stock exchange (including,
without, limitation, the Alternative Investment Market and NASDAQ).
9.7 The P/C Option shall be exercised by the delivery of a written notice
(in the case of the Milton Put Option) by Mr Moreton on Milton or (in
the case of the Milton Call Option) by Milton on Mr Moreton stating
that the relevant option is being exercised.
9.8 If the P/C Option is exercised, Milton and Mr Moreton shall determine
the Prescribed Price as soon as practicable. Completion of the sale
and purchase of the PDM Shares shall take place within three months of
the Prescribed Price having been determined when Mr Moreton shall
deliver to Milton a duly executed transfer of all of the PDM Shares in
favour of Milton (or as it may direct) and Milton shall pay to Mr
Moreton the Prescribed Price in full.
9.9 Mr Moreton and Milton shall do all such acts as are required by the
articles of association of the Company to ensure the registration of
the transfer of the PDM Shares and each of Mr Moreton and Milton
hereby authorises any director of the Company to do all such acts on
his behalf.
9.10 Mr Moreton shall not create or allow to be created over any of the PDM
Shares any lien, charge or encumbrance whatsoever so that any transfer
made by him pursuant to this clause 9 shall be made with full title
guarantee.
9.11 The Company shall prepare monthly management accounts in accordance
with standard accounting practice and such management accounts shall
be conclusive in determining Sales Revenue, Sales Costs and Personnel
Costs.
10 Confidentiality, non-competition and non-solicitation
10.1 To assure to Milton the full benefit of the business and goodwill of
the Company generated by the Vendors, the Vendors undertake by way of
further consideration for the obligations of Milton under this
agreement, as separate and independent agreements, that they will not:
10.1.1 disclose to any person, or use for any purpose, and shall use all
reasonable endeavours to prevent the publication or disclosure of,
information concerning the business, accounts or finances of the
Company or its clients or customers' transactions or affairs, of which
he has knowledge;
7
<PAGE>
10.1.2 for the later of six months from the date of this agreement and six
months after the termination of their respective employments with the
Company, either on their own account or for another person, directly
or indirectly solicit, interfere with or endeavour to entice away from
the Company a person who, to their knowledge, is, or has during the
previous two years been, a client, customer or employee of, or in the
habit of dealing with, the Company;
lO.1.3 for the later of six months from the date of this agreement and six
months after the termination of their respective employments with the
Company, either alone or jointly with, or as manager, agent for or
employee of, another person, directly or indirectly carry on or be
engaged, concerned or interested in the area of 75 miles radius of the
head office of the Company from time to time (a) in the business of
advertising, sales promotion and direct marketing; or (b) in any other
business similar to any business now carried on by the Company in
which he shall have been actively involved in the previous twelve
months.
10.2 The Vendors agree that the covenants and undertakings contained in
clause 10.1 are reasonable and are entered into for the purpose of
protecting the goodwill of the business of the Company and that
accordingly the benefit of the covenants and undertakings may be
assigned by Milton and its successors in title without the consent of
the Vendors.
10.3 Each covenant and/or undertaking contained in clause 10.1 shall be
construed as a separate covenant or undertaking. If one or more of the
covenants and/or undertakings is held to be against the public
interest or unlawful or in any way an unreasonable restraint of trade,
the remaining covenants and undertakings shall continue to bind the
Vendors.
10.4 If any covenant or undertaking contained in clause 10.1 were void but
would be valid if the period of application were reduced or if some
part of the covenant or undertaking were deleted, the covenant or
undertaking in question shall apply with such modification as is
necessary to make it valid.
8
<PAGE>
11 Communications
11.1 All communications between the parties with respect to this agreement
shall be delivered by hand or sent by post. The address for service of
each party shall be the address as stated in this agreement or such
address as the addressee may from time to time have notified in
writing for the purpose of this clause.
A notice shall be deemed to have been served:
l1.1.1 if personally delivered: at the time of delivery;
ll.1.2 if posted: at the expiration of 24 hours.
11.2 In proving service it shall be necessary only to prove that the
communication was contained in an envelope which was duly addressed
and posted in accordance with clause 11.1
12 General
12.1 All expenses incurred by or on behalf of the parties, including all
fees of representatives, solicitors and accountants employed by any of
them in connection with the negotiation, preparation or execution of
this agreement, shall be borne solely by the party who incurred the
liability and the Company shall have no liability in respect of them.
12.2 The construction, validity and performance of this agreement shall be
governed by the laws of England.
13 Announcements
No announcement shall be made in respect of the subject matter of this
agreement, except as specifically agreed between the parties, unless
an announcement is required by law.
14 Working capital
Milton undertakes with the Vendors to use its best endeavours to
assure that the Company is provided with at least (pound)60,000
working capital provided that this undertaking shall lapse in the
event of:
9
<PAGE>
l4.1 any distress, execution. sequestration, or other process being levied
or enforced upon or sued against the Company's property which is not
discharged within 10 days; or
14.2 the Company being unable to pay its debts in the normal course of
business; or
14.3 the Company ceasing or threatening to cease wholly or substantially to
carry on its business or the making of an order or the passing of a
resolution for its winding-up, being in any of these cases otherwise
than for the purpose of a reconstruction or amalgamation, without
insolvency; or
14.4 an encumbrancer taking possession of, or a receiver or trustee being
appointed over the whole or any part of the Company's undertaking,
property or other assets.
EXECUTED by the parties as a deed on the date of this agreement.
10
<PAGE>
SCHEDULE
Vendors names, address and shareholdings
Consideration in
Vendor's name and address Number of Cash Repayment of Loan
Shares Account
Leonard Moreton 14 (pound)6,533 Nil
("Mr Moreton")
South Croft Copsem Lane
Oxshott Surrey KT22 ONT
Lizabeth Jenny Moreton 13 (pound)3,700 (pound)2,367
("Mrs Moreton")
South Croft aforesaid
11
<PAGE>
SIGNED and DELIVERED )
by LEONARD MORETON in his )
personal capacity and on behalf of ) /s/ L. Moreton
LEONARD MORETON & CO )
as a deed in the presence of: )
Witness signs: /s/ M. Gracey
Print name: M. GRACEY
Address: 26 Daryngton Drive
Guildford
Surrey
GUI 2QD
Occupation: Marketing Consultant
SIGNED and DELIVERED )
by LIZABETH JENNY MORETON ) /s/ L.J. Moreton
as a deed in the presence of: )
Witness signs: /s/ M. Gracey
Print name: M. GRACEY
Address: 26 Daryngton Drive
Guildford
Surrey
GUI 2QD
Occupation: Marketing Consultant
12
<PAGE>
EXECUTED as a deed by )
SITEINPUT LIMITED )
Director /s/ L. Milton
Director Secrerary /s/ AJ Turnbull
13
<PAGE>
DATED 21 NOVEMBER 1996
(1) WILLIAM ANNANDALE
- and -
(2) SITEINPUT LIMITED
-----------------------------------------------
AGREEMENT
for the sale and purchase of shares in
PDM Communications Limited
-----------------------------------------------
R A K I S O N S
S O L I C I T O R S
27 Chancery Lane, London WC2A 1NF
TELEPHONE: 0171-404 5212
FAX: 0171-831 1926
REF: JMP\11714\sapagmt.02
<PAGE>
DATED: 1996
PARTIES:
1 "Vendor": William Annandale of Stompond Cottage, 12 Stompond Lane,
Walton-on-Thames, Surrey KT12 1HB
2 "Purchaser": Siteinput Limited (registered in England under company
number 3113109) whose registered office is at 1 Thames Street,
Windsor, Berkshire SL4 1PL
OPERATIVE PROVISIONS:
1 Definitions
1.1 In this agreement the following words and expressions have the
meanings stated:
"Agreed Form"
a form agreed between the parties, a copy of which has been initialled
for the purposes of identification by or on behalf of the parties.
