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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM JANUARY 1, 1996 TO JUNE 30, 1996
--------------------------
COMMISSION FILE NO. 33-63838
NEODATA SERVICES, INC.
(a Delaware Corporation)
I.R.S. EMPLOYER IDENTIFICATION NUMBER 75-2333190
833 W. SOUTH BOULDER ROAD
LOUISVILLE, COLORADO 80027
(303) 666-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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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 REQUIREMENT 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. /X/
AS OF SEPTEMBER 20, 1996, THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S
VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $0.
AS OF SEPTEMBER 20, 1996, THE REGISTRANT HAD OUTSTANDING 1,173 SHARES OF ITS
COMMON STOCK, $.01 PAR VALUE PER SHARE.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART I
ITEM 1. BUSINESS
GENERAL
Neodata(R) Services, Inc. (the "Company"), the sole direct operating
subsidiary of Neodata Corporation ("Holding"), provides comprehensive,
integrated outsourced services to organizations using direct marketing. These
services include magazine, book, and product fulfillment, product warehousing
and distribution, telephone customer service, and marketing database
management. The Company's services are employed by various organizations using
direct marketing and are adaptable to a broad variety of products and marketing
activities.
The Company's fulfillment services include processing incoming and outgoing
mail, responding to customer mail, telephone, or on-line inquiries, preparing
renewal notifications, maintaining and managing client lists of customers and
related databases, preparing mailing labels, generating statistical and
informational reports for clients, and billing and collecting monies. The
Company also offers its clients marketing database management (which is
principally used by clients to identify the most likely purchasers of the
clients' products or services), product promotion, order taking, warehouse
storage, product distribution, collection, and follow-up consumer services. The
Company's client base includes magazine and book publishers, consumer packaged
goods companies, financial service companies, telecommunications companies,
retailers, membership and non-profit organizations, and government agencies.
BACKGROUND
Holding was formed in 1990 by a group of investors led by Hicks, Muse, Tate
& Furst Incorporated ("Hicks, Muse") to acquire the magazine fulfillment
division ("Subscription Fulfillment") of A.C. Nielsen Company ("Nielsen") and
TMI Corporation ("Telemedia") (collectively referred to as the "Services
Acquisition"). A Holding subsidiary ("Product") acquired the book and product
distribution assets of Meredith Corporation ("Meredith") in 1991 (the "Product
Acquisition"), and in 1992 Holding acquired the stock of Wiland Services, Inc.
("Database"). Each of these acquired companies had an established reputation
and long operating history in one or more specialized areas of the direct
marketing services industry. On May 5, 1993, Holding and the Company engaged
in a series of transactions that resulted in all of the operations and
substantially all of the assets of Holding, the Company, and their respective
subsidiaries (collectively, the "Neodata Companies") being held by the Company
and its subsidiaries (the "Mergers").
The Transaction
On May 5, 1993, the Neodata Companies implemented a plan (the
"Transaction") which included, among other things, the sale of $163.0 million
aggregate principal amount of the Company's 12% Senior Deferred Coupon Notes
(the "Notes"), the issuance of Holding common stock ("Holding Common Stock") to
certain affiliates of Hicks, Muse and to Electronic Data Systems Corporation
("EDS"), the repayment of substantially all of the outstanding debt of the
Neodata Companies, the Company's entering into a revolving credit facility (the
"Senior Credit Facility"), and the Mergers. In addition, the Company and EDS
entered into an Amended and Restated Agreement for Information Technology which
required EDS to manage the Company's data processing centers and to develop the
Neodata Customer Oriented Relational Environment System ("NCORE"). As discussed
herein, significant changes with respect to NCORE have occurred since the
consummation of the Transaction. See "-- The Restructuring" and "-- Impairment
of NCORE." See also "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations -- Impairment of
NCORE" and "-- The Restructuring" and Notes 11 and 18 to the Company's
Consolidated Financial Statements.
The Restructuring
During 1993, management reviewed the existing operations and focus of the
Company and adopted a plan (the "Restructuring") which included, among other
things, a new service delivery plan to transform the Company's function- based
operating divisions into customer-based service centers ("CSCs"). The Company's
1993 operating
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results included Restructuring charges of $20,280,000. During 1994, eleven
CSCs became operational and certain facilities were closed. Operations in
Ireland were restructured in 1993 and 1995. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations -- The Restructuring" and Note 18 to the Company's
Consolidated Financial Statements.
The Recapitalization; Impairment of NCORE
The Company, Holding, and EDS entered into a transaction (the
"Recapitalization") in November of 1994 which reduced the Company's obligations
owed to EDS by approximately $28.3 million and resulted in the issuance of
additional Holding equity and the recapitalization of other Holding equity. In
connection with the Recapitalization the Company entered into a new Agreement
for Information Technology Services (the "Amended IT Agreement") with EDS.
In connection the Recapitalization and the Amended IT Agreement with EDS,
the Company determined that the full value of NCORE would not be recoverable.
As a result, a $31.2 million write down of the NCORE development asset was
recorded in the fourth quarter of 1994. Costs capitalized in connection with
the development of NCORE were funded under a long- term obligation to EDS which
was released as part of the Recapitalization, and as a result, the write down
of these costs did not affect 1994 operating cash flows. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Impairment of NCORE" and Note 18 to the
Company's Consolidated Financial Statements.
Acquisitions
In May 1996 the Company acquired the product distribution assets of
Newfield Publications (the "Newfield Acquisition"). The Newfield Acquisition
included distribution machinery and equipment, a six-year lease on a 235,000
square foot distribution facility in Fairfield, Ohio, and the transfer of 55
employees from Newfield Publications to Neodata. Pursuant to the Newfield
Acquisition the Company signed a five year distribution contract with Newfield
Publications which management expects to generate approximately $3.9 million in
annual revenue.
In July 1996 the Company acquired the subscription fulfillment assets of
International Subscription Services Limited ("ISS"), a United Kingdom based
subscription fulfillment subsidiary of The Economist Newspaper Limited (the
"ISS Acquisition"). ISS provides magazine subscription fulfillment services to
The Economist Newspaper Limited in Europe and to other publications unrelated
to The Economist Newspaper Limited. The ISS Acquisition included subscription
fulfillment systems and equipment, a lease on a 10,000 square foot facility
near London, England, and the transfer of 70 employees from ISS to Neodata.
Pursuant to the ISS acquisition the Company signed a three-year subscription
fulfillment contract with The Economist Newspaper Limited which management
expects will generate approximately $4.5 million in annual revenue. Management
views the ISS Acquisition as a vehicle to become a leading provider of
subscription fulfillment services in the United Kingdom and as a first step
toward expansion into the European direct marketing industry.
DIRECT MARKETING INDUSTRY
Direct marketing is any direct communication to a consumer or business that
is designed to generate a response in the form of an order, a request for
further information, and/or a visit to a store or other place of business for
purchase of a specific product or service. Direct marketing has been utilized
extensively in the magazine, book publishing, catalog, and non-profit
industries for over ten years. Its use by companies in other industries, such
as consumer goods, telecommunications, financial services, retail, and
government, has been increasing in recent years. While the Company primarily
serves the publishing and consumer goods industries, the Company is able to
provide services to direct marketers in any industry, and its client base has
broadened from the increased utilization of direct marketing by non-traditional
users.
As the usage of direct marketing increases, direct marketing programs are
becoming more sophisticated. Complex continuity and loyalty programs utilizing
integrated coupon and premium fulfillment, distribution, telephone customer
service, and database analysis are being used to open new channels of
distribution and to increase customer loyalty. Increasingly sophisticated
database modeling and list optimization techniques are being
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used to better target existing and potential customers. The trend to outsource
direct marketing functions is being driven by economies of scale, investment
requirements in technology and capital equipment, and postal savings gained by
co-mingling of mail and parcels. Both suppliers and users in the direct
marketing industry are consolidating in order to take advantage of these
factors. The international direct marketing industry is also developing
rapidly. Like the American market in the 1980s, Europe, South America, the Far
East, and other global arenas are discovering the benefits of direct marketing.
The company believes it is well positioned to capitalize on these industry
trends.
PRODUCTS AND SERVICES
The Company provides its integrated direct marketing products and services
through three industry-focused divisions: Publishing, Consumer Products, and
Services. The Company's four principal competencies are: Fulfillment Services
(magazine, book, and product), Distribution Services (book and product),
Telephone Customer Service, and Database Marketing and Consulting Services. In
addition, the Company provides Marketing and Promotional Services and Internet
Services to a significant number of clients in various industries.
Fulfillment Services
The Company provides fulfillment services to publishers of magazines,
books, videos, and music, membership organizations, on-line subscription
service providers, and consumer products companies such as food, beverage,
tobacco, and apparel companies. Fulfillment services include processing new
orders and subscriptions, mailing of billing and renewal notices, processing
payments, responding to inquiries about account status, preparing mailing
labels, updating databases, and producing information reports. The Company
serves approximately 130 publishers of approximately 400 publications with
approximately 103 million subscribers, as well as 12 consumer products
companies who serve over 50 million customers. Typical subscription fulfillment
contract terms are for three years, and many of the Company's clients have
continuously renewed. Consumer products contract terms range from one to three
years.
Fulfillment programs also include loyalty programs, negative-option clubs,
continuity programs, and one-shot sales programs. Loyalty programs generally
involve incenting customers to purchase additional products and services by
offering logo premiums, rebates, and/or special status for their behavior.
Announcements are sent, coupons and/or points are accumulated and redeemed, and
databases are updated to reflect customer status and to support customer
service operations. Negative-option clubs mail announcements that describe the
next product that will automatically be shipped to the customer unless the
customer directs the club otherwise. Continuity programs involve a series of
sales of products to a customer over a period of time. With continuity
programs, a customer is enrolled until either the program's completion or the
customer cancels. The Company handles all of a continuity club's contacts with
its customers, including mailing the periodic offering bulletins, processing
customer billings, and receiving payments and customer inquiries. A one-shot
product program is a single sale, such as the sale of a reference book rather
than the sale of a series of books or products. The Company's services to
one-shot direct marketers include order processing, picking from inventory,
packing inventory, and shipment of products. Fulfillment clients also benefit
from the automation and economies of scale offered through the Company's mail
operations.
Distribution Services
The Company offers warehousing and distribution services to direct
marketing clients such as book clubs, music/video clubs, continuity (mail
order) clubs, and consumer packaged goods companies that make repetitive
mailings and periodic product offerings to their members or customers. The
Company's distribution services consist of customer invoicing, inventory
management and warehousing, order packaging and labeling, and package sorting
and mailing. The Company also provides its clients with daily reports of
inventory levels and shipments which enable clients to measure accurately and
efficiently the results of their marketing efforts.
The Company utilizes computer-operated automated package sorting and
manifest systems in its distribution centers in Iowa and Ohio. These systems
read bar codes applied to ordered merchandise, sort the merchandise by zip
code, and prepare detailed shipping instructions. Packages are delivered
directly to U.S. Postal Service bulk mail
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centers, resulting in significant postal discounts and more rapid shipment to
clients' customers. The Company is currently the only service bureau to offer
such a capability and ships, on average, approximately 153,000 packages per day
from its outbound warehouse/distribution centers in Iowa and Ohio. This
combination of automation and economies of scale gives the Company significant
competitive advantages.
Telephone Customer Service
The Company provides telephone customer service to a variety of clients as
an integral component of its fulfillment programs as well as on a standalone
basis. Telephone customer services consist of answering customer-initiated
calls, including the processing of customer inquiries, lead generation,
customer service, and orders received via telephone numbers presented in radio,
television, newsprint, direct mail, or catalog advertising. In addition, the
Company provides direct sales and order processing, credit card promotions,
product/service introductions, fundraising, subscription sales and renewals
(primarily for magazine and book publishers), qualifications of sales leads,
market surveys, dealer locator, consumer affairs, and order capture for a
variety of clients.
