<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-50119
AMERICAN LAWYER MEDIA HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3980412
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
345 Park Avenue South
New York, New York 10010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 779-9200
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of March 30, 2000, 1,200,000 shares of Common Stock, par value $.01
per share, were outstanding, the majority of which were held by affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
See Exhibit Index
1
<PAGE>
PART I
Item 1. BUSINESS
Unless the context otherwise requires: (i) the "Company" refers to
American Lawyer Media Holdings, Inc., which is the parent company of American
Lawyer Media, Inc. and its subsidiaries, and to the Company's predecessor,
Cranberry Partners, LLC; and (ii) "ALM" refers to American Lawyer Media, Inc.
and its subsidiaries. References herein to estimated circulation include
total paid and free circulation for all of the Company's periodicals.
References herein to readership include estimated circulation plus combined
pass-along readership unadjusted for any overlap that exists among readers of
the Company's various publications.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE
BASED UPON THE BELIEFS AND ASSUMPTIONS OF, AND ON INFORMATION AVAILABLE TO,
THE MANAGEMENT OF THE COMPANY AT THE TIME SUCH STATEMENTS ARE MADE. THE
FOLLOWING ARE OR MAY CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: (I) STATEMENTS
PRECEDED BY OR FOLLOWED BY OR THAT INCLUDE THE WORDS "MAY," "WILL," "COULD,"
"SHOULD," "BELIEVE," "EXPECT," "FUTURE," "POTENTIAL," "ANTICIPATE," "INTEND,"
"PLAN," "ESTIMATE" OR CONTINUE OR THE NEGATIVE OR OTHER VARIATIONS THEREOF
AND (II) STATEMENTS REGARDING MATTERS THAT ARE NOT HISTORICAL FACTS. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES,
INCLUDING WITHOUT LIMITATION, (I) GENERAL ECONOMIC CONDITIONS AND
DEVELOPMENTS IN THE LEGAL SERVICES INDUSTRY OR THE PUBLISHING INDUSTRY, (II)
PRODUCT DEMAND AND PRICING, (III) THE SUCCESS OF NEW INITIATIVES, (IV)
INCREASED COMPETITION WITH RESPECT TO SERVICES IT PROVIDES AND FOR
ADVERTISING AND SUBSCRIPTION REVENUE, AND (V) SUFFICIENCY OF CASH FLOW TO
FUND ITS OPERATIONS.
Company Overview
The Company is a holding company, the principal asset of which
consists of all of the outstanding capital stock of ALM. The Company publishes
22 periodicals serving legal and business professionals, including several
leading national periodicals and regional publications serving four of the five
largest state legal markets. The Company's nationally-recognized periodicals
include The American Lawyer, a monthly magazine containing articles and features
targeted to attorneys practicing in large law firms, and The National Law
Journal, the nation's largest selling legal newspaper, which covers the law,
lawyers and the business of the legal profession. The Company's regional
publications are led by the New York Law Journal, which has the largest paid
circulation of any regional legal newspaper in the United States. In addition
to the New York Law Journal, the Company publishes seven other daily newspapers
serving Atlanta, Philadelphia, Northern California, Miami, Fort Lauderdale and
Palm Beach, as well as eight weekly newspapers serving New Jersey, Delaware,
Texas, Washington, D.C., Connecticut, California, Georgia and Pennsylvania. In
September 1999, the Company launched The Daily Deal, a daily publication and
Web site that focuses on international deals and the deal-making community of
bankers, accountants, lawyers, venture capitalists and business professionals,
which the Company sold in March 2000. See Recent Developments.
In addition to the periodicals referred to above, the Company publishes
Corporate Counsel, a leading magazine for corporate in-house attorneys, Law
Technology News and AmLaw Tech, two leading legal technology magazines, as well
as IP Worldwide, a leading specialty magazine focusing on intellectual property.
The Company also creates and packages information for attorneys and
business professionals through its Professional Information division. This
business includes a portfolio of publications covering a variety of specialized
legal interests and practice areas, including 37 newsletters and 111 books on
topics of national and regional interest. The Company also publishes various
directories used by legal professionals.
2
<PAGE>
The Company, under its LegalTech trademark, is a leading producer of
trade shows and conferences relating to law practice technology. In addition,
the Company organizes and sponsors numerous professional seminars and
conferences that cover issues of current legal interest.
The Company derives its revenues principally from advertising and
subscriptions, with additional revenues generated by its Professional
Information division and its LegalTech and seminars divisions. For the twelve
months ended December 31, 1999, approximately 57% of the Company's revenues were
from advertising, 18% were from subscriptions, 24% were from ancillary products
and services and 1% were from Internet services.
At the beginning of 1999, the Company's Internet business consisted of
various web sites that offered a myriad of legal resources to serve lawyers,
legal professionals, law students, business people and consumers. Its Law News
Network site (www.lawnewsnetwork.com), launched in December 1998, provided
updated legal news and information from the Company's publications as well as
original content, online advertising and specialized legal subscription
services. The Company's Internet business also included Law Journal Information
Systems, a division which included MA/3000, a case tracking and docketing
software package that allows litigators to track court activity published in the
New York Law Journal, and QDS, which offers subscribers faxed copies on request
of both published and unpublished state and federal court opinions for New York.
In May 1999, the Company reorganized its Internet business under a
wholly-owned subsidiary, Professional On-Line, Inc. In July 1999, the Company
completed the sale of its Internet business to Law.com, Inc. ("Law.com"), the
holding company for a leading Internet destination for legal information,
e-commerce and e-services, for $1.0 million in cash and retained a preferred
stock interest in Professional On-Line, Inc. with a face amount of $3.75
million. The sale consisted of various national and regional web sites of Law
News Network, the uniform resource locators for these web sites and
substantially all of the Law Journal Information Systems division. In
December 1999, Law.com redeemed all of the preferred stock for $3.75 million
plus accrued dividends.
As part of the sale, ALM entered into a license agreement with
Law.com, which provides for an exclusive license to Law.com of digital and
electronic distribution rights to all of the ALM's content through 2004.
Product Lines
Periodicals. The Company's newspaper and magazine business publishes 22
national, regional and local periodicals that serve legal and business
professionals. The Company's periodicals have a combined circulation of
approximately 300,000. The subscription renewal rate for the Company's
periodicals has historically averaged approximately 80%.
Newspapers. The Company's newspapers provide news, features, analysis
and commentary about the world of law and advocacy. Feature articles and stories
covering the local, state and federal courts and law firms are supplemented by
reports and analyses of cutting-edge legal issues. The Company is committed to
providing high quality and balanced coverage of its local markets. Most of the
Company's newspapers serve as the newspaper of record for their respective legal
markets. Lawyers look to the newspapers for reports on local court rulings and
opinions, as well as information regarding local court dockets.
As of December 31, 1999, the Company published sixteen daily and weekly
newspapers including The National Law Journal, the leading national legal
newspaper in the United States, and the New York Law Journal, which has the
largest circulation of any regional legal newspaper. In the
3
<PAGE>
aggregate, the Company's newspapers serve nine state markets, including New
York, New Jersey, Pennsylvania, Georgia, Florida, Texas, California, Connecticut
and Delaware, and the District of Columbia, which cover approximately 45% of all
active attorneys in the United States. Each of the Company's regional newspapers
has a significant presence in its respective market.
The following table sets forth information regarding the Company's
newspapers:
Newspapers
<TABLE>
<CAPTION>
Estimated
Year of Total Total
Title Market Founding Circulation(1) Readership(2)
- ----- ------ -------- -------------- -------------
<S> <C> <C> <C>
Weekly Newspapers
The National Law Journal............ National 1978 31,000 140,000
New Jersey Law Journal.............. New Jersey 1878 9,569 59,700
Texas Lawyer........................ Texas 1985 10,341 65,100
Legal Times......................... Washington, D.C. 1978 10,776 75,600
The Connecticut Law Tribune......... Connecticut 1974 3,228 23,800
Delaware Law Weekly................. Delaware 1998 500 2,000
Pennsylvania Law Weekly............. Pennsylvania 1978 3,100 13,020
California Law Week(3).............. California 1999 12,000 N/A(4)
Daily Newspapers
New York Law Journal................ New York 1888 15,425 66,700
The Recorder........................ Northern 1877 8,027 48,500
The Legal Intelligencer............. Pennsylvania 1843 3,050 12,810
Fulton County Daily Report.......... Georgia 1890 6,615 37,700
Miami Daily Business Review......... South Florida 1926 5,148 37,800
Broward Daily Business Review....... South Florida 1926 2,772 20,400
Palm Beach Daily Business Review.... South Florida 1926 1,990 14,700
The Daily Deal(5)................... National 1999 18,000 N/A(4)
- -----------
</TABLE>
(1) References in the table above to the Company's total circulation include
total paid and free circulation.
(2) References in the table above to the Company's estimated total
readership include total circulation plus combined pass-along readership
unadjusted for any overlap that exists among readers of the Company's
various publications.
(3) California Law Week ceased publishing in December 1999.
(4) For these recently launched publications, insufficient information is
currently available.
(5) In March 2000, the Company sold The Daily Deal. See Recent
Developments.
Magazines. The American Lawyer anchors the Company's magazine portfolio.
Founded in 1979, The American Lawyer is a glossy magazine that features stories
on the strategies, successes, failures and
4
<PAGE>
personalities of the most important figures in the legal world. The target
audience for the publication is attorneys practicing in large law firms and
corporate legal departments across the United States. The American Lawyer has
been the winner of National Magazine awards granted by the American Society of
Magazine Editors four times, and has been nominated for 22 such awards since its
founding.
The Company's other magazines focus on specific practice areas or
segments within the legal profession and certain topics applicable to the
business of law. The Company's specialty legal magazines include Corporate
Counsel, one of the nation's largest magazines focused on issues of importance
to in-house lawyers at large and mid-size corporations, and IP Worldwide, which
covers developments in intellectual property law. The Company also publishes two
leading technology magazines targeted to the legal community, AmLaw Tech and Law
Technology News, which focus on information technology and its applications to
the practice of law. AmLaw Tech is targeted toward persons at law firms with
purchase-making authority and is distributed to all readers of The American
Lawyer, while Law Technology News is targeted toward attorneys and information
services departments in law offices. At the end of 1999, the Company introduced
L magazine, a law and lifestyle quarterly publication for law students.
The Company publishes the following six magazines:
Magazines
<TABLE>
<CAPTION>
Estimated
Year of Total Total
Title Founding Frequency Circulation(1) Readership(2)
- ----- -------- --------- -------------- -------------
<S> <C> <C> <C> <C>
The American Lawyer................... 1979 12 times per year 16,000 118,400
AmLaw Tech............................ 1996 4 times per year 16,000 118,400(3)
Corporate Counsel..................... 1994 11 times per year 35,000 70,000(4)
IP Worldwide.......................... 1995 6 times per year 10,000 20,000(4)
Law Technology News................... 1993 14 times per year 47,000 94,000(4)
L ................................... 1999 4 times per year(5) 60,000 120,000(4)
</TABLE>
- -----------
(1) References in the table above to the Company's total circulation include
total paid and free circulation.
(2) References in the table above to the Company's estimated total
readership include total circulation plus combined pass-along readership
unadjusted for any overlap that exists among readers of the Company's
various publications.
(3) AmLaw Tech is distributed for free to subscribers of The American
Lawyer.
(4) These magazines are distributed primarily free of charge. For these
publications, the Company assumes only two readers per copy.
(5) L was only distributed once in 1999, as it was founded in December.
Newsletters. The Company's newsletter division publishes 37 newsletters that
cover specialized legal practice areas. Circulation for the Company's
newsletters ranges from approximately 250 to 2,000, with an average circulation
of over 700. The total number of paid subscribers for all newsletters was
5
<PAGE>
approximately 18,200 as of December 31, 1999. In February 2000, the Company
discontinued publication of four of its weekly newsletters. See Recent
Developments. The following table sets forth a list of the Company's
newsletters as of December 31, 1999:
Newsletters
Accounting for Law Firms
The Bankruptcy Strategist
Broadcast Law Report
Business Crimes Bulletin
Commercial Leasing Law & Strategy
Corporate Control Alert
Corporate Law Weekly
The Corporate Counsellor
Criminal Justice Weekly
Employment Law Strategist
Employment Law Weekly
Entertainment Law & Finance
Environmental Compliance and Litigation Strategy
Equipment Leasing
E-Commerce Law Weekly
E-Commerce Law & Strategy
e Securities
Fen Phen Litigation Strategist
Healthcare Fraud and Abuse
The Intellectual Property Law Strategist
The Internet Newsletter: Legal & Business Aspects
IP Law Weekly
Law Firm Partnership & Benefits Report
Leader's Franchising Business & Law Alert
Legal Tech
Managed Care Law Strategist
Marketing for Lawyers
The Matrimonial Strategist
Medical Malpractice Law & Strategy
Medical/Legal Aspects of Breast Implants
New York Employment Law & Practice
New York Family Law Monthly
New York Real Estate Law Reporter
Personal Injury Reporter
Product Liability Law & Strategy
Securities Law Weekly
Shopping Center Law Report
Books. The Company currently publishes 111 books on a broad array of legal
topics. These books generally focus on practical legal subjects that arise in
the daily professional lives of lawyers. Most of the Company's books are updated
once or twice per year with inserts to keep the material current. The Company
focuses on publishing books that cover particularly dynamic areas of law that
lend themselves to frequent supplementation.
6
<PAGE>
The Company most often develops the concept for a new book and then
solicits an author to write the text. However, in certain cases, the Company has
received unsolicited manuscripts which it has ultimately published. Authors who
have written books for the Company include prominent attorneys and judges such
as Martin Lipton, Judge Jed Rakoff, James Freund and James Goodale. The
following tables set forth the Company's current offering of books:
Books
State and Local Subjects
Encyclopedia of New Jersey Causes of Action
Georgia Bench Book
1999 Harris County Bench Book Supplement (Texas)
Texas Auto Insurance Policy Annotated
Marketing and Maintaining a Family Law Mediation Practice
Mediation: A Texas Practice Guide
New Jersey Brownfields Law
New Jersey Employment Law
New Jersey Federal Civil Procedure
New Jersey Insurance Law
New Jersey Product Liability Law
New York County Bench Book 2000
Pennsylvania Tax Handbook
Pennsylvania District and County Reports
Pennsylvania Court Rules
Pennsylvania: The Legal Directory
Pleadings and Pretrial Practice (Connecticut)
Representing Clients in Mediation
1999 Tarrant County Bench Book (Texas)
1999-2000 Texas Criminal Codes and Rules, Annotated
2000 Assigned Judges Bench Book
National Subjects
A Practical Guide to Equal Employment Opportunity
A Practical Guide to the Occupational Safety and Health Act
Acquisitions Under the Hart-Scott-Rodino Antitrust Improvements Act
All About Cable Alternative
Dispute Resolution in the Work Place
Anatomy of a Merger: Strategies and Techniques for Negotiating
Corporate Acquisitions
Antitrust Basics
Antitrust: An Economic Approach
Changing the Situs of a Trust
Class Actions: The Law of 50 States
Communications Law and Practice
Computer Law: Drafting and Negotiating Forms and Agreements
Corporate Internal Investigations
Corporate Privileges and Confidential Information
Corporate Sentencing Guidelines: Compliance and Mitigation
Divorce, Separation and the Distribution of Property
Doing Business on the Internet: Forms and Analysis
7
<PAGE>
Due Diligence in Business Transactions
Employee Benefits Law: ERISA and Beyond
Encyclopedia of Matrimonial Clauses
Environmental Enforcement: Civil and Criminal
Environmental Law Lexicon
Environmental Regulation of Real Property
Estate Planning
Executive Compensation
Executive Stock Options and Stock Appreciation Rights
Federal Bank Holding Company Law
Federal Rules of Civil Procedure
Federal Taxation of Intellectual Property Transfers
Federal Taxation of Real Estate
Federal Taxation of S Corporations
Federal Trade Commission: Law, Practice and Procedure
Ferrara on Insider Trading and The Wall
Franchising: Realities and Remedies
Franchising: Realities and Remedies Forms Volume
Going Private
Grand Jury Practice
Ground Leases and Land Acquisition Contracts
Health Care Fraud: Enforcement and Compliance
Hospital Liability
"I'd Rather Do It Myself": How to Set Up Your Own Law Firm
Insurance Coverage Disputes
Intellectual Property Law: Commercial, Creative and Industrial Property
Intellectual Property Licensing Forms and Analysis
Internet and Online Law
Law Firm Accounting and Financial Management
Law Firm Partnership Agreements
Lawyering: A Realistic Approach to Legal Practice
Legal Research and Law Library Management
Lender Liability and Banking Litigation
Licensing of Intellectual Property
Limited Liability Companies and Limited Liability Partnerships
Marketing the Law Firm: Business Development Techniques
Maximizing Law Firm Profitability: Hiring, Training and Developing
Productive Lawyers
Merit Systems Protection Board: Rights and Remedies
Model Terms of Engagement
Modern Visual Evidence
Multimedia Law: Forms and Analysis
Negotiated Acquisitions of Companies, Subsidiaries and Divisions
Negotiating and Drafting Office Leases
Negotiation: Strategies for Law and Business
Partnership and Joint Venture Agreements
Private Equity Funds: Business Structure & Operations
Private Real Estate Syndications
Product Liability
Product Liability: Winning Strategies and Techniques
Products Liability: Recreation and Sports Equipment
Real Estate, A Guide for the Profession
8
<PAGE>
Real Estate Financing
Reorganizations under Chapter 11 of the Bankruptcy Code
Representing High-Tech Companies
RICO: Civil and Criminal, Law and Strategy
Savings Institutions: Mergers, Acquisitions and Conversions
Securities Practice and Electronic Technology
Securities Regulation: Liabilities and Remedies
Sex Discrimination and Sexual Harassment in the Workplace
Shareholder Derivative Litigation: Besieging the Board
Shopping Center and Store Leases
Start-Up and Emerging Companies: Planning, Financing and Operating the
Successful Business
State Antitrust Law
Structured Settlements and Periodic Payment Judgments
Takeovers and Freezeouts
Tax Aspects of Divorce and Separation
The Law and Practice of Secured Transactions: Working with Article 9
The Preparation and Trial of Medical Malpractice Cases
Trade Secrets
Travel Law
Use of Statistics in Equal Employment Opportunity Litigation
White Collar Crime: Business and Regulatory Offenses
Winning Attorney's Fees from the U.S. Government
Conferences and Seminars. Under its LegalTech tradename, the Company produces
conferences and exhibitions relating to law practice technology in New York, Los
Angeles, Chicago, Miami, Atlanta and Houston. In 2000, the Company plans to
produce Legal Tech shows in New York, Los Angeles, Chicago, Miami, Atlanta,
Dallas, Toronto, Canada and London, England. The conferences are generally
three-day events that include vendor exhibits, a seminar program and a variety
of workshops and focus sessions. Attendees typically include attorneys in
private practice, corporate counsel, law firm administrators and information
technology personnel, while exhibitors include a variety of software, hardware,
publishing and other technology product related companies. The Company conducts
a number of seminars for lawyers and other professionals in related fields. The
Company's seminars complement its other products and services both by serving as
powerful marketing vehicles for the Company's existing books and newsletters and
by generating ideas for new seminars, books and newsletters. Seminars also
introduce the Company to lawyers who may subsequently write articles or books
for the Company. The following table sets forth the seminars and conferences
held in 1999:
Seminars
Civil Litigation Practice
Year 2000 Litigation
Acquisitions Of Subsidiaries, Divisions and Private Companies
Distribution and Dealer Termination
Failure to Diagnose Breast Cancer
Computer Law
General Counsel Conference
Negotiating Joint Ventures and Strategic Alliances
Failure to Diagnose Fetal Distress
Counseling Start-up and Emerging Companies
Negotiating the Modern Lease
Law Firm Marketing Beyond the New Millennium
9
<PAGE>
Negotiating Contracts in the Entertainment Industry
Trial of Obstetrical Malpractice Case
Negotiating Corporate Acquisitions
Internet Security Summit
International Money Laundering
China Update
Avoiding Ethical Pitfalls
Facing Experienced Practitioners
Ethics in the 21st Century
Ethics for Corporate Lawyers and Business Litigators
Internet and Electronic Commerce
Conferences
LegalTech New York (January)
LegalTech Miami
LegalTech Los Angeles
LegalTech New York (September)
LegalTech Chicago
LegalTech Houston
LegalTech Atlanta
Printing and Distribution
Layouts for the Company's publications are prepared in-house, while the
large majority of the Company's printing activities, and all of its distribution
activities, are outsourced.
Competition
The Company competes for advertising and subscription revenues with
publishers of special-interest legal newspapers and magazines with similar
editorial content. However, in most of the Company's markets, its newspaper is
the only newspaper focused on serving the legal community. The Company also
competes for advertising revenues with other national legal publications, as
well as general-interest magazines and other forms of media, including broadcast
and cable television, radio, direct marketing and electronic media. Factors that
may affect competition for advertisers include effective costs of such
advertising compared to other forms of media, and the size and characteristics
of the readership of the Company's publications. The Company also faces
significant competition from other legal publishers and legal service providers
in all media.
Intellectual Property
The Company owns a number of registered and unregistered trademarks for
use in connection with its business, including trademarks in the titles of its
major periodicals such as The American Lawyer, Corporate Counsel, The National
Law Journal and New York Law Journal. Provided that trademarks remain in
continuous use in connection with similar goods or services, their term can be
perpetual, subject, with respect to registered trademarks, to the timely renewal
of such registrations in the United States Patent and Trademark Office.
The Company approaches copyright ownership with respect to its
publications in the same manner as is generally customary within the publishing
industry. Consequently, the Company owns the copyright in all of its newspapers,
magazines and newsletters, as compilations, and also owns the
10
<PAGE>
copyright in most of its books. With respect to the specific articles in its
publications, the Company generally obtains the assignment of all right, title
and interest in original materials created by the Company's full-time
journalists and editors as well as by paid contributors. For articles authored
by outside contributors, the Company generally obtains only the exclusive
"first-time publication" and non-exclusive republication rights. Judicial
opinions, court schedules and docketing information are provided to the Company
directly by the courts, on a non-exclusive basis, and are public information. In
connection with the sale of the Company's Internet business to Law.com, the
Company entered into an exclusive content license with Law.com which grants
Law.com the right to publish all Company content in electronic or digital
format. The license runs through 2004.
The Company licenses the content of certain of its publications and
forms to third parties, including West Publishing Company and LEXIS/NEXIS, on a
non-exclusive basis, for republication and dissemination on electronic databases
marketed by the licensees. After the expiration of their initial terms (the
latest of which is September 2002 and May 2002, respectively), the licenses
automatically renew, subject to either parties' right to terminate at the end of
each subsequent term.
Some of the Company's products, such as the Daily Decision Service and
PICS, which offers subscribers faxed copies on request of both published and
unpublished state and federal court opinions for New Jersey and Pennsylvania,
respectively, utilize the extensive databases of court decisions compiled by the
Company. The Company also has extensive subscriber and other customer databases
which it believes would be extremely difficult to replicate. The Company
attempts to protect these databases and lists as trade secrets by restricting
access thereto and/or by the use of non-disclosure agreements. There can be no
assurance, however, that the means taken to protect the confidentiality of these
items will be sufficient, or that others will not independently develop similar
databases and customer lists.
Employees and Labor Relations
As of December 31, 1999, the Company employed approximately 960
full-time employees, 21 of whom are subject to a single collective bargaining
agreement. The Company believes that its relations with its employees are
satisfactory.
Significant Transactions
Sale of Internet Assets to Law.com. In July 1999, ALM sold the common stock
of its wholly-owned subsidiary, Professional On-Line, Inc., which held ALM's
Internet business, to Law.com for $1.0 million in cash and ALM retained a
preferred stock interest with a face amount of $3.75 million. In December
1999, Law.com redeemed the preferred stock for $3.75 million plus accrued
dividends of $187,500. ALM and Law.com entered into an exclusive
content license which grants Law.com the right to publish all ALM content
in electronic or digital format through 2004 as part of the transaction.
Law.com is the holding company for a leading Internet destination for legal
information, e-commerce and e-services whose stockholders include
substantially all of the stockholders of Holdings.
Recent Developments
Restructuring of Weekly Newsletter Division. In February 2000, the Company
restructured its weekly newsletter division by discontinuing publication of four
of its weekly newsletters. The Company will continue to publish IP Law Weekly
and E-Commerce Law Weekly which serve reader demand for information in these two
growing practice areas.
Sale of the Business of The Daily Deal and Corporate Control Alert. On
March 28, 2000, the Company sold the business of the Company and certain of the
Company's wholly-owned subsidiaries
11
<PAGE>
constituting The Daily Deal and Corporate Control Alert (the "Business") to TDD,
L.L.C., a newly formed limited liability company (the "Purchaser"), owned by
substantially all of the same stockholders as Holdings. The consideration for
the sale was $7.5 million in cash and a $2.5 million face amount of a membership
interest in the Purchaser with a preferred return (the "Preferred Membership
Interest"). In addition, the Purchaser will pay the Company the aggregate amount
of operating losses incurred by the Company in connection with the operation of
the Business for the month of March 2000. The Preferred Membership Interest
accretes at 12.25% compounded annually, is convertible into 3.0% of the common
equity of the Purchaser, has anti-dilution protection for dividends in the form
of additional equity interests, combinations, splits and reclassifications and
has anti-dilution protection up to the first $25.0 million of equity capital
including the Preferred Membership Interest issued by the Purchaser.
Stock Split. On March 7, 2000, the Board of Directors of the Company approved
a 10-for-1 split of its common stock, par value $0.01 per share. Prior to the
stock split, the Company had 200,000 shares of common stock authorized and
120,000 shares of common stock outstanding. After giving effect to the stock
split, the Company has 2,000,000 shares of common stock authorized and
1,200,000 shares of common stock outstanding.
Item 2. PROPERTIES
The Company operates from various locations throughout the United
States. Its corporate headquarters are based in New York. Information relating
to the Company's corporate headquarters and other significant regional offices
which are owned or leased is set forth in the following table:
<TABLE>
<CAPTION>
Street Address City/State Square Footage Lease Expiration
- -------------- ---------- -------------- ----------------
<S> <C> <C> <C>
345 Park Avenue South............... New York, NY 55,000 Sept. 2008
105 Madison Avenue.................. New York, NY 50,000 Sept. 2008
238 Mulberry Street................. Newark, NJ 7,022 Dec. 2006
10 United Nations Plaza............. San Francisco, CA 14,632 Sept. 2009
800 Wilshire Blvd................... Los Angeles, CA 2,624 May 2004
900 Jackson Street.................. Dallas, TX 10,190 Dec. 2003
1010 Brazos......................... Austin, TX 1,300 June 2004
7000 Regency Square, Suites 242-243. Houston, TX 3000 June 2004
190 Pryor Street, S.W............... Atlanta, GA 20,000 Owned
1730 M Street, N.W.................. Washington, DC 11,113 Mar. 2002
1730 K Street....................... Washington, D.C. 5,782 Mar. 2001
1 Post Road......................... Fairfield, CT 6,520 Dec. 2001
363 Main Street..................... Hartford, CT 414 Dec. 2001
1 S.E. Third Avenue................. Miami, FL 19,742 Sept. 2004
150 N.E. 7th Street................. Miami, FL 17,701 Sept. 2004
633 South Andrews Avenue............ Fort Lauderdale, FL 3,408 Jan. 2003
330 Clematis Street................. W. Palm Beach, FL 2,927 Jan. 2004
901 Market Street................... Wilmington, DE 1,089 Aug. 2001
1617 JFK Blvd....................... Philadelphia, PA 11,997 July 2001
222 Friend Street................... Boston, MA 1,533 Dec. 2002
321 S. Plymouth Court, Suite 800.... Chicago, IL 600 Oct. 2000
</TABLE>
12
<PAGE>
Item 3. LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any of
the matters in which it is currently involved will have a material adverse
effect on its financial condition or on the results of its operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MARKETS
The majority of the Company's common stock is owned by US Equity
Partners, L.P. and its affiliates. There is no public trading market for the
Company's common stock.
The Company has never paid any cash dividends on its common stock.
Item 6. SELECTED FINANCIAL DATA
In August 1997, U.S. Equity Partners, L.P. and its affiliates and
certain other investors controlled by or managed by WP Management Partners,
LLC., the merchant banking arm of Wasserstein Perella Group, Inc. (the
"Investors"), through the Company, acquired substantially all of the assets and
assumed certain of the liabilities related to American Lawyer Media, L.P. (the
"ALM Acquisition"), and in December 1997, the Company acquired all of the issued
and outstanding capital stock of National Law Publishing Company, Inc. (the "NLP
Acquisition"). The two acquisitions (the "Acquisitions") have been accounted for
using the purchase method of accounting. The results of operations of American
Lawyer Media, L.P. have been included in the financial statements of the Company
since August 1, 1997, the effective date of the ALM Acquisition, and the results
of operations of National Law Publishing Company have been included in the
financial statements of the Company since December 22, 1997, the closing date of
the NLP Acquisition. As a result, the Acquisitions affect the Company's results
of operations in certain significant respects. In connection with the ALM
Acquisition, the purchase price was $63.0 million and the excess of the purchase
price over the book value of net tangible assets acquired was $67.7 million. The
aggregate purchase price for the NLP Acquisition was $203.2 million, and the
excess of the purchase price over the book value of net tangible assets acquired
was $257.6 million. The excess purchase price of both Acquisitions has been
allocated to the tangible and intangible assets acquired by the Company based
upon their respective fair values as of the acquisition date.
The following tables present selected historical financial information
(i) for American Lawyer Media, L.P. and its subsidiaries ("Old ALM"), as of and
for the years ended December 31, 1995 and 1996, (ii) for National Law Publishing
Company, Inc. and its subsidiaries ("NLP"), as of and for the years ended
December 31, 1995 and 1996, (iii) for Old ALM, as of and for the seven months
ended July 31, 1997, (iv) for the Company, as of and for the five months ended
December 31, 1997 and the years ended December 31, 1998 and 1999, and (v) for
NLP, as of and for the period from January 1, 1997 through December 21, 1997.