"Company"
PDM Communications Limited (registered in England under number
1324588).
"Completion"
completion of the purchase of the Shares in accordance with clause 4.
"Compromise Agreement"
an agreement in the Agreed Form.
"Loan Account"
the loan account opened by the Company in the name of the Vendor on
which the Vendor owes to the Company (pound)9,300 as at the date of
this agreement.
"Shares"
the 45 issued ordinary shares of one pound each of the Company held by
the Vendor at the date of this agreement.
"Warranties"
the warranties and representations by the Vendor set out in clause 5.
1.2 Clause headings in this agreement are for ease of reference only and
do not affect the construction of any provision.
2 Agreement for sale
Subject to the terms and conditions of this agreement the Vendor shall
sell with
1
<PAGE>
full title guarantee and the Purchaser shall purchase the Shares,
with all rights attaching to them, with effect from the date of
Completion.
3 Purchase consideration
3.1 The purchase consideration for the Shares shall be the sum
of (pound)6,300.
3.2 The amount outstanding on the Loan Account shall be satisfied in part
by the purchase consideration.
4 Completion
4.1 Completion shall take place at the offices of the Purchaser on the
execution of this agreement.
4.2 The Vendor shall deliver to the Purchaser:
4.2.1 a duly completed and signed transfer in favour of the Purchaser, or as
it may direct, of the Shares;
4.2.2 a resignation as a director of the Company with a written
acknowledgment from him, executed as a deed in such form as the
Purchaser requires, that he has no claim against the Company on any
grounds whatsoever;
4.2.3 all documents relating to the Company which are the Company's
property;
4.2.4 the Compromise Agreement duly executed by the Vendor and his adviser;
4.2.5 a resignation letter from J Herd as an employee of the Company in
Agreed Form;
4.3 The parties to this agreement shall take or cause to be taken the
following steps at a board meeting of the Company:
4.3.1 the approval of the transfer (subject to stamping) referred to in
clause 4.2.1;
4.3.2 the submission and acceptance of the resignation referred to in clause
4.2.2.
4.4 Upon completion of the matters referred to in clauses 4.2 and 4.3 the
Purchaser shall procure:
4.4.1 the delivery up of the Compromise Agreement duly executed by the
Company;
4.4.2 the partial satisfaction of the Loan Account by the purchase
consideration referred to in clause 3.1;
4.4.3 the payment of a bonus to the Vendor which will be used to satisfy in
full the balance outstanding on the Loan Account;
4.4.4 the delivery of a receipt confirming that the Loan Account has been
satisfied in full;
4.4.5 the delivery of waivers of any pre-emption or other rights relating to
the transfer of the Shares executed by the other shareholders in the
Company.
2
<PAGE>
5 Warranties by the Vendor
5.1 The Vendor warrants to the Purchaser that the warranties set out below
are true and accurate in all material respects and are not misleading
at the date of this agreement:
5.1.1 the Vendor has full power to enter into and perform this agreement and
this agreement constitutes binding obligations on him in accordance
with the terms of this agreement;
5.1.2 there are no agreements or arrangements in force, other than this
agreement, which grant to any person the right to call for the issue,
allotment or transfer of any of the Shares.
6 Limitation of Liability
6.1 The provisions of this paragraph shall operate to limit the liability
of the Vendor under or in connection with the Warranties and
references to "such liabilities" shall be construed accordingly. The
parties agree as follows:
6.1.1 no such liabilities shall attach to the Vendor unless the aggregate
amount of such liabilities shall exceed the total sum of (pound)1,000
but if such liabilities shall exceed that sum the Vendor shall be
liable for the whole of such liabilities and not merely for the
excess;
6.1.2 the aggregate amount of such liabilities shall not exceed the purchase
consideration stated in clause 3.1;
6.1.3 claims against the Vendor in relation to the Warranties shall be
wholly barred and unenforceable unless written particulars thereof
(giving reasonable details of the specific matter or claim in respect
of which such claim is made so far as then known to the Purchaser)
shall have been given to the Vendor prior to the first anniversary of
this agreement; and
6.1.4 if the Vendor makes any payment by way of damages for breach of the
Warranties and within twelve months of the making of the relevant
payment the Company or the Purchaser receives any benefit otherwise
than from the Vendor which would not have been received but for the
circumstances giving rise to the claim in respect of which the damages
payment was made the Purchaser shall, once it or the Company, as the
case may be, has received such benefit, forthwith repay to the Vendor
an amount equal to the lesser of (a) the amount of such benefit and
(b) the damages payment in question.
3
<PAGE>
7 No other representations
The Purchaser admits that it has not entered into this agreement in
reliance upon any representation or promise other than those
incorporated in this agreement.
8 Indemnity
The Vendor shall indemnify and keep indemnified on a continuing basis
the Purchaser and the Company from and against all losses, costs,
damages, liabilities, fines, judgments, expenses, proceedings and
demands, which the Purchaser and/or the Company may suffer, incur or
pay as a result of any claim (including, but not limited to, claims
for redundancy payments, protective awards, damages for wrongful
dismissal or compensation for unfair dismissal) by J Herd as an
employee of the Company.
9 Non-competition and non-solicitation
9.1 To assure to the Purchaser the full benefit of the business and
goodwill of the Company generated by the Vendor, the Vendor undertakes
by way of further consideration for the obligations of the Purchaser
under this agreement, as separate and independent agreements, that he
will not:
9.1.1 disclose to any person, or himself use for any purpose, and shall use
all reasonable endeavours to prevent the publication or disclosure of,
information concerning the business, accounts or finances of the
Company or its clients' or customers' transactions or affairs, of
which he has knowledge;
9.1.2 for one year after Completion either on his own account or for another
person and in competition with the Company, directly or indirectly
solicit, interfere with or endeavour to entice away from the Company a
person who, to his knowledge, is, or has during the past two years
been, a client, customer or employee of, or in the habit of dealing
with, the Company.
