<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1997
REGISTRATION NO. 333-34751
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
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: /x/
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
------------------------------------------------------ ------------------------------------------------------
<S> <C> <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>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION
NOVEMBER 4, 1997
2,100,000 SHARES
[LOGO]
H E A L T H W O R L D
C O R P O R A T I O N
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'). Prior to the
Offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price for the Common
Stock will be between $8.00 and $9.50 per share. See 'Underwriting' for a
discussion of the factors considered in determining the initial public offering
price of the Common Stock. The Common Stock has been approved for quotation 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 7.
------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share............................. $ $ $
Total(3).............................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Excludes a non-accountable expense allowance payable by the Company to C. E.
Unterberg, Towbin 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.
------------------------------
C. E. UNTERBERG, TOWBIN PENNSYLVANIA MERCHANT GROUP LTD
The date of this Prospectus is , 1997
<PAGE>
[THE NAME 'HEALTHWORLD CORPORATION' ABOVE A PICTURE OF THE EARTH, BENEATH WHICH
IS A LIST OF THE COMPANY'S SERVICES]
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>
[Three page fold out containing the Healthworld name and logo, along with
the phrase underneath the name and logo 'Worldwide Healthcare Communications,'
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 'The Company
is a licensee of Healthworld B.V., a worldwide network of licensed independent
agencies offering marketing and communications services. Through Healthworld
B.V., the Company is able to offer its clients the creative talents and
marketing expertise of experienced agencies, as well as their knowledge of local
markets, to develop consistent, integrated multinational programs.']
<PAGE>
PROSPECTUS SUMMARY
On November 12, 1997, 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 (i) Girgenti, Hughes, Butler & McDowell,
Inc. ('GH') and its affiliated entities, consisting of Medical Education
Technologies, Inc., Syberactive, Inc., Brand Research Corporation, Black Cat
Graphics, Inc. and GHBM, Inc. (together with GH, 'GHB&M'), each of which is
under common control and management, and (ii) 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.
THE COMPANY
Healthworld Corporation is an international marketing and communications
services company specializing in health care. On November 12, 1997, Healthworld
will acquire GHB&M and Milton, after which the Company will conduct all of its
operations in the United States through GHB&M and in the United Kingdom through
Milton. See 'The Consolidation.'
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
services include advertising and promotion, contract sales, consulting,
publishing, medical education, public relations, interactive multimedia,
database marketing and marketing research services. 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 marketing and communications agencies located in 13 other
countries, in which GHB&M and Milton are founding licensees.
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, based on a number of criteria,
including creative marketing ability and account wins and losses, 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 based on a poll of the presidents of the top 50
communications agencies. The Company believes that GHB&M was one of the first
companies to develop a direct-to-consumer marketing ('DTC') campaign for a
prescription drug, and that it is an industry leader in the development of DTC
campaigns based on the number of DTC assignments it has performed. The Company
also believes that Milton is an industry leader in the development of marketing
strategies and campaigns for 'switching' a drug from prescription to
over-the-counter status, based on the number of switching assignments it has
performed.
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. According to industry sources, 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
3
<PAGE>
communications services to educate the market as to cost-effectiveness as well
as the safety and efficacy of their products.
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, industry
sources report that 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, and that figures for the first few months of 1997 suggest that the
total may double again and exceed $1.0 billion for the year. In fiscal 1994,
1995, 1996 and the fiscal nine months ended September 30, 1996 and 1997, the
Company's revenues from DTC represented 18%, 21%, 20%, 18% and 15%,
respectively, of the Company's pro forma combined revenues.
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 in the United Kingdom and provides its
services primarily to consumer products companies, utilities and other
non-health care related companies. The Company began providing contract sales
services to pharmaceutical and other health care companies in the United Kingdom
in May 1997, and as of September 30, 1997 revenues generated from such clients
were not significant. The Company intends to expand its contract sales
organization into the United States in the second quarter of 1998 and 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 marketing and communications services,
(iv) increasing its contract sales services, and (v) further expanding globally.
The Company intends to implement its strategy through internal development and
potential acquisitions.
Healthworld was incorporated in Delaware in September 1996 and, upon
consummation of the Consolidation, will conduct all of its operations through
GHB&M and Milton, which have been operating in the marketing and communications
industry since April 1986 and August 1978, respectively. 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.
4
<PAGE>
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 (i) start-up and other funding costs relating to the expansion
of the Company's contract sales operations into the United States,
(ii) capital expenditures associated with the expansion of the
Company's New York facility, (iii) the repayment of a $456,000
loan, and (iv) 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 date of this Prospectus, the Company will grant options
under the Stock Option Plan to purchase up to an aggregate of 498,500 shares
of Common Stock, at an exercise price per share equal to the initial public
offering price. See 'Management--Stock Option Plan.'
5
<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>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, (1) SEPTEMBER 30, (2)
----------------------------- ------------------
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 $17,359 $23,186
Operating expenses:
Salaries and related costs............................... 7,890 9,857 15,733 11,889 16,042
Other operating expenses................................. 3,727 4,469 5,274 3,729 4,358
------- ------- ------- ------- -------
11,617 14,326 21,007 15,618 20,400
------- ------- ------- ------- -------
Income from operations..................................... 1,464 2,441 3,202 1,741 2,786
Income before provision for income taxes................... 1,450 2,439 3,133 1,726 2,794
Net income(3).............................................. $ 837 $ 1,401 $ 1,828 $ 1,003 $ 1,612
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings per share......................................... $ 0.17 $ 0.28 $ 0.37 $ 0.20 $ 0.32
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Shares used in computing earnings per share................ 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
PRO FORMA
PRO FORMA AS ADJUSTED(4)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 794 $ 15,788
Total assets.......................................................................... 22,764 37,302
Long-term debt, including current portion............................................. 1,275 819
Stockholders' equity.................................................................. 6,684 21,678
</TABLE>
- ------------------
(1) Includes financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end.
(2) Includes financial data for GHB&M for the nine month period ended September
30 and for Milton for the nine month period ended August 31.
(3) 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.'
(4) 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,
including the repayment of a $456,000 loan. See 'Use of Proceeds.'
6
<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.
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, Healthworld, which was incorporated in
September 1996, has conducted no operations and generated no revenues to date.
In connection with the Consolidation, Healthworld will acquire GHB&M and Milton
on November 12, 1997. GHB&M and Milton have been operating and, following the
consummation of the Consolidation, will continue to operate as separate
independent entities. Following the Consolidation, the Company intends to manage
the operations of each of GHB&M and Milton, institute necessary Company-wide
systems and procedures to effectively provide such management, and implement its
growth strategy, and does not expect to realize any cost reductions in the
foreseeable future as a result of the Consolidation. The inability of the
Company to successfully manage 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. 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. 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.
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 and other clients. 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 derives a large portion of its revenues from a small number of
clients. These clients generally do not engage the Company on an exclusive basis
and may engage different agencies for different services with respect to their
products or with respect to a particular product. Moreover, the contracts with
the Company's clients, except with respect to contract sales services, generally
have a term of one year and, with respect to long-term projects, are renewed on
a year-to-year basis. Such contracts typically relate to specific services or
services only for specific products and may be terminated by the client on short
notice. The Company's contracts relating to its contract sales services
generally are either short-term (i.e., one week to six months) or long-term
(i.e., up to three years), and may also be terminated by the client on short
notice. As a result, the Company's results of operations may be materially
adversely affected by the loss of one or more of its clients, the deterioration
of the Company's relationship with any of its major clients, a decline in the
business of its major clients or a decline in the marketing and communications
spending by its major clients, either generally or with respect to specific
products for which the Company is engaged. See 'Business--Clients' and
'--Competition.' In the third quarter of 1997, one of GHB&M's clients withdrew a
product due to possible side effects previously not associated with such
product, which, for the fiscal nine months ended September 30, 1996 and 1997,
accounted for approximately 5.5% and 6.0%, respectively, of GHB&M's combined
revenues and approximately 3.3% and 3.2%, respectively, of the Company's pro
forma combined revenues. However, as is typically the case with the Company's
clients, the Company is retained by the client to provide marketing and
communications services with respect to multiple products, and the loss of
business with respect to the withdrawn product is not expected to have a
material adverse effect on the Company's results of operations.
For the 1996 fiscal year and the fiscal nine months ended September 30,
1997, the five largest clients of the Company represented an aggregate of 52%
and 48%, respectively, of the Company's pro forma combined revenues, and the
five largest clients of GHB&M represented an aggregate of 78% and 80%,
respectively, of GHB&M's combined revenues. For the 1996 fiscal year and the
nine months ended August 31, 1997, the five
7
<PAGE>
largest clients of Milton represented an aggregate of 49% and 52%, respectively,
of Milton's consolidated revenues. For the 1996 fiscal year, American Home
Products (through its Wyeth-Ayerst Laboratories and Whitehall Laboratories
divisions), Ortho/McNeil Pharmaceuticals (a division of Johnson & Johnson) and
Kraft Jacobs Suchard Limited accounted for an aggregate of approximately 27%, 9%
and 6%, respectively, of the Company's pro forma combined revenues, American
Home Products, Ortho/McNeil Pharmaceuticals and Sanofi Winthrop Pharmaceuticals
accounted for approximately 42%, 16% and 9%, respectively, of GHB&M's combined
revenues, and Ionica plc, Kraft Jacobs Suchard Limited and The Hospital Savings
Association accounted for approximately 13%, 13% and 8%, respectively, of
Milton's consolidated revenues. For the fiscal nine months ended September 30,
1997, American Home Products, Ionica plc and Ortho/McNeil Pharmaceuticals
accounted for approximately 18%, 9% and 9%, respectively, of the Company's pro
forma combined revenues, American Home Products, Ortho/McNeil Pharmaceuticals
and Sanofi Winthrop Pharmaceuticals accounted for approximately 33%, 17% and
11%, respectively, of GHB&M's combined revenues. For the nine months ended
August 31, 1997, Ionica plc, News International and Kraft Jacobs Suchard Limited
accounted for approximately 19%, 14% and 9%, respectively, of Milton's
consolidated revenues.
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 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 results of operations of
each of GHB&M and Milton have been and, following the Consolidation, the
Company's results of operations are expected to be, subject to quarterly
fluctuations. Generally, GHB&M's and Milton's revenues and profits are lowest in
the first quarter and highest in the fourth quarter. GHB&M's and Milton'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 GHB&M's and Milton's communications services expenses generally
remain constant. The Company's quarterly results may fluctuate as a result of
such factors and 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.'
CLIENT CONFLICTS OF INTEREST. Client conflicts of interest are inherent in
the marketing and communications industry, particularly with respect to
pharmaceutical and other health care clients for which the Company performs
marketing and communications services, due to the proprietary nature of such
clients' products. The Company's ability to compete for new clients and
assignments is limited by the Company's general practice, and the practice
followed by many of the Company's competitors, of not representing clients with
competing product lines. In addition, the Company is often contractually
precluded from representing companies with competing
8
<PAGE>
products. As a result, the Company may not be retained by existing, new or
potential clients with respect to certain products if the Company provides
marketing or communications services for competing products.
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.
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 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. The Company began providing contract sales services to
pharmaceutical and other health care companies in the United Kingdom to take
advantage of the increased use by such companies in the United Kingdom of
contract sales forces to market their products in May 1997 and as of September
30, 1997 revenues generated from such clients were not significant. 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, 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
9
<PAGE>
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 and provides
contract sales services 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 or, in limited circumstances, product liability claims. 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, although there can be no assurance that the coverage maintained by
the Company will be sufficient to cover all future claims. 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.
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. Healthworld's Certificate of Incorporation allows for any action
which can be taken at a meeting of its stockholders to be taken by written
consent in lieu of a meeting. Such concentrations of share ownership and ease of
stockholder action 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 $6.20. 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 Healthworld. The initial public offering price for the Common Stock
will be determined through negotiations between the Company and the
Representatives based on
10
<PAGE>
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 Common Stock has been approved for quotation 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 who will receive
shares of Common Stock in the Consolidation have entered 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 C. E. Unterberg, Towbin, 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 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. Healthworld's Certificate of
Incorporation authorizes the Board of Directors of Healthworld 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.'
11
<PAGE>
THE CONSOLIDATION
Healthworld was incorporated in Delaware on September 12, 1996 and has
conducted no operations to date. Healthworld entered into separate Agreements
and Plans of Organization (the 'Consolidation Agreements') in October 1997 with
the stockholders of GHB&M and Milton to acquire GHB&M and Milton on November 12,
1997. Each of the companies comprising GHB&M is owned by Steven Girgenti, the
Chairman of the Board and Chief Executive Officer of the Company, William
Butler, the Executive Vice President of Global Communications Services of GH,
Herbert Ehrenthal, the Executive Vice President of U.S. Communications Services
of GH, and Francis Hughes, a director of the Company and Creative Director of
GH. Milton Marketing Group Limited ('MMGL') is owned by William Leslie Milton,
the Vice Chairman of the Board and President of the Company, and minority
interests of Milton Marketing Limited, Effective Sales Personnel (f/k/a Milton
Headcount Limited), PDM Communications Limited ('PDM') and Milton Cater Limited,
each a subsidiary of MMGL, are owned by Michael Bourne, Michael Garnham (the
Managing Director of U.K. Contract Sales Services), Leonard Moreton and Claire
Cater, respectively.
Pursuant to the terms of the Consolidation Agreements, in exchange for all
of the shares of common stock of the companies comprising GHB&M and all of the
shares of common stock of the companies comprising Milton, including Milton's
minority interests, Healthworld will, on November 12, 1997, issue an aggregate
of 5,000,000 shares of its Common Stock, of which 3,450,000 shares will be
issued to the stockholders of GHB&M and 1,550,000 shares will be issued to the
stockholders of Milton, other than Claire Cater, who will not receive any of
such shares since her minority interest will be redeemed by Milton for no
consideration pursuant to a prior agreement between Milton and Ms. Cater. See
'Principal Stockholders.' The allocation of the shares of Common Stock to be
issued in the Consolidation to the GHB&M stockholders will be made in the same
proportion as each such stockholder's current ownership interest in the GHB&M
companies. Of the shares of Common Stock to be issued to Milton's stockholders,
assuming an initial offering price of $8.75 per share and an exchange rate of
$1.62 = pounds 1.00, Mr. Milton will receive 1,303,737 shares and the minority
stockholders (other than Ms. Cater) will receive an aggregate of 246,263 shares.
In addition, the Company will pay to Mr. Moreton no later than July 31, 1999 an
amount in cash up to approximately $320,000 based on the profits earned by PDM.
Upon consummation of the Consolidation, all of the shares of GHB&M and Milton
(including the minority interests in the subsidiaries of Milton) will be
acquired by Healthworld as described above, and GHB&M and Milton will become
wholly owned subsidiaries of Healthworld.
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
inception and restates the historical financial statements for the periods prior
to the consummation of the Consolidation as though GHB&M and Milton had been
combined from inception.
Pursuant to the Consolidation Agreements, Messrs. Milton and Garnham and
each of the stockholders of GHB&M have agreed not to compete with the Company
for a two year period, and Messrs. Bourne and Moreton have agreed not to compete
with the Company for a six month period, commencing on the date of this
Prospectus. 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 GHB&M's
estimated 1997 S Corporation earnings through the date of the Consolidation
(including taxable earnings arising from the Accounts Receivable Sale).
12
<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 $15.0 million, after deducting underwriting
discounts and commissions and other estimated expenses payable by the Company in
connection with the Offering (or approximately $17.5 million if the
Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds of the Offering for (i)
approximately $2.0 million of start-up and other funding costs related to the
expansion of the Company's contract sales operations into the United States,
(ii) approximately $1.3 million of capital expenditures associated with the
expansion of the Company's New York facility and the acquisition of additional
office furniture and computer equipment, and (iii) the repayment of a loan in
the principal amount of $456,000 which was originally issued in connection with
Milton's acquisition of Milton Headcount Limited (f/k/a Effective Sales
Personnel Limited), bears interest at the rate of 4% per annum and is payable in
March 1998. The remainder of such net proceeds will be used 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 Discussion
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 fiscal 1995, $1.5
million in fiscal 1996, $498,000 in fiscal 1997 through September 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 fiscal 1995, none in
fiscal 1996 and $160,000 in fiscal 1997 through August 31, 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.
13
<PAGE>
DILUTION
At September 30, 1997, the Company had a pro forma net tangible book value
of $3.1 million, or $0.62 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 September 30,
1997 would have been approximately $18.1 million or $2.55 per share. This
represents an immediate increase in pro forma net tangible book value of $1.93
per share to existing stockholders and an immediate dilution of $6.20 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............ $0.62
Increase in pro forma net tangible book value per share attributable to the
sale of the Common Stock offered hereby................................. 1.93
-----
Pro forma net tangible book value per share after the Offering............... 2.55
-----
Dilution per share to new investors.......................................... $6.20
-----
-----
</TABLE>
The following table sets forth, on a pro forma basis as of September 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% $ 6,684,000(1) 26.7% $1.34
New investors........................... 2,100,000 29.6% 18,375,000 73.3% 8.75
--------- ------- ----------- -------
Total................................. 7,100,000 100.0% $25,059,000 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
- ------------------
(1) Represents the pro forma combined stockholders' equity of the Company before
the Offering. See 'The Consolidation.'
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 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>
SEPTEMBER 30, 1997
--------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
------------ ------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Long-term obligations, less current
maturities............................ $ 471 $ 471
Stockholders' equity:
Preferred Stock, $.01 par value,
1,000,000 shares authorized, no
shares outstanding................. -- --
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........................... 50 71
Additional paid-in capital............ 5,808 20,781
Retained earnings..................... 826 826
------------ ------------
Total stockholders' equity......... 6,684 21,678
------------ ------------
Total capitalization............... $ 7,155 $ 22,149
------------ ------------
------------ ------------
</TABLE>
15
<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
fiscal years ended December 31, 1994, 1995 and 1996 and for the fiscal nine
months ended September 30, 1996 and 1997 and the selected pro forma combined
balance sheet data as of December 31, 1995 and 1996 and September 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 fiscal 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>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, (1) SEPTEMBER 30, (2)
----------------------------------------------- ------------------
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 $17,359 $23,186
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Salaries and related costs................ 6,876 7,554 7,890 9,857 15,733 11,889 16,042
Other operating expenses.................. 2,596 3,321 3,727 4,469 5,274 3,729 4,358
------- ------- ------- ------- ------- ------- -------
9,472 10,875 11,617 14,326 21,007 15,618 20,400
------- ------- ------- ------- ------- ------- -------
Income from operations...................... 1,097 331 1,464 2,441 3,202 1,741 2,786
Interest expense, net....................... 7 8 14 2 69 15 (8)
------- ------- ------- ------- ------- ------- -------
Income before provision for income taxes.... 1,090 323 1,450 2,439 3,133 1,726 2,794
Provision for income taxes(3)............... 436 106 613 1,038 1,305 723 1,182
------- ------- ------- ------- ------- ------- -------
Net income.................................. $ 654 $ 217 $ 837 $ 1,401 $ 1,828 $ 1,003 $ 1,612
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Earnings per share.......................... $ 0.13 $ 0.04 $ 0.17 $ 0.28 $ 0.37 $ 0.20 $ 0.32
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
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, (1)
--------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 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 $ 794
Total assets................................. 11,327 13,792 13,848 18,665 22,546 22,764
Long-term debt, including current portion.... 1,216 838 662 1,223 1,419 1,275
Stockholders' equity......................... 3,501 2,914 3,880 7,301 8,525 6,684
</TABLE>
- ------------------
(1) Includes financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end.
(2) Includes financial data for GHB&M for the nine month period ended September
30 and for Milton for the nine month period ended August 31.
(3) 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.'
16
<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 nine months ended September 30, 1996 and 1997 and the selected
combined balance sheet data as of September 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 nine months ended August 31, 1996 and 1997 and the
selected consolidated balance sheet data as of August 31, 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 nine months ended September 30, 1997 and of
Milton for the nine months ended August 31, 1997 are not necessarily indicative
of the results for the full fiscal year.
<TABLE>
<CAPTION>
GHB&M
---------------------------------------------------------------------------------------
(IN THOUSANDS)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 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 $10,165 $12,562
------- ------- ------- ------- ------- -------- --------
Income from operations..... 991 16 1,088 1,927 2,183 1,130 2,259
Net income................. 927 11 1,067 1,816 2,049 1,096 2,176
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 2,606 $ 1,974 $ 2,455 $ 4,061 $ 4,668 $ 5,403
Total assets................................. 10,264 11,190 12,232 13,287 14,049 16,237
Long-term debt, including current portion.... 875 785 587 82 223 151
</TABLE>
<TABLE>
<CAPTION>
MILTON
----------------------------------------------------------------------
(IN THOUSANDS)
NINE MONTHS ENDED
YEAR ENDED NOVEMBER 30, AUGUST 31,
----------------------------------------------- --------------------
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 $ 7,194 $ 10,624
------- ------- ------- ------- ------- ------- ----------
Income from operations....................... 106 315 390 558 1,085 663 579
Net income................................... 64 230 222 316 502 276 151
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------------------------- AUGUST 31,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ (145) $ (140) $ (64) $ (157) $ (536) $ (1,109)
Total assets................................. 1,063 2,602 1,681 3,401 6,487 8,158
Long-term debt, including current portion.... 92 53 75 1,141 1,196 1,124
</TABLE>
17
<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 was formed in September 1996 and has conducted no operations to
date. In October 1997, Healthworld entered into the Consolidation Agreements
pursuant to which Healthworld will acquire GHB&M and Milton on November 12,
1997, after which, the entities comprising GHB&M and Milton will be wholly owned
subsidiaries of Healthworld and Healthworld will conduct all of its operations
in the marketing communications industry segment through GHB&M in the United
States and through Milton in the United Kingdom. For a discussion of the
Consolidation and other related events, including the S Corporation
Distributions, see 'The Consolidation.'
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') (f/k/a Effective
Sales Personnel Limited), originally formed as a division of Milton Marketing in
January 1994, which, along with Effective Sales Personnel Limited ('ESP') (f/k/a
Milton Headcount Limited), 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, 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 weeks to several years. The Company offers to its pharmaceutical
and other health care clients 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
marketing and communications services to its clients. For services such as the
production of advertising and promotion materials and medical education
programs, fees are recognized when the production materials or programs are
completed. With respect to services such as consulting, publishing and public
relations, the Company is either paid a monthly retainer or bills on an actual
time incurred basis. 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
18
<PAGE>
statements are denominated in U.S. Dollars, and accordingly, changes in the
exchange rate between the British 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.
The Company has provided contract sales services since January 1994.
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. The Company began
providing contract sales 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 in May 1997
and as of September 30, 1997 revenues generated from such clients were not
significant. The Company intends to expand its contract sales operations into
the United States by the end of the second quarter of 1998 and anticipates that
such operations will focus almost exclusively on pharmaceutical and other health
care products.
A significant portion of the Company's growth in recent years is
attributable to the expansion of the Company's contract sales operations.
Revenues from contract sales services for the fiscal years ended December 31,
1994, 1995 and 1996 and for the fiscal nine months ended September 30, 1996 and
1997 were $280,000, $1.5 million, $6.6 million, $4.9 million and $7.7 million,
respectively, and represented 2.0%, 9.0%, 27.0%, 28.5% and 33.1%, respectively,
of the Company's pro forma combined revenues. As a result of the continued
growth and planned expansion of the Company's contract sales operations, the
Company anticipates that, in the future, revenues derived from contract sales
will continue to increase as a percentage of total revenues. In addition,
although profit margins for contract sales have been lower than profit margins
for other marketing and communications services, the Company believes that the
growth in its specialty pharmaceutical and health care contract sales services
will result in higher profit margins for contract sales in the future. Due to
the labor intensive nature of providing contract sales services, the Company
anticipates that its direct labor costs will increase as its contract sales
operations grow, and that the Company's working capital requirements will also
increase in order to enable the Company to fund such increases in business.
RESULTS OF OPERATIONS--THE COMPANY
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>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
(1) (2)
------------------------- ---------------
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 58.8 65.0 68.5 69.2
Other operating expenses.......................... 28.5 26.6 21.8 21.5 18.8
----- ----- ----- ----- -----
88.8 85.4 86.8 90.0 88.0
----- ----- ----- ----- -----
Income from operations.............................. 11.2 14.6 13.2 10.0 12.0
Interest expense, net............................... 0.1 -- 0.3 -- --
----- ----- ----- ----- -----
Income before provisions for income taxes........... 11.1 14.6 12.9 10.0 12.0
Provision for income taxes.......................... 4.7 6.2 5.3 4.2 5.0
----- ----- ----- ----- -----
Net income.......................................... 6.4% 8.4% 7.6% 5.8% 7.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
- ------------------
(1) Includes financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end.
(2) Includes financial data for GHB&M for the nine month period ended September
30 and for Milton for the nine month period ended August 31.
FISCAL NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL NINE MONTHS ENDED
SEPTEMBER 30, 1996
Revenues for the first nine months of 1997 were $23.2 million, an increase
of $5.8 million, or 33.6%, from $17.4 million for the first nine months of 1996.
Of such increase, (i) $2.8 million was primarily attributable to the growth of
the Company's advertising and promotion services, which resulted primarily from
new projects from existing clients and (ii) $2.7 million was attributable to the
growth of the Company's contract sales operations, which resulted primarily from
additional business relating to the duration and size of assignments for
existing
19
<PAGE>
clients and new clients. Such increases were partially offset by a decline in
revenues from medical education services resulting from the timing of clients'
medical education related activities.
Salaries and related costs include all compensation and related benefits
for all employees and contracted talent. Salaries and related costs for the
first nine months of 1997 were $16.0 million, an increase of $4.1 million, or
34.9%, from $11.9 million for the first nine months of 1996. Such increase was
primarily attributable to (i) $1.8 million of labor and other direct costs
relating to the growth of the Company's contract sales operations, (ii) $1.1
million relating to additional staff hired to support the increased level of
business activity in the United States, and (iii) $600,000 relating to staffing
costs in the United Kingdom incurred in anticipation of increased business
activity in advertising and promotion and public relations. Salaries and related
costs represented 69.2% of revenues in the first nine months of 1997, compared
to 68.5% in the first nine 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 and increased staffing
costs. Generally, labor costs associated with contract sales operations are
greater as a percentage of corresponding revenues than those for the Company's
other services.
Other operating expenses primarily include rent and occupancy, client
development and other related administrative costs. Other operating expenses for
the first nine months of 1997 were $4.4 million, an increase of $629,000, or
16.9%, from $3.7 million for the first nine months of 1996. Such increase was
primarily attributable to (i) increased miscellaneous costs of $382,000
primarily related to increased business development costs and (ii) additional
rent and occupancy costs of $306,000 primarily related to the expansion of
office space in the United Kingdom in connection with the acquisition by Milton
of PDM in November 1996 and the growth of the Company's contract sales
operations, partially offset by a decrease in professional costs. Other
operating expenses represented 18.8% of revenues in the first nine months of
1997, compared to 21.5% of revenues in the first nine 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.
Income from operations for the first nine months of 1997 was $2.8 million,
an increase of $1.1 million, or 60.0%, from $1.7 million for the first nine
months of 1996. Income from operations represented 12.0% of revenues in the
first nine months of 1997, compared to 10.0% in the first nine months of 1996.
The provision for income taxes for the first nine months of 1997 was $1.2
million, an increase of $459,000, or 63.5%, from $723,000 for the first nine
months of 1996. Such increase was primarily attributable to higher income before
taxes in the first nine months of 1997, as compared to the first nine months of
1996. The effective tax rate was 42.3% for the first nine months of 1997,
compared to 41.9% for the first nine 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, (i) $5.1 million was
attributable to the growth of the Company's contract sales operations, of which
$2.5 million was attributable to the operations of Headcount (acquired in
November 1995) and the remainder was primarily attributable to additional
business from new clients, and (ii) $1.3 million, $300,000, $300,000 and
$200,000 was attributable to additional revenues from advertising and promotion,
medical education, consulting and public relations services, respectively, which
all resulted primarily from new projects from existing clients.
Salaries and related costs for 1996 were $15.7 million, an increase of $5.8
million, or 59.6%, from $9.9 million for 1995. Such increase was primarily
attributable to (i) $3.4 million of labor and other direct costs related to the
Company's contract sales operations, (ii) $1.5 million for additional staff
hired to support the higher level of business activity, (iii) $500,000 for
annual salary increases, and (iv) $400,000 related to the retention of the staff
of Headcount as a result of its acquisition by Milton. Salaries and related
costs represented 65.0% of revenues in 1996, compared to 58.8% 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 increases in salaries and other costs.
Other operating expenses for 1996 were $5.3 million, an increase of
$805,000, or 18.0%, from $4.5 million for 1995. Such increase was primarily
attributable to additional rent and occupancy costs of $500,000 primarily
related to expanded office space, and increased business development costs of
$300,000 in the United States and
20
<PAGE>
the United Kingdom. Other operating expenses represented 21.8% of revenues in
1996, compared to 26.6% 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 (i) $1.3 million was
attributable to growth in the Company's advertising and promotion services,
resulting primarily from new projects from existing clients, (ii) $1.2 million
was attributable to the expansion of the Company's contract sales operations
resulting primarily from business from new clients as such operations continued
to grow, (iii) $600,000 was attributable to the growth in medical education
services, resulting primarily from the completion of two significant projects in
fiscal 1995, and (iv) $300,000 was attributable to growth in publishing
services, resulting from an increase in billing rates.
Salaries and related costs for 1995 were $9.9 million, an increase of $2.0
million, or 24.9%, from $7.9 million for 1994. Such increase primarily resulted
from $1.1 million related to the addition of staff, primarily in the U.S., to
support the higher level of business activity, and $800,000 of additional labor
and other direct costs of the Company's contract sales operations. Salaries and
related costs represented 58.8% of revenues in 1995, compared to 60.3% in 1994.
Other operating expenses for 1995 were $4.5 million, an increase of
$742,000, or 19.9%, from $3.7 million for 1994. Such increase primarily resulted
from additional rent and occupancy costs of $300,000 primarily related to
additional office space, and additional business development costs of $500,000,
which was partially offset by a decrease in professional fees. Other operating
expenses represented 26.6% 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 in 1994. 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 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
GHB&M's and Milton's results of operations have been, and following the
Consolidation, the Company's results of operations are expected to be, subject
to quarterly fluctuations. Generally, GHB&M's and Milton's revenues and profits
are lowest in the first quarter and highest in the fourth quarter. GHB&M's and
Milton'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 GHB&M's and Milton's communications services expenses
generally remain constant. The Company's quarterly results may fluctuate as a
result of such factors and 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.
21
<PAGE>
The following table sets forth, on a quarterly basis, certain pro forma
combined financial information of the Company for the periods indicated.
<TABLE>
<CAPTION>
1995(1) 1996(1) 1997(1)
------------------------------------- ------------------------------------- ---------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH 1ST 2ND 3RD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <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 $6,278 $7,473 $9,435
Operating expenses:
Salaries and
related costs.. 2,209 2,245 2,523 2,880 3,691 4,010 3,782 4,250 4,808 5,083 6,151
Other operating
expenses....... 748 1,064 1,350 1,307 1,296 1,325 1,324 1,329 1,270 1,513 1,575
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
2,957 3,309 3,873 4,187 4,987 5,335 5,106 5,579 6,078 6,596 7,726
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
operations....... $ 430 $ 601 $ 362 $1,048 $ (282 ) $ 765 $ 848 $1,871 $ 200 $ 877 $1,709
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
- ------------------
(1) Includes financial data for GHB&M based on quarterly fiscal periods for a
December 31 fiscal year end and for Milton based on quarterly fiscal periods
for a November 30 fiscal year end.