The Company's inbound services operate 24 hours a day, 365 days a year.
Because of the sophistication of the Company's telephone switching systems, it
is possible to direct calls to one or more service centers simultaneously.
Database Marketing and Modeling Services
The Company provides a variety of database marketing and modeling services
to its clients on a standalone or an integrated basis. These services include
list fulfillment, merge/purge services, database maintenance, and modeling
services.
List fulfillment services allow the client to extract a subset of their
customer files for rental to a third party. Clients can request segments of
their files based on geographic, demographic, or a wide variety of other
parameters for overnight delivery to a third party. The Company's new "List
Lightning" product allows fast and flexible fulfillment of list rental
requests.
Merge/purge refers to a process of combining and cleansing multiple lists
from multiple sources. The process can be used to merge up to 100 lists
together and to purge duplicate, undeliverable, or undesirable names. The
process also provides accounting support to ensure authorized usage of the
lists and proper payment to list owners.
The Company builds and maintains customer and promotional databases for a
number of its clients. A customer or prospect database can be built utilizing
existing customer files, promotional and sales history, or other sources of
marketing data. As new customers or prospects are added or deleted and monthly
sales transactions are received, the database is updated. This active database
is then used for a variety of promotional, analytical, or modeling functions,
all intended to better target direct marketing programs.
The Company provides market research and response analysis through the
development of sophisticated statistical models for its clients. These models
are used to identify high-potential and unprofitable segments of an existing
marketing database. By utilizing the client's current customer database and
marketing history, in addition to certain demographic, behavioral, and other
"overlaid" data available from third parties, the models can predict buyer
behavior in order to increase the effectiveness of the client's direct
marketing programs.
Marketing and Promotional Services
The Company provides promotional mailing and outbound telephone services to
direct marketing clients for the promotion and solicitation of new business.
The Company provides extensive personalized printing and mailing services to
its clients. Mailing services include first-time promotional offers, upgrade
promotions, renewals, and ongoing or continuity offers. In addition to
cost-effective print addressing and mailing services, the Company offers its
clients significant postal savings through the co-mingling of client outbound
mail.
Outbound telephone customer services entail the calling of potential
customers, and include both business-to- business telemarketing and
business-to-consumer telemarketing. In most cases, the Company works with its
clients
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in designing marketing strategies, preparing telemarketing presentations and
scripts, and training the Company's telephone sales representatives to sell
clients' products.
Internet Services
In November of 1995, the Company announced its first Internet fulfillment
and customer service offering, providing clients the option of routing new
subscription requests, product orders, and customer service requests directly
to the Company via the Internet. This alternative medium to mail or telephone
allows clients to offer on-line promotions and services via the Internet.
Transactions received via the Internet are directly entered into the Company's
existing fulfillment systems for processing. In 1996, usage of this service has
increased significantly as publishers expanded their Internet presence and
marketing initiatives.
COMPETITION
The Company has several competitors which provide a similar range of
services and integrated program support, as well as numerous competitors for
each of the primary services it offers. Some of these competitors offer
services the Company does not provide, and some have substantially greater
financial and other resources than the Company. There can be no assurance that
the Company will not encounter increased competition in the future.
Although the primary service areas in which the Company competes tend to be
highly fragmented, there is a trend toward the consolidation of previously
fragmented services into a single comprehensive provider through mergers,
acquisitions, and strategic alliances. The primary purpose of the consolidation
of previously fragmented services is to provide the convenience of "one stop
shopping" for total program management, to increase economies of scale and
improve speed of execution, and to increase the types of services that can be
cross-sold to an existing client base or offered to new clients by the
provider. In addition to building vertical expertise and expanding capacity, an
important challenge for providers in the Company's field is to satisfy client
demands for new and improved technology and greater operational efficiencies.
The primary competitors offering integrated services are DIMAC Corporation (a
subsidiary of Heritage Media Corporation), DiMark, Inc. (a subsidiary of Harte
Hanks), and Maritz.
The primary subscription fulfillment competitor of the Company is
Communications Data Services, Inc. (a subsidiary of the Hearst Corporation).
Other major competitors are Palm Coast Data (a subsidiary of Heritage Media
Corporation) and Kable News Company. The Company competes with a number of
product fulfillment, distribution, and database marketing firms, including both
in-house and contract companies. The Company's primary product fulfillment and
distribution competitors include R.R. Donnelley & Sons Company, Young America,
Gage Marketing Group, LCS Industries, Inc., Hyaid, Inc., and MBS/Multimode,
Inc. (a subsidiary of DIMAC Corporation). The Company's primary database
marketing competitors include Donnelley Marketing, Acxiom Corporation, Direct
Marketing Technology Inc., Metromail Corporation, May & Speh, Inc., and
Database America Companies, Inc.
CLIENTS
In December 1993, the Company entered into a contract with Philip Morris
Incorporated ("Philip Morris") to perform product fulfillment, distribution,
and telephone customer services for an initial term commencing in April 1994
and concluding in October 1995. In 1995, the Company entered into a similar
contract with Philip Morris for another term commencing in November 1995 and
concluding in December 1996. Management believes its prospects for continued
services are strong, however, there can be no assurances that additional
contracts with this client will be obtained subsequent to December 1996.
Revenues related to these services provided accounted for approximately 15%,
17%, 18%, and 9% of the Company's revenues in the six month periods ended June
30, 1996 and 1995 and in the years ended December 31, 1995 and 1994,
respectively.
In 1991, the Company entered into three agreements with Meredith for the
provision of subscription fulfillment services, product fulfillment services,
and product distribution services. The Company is required to provide various
fulfillment and distribution services to Meredith at the rates set forth in the
agreements. The agreements require that the Company grant certain service
credits to Meredith through June 1998. In the event that revenue from Meredith
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is insufficient to offset the scheduled credits, the Company is obligated to
pay Meredith the service credit amounts in cash. In 1995, Meredith extended its
subscription fulfillment contract with the Company through 1998. Liabilities
associated with the service credits have been recorded as a liability in the
Company's balance sheet and totaled $2.9 million and $3.5 million at June 30,
1996 and December 31, 1995, respectively. See Note 10 to the Company's
Consolidated Financial Statements. In 1995, Meredith sold its book club and
continuity business, which resulted in a decrease in revenues to the Company of
approximately $2.0 million for the six month period ended June 30, 1996 as
compared to the similar period in 1995, and $7.0 million annually in fiscal
years thereafter. Meredith accounted for approximately 8%, 10%, 10%, and 11%
of the Company's revenues in the six month periods ended June 30, 1996 and 1995
and in the years ended December 31, 1995 and 1994, respectively.
EMPLOYEES
The Company currently employs approximately 4,550 people, of whom
approximately 300 are temporary employees used to meet seasonal needs. Of the
4,550 employees, approximately 4,330 are located in the United States, 150 are
located in Ireland, and 70 are located in the United Kingdom. The Irish
employees are covered by a collective bargaining agreement with the
Manufacturing Science and Finance Union. All domestic employees are currently
non-union. Management believes its relationship with its employees is
satisfactory.
GOVERNMENT REGULATION
The direct marketing industry is affected by a variety of regulatory
issues, including Federal Trade Commission ("FTC") regulations, U.S. Postal
Service ("USPS") reclassification and postal reform, sales and use tax
legislation, as well as legislation on a variety of privacy acts.
The Telemarketing Sales Rule (the "Rule") became effective December 31,
1995. The Rule was written by the FTC to comply with the requirements of the
1994 Telemarketing Fraud and Abuse Prevention Act, which placed certain
restrictions on telemarketing activities. The Company believes it is in
compliance with all requirements of the Rule.
In July 1996, the initial phase of the 1996 Postal Classification Reform
requirements ("Classification Reform") was implemented by the USPS. The company
has met the Classification Reform requirements in its various mail preparation
and sortation systems. Additional requirements for the company's non-profit
customers will be implemented by October 1996. The USPS is in the process of
finalizing Classification Reform requirements for the Company's parcel
customers. The impact of Classification Reform includes modification to
computer software, additional procedures to ensure address accuracy, changes to
physical makeup of mail, and maximizing automation in order to gain USPS
discounts. The company expects to meet all future Classification Reform
requirements.
The United States House of Representatives is presently reviewing proposed
legislation that may make comprehensive and substantial modifications to the
Postal Reorganization Act of 1970. The proposed bill, H.R. 3717, proposes
comprehensive and substantial changes for setting postal rates. H.R. 3717
would authorize the USPS to offer volume discounts, set rates for competitive
products, require more stringent security, and initiate broad administrative
actions.
New bills are regularly introduced in Congress and state legislatures that
propose restrictions concerning distribution of personal information, privacy
in telecommunications and Internet communications, and taxation of periodicals
and direct mail merchandise. Recently the Federal government has proposed
regulations on the tobacco industry which could, among other things, place
additional restrictions on the tobacco industry's use of certain forms of
advertising. The Company cannot predict what effect, if any, such regulations
would have on its relationship with Philip Morris, a significant client of the
Company. See "Item 1. Business - Clients."
ENVIRONMENTAL REGULATION
Based upon current knowledge, the Company believes it is in material
compliance with all environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control problems, if
any,
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which the Company may encounter in the future cannot be predicted, primarily
because of the increasing number, complexity, and changing character of
environmental requirements that may be enacted or of the standards being
promulgated by federal and state authorities.
SEASONALITY
Certain elements of the Company's business are subject to seasonal
variations. Both revenues and cash needs tend to be higher in the latter part
of the third calendar quarter and in the fourth calendar quarter. The Company
believes that this increase is generally associated with the holiday activities
of the direct marketing industry and back-to-school promotional periods.
ITEM 2. PROPERTIES
PRINCIPAL PROPERTIES
The Company operates facilities in the United States and in Ireland. The
following table sets forth information regarding the principal leased and owned
properties:
<TABLE>
<CAPTION>
PRINCIPAL USE LOCATION SIZE OWNED OR LEASED
------------- -------- ---- ---------------
<S> <C> <C> <C>
Corporate Offices. . . . . . . Louisville, Colorado 97,048 square feet Owned
Fulfillment. . . . . . . . . . Knoxville, Iowa 9,000 square feet Leased
Fulfillment. . . . . . . . . . Louisville, Colorado 207,923 square feet Leased
Fulfillment. . . . . . . . . . Louisville, Colorado 193,500 square feet Leased
Fulfillment. . . . . . . . . . Boulder, Colorado 74,119 square feet Leased
Fulfillment. . . . . . . . . . Longmont, Colorado 152,200 square feet Leased
Fulfillment. . . . . . . . . . Longmont, Colorado 152,218 square feet Leased
Fulfillment. . . . . . . . . . Broomfield, Colorado 74,736 square feet Leased
Fulfillment. . . . . . . . . . Limerick, Ireland 5,890 square feet Leased
Fulfillment. . . . . . . . . . Listowel, Ireland 2,500 square feet Leased
Fulfillment. . . . . . . . . . Newcastle West, Ireland 7,878 square feet Owned
Fulfillment. . . . . . . . . . Kilmallock, Ireland 8,500 square feet Owned
Fulfillment. . . . . . . . . . Roxboro, Ireland 8,000 square feet Leased
Fulfillment. . . . . . . . . . Romford, Essex, England 10,000 square feet Leased
Distribution . . . . . . . . . Des Moines, Iowa 154,000 square feet Owned
Distribution . . . . . . . . . Des Moines, Iowa 7,500 square feet Leased
Distribution . . . . . . . . . Des Moines, Iowa 214,000 square feet Leased
Distribution . . . . . . . . . Des Moines, Iowa 173,266 square feet Leased
Distribution . . . . . . . . . Urbandale, Iowa 150,000 square feet Leased
Distribution . . . . . . . . . Clarion, Iowa 210,400 square feet Owned
Distribution . . . . . . . . . Clarion, Iowa 4,000 square feet Leased
Distribution . . . . . . . . . Fairfield, Ohio 235,000 square feet Leased
Telephone Customer Service . . Phoenix, Arizona 65,900 square feet Leased
Telephone Customer Service . . Phoenix, Arizona 40,650 square feet Leased
Database . . . . . . . . . . . Boulder, Colorado 34,026 square feet Leased
Database . . . . . . . . . . . Fredericksburg, Virginia 51,848 square feet Owned
</TABLE>
In April 1993, the Company entered into a capital lease agreement (the
"Centennial Building Capital Lease") for a new warehouse and operating facility
(the "Centennial Building") of approximately 208,000 square feet, situated on 25
acres in the Centennial Valley Industrial Park, Louisville, Colorado. In
December 1994, the Company entered into a capital lease agreement which amends
and restates the Centennial Building Capital Lease, for a second phase addition
of approximately 194,000 square feet to the Centennial Building. The initial
term of the Centennial Building Capital Lease is 20 years and total annual
payments are approximately $2.9 million.