9.2 The Vendor agrees that the covenants and undertakings contained in
clause 9.1 are reasonable and are entered into for the purpose of
protecting the goodwill of the business of the Company and that
accordingly the benefit of the covenants and undertakings may be
assigned by the Purchaser and its successors in title without the
consent of the Vendor.
9.3 Each covenant and/or undertaking contained in clause 9.1 shall be
construed as a separate covenant or undertaking. If one or more of the
covenants and/or undertakings is held to be against the public
interest or unlawful or in any way an
4
<PAGE>
unreasonable restraint of trade, the remaining covenants and
undertakings shall continue to bind the Vendor.
9.4 If any covenant or undertaking contained in clause 9.1 were void but
would be valid if the period of application were reduced or if some
part of the covenant or undertaking were deleted, the covenant or
undertaking in question shall apply with such modification as is
necessary to make it valid.
10 Release of Guarantee
10.1 The Purchaser shall use ifs reasonable endeavours to procure the
release as soon as practicable after completion of the Vendor from a
certain bank guarantee given by the Vendor to Midland Bank plc in
respect of an overdraft facility in favour of the Company.
10.2 The Purchaser shall indemnify and hold harmless the Vendor against any
liability (contingent or otherwise), costs, claims and demands
whatsoever which he may incur as a result of a call under the
Guarantee after Completion due to an act or deed undertaken by the
Company after Completion.
11 Communications
11.1 All communications between the parties with respect to this agreement
shall be delivered by hand or sent by post. The address for service of
each party shall be the address as the addressee may from time to time
have notified for the purpose of this clause.
A notice shall be deemed to have been served:
11.1.1 if personally delivered: at the time of delivery;
11.1.2 if posted: at the expiration of 24 hours.
11.2 In proving service it shall be necessary only to prove that the
communication was contained in an envelope which was duly addressed
and posted in accordance with clause 11.1
12 General
12.1 All expenses incurred by or on behalf of the parties, including all
fees of representatives, solicitors and accountants employed by any of
them in connection with the negotiation, preparation or execution of
this agreement, shall be borne solely by the party who incurred the
liability and the Company shall have no liability in respect of them.
5
<PAGE>
The construction, validity and performance of this agreement shall be
governed by the laws of England.
13 Announcements
No announcement shall be made in respect of the subject matter of this
agreement, except as specifically agreed between the parties, unless
an announcement is required by law.
EXECUTED by the parties as a deed on the date of this agreement.
SIGNED and DELIVERED )
by WILLIAM ANNANDALE ) /s/ W. J. Annandale
as a deed in the presence of: )
Witness signs: /s/ M. Gracey
Print name: M. GRACEY
Address: 26 Daryngton Drive
Guildford
Surrey
GUI 2QD
Occupation: Marketing Consultant
EXECUTED as a deed by )
SITEINPUT LIMITED )
Director /s/ Milton
Director Secrerary /s/ AJ Turnbull
6
<PAGE>
DATED 23 MAY 1996
SITEINPUT LIMITED
- and -
CLAIRE DENISE CATER
JOINT VENTURE AGREEMENT
RAKISONS
27 Chancery Lane
London
WC2A 1NF
Telephone: 0171 404 5212
Fax: 0171 831 1926
Ref: JMP\11715\jvagmt.04
<PAGE>
DATED 23 May 1996
PARTIES:
1 "Milton": Siteinput Limited (registered in England no 3113109) whose
registered office is at 1 Thames Street, Windsor, Berkshire, SL4 1PL
2 "CC": Claire Denise Cater of Back of Beyond, High Street, Ardingley, West
Sussex RH17 6TD
OPERATIVE PROVISIONS:
1 DEFINITIONS
1.1 In this agreement:
"Articles of Association"
the articles of association of the Company to be adopted on the date
of this agreement in the agreed terms or any articles for the time
being adopted or amended with the consent of the Shareholders;
the board of directors for the time being of the Company;
"Board"
the board of directors for the time being of the Company;
"Business"
the business of public relations and communications services and
assistance in the health care sector and such other business as the
Shareholders may agree from time to time in writing should be carried
on by the Company;
"Company"
Classcode Limited which was incorporated under the Companies Acts 1985
and 1989 on 10 May 1996 under registered number 3196839 with an
authorised share capital of (pound)1,000 divided into 51 "A" Shares
of (pound)1 each (""A" Shares"), 49 "B" Shares (""B" Shares") of
(pound)1.00 each and 900 undesignated ordinary shares of
(pound)1 each;
"Director"
any director for the time being of the Company including, where
applicable, any alternate director;
"Service Contract"
the contract of employment to be entered into by CC
in accordance with clauses 3.1.8 and 3.2;
"Shareholders"
Milton and CC or any person or persons to whom they may
properly transfer their Shares in accordance with this agreement;
"Shares"
1
"A" Shares and the "B" Shares of the Company;
"subsidiary" and "holding company"
have the same meanings as in section 736 of the Companies Act
1985 and "equity share capital" the same meaning as in section
744 of the Companies Act 1985;
"in the agreed terms"
in the form of an annexed draft agreed between the parties or
their respective legal advisers which, for the purpose of
identification, has been signed by or on behalf of the parties
prior to today's date;
1.2 Reference to any statute or statutory provision includes a reference
to that statute or statutory provision as from time to time amended,
extended or re-enacted, with or without amendment.
1.3 Unless there is something inconsistent in the subject or context,
words denoting the singular number only include the plural and vice
versa; words denoting one gender only include the other genders; words
denoting individuals include corporations and vice versa; and
references to "person" include a firm or corporation.
1.4 Unless the context otherwise requires, a reference to a clause is to a
clause of this agreement.
1.5 The headings in this agreement are inserted for convenience only and
do not affect its interpretation.
2 CONDITION
2.1 The obligations of the parties under this agreement are subject to and
conditional on the purchase of the fixed assets of Elliott & Cater
Limited for (pound)8,500 exclusive of Value Added Tax.
2.2 The Shareholders shall use their best endeavours to ensure that the
condition set out in clause 2.1 is satisfied not later than 25 May
1996 but if by that date the condition has not been satisfied or
waived by the Shareholders in writing, this agreement shall be null
and void without any claim or liability by any party against any other
party, save in respect of a prior breach.
3 COMPLETION
3.1 As soon as practicable after the fulfilment of the condition set out
in clause 2.1 but before the Company commences trading, each of the
Shareholders shall take or cause to be taken the following steps at
Directors' and shareholders' meetings of the Company (as appropriate):
3.1.1 the adoption by the Company of the Articles of Association;
3.1.2 the appointment of Les Milton and Andrew Turnbull as "A"
Directors of the
2
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Company;
3.1.3 the appointment of CC as a "B" Director of the Company;
3.1.4 the appointment of Andrew Turnbull as secretary of the Company;
3.1.5 the resignation of all Directors and the secretary of the
Company holding office prior to the execution of this agreement
and delivery of written confirmation executed as a deed by each
of them that it has no claim or right of action against the
Company and that the Company is not in any way obligated or
indebted to it;
3.1.6 the subscription by Milton for 51 "A" shares of (pound)1.00
each of the Company at a price of (pound)1 per share and the
allotment and issue of those shares by the Company to Milton
against payment of (pound)51 in full in cash;
3.1.7 the subscription by CC for 49 "B" shares of (pound)1.00
each of the Company at a price of (pound)1 per share and the
allotment and issue of such shares by the Company to CC against
payment of (pound)49 in full in cash;
3.1.8 the execution by the Company of the Service Contract;
3.2 CC shall sign and deliver to the Company the Service Contract.
4 APPOINTMENT OF DIRECTORS
4.1 The maximum number of Directors holding office at any time shall be
three unless otherwise agreed in writing by the Shareholders.