The financial data for the Company, as of and for the five months ended December
31, 1997 and the years ended December 31, 1998 and 1999, and the financial data
for Old ALM for the years ended December 31, 1995 and 1996 and the seven months
ended July 31, 1997 were derived from financial statements audited by
13
<PAGE>
Arthur Andersen LLP. The financial data for NLP as of and for the period from
January 1, 1997 through December 21, 1997 were derived from financial statements
audited by Arthur Andersen LLP and financial data for NLP for the years ended
December 31, 1995 and 1996 were derived from financial statements audited by
Leslie Sufrin and Company, P.C. Results of operations for the interim periods
presented are not necessarily indicative of the results of operations for the
full year. The selected financial information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the historical financial statements and notes thereto included
elsewhere in this Report. See Index to Financial Statements.
14
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
AND AMERICAN LAWYER MEDIA HOLDINGS, INC.
Selected Historical Consolidated Financial Information
(In Thousands)
<TABLE>
<CAPTION>
Predecessor Company American Lawyer Media Holdings, Inc.
---------------------------------- ------------------------------------
Five
Year Year Seven Months Year Year
Ended Ended Months Ended Ended Ended
December December Ended July December December December
31, 1995 31, 1996 31, 1997 31, 1997 31, 1998 31, 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Periodicals:
Advertising........... $ 25,037 $ 26,659 $ 18,146 $ 13,410 $ 67,510 $ 75,887
Subscription.......... 10,884 11,304 6,719 5,260 23,172 23,570
Ancillary products and 8,387 8,467 4,532 4,142 28,208 31,791
Internet services....... 3,238 5,474 2,148 1,162 2,639 1,244
---------- ---------- ---------- ---------- ---------- ----------
Total Revenues.... 47,546 51,904 31,545 23,974 121,529 132,492
---------- ---------- ---------- ---------- ---------- ----------
Operating costs and expenses:
Editorial.................. 7,073 7,141 4,023 3,323 15,523 22,940
Production and distribution 12,587 12,469 6,919 5,766 26,266 29,821
Selling.................... 6,913 7,479 4,640 3,656 19,002 27,806
General and administrative. 16,506 16,829 9,531 7,145 30,012 32,136
Internet services.......... 10,854 11,886 6,464 2,988 4,667 3,313
Depreciation and amortization 2,680 2,488 1,590 3,273 26,302 27,298
Shutdown of ALM Internet
Services................. -- -- -- 3,000 -- --
---------- ---------- ---------- ---------- ---------- ----------
Total operating
costs and expenses....... 56,613 58,292 33,167 29,151 121,772 143,314
---------- ---------- ---------- ---------- ---------- ----------
Operating (loss)........... (9,067) (6,388) (1,622) (5,177) (243) (10,822)
Interest expense........... (1,384) (1,972) (1,420) (2,534) (22,916) (24,093)
Other income............... -- -- -- -- -- 187
Benefit for income tax..... -- -- -- -- 3,403 3,078
---------- ---------- ---------- ---------- ---------- ----------
(Loss) before minority interest (10,451) (8,360) (3,042) (7,711) (19,756) (31,650)
minority interest.......... 2,334 172 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net loss................. $ (8,117) $ (8,188) $ (3,042) $ (7,711) $ (19,756) $ (31,650)
=========== =========== =========== =========== =========== ===========
Balance Sheet Data:
(At end of period)
Working deficit............ $ (7,066) $ (7,009) $ (5,895) $ (8,322) $ (14,850) $ (14,819)
Total assets............... 19,313 19,482 18,982 361,314 367,860 349,237
Long-term debt (including
current maturities) .... 22,114 30,150 34,742 210,119 223,038 237,815
Partners' (deficit) and
stockholders' equity ... (19,759) (26,300) (29,342) 67,289 62,533 30,619
Other data:
EBITDA (1):
Periodicals and ancillary
products and services .. $ 1,229 $ 2,512 $ 4,284 $ 2,922 $ 28,087 $ 18,544
Internet services.......... (7,616) (6,412) (4,316) (4,826) (2,028) (2,069)
----------- ----------- ----------- ----------- ----------- -----------
Total............. $ (6,387) $ (3,900) $ (32) $ (1,904) $ 26,059 $ 16,475
=========== =========== =========== =========== ========== ==========
Capital Expenditures:
Periodicals and ancillary
products and services .. $ 864 $ 1,118 $ 439 $ 357 $ 3,767 $ 11,196
Internet services.......... 617 1,084 1,532 7 144 90
---------- ---------- ---------- ---------- ---------- ----------
Total................. $ 1,481 $ 2,202 $ 1,971 $ 364 $ 3,911 $ 11,286
========== ========== ========== ========== ========== ==========
</TABLE>
- -------------------
(1) "EBITDA" is defined as income before interest, income taxes,
depreciation and amortization and gain on sale of assets. EBITDA is not
a measure of performance under generally accepted accounting principles
("GAAP"). Items excluded from income in calculating EBITDA are
significant components in understanding and evaluating Old ALM's and
ALM's financial performance. While EBITDA should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities and
15
<PAGE>
other income or cash flow statement data prepared in accordance with
GAAP or as a measure of profitability or liquidity, management
understands that EBITDA is customarily used in evaluating publishing
companies. The EBITDA measures presented herein may not be comparable to
similarly titled measures of other companies.
16
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
Selected Historical Consolidated Financial Information
(In Thousands)
<TABLE>
<CAPTION>
Period from
January 1,
Years Ended December 31, 1997 through
------------------------------ December 21,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Operating Data:
Revenues:
Periodicals:
Advertising ..................................................... $ 21,387 $ 23,319 $ 26,402
Subscription .................................................... 9,694 9,759 9,504
Ancillary products and services ................................... 12,729 13,398 13,926
Internet services ................................................. 264 747 1,109
--------- --------- ---------
Total revenues ................................................ 44,074 47,223 50,941
--------- --------- ---------
Operating costs and expenses:
Editorial ......................................................... 5,778 5,929 5,837
Production and distribution ....................................... 8,146 8,679 9,872
Selling ........................................................... 9,776 8,991 8,211
General and administrative ........................................ 7,620 8,047 8,722
Internet services ................................................. 2,947 1,704 1,657
Depreciation and amortization ..................................... 6,329 7,487 7,283
Special compensation charge ....................................... -- -- 6,926
--------- --------- ---------
Total operating costs and expenses ............................ 40,596 40,837 48,508
--------- --------- ---------
Operating income .................................................... 3,478 6,386 2,433
Interest expense, net ............................................... (5,458) (6,013) (5,137)
Other income (expense) .............................................. (211) 181 --
--------- --------- ---------
(Loss) income before income taxes ................................... (2,191) 554 (2,704)
Benefit (provision) for income taxes ................................ 523 (3,007) (2,508)
Net loss .......................................................... $ (1,668) $ (2,453) $ (5,212)
========= ========= =========
Balance Sheet Data: (at end of period)
Working deficit ..................................................... $ (4,717) $ (2,081) $ (2,204)
Total assets ........................................................ 154,125 147,311 139,610
Long-term debt (including current maturities) ....................... 70,900 70,300 59,500
Stockholders' equity ................................................ 65,620 63,167 64,782
Other Data:
EBITDA (1):
Periodicals and ancillary products and services ..................... $ 12,490 $ 14,830 $ 10,264
Internet services ................................................... (2,683) (957) (548)
--------- --------- ---------
Total ......................................................... $ 9,807 $ 13,873 $ 9,716
========= ========= =========
Capital expenditures:
Periodicals and ancillary products and services ..................... $ 436 $ 486 $ 473
Internet services ................................................... 172 26 42
--------- --------- ---------
Total ......................................................... $ 608 $ 512 $ 515
========= ========= =========
</TABLE>
- -------------------
17
<PAGE>
(1) EBITDA is not a measure of performance under GAAP. Items excluded from
income in calculating EBITDA are significant components in understanding
and evaluating NLP's financial performance. While EBITDA should not be
considered in isolation or as a substitute for net income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with GAAP or as a measure of profitability or
liquidity, management understands that EBITDA is customarily used in
evaluating publishing companies. The EBITDA measures presented herein
may not be comparable to similarly titled measures of other companies.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
Selected Financial Data and the historical consolidated financial statements
of the Company, including the notes thereto, included elsewhere in this Form
10-K.
Overview
In August and December 1997, the Investors consummated the ALM
Acquisition and the NLP Acquisition, respectively. The Acquisitions have been
accounted for using the purchase method of accounting. The results of
operations of Old ALM have been included in the financial statements of the
Company since August 1, 1997, the effective date of the ALM Acquisition, and
the results of operations of NLP have been included in the financial
statements of the Company since December 22, 1997, the closing date of the
NLP Acquisition. As a result, the Acquisitions affect the Company's results
of operations in certain significant respects. In connection with the ALM
Acquisition, the purchase price was $63.0 million and the excess of the
purchase price over the book value of net tangible assets acquired was $67.7
million. The aggregate purchase price for the NLP Acquisition was $203.2
million, and the excess of the purchase price over the book value of net
tangible assets acquired was $257.6 million. The excess purchase price of
both Acquisitions has been allocated to the tangible and intangible assets
acquired by the Company based upon their respective fair values as of the
acquisition date.
In March 1998, the Company acquired all the assets and certain
liabilities of Corporate Presentations, Inc., an operator of legal technology
trade shows ("LegalTech"), for approximately $10.8 million. The excess purchase
price over the net liabilities acquired was $11.3 million. In April 1998, the
Company acquired the legal publishing-related assets and certain liabilities of
Legal Communications, Ltd. ("LCL") for approximately $20.1 million. The excess
purchase price over the net assets acquired was allocated $14.3 million and $6.3
million to identified intangibles and goodwill, respectively. The allocation was
based on the assets' respective fair values at acquisition date. The results of
operations of these acquisitions have been included in the Company's results of
operations since their respective acquisition dates.
The following table presents the results of operations (in
thousands) for the years ended December 31, 1999 and 1998 and the pro forma
calculation for the combined period ended December 31, 1997:
18
<PAGE>
The total combined information for the period ended December 31, 1997
is derived from the financial information for Old ALM for the seven months
ended July 31, 1997 and for ALM for the five months ended December 31, 1997,
including adjustments for the ALM Acquisition and financial information for
NLP for the period from January 1, 1997 through December 31, 1997. As a
result, the financial information for the combined year ended December 31,
1997 has not been prepared on a basis in conformity with Generally Accepted
Accounting Principles.
<TABLE>
<CAPTION>
Old ALM American Lawyer Media, Inc. NLP
-------- -------------------------- --------
Seven Five Jan. 1,
Months Months Pro Forma 1997 Pro Forma
Ended Ended Total through Total Year Ended Year Ended
July 31, December 31, Combined December 21, Combined December 31, December 31,
1997 1997 1997 1997 1997 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Periodicals:
Advertising ................... 18,146 13,410 31,556 26,402 57,958 67,510 75,887
Subscription .................. 6,719 5,260 11,979 9,504 21,483 23,172 23,570
Ancillary products and services 4,532 4,142 8,674 13,926 22,600 28,208 31,791
Internet services .............. 2,148 1,162 3,310 1,109 4,419 2,639 1,244
-------- -------- -------- -------- -------- -------- --------
Total revenues .................... 31,545 23,974 55,519 50,941 106,460 121,529 132,492
-------- -------- -------- -------- -------- -------- --------
Operating costs and expenses:
Editorial ......................... 4,023 3,323 7,346 5,837 13,183 15,523 22,940
Production and distribution ....... 6,919 5,766 12,685 9,872 22,557 26,266 29,821
Selling ........................... 4,640 3,656 8,296 8,211 16,507 19,002 27,806
General and administrative ........ 9,531 7,145 16,676 8,722 25,398 30,012 32,136
Internet services ................. 6,464 2,988 9,452 1,657 11,109 4,667 3,313
Depreciation and amortization ..... 1,590 3,273 4,863 7,283 12,146 26,302 27,298
Shutdown of ALM Internet services . -- 3,000 3,000 -- 3,000 -- --
Special compensation charge ....... -- -- -- 6,926 6,926 -- --
-------- -------- -------- -------- -------- -------- --------
Total operating costs and expenses 33,167 29,151 62,318 48,508 110,826 121,772 143,314
-------- -------- -------- -------- -------- -------- --------
Operating (loss) income ........... (1,622) (5,177) (6,799) 2,433 (4,366) (243) (10,822)
======== ======== ======== ======== ======== ======== ========
</TABLE>
Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
For the year ended December 31, 1998, the financial results include the
acquisitions of LegalTech in March 1998 and LCL in April 1998 as well as the
acquisition of a regional publication entitled Delaware Law Monthly (the
"Delaware Acquisition") in October 1998, since their respective acquisition
dates.
Overview. Revenues increased by $11.0 million, or 9.0%, from $121.5
million for the year ended December 31, 1998 to $132.5 million for the year
ended December 31, 1999. Total operating costs and expenses increased $21.5
million, or 17.7%, from $121.8 million for the year ended December 31, 1998
to $143.3 million for the year ended December 31, 1999 due primarily to new
initiatives launched by the Company during 1999. These initiatives included
the launch of a new daily publication entitled The Daily Deal, a daily
publication and Web site that focuses on international deals and the
deal-making community of bankers, accountants, lawyers, venture capitalists
and business professionals, which was sold in March 2000, and a new high-end
newsletter division, which published six weekly newsletters focusing on
various legal topics during 1999. As a result, the operating loss increased
$10.6 million from a loss of $0.2 million for the year ended December 31,
1998 to a loss of $10.8 million for the year ended December 31, 1999 and
EBITDA decreased $9.6 million, or 36.8%, from $26.1 million for the year
ended December 31, 1998 to $16.5 million for the year ended December 31,
1999. Internet services revenues decreased $1.4 million, or 52.9%, from $2.6
million for the year ended December 31, 1998 to $1.2 million for the year
ended December 31, 1999. Internet services expenses decreased $1.4 million, or
19
<PAGE>
29.0%, from $4.7 million for the year ended December 31, 1998 to $3.3 million
for the year ended December 31, 1999. The reduction in Internet services
revenues and expenses in 1999 was due to the sale of the common stock of the
entity holding the Company's Internet business to Law.com during the third
quarter of 1999. Excluding the Internet services business and new
initiatives, revenues increased $11.6 million, or 9.8% from $118.9 million
for the year ended December 31, 1998 to $130.5 million for the year ended
December 31, 1999. In addition, excluding the Internet service business and
new initiatives, EBITDA also increased $0.9 million, or 3.4%, from $28.1
million at December 31, 1998 to $29.0 million at December 31, 1999.
Revenues. Advertising revenues increased $8.4 million, or 12.4%, from
$67.5 million for the year ended December 31, 1998 to $75. 9 million for the
year ended December 31, 1999. The acquisition of LCL accounted for $2.0 million
of this increase recorded during the first quarter of this year with no revenue
for LCL recorded during the first quarter of 1998. Excluding the revenues from
LCL, advertising revenues increased $6.4 million, or 9.5% during 1999. This
increase in advertising revenues was due to a growth in classified, law firm and
legal advertising, but was partially offset by a decline in display advertising.
Advertising growth was also due to an increase in advertising rates along with
an increase in advertising pages.
Subscription revenue increased $0.4 million, or 1.7%, from $23.2 million
for the year ended December 31, 1998 to $23.6 million for the year ended
December 31, 1999. Growth in subscription revenue in 1999 resulted primarily
from the acquisition of LCL at the end of the first quarter of 1998.
Revenue from ancillary products and services increased $3.6 million, or
12.7%, from $28.2 million for the year ended December 31, 1998 to $31.8 million
for the year ended December 31, 1999. The acquisition of LegalTech and LCL
during early 1998 accounted for approximately $2.5 million, or 69% of the
growth, with no LegalTech and LCL revenues recorded during the first three
months of 1998. The remaining increase was due to higher licensing and royalty
fees received by the Company and to increased book and newsletter revenue.
However, the increase in revenue was partially offset by lower printing revenue.
In addition, lower information service income was recorded in 1999 as a result
of the sale of the Company's Internet business to Law.com during the third
quarter of 1999.
Revenue from Internet services decreased $1.4 million, or 52.9%, from
$2.6 million for the year ended December 31, 1998 to $1.2 million for the year
ended December 31, 1999. The decrease is attributable to the sale of the
Company's Internet business to Law.com during the third quarter of 1999.
Operating costs and expenses. Total operating costs and expenses
increased $21.5 million, or 17.7%, from $121.8 million for the year ended
December 31, 1998 to $143.3 million for the year ended December 31, 1999.
Included in operating costs and expenses for 1999 was $3.3 million recorded
during the first quarter of 1999 for LCL and LegalTech with no expenses recorded
during the same period of 1998. In addition, start-up and operating costs and
expenses for the Company's new initiatives during 1999 totaled $11.2 million
with no similar costs or expenses during 1998. Excluding the above-mentioned
items, total operating costs and expenses increased $7.0 million, or 5.7%. The
remaining increase in operating costs and expenses resulted primarily from
higher costs in all categories due to the overall growth in revenues.
Editorial expenses increased $7.4 million, or 47.8%, from $15.5 million
for the year ended December 31, 1998 to $22.9 million for the year ended
December 31, 1999. The acquisition of LCL and start-up costs for the new
initiatives accounted for $3.6 million of the increase and general salary
increases and the hiring for a number of key vacant positions accounted for the
remaining increase.
Production and distribution expenses increased $3.6 million, or 13.5%,
from $26.3 million for the year ended December 31, 1998 to $29.8 million for the
year ended December 31, 1999. The acquisition of LCL and LegalTech increased
expenses by $1.3 million and the new initiatives launched during 1999
20
<PAGE>
accounted for $1.4 million of the increase. Excluding the acquisitions of LCL
and LegalTech and new initiatives, production and distribution expenses
increased $0.9 million, or 3.3% over prior year costs. This increase primarily
resulted from the introduction of a new weekly publication in California
(California Law Week), which has since been discontinued, along with higher
materials costs and increased runs in an effort to increase coverage in some
markets.
Selling expenses increased $8.8 million, or 46.3%, from $19.0 million
for the year ended December 31, 1998 to $27.8 million for the year ended
December 31, 1999. LCL and LegalTech accounted for $1.0 million of the increase
and costs incurred for the new initiatives accounted for $4.1 million of the
increase. Excluding these items mentioned above, selling expenses increased $3.7
million, or 19.4%. This increase resulted primarily from higher commission costs
related to an increase in revenues, increased headcount and increased direct
mailing efforts and other marketing related costs.
General and administrative expenses increased $2.1 million, or 7.1%,
from $30.0 million for the year ended December 31, 1998 to $32.1 million for the
year ended December 31, 1999. This increase reflects $0.7 million of costs
associated with the acquisitions of LCL and LegalTech. The remaining expense
increase relates primarily to the launching of the new initiatives during 1999,
which included increased total occupancy and other related general overhead
costs.
Internet services expenses decreased $1.4 million, or 29.0%, from $4.7
million for the year ended December 31, 1998 to $3.3 million for the year ended
December 31, 1999. This decrease is attributable to the sale of the Company's
Internet business to Law.com during the third quarter of 1999.
Depreciation and amortization expenses increased $1.0 million, or 3.8%,
from $26.3 million for the year ended December 31, 1998 to $27.3 million for the
year ended December 31, 1999. An increase in amortization of goodwill during
1999 was due to the acquisitions of LCL and LegalTech during early 1998. The
increase in depreciation during 1999 was due to increased capital expenditures
in 1999 for new and upgraded systems and to replace outdated systems with new
systems and facilities to support the new initiatives and the Company's core
growth.
Operating loss. As a result of the above factors, the operating loss
increased $10.6 million from a $0.2 million loss for the year ended December
31, 1998 to a $10.8 million loss for the year ended December 31, 1999. EBITDA
decreased $9.6 million, or 36.8%, from $26.1 million for the year ended
December 31, 1998 to $16.5 million for the year ended December 31, 1999.
Excluding the Internet services business and new initiatives, EBITDA
increased $0.9 million, or 3.4%, from $28.1 million at December 31, 1998 to
$29.0 million at December 31, 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
The following discussion includes the year ended December 31, 1997 which
is derived from the financial information for Old ALM for the seven months ended
July 31, 1997 and for ALM for the five months ended December 31, 1997, including
adjustments for the ALM Acquisition, and financial information for NLP for the
periods from January 1, 1997 through December 21, 1997, presented above. As a
result, the financial information for the combined year ended December 31, 1997
has not been prepared on a basis in conformity with GAAP.
For the year ended December 31, 1998, their financial results include
the acquisitions of LegalTech, LCL and the Delaware Acquisition, since their
respective acquisition dates.
Overview. Revenues increased by $15.1 million, or 14.2%, from $106.5
million for the year ended December 31, 1997 to $121.5 million for the year
ended December 31, 1998. Total operating costs
21
<PAGE>
and expenses increased $10.9 million, or 9.9%, from $110.8 million for the year
ended December 31, 1997 to $121.8 million for the year ended December 31, 1998,
due primarily to a $14.2 million increase in depreciation and amortization
resulting from the ALM and NLP Acquisitions. As a result, the operating loss
decreased $4.1 million, or 94.4%, from a loss of $4.4 million for the year ended
December 31, 1997 to a loss of $0.2 million for the year ended December 31,
1998, while EBITDA increased $18.3 million, or 234.9%, from $7.8 million for the
year ended December 31, 1997 to $26.1 million for the year ended December 31,
1998. Internet services revenues decreased $1.8 million, or 40.3%, from $4.4
million for the year ended December 31, 1997 to $2.6 million for the year ended
December 31, 1998. Internet services expenses decreased $6.4 million, or 58.0%,
from $11.1 million for the year ended December 31, 1997 to $4.7 million for the
year ended December 31, 1998. Also included in the operating costs for 1997
was a special compensation charge of $6.9 million reflecting stock option and
bonus payments related to the sale of NLP. Accordingly, excluding the net
operating loss from Internet services, the shutdown charge, and the one time
special compensation charge, operating income decreased $10.5 million, or
85.4%, from $12.2 million for the year ended December 31, 1997 to $1.8
million for the year ended December 31, 1998, while EBITDA increased $3.7
million, or 15.1%, from $24.4 million to $28.1 million over the same periods.
Revenues. Advertising revenues increased $9.6 million, or 16.5%, from
$58.0 million for the year ended December 31, 1997 to $67.5 million for the year
ended December 31, 1998. The acquisition of LCL accounted for $3.9 million of
this increase. Without LCL, revenues increased $5.7 million, or 9.8%, due
principally to an increase in advertising rates as well as an overall increase
in advertising pages.
Subscription revenues increased $1.7 million, or 7.9%, from $21.5
million for the year ended December 31, 1997 to $23.2 million for the year ended
December 31, 1998. This increase was primarily due to the acquisition of LCL.
Revenues from ancillary products and services increased $5.6 million, or
24.8%, from $22.6 million for the year ended December 31, 1997 to $28.2 million
for the year ended December 31, 1998. The additions of LCL and LegalTech
accounted for $3.1 million of the increase. The $2.5 million balance of this
increase was due to an increase in the number of book updates released along
with increased royalty income. In addition, a portion of book sales historically
recorded in the fourth quarter were shipped and included in the first quarter
results of 1998.
Revenues from Internet services decreased $1.8 million, or 40.3%, from
$4.4 million for the year ended December 31, 1997 to $2.6 million for the year
ended December 31, 1998. This decrease is attributable primarily to the shutdown
of Counsel Connect, Old ALM's Internet service.
Operating costs and expenses. Total operating costs and expenses
increased $10.9 million, or 9.9%, from $110.8 million for the year ended
December 31, 1997 to $121.8 million for the year ended December 31, 1998.
This increase is due to a $14.2 million increase in depreciation and
amortization resulting from the ALM and NLP Acquisitions. The inclusion of
$7.1 million in costs and expenses for LCL and LegalTech as well as other
normal operating costs and expenses increases were offset by the reduction in
Internet services costs and expenses.
Editorial expenses increased by $2.3 million, or 17.8%, from $13.2
million for the year ended December 31, 1997 to $15.5 million for the year ended
December 31, 1998 as a number of key vacant positions were filled. The addition
of LCL accounted for $0.7 million of the increase.
Production and distribution expenses increased $3.7 million, or 16.4%,
from $22.6 million for the year ended December 31, 1997 to $26.3 million for the
year ended December 31, 1998. The addition of
22
<PAGE>
LCL and LegalTech accounted for $2.0 million of the increase. The remainder of
this increase is primarily the result of the increased book sales as well as
higher paper usage at ALM's printing facilities.
Selling expenses increased $2.5 million, or 15.1%, from $16.5 million
for the year ended December 31, 1997 to $19.0 million for the year ended
December 31, 1998. This increase is primarily the result of the additions of LCL
and LegalTech.
General and administrative expenses increased $4.6 million, or 18.2%,
from $25.4 million for the year ended December 31, 1997 to $30.0 million for the
year ended December 31, 1998. This increase reflects $2.0 million of costs
associated with the addition of LCL and LegalTech. The balance of the increase
is primarily the result of transition costs associated with the Company's new
corporate structure and salary increases.
Internet services expenses decreased $6.4 million, or 58.0%, from $11.1
million for the year ended December 31, 1997 to $4.7 million for the year ended
December 31, 1998. This decrease is the direct result of the shutdown of Counsel
Connect.
Depreciation and amortization expenses increased $14.2 million, or
116.5%, from $12.1 million for the year ended December 31, 1997 to $26.3 million
for the year ended December 31, 1998. These expenses are not comparable for the
two periods due to purchase accounting adjustments related to the ALM and NLP
Acquisitions.
Operating loss. As a result of the above factors, the operating loss
decreased $4.1 million, or 94.4%, from $4.4 million for the year ended
December 31, 1997 to $0.2 million for the year ended December 31, 1998.
EBITDA increased $18.3 million, or 234.9%, from $7.8 million for the year
ended December 31, 1997 to $26.1 million for the year ended December 31,
1998. Excluding the one-time charges in 1997 related to the shutdown of
Counsel Connect and special compensation charge, EBITDA increased $8.4
million, or 47.2%, from $17.7 million for the year ended December 31, 1997 to
$26.1 million for the year ended December 31, 1998. Excluding all Internet
services and the special compensation charge, EBITDA increased $3.7 million,
or 15.1%, from $24.4 million for the year ended December 31, 1997 to $28.1
million for the year ended December 31, 1998.
Liquidity and Capital Resources
Capital expenditures. Capital expenditures were $11.8 million for the
year ended December 31, 1999. The amount of capital expenditures in 1999 was
higher than historical and expected future spending due to an investment in new
editorial and advertising systems to replace outdated systems and ensure Year
2000 compliance and due to the implementation of new systems and facilities
needed for the new initiatives and to support the Company's core growth.
Net cash used in operating activities. Net cash used in operating
activities was $5.7 million for the year ended December 31, 1999, which
primarily reflects depreciation and amortization of $27.3 million, an
increase in accounts payable of $4.3 million and non-cash interest recorded
during the current period of $1.0 million, offset by a net loss of $31.7
million, an increase in accounts receivable of $3.3 million, a decrease in
other non-current liabilities of $2.4 million and an increase in other assets
of $1.4 million. The use of funds in operating activities during 1999
primarily resulted from the Company's net loss, of which $10.6 million
resulted from new initiatives started during this year. Excluding these new
initiatives would have resulted in net cash provided by operating activities
of $4.9 million.
Net cash used in investing activities. Net cash used in investing
activities was $8.0 million for the year ended December 31, 1999, which
primarily resulted from capital expenditures of $11.8 million
23
<PAGE>
offset by the proceeds related to the sale of the Company's Internet business
to Law.com during the third quarter of 1999.
Net cash provided by financing activities. Net cash provided by
financing activities totaled $14.5 million for the year ended December 31,
1999, which reflects a drawdown of $9.8 million under the Revolving Credit
Facility and accretion of interest on senior discount notes (described below)
of $5.0 million.
Working capital. The Company traditionally has had favorable cash
flow characteristics resulting from its high level of advance payments by
subscribers, low working capital investment, minimal capital expenditure
needs, predictable cost structure and high margins. Because cash receipts
associated with subscriptions are received toward the beginning of a
subscription cycle, the Company's periodicals business requires minimal
investment in working capital.
During 1999, the Company incurred startup costs for the new
initiatives resulting in losses totaling approximately $10.6 million.
Additionally, the Company invested $11.8 million in capital expenditures as
described above. These two factors, both unusual, combined to produce an
unfavorable cash flow for 1999.
Liquidity. The Company's principal sources of funds are anticipated
to be cash flows from operating activities, which may be supplemented by
borrowings under the Revolving Credit Facility (described below). The Company
believes that on an ongoing basis these funds will be sufficient to meet its
current and future financial obligations, including the payment of interest
on the $175,000,000 of 9.75% senior notes and the outstanding balance under
the Company's Revolving Credit Facility, working capital, capital
expenditures and other obligations. No assurance can be given, however, that
this will be the case. The Company's future operating performance and ability
to service or refinance the Notes and to repay, extend or refinance any
credit agreements to which it is a party will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control.
Material Financing
The Company has borrowed funds to finance its operations through the
transactions described below.
Revolving Credit Facility. On March 25, 1998, the Company and ALM entered
into a $40 million, five-year senior secured revolving credit facility (the
"Revolving Credit Facility") with a group of banks to be available for
working capital and general corporate purposes, including acquisitions and
capital expenditures.