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Under certain circumstances, the lessor of the Centennial Building (the
"Lessor") may require the Company to purchase the Centennial Building at a price
determined in accordance with a formula set forth in the Centennial Building
Capital Lease. Additionally, if the Lessor desires to sell the Centennial
Building to a bona-fide purchaser, the Company has a right of first refusal to
purchase the Centennial Building from the Lessor on the same terms as the Lessor
proposes to sell the Centennial Building to the bona-fide purchaser.
In August 1993, the Company entered into a lease for a new building in
Longmont, Colorado of approximately 152,000 square feet which houses two CSCs.
The building was occupied in January 1994. The lease term is for 15 years, with
options to terminate the lease at the end of the fifth and tenth years. In
August 1994 the Company entered into a lease with similar terms for a second
building in Longmont, Colorado of approximately the same square footage. Total
annual rent on the Longmont leases amounts to $2,140,000.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various lawsuits in the ordinary course of
business. The Company believes that the outcome of these lawsuits, individually
or in the aggregate, will not have a material adverse effect on its business or
financial condition or on future results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the quarter ended June 30, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information required by this Item is not included because there is no
established public trading market for any class of the Company's common equity.
As of September 20, 1996, Holding was the sole holder of record of the
Company's common equity.
The terms of the Indenture dated as of May 5, 1993 covering the Notes (the
"Indenture"), the Senior Credit Facility, and the Centennial Building Capital
Lease limit the ability of the Company to declare or pay any cash dividends on
the Company's common stock except for limited dividends to Holding for the
purpose of meeting expenses and an obligation of approximately $1.8 million
annually in respect of a note payable to Meredith that was assumed by Holding in
the Transaction. With the exception of such limited dividends, the Company paid
no cash dividends in the six month period ended June 30, 1996, or in the years
ended December 31, 1995, 1994, or 1993. Certain provisions of Delaware corporate
law may prohibit the payment of dividends or distributions on the Company's
common stock in certain instances. The Company intends to retain earnings for
use in its business and, except to the limited extent described above, does not
intend to pay dividends or distributions for the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data information below presents financial information
of the Company, Holding, and their predecessors for the periods indicated. The
information presented below should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and related
notes, included herein.
<TABLE>
<CAPTION>
COMPANY HOLDING (1)
------------------------------------------------ -----------
SIX SIX
MONTHS MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31,
JUNE 30, JUNE 30, ------------------------------------------------
(DOLLARS IN THOUSANDS) 1996 1995 1995 1994 1993 1992(2) 1991(3)
-------- -------- ---- ---- ---- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue . . . . . . . . . . . . . . . . $114,665 $121,859 $244,255 $221,132 $192,004 $170,934 $144,435
Expenses(4) . . . . . . . . . . . . . 101,295 108,242 215,641 201,436 179,060 154,262 124,130
Restructuring charges(5). . . . . . . 1,667 (1,236) 20,280
Impairment of assets(6) . . . . . . . 31,155 37,011
Depreciation and amortization(7). . . 7,102 7,198 14,761 13,246 29,270 23,184 18,738
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations before
interest expense and other. . . . . . 6,268 6,419 12,186 (23,469) (73,617) (6,512) 1,567
Interest expense and other(8) . . . . . 11,968 11,120 23,015 19,444 15,550 13,218 11,431
-------- -------- -------- -------- -------- -------- --------
Net loss before extraordinary loss. . (5,700) (4,701) (10,829) (42,913) (89,167) (19,730) (9,864)
Extraordinary loss - early. . . . . . .
extinguishment of debt(9) . . . . . . (7,089)
-------- -------- -------- -------- -------- -------- --------
Net loss . . . . . . . . . . . . . . $ (5,700) $ (4,701) $(10,829) $(42,913) $(96,256) $(19,730) $ (9,864)
======== ======== ======== ======== ======== ======== ========
STATEMENT OF CASH FLOWS DATA:
Net cash provided by (used in)
operating activities. . . . . . . . . $ 11,731 $ 12,225 $ 25,906 $ (574) $ 13,465 $ 11,278 $ (268)
Net cash used in investing activities . (5,241) (4,715) (11,639) (17,343) (17,838) (38,663) (12,907)
Net cash provided by (used in)
financing activities. . . . . . . . . (5,447) (7,004) (16,478) 16,290 7,874 27,799 13,295
BALANCE SHEET DATA:
Working capital(10) . . . . . . . . . . $ 22,368 $ 29,978 $ 22,205 $ 37,493 $ 22,894 $ 13,046 $ 18,474
Total assets. . . . . . . . . . . . . . 139,537 148,589 148,756 164,174 154,641 186,166 146,933
Long-term debt and capital lease
obligations, net of current 184,651 178,061 178,852 182,362 134,749 100,785 81,683
maturities. . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . 241,914 237,718 244,683 247,593 221,268 184,928 138,462
Stockholders' (deficit) equity. . . . . (102,377) (89,129) (95,927) (83,419) (66,627) 1,238 8,471
OTHER DATA:
Amortization of computer software and
intangible assets included in depreciation
and amortization shown above . . . . . $ 2,741 $ 2,234 $ 4,892 $ 3,631 $ 20,846 $ 17,060 $ 12,749
EBITDA(11). . . . . . . . . . . . . . . 13,370 13,617 26,947 20,932 (7,336) 16,672 20,305
- ----------
</TABLE>
(1) Prior to the consummation of the Mergers on May 5, 1993, the domestic
operations of the Company were conducted by four wholly-owned
subsidiaries of Holding. Holding did not conduct any material operations
separate from those of such subsidiaries. As a result of the Mergers,
the Company is the sole direct operating subsidiary of Holding and all
operations of the Neodata Companies are conducted through the Company.
Consequently, the financial information presented in respect of Holding
for the periods indicated is comparable to the financial information for
the Company as it is currently constituted. See "Item 1. Business -
Background."
(2) Includes three months of operations of Database.
(3) Includes six months of operations of Product.
9
<PAGE> 11
(4) Includes only operating and production expenses, selling, general and
administrative expenses, and provision for doubtful accounts receivable
and excludes restructuring charges, impairment of assets, depreciation
and amortization, and interest expense and other.
(5) For 1993 and 1994, consists primarily of employee separation costs,
facility closings, recruiting, relocation, asset write-downs and other
costs associated with the Company's decision to engage in the
Restructuring. For 1995, consists of employee separation costs for the
closure of additional facilities in Ireland. See "Item 1. Business -
Background - The Restructuring" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations - The Restructuring" and Note 18 to Consolidated Financial
Statements of the Company.
(6) Consists of the fourth quarter 1994 write-off of approximately $31.2
million of costs capitalized in connection with the development of
NCORE, and of the fourth quarter 1993 write-off of approximately $37.0
million of the remaining book value of intangible assets. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations - Results of Operations - The Restructuring" and "-
Impairment of NCORE." See also Note 18 to Consolidated Financial
Statements of the Company.
(7) Consists of (a) depreciation and amortization of property, plant and
equipment, (b) amortization of computer software, and (c) amortization
of intangible assets.
(8) "Other" consists solely of the write-off of $1.2 million in 1992 of
costs incurred during that year related to a proposed public offering of
Holding Common Stock which was not consummated.
(9) The Company incurred a one-time charge to operations of $7.1 million as
a result of the Transaction consisting of (a) the write-off of debt
issuance costs of $2.1 million relating to the early retirement of
certain debt, (b) the write-off of original issue discount of $2.8
million upon the early retirement of certain debt and (c) payment of
prepayment penalties of $2.2 million on the early retirement of certain
debt.
(10) Excess of current assets over current liabilities.
(11) Earnings before interest, taxes, depreciation and amortization
("EBITDA"). EBITDA also excludes charges for impairment of assets. The
Company considers EBITDA an important indicator of the operational
strength and performance of its business. EBITDA, however, should not
be considered as an alternative to operating or net income as an
indicator of the performance of the Company's businesses or as an
alternative to cash flows from operating activities as a measure of
liquidity, in each case determined in accordance with generally accepted
accounting principles.
10
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
This discussion and analysis should be read in conjunction with the
Selected Financial Data and the Consolidated Financial Statements and notes
thereto of the Company included elsewhere in this report.
The Company began operations on August 27, 1990 with the acquisition of
Subscription Fulfillment and Telemedia. On June 26, 1991, Holding acquired
Product. On September 30, 1992, Holding acquired Database. These acquisitions
have been accounted for as purchases and are included in results of operations
from the respective dates of acquisition. The purchase price of each
acquisition was allocated to the assets and liabilities based upon the fair
market values of such assets and liabilities. Holding acquired Telemedia and
Database by means of stock acquisitions. Subscription Fulfillment and Product
were each purchased as operating divisions. As a consequence, independent
financial statements did not exist for these operating divisions and adequate
allocations related to infrastructure, primarily selling, general and
administrative expenses were excluded from such divisions' results. Therefore,
the historical results of such divisions prior to their acquisition by Holding
may not be representative of their post-acquisition results.
RESULTS OF OPERATIONS
The following table sets forth the amounts and percentages of revenue
contributed by each service for the six month periods ended June 30, 1996 and
1995 and for each of the years ended December 31, 1995, 1994 and 1993 as
follows:
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------------- ---------------------------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
($ in thousands) Amount % Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Type of service:
Fulfillment. . . . . . . . . $ 70,209 61.3 $ 71,217 58.4 $143,032 58.6 $129,901 58.8 $116,002 60.5
Distribution . . . . . . . . 9,637 8.4 11,733 9.6 23,890 9.8 17,185 7.8 10,842 5.6
Telephone customer service . 22,410 19.5 26,050 21.4 51,343 21.0 44,375 20.0 37,866 19.7
Database marketing . . . . . 12,409 10.8 12,859 10.6 25,990 10.6 29,671 13.4 27,294 14.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total $114,665 100.0 $121,859 100.0 $244,255 100.0 $221,132 100.0 $192,004 100.0
======== ===== ========= ===== ======== ===== ======== ===== ======== =====
</TABLE>
THE RESTRUCTURING
During 1993, management reviewed the Company's business, including the
management, products, technology, service levels, facilities, systems, and
business strategy of the Company. The result of this review was a plan to
implement the Restructuring, which refined the strategic direction of the
Company. Expense savings associated with the elimination of nonessential
functions and excess facilities and other costs were largely offset by
transition inefficiencies through the end of 1994. Efficiencies anticipated
with the transition to CSCs were gradually realized throughout 1995. No further
cash payments or noncash charges are anticipated relating to the Restructuring.
See "Item 1. Business -- Background -- The Restructuring" and Note 18 to the
Company's Consolidated Financial Statements.