4.2 Each of the Shareholders shall be entitled to appoint one Director for
each part of its shareholding which represents 25 per cent. in nominal
value of the issued share capital of the Company (regardless of class)
and at any time to require the removal or substitution of any Director
appointed by it. The Directors appointed by Milton shall be designated
as "A" Directors and the Director appointed by CC shall be designated
as a "B" Director.
4.3 The chairman of the board of directors shall be appointed by Milton
and in the case of an equality of votes at any meeting of the
directors the chairman shall be entitled to a second or casting vote.
5 CONDUCT OF THE COMPANY'S AFFAIRS
5.1 The Shareholders shall exercise all voting rights and other powers of
control available to them in relation to the Company so as to procure
(insofar as they are able to do so by the exercise of those rights and
powers) that at all times during the term of this agreement:
5.1.1 the business of the Company consists exclusively of the
Business;
3
<PAGE>
5.1.2 the Shareholders shall each be entitled (at their own cost and
effort) to examine the books and accounts of the Company and to
be supplied with all relevant information, including monthly
management accounts and operating statistics and such other
trading and financial information in such form as they may
reasonably require, to keep them properly informed about the
business of the Company and generally to protect their
interests;
5.1.3 the auditors of the Company shall be Milton's auditors or such
other firm as the Board may determine;
5.1.4 the bankers of the Company shall be Bank of Scotland plc or
such other bankers as the Board may determine;
5.1.5 the registered office of the Company shall be located at
Milton's head office or at such other place as Milton may
require;
5.1.6 the Company shall comply with the provisions of its memorandum
of association and the Articles of Association;
5.1.7 the memorandum of association and the Articles of Association
of the Company will not be altered and no further articles or
resolution inconsistent with them will be adopted or passed,
unless the terms of the further articles or resolution have
been previously approved in writing by the Shareholders;
5.1.8 all cheques drawn by the Company in excess of:
(a) (Pound)500 but less than (pound)2,500 shall be signed
by one person nominated by Milton and CC;
(b) (Pound)2,500 shall be signed by Les Milton;
5.1.9 board meetings shall be convened at regular intervals not
exceeding three months, by not less than forty-eight hours'
notice in writing accompanied by an agenda specifying the
business to be transacted; and
5.1.10 the Board will determine the general policy of the Company
(subject to the express provisions of this agreement),
including the scope of its activities and operations, and the
Board will reserve to itself all matters involving major or
unusual decisions.
6 MATTERS REQUIRING CONSENT OF BOTH SHAREHOLDERS
6.1 The Shareholders shall exercise all voting rights and other powers of
control available to them in relation to the Company so as to procure
(insofar as they are able to do so by the exercise of those rights and
powers) that, without the prior written consent of the Shareholders,
the Company shall not:
4
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6.1.1 create any fixed or floating charge, lien (other than a lien
arising by operation of law) or other encumbrances over the
whole or any part of the undertaking, property or other assets
of the Company, except for the purpose of securing the
indebtedness of the Company or any holding company or to any
subsidiary of any such holding company to its bankers for sums
borrowed in the ordinary and proper course of the Business;
6.1.2 borrow any sum unless it is in the ordinary and proper course
of the Business;
6.1.3 make any loan or advance or gives any credit (other than normal
trade credit) to any person, except for the purpose of making
deposits with bankers and unless it is in the ordinary and
proper course of the Business;
6.1.4 give any guarantee or indemnity to secure the liabilities or
obligations of any person other than in respect of its holding
company and/or any subsidiary of any such holding company;
6.1.5 sell, transfer, lease, assign or otherwise dispose of a
material part of its undertaking, property or other assets (or
any interest in them) or contract to do so otherwise than in
the ordinary and proper course of the Business;
6.1.6 enter into any contract, arrangement or commitment involving
expenditure on capital account or the realisation of capital
assets;
6.1.7 engage or dismiss (save that this does not apply to dismissal
of CC under the Service Contract) any employee;
6.1.8 save that this will not apply to any review as referred to in
clause 5.2 of the Service Contract increase the remuneration of
any employee;
6.1.9 issue any unissued shares or creates any new shares, except as
expressly permitted by its articles of association;
6.1.10 alter any rights attaching to any class of its share;
6.1.11 consolidate, sub-divide or convert any of its share capital;
6.1.12 issue any debentures or other securities convertible into
shares or debentures or any share warrants or any options in
respect of shares;
6.1.13 create or acquire any subsidiary;
6.1.14 enter into any partnership or profit sharing agreement with any
person;
6.1.15 do or permit or suffer to be done any act or thing whereby it
may be wound up (whether voluntarily or compulsorily), except
as otherwise expressly provided for in this agreement;
5
<PAGE>
6.1.16 enter into any contract or transaction except in the ordinary
and proper course of the Business on arm's length terms;
6.1.17 acquire, purchase or subscribe for, or for any interest in, any
shares, debentures, mortgages or securities in any company,
trust or other person;
6.1.18 appoint or dismiss any director, but without prejudice to the
rights conferred on each of the Shareholders by clause 4 to
appoint and remove Directors;
6.1.19 appoint any committee of directors or any local board or
delegate any of the powers of the directors to a committee or
local board;
6.1.20 hold any meeting of its members or any class of members or
purport to transact any business at any such meeting unless
there are present duly authorised representatives or proxies
for each of the Shareholders.
7 LOAN FINANCE
7.1 The Shareholders shall each use reasonable endeavours to procure that
the requirements of the Company for working capital to finance the
Business are met, as far as practicable, by borrowings from banks and
other similar sources on the most favorable terms reasonably
obtainable as to interest, repayment and security, but without
allowing any prospective lender a right to participate in the equity
share capital of the Company as a condition of any loan.
8 DISPOSAL OR CHARGING OF SHARES
8.1 CC shall not, except with the prior written consent of Milton, create
or permit to subsist any pledge, lien or charge over, or grant any
option or other rights over or dispose of any interest in, all or any
of the "B" Shares held or beneficially owned by it (otherwise than by
a transfer of the "B" Shares in accordance with the provisions of the
Articles of Association). Any person in whose favour a pledge, lien or
charge is created or permitted to subsist or an option or rights are
granted or an interest is disposed of shall be subject to and bound by
the limitations and provisions of this agreement so far as they may
apply.