The Revolving Credit Facility is guaranteed by the Company and by all
existing and future subsidiaries of ALM. In addition, the Revolving Credit
Facility is secured by a first priority security interest in substantially
all of the properties and assets of ALM and its existing and future domestic
subsidiaries, including a pledge of all of the stock of such subsidiaries,
and a pledge by the Company of all of the stock of ALM. The Revolving Credit
Facility contains customary covenants commensurate with the size of the
Revolving Credit Facility that, among other things, restrict the ability of
ALM and its subsidiaries to take certain actions.
On April 14, 1998, the Company contributed an aggregate of $15 million
to the equity capital of ALM. The proceeds of the equity contribution were used
to fund acquisitions and to provide capital for aggressive internal growth. On
April 26, 1999, the Company and ALM amended the Revolving Credit Facility,
effective as of March 29, 1999. This amendment (inter alia) limits ALM's ability
to borrow in excess of $20 million under the Revolving Credit Facility until
certain ratios are achieved, modifies certain of the covenants and modifies the
interest calculation mechanism. Effective July 20, 1999, the
24
<PAGE>
Revolving Credit Facility was further amended to provide for the sale of the
Company's Internet business to Law.com and to modify certain debt covenants.
On March 8, 2000 (effective March 28, 2000), the Revolving Credit Facility
was further amended to modify certain of the covenants, to permit the
transaction described below under Recent Developments -- Sale of The Business
of The Daily Deal and Corporate Control Alert and to increase the borrowing
limit described above from $20 million to $22.5 million.
Senior Notes Financing. In December 1997, ALM issued $175,000,000 aggregate
principal amount of 9.75% Senior Notes due 2007 (the "Notes"). The Notes are
unsecured general obligations of the ALM and are fully and unconditionally
guaranteed on a joint and several and senior unsecured basis, by each of the
ALM's existing and future subsidiaries. The subsidiary guarantors comprise
all of the direct and indirect subsidiaries of ALM and each of the subsidiary
guarantors us a wholly-owned subsidiary of ALM. Separate financial statements
of, and other disclosures concerning the subsidiary guarantors are not
included herein because of the subsidiary guarantors' full and unconditional
guarantee of the Notes and management has determined that separate financial
statements and other disclosures concerning the subsidiary guarantors are not
material and would not provide any additional meaningful disclosure. There
are currently no contractual or regulatory restrictions limiting the ability
of the subsidiary guarantors to make distributions to ALM. The Notes may be
redeemed at any time by ALM, in whole or in part, at various redemption
prices that include accrued and unpaid interest. The Notes contain certain
covenants that, among other things, limit the incurrence of additional
indebtedness by the Company and its subsidiaries, the payment of dividends
and other restricted payments by ALM and its subsidiaries, asset sales,
transactions with affiliates, the incurrence of liens, and mergers and
consolidations. Assuming there is no redemption of the Notes prior to
maturity, the entire principal will be payable on December 15, 2007.
Senior Discount Notes Financing. In December 1997, the Company issued
$63,275,000 aggregate principal amount at maturity of 12.25% of Senior
Discount Notes dues 2008 (the "Discount Notes"), at a discount rate of
$553.14 per Discount Note. The Discount Notes accrete interest compounded
semi-annually at a rate of 12.25% to an aggregate principal amount of
$63,275,000 by December 2002. Commencing in June 2003, cash interest will be
payable semi-annually until maturity each June 15 and December 15. The
Discount Notes are senior, unsecured obligations of the Company. The Discount
Notes may be redeemed at any time by the Company, in whole or in part, at
various redemption prices that include accrued and unpaid interest as well as
any existing liquidating damages. The Discount Notes contain certain
covenants that, among other things, limit the incurrence of additional
indebtedness, by the Company and its subsidiaries, the payment of dividends
and other restricted payments by the Company and its subsidiaries,
restrictions on distributions from certain restricted subsidiaries, asset
sales, transactions with affiliates, incurrence of liens and mergers and
consolidations. Assuming that there is no redemption of the Discount Notes
prior to maturity, the entire principal will be payable on December 15, 2008.
Year 2000 Compliance
The Company did not experience any significant malfunctions or errors in
its operating or business systems related to the "Year 2000" issue. Based on
operations since January 1, 2000, the Company does not expect any significant
impact to its ongoing business as a result of the "Year 2000" issue. However, it
is possible that the full impact of the date change, which was of concern due to
computer programs that use two digits instead of four digits to define years,
has not been fully recognized. For example, it is possible that Year 2000 or
similar issues such as leap year-related problems may occur with billing,
payroll or financial closings at month, quarterly or year-end. The Company
believes that any such problems are likely to be minor and correctable. In
addition, the Company could still be negatively impacted if customers or
suppliers are adversely affected by the Year 2000 or similar issues. The Company
is not aware of any significant Year 2000 or similar problems that have arisen
for its customers and suppliers.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On March 25, 1998, the Company and ALM entered into the Revolving
Credit Facility. Each revolving loan shall bear interest on the outstanding
principal amount from the borrowing date until it becomes due at a rate per
annum equal to the "Base Rate" or the Eurodollar rate plus the "Applicable
Margin" of 1.5% for base rate loans and 2.5% for Eurodollar rate loans. The
Base Rate is the higher of the Bank of America publicly announced "Reference
Rate" or the Federal Funds Rate plus 0.5%. The amount outstanding under the
Revolving Credit Facility was $18.3
25
<PAGE>
million at December 31, 1999. The interest rate at December 31, 1999 was 9.15%.
A 10% increase in the average rate, during 1999, would have increased the
Company's net loss to approximately $26.5 million.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Exhibits, which appears on Page
F-1 hereof.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT
The following table sets forth certain information regarding each of the
executive officers, directors and certain other key employees of the Company and
ALM, as of March 15, 2000.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
Executive Officers, Directors
and Key Employees of the
Company and ALM
<S> <C> <C>
Bruce Wasserstein.............52 Chairman and Director
William L. Pollak.............44 President, Chief Executive Officer and Director
Anup Bagaria..................27 Vice President and Director
Bruce Barnes..................38 Director
Michael J. Biondi.............42 Director
Robert C. Clark...............56 Director
Donald G. Drapkin.............52 Director
James A. Finkelstein..........51 Director
Andrew G.T. Moore, II.........64 Director
Jack Berkowitz................53 Vice President, Strategic Planning
Michael Cronan................34 Vice President, Marketing
Sally Feldman.................43 Vice President, Professional Information Division
Stephen C. Jacobs.............38 Vice President, Corporate Affairs, General Counsel and Secretary
Leslye G. Katz................45 Vice President, Chief Financial Officer
Kevin Vermeulen...............36 Vice President, Group Publisher
</TABLE>
Each Director is elected annually and serves until the next annual
meeting of stockholders or until his or her successor is duly elected and
qualified. The Independent Directors are each compensated $20,000 per year for
their service as Directors and receive reimbursement of expenses incurred from
their attendance at Board of Directors meetings. Directors will also be eligible
to participate in an equity participation plan to be established.
26
<PAGE>
The Board has established an executive committee (the "Executive
Committee") consisting of three members, currently Bruce Wasserstein, Bruce
Barnes and Anup Bagaria. The Executive Committee has been delegated the
authority to approve (i) the acquisition and divestiture by the Company or an
affiliate of the Company of all or a portion of one or more business entities
for a price of up to $25 million, (ii) the appointment of senior officers of the
Company or its affiliates and termination of such employment, (iii) the
preparation and approval of short-term and long-term budgets, and (iv) other
material policy-level decisions to the extent permitted by the Delaware General
Corporation Law.
Executive Officers, Directors and Key Employees of the Company and ALM
Bruce Wasserstein is Chairman of the Board of Directors of the Company
and ALM since December 1997. He is Chairman, Chief Executive Officer and founder
of Wasserstein Perella Group, Inc. ("WPG"). Previously, Mr. Wasserstein served
as a Director and the Chairman of Maybelline, Inc. and as a Director of Collins
& Aikman Corp. Before establishing WPG, Mr. Wasserstein was Co-Head of
Investment Banking at The First Boston Corporation, and a Managing Director and
Member of its Management Committee. Prior to joining First Boston in 1977, Mr.
Wasserstein was an attorney at Cravath, Swaine & Moore in New York City. Mr.
Wasserstein graduated with honors from the University of Michigan in 1967. In
1971 he graduated from Harvard Business School as a Baker Scholar with high
distinction, and earned a J.D., cum laude, from Harvard Law School. In 1972 he
was a Knox Traveling Fellow at Cambridge University. Mr. Wasserstein is a member
of the Council on Foreign Relations. He has served as a member of the SEC's
Advisory Committee on Tender Offers and as a member of the Visiting Committees
of Harvard Law School, the University of Michigan and Columbia Journalism
School. Mr. Wasserstein is also on the board of numerous private companies.
William L. Pollak has served as President, Chief Executive Officer and
Director of the Company and ALM since March 1998. Before joining the Company,
Mr. Pollak spent 16 years at the New York Times, where he held a variety of
positions, most recently as Executive Vice President, Circulation.
Anup Bagaria has served as a Vice President and Director of the Company
and ALM since their founding since November 1998. He is a Managing Director of
Wasserstein Perella & Co., Inc. He graduated from the Massachusetts Institute of
Technology. Mr. Bagaria also serves on the board of various private companies.
Bruce R. Barnes has served as a director of the Company and ALM since
November 1998. Dr. Barnes has been Managing Director of Wasserstein Perella &
Co., Inc. since February 1997 and has been a senior member of its Merchant
Banking Group since September 1998. He was Executive Vice President of Ziff
Brothers Investments, L.L.C., a private investment company, from January 1995 to
June 1996. Prior to that, at Ziff Communications Company, a privately-held
publishing and media company, Dr. Barnes was Senior Vice President and Chief
Financial Officer from September 1993 to December 1994 and was Vice President
and Special Assistant to the Chairman from November 1992 to September 1993. Dr.
Barnes received a B.A. in Economics magna cum laude and a Ph.D. in Economics
from the University of Pennsylvania. Dr. Barnes is also a director of Collins &
Aikman Corporation and various private companies.
Michael J. Biondi has served as a Director of the Company and ALM since
March 1998. He is Chairman and Chief Executive Officer of Wasserstein Perella &
Co., Inc. Mr. Biondi holds M.B.A. and J.D. degrees from the Wharton School and
the University of Pennsylvania Law School, respectively. Prior to joining
Wasserstein Perella, Mr. Biondi was a member of the First Boston Mergers &
Acquisitions Group, and practiced law at Skadden, Arps, Slate, Meagher & Flom
LLP.
27
<PAGE>
Robert C. Clark has served as a Director of the Company and ALM since
their founding. He has been Dean of the Harvard Law School since 1989 and is the
Royall Professor of Law. Mr. Clark is a trustee of Teachers' Insurance Annuity
Association (TIAA). He is currently a Director of Collins & Aikman Corp. and of
Household International, Inc.
Donald G. Drapkin has served as a Director of the Company and ALM since
their founding. He has been a Director and Vice Chairman and Director of
MacAndrews & Forbes Holdings Inc. and various of its affiliates since 1987. Mr.
Drapkin also is a Director of the following corporations which file reports
pursuant to the Exchange Act: Algos Pharmaceutical Corporation, Anthracite
Capital, Inc., BlackRock Asset Investors, Cardio Technologies, Inc., The Molson
Companies Limited, Revlon Consumer Products Corporation, Revlon, Inc., Playboy
Enterprises, Inc., Weider Nutrition International, Inc., and VIMRX
Pharmaceuticals Inc. On December 27, 1996, Marvel, Marvel Holdings, Marvel
Parent and Marvel III of which Mr. Drapkin was a Director on such date, and
several subsidiaries of Marvel filed voluntary petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code.
James A. Finkelstein has served as a Director of the Company and ALM
since March 1998. He has been President and Chief Executive Officer of JAF
Communications, LLC since July 1998. Prior to that, Mr. Finkelstein served as
President and Chief Executive Officer of NLP and its predecessor companies
beginning in 1974. He joined the New York Law Publishing Company in 1970. He was
the former publisher of the New York Law Journal and the founder and publisher
of The National Law Journal. He currently serves on the Faculty of Arts and
Sciences Board of Overseers at New York University.
Andrew G. T. Moore, II has served as a Director of the Company and ALM
since their founding. He is a Managing Director of Wasserstein Perella and is a
former Justice of the Delaware Supreme Court. Justice Moore served on the
Delaware Supreme Court for 12 years until 1994. Justice Moore has served as the
Lehmann Distinguished Visiting Professor of Law at Washington University in St.
Louis. He has also served as an adjunct professor of law at the Georgetown
University Law Center, University of Iowa College of Law and Widener University
School of Law, where he taught seminars in advanced corporation law. He also
teaches comparative principles of international corporation law at the Tulane
University Institute of European Legal Studies in Paris, and has been a guest
lecturer at various law schools and national corporate law programs in the
United States, Canada and Europe.
Jack Berkowitz has served as Vice President, Strategic Planning of the
Company and ALM since January 1999. Prior to joining the Company and ALM, Mr.
Berkowitz served as a consultant to the Company during 1998. Mr. Berkowitz is a
25 year veteran of the publishing industry. As a consultant, in addition to the
Company and ALM, his client roster has included Cowles Business Media, Hearst
Magazines, Time Inc., Felker Media, Associated Newspapers and Adweek. Mr.
Berkowitz had previously served as Executive Vice President of the Village Voice
and President of The Nation.
Michael Cronan has served as Vice President, Marketing of the Company
and ALM since September 1999 and served as the Company and ALM's Director of
Circulation for National Publications from April 1999 until September 1999.
Prior to joining the Company, Mr. Cronan served in various positions with McGraw
Hill Cos. From February 1995 until April 1999 and most recently served as the
director of sales and marketing with its Construction Information Group On-line.
In this capacity, Mr. Cronan developed design, branding and content and
implemented successful e-commerce subscription systems for CIG On-Line's Web
sites.
Sally Feldman has served as Vice President, Professional Information
Division of the Company and ALM since October 1999. Prior to joining the
Company, Ms. Feldman served as Director of
28
<PAGE>
Marketing and Communications at Skadden, Arps, Slate, Meagher & Flom LLP where
she was responsible for all aspects of global marketing and public relations.
Stephen C. Jacobs has served as Vice President, General Counsel and
Secretary of the Company and ALM since May 1998. Prior to joining the Company
and ALM, Mr. Jacobs was Assistant General Counsel, Global Transactions for
American International Group, Inc.
Leslye G. Katz has served as Vice President and Chief Financial Officer
of the Company and ALM since September 1998. Prior to joining the Company, Ms.
Katz served as Vice President and Treasurer of IMS Health, Inc. Previously, she
held senior financial management positions for 18 years in the publishing
industry, most recently as Senior Vice President and Chief Financial Officer of
Reuben H. Donnelley.
Kevin Vermeulen has been Vice President, National Advertising of the
Company and ALM since 1998. Prior to that he was a Vice President of Sales for
NLP, which he joined in October 1992.
Item 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table includes individual
compensation information for the Chief Executive Officer and certain other
executive officers of the Company and ALM for the year ended December 31, 1999
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company and ALM during the year ended December 31, 1999. All
numbers relating to option grants relate to options to purchase shares in
the Company and include the effect of a 10-for-1 stock split in March 2000.
See Business--Recent Developments--Stock Split.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------------------------------
Long Term Compensation
----------------------------------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and sation Awards Sales Payouts sation
Principal Position Year ($)Salary ($) Bonus ($) ($) ($) ($) ($)
------------------- ---- --------- -------- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William L. Pollak, President and
Chief Executive Officer ......... 1999 416,212 217,516 -- -- 12,000 -- 294,326(1)
1998(2) 325,000 400,000 -- -- -- -- 539,256(1)
1997 -- -- -- -- -- -- --
Jack Berkowitz, Vice President,
Strategic Planning .............. 1999(3) 215,000 42,500 -- -- 1,800 -- --
1998 -- -- -- -- -- -- --
1997 -- -- -- -- -- -- --
Stephen C. Jacobs, Vice President,
Corporate Affairs and General
Counsel ......................... 1999 206,625 100,000 -- -- 1,200 -- --
1998(4) 132,692 50,000 -- -- -- -- --
1997 -- -- -- -- -- -- --
Leslye G. Katz, Vice President
and Chief Financial Officer ..... 1999 305,000 150,000 -- -- 3,000 -- 204,200(5)
1998(6) 100,000 73,500 -- -- -- -- 204,200(5)
1997 -- -- -- -- -- -- --
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin Vermeulen, Vice
President, Group Publisher ...... 1999 165,667 34,507 -- -- 1,800 -- 105,303(7)
1998 134,047 10,000 -- -- -- -- 120,614(7)
1997(8) 260,505 -- -- -- -- -- --
</TABLE>
- -----------------
(1) Represents payments made by the Company to Mr. Pollak pursuant to the
terms of his employment agreement with the Company to reimburse him for
the value of options forfeited upon his resignation from his former
employer.
(2) Mr. Pollak's employment with the Company pursuant to his employment
agreement commenced as of March 9, 1998.
(3) Mr. Berkowitz's employment with the Company pursuant to his employment
agreement commenced as of January 1, 1999.
(4) Mr. Jacobs' employment with the Company pursuant to his employment
agreement commenced as of May 4, 1998.
(5) Represents payments made by the Company to Ms. Katz pursuant to the
terms of her employment agreement with the Company to reimburse her for
the value of options forfeited upon her resignation from her previous
employer.
(6) Ms. Katz's employment with the Company pursuant to her employment
agreement commenced as of September 1, 1998.
(7) Represents commissions earned by Mr. Vermeulen pursuant to the terms of
his employment agreement.
(8) The 1997 compensation information for Mr. Vermeulen includes salary,
bonus and commission in the aggregate. A breakdown of this amount was
not easily ascertainable.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants**
---------------------------------------------------------
Percent of
Total
Number of Options/SARS
Securities Granted to Potential Realizable Value
Underlying Employees Exercise of at Assumed Annual Rates of
Options/SARS in Fiscal Base Price Expiration Stock Price Appreciation
Name Granted (#) Year ($/Sh) Date for Option Term
- ---------------- ------------- ------------ ------------ ----------- --------------------------
5% 10%
($) ($)
------- -------
<S> <C> <C> <C> <C> <C> <C>
William Pollak 12,000 40.0% $75 10/13/09 * *
Jack Berkowitz 1,800 6.1% $75 10/13/09 * *
Stephen Jacobs 1,200 4.0% $75 10/13/09 * *
Leslye Katz 3,000 10.1% $75 10/13/09 * *
Kevin Vermeulen 1,800 6.1% $75 10/13/09 * *
</TABLE>
- ---------------
* As of December 31, 1999, each of the outstanding options was out-of-the-money
and therefore, the potential realizable value was less than zero.
**Each of the options is exercisable for a share of the Company common stock.
Employment Agreements
Each of William Pollak, President and Chief Executive Officer, and
Leslye Katz, Vice President and Chief Financial Officer, has entered into an
employment agreement with the Company for a five year
30
<PAGE>
term effective March 9, 1998 and September 1, 1998, respectively. The employment
agreements provide for an annual salary of $400,000, in the case of Mr. Pollak,
and $300,000, in the case of Ms. Katz, subject to increases of 5% annually
during the term. In addition, the employment agreements provide for bonuses of
(i) $400,000 after the first year of the term and between 50% and 150% of the
base salary, as determined by the Board of Directors, in each of the remaining
years of the term, for Mr. Pollak, and (ii) $150,000 after the first year of the
term and between 25% and 75% of the base salary, as determined by the Board of
Directors, in each of the remaining years of the term, for Ms. Katz. Under the
employment agreements, if the executives' employment is terminated by the
Company without cause or by the executive with good reason, the executive will
be entitled to severance equal to the amount of the executive's salary and bonus
accrued but unpaid through the termination date and one year's salary in the
cases of Mr. Pollak and Ms. Katz, commencing on the termination date, together
with any accrued but unpaid bonus. Each of Mr. Pollak and Ms. Katz is also
entitled to payments for options granted to them and forfeited upon their
resignations from their prior employers.
The Company has also entered into employment agreements with each of its
executive officers providing for varying bonuses, severance provisions and
termination rights.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company as of December 31, 1999 by (i) each person (or group of
affiliate persons) known by the Company to be the beneficial owner of more than
5% of the outstanding Common Stock of the Company, (ii) each Director, Director
nominee, and the Chief Executive Officer and Vice President of the Company, and
(iii) all directors and executive officers of the Company as a group. The share
numbers below include the effect of a 10-for-1 stock split in March 2000. See
Business--Recent Developments--Stock Split.
Percentage
of Total
Number of Shares of
Shares of Common Stock
Name and Address of Beneficial Owner Common Stock Outstanding
- ---------------------------------------- ------------ ------------
U.S. Equity Partners, L.P. (1) 569,960 47.49%
U.S. Equity Partners (Offshore), L.P (2). 144,110 12.01%
ALM Employee Partners, L.L.C. (3) 80,000 6.67%
Wasserstein & Co., Inc..(4) 405,930 33.83%
--------- -------
Total 1,200,000 100.00%
- --------------------------
(1) Includes approximately 2.9% of the issued and outstanding common stock
of the Company held by a co-investor of U.S. Equity Partners, L.P.
("USEP") which has granted WP Management Partners, LLC ("WPMP"), the
general partner of USEP, an irrevocable proxy to vote such shares of
common stock. Wasserstein & Co., Inc. shares voting and dispositive
power with respect to the shares held by USEP. See footnote (4).
(2) Wasserstein & Co., Inc. shares voting and dispositive power with respect
to the shares held by U.S. Equity Partners (Offshore), L.P. See footnote
(4).
(3) ALM Employee Partners, L.L.C. is managed by WP Plan Management Partners,
Inc., a wholly-owned subsidiary of Wasserstein & Co., Inc. Wasserstein &
Co., Inc. shares voting and dispositive power with respect to the shares
held by ALM Employee Partners, L.L.C. See footnote (4).
(4) Does not include: 569,960 shares as to which Wasserstein & Co. shares
voting and dispositive power with USEP; 144,110 shares as to which
Wasserstein & Co. shares voting and dispositive power with U.S. Equity
Partners (Offshore), L.P.; and 80,000 shares as to which Wasserstein &
Co. shares voting and dispositive power with ALM Employee Partners,
L.L.C.
31
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A majority of the Company's equity securities are held by USEP and its
affiliates. USEP is a Delaware limited partnership investment fund of which WPMP
is the general partner. WPMP is controlled by Wasserstein Perella & Co., Inc.
WPMP is entitled to receive a monitoring fee in an amount not to exceed $1.0
million in respect of any year.
The Company may engage in transactions with its affiliates, including
entities owned or controlled by certain of its principal shareholders. The
Company believes that such transactions will be no more favorable to the Company
than similar transactions with non-affiliates.
In July 1999, the Company sold the common stock of its wholly-owned
subsidiary, Professional On-Line, Inc., which held the Company's Internet
business, to Law.com for $1.0 million in cash and the Company retained a
preferred stock interest with a face amount of $3.75 million. On March 28,
2000, the Company sold its business constituting The Daily Deal and Corporate
Control Alert to TDD, L.L.C. The stockholders of Law.com and TDD, L.L.C.
include substantially all of the stockholders of the Company. See Significant
Transactions and Recent Developments.
In connection with the sale of the Company's Internet business to
Law.com, the Company entered into an exclusive content five-year license
agreement with Law.com granting Law.com the right to publish in electronic or
digital format all Company content. See Significant Transactions. The Company
believes that the transactions referred to in the preceding paragraph were
effected on arms-length terms and conditions.
In 1999, $260,000 in fees relating to the sale of the Company's
Internet business to Law.Com were paid to Wasserstein & Co., Inc.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
See Index to Financial Statements that appears on page F-1 hereof. No
Schedules are provided as the Schedules are either not applicable, or the
information has been otherwise provided in the Financial Statements.
(b) Reports on Form 8-K
The Company has filed a report on Form 8-K, dated July 27, 1999, and
filed August 24, 1999, relating to the sale of the Company's Internet business
to Law.com.
(c) Exhibits
The exhibits listed on the Exhibit Index following the signature page
hereof are filed herewith in response to this Item.
32
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN LAWYER MEDIA
HOLDINGS, INC.
Report of Independent Public Accountants as of and for the
Years Ended December 31, 1999 and 1998 and the Five Months
Ended December 31, 1997.............................................. F-2
Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998.................................................... F-3
Consolidated Statements of Operations for the Years
Ended December 31, 1999 and 1998 and the Five Months Ended
December 31, 1997.................................................... F-4
Consolidated Statements of Changes in Stockholder's Equity for
the Years Ended December 31, 1999 and 1998 and the Five Months
Ended December 31, 1997.............................................. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 and the Five Months Ended
December 31, 1997.................................................... F-6
Notes to the Consolidated Financial Statements as of
December 31, 1999, 1998 and 1997..................................... F-8
FINANCIAL STATEMENTS OF AMERICAN LAWYER MEDIA, L.P. (OLD ALM)
Report of Independent Public Accountants as of and for the Seven
Months Ended July 31, 1997........................................... F-21
Balance Sheet as of July 31, 1997...................................... F-22
Statement of Operations for the Seven Months Ended July 31, 1997....... F-23
Statement of Changes in Partners' Capital and Accumulated Deficit
for the Seven Months Ended July 31, 1997............................. F-24
Statement of Cash Flows for the Seven Months Ended July 31, 1997....... F-25
Notes to the Financial Statements as of July 31, 1997.................. F-26
CONSOLIDATED FINANCIAL STATEMENTS OF NATIONAL LAW PUBLISHING
COMPANY, INC.