IMPAIRMENT OF NCORE
The Company reviewed NCORE between November 1994 and January 1995 and
determined that the full value of NCORE would not be recoverable. A $31.2
million writedown of NCORE was recorded in the fourth quarter of 1994. No
subsequent additions to or writedowns of NCORE have been recorded and
management does not anticipate any further additions or writedowns in future
periods. See Note 18 to the Company's Consolidated Financial Statements.
11
<PAGE> 13
THE SIX MONTH PERIOD ENDED JUNE 30, 1996, COMPARED TO THE SIX MONTH PERIOD
ENDED JUNE 30, 1995
Revenue. Revenue decreased by 5.9%, or $7.2 million, from $121.9 million
for the six month period ended June 30, 1995 to $114.7 million for the
comparable period in 1996. Approximately $3.3 million of the decrease was due
to lower revenues from Philip Morris and approximately $2.0 million of the
decrease was due to the sale of the Meredith book club and continuity business.
See "Item 1. Business -- Clients." Approximately $3.2 million of the decrease
was due to the Company's decision to downsize certain telephone customer
service operations in order to focus on more profitable market segments. The
revenue decreases were offset by a net increase in revenues from other clients
totaling approximately $1.3 million.
Expenses. Expenses decreased $6.9 million, or 6.4%, from $108.2 million
for the six month period ended June 30, 1995 to $101.3 million for the
comparable period in 1996, and decreased as a percentage of revenue from 88.8%
to 88.3%. "Expenses" as set forth in the Selected Financial Data are comprised
of the line items "operating and production," "selling, general and
administrative," and "provision for doubtful accounts receivable" as set forth
in the Company's Consolidated Financial Statements.
Operating and production expenses (excluding depreciation, amortization and
interest expense) decreased by $8.7 million, or 9.7%, from $90.7 million for
the six month period ended June 30, 1995 to $82.0 million for the comparable
period in 1996 and decreased as a percentage of revenue from 74.5% to 71.5%.
This decrease was due to the related decreases in revenue described above, as
well as operating efficiencies gained in the transition to CSCs. See "Item 1.
Business -- The Restructuring" and "-- The Restructuring."
Selling, general, and administrative expenses (including provision for
doubtful accounts receivable) increased $1.8 million, or 10.5%, from $17.5
million for the six month period ended June 30, 1995 to $19.3 million for the
comparable period in 1996, and increased as a percentage of revenue from 14.4%
to 16.9%. The increase was primarily due to increased sales and marketing
efforts and increased general corporate expenses.
Depreciation and Amortization. Charges for depreciation and amortization
expenses decreased slightly, from $7.2 million for the six month period ended
June 30, 1995 to $7.1 million for the comparable period in 1996. The decrease
was due to a decrease in depreciation and amortization on property, plant, and
equipment of $0.6 million, offset by an increase in amortization of computer
software of $0.5 million.
Income before Interest Expense and Other. The Company reported income from
operations of $6.3 million for the six month period ended June 30, 1996, a
decrease of $0.1 from the comparable period in 1995. The decrease is due to
decreased revenues and increased selling, general, and administrative expenses,
offset by decreased operating expenses, all as described above.
Interest Expense and Other. Interest expense and other increased 7.6%, or
$0.9 million, from $11.1 million for the six month period ended June 30, 1995
to $12.0 million for the comparable period in 1996. The increase in interest
expense and other was due mainly to an increase of $1.1 million in interest on
the Notes, as well as an increase of $0.3 million in interest expense under
capital lease obligations, offset by a decrease in interest of $0.5 million
under the Company's Senior Credit Facility. Under the terms of the Notes,
approximately $6.2 million in interest was accreted in 1996 as an addition to
the Notes rather than being paid in cash.
Net Loss. The Company reported net losses of $5.7 million for the six
month period ended June 30, 1996, an increase of $1.0 million over the
comparable period in 1995. The increased loss was the result of decreased
revenues, increased selling, general, and administrative expenses, and
increased interest expense, offset by decreased operating expenses, all as
described above.
Income Taxes. The Company has not accrued federal income taxes since its
inception and does not expect to incur a federal income tax liability in the
immediate future. However, during the year ended December 31, 1995 the Company
paid $129,000 in alternative minimum tax as a result of an adjustment to the
Company's net operating loss carryforwards. See Note 13 to the Company's
Consolidated Financial Statements.
12
<PAGE> 14
The affiliated group filing consolidated federal income tax returns of
Holding and its subsidiaries, including the Company (the "Affiliated Group"),
has incurred net operating losses for federal income tax purposes of $48.0
million for the period from inception through June 30, 1996. These federal
income tax net operating losses are primarily a result of the write-off of
intangible assets and software arising from the acquisitions. The Affiliated
Group expects to incur a tax net operating loss for fiscal 1997. Under certain
circumstances, a change of control of the Company would result in a loss or a
substantial limitation of the Company's tax loss carryforwards.
THE YEAR ENDED DECEMBER 31, 1995, COMPARED TO THE YEAR ENDED DECEMBER 31, 1994
Revenue. Revenue increased by 10.4%, or $23.2 million, from $221.1 million
in 1994 to $244.3 million in 1995. The increase was the result of increased
demand from existing clients of approximately $35.6 million, including an
increase of approximately $23.7 million from Philip Morris, partially offset by
the loss of certain other clients totaling approximately $12.4 million. See
"Item 1. Business -- Clients" and "-- Revenues."
Expenses. Expenses increased $14.2 million, or 7.1%, from $201.4 million
in 1994 to $215.6 million in 1995, but decreased as a percentage of revenue
from 91.1% in 1994 to 88.2% in 1995.
Operating and production expenses (excluding depreciation, amortization and
interest expense) increased by $14.7 million, or 8.8%, from $167.4 million in
1994 to $182.1 million in 1995 but decreased as a percentage of revenue from
75.7% in 1994 to 74.5% in 1995. This increase was primarily the result of
operating volumes from new business and growth from existing clients. The
decrease as a percentage of revenues was due to operating efficiencies gained
in the transition to CSCs. See "Item 1. Business -- The Restructuring and
"-- The Restructuring."
Selling, general, and administrative expenses (including provision for
doubtful accounts receivable) decreased $.5 million, or 1.3%, from $34.1
million in 1994 to $33.6 million in 1995, and decreased as a percentage of
revenue from 15.4% in 1994 to 13.7% in 1995. The decrease was primarily due to
the implementation of cost controls.
Restructuring Charges. The Company recorded $1.7 million in restructuring
charges during 1995. Adjustments during 1994 to reserves established for the
1993 Restructuring amounted to approximately $1.2 million.
Depreciation and Amortization. Charges for depreciation and amortization
expenses increased by 11.4%, or $1.6 million, from $13.2 million in 1994 to
$14.8 million in 1995. The increase was due primarily to additions to plant,
property, equipment and capitalized software.
Income (Loss) before Interest Expense and Other. The Company reported
income from operations of $12.2 million for the fiscal year ended 1995, an
increase of $35.7 million compared to the loss of $23.5 million for the fiscal
year ended 1994. The decreased loss was due to the $31.2 million impairment of
NCORE recognized in 1994, as well as the increase in revenues combined with the
decreases in selling, general, and administrative expenses as described above.
Interest Expense and Other. Interest expense and other was $23.0 million
for the fiscal year ended 1995, an increase of $3.6 million, or 18.4%, from
$19.4 million for the fiscal year ended 1994. The increase in interest expense
and other was due primarily to an increase of $1.8 million in accreted interest
related to the Notes, as well as an increase of $1.0 million in interest
expense under capital lease obligations. Under the terms of the Notes,
approximately $17.2 million in interest was accreted in 1995 as an addition to
the Notes rather than being paid in cash.
Net Loss. The Company reported net losses of $10.8 million in the year
ending December 31, 1995, as compared to net losses of $42.9 million incurred
in the year ended December 31, 1994. The decreased losses of $32.1 million are
the result of the NCORE impairment recognized in 1994 as well as increased
volumes and decreased selling, general, and administrative expenses, offset by
increased depreciation, amortization, and interest expenses, all as described
above.
13
<PAGE> 15
THE YEAR ENDED DECEMBER 31, 1994, COMPARED TO THE YEAR ENDED DECEMBER 31, 1993
Revenue. Revenue increased by 15.2%, or $29.1 million, from $192.0 million
in 1993 to $221.1 million in 1994. Approximately 69.4%, or $20.2 million, of
the increase was the result of revenue generated by a new client. The remaining
30.6%, or $8.9 million, of the increase was attributable to a $15.8 million
increase related to revenues generated by other new clients and the growth of
revenue from existing clients, offset by approximately $6.0 million decline in
revenues resulting from a reduction of telephone customer services volumes
formerly purchased by one of the Company's largest clients. See "-- Revenues".
Expenses. Expenses increased $22.3 million, or 12.5%, from $179.1 million
in 1993 to $201.4 million in 1994, but decreased as a percentage of revenue
from 93.3% in 1993 to 91.1% in 1994.
Operating and production expenses (excluding depreciation, amortization and
interest expense) increased by $23.8 million, or 16.5%, from $143.6 million in
1993 to $167.4 million in 1994, and increased as a percentage of revenue from
74.8% in 1993 to 75.7% in 1994. This increase was primarily the result of
increases in operating volumes resulting from new business and growth from
existing clients.
Selling, general, and administrative expenses (which includes provision for
doubtful accounts receivable) decreased $1.3 million, or 3.8%, from $35.4
million in 1993 to $34.1 million in 1994, and decreased as a percentage of
revenue from 18.4% in 1993 to 15.4% in 1994. The decrease in expenses was
primarily due to the addition of more expensive facilities which were offset by
decreased costs resulting from the implementation of the Restructuring, and a
decline of $0.9 million in provision for doubtful accounts receivable resulting
from improved cash collections.
Restructuring Charges. The Company recorded $20.3 million in Restructuring
charges during 1993 and made adjustments to such reserves during 1994 of
approximately $1.2 million. These adjustments were primarily related to
reductions in the anticipated costs of severance for Irish employees.
Depreciation and Amortization. Charges for depreciation and amortization
expenses decreased by 54.9%, or $16.1 million, from $29.3 million, or 15.3% of
revenue in 1993 to $13.2 million, or 6.0% of revenue in 1994. The decrease was
primarily due to the write-off of certain computer software and all intangible
assets in the fourth quarter of 1993. Amortization of intangible assets was $0
and $12.0 million during 1994 and 1993, respectively.
Impairment of NCORE. The Company incurred a charge to earnings for the
impairment of NCORE of $31.2 million during the fourth quarter of 1994. In
connection with its decision to effect the Recapitalization and enter into the
Amended IT Agreement with EDS, the Company reevaluated its business plan and
strategic technology direction and determined that NCORE's full value would not
be recoverable. As a result of such determination, a write down of $31.2
million of the NCORE development asset was required in the fourth quarter of
1994. See "-- Impairment of NCORE" and Note 18 to the Company's Consolidated
Financial Statements.
Income (Loss) before Interest Expense and Other. The Company reported
losses from operations of $23.5 million for the fiscal year ended 1994, a
decreased loss of $50.1 million compared to the loss of $73.6 million for the
fiscal year ended 1993. The decreased loss was due to the cumulative effect of
the items listed above, which consist primarily of declines in restructuring
charges of $20.3 million, intangible asset amortization expense of $12.0
million, computer software amortization expense of $5.2 million and asset
impairment expenses of $5.9 million and a general increase in income from
operations of $6.7 million.
Interest Expense and Other. Interest expense and other was $19.4 million
for the fiscal year ended 1994, an increase of $3.9 million, or 25.2%, from
$15.5 million for the fiscal year ended 1993. The increase in interest expense
and other was primarily the result of an increase of $5.8 million in accreted
interest related to the Notes. Under the terms of the Notes, approximately
$15.4 million in interest was accreted in 1994 as an addition to the Notes
rather than being paid in cash.