8.2 Milton may assign, charge or dispose of its interest in the Company.
9 ISSUE, TRANSFER AND SALE OF SHARES
9.1 The issue of new Shares subject to clause 9.2 and the transfer of
Shares shall be regulated in accordance with the Articles of
Association.
9.2 Milton agrees to acquire and CC agrees to sell to Milton the "B"
Shares on the earlier of:
9.2.1 five years after the date of this agreement;
6
<PAGE>
9.2.2 (in the case of the Company which is subject to clause 6) the
sale or other disposal of the undertaking of the Company or
Milton or its holding company;
9.2.3 the equity share capital of Milton or its holding company being
admitted to a listing or quotation on any stock exchange
(including without limitation, AIM and NASDAQ).
The price for the "B" Shares shall be equal to 60% of the average
annual gross profits of the Company which are in excess of
(pound)350,000 for the three years prior to the above date
("calculation period") subject always to a maximum price of (pound)
300,000. This price will be calculated on the same basis as the Gross
Profit calculation contained in the Service Contract. In the event
that the relevant calculation period in the case of clauses 9.2.2 or
9.2.3 is less than five years, the calculation period shall be reduced
and will terminate 60 days prior to the relevant event contained in
those clauses. The amount to be calculated will be pro-rated on an
annual basis to take account of the reduction in the calculation
period.
Completion of the sale and purchase of the "B" Shares shall take place
as soon as practicable following agreement or deemed agreement of the
purchase price when CC shall deliver the share certificate in respect
of the "B" Shares and an executed stock transfer form and Milton shall
pay the relevant consideration in cash.
10 EXERCISE OF VOTING RIGHTS
10.1 Each Shareholder shall:
10.1.1 exercise all voting rights and powers of control available to
it in relation to the Company so as to give full effect to the
terms and conditions of this agreement;
10.1.2 generally use its best endeavours to promote the Business and
the interests of the Company.
11 OPTION
11.1 If either Shareholder commits or suffers an event of default (as
defined in clause 11.3.1), the other Shareholder shall have the
option, in its entire discretion, to require the defaulting
Shareholder either to purchase all (but not some only) of the Shares
held or beneficially owned by the other Shareholder or to sell to the
other Shareholder all (but not some only) of the Shares held or
beneficially owned by the defaulting Shareholder. The option shall be
exercised by delivering written notice to the defaulting Shareholder,
stating which option is exercised, at any time within 30 days of the
date of the occurrence of the event of default or, if later, of the
other Shareholder becoming aware of the occurrence.
11.2 If either option is exercised, the Shareholders shall determine the
Prescribed Price (as defined in clause 11.3.2) as soon as practicable.
The completion of the sale shall take
7
<PAGE>
place within 10 days of the Prescribed Price having been agreed or
determined and the selling Shareholder shall deliver a duly executed
transfer of all its Shares in favour of the purchasing Shareholder (or
as it may direct) and the purchasing Shareholder shall make payment of
full in sterling in London of the Prescribed Price. The Shares shall
be deemed to be sold by the transferor as beneficial owner with effect
from the date of the transfer free from any lien, charge or
encumbrance and with all attached rights.
11.3 For the purpose of this clause:
11.3.1 "an event of default" in relation to a Shareholder means the
occurrence of any of the following:
(a) committing a material breach of its obligations under this
agreement which, in the case of a breach capable of remedy,
it fails to remedy within 21 days of being specifically
required in writing so to do by the other Shareholder; or
(b) any distress, execution, sequestration or other process
being levied or enforced upon or sued out against its
property which is not discharged within 10 days; or
(c) being unable to pay its debts in the normal course of
business;
(d) ceasing or threatening to cease wholly or substantially to
carry on its business or the making of an order or the
passing of a resolution for its winding up, being in any of
these cases otherwise than for the purpose of a
reconstruction or amalgamation, without insolvency,
previously approved by the other Shareholder in writing
(which approval shall not be unreasonably withheld); or
(e) an encumbrancer taking possession of, or a receiver or
trustee being appointed over the whole or any part of its
undertaking, property or other assets;
(f) in the case of CC, cessation of employment of CC pursuant
to the Service Contract; but
shall exclude any event which occurs as a direct result of the
statutory demand by Beacon Print Limited in the sum of (pound)6,588.46
or a claim with CC's guarantee of a lease of Grosvenor Hall, Haywards
Heath, Sussex up to a maximum value of (pound)8,822;
11.3.2 "the Prescribed Price" means in the case of CC, (pound)1 but in
the as may be agreed between the Shareholders within 21 days of
the date of the notice exercising the relevant option or (in
default of agreement between them) such sum as the auditors of
the Company for the time being, acting as independent experts,
certify to
8
<PAGE>
be in their opinion the fair value of those Shares as between a
willing buyer and a willing seller contracting on arm's length
terms, having regard to the fair value of the Business as a
going concern as at the date of the notice exercising the
option.
11.4 Notwithstanding the provisions of clauses 11.1, 11.2 and 11.3 it is
agreed that in the event that CC ceases to be employed by the Company
at any time during the period of three years from the date of this
agreement to five years from the date of this agreement as a result
of:
11.4.1 service by the Company of three months' notice; or
11.4.2 in circumstances where it is finally determined in proceedings
from which there is no appeal or where the parties have agreed
to waive their right to such appeal or the time limit for such
appeal has expired that CC has been wrongfully dismissed from
her employment;
then the Prescribed Price shall be calculated in accordance with the
provisions of clause 9.2.
12 THIS AGREEMENT NOT TO CONSTITUTE A PARTNERSHIP
12.1 None of the provisions of this agreement shall be deemed to constitute
a partnership between the Shareholders and neither of them shall have
any authority to bind the other in any way.
13 COSTS
13.1 Each of the Shareholders shall bear its own costs, legal fees and
other expenses incurred in the preparation and execution of this
agreement and the Company shall have no liability in respect of them.
13.2 All costs, legal fees, registration fees and other expenses incurred
in the formation of the Company shall be borne and paid by the
Company.
14 NON-DISCLOSURE OF INFORMATION
14.1 Neither of the Shareholders shall divulge or communicate to any person
(except for the benefit of the Business or if legally obliged to do
so) or use or exploit for any purpose whatever any of the trade
secrets or confidential knowledge or information or any financial or
trading information relating to the other Shareholder and the Company
which the relevant Shareholder receives or obtains as a result of
entering into this agreement, and shall use its reasonable endeavours
to prevent its employees from doing so. This restriction shall
continue to apply after the expiration or termination of this
agreement without limit in point of time, but shall cease to apply to
knowledge or information which may properly come into the public
domain through no fault of the Shareholder concerned.