LIQUIDITY AND CAPITAL RESOURCES
GHB&M's cash provided by operations for the nine months ended September 30,
1997 was $1.1 million and was comprised of net income of $2.2 million, non-cash
charges of $570,000, a decrease in accounts receivable of $109,000, an increase
in accounts payable of $938,000, and an increase in accrued expenses of
$294,000, partially offset by (i) an increase in unbilled production charges of
$1.6 million, (ii) an increase in other assets of $989,000, and (iii) a decrease
in advanced production billings of $500,000. GHB&M's cash used in investing
activities for the nine months ended September 30, 1997 was $450,000 consisting
of capital expenditures. GHB&M's cash used in financing activities for the nine
months ended September 30, 1997 was $970,000 and was primarily comprised of S
Corporation distributions to stockholders of $498,000 and the repayment of bank
debt of $472,000, in the aggregate. GHB&M's accounts receivable tend to be
highest during the fourth quarter as a result of the timing of GHB&M's billings
to its clients, which generally are highest in the fourth quarter. The higher
billings in the fourth quarter are attributable to a number of factors,
including the timing of commencement, completion or cancellation of major
projects and industry billing practices which are tied to annual marketing
budgets. GHB&M's unbilled production charges may vary from period to period
depending primarily on the stage of completion of the Company's ongoing projects
for its clients.
Milton's cash used in operating activities for the nine months ended August
31, 1997 was $349,000 and was comprised of (i) an increase in accounts
receivable of $1.3 million, (ii) an increase in unbilled production charges of
$109,000, (iii) an increase in other current assets and other assets of
$285,000, partially offset by an increase in accounts payable and accrued
expenses of $523,000, an increase in advance billings of $378,000, and non-cash
charges of $346,000. Milton's cash used in investing activities for the nine
months ended August 31, 1997 was $53,000, consisting of capital expenditures of
$128,000, partially offset by the sale of fixed assets of $75,000. Milton's cash
provided by financing activities for the nine months ended August 31, 1997 was
primarily comprised of additional bank overdraft borrowings of $748,000,
partially offset by repayment of bank loans and capital lease obligations of
$186,000, and the payment of dividends of $160,000.
Cash provided by operations of the Company on a combined basis for fiscal
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 fiscal 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 fiscal 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 capital lease
obligations of $66,000, which were partially financed by net proceeds from line
of credit and bank overdraft borrowings of $109,000.
With respect to the Company's billing practices for its non-contract sales
services, fee billings for time incurred are billed either on a monthly retainer
basis or in each month following a month in which services were provided by the
Company. Production billings are progress billed when costs are incurred and
final billed when
22
<PAGE>
completed. Fees for a portion of contract sales services are advanced billed
prior to commencement of the assignment and the remainder of such fees are
billed in the month following the month in which services were provided by the
Company. GHB&M and Milton have each maintained reserves for bad debts, although
neither GHB&M nor Milton has incurred any material losses from bad debts. The
Company does not expect to incur any material losses from bad debts, although
there can be no assurance to such effect. The Company believes that the
continued growth and planned expansion of its contract sales operations will not
materially adversely affect its ability to bill and collect on a timely basis
for services provided.
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 expires on June 30, 1998, pursuant to which GHB&M may request
borrowings of, but the bank is 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 $151,000 outstanding as of
September 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 September 30,
1997.
Milton's borrowings consist of an overdraft facility (the 'Milton Overdraft
Facility') with The Bank of Scotland plc ('The Bank of Scotland') in an amount
which reduces from up to $1,252,500 as of October 31, 1997, to an aggregate
amount of up to $835,000. Amounts drawn under the Milton Overdraft Facility bear
interest payable at the United Kingdom base rate (7.0% as of August 31, 1997)
plus 2.0% per annum (the 'Prevailing Rate'). As of August 31, 1997, Milton had
an outstanding balance of approximately $1.2 million under the facility. Amounts
owed by Milton under the Milton Overdraft Facility, as well as any other amounts
which may be owed by Milton to The Bank of Scotland, are secured under a
debenture pursuant to which any securities held by MMGL in its subsidiaries are
pledged to The Bank of Scotland. The Milton Overdraft Facility expires on
November 30, 1997, unless renewed or extended by The Bank of Scotland prior to
such date. In addition, as of August 31, 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 $400,000 was
outstanding on August 31, 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 Headcount, under
which principal is due and payable in March 1998, and (iii) a term loan from
National Westminster Bank plc in the principal amount of $75,000 ($10,000 of
which was outstanding as of August 31, 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 $700,000 (of which $578,000 has been spent as of September
30, 1997) 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.
Pursuant to the Consolidation Agreements, the Company will pay to one of
Milton's minority stockholders no later than July 31, 1999 an amount in cash up
to approximately $320,000 based on the profits earned by PDM.
Upon consummation of the Consolidation, the entities comprising GHB&M and
Milton will be wholly owned subsidiaries of Healthworld and Healthworld will
conduct all of its operations through GHB&M and
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Milton. The Company's primary capital needs after the Consolidation and the
Offering will be for (i) approximately $2 million of start-up and other funding
costs relating to the expansion of the Company's contract sales operations into
the United States, (ii) approximately $1.3 million of capital expenditures,
(iii) the repayment of a term loan in the principal amount of $456,000 which is
due and payable in March 1998, (iv) 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, and (v) potential
acquisitions. The Company believes that cash generated from operations of GHB&M
and Milton and the net proceeds received by the Company from the Offering will
be sufficient to fund such capital needs on a short-term basis and for at least
the next 12 months.
RESULTS OF OPERATIONS--GHB&M
GHB&M's revenues are derived primarily from providing advertising and
promotion, consulting, medical education, publishing and public relations
services to its clients.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Revenues for the first nine months of fiscal 1997 were $12.6 million, an
increase of $2.4 million, or 23.6%, from $10.2 million for the first nine months
of fiscal 1996. This increase was primarily attributable to a $2.2 million
increase in revenues from advertising and promotion services and a $538,000
increase in revenues from consulting services, which increases were partially
offset by declines in revenues from medical education services. The increases in
advertising and promotion and consulting services resulted primarily from new
projects from existing clients. The decline in revenues derived from medical
education services primarily resulted from the timing of clients' medical
education related activities.
Salaries and related costs include all compensation and related benefits
for all employees and contracted talent. Salaries and related costs for the
first nine months of fiscal 1997 were $7.8 million, an increase of $1.1 million,
or 16.8%, from $6.7 million for the first nine months of fiscal 1996. The
increase was primarily attributable to the additional staff hired to support the
increased level of business activity. Salaries and related costs represented
62.0% of revenues in the first nine months of fiscal 1997, as compared to 65.6%
in the first nine months of fiscal 1996.
Other operating expenses primarily include rent and occupancy, client
development and other related administrative costs. Other operating expenses for
the first nine months of fiscal 1997 were $2.5 million, an increase of $146,000,
or 6.2%, from $2.4 million for the first nine months of fiscal 1996. Other
operating expenses represented 20.0% of revenues in the first nine months of
fiscal 1997, as compared to 23.3% in the first nine months of fiscal 1996.
Income from operations for the first nine months of fiscal 1997 was $2.3
million, an increase of $1.2 million, from $1.1 million for the first nine
months of fiscal 1996. Income from operations represented 18.0% of revenues in
the first nine months of fiscal 1997, as compared to 11.1% in the first nine
months of fiscal 1996. The increase in income from operations, as a percentage
of revenues, resulted from the increase in revenues, without a commensurate
increase in operating expenses.
The provision for income taxes for the first nine months of 1997 was
$177,000, an increase of $92,000 from $85,000 for the first nine months of 1996.
This increase was primarily attributable to higher income before taxes in the
first nine months of 1997, as compared to the first nine months of 1996. The
effective tax rate was 7.5% for the first nine months of 1997, compared to 7.2%
for the first nine months of 1996. As S Corporations, the companies comprising
GHB&M (other than Syberactive) were not taxed at the Federal level but were
subject to certain state corporate taxes and the New York City General
Corporation Tax.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues for fiscal 1996 were $14.3 million, an increase of $1.9 million,
or 15.7%, from $12.4 million for fiscal 1995. This increase was primarily
attributable to a $1.1 million increase in revenues from advertising and
promotion services, a $300,000 increase in revenues from consulting services and
a $300,000 increase in revenues from medical education services, all of which
principally resulted from new projects from existing clients.
Salaries and related costs for fiscal 1996 were $8.9 million, an increase
of $1.6 million, or 22%, from $7.3 million for fiscal 1995. Of such increase,
$1.1 million was attributable to the additional staff hired to support the
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higher level of business activity and $500,000 was attributable to annual salary
increases. Salaries and related costs represented 62.5% of revenues in fiscal
1996, as compared to 59.2% in fiscal 1995.
Other operating expenses for fiscal 1996 were $3.2 million, an increase of
$76,000, or 2.4%, from $3.1 million for fiscal 1995. Other operating expenses
represented 22.3% of revenues in fiscal 1996, as compared to 25.2% in fiscal
1995.
Income from operations for fiscal 1996 was $2.2 million, an increase of
$256,000, or 13.3%, from $1.9 million for fiscal 1995. Income from operations
represented 15.3% of revenues in fiscal 1996, as compared to 15.6% in fiscal
1995.
The provision for income taxes for fiscal 1996 was $158,000, an increase of
$34,000, or 27.4%, from $124,000 in fiscal 1995. This increase was primarily
attributable to higher income before taxes in fiscal 1996, as compared to fiscal
1995. The effective tax rate was 7.2% in fiscal 1996, compared to 6.4% for
fiscal 1995. As S Corporations, the companies comprising GHB&M (other than
Syberactive) were not taxed at the Federal level but were subject to certain
state corporate taxes and the New York City General Corporation Tax.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues for fiscal 1995 were $12.4 million, an increase of $2.0 million,
or 18.8%, from $10.4 million for fiscal 1994. This increase was primarily
attributable to (i) an $800,000 increase in revenues from advertising and
promotion services, resulting primarily from additional business relating to new
projects from existing clients, (ii) a $600,000 increase in revenues from
medical education services, resulting primarily from the completion of two
significant projects in fiscal 1995, and (iii) a $300,000 increase in revenues
from publishing services, resulting primarily from an increase in billing rates.
Salaries and related costs for fiscal 1995 were $7.3 million, an increase
of $910,000, or 14.2%, from $6.4 million for fiscal 1994. The increase was
primarily attributable to the additional staff hired to support the higher level
of business activity. Salaries and related costs represented 59.2% of revenues
in fiscal 1995, as compared to 61.6% in fiscal 1994.
Other operating expenses for fiscal 1995 were $3.1 million, an increase of
$204,000, or 7.0%, from $2.9 million for fiscal 1994. This increase was
primarily attributable to increased new business development costs of $250,000
and additional rent and occupancy costs of $150,000 related to expanded office
space, which increases were partially offset by a decrease in professional fees
of $300,000. Other operating expenses represented 25.2% of revenues in fiscal
1995, as compared to 28% in fiscal 1994.
Income from operations for fiscal 1995 was $1.9 million, an increase of
$839,000, or 77.1%, from $1.1 million for fiscal 1994. Income from operations
represented 15.6% of revenues in 1995, as compared to 10.4% in fiscal 1994. The
increase in income from operations, as a percentage of revenues, resulted from
decreases in both salaries and related costs and other operating expenses as a
percentage of revenues.
The provision for income taxes for fiscal 1995 was $124,000, an increase of
$105,000, or 553.0%, from $19,000 in 1994. Such increase was attributable to an
increase in the effective tax rate of 6.4% in fiscal 1995, compared to 1.7% in
fiscal 1994, and higher income before taxes in fiscal 1995, as compared to
fiscal 1994. The increase in the effective tax rate was due to GHB&M's
relocation of its graphic design facility to New York City in fiscal 1995.
RESULTS OF OPERATIONS--MILTON
Milton's revenues are derived primarily from providing contract sales,
advertising and promotion and public relations services to its clients.
NINE MONTHS ENDED AUGUST 31, 1997 COMPARED TO NINE MONTHS ENDED AUGUST 31, 1996
Revenues for the first nine months of fiscal 1997 were $10.6 million, an
increase of $3.4 million, or 47.7%, from $7.2 million for the first nine months
of fiscal 1996. Such increase was primarily attributable to (i) a $2.7 million
increase in revenues from contract sales services which resulted from additional
business relating to the duration and size of assignments for existing clients
and new clients, and (ii) a $527,000 increase in revenues from advertising and
promotion services, which was primarily attributable to the operations of PDM
(acquired in November 1996).
Salaries and related costs include all compensation and related benefits
for all employees and contracted talent. Salaries and related costs for the
first nine months of fiscal 1997 were $8.3 million, an increase of $3.1 million,
or 58.1%, from $5.2 million for the first nine months of fiscal 1996. The
increase was primarily attributable to (i) $1.8 million in increased labor and
other direct costs relating to Milton's contract sales operations,
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(ii) $600,000 relating to staffing costs incurred in anticipation of increased
business activity in advertising and promotion and public relations, which did
not occur in the period, and (iii) $350,000 relating to additional managerial
staff hired to support the increased level of contract sales activity. Salaries
and related costs represented 77.7% of revenues in the first nine months of
fiscal 1997, compared to 72.6% in the first nine months of fiscal 1996.
Other operating expenses primarily include rent and occupancy, client
development and other related administrative costs. Other operating expenses for
the first nine months of fiscal 1997 were $1.8 million, an increase of $483,000,
or 36.8%, from $1.3 million for the first nine months of fiscal 1996. Such
increase was primarily attributable to $230,000 of additional rent and occupancy
costs related to expanded office space in connection with the acquisition of PDM
and growth of Milton's contract sales operations, and increased miscellaneous
costs of $245,000 primarily related to increased business development costs.
Other operating expenses represented 16.9% of revenues in the first nine months
of fiscal 1997, compared to 18.2% in the first nine months of fiscal 1996.
Income from operations for the first nine months of fiscal 1997 was
$579,000, a decrease of $84,000, or 12.7%, from $663,000 for the first nine
months of fiscal 1996. Income from operations represented 5.4% of revenues for
the first nine months of fiscal 1997, compared to 9.2% in the first nine months
of fiscal 1996. Such declines were 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. Milton 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. Milton
is in the process of reducing its overhead associated with public relations to
reflect current business activity.
The provision for income taxes for the first nine months of fiscal 1997 was
$182,000, a decrease of $39,000 or 17.6%, from $221,000 for the first nine
months of fiscal 1996. The effective tax rate was 37.0% for the first nine
months of 1997 and 1996.
YEAR ENDED NOVEMBER 30, 1996 COMPARED TO YEAR ENDED NOVEMBER 30, 1995
Revenues for fiscal 1996 were $9.9 million, an increase of $5.5 million, or
125.0%, from $4.4 million for fiscal 1995. Such increase was primarily
attributable to an increase of $5.1 million in revenues from Milton's contract
sales operations, including $2.5 million of revenues attributable to the
operations of Headcount (acquired by Milton in November 1995). The remainder of
such growth in contract sales services resulted primarily from additional
business from new clients.
Salaries and related costs for fiscal 1996 were $6.8 million, an increase
of $4.3 million, or 168.0%, from $2.5 million for fiscal 1995. Of such increase,
approximately $3.4 million was attributable to labor and other direct costs
attributable to Milton's contract sales operations, $400,000 was attributable to
retaining the staff of Headcount (acquired by Milton in November 1995) and
$400,000 was attributable to the additional managerial staff hired to support
the increased level of business activity of Milton's contract sales operations.
Salaries and related costs represented 68.7% of revenues in fiscal 1996,
compared to 57.5% in fiscal 1995. As a percentage of revenues, Milton's contract
sales operations generally have higher labor costs than those for other
marketing and communications services.
Other operating expenses for fiscal 1996 were $2.0 million, an increase of
$707,000, or 54.0%, from $1.3 million for fiscal 1995. This increase was
primarily attributable to additional rent and occupancy costs of $380,000
related to expanded office space and increased business development costs of
$180,000, both of which resulted from the growth of Milton's contract sales
operations (including the acquisition of ESP in November 1995) and the start-up
of Milton's public relations business in May 1996. Other operating expenses
represented 20.4% of revenues in fiscal 1996, compared to 29.8% in fiscal 1995.
The decrease, as a percentage of revenues, was primarily attributable to such
expenses generally being fixed relative to increases in Milton's revenues.
Income from operations for fiscal 1996 was $1.1 million, an increase of
$527,000, or 94.4%, from $558,000 for fiscal 1995. Income from operations
represented 11.0% of revenues in 1996, compared to 12.7% in 1995.
The provision for income taxes for fiscal 1996 was $366,000, an increase of
$207,000, or 130.2%, from $159,000 for fiscal 1995. This increase was primarily
attributable to higher income before taxes and minority interests in fiscal
1996, as compared to fiscal 1995. The effective tax rate was 37.0% in 1996, as
compared to 29.3% in fiscal 1995. The difference in effective tax rates was due
primarily to nondeductible goodwill in 1996 and United Kingdom marginal company
rate relief in fiscal 1995.
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YEAR ENDED NOVEMBER 30, 1995 COMPARED TO YEAR ENDED NOVEMBER 30, 1994
Revenues for fiscal 1995 were $4.4 million, an increase of $1.7 million, or
65.0%, from $2.7 million for fiscal 1994. The increase was primarily
attributable to (i) an increase of $1.2 million in revenues from Milton's
contract sales operations which resulted primarily from business from new
clients as such operations continued to grow, and (ii) an increase of $500,000
from advertising and promotion services which resulted from additional business
from new and existing clients.
Salaries and related costs for fiscal 1995 were $2.5 million, an increase
of $1.0 million, or 71.7%, from $1.5 million for fiscal 1994. Of such increase,
$800,000 was attributable to labor and other direct costs of Milton's contract
sales operations, and the remainder was attributable to the addition of staff to
support the higher level of business activity and normal annual salary increases
to existing employees. Salaries and related costs represented 57.5% of revenues
in fiscal 1995, compared to 55.3% in fiscal 1994.
Other operating expenses for fiscal 1995 were $1.3 million, an increase of
$508,000, or 63.3%, from $802,000 for fiscal 1994. This increase was primarily
attributable to additional business development costs of $200,000, additional
rent and occupancy costs of $100,000 and additional other operating expenses of
$100,000. Other operating expenses represented 30.0% of revenues in each of
fiscal 1995 and fiscal 1994.
Income from operations for fiscal 1995 was $558,000, an increase of
$168,000, or 43.1%, from $390,000 for fiscal 1994. Income from operations
represented 12.7% of revenues in fiscal 1995, compared to 14.6% in fiscal 1994.
The decrease, as a percentage of revenues, was primarily attributable to the
growth of Milton's contract sales operations.
The provision for income taxes for fiscal 1995 was $159,000, an increase of
$42,000, or 35.9%, from $117,000 for fiscal 1994. This increase was primarily
attributable to higher income before taxes and minority interests in fiscal
1995, as compared to fiscal 1994. The effective tax rate was 29.3% in 1995, as
compared to 31.0% in 1994. The difference in effective tax rates was due to
differences in United Kingdom marginal company rate relief in fiscal 1994.
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.
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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 an 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 services include advertising and promotion,
contract sales, consulting, publishing, medical education, public relations,
interactive multimedia, database marketing and marketing research services.
Healthworld was incorporated in Delaware in September 1996 and has
conducted no operations to date. In connection with the Consolidation, the
entities comprising GHB&M and Milton will be, as of November 12, 1997, wholly
owned subsidiaries of Healthworld and Healthworld will conduct all of its
operations in the United States through GHB&M and in the United Kingdom through
Milton. GHB&M and Milton have been operating in the marketing and communications
industry since April 1986 and August 1978, respectively. See the Combined
Financial Statements of GHB&M and the Consolidated Financial Statements of
Milton contained elsewhere in this Prospectus.
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 15 years. As a result, once a
pharmaceutical company is ready to begin commercial introduction of a newly
developed drug, only approximately five 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
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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, industry sources report that
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, and that
figures for the first few months of 1997 suggest that the total may double again
and may exceed $1.0 billion for the year.
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 marketing and communications services,
(iv) increasing its contract sales services, and (v) further expanding globally.
The Company intends to implement its strategy through internal development and
potential acquisitions.
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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 that GHB&M is an industry leader in the development of DTC campaigns
for prescription drugs and that Milton is an industry leader in the development
of marketing strategies and campaigns for 'switching' a drug from prescription
to over-the-counter (non-prescription) status based on the number of assignments
GHB&M and Milton have performed in such respective areas. The Company believes
that GHB&M was one of the first firms to develop a DTC campaign for a
prescription drug. GHB&M currently has 12 DTC assignments. 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 medical advertising and communications trade publication, based on a
number of criteria, including creative marketing ability and account wins and
losses, 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, based on a poll of the presidents
of the top 50 communications agencies. 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. The Company began providing contract sales 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 in May 1997 and as of September 30, 1997 revenues
generated from such clients were not significant. The Company intends to expand
its contract sales operations into the United States by the end of the second
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 13 other countries of which GHB&M and Milton are founding licensees.
Healthworld B.V. generally operates as a trade organization through which its
licensed agencies, including GHB&M and Milton, provide business referrals to one
another. In addition, Healthworld B.V. enables GHB&M and Milton and its other
member agencies to utilize the creative talents of other member agencies that
have expertise and knowledge of particular countries or geographic regions in
order to develop consistent and integrated multinational campaigns for its
clients. See '--Healthworld B.V.' The Company currently intends to
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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 independent 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.'
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.
GHB&M's revenues are derived primarily from providing advertising and
promotion, consulting, publishing and medical education services to its clients.
In addition, GHB&M also offers other marketing and communications services to
its clients, including public relations, interactive multimedia, database
marketing and marketing research services. Milton's revenues are derived
primarily from providing contract sales, advertising and promotion and public
relations services to its clients.
The services provided by the Company include:
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, GHB&M
expanded its advertising and promotion services to include DTC. The Company
believes that GHB&M was one of the first firms to develop a DTC campaign for
prescription drugs and has become an industry leader in developing such DTC
campaigns based on the number of DTC assignments it has performed. 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. In
fiscal 1994, 1995, 1996 and the fiscal nine months ended September 30, 1996 and
1997, the Company's revenues from DTC represented 18%, 21%, 20%, and 18% and
15%, respectively, of the Company's pro forma combined revenues.
The Company also believes that Milton is an industry leader in Europe in
developing campaigns for 'switching' a drug from prescription to
over-the-counter status based on the number of switching assignments it has
performed. 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
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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.
GHB&M generated revenues from its advertising and promotion services of
approximately $7.7 million in fiscal 1994, $8.5 million in fiscal 1995, $9.6
million in fiscal 1996, $6.9 million for the nine months ended September 30,
1996 and $9.2 million for the nine months ended September 30, 1997, constituting
74%, 68%, 67%, 68% and 73%, respectively, of GHB&M's combined revenues in each
of such periods. Milton generated revenues from its advertising and promotion
services of approximately $2.4 million in fiscal 1994, $2.9 million in fiscal
1995, $3.1 million in fiscal 1996, $2.2 million for the nine months ended August
31, 1996 and $2.7 million for the nine months ended August 31, 1997,
constituting 90%, 66%, 31%, 30% and 25%, respectively, of Milton's consolidated
revenues in each of such periods. The Company's pro forma combined revenues from
advertising and promotion services were approximately $10.0 million in fiscal
1994, $11.4 million in fiscal 1995, $12.7 million in fiscal 1996, $9.1 million
for the fiscal nine months ended September 30, 1996 and $11.9 million for the
fiscal nine months ended September 30, 1997, constituting 77%, 68%, 52%, 52% and
51%, respectively, of the Company's total pro forma combined revenues in each of
such periods.
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 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. Sound hiring procedures, supplemented by the Company's internal
training and development programs, help to ensure the quality of recruited
personnel.
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 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.
The Company began providing contract sales services to pharmaceutical and
other health care product companies in the United Kingdom in May 1997 and as of
September 30, 1997 revenues generated from such clients were not significant. 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.
Milton generated revenues from its contract sales services of approximately
$280,000 in fiscal 1994, $1.5 million in fiscal 1995, $6.6 million in fiscal
1996, $4.9 million for the nine months ended August 31, 1996 and $7.7 million
for the nine months ended August 31, 1997, constituting 11%, 34%, 67%, 69% and
72%, respectively, of Milton's consolidated revenues in each of such periods,
and 2%, 9%, 27%, 29% and 33%, respectively, of the Company's total pro forma
combined revenues in each of such periods. GHB&M did not have any contract sales
operations during such periods.
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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.
GHB&M generated revenues from its consulting services of approximately $1.4
million in fiscal 1994, $1.5 million in fiscal 1995, $1.8 million in fiscal
1996, $1.3 million for the nine months ended September 30, 1996 and $1.8 million
for the nine months ended September 30, 1997, constituting 14%, 13%, 13%, 12%
and 14%, respectively, of GHB&M's combined revenues in each of such periods, and
11%, 9%, 8%, 7% and 8%, respectively, of the Company's total pro forma combined
revenues in each of such periods. Milton does not provide consulting services.
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 publishes and manages the circulation for 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 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.
GHB&M generated revenues from its publishing services of approximately
$757,000 in fiscal 1994, $1.1 million in fiscal 1995, $1.2 million in fiscal
1996, $745,000 for the nine months ended September 30, 1996 and $732,000 for the
nine months ended September 30, 1997, constituting 7%, 8%, 8%, 7% and 6%,
respectively, of GHB&M's combined revenues in each of such periods, and 6%, 6%,
5%, 4% and 3%, respectively, of the Company's total pro forma combined revenues
in each of such periods. Milton does not have publishing operations.
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.
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GHB&M generated revenues from its medical education services of
approximately $530,000 in fiscal 1994, $1.1 million in fiscal 1995, $1.4 million
in fiscal 1996, $1.1 million for the nine months ended September 30, 1996 and
$750,000 for the nine months ended September 30, 1997, constituting 5%, 9%, 10%,
10% and 6%, respectively, of GHB&M's combined revenues in each of such periods,
and 4%, 7%, 6%, 6% and 3%, respectively, of the Company's total pro forma
combined revenues in each of such periods. Milton does not provide medical
education services.
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.
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.
DATABASE MARKETING. The Company employs database technology to develop and
implement marketing campaigns that are targeted to specific audience profiles.
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.
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.
Revenues from public relations, interactive multimedia, database marketing
and marketing research services, in the aggregate, did not constitute more than
3% of GHB&M's combined revenues, Milton's consolidated revenues or the Company's
pro forma combined revenues in any fiscal year.
HEALTHWORLD B.V.
Healthworld B.V. is a world-wide network of licensed independent marketing
and communications agencies which began operating in August 1993. Healthworld
B.V. was organized as a Dutch corporation by GHB&M, Milton and two other
founding licensees in response to the founders' 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. generally operates as a trade organization through which its licensed
agencies, including GHB&M and Milton, provide business referrals to one another
and, where appropriate, work with other licensed agencies with respect to
projects which require expertise in other geographic markets. As such,
Healthworld B.V. does not generate revenues from operations and is funded solely
by membership fees and royalty payments from its licensees. Healthworld B.V.
enables its member agencies to utilize the creative talents of other member
agencies that have expertise and knowledge of particular countries or geographic
regions to develop consistent and integrated multinational campaigns for the
clients of such member agencies.
Healthworld B.V. currently consists of GHB&M in the United States, Milton
in the United Kingdom, and 13 other licensed independent marketing and
communications agencies located in Belgium, Canada, Denmark, Finland, France,
Holland, Hungary, Italy, Norway, Russia, South Africa, Spain and Sweden. Member
agencies
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are carefully selected based on, among other things, quality of work, local
reputation, client base and certain other organizational and financial criteria.
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.
In addition, each such license agreement provides for the member agency to pay a
royalty fee to Healthworld B.V. and permits such member agency to use certain of
Healthworld's trademarks within its geographic market.
GHB&M and Milton each own 30.2% of the capital stock of Healthworld B.V.,
and the remainder is owned by nine other member agencies. Each agency that
enters into a license agreement with Healthworld B.V. is given the opportunity
to become a shareholder of Healthworld B.V. Healthworld B.V. is managed by a
Board of Directors consisting of five members, and each of GHB&M and Milton is
entitled to designate one of such members.
Although to date, Healthworld B.V. has neither conducted significant
operations nor contributed materially to GHB&M's or Milton'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 many of the world's largest pharmaceutical companies. The Company has
enjoyed long-standing relationships with many of such clients, a number of which
have lasted for more than five years. 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.
The following list sets forth in alphabetical order pharmaceutical and
other health care clients of the Company who each represented $350,000 or more
of the Company's pro forma combined revenues in fiscal 1996, as well as the
corresponding percentage of the Company's pro forma combined revenues
represented by each such client in fiscal 1996:
Applied Microbiology, Inc. (1.7%)
Connaugh Laboratories (1.7%)
Eli Lilly & Co. (2.7%)
The Hospital Saving Association (3.4%)
Johnson & Johnson/Merck-Sharp-Dome
(a joint venture) (2.0%)
Ortho/McNeil Pharmaceuticals (a division of
Johnson & Johnson) (9.3%)
Roche Laboratories (4.3%)
Sanofi Winthrop Pharmaceuticals (a division
of Sanofi Winthrop, Inc.) (5.2%)
SmithKline Beecham Pharmaceuticals (1.5%)
Whitehall Laboratories (a division of American
Home Products) (2.0%)
Wyeth-Ayerst Laboratories (a division
of American Home Products) (24.8%)
The Company's contracts with its clients, except with respect to contract
sales services, generally have a term of one year and, with respect to long-term
projects, are renewed on a year-to-year basis. Such contracts typically relate
to specific services or services only for specific products and may be
terminated by the client on short notice. The Company's contracts relating to
its contract sales services generally are either short-term (i.e., one week to
six months) or long-term (i.e., up to three years), and may also be terminated
by the client on short notice. The Company typically enters into contracts with
new clients or contracts for additional projects from existing clients either by
being directly retained by such clients or after being invited to bid and
successfully bidding on projects for such clients.
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. Client
conflicts of interest are inherent in the marketing and communications industry,
particularly with respect to pharmaceutical and other health care clients for
whom the Company performs advertising services, due to the proprietary nature of
such clients' products. The Company's ability to compete for new clients and
assignments is limited by the Company's general practice, and the practice
followed by many of the Company's competitors, of not representing more than one
client with competing product lines. In addition, the
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Company is often contractually precluded from representing companies with
competing products. As a result, the Company may not be retained by existing,
new and potential clients with respect to certain products if the Company
provides marketing or communications services for competing products.
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
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offer marketing communications services and products that provide significant
performance, creative, technical or other advantages over those offered by the
Company.
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
GHB&M 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. GHB&M also leases
small offices in Bellmore, New York and Chicago, Illinois.
Milton 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. Milton 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 Milton'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 September 30, 1997, the Company had four part-time employees and
approximately 192 full-time employees, 112 of which were employed in GHB&M's
United States operations and 80 of which were employed in Milton's United
Kingdom operations, excluding sales persons employed in Milton's contract sales
organization. In the United Kingdom, Milton 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
against 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.
37
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning Healthworld's
directors and the Company's executive officers and those persons who will become
directors of Healthworld (each, a 'Director Nominee') immediately upon
consummation of the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Steven Girgenti................................. 52 Chairman of the Board and Chief Executive
Officer
William Leslie Milton........................... 53 Vice Chairman of the Board and President
Stuart Diamond.................................. 37 Executive Vice President, Chief Financial
Officer and Secretary
William Butler.................................. 52 Executive Vice President--Global Communications
Services of GH
Herbert Ehrenthal............................... 61 Executive Vice President--U.S. Communications
Services of GH
Francis Hughes.................................. 59 Creative Director of GH and Director
Michael Garnham................................. 42 Managing Director--U.K. Contract Sales Services
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 Offering.