Report of Independent Public Accountants as of and for the
Period from January 1, 1997 through December 21, 1997................ F-31
Consolidated Balance Sheet as of December 21, 1997..................... F-32
Consolidated Statement of Operations for the Period from
January 1, 1997 through December 21, 1997............................ F-33
Consolidated Statement of Stockholders' Equity for the Period
from January 1, 1997 through December 21, 1997....................... F-34
Consolidated Statement of Cash Flows for the Period from
January 1, 1997 through December 21, 1997............................ F-35
Notes to the Consolidated Financial Statements as of
December 21, 1997.................................................... F-36
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Lawyer Media Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of
American Lawyer Media Holdings, Inc. (a Delaware corporation) as of December
31, 1999 and 1998 and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the years ended December
31, 1999 and 1998 and the five months ended December 31, 1997. These
financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Lawyer
Media Holdings, Inc. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998 and
the five months ended December 31, 1997 in conformity with accounting principles
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule appearing on SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS of this Form 10-K is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not a part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
March 28, 2000
F-2
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(In Thousands, except share data)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................................ $ 1,598 $ 514
Accounts receivable, net of allowance for doubtful accounts and returns of
$2,758 and $3,595, respectively......................................................... 16,811 14,850
Inventories, net ......................................................................... 1,449 1,849
Other current assets ..................................................................... 2,016 1,361
--------- ---------
Total current assets ................................................................... 21,874 18,574
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation and
amortization of $5,912 and $3,441, respectively......................................... 15,018 7,146
INTANGIBLE ASSETS, net of accumulated amortization of $24,121 and
$13,579, respectively................................................................... 149,831 165,843
GOODWILL, net of accumulated amortization of $23,937 and $12,231,
respectively ........................................................................... 153,816 167,402
DEFERRED FINANCING COSTS, net of accumulated amortization of
$1,983 and $997, respectively .......................................................... 7,488 8,474
OTHER ASSETS ............................................................................. 1,210 421
--------- ---------
Total assets............................................................................ $ 349,237 $ 367,860
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ......................................................................... $ 6,792 $ 2,527
Accrued expenses ......................................................................... 10,918 11,580
Accrued interest payable ................................................................. 1,185 1,076
Deferred income (including deferred subscription income of $16,380 and
$16,997, respectively).................................................................. 17,798 18,241
--------- ---------
Total current liabilities .............................................................. 36,693 33,424
--------- ---------
LONG TERM DEBT:
Revolving credit facility ................................................................ 18,300 8,500
Senior notes ............................................................................. 175,000 175,000
Senior discount notes .................................................................... 44,515 39,538
--------- ---------
Total long term debt ................................................................... 237,815 223,038
--------- ---------
DEFERRED INCOME TAXES .................................................................... 38,182 43,834
--------- ---------
OTHER NONCURRENT LIABILITIES ............................................................. 5,924 5,031
--------- ---------
STOCKHOLDERS' EQUITY
Common stock-$.01 par value; 2,000,000 shares authorized; 1,200,000 issued
and outstanding as of December 31, 1999 and 1998........................................ 12 12
Paid-in-capital .......................................................................... 89,728 89,988
Accumulated deficit ...................................................................... (59,117) (27,467)
--------- ---------
Total stockholders' equity ............................................................. 30,623 62,533
--------- ---------
Total liabilities and stockholders' equity ............................................. $ 349,237 $ 367,860
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-3
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
Year Year For the Five
Ended Ended Months Ended
December 31, December 31, December 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
NET REVENUES:
Periodicals:
Advertising .............................................. $ 75,887 $ 67,510 $ 13,410
Subscription ............................................. 23,570 23,172 5,260
Ancillary products and services ............................ 31,791 28,208 4,142
Internet services .......................................... 1,244 2,639 1,162
--------- --------- ---------
Total net revenues ....................................... 132,492 121,529 23,974
--------- --------- ---------
OPERATING EXPENSES:
Editorial .................................................. 22,940 15,523 3,323
Production and distribution ................................ 29,821 26,266 5,766
Selling .................................................... 27,806 19,002 3,656
General and administrative ................................. 32,136 30,012 7,145
Internet services .......................................... 3,313 4,667 2,988
Depreciation and amortization .............................. 27,298 26,302 3,273
Shutdown of Internet services .............................. -- -- 3,000
--------- --------- ---------
Total operating expenses ................................. 143,314 121,772 29,151
--------- --------- ---------
Operating loss ........................................... (10,822) (243) (5,177)
Interest expense............................................ (24,093) (22,916) (2,534)
Other income ............................................... 187 -- --
--------- --------- ---------
Loss before income taxes ................................. (34,728) (23,159) (7,711)
BENEFIT FOR INCOME TAXES ................................... 3,078 3,403 --
--------- --------- ---------
Net loss ................................................. $ (31,650) $ (19,756) $ (7,711)
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
AND FOR THE FIVE MONTHS ENDED DECEMBER 31, 1997
(In Thousands, except share data)
<TABLE>
<CAPTION>
Additional
Paid-In Accumulated
Shares Par Value Capital Deficit Total
--------- --------- --------- --------- ---------
Common Stock
-------------------------
<S> <C> <C> <C> <C> <C>
INCEPTION ....................................... -- -- $ -- $ -- $ --
Issuance of common stock ........................ 1,000,000 $ 10 74,990 -- 75,000
Net loss for the five months ended .............. -- -- -- (7,711) (7,711)
--------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1997 .................... 1,000,000 10 $ 74,990 $ (7,711) $ 67,289
Capital contribution ............................ 200,000 2 14,998 -- 15,000
Net loss for the twelve months ended ............ -- -- -- (19,756) (19,756)
--------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1998 .................... 1,200,000 12 $ 89,988 $ (27,467) $ 62,533
Loss on sale of Internet business ............... -- -- (260) -- (260)
Net loss for the twelve months ended ............ -- -- -- (31,650) (31,650)
--------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1999 .................... 1,200,000 $ 12 $ 89,728 $ (59,117) $ 30,623
========= ========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
For the
Five
Year Year Months
Ended Ended Ended
December December December
31, 1999 31, 1998 31, 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................................................... $ (31,650) $ (19,756) $ (7,711)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization .................................................... 27,298 26,302 3,273
Non-cash interest ................................................................ 986 997 --
(Increase) decrease in:
Accounts receivable, net ........................................................... (3,252) (772) 388
Inventories ........................................................................ 399 (202) (74)
Other current assets ............................................................... (655) 394 1,470
Other assets ....................................................................... (785) (207) 3,023
(Decrease) increase in:
Accounts payable ................................................................... 4,278 (1,544) 1,200
Accrued expenses ................................................................... (43) (3,012) (1,014)
Accrued interest payable ........................................................... 109 602 593
Deferred income .................................................................... 50 (334) (466)
Other noncurrent liabilities ....................................................... (2,407) (1,854) 1,035
--------- --------- ---------
Total adjustments ................................................................ 25,978 20,370 9,428
--------- --------- ---------
Net cash (used in) provided by operating activities .............................. (5,672) 614 1,717
--------- --------- ---------
Capital expenditures................................................................ (11,286) (3,911) (364)
Purchase of businesses:
Working capital, other than cash ................................................... -- 426 9,229
Plant, property and equipment ...................................................... (470) (450) (8,058)
Intangible assets .................................................................. -- (14,262) (165,160)
Deferred income taxes .............................................................. -- -- 45,893
Other noncurrent assets ............................................................ -- -- (595)
Cost in excess of net assets of company acquired ................................... (755) (19,512) (160,121)
Disposition of assets .............................................................. 4,490 -- --
Acquisition related costs and expenses ............................................. -- 2,041 9,579
--------- --------- ---------
Net cash used in investing activities ............................................ (8,021) (35,668) (269,597)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution ............................................................. -- 15,000 75,000
Net borrowing on revolving credit facility ....................................... 9,800 8,500 --
Accretion of interest on senior discount notes ................................... 4,977 4,419 --
Issuance of notes, net of fees and expenses of $7,678 in 1997 .................... -- (1,793) 202,322
Assumption of affiliate note in connection with acquisition ...................... -- -- 32,000
Repayment of affiliate note ...................................................... -- -- (32,000)
Note payable assumed in connection with acquisition .............................. -- -- 31,500
Repayment of note payable ........................................................ -- -- (31,500)
--------- --------- ---------
Net cash provided by financing activities ........................................ 14,777 26,126 277,322
--------- --------- ---------
Net increase (decrease) in cash .................................................. 1,084 (8,928) 9,442
CASH, beginning of period .......................................................... 514 9,442 --
--------- --------- ---------
</TABLE>
F-6
<PAGE>
<TABLE>
<S> <C> <C> <C>
CASH, end of period ................................................................ $ 1,598 $ 514 $ 9,442
========= ========= =========
Cash paid during the period:
Income taxes ..................................................................... $ 187 $ 280 $ --
========= ========= =========
Interest ......................................................................... $ 18,028 $ 17,039 $ 1,954
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
1. ORGANIZATION AND OPERATIONS
American Lawyer Media Holdings, Inc. and its subsidiaries (the
"Company") is the parent company of American Lawyer Media, Inc. ("ALM"). The
Company was formerly named Cranberry Partners, LLC ("Cranberry").
Cranberry, a Delaware limited liability company, was formed on August 1,
1997. On August 27, 1997 (the "ALM Acquisition Closing"), Cranberry acquired
substantially all of the assets and liabilities of American Lawyer Media, L.P.
("Old ALM") for $63,000,000 ("ALM Acquisition"). The acquisition was effective
retroactive to July 31, 1997. As of the ALM Acquisition Closing, all of the
membership interests of Cranberry were held by W.P. Management Partners, LLC on
behalf of U.S. Equity Partners, L.P. and certain of its affiliates. Old ALM was
a publisher of legal publications, which included primarily The American Lawyer,
Corporate Counsel Magazine, AmLaw Tech, The Connecticut Law Tribune, Legal
Times, New Jersey Law Journal, The Recorder, Texas Lawyer, Fulton County Daily
Report, and Miami Daily Business Review. In addition, Old ALM operated Counsel
Connect, a membership-based online service exclusively for lawyers and legal
professionals.
Prior to the ALM Acquisition Closing, Cranberry formed ALM Holdings,
LLC, a Delaware limited liability company, and ALM Holdings, LLC formed two
wholly-owned subsidiaries, ALM, LLC (a New York limited liability company) and
Counsel Connect, LLC (a Delaware limited liability company) and one 99% owned
subsidiary (the remaining 1% of which was, as of the ALM Acquisition Closing,
held by W.P. Management Partners, LLC on behalf of U.S. Equity Partners, L.P.
and certain of its affiliates), ALM IP, LLC (a Delaware limited liability
company). On the ALM Acquisition Closing, Cranberry transferred all of the
non-intellectual property publishing assets and liabilities acquired from Old
ALM to ALM, LLC, all the non-intellectual property Counsel Connect assets and
liabilities acquired from Old ALM to Counsel Connect, LLC, and all of the
intellectual property assets acquired from Old ALM to ALM IP, LLC.
On November 26, 1997, Cranberry was merged with and into ALM Capital
Corp. (a Delaware corporation), and ALM Capital Corp. was simultaneously
renamed American Lawyer Media Holdings, Inc. Also on November 26, 1997, ALM
Holdings, LLC was merged with and into ALM Capital Corp. II (a Delaware
corporation), and ALM Capital Corp. II was simultaneously renamed American
Lawyer Media, Inc. The Company's operations are based in New York with
regional offices in nine states and the District of Columbia.
In December 1997, the Company received capital contributions from its
stockholders, Wasserstein & Co., Inc., U.S. Equity Partners L.P. and U.S. Equity
Partners (Offshore) L.P., totaling $75 million. On December 22, 1997, the
Company issued $35 million of 12.25% Senior Discount Notes in an offering under
Rule 144A promulgated under the Securities Act of 1933, as amended (the "Act").
Simultaneously, the Company contributed capital of $108.8 million to ALM. Also
on December 22, 1997, the Company issued $175 million of 9.75% Senior Notes in
an offering under Rule 144A promulgated under the Act. The Company used a
portion of the capital and the proceeds from the Company's 144A offering to
acquire all of the outstanding capital stock of National Law Publishing Company,
Inc. (a Delaware corporation) ("Old NLP") for approximately $203 million (the
"NLP Acquisition") through a
F-8
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
wholly-owned subsidiary, NLP Acquisition Co., Inc., (a New York corporation)
("Acquisition"). Old NLP was then, on December 22, 1997, merged with and into
Acquisition with Acquisition surviving. Subsequent to the merger, Acquisition
was renamed National Law Publishing Company, Inc. ("NLP"). At the closing of the
NLP Acquisition, all intellectual property of NLP and its subsidiaries was
transferred to NLP IP Company, a wholly-owned subsidiary of NLP. Old NLP was a
publisher of legal publications, which include New York Law Journal, The
National Law Journal and Law Technology News. In addition, Old NLP operated Law
Journal EXTRA!, a membership-based Internet service for lawyers and legal
professionals, publishes legal text and provides seminars targeted at the U.S.
legal community.
On April 2, 1998, the Board of Directors authorized the Company to issue
shares of the Company's $.01 par value per share common stock to U.S. Equity
Partners, L.P., in consideration of payment by U.S. Equity Partners, L.P. of
$15,000,000.
On December 29, 1998, the Company enacted an internal plan of
reorganization (the "Plan") approved by a subcommittee of the Company's Board of
Directors appointed by the Board of Directors at its quarterly meeting on
November 9, 1998. Pursuant to the Plan, the Company and its subsidiaries entered
into the following transactions: (i) ALM, LLC merged with and into The New York
Law Publishing Company, a New York corporation, and a wholly-owned indirect
subsidiary of the Company ("NYLP"), with NYLP surviving; (ii) ALM IP, LLC merged
with and into NLP IP Company, with NLP IP Company surviving; (iii) ALM Counsel
Connect, Inc. merged with and into Counsel Connect, LLC, with Counsel Connect
LLC surviving; (iv) ALM formed a new, wholly-owned subsidiary, Professional
On-Line, Inc., a Delaware corporation ("POL"); (v) Counsel Connect LLC merged
with and into POL with POL surviving; (vi) Law Journal Extra, Inc., a New York
corporation, and a wholly-owned indirect subsidiary of the Company, merged with
and into POL with POL surviving; and (vii) LegalTech, LLC, a Delaware limited
liability company, and a wholly-owned indirect subsidiary of the Company, merged
with and into NYLP with NYLP surviving.
Effective March 5, 1999, ALM Intermediate Offshore Holdings, Inc. ("ALM
Intermediate") was merged with and into the Company with the Company surviving
(the "Reorganization Merger"). Immediately prior to the effectiveness of the
Reorganization Merger, (i) ALM Intermediate owned of record 14,411 shares of
Common Stock, par value $.01 per share, of the Company (the "ALM Intermediate
Shares") and (ii) all of the issued and outstanding capital stock of ALM
Intermediate was owned of record by U.S. Equity Partners (Offshore), L.P.
("Offshore"). In connection with the Reorganization Merger, the ALM Intermediate
Shares became treasury shares of the Company and were simultaneously reissued
directly to Offshore. The beneficial ownership of the capital stock of the
Company has not changed as a result of the Reorganization Merger.
On July 21, 1999, the Company transferred all of its and its
subsidiaries' Internet and electronic commerce business to Professional On-Line,
Inc. ("POL"). On July 24, 1999, POL was recapitalized by creating a class of
12.25% preferred stock, par value $0.01 (the "POL Preferred Stock"), in addition
to the class of Common Stock, par value $0.01 per share, previously authorized
(the "POL Common Stock"). On July 27, 1999, the Company sold all of the issued
and outstanding POL Common Stock to Law.com, Inc. (f/k/a Law.com Acquisition
Corp.) ("Law.com") for $1.0 million in cash and the Company retained all of the
issued and outstanding POL Preferred Stock. In December 1999, Law.com redeemed
all of the 12.25% preferred stock for $3.75 million plus accrued dividends.
Law.com is a web destination for legal information, e-commerce and e-services.
Under a cross-licensing agreement, the Company will continue to provide content
and editorial direction for Law.com. Law.com is owned by substantially the same
investors that own the Company, including Wasserstein & Co., Inc., U.S. Equity
Partners, L.P., and U.S. Equity Partners (Offshore) L.P.
F-9
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
2. ACQUISITIONS
Pursuant to an Asset Purchase Agreement dated as of March 3, 1998, among
Corporate Presentations, Inc., its sole stockholder and LegalTech, LLC, a
wholly-owned indirect subsidiary of American Lawyer Media, Inc., LegalTech, LLC
agreed to purchase substantially all of the assets and assume certain of the
liabilities of Corporate Presentations, Inc., for approximately $10.8 million
(the "LegalTech Acquisition"). Approximately $11.3 million was recorded as
goodwill for the excess purchase price over the net liabilities acquired.
Corporate Presentations, Inc. is a producer of trade shows and conferences for
the legal community. For advisory services rendered to the Company (as defined
below) in connection with the LegalTech Acquisition, the Company paid WP
Management Partners, LLC ("WPMP"), an affiliate of Holdings, a fee of 1% of the
purchase price of the LegalTech Acquisition.
On April 22, 1998, effective as of April 1, 1998, the Company
consummated the acquisition of substantially all of the legal publishing-related
assets and assumed certain liabilities of Legal Communications, Ltd ("LCL") for
an aggregate purchase price of approximately $20.1 million (the "LCL
Acquisition"). The excess purchase price over the net liabilities acquired was
allocated $6.3 million to goodwill and $14.3 million to identified intangibles
based upon the appraisal done. LCL is a publisher of regional legal
publications. For advisory services rendered to the Company in connection with
the LCL Acquisition, the Company paid WPMP a fee of 1% of the purchase price of
the LCL Acquisition.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company as if the LegalTech
Acquisition and the LCL Acquisition had occurred on January 1, 1998 (in
thousands):
For The Year Ended
December 31, 1998
------------------
Net revenues................................... $125,569
Net loss....................................... $(19,529)
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional amortization
expense as a result of goodwill. They do not purport to be indicative of the
results of operations which actually would have resulted had the combination
been in effect on January 1, 1998, or of future results of operations of the
consolidated entities.
On October 28, 1998, the Company consummated the acquisition of all of
the assets, properties and rights of the Delaware Law Monthly for an aggregate
purchase price of $280,000 (the "DLM Acquisition"). DLM is a publisher of a
monthly magazine.
On November 22, 1999, effective December 1, 1999, the Company
consummated the acquisition of all of the assets, properties and rights of
Houston Trial Reports, Inc. and Blue Sheet Publications, Inc. (collectively,
"Blue Sheet") for an aggregate purchase price of $750,000 (the "Blue Sheet
Acquisition"). Blue Sheet publishes regional and statewide publications which
serves the legal community and provides legal research through in-house and
on-line facilities.
The LegalTech Acquisition, the LCL Acquisition, the DLM Acquisition and
the Blue Sheet Acquisition have been accounted for under the purchase method of
accounting and the results of operations of the acquired businesses have been
included in the financial statements since the effective dates of the respective
acquisitions. The excess of the purchase price over net assets acquired was
F-10
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
allocated to goodwill. In the accompanying consolidated statements of
operations, the excess of purchase price over net assets acquired is being
amortized over fifteen years.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of American
Lawyer Media Holdings, Inc. and its wholly-owned subsidiaries which, unless the
context otherwise requires, are collectively referred to herein as the
"Company." Intercompany transactions and balances have been eliminated in
consolidation.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentration of
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company believes it is not exposed to any significant credit
risk related to cash and cash equivalents. Concentrations of credit risk with
respect to trade accounts receivable are, except for amounts due from legal
advertising agents ("Legal Ad Agents"), generally limited due to the large
number of customers comprising the Company's customer base. Such Legal Ad Agents
do not have significant liquid net worth and, as a result, the Company is
exposed to a certain level of credit concentration risk in this area, which the
Company believes it has adequately provided for.
Revenue Recognition
Periodical advertising revenues are generated from the placement of
display and classified advertisements, as well as legal notices, in the
Company's publications. Advertising revenue is recognized upon release of the
related publications.
Periodical subscription revenues are recognized on a pro rata basis as
issues of a subscription are served.
Ancillary products and services revenues consist principally of
third-party printing revenues, newsletter subscriptions, sales of professional
books, seminar and conference income, income from a daily fax service of court
decisions and income from electronic products. Printing revenue is recorded upon
shipment. Book revenues are recognized upon shipment and are reflected net of
estimated returns. Newsletter revenues are recognized on the same basis as
subscription revenues. Seminar and conference revenues are recognized when the
seminar or conference is held. Daily fax service revenue is recognized upon
fulfillment of orders. Income from electronic products is recognized monthly as
the service is provided.
F-11
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
Internet services revenues consist primarily of revenues from
subscriptions and advertising. Internet subscription income is recognized on a
pro-rata basis over the life of a subscription, generally one year. Internet
advertising revenues are recognized upon the release of an advertisement on the
website.
Deferred Subscription Income
Deferred subscription income results from advance payments or orders for
subscriptions received from subscribers and is amortized on a straight-line
basis over the life of the subscription as issues are served. Subscription
receivables of $3,128,600 and $2,602,000 at December 31, 1999 and 1998,
respectively, are included in accounts receivable in the accompanying
consolidated balance sheet.
Advertising and Promotion Costs
Advertising and promotion expenditures totaled approximately $11.0
million and $6.2 million for the years ended December 31, 1999 and 1998,
respectively. These are expensed as the related advertisement or campaign is
released.
Cash and Cash Equivalents
The Company considers time deposits and certificates of deposit with
original maturities of three months or less to be cash equivalents.
Inventories
Inventories consist principally of paper and related binding materials
utilized by the Company and its outside printers and professional books
published and sold by the Company. Inventories are stated at the lower of cost,
as determined by the average cost method, or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, with the exception
of fixed assets acquired as part of the ALM and NLP Acquisitions, which are
stated at approximate fair market value as of the date of the acquisitions.
Significant improvements are capitalized, while expenditures for maintenance
and repairs are charged to expense as incurred. Depreciation is calculated
using the straight-line method over the estimated remaining useful lives of
the assets acquired as part of the ALM and NLP Acquisitions. Assets purchased
after the ALM and NLP Acquisitions are depreciated using the straight-line
method over the following estimated useful lives:
Buildings............................................... 25 years
Furniture, machinery and equipment...................... 5-9 years
Computer equipment and software......................... 3-6 years
Leasehold improvements are amortized over the shorter of the remaining
lease term or the estimated useful life.
Goodwill
Goodwill represents the excess of purchase price over the fair value of
net assets acquired. It is stated at cost less accumulated amortization and is
amortized on a straight-line basis over a fifteen-year useful life. The Company
periodically assesses the recoverability of goodwill by determining whether the
F-12
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
amortization of goodwill over its estimated remaining life can be recovered
through projected undiscounted future consolidated operating cash flows.
Intangible Assets
Intangible assets represent advertiser commitments, trademarks, customer
and subscriber lists and non-compete agreements. They are stated at cost less
accumulated amortization and are amortized on a straight-line basis over a
weighted average life of fifteen years.
Sales of Subsidiary Stock
The Company has elected to treat gains and losses on the sales of
subsidiary stock as equity transactions. Therefore, the sale of Law.com has
been reflected this way in the accompanying financial statements.
Reclassifications
Certain amounts have been reclassified to conform with the current year
presentation.
New Accounting Pronouncements
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement
of Accounting Financial Standards ("SFAS No. 133") "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or a liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate and assess the effectiveness of
transactions that require hedge accounting.
In June 1999, the Financial Accounting Standards Board delayed the
required adoption of SFAS No. 133 to be effective for fiscal years beginning
after June 15, 2000. The Company is currently evaluating the impact that SFAS
No. 133 will have on the Company's consolidated financial position and results
of operations.
4. SHUTDOWN OF COUNSEL CONNECT
The Company had operated Counsel Connect, a major legal Internet site,
since 1993. Counsel Connect operated as a subscription based service offering
users the opportunity to exchange legal information such as court opinions,
insights about judges and legal opinions and special written work. The Company,
through Counsel Connect, provided general Internet access (as an "Internet
service provider") to its subscribers.
During 1998, the Company essentially completed its shutdown of Counsel
Connect and migrated its customers to Law News Network. The 1997 accompanying
statement of operations includes a provision of $3,000,000 related to the
shutdown of Counsel Connect to cover severance costs, uncollectible receivables,
writedown of computer and network equipment and termination of contracts related
to network services which provided Internet access. Through December 31, 1999,
approximately $3.0 million was charged against the reserve established in 1997
for the costs listed above.
5. INCOME TAXES
F-13
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
Deferred income taxes are provided for the temporary differences between
the financial reporting and the tax basis of the Company's assets and
liabilities and principally consist of identified intangibles relating to NLP,
accelerated depreciation, allowance for doubtful accounts, certain accrued
liabilities not currently deductible for tax purposes and net operating loss
carryforwards.
The reconciliation between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to loss before income
taxes is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December December 31, December 31,
31, 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Federal statutory income taxes ................... $(10,321) $ (6,506) $ (2,582)
Permanent differences (principally goodwill and
intangible amortization ........................ 6,083 2,680 194
State and local income taxes ..................... -- -- (456)
Other ............................................ -- -- (126)
Valuation allowance .............................. 1,160 423 2,970
-------- -------- --------
$ (3,078) $ (3,403) $ --
======== ======== ========
</TABLE>
The Company had a deferred tax liability of $38,182 and $43,834 at
December 31, 1999 and 1998, respectively. These deferred income tax liabilities
primarily relate to the identified intangibles from the NLP Acquisition which
were recorded at the acquisition date as an increase in goodwill. The liability
was calculated on the identified intangibles from the NLP Acquisition using the
effective tax rate of the Company.
The Company has recorded a 100% valuation allowance against its net
deferred tax assets consisting primarily of net operating losses. The valuation
allowance was provided as management cannot be sure of when or if they will be
able to utilize these net operating losses.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31
(in thousands):
1999 1998
-------- --------
Land ........................................ $ 207 $ 207
Buildings and improvements .................. 5,214 2,826
Furniture, machinery, and equipment ......... 5,059 2,793
Computer equipment and software ............. 10,450 4,761
-------- --------
20,930 10,587
Accumulated depreciation and amortization ... (5,912) (3,441)
-------- --------
Net property, plant and equipment ........... $ 15,018 $ 7,146
======== ========
7. INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31 (in
thousands):
F-14
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
Useful
1999 1998 lives
--------- --------- --------
Advertiser commitments ............ $ 880 $ 880 6 months
Trademarks ........................ 86,248 87,678 20 years
Customer and subscriber lists ..... 72,832 76,872 5-17 years
Non-compete agreements ............ 13,992 13,992 3 years
--------- ---------
173,952 179,422
Accumulated amortization .......... (24,121) (13,579)
--------- ---------
Net intangible assets ............. $ 149,831 $ 165,843
========= =========
8. OTHER CURRENT ASSETS
Other current assets consisted of the following at December 31 (in
thousands):
1999 1998
------ ------
Prepaid expenses ......................... $1,182 $1,235
Other .................................... 834 126
------ ------
Total .................................... $2,016 $1,361
====== ======
9. RELATED PARTY TRANSACTIONS
In July 1999, the Company sold the common stock of its wholly-owned
subsidiary, Professional On-Line, Inc., which held the Company's Internet
business, to Law.com for $1 million in cash and the Company retained a
preferred stock interest with a face amount of $3.75 million. The Preferred
Stock was redeemed prior to December 31, 1999 for $3.75 million plus accrued
dividends. On March 28, 2000, the Company sold its business constituting The
Daily Deal and Corporate Control Alert to TDD, L.L.C. The stockholders of
Law.com and TDD, L.L.C. include substantially all of the stockholders of
Holdings. See Note 14, Subsequent Events.
In connection with the sale of the Company's Internet business to
Law.com, the Company entered into an exclusive five-year license with Law.com
granting Law.com the right to publish in electronic or digital format all
Company content. See Note 1, Organization and Operations.
The Company believes that the transactions referred to the preceding
paragraphs were effected on arms-length terms and conditions.
The Company and CourtRoom Television Network ("CourtTV"), an affiliate
of Old ALM's general partner, shared certain administrative resources and
employees in 1997 only. In addition, the Company had advertising revenue from
Court TV under an agreement made by the former owner of Old ALM. This agreement
was terminated in October 1997. The cost associated with Court TV employees who
devoted a portion of their time to the Company's activities was charged to the
Company based on an estimate of the time spent on such activities. These charges
amounted to $99,191, while the revenue was $44,730 for the five months ended
December 31, 1997. In addition, the Company had a receivable from CourtTV of $0
and $118,500 at December 31, 1999 and 1998 respectively, reflected in accounts
receivable on the accompanying balance sheets.
F-15
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
Approximately $6,500,000 of financing costs related to the Senior
Notes and Senior Discount Notes, as defined in Note 12, were paid to
Wasserstein Perella, an affiliate of the Company. In addition, approximately
$4,150,000 of acquisition related fees and expenses were paid to Wasserstein
Perella. In 1999, $260,000 in fees, relating to the sale of POL the Company's
Internet business to Law. Com were paid to Wasserstein & Co., Inc.
10. COMMITMENTS AND CONTINGENCIES
Rent expense, including payments of real estate taxes, insurance and
other expenses required under certain leases, amounted to approximately
$3,685,000, $3,580,000 and $783,000 for the years ended December 31, 1999 and
1998 and the five months ended December 31, 1997. This amount includes the
monthly rent payments for corporate headquarters discussed below.
At December 31, 1999, minimum rental commitments under noncancellable
leases were as follows (in thousands):
Real
Estate Other Total
------- ------- -------
2000 ......................... $ 5,579 $ 160 $ 5,739
2001 ......................... 5,525 129 5,654
2002 ......................... 5,025 92 5,117
2003 ......................... 5,005 18 5,023
2004 and thereafter .......... 24,743 17 24,760
------- ------- -------
$45,877 $ 416 $46,293
======= ======= =======
Certain of the leases provide for free rent periods as well as rent
escalations. The rental commitments above represent actual rental payments to be
made. The financial statements reflect rent expense and rental income on a
straight-line basis over the terms of the leases. Approximately $2,665,000 and
$1,924,000, representing accrued pro rata future payments, net of receipts, is
included in other noncurrent liabilities in the accompanying balance sheets as
of December 31, 1999 and 1998, respectively.
The Company is involved in a number of legal proceedings, some of which
are significant, which arose in the ordinary course of business. In the opinion
of management, the ultimate outcome of these contingencies is not expected to
have a material adverse effect on the Company's financial position or results of
operations.
The Company has letters of credit outstanding totaling approximately
$1,121,000 and $983,000 for security deposits on its corporate office space as
of December 31, 1999 and 1998, respectively.
11. EMPLOYEE BENEFITS
NLP has a 401(k) profit sharing plan (the "NLP Plan") for all eligible
employees who have completed one year of service. Under the NLP Plan, NLP has
the option of making a matching contribution of up to 3% of a participant's
compensation. NLP may also annually contribute additional discretionary amounts
to participants. For the years ended December 31, 1999 and 1998 and the five
months ended December 31, 1997, NLP did not make any matching discretionary
contributions to the NLP Plan. In addition, approximately twenty NLP employees
are covered by certain defined contribution retirement plans sponsored by the
Typographical Union. NLP made contributions to these retirement
F-16
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
plans of $0, $11,719 and $0 for the years ended December 31, 1999, 1998 and the
five months ended December 31, 1997, respectively.
ALM, LLC sponsored a 401(k) salary deferral plan (the "ALM Plan") which
was transferred to the Company upon the Acquisitions. Participation in the ALM
Plan is available for substantially all Company employees. The ALM Plan provides
for employer matching of employees' contributions, as defined. The cost of the
ALM Plan for the years ended December 31, 1999 and 1998 and the five months
ended December 31, 1997 was $606,979, $276,400 and $137,400, respectively.
ALM, LLC also sponsored a defined benefit plan covering substantially
all ALM, LLC and Counsel Connect, LLC employees. This plan was frozen effective
December 31, 1997, resulting in an insignificant curtailment gain.
Pension benefits for 1999, 1998 and 1997 for the ALM Plan consist of the
following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Change in Projected Benefit Obligation
Projected Benefit Obligation, at beginning of year ....... $ 3,546 $ 3,424 $ 3,518
Service Cost ............................................. -- -- 174
Interest Cost ............................................ 238 226 101
Actuarial (gain)/loss .................................... (12) (82) 682
Benefits paid ............................................ (125) (22) (11)
Curtailments ............................................. -- -- (1,040)
------- ------- -------
Projected Benefit Obligation, at end of year ............. $ 3,647 $ 3,546 $ 3,424
======= ======= =======
Change in Plan Assets
Fair value of assets, at beginning of year ............... $ 3,225 $ 2,613 $ 2,253
Actual return on plan assets ............................. 178 534 312
Employer contributions ................................... -- 100 59
Benefits paid ............................................ (125) (22) (11)
------- ------- -------
Fair value of assets, at end of year ..................... $ 3,278 $ 3,225 $ 2,613
======= ======= =======
Funded Status
Projected Benefit Obligation ............................. $(3,647) $(3,546) $(3,424)
Fair value of plan assets ................................ 3,278 3,225 2,613
Unrecognized net actuarial (gain)/loss ................... (278) (382) --
------- ------- -------
Accrued benefit cost ..................................... $ (647) $ (703) $ (811)
======= ======= =======
</TABLE>
Components of Net Periodic Pension Cost
F-17
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<S> <C> <C> <C>
Service Cost ............................................. $ -- $ -- $ 174
Interest Cost ............................................ 237 226 101
Expected return on plan assets ........................... (288) (237) (86)
Amortization of unrecognized transition (asset)/obligation -- -- 25
Amortization of unrecognized prior service cost .......... -- -- 4
Amortization of unrecognized net actuarial (gain)/loss ... (5) 3 --
Curtailment (gain)/loss .................................. -- -- 57
------- ------- -------
Net Periodic Pension Cost/(Income) ....................... $ (56) $ (8) $ 275
======= ======= =======
</TABLE>
In determining the actuarial present value of the projected benefit
obligation as of December 31, 1999, 1998 and 1997, the discount rate was 6.75%,
and the expected long-term rate of return on assets was 9.00% as of December 31,
1999, 1998 and 1997.