Net Loss. The Company reported net losses of $42.9 million in the year
ending December 31, 1994, as compared to net losses of $96.3 million incurred
in the year ended December 31, 1993. The decreased losses of
14
<PAGE> 16
$53.4 million were due to the cumulative effect of the items listed above, as
well as the repayment of outstanding indebtedness as a result of the
Transaction which resulted in $2.2 million of prepayment penalties and $4.9
million of charges to earnings in 1993, representing the write-offs of $2.1
million of unamortized debt issue costs and $2.8 million of original issue
discount.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations for the six month period ended June 30, 1996
was approximately $11.7 million, a decrease of $0.5 million, or 4.0%, from the
comparable period in 1995. The decrease was primarily due to the increased net
loss for the six month period ended June 30, 1996 and to higher collections on
accounts receivable during the six month period ended June 30, 1995, which were
attributable to the high accounts receivable balance at December 31, 1994.
Working capital decreased $7.6 million from $30.0 million at June 30, 1995 to
$22.4 million at June 30, 1996, due mainly to reductions in accounts
receivable. No amounts were outstanding under the Senior Credit Facility at
June 30, 1996.
In accordance with the terms of the Notes, interest expense was added to
the balance of the Notes on the Company's books during the period from issuance
through May 1, 1996 and accrued for payment thereafter. Interest is calculated
monthly on the accreted value of the Notes, using an annual interest rate of
12.0% compounded semi-annually. Semi-annual cash interest payments of $9.8
million on the Notes commence in November 1996. The Notes mature on May 1,
2003, when the principal balance of $163.0 million becomes due and payable.
Cash provided by operations for the year ended December 31, 1995 was
approximately $25.9 million, an increase of $26.5 million from the cash used in
operations of $0.6 million for the year ended December 31, 1994. The increase
over 1994 was primarily due to increased volumes and improved collections of
accounts receivable. Working capital decreased $15.3 million from $37.5 million
at December 31, 1994 to $22.2 million at December 31, 1995, due mainly to the
reduction in accounts receivable. Operating cash flow was used by the Company
to reduce the Senior Credit Facility to zero.
Cash used in 1994 operations was approximately $0.6 million, a decrease of
$14.1 million from the 1993 operating cash flow of $13.5 million. Property,
plant and equipment expenditures for 1994, which were primarily related to CSC
implementation, totaled $12.1 million, and 1994 software development projects
totaled $5.3 million. Such expenditures were funded primarily through
borrowings under the Senior Credit Facility. Working capital increased $14.6
million from $22.9 million in 1993 to $37.5 million in 1994. This increase was
primarily the result of higher volumes, which increased accounts receivable and
prepaid expenses.
In connection with the Transaction, the Company entered into the Senior
Credit Facility, which provides a senior revolving line of credit in the
aggregate principal amount of up to $30.0 million, as determined pursuant to a
borrowing base formula. The Senior Credit Facility was amended in 1995 and in
1996 to revise certain financial and technical covenants. The Company
anticipates utilizing the Senior Credit Facility during fiscal 1997 to fund
normal working capital requirements.
In April 1993, the Company entered into the Centennial Building Capital
Lease in the amount of $9.0 million for an operating facility in Louisville,
Colorado. Certain of the existing Company facilities were consolidated into
the new facility. In December 1994, the Company completed construction on a
second phase addition to the Centennial Building, which houses two additional
CSCs. In connection therewith, the Company entered into an additional capital
lease obligation of $12.0 million pursuant to the amended Centennial Building
Capital Lease. During 1996, the lessor modified certain financial covenants
under the Centennial Building Capital Lease.
The Indenture, the Senior Credit Facility, and the Centennial Building
Capital Lease contain certain covenants that, among other things, limit the
Company's ability to incur additional debt, create liens, pay cash dividends
(with certain exceptions), enter into sale/leaseback transactions, or enter
into certain other transactions, and which require the Company to meet certain
financial provisions. A failure by the Company to comply with the applicable
restrictions could lead to a default under the terms of the Indenture, the
Senior Credit Facility, and the Centennial Building Capital Lease. In the event
of such default, the holders of indebtedness under the Indenture and the Senior
Credit Facility could elect to declare all of the funds borrowed pursuant
thereto to be due and payable together with
15
<PAGE> 17
accrued and unpaid interest. In addition, the Lessor under the Centennial
Building Capital Lease could accelerate lease payments payable for the lease
term or require the Company to repurchase the Centennial Buildings at a defined
price. In any such event, there can be no assurance that the Company would be
able to make any such payment or borrow sufficient funds from alternative
sources on terms satisfactory to the Company in order to make such payment.
During fiscal 1997, the Company may not meet one of the financial provisions
required by both the Senior Credit Facility and Centennial Building Capital
Lease. In the event that this financial provision is not met management
believes it will be able to obtain a waiver for the provision. If management
is unsuccessful in obtaining such a waiver all amounts outstanding under the
Senior Credit Facility and the Centennial Building Capital Lease could become
currently payable.
For the year ended June 30, 1997, management expects operations, together
with borrowings under the Senior Credit Facility, will generate sufficient cash
flows to meet anticipated operating cash needs, which include semi-annual cash
interest payments of $9.8 million on the Notes commencing in November 1996.
This expectation is based upon management's assessment of various financial and
operational factors including, but not limited to, assumptions relating to
sales volumes and prices, productivity and efficiency rates, labor, employee
benefits and other fixed and variable costs, working capital requirements,
capital expenditures, and available borrowings under the Senior Credit
Facility. Should sufficient funds not be available from operations and from the
Senior Credit Facility to fund the interest payments, maintain working capital,
update technology, invest in productivity projects and meet other growth
requirements, other options would include: i) curtailing discretionary capital
expenditures; ii) reducing the costs associated with facilities management
services; iii) downsizing the Company's selling, general and administrative
overhead and iv) effecting sale/leaseback transactions to the extent permitted
under the Indenture and the Senior Credit Facility.
Inflation has not had a material impact on operations through June 30,
1996. The Company's management does not anticipate that inflation will have a
significant impact on continuing operations.
Technology Agreement. Pursuant to the Amended IT Agreement, EDS provides
information technology services (the "IT Services") to the Company. Under the
Amended IT Agreement, the Company has control over the management direction of
the IT Services and EDS' delivery of the IT Services. The Amended IT Agreement
amended, restated and supersedes the terms and conditions of all prior
information technology services agreements between the Company and EDS as of
the effective date of the Amended IT Agreement.
The Amended IT Agreement provides for an initial term commencing January 1,
1995 and concluding on March 31, 2003 unless earlier terminated or subsequently
renewed. Under the Amended IT Agreement, EDS supplies all of the Company's
information technology, equipment, and services needs with certain exceptions.
Certain information technology functions formerly performed by the Company are
included in the IT Services. Effective January 1, 1995, approximately 112
Company employees were transferred to EDS, as well as certain operating lease
obligations for equipment and software.
The Company compensates EDS for IT Services on a "cost-plus" basis. The
term "cost-plus" means that the Company reimburses EDS for EDS's direct
out-of-pocket expenses incurred by EDS in performing the IT Services and pays
EDS an amount based on a percentage of the reimbursed costs.
Fees incurred under the Amended IT Agreement for the six month period ended
June 30, 1996 were $23,583,000, including $4,659,000 of capitalized
expenditures. Fees incurred under the Amended IT Agreement for the year ended
December 31, 1995 were $44,773,000, including $7,553,000 of capitalized
expenditures. Fees incurred under the then-existing EDS information technology
services agreement for the year ended December 31, 1994 were $31,664,000,
including $5,271,000 of capitalized expenditures. The increase from 1994 to
1995 was primarily due to the transfers of employees and operating leases
discussed above. Fees incurred under the then-existing information technology
services agreement for the year ended December 31, 1993 were $35,891,000,
including $7,024,000 of capitalized expenditures.
The Company expects to spend approximately $48.7 million annually with
respect to IT Services on a cost-plus basis as discussed above, including
approximately $5.5 million of capital expenditures. Amounts expended for
16
<PAGE> 18
facilities management services may vary in accordance with the amount and kind
of services rendered, but are generally expected to remain flat or grow
commensurate with the growth in revenue for the foreseeable future.
Service Credits. In connection with the Product acquisition, the Company
entered into an agreement granting credits to Meredith against future services
to be provided by the Company through August 1998. In the event that revenue
from Meredith is insufficient to offset the scheduled service credits, the
Company is obligated to pay cash to Meredith in the amount of the remaining
service credits. In 1995, Meredith sold its book club and continuity business,
which resulted in a decrease in revenues to the Company of approximately $2.0
million for the six month period ended June 30, 1996 as compared to the similar
period in 1995, and $7.0 million annually in fiscal years thereafter. Based on
the anticipated level of revenues from Meredith, the Company believes that the
scheduled service credits due to Meredith will be fully offset by such revenues
despite the loss of the book fulfillment revenues. Total service credits due
to Meredith at June 30, 1996 and December 31, 1995 amounted to $2.9 and $3.5
million, respectively, which equal the present value of the credits discounted
at 14.5%.
Holding Obligation. Holding owes Meredith approximately $4.7 million
pursuant to a note executed in connection with the acquisition of Product.
Holding is a holding company with no independent operations. The Board of
Directors of the Company may, from time to time, declare dividends to the
extent of legally available funds to Holding in amounts sufficient to make
payments on such note.
Ireland Grants. Under the terms of a grant agreement with the Industrial
Development Agency of Ireland (the "IDA"), the IDA may demand reimbursement of
certain amounts previously advanced to the Company if the Company's employment
levels in Ireland are not sufficient. In the opinion of management, the
aggregate amount reimbursed to the IDA, if any, will not be material to the
financial position, results of operations, or cash flows of the Company. See
Note 12 to the Company's Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item is contained in a separate section
of this report. See Index of Consolidated Financial Statements and Consolidated
Financial Statement Schedule on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages, and positions of the executive officers
and directors of the Company and the directors of Holding as of September 20,
1996. All directors of Holding and the Company serve for the term for which they
are elected or until their successors are duly elected and qualified or until
death, retirement, resignation, or removal. All executive officers hold office
at the pleasure of the board of directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
A. Laurence Jones . . . . . 43 Director, President and Chief Executive Officer of Holding and the
Company
Nicholas J. Cuccaro . . . . 53 Senior Vice President, Chief Financial Officer, Secretary, and Treasurer
of Holding and the Company
Frances M. Anhut . . . . . 43 Senior Vice President - Strategic Marketing of the Company
Ed L. Frazier . . . . . . . 49 Senior Vice President - Chief Information Officer of the Company
J. Benjamin Gill . . . . . 40 Senior Vice President - Database Marketing Services of the Company
Kevin G. Heery . . . . . . 47 Senior Vice President - International Division of the Company
Susan L. Morse . . . . . . 49 Senior Vice President - Human Resources of the Company
Richard L. Rosy . . . . . . 47 Senior Vice President - Consumer Products Group of the Company
Nancy S. Talmey . . . . . . 46 Senior Vice President - Publishing Group of the Company
Kurt J. Burghardt . . . . . 61 Director of Holding and the Company
Jack D. Furst . . . . . . . 37 Director of Holding and the Company
Thomas O. Harbison . . . . 52 Director of Holding and the Company
Thomas O. Hicks . . . . . . 50 Director of Holding and the Company
Bruce W. Schnitzer . . . . 52 Director of Holding and the Company
</TABLE>
A. Laurence Jones was elected a Director of Holding effective December 14,
1993. Mr. Jones was elected President and Chief Executive Officer and Director
of Holding on March 10, 1994 and of the Company on June 30, 1993. Mr. Jones
served as President and Chief Executive Officer of GovPX, a provider of U.S.
Treasury data and pricing services, from January 1992 to August 1993. From 1987
to January 1992, Mr. Jones held the position of Sr. Vice President with
Automatic Data Processing, Inc. as the General Manager of their Institutional
Markets Division. Between 1977 and 1987, Mr. Jones held management positions at
Wang Laboratories.