(3) Will become a member of the Audit Committee immediately upon consummation of
the Offering.
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 Healthworld 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 Healthworld 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 Healthworld 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.
38
<PAGE>
WILLIAM BUTLER will become Executive Vice President of GH'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 Executive Vice President of GH'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 Healthworld since August 1997 and has
been Creative Director since September 1995. 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 U.K. Contract Sales
Services since August 1993. Mr. Garnham was the Associate Director of FMCG Field
Marketing Ltd., a field marketing company, from February 1992 to August 1993.
PETER KNIGHT will become a director of Healthworld upon consummation of the
Offering. Mr. Knight has been a partner of the law firm of Wunder, Knight,
Levine, Thelen & Forsey since 1991. In 1996, Mr. Knight took a leave of absence
from the firm to serve as Campaign Manager for the 1996 Clinton/Gore campaign.
Mr. Knight was General Counsel and Secretary of Medicis Pharmaceutical Corp.
from 1989 to 1991, and 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 Healthworld upon consummation of the
Offering. 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 Healthworld upon consummation of
the Offering. 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 Healthworld upon consummation of the
Offering. For more than the past five years, Mr. Spizz has been a senior member
of the law firm of Todtman, 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 a
Compensation Committee and an Audit Committee. The Compensation Committee will
review and recommend to the Board of Directors the compensation and benefits of
all officers of 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
39
<PAGE>
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
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
Executive Vice President--Global Communications
Services of GH....................................... -- -- $ 275,000(1) $ 222,622(2)
Herbert Ehrenthal
Executive Vice President--U.S. Communications
Services of GH....................................... -- -- $ 275,000(1) $ 231,211(2)
Francis Hughes
Creative Director of GH.............................. -- -- $ 225,000(1) $ 52,372(2)
</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.
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.'
EMPLOYMENT AGREEMENTS
The Company will enter into a three-year employment agreement with each of
Messrs. Girgenti, Milton, Butler, Ehrenthal, and Garnham (the 'Executive
Employment Agreements'), which will provide that Messrs. Girgenti, Milton,
Butler, Ehrenthal and Garnham (the 'Executives') will serve as Chairman of the
Board and Chief Executive Officer of the Company, Vice Chairman of the Board and
President of the Company, Executive Vice President--Global Communications
Services of GH, Executive Vice President--U.S. Communications Services of GH and
Managing Director--Headcount, respectively, at an annual salary of
40
<PAGE>
$360,000, $325,000, $300,000, $300,000, and $175,000, respectively, subject to
review and increase at the discretion of the Board of Directors of the Company.
Messrs. Girgenti's and Milton's Executive Employment Agreements provide that
each of Messrs. Girgenti and Milton will serve as members 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 90 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 Messrs. Girgenti's or Milton's Executive Employment Agreement, in
the event that the Company terminates Mr. Girgenti or Milton without cause (as
defined in the agreement) prior to the expiration of the agreement, the Company
will be obligated to pay Messrs. Girgenti or Milton, as the case may be,
severance in an amount equal to twice his then current base salary.
Furthermore, each Executive Employment 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, and
may be entitled to an additional bonus to be determined at the sole discretion
of the Compensation Committee of the Company. 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 and awards under any plans established by
the Company as determined by the Board of Directors or Compensation Committee in
their 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 (in addition to the amount payable in (i) above).
In September 1995, the Company entered into a three-year employment
agreement (the 'Hughes Employment Agreement') with Francis Hughes, a member of
Healthworld's Board of Directors, which provides that Mr. Hughes will serve as
the Creative Director and Secretary of GH for an annual base salary of $225,000.
Under the Hughes Employment Agreement, Mr. Hughes is obligated to work a total
of six out of 12 months per calendar year in accordance with a pre-approved
schedule. The Hughes Employment Agreement may be extended by Mr. Hughes at his
sole discretion for up to two additional one-year periods upon at least 30 days
prior written notice to the Company. The Hughes Employment Agreement contains a
confidentiality provision as well as a non-competition provision which prohibits
Mr. Hughes from competing with the Company during the term of the agreement and
for five years thereafter.
STOCK OPTION PLAN
The Board of Directors has adopted, and the stockholders have approved, the
Company's 1997 Stock Option Plan ('Stock Option Plan'). The Stock Option Plan
provides 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 is
710,000. To date, no stock options have been granted under the Stock Option
Plan. On the effective date of the Offering, Options will be granted by the
41
<PAGE>
Company under the Stock Option Plan to purchase up to an aggregate of 498,500
shares of Common Stock at an exercise price per share equal to the initial
public offering price, which includes (i) options to purchase 25,000 shares of
Common Stock granted to each of Messrs. Girgenti, Milton, Diamond, Butler,
Ehrenthal and Hughes and options to purchase 12,500 shares granted to Mr.
Garnham and (ii) options to purchase 10,000 shares granted to each of Messrs.
Knight, Lloyd, Shacknai and Spizz.
The Stock Option Plan will be administered by the Compensation Committee
(the 'Committee') of the Board of Directors, 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. The
Committee may appoint a separate committee comprised of the Chief Executive
Officer and the Chief Financial Officer of the Company (the 'Administrative
Committee') to act on its behalf and administer the Stock Option Plan with
respect to certain employees of the Company who are not officers of the Company,
provided that (i) the Administrative Committee may not grant options to purchase
more than an aggregate of 50,000 shares of Common Stock in any one calendar year
and (ii) unless otherwise determined by the Committee, no single employee may be
granted options to purchase more than 2,500 shares of Common Stock. No option
granted under the Stock Option Plan will be transferable by the optionee other
than by will or the laws of descent and distribution and each option will be
exercisable during the lifetime of the optionee only by such optionee. The Stock
Option Plan provides that no person shall be granted options to purchase more
than an aggregate of 200,000 share of Common Stock during any fiscal year.
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 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. Options are subject
to earlier termination upon termination of employment. Except as otherwise
provided by the Committee at the time of grant, options shall become exercisable
ratably over three years commencing on the first anniversary of the date of
grant.
The Stock Option Plan also provides for an automatic annual option grant
for the non-employee directors. Each Director Nominee will automatically receive
an option grant for 10,000 shares of Common Stock on the date of this Prospectus
and on the date of the first meeting of the Board of Directors following each
annual meeting of stockholders thereafter. In addition, a non-employee director
who becomes a director subsequent to the date of this Prospectus and other than
on the date of any annual meeting of stockholders will receive an option grant
for 10,000 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.
In the event of a change of control (as defined in the Stock Option Plan)
of the Company, each option granted under the Stock Option Plan which has not
previously expired or been cancelled, shall become immediately exercisable in
full.
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.
42
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Healthworld entered into the Consolidation Agreements with the stockholders
of GHB&M and Milton in October 1997 pursuant to which, on November 12, 1997,
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 Consolidation.'
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 September 30, 1997, the
aggregate principal amount of indebtedness outstanding under the GHB&M Credit
Facility was $151,000. 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 stockholder agreements. In connection with the
Consolidation, GHB&M and its stockholders have entered into an agreement to
terminate such stockholder agreements, concurrent with the consummation of the
Consolidation.
Todtman, 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.
43
<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)................................... 1,303,737 26.1% 18.4%
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(1)......................................... 185,143 3.7% 2.6%
Peter Knight............................................... -- -- --
Colin Lloyd................................................ -- -- --
Jonah Shacknai............................................. -- -- --
Alex Spizz................................................. -- -- --
All directors, Director Nominees and executive officers as
a group (11 persons)..................................... 4,938,880 98.8% 69.6%
</TABLE>
- ------------------
(1) The actual number of shares of Common Stock to be received by each
stockholder of Milton in the Consolidation will be determined using the
exchange rate between the U.S. Dollar and the British Pound Sterling in
effect on the business day prior to the date of the Consolidation. The
number of shares listed in the table to be received by Messrs. Milton and
Garnham has been calculated using an exchange rate as of September 30, 1997
of $1.62=pounds 1.00.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary description of Healthworld's capital stock and
certain provisions of Healthworld's Certificate of Incorporation and Bylaws does
not purport to be complete and is qualified in its entirety by reference to
Healthworld's Certificate of Incorporation and Bylaws, copies of which have been
filed with the Securities and Exchange Commission (the 'Commission') as exhibits
to Healthworld's registration statement on Form S-1 (the 'Registration
Statement') of which this Prospectus forms a part.
GENERAL
Healthworld'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, Healthworld 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, Healthworld 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 Healthworld'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 Healthworld 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
Healthworld's Certificate of Incorporation and By-laws include provisions
which eliminate the personal liability of Healthworld'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
45
<PAGE>
improper personal benefit). These provisions do not limit or eliminate the right
of Healthworld 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 Healthworld 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 (Healthworld 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.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Consolidation and completion of the Offering,
Healthworld 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 who will receive shares of Common Stock in the Consolidation have
entered 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 Healthworld for a period of 180 days, commencing
upon the date of this Prospectus, without the prior written consent of C. E.
Unterberg, Towbin, other than sales or issuances by Healthworld pursuant to the
exercise of the Underwriters' over-allotment option or pursuant to the grant of
stock options under Healthworld's Stock Option Plan.
The stockholders of GHB&M and Milton will, pursuant to the Consolidation
Agreements, be granted the right by Healthworld, commencing one year from the
date of this Prospectus, to require Healthworld, subject to certain exceptions,
to include their shares (up to 5,000,000 in the aggregate) in any and all
offerings in which Healthworld 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 Healthworld'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.
47
<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 C. E.
Unterberg, Towbin 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>
C. E. Unterberg, Towbin....................................................................
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
48
<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 Common Stock has been approved for quotation on The Nasdaq National
Market under the symbol 'HWLD.'
The Company and its officers and directors and the stockholders of GHB&M
and Milton who will receive shares of Common Stock in the Consolidation have
entered 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 C. E. Unterberg, Towbin, 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
Healthworld'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 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 financial statements of Healthworld, 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.
49
<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.
50
<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
HEALTHWORLD CORPORATION
Report of Independent Public Accountants................................................................... F-13
Balance Sheet.............................................................................................. F-14
Notes to Balance Sheet..................................................................................... F-15
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
Report of Independent Public Accountants................................................................... F-16
Combined Balance Sheets.................................................................................... F-17
Combined Statements of Income.............................................................................. F-18
Combined Statements of Stockholders' Equity................................................................ F-19
Combined Statements of Cash Flows.......................................................................... F-20
Notes to Combined Financial Statements..................................................................... F-21
MILTON MARKETING GROUP LIMITED AND SUBSIDIARIES
Report of Independent Public Accountants................................................................... F-26
Consolidated Balance Sheets................................................................................ F-27
Consolidated Statements of Income.......................................................................... F-28
Consolidated Statements of Stockholders' Equity............................................................ F-29
Consolidated Statements of Cash Flows...................................................................... F-30
Notes to Consolidated Financial Statements................................................................. F-31
</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'), including the
minority interest stockholders in such subsidiaries, 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 November 12, 1997 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, S Corporation distributions to the stockholders of the companies
comprising GHB&M (other than Syberactive, Inc.), the contribution by the
stockholders of GHB&M to the Company of undistributed S Corporation earnings,
the purchase by the Company of minority interests in certain of Milton's
subsidiaries, and the sale by GHB&M of certain of its accounts receivable, 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, the tax impact of the termination of 'S' Corporation status of
the companies comprising GHB&M, and the purchase of Milton's minority interests,
as if each event had occurred at the beginning of each period presented.
The pro forma adjustments are based on the historical financial position
and results of operations for the periods presented, preliminary estimates,
available information and certain assumptions. While these pro forma adjustments
are not subject to material fluctuation as of and for the periods presented,
they may be revised based on future results of operations and the financial
position of the Company as of the date of the future transaction for which pro
forma effects are resolved. The amount of GHB&M's S Corporation distributions
are based on management's estimate of the tax liability of GHB&M's stockholders
for GHB&M's 1997 taxable income at the time of the Consolidation. The proceeds
from the sale of certain of GHB&M's accounts receivable sale are based on an
estimate of the aggregate amount of GHB&M's fee-based accounts receivable at the
time of the Consolidation. 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 1,977 (d) 2,971
Other assets....................................................... 368 8 -- 376
------- ------ ----------- ---------
$13,287 $3,401 $ 1,977 $18,665
------- ------ ----------- ---------
------- ------ ----------- ---------
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)(d) --
Deferred rent...................................................... 642 -- -- 642
Deferred income taxes.............................................. 118 -- -- 118
------- ------ ----------- ---------
Total liabilities.................................................. 8,482 2,971 (89) 11,364
------- ------ ----------- ---------
Stockholders' equity:
Common stock..................................................... 289 -- (241)(a) 50
2 (d)
Additional paid-in capital....................................... -- 13 241 (a) 2,318
2,064 (d)
Retained earnings................................................ 4,516 423 -- 4,939
Cumulative foreign currency translation adjustments.............. -- (6) -- (6)
------- ------ ----------- ---------
Total stockholders' equity......................................... 4,805 430 2,066 7,301
------- ------ ----------- ---------
$13,287 $3,401 $ 1,977 $18,665
------- ------ ----------- ---------
------- ------ ----------- ---------
</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 2,010 (d) 3,810
Other assets....................................................... 455 49 -- 504
------- ------ ----------- ---------
$14,049 $6,487 $ 2,010 $22,546
------- ------ ----------- ---------
------- ------ ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit................................................... $ 400 $ -- $ -- $ 400
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)(d) --
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 -- (242)(a) 50
2 (d)
Additional paid-in capital....................................... -- 13 242 (a) 2,406
2,151 (d)
Retained earnings................................................ 5,078 925 -- 6,003
Cumulative foreign currency translation adjustments.............. -- 66 -- 66
------- ------ ----------- ---------
Total stockholders' equity......................................... 5,368 1,004 2,153 8,525
------- ------ ----------- ---------
$14,049 $6,487 $ 2,010 $22,546
------- ------ ----------- ---------
------- ------ ----------- ---------
</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
SEPTEMBER 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........................................ $ 1,873 $ -- $(3,500)(b) $ 873
2,500 (e)
Accounts receivable.............................................. 8,430 4,591 (2,500)(e) 10,521
Unbilled production charges...................................... 3,040 196 -- 3,236
Other current assets............................................. 78 518 -- 596
------- ------ ----------- ---------
Total current assets............................................... 13,421 5,305 (3,500) 15,226
Furniture, equipment and leasehold improvements, net............... 1,372 926 -- 2,298
Goodwill, net...................................................... -- 1,696 1,869 (d) 3,565
Other assets....................................................... 1,444 231 -- 1,675
------- ------ ----------- ---------
$16,237 $8,158 $(1,631) $22,764
------- ------ ----------- ---------
------- ------ ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans and overdrafts........................................ -- 1,154 -- 1,154
Current portion of long-term debt................................ 100 581 -- 681
Current portion of capitalized lease obligation.................. -- 123 -- 123
Accounts payable................................................. 2,265 1,518 -- 3,783
Accrued expenses................................................. 414 2,126 -- 2,540
Advance billings................................................. 5,239 912 -- 6,151
------- ------ ----------- ---------
Total current liabilities.......................................... 8,018 6,414 -- 14,432
Long-term debt..................................................... 51 285 -- 336
Capitalized lease obligation....................................... -- 135 -- 135
Minority interests................................................. -- 284 (284)(d) --
Deferred rent...................................................... 742 -- -- 742
Deferred income taxes.............................................. 380 -- -- 380
Other liabilities.................................................. -- 55 -- 55
------- ------ ----------- ---------
Total liabilities.................................................. 9,191 7,173 (284) 16,080
------- ------ ----------- ---------
Stockholders' Equity:
Common stock..................................................... 290 -- (242)(a) 50
2 (d)
Additional paid-in capital....................................... -- 13 242 (a) 5,808
2,151 (d)
3,402 (c)
Retained earnings................................................ 6,756 971 (3,500)(b) 825
(3,402)(c)
Cumulative foreign currency translation adjustments.............. -- 1 -- 1
------- ------ ----------- ---------
Total stockholders' equity......................................... 7,046 985 (1,347) 6,684
------- ------ ----------- ---------
$16,237 $8,158 $(1,631) $22,764
------- ------ ----------- ---------
------- ------ ----------- ---------
</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 (b) 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 (a) 613
Minority interests in net earnings of subsidiaries................. -- 39 (39)(b) --
------- ------ ----------- ---------
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.................................... 7,326 2,531 -- 9,857
Other operating expenses...................................... 3,115 1,310 44 (b) 4,469
------- ------ ----------- ---------
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 (a) 1,038
Minority interests in net earnings of subsidiaries................. -- 68 (68)(b) --
------- ------ ----------- ---------
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.................................... 8,940 6,793 -- 15,733
Other operating expenses...................................... 3,191 2,017 66 (b) 5,274
------- ------ ----------- ---------
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 (a) 1,305
Minority interests in net earnings of subsidiaries................. -- 124 (124)(b) --
------- ------ ----------- ---------
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 NINE MONTHS ENDED SEPTEMBER 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........................................................... $10,165 $7,194 $ -- $17,359
------- ------ ----------- ---------
Operating expenses:
Salaries and related costs.................................... 6,669 5,220 -- 11,889
Other operating expenses...................................... 2,366 1,311 52 (b) 3,729
------- ------ ----------- ---------
9,035 6,531 52 15,618
Income from operations............................................. 1,130 663 (52) 1,741
Interest expense, net.............................................. (51) 66 -- 15
------- ------ ----------- ---------
Income before provision for income taxes and minority interests.... 1,181 597 (52) 1,726
Provision for income taxes......................................... 85 221 417 (a) 723
Minority interests in net earnings of subsidiaries................. -- 100 (100)(b) --
------- ------ ----------- ---------
Net income......................................................... $ 1,096 $ 276 $ (369) $ 1,003
------- ------ ----------- ---------
------- ------ ----------- ---------
Earnings per share................................................. $ 0.20
---------
---------
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 NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
PRO FORMA
GHB&M MILTON ADJUSTMENTS PRO FORMA
------- ------ ----------- ---------
(NOTE 3)
<S> <C> <C> <C> <C>
Revenues.......................................................... $12,562 $10,624 $ -- $23,186
------- ------- ----------- ---------
Operating expenses:
Salaries and related costs................................... 7,791 8,251 -- 16,042
Other operating expenses..................................... 2,512 1,794 52 (b) 4,358
------- ------- ----------- ---------
10,303 10,045 52 20,400
Income from operations............................................ 2,259 579 (52) 2,786
Interest expense, net............................................. (94) 86 -- (8)
------- ------- ----------- ---------
Income before provision for income taxes and minority interests... 2,353 493 (52) 2,794
Provision for income taxes........................................ 177 182 823 (a) 1,182
Minority interests in net earnings of subsidiaries................ -- 160 (160)(b) --
------- ------- ----------- ---------
Net income........................................................ $ 2,176 $ 151 $ (715) $ 1,612
------- ------- ----------- ---------
------- ------- ----------- ---------
Earnings per share................................................ $ 0.32
---------
---------
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'), including the minority interest
stockholders in such subsidiaries in exchange for an aggregate of 5,000 shares
of common stock of the Company (the 'Consolidation') as of November 12, 1997.
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 include, (i) with respect to periods as of and for the year ended
December 31, financial data for GHB&M based on a December 31 fiscal year end and
for Milton based on a November 30 fiscal year end and (ii) with respect to
periods as of September 30, financial data for GHB&M at September 30 and for
Milton at August 31.
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 GHB&M's
estimated 1997 'S' Corporation earnings through the date of the
Consolidation;
c. an increase in additional paid-in capital of $3,402 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
September 30, 1997;
d. the acquisition of minority interests in Milton's subsidiaries and the
goodwill resulting therefrom. The holders of minority interests in
certain of Milton's subsidiaries will exchange all of their shares in
such subsidiaries for an agreed upon aggregate purchase price of $2,153
to be paid for in shares of the Company's common stock based upon the
per share public offering price. The acquisition will be accounted for
using the purchase method of accounting;
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 acquisition of minority interests in Milton's subsidiaries and the
goodwill resulting therefrom. The holders of minority interests in
certain of Milton's subsidiaries will exchange all of their shares in
such subsidiaries for an agreed upon aggregate purchase price of $2,153
to be paid for in shares of the
F-11
<PAGE>
HEALTHWORLD CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. UNAUDITED PRO FORMA INCOME STATEMENT ADJUSTMENTS--(CONTINUED)
Company's common stock based upon the per share public offering price.
The acquisition will be accounted for using the purchase method of
accounting.
4. INITIAL PUBLIC OFFERING
The Company is pursuing an initial public offering of its common stock. The
Offering presently contemplates the sale of 2,100 shares of common stock at an
assumed initial offering price of $8.75 per share. The Company plans to use a
portion of the proceeds of the Offering to repay a loan. The Company's
supplementary pro forma net income per share for the year ended December 31,
1996 and the nine months ended September 30, 1997, which follows, gives
supplemental effect to the issuance of 53 and 52 shares of its common stock,
respectively, which is the number of additional shares of its common stock which
would need to be issued in the Offering from which the proceeds from such
additional issuance could be used to repay the $462 loan which was outstanding
at December 31, 1996 or the $456 of such loan which was outstanding at September
30, 1997, as well as to effect the reduction of related interest expense for
such periods. Such additional shares are presumed outstanding for supplementary
purposes only, and were neither issued nor outstanding for any purpose during
the year ended December 31, 1996 or the nine months ended September 30, 1997.
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------------
<S> <C> <C>
Supplementary pro forma net income per share... $ .36 $ .32
Supplementary weighted average common shares
outstanding.................................. 5,053 5,052
</TABLE>
F-12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Healthworld Corporation:
We have audited the accompanying balance sheet of Healthworld Corporation (a
Delaware corporation) as of October 13, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Healthworld Corporation as of
October 13, 1997, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN
--------------------------------------
Arthur Andersen
Melville, New York
October 13, 1997
(except with respect to the matters
discussed in Note 1 as to which
the date is October 23, 1997)
F-13
<PAGE>
HEALTHWORLD CORPORATION
BALANCE SHEET
AS OF OCTOBER 13, 1997
<TABLE>
<S> <C>
ASSETS
Cash........................................................................................... $ 100
------
Total assets.............................................................................. $ 100
------
------
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities.............................................................................. $ --
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding.......... --
Common stock, $.01 par value; 20,000,000 shares authorized; 100 shares outstanding........... 1
Additional paid-in capital................................................................... 99
------
Total stockholders' equity................................................................ 100
------
Total liabilities and stockholders' equity................................................ $ 100
------
------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-14
<PAGE>
HEALTHWORLD CORPORATION
NOTES TO BALANCE SHEET
OCTOBER 13, 1997
1. ORGANIZATION AND BUSINESS
Healthworld Corporation ('Healthworld') was incorporated in Delaware on
September 12, 1996 and has conducted no operations to date. Prior to the
consummation of the initial public offering of its common stock (the
'Offering'), Healthworld entered into separate Agreements and Plans of
Organization (the 'Consolidation Agreements'), dated as of October 23, 1997,
with the stockholders of Girgenti, Hughes, Butler & McDowell, Inc. and
affiliates ('GHB&M') and Milton Marketing Group and subsidiaries ('Milton'),
including the minority interest stockholders in such subsidiaries. Pursuant to
the Consolidation Agreements, on November 12, 1997, 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 Healthworld, at which time GHB&M and Milton will
become wholly-owned subsidiaries of Healthworld.
2. STOCK ISSUANCE
On October 13, 1997, Healthworld issued one hundred shares of common stock
to the stockholders of GHB&M in exchange for cash in the amount of $100.
F-15
<PAGE>
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.
/s/ ARTHUR ANDERSEN
-----------------------------------
Arthur Andersen
Melville, New York
January 24, 1997
(except with respect to the matters
discussed in Note 9 as to which
the date is October 23, 1997)
F-16
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 627 $ 2,214 $ 1,873
Accounts receivable........................................................ 7,854 8,539 8,430
Unbilled production charges, at cost....................................... 3,060 1,477 3,040
Other current assets....................................................... 242 122 78
------- ------- -------------
Total current assets......................................................... 11,783 12,352 13,421
Furniture, equipment and leasehold improvements, net......................... 1,136 1,242 1,372
Other assets................................................................. 368 455 1,444
------- ------- -------------
$13,287 $14,049 $16,237
------- ------- -------------
------- ------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit............................................................. $ 600 $ 400 $ --
Current portion of long-term debt.......................................... 82 98 100
Accounts payable........................................................... 1,361 1,327 2,265
Accrued expenses........................................................... 110 120 414
Advance production billings................................................ 5,569 5,739 5,239
------- ------- -------------
Total current liabilities.................................................... 7,722 7,684 8,018
Commitments (Note 7)
Long-term debt............................................................... -- 125 51
Deferred rent................................................................ 642 665 742
Deferred income taxes........................................................ 118 207 380
------- ------- -------------
8,482 8,681 9,191
------- ------- -------------
Stockholders' equity:
Common stock............................................................... 289 290 290
Retained earnings.......................................................... 4,516 5,078 6,756
------- ------- -------------
Total stockholders' equity................................................... 4,805 5,368 7,046
------- ------- -------------
$13,287 $14,049 $16,237
------- ------- -------------
------- ------- -------------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these balance sheets.
F-17
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................................... $10,415 $12,368 $14,314 $10,165 $12,562
------- ------- ------- ------- -------
Operating expenses:
Salaries and related costs............................... 6,416 7,326 8,940 6,669 7,791
Other operating expenses................................. 2,911 3,115 3,191 2,366 2,512
------- ------- ------- ------- -------
9,327 10,441 12,131 9,035 10,303
Income from operations..................................... 1,088 1,927 2,183 1,130 2,259
Interest expense, net...................................... 2 (13) (24) (51) (94)
------- ------- ------- ------- -------
Income before provision for income taxes................... 1,086 1,940 2,207 1,181 2,353
Provision for income taxes................................. 19 124 158 85 177
------- ------- ------- ------- -------
Net income................................................. $ 1,067 $ 1,816 $ 2,049 $ 1,096 $ 2,176
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Pro forma information--unaudited (note 9):
Income before provision for income taxes................. $ 1,086 $ 1,940 $ 2,207 $ 1,181 $ 2,353
Pro forma provision for income taxes..................... 496 879 939 502 1,000
------- ------- ------- ------- -------
Pro forma net income..................................... $ 590 $ 1,061 $ 1,268 $ 679 $ 1,353
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-18
<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)..................................................................... -- 2,176
Stockholders' distributions (unaudited).................................................... -- (498)
------ --------
Balance, September 30, 1997 (unaudited)...................................................... $290 $6,756
------ --------
------ --------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-19
<PAGE>
GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 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 $ 1,096 $ 2,176
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization.... 214 274 402 268 320
Deferred rent.................... 80 200 23 17 77
Deferred income taxes............ -- 83 89 85 173
Changes in operating assets and
liabilities:
Accounts receivable.............. (1,652) 336 (685) 571 109
Unbilled production charges...... 287 (719) 1,583 778 (1,563)
Other current assets............. 18 (88) 120 (73) 44
Other assets..................... 95 30 (88) (22) (989)
Accounts payable................. (145) 253 (35) (614) 938
Advanced production billing...... 1,313 (1,653) 171 (530) (500)
Accrued expenses................. (125) 98 9 149 294
------ ------ ------ ------- -------
Net cash provided by operating
activities.............................. 1,152 630 3,638 1,725 1,079
------ ------ ------ ------- -------
Cash flows from investing activities:
Capital expenditures, net............. (258) (563) (507) (244) (450)
------ ------ ------ ------- -------
Net cash (used in) investing
activities.............................. (258) (563) (507) (244) (450)
------ ------ ------ ------- -------
Cash flows from financing activities:
Distributions to stockholders......... (544) (209) (1,487) (772) (498)
Net (repayment) proceeds from line of
credit............................. (100) 200 (200) (200) (400)
Issuance of long-term debt............ -- -- 300 300 --
Repayment of long-term debt........... (97) (105) (158) (135) (72)
Issuance of common stock in new
affiliate.......................... -- -- 1 1 --
------ ------ ------ ------- -------
Net cash (used in) financing
activities.............................. (741) (114) (1,544) (806) (970)
------ ------ ------ ------- -------
Net increase/(decrease) in cash and cash
equivalents............................. 153 (47) 1,587 675 (341)
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 $ 1,302 $ 1,873
------ ------ ------ ------- -------
------ ------ ------ ------- -------
Supplemental disclosure of cash flow
information:
Cash paid for taxes................... $ 17 $ 45 $ 64 $ 45 $ 64
------ ------ ------ ------- -------
------ ------ ------ ------- -------
Cash paid for interest................ $ 30 $ 31 $ 41 $ 34 $ 15
------ ------ ------ ------- -------
------ ------ ------ ------- -------
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-20
<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
controlled and managed by a stockholder group consisting of four individuals and
each is owned in the same proportion by such stockholders.
The Company operates in the marketing communications industry segment and
provides a broad range of integrated 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
Revenues and fees are derived 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. For services such as the production of advertising and
promotion materials and medical education programs, fees are recognized when the
production materials or programs are completed. With respect to services such as
consulting, publishing and public relations, the Company is either paid a
monthly retainer or bills on an actual time incurred basis, which, in each case,
the Company recognizes as income each month to match its monthly payroll and
operating costs.
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 marketing and communications services to a wide range
of clients who operate primarily in the health care industry. For the year ended
December 31, 1996, the Company had three clients which constituted approximately
42%, 16% and 9% of total revenues. In addition, the Company's five largest
clients represent 78% of combined revenues for that period. The Company had
three clients which constituted approximately 36%, 17% and 13% of total 1995
revenues and 24%, 18% 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-21
<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>
Advance Production Billing
Advance production billings consist of progress billings for production
jobs that are not completed, as well as accrued media placements that have been
billed to clients.
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
F-22
<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)
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. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and equipment......................................... $1,607 $2,117 $ 2,315
Leasehold improvements.......................................... 465 465 628
------------ ------------ -------------
2,072 2,582 2,943
Less: Accumulated depreciation and amortization................. 936 1,340 1,571
------------ ------------ -------------
$1,136 $1,242 $ 1,372
------------ ------------ -------------
------------ ------------ -------------
</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 nine months ended
September 30, 1996 and 1997 amounted to approximately $268 and $320,
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, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Line of Credit.................................................... $600(a) $400(a) $ --
Term Note/Loan.................................................... 82(b) 223(c) 151
------ ------ ------
682 623 151
Less: Current portion............................................. 682 498 100
------ ------ ------
$ -- $125 $ 51
------ ------ ------
------ ------ ------
</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, which matured
on July 31, 1997, was renewed in October 1997, bears interest at prime (8.25%
as of December 31, 1996) plus 1% per annum, and matures on June 30, 1998. 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.
F-23
<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)
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.
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
September 30, 1997 (unaudited), stockholders' equity consisted of the following:
<TABLE>
<CAPTION>
RETAINED EARNINGS/
COMMON STOCK (ACCUMULATED DEFICIT)
----------------------------- -------------------------------------
SHARES SEPTEMBER 30, SEPTEMBER 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 $ 3,057
Black Cat........................ 120.90 89 89 89 2,434 2,655 2,970
MET.............................. 120.90 6 6 6 477 847 826
Brand............................ 120.90 1 1 1 88 43 50
GHBM, Inc........................ 120.90 1 1 1 -- (1) (1)
Syberactive...................... 100.00 -- 1 1 -- (6) (146)
---- ---- ------ ------ ------ -------------
$289 $290 $ 290 $4,516 $5,078 $ 6,756
---- ---- ------ ------ ------ -------------
---- ---- ------ ------ ------ -------------
</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 nine
months ended September 30, 1996 and 1997 was approximately $542 and $555,
respectively (unaudited).