ALM, LLC also sponsored an Excess Benefit Pension Plan providing a
benefit to highly compensated employees in excess of the benefits provided by
the tax qualified defined benefit plan. The plan is an unfunded, non-qualified
deferred compensation plan. This plan was also frozen as of December 31, 1997.
The Company sponsors a comprehensive medical and dental insurance plan,
which is available to substantially all employees.
12. LONG-TERM DEBT
In December 1997, the Company issued $63,275,000 aggregate principal
amount at maturity of 12.25% of Senior Discount Notes dues 2008 (the
"Discount Notes"), at a discount rate of $553.14 per Discount Note. The
Discount Notes accrete interest compounded semi-annually at a rate of 12.25%
to an aggregate principal amount of $63,275,000 by December 2002. Commencing
in June 2003, cash interest will be payable semi-annually until maturity each
June 15 and December 15. The Discount Notes are senior, unsecured obligations
of the Company. The Discount Notes may be redeemed at any time by the
Company, in whole or in part, at various redemption prices that include
accrued and unpaid interest as well as any existing liquidating damages. The
Discount Notes contain certain covenants that, among other things, limit the
incurrence of additional indebtedness, by the Company and its subsidiaries,
the payment of dividends and other restricted payments by the Company and its
subsidiaries, restrictions on distributions from certain restricted
subsidiaries, asset sales, transactions with affiliates, incurrence of liens
and mergers and consolidations. Financing costs, totaling $1,693,000, have
been capitalized on the accompanying December 31, 1998, balance sheet and are
being amortized over the term of the Discount Notes. Assuming that there is
no redemption of the Discount Notes prior to maturity, the entire principal
will be payable on December 15, 2008.
On December 22, 1997, ALM issued $175,000,000 of 9.75% senior notes
("Senior Notes") due December 15, 2007. The Senior Notes accrue interest at
9.75% which is payable in cash semi-annually on June 15 and December 15
(beginning June 15, 1998) of each year. The Senior Notes are unsecured general
obligations of ALM and are fully and unconditionally guaranteed, on a joint and
several and senior unsecured basis, by each of ALM's existing and future
subsidiaries. Separate financial statements of, and other disclosures
concerning, the Guarantors are not included herein because of the Guarantors'
full and unconditional guarantee of the Senior Notes and management's
determination that separate financial statements and other disclosures
concerning the Guarantors are not material and would not provide any additional
meaningful disclosure. The Senior Notes may be redeemed at any time by ALM, in
whole or in part, at various redemption prices that include accrued and unpaid
interest as well as any existing liquidating damages. The Senior Notes contain
certain covenants that, among other things, limit the incurrence of additional
indebtedness by ALM and its Subsidiaries, the payment of dividends and other
restricted payments by ALM and its Subsidiaries, asset sales, transactions with
affiliates, the incurrence of liens, and mergers and consolidations. Financing
costs, totaling $7,236,000, have been capitalized in 1998 and are being
amortized over the term of the Senior Notes. Amortization of deferred financing
costs is recorded as interest expense. Assuming there is no redemption of the
Senior Notes prior to maturity, the entire principal will be payable on December
15, 2007.
On March 25, 1998, the Company and ALM entered into a Credit
Agreement with various banks that has a combined revolving commitment in the
initial principal amount of $40,000,000 and capitalized $542,000 of financing
costs which are amortized over the term of the revolver, reflected in the
accompanying balance sheets (the "Revolving Credit Facility"). Financial
costs associated with the Revolving Facility have been capitalized and are
being amortized over the term of the agreement. The Revolving Credit Facility
is guaranteed by the Company and by all subsidiaries of ALM. In addition, the
Revolving Credit Facility is secured by a first priority security interest in
substantially all of the properties and assets of ALM and its domestic
subsidiaries, including a pledge of all of the stock of such subsidiaries,
and a pledge by the
F-18
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
Company of all of the stock of ALM. The Revolving Credit Facility bears interest
at a fluctuating rate determined by reference to (i) the Base Rate plus a margin
ranging from .25% to 1.5%, or (ii) the Eurodollar Rate plus a margin ranging
from 1.25% to 2.5% as the case may be. The applicable margin is based on the
Company's total consolidated leverage ratio. The Base Rate equals the higher of
(a) the rate of interest publicly announced from time to time by Bank of America
as its reference rate, or (b) the Federal funds rate plus .5%. The Eurodollar
Rate is based on (i) the interest rate per annum at which deposits in U.S.
Dollars are offered by Bank of America's applicable lending office to major
banks in the offshore market account in an aggregate principal amount
approximately equal to the amount of the loan made to the Company and (ii) the
maximum reserve percentage in effect under regulations issued from time to time
by the Federal Reserve Board. The Company is also required to pay customary fees
with respect to the Revolving Credit Facility, including an up-front arrangement
fee, annual administrative agency fees and commitment fees on the unused portion
of the Revolving Credit Facility. The Revolving Credit Facility includes both
affirmative and negative covenants that include meeting certain financial
ratios.
On April 26, 1999, the Company and ALM amended the Revolving Credit
Facility, effective as of March 29, 1999. This amendment limits ALM's ability to
borrow in excess of $20,000,000 under the Revolving Credit Facility until
certain ratios are achieved. This amendment also adjusted certain covenants
contained in the original Revolving Credit Facility.
Effective July 20, 1999, the Revolving Credit Facility was further
amended to provide for the sale of the Company's Internet business to Law.com
(described below) and to modify certain debt covenants. On March 8, 2000
(effective March 28, 2000), the Revolving Credit Facility was further amended
to modify certain of the covenants, permit the proposed transaction described
below under Note 14 - Subsequent Events and to increase the borrowing limit
described above from $20 million to $22.5 million.
At December 31, 1999, the unused commitment is approximately
$21,700,000, of which, 1,700,000 is available in accordance with the April
26, 1999 Revolving Credit Facility amendment. The available balance under the
unused commitment is further reduced by any letters of credit outstanding of
which totaled $1,121,000 at December 31, 1999. A 10% increase in the average
rate in the Revolving Credit Facility during 1999 would have increased ALM's
net loss to approximately $26,506,000.
13. FASB 107--FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses, and notes
payable. The Company believes that the carrying amount for these accounts
approximates fair value.
14. SUBSEQUENT EVENTS
On March 28, 2000, the Company sold the business of the Company and
certain of the Company's wholly-owned subsidiaries constituting The Daily Deal
and Corporate Control Alert (the "Business") to TDD, L.L.C., a newly formed
limited liability company (the "Purchaser"), owned by substantially all of the
same stockholders as Holdings. The consideration for the sale was $7.5 million
in cash and $2.5 million face amount of a membership interest in the Purchaser
with a preferred return (the "Preferred Membership Interest"). In addition, the
Purchaser will pay the Company the aggregate amount of operating losses incurred
by the Company in connection with the operation of the Business for the month of
March 2000. The Preferred Membership Interest accretes at 12.25% compounded
annually, is convertible into 3.0% of the common equity of the Purchaser, has
anti-dilution protection for dividends in the form of additional equity
interests, combinations, splits and reclassifications and has anti-dilution
F-19
<PAGE>
AMERICAN LAWYER MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
protection up to the first $25.0 million of equity capital including the
Preferred Membership Interest issued by the Purchaser.
On March 7, 2000, The Board of Directors approved a 10-for-1 split of
its common stock, par value $0.01 per share. Prior to the stock split, the
Company had 200,000 shares of common stock authorized and 120,000 shares of
common stock outstanding. After the stock split, the Company has 2,000,000
shares of common stock authorized and 1,200,000 shares of common stock
outstanding.
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Lawyer Media, L.P.:
We have audited the accompanying balance sheet of American Lawyer Media,
L.P. as of July 31, 1997 and the related statements of operations, changes in
partners' capital and accumulated deficit and cash flows for the seven months
then ended. 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 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 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 audit provides 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 American Lawyer
Media, L.P. as of July 31, 1997, and the results of its operations and its cash
flows for the seven months then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
November 20, 1997
F-21
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
BALANCE SHEET
JULY 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 615
Accounts receivable, net of allowance for doubtful accounts of $1,661 .. 5,726
Due from affiliate ..................................................... 390
Inventories, net ....................................................... 399
Other current assets ................................................... 557
--------
Total current assets .................................... 7,687
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $7,354 5,594
INTANGIBLE ASSETS, net of accumulated amortization of $20,665 .......... 4,488
GOODWILL, net of accumulated amortization of $247 ...................... 1,057
OTHER ASSETS ........................................................... 156
--------
Total assets ............................................ $ 18,982
========
LIABILITIES AND PARTNERS' ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 744
Accrued expenses ....................................................... 4,745
Deferred income (including deferred subscription income of $7,466) ..... 8,093
--------
Total current liabilities ............................... 13,582
DUE TO GENERAL PARTNER ................................................. 34,742
--------
Total liabilities ....................................... 48,324
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' ACCUMULATED DEFICIT .......................................... (29,342)
--------
Total liabilities and partners' accumulated deficit ..... $ 18,982
========
</TABLE>
The accompanying notes to financial statements are an integral part of this
balance sheet.
F-22
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
STATEMENT OF OPERATIONS (NOTE 3)
FOR THE SEVEN MONTHS ENDED JULY 31, 1997
(In Thousands)
<TABLE>
<S> <C>
NET REVENUES:
Periodicals
Advertising ........................................... $ 18,146
Subscription .......................................... 6,719
Ancillary Products and Services .......................... 4,532
Internet Services ........................................ 2,148
--------
Total net revenues .................................. 31,545
--------
OPERATING EXPENSES:
Editorial ................................................ 4,023
Production and Distribution .............................. 6,919
Selling .................................................. 4,640
General and Administrative ............................... 9,531
Internet Services ........................................ 6,464
Depreciation and Amortization ............................ 1,590
--------
Total operating expenses .............................. 33,167
--------
Operating loss ........................................ (1,622)
INTEREST EXPENSE, net ...................................... 1,420
--------
Net loss (Note 3) ..................................... $ (3,042)
========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-23
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
AND ACCUMULATED DEFICIT
FOR THE SEVEN MONTHS ENDED JULY 31, 1997
(In Thousands)
Partners'
Contributed Earnings/ Accumulated
Capital Losses Deficit
-------- -------- --------
BALANCE AT DECEMBER 31, 1996 ....... $ 31,677 $(57,977) $(26,300)
Net loss ......................... -- (3,042) (3,042)
-------- -------- --------
BALANCE AT JULY 31, 1997 ........... $ 31,677 $(61,019) $(29,342)
======== ======== ========
The accompanying notes to financial statements are an integral part of this
statement.
F-24
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
STATEMENT OF CASH FLOWS
FOR THE SEVEN MONTHS ENDED JULY 31, 1997
(In Thousands)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................. $(3,042)
Adjustments to reconcile net loss to net cash used in operating activities-
Interest expense ....................................................... 1,420
Allowance for doubtful accounts ........................................ 304
Decrease (increase) in-
Accounts receivable and due from affiliate .......................... 1,057
Inventories ......................................................... 121
Other current assets ................................................ (21)
Other assets ........................................................ (56)
Increase (decrease) in-
Accounts payable .................................................... (1,137)
Accrued expenses .................................................... (998)
Deferred income ..................................................... 85
-------
Total adjustments ................................................ 2,365
-------
Net cash used in operating activities ............................ (677)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................................... (1,971)
-------
Net cash used in investing activities ............................ (1,971)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from general partner ....................................... 3,173
-------
Net cash provided by financing activities ........................ 3,173
-------
Net increase in cash ............................................. 525
CASH, beginning of period ................................................... 90
-------
CASH, end of period ......................................................... $ 615
=======
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
F-25
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
1. ORGANIZATION
American Lawyer Media, L.P. (the "Company") is a limited partnership of
Time Warner and Associated Newspapers. The sole general partner of American
Lawyer Media, L.P. is Time Warner. The Company is based in New York and has
operations in seven states and the District of Columbia. The Company publishes
The American Lawyer, Corporate Counsel Magazine, AmLaw Tech, The Connecticut Law
Tribune, Legal Times, New Jersey Law Journal, The Recorder, Texas Lawyer, Fulton
County Daily Report, and the Daily Business Reviews, all of which are divisions
of the Company. In addition, the Company consolidates its interest in Counsel
Connect, a New York general partnership. The partnership, which runs a
membership-based Internet service exclusively for lawyers and legal
professionals, was formed in February 1994 by Mead Data Central and the Company.
In February 1996, Mead Data Central assigned its interest in the partnership to
the Company and also contributed the balance in its capital account of
approximately $1,647,000, to the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Advertising revenues are generated from the placement of display and
classified advertisements, as well as legal notices, in the Company's
publications. Advertising revenue is recognized upon release of the related
publications to subscribers. Allowances for estimated doubtful accounts are
provided based upon historical experience.
Subscription revenues are recognized on a pro rata basis as issues of a
subscription are served.
Ancillary revenues consist principally of third-party printing services,
newsletter subscriptions, sales of professional books and directories,
Lexis/Nexis royalty income, seminar income, and a daily fax service of court
decisions.
Internet services revenues consist of income earned from Counsel Connect
subscriptions and usage fees.
Deferred Subscription Income
Deferred subscription income results from advance payments or orders for
magazine subscriptions received from subscribers.
Circulation Promotion (Subscription Direct Mail) Costs
Circulation promotion costs are charged to expense upon the release of
the campaign.
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 reported amounts of
F-26
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers time deposits and certificates of deposit with
original maturities of three months or less to be cash equivalents.
Inventories
Inventories consist principally of paper utilized by the Company and its
outside printers and professional books published and sold by the Company.
Inventories are stated at the lower of cost or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Significant
improvements are capitalized, while expenditures for maintenance and repairs are
charged to expense as incurred. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets as follows:
Machinery and equipment.......................................... 5 years
Buildings........................................................ 25 years
Furniture and fixtures........................................... 5 years
Computer equipment and software.................................. 3-5 years
Leasehold improvements are amortized over the shorter of the remaining
lease term or the estimated useful life. The cost and accumulated depreciation
of property sold or retired are removed from the accounts upon disposition.
Intangibles and Goodwill
Intangible assets, consisting primarily of noncompete agreements and
subscription lists, are valued at the appraised market value of the assets at
the date of acquisition, net of accumulated amortization. Intangibles are
amortized over the expected useful lives of the respective assets, ranging from
two to thirteen years. Goodwill represents the excess of purchase price over the
fair value of net assets acquired, less accumulated amortization. Goodwill is
being amortized on a straight-line basis over 40 years.
Accounts Payable
Included in accounts payable are $425,000 of bank overdrafts as of July
31, 1997.
3. INCOME TAXES
No provision has been made in the accompanying statement of operations
for income taxes since, pursuant to provisions of the Internal Revenue Code, the
net loss appearing on the accompanying statement of operations is reportable by
each of the partners on their individual tax returns.
F-27
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at July 31,
1997 (in thousands):
Machinery and equipment................................ $ 10,323
Buildings and improvements............................. 1,430
Furniture and fixtures................................. 823
Land................................................... 300
Automobiles............................................ 72
---------
12,948
Accumulated depreciation and amortization.............. (7,354)
---------
Net property, plant and equipment.................... $ 5,594
=========
5. RELATED PARTY TRANSACTIONS
The Company has a business relationship with Courtroom Television
Network ("Court TV"), an affiliate of the Company's general partner. Revenues
are generated through licensing fees charged to Court TV for editorial content
and sales of advertisements. The licensing fees for American Lawyer publications
totaled approximately $149,000 for the seven months ended July 31, 1997.
Advertising revenues from Court TV totaled approximately $122,000 for the seven
months ended July 31, 1997. In addition, the Company and Court TV share certain
editorial and administrative resources and employees, as well as office
facilities. The cost associated with employees who devote all or a portion of
their time to Court TV activities is charged to Court TV based on an estimate of
their time spent on such activities. These charges, which include an allocation
for the chairman of the Company, amounted to $321,000 for the seven months ended
July 31, 1997. Court TV is also charged a flat annual fee of $195,000 for use of
the Company's reporters for on-camera appearances and background reports.
Finally, an allocation is made to Court TV to cover general overhead costs
(e.g., rent, utilities, etc.) which amounted to approximately $53,000 for the
seven months ended July 31, 1997. Amounts due from Court TV are reflected as due
from affiliate on the accompanying balance sheet.
The Company's general partner provides certain legal, administrative,
accounting, and tax services for the Company. Charges for such services amounted
to approximately $47,000 for the seven months ended July 31, 1997.
6. DUE TO GENERAL PARTNER
Due to General Partner consists of borrowings from WCI/AMLAW Inc. and
interest accrued thereon. The borrowings bear interest at 1% under prime and do
not have a stated maturity date. This amount has been included in long-term
liabilities in the accompanying balance sheet since the amount is not intended
to be repaid within the next year.
7. COMMITMENTS AND CONTINGENCIES
Rent expense, including payments of real estate taxes, insurance and
other expenses required under certain leases, amounted to approximately
$1,046,500 for the seven months ended July 31, 1997, including rent accruals in
excess of payments of $6,600.
F-28
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
Minimum rental commitments under noncancellable leases as of July 31,
1997 were as follows (in thousands):
Real Sublease
Estate Income Other Total
-------- ------- -------- --------
1997..................... $ 1,450 $ (650) $ 28 $ 828
1998..................... 3,161 (1,443) 70 1,788
1999..................... 3,094 (1,473) 59 1,680
2000..................... 3,087 (1,473) 44 1,658
2001..................... 2,906 (1,473) 33 1,466
2002 and thereafter...... 17,424 (10,823) 5 6,606
-------- ------- -------- --------
$ 31,122 $(17,335) $ 239 $ 14,026
======== ======== ======== ========
- --------------------------------------------------------------------------------
Certain of the leases provide for free rent periods as well as rent
escalations. The rental commitments above represent actual rental payments to be
made. The financial statements reflect rent expense and rental income on a
straight-line basis over the terms of the leases. An obligation of $6,600,
representing accrued pro rata future payments, net of receipts, is included in
the accompanying balance sheet.
The Company subleases a portion of its office facilities to Court TV.
The sublease charges summarized above are based on an oral agreement between the
Company and Court TV.
The lease for the Company's headquarters contains a provision whereby
the Company could elect not to renew the lease for the years 1999 through 2008
upon payment of a $2,200,000 termination penalty.
The Company is involved in a number of legal proceedings, some of which
are significant, which arose in the ordinary course of business. In the opinion
of management, the ultimate outcome of these contingencies is not expected to
have a material adverse effect on the Company's financial position or results of
operations.
8. EMPLOYEE BENEFITS
The Company sponsors a retirement savings plan. Participation in this
plan is available for substantially all employees. The plan provides for
employer matching of employees' contributions, as defined. The cost of the plan
was $177,000 for the seven months ended July 31, 1997.
The Company has a defined benefit plan covering substantially all
employees. The Company's general funding policy is to contribute annual amounts
that satisfy the Internal Revenue Code funding requirements. The components of
net periodic pension cost for the year ended December 31, 1996 were as follows:
Service cost..........................................$ 361,216
Interest cost on projected benefit obligation......... 188,428
Actual return on assets............................... (260,515)
Net amortization and deferral......................... 178,602
----------
$ 467,731
==========
F-29
<PAGE>
AMERICAN LAWYER MEDIA, L.P.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
The following table sets forth the funded status of the Company's
defined benefit plan and amounts recognized in the balance sheet as of December
31, 1996:
Actuarial present value of benefit obligations:
Vested benefit obligation................................ $1,756,139
----------
Accumulated benefit obligation........................... $1,988,235
----------
Projected benefit obligation............................. $3,031,741
Plan assets at fair value................................ 1,965,782
----------
Projected benefit obligation in excess of plan assets.... $1,065,959
Unrecognized net gain.................................... 155,802
Unrecognized net transition obligation................... (728,462)
----------
Accrued pension liability................................ $ 493,299
==========
In determining the actuarial present value of the projected benefit
obligation as of December 31, 1996, the discount rate was 7.5%, the rate of
increase in future compensation levels was 6%, and the expected long-term rate
of return on assets was 9%.
The Company sponsors an Excess Benefit Pension Plan providing a benefit
to highly compensated employees in excess of the benefits provided by the tax
qualified defined benefit plan. The plan is an unfunded, non-qualified deferred
compensation plan.
The Company also sponsors a comprehensive medical and dental insurance
plan which is available to substantially all employees. The Company is self
insured for claims submitted under this plan up to predetermined amounts, above
which third party insurance applies.
9. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107-FAIR VALUE OF
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses, and due to
general partner. The carrying amount of these accounts approximates fair value.
F-30
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the National Law Publishing Company, Inc.:
We have audited the accompanying consolidated balance sheet of National
Law Publishing Company, Inc. (a New York corporation) and subsidiaries as of
December 21, 1997 and the related consolidated statement of operations,
stockholders' equity and cash flows for the period from January 1, 1997 through
December 21, 1997. 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 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 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 audit provides 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 National Law
Publishing Company, Inc. and subsidiaries as of December 21, 1997, and the
results of their operations and their cash flows for the period from January 1,
1997 through December 21, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
New York, New York
April 3, 1998
F-31
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 21, 1997
(In Thousands, except per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 584
Accounts receivable, net of allowances for doubtful accounts
and sales returns of $1,014.................................... 7,402
Inventories, net................................................ 1,010
Deferred income taxes........................................... 800
Other current assets............................................ 741
----------
Total current assets......................................... 10,537
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation
and amortization of $2,250..................................... 2,544
INTANGIBLE ASSETS, net of accumulated amortization of $14,306..... 122,351
DEFERRED INCOME TAXES............................................. 2,934
OTHER ASSETS...................................................... 1,244
----------
Total assets................................................. $ 139,610
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................ $ 1,522
Accrued expenses................................................ 1,674
Deferred income (including deferred subscription income of
$9,041)........................................................ 9,545
----------
Total current liabilities.................................... 12,741
----------
LONG-TERM DEBT.................................................... 59,500
DEFERRED INCOME TAXES............................................. 926
----------
OTHER NONCURRENT LIABILITIES...................................... 1,661
----------
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 125,000 shares authorized;
86,609 shares issued and outstanding........................... 1
Paid-in capital................................................. 72,993
Accumulated (deficit)........................................... (8,212)
----------
Total stockholders' equity................................... 64,782
----------
Total liabilities and stockholders' equity................... $ 139,610
==========
The accompanying notes are an integral part of this balance sheet
F-32
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 21, 1997
(In Thousands)
REVENUES:
Periodicals
Advertising.......................................... $ 26,402
Subscription......................................... 9,504
Ancillary products and services........................... 13,926
Internet services......................................... 1,109
----------
Total net revenues................................ 50,941
----------
OPERATING EXPENSES:
Editorial................................................. 5,837
Production and distribution............................... 9,872
Selling................................................... 8,211
General and administrative................................ 8,722
Internet services......................................... 1,657
Depreciation and amortization............................. 7,283
Special compensation charge............................... 6,926
----------
Total operating costs and expenses................ 48,508
----------
Operating income.................................. 2,433
INTEREST EXPENSE, NET..................................... (5,137)
----------
Loss before income taxes.......................... (2,704)
PROVISION FOR INCOME TAXES................................ (2,508)
----------
Net loss.......................................... $ (5,212)
==========
The accompanying notes are an integral part of this statement
F-33
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 21, 1997
(In Thousands)
<TABLE>
<CAPTION>
Common Paid-In Accumulated Treasury
Stock Capital (Deficit) Stock Total
--------- -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996................ $ 1 $ 66,165 $ (3,000) $ -- $ 63,166
Contribution from Stockholder............. -- 6,828 -- -- 6,828
Net loss for the period from January 1, 1997
through December 21, 1997............... -- -- (5,212) -- (5,212)
--------- -------- ------------ --------- ----------
BALANCE AT DECEMBER 21, 1997................ $ 1 $ 72,993 $ (8,212) $ -- $ 64,782
========= ======== ============ ========= ==========
</TABLE>
The accompanying notes are an integral part of this statement
F-34
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH DECEMBER 21, 1997
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................... $ (5,212)
Adjustments to reconcile net loss to net cash provided by
operating activities-Depreciation and amortization 7,283
Decrease in deferred income taxes....................... 1,134
Special compensation charges............................... 6,828
Changes in operating assets and liabilities-
(Increase) in accounts receivable....................... (405)
(Increase) in inventories............................... (174)
Decrease in prepaid expenses and other current assets... 37
Decrease in other assets................................ 317
(Decrease) in accounts payable and accrued expenses..... (320)
Increase in deferred income............................. 788
Increase in other noncurrent liabilities................ 1,016
----------
Net cash provided by operating activities............. 11,292
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to furniture, equipment and leasehold improvements,
net of loss on disposal of fixed assets of $19............. (496)
----------
Net cash used in investing activities................... (496)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt............................................ (10,800)
----------
Net cash used in financing activities................... (10,800)
----------
Net decrease in cash and cash equivalents............... (4)
CASH AND CASH EQUIVALENTS, beginning of period.................. 588
----------
CASH AND CASH EQUIVALENTS, end of period........................ $ 584
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest.................................................... $ 5,528
Income taxes................................................ 341
==========
The accompanying notes are an integral part of this statement
F-35
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
1. ORGANIZATION
The National Law Publishing Company, Inc. ("National") through its
wholly owned operating subsidiary, New York Law Publishing Company, Inc. ("NYLP"
or the "Company") is considered a leading publisher of periodicals, books and
newsletters as well as a provider of seminars and electronic information
services targeted to the U.S. legal community. NYLP's principal periodical
publications are the New York Law Journal (a daily newspaper), The National Law
Journal (a weekly publication) and Law Technology Product News (published
approximately fifteen times per year). NYLP also wholly owns Law Journal EXTRA!,
Inc. ("LJX"). LJX is an on-line service available on the World Wide Web
providing access to various legal information and related services including
electronic versions of NYLP's principal periodicals.
On December 1, 1995, Boston Ventures Limited Partnership IV and Boston
Ventures Limited Partnership IVA (collectively "Boston Ventures"), through a
wholly-owned subsidiary, NLPC Acquisition, Inc. ("NAI"), acquired approximately
71,308 shares of National's common stock from Apollo Publishing Partners, L.P.
("Apollo") and James A. Finkelstein ("Finkelstein"), the chief executive of the
Company, and initiated a series of related transactions which resulted in Boston
Ventures acquiring approximately 94.3% of National for $141,958,454 in cash plus
acquisition related costs of $757,000.
In addition, on December 1, 1995, NAI was merged into National, with
National as the surviving corporation. In connection with the merger, Boston
Ventures received 60,916.5954 shares of National's common stock (approximately
94.3% of National's outstanding stock) in exchange for its shares of NAI.
Finkelstein retained 3,691.9149 shares of National, approximately 5.7% of its
outstanding stock. In addition, under a related stock option agreement,
Finkelstein was granted options to acquire up to an additional 6,461 shares of
National which vest, subject to certain employment and operating performance
criteria, over a five year period (Note 7).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentration of
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company believes it is not exposed to any significant credit
risk related to cash and cash equivalents. Concentrations of credit risk with
respect to trade accounts receivable are, except for amounts due from legal
advertising ad agents ("Legal Ad Agents"), generally limited due to the large
number of customers comprising the Company's
F-36
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
customer base. Such Legal Ad Agents do not have significant liquid net worth
and, as a result, the Company is exposed to a certain level of credit
concentration risk in this area, which the Company believes it has adequately
provided for.
Revenue Recognition
Advertising revenues are generated from the placement of display and
classified advertisements, as well as legal notices, in the Company's
publications. Advertising revenue is recognized upon release of the related
publications to subscribers.
Subscription revenues are recognized on a pro rata basis as issues of a
subscription are served.
Ancillary revenues consist principally of newsletter subscriptions,
sales of professional books, software, royalty income and seminar income.
Internet services revenues are recognized upon the release of an
advertisement on the website.
Deferred Subscription Income
Deferred subscription income results from advance payments or orders for
subscriptions received from subscribers and is amortized on a straight-line
basis over the life of the subscription as issues are served. Subscription
receivables of $734,000 are included in accounts receivable in the accompanying
consolidated balance sheet.
Expense Recognition
Advertising and promotion costs--Advertising expenditures are expensed
when the particular advertisement is released. The Company capitalizes direct
response promotional costs. At December 21, 1997 approximately $1,152,000 of
direct response promotional costs was recorded in other assets on the
accompanying consolidated balance sheet. Advertising expense was approximately
$3,018,000 for the period ended December 21, 1997. The amortization of direct
response promotion expenditures is included in selling expense in the
accompanying consolidated statements of operations.
Editorial costs--All editorial costs are expensed as incurred.
Cash and Cash Equivalents
The Company considers time deposits and certificates of deposit with
original maturities of three months or less to be cash equivalents.
Inventories
Inventories consist principally of professional books published and sold
by the Company and related binding materials utilized. Inventories are stated at
the lower of cost, as determined by the average cost method, or market.
F-37
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
Property, Plant and Equipment
Furniture, equipment and leasehold improvements are stated at cost less
accumulated depreciation and amortization. Furniture, equipment and purchased
software are depreciated on a straight-line basis over their respective
estimated useful lives. Repairs and maintenance are charged to expense as
incurred. Leasehold improvements are amortized over the lives of the
improvements or the term of the related lease, whichever is shorter.
Intangible Assets
Intangible assets include deferred financing costs with the amortization
and/or write-off of such costs classified as part of amortization expense.
Goodwill represents the excess of purchase price over the fair value of net
assets acquired.