9
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15 DURATION
15.1 This agreement shall continue in full force and effect until the first
to occur of the following:
15.1.1 five years from the date of this agreement;
15.1.2 either Shareholder acquiring the whole of the other
Shareholder's shareholding in the Company; or
15.1.3 the Shareholders ceasing to be beneficially entitled in
aggregate to 51 per cent or more of the equity share capital of
the Company or otherwise ceasing between them to control (as
defined by section 416 of the Taxes Act) the affairs of the
Company; or
15.1.4 commencement of the Company's winding-up.
15.2 The terms of this agreement shall continue to bind the Shareholders
after termination to such extent and for so long as may be necessary
to give effect to the rights and obligations embodied in it.
16 ASSIGNMENT
16.1 Neither of the Shareholders shall assign or transfer, or purport to
assign or transfer, any of its right or obligations under this
agreement without the prior written consent of the other Shareholder,
except to a wholly-owned subsidiary which has executed a deed in
accordance with the provisions of clause 25, and the assignor shall,
before making the transfer, guarantee by deed under seal in favour of
the other Shareholder the due performance of the assignee's
obligations under the deed.
17 SUCCESSORS AND ASSIGNS
17.1 This agreement shall operate for the benefit of and be binding on the
respective successors in title, heirs, executors and permitted assigns
of each Shareholder.
17.2 Before transferring any of its Shares a Shareholder shall procure that
the transferee executes a deed in favour of the other Shareholder by
which the transferee agrees to be bound by terms identical, so far as
appropriate, to the terms of this agreement (including the terms of
this clause as regards any subsequent transfer of any of the Shares).
18 WAIVER, FORBEARANCE AND VARIATION
18.1 None of the rights of either party shall be prejudiced or restricted
by any indulgence or forbearance extended to the other party and no
waiver by either party in respect of any breach shall operate as a
waiver in respect of any subsequent breach.
18.2 This agreement shall not be varied or cancelled, unless the variation
or cancellation
10
<PAGE>
is expressly accepted in writing by a duly authorised director of each
party which is a company.
19 GOVERNING LAW
19.1 The construction, validity and performance of this agreement shall be
governed in all respects by English law.
19.2 The High Court of England shall have jurisdiction to settle any
dispute which may arise between the parties in respect of the
construction, validity or performance of this agreement, or as to the
rights and liabilities of the parties or in any way connected with the
Company and, in the event of any action in respect of this agreement
being begun, the process by which it is begun, may be served on the
Shareholders in accordance with the provision of clause 21.
20 GENERAL MATTERS
20.1 This agreement supersedes any previous agreement between the parties
in relation to the matters dealt with and represents the entire
understanding between the parties in that respect.
20.2 In the event of any ambiguity or conflict arising between the terms of
this agreement and those of the Company's memorandum and articles of
association, the terms of this Agreement shall prevail.
20.3 If any of the provisions of this agreement is found by a Court or
other competent authority to be void or unenforceable, the provision
shall be deemed to be deleted from this agreement and the remaining
provisions shall continue in full force and effect. The parties shall
nevertheless negotiate in good faith in order to agree the terms of a
mutually satisfactory provision to be substituted for the provision
which is void or unenforceable.
21 NOTICES
21.1 Any notice to be given under this agreement shall either be delivered
personally or sent by first class delivery post (airmail if overseas)
or facsimile transmission. The address for service of each party (in
the case of a company) shall be its registered office for the time
being and (in the case of an individual) shall be her address stated
above or any other address for service previously notified to the
other parties or (in the absence of notification) her last known place
of residence. A notice shall be deemed to have been served:
21.1.1 if personally delivered: at the time of delivery;
21.1.2 if posted: at the expiration of 48 hours or (in the case of
airmail) seven days after the envelope containing the notice
was delivered into the custody of the postal authorities;
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21.1.3 if sent by facsimile transmission: at the time of transmission.
21.2 In proving service it shall be sufficient to prove that personal
delivery was made, or that the envelope containing the notice was
properly addressed and delivered into the custody office of the postal
authority as a prepaid first class or airmail letter (as appropriate)
or that the facsimile transmission was transmitted to the specified
number, as the case may be.
22 CHANGE OF NAME
It is agreed by the parties that as soon as practicable following
Completion the name of the Company shall be changed to "Milton Cater
Communications Limited".
Executed as a Deed.
EXECUTED as a deed by )
SITEINPUT LIMITED )
/s/ L. Milton
-------------------
Director
/s/ Illegible
-------------------
Director/Secretary
SIGNED and DELIVERED as )
a deed by CLAIRE DENISE CATER ) /s/ Claire Cater
-------------------
in the presence of: )
Witness sign:
-----------------------
Illegible Stamp
Name: -------------------------
Address: -------------------------
-------------------------
-------------------------
Illegible Stamp
Occupation: -------------------------
Solicitor
12
<PAGE>
SCHEDULE C
Infringement Actions and Oppositions
11
<PAGE>
DATED 4th APRIL, 1996
WENDY CARTER
-and-
SITE INPUT LIMITED
--------------------
SHARE SALE AGREEMENT
--------------------
CLARKS SOLICITORS
Great Western House
Station Road
READING
RG1 lSX
Tel: (01734) 585321
Ref: SJW\01908\JGE\04.04.96
<PAGE>
SHARE SALE AGREEMENT
DATED this 4th day of APRIL, 1996
PARTIES:
(1) WENDY CARTER of 15 Eton Square Eton Windsor Berkshire SL4 6BG ("the
Vendor")
(2) SITE INPUT LIMITED of 1 Thames Street Windsor Berkshire SL4 1PL ("the
Purchaser")
1. Interpretation
1.1 In this agreement the following words and expressions have the
following meanings:
"Company" Milton Marketing Limited
"Shares" the 750 issued Ordinary Shares of (pound)1 each
of the Company registered in the name of the
Vendor
1.2 Any reference in this agreement to the Vendor includes her personal
representatives
1.3 Clause headings in this agreement are for ease of reference only and
do not affect the construction of any provision
2. Agreement for Sale
2.1 Subject to the terms and conditions of this agreement the Vendor shall
sell with full title guarantee and the Purchaser shall purchase the
Shares free from all liens charges and encumbrances and with all
rights attaching to them with effect from the date of this agreement
3. Purchase Consideration
3.1 The purchase consideration for the Shares shall be the sum of
(pound)150,968 which shall be paid as follows:
3.1.1 (pound)106,476 on Completion;
3.1.2 (pound)9,000 to be paid over two years at the rate of
(pound)375 per month on the last day of each month the first
payment to be made on 30th April, 1996;
3.1.3 (pound)20,000 on 28 February 1998; and
3.1.4 (pound)15,492 at such time as the Purchaser shall transfer
the legal and beneficial ownership of any shares in the
Company owned by it for good and valuable consideration or
earlier at the Purchaser's discretion
<PAGE>
4. Completion
4.1 Completion of the purchase of the Shares shall take place at 1 Thames
Street Windsor Berkshire immediately after the signing of this
agreement
4.2 The Vendor shall deliver to the Purchaser:
4.2.1 a duly completed and signed transfer in favour of the
Purchaser of the Shares together with the relative share
certificate;
4.2.2 her resignation as Director of the Company; and
4.2.3 a consultancy agreement between the Company and the Vendor
in such form as shall have been agreed between them duly
signed by the Vendor;
4.3 The Purchaser will deliver to the Vendor a cheque for (pound)106,4.76
5. Miscellaneous
5.1 The Purchaser shall pay one half of the Vendor's costs in connection
with this transaction
5.2 At any time after the date hereof the Vendor shall at the request of
the Purchaser execute such documents and do such acts and things as
the Purchaser may reasonably require for the purpose of vesting the
Shares in the Purchaser or its nominees and giving to the Purchaser
the full benefit of all the provisions of this Agreement
5.3 Any notice, communication or demand to be given or made by a party
pursuant to this Agreement shall be given or made in writing
(including facsimile transmissions) and shall be deemed to be duly
served, in the case of a notice given by letter, 3 days after despatch
by first class prepaid post or, if delivered by hand, at the date and
time of delivery or, in the case of a notice given by facsimile, on
the next day (other than a Saturday, Sunday or Bank holiday in England
and Wales) after receipt of confirmation of transmission, (provided in
the case of a facsimile transmission that a copy of the notice is also
sent by first class prepaid post). Any notice by letter shall be valid
if sent or delivered to the party to be served at the address of such
party specified at the commencement of this agreement (or such other
address as such party may have notified in accordance with this clause
to the other) and any notice given by facsimile shall be valid if sent
to the Vendor or the Purchaser, as the case may be on such facsimile
number as such party may have notified in accordance with this clause
to the other)
5.4 This Agreement shall not be capable of assignment
-2-
<PAGE>
SIGNED by the said ) /s/ W. Carter
WENDY CARTER ) . . . . . . . . . . . . . . . . .