F-24
<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 nine months ended September 30, 1996 and 1997, the Company has
contributed $79 and $137, respectively (unaudited), to the Plan.
8. INTERIM FINANCIAL STATEMENTS
The combined financial statements of Girgenti, Hughes, Butler & McDowell,
Inc. as of and for the nine months ended September 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 September 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 the Agreements and Plans of Organization (the 'Consolidation
Agreements'), dated as of October 23, 1997, the stockholders of the Company and
Milton Marketing Group Limited and its subsidiaries ('Milton'), including the
minority interest stockholders in such subsidiaries, have agreed to exchange all
of the outstanding shares of common stock of each of the companies comprising
the Company and Milton for shares of common stock of Healthworld Corporation
('Healthworld') as of November 12, 1997 (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. The pro forma effect of a subchapter 'C' Corporation
income tax provision has been included in the calculation of pro forma net
income in the accompanying combined statements of income.
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 GHB&M's 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.
F-25
<PAGE>
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.
/s/ Arthur Andersen
--------------------------------------
Arthur Andersen
Melville, New York
January 27, 1997
(except with respect to the matters
discussed in Note 11 as to which
the date is October 23, 1997)
F-26
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------- AUGUST 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 511 $ -- $ --
Accounts receivable............................................................ 1,058 3,266 4,591
Unbilled production charges, at cost........................................... 49 87 196
Other current assets........................................................... 147 415 518
------ ------ -----------
Total current assets........................................................ 1,765 3,768 5,305
Furniture, equipment and leasehold improvements, net............................. 634 870 926
Goodwill, net of accumulated amortization of $2, $44 and $91, respectively....... 994 1,800 1,696
Other assets..................................................................... 8 49 231
------ ------ -----------
$3,401 $6,487 $ 8,158
------ ------ -----------
------ ------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans and overdrafts...................................................... $ 24 $ 406 $ 1,154
Current portion of long-term debt.............................................. 107 118 581
Current portion of capitalized lease obligation................................ 74 125 123
Accounts payable............................................................... 340 1,144 1,518
Accrued expenses............................................................... 936 1,977 2,126
Advance billings............................................................... 441 534 912
------ ------ -----------
Total current liabilities................................................... 1,922 4,304 6,414
Commitments (Note 9)
Long-term debt................................................................... 882 825 285
Capitalized lease obligation..................................................... 78 128 135
Minority interests............................................................... 89 143 284
Other liabilities................................................................ -- 83 55
------ ------ -----------
2,971 5,483 7,173
------ ------ -----------
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.............................................................. 423 925 971
Cumulative foreign currency translation adjustments............................ (6) 66 1
------ ------ -----------
Total stockholders' equity.................................................. 430 1,004 985
------ ------ -----------
$3,401 $6,487 $ 8,158
------ ------ -----------
------ ------ -----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-27
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED NOVEMBER 30, ENDED AUGUST 31,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues....................................................... $2,666 $4,399 $9,895 $7,194 $10,624
------ ------ ------ ------ -------
Operating expenses:
Salaries and related costs................................... 1,474 2,531 6,793 5,220 8,251
Other operating expenses..................................... 802 1,310 2,017 1,311 1,794
------ ------ ------ ------ -------
2,276 3,841 8,810 6,531 10,045
Income from operations......................................... 390 558 1,085 663 579
Interest expense, net.......................................... 12 15 93 66 86
------ ------ ------ ------ -------
Income before provision for income taxes and minority
interests.................................................... 378 543 992 597 493
Provision for income taxes..................................... 117 159 366 221 182
Minority interests in net earnings of subsidiaries............. 39 68 124 100 160
------ ------ ------ ------ -------
Net income..................................................... $ 222 $ 316 $ 502 $ 276 $ 151
------ ------ ------ ------ -------
------ ------ ------ ------ -------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-28
<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)............................ -- -- 151 -- 151
Dividends (unaudited)............................. -- -- (105) -- (105)
Foreign currency translation adjustments
(unaudited).................................... -- -- -- (65) (65)
------ --- -------- ----- ------
Balance, August 31, 1997 (unaudited)................ $-- $ 13 $971 $ 1 $ 985
------ --- -------- ----- ------
------ --- -------- ----- ------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-29
<PAGE>
MILTON MARKETING GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED NOVEMBER 30, AUGUST 31,
----------------------- -----------------
1994 1995 1996 1996 1997
----- ----- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $ 222 $ 316 $ 502 $ 276 $ 151
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................... 114 136 225 143 205
Minority interest in net earnings............................... 39 68 124 100 160
(Gain)/loss on sale of fixed assets............................. (24) 1 18 5 (19)
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable............................................. 418 (138) (1,456) (2,393) (1,325)
Unbilled production charges..................................... 538 28 (21) (160) (109)
Other current assets............................................ -- (22) (166) 10 (103)
Other assets.................................................... -- -- -- -- (182)
Accounts payable................................................ (536) (614) (359) 898 374
Accrued expenses................................................ 7 763 876 341 149
Advance billings................................................ (502) 74 50 188 378
Other liabilities............................................... -- -- 18 61 (28)
----- ----- ------- ------- -------
Net cash provided by (used in) operating activities................... 276 612 (189) (531) (349)
----- ----- ------- ------- -------
Cash flows from investing activities:
Net purchase price of acquisitions (Note 3)......................... -- (639) (242) (234) --
Capital expenditures, net........................................... (95) (203) (214) (66) (128)
Proceeds from the sale of fixed assets.............................. 58 63 50 23 75
----- ----- ------- ------- -------
Net cash (used in) investing activities............................... (37) (779) (406) (277) (53)
----- ----- ------- ------- -------
Cash flows from financing activities:
Payment of majority stockholder dividends........................... (130) (86) -- -- (105)
Payment of minority interest shareholders dividends................. (23) (15) -- -- (55)
Proceeds from bank overdraft........................................ -- -- 309 382 748
Repayment of bank loans............................................. -- -- (131) (30) (77)
Proceeds from bank loans............................................ -- 613 -- -- --
Capital lease repayments............................................ (88) (152) (77) (41) (109)
----- ----- ------- ------- -------
Net cash (used in) provided by financing activities................... (241) 360 101 311 402
----- ----- ------- ------- -------
Effect of exchange rate changes on cash............................... 12 (14) (17) (14) --
----- ----- ------- ------- -------
Net increase/(decrease) in cash and cash equivalents.................. 10 179 (511) (511) --
Cash and cash equivalents at beginning of year........................ 322 332 511 511 --
----- ----- ------- ------- -------
Cash and cash equivalents at end of year.............................. $ 332 $ 511 $ -- $ -- $ --
----- ----- ------- ------- -------
----- ----- ------- ------- -------
Supplemental disclosure of cash flow information:
Cash paid for taxes................................................. $ 113 $ 151 $ 67 $ 58 $ 301
----- ----- ------- ------- -------
----- ----- ------- ------- -------
Cash paid for interest.............................................. $ 21 $ 22 $ 88 $ 66 $ 86
----- ----- ------- ------- -------
----- ----- ------- ------- -------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-30
<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'). The Company
operates in the marketing communications industry segment and provides
integrated services including contract sales, advertising and promotion and
public relations services to its clients. Milton is comprised of its
wholly-owned subsidiary Milton Headcount Limited (formerly Effective Sales
Personnel Limited) ('MHL') and its majority-owned subsidiaries, Milton Marketing
Limited ('MML'), Effective Sales Personnel (formerly Milton Headcount Limited)
('ESP'), 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
Revenues and fees are derived from clients for creative concept
development, production of advertising and marketing materials, the supply of
long and short-term personnel for client promotional purposes and the provision
of public relations services to public health service institutions. For services
such as the production of advertising and promotion materials, fees are
recognized when the production materials are completed. With respect to services
such as public relations, the Company is either paid a monthly retainer or bills
on an actual time incurred basis, which, in each case, the Company recognizes as
income each month to match its monthly payroll and operating costs.
Additionally, revenues associated with contract sales services are recognized as
such services are provided and payroll expenses are incurred.
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 three clients which constituted approximately
13%, 13% and 8% of total revenues. In addition, the Company's five largest
clients represented 49% of total revenues for that period. The Company had three
clients which constituted approximately 16%, 13% and 10% and 27%, 18% and 11% 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-31
<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 nine months ended August 31, 1996 and 1997 amounted to $32 and $47,
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-32
<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
Milton Headcount Limited (formerly Effective Sales Personnel Limited)
In November 1995, the Company acquired all of the outstanding stock of MHL
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.
The three acquisitions discussed above were all accounted for using the
purchase method of accounting. Accordingly, a portion of the purchase price was
allocated to the net assets acquired based on their estimated fair
F-33
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. ACQUISITIONS OF BUSINESSES--(CONTINUED)
values. The excess of the purchase price over the fair value of net assets
acquired was recorded as goodwill. 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, AUGUST 31,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Motor vehicles............................................. $ 204 $ 265 $ 229
Furniture and equipment.................................... 670 996 1,052
Leasehold improvements................................... 126 163 202
Equipment held under capital leases........................ 284 395 429
------------ ------------ -----------
1,284 1,819 1,912
Less: Accumulated depreciation and amortization............ 650 949 986
------------ ------------ -----------
$ 634 $ 870 $ 926
------------ ------------ -----------
------------ ------------ -----------
</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 nine months ended
August 31, 1996 and 1997 amounted to $111 and $158, respectively (unaudited).
F-34
<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, AUGUST 31,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Value added and payroll taxes................................ $ 445 $1,155 $ 898
Payroll...................................................... -- 356 369
Directors fees............................................... 130 -- --
Other........................................................ 361 466 859
------------ ------------ -----------
$ 936 $1,977 $ 2,126
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
6. BANK LOANS AND OVERDRAFT
The Company has the following loans outstanding:
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30, AUGUST 31,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Term loan(a)................................................. $ 535 $ 470 $ 400
Business development loan(b)................................. 57 38 10
Overdraft facility(c)........................................ -- 379 1,154
4% loan notes(d)............................................. 421 462 456
------------ ------------ -----------
1,013 1,349 2,020
Less: Current portion........................................ 131 524 1,735
------------ ------------ -----------
$ 882 $ 825 $ 285
------------ ------------ -----------
------------ ------------ -----------
</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
renegotiated the overdraft facility and increased the borrowing limit to
$1,223 until October 31, 1997, after which it reduces to $815. The facility
is due to be renewed on November 30, 1997 (unaudited).
d) In connection with the MHL 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>
F-35
<PAGE>
MILTON MARKETING GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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.
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 goodwill............................................................. -- -- 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 nine
months ended August 31, 1996 and 1997 was approximately $156 and $283,
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 $312.
F-36
<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 nine months ended August 31, 1996 and 1997, the
Company has contributed $43 and $49, respectively (unaudited).
10. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of Milton Marketing Group Limited as
of and for the seven months ended August 31, 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
August 31, 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 the Agreements and Plans of Organization (the 'Consolidation
Agreements'), dated as of October 23, 1997, the stockholders of the Company and
Girgenti, Hughes, Butler & McDowell, Inc. and its affiliated entities ('GHB&M')
have agreed to exchange all of the outstanding shares of common stock of each of
the companies comprising the Company and GHB&M for shares of common stock of
Healthworld Corporation ('Healthworld') as of November 12, 1997 (the
'Consolidation'). Concurrent with the Consolidation, three of the stockholders
holding minority interests in certain of the Company's subsidiaries will
contribute their interests in such respective companies to Healthworld in
exchange for shares of common stock of Healthworld, and the remaining shares of
common stock in one of the Company's subsidiaries held by a fourth stockholder
will be redeemed by the Company for no consideration pursuant to a prior
agreement between the Company and such stockholder. These acquisitions will be
accounted for using the purchase method of accounting. The excess purchase price
over the underlying equity of the minority interests will be recorded as
goodwill.
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.
F-37
<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................................... 7
The Consolidation.............................. 12
Use of Proceeds................................ 13
Dividend Policy................................ 13
Dilution....................................... 14
Capitalization................................. 15
Selected Pro Forma Combined Financial
Information.................................. 16
Selected Financial Information of GHB&M
and Milton................................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 18
Business....................................... 28
Management..................................... 38
Certain Relationships and Related
Transactions................................. 43
Principal Stockholders......................... 44
Description of Capital Stock................... 45
Shares Eligible for Future Sale................ 47
Underwriting................................... 48
Legal Matters.................................. 49
Experts........................................ 49
Forward Looking Statements..................... 49
Additional Information......................... 50
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
HEALTHWORLD
CORPORATION
[LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
C. E. UNTERBERG, TOWBIN
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
NASD filing fee............................................. 2,794
Nasdaq National Market listing fee.......................... 36,250
Accountants' fees and expenses.............................. 634,000
Blue Sky fees and expenses.................................. --
Legal fees and expenses..................................... 1,058,000
Transfer Agent and Registrar fees and expenses.............. 3,500
Printing and engraving expenses............................. 160,000
Miscellaneous............................................... 10,000
-----------
Total.................................................. $1,911,496
-----------
-----------
</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
On October 13, 1997, the Registrant issued an aggregate of 100 founders
shares of Common Stock to the stockholders of GHB&M for an aggregate of $100.
Such transaction was effected in reliance upon the exemption from registration
under the Securities Act contained in Section 4(2) of the Securities Act. In
connection with the Consolidation, the Registrant will, on November 12, 1997,
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 registration
under the Securities Act contained in Section 4(2) of the Securities Act. No
underwriters were engaged with respect to such transactions and no underwriting
discounts or commissions will be paid in connection with the sale of such
securities.
II-1
<PAGE>
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> <C>
*1.01 -- Form of Underwriting Agreement between the Registrant and C.E. Unterberg, Towbin 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 -- Agreement and Plan of Organization by and among the Registrant, Steven Girgenti, Francis Hughes,
William Butler and Herbert Ehrenthal, dated as of October 23, 1997.
2.03 -- Agreement and Plan of Organization between the Registrant and William Leslie Milton, dated as of
October 23, 1997.
2.04 -- Agreement and Plan of Organization by and between the Registrant and Michael Garnham, dated as of
October 23, 1997.
2.05 -- Agreement and Plan of Organization between the Registrant and Leonard Moreton, dated as of October
23, 1997.
2.06 -- Agreement and Plan of Organization between the Registrant and Michael Bourne, dated as of October
23, 1997.
*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 Bank of Scotland, 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.
*10.06 -- Form of Employment Agreement by and between the Registrant and Steven Girgenti.
*10.07 -- Form of Employment Agreement by and between the Registrant and William Leslie Milton.
*10.08 -- Form of Employment Agreement by and between GH and William Butler.
**10.09 -- Form of Employment Agreement by and between GH and Herbert Ehrenthal.
*10.10 -- Employment Agreement by and between GH and Francis Hughes, dated as of September 8, 1995.
*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.
*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.
*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.
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
*10.20 -- Overdraft Facility, dated November 6, 1995, between Siteinput Limited and The Bank of Scotland.
*10.21 -- Multi Option Facility by and between Bank of Scotland and Milton Marketing Group Limited, Milton
Marketing Limited, Milton Cater Limited, Milton Headcount Limited, Effective Sales Personnel
Limited and PDM Communications Ltd.
10.22 -- Form of Employment Agreement by and between Milton Headcount Limited and Michael Garnham.
10.23 -- Line of Credit between Chase and GH and each of its affiliated entities, dated October 23, 1997.
11.01 -- Statement regarding computation of supplemental pro forma per share earnings.
*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>
- ------------------
* Previously filed.
** To be filed by amendment.
(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 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to 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 4th day of November 1997.
HEALTHWORLD CORPORATION
By: /s/ STEVEN GIRGENTI
----------------------------------
Steven Girgenti
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ STEVEN GIRGENTI Chairman of the Board and Chief Executive November 4, 1997
- ------------------------------------------ Officer (principal executive officer)
Steven Girgenti
/s/ STUART DIAMOND Executive Vice President, Chief Financial November 4, 1997
- ------------------------------------------ Officer and Secretary (principal financial
Stuart Diamond and accounting officer)
/s/ WILLIAM LESLIE MILTON* Vice Chairman of the Board and President November 4, 1997
- ------------------------------------------
William Leslie Milton
/s/ FRANCIS HUGHES* Director November 4, 1997
- ------------------------------------------
Francis Hughes
</TABLE>
------------------
*By: /s/ STEVEN GIRGENTI
- ------------------------------------------
Steven Girgenti, as
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<S> <C> <C>
*1.01 -- Form of Underwriting Agreement between the Registrant and C.E. Unterberg, Towbin 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 -- Agreement and Plan of Organization by and among the Registrant, Steven Girgenti,
Francis Hughes, William Butler and Herbert Ehrenthal, dated as of October 23, 1997.
2.03 -- Agreement and Plan of Organization between the Registrant and William Leslie Milton,
dated as of October 23, 1997.
2.04 -- Agreement and Plan of Organization by and between the Registrant and Michael Garnham,
dated as of October 23, 1997.
2.05 -- Agreement and Plan of Organization between the Registrant and Leonard Moreton, dated
as of October 23, 1997.
2.06 -- Agreement and Plan of Organization between the Registrant and Michael Bourne, dated as
of October 23, 1997.
*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 Bank of Scotland, 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.
*10.06 -- Form of Employment Agreement by and between the Registrant and Steven Girgenti.
*10.07 -- Form of Employment Agreement by and between the Registrant and William Leslie Milton.
*10.08 -- Form of Employment Agreement by and between GH and William Butler.
**10.09 -- Form of Employment Agreement by and between GH and Herbert Ehrenthal.
*10.10 -- Employment Agreement by and between GH and Francis Hughes, dated as of September 8,
1995.
*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.
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<S> <C> <C>
*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.
*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.
*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.
*10.21 -- Multi Option Facility by and between Bank of Scotland and Milton Marketing Group
Limited, Milton Marketing Limited, Milton Cater Limited, Milton Headcount Limited,
Effective Sales Personnel Limited and PDM Communications Ltd.
10.22 -- Form of Employment Agreement by and between Milton Headcount Limited and Michael
Garnham.
10.23 -- Line of Credit between Chase and GH and each of its affiliated entities, dated October
23, 1997.
11.01 -- Statement regarding computation of supplemental pro forma per share earnings.
*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>
- ------------------
* Previously filed.
** To be filed by amendment.
<PAGE>
Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the 23rd day of October, 1997
by and between
HEALTHWORLD CORPORATION,
and
STEVEN GIRGENTI,
FRANCIS HUGHES,
WILLIAM BUTLER,
and
HERBERT EHRENTHAL
<PAGE>
Healthworld Agreement and Plan of Organization/US
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1 The Organization................................................................................................ 7
----------------
1.1 Organization............................................................................... 7
------------
1.2 Directors and Officers..................................................................... 8
----------------------
2 Conversion of Stock............................................................................................. 8
-------------------
2.1 Manner of Conversion....................................................................... 8
--------------------
2.2 Beneficial Ownership of Shares............................................................. 8
------------------------------
2.3 Allocation of Shares....................................................................... 8
--------------------
3 Delivery of Company Stock and Healthworld Stock................................................................ 10
-----------------------------------------------
4 Closing........................................................................................................ 10
-------
5 Representations And Warranties of U.S. Stockholders............................................................ 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............................................................. 13
-----------------------------
5.5 No Bonus Shares........................................................................... 13
---------------
5.6 Subsidiaries.............................................................................. 13
------------
5.7 Predecessor Status; etc................................................................... 13
-----------------------
5.8 Spin-off by the Company................................................................... 14
-----------------------
5.9 Financial Statements...................................................................... 14
--------------------
5.10 Liabilities and obligations............................................................... 14
---------------------------
5.11 Accounts and Notes Receivable............................................................. 15
-----------------------------
5.12 Permits and Intangibles................................................................... 15
-----------------------
5.13 Environmental Matters..................................................................... 16
---------------------
5.14 Personal Property......................................................................... 16
-----------------
5.15 Significant Customers; Material Contracts and Commitments................................. 17
---------------------------------------------------------
5.16 Real Property............................................................................. 18
-------------
5.17 Insurance................................................................................. 18
---------
5.18 Compensation; Employment Agreements; Organized Labor Matters.............................. 18
------------------------------------------------------------
5.19 Employee Plans............................................................................ 23
--------------
5.20 Compliance with ERISA..................................................................... 24
---------------------
5.21 Conformity with Law; Litigation........................................................... 25
-------------------------------
5.22 Taxes..................................................................................... 25
-----
5.23 No Violations............................................................................. 28
-------------
</TABLE>
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
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................................................................................ 32
----------
5.30 Authority; Ownership. ................................................................... 33
--------------------
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............................................................................. 34
-------------
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........................................................................ 38
------------------
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................................................................ 41
--------------------------
8.7 Secretary's Certificates; Good Standing................................................... 41
---------------------------------------
8.8 Employment Agreements..................................................................... 42
---------------------
</TABLE>
ii
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7 Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
8.9 Simultaneous Closings..................................................................... 42
---------------------
8.10 Cater Share Purchase...................................................................... 42
--------------------
9 Conditions Precedent to Obligations of Healthworld............................................................. 42
--------------------------------------------------
9.1 Representations and Warranties; Performance of Obligations................................ 42
----------------------------------------------------------
9.2 Satisfaction.............................................................................. 42
------------
9.3 No Litigation............................................................................. 43
-------------
9.4 Opinion of Counsel........................................................................ 43
------------------
9.5 Consents and Approvals.................................................................... 43
----------------------
9.6 No Material Adverse Change................................................................ 43
--------------------------
9.7 Secretary's Certificates.................................................................. 43
------------------------
9.8 Employment Agreements. ................................................................... 43
---------------------
9.9 U.S. Stockholders' Release................................................................ 44
--------------------------
9.10 Termination of Related Party Agreements................................................... 44
---------------------------------------
9.11 Closings.................................................................................. 44
--------
9.12 Cater Share Purchase...................................................................... 44
--------------------
10 Covenants of Healthworld and the U.S. Stockholders after Closing............................................... 44
----------------------------------------------------------------
10.1 Release From Guarantees; Repayment of Certain Obligations................................. 44
---------------------------------------------------------
10.2 Preservation of Tax and Accounting Treatment.............................................. 45
--------------------------------------------
10.3 Preparation and Filing of Tax Returns..................................................... 45
-------------------------------------
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding Governance..................... 46
---------------------------------------------------------------------
10.5 Distributions for Estimated Taxes......................................................... 46
---------------------------------
11 Indemnification................................................................................................ 47
---------------
11.1 General Indemnification by the U.S. Stockholders.......................................... 47
------------------------------------------------
11.2 Indemnification by Healthworld............................................................ 48
------------------------------
11.3 Third Person Claims....................................................................... 48
-------------------
11.4 Exclusive Remedy.......................................................................... 50
----------------
11.5 Limitations on Indemnification............................................................ 50
------------------------------
12 Termination of Agreement....................................................................................... 51
------------------------
12.1 Termination............................................................................... 51
-----------
12.2 Liabilities in Event of Termination....................................................... 52
-----------------------------------
13 Non-Competition; Non-Disclosure................................................................................ 52
-------------------------------
13.1 Non-Competition........................................................................... 52
---------------
13.2 Nondisclosure............................................................................. 54
-------------
13.3 Injunctive Relief; Damages................................................................ 55
--------------------------
</TABLE>
iii
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Healthworld Agreement and Plan of Organization/US
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
13.4 Reasonable Restraint...................................................................... 55
--------------------
13.5 Severability; Reformation................................................................. 55
-------------------------
13.6 Independent Covenant...................................................................... 55
--------------------
13.7 Survival.................................................................................. 56
--------
14 Federal Securities Act Representations......................................................................... 56
--------------------------------------
14.1 Compliance with Law....................................................................... 56
-------------------
14.2 Economic Risk; Sophistication............................................................. 56
-----------------------------
15 Registration Rights............................................................................................ 57
-------------------
15.1 Piggyback Registration Rights............................................................. 57
----------------------------
15.2 Registration Procedures................................................................... 57
-----------------------
15.3 Underwriting Agreement.................................................................... 58
----------------------
15.4 Availability of Rule 144.................................................................. 58
------------------------
16 General........................................................................................................ 58
-------
16.1 Cooperation............................................................................... 58
-----------
16.2 Successors and Assigns.................................................................... 58
----------------------
16.3 Entire Agreement.......................................................................... 59
----------------
16.4 Counterparts.............................................................................. 59
------------
16.5 Expenses.................................................................................. 59
--------
16.6 Notices................................................................................... 60
-------
16.7 Governing Law............................................................................. 61
-------------
16.8 Exercise of Rights and Remedies........................................................... 61
-------------------------------
16.9 Time...................................................................................... 61
----
16.10 Reformation and Severability.............................................................. 61
----------------------------
16.11 Remedies Cumulative....................................................................... 62
-------------------
16.12 Captions.................................................................................. 62
--------
16.13 Amendments and Waivers.................................................................... 62
----------------------
</TABLE>
iv
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Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of the
____ day of October, 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 Milton Marketing Group Limited, a company incorporated in England and
Wales with registered no. 3113109 (the "U.K. Company"); and
WHEREAS, Bourne, Cater, Garnham and Moreton (the "Minority U.K.
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
WHEREAS, Healthworld was formed on September 12, 1996, in the State of
Delaware, for the purpose of effecting the Healthworld Plan of Organization; and
1
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Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
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 Garnham,
Moreton and Bourne 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 (hereafter defined); and
WHEREAS, all of the foregoing contributions together with 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, Cater owns a portion of the issued share capital of Milton Cater
Limited, a company incorporated in England and Wales with registered no. 3196839
("MCL"); and
WHEREAS, Cater desires to transfer her shares of MCL in consideration for a
variation to her service agreement and not in exchange for Healthworld Stock;
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.
"Absolute Representations" shall have the meaning set forth in subparagraph
(ii) of the preliminary paragraphs of Section 5.
"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.
"Balance Sheet Date" shall mean December 31, 1996.
2
<PAGE>
Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
"Bourne" means Michael Bourne, residing at 15 Eton Square, Eton, Windsor,
Berkshire, SL4 6BG, United Kingdom.
"Butler" has the meaning set forth in the introductory paragraphs of this
Agreement.
"Cater" means Claire Cater, residing at Back of Beyond, 76 The High Street,
Ardingly, West Sussex, RH17 6TD, United Kingdom.
"Closing" has the meaning set forth in Section 4.2.
"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 Financial Statements" has the meaning set forth in Section 5.9.
"Company Stock" has the meaning set forth in Section 2.1.
"Contributing Minority Stockholders" means Bourne, Garnham and Moreton.
"Disclosure Schedule" has the meaning set forth in the preliminary
paragraph of Section 5.
"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.
"Garnham" means Michael Garnham, residing at 42 The Burlings, Ascot,
Berkshire, SL5 8BY, United Kingdom.
"Girgenti" has the meaning set forth in the introductory paragraphs of this
Agreement.
3
<PAGE>
Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
"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 dated
February 27, 1997 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" 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 Agreements of Organization" has the meaning set forth in Section
1.1.2.
"Minority U.K. Stockholders" has the meaning set forth in the introductory
paragraphs of this Agreement.
"Moreton" means Leonard Moreton, residing at "Southcroft," Copsem Lane,
Oxshott, Surrey, KT22 0NT, United Kingdom.
"Offering Price" means (i) the offering price in the IPO if the Closing
Date occurs contemporaneously with the Pricing and (ii) the proposed mid-range
offering price in the IPO as
4
<PAGE>
Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
reflected in the Registration Statement, as most recently amended, if the
Closing Date occurs prior to the Pricing.
"Organization" means the contribution of all the shares of stock of the
U.S. 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.
"Prevailing Conversion Rate" means the prevailing exchange rate, as shown
in The Financial Times, between the U.S. dollar and the U.K. pound sterling at
the close of business on the business day immediately prior to the Closing Date.
"PBGC" has the meaning set forth in Section 5.20.
"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 and the execution of the Underwriting Agreement by Healthworld and the
Underwriters.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on Form
S-1 (Registration No. 333-34751) 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.
"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.
"Stuart Diamond Employment Agreement" means that certain Employment
Agreement by and between Healthworld and Stuart Diamond, dated August 18, 1997,
pursuant to which Healthworld has engaged the services of Stuart Diamond.
"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
5
<PAGE>
Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
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.
"Underwriting Agreement" means the agreement to be negotiated between
Healthworld and the Underwriters regarding the Underwriters' representation of
Healthworld in the IPO.
"U.K. Agreement of Organization" has the meaning set forth in Section
1.1.1.
"U.K. Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"U.K. Percentage" has the meaning set forth in Section 2.3.1.
"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. Percentage" has the meaning set forth in Section 2.3.1.
"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.
6
<PAGE>
Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
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"),
1.1.2 The Contributing Minority Stockholders 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"), and
1.1.3 The U.K. Company shall, on or prior to the Closing Date,
purchase Cater's shares owned by her in the U.K. Company
Subsidiary of which she is a minority owner, pursuant to a
certain Joint Venture Agreement dated May 23, 1996.
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.
7
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Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
1.2 Directors and Officers. At the Closing, the directors and officers
of the Companies then holding office shall remain unchanged.
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 to be
received by the U.S. Stockholders 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 Healthworld Stock to be
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. Stockholder and the Contributing Minority
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 the
U.S. Stockholders, who presently own one hundred (100) shares of
Healthworld Stock in the aggregate, the conversion shall be made
in such a manner as to issue to them 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 Contributing 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
8
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Healthworld Agreement and Plan of Organization/US
- --------------------------------------------------------------------------------
Number of Founder Shares shall be allocated to the U.K.
Stockholders and the Contributing 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
Contributing Minority Stockholders in the following manner:
2.3.3.1 Garnham shall receive that number of shares of Healthworld
Stock having a value of (pound)1,000,000, based on the
Offering Price and utilizing the Prevailing Conversion
Rate.
2.3.3.2 Bourne shall receive that number of shares of Healthworld
Stock having a value of (pound)276,448.35, based on the
Offering Price and utilizing the Prevailing Conversion
Rate.
2.3.3.3 Moreton shall receive that number of shares of Healthworld
Stock having a value of (pound)53,677 based on the Offering
Price and utilizing the Prevailing Conversion Rate.
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
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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 the Prevailing Conversion Rate.
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 to cure any
deficiencies prior to the Closing 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.
On the earlier of November 12, 1997 or 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, 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 each of the U.S. Companies, 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.S. Stockholders shall make
a good faith effort to cross reference disclosure, as necessary or advisable,
between related Disclosure Schedules.
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For purposes of this Section 5, the term Company shall mean and refer to
each of the U.S. Companies.
The representations and warranties made herein are being made for the
benefit of Healthworld, the U.K. Stockholder and the Contributing Minority
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 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 Sections 5.1,
5.3 and hereof (regarding "Due Organization; Capital Stock of the
Company; Authority; Ownership"), which shall be referred to in
this Agreement as the "Absolute Representations" 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 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
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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 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.
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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 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
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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 Combined
Balance Sheets as of December 31, 1996 (the "1996 Balance Sheet")
and 1995 and unaudited Combined Balance Sheets as of June 30,
1997; audited Combined Statements of Income for each of the years
in the three-year period ended December 31, 1996 and unaudited
Combined Statements of Income for the six-month periods ending
June 30, 1996 and June 30, 1997; Combined Statements of
Stockholders' Equity for each of the years in the four-year period
ending December 31, 1996 and the unaudited Combined Statement of
Stockholders' Equity at June 30, 1997; and audited Combined
Statements of Cash Flows for each of the years in the three-year
period ended December 31, 1996 and the unaudited Combined
Statements of Cash Flows for the six-month periods ending June 30,
1996 and June 30, 1997. The Company Financial Statements which
were prepared on an audited basis 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 Combined Balance Sheets as of December 31, 1996 and 1995
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.