Nicholas J. Cuccaro was elected as Senior Vice President and Chief
Financial Officer of Holding and the Company effective June 1994 and was
elected Secretary of the Company effective March 1995. From 1985 to June 1994,
Mr. Cuccaro served as Vice President of Finance and Administration and Chief
Financial Officer of Jupiter Technology, Inc. Mr. Cuccaro also served as
Chief Financial Officer in other technology companies after having begun his
career in public accounting with Deloitte & Touche. Mr. Cuccaro is a Certified
Public Accountant.
Frances M. Anhut was elected as Senior Vice President of Sales and
Marketing of the Company in March 1994, and subsequently changed to Senior Vice
President of Strategic Marketing in January 1996 to reflect changes brought
about by the company's realignment into industry divisions. Prior to joining
the Company, Ms. Anhut served as Executive Vice President of Praxis
International and President of its Market Pulse Division since June 1990. From
1984 to June 1990, Ms. Anhut held various positions with Computer Corporation
of America, including that of Vice President of Sales and Vice President of
North American Operations.
Ed L. Frazier was elected as Senior Vice President and Chief Information
Officer of the Company in November 1995. Prior to that time Mr. Frazier held
various positions with TRW Information Systems and Services, including
Corporate Director of Technical Services, since 1989. From 1973 to 1989, Mr.
Frazier held various positions with Chilton Corporation, including Vice
President, Data Processing Division.
18
<PAGE> 20
J. Benjamin Gill was elected as Senior Vice President of Database Marketing
Services of the Company in September 1993. Mr. Gill joined the Company (then
Wiland Services) in 1982. He held a variety of positions in sales, product
management, and account management before becoming Vice President of Client
Services in 1989.
Kevin G. Heery was appointed as Senior Vice President of the International
Division of the Company in July 1996. Prior to joining the Company in 1995,
Mr. Heery served for four years as Director of International Marketing and
Sales for the European operations of A.T. Cross. From 1989 to 1991, Mr. Heery
held the position of Chief Executive Officer of Galvia, an Ireland-based
healthcare provider.
Susan L. Morse was elected as Senior Vice President -- Human Resources of
the Company in October 1993. Prior to joining the Company, Ms. Morse held
various positions with Wang Laboratories, Inc. since 1979, including Director
of Human Resources.
Richard L. Rosy was elected as Senior Vice President of Sales of the
Company in March 1992, and subsequently changed to Senior Vice President,
Consumer Products Group in January, 1996, to reflect changes brought about by
the company's reorganization into industry divisions. Prior to joining the
Company in 1992, Mr. Rosy served as Vice President of Sales and Marketing for
A.B. Dick Company, where he held various positions since 1972.
Nancy S. Talmey was elected as Vice President of Client Services of the
Company in 1994, and subsequently changed to Senior Vice President, Publishing
Group in January, 1996, to reflect changes brought about by the company's
realignment into industry divisions. Ms. Talmey joined the Company in 1983.
Kurt J. Burghardt was elected a director of Holding and the Company in
August 1990. From 1977 to his joining the Company in August 1990, Mr. Burghardt
served as President of the Neodata Services Division of Nielsen and was
Executive Vice President of Nielsen. Mr. Burghardt began his career in 1960
with Nielsen.
Jack D. Furst was elected a director of Holding in August 1990 and a
director of the Company in April 1993. Mr. Furst is a Managing Director and
Principal of Hicks, Muse. From 1990 until 1992, Mr. Furst was Vice President,
Treasurer and Assistant Secretary of the Company. Prior to joining Hicks, Muse,
Mr. Furst was a Vice President and subsequently a partner of Hicks & Haas from
1987 to May 1989. Mr. Furst serves on the board of directors of International
Wire Holding Corp., Crain Industries, Inc., and DESA International, Inc.
Thomas O. Harbison was elected a director of Holding in August 1990 and a
director of the Company in 1990. He served as President and Chief Executive
Officer of Holding and Chairman and Chief Executive Officer of the Company from
August 1990 until June 1993. He also served as the Chairman of Holding from
June, 1993 until September 1993. From February 1983 to April 1989, he was
President of Telemedia and from 1989 through May 5, 1993, he was Chairman and
Chief Executive Officer of that company. Since October 1995, Mr. Harbison has
served as President of the Media Strategic Business Unit of EDS.
Thomas O. Hicks was elected as Chairman of Holding in June 1990 and a
director of the Company in April 1993. Effective June 1, 1993, Mr. Hicks
resigned as Chairman of Holding (but continues to serve as a Director thereof).
Mr. Hicks is Chairman and Chief Executive Officer of Hicks, Muse, a private
investment firm in Dallas and New York specializing in strategic investments,
leveraged acquisitions and recapitalizations. From 1984 to May 1989, Mr. Hicks
was Co-Chairman of the Board and Co-Chief Executive Officer of Hicks & Haas
Incorporated, a Dallas-based private investment firm ("Hicks & Haas"). Mr.
Hicks also serves as a director of Sybron Corporation, Berg Electronics, Inc.,
Chancellor Communications, and D.A.C. Vision, Inc.
Bruce W. Schnitzer was elected a director of Holding in August 1990 and a
director of the Company in April 1993. Since 1987, Mr. Schnitzer has served as
Chairman of the Board of Wand Partners Inc. which serves as the general partner
of Wand Investments L.P., a private investment firm located in New York City.
Mr. Schnitzer also serves as a director of the following publicly-held U.S.
companies: Chartwell Re Corporation, a property and casualty insurance holding
company, PennCorp Financial Group, AMRESCO Inc., and Nestor, Inc. Mr.
Schnitzer is also Chairman and director of the London- based New London
Capital, plc.
19
<PAGE> 21
COMMITTEES
Each of the boards of directors of Holding and the Company has established
an Executive Committee comprised of Messrs. Hicks and Furst, which committee
possesses the powers and discharges the duties of the Board of Directors during
the interim between meetings of the full board. Each of the boards of directors
of Holding and the Company has also established an Audit Committee comprised of
Messrs. Burghardt and Schnitzer and a Compensation Committee comprised of
Messrs. Hicks and Furst. The boards of directors of Holding and the Company
hold meetings of the committees on a regular basis.
STOCKHOLDERS AGREEMENT
In connection with the Recapitalization, Holding entered into a
Stockholders Agreement with Hicks, Muse, EDS, certain affiliates of Hicks,
Muse, certain executive officers of Holding, and certain other stockholders of
Holding (the "Stockholders Agreement"). The Stockholders Agreement provides
that each party thereto will take action within its respective power, including
voting of capital stock of Holding, required to cause all members of the Board
of Directors of Holding to at all times consist of persons designated by Hicks,
Muse.
In consideration for the execution and delivery of the Stockholders
Agreement by Holding, each other party to the Stockholders Agreement waived any
and all rights that such party possessed (with respect to registration rights
or otherwise) pursuant to that certain Amended and Restated Stockholders
Agreement dated as of May 5, 1993 among Holding and each of the parties
thereto.
Messrs. Furst, Burghardt, Hicks, and Harbison serve on the board of
directors of Holding pursuant to the terms of the Stockholders Agreement as the
nominees of Hicks, Muse. The Hicks, Muse Voting Agreement (as defined) requires
Mr. Harbison be one of Hicks, Muse's nominees to Holding's Board of Directors,
subject to certain conditions. See "Item 13. Certain Relationships and Related
Transactions -- Harbison Employment Agreement." Mr. Jones serves on the Board
of Directors pursuant to the terms of the Stockholders Agreement as the Chief
Executive Officer of Holding.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Current directors, other than Mr. Burghardt, receive no compensation for
their services as Directors; however, Directors of the Neodata Companies are
entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the Board of
Directors or committees thereof. Mr. Burghardt receives director's fees
$12,000 per year plus $1,000 for each Board meeting attended.
20
<PAGE> 22
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for the
six month period ended June 30, 1996 and for the years ended December 31, 1995,
1994, and 1993 awarded to or earned by the Chief Executive Officer of the
Company and the four other most highly compensated executive officers of the
Company serving as such at June 30, 1996.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION PERIOD ($) ($) ($) OPTIONS(#)(1) ($)
--------------------------- ------ --- --- --- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
A. LAURENCE JONES. . . . . . . . . . . . . . June 1996 175,000 176,750 --(2) 0 3,833(3)
Director, President and Chief Executive Dec. 1995 350,000 124,687 --(2) 0 10,272
Officer of Holding and the Company Dec. 1994 350,000 0 --(2) 20,673/355,578 13,555
Dec. 1993 148,077 300,000 156,227 0 37,769
NICHOLAS J. CUCCARO. . . . . . . . . . . . . June 1996 93,489 39,623 --(2) 0 377(4)
Senior Vice President, Chief Financial Dec. 1995 180,100 63,830 --(2) 0 4,386
Officer of Holding and the Company(5) Dec. 1994 96,284 12,500 74,424 1,509/25,952 114,582
Dec. 1993 0 0 0 0 0
RICHARD L. ROSY. . . . . . . . . . . . . . . June 1996 87,500 34,300 --(2) 0 191(4)
Senior Vice President - Consumer Dec. 1995 160,000 48,000 --(2) 0 22,657
Products Group of the Company Dec. 1994 140,000 0 --(2) 0 206,414
Dec. 1993 136,298 18,506 --(2) 0 1,542
FRANCES M. ANHUT . . . . . . . . . . . . . . June 1996 90,000 37,700 --(2) 0 134(4)
Senior Vice President - Strategic Dec. 1995 180,000 24,469 --(2) 0 69,091
Marketing of the Company(5) Dec. 1994 158,173 0 17,629 1,207/20,761 24,280
Dec. 1993 0 0 0 0 0
NANCY S. TALMEY. . . . . . . . . . . . . . . June 1996 87,500 28,000 --(2) 0 176(4)
Senior Vice President - Publishing Dec. 1995 150,000 27,000 --(2) 0 226
Group of the Company Dec. 1994 116,467 0 --(2) 0 230
Dec. 1993 80,000 0 --(2) 0 63
</TABLE>
- -----------------
(1) Represents options to purchase Holding Common Stock and Holding Series 2
Preferred Stock, respectively.
(2) Holding and the Company provide to certain executive officers the use of
automobiles, club memberships, insurance policies, and certain other
benefits. The aggregate incremental costs of these benefits to Holding
and the Company for such officer did not exceed the lesser of either
$50,000 or 10.0% of the total of annual salary and bonus reported for
such officer.
(3) Represents (i) $2,501 of matching contributions to a defined
contribution supplemental retirement plan, (ii) $307 in premiums for
group term life insurance pursuant to the group insurance plan of the
Company that are taxable as compensation to the executive, and (iii)
$1,025 in premiums paid by or on behalf of the Company for an additional
life insurance policy for the benefit of the executive under terms of
his employment agreement.
(4) Represents premiums for group term life insurance pursuant to the group
insurance plan of the Company that are taxable as compensation to the
executive.
(5) Mr. Cuccaro and Ms. Anhut joined the Company during 1994 and,
consequently, no compensation from the Company was awarded to or earned
by those executives during 1993.
21
<PAGE> 23
OPTION GRANTS TABLE
No options were granted during the six month period ended June 30, 1996.