3. PROPERTY, PLANT AND EQUIPMENT, NET
The following is a summary of property, plant and equipment at December
21, 1997:
<TABLE>
<CAPTION>
(In Thousands) Estimated Useful Lives
-------------- ----------------------
<S> <C> <C>
Computer equipment and purchased software........ $ 2,971 6 years
Furniture and office equipment................... 1,210 5 to 9 years
Leasehold improvements........................... 613 7 to 10 years
-----------
4,794
Less--accumulated depreciation and amortization.. (2,250)
-----------
$ 2,544
===========
</TABLE>
4. INTANGIBLE ASSETS, NET
The following is a summary of intangible assets at December 21, 1997:
<TABLE>
<CAPTION>
(In Thousands) Amortization Periods
-------------- --------------------
<S> <C> <C>
Goodwill........................................... $ 135,519 20 years
Deferred financing costs........................... 1,138 7 years
-----------
136,657
Less-accumulated amortization...................... (14,306)
-----------
$ 122,351
===========
</TABLE>
Total amortization expense of intangibles was approximately $6,709,000
for the period ended December 21, 1997.
F-38
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
5. LONG-TERM DEBT
Long-term debt was comprised of the following at December 21, 1997:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
Revolving credit facilities........................................... $ 59,500
Less-current portion of revolving credit facilities reduction amount.. --
---------
$ 59,500
=========
</TABLE>
Revolving Credit Facilities
On December 1, 1995, the Company entered into a revolving credit
facility agreement (the "Credit Agreement") with The First National Bank of
Boston (the "Bank"), as a lender and as agent for other lenders, under which NAI
borrowed $15,674,061 and NYLP borrowed $55,225,939 (aggregating $70,900,000) in
connection with Boston Ventures' acquisition of the Company. Upon NAI's merger
into National, NYLP assumed the $15,674,061 of Bank debt, in the form of a
dividend from NYLP to National. The Company's borrowing capacity under the
Revolving Credit Facility, including cash loans and standby letters of credit of
up to $6 million, was $70.5 million through December 21, 1997, and decreases
semi-annually until final maturity on December 31, 2002 as follows:
Amount
PERIOD (In Thousands)
------ --------------
January 1, 1998 through June 29, 1998............... $ 67,000
June 30, 1998 through December 30, 1998............. 63,250
December 31, 1998 through June 29, 1999............. 59,500
June 30, 1999 through December 30, 1999............. 55,250
December 31, 1999 through June 29, 2000............. 51,000
June 30, 2000 through December 30, 2000............. 45,750
December 31, 2000 through June 29, 2001............. 40,500
June 30, 2001 through December 30, 2001............. 33,750
December 31, 2001 through June 29, 2002............. 27,000
June 30, 2002 through final maturity date........... 19,000
Final maturity date (December 31, 2002)
Available borrowings under this facility are further limited by the sum
of (a) the Company's letter of credit exposure and (b) certain stipulated
percentages of excess cash flow based on the ratio of the Company's consolidated
funded debt to consolidated operating cash flow, as defined. Outstanding
borrowings under the facility bear interest at a fluctuating rate, subject to
the Company's elected pricing option, at either the Base Rate, Eurodollar Rate,
and/or CD Rate, plus a variable margin based on the Company's ratio of
consolidated funded debt to consolidated operating cash flow, as defined. The
interest rate under this Revolving Credit Facility approximated 8.0% for the
period ended December 21, 1997. Commitment fees are charged and payable
quarterly at either a .375% or .500% annual rate, depending on the Company's
ratio of consolidated funded debt to consolidated operating cash flow for the
immediately preceding quarter (the "Quarterly Funded Debt Ratio") and on the
average daily unused portion of the Revolving Credit Facility. In addition,
letter of credit usage fees are payable at rates which range between
F-39
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
1.25% and 2.5% depending on the Quarterly Funded Debt Ratio and on the daily
letter of credit exposure during the three month period or portion thereof
ending on such payment date. The Revolving Credit Facility is secured by the
assets of National and NYLP and the stock of NYLP and its subsidiaries.
The Credit Agreement requires, among other things, that the Company
maintain certain minimum levels of consolidated operating cash flow and certain
prescribed ratios of consolidated funded debt to consolidated operating cash
flows, consolidated operating cash flow to interest expense and consolidated
adjusted operating cash flow to consolidated fixed charges, as defined. The
Credit Agreement contains other restrictive covenants, including limitations on
indebtedness, investments and acquisitions, the disposition of assets,
transactions with affiliates and distributions to stockholders.
The Agreement provides that within 10 days after the Eurodollar Basic
Rate for three month Eurodollar Pricing Options first exceeds 5.875% per annum,
the Company will obtain and thereafter keep in effect one or more interest rate
protection agreements covering a notional amount of at least 50% of the
outstanding borrowings under the Revolving Credit Facility for an aggregate
period of not less than two years.
6. INCOME TAXES
National and its subsidiaries file a consolidated Federal and combined
New York State and New York City income tax returns. NYLP also files income tax
returns in California and the District of Columbia. At December 21, 1997,
National had a net operating loss carryforwards available to offset future
taxable income for Federal income tax purposes of approximately $2.0 million.
These carryforwards expire in the years 2004 through 2010 and, as a result of
the change in ownership described in Note 1, are subject to the limitations of
Internal Revenue Code Section 382. At December 21, 1997, National had
approximately $75,000 of operating loss carryforwards for New York State and New
York City income tax purposes.
The provision for income taxes is comprised of the following for the
period from January 1, 1997 to December 21, 1997:
Current-
Federal................................................ $ 1,830
State and local........................................ 610
----------
2,440
----------
Deferred-
Fereal................................................. 50
State and local........................................ 18
----------
68
----------
$ 2,508
==========
The reconciliation between the provision for income taxes and the amount
computed by applying the statutory Federal income tax rate to loss before income
taxes is as follows for the period from January 1, 1997 to December 21, 1997:
F-40
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
Federal statutory income taxes........................... $ (947)
Permanent differences (principally goodwill
amortization)........................................... 2,391
State and local income taxes, net of Federal benefit..... 352
Other.................................................... 712
----------
$ 2,508
==========
7. STOCKHOLDERS' EQUITY
Stock Options
In connection with and as a condition of Boston Ventures' acquisition,
the Company entered into a stock option agreement (the "Agreement") with
Finkelstein which, subject to certain terms and conditions of the Agreement,
granted Finkelstein an option to purchase an aggregate of approximately 6,461
shares of National's common stock. One-third of the shares covered by the option
vest and become exercisable in 60 equal installments of approximately 36 shares
on the last day of each month commencing on January 31, 1996 and continuing
until December 31, 2000. The remaining shares vest and become exercisable,
subject to the Company's attainment of two separate annual operating cash flow
targets, as defined, in equal annual installments of approximately 431 shares or
approximately 862 shares, respectively (if such respective operating cash flow
targets are reached), on December 31, 1996 through 2000 or upon sale, subject to
achieving certain performance targets. The vesting of all shares is generally
subject to Finkelstein being employed by the Company on such dates. The shares
are exercisable at a price of approximately $1,083 per share and expire on the
tenth anniversary date of the Agreement.
Stockholders' Agreement
On December 1, 1995, Boston Ventures, National and Finkelstein entered
into a stockholders' agreement which, among other things, allows Finkelstein,
upon the nonrenewal of his employment, as defined in his employment agreement to
require the Company to purchase all of his shares and liquidate and cash out his
vested option shares for fair value. The Company's obligation to acquire
Finkelstein's shares is subject to it being permitted by the Credit Agreement
and applicable law to do so. In addition, the stockholders' agreement gives the
Company, along with Boston Ventures, the right of first refusal with respect to
Finkelstein's shares.
8. RETIREMENT PLANS
The Company has a 401(k) profit sharing plan (the "Plan") for all
eligible employees who have completed one year of service. Under the Plan, the
Company has the option of making a matching contribution of up to 3% of a
participant's compensation. The Company may also annually contribute additional
discretionary amounts to participants. For the period ended December 21, 1997,
the Company did not make any matching discretionary contributions to the Plan.
In addition, approximately twenty Company employees are covered by
certain defined contribution retirement plans sponsored by the Typographical
Union. Company contributions to these retirement plans for the period ended
December 21, 1997 were approximately $474,000.
F-41
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space under non-cancelable operating leases
which expire at various dates through October 2008. At December 21, 1997, the
future minimum payments due under these leases, net of sublease income are as
follows:
Amount
Years Ending December 31, (In Thousands)
------------------------- --------------
1998................................................. $ 1,093
1999................................................. 1,173
2000................................................. 1,177
2001................................................. 1,177
Thereafter........................................... 8,611
--------
$ 13,231
========
Rent expense, net of sublease income, was approximately $1,153,000 for
the period ended December 21, 1997.
At December 21, 1997, the Company had a letter of credit outstanding of
approximately $533,000 for the security deposit on its corporate office space.
Employment Agreement
In connection with Boston Ventures' December 1, 1995 acquisition of the
Company, Finkelstein entered into a long-term employment agreement (the
"Employment Agreement") with the Company. The initial term of the Employment
Agreement is through December 31, 2000 and provides for, among other things, an
annual base salary which, beginning on June 30, 1996, and annually thereafter,
is to be increased by the greater of (i) 5% or (ii) the annual increase in the
consumer price index for all urban consumers not in excess of 8%.
Legal Matters
The Company is subject to certain legal actions and complaints that
arise in the ordinary course of its business. In the opinion of management, the
amount of the ultimate liability, if any, which may result from these legal
actions and complaints will not materially affect the consolidated financial
statements of the Company.
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are
held for trading purposes. These financial instruments consist of cash and cash
equivalents, long-term debt and interest rate protection agreements. The Company
estimates that the fair value of all financial instruments at December 21, 1997
does not differ materially from the aggregate carrying values of its financial
instruments recorded in the accompanying consolidated balance sheet.
F-42
<PAGE>
NATIONAL LAW PUBLISHING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 21, 1997
11. SUBSEQUENT EVENT
On December 22, 1997, Boston Ventures and Mr. James A. Finkelstein
completed a Stock Purchase Agreement with American Lawyer Media, LLC for the
sale of NLP. The purchase price for the NLP acquisition was approximately
$203,200,000 in cash. In connection with the sale of the Company, Boston
Ventures cashed out options held by certain management employees with a portion
of the proceeds of the sale. The payment totaled approximately $6,926,000 which
is included as a special compensation charge in the accompanying consolidated
statement of operations (See Note 7).
F-43
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN LAWYER MEDIA, INC.
By: /s/ William L. Pollak
William L. Pollak
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
William L. Pollak and Anup Bagaria and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to this report, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their, his or her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
* * * * *
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
William L. Pollak Director, President and Chief Executive Officer March 30, 2000
(Principal Executive Officer)
Leslye G. Katz Vice President and Chief Financial Officer March 30, 2000
(Principal Financial Officer and Principal
Accounting Officer)
Bruce Wasserstein Chairman of the Board of Directors March 30, 2000
Anup Bagaria Director, Vice President March 30, 2000
Bruce Barnes Director March 30, 2000
Michael J. Biondi Director March 30, 2000
Robert C. Clark Director March 30, 2000
Donald G. Drapkin Director March 30, 2000
James A. Finkelstein Director March 30, 2000
Andrew G.T. Moore, II Director March 30, 2000
</TABLE>
F-44
<PAGE>
Exhibit
Number Description
------ -----------
2.1* Purchase Agreement, dated as of October 23, 1997, by and among Boston
Ventures Limited Partnership IV, Boston Ventures Limited Partnership
IVA, James A. Finkelstein and ALM Holdings, LLC, as amended.
3.1* Certificate of Incorporation of the Company
3.2* Certificate of Amendment of the Certificate of Incorporation of the
Company
3.16* Bylaws of the Company
4.1* Indenture, dated as of December 22, 1997, among the Company, the
Guarantors named therein and The Bank of New York, as trustee
4.2* Supplemental Indenture, dated as of December 22, 1997, among the
Company, the Guarantors named therein and The Bank of New York, as
trustee
4.3* Supplemental Indenture, dated as of December 22, 1997, among the
Company, the Guarantors named therein and The Bank of New York, as
trustee
4.4* Supplemental Indenture, dated as of December 22, 1997, among the
Company, the Guarantors named therein and The Bank of New York, as
trustee
4.5* Supplemental Indenture, dated as of December 22, 1997, among the
Company, the Guarantors named therein and The Bank of New York, as
trustee
4.6* Supplemental Indenture, dated as of December 22, 1997, among the
Company, the Guarantors named therein and The Bank of New York,
as trustee
4.7* Supplemental Indenture, dated as of April 14, 1998, among the Company,
the Guarantors and The Bank of New York, as trustee
4.10* Registration Rights Agreement, dated as of December 22, 1997, among
the Company, the Guarantors named therein and the Initial Purchasers
10.1* Lease, dated September 30, 1993, between Park Avenue South/Armory,
Inc. and The New York Law Publishing Company for premises at 345 Park
Avenue South, New York, New York
10.2* First Supplemental Agreement, dated November 30, 1994, between Park
Avenue South/Armory, Inc. and The New York Law Publishing Company for
premises at 345 Park Avenue South, New York, New York
10.3* Credit Agreement, dated as of March 25, 1998, among the Company,
ALM, various banks, Bank of America National Trust and Savings
Association, BancBoston Securities Inc. and BancAmerica Robertson
Stephens
10.4 First Amendment to Credit Agreement, dated as of April 24, 1998,
among the Company, ALM, various banks and Bank of America
National Trust and Savings Association, (ii) Second Amendment to
Credit Agreement, dated as of April 26, 1999, among the Company,
ALM, various banks and Bank of America National Trust and Savings
Association, Waiver and (iii) Consent and Third Amendment to Credit
Agreement, dated as of July 20, 1999, among the Company, ALM,
various banks and Bank of America National Trust and Savings
Association, and (iv) Consent and Fourth Amendment to Credit
Agreement, dated as of March 8, 2000, the Company, ALM, various
banks and Bank of America National Trust and Savings Association
10.5* Employment Agreement dated February 9, 1998 between ALM and
William L. Pollak
10.6+ License Agreement between ALM and Law.com, Inc., dated
December 13, 1999
10.7 Stock Purchase Agreement, dated as of July 27, 1999 among ALM,
Law.com Acquisition Corp. and Professional On Line, Inc.
12.1 Statement re: computation of ratio of earnings to fixed charges
21.1 List of Subsidiaries of the Company
24.1 Power of Attorney of the Company (included on Signature Page)
27.1 Financial Data Schedule
- -----------
+ Confidential treatment has been requested for certain portions of this
document.
F-45
<PAGE>
* Exhibits are incorporated by reference from the Company's Registration
Statement on Form S-4 (File No. 333-50119).
(b) Financial Statement Schedules
F-46
<PAGE>
AMERICAN LAWYER MEDIA, INC. SCHEDULE II VALUATION AND QUALIFYING
ACCOUNTS
For the Twelve Months Ended December 31, 1999 and the Twelve Months Ended
December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance
Beginning Costs and Other at end of
Description of Period Expenses Accounts Deductions(1) Period
- ----------- --------- -------- -------- ---------- ------
Credit Credit Debit Debit Credit
------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
For the Twelve
Months Ended
December 31,
1998:
Allowance for doubtful
accounts....... $(3,236) $(1,819) -- $1,460 $(3,595)
For the Twelve
Months Ended
December 31,
1999:
Allowance for doubtful
accounts....... $(3,595) $(2,590) -- $3,427 $(2,758)
</TABLE>
- -----------
(1) Represents reversals of the allowance for doubtful accounts and
write-offs of accounts receivable, net of recoveries.
F-47
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of April 24,
1998, among AMERICAN LAWYER MEDIA HOLDINGS, INC., a Delaware corporation
("HOLDINGS"), AMERICAN LAWYER MEDIA, INC., a Delaware corporation (the
"BORROWER"), the several lenders from time to time party to the Credit Agreement
referred to below (the "BANKS"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Issuing Bank, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent. Unless otherwise defined herein, all
capitalized terms used herein shall have the respective meanings provided such
terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks, the Issuing Banks,
the Administrative Agent and the Arrangers are parties to a Credit Agreement,
dated as of March 25, 1998 (the "Credit Agreement"); and
WHEREAS, subject to the terms and conditions set forth herein,
the parties hereto agree as follows;
NOW, THEREFORE, it is agreed:
I. AMENDMENT:
1. The definition of "Consolidated Total Indebtedness" appearing in
Section 1.01 of the Credit Agreement is hereby amended by deleting the
parenthetical phrase ("excluding the Holdings Senior Discount Notes)" appearing
therein.
II. MISCELLANEOUS:
1. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
2. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
3. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
4. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when Holdings, the Borrower and the Required Banks
shall have signed a counterpart hereof
1
<PAGE>
(whether the same or different counterparts) and shall have delivered (including
by way of telecopier) the same to the Administrative Agent.
5. From and after the First Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement after giving
effect to this Amendment.
AMERICAN LAWYER MEDIA HOLDINGS, INC.
By:
-----------------------------------
Name:
Title
AMERICAN LAWYER MEDIA, INC.
By:
-----------------------------------
Name:
Title
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS ADMINISTRATIVE
AGENT
BANK OF AMERICAN NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS AN ISSUING BANK
By:
-----------------------------------
Name:
Title
2
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS A BANK
By:
-----------------------------------
Name:
Title:
BANKBOSTON, N.A., AS BANK AND AS AN ISSUING
BANK
By:
-----------------------------------
Name:
Title:
3
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT is entered into as of the 26th day
of April, 1999 (the "AMENDMENT") by and among AMERICAN LAWYER MEDIA HOLDINGS,
INC., a Delaware corporation, ("HOLDINGS"), AMERICAN LAWYER MEDIA, INC., a
Delaware corporation, (the "BORROWER"), the several lenders from time to time
party to the Amendment (the "REQUIRED BANKS") and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, a national banking association, as administrative agent
(the "ADMINISTRATIVE AGENT").
RECITALS
A. The Borrower, Holdings, various banks and other financial
institutions or entities (collectively, the "BANKS"), the Administrative Agent,
the Issuing Bank, the Syndication Agent and the Arrangers have previously
entered into that certain Credit Agreement dated as of March 25, 1998 (as
amended from time to time, the "CREDIT AGREEMENT").
B. The Borrower and Holdings have requested that the Required
Banks and the Administrative Agent agree to the amendments as hereinafter
described.
C. The Required Banks and the Administrative Agent (including on
behalf of all other parties to the Credit Agreement not party hereto) hereby
agree to the requested amendments, subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein, any extension of credit or other financial accommodation heretofore, now
or hereafter made by any of the Banks or of the Administrative Agent to the
Borrower and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. RECITALS. The foregoing recitals are accurate and are
incorporated herein and made a part hereof.
2. DEFINITIONS. Each initially capitalized term used
herein without definition shall have the meaning ascribed to such term in the
Credit Agreement.
3. AMENDMENTS. It is hereby agreed that the Credit
Agreement shall be amended, effective as of the Effective Date (defined below),
as follows:
<PAGE>
(a) SECTION 1.01(DEFINED TERMS): "ADJUSTED CONSOLIDATED EBITDA": The
definition of Adjusted Consolidated EBITDA in Section 1.01 of the
Credit Agreement shall be amended by the deletion of the existing
definition and its replacement by the following:
"ADJUSTED CONSOLIDATED EBITDA" means, for any Measurement Period,
Consolidated EBITDA for such Measurement Period, adjusted by adding
thereto up to the Applicable Amount of Development Costs actually
incurred by Holdings and its Subsidiaries for such Measurement Period,
PROVIDED that such Development Costs shall only be added back to the
extent that same reduced Consolidated Net Income for such Measurement
Period. For these purposes, and in respect of the Measurement Periods
specified, the "Applicable Amount" of Development Costs shall be as
follows:
<TABLE>
Period Applicable Amount of
Development Costs
(fiscal quarter ending) ----------------------
- -----------------------
<S> <C>
March 31, 1999 1,500,000
June 30, 1999 4,100,000
September 30, 1999 6,900,000
December 31, 1999 9,200,000
March 31, 2000 10,000,000
June 30, 2000 9,000,000
September 30, 2000 7,000,000
December 31, 2000 5,500,000
March 31, 2001 and each fiscal 4,000,000
quarter thereafter
</TABLE>
(b) SECTION 1.01 (DEFINED TERMS): "CONSOLIDATED EBITDA":
The definition of Consolidated EBITDA in Section 1.01 of the Credit
Agreement shall be amended by the insertion on the 26th line thereof
after the words, "(y) subtracting therefrom any cash expenses, cash
charges or cash payments arising from any non-cash expenses or non-cash
charges that were added back to Consolidated EBITDA pursuant to clause
(x)(i) above in a previous period", and before the semi-colon
immediately thereafter, the following additional words:
"(other than cash expenses arising from the expense accruals that were
added back to Consolidated EBITDA for the Measurement Period ending
December 31, 1998 in respect of the buyout of options of William Pollak
and Leslye Katz in the respective amounts of $539,000 and $204,000,
which amounts are reflected in the
-2-
<PAGE>
audited financial statements of Holdings and the Borrower for the
Fiscal Year ended December 31, 1998)"
(c) SECTION 1.01 (DEFINED TERMS): "CONSOLIDATED TOTAL LEVERAGE RATIO" The
definition of "Consolidated Total Leverage Ratio" in Section 1.01 of
the Credit Agreement shall be amended by the deletion of the existing
definition and its replacement by the following:
"CONSOLIDATED TOTAL LEVERAGE RATIO" means, at any time, the
ratio of (i) Consolidated Total Indebtedness at such time to
(ii) (for the purposes of Section 2.09(a) hereof only)
Consolidated EBITDA or (for all other purposes) Adjusted
Consolidated EBITDA, in each case, for the Measurement Period
then most recently ended."
(d) Section 2.01 (Amounts and Terms of Commitment): Section 2.01 shall be
amended by adding "(a)" before the first word of the first line thereof
and adding the following as a second paragraph immediately following
the last line of the first paragraph of Section 2.01:
(b) Notwithstanding anything to the contrary,
contained in Section 2.01(a), the Banks shall not be obligated
to make Revolving Loans the principal amount of which,
together with the aggregate principal amount of all
outstanding Revolving Loans plus the aggregate amount of all
outstanding Letters of Credit Obligations (exclusive of unpaid
drawings under any Letter of Credit which are repaid with the
proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans), exceeds $20,000,000
in the aggregate until the first date on which either (i) the
Administrative Agent is reasonably satisfied that the
Consolidated Leverage Ratio, on a pro forma basis, is less
than 7.00:1.00 or (b) the actual Consolidated Total Leverage
Ratio for the Measurement Period then most recently ended is
less than 7.00:1.00.
(e) SECTION 2.09 (INTEREST) Section 2.09 shall be amended as follows:
(i) in Section 2.09(a)(ii), by deleting the words
"Consolidated Total Leverage Ratio is greater than or
equal to 7.00 to 1.00 ("LEVEL VI")" and substituting
therefor the words:
"Consolidated Total Leverage Ratio is equal
to or less than 7.50 to 1.00 but greater
than or equal to 7.00 to 1.00 ("Level VI")"
(ii) in Section 2.09(a)(ii), by inserting the following
below Level VI:
-3-
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE MARGINS
------------------
Consolidated Total Leverage EURODOLLAR RATE BASE RATE
- --------------------------- --------------- ---------
Ratio is Greater Than 7.50 to
<S> <C> <C>
1.00 ("LEVEL VII") 3.000% 2.000%
</TABLE>
(iii) in Section 2.09(a)(iii), by deleting references on
the sixth and eleventh lines to "Level VI" and
replacing such references with "Level VII".
(f) SECTION 8.07 (CONSOLIDATED INTEREST COVERAGE RATIO):
The ratios set forth in Section 8.07 with respect to the periods set
forth below shall be amended by deleting the existing ratio
corresponding to the respective periods set forth below and
substituting therefor the respective ratios specified below for the
same corresponding periods:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
<S> <C>
March 31, 1999 1.40:1.00
June 30, 1999 1.40:1.00
September 30, 1999 1.40:1.00
</TABLE>
(g) SECTION 8.09 (MAXIMUM TOTAL LEVERAGE RATIO):
Section 8.09 shall be amended by deleting the words "December 31, 1998
through and including December 30, 1999" and the ratio corresponding
thereto and the words "December 31, 1999 through and including December
30, 2000" and the ratio corresponding thereto and substituting therefor
the respective ratios specified below for the corresponding periods
specified below:
<TABLE>
<CAPTION>
PERIOD RATIO
- ------ -----
<S> <C>
December 31, 1998 through and including
March 30, 1999 7.50:1.00
March 31, 1999 through and including June
29, 1999 8.25:1.00
June 30, 1999 through and including
September 29, 1999 8.25:1.00
September 30, 1999 through and including
December 30, 1999 8.00:1.00
December 31, 1999 through and including
March 30, 2000 7.25:1.00
March 31, 2000 through and including
December 30, 2000 6.75:1.00
</TABLE>
4. CONDITIONS TO EFFECTIVENESS. Provided that no
unwaived Default or Event of Default shall then exist, this Amendment shall be
deemed to be effective as of March 29, 1999
-4-
<PAGE>
(the "EFFECTIVE DATE") upon the Administrative Agent's receipt of each of the
following in form and substance satisfactory to the Administrative Agent:
(a) A duly executed original or facsimile counterpart
of this Amendment executed by the Borrower, Holdings, the
Administrative Agent and the Required Banks;
(b) True, complete and accurate copies, duly
certified by an officer of the Borrower and Holdings,
respectively, of all documents evidencing any necessary
corporate action, resolutions, consents and governmental
approvals, if any, required for the execution, delivery and
performance of this Amendment, and any other document,
instrument or agreement executed or delivered in connection
therewith by the Borrower or Holdings; and
(c) Such other documents, instruments or agreements
as the Administrative Agent may reasonably request.
5. REPRESENTATIONS AND WARRANTIES. In order to induce
the Administrative Agent and the Required Banks to enter into this Amendment,
the Borrower and Holdings hereby represent, warrant and certify to each of the
Administrative Agent and the Banks that, as of the date of this Amendment and as
of the Effective Date and after giving effect to this Amendment and to the
Waiver to Credit Agreement dated March 29, 1999 between the parties hereto in
respect of the Credit Agreement:
(a) no Default or Event of Default exists;
(b) each and every representation and warranty
contained in the Loan Documents is true, correct, complete and
accurate with the same effect as if then made, except to the
extent that such representations and warranties relate solely
to an earlier date (in which case such representations and
warranties shall have been true, correct, complete and
accurate on and as of such earlier date); and
(c) the Borrower and Holdings are in compliance with
all of the covenants contained in the Loan Documents.
6. FULL FORCE AND EFFECT. Except as specifically
modified or amended by the terms of this Amendment, the Loan Documents and all
provisions contained therein are, and shall continue, in full force and effect
and are hereby ratified and confirmed.
7. INDEMNITIES. The Borrower and Holdings shall
indemnify and hold the Required Banks, the Administrative Agent, their assignees
and participants and their respective affiliates, officers, employees,
directors, agents and attorneys (collectively, "INDEMNIFIED PARTIES") harmless
from any and all liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever incurred by the Indemnified Parties, or any of them, whether direct,
indirect or consequential, as a result of or arising from or relating to any
proceeding by, or on behalf of, any person including, without limitation,
officers, directors, agents, trustees, creditors, partners or shareholders of
the Borrower and Holdings, whether threatened or initiated, asserting any claim
for legal or equitable remedy
-5-
<PAGE>
under any statute, regulation or common law principle arising from or in
connection with the negotiation, preparation, execution, delivery, performance,
administration and enforcement of this Amendment or any other document executed
in connection herewith, provided that the Borrower and Holdings shall have no
obligation hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of any of the Indemnified Parties seeking
such indemnification. The foregoing indemnity shall survive the payment in full
of the Obligations, and shall not in any way limit or modify the provisions of
Section 12.05 of the Credit Agreement.
8. COUNTERPARTS. This Amendment may be executed in any
number of separate counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
9. MISCELLANEOUS. This Amendment shall be binding upon
all the parties to the Credit Agreement and their respective successors and
assigns, and shall inure to the benefit of, and be enforceable by, the
Administrative Agent and the Banks and their respective successors and assigns
and shall be governed by, and construed and enforced in accordance with, the
internal laws in effect in the State of New York.
[INDIVIDUAL SIGNATURE PAGES FOLLOW]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Consent to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By:
-----------------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By:
-----------------------------------------
Name:
Title:
AMERICAN LAWYER MEDIA HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
AMERICAN LAWYER MEDIA, INC.
By:
-----------------------------------------
Name:
Title:
BANKBOSTON, N.A., as a Bank
By:
-----------------------------------------
Name:
Title:
CREDIT LYONNAIS, as a Bank
By:
-----------------------------------------
Name:
Title:
-7-
<PAGE>
WAIVER AND CONSENT
AND THIRD AMENDMENT
TO CREDIT AGREEMENT
This WAIVER AND CONSENT AND THIRD AMENDMENT TO CREDIT
AGREEMENT is entered into as of the 20th day of July, 1999 (this "WAIVER AND
CONSENT") by and among AMERICAN LAWYER MEDIA HOLDINGS, INC., a Delaware
corporation ("HOLDINGS"), AMERICAN LAWYER MEDIA, INC., a Delaware corporation
(the "BORROWER"), the several lenders party hereto (the "REQUIRED BANKS") and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, as administrative agent (the "ADMINISTRATIVE AGENT").
RECITALS
A. The Borrower, Holdings, various banks and other financial
institutions or entities (collectively, the "BANKS"), the Administrative Agent,
the Issuing Bank, the Syndication Agent and the Arrangers have previously
entered into that certain Credit Agreement, dated as of March 25, 1998, as
amended by the Amendment to Credit Agreement, dated as of April 24, 1998 (the
"FIRST AMENDMENT"), among Holdings, the Borrower, the Required Banks (as defined
therein) and the Administrative Agent, and as amended by the Second Amendment to
Credit Agreement, dated as of April 26, 1999 (the "SECOND AMENDMENT"), among
Holdings, the Borrower, the Required Banks (as defined therein) and the
Administrative Agent (such Credit Agreement, as amended by the First Amendment
and the Second Amendment, collectively, the "CREDIT AGREEMENT").