in the presence of:- )
Witness Signature /s/ AJ Turnbull
.....................................
Name in Capitals AJ TURNBULL
.....................................
Address HOLCOMBE HOUSE
...............................................
SHURLOCK ROW BERKSHIRE
...............................................
Occupation CHARTERED ACCOUNTANT
............................................
SIGNED by /s/ W. Carter
...............................
Duly authorised, for and on behalf of
SITE INPUT LIMITED
-3-
<PAGE>
[SEAL] [BANK OF SCOTLAND LOGO]
300 YEARS OF
BANKING SERVICE London Chief Office
P.O. Box No. 267
38 Threadneedle Street
LONDON
EC2P 2EH
Telephone: Direct Line: 0171-6960
PRIVATE & CONFIDENTIAL Switchboard: 0171-601 6666
The Directors Fax: 0171-628 7286
Siteinput Limited Telex: 887073
1 Thames Street
Windsor Our Ref: 1/DM/KUR
Berksire
SL4 1PL Your Ref:
6th November, 1995
Overdraft Facility
The Bank is pleased to offer an overdraft Facility ("the facility") to the
undernoted Borrower on the following terms and conditions ("this Offer"):
1. Main Financial Provisions
1.1. Name of each Borrower:
Siteinput Limited (Company No. 3113109)
Milton Marketing Limited (Company No. 1385429)
Milton Headcount Limited (Company No. 2998311)
Effective Sales Personnel Limited (Company No. 01425412)
Where there is more than one Borrower any reference to "the Borrower"
shall mean and include each of the above and their obligations under
this facility shall be joint and several.
1.2. Overdraft limit: (pounds)150,000
1.3. Bank charges in relation to the facility will be payable in
accordance with the Bank's tariff issued to the Borrower from time to
time.
1.4. The expression "the Cleared Debit Balance" is used in the following
paragraphs. It means, at any time, the amount due to the Bank by the
Borrower on any applicable account, ignoring any payments which are
not "cleared funds". The expression "cleared funds" means cash and
other payments into an applicable account but not including cheques
until the Bank has actually received payment from another bank.
1.5. All overdrafts are repayable on written demand, so the Borrower must
immediately pay the Bank the Cleared Debit Balance on the Borrower's
account(s) (plus interest and charges accrued but not yet added),
whenever the Bank requires the Borrower to do so. The facility will
cease to be available as from the date of receipt of any such demand.
Please note that in some circumstances the Bank may demand payment
before the Review Date given in paragraph 1.6 below; this may happen
if the Bank considers that:-
(a) any of the terms or condistions of the facility have been
breached; or
(b) the financial condition of the Borrower has altered in any
material way; or
<PAGE>
-2-
(c) the basis upon which the facility was agreed by the Bank has
altered in any material way.
1.6 The Bank will review the facility on 10th October 1996 ("the Review
Date"); the facility will cease to be available at that date at the
latest (unless before then the Bank has specifically agreed in
writing to renew or extend the facility).
1.7 Interest will be calculated by the Bank on a day-to-day basis on the
Cleared Debit Balance on the Borrower's account(s). Interest accruing
will be added to the Cleared Debit Balance on the Bank's Interest
Application Dates which are the last business days of each calendar
month. The interest rate will be 2% per annum over the Bank's Base
Rate, as fluctuating from time to time.
1.8 The Bank's Base Rate at the date of this Offer is 6.75% per annum.
Changes are notified in national newspapers and all the Bank's
Branches.
1.9 The Borrower must at all times provide sufficient funds to ensure
that the Cleared Debit Balance on the Borrower's account(s) never
exceeds the overdraft limit set out in 1.2 above (unless the Bank
otherwise agrees in writing).
1.10 The Borrower must not exceed the overdraft limit specified in this
Offer; and the Bank may refuse to pay a cheque (or allow any other
payment or withdrawal) which would have that effect. If the Bank does
pay such a cheque or allows such payment or withdrawal, that does
not mean that the overdraft limit has changed, or that the Bank will
agree to pay any other cheque or meet any other payment instruction
which would have the effect of exceeding that limit. Unless otherwise
agreed by the Bank, any debit balance of the facility over the agreed
limit and, where the facility has ceased to be available (whether on
the Review Date or by earlier demand) the total debit balance of the
failcity, will attract interest at the Bank's unauthorised rate,
which will be 4% per annum over the Bank's Base Rate, as fluctuating
from time to time.
1.11 As from the date on which the facility is made available by the
Bank, the Borrower ceases to be entitled to use any overdraft
facility previously made available by the Bank.
2. Use of Facility
The facility may be used only for the Borrower's general corporate needs.
3. Financial Information
Throughout the period the facility is available (including any extension of
the facility) the Borrower must provide the Bank with the following
financial information in relation to the Borrower and each of its
subsidiaries:
Annual audited financial statements, within 120 days after the end of
the financial year to which they relate;
Annual budget and cash flow projections, not less than one month
before the start of the period to which they relate;
<PAGE>
-3-
Monthly management accounts, within one month after the end of the
period to which they relate;
4. Additional Conditions
All additional conditions detailed in our Term Loan Offer letter of even
date also apply to this facility.