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
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Healthworld Agreement and Plan of Organization/US
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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
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
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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
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 Federal, state, local and, so far as
it is required, 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 16 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
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Healthworld Agreement and Plan of Organization/US
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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 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
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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 any Affiliates, by any of the U.S.
Stockholders, by any relative of any U.S. Stockholder or by any
entity that directly, or indirectly through one or more
intermediaries, is controlled by any U.S. Stockholder or any of
his relatives. 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 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
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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 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.
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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, to the extent now known, 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 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
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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 pro-
posed 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 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 greement.
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:
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Healthworld Agreement and Plan of Organization/US
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(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
(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.
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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 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
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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 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
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Healthworld Agreement and Plan of Organization/US
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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 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, except that MET and Syberactive each
reports its income on the accrual basis of accounting. Upon
the consummation of the transactions contemplated hereby,
the Company will be required to change its method of
accounting to
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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 $750,000.
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, 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 Balance Sheet Date, all
applicable tax laws and agreements have been complied with
in all material respects, and all such amounts required to
be paid by the Company to taxing authorities in respect of
all periods ending on or before the Balance Sheet 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 Company
Financial Statements or are being
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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.
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.
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5.12.12 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,
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,
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Healthworld Agreement and Plan of Organization/US
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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 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 material 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;
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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
capital stock of the Company (except for dividends which
the Company may declare and pay pursuant to Section 10.5
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;
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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;
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
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Healthworld Agreement and Plan of Organization/US
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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
contribution in the amount of $5,000 or more shall be described on
Schedule 5.28.
5.29 Disclosure.
5.29.1 If, on or 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 (other than as provided in the
Underwriting Agreement) 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,
(iv) 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
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Healthworld Agreement and Plan of Organization/US
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performed by any prospective underwriters, relative
to Healthworld or the IPO.
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 to be 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.
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Healthworld Agreement and Plan of Organization/US
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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 the U.S. Stockholders in the amounts set forth in Schedule 6.3.
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 the capital stock of Healthworld have been duly authorized and
validly issued, and 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.
6.4 Transactions in Capital Stock. Except for the obligations under
the agreements which form a part of the Healthworld Plan of
Organization or the obligations which will arise under the
Underwriting Agreement, 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 for fees incurred in
connection with the transactions contemplated hereby and thereby,
and any liabilities and obligations which may exist under the
Stuart Diamond Employment Agreement and the Healthworld License
Agreement, copies of which are 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
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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 Stuart Diamond Employment
Agreement and the Healthworld License Agreement and has engaged in
other limited startup activities. It is anticipated that prior to
the Closing, Healthworld will adopt a Stock Option Plan; however,
Healthworld covenants that no options will be granted before the
Registration Statement is declared effective by the SEC.
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 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
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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 except as may be
reasonably necessary to effectuate the IPO; 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.
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7.3 Prohibited Activities. Except as disclosed on Schedule 7.3 or as
otherwise contemplated by this Agreement, 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
and except if it involves the performance of services in
the ordinary course of business;
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
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;
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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.
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
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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 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.
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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
Contributing 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 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 Contributing 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
the U.K. Stockholder and each of the Contributing Minority Stockholders,
shall have been delivered to the U.S. Stockholders.
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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
Contributing Minority Stockholders and any other agreement
incidental hereto or thereto and all other related legal matters
shall be reasonably satisfactory to the U.S. Stockholders and
their respective counsel. The U.S. Stockholders shall be
reasonably 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
Contributing Minority Stockholders, dated the Closing Date, in
form and substance reasonably acceptable to counsel for the U.S.
Stockholders.
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 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
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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. Healthworld shall have executed an
employment agreement substantially in the form of Exhibit hereto,
for the annual compensation set forth on Schedule 8.8.
8.9 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.K. Stockholder and the
Contributing Minority Stockholders shall have occurred
simultaneously with the Closing hereunder.
8.10 Cater Share Purchase. The U.K. Company shall have purchased
Cater's shares as described in Section 1.1.3.
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.S. Stockholders and
the Company 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.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
Contributing Minority Stockholders and any other agreement
incidental hereto or thereto and all other related legal matters
shall be reasonably satisfactory to Healthworld and its counsel.
Healthworld shall be reasonably
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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.S. Stockholders, dated the Closing Date, in
form and substance reasonably 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 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. The U.S. Stockholders shall have executed
employment agreements substantially in the form of Exhibit hereto,
for the annual compensation set forth on Schedule 8.8.
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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 9.10, all existing agreements between the Company and the
U.S. Stockholders shall have been canceled effective as of the
Closing Date.
9.11 Closings. The closing of the Organization agreements with respect
to the U.K. Stockholder and the Contributing Minority Stockholders
shall simultaneously occur with the closing of the transactions
contemplated by this Agreement.
9.12 Cater Share Purchase. The U.K. Company shall have purchased
Cater's shares as described in Section 1.1.3.
10 Covenants of Healthworld and the U.S. Stockholders after Closing.
10.1 Release From Guarantees; Repayment of Certain Obligations.
Healthworld shall use commercially reasonable efforts to have each
of the U.S. Stockholders released from any and all guarantees on
any indebtedness or obligation that he personally guaranteed and
from any and all pledges of assets that he pledged to secure such
indebtedness or obligation for the benefit of the Company, with
all such guarantees on indebtedness or obligation being assumed by
Healthworld. In the event that Healthworld cannot obtain such
releases from the lenders of any such guaranteed indebtedness or
the obligee of any guaranteed obligation on or prior to 120 days
subsequent to the Closing Date, Healthworld shall pay off or
otherwise refinance or retire such indebtedness or obligation.
From and after the Closing Date and until such time as all of such
indebtedness or obligation 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 guarantee as described above and whose indebtedness as
described above has not as of that time been paid off, refinanced
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or retired. Furthermore, Healthworld shall assume all obligations
which any the U.S. Stockholder may have incurred to guarantee any
lease of the Company and shall indemnify and hold harmless the
U.S. Stockholders from any cost or expense arising under any such
lease guarantee.
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 Companies shall file or cause to be filed all required
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 in a manner prepared under the
instructions of the U.S. Stockholders, consistent with
historical practices. 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.
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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 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 Conformity With Girgenti/Milton Letter of Intent Regarding
Governance. Corporate governance at the date of the closing of the
IPO shall be in accordance with section 1.3 of the Girgenti/Milton
Letter of Intent.
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 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.
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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:
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.
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.
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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:
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 any representation or warranty relating to Healthworld's
right, authority or capacity to enter into and consummate
the terms of this Agreement.
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
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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, 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
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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 (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 any Absolute
Representation 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 any Absolute Representation 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 11.2.4 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 11.2.4 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 to be received by such
U.S. Stockholder in connection with the Organization,
provided that a U.S. Stockholder's indemnification
obligations pursuant to any Absolute Representation shall
not be limited. For purposes of calculating the value of
the Healthworld Stock to be 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
December 31, 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; or
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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
Contributing Minority 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.
12.2 Liabilities in Event of Termination.
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.
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 two (2) 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
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)
within the "Territory" (hereafter defined):
13.1.1.1 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 engage in any mass media communication of
health-related information, whether by means of
publishing, television, radio, the internet or
otherwise; or
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13.1.1.3 engage in any other business engaged in by
Healthworld or any of its subsidiaries at any time
during the "Contact Period" (hereafter defined).
The term "Territory" means each of the geographic areas which lie within a 100
mile radius of any location at which Healthworld or any of its subsidiaries
(which were subsidiaries of Healthworld at any time during the "Contact Period,"
hereafter defined) conducted any business during the Restrictive Period. The
term "Contact Period" means the period commencing with the date hereof and
ending with the later to occur of (i) the Closing Date or (ii) the date upon
which the respective Stockholder is no longer engaged as an officer, employee or
director of Healthworld or any of its subsidiaries.
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;
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) at any
time during the Restrictive Period or for which, to the
actual knowledge of the U.S. Stockholder after due inquiry,
Healthworld (or any subsidiary thereof) at any time during
the Restrictive Period 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.
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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 (ii), the U.S.
Stockholder shall give prior written notice thereof
to 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,
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(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 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 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 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
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Healthworld Agreement and Plan of Organization/US
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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, 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.
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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 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 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
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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 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.
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Healthworld Agreement and Plan of Organization/US
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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).
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
preparation and filing of the registration statement, the
underwriting and the IPO, 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, LLP, Rosenman & Colin LLP,
Todtman, Nachamie, Hendler & Spizz, P.C. (as they relate to the
subject matter described in this paragraph), the Underwriters or
any other person or entity retained by Healthworld (the "IPO
costs").
If the transactions herein contemplated shall not be
consummated, then the IPO costs 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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If the transactions herein contemplated shall be
consummated, Healthworld shall pay the fees, expenses and
disbursements of Healthworld and the U.S. Stockholders and
their respective agents, representatives, accountants and
counsel incurred in connection with the negotiation and
consummation of this Agreement and any amendments thereto,
including all counsel and professional costs of the U.S.
Stockholder relating to the negotiation and consummation of
this Agreement (the "Reorganization Costs"), but not
including the cost of any broker or agent described in
Section 5.27.
If the transactions herein contemplated shall not be
consummated, the U.S. Stockholders shall pay their
Reorganization Costs.
Any other costs and expenses of the U.S. Stockholders which
are not described as IPO Costs or Reorganization Costs
shall be paid by the U.S. Stockholders, including but not
limited to the cost of any broker or agent described in
Section 5.27, except that Healthworld shall pay all stock
transfer and/or recording taxes or duties imposed with
respect to stock transfers effectuated pursuant to the
Organization. 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, except as otherwise specifically
contemplated in this Section 16.5.
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:
Rosenman & Colin LLP Todtman, Nachamie,
575 Madison Avenue Hendler & Spizz, P.C.
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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 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.
16.9 Time. Time is of the essence with respect to this Agreement.
16.10 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.
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16.11 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.
16.12 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.
16.13 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 mutual consent of Healthworld and the Vote of a Majority
in Interest of the U.S. Stockholders.
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
- ---------------------------------- ------------------------------------
STEVEN GIRGENTI WILLIAM BUTLER
- ---------------------------------- -----------------------------------
FRANCIS HUGHES HERBERT EHRENTHAL
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AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the 23rd day of October, 1997
by and between
HEALTHWORLD CORPORATION
and
WILLIAM LESLIE MILTON
<PAGE>
Healthworld Agreement and Plan of Organization/UK
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1 The Organization..........................................................................................................-6-
----------------
1.1 Organization......................................................................................-7-
------------
1.2 Directors and Officers............................................................................-7-
----------------------
2 Conversion of Stock.......................................................................................................-7-
-------------------
2.1 Manner of Conversion..............................................................................-7-
--------------------
2.2 Beneficial Ownership of Shares....................................................................-8-
------------------------------
2.3 Allocation of Shares..............................................................................-8-
--------------------
3 Delivery of U.K. Company Stock and Healthworld Stock......................................................................-9-
----------------------------------------------------
4 Closing..................................................................................................................-10-
-------
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..................................................................-21-
-------------------------------
5.21 Taxes............................................................................................-22-
-----
</TABLE>
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<S> <C>
5.22 No Violations....................................................................................-24-
-------------
5.23 Government Contracts.............................................................................-24-
--------------------
5.24 Absence of Changes...............................................................................-24-
------------------
5.25 Deposit Accounts; Powers of Attorney.............................................................-26-
------------------------------------
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.....................................................-28-
--------------------------------------------
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...........................................................................-33-
----------------------
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 Contributing 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-
--------------------------
</TABLE>
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8.7 Secretary's Certificates; Good Standing.....................................................-35-
---------------------------------------
8.8 Employment Agreement........................................................................-36-
--------------------
8.9 Simultaneous Closings.......................................................................-36-
---------------------
9 Conditions Precedent to Obligations of Healthworld..................................................................-36-
--------------------------------------------------
9.1 Representations and Warranties; Performance of Obligations..................................-36-
----------------------------------------------------------
9.2 Satisfaction................................................................................-36-
------------
9.3 No Litigation...............................................................................-36-
-------------
9.4 Opinion of Counsel..........................................................................-37-
------------------
9.5 Consents and Approvals......................................................................-37-
----------------------
9.6 No Material Adverse Change..................................................................-37-
--------------------------
9.7 Secretary's Certificates....................................................................-37-
------------------------
9.8 Employment Agreement........................................................................-37-
--------------------
9.9 Stockholder's Release.......................................................................-37-
---------------------
9.10 Termination of Related Party Agreements.....................................................-37-
---------------------------------------
9.11 Simultaneous Closings.......................................................................-38-
---------------------
9.12 Cater Share Purchase........................................................................-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................................................-38-
--------------------------------------------
10.3 Preparation and Filing of Tax Returns.......................................................-38-
-------------------------------------
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding
----------------------------------------------------------
Governance..........................................................................................................-39-
----------
11 Indemnification.....................................................................................................-39-
---------------
11.1 General Indemnification by the U.K. Stockholder.............................................-39-
-----------------------------------------------
11.2 Indemnification by Healthworld..............................................................-40-
------------------------------
11.3 Third Person Claims.........................................................................-40-
-------------------
11.4 Exclusive Remedy............................................................................-42-
----------------
11.5 Limitations on Indemnification..............................................................-42-
------------------------------
12 Termination of Agreement............................................................................................-43-
------------------------
12.1 Termination.................................................................................-43-
-----------
12.2 Liabilities in Event of Termination.........................................................-43-
-----------------------------------
13 Non-Competition; Non-Disclosure.....................................................................................-43-
-------------------------------
13.1 Non-Competition.............................................................................-44-
---------------
</TABLE>
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<TABLE>
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13.2 Nondisclosure...............................................................................-45-
-------------
13.3 Injunctive Relief; Damages..................................................................-46-
--------------------------
13.4 Reasonable Restraint........................................................................-46-
--------------------
13.5 Severability; Reformation...................................................................-47-
-------------------------
13.6 Independent Covenant........................................................................-47-
--------------------
13.7 Survival....................................................................................-47-
--------
14 Federal Securities Act Representations................................................................................-47-
--------------------------------------
14.1 Compliance with Law.........................................................................-47-
-------------------
14.2 Economic Risk; Sophistication...............................................................-48-
-----------------------------
15 Registration Rights...................................................................................................-48-
-------------------
15.1 Piggyback Registration Rights...............................................................-48-
-----------------------------
15.2 Registration Procedures.....................................................................-49-
-----------------------
15.3 Underwriting Agreement......................................................................-49-
----------------------
15.4 Availability of Rule 144....................................................................-49-
------------------------
16 General...............................................................................................................-49-
-------
16.1 Cooperation.................................................................................-49-
-----------
16.2 Successors and Assigns......................................................................-49-
----------------------
16.3 Entire Agreement............................................................................-50-
----------------
16.4 Counterparts................................................................................-50-
------------
16.5 Expenses....................................................................................-50-
--------
16.6 Notices.....................................................................................-51-
-------
16.7 Governing Law...............................................................................-52-
-------------
16.8 Exercise of Rights and Remedies.............................................................-52-
-------------------------------
16.9 Time........................................................................................-52-
----
16.10 Reformation and Severability................................................................-52-
----------------------------
16.11 Remedies Cumulative.........................................................................-52-
-------------------
16.12 Captions....................................................................................-52-
--------
16.13 Amendments and Waivers......................................................................-53-
----------------------
</TABLE>
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Healthworld Agreement and Plan of Organization/UK
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of the
_______ day of October, 1997, by and between:
Healthworld Corporation, a Delaware corporation ("Healthworld"), and
William Leslie Milton (the "U.K. Stockholder"), residing at 17 Clappers
Meadow, Maidenhead, Berkshire SL6 8TT, United Kingdom.
WHEREAS, the U.K. Stockholder is the registered and beneficial owner with
full title 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, Bourne, Cater, Garnham and Moreton (the "Minority Stockholders")
own minority share interests in certain Subsidiaries of the U.K. Company; and
WHEREAS, the U.K. Company and its Subsidiaries are sometimes hereinafter
referred to individually as a "Company" and collectively as the "Companies"; 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 Garnham,
Moreton and Bourne 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 (as hereafter defined); and
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Healthworld Agreement and Plan of Organization/UK
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WHEREAS, all of the foregoing contributions together with 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, Cater owns a portion of the issued share capital of Milton Cater
Limited, a company incorporated in England and Wales with registered no. 3196839
("MCL"); and
WHEREAS, Cater desires to transfer her shares of MCL in consideration for a
variation to her service agreement and not in exchange for Healthworld Stock;
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.
"Absolute Representations" shall have the meaning set forth in subparagraph
(ii) of the preliminary paragraphs of Section 5.
"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.
"Bourne" means Michael Bourne, residing at 15 Eton Square, Eton, Windsor,
Berkshire, SL4 6BG, United Kingdom.
"Butler" means William Butler, residing at Post Office Box 1430, Olive
Bridge, New York 12461-0430.
"Cater" means Claire Cater, residing at Back of Beyond, 76 The High Street,
Ardingly, West Sussex, RH17 6TD, United Kingdom.
-2-
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Healthworld Agreement and Plan of Organization/UK
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"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 Financial Statements" has the meaning set forth in Section 5.9.
"Company Stock" has the meaning set forth in Section 2.1.
"Contributing Minority Stockholders" means Bourne, Garnham and Moreton.
"Disclosed Schemes" has the meaning set forth in Section 5.19.
"Disclosure Schedule" has the meaning set forth in the preliminary
paragraph of Section 5.
"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 5.
"Garnham" means Michael Garnham, residing at 42 The Burlings, Ascot,
Berkshire, SL5 8BY, United Kingdom.
"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.
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
"Healthworld" has the meaning set forth in the introductory paragraphs of
this Agreement.
"Healthworld License Agreement" means that certain License Agreement dated
February 27, 1997 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.
"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 Agreements of Organization" has the meaning set forth in Section
1.1.2.
"Minority Stockholders" has the meaning set forth in the introductory
paragraphs of this Agreement.
"Moreton" means Leonard Moreton, residing at "Southcroft," Copsem Lane,
Oxshott, Surrey, KT22 0NT, United Kingdom.
"Offering Price" means (i) the offering price in the IPO if the Closing
Date occurs contemporaneously with the Pricing and (ii) the proposed mid-range
offering price in the IPO as reflected in the Registration Statement, as most
recently amended, if the Closing Date occurs prior to the Pricing.
-4-
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
"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.
"Prevailing Conversion Rate" means the prevailing exchange rate, as shown
in The Financial Times, between the U.S. dollar and the U.K. pound sterling at
the close of business on the business day immediately prior to the Closing Date.
"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 and the execution of the Underwriting Agreement by Healthworld and the
Underwriters.
"Registration Statement" means that certain registration statement on Form
S-1 (Registration No. 333-34751) 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.
"SEC" means the United States Securities and Exchange Commission.
"Stuart Diamond Employment Agreement" means that certain Employment
Agreement by and between Healthworld and Stuart Diamond, dated August 18, 1997,
pursuant to which Healthworld has engaged the services of Stuart Diamond.
"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.
"Taxes Act" means the United Kingdom Income and Corporation Taxes Act 1988.
"Underwriters" means Unterberg Harris and Pennsylvania Merchant Group Ltd.
-5-
<PAGE>
Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
"Underwriters' Engagement Letter" means the letter dated July 17, 1997,
pursuant to which the Underwriters were engaged by Healthworld.
"Underwriting Agreement" means the agreement to be negotiated between
Healthworld and the Underwriters regarding the Underwriters' representation of
Healthworld in the IPO.
"U.K. Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"U.K. Percentage" has the meaning set forth in Section 2.3.1.
"U.K. Stockholder" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Agreement of Organization" has the meaning set forth in Section
1.1.1.
"U.S. Companies" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Percentage" has the meaning set forth in Section 2.3.1.
"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.
-6-
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
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 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:
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 Contributing Minority Stockholders 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"), and
1.1.3 The U.K. Company shall, on or prior to the Closing Date,
purchase Cater's shares owned by her in the U.K. Company Subsidiary of
which she is a minority owner, pursuant to a certain Joint Venture
Agreement dated May 23, 1996.
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
-7-
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
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 to be 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 Healthworld Stock to be 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 Contributing Minority Stockholders, in the
aggregate, 5,000,000 shares (the "Aggregate Number of Founder Shares") of
Healthworld Stock at the Closing. With respect to the U.S. Stockholders, who
presently own one hundred (100) shares of Healthworld Stock in the aggregate,
the conversion shall be made in such a manner as to issue to them 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 Contributing 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
Contributing 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 Contributing Minority
Stockholders in the following manner:
-8-
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
2.3.3.1 Garnham shall receive that number of shares of
Healthworld Stock having a value of (pound)1,000,000,
based on the Offering Price and utilizing the Prevailing
Conversion Rate.
2.3.3.2 Bourne shall receive that number of shares of
Healthworld Stock having a value of (pound)276,448.35,
based on the Offering Price and utilizing the Prevailing
Conversion Rate.
2.3.3.3 Moreton shall receive that number of shares of
Healthworld Stock having a value of (pound)53,677 based
on the Offering Price and utilizing the Prevailing
Conversion Rate.
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 the
Prevailing Conversion Rate.
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 to cure any
deficiencies prior to the Closing 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.
-9-
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Healthworld Agreement and Plan of Organization/UK
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4 Closing.
On the earlier of November 12, 1997 or 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, 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, the U.S. Stockholders and the Contributing Minority
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;
-10-
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(ii) the warranties and representations set forth in Sections 5.1, 5.3
and hereof (regarding "Due Organization; Capital Stock of the Company;
Authority; Ownership"), which shall be referred to in this Agreement
as the "Absolute Representations" 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.
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
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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 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 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;
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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.
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") and 1995 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 two-year period ended
November 30, 1996, the consolidated unaudited financial statements for the
period between the Balance Sheet Date and June 30, 1997, and the consolidated
unaudited balance sheet
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as of June 30, 1997. Such Company Financial Statements (other than the
consolidated unaudited financial statements for the period between the Balance
Sheet Date and June 30, 1997 and the consolidated unaudited balance sheet as of
June 30, 1997, which have been prepared in accordance with U.S. generally
accepted accounting principles) have been prepared in accordance with the
Companies Act 1985, generally accepted accounting principles including all
statements of U.K. Standard Accounting Practice and U.K. 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
Company and the Subsidiaries of the 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
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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, so far as it is required, 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
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,
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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 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.
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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 any Affiliates, by the U.K.
Stockholder, by any relative of the U.K. Stockholder or by any entity that
directly, or indirectly through one or more intermediaries, is controlled by the
U.K. Stockholder or any of his relatives. 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.
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,
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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 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, to the extent now
known, 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.
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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.
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.
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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;
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.
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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 Schedules 5.18 or 5.19 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 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,
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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 Company 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.
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);
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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:
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
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the U.K. Stockholder, liable to be withdrawn, modified or
rendered void and, to the knowledge of the U.K. Stockholder,
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.
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 Effect on the Company;
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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;
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;
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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
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;
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, on or 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
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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 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
(other than as provided in the Underwriting Agreement) 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 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
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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 to be 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.
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 the U.S. Stockholders in
the amounts set forth in Schedule 6.3. 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 the capital stock of Healthworld have been duly authorized
and validly issued and are fully paid and nonassessable. Such shares were
offered, issued, sold and delivered by Healthworld in compliance with all
applicable state and Federal laws concerning the issuance of securities.
6.4 Transactions in Capital Stock. Except for the obligations under the
agreements which form a part of the Healthworld Plan of Organization or the
obligations which will arise
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under the Underwriting Agreement, 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.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, for fees
incurred in connection with the transactions contemplated hereby and thereby,
and any liabilities and obligations which may exist under the Stuart Diamond
Employment Agreement and the Healthworld License Agreement, copies of which are
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 Stuart Diamond Employment
Agreement, the Healthworld License Agreement and has engaged in other limited
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startup activities. It is anticipated that prior to the Closing, Healthworld
will adopt a Stock Option Plan; however, Healthworld covenants that no options
will be granted before the Registration Statement is declared effective by the
SEC.
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;
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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 except as may be reasonably necessary to effectuate the IPO;
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 or as
otherwise contemplated by this Agreement, 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 and except if it involves the
performance of services in the ordinary course of business;
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;
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.
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
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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 Contributing Minority Stockholders. All representations and
warranties of the U.S. Stockholders and the Contributing 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 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 Contributing 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
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of the U.S. Stockholders and the Contributing 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 Contributing Minority Stockholders and any
other agreement incidental hereto or thereto and all other related legal matters
shall be reasonably satisfactory to the U.K. Stockholder and his counsel. The
U.K. Stockholder shall be reasonably 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 each of the U.S. Stockholders, Healthworld and the
Contributing Minority Stockholders, dated the Closing Date, in form and
substance reasonably acceptable to counsel for the U.K. Stockholder.
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 by the secretary of Healthworld,
certifying the truth and correctness of attached copies of Healthworld's
certificate of
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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 Agreement. Healthworld shall have executed an employment
agreement substantially in the form of Exhibit hereto, for the annual
compensation set forth on Schedule 8.8.
8.9 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders and the Contributing 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 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 Contributing Minority Stockholders and any
other agreement incidental hereto or thereto and all other related legal matters
shall be reasonably satisfactory to Healthworld and its counsel. Healthworld
shall be reasonably 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
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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 Opinion of Counsel. Healthworld shall have received an opinion from
counsel to the U.K. Stockholder, dated the Closing Date, in form and substance
reasonably 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 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 Agreement. The U.K. Stockholder shall have executed 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 9.10, 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.
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9.11 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders and the Contributing Minority
Stockholders shall occur simultaneously with the Closing hereunder.
9.12 Cater Share Purchase. The U.K. Company shall have purchased Cater's
shares as described in Section 1.1.3.
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 or obligation that he personally
guaranteed and from any and all pledges of assets that he pledged to secure such
indebtedness or obligation for the benefit of the Company, with all such
guarantees on indebtedness or obligation being assumed by Healthworld. In the
event that Healthworld cannot obtain such releases from the lenders of any such
guaranteed indebtedness or the obligee of any guaranteed obligation on or prior
to 120 days subsequent to the Closing Date, Healthworld shall pay off or
otherwise refinance or retire such indebtedness or obligation. From and after
the Closing Date and until such time as all of such indebtedness or obligation
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.
Furthermore, Healthworld shall assume all obligations which the U.K. Stockholder
may have incurred to guarantee any lease of the Company and shall indemnify and
hold harmless the U.K. Stockholder from any cost or expense arising under any
such lease guarantee.
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 Companies shall 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 in a manner prepared under the instructions of
the U.K. Stockholder, consistent with historical practices.
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.
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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.
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding Governance.
Corporate governance at the date of the closing of the IPO shall be in
accordance with section 1.3 of the Girgenti/Milton Letter of Intent.
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, or
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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.
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, or
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 any representation or warranty relating to Healthworld's right,
authority or capacity to enter into and consummate the terms of this
Agreement.
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
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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, 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
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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
under any Absolute Representation 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 any Absolute Representation 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 to be received by the U.K. Stockholder in connection with
the Organization, provided that the U.K. Stockholder's indemnification
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obligations pursuant to any Absolute Representation shall not be limited. For
purposes of calculating the value of the Healthworld Stock to be 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 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 December 31, 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 Contributing
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.
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.
13 Non-Competition; Non-Disclosure.
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13.1 Non-Competition. The U.K. Stockholder will not, for a period (the
"Restrictive Period") commencing with the date hereof and concluding two (2)
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) within
the "Territory" (hereafter defined):
13.1.1.1 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 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 engage in any other business engaged in by Healthworld
or any of its subsidiaries at any time during the "Contact
Period" (hereafter defined).
The term "Territory" means each of the geographic areas which lie within a 100
mile radius of any location at which Healthworld or any of its subsidiaries
(which were subsidiaries of Healthworld at any time during the "Contact Period,"
hereafter defined) conducted any business during the Restrictive Period. The
term "Contact Period" means the period commencing with the date hereof and
ending with the later to occur of (i) the Closing Date or (ii) the date upon
which the U.K. Stockholder is no longer engaged as an officer, employee or
director of Healthworld or any of its subsidiaries.
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;
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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) at any time during the Restrictive Period or for
which, to the actual knowledge of the U.K. Stockholder after due inquiry,
Healthworld (or any subsidiary thereof) at any time during the Restrictive
Period 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 13.2.1.2, the U.K. Stockholder shall give prior
written notice thereof to Healthworld and provide
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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.
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.
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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 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, 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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Healthworld Agreement and Plan of Organization/UK
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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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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
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 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.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
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
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 preparation and filing of the registration statement, the
underwriting and the IPO, 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, LLP,
Rosenman & Colin LLP, Todtman, Nachamie, Hendler & Spizz, P.C. (as they relate
to the subject matter described in this paragraph), the Underwriters or any
other person or entity retained by Healthworld (the "IPO costs").
If the transactions herein contemplated shall not be consummated, then the IPO
costs 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.
If the transactions herein contemplated shall be consummated, Healthworld shall
pay the fees, expenses and disbursements of Healthworld and the U.K. Stockholder
and his agents, representatives, accountants and counsel incurred in connection
with the negotiation and
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
consummation of this Agreement and any amendments thereto, including all counsel
and professional costs of the U.K. Stockholder relating to the negotiation and
consummation of this Agreement (the "Reorganization Costs"), but not including
the cost of any broker or agent described in Section 5.26.
If the transactions herein contemplated shall not be consummated, the U.K.
Stockholder shall pay his Reorganization Costs.
Any other costs and expenses of the U.K. Stockholder which are not described as
IPO Costs or Reorganization Costs shall be paid by the U.K. Stockholder,
including but not limited to the cost of any broker or agent described in
Section 5.26, except that Healthworld shall pay all stock transfer and/or
recording taxes or duties imposed with respect to stock transfers effectuated
pursuant to the Organization. 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,
except as otherwise specifically contemplated in this Section 16.5.
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, 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
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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
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 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.
16.9 Time. Time is of the essence with respect to this Agreement.
16.10 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.
16.11 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.
16.12 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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Healthworld Agreement and Plan of Organization/UK
- --------------------------------------------------------------------------------
16.13 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 the mutual
consent of Healthworld and the U.K. Stockholder.
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
______________________________________
WILLIAM LESLIE MILTON
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Healthworld Agreement and Plan of Organization/Garnham
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the 23rd day of October, 1997
by and between
HEALTHWORLD CORPORATION
and
MICHAEL GARNHAM
<PAGE>
Healthworld Agreement and Plan of Organization/Garnham
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
Page No.