OPTION EXERCISES AND YEAR-END VALUES
The following table summarizes the value of options to acquire Holding
Common Stock held by the named executive officers as of June 30, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NAME UNDERLYING UNEXERCISED IN-THE-MONEY
- ---- OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(2)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C>
A. Laurence Jones . . . . . . . . . . . . . . . . . 13,782/ 6,891* 0/ 0
237,052/ 118,526** 1,991,236/ 995,618
J. Benjamin Gill . . . . . . . . . . . . . . . . . 905/ 0* 0/ 0
15,571/ 0** 130,796/ 0
Frances M. Anhut . . . . . . . . . . . . . . . . . 805/ 402* 0/ 0
13,841/ 6,920** 116,264/ 58,132
Richard L. Rosy . . . . . . . . . . . . . . . . . . 604/ 0* 0/ 0
10,381/ 0** 87,200/ 0
Nicholas J. Cuccaro . . . . . . . . . . . . . . . . 1,006/ 503* 0/ 0
17,301/ 8,651** 145,329/ 72,665
Susan L. Morse . . . . . . . . . . . . . . . . . . 402/ 201* 0/ 0
6,920/ 3,460** 58,132/ 29,066
Nancy S. Talmey . . . . . . . . . . . . . . . . . . 402/ 0* 0/ 0
6,920/ 0** 58,132/ 0
- ----------
</TABLE>
* Represents options to purchase Holding Common Stock.
** Represents options to purchase Holding Series 2 Preferred Stock.
(1) No options were exercised by a named executive officer during the six
month period ended June 30, 1996.
(2) Value is calculated on the basis of the remainder of the per share fair
market value of Holding Common Stock, and Holding Series 2 Preferred
Stock, as applicable, minus the exercise price multiplied by the number
of shares of Holding Common Stock, and Holding Series 2 Preferred Stock,
as applicable underlying the option. The per share fair market value of
Holding Common Stock used in making the calculation is $.50. The per
share fair market value of Holding Series 2 Preferred Stock used in
making the calculation is $10.00. All amounts are rounded to the nearest
dollar.
22
<PAGE> 24
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Jones has entered into an employment contract (the "Jones Employment
Contract") with the Company. No fixed term of employment is provided by the
Jones Employment Contract. The Jones Employment Contract provides for an annual
base salary of $350,000. The Jones Employment Contract provides for the
eligibility of the executive for an annual merit bonus as established by the
board of directors pursuant to the Company's cash bonus plan as in effect from
time to time. The Jones Employment Contract provides that upon (i) a
termination of the executive's employment by the Company for any reason other
than cause, (ii) the executive's death, disability, or retirement, or (iii)
upon the termination of employment by the executive for good reason, Mr. Jones
is entitled to receive severance pay in an amount equal to his base salary for
a period equal to the longer of eighteen months or three years from the date of
the Jones Employment Contract, a prorated bonus for the year of the executive's
termination, and certain other benefits. The Jones Employment Contract provides
that in the event of the sale of the Company, the Company may terminate Mr.
Jones and provide the severance benefits discussed above or require Mr. Jones
to continue to work for a specified transition period and, unless agreed
otherwise, provide the severance benefits discussed above at the expiration of
the transition period for a period of eighteen months. For purposes of the
Jones Employment Contract, (i) "cause" includes conviction of a felony, use of
illegal drugs, fraud, or willful neglect of duties, (ii) "good reason" includes
adverse change of title, duties, responsibilities, compensation, or benefits,
and (iii) a "sale of the Company" occurs when (a) Hicks, Muse owns less than
25% of the outstanding common stock of Holding and has an unrecovered
investment in Holding and its Subsidiaries amounting to less than $1 million,
(b) Hicks, Muse receives, for its shares of Holding Common Stock, cash and/or
marketable securities equal to at least 75% of the total value of Holding
Common Stock, (c) a person or group other than Hicks, Muse acquires a majority
of the outstanding voting stock of Holding or the Company, (d) Holding or the
Company sells substantially all of its assets to someone other than Hicks,
Muse, or (e) a majority of the board of Holding or the Company consists of
persons nominated by anyone other than the then-current board.
The Company has employment agreements with Messrs. Cuccaro, Frazier, Heery,
Gill, and Rosy, and Mss. Anhut, Morse, and Talmey (collectively, the "Senior
Vice Presidents") with variable terms. The agreements provide for annual base
salaries and additional annual merit bonuses as established by the Board of
Directors. Under certain circumstances, including termination without cause (as
defined), Senior Vice Presidents will be entitled to receive (i) monthly
severance payments in an amount equal to their monthly base salary for a period
of 3-12 months, (ii) a pro-rated portion of the bonus that would have been
payable for the year in which such termination occurs, and (iii) certain other
benefits.
The Company also has change in control employment agreements (the "Change
in Control Agreements") with each of the Senior Vice Presidents, with the
exception of Mr. Heery. The Change in Control Agreements provide that for a
period of eighteen months (the "Retention Period") following a sale of the
Company (as defined), if the Company terminates the employee for reasons other
than cause (as defined), the employee shall receive severance pay equal to the
employee's aggregate base salary through the remainder of the Retention Period.
The Change in Control Agreements also provide that in the event of a sale of
the Company (as defined) in which the holders of Holding Preferred Stock
receive at least $125,000,000 in the aggregate, the employee shall receive a
retention bonus equal to the 100% of the employee's then- existing base salary.
The Company's aggregate obligation under the Change in Control Agreements is
limited to $3,000,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Furst, who is also a director of Holding and the Company, is Managing
Director of Hicks, Muse. Mr. Hicks, who is also a director of Holding and the
Company, is Chairman and Chief Executive Officer of Hicks, Muse. The Company
has engaged Hicks, Muse to provide financial advisory services during the
ten-year period ending August 22, 2000, in consideration for which Hicks, Muse
will receive aggregate fees of approximately $1,800,000, which is currently
payable in forty equal quarterly installments of $45,000. Hicks, Muse is also
entitled to reimbursement for all reasonable and customary disbursements and
out-of-pocket expenses incurred in the performance of those financial advisory
services and will be indemnified by the Company against certain liabilities and
expenses. During the six month period ended June 30, 1996, Hicks, Muse received
fees pursuant to such agreement of $90,000.
23
<PAGE> 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding shares of common stock of the Company are
held by Holding. The following table sets forth certain information as of
September 20, 1996, regarding the beneficial ownership of the equity securities
of Holding by each person who is known by Holding to beneficially own more than
5% of any class of Holding's voting securities, by the directors of the
Company, and by the executive officers of the Company named in the Summary
Compensation Table, individually, and by the directors and all executive
officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT/NATURE PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OF OWNERSHIP CLASS
-------------- ---------------- ------------ -----
5% STOCKHOLDERS:
<S> <C> <C> <C>
Common Stock Thomas O. Hicks 356,421(1) 84.27%
200 Crescent Court, Suite 1600
Dallas, TX 75201
Common Stock HMC/Neodata, L.P. 147,065 37.86%
200 Crescent Court, Suite 1600
Dallas, TX 75201
Common Stock HM/Neodata DBMS, L.P. 98,210 25.29%
200 Crescent Court, Suite 1600
Dallas, TX 75201
Common Stock Bruce W. Schnitzer 47,094(2) 12.10%
630 5th Avenue, Suite 2435
New York, NY 10111
Common Stock Wand/Neodata Investments, L.P. 47,094(3) 12.10%
30 Rockefeller Plaza, Suite 3226
New York, NY 10112
Common Stock Thomas O. Harbison 22,901(4) 5.79%
5400 Legacy Drive, H1-5B-29
Plano, TX 75024
Common Stock Steven L. Korby 19,912 5.07%
15110 North Dallas Parkway
Dallas, TX 75248
MANAGEMENT AND
DIRECTORS:
Common Stock A. Laurence Jones 13,782(5) 3.43%
(director of Holding and the Company
and named executive officer)
Common Stock Nicholas J. Cuccaro 1,006(5) *
(named executive officer)
Common Stock J. Benjamin Gill 905(5) *
(named executive officer)
Common Stock Frances M. Anhut 805(5) *
(named executive officer)
Common Stock Richard L. Rosy 604(5) *
(named executive officer)
</TABLE>
24
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
Common Stock Susan L. Morse 402(5) *
(named executive officer)
Common Stock Nancy S. Talmey 402(5) *
(named executive officer)
Common Stock Thomas O. Hicks 356,421(1) 84.27%
(director of Holding and the Company)
Common Stock Bruce W. Schnitzer 47,094(2) 12.10%
(director of Holding and the Company)
Common Stock Thomas O. Harbison 22,901(4) 5.79%
(director of Holding and the Company)
Common Stock Jack D. Furst 1,998 *
(director of Holding and the Company)
Common Stock Kurt J. Burghardt 805 *
(director of Holding and the Company)
Common Stock DIRECTORS AND EXECUTIVE OFFICERS 384,251 88.51%
AS A GROUP
Series 2 A. Laurence Jones 237,052(6) 3.43%
Preferred Stock (director of Holding and the Company
and named executive officer)
Series 2 Nicholas J. Cuccaro 17,301(6) *
Preferred Stock (named executive officer)
Series 2 J. Benjamin Gill 15,571(6) *
Preferred Stock (named executive officer)
Series 2 Frances M. Anhut 13,841(6) *
Preferred Stock (named executive officer)
Series 2 Richard L. Rosy 10,381(6) *
Preferred Stock (named executive officer)
Series 2 Susan L. Morse 6,920(6) *
Preferred Stock (named executive officer)
Series 2 Nancy S. Talmey 6,920(6) *
Preferred Stock (named executive officer)
Series 2 Thomas O. Hicks 6,130,445(7) 84.27%
Preferred Stock (director of Holding and the Company)
Series 2 Bruce W. Schnitzer 810,017(8) 12.10%
Preferred Stock (director of Holding and the Company)
Series 2 Thomas O. Harbison 393,899(9) 5.79%
Preferred Stock (director of Holding and the Company)
Series 2 Jack D. Furst 34,358 *
Preferred Stock (director of Holding and the Company)
Series 2 Kurt J. Burghardt 13,841 *
Preferred Stock (director of Holding and the Company)
Series 2 DIRECTORS AND EXECUTIVE OFFICERS 6,609,119 88.51%
Preferred Stock AS A GROUP
</TABLE>
- ----------
* Represents less than 1%.
25
<PAGE> 27
(1) Includes (i) 4,459 shares of Common Stock held directly of record by
Thomas O. Hicks or by trusts pursuant to which Mr. Hicks is sole trustee
and has sole investment and voting power, (ii) 147,065 shares of Common
Stock held directly of record by HMC/Neodata, (iii) 98,210 shares of
Common Stock held directly of record by HM/DBMS, (iv) 47 shares of Common
Stock held directly of record by an employee of Hicks, Muse, for which
Mr. Hicks has sole investment and voting power, and (v) 106,640 shares of
Common Stock beneficially owned by other stockholders (including, among
others, Wand and Messrs. Furst and Turner) who are obligated pursuant to
the Stockholders Agreement to vote their shares of Holding Common Stock
in favor of nominees of HMC/Neodata for election to Holding's board of
directors.
HMC/Neodata is a limited partnership in which the sole general partner is
HMC Partners, L.P., a limited partnership in which the managing general
partner is Hicks, Muse. Mr. Hicks is a controlling stockholder of Hicks,
Muse and is also its Chairman of the Board, President, Chief Operating
Officer, Chief Executive Officer, and Secretary. Accordingly, Mr. Hicks
may be deemed to be the beneficial owner of Common Stock held by
HMC/Neodata. John R. Muse and Jack D. Furst are officers, directors and
minority stockholders of Hicks, Muse and as such may be deemed to share
with Mr. Hicks the power to vote or dispose of Common Stock held by
HMC/Neodata. HMC/Neodata and each of Messrs. Hicks, Muse, and Furst
disclaims the existence of a group and disclaims beneficial ownership of
Common Stock not held directly of record by it or him.
HM/DBMS is a limited partnership in which the sole general partner is HMC
Partners, L.P., a limited partnership in which the managing general
partner is Hicks, Muse. Mr. Hicks may be deemed to be the beneficial
owner of Common Stock held by HM/DBMS. Messrs. Muse and Furst may be
deemed to share with Mr. Hicks the power to vote or dispose of Common
Stock held by HM/DBMS. HM/DBMS and each of Messrs. Hicks, Muse, and Furst
disclaims the existence of a group and disclaims beneficial ownership of
Common Stock not held directly of record by it or him.