The Bank agrees with the Borrower that the Borrower may operate a
number of bank accounts on which the facility may be available. For
the purpose of ascertaining compliance with the facility and the
overdraft limit the Bank shall notionally set off the credit
balances of the Borrower's account against the debit balances of the
Borrower's account and the Bank shall be entitled to refuse to pay
any cheques, orders or withdrawals on any one or more of the
Borrower's account where such payments would result in the
overdraft limit (taking into account the amounts notionally offset)
being exceeded. The Bank may exercise its legal right to actually
offset creditor balances against any debtor balances of the
Borrower's account at any time.
5. Security
The Borrower will grant or cause to be granted to the Bank security
in a form acceptable to the Bank (which, unless otherwise stated
below, must be first-ranking and cover not only the amounts owing to
the Bank under this Offer but also all other sums due and to become due
to the Bank) as follows:
a) Debentures in the Bank's standard format, constituting first
fixed and floating charges over the assets of the Borrower and
its subsidiaries, present and future ("the Group");
b) Guarantees from each member of the Group in respect of all
moneys and liabilities owing or incurred by each member of the
Group to the Bank.
Any security which may subsequently be held by the Bank shall be
available to secure the amounts owing to the Bank under this Offer
and all other sums due to the Bank, to the full extent that the
terms of such security permit.
6. Time Limit for Acceptance of Offer
To accept this Offer, each Borrower named in paragraph 1.1 should
please sign below where indicated, and the completed Offer should be
returned to the Bank at the above address within one calendar month
from the date of this Offer. A duplicate of this Offer is enclosed
for the Borrower to keep. Where the Borrower does not return this
Offer indicating acceptance, then, this Offer will nevertheless be
deemed to be accepted should the Borrower proceed to use the
facility within or after that one month period, and any drawing
shall be deemed to be a drawing under this Offer as opposed to under
any previous facility. Where there is more than one Borrower, then
(unless the Bank agrees otherwise) deemed acceptance of this Offer
shall apply only to each Borrower using the facility within or after
that one month period.
<PAGE>
-4-
/s/ [illegible]
.......................................Date of Offer: 6th November, 1995
For and on behalf of the Bank
We accept the above Offer.
/s/ [illegible] 8th November 1995
Signed:................................ Date of signing:..................
/s/ [illegible]
.......................................
/s/ [illegible]
.......................................
/s/ [illegible]
.......................................
.......................................
For and on behalf of all the Borrowers
SUBSIDIARIES OF HEALTHWORLD CORPORATION
Jurisdiction of
Name of Entity: Organization:
- --------------- -------------
Girgenti, Hughes, Butler & McDowell, Inc. State of New York
(also d/b/a "GHBM" and "Rubin Ehrenthal")
Black Cat Graphics, Inc. State of New York
(also d/b/a "Studio Temps")
Brand Research Corporation State of New York
Medical Education Technologies, Inc. State of New York
Syberactice, Inc. State of Illinois
Milton Marketing Group Limited England
Milton Marketing Limited England
(also d/b/a "Milton Healthworld",
"Milton Broadway" and "Milton PDM")
PDM Communications Ltd. England
(also d/b/a "Milton PDM")
Effective Sales Personnel Limited England
(also d/b/a "Headcount Field Marketing",
"Medical Headcount" and "Merlink")
Milton Cater Limited England
Milton Headcount Limited England
(also d/b/a "Effective Sales
Personnel", "Headcount Field Marketing",
"Medical Headcount" and "Merlink")
Healthworld B.V The Netherlands
<PAGE>
Exhibit 23.1
After the execution of definitive agreements to undertake the Consolidation
discussed in Note 9 of the combined financial statements of Girgenti, Hughes,
Butler & McDowell, Inc. and Affiliates, and Note 11 of the consolidated
financial statements of Milton Marketing Group Limited and Subsidiaries, we
expect to be in a position to render the following consent.
August 29, 1997 /s/ Arthur Andersen LLP
-------------------------
Arthur Andersen LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated January 24, 1997 (except with respect to the matters discussed in Note 9,
as to which the date is ___, 1997), and January 27, 1997 (except with respect to
the matters discussed in Note 11, as to which the date is ___, 1997) and to all
references to our Firm included in or made a part of this registration
statement.
Melville, New York
, 1997
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<PAGE>
Board of Directors
HEALTHWORLD CORPORATION
100 Avenue of the Americas
New York, NY 10013
Gentlemen:
I hereby consent to my being named as a nominee for director of
Healthworld Corporation (the "Company") in the Company's Registration Statement
on Form S-1 to be filed with the Securities and Exchange Commission in
connection with the initial public offering of the Company's common stock, and
to serve in such capacity if so elected.
Very truly yours,
/s/ Colin Lloyd
---------------------
Colin Lloyd
Dated: August 5, 1997
<PAGE>
Board of Directors
HEALTHWORLD CORPORATION
100 Avenue of the Americas
New York, NY 10013
Gentlemen:
I hereby consent to my being named as a nominee for director of
Healthworld Corporation (the "Company") in the Company's Registration Statement
on Form S-1 to be filed with the Securities and Exchange Commission in
connection with the initial public offering of the Company's common stock, and
to serve in such capacity if so elected.
Very truly yours,
/s/ Peter Knight
---------------------
Peter Knight
Dated: August 4, 1997
<PAGE>
Board of Directors
HEALTHWORLD CORPORATION
100 Avenue of the Americas
New York, NY 10013
Gentlemen:
I hereby consent to my being named as a nominee for director of
Healthworld Corporation (the "Company") in the Company's Registration Statement
on Form S-1 to be filed with the Securities and Exchange Commission in
connection with the initial public offering of the Company's common stock, and
to serve in such capacity if so elected.
Very truly yours,
/s/ Jonah Shacknai
---------------------
Jonah Shacknai
Dated: August 6, 1997
<PAGE>
Board of Directors
HEALTHWORLD CORPORATION
100 Avenue of the Americas
New York, NY 10013
Gentlemen:
I hereby consent to my being named as a nominee for director of
Healthworld Corporation (the "Company") in the Company's Registration Statement
on Form S-1 to be filed with the Securities and Exchange Commission in
connection with the initial public offering of the Company's common stock, and
to serve in such capacity if so elected.
Very truly yours,
/s/ Alex Spizz
---------------------
Alex Spizz
Dated: August 1, 1997
<PAGE>
Board of Directors
HEALTHWORLD CORPORATION
100 Avenue of the Americas
New York, NY 10013
Gentlemen:
I hereby consent to my being named as a nominee for director of
Healthworld Corporation (the "Company") in the Company's Registration Statement
on Form S-1 to be filed with the Securities and Exchange Commission in
connection with the initial public offering of the Company's common stock, and
to serve in such capacity if so elected.
Very truly yours,
/s/ Francis Hughes
---------------------
Francis Hughes
Dated: August 5, 1997