--------
1 The Organization........................................................-7-
----------------
1.1 Organization..........................................-7-
------------
1.2 Directors and Officers................................-8-
----------------------
2 Conversion of Stock.....................................................-8-
-------------------
2.1 Manner of Conversion..................................-8-
--------------------
2.2 Beneficial Ownership of Shares........................-8-
------------------------------
2.3 Allocation of Shares..................................-8-
--------------------
3 Delivery of U.K. Company Stock and Healthworld Stock; Disclaimer
----------------------------------------------------------------
of Rights...........................................-10-
---------
4 Closing................................................................-10-
-------
5 Representations And Warranties of the U.K. Stockholder.................-11-
------------------------------------------------------
5.1 Due Organization.....................................-12-
----------------
5.2 Prohibited Activities................................-12-
---------------------
5.3 Capital Stock of the Company.........................-13-
----------------------------
5.4 Transactions in Capital Stock........................-13-
-----------------------------
5.5 No Bonus Shares......................................-13-
---------------
5.6 Subsidiaries.........................................-13-
------------
5.7 Predecessor Status; etc..............................-14-
-----------------------
5.8 Spin-off by the Company..............................-14-
-----------------------
5.9 Financial Statements.................................-14-
--------------------
5.10 Liabilities and Obligations..........................-14-
---------------------------
5.11 Accounts and Notes Receivable........................-15-
-----------------------------
5.12 Permits and Intangibles..............................-15-
-----------------------
5.13 Environmental Matters................................-16-
---------------------
5.14 Personal Property....................................-16-
-----------------
5.15 Significant Customers; Material Contracts
-----------------------------------------
and Commitments.....................................-17-
----------------
5.16 Real Property........................................-17-
-------------
5.17 Insurance............................................-18-
---------
5.18 Compensation; Employment Agreements; Organized
----------------------------------------------
Labor Matters.......................................-18-
--------------
5.19 Employee Benefits....................................-22-
-----------------
5.20 Conformity with Law; Litigation......................-22-
-------------------------------
5.21 Taxes................................................-22-
-----
5.22 No Violations........................................-24-
-------------
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Healthworld Agreement and Plan of Organization/Garnham
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Page No.
--------
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..........................................-28-
------------------------------
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...........................-29-
---------------------------
6.6 Conformity with Law; Litigation.......................-30-
-------------------------------
6.7 Validity of Obligations...............................-30-
-----------------------
6.8 Limited Business Conducted............................-30-
--------------------------
7 Covenants Prior to Closing..............................................-30-
--------------------------
7.1 Access and Cooperation; Due Diligence.................-30-
-------------------------------------
7.2 Conduct of Business Pending Closing...................-31-
-----------------------------------
7.3 Prohibited Activities.................................-32-
---------------------
7.4 No Shop...............................................-33-
-------
7.5 Further Assurances....................................-33-
------------------
7.6 Agreements............................................-33-
----------
7.7 Notification of Certain Matters.......................-34-
-------------------------------
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.............-35-
-----------------------------------------------------------
8.1 Representations and Warranties; Performance of
----------------------------------------------
Obligations by Healthworld...........................-35-
---------------------------
8.2 Satisfaction..........................................-35-
------------
8.3 No Litigation.........................................-35-
-------------
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-
---------------------------------------
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Healthworld Agreement and Plan of Organization/Garnham
- --------------------------------------------------------------------------------
Page No.
--------
8.8 Employment Agreement..................................-36-
-------------------
8.9 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 Opinion of Counsel....................................-37-
------------------
9.5 Consents and Approvals................................-37-
----------------------
9.6 No Material Adverse Change............................-37-
--------------------------
9.7 Secretary's Certificates..............................-37-
------------------------
9.8 Employment Agreement..................................-38-
--------------------
9.9 Stockholder's Release.................................-38-
---------------------
9.10 Termination of Related Party Agreements...............-38-
---------------------------------------
9.11 Simultaneous Closings.................................-38-
---------------------
9.12 Cater Share Purchase..................................-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-
-------------------------------------
10.4 Conformity With Girgenti/Milton Letter of Intent
------------------------------------------------
Regarding Governance.................................-39-
---------------------
11 Indemnification.........................................................-39-
---------------
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........................-42-
------------------------------
12 Termination of Agreement................................................-43-
------------------------
12.1 Termination...........................................-43-
-----------
12.2 Liabilities in Event of Termination...................-44-
-----------------------------------
13 Non-Competition; Non-Disclosure.........................................-44-
-------------------------------
13.1 Non-Competition.......................................-44-
---------------
13.2 Nondisclosure.........................................-45-
-------------
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Healthworld Agreement and Plan of Organization/Garnham
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Page No.
--------
13.3 Injunctive Relief; Damages............................-46-
--------------------------
13.4 Reasonable Restraint..................................-47-
--------------------
13.5 Severability; Reformation.............................-47-
-------------------------
13.6 Independent Covenant..................................-47-
--------------------
13.7 Survival..............................................-47-
--------
14 Federal Securities Act Representations..................................-47-
--------------------------------------
14.1 Compliance with Law...................................-48-
-------------------
14.2 Economic Risk; Sophistication.........................-48-
-----------------------------
15 Registration Rights.....................................................-48-
-------------------
15.1 Piggyback Registration Rights.........................-48-
-----------------------------
15.2 Registration Procedures...............................-49-
-----------------------
15.3 Underwriting Agreement................................-49-
15.4 Availability of Rule 144..............................-49-
------------------------
16 General.................................................................-49-
-------
16.1 Cooperation...........................................-49-
-----------
16.2 Successors and Assigns................................-50-
----------------------
16.3 Entire Agreement......................................-50-
---------------
16.4 Counterparts..........................................-50-
------------
16.5 Expenses..............................................-50-
--------
16.6 Notices...............................................-51-
-------
16.7 Governing Law.........................................-52-
-------------
16.8 Exercise of Rights and Remedies.......................-52-
-------------------------------
16.9 Time..................................................-52-
----
16.10 Reformation and Severability..........................-52-
----------------------------
16.11 Remedies Cumulative...................................-53-
-------------------
16.12 Captions..............................................-53-
--------
16.13 Amendments and Waivers................................-53-
----------------------
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Healthworld Agreement and Plan of Organization/Garnham
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of the
_______ day of October, 1997, by and between:
Healthworld Corporation, a Delaware corporation ("Healthworld"), and
Michael Garnham (the "U.K. Stockholder"), residing at 42 The Burlings,
Ascot, Berkshire, SL5 8BY, United Kingdom.
WHEREAS, the U.K. Stockholder is the registered and beneficial owner with
full title 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 and Wales with registered no. 2998311 (the "Company"); and
WHEREAS, the remainder of the issued share capital of the Company is owned
by Milton Marketing Limited, a company incorporated in England and Wales with
registered no. 1385429 (the "Sister Company"), which is itself owned as to 7.5%
by Michael Bourne ("Bourne") and 92.5% 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, Leonard Moreton ("Moreton") owns a portion of the issued share
capital of PDM Communications Limited, a company incorporated in England and
Wales with registered no. 1324588 ("PDM"); 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
Company into Healthworld in exchange for
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Healthworld Agreement and Plan of Organization/Garnham
- --------------------------------------------------------------------------------
Healthworld Stock, Milton desires to contribute all of his shares of stock in
the U.K. Company into Healthworld in exchange for Healthworld Stock, Moreton
desires to contribute all of his shares of PDM 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 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, Cater owns a portion of the issued share capital of Milton Cater
Limited, a company incorporated in England and Wales with registered no. 3196839
("MCL"); and
WHEREAS, Cater desires to transfer her shares of MCL in consideration for a
variation to her service agreement and not in exchange for Healthworld Stock;
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.
"Absolute Representations" shall have the meaning set forth in subparagraph
(ii) of the preliminary paragraphs of Section 5.
"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.
-2-
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Healthworld Agreement and Plan of Organization/Garnham
- --------------------------------------------------------------------------------
"Bourne" means Michael Bourne, residing at 15 Eton Square, Eton, Windsor,
Berkshire, SL4 6BG, United Kingdom.
"Butler" means William Butler, residing at Post Office Box 1430, Olive
Bridge, New York 12461-0430.
"Cater" means Claire Cater, residing at Back of Beyond, 76 The High Street,
Ardingly, West Sussex, RH17 6TD, United Kingdom.
"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 Financial Statements" has the meaning set forth in Section 5.9.
"Company Stock" has the meaning set forth in Section 2.1.
"Contributing Minority Stockholders" means the U.K. Stockholder, Bourne and
Moreton.
"Disclosed Schemes" has the meaning set forth in Section 5.19.
"Disclosure Schedule" has the meaning set forth in the preliminary
paragraph of Section 5.
"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 5.
"Girgenti" means Steven Girgenti, residing at 3312 Judith Drive, Bellmore,
New York 11710.
-3-
<PAGE>
Healthworld Agreement and Plan of Organization/Garnham
- --------------------------------------------------------------------------------
"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 dated
February 27, 1997 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.
"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 William Leslie Milton, residing at 17 Clappers Meadow,
Maidenhead, Berkshire SL6 8TT, United Kingdom.
"Moreton" means Leonard Moreton, residing at "Southcroft," Copsem Lane,
Oxshott, Surrey, KT22 0NT, United Kingdom.
"Offering Price" means (i) the offering price in the IPO if the Closing
Date occurs contemporaneously with the Pricing and (ii) the proposed mid-range
offering price in the IPO as
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reflected in the Registration Statement, as most recently amended, if the
Closing Date occurs prior to the Pricing.
"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.
"Prevailing Conversion Rate" means the prevailing exchange rate, as shown
in The Financial Times, between the U.S. dollar and the U.K. pound sterling at
the close of business on the business day immediately prior to the Closing Date.
"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 and the execution of the Underwriting Agreement by Healthworld and the
Underwriters.
"Registration Statement" means that certain registration statement on Form
S-1 (Registration No. 333-34751) 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.
"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.
"Sister Company Agreements of Organization" has the meaning set forth in
Section 1.1.2.
"Stuart Diamond Employment Agreement" means that certain Employment
Agreement by and between Healthworld and Stuart Diamond, dated August 18, 1997,
pursuant to which Healthworld has engaged the services of Stuart Diamond.
"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.
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"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.
"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.
"Underwriting Agreement" means the agreement to be negotiated between
Healthworld and the Underwriters regarding the Underwriters' representation of
Healthworld in the IPO.
"U.K. Agreement of Organization" has the meaning set forth in Section
1.1.4.
"U.K. Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"U.K. Percentage" has the meaning set forth in Section 2.3.1.
"U.K. Stockholder" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Agreement of Organization" has the meaning set forth in Section
1.1.1.
"U.S. Companies" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Percentage" has the meaning set forth in Section 2.3.1.
"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
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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 are owned by them to
the capital of Healthworld, pursuant to separate Agreements of Organization
of even date herewith (the "Sister Company Agreements of Organization"),
and
1.1.3 The U.K. Company shall, on or prior to the Closing Date,
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 herewith
(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
contributions made pursuant to the Sister Company 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
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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 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 Company owned by the U.K. Stockholder prior to the
Closing into shares of Healthworld Stock shall be as follows: At the Closing all
of the Company Stock 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 to be 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 Healthworld Stock to be 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 the U.S. Stockholders, who presently own one hundred
(100) shares of Healthworld Stock in the aggregate, the conversion shall be made
in such a manner as to issue to them 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:
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 Milton and the Contributing
Minority 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, 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 (pound)1,000,000,
based on the Offering Price and utilizing the Prevailing
Conversion Rate.
2.3.3.2 Bourne shall receive that number of shares of Healthworld
Stock having a value of (pound)276,448.35, based on the
Offering Price and utilizing the Prevailing Conversion Rate.
2.3.3.3 Moreton shall receive that number of shares of
Healthworld Stock having a value of (pound)53,677 based on
the Offering Price and utilizing the Prevailing Conversion
Rate.
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 the
Prevailing Conversion Rate.
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 to
cure any deficiencies prior to the Closing 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 form 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 which results from applying the percentage 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.
On the earlier of November 12, 1997 or 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, 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."
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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 Company and to Milton Headcount Limited (f/k/a Effective Sales Personnel
Limited) a company incorporated in England and Wales with registered no.
1425412.
The representations and warranties made herein are being made for the
benefit of Healthworld, the U.S. Stockholders, Milton, Bourne and Moreton. 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
Company and Milton Headcount Limited 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 Sections 5.1, 5.3 and
hereof (regarding "Due Organization; Capital Stock of the Company;
Authority; Ownership"), which shall be referred to in this Agreement as the
"Absolute Representations" 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
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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.
The Company has complied in all material respects with the provisions of
the Companies Act 1985, 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.
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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 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
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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 Balance Sheets as of June 30, 1996 (the "1996
Balance Sheet"), (and solely in the case of Milton Headcount Limited) 1995 and
1994 and Profit and Loss Accounts, Directors' and Auditors' reports thereon and
the notes thereto and all other documents annexed thereto for the period ended
June 30, 1996, the unaudited management accounts of the Company which form part
of the unaudited consolidated financial statements for the period between the
Balance Sheet Date and June 30, 1997, and the unaudited consolidated balance
sheet as of June 30, 1997. Such Financial Statements (other than the unaudited
management accounts of the Company for the period between the Balance Sheet Date
and June 30, 1997 which have been prepared in accordance with U.S. generally
accepted accounting principles) have been prepared in accordance with the
Companies Act 1985, generally accepted accounting principles including all
statements of U.K. Standard Accounting Practice and U.K. 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
Balance Sheets as of June 30, 1996, (and solely in the case of Milton Headcount
Limited) 1995 and 1994 give a true and fair view of the assets and liabilities
and the financial position of the 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,
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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 Balance Sheet Date, and including receivables from and advances to
employees and the U.K. Stockholder. The U.K. Stockholder shall use commercially
reasonable efforts to 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
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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, so far as it is required, 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
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,
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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 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 any Affiliates, by the U.K.
Stockholder, by any relative of the U.K. Stockholder or by any entity that
directly, or indirectly through one or more intermediaries, is controlled by the
U.K. Stockholder or any of his relatives. 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.
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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.
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.
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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 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, to the extent now
known, 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
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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.
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
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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;
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 Schedules 5.18 or 5.19 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
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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 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
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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.
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
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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, to the knowledge of the U.K. Stockholder,
liable to be withdrawn, modified or rendered void and,
to the knowledge of the U.K. Stockholder, 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
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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 Effect on 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 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;
5.25.2 the names in which the accounts or boxes are held;
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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, on or 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
price or within a particular range of prices or occur
at all;
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5.28.2.2 that neither Healthworld nor any of its officers,
directors, agents or representatives nor any
Underwriter (other than as provided in the Underwriting
Agreement) 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 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 to be 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.
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 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
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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 the U.S. Stockholders in
the amounts set forth in Schedule 6.3. 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 the capital stock of Healthworld have been duly authorized
and validly issued and are fully paid and nonassessable. Such shares were
offered, issued, sold and delivered by Healthworld in compliance with all
applicable state and Federal laws concerning the issuance of securities.
6.4 Transactions in Capital Stock. Except for the obligations under the
agreements which form a part of the Healthworld Plan of Organization or the
obligations which will arise under the Underwriting Agreement, 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.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, for fees
incurred in connection with the transactions contemplated hereby and thereby,
and any liabilities and obligations which may exist under the Stuart
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Diamond Employment Agreement and the Healthworld License Agreement, copies of
which are 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 Stuart Diamond Employment
Agreement, the Healthworld License Agreement and has engaged in other limited
startup activities. It is anticipated that prior to the Closing, Healthworld
will adopt a Stock Option Plan; however, Healthworld covenants that no options
will be granted before the Registration Statement is declared effective by the
SEC.
7 Covenants Prior to Closing.
For purposes of this Section 7, the term Company shall mean and refer to
the Company and Milton Headcount Limited.
7.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the U.K. Stockholder will use commercially
reasonable efforts to 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
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cooperate, and will use commercially reasonable efforts to 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 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 use commercially reasonable
efforts to 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 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 except as may be reasonably necessary to effectuate the IPO;
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.
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7.3 Prohibited Activities. Except as disclosed on Schedule 7.3 or as
otherwise contemplated by this Agreement, 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 and except if it involves the
performance of services in the ordinary course of business;
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,
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;
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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,
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 use commercially
reasonable efforts to 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 hereto on or
prior to the Closing Date.
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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 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
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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.
8.1 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.
8.2 Representations and Warranties; Performance of Obligations by
Healthworld. All representations and warranties of Healthworld 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 as though such representations and warranties had been made as of
that time. All of the terms, covenants and conditions of Healthworld contained
in this Agreement shall have been duly complied with and performed in all
material respects. Certificates to the foregoing effect dated the Closing Date,
signed by Healthworld, shall have been delivered to the U.K. Stockholder.
8.3 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement and any other agreement incidental hereto
and all other related legal matters shall be reasonably satisfactory to the U.K.
Stockholder and his counsel. The U.K. Stockholder shall be reasonably 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.
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.
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8.4 Opinions of Counsel. The U.K. Stockholder shall have received an
opinion from counsel for each of U.S. Stockholders, Milton and Healthworld,
dated the Closing Date, in form and substance reasonably acceptable to counsel
for the U.K. Stockholder.
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 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 Agreement. Healthworld shall have executed an employment
agreement substantially in the form of Exhibit hereto, for the annual
compensation set forth on Schedule 8.8.
8.9 Simultaneous Closings. The Closings pursuant to the Sister Company
Agreements of Organization, the U.K. Agreement of Organization and the U.S.
Agreement of Organization 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
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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 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 Contributing Minority Stockholders and any
other agreement incidental hereto or thereto and all other related legal matters
shall be reasonably 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 Opinion of Counsel. Healthworld shall have received an opinion from
counsel to the U.K. Stockholder, dated the Closing Date, in form and substance
reasonably 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 the Company which would constitute a Material Adverse
Effect, and the Company shall not 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 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 Agreement. The U.K. Stockholder shall have executed 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 9.10, all existing agreements between any of the Company, the U.K.
Stockholder, Milton, Moreton, Bourne 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, Moreton and Bourne
shall occur simultaneously with the Closing hereunder.
9.12 Cater Share Purchase. The U.K. Company shall have purchased Cater's
shares as described in Section 1.1.3.
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. Furthermore, Healthworld shall assume
all obligations which the U.K. Stockholder may have incurred to guarantee any
lease of the Company and shall indemnify and hold harmless the U.K. Stockholder
from any cost or expense arising under any such lease guarantee.
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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 Company shall 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 in a manner prepared under the instructions of
Milton, consistent with historical practices.
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 use commercially reasonable efforts to 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.
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding Governance.
Corporate governance at the date of the closing of the IPO shall be in
accordance with section 1.3 of the Girgenti/Milton Letter of Intent.
11 Indemnification.
The U.K. Stockholder and Healthworld each make the following covenants that
are applicable to them, respectively:
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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, or
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 the Company 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 the Company or the U.K. Stockholder required to be stated therein or
necessary to make the statements therein not misleading.
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 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
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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 any representation or warranty relating to Healthworld's right,
authority or capacity to enter into and consummate the terms of this
Agreement.
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, 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
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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 (pound)31,250, provided, however,
that Healthworld may assert and shall be indemnified for any claim under
any Absolute Representation at any time, regardless of whether the
aggregate of all claims which such persons may have against the U.K.
Stockholder exceeds (pound)31,250, it being understood that the amount of
any such claim under any Absolute Representation shall not be counted
towards such (pound)31,250 amount.
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
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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 to be received by the U.K. Stockholder in connection with
the Organization, provided that the U.K. Stockholder's indemnification
obligations pursuant to any Absolute Representation shall not be limited.
For purposes of calculating the value of the Healthworld Stock to be
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 or Healthworld if the transactions
contemplated by this Agreement to take place at the Closing shall not have
been consummated by December 31, 1997, unless the failure of such
transactions to be consummated is due to the willful failure of the party
invoking this subsection to perform any of his or its obligations under
this Agreement to the extent required to be performed by him or it 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 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
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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.
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.
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 two (2)
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) within
the "Territory" (hereafter defined):
13.1.1.1 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 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 engage in any other business engaged in by
Healthworld or any of its subsidiaries at any time
during the "Contact Period" (hereafter defined).
The term "Territory" means each of the geographic areas which lie within a 100
mile radius of any location at which Healthworld or any of its subsidiaries
(which were subsidiaries of Healthworld at any time during the "Contact Period,"
hereafter defined) conducted any business
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during the Restrictive Period. The term "Contact Period" means the period
commencing with the date hereof and ending with the later to occur of (i) the
Closing Date or (ii) the date upon which the U.K. Stockholder is no longer
engaged as an officer, employee or director of Healthworld or any of its
subsidiaries.
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;
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) at any time during the Restrictive Period or for
which, to the actual knowledge of the U.K. Stockholder after due inquiry,
Healthworld (or any subsidiary thereof) at any time during the Restrictive
Period 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
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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 13.2.1.2, 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.
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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 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 shall be
cons13.7trued 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 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 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.
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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.
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
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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 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 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 use commercially
reasonable efforts to 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
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request for the purpose of carrying out this Agreement. The U.K. Stockholder
shall use commercially reasonable efforts to 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.
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 preparation and filing of the registration statement, the
underwriting and the IPO, 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, LLP,
Rosenman & Colin LLP, Todtman, Nachamie, Hendler & Spizz, P.C. (as they relate
to the subject matter described in this paragraph), the Underwriters or any
other person or entity retained by Healthworld (the "IPO costs").
If the transactions herein contemplated shall not be consummated, then the IPO
costs 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
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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.
If the transactions herein contemplated shall be consummated, Healthworld shall
pay the fees, expenses and disbursements of Healthworld and the U.K. Stockholder
and his agents, representatives, accountants and counsel incurred in connection
with the negotiation and consummation of this Agreement and any amendments
thereto, including all counsel and professional costs of the U.K. Stockholder
relating to the negotiation and consummation of this Agreement (the
"Reorganization Costs"), but not including the cost of any broker or agent
described in Section 5.26.
If the transactions herein contemplated shall not be consummated, the U.K.
Stockholder shall pay his Reorganization Costs.
Any other costs and expenses of the U.K. Stockholder which are not described as
IPO Costs or Reorganization Costs shall be paid by the U.K. Stockholder,
including but not limited to the cost of any broker or agent described in
Section 5.26, except that Healthworld shall pay all stock transfer and/or
recording taxes or duties imposed with respect to stock transfers effectuated
pursuant to the Organization. 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,
except as otherwise specifically contemplated in this Section 16.5.
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:
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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 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 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.
16.9 Time. Time is of the essence with respect to this Agreement.
16.10 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.
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16.11 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.
16.12 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.
16.13 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 mutual
consent of Healthworld and the U.K. Stockholder.
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
______________________________________________
Michael Garnham
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AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the 23rd day of October, 1997
by and between
HEALTHWORLD CORPORATION
and
LEONARD MORETON
<PAGE>
Healthworld Agreement and Plan of Organization/Moreton
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
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<S> <C>
1 The Organization............................................................................................................-7-
----------------
1.1 Organization........................................................................................-7-
------------
1.2 Directors and Officers..............................................................................-8-
----------------------
2 Conversion of Stock.........................................................................................................-8-
-------------------
2.1 Manner of Conversion................................................................................-8-
--------------------
2.2 Beneficial Ownership of Shares......................................................................-8-
------------------------------
2.3 Allocation of Shares; Additional Consideration......................................................-8-
----------------------------------------------
3 Delivery of U.K. Company Stock and Healthworld Stock; Disclaimer of Rights................................................-11-
--------------------------------------------------------------------------
4 Closing....................................................................................................................-11-
-------
5 Representations And Warranties of the U.K. Stockholder.....................................................................-12-
------------------------------------------------------
5.1 Due Organization...................................................................................-12-
----------------
5.2 Prohibited Activities..............................................................................-13-
---------------------
5.3 Capital Stock of the Company.......................................................................-13-
----------------------------
5.4 Transactions in Capital Stock......................................................................-14-
-----------------------------
5.5 No Bonus Shares....................................................................................-14-
---------------
5.6 Subsidiaries.......................................................................................-14-
------------
5.7 Predecessor Status; etc............................................................................-14-
-----------------------
5.8 Spin-off by the Company............................................................................-15-
-----------------------
5.9 Financial Statements...............................................................................-15-
--------------------
5.10 Liabilities and Obligations........................................................................-15-
---------------------------
5.11 Accounts and Notes Receivable......................................................................-16-
-----------------------------
5.12 Permits and Intangibles............................................................................-16-
-----------------------
5.13 Environmental Matters..............................................................................-17-
---------------------
5.14 Personal Property..................................................................................-17-
-----------------
5.15 Significant Customers; Material Contracts and Commitments..........................................-17-
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5.16 Real Property......................................................................................-18-
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5.17 Insurance..........................................................................................-18-
---------
5.18 Compensation; Employment Agreements; Organized Labor Matters.......................................-19-
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5.19 Employee Benefits..................................................................................-22-
-----------------
5.20 Conformity with Law; Litigation....................................................................-23-
-------------------------------
5.21 Taxes..............................................................................................-23-
-----
5.22 No Violations......................................................................................-25-
-------------
5.23 Government Contracts...............................................................................-26-
--------------------
</TABLE>
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
5.24 Absence of Changes.................................................................................-26-
------------------
5.25 Deposit Accounts; Powers of Attorney...............................................................-27-
------------------------------------
5.26 Brokers and Agents.................................................................................-28-
------------------
5.27 Relations with Governments.........................................................................-28-
--------------------------
5.28 Disclosure.........................................................................................-28-
----------
5.29 Authority; Ownership. ............................................................................-29-
--------------------
5.30 Preemptive Rights..................................................................................-29-
-----------------
5.31 No Intention to Dispose of Healthworld Stock.......................................................-29-
--------------------------------------------
6 Representations of Healthworld.............................................................................................-29-
------------------------------
6.1 Due Organization...................................................................................-29-
----------------
6.2 Authorization......................................................................................-30-
-------------
6.3 Capital Stock of Healthworld.......................................................................-30-
----------------------------
6.4 Transactions in Capital Stock......................................................................-30-
-----------------------------
6.5 Liabilities and Obligations........................................................................-30-
---------------------------
6.6 Conformity with Law; Litigation....................................................................-30-
-------------------------------
6.7 Validity of Obligations............................................................................-31-
-----------------------
6.8 Limited Business Conducted.........................................................................-31-
--------------------------
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............................................................................................-34-
-------
7.5 Further Assurances.................................................................................-34-
------------------
7.6 Agreements.........................................................................................-34-
----------
7.7 Notification of Certain Matters....................................................................-34-
-------------------------------
7.8 Amendment of Schedules.............................................................................-35-
----------------------
7.9 Cooperation in Preparation of Registration Statement...............................................-35-
----------------------------------------------------
8 Conditions Precedent to Obligations of the U.K. Stockholder................................................................-36-
-----------------------------------------------------------
8.1 Representations and Warranties; Performance of Obligations by
-------------------------------------------------------------
Healthworld........................................................................... ........................-36-
-----------
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.........................................................................-37-
--------------------------
8.7 Secretary's Certificates; Good Standing............................................................-37-
---------------------------------------
8.8 Simultaneous Closings..............................................................................-37-
---------------------
</TABLE>
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<TABLE>
<CAPTION>
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--------
<S> <C>
9 Conditions Precedent to Obligations of Healthworld.........................................................................-37-
--------------------------------------------------
9.1 Representations and Warranties; Performance of Obligations.........................................-37-
----------------------------------------------------------
9.2 Satisfaction.......................................................................................-37-
------------
9.3 No Litigation......................................................................................-38-
-------------
9.4 Opinion of Counsel.................................................................................-38-
------------------
9.5 Consents and Approvals.............................................................................-38-
----------------------
9.6 No Material Adverse Change.........................................................................-38-
--------------------------
9.7 Secretary's Certificates...........................................................................-38-
------------------------
9.8 Stockholder's Release..............................................................................-38-
---------------------
9.9 Termination of Related Party Agreements............................................................-38-
---------------------------------------
9.10 Simultaneous Closings..............................................................................-39-
---------------------
9.11 Cater Share Purchase...............................................................................-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..............................................................-39-
-------------------------------------
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding
----------------------------------------------------------
Governance.................................................................................................................-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................................................................................-41-
-------------------
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................................................................-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...............................................................................-47-
--------------------
13.5 Severability; Reformation..........................................................................-48-
-------------------------
</TABLE>
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<TABLE>
<CAPTION>
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--------
<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 Exercise of Rights and Remedies...................................................................-53-
-------------------------------
16.9 Time..............................................................................................-53-
----
16.10 Reformation and Severability......................................................................-53-
----------------------------
16.11 Remedies Cumulative...............................................................................-53-
-------------------
16.12 Captions..........................................................................................-53-
--------
16.13 Amendments and Waivers............................................................................-54-
----------------------
</TABLE>
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Healthworld Agreement and Plan of Organization/Moreton
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of the
_______ day of October, 1997, by and between:
Healthworld Corporation, a Delaware corporation ("Healthworld"), and
Leonard Moreton (the "U.K. Stockholder"), residing at "Southcroft," Copsem
Lane, Oxshott, Surrey, KT22 0NT, United Kingdom.
WHEREAS, the U.K. Stockholder is the registered and beneficial owner with
full title guarantee of a portion of the issued share capital of PDM
Communications Limited, a company incorporated in England and Wales with
registered no. 1324588 (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 Garnham ("Garnham") owns a portion of the issued share
capital of Effective Sales Personnel Ltd. (f/k/a Milton Headcount Limited), a
company incorporated in England and Wales with registered no. 2998311 ("ESP");
and
WHEREAS, Michael Bourne ("Bourne") owns a portion of the issued share
capital of Milton Marketing Limited, a company incorporated in England and Wales
with registered no. 1385429 (the "Sister Company");
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
-1-
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
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, Bourne desires to contribute all of his shares of stock in the Sister
Company into Healthworld in exchange for Healthworld Stock, and Garnham desires
to contribute all of his shares of stock in ESP 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 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, Cater owns a portion of the issued share capital of Milton Cater
Limited, a company incorporated in England and Wales with registered no. 3196839
("MCL"); and
WHEREAS, Cater desires to transfer her shares of MCL in consideration for a
variation to her service agreement and not in exchange for Healthworld Stock;
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.
"Absolute Representations" shall have the meaning set forth in subparagraph
(ii) of the preliminary paragraphs of Section 5.
"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.
-2-
<PAGE>
Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
"Bourne" means Michael Bourne, residing at 15 Eton Square, Eton, Windsor,
Berkshire, SL4 6BG, United Kingdom.
"Butler" means William Butler, residing at Post Office Box 1430, Olive
Bridge, New York 12461-0430.
"Cater" means Claire Cater, residing at Back of Beyond, 76 The High Street,
Ardingly, West Sussex, RH17 6TD, United Kingdom.
"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 Financial Statements" has the meaning set forth in Section 5.9.
"Company Stock" has the meaning set forth in Section 2.1.
"Contributing Minority Stockholders" means the U.K. Stockholder, Bourne and
Garnham.
"Disclosed Schemes" has the meaning set forth in Section 5.19.
"Disclosure Schedule" has the meaning set forth in the preliminary
paragraph of Section 5.
"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 5.
-3-
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
"Garnham" means Michael Garnham, residing at 42 The Burlings, Ascot,
Berkshire, SL5 8BY, United Kingdom.
"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 dated
February 27, 1997 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.
"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 William Leslie Milton, residing at 17 Clappers Meadow,
Maidenhead, Berkshire SL6 8TT, United Kingdom.
-4-
<PAGE>
Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
"Offering Price" means (i) the offering price in the IPO if the Closing
Date occurs contemporaneously with the Pricing and (ii) the proposed mid-range
offering price in the IPO as reflected in the Registration Statement, as most
recently amended, if the Closing Date occurs prior to the Pricing.
"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.
"Prevailing Conversion Rate" means the prevailing exchange rate, as shown
in The Financial Times, between the U.S. dollar and the U.K. pound sterling at
the close of business on the business day immediately prior to the Closing Date.
"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 and the execution of the Underwriting Agreement by Healthworld and the
Underwriters.
"Registration Statement" means that certain registration statement on Form
S-1 (Registration No. 333-34751) 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.
"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.
"Sister Company Agreements of Organization" has the meaning set forth in
Section 1.1.2.