B. The Borrower and Holdings have requested that the Required Banks and
the Administrative Agent grant certain waivers and consents as hereinafter
described.
C. The Required Banks and the Administrative Agent are willing to grant
the requested waivers and consents, subject to the terms and conditions set
forth herein.
D. The Borrower, Holdings, the Required Banks and the Administrative
Agent desire also to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein, any extension of credit or other financial accommodation heretofore, now
or hereafter made by any of the Banks or of the Administrative Agent to the
Borrower and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. RECITALS. The foregoing recitals are accurate and are
incorporated herein and made a part hereof.
2. DEFINITIONS AND REFERENCES. Each initially capitalized term
used herein without definition shall have the meaning ascribed to such term in
the Credit Agreement. Unless otherwise specified, references to an article, a
section, a subsection, a schedule or an exhibit are to the Credit Agreement.
<PAGE>
3. WAIVERS AND CONSENTS.
(a) On December 31, 1998, the Borrower created Professional On
Line, Inc., a Delaware corporation ("POL"), as a Subsidiary and POL issued 100
shares of common stock, par value $.01 per share, to the Borrower. Additionally,
on the same date, Counsel Connect, LLC and Law Journal Extra, Inc. merged with
and into POL, with POL being the surviving corporation in both instances. The
Administrative Agent and the Banks hereby consent to such transactions and,
subject to paragraph 3(d) below, waive any Defaults or Events of Default under
the Credit Agreement and defaults under the other Loan Documents attributable to
such transactions including, without limitation, under Credit Agreement Sections
8.02 (Consolidation, Merger, Purchase or Sale of Assets, etc.), 8.06
(Transactions with Affiliates), 8.12 (Limitation on Issuance of Capital Stock),
8.14 (Limitation on Creation of Subsidiaries), 9.01(b), (c), and (d) (Events of
Default), 7.03(a) (Notices), 6.06 (No Default), 6.15 (Subsidiaries) and 6.17
(Accuracy of Information) and Pledge Agreement Sections 3.2 (Subsequently
Acquired Securities and/or Partnership Interests) and 5 (Voting, Etc., While No
Event of Default), that may be deemed to relate to or arise from the above
described transactions.
(b) On or about July 20, 1999:
(i) NLP IP Company and The New York Law Publishing
Company intend to dividend the assets constituting the Internet and other
electronic commerce business thereof (the "INTERNET ASSETS") and intend to
transfer liabilities relating to the Internet Assets (the "INTERNET
LIABILITIES"), in each case listed respectively, on SCHEDULE 1 hereto and
SCHEDULE 2 hereto, to National Law Publishing Company, Inc. ("NLPC");
(ii) NLPC intends to dividend the Internet Assets
together with the assets constituting the Internet and other electronic commerce
business of NLPC and intends to transfer the Internet Liabilities together with
liabilities relating to the Internet and other electronic business of NLPC, in
each case listed on SCHEDULE 3 hereto, to the Borrower;
(iii) the Borrower intends to contribute to POL the
assets and intends to transfer the liabilities, in each case, described in
clauses (i) and (ii) above;
(iv) POL intends to recapitalize with the result that
100 shares of preferred stock, par value $.01 per share, of POL and 600 shares
of common stock, par value $.01 per share, of POL will, in each case, be
delivered to and owned by the Borrower; and
(v) the Borrower intends (x) to sell to the existing
stockholders of Holdings and to ALM Management Investors, L.L.C. ("ALM
MANAGEMENT") or to an entity owned by them, all of the common stock, par value
$.01 per share, of POL in consideration of $1,000,000 in cash and (y) to pledge
to the Collateral Agent, for the benefit of the Secured Creditors, pursuant to
the Pledge Agreement Section 3.2, all of the preferred stock, par value $.01 per
share, of POL.
The parties understand and agree that the Borrower may supplement or amend the
Schedules attached hereto with the prior written consent of the Administrative
Agent, which consent shall not be unreasonably delayed or withheld.
The Administrative Agent and the Banks hereby consent to such transactions and,
subject to paragraph 3(d) below, waive any Defaults or Events of Default under
the Credit Agreement and defaults under the other Loan Documents attributable to
such transactions including without limitation, Credit Agreement Sections 8.02
(Consolidation, Merger, Purchase or Sale of Assets,
-2-
<PAGE>
etc.), 8.03 (Dividends), 8.05 (Advances, Investments and Loans), 8.06
(Transactions with Affiliates), 8.12 (Limitation on Issuance of Capital Stock),
8.14 (Limitation on Creation of Subsidiaries), 9.01(b), (c), and (d) (Events of
Default), 7.03(a) (Notices), 6.06 (No Default), 6.15 (Subsidiaries) and 6.17
(Accuracy of Information), Pledge Agreement Section 6 (Dividends and Other
Distributions) and Security Agreement Sections 4.2 (Trademark: Licenses and
Assignments) and 5.2 (Patent or Copyright: Licenses and Assignments), that may
be deemed to relate to or arise from the above described transactions.
(c) Additionally, the Administrative Agent and the Banks
hereby agree that the proposed contribution of assets by the Borrower to POL
(described in clause (iii) of paragraph 3(b) above) will be excluded from any
determination of compliance by the Borrower with the investment limitations set
forth in Credit Agreement Section 8.05(xii) and (xiii).
(d) This Waiver and Consent is specifically limited in time
and scope to the occurrences described herein and the consequences of such
occurrences and shall not be deemed to extend or apply to any other event or
occurrence in existence as of the date hereof or arising hereafter. In addition,
this Waiver and Consent shall not be deemed to constitute a custom or a practice
on the part of any or all of the Banks or the Administrative Agent.
4. AMENDMENT.
(a) ADJUSTED CONSOLIDATED EBITDA The definition of "Adjusted
Consolidated EBITDA" in Section 1.01 of the Credit Agreement shall be amended by
the deletion of the existing definition and its replacement by the following:
"ADJUSTED CONSOLIDATED EBITDA" means, for any Measurement
Period, Consolidated EBITDA for such Measurement Period,
adjusted by adding thereto up to the Applicable Amount of
Development Costs actually incurred by Holdings and its
Subsidiaries for such Measurement Period in connection with a
Specified Project (defined below); PROVIDED that such
Development Costs shall only be added back to the extent that
the same reduced Consolidated Net Income for such Measurement
Period. For these purposes, and in respect of the Measurement
Periods specified, the "Applicable Amount" of Development
Costs shall be as follows:
<TABLE>
<CAPTION>
PERIOD APPLICABLE AMOUNT OF
- ------ DEVELOPMENT COSTS
--------------------
(FISCAL QUARTER ENDING)
- -----------------------
<S> <C>
March 31, 1999 1,500,000
June 30, 1999 4,100,000
September 30, 1999 6,700,000
December 31, 1999 8,700,000
March 31, 2000 9,500,000
June 30, 2000 8,600,000
September 30, 2000 6,700,000
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Period
- ------ Applicable Amount of
Development Costs
--------------------
<S> <C>
December 31, 2000 5,500,000
March 31, 2001 and each fiscal 4,000,000
quarter thereafter
</TABLE>
For purposes of this definition, "Specified Project" means the
development of: (i) the publication to be entitled the "Daily
Deal", (ii) the Law News Network and (iii) the Borrower's new
high-end news letter initiative.
(b) Article VIII of the Credit Agreement is hereto amended to
add the following new Section 8.15:
"8.15 APPROVAL FOR CERTAIN TRANSACTIONS. Notwithstanding anything in
Section 8.06 to the contrary. Holdings and its subsidiaries shall obtain
the prior written consent of the Administrative Agent, which consent
shall not be unreasonably delayed or withheld, prior to executing any
agreement relating to the categories listed on SCHEDULE 4 hereto with
Law.Com Acquisition Corp., a Delaware corporation, or its Subsidiaries;
PROVIDED, HOWEVER, that any non-material amendment, supplement or
modification to any such agreement shall not require such consent."
(c) Section 8.14 of the Credit Agreement is hereby amended (i)
to insert on the fifth line of such section (directly following the phrase "so
long as") the following: ", within 30 days of such establishment, creation or
acquisition, as the case may be," and (ii) to insert on the twelfth line of such
section (directly following the phrase "cause to be executed and delivered,")
the following: ", within 30 days of establishment, creation or acquisition, as
the case may be,".
(d) Article XII of the Credit Agreement is hereby amended to
add the following new Section 12.18:
"12.18 PROFESSIONAL ON LINE, INC. Notwithstanding any other provision of
this Agreement or any other Loan Document, upon consummation of the sale
contemplated by paragraph 3(b)(v) hereof (a) Professional On Line, Inc.,
a Delaware corporation ("POL"), and any Subsidiaries of POL from time to
time in existence, shall be excluded and released from all
representations, warranties, covenants and other obligations under the
Loan Documents applicable to Subsidiaries of the Borrower, (b) POL and
its Subsidiaries shall not be obligated to become parties to the Pledge
Agreement, the Subsidiary Guaranty, the Security Agreement, any Guarantor
Supplement or any other Loan Document but (c) the Borrower shall be
required to pledge the preferred stock of POL to the Collateral Agent
pursuant to the Pledge Agreement."
(e) Section 3.2 of the Pledge Agreement is hereby amended to
insert on the fourth line of such section (immediately following the phrase
"promptly thereafter") the following: ", and in any event within 30 days,".
-4-
<PAGE>
(f) Section 3.3 of the Pledge Agreement is hereby amended to
insert on the fourth line of such section (immediately following the phrase
"shall promptly") the following: ", and in any event within 30 days,".
5. CONDITIONS TO EFFECTIVENESS. Provided that no unwaived Default or
Event of Default shall then exist other than any Default or Event of Default
relating to or arising from any of the transactions described in paragraph 3
hereof, this Waiver and Consent shall be deemed to be effective as of July 20,
1999 (the "EFFECTIVE DATE"), provided the Administrative Agent shall have
received on or before July 20, 1999 each of the following in form and substance
satisfactory to the Administrative Agent:
(a) A duly executed original or facsimile counterpart of this
Waiver and Consent executed by the Borrower, Holdings, the Administrative Agent
and the Banks;
(b) True, complete and accurate copies, duly certified by an
officer of the Borrower and Holdings, respectively, of all documents evidencing
any necessary corporate action, resolutions, consents and governmental
approvals, if any, required for the execution, delivery and performance of this
Waiver and Consent, and any other document, instrument or agreement executed or
delivered in connection therewith by the Borrower or Holdings;
(c) Such other documents, instruments or agreements as the
Administrative Agent may reasonably request.
6. REPRESENTATIONS AND WARRANTIES. In order to induce the Administrative
Agent and the Required Banks to enter into this Waiver and Consent, the Borrower
and Holdings hereby represent, warrant and certify to each of the Administrative
Agent and the Banks that, except as described in paragraph 3 above, as of the
date of this Waiver and Consent and as of the Effective Date and after giving
effect to this Waiver and Consent:
(a) no Default or Event of Default exists before and after
giving effect to the waivers and consents contained herein;
(b) each and every representation and warranty contained in
the Loan Documents is true, correct, complete and accurate with the same effect
as if then made, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties shall have been true, correct, complete and accurate on and as of
such earlier date); and
(c) the Borrower and Holdings are in compliance with all of
the covenants contained in the Loan Documents.
7. FULL FORCE AND EFFECT. Except as specifically modified or amended by
the terms of this Waiver and Consent, the other Loan Documents and all
provisions contained therein are, and shall continue, in full force and effect
and are hereby ratified and confirmed.
8. INDEMNITIES. The Borrower and Holdings shall, jointly and severally,
indemnify and hold the Banks, the Administrative Agent, their assignees and
participants and their respective affiliates, officers, employees, directors,
agents and attorneys (collectively, "INDEMNIFIED PARTIES") harmless from any and
all liabilities, obligations, losses, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever incurred by
the Indemnified Parties, or any of them, whether direct, indirect or
consequential, as a result of or arising from or relating to any proceeding by,
or on behalf of any Person including, without limitation, officers, directors,
agents, trustees, creditors, partners or shareholders of the
-5-
<PAGE>
Borrower and Holdings, whether threatened or initiated, asserting any claim for
legal or equitable remedy under any statute, regulation or common law principle
arising from or in connection with the negotiation, preparation, execution,
delivery, performance, administration and enforcement of this Waiver and Consent
or any other document executed in connection herewith, provided that the
Borrower and Holdings shall have no obligation hereunder with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of any of the Indemnified Parties seeking such indemnification. The foregoing
indemnity shall survive the payment in full of the Obligations and the
termination of this Waiver and Consent, and shall not in any way limit or modify
the provisions of Section 12.05 of the Credit Agreement.
9. COUNTERPARTS. This Waiver and Consent may be executed in any number of
separate counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
10. MISCELLANEOUS. This Waiver and Consent shall be binding upon the
Borrower, Holdings and their successors and assigns, and shall inure to the
benefit of, and be enforceable by, the Administrative Agent and the Banks and
their respective successors and assigns and shall be governed by, and construed
and enforced in accordance with, the internal laws in effect in the State of New
York without giving effect to principles of choice of law.
[INDIVIDUAL SIGNATURE PAGES FOLLOW]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Consent to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By:
-----------------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By:
-----------------------------------------
Name:
Title:
AMERICAN LAWYER MEDIA HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
AMERICAN LAWYER MEDIA, INC.
By:
-----------------------------------------
Name:
Title:
BANKBOSTON, N.A., as a Bank
By:
-----------------------------------------
Name:
Title:
CREDIT LYONNAIS, as a Bank
By:
-----------------------------------------
Name:
Title:
-7-
<PAGE>
SCHEDULE 1
NLP IP COMPANY INTERNET ASSETS AND LIABILITIES
- - National and regional web sites
- - Law journal information systems (excluding the court calendar and other
databases)
- - Uniform resource locators relating to national and regional web sites
and law journal information systems (excluding the court calendar and
other databases)
- - Accounts receivable
- - Trade payables
- - Employee accruals and related liabilities
<PAGE>
SCHEDULE 2
THE NEW YORK LAW PUBLISHING COMPANY INTERNET ASSETS AND LIABILITIES
- - National and regional web sites
- - Law journal information systems (excluding the court calendar and other
databases)
- - Uniform resource locators relating to national and regional web sites
and law journal information systems (excluding the court calendar and
other databases)
- - Accounts receivable
- - Trade payables
- - Employee accruals and related liabilities
<PAGE>
SCHEDULE 3
NATIONAL LAW PUBLISHING COMPANY INTERNET ASSETS AND LIABILITIES
- - National and regional web sites
- - Law journal information systems (excluding the court calendar and other
databases)
- - Uniform resource locators relating to national and regional web sites
and law journal information systems (excluding the court calendar and
other databases)
- - Accounts receivable
- - Trade payables
- - Employee accruals and related liabilities
<PAGE>
SCHEDULE 4
1. License agreements relating to the MA3000 database
2. Content license agreements
3. Advertising agreements
4. Classified advertising revenue sharing agreements
5. Administrative services agreements
<PAGE>
CONSENT AND
FOURTH AMENDMENT
TO CREDIT AGREEMENT
This CONSENT AND FOURTH AMENDMENT TO CREDIT AGREEMENT is entered into
as of the __th day of March, 2000 (the "CONSENT AND FOURTH AMENDMENT") by and
among AMERICAN LAWYER MEDIA HOLDINGS, INC., a Delaware corporation ("HOLDINGS"),
AMERICAN LAWYER MEDIA, INC., a Delaware corporation (the "BORROWER"), the
several lenders from time to time party to the Consent and Fourth Amendment (the
"REQUIRED BANKS") and BANK OF AMERICA, N.A. (as successor in interest to BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION), a national banking association,
as administrative agent (the "ADMINISTRATIVE AGENT").
RECITALS
A. The Borrower, Holdings, various banks and other financial
institutions or entities (collectively, the "BANKS"), the Administrative Agent,
the Issuing Bank, the Syndication Agent and the Arrangers previously entered
into that certain Credit Agreement dated as of March 25, 1998, as amended by the
Amendment to Credit Agreement, dated as of April 24, 1998 (the "FIRST
AMENDMENT"), among Holdings, the Borrower, the Required Banks (as defined
therein) and the Administrative Agent, as further amended by the Second
Amendment to Credit Agreement, dated as of April 26, 1999 (the "SECOND
AMENDMENT"), among Holdings, the Borrower, the Required Banks (as defined
therein) and the Administrative Agent, as further amended by the Waiver and
Consent and Third Amendment to Credit Agreement, dated as of July 20, 1999 (the
"WAIVER AND CONSENT AND THIRD AMENDMENT"), among Holdings, the Borrower, the
Required Banks (as defined therein) and the Administrative Agent, and as further
modified by the Waiver to Credit Agreement dated as of November 12, 1999 (the
"WAIVER") among Holdings, the Borrower, the Required Banks and the
Administrative Agent (such Credit Agreement, as amended by the First Amendment,
the Second Amendment, the Waiver and Consent and Third Amendment, and the
Waiver, collectively, the "CREDIT AGREEMENT").
B. The Borrower and Holdings have requested that the Required Banks and
the Administrative Agent grant certain consents as hereinafter described.
C. The Required Banks and the Administrative Agent are willing to grant
the requested consents, subject to the terms and conditions set forth herein.
D. The Borrower, Holdings, the Required Banks and the Administrative
Agent desire also to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein, any extension of credit or other financial accommodation heretofore, now
or hereafter made by any of the Banks or the Administrative Agent to the
Borrower and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
1. RECITALS. The foregoing recitals are accurate and are
incorporated herein and made a part hereof.
2. DEFINITIONS AND REFERENCES. Each initially capitalized term
used herein without definition shall have the meaning ascribed to such term in
the Credit Agreement. Unless otherwise specified, references to an article, a
section, a subsection, a schedule or an exhibit are to the Credit Agreement.
3. CONSENTS.
(a) The Borrower intends to sell substantially
all of the assets and liabilities of the business of the Borrower and its direct
and indirect Subsidiaries engaged in the publication of "The Daily Deal" and
"Corporate Control Alert" in printed and electronic form to a limited liability
company (the "LLC") to be organized and owned (directly or indirectly) by all or
substantially all of the stockholders of Holdings, in return for cash
consideration and a membership interest issued by the LLC (the "MEMBERSHIP
INTEREST"). Upon the issue to it of certificates representing the Membership
Interest, the Borrower will pledge to the Collateral Agent, for the benefit of
the Secured Creditors, pursuant to Section 3.2 of the Pledge Agreement, all of
such certificates. In connection with the Transaction (as defined below),
certain assets of the business mentioned above will, prior to the sale thereof,
be dividended by one or more Subsidiaries of the Borrower to the Borrower. The
transactions referred to in this paragraph 3(a) shall be referred to in the
aggregate as the "TRANSACTION".
(b) Notwithstanding anything to the contrary in
the Loan Documents, the Administrative Agent and the Banks hereby consent to the
Transaction so long as (i) the aggregate consideration received by the Borrower
in connection therewith is at least $9,700,000, (ii) at least 75% of such
consideration consists of cash, with the balance consisting of the Membership
Interest, and (iii) all such consideration is received at the time of the
consummation of the Transaction. Upon the consummation of the Transaction, the
Administrative Agent (including in its capacity as Collateral Agent) and the
Banks hereby agree that the assets so sold shall be sold free and clear of the
Liens created by the respective Collateral Documents.
(c) The Administrative Agent and the Banks
hereby agree that the Transaction and any disposal of the Membership Internet
(which is otehrwise in accordance with the terms of the Credit Agreement) will
be excluded from any determination of compliance by the Borrower with the asset
sale limitations set forth in Credit Agreement Section 8.02(iv)and the
investment limitations set forth in Credit AGreement Section 8.05(xiii).
-2-
<PAGE>
(d) The Administrative Agent and the Banks
further agree that, notwithstanding anything to the contrary contained in
Section 2.05(f) of the Credit Agreement, the Net Sale Proceeds from (i) the
Transaction and/or (ii) any disposal of the Membership Interest (which is
otherwise in accordance with the terms of the Credit Agreement), may be
reinvested in a Person, business, assets or property which in the good faith
reasonable judgment of the Board of Directors of the Borrower will constitute or
be a part of a Related Business (as defined in the Borrower Senior Note
Indenture) within 265 days following the date of the Transaction or, as the case
may be, such disposal, so long as such reinvestment is otherwise permitted under
the Credit Agreement; PROVIDED, HOWEVER, that if all or any portion of such Net
Sale Proceeds are not so reinvested within such 265 day period (or such earlier
date, if any, on which the Board of Directors of the Borrower determines not to
so reinvest such Net Sale Proceeds), the Aggregate Revolving Commitment shall be
permanently reduced on the last day of such period (or such earlier date, as the
case may be) by an amount equal to such remaining portion.
(e) Finally, the Administrative Agent and the
Banks agree that, for the purposes of Section 2.05(h) of the Credit Agreement,
any gain on the proceeds of (i) the Transaction, and (ii) any disposal of the
Membership Interest (which is otherwise in accordance with the terms of the
Credit Agreement), received by the Borrower shall be deemed to be excluded from
the Excess Cash Flow calculation in respect of the Excess Cash Payment Period
during which such proceeds are received by the Borrower (by excluding an amount
equal to such gain from Adjusted Consolidated Net Income for such period).
(f) The consents described in this Section 3 are
specifically limited in scope to the Transaction and other circumstances
described herein and shall not be deemed to extend or apply to any other event
or circumstance in existence as of the date hereof or arising hereafter. In
addition, the consents described in this Section 3 shall not be deemed to
constitute a custom or a practice on the part of any or all of the Banks or the
Administrative Agent.
4. AMENDMENT. It is hereby agreed that the Credit Agreement
shall be amended, effective as of the Effective Date (defined below), as
follows:
(a) SECTION 1.01 (DEFINED TERMS): "ADJUSTED CONSOLIDATED EBITDA":
The definition of "Adjusted Consolidated EBITDA" in Section 1.01 of the
Credit Agreement shall be amended by the deletion of the existing
definition and its replacement by the following:
"ADJUSTED CONSOLIDATED EBITDA" means, for any Measurement Period,
Consolidated EBITDA for such Measurement Period, adjusted by adding
thereto up to the Applicable Amount of Development Costs actually
incurred by Holdings and its Subsidiaries for such Measurement Period
in connection with a Specified Project (defined below); PROVIDED that
such Development Costs shall only be added back to the extent that the
same reduced Consolidated Net Income for such Measurement Period. For
these purposes, and in respect of the Measurement Periods specified
below, the "Applicable Amount" of Development Costs shall be as
follows:
-3-
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------- -------------------------------------
MEASUREMENT PERIOD Applicable Amount of
(FISCAL QUARTER ENDING) DEVELOPMENT COSTS
------------------------------------------- ------------------------------------
<S> <C>
March 31, 1999 1,500,000
------------------------------------------- -------------------------------------
June 30, 1999 4,100,000
------------------------------------------- -------------------------------------
September 30, 1999 7,300,000
------------------------------------------- -------------------------------------
December 31, 1999 11,850,000
------------------------------------------- ------------------------------------
March 31, 2000 12,300,000
------------------------------------------- ------------------------------------
June 30, 2000 11,400,000
------------------------------------------- -------------------------------------
September 30, 2000 7,800,000
------------------------------------------- -------------------------------------
December 31, 2000 4,000,000
------------------------------------------- -------------------------------------
March 31, 2001 and each fiscal quarter 4,000,000
thereafter
------------------------------------------- -------------------------------------
</TABLE>
Provided that the Applicable Amount of Development Costs for all
Measurement Periods from (and including) the fiscal quarter ending March
31, 2000 to (and including) the fiscal quarter in which substantially all
of the assets and liabilities comprising "The Daily Deal" publication are
sold by the Borrower shall be increased by the amount of Development
Costs actually incurred by Holdings and its Subsidiaries for such
Measurement Periods in connection with the Specified Project stated under
clause (i) of the definition thereof below but only to the extent that
such Development Costs do not exceed, in aggregate, the cash
consideration received by the Borrower in respect of such sale.
For purposes of this definition, "Specified Project" means the
development of: (i) the business comprising "The Daily Deal" publication,
(ii) the business of Professional On Line, Inc., (iii) the Borrower's
high-end newsletter initiative, (iv) the Borrower's "Directory
Publishing" division, and (v) an international network of offices of the
Borrower as part of the "International Expansion" initiative."
(b) SECTION 2.01 (AMOUNTS AND TERMS OF COMMITMENT):
Section 2.01(b) of the Credit Agreement shall be amended by replacing the
amount "$20,000,000" where it appears in such Section with the amount
"$22,500,000".
(c) SECTION 8.06 (TRANSACTIONS WITH AFFILIATES):
Section 8.06 of the Credit Agreement shall be amended by the addition of
a new Section 8.06(vi) as follows:
-4-
<PAGE>
"(vi) any agreement between the LLC (or its successors) and the Borrower
or any of its Subsidiaries with respect to the business comprising "The
Daily Deal" and "Corporate Control Alert" publications so long as such
agreement is otherwise on an arms' length basis."
(d) SECTION 8.07 (CONSOLIDATED INTEREST COVERAGE RATIO):
The ratios set forth in Section 8.07 of the Credit Agreement with respect
to the periods set forth below shall be amended by deleting the existing
ratio corresponding to the respective periods set forth below and
substituting therefor the respective ratios specified below for the same
corresponding periods:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
<S> <C>
December 31, 1999 1.50:1.00
March 31, 2000 1.50:1.00
June 30, 2000 1.60:1.00
September 30, 2000 1.60:1.00
December 31, 2000 1.90:1.00
</TABLE>
(e) SECTION 8.08 (CONSOLIDATED FIXED CHARGE COVERAGE RATIO):
The ratio set forth in Section 8.08 of the Credit Agreement with respect
to the period set forth below shall be amended by deleting the existing
ratio corresponding to the period set forth below and substituting
therefor the ratio specified below for the same corresponding period:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
<S> <C>
December 31, 1999 0.95:1.00
</TABLE>
(f) SECTION 8.09 (MAXIMUM TOTAL LEVERAGE RATIO):
Section 8.09 of the Credit Agreement shall be amended by deleting the
existing table of periods and corresponding ratios and substituting
therefor the following:
<TABLE>
<CAPTION>
PERIOD RATIO
- ------ -----
<S> <C>
June 30, 1998 through and including
December 30, 1998 7.75:1.00
December 31, 1998 through and including
March 30, 1999 7.50:1.00
March 31, 1999 through and including June
29, 1999 8.25:1.00
June 30, 1999 through and including
September 29, 1999 8.25:1.00
September 30, 1999 through and including
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C>
December 30, 1999 8.00:1.00
December 31, 1999 through and including
March 30, 2000 8.25:1.00
March 31, 2000 through and including
June 29, 2000 8.25:1.00
June 30, 2000 through and including
September 29, 2000 7.75:1.00
September 30, 2000 through and including
December 30, 2000 7.75:1.00
December 31, 2000 through and including
December 30, 2001 6.75:1.00
Thereafter 6.00:1.00
</TABLE>
5. FEES. In consideration for the consents and amendments
herein contained, the Borrower and Holdings agree that a fee of $100,000 shall
be payable by the Borrower to the Administrative Agent (for the PRO RATA
distribution to the Banks), $50,000 of which shall be payable on or prior to the
Effective Date and the remaining $50,000 of which shall be payable upon (and
only upon) the date referred to in Section 2.01(b) of the Credit Agreement (as
amended hereby) on which the cap of $22,500,000 referred to therein is no longer
applicable in accordance therewith or, if earlier, the date on which such cap is
raised by agreement of the Required Banks.
6. CONDITIONS TO EFFECTIVENESS. Provided that no unwaived
Default or Event of Default shall then exist, this Consent and Fourth Amendment
shall be deemed to be effective upon (I) consummation of the initial capital
contribution to the LLC and (II) the Administrative Agent's receipt of:
(a) one or more duly executed original or facsimile
counterparts of this Consent and Fourth Amendment executed by the Borrower,
Holdings, the Administrative Agent and the Required Banks;
(b) the initial $50,000 fee referred to in Section 5
hereof;
(c) the Borrower's written confirmation of the consummation
of the Transaction, the material terms and conditions of which shall have been
approved in writing by the Administrative Agent (although this clause (c) shall
be the last event to occur under this Section 6);
(d) true, complete and accurate copies, duly certified by
an officer of the Borrower and Holdings, respectively, of all documents
evidencing any necessary corporate action, resolutions, consents and
governmental approvals, if any, required for the execution, delivery and
performance of this Consent and Fourth Amendment, and any other document,
instrument or agreement executed or delivered in connection therewith by the
Borrower or Holdings; and
-6-
<PAGE>
(e) such other documents, instruments or agreements as the
Administrative Agent may reasonably request.
The date on which all such conditions are satisfied being the
"EFFECTIVE DATE".
7. REPRESENTATIONS AND WARRANTIES. In order to induce the
Administrative Agent and the Required Banks to enter into this Consent and
Fourth Amendment, the Borrower and Holdings hereby represent, warrant and
certify to each of the Administrative Agent and the Banks that, as of the date
of this Consent and Fourth Amendment and as of the Effective Date and after
giving effect to this Consent and Fourth Amendment:
(a) no Default or Event of Default exists;
(b) each and every representation and warranty contained in
the Loan Documents is true, correct, complete and accurate with the same effect
as if then made, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties shall have been true, correct, complete and accurate on and as of
such earlier date); and
(c) the Borrower and Holdings are in compliance with all of
the covenants contained in the Loan Documents.
8. FULL FORCE AND EFFECT. Except as specifically modified or
amended by the terms of this Consent and Fourth Amendment, the Loan Documents
and all provisions contained therein are, and shall continue, in full force and
effect and are hereby ratified and confirmed.