"Stuart Diamond Employment Agreement" means that certain Employment
Agreement by and between Healthworld and Stuart Diamond, dated August 18, 1997,
pursuant to which Healthworld has engaged the services of Stuart Diamond.
-5-
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
"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.
"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.
"Underwriting Agreement" means the agreement to be negotiated between
Healthworld and the Underwriters regarding the Underwriters' representation of
Healthworld in the IPO.
"U.K. Agreement of Organization" has the meaning set forth in Section
1.1.4.
"U.K. Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"U.K. Percentage" has the meaning set forth in Section 2.3.1.
"U.K. Stockholder" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Agreement of Organization" has the meaning set forth in Section
1.1.1.
"U.S. Companies" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Percentage" has the meaning set forth in Section 2.3.1.
"U.S. Stockholders" means Girgenti, Hughes, Butler & Ehrenthal.
-6-
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
"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 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 Garnham and Bourne will be contributing all of the issued and
outstanding shares of ESP and the Sister Company which are owned by them to
the capital of Healthworld, pursuant to separate Agreements of Organization
of even date herewith (the "Sister Company Agreements of Organization"),
and
1.1.3 The U.K. Company shall, on or prior to the Closing Date,
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 herewith
(the "U.K. Agreement of Organization").
-7-
<PAGE>
Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
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 Sister Company 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 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 Company owned by the U.K. Stockholder prior to the
Closing into shares of Healthworld Stock shall be as follows: At the Closing all
of the Company Stock 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 to be 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 Healthworld Stock to be 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; Additional Consideration. Healthworld will issue
to the U.S. Stockholders, the U.K. Stockholder, Milton, Garnham and Bourne, in
the aggregate, 5,000,000 shares (the "Aggregate Number of Founder Shares") of
Healthworld Stock at the Closing. With respect to the U.S. Stockholders, who
presently own one hundred (100) shares of Healthworld Stock in the aggregate,
the conversion shall be made in such a manner as to issue to them 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
-8-
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
Shares among all of the U.S. Stockholders, the U.K. Stockholder, Milton, Garnham
and Bourne 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 Milton and the Contributing
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, Garnham and Bourne in
the following manner:
2.3.3.1 Garnham shall receive that number of shares of
Healthworld Stock having a value of (pound)1,000,000, based
on the Offering Price and utilizing the Prevailing
Conversion Rate.
2.3.3.2 Bourne shall receive that number of shares of Healthworld
Stock having a value of (pound)276,448.35, based on the
Offering Price and utilizing the Prevailing Conversion Rate.
2.3.3.3 The U.K. Stockholder shall receive that number of shares
of Healthworld Stock having a value of (pound)53,677 based
on the Offering Price and utilizing the Prevailing
Conversion Rate.
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.
-9-
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
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 the Prevailing
Conversion Rate.
2.3.5 Additional Consideration. Healthworld shall pay to the U.K.
Stockholder the "Deferred Payment," hereafter defined, sixty (60) days
following the "Determination Date," hereafter defined. The following
definitions shall apply to the calculation under this Section 2.3.5:
2.3.5.1 "Determination Date" means May 31, 1999.
2.3.5.2 "Deferred Payment" means the "Base Amount" plus the
"Disposal Costs" minus the "Initial Share Value," but in no
event shall the Deferred Payment be less than the "Minimum
Payment" nor more than the "Maximum Payment."
2.3.5.3 "Base Amount" means twenty-five (25%) percent of the
"Average Gross Profits."
2.3.5.4 "Disposal Costs" means all brokers' fees and exchange
rate charges (but not including any Taxes due upon the U.K.
Stockholder) incurred by the U.K. Stockholder on or before
the Determination Date in disposing of any of the
Healthworld Stock received by him in accordance with this
Section 2.3.
2.3.5.5 "Initial Share Value" means (pound)53,677
2.3.5.6 "Average Gross Profits" means fifty (50%) percent of the
"Gross Income" of the Company from June 1, 1997 through the
Determination Date.
2.3.5.7 "Gross Income" means "Sales Revenues" less "Sales Costs."
2.3.5.8 "Sales Revenues" means the income of the Company as shown
in the Company's management accounts.
2.3.5.9 "Sales Costs" means the expenditure of the Company
excluding "Personnel Costs" and overheads as shown in the
Company's management accounts.
2.3.5.10 "Personnel Costs" means the cost to the Company of
employing or engaging staff in the operation of its business
as shown in the Company's management accounts.
-10-
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
2.3.5.11 "Minimum Payment" means twenty-five (25%) percent of the
gross profits of the Company for the twelve (12) month
period ending November 30, 1997 plus the Disposal Costs
minus the Initial Share Value.
2.3.5.12 "Maximum Payment" means (pound)250,000 plus the Disposal
Costs minus the Initial Share Value.
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 to
cure any deficiencies prior to the Closing 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 form 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 which results from applying the percentage 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.
On the earlier of November 12, 1997 or 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, 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."
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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.
The representations and warranties made herein are being made for the
benefit of Healthworld, the U.S. Stockholders, Milton, Garnham and Bourne. 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
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"), which shall be referred to
in this Agreement as the "Absolute Representations" 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
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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.
The Company has complied in all material respects with the provisions of
the Companies Act 1985, 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
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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 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,
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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 Balance Sheets as of November 30, 1996 (the "1996
Balance Sheet") and 1995 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 two-year period ended November 30, 1996, the
unaudited management accounts of the Company which form part of the unaudited
consolidated financial statements for the period between the Balance Sheet Date
and June 30, 1997, and the consolidated unaudited balance sheet as of June 30,
1997. Such Company Financial Statements (other than the unaudited management
accounts for the period between the Balance Sheet Date and June 30, 1997, which
have been prepared in accordance with U.S. generally accepted accounting
principles) have been prepared in accordance with the Companies Act 1985,
generally accepted accounting principles including all statements of U.K.
Standard Accounting Practice and U.K. 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 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 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:
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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 Balance Sheet Date, and including receivables from and advances to
employees and the U.K. Stockholder. The U.K. Stockholder shall use commercially
reasonable efforts to 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
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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, so far as it is required, 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
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
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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 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 any Affiliates, by the U.K.
Stockholder, by any relative of the U.K. Stockholder or by any entity that
directly, or indirectly through one or more intermediaries, is controlled by the
U.K. Stockholder or any of his relatives. 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.
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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.
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)
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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, to the extent now
known, 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 Schedules 5.18 or 5.19 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
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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 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 Company 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.
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.
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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:
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,
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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, to the knowledge of the U.K. Stockholder,
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.
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.
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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 Effect on 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;
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;
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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;
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.
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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, on or 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 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
(other than as provided in the Underwriting Agreement) 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
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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 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 to be 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.
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.
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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 the U.S. Stockholders in
the amounts set forth in Schedule 6.3. 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 the capital stock of Healthworld have been duly authorized
and validly issued and are fully paid and nonassessable. Such shares were
offered, issued, sold and delivered by Healthworld in compliance with all
applicable state and Federal laws concerning the issuance of securities.
6.4 Transactions in Capital Stock. Except for the obligations under the
agreements which form a part of the Healthworld Plan of Organization or the
obligations which will arise under the Underwriting Agreement, 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.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, for fees
incurred in connection with the transactions contemplated hereby and thereby,
and any liabilities and obligations which may exist under the Stuart Diamond
Employment Agreement and the Healthworld License Agreement, copies of which are
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
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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 Stuart Diamond Employment
Agreement, the Healthworld License Agreement and has engaged in other limited
startup activities. It is anticipated that prior to the Closing, Healthworld
will adopt a Stock Option Plan; however, Healthworld covenants that no options
will be granted before the Registration Statement is declared effective by the
SEC.
7 Covenants Prior to Closing.
7.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the U.K. Stockholder will use commercially
reasonable efforts to 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 use commercially reasonable efforts to 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 use commercially reasonable
efforts to cause the Company to, except as set forth on Schedule 7.2 of its
respective Disclosure Schedule:
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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 except as may be reasonably necessary to effectuate the IPO;
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 or as
otherwise contemplated by this Agreement, 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;
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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 and except if it involves the
performance of services in the ordinary course of business;
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,
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;
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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,
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 use commercially
reasonable efforts to 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 9.9 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
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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 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.
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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
Healthworld. All representations and warranties of Healthworld 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 as though such representations and warranties had been made as of
that time. All of the terms, covenants and conditions of Healthworld contained
in this Agreement shall have been duly complied with and performed in all
material respects. Certificates to the foregoing effect dated the Closing Date,
signed by Healthworld, 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 any other agreement incidental hereto
and all other related legal matters shall be reasonably satisfactory to the U.K.
Stockholder and his counsel. The U.K. Stockholder shall be reasonably 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 each of the U.S. Stockholders, Milton and Healthworld,
dated the Closing Date, in form and substance reasonably acceptable to counsel
for the U.K. Stockholder.
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 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 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 Simultaneous Closings. The Closings pursuant to the Sister Company
Agreements of Organization, the U.K. Agreement of Organization and the U.S.
Agreement of Organization 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 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 Contributing Minority Stockholders and any
other agreement incidental hereto or thereto and all other related legal matters
shall be reasonably satisfactory to Healthworld and its counsel. Healthworld
shall be reasonably 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
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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 Opinion of Counsel. Healthworld shall have received an opinion from
counsel to the U.K. Stockholder, dated the Closing Date, in form and substance
reasonably 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 the Company which would constitute a Material Adverse
Effect, and the Company shall not 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 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).
9.8 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.
9.9 Termination of Related Party Agreements. Except as set forth on
Schedule 9.9, all existing agreements between any of the Company, the U.K.
Stockholder, Milton, Garnham, Bourne and Cater shall have been canceled
effective as of the Closing Date.
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9.10 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders, Milton, Garnham and Bourne
shall occur simultaneously with the Closing hereunder.
9.11 Cater Share Purchase. The U.K. Company shall have purchased Cater's
shares as described in Section 1.1.3.
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 or obligation that he personally
guaranteed and from any and all pledges of assets that he pledged to secure such
indebtedness or obligation for the benefit of the Company, with all such
guarantees on indebtedness or obligation being assumed by Healthworld. In the
event that Healthworld cannot obtain such releases from the lenders of any such
guaranteed indebtedness or the obligee of any guaranteed obligation on or prior
to 120 days subsequent to the Closing Date, Healthworld shall pay off or
otherwise refinance or retire such indebtedness or obligation. From and after
the Closing Date and until such time as all of such indebtedness or obligation
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.
Furthermore, Healthworld shall assume all obligations which the U.K. Stockholder
may have incurred to guarantee any lease of the Company and shall indemnify and
hold harmless the U.K. Stockholder from any cost or expense arising under any
such lease guarantee.
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 Company shall 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 in a manner prepared under the instructions of
Milton, consistent with historical practices.
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.
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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 use commercially reasonable efforts to 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.
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding Governance.
Corporate governance at the date of the closing of the IPO shall be in
accordance with section 1.3 of the Girgenti/Milton Letter of Intent.
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,
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11.1.2 any breach of any covenant or agreement on the part of the U.K.
Stockholder under this Agreement, or
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 the Company 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 the Company or the U.K. Stockholder required to be stated therein or
necessary to make the statements therein not misleading.
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 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 any representation or warranty relating to Healthworld's right,
authority or capacity to enter into and consummate the terms of this
Agreement.
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
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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, 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
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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 (pound)31,250, provided, however,
that Healthworld may assert and shall be indemnified for any claim under
any Absolute Representation at any time, regardless of whether the
aggregate of all claims which such persons may have against the U.K.
Stockholder exceeds (pound)31,250, it being understood that the amount of
any such claim under any Absolute Representation shall not be counted
towards such (pound)31,250 amount.
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 to be received by the U.K. Stockholder in connection with
the Organization, provided that the U.K. Stockholder's indemnification
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obligations pursuant to any Absolute Representation shall not be limited.
For purposes of calculating the value of the Healthworld Stock to be
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
Healthworld, Milton and the U.S. Stockholders;
12.1.2 by the U.K. Stockholder or Healthworld if the transactions
contemplated by this Agreement to take place at the Closing shall not have
been consummated by December 31, 1997, unless the failure of such
transactions to be consummated is due to the willful failure of the U.K.
Stockholder or Healthworld, as the case may be, to perform any of his or
its own obligations under this Agreement to the extent required to be
performed by him or it 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 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.
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.
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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 ending six (6) months
following the later of (i) the Closing Date or (ii) the termination of the U.K.
Stockholder's employment with the Company, 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) within
the "Territory" (hereafter defined):
13.1.1.1 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 during
the two (2) year period (the "Contact Period") ending with
the last day of the Restrictive Period; or
13.1.1.2 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 engage in any other business engaged in by Healthworld
or any of its subsidiaries at any time during the Contact
Period.
The term "Territory" means each of the geographic areas which lie within a 75
mile radius of any location at which Healthworld or any of its subsidiaries
(which were subsidiaries of Healthworld at any time during the Contact Period)
conducted any business during the Restrictive Period.
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;
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13.1.3 call upon any person or entity which is, at that time, or which
has been, at any time within the Contact 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) at any time during the Contact Period or for
which, to the actual knowledge of the U.K. Stockholder after due inquiry,
Healthworld (or any subsidiary thereof) at any time during the Contact
Period made an acquisition analysis, for the purpose of acquiring such
entity; or
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 13.2.1.2, the U.K. Stockholder shall give prior
written notice thereof to Healthworld and provide
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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.
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.
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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 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, 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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Healthworld Agreement and Plan of Organization/Moreton
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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 use commercially
reasonable efforts to 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 use commercially
reasonable efforts to 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 preparation and filing of the registration statement, the
underwriting and the IPO, 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, LLP,
Rosenman & Colin LLP, Todtman, Nachamie, Hendler & Spizz, P.C. (as they relate
to the subject matter described in this paragraph), the Underwriters or any
other person or entity retained by Healthworld (the "IPO costs").
If the transactions herein contemplated shall not be consummated, then the IPO
costs 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.
If the transactions herein contemplated shall be consummated, Healthworld shall
pay the fees, expenses and disbursements of Healthworld and the U.K. Stockholder
and his agents,
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Healthworld Agreement and Plan of Organization/Moreton
- --------------------------------------------------------------------------------
representatives, accountants and counsel incurred in connection with the
negotiation and consummation of this Agreement and any amendments thereto,
including all counsel and professional costs of the U.K. Stockholder relating to
the negotiation and consummation of this Agreement (the "Reorganization Costs"),
but not including the cost of any broker or agent described in Section 5.26.
If the transactions herein contemplated shall not be consummated, the U.K.
Stockholder shall pay his Reorganization Costs.
Any other costs and expenses of the U.K. Stockholder which are not described as
IPO Costs or Reorganization Costs shall be paid by the U.K. Stockholder,
including but not limited to the cost of any broker or agent described in
Section 5.26, except that Healthworld shall pay all stock transfer and/or
recording taxes or duties imposed with respect to stock transfers effectuated
pursuant to the Organization. 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,
except as otherwise specifically contemplated in this Section 16.5.
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, Nachamie,
575 Madison Avenue Hendler & Spizz, P.C.
New York, New York 10022 425 Park Avenue, 5th Fl.
Attn: Howard Jacobs New York, New York 10022
Attn: Alex Spizz
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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 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.
16.9 Time. Time is of the essence with respect to this Agreement.
16.10 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.
16.11 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.
16.12 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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16.13 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 mutual
consent of Healthworld and the U.K. Stockholder.
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
______________________________________
Leonard Moreton
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- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
Dated as of the 23rd day of October, 1997
by and between
HEALTHWORLD CORPORATION
and
MICHAEL BOURNE
<PAGE>
Healthworld Agreement and Plan of Organization/Bourne
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<C> <S> <C> <C>
1 The Organization................................................................................................. -7-
----------------
1.1 Organization............................................................................. -7-
------------
1.2 Directors and Officers................................................................... -8-
----------------------
2 Conversion of Stock.............................................................................................. -8-
-------------------
2.1 Manner of Conversion..................................................................... -8-
--------------------
2.2 Beneficial Ownership of Shares........................................................... -8-
------------------------------
2.3 Allocation of Shares..................................................................... -8-
--------------------
3 Delivery of U.K. Company Stock and Healthworld Stock; Disclaimer of Rights....................................... -10-
--------------------------------------------------------------------------
4 Closing......................................................................................................... -10-
-------
5 Representations And Warranties of the U.K. Stockholder.......................................................... -11-
------------------------------------------------------
5.1 Due Organization........................................................................ -11-
----------------
5.2 Prohibited Activities................................................................... -12-
---------------------
5.3 Capital Stock of the Company............................................................ -12-
----------------------------
5.4 Transactions in Capital Stock........................................................... -13-
-----------------------------
5.5 No Bonus Shares......................................................................... -13-
---------------
5.6 Subsidiaries............................................................................ -13-
------------
5.7 Predecessor Status; etc................................................................. -13-
-----------------------
5.8 Spin-off by the Company................................................................. -14-
-----------------------
5.9 Financial Statements.................................................................... -14-
--------------------
5.10 Liabilities and Obligations............................................................. -14-
---------------------------
5.11 Accounts and Notes Receivable........................................................... -15-
-----------------------------
5.12 Permits and Intangibles................................................................. -15-
-----------------------
5.13 Environmental Matters................................................................... -16-
---------------------
5.14 Personal Property....................................................................... -16-
-----------------
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. .......................... -18-
------------------------------------------------------------
5.19 Employee Benefits....................................................................... -21-
-----------------
5.20 Conformity with Law; Litigation......................................................... -22-
-------------------------------
5.21 Taxes................................................................................... -22-
-----
5.22 No Violations........................................................................... -24-
-------------
5.23 Government Contracts.................................................................... -25-
--------------------
</TABLE>
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<TABLE>
<CAPTION>
Page No. 8
<C> <S> <C> <C>
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.................................................................................. -28-
------------------------------
6.1 Due Organization........................................................................ -28-
----------------
6.2 Authorization........................................................................... -29-
-------------
6.3 Capital Stock of Healthworld............................................................ -29-
----------------------------
6.4 Transactions in Capital Stock........................................................... -29-
-----------------------------
6.5 Liabilities and Obligations............................................................. -29-
---------------------------
6.6 Conformity with Law; Litigation......................................................... -29-
-------------------------------
6.7 Validity of Obligations................................................................. -30-
-----------------------
6.8 Limited Business Conducted.............................................................. -30-
--------------------------
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................................................................................. -33-
-------
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..................................................... -35-
-----------------------------------------------------------
8.1 Representations and Warranties; Performance of Obligations by Healthworld............... -35-
-------------------------------------------------------------------------
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.............................................................. -36-
--------------------------
8.7 Secretary's Certificates; Good Standing................................................. -36-
---------------------------------------
8.8 Simultaneous Closings................................................................... -36-
--------------------
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Healthworld Agreement and Plan of Organization/Bourne
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<TABLE>
<CAPTION>
Page No.
<C> <S> <C> <C>
9 Conditions Precedent to Obligations of Healthworld.............................................................. -36-
--------------------------------------------------
9.1 Representations and Warranties; Performance of Obligations.............................. -36-
----------------------------------------------------------
9.2 Satisfaction............................................................................ -36-
------------
9.3 No Litigation........................................................................... -37-
-------------
9.4 Opinion of Counsel...................................................................... -37-
------------------
9.5 Consents and Approvals.................................................................. -37-
----------------------
9.6 No Material Adverse Change.............................................................. -37-
--------------------------
9.7 Secretary's Certificates................................................................ -37-
------------------------
9.8 Stockholder's Release................................................................... -37-
---------------------
9.9 Termination of Related Party Agreements................................................. -37-
---------------------------------------
9.10 Simultaneous Closings................................................................... -38-
---------------------
9.11 Cater Share Purchase.................................................................... -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............................................ -38-
--------------------------------------------
10.3 Preparation and Filing of Tax Returns................................................... -38-
-------------------------------------
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding Governance................... -39-
----------------------------------------------------------
Governance...................................................................................................... -39-
11 Indemnification................................................................................................. -39-
---------------
11.1 General Indemnification by the U.K. Stockholder......................................... -39-
-----------------------------------------------
11.2 Indemnification by Healthworld.......................................................... -40-
------------------------------
11.3 Third Person Claims..................................................................... -40-
-------------------
11.4 Exclusive Remedy........................................................................ -42-
----------------
11.5 Limitations on Indemnification.......................................................... -42-
------------------------------
12 Termination of Agreement........................................................................................ -43-
------------------------
12.1 Termination............................................................................. -43-
-----------
12.2 Liabilities in Event of Termination..................................................... -43-
-----------------------------------
13 Non-Competition; Non-Disclosure................................................................................. -43-
-------------------------------
13.1 Non-Competition......................................................................... -43-
---------------
13.2 Nondisclosure........................................................................... -45-
-------------
13.3 Injunctive Relief; Damages.............................................................. -46-
--------------------------
13.4 Reasonable Restraint.................................................................... -46-
--------------------
13.5 Severability; Reformation............................................................... -46-
-------------------------
</TABLE>
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<TABLE>
<CAPTION>
Page No.
<C> <S> <C> <C>
13.6 Independent Covenant.................................................................... -47-
--------------------
13.7 Survival................................................................................ -47-
--------
14 Federal Securities Act Representations.... ..................................................................... -47-
--------------------------------------
14.1 Compliance with Law..................................................................... -47-
-------------------
14.2 Economic Risk; Sophistication........................................................... -47-
-----------------------------
15 Registration Rights............................................................................................. -48-
-------------------
15.1 Piggyback Registration Rights........................................................... -48-
-----------------------------
15.2 Registration Procedures................................................................. -48-
-----------------------
15.3 Underwriting Agreement.................................................................. -49-
----------------------
15.4 Availability of Rule 144................................................................ -49-
------------------------
16 General......................................................................................................... -49-
-------
16.1 Cooperation............................................................................. -49-
-----------
16.2 Successors and Assigns.................................................................. -49-
----------------------
16.3 Entire Agreement........................................................................ -49-
----------------
16.4 Counterparts............................................................................ -50-
------------
16.5 Expenses................................................................................ -50-
--------
16.6 Notices................................................................................. -51-
-------
16.7 Governing Law........................................................................... -52-
-------------
16.8 Exercise of Rights and Remedies......................................................... -52-
-------------------------------
16.9 Time.................................................................................... -52-
----
16.10 Reformation and Severability............................................................ -52-
----------------------------
16.11 Remedies Cumulative..................................................................... -52-
-------------------
16.12 Captions................................................................................ -52-
--------
16.13 Amendments and Waivers.................................................................. -52-
----------------------
</TABLE>
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of the
_______ day of October, 1997, by and between:
Healthworld Corporation, a Delaware corporation ("Healthworld"), and
Michael Bourne (the "U.K. Stockholder"), residing at 15 Eton Square, Eton,
Windsor, Berkshire, SL4 6BG, United Kingdom.
WHEREAS, the U.K. Stockholder is the registered and beneficial owner with
full title guarantee of a portion of the issued share capital of Milton
Marketing Limited, a company incorporated in England and Wales with registered
no. 1385429 (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 Garnham ("Garnham") owns a portion of the issued share
capital of Effective Sales Personnel Ltd. (f/k/a Milton Headcount Limited), a
company incorporated in England and Wales with registered no. 2998311 ("ESP");
and
WHEREAS, Leonard Moreton ("Moreton") owns a portion of the issued share
capital of PDM Communications Limited, a company incorporated in England and
Wales with registered no. 1324588 ("PDM"); 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
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Healthworld Agreement and Plan of Organization/Bourne
- --------------------------------------------------------------------------------
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, Moreton desires to contribute all of his shares of stock in PDM into
Healthworld in exchange for Healthworld Stock, and Garnham desires to contribute
all of his shares of stock in ESP 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 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, Cater owns a portion of the issued share capital of Milton Cater
Limited, a company incorporated in England and Wales with registered no. 3196839
("MCL"); and
WHEREAS, Cater desires to transfer her shares of MCL in consideration for a
variation to her service agreement and not in exchange for Healthworld Stock;
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.
"Absolute Representations" shall have the meaning set forth in subparagraph
(ii) of the preliminary paragraphs of Section 5.
"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.
-2-
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Healthworld Agreement and Plan of Organization/Bourne
- --------------------------------------------------------------------------------
"Butler" means William Butler, residing at Post Office Box 1430, Olive
Bridge, New York 12461-0430.
"Cater" means Claire Cater, residing at Back of Beyond, 76 The High Street,
Ardingly, West Sussex, RH17 6TD, United Kingdom.
"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 Financial Statements" has the meaning set forth in Section 5.9.
"Company Stock" has the meaning set forth in Section 2.1.
"Contributing Minority Stockholders" means the U.K. Stockholder, Garnham
and Moreton.
"Disclosed Schemes" has the meaning set forth in Section 5.19.
"Disclosure Schedule" has the meaning set forth in the preliminary
paragraph of Section 5.
"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 5.
"Garnham" means Michael Garnham, residing at 42 The Burlings, Ascot,
Berkshire, SL5 8BY, United Kingdom.
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"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 dated
February 27, 1997 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.
"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 William Leslie Milton, residing at 17 Clappers Meadow,
Maidenhead, Berkshire SL6 8TT, United Kingdom.
"Moreton" means Leonard Moreton, residing at "Southcroft," Copsem Lane,
Oxshott, Surrey, KT22 0NT, United Kingdom.
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"Offering Price" means (i) the offering price in the IPO if the Closing
Date occurs contemporaneously with the Pricing and (ii) the proposed mid-range
offering price in the IPO as reflected in the Registration Statement, as most
recently amended, if the Closing Date occurs prior to the Pricing.
"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.
"Prevailing Conversion Rate" means the prevailing exchange rate, as shown
in The Financial Times, between the U.S. dollar and the U.K. pound sterling at
the close of business on the business day immediately prior to the Closing Date.
"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 and the execution of the Underwriting Agreement by Healthworld and the
Underwriters.
"Registration Statement" means that certain registration statement on Form
S-1 (Registration No. 333-34751) 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.
"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 Agreements of Organization" has the meaning set forth in
Section 1.1.2.
"Stuart Diamond Employment Agreement" means that certain Employment
Agreement by and between Healthworld and Stuart Diamond, dated August 18, 1997,
pursuant to which Healthworld has engaged the services of Stuart Diamond.
"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.
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"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.
"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.
"Underwriting Agreement" means the agreement to be negotiated between
Healthworld and the Underwriters regarding the Underwriters' representation of
Healthworld in the IPO.
"U.K. Agreement of Organization" has the meaning set forth in Section
1.1.4.
"U.K. Company" has the meaning set forth in the introductory paragraphs of
this Agreement.
"U.K. Percentage" has the meaning set forth in Section 2.3.1.
"U.K. Stockholder" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Agreement of Organization" has the meaning set forth in Section
1.1.1.
"U.S. Companies" has the meaning set forth in the introductory paragraphs
of this Agreement.
"U.S. Percentage" has the meaning set forth in Section 2.3.1.
"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
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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 Garnham and Moreton will be contributing all of the issued and
outstanding shares of ESP and PDM which are owned by them to the capital of
Healthworld, pursuant to separate Agreements of Organization of even date
herewith (the "Sister Company Agreements of Organization"), and
1.1.3 The U.K. Company shall, on or prior to the Closing Date,
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 herewith
(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
contributions made pursuant to the Sister Company 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
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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 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 Company owned by the U.K. Stockholder prior to the
Closing into shares of Healthworld Stock shall be as follows: At the Closing all
of the Company Stock 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 below.
2.2 Beneficial Ownership of Shares. All Healthworld Stock to be 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 to be 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, Garnham and Moreton, in the aggregate, 5,000,000
shares (the "Aggregate Number of Founder Shares") of Healthworld Stock at the
Closing. With respect to the U.S. Stockholders, who presently own one hundred
(100) shares of Healthworld Stock in the aggregate, the conversion shall be made
in such a manner as to issue to them 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, Garnham and Moreton
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 Milton and
the Contributing Minority 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, Milton,
Garnham and Moreton in the following manner:
2.3.3.1 Garnham shall receive that number of shares of
Healthworld Stock having a value of (pound)1,000,000,
based on the Offering Price and utilizing the Prevailing
Conversion Rate.
2.3.3.2 The U.K. Stockholder shall receive that number of shares
of Healthworld Stock having a value of
(pound)276,448.35, based on the Offering Price and
utilizing the Prevailing Conversion Rate.
2.3.3.3 Moreton shall receive that number of shares of
Healthworld Stock having a value of (pound)53,677 based
on the Offering Price and utilizing the Prevailing
Conversion Rate.
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
the Prevailing Conversion Rate.
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 to cure any
deficiencies prior to the Closing 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 form
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 which results from applying
the percentage 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.
On the earlier of November 12, 1997 or 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, 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."
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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.
The representations and warranties made herein are being made for the
benefit of Healthworld, the U.S. Stockholders, Milton, Garnham and Moreton. 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
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;
(ii) the warranties and representations set forth in Section hereof
(regarding "Authority; Ownership"), which shall be referred to in this
Agreement as the "Absolute Representations" 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
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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.
The Company has complied in all material respects with the provisions of
the Companies Act 1985, 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
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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 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,
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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 Balance Sheets as of November 30, 1996 (the "1996
Balance Sheet") and 1995 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 two-year period ended November 30, 1996, the
unaudited management accounts of the Company which form part of the unaudited
consolidated financial statements for the period between the Balance Sheet Date
and June 30, 1997, and the consolidated unaudited balance sheet as of June 30,
1997. Such Company Financial Statements (other than the unaudited management
accounts of the Company for the period between the Balance Sheet Date and June
30, 1997, which have been prepared in accordance with U.S. generally accepted
accounting principles) have been prepared in accordance with the Companies Act
1985, generally accepted accounting principles including all statements of U.K.
Standard Accounting Practice and U.K. 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 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 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:
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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 Balance Sheet Date, and including receivables from and advances to
employees and the U.K. Stockholder. The U.K. Stockholder shall use commercially
reasonable efforts to 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
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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, so far as it is required, 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
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
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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 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 any Affiliates, by the U.K.
Stockholder, by any relative of the U.K. Stockholder or by any entity that
directly, or indirectly through one or more intermediaries, is controlled by the
U.K. Stockholder or any of his relatives. 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.
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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.
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)
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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, to the extent now known, 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 Schedules 5.18 or 5.19 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
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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 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.
5.22.2 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.
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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:
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,
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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, to the knowledge of the U.K. Stockholder, 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.
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.
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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 , 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 , there has not been:
5.24.1 any Material Adverse Effect on 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;
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;
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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 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;
5.21.2 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.
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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, on or 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 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 (other than as provided in the Underwriting
Agreement) 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
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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 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 to be 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.
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 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.
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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 the U.S. Stockholders in
the amounts set forth in Schedule 6.3. 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 the capital stock of Healthworld have been duly authorized
and validly issued and are fully paid and nonassessable. Such shares were
offered, issued, sold and delivered by Healthworld in compliance with all
applicable state and Federal laws concerning the issuance of securities.
6.4 Transactions in Capital Stock. Except for the obligations under the
agreements which form a part of the Healthworld Plan of Organization or the
obligations which will arise under the Underwriting Agreement, 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.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, for fees
incurred in connection with the transactions contemplated hereby and thereby,
and any liabilities and obligations which may exist under the Stuart Diamond
Employment Agreement and the Healthworld License Agreement, copies of which are
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
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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 Stuart Diamond Employment Agreement, the
Healthworld License Agreement and has engaged in other limited startup
activities. It is anticipated that prior to the Closing, Healthworld will adopt
a Stock Option Plan; however, Healthworld covenants that no options will be
granted before the Registration Statement is declared effective by the SEC.
7 Covenants Prior to Closing.
7.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing Date, the U.K. Stockholder will use commercially
reasonable efforts to 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 use commercially reasonable efforts to 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 use commercially reasonable
efforts to cause the Company to, except as set forth on Schedule 7.2 of its
respective Disclosure Schedule:
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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 except as may be reasonably necessary to
effectuate the IPO; 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 or as
otherwise contemplated by this Agreement, 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;
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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 and except if it
involves the performance of services in the ordinary course of business;
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,
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;
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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,
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 use commercially
reasonable efforts to 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 9.9 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
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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 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.
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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
Healthworld. All representations and warranties of Healthworld 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 as though such representations and warranties had been made as of
that time. All of the terms, covenants and conditions of Healthworld contained
in this Agreement shall have been duly complied with and performed in all
material respects. Certificates to the foregoing effect dated the Closing Date,
signed by Healthworld, 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 any other agreement incidental hereto
and all other related legal matters shall be reasonably satisfactory to the U.K.
Stockholder and his counsel. The U.K. Stockholder shall be reasonably 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 each of the U.S. Stockholders, Milton and Healthworld,
dated the Closing Date, in form and substance reasonably acceptable to counsel
for the U.K. Stockholder.
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 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 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 Simultaneous Closings. The Closings pursuant to the Sister Company
Agreements of Organization, the U.K. Agreement of Organization and the U.S.
Agreement of Organization 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 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 Contributing Minority Stockholders and any
other agreement incidental hereto or thereto and all other related legal matters
shall be reasonably 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,
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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 Opinion of Counsel. Healthworld shall have received an opinion from
counsel to the U.K. Stockholder, dated the Closing Date, in form and substance
reasonably 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 the Company which would constitute a Material Adverse
Effect, and the Company shall not 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 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).
9.8 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.
9.9 Termination of Related Party Agreements. Except as set forth on
Schedule , all existing agreements between any of the Company, the U.K.
Stockholder, Milton, Garnham, Moreton and Cater shall have been canceled
effective as of the Closing Date.
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9.10 Simultaneous Closings. The Closings pursuant to the Organization
Agreements with respect to the U.S. Stockholders, Milton, Garnham and Moreton
shall occur simultaneously with the Closing hereunder.
9.11 Cater Share Purchase. The U.K. Company shall have purchased Cater's
shares as described in Section 1.1.3.
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 or obligation that he personally
guaranteed and from any and all pledges of assets that he pledged to secure such
indebtedness or obligation for the benefit of the Company, with all such
guarantees on indebtedness or obligation being assumed by Healthworld. In the
event that Healthworld cannot obtain such releases from the lenders of any such
guaranteed indebtedness or the obligee of any guaranteed obligation on or prior
to 120 days subsequent to the Closing Date, Healthworld shall pay off or
otherwise refinance or retire such indebtedness or obligation. From and after
the Closing Date and until such time as all of such indebtedness or obligation
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.
Furthermore, Healthworld shall assume all obligations which the U.K. Stockholder
may have incurred to guarantee any lease of the Company and shall indemnify and
hold harmless the U.K. Stockholder from any cost or expense arising under any
such lease guarantee.
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 Company shall 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 in a manner prepared under the
instructions of Milton, consistent with historical practices.
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.
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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 use commercially reasonable efforts to
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.
10.4 Conformity With Girgenti/Milton Letter of Intent Regarding Governance.
Corporate governance at the date of the closing of the IPO shall be in
accordance with section 1.3 of the Girgenti/Milton Letter of Intent.
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, or
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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 the
Company 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 the
Company or the U.K. Stockholder required to be stated therein or
necessary to make the statements therein not misleading.
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 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 any representation or warranty relating to Healthworld's
right, authority or capacity to enter into and consummate the terms of
this Agreement.
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
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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
reasonableestimate 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, 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
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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 (pound)31,250,
provided, however, that Healthworld may assert and shall be
indemnified for any claim under any Absolute Representation at any
time, regardless of whether the aggregate of all claims which such
persons may have against the U.K. Stockholder exceeds (pound)31,250,
it being understood that the amount of any such claim under any
Absolute Representation shall not be counted towards such
(pound)31,250 amount.
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 to be received by the U.K.
Stockholder in connection with the Organization, provided that the
U.K. Stockholder's indemnification obligations pursuant to any
Absolute Representation shall not be limited. For purposes of
calculating the value of the Healthworld Stock to be received by the
U.K. Stockholder, Healthworld Stock shall be valued at its initial
public offering price as set forth in the
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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
Healthworld, Milton and the U.S. Stockholders;
12.1.2 by the U.K. Stockholder or Healthworld if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by December 31, 1997, unless the failure of such
transactions to be consummated is due to the willful failure of the
party invoking this subsection to perform any of his or its
obligations under this Agreement to the extent required to be
performed by him or it prior to or on the Closing Date;
121.1.3 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 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.
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.
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 ending six (6) months
following the later of (i) the Closing Date or (ii) the termination of the U.K.
Stockholder's employment with
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the Company, 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) within the "Territory" (hereafter defined):
13.1.1.1 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 during the
two (2) year period (the "Contact Period") ending with the last
day of the Restrictive Period; or
13.1.1.2 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 engage in any other business engaged in by
Healthworld or any of its subsidiaries at any time during the
Contact Period.
The term "Territory" means each of the geographic areas which lie within a 75
mile radius of any location at which Healthworld or any of its subsidiaries
(which were subsidiaries of Healthworld at any time during the Contact Period)
conducted any business during the Restrictive Period.
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 Contact 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) at any time during the
Contact Period or for which, to the actual knowledge of the U.K.
Stockholder after due inquiry, Healthworld (or any subsidiary thereof)
at any time during the Contact Period 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 13.2.1.2, 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 , 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 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
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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 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 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.
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
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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).
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
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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 use commercially
reasonable efforts to 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 use commercially
reasonable efforts to 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.
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
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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 preparation and filing of the registration statement, the
underwriting and the IPO, 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, LLP,
Rosenman & Colin LLP, Todtman, Nachamie, Hendler & Spizz, P.C. (as they relate
to the subject matter described in this paragraph), the Underwriters or any
other person or entity retained by Healthworld (the "IPO costs").
If the transactions herein contemplated shall not be consummated, then the IPO
costs 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.
If the transactions herein contemplated shall be consummated, Healthworld shall
pay the fees, expenses and disbursements of Healthworld and the U.K. Stockholder
and his agents, representatives, accountants and counsel incurred in connection
with the negotiation and consummation of this Agreement and any amendments
thereto, including all counsel and professional costs of the U.K. Stockholder
relating to the negotiation and consummation of this Agreement (the
"Reorganization Costs"), but not including the cost of any broker or agent
described in Section 5.26.
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If the transactions herein contemplated shall not be consummated, the U.K.
Stockholder shall pay his Reorganization Costs.
Any other costs and expenses of the U.K. Stockholder which are not described as
IPO Costs or Reorganization Costs shall be paid by the U.K. Stockholder,
including but not limited to the cost of any broker or agent described in
Section 5.26, except that Healthworld shall pay all stock transfer and/or
recording taxes or duties imposed with respect to stock transfers effectuated
pursuant to the Organization. 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,
except as otherwise specifically contemplated in this Section 16.5.
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, Nachamie,
575 Madison Avenue Hendler & Spizz, P.C.
New York, New York 10022 425 Park Avenue, 5th Fl.
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 th 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 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.
16.9 Time. Time is of the essence with respect to this Agreement.
16.10 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.
16.11 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.
16.12 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.
16.13 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 mutual
consent of Healthworld and the U.K. Stockholder.
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 Bourne
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of ________________, 1997, between MILTON
HEADCOUNT LIMITED, an England corporation with offices at 1 Thames Street,
Windsor, Berkshire, England (the "Company"), and MICHAEL GARNHAM, residing at 42
The Burlings, Ascot, Berkshire, England SL5 8BY ("Employee").
W I T N E S S E T H:
WHEREAS, as of the Effective Date (as defined in Section 1), the Company
will be an indirect wholly owned subsidiary of Healthworld Corporation, a
Delaware corporation (the "Parent"); and
WHEREAS, as of the Effective Date, the Company desires to engage Employee
to perform services for the Company and Effective Sales Personnel Ltd. ("ESP"),
an England corporation which, as of the Effective Date will be an indirect
wholly owned subsidiaries of the Parent, and their successors and assigns, and
Employee desires to perform such services, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the representations, warranties and
mutual covenants set forth herein, the parties agree as follows:
1. Term.
The Company agrees to employ Employee, and Employee agrees to serve, on the
terms and conditions of this Agreement for a period commencing on the effective
date (the "Effective Date") of the Parent's Registration Statement on Form S-1
(Registration No. 333-34751), filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and ending on December 31, 2000
(the "Termination Date"), or such shorter period as may be provided for herein;
provided, however, that the term of this Agreement shall be extended (subject to
earlier termination as provided herein) for successive one year periods unless
at least 90 days prior to the end of the then current term hereof, the Company
or Employee has notified the other party in writing that Employee's employment
hereunder shall terminate at the end of the then current term. The period during
which Employee is employed hereunder is hereinafter referred to as the
"Employment Period." As used herein, the term "Employment Year" shall mean a
one-year period of Employee's employment hereunder commencing on each January 1
during the Employment Period, provided that the first Employment Year shall be
the period commencing on January 1, 1998 and ending on December 31, 1998.
<PAGE>
2. Duties and Services.
During the Employment Period, Employee shall be employed as the Managing
Director of the Company, and shall perform the duties incident to that position.
In the performance of his duties, Employee shall be subject to the direction of
the Chairman of the Company and the Board of Directors of the Company. In
addition, during the Employment Period, Employee may be elected to and shall
serve, if so elected, as a member of the Board of Directors of the Company, ESP
or Milton Marketing Ltd. as may from time to time be prescribed by the the
Chairman of the Company or the Board of Directors of the Company. Employee
agrees to his employment as described in this Section 2. Employee agrees to
devote all of his time and efforts to the performance of his duties under this
Agreement. Employee shall be available to travel as the needs of the business
require.
3. Compensation.
(a) As full compensation for his full-time services hereunder, the Company
shall pay Employee, during the Employment Period, a base salary at the annual
rate of $175,000 (prorated for periods that are less than one year) payable at
such intervals as salaries are paid by the Company to other executives of the
Company. Employee's base salary shall be subject to annual increase at the sole
discretion of the Board of Directors of the Company.
(b) During the Employment Period, Employee shall receive an annual
incentive bonus (the "Annual Incentive Bonus") for each Employment Year, payable
not later than 110 days after the end of the applicable Employment Year, in an
amount to be determined as follows:
(i) if EBIT (as defined below) for the fiscal year corresponding to
the applicable Employment Year does not exceed the Base EBIT (as defined
below), Employee shall not be entitled to an Annual Incentive Bonus with
respect to such Employment Year;
(ii) if EBIT for the fiscal year corresponding to the applicable
Employment Year exceeds the Base EBIT by an amount equal to or less than
10%, Employee shall receive an Annual Incentive Bonus with respect to such
Employment Year in an amount equal to 12.5% of Employee's annual base
salary for such Employment Year, subject to reduction pursuant to Section
3(c) below;
(iii) if EBIT for the fiscal year corresponding to the applicable
Employment Year exceeds the Base EBIT by an amount in excess of 10% but
less than or equal to 15%, Employee shall receive an Annual Incentive
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<PAGE>
Bonus with respect to such Employment Year in an amount equal to 18.5% of
Employee's annual base salary for such Employment Year, subject to
reduction pursuant to Section 3(c) below;
(iv) if EBIT for the fiscal year corresponding to the applicable
Employment Year exceeds the Base EBIT by an amount in excess of 15% but
less than or equal to 20%, Employee shall receive an Annual Incentive Bonus
with respect to such Employment Year in an amount equal to 26% of
Employee's annual base salary for such Employment Year, subject to
reduction pursuant to Section 3(c) below; and
(v) if EBIT for the fiscal year corresponding to the applicable
Employment Year exceeds the Base EBIT by an amount in excess of 20%,
Employee shall receive an Annual Incentive Bonus with respect to such
Employment Year in an amount equal to 35% of Employee's annual base salary
for such Employment Year, subject to reduction pursuant to Section 3(c)
below.
(c) The amount of the Annual Incentive Bonus which Employee may be entitled
to receive for each Employment Year as calculated above shall be subject to the
following reductions:
(i) if Revenues (as defined below) for the fiscal year corresponding
to the applicable Employment Year do not exceed the Base Revenues (as
defined below), Employee shall only be entitled to an Annual Incentive
Bonus with respect to such Employment Year in an amount equal to 25% of the
amount calculated in Section 3(b) above;
(ii) if Revenues for the fiscal year corresponding to the applicable
Employment Year exceed the Base Revenues by an amount equal to or less than
7.5%, Employee shall receive an Annual Incentive Bonus with respect to such
Employment Year in an amount equal to 40% of the amount calculated in
Section 3(b) above;
(iii) if Revenues for the fiscal year corresponding to the applicable
Employment Year exceed the Base Revenues by an amount in excess of 7.5% but
less than or equal to 12.5%, Employee shall receive an Annual Incentive
Bonus with respect to such Employment Year in an amount equal to 60% of the
amount calculated in Section 3(b) above;
(iv) if Revenues for the fiscal year corresponding to the applicable
Employment Year exceed the Base Revenues by an amount in excess of 12.5%
but less than or equal to 18.5%, Employee shall receive an Annual Incentive
Bonus with respect to such Employment Year in an amount equal to 80% of the
amount calculated in Section 3(b) above; and
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<PAGE>
(v) if Revenues for the fiscal year corresponding to the applicable
Employment Year exceed the Base Revenues by an amount in excess of 18.5%,
Employee shall receive an Annual Incentive Bonus in an amount equal to the
amount calculated in Section 3(b) above.
The Company shall deliver to Employee a calculation of the Annual Incentive
Bonus together with its payment thereof.
(d) As used herein, the term "EBIT" shall mean the earnings from operations
of the Company, ESP and the field marketing business of Milton Marketing Ltd.
("Milton PDM Field Marketing") before interest, taxes and extraordinary items,
determined in accordance with United States generally accepted accounting
principles ("GAAP"). As used herein, the term "Revenues" shall mean the revenues
of the Company, ESP and Milton PDM Field Marketing (before deducting direct
labor costs of field marketing personnel), determined in accordance with United
States GAAP.
(e) As used herein, the term "Base EBIT" shall mean (i) with respect to
calculating the Annual Incentive Bonus for the first Employment Year, EBIT for
the fiscal year ending December 31, 1997, and (ii) the "Base EBIT" used to
calculate the Annual Incentive Bonus for each successive Employment Year shall
be determined by increasing the Base EBIT used for calculating the Annual
Incentive Bonus for the prior Employment Year by 10%, compounded annually. As
used herein, the term "Base Revenues", shall mean (x) with respect to
calculating the Annual Incentive Bonus for the first Employment Year, the
Revenues for the fiscal year ending December 31, 1997, and (y) the "Base
Revenues" used to calculate the Annual Incentive Bonus for each successive
Employment Year shall be determined by increasing the Base Revenues used for
calculating the Annual Incentive Bonus for the prior Employment Year by 10%,
compounded annually.
(f) In addition, Employee may be entitled to receive an additional annual
bonus at the sole discretion of the Board of Directors of the Parent and the
Company.
(g) All compensation hereunder (whether in the form of base salary or
incentive compensation) shall be subject to payroll deductions as may be
necessary or customary in respect of salaried personnel of the Company.
4. Benefits.
(a) During the Employment Period, Employee may participate, to the extent
eligible, in each insurance (including, without limitation, any life, travel and
accident and medical and other health insurance), pension, disability and other
employee benefit plans maintained by the Company for its senior management or
employees generally (and, in particular, those employee benefit plans in which
the Chairman of the
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<PAGE>
Board and Chief Executive Officer of the Company participates) in accordance
with the terms thereof.
(b) Employee shall be entitled to such number of sick days every year
during the Employment Period as are generally provided from time to time by the
Company to its senior management. Any unused sick days at the end of the
calendar year shall not accrue or cumulate from year to year.
(c) During the Employment Period, Employee shall be entitled to
reimbursement for all reasonable travel, entertainment and other out-of-pocket
expenses necessarily incurred in the performance of his duties hereunder, upon
submission and approval of written statements and bills in accordance with the
then regular procedures of the Company.
(d) During the Employment Period, Employee shall be entitled to a Company
car in accordance with the Company's practice immediately prior to the date of
this Agreement.
5. Vacation.
Employee shall be entitled to such number of weeks of paid vacation every
year during the Employment Period as are generally provided from time to time by
the Company to its senior management. The time during which vacation will be
taken shall be coordinated with other senior management of the Company. Any
unused vacation time at the end of a calendar year shall not accrue or cumulate
from year to year and Employee shall not be entitled to compensation for unused
vacation time.
6. Representations, Warranties and Covenants of Employee.
Employee represents and warrants to the Company that (a) Employee is under
no contractual or other restriction or obligation which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder, or the
other rights of the Company hereunder and (b) Employee is under no physical or
mental disability that would hinder his performance of duties under this
Agreement.
7. Noncompetition.
(a) In view of the unique and valuable services it is expected Employee
will render to the Company, and in consideration of the compensation to be
received hereunder, Employee agrees (i) that he will not, during the period he
is employed by the
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<PAGE>
Company under this Agreement or otherwise, Participate In (as defined below) any
other business or organization, whether or not such business or organization now
is or shall then be competing with or of a nature similar to the business or
profession of the Company or ESP or Milton PDM Field Marketing, and (ii) for a
period of two years after he ceases to be employed by the Company under this
Agreement, he will not compete with or be engaged in the same business as or
Participate In any other business or organization which during such two year
period competes with or is engaged in the same business as the Company or ESP or
Milton PDM Field Marketing with respect to any product or service sold or
proposed to be sold or activity engaged in or proposed to be engaged in up to
the time of such cessation within a 100-mile radius of the location of the
Company's or ESP's or Milton PDM Field Marketing's principal offices on the date
on which Employee ceases to be employed by the Company under this Agreement,
except that in each case the provisions of this Section 7 will not be deemed
breached merely because Employee owns not more than 1% of the outstanding common
stock of a corporation, if, at the time of its acquisition by Employee, such
stock is listed on a national securities exchange, is reported on Nasdaq, or is
regularly traded in the over-the-counter market by a member of a national
securities exchange.
As used in this Agreement, the term "Participate In" shall mean: "directly
or indirectly, for his own benefit or for, with, or through any other person,
firm, or corporation, own, manage, operate, control, loan money to, or
participate in the ownership, management, operation, or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in."
(b) Employee will not directly or indirectly reveal the name of, solicit or
interfere with, or endeavor to entice away from the Company or ESP or Milton PDM
Field Marketing any of its respective employees. Employee will not directly or
indirectly employ any person who is an employee of the Company or ESP or Milton
PDM Field Marketing for a period of two years after the Employee leaves the
employ of the Company.
(c) Since a breach of the provisions of this Section 7 could not adequately
be compensated by money damages, the Company shall be entitled, in addition to
any other right and remedy available to it, to an injunction restraining such
breach or a threatened breach, and in either case no bond or other security
shall be required in connection therewith, and Employee hereby consents to the
issuance of such injunction. Employee agrees that the provisions of this Section
7 are necessary and reasonable to protect the Company or ESP or Milton PDM Field
Marketing in the conduct of its respective business. If any restriction
contained in this Section 7 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope thereof,
or otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope, or other provisions hereof,
and in its reduced form such restriction shall then be enforceable in the manner
contemplated hereby.
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<PAGE>
8. Copyrights, Patents, Etc.
Any interest in patents, patent applications, inventions, technological
innovations, copyrights, copyrightable works, developments, discoveries,
designs, and processes ("Such Inventions") which Employee now or hereafter
during the period he is employed by the Company under this Agreement or
otherwise and for one year thereafter may own, conceive of, or develop and
either relating to the fields in which the Company or ESP or Milton PDM Field
Marketing may then be engaged or contemplates being engaged or conceived of or
developed utilizing the time, material, facilities, or information of the
Company or ESP or Milton PDM Field Marketing, shall belong to the Company or ESP
or Milton PDM Field Marketing, as the case may be. As soon as Employee owns,
conceives of, or develops any Such Invention, he agrees immediately to
communicate such fact in writing to the Company, and without further
compensation, but at the Company's expense (except as noted in clause (a) of
this Section 8), forthwith upon request of the Company, Employee shall execute
all such assignments and other documents (including applications for patents,
copyrights, trademarks, and assignments thereof) and take all such other action
as the Company may reasonably request in order (a) to vest in the Company all
Employee's right, title, and interest in and to Such Inventions, free and clear
of liens, mortgages, security interests, pledges, charges, and encumbrances
("Liens") (Employee to take such action, at his expense as is necessary to
remove all such Liens) and (b), if patentable or copyrightable, to obtain
patents or copyrights (including extensions and renewals) therefor in any and
all countries in such name as the Company shall determine.
9. Confidential Information.
All confidential information which Employee may now possess, may obtain
during or after the Employment Period, or may create prior to the end of the
period he is employed by the Company under this Agreement or otherwise relating
to the business of the Parent, the Company or ESP or Milton PDM Field Marketing
shall not be published, disclosed, or made accessible by him to any other
person, firm, or corporation either during or after the termination of his
employment or used by him except during the Employment Period in the business
and for the benefit of the Company and ESP and Milton PDM Field Marketing, in
each case without prior written permission of the Company. Employee shall return
all tangible evidence of such confidential information to the Company prior to
or at the termination of his employment.
10. Life Insurance.
If requested by the Company, Employee shall submit to such physical
examinations and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Company, at its expense
and for its own benefit, to obtain life insurance on the life of Employee.
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<PAGE>
11. Termination.
Notwithstanding anything herein contained, if, prior to the end of the
Employment Period:
(a) either (i) Employee shall be physically or mentally incapacitated or
disabled (as determined by an independent physician selected by the Board of
Directors of the Company) or otherwise unable fully to discharge his duties
hereunder for a period of 13 consecutive weeks or an aggregate of 13 weeks in
any six-month period, (ii) Employee shall be convicted by, or shall have entered
a plea of guilty or nolo contendere in, a court of competent and final
jurisdiction for any crime involving moral turpitude, fraud, embezzlement,
misappropriation, or any other felony or crime punishable by imprisonment, (iii)
Employee shall commit any act of fraud, embezzlement or other act of
misappropriation, (iv) Employee shall fail or refuse to perform his duties as
required hereunder or shall refuse to follow direct instructions from the
Chairman of the Company or the Board of Directors of the Company or shall
materially violate his duty of loyalty to the Company or ESP or Milton PDM Field
Marketing or otherwise shall breach any term of this Agreement and fail to
correct such breach within 20 days after commission thereof, then, in each such
case, the Company shall have the right to give notice of termination of
Employee's services hereunder as of a date (not earlier than ten days from such
notice) to be specified in such notice, and this Agreement shall terminate on
the date so specified; or
(b) Employee shall die, then this Agreement shall terminate on the date of
Employee's death.
(c) Upon termination of this Agreement pursuant to subsection (a)(i) or (b)
of this Section 11, neither party shall have any further obligations hereunder
except that (i) Employee (or his estate in the event of his death) shall be
entitled to receive his salary which shall not have previously been paid to the
date of termination, any bonus (including, without limitation, the Annual
Incentive Bonus) for the Employment Year prior to the Employment Year in which
Employee is terminated to the extent accrued but not yet paid, and any bonus
(including, without limitation, the Annual Incentive Bonus) for the Employment
Year in which Employee is terminated pro-rata to the date of termination, and
(ii) for obligations or covenants contained herein that extend beyond the term
of this Agreement.
(d) Upon termination of this Agreement as a result of Employee's voluntary
action or pursuant to subsections (a)(ii), (a)(iii) or (a)(iv) of this Section
11, neither party shall have any further obligations hereunder except (i)
Employee shall be entitled to receive his salary which shall not have previously
been paid to the date of termination, and any bonus (including, without
limitation, the Annual Incentive Bonus) for the Employment Year prior to the
Employment Year in which Employee is terminated to the extent accrued but not
yet paid, and (ii) for obligations or covenants contained herein that extend
beyond the term of this Agreement.
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<PAGE>
(e) In the event Employee's employment is terminated during the term of
this Agreement other than by Employee's voluntary action or pursuant to
subsection (a) or (b) of this Section 11, Employee shall be entitled to receive
(i) an amount equal to his current base salary for the period from the date of
termination through the balance of the scheduled term of this Agreement, less
any compensation received or receivable by Employee as a result of any other
employment obtained by Employee during such period, which amounts shall be
payable in accordance with the Company's normal payroll practices then in
effect, (ii) any bonus (including, without limitation, the Annual Incentive
Bonus) for the Employment Year prior to the Employment Year in which Employee is
terminated, to the extent accrued but not yet paid, and any bonus (including,
without limitation, the Annual Incentive Bonus) for the Employment Year in which
Employee is terminated pro rata to the date of termination; (iii) any benefits
then vested under any benefit plans and otherwise payable in accordance with the
provisions of the applicable benefit plan and applicable laws, (iv) continued
coverage (net of any Employee contributions) to the extent any such coverage was
provided immediately prior to the termination of Employee for medical, health,
hospital and disability insurance from the date of termination through the
balance of the scheduled term of the Agreement under the benefit plans
maintained by the Company for its senior management or employees generally in
accordance with the terms thereof or, if the Company is unable to provide such
coverage under its benefits plans as they may from time to time be in effect,
the Company will provide or pay (without gross-up for taxes), at the Company's
sole discretion, for coverage (net of any Employee contributions) having
substantially the same aggregate value as the coverage provided under such
plans, and (v) continued coverage (net of any Employee contributions) from the
date of termination through the balance of the scheduled term of this Agreement
under any life insurance policies maintained for Employee immediately prior to
the termination of Employee (other than any policy under which the Company is
the beneficiary) or, if the Company is unable to provide such coverage, the
Company will pay (net of any Employee contributions) to Employee (without
gross-up for taxes) an amount sufficient for Employee to purchase such life
insurance policy and pay the premiums thereon through the balance of the
scheduled term of this Agreement. Employee shall promptly notify the Company in
writing of any other employment obtained or undertaken by Employee, and the
salary, compensation or other amounts received or to be received by Employee
therefrom. In the event Employee's employment is terminated during the term of
this Agreement other than by Employee's voluntary action or pursuant to
subsection (a) or (b) of this Section 11, this subsection (e) of this Section 11
will apply in place of any Company severance policies that might otherwise be
applicable, and the Company will have no obligation to make any payments to
Employee except those expressly set forth in this subsection (e) of this Section
11.
12. Survival.
The covenants, agreements, representations, and warranties contained in or
made pursuant to this Agreement shall survive Employee's termination of
employment.
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<PAGE>
13. Modification.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements between
them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
14. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 14). Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 14. Any notice or other communication given by certified mail (or such
comparable method) shall be deemed given at the time of certification thereof
(or comparable act), except for a notice changing a party's address which shall
be deemed given at the time of receipt thereof.
15. Waiver.
Any waiver by either party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
16. Binding Effect.
Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and assigns.
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<PAGE>
17. No Third Party Beneficiaries.
This Agreement does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this Agreement (except as
provided in Section 16).
18. Headings.
The headings in this Agreement are solely for the convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
19. Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be governed by and construed in
accordance with the laws of England, without giving effect to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
MILTON HEADCOUNT LIMITED
By:____________________________________
Name:
Title:
_______________________________________
Michael Garnham
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<PAGE>
[LETTERHEAD OF CHASE]
October 23, 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 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.
<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.
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:
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.
<PAGE>
2. Within 45 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 from a Responsible Officer as being stated in all material
respects.
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 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,
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.
<PAGE>
Chase will consider requests for advances hereunder until June 30, 1998
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 to the undersigned no later than
November 21, 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
Vice President
(212) 403-5020
<PAGE>
ACKNOWLEDGED AND AGREED:
Girgenti, Hughes, Butler & McDowell, Inc.
By: Date:
----------------------------- --------------------------
Its:
----------------------------
Black Cat Graphics, Inc.
By: Date:
----------------------------- --------------------------
Its:
----------------------------
Brand Research Corp.
By: Date:
----------------------------- --------------------------
Its:
----------------------------
Syberactive, Inc.
By: Date:
----------------------------- --------------------------
Its:
----------------------------
RE&A, Inc.
By: Date:
----------------------------- --------------------------
Its:
----------------------------
Medical Education Technologies, Inc.
By: Date:
----------------------------- --------------------------
Its: ----------------------------
<PAGE>
HEALTHWORLD CORPORATION
SUPPLEMENTAL PRO FORMA NET INCOME
PER COMMON SHARE COMPUTATION
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE
ENDED MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
-------------------- -------------------
<S> <C> <C>
Calculation of Supplemental Shares Outstanding:
Debt repaid by offering proceeds........................................ $ 462,000 $ 456,000
Proceeds per share...................................................... 8.75 8.75
-------------------- ----------------
Additional shares assumed outstanding................................... 52,800 52,114
Weighted average common shares outstanding.............................. 5,000,000 5,000,000
-------------------- ----------------
Supplemental weighted average common shares outstanding................. 5,052,800 5,052,114
-------------------- ----------------
-------------------- ----------------
Supplemental Net Income Per Share:
Pro forma net income.................................................... $1,828,000 $1,612,000
Pro forma impact of use of proceeds on interest expense,
net of tax........................................................... 11,592 8,618
-------------------- ----------------
Supplemental net income................................................. 1,839,592 1,620,618
Supplemental weighted average common shares outstanding................. 5,052,800 5,052,114
-------------------- ----------------
Supplemental pro forma net income per common share...................... $ .36 $ .32
-------------------- ----------------
-------------------- ----------------
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report of
the combined financial statements of Girgenti, Hughes, Butler & McDowell, Inc.
and Affiliates, dated January 24, 1997 (except with respect to the matters
discussed in Note 9 as to which the date is October 23, 1997), our report of the
consolidated financial statements of Milton Marketing Group Limited and
Subsidiaries, dated January 27, 1997 (except with respect to the matters
discussed in Note 11 as to which the date is October 23, 1997), and our report
of the financial statements of Healthworld Corporation, dated October 13, 1997
(except with respect to the matters discussed in Note 1 as to which the date is
October 23, 1997), and to all references to our Firm included in or made a part
of this registration statement.
/s/ Arthur Andersen LLP
Melville, New York
November 3, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001044993
<NAME> MILTON MARKETING GROUP LIMITED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,591
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,305
<PP&E> 1,912
<DEPRECIATION> 986
<TOTAL-ASSETS> 8,158
<CURRENT-LIABILITIES> 6,414
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 985
<TOTAL-LIABILITY-AND-EQUITY> 8,158
<SALES> 0
<TOTAL-REVENUES> 10,624
<CGS> 0
<TOTAL-COSTS> 10,045
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 493
<INCOME-TAX> 182
<INCOME-CONTINUING> 151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001044993
<NAME> GIRGENTI, HUGHES, BUTLER & McDOWELL, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,873
<SECURITIES> 0
<RECEIVABLES> 8,430
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,421
<PP&E> 2,943
<DEPRECIATION> 1,571
<TOTAL-ASSETS> 16,237
<CURRENT-LIABILITIES> 8,018
<BONDS> 0
0
0
<COMMON> 290
<OTHER-SE> 6,756
<TOTAL-LIABILITY-AND-EQUITY> 16,237
<SALES> 0
<TOTAL-REVENUES> 12,562
<CGS> 0
<TOTAL-COSTS> 10,303
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 2,353
<INCOME-TAX> 177
<INCOME-CONTINUING> 2,176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,176
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