9. INDEMNITIES. The Borrower and Holdings shall, jointly and
severally, indemnify and hold the Banks, the Administrative Agent, their
assignees and participants and their respective affiliates, officers, employees,
directors, agents and attorneys (collectively, "INDEMNIFIED PARTIES") harmless
from any and all liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever incurred by the Indemnified Parties, or any of them, whether direct,
indirect or consequential, as a result of or arising from or relating to any
proceeding by, or on behalf of, any Person including, without limitation,
officers, directors, agents, trustees, creditors, partners, shareholders or
affiliates of the Borrower, Holdings and their respective Subsidiaries, whether
threatened or initiated, asserting any claim for legal or equitable remedy under
any statute, regulation or common law principle arising from or in connection
with the negotiation, preparation, execution, delivery, performance,
administration and enforcement of this Consent and Fourth Amendment or any other
document executed in connection herewith, provided that the Borrower and
Holdings shall have no obligation hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of any of
the Indemnified Parties seeking such indemnification. The foregoing indemnity
shall survive the payment in full of the Obligations and the termination of this
Consent and Fourth Amendment, and shall not in any way limit or modify the
provisions of Section 12.05 of the Credit Agreement.
10. COUNTERPARTS. This Consent and Fourth Amendment may be
executed in any number of separate counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to be one and the
same instrument.
-7-
<PAGE>
11. MISCELLANEOUS. This Consent and Fourth Amendment shall be
binding upon all the parties to the Credit Agreement and their respective
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Administrative Agent and the Banks and their respective successors and
assigns and shall be governed by, and construed and enforced in accordance with,
the internal laws in effect in the State of New York without giving effect to
principles of choice of law.
[INDIVIDUAL SIGNATURE PAGES FOLLOW]
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Consent and Fourth Amendment to be duly executed and delivered by their proper
and duly authorized officers as of the day and year first above written.
BANK OF AMERICA, N.A. (as successor in interest to
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION), as Administrative Agent
By:
----------------------------------------------
Name:
Title:
BANK OF AMERICA, N.A. (as successor in interest to
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION), as a Bank
By:
------------------------------------------------
Name:
Title:
BANKBOSTON, N.A., as a Bank
By:
----------------------------------------------
Name:
Title:
CREDIT LYONNAIS, as a Bank
By:
-----------------------------------------------
Name:
Title:
AMERICAN LAWYER MEDIA HOLDINGS, INC.
By:
------------------------------------------------
Name:
Title:
AMERICAN LAWYER MEDIA, INC.
By:
------------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.6
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS DOCUMENT.
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
LICENSE AGREEMENT
This Agreement is entered into between American Lawyer Media, Inc., a
Delaware corporation with offices at 345 Park Avenue South, New York, NY 10010,
("ALM") and Law.com, Inc., a Delaware corporation with offices at 10 United
Nations Plaza, suite 410, San Francisco, CA 94102, ("LAW.COM").
ALM publishes several publications. Law.com desires to acquire the
exclusive worldwide rights to distribute the content of certain ALM publications
electronically and/or digitally.
THEREFORE, the parties agree as follows:
1. DEFINITIONS
As used herein the following terms shall have the following definition:
"ADDITIONAL CONTENT" means any new product created by ALM and licensed
to Law.com pursuant to Section 2.6.
"AGREEMENT YEAR" means each twelve-month period during the Term
commencing on December 1.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
the first Person. For the purposes of this Agreement, "CONTROL," when used with
respect to any Person, means the possession, directly or indirectly, of the
power to (a) vote 10% or more of the securities having ordinary voting power for
the election of directors (or comparable positions) of such Person or (b) direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"ALM CONTENT" means the material contained in the current or future ALM
Publications during the Term of this Agreement.
"ALM CONTENT FEE" means the payment due under Section 3.1.
"ALM CONTENT LICENSE" means the license with respect to the ALM Content
as set forth in Section 2.1.
"ALM PUBLICATIONS" means the publications listed in Exhibit A.
<PAGE>
"BUSINESS DAY" means a day other than a Saturday, Sunday or a day on
which banks located in New York City or San Francisco are authorized or required
to close.
"CONTENT LICENSES" means the licenses granted pursuant to Sections 2.1,
2.2 and 2.6.
"ELECTRONIC PUBLICATION" or "ELECTRONIC PUBLISHING" means all forms of
publications or publishing in digital or electronic media, whether now in
existence or in the future developed, including, without limitation, publication
or publishing on the Internet, worldwide web or any other digital or electronic
network accessible by the public and excluding all non-electronic or non-digital
media (such as, without limitation, print, television, audio tape and radio).
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
"LAW" means any federal, foreign, state or local statute, law, rule,
regulation, ordinance, code, permit, license, policy or rule of common law.
"LICENSED CONTENT" means all ALM Content, all MA 3000 Content and all
Additional Content.
"LICENSED URLS" means the URLs listed in Exhibit B.
"MA 3000 CONTENT" means all court-related information formerly used by
the Law Journal Information Systems Division of ALM in connection with its MA
3000 products.
"MA 3000 CONTENT FEE" means the payments due under Section 3.2.
"MA 3000 CONTENT LICENSE" means the license with respect to the MA 3000
Content as set forth in Section 2.2.
"NON-PUBLICATION RELATED SITES" means all State Sites which are not
Publication Related Sites.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, joint venture, trust or other entity or
organization, including a governmental authority.
"PUBLICATION RELATED SITES" means State Sites corresponding to ALM
publications, including nylj.com, callaw.com, etc.
"STATE SITES" means the network of state web sites owned and operated
by Law.com pursuant to Section 5.1.
"TERM" means the period from December 1, 1999 through November 30, 2004
and, if not terminated by one party in accordance with Section 9.1, for a
five-year renewal period.
<PAGE>
"TRANSFER" means any sale, assignment, transfer, conveyance and
delivery or other disposition.
2. LICENSE
2.1 ALM CONTENT LICENSE. ALM grants to Law.com an exclusive license to
Electronically Publish all ALM Content throughout the world.
2.2 MA 3000 LICENSE. ALM grants to Law.com an exclusive license to
Electronically Publish all MA 3000 Content throughout the world.
2.3 LIMITATIONS ON LICENSES. Law.com shall not have the right to
change, modify or adapt Licensed Content, other than editing necessary to adapt
the Licensed Content for Electronic Publication.
2.4 PRE-EXISTING RIGHTS. The Content Licenses shall be subject to
(i) ALM's existing or prospective agreements with [CONFIDENTIAL PORTION](1),
or their respective successors or assigns, which may contain components
relating to the distribution of ALM Content published through electronic
media, (ii) any agreements listed on Schedule 1 attached hereto, and (iii)
any retention of rights by third parties.
2.5 SUBLICENSES. [CONFIDENTIAL PORTION] In no event may any such
sublicense exceed the scope or Term of this Agreement and any sublicense
purporting to do so shall be void. Law.com shall notify ALM of all sublicenses
and shall provide copies thereof to ALM immediately upon execution.
2.6 ADDITIONAL CONTENT LICENSES. [CONFIDENTIAL PORTION]
2.7 DELIVERY OF CONTENT. All License Content shall be delivered to
Law.com in a mutually agreed format.
2.8 TIMING OF PUBLICATION. ALM may require that the Licensed Content be
Electronically Published simultaneously with print distribution. Law.com may not
Electronically Publish any Licensed Content before print distribution thereof
without ALM's prior consent.
2.9 PROPRIETARY RIGHTS. Law.com acknowledges and agrees that the
Licensed Content and all right, title and interest therein, is and shall remain
the exclusive property of ALM and, except as expressly described in this
Agreement, Law.com shall have no rights to copy, use, reproduce, display,
perform, modify or transfer the Licensed Content, or any derivative works
thereof. Law.com shall not use the Licensed Content for any use other than
described herein without the prior written approval of ALM.
- -----------------------
(1) Confidential treatment has been requested for all redacted portions.
<PAGE>
3. PAYMENTS
3.1 ALM CONTENT FEES. [CONFIDENTIAL PORTION]
3.2 MA CONTENT 3000 FEES. [CONFIDENTIAL PORTION]
3.3 PAYMENT SCHEDULE. The MA 3000 Content Fee and the ALM Content Fee
shall be paid in twelve equal installments on the first day of each month during
the Term.
3.4 ENHANCEMENTS. [CONFIDENTIAL PORTION]
3.5 ADDITIONAL CONTENT FEE. Law.com shall pay to ALM an Additional
Content Fee which shall be the sum of the following:
<TABLE>
<CAPTION>
---------------------------------- ---------------------------------- -------------------------------------------
Agreement Year [CONFIDENTIAL [CONFIDENTIAL PORTION]
PORTION]
---------------------------------- ---------------------------------- -------------------------------------------
<S> <C> <C>
1
---------------------------------- ---------------------------------- -------------------------------------------
2
---------------------------------- ---------------------------------- -------------------------------------------
3
---------------------------------- ---------------------------------- -------------------------------------------
4
---------------------------------- ---------------------------------- -------------------------------------------
5
---------------------------------- ---------------------------------- -------------------------------------------
</TABLE>
[CONFIDENTIAL PORTION]
4. LICENSED URLS
4.1 URL LICENSE. ALM grants to Law.com a license to the Licensed URLs.
4.2 OWNERSHIP OF URLS. ALM shall retain title to all Licensed URLS.
4.3 MAINTENANCE OF LICENSED URLS. Law.com shall be responsible for
maintenance, administration, and registration or other maintenance costs
relating to the Licensed URLS.
5. STATE SITES
5.1 OWNERSHIP. Law.com shall create, operate, and own the State Sites.
5.2 EDITORIAL CONTENT. ALM will control all Licensed Content with
respect to the editorial portion of the Publication Related Sites.
5.3 ACCESS TO SITES. All State Sites, including Publication Related
Sites, will contain dual levels of accessibility, with both paid and free
sections.
5.4 SUBSCRIPTION PRICING. [CONFIDENTIAL PORTION]
<PAGE>
5.5 MARKETING. [CONFIDENTIAL PORTION]
5.6 ACCESS TO CUSTOMER LISTS. Each party will have access to customer
lists and other data accumulated with respect to customers by the other party.
6. ADVERTISING
6.1 STATE SITE ADVERTISING. [CONFIDENTIAL PORTION]
6.2 NATIONAL ADVERTISING SALES. [CONFIDENTIAL PORTION]
6.3 CLASSIFIED ADVERTISING SALES. [CONFIDENTIAL PORTION] Law.com shall
be the exclusive on-line distributor of ALM's classified advertising during the
Term. Determination as to which ALM classified advertising appears on Law.com
shall be determined by Law.com. ALM will, on a non-exclusive basis, establish a
national online classified sales force that will be responsible for selling
online classified advertising and will work with Law.com toward establishing and
meeting revenue goals. [CONFIDENTIAL PORTION]
<TABLE>
<CAPTION>
--------------------- ----------------------------------
Agreement CONFIDENTIAL
Year PORTION
--------------------- ----------------------------------
<S> <C>
1
--------------------- ----------------------------------
2
--------------------- ----------------------------------
3
--------------------- ----------------------------------
4
--------------------- ----------------------------------
5
--------------------- ----------------------------------
</TABLE>
ALM will cooperate with Law.com to determine pricing for online
classified advertising.
6.4 INTERCOMPANY ADVERTISING / PROMOTION. [CONFIDENTIAL PORTION]
7. ALM NATIONAL PUBLICATION SITES
7.1 SITE DEVELOPMENT. Law.com shall cooperate with ALM to promptly
develop marketing sites corresponding to existing ALM national publications.
These sites will contain, among other things, limited editorial content, a table
of contents with respect to the relevant publication, and will be updated
periodically.
7.2 SITE DESIGN. The sites shall be designed to market and promote the
brand of the corresponding publication and to reroute traffic primarily to
Law.com national sites.
8. CUSTOMER SERVICE
<PAGE>
8.1 CUSTOMER SUPPORT. Law.com shall establish a customer service center
to field all calls relating to both State Sites and national Law.com sites
(including, without limitation, advertising, circulation, fulfillment and
subscription billing information), with ALM providing regional contact to assist
Law.com customer service personnel.
8.2 COSTS. [CONFIDENTIAL PORTION]
9. TERM AND TERMINATION
9.1 TERM. The term of this Agreement commences on December 1, 1999 and
shall end, unless sooner terminated on November 30, 2004. This Agreement will
automatically be renewed for an additional five-year period, unless one party
gives the other party written notice of termination before June 1, 2004.
9.2 TERMINATION FOR MATERIAL BREACH. Either party may terminate this
Agreement upon sixty (60) days written notice if the other party, its officers,
directors, partners, employees, agents or contractors, materially breaches any
of the terms of this Agreement PROVIDED, HOWEVER, that this Agreement will not
terminate if the non-terminating party has cured the breach within the sixty
(60)-day period.
9.3 TERMINATION BY ALM. In addition to various other express rights of
ALM to terminate this Agreement set forth herein, ALM shall also have the right
to terminate this Agreement immediately by written notice to Law.com if:
[CONFIDENTIAL PORTION], or (iii) upon a violation of ALM's proprietary rights
hereunder, or (iv) upon termination of the business of Law.com.
9.4 EFFECT OF TERMINATION. Upon termination or expiration of this
Agreement, Law.com shall immediately remove all Licensed Content from its sites
and immediately deliver to ALM all fees due to ALM hereunder. Upon termination
or expiration of this Agreement, all rights granted to Law.com hereunder shall
automatically revert to ALM without further notice.
10. WARRANTIES AND LIMITATION OF LIABILITY
10.1 ALM WARRANTY. [CONFIDENTIAL PORTION]
10.2 LIMITATION OF WARRANTY. THE WARRANTY STATED ABOVE IS A LIMITED
WARRANTY AND THE ONLY WARRANTY MADE BY THE PARTIES. BOTH PARTIES WAIVE ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED INCLUDING, BUT NOT LIMITED TO IMPLIED WARRANTIES
OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
10.3 LIMITATION OF LIABILITY. [CONFIDENTIAL PORTION]
<PAGE>
11. NOTICES
All notices, requests and other communications to any party hereunder
will be in writing (including facsimile transmission) and will be given to such
party at its address and facsimile number set forth in SCHEDULE 11 (which may be
changed by such party upon notice in accordance with this Section 11). All such
notices, requests and other communications will be deemed received on the date
of receipt by the recipient thereof if received prior to 5:00 p.m. in the place
of receipt and such day is a Business Day in the place of receipt. Otherwise,
any such notice, request of communication will be deemed not to have been
received until the next succeeding Business Day in the place of receipt.
12. MISCELLANEOUS
12.1 AMENDMENTS. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed, in
the case of an amendment, by each .party to this Agreement, or in the case of a
waiver, by the party against whom the waiver is to be effective.
12.2 WAIVERS. No failure or delay by any party in exercising any right,
power or privilege hereunder will operate as a waiver thereof nor will any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided will be cumulative and not exclusive of any rights or
remedies provided by Law.
12.3 EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, except as otherwise expressly provided for herein,
the parties will pay or cause to be paid all of their own fees and expenses
incident to this Agreement and in preparing to consummate and consummating the
transactions contemplated hereby, including the fees and expenses of any broker,
finder, financial advisor or similar person engaged by such party.
12.4 INDEPENDENT CONTRACTOR. The parties agree and acknowledge that the
relationship of the parties is in the nature of an independent contractor. This
Agreement shall not be deemed to create a partnership or joint venture and
neither party is the other's agent, partner, employee, or representative.
Neither party hereto shall have the right to obligate or bind the other party in
any manner whatsoever, and nothing herein contained shall give or is intended to
give any rights of any kind to any third persons.
12.5 FORCE MAJEURE. Neither party shall be deemed in default of this
Agreement to the extent that performance of its obligations or attempts to cure
any breach are delayed, restricted or prevented by reason of any acts of God,
fire, natural disaster, act of government, strikes of labor disputes, inability
to provide raw materials, power or supplies, or any other act or condition
beyond the reasonable control of the parties provided that such party gives the
other party written notice thereof and uses its best efforts to cure the delay.
In the event that any act of force majeure prevents
<PAGE>
either party from carrying out its obligations under this Agreement for a period
of more than six months, the other party may terminate this Agreement without
liability upon 30 days written notice.
12.6 SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
Transfer (including by merger or operation of Law) any of its rights or
obligations under this Agreement without the consent of each other party hereto.
Notwithstanding the foregoing, ALM may assign its rights and delegate its
obligations under this Agreement to an Affiliate of ALM without the consent of
Law.com. Any assignment in violation of this Section 12.6 will be void and of no
force and effect.
12.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted successors and assigns and
nothing herein expressed or implied will give or be construed to give to any
Person, other than the parties hereto and such permitted successors and assigns
any legal or equitable rights hereunder.
12.8 GOVERNING LAW. This Agreement will be governed by, and construed
in accordance with, the laws of the State of New York, without regard to the
conflicts of laws rules of such state.
12.9 JURISDICTION. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought in any
court of competent jurisdiction in the Borough of Manhattan or the United States
District Court for the Southern District of New York. Each of the parties hereby
(i) consents to the non-exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding,
(ii) irrevocably waives, to the fullest extent permitted by Law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum, (iii) will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iv)
will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any other court. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court.
12.10 PUBLIC ANNOUNCEMENTS. ALM and Law.com will consult with each
other before issuing, or permitting any agent or Affiliate to issue, any press
releases or otherwise making or permitting any agent or Affiliate to make any
public statements with respect to this Agreement and the transactions
contemplated hereby.
12.11 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING
OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
<PAGE>
12.12 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12.13 HEADINGS. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
12.14 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement among the parties with respect
to the subject matter of this Agreement. This Agreement (including the Schedules
and Exhibits hereto) supersedes all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
of this Agreement.
12.15 SEVERABILITY. The provisions of this Agreement are severable. If
any provision of this Agreement or the application of any such provision to any
Person or circumstance is held invalid, illegal or otherwise unenforceable, in
any respect by a competent court of jurisdiction, the remainder of the
provisions of this Agreement (or the application of such provision in other
jurisdictions or to other Persons or circumstances other than those to which it
was held invalid, illegal or unenforceable) will in no way be affected, impaired
or invalidated, and to the extent permitted by applicable Law, any such
provision will be restricted in applicability or reformed to the minimum extent
required for such provision to be enforceable. This provision will be
interpreted and enforced to give effect to the original written intent of the
parties prior to the determination of such invalidity or unenforceability.
12.16 INJUNCTIVE RELIEF. The parties acknowledge and agree that any
violation of this Agreement will result in irreparable injury to the
non-breaching party, the exact amount of which will be difficult to ascertain
and the remedies at Law for which will not be reasonable or adequate
compensation to the non-breaching party for such a violation. Accordingly, ALM
and Law.com agree that if either party violates any of the provisions of this
Agreement, in addition to any other remedy available at law or in equity, the
non-breaching party will be entitled to seek specific performance or injunctive
relief without posting a bond, or other security, and without the necessity of
proving actual damages.
12.17 NO WAIVER. No action or inaction taken or omitted pursuant to
this Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
12.18 CERTAIN INTERPRETIVE MATTERS. (a) Unless the context otherwise
requires, (i) all references to Sections, Articles, Schedules or Exhibits are to
Sections, Articles, Schedules or Exhibits of or to this Agreement; (ii) each of
the Schedules will apply only to the corresponding subsection (or, if there is
no subsection, section) of this Agreement; (iii) each term defined in this
Agreement has the meaning assigned to it; (iv) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP; (v) words in the singular include the plural and VICE VERSA; and (vi)
the term "INCLUDING" means "including without limitation." All references to
Laws in this Agreement will include any applicable amendments
<PAGE>
thereunder. All references to "$" or dollar amounts will be to lawful currency
of the United States. To the extent the term "DAY" or "DAYS" is used, it will
mean calendar days (unless referred to as a Business Day). All terms defined in
this Agreement have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. References to a Person are also to its
permitted successors and assigns.
(b) No provision of this Agreement will be interpreted in favor or, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
<PAGE>
The parties hereto have caused this Agreement to be duly executed by
their respective authorized officers or in their individual capacity, if
applicable as of the day and year first above written.
AMERICAN LAWYER MEDIA, INC.
-----------------------------
By:
Its:
LAW.COM, INC.
-----------------------------
By:
Its:
<PAGE>
Exhibit 10.7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July 27, 1999,
among American Lawyer Media, Inc., a Delaware corporation ("SELLER"), Law.Com
Acquisition Corp., a Delaware corporation ("BUYER"), and Professional On Line,
Inc., a Delaware corporation (the "COMPANY").
RECITALS
A. Seller owns all the common stock, par value $.01 per share (the "COMMON
STOCK"), and all of the preferred stock, par value $.01 per share (the
"PREFERRED STOCK", and together with the Common Stock, the "CAPITAL STOCK"), of
the Company, which shares constitute as of the date hereof, all of the issued
and outstanding Capital Stock of the Company.
B. Buyer wishes to purchase from Seller, and Seller wishes to sell to
Buyer, the Common Stock, upon the terms and subject to the conditions set forth
herein.
Accordingly, the parties hereto agree as follows:
1. PURCHASE OF THE COMMON STOCK. As of the date hereof, Buyer will
purchase from Seller, and Seller will sell, assign, transfer and deliver to
Buyer, 600 shares of the Common Stock, in consideration of the payment from
Buyer to Seller of the amount of $1,000,000 in cash.
2. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY. Each of
Seller and the Company represents and warrants to Buyer as of the date hereof as
follows:
(a) CORPORATE EXISTENCE AND POWER. Each of Seller and the Company is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Each of Seller and the Company has all corporate
power and all governmental licenses, authorizations, Permits, consents and
approvals required to carry on their respective businesses as now conducted.
(b) CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery
and performance by each of Seller and the Company of this Agreement are within
their respective corporate powers and have been, duly authorized by all
necessary corporate action on the part of each of Seller and the Company. This
Agreement has been duly executed and delivered by each of Seller and the Company
and constitutes the valid and binding agreement of each of Seller and the
Company, enforceable against each of Seller and the Company in accordance with
their respective terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar Laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
<PAGE>
(c) GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each of Seller and the Company of this Agreement require no
consent, approval, Order, authorization or action by or in respect of, or filing
with, any Governmental Authority.
(d) NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE 2(D)
attached hereto, the execution, delivery and performance by each of Seller and
the Company of this Agreement and the consummation of the transactions
contemplated hereby do not (i) violate the certificate of incorporation or
bylaws of Seller or the Company, (ii) violate any applicable Law or Order, (iii)
require any filing with or Permit, consent or approval of, or the giving of any
notice to, any Person (including filings, consents or approvals required under
any Permits of Seller or the Company or any licenses to which the Company is a
party), (iv) result in a violation or breach of, conflict with, constitute (with
or without due notice or lapse of time or both) a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or to a loss of any benefit to which the Company is
entitled under, any Contract, agreement or other instrument binding upon the
Company or any license, franchise, Permit or other similar authorization held by
the Company, or (v) result in the creation or imposition of any Lien on any
asset of the Company.
(e) CAPITALIZATION. As of the date hereof, Seller owns 600 shares of
the Common Stock and 100 shares of the Preferred Stock, which shares of the
Common Stock and the Preferred Stock represent 100% of the authorized, issued
and outstanding Capital Stock of the Company. The Common Stock to be acquired by
Buyer will be duly authorized, validly issued, fully-paid, nonassessable and
free and clear of any Liens.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to each of Seller and the Company as of the date hereof as follows:
(a) CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Buyer has all corporate power and all governmental licenses,
authorizations, Permits, consents and approvals required to carry on its
business as now conducted.
(b) CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery
and performance by Buyer of this Agreement are within Buyer's corporate powers
and have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been duly executed and delivered by Buyer and
constitutes the valid and binding agreement of Buyer, enforceable against Buyer
in accordance with its terms, except to the extent that its enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
(c) GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement require no consent, approval, Order,
authorization or action by or in respect of, or filing with, any Governmental
Authority.
<PAGE>
(d) NON-CONTRAVENTION; CONSENTS. The execution, delivery and
performance by Buyer of this Agreement, and the consummation of the transactions
contemplated hereby do not (i) violate the certificate of incorporation or
bylaws of Buyer or (ii) violate any applicable Law or Order.
4. DEFINITIONS. As used in this Agreement:
(a) "AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
the first Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, directly or indirectly, of the
power to (i) vote 10% or more of the securities having ordinary voting power for
the election of directors (or comparable positions) of such Person or (ii)
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
(b) "CONTRACTS" means any contracts (whether written or oral),
commitments, leases of personal property, purchase orders, contracts to purchase
raw materials, contracts for services and supplies, contracts to supply or sell
products and all of the other agreements (whether written or oral);
(c) "GOVERNMENTAL AUTHORITY" means any domestic or foreign
governmental or regulatory authority;
(d) "LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code, Permit, license, policy or rule of common law;
(e) "LIEN" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of this
Agreement, a Person will be deemed to own, subject to a Lien, any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset;
(f) "ORDER" means any judgment, injunction, judicial or
administrative order or decree;
(g) "PERMIT" means any government or regulatory license,
authorization, permit, franchise, consent or approval; and
(h) "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
<PAGE>
5. MISCELLANEOUS.
(a) COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same instrument.
(b) AMENDMENTS AND WAIVERS. (i) Any provision of this Agreement may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be effective.
(ii) No failure or delay by any party in exercising any right, power
or privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by Law.
(c) SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer (including by operation of Law) any of its rights or obligations under
this Agreement without the consent of each other party hereto. Notwithstanding
the foregoing, the Buyer may assign its rights and delegate its obligations
under the Agreement to an Affiliate of Buyer without the consent of any other
party hereto. Any assignment in violation of this subsection will be void AB
INITIO.
(d) NO THIRD PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted successors and assigns and
nothing herein expressed or implied will give or be construed to give to any
Person, other than the parties hereto and such permitted successors and assigns
any legal or equitable rights hereunder.
(e) GOVERNING LAW. This Agreement will be governed by, and construed
in accordance with, the internal substantive law of the State of New York.
(f) JURISDICTION. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought in any court of competent
jurisdiction in the Borough of Manhattan, New York and the United States
District Court for the Southern District of New York (assuming that such court
otherwise has jurisdiction) and each of the parties hereby consents to the
non-exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by Law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient forum. Process in any such
suit, action
<PAGE>
or proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court.
(g) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING
OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
(i) ENTIRE AGREEMENT. This Agreement (including the Schedules)
constitute the entire agreement among the parties with respect to the subject
matter of this Agreement. This Agreement (including the Schedules hereto)
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof of this Agreement.
(j) SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any Person or circumstance is held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
the remainder of the provisions of this Agreement (or the application of such
provision in other jurisdictions or to Persons or circumstances other than those
to which it was held invalid, illegal or unenforceable) will in no way be
affected, impaired or invalidated, and to the extent permitted by applicable
Law, any such provision will be restricted in applicability or reformed to the
minimum extent required for such provision to be enforceable. This provision
will be interpreted and enforced to give effect to the original written intent
of the parties prior to the determination of such invalidity or
unenforceability.
[THE REMAINDER OF THE PAGE LEFT INTENTIONALLY BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered effective as of the date first above written.
AMERICAN LAWYER MEDIA, INC.
By:
---------------------------------------
Stephen C. Jacobs
Vice President
LAW.COM ACQUISTION CORP.
By:
---------------------------------------
Anup Bagaria
Vice President
PROFESSIONAL ON LINE, INC.
By:
---------------------------------------
Stephen C. Jacobs
Vice President
<PAGE>
Exhibit 12.1
AMERICAN LAWYER MEDIA HOLDINGS, INC.
STATEMENT OF COMPUTATION OF EARNINGS TO COMBINED FIXED CHARGES
<TABLE>
<CAPTION>
For the Five For the For the
Months Ended Year Ended Year Ended
December 31, 1997 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Loss from continuing operations
before income taxes................ $(7,711) $(23,159) $(34,728)
Fixed Charges:
Interest expense................... 2,534 22,916 24,093
Rent expense (a)................... 261 1,193 1,228
Total fixed charges............ $ 2,795 $ 24,109 $ 25,321
------- -------- --------
Earnings............................. $(4,916) $ 950 $ (9,407)
------- -------- --------
Ration of earnings to fixed charges.. (b) (b) (b)
</TABLE>
- -----------------
(a) Represents one-third of rent expense which is deemed to be equivalent to an
interest factor.
(b) Earnings were inadequate to cover combined fixed charges by $7,711, $23,159
and $34,728 for the five months ended December 31, 1997 and the twelve
months ended December 31, 1998 and 1999 respectively
<PAGE>
Exhibit 21.1
Subsidiaries
The subsidiaries of American Lawyer Media Holdings, Inc. are as follows:
Name Jurisdiction of Incorporation
American Lawyer Media, Inc. Delaware
The subsidiaries of American Lawyer Media, Inc. are as follows:
Name Jurisdiction of Incorporation
National Law Publishing Company, Inc. New York
The subsidiaries of National Law Publishing Company, Inc. are as follows:
Name Jurisdiction of Incorporation
The New York Law Publishing Company New York
NLP IP Company Delaware
PPC Publishing Corporation New York
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-K FILING AT DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001059496
<NAME> AMERICAN LAWYER MEDIA HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,598
<SECURITIES> 0
<RECEIVABLES> 19,569
<ALLOWANCES> 2,758
<INVENTORY> 1,449
<CURRENT-ASSETS> 21,874
<PP&E> 20,930
<DEPRECIATION> 5,912
<TOTAL-ASSETS> 349,237
<CURRENT-LIABILITIES> 36,693
<BONDS> 219,515
0
0
<COMMON> 12
<OTHER-SE> 30,611
<TOTAL-LIABILITY-AND-EQUITY> 30,623
<SALES> 132,492
<TOTAL-REVENUES> 132,492
<CGS> 52,761
<TOTAL-COSTS> 143,314
<OTHER-EXPENSES> (187)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,093
<INCOME-PRETAX> (34,728)
<INCOME-TAX> (3,078)
<INCOME-CONTINUING> (31,650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,650)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