Mr. Hicks may be deemed to be the beneficial owner of Common Stock held
by Hicks, Muse. Messrs. Muse and Furst may be deemed to share with Mr.
Hicks the power to vote or dispose of Common Stock held by Hicks, Muse.
Hicks, Muse and each of Messrs. Hicks, Muse, and Furst disclaims the
existence of a group and disclaims beneficial ownership of Common Stock
not held directly of record by it or him.
(2) Mr. Schnitzer holds no shares of Common Stock directly. Includes (i)
46,381 shares of Common Stock held directly of record by Wand and (ii)
713 shares of Common Stock issuable to Wand pursuant to a warrant issued
in connection with the formation of the Company. Mr. Schnitzer is a
director, an executive officer, and the controlling stockholder of the
general partner of Wand and has investment and voting power with respect
to shares of Common Stock held by Wand. Accordingly, Mr. Schnitzer
disclaims beneficial ownership of New Common Stock not held directly of
record by it or him.
(3) Includes (i) 46,381 shares of Common Stock held directly of record by
Wand and (ii) 713 shares of Common Stock issuable to Wand pursuant to a
warrant issued in connection with the formation of the Company.
(4) Includes (i) 15,808 shares of Common Stock held directly of record by
Harbison Family Living Trust pursuant to which Mr. Harbison has
investment and voting power with respect to shares of New Common Stock
held by it, (ii) 2,012 shares of Common Stock that are immediately
issuable pursuant to options granted under the Harbison Employment
Agreement, and (iii) 5,081 shares of Common Stock that are immediately
issuable pursuant to an option.
(5) Represents shares of Common Stock that are immediately issuable pursuant
to an option.
(6) Represents shares of Series 2 Preferred Stock that are immediately
issuable pursuant to an option.
(7) Includes (i) 76,695 shares of Series 2 Preferred Stock held directly of
record by Thomas O. Hicks or by trusts pursuant to which Mr. Hicks is
sole trustee and has sole investment and voting power, (ii) 2,529,522
shares of Series 2 Preferred Stock held directly of record by
HMC/Neodata, (iii) 1,689,212 shares of Series 2 Preferred Stock held
directly of record by HM/DBMS, (iv) 808 shares of Series 2 Preferred
Stock held directly of record of an employee of Hicks, Muse for which Mr.
Hicks has sole investment and voting power, and (v) 1,834,208
26
<PAGE> 28
shares of Series 2 Preferred Stock beneficially owned by other
stockholders (including, among others, Wand and Messrs. Furst, Jones and
Turner) who are obligated pursuant to the Stockholders Agreement to vote
their shares of Series 2 Preferred Stock in favor of nominees of
HMC/Neodata for election to Holding's board of directors. See Footnote 1
for additional information concerning Mr. Hicks.
(8) Mr. Schnitzer holds no shares of Series 2 Preferred Stock directly.
Includes (i) 797,753 shares of Series 2 Preferred Stock held directly of
record by Wand and (ii) 12,264 shares of Series 2 Preferred Stock
issuable to Wand pursuant to a warrant in connection with the formation
of the Company. Mr. Schnitzer is a director, and executive officer, and
the controlling stockholder of the general partner of Wand and has
investment and voting power with respect to shares of Series 2 Preferred
Stock held by Wand. Accordingly, Mr. Schnitzer disclaims beneficial
ownership of Series 2 Preferred Stock not held directly of record by it
or him.
(9) Includes (i) 271,895 shares of Series 2 Preferred Stock held directly of
record by The Harbison Family Living Trust pursuant to which Mr. Harbison
has investment and voting power with respect to shares of Series 2
Preferred Stock held by it, (ii) 34,602 shares of Series 2 Preferred
Stock that are immediately issuable pursuant to options granted under the
Harbison Employment Agreement and (iii) 87,402 shares of Series 2
Preferred Stock that are immediately issuable pursuant to an option.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FINANCIAL ADVISORY AGREEMENTS
The Company has engaged each of Hicks, Muse and Wand to provide financial
advisory services during the ten-year period ending August 22, 2000, in
consideration for which Hicks, Muse and Wand will receive aggregate fees of
approximately $1,800,000 and $350,000, respectively, which fees are currently
payable in forty equal quarterly installments of $45,000 and $8,750,
respectively. Hicks, Muse and Wand are also entitled to reimbursement for all
reasonable and customary disbursements and out-of-pocket expenses incurred in
the performance of those financial advisory services and will be indemnified by
the Company against certain liabilities and expenses. During the six month
period ended June 30, 1996, Hicks, Muse and Wand received fees pursuant to such
agreements of $90,000 and $17,500, respectively.
RELATIONSHIP WITH EDS
The Company, Holding and EDS consummated the Recapitalization of Holding in
November 1994. This transaction reduced the Company's obligations owed to EDS
relating to NCORE by approximately $28.3 million. The transaction resulted in
the issuance of additional Holding equity and the recapitalization of other
Holding equity but had no effect on the Company's common equity ownership. See
"Item 1. Business -- Background -- The Recapitalization" and Note 18 to the
Company's Consolidated Financial Statements.
Pursuant to the Amended IT Agreement, EDS will (i) continue to supply to
the Company IT Services and (ii) assist the Company in reducing costs and
improving its business operations. Under the Amended IT Agreement, the Company
has control over the management direction of the IT Services and EDS' delivery
of the IT Services. The Amended IT Agreement amended, restated and supersedes
the terms and conditions of all prior information technology services
agreements between the Company and EDS as of the effective date of the Amended
IT Agreement.
The Amended IT Agreement provides for an initial term commencing January 1,
1995 and concluding on March 31, 2003 unless earlier terminated or subsequently
renewed in accordance with the terms of the Amended IT Agreement. Under the
Amended IT Agreement, EDS supplies all of the Company's information technology,
equipment, and services needs. Excluded from the IT Services to be provided are
the Company's existing information technology functions in Ireland; advanced
function printing technicians, letter shop printing functions, and
corporate-wide data entry systems (with certain exceptions); and any new
business, entities, units or subsidiaries acquired or formed by Services
subsequent to the effective date of the Amended IT Agreement which are operated
independently from the Company's then existing information technology
functions. Certain information technology functions formerly performed by the
Company are included in the IT Services. Effective January 1, 1995,
27
<PAGE> 29
approximately 112 Company employees were transferred to EDS, as well as certain
operating lease obligations for equipment and software. The Amended IT
Agreement eliminated funding for NCORE.
The Company compensates EDS for IT Services on a "cost-plus" basis. The
term "cost-plus" means that the Company reimburses EDS for EDS' direct
out-of-pocket expenses incurred by EDS in performing the IT Services and pays
EDS an amount based on a percentage of the reimbursed costs.
Fees incurred under the Amended IT Agreement for the six month period
ended June 30, 1996 were $23,583,000, including $4,659,000 of capitalized
expenditures. Fees incurred under the Amended IT Agreement for the year ended
December 31, 1995 were $44,773,000, including $7,553,000 of capitalized
expenditures. Fees incurred under the then- existing EDS information technology
services agreement for the year ended December 31, 1994 were $31,664,000,
including $5,271,000 of capitalized expenditures. Fees incurred under the
then-existing information technology services agreement for the year ended
December 31, 1993 were $35,891,000, including $7,024,000 of capitalized
expenditures.
The Company will spend approximately $48.7 million annually with respect to
information technology services on a cost-plus basis as discussed above,
including approximately $5.5 million in capital expenditures. Amounts expended
for facilities management services may vary in accordance with the amount and
kind of services rendered, but are generally expected to remain flat or grow
slightly commensurate with the growth in revenue for the foreseeable future.
Mr. Harbison, who is a director of Holding and the Company, is currently
serving as President of the Media Strategic Business Unit of EDS.
EXPENSES
At June 30, 1996, an affiliate of Hicks, Muse owed the Company $250,000 for
the affiliate's share of certain expenses paid by the Company to common
vendors.
THE TAX SHARING AGREEMENT
Holding and its subsidiaries file consolidated federal income tax returns
and are parties to a tax sharing agreement for the purpose of allocating the
federal income tax liability of the group among its members. The tax sharing
agreement generally allocates the consolidated federal income tax liability to
each member according to the ratio of what that member's tax liability would be
if it filed separate federal income tax returns (subject to certain
modifications) to the similarly computed separate return tax liabilities of all
of the members of the group. Pursuant to the agreement, a member is permitted
to utilize the net operating loss of another member (a "Loss Member") to reduce
its share of consolidated federal income tax liability and is not required to
compensate the Loss Member for such tax benefit unless and to the extent that
the Loss Member generates taxable income which would have permitted the Loss
Member to utilize the net operating loss in a separate federal income tax
return.
HARBISON EMPLOYMENT AGREEMENT
Effective June 1, 1993, Mr. Harbison entered into the Harbison Employment
Agreement with Holding and the Company. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- The
Restructuring; 1993 Results" and "Item 11. Executive Compensation --
Compensation Committee Interlocks and Insider Participation." The Harbison
Employment Agreement provides that Mr. Harbison was granted options for 2,012
shares of Holding Common Stock and 34,602 shares of Holding Series 2 Preferred
Stock and that Mr. Harbison will receive the salary, bonus, and other benefits
provided by the Harbison Employment Agreement. In addition, the Company agreed
to the vesting of Mr. Harbison's unvested options. The Harbison Employment
Agreement provided for a two and one-half year term through December 31, 1995.
At December 31, 1995, all amounts due to Mr. Harbison pursuant to the Harbison
Employment Agreement had been paid.
In connection with the Harbison Employment Agreement, Mr. Harbison entered
into a letter agreement with Hicks, Muse (the "Hicks, Muse Voting Agreement").
The Hicks, Muse Voting Agreement provides that, so long as
28
<PAGE> 30
either HMC/Neodata or HM/DBMS has the right, pursuant to the Stockholders
Agreement, to designate certain members of Holding's Board of Directors, Hicks,
Muse will cause Mr. Harbison to be one of such designees. Such obligation of
Hicks, Muse (i) shall terminate in the event that Mr. Harbison owns less than
10,059 shares of Holding Common Stock and (ii) shall be suspended during such
period of time as certain former shareholders of Telemedia who are parties to
the Stockholders Agreement designate someone other than Mr. Harbison to act in
such capacity.
29
<PAGE> 31
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
The following financial statements, financial statement schedule, and
exhibits are filed as part of this report.
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
See Index to Consolidated Financial Statements and Consolidated Financial
Statement Schedule on page F-1 of this report.
EXHIBITS
EXHIBIT NO. EXHIBIT
- ----------- -------
3.1 -- Certificate of Incorporation of the Company. (incorporated by
reference from Exhibit 3.1 to the Company's Registration Statement
on Form S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
3.2 -- By-Laws of the Company. (incorporated by reference from Exhibit
3.2 to the Company's Registration Statement on Form S-1 as
declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
4.1 -- Indenture, dated as of May 5, 1993, between the Company, as
Issuer, and Ameritrust Texas National Association, as Trustee.
(incorporated by reference from Exhibit 4.1 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
4.2 -- Form of 12% Series B Senior Deferred Coupon Note due 2003.
(incorporated by reference from Exhibit 4.3 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.1 -- Credit Agreement, dated as of May 5, 1993, among the Company,
certain Lenders named therein and Heller Financial, Inc.
("Heller"), as Agent and Lender. (incorporated by reference from
Exhibit 10.1 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.2 -- Waiver and Amendment to Credit Agreement, dated as of January 1,
1994, among the Company, the CIT Group/Business Credit, Inc.
("CIT"), and Heller, as Agent and Lender. (incorporated by
reference from Exhibit 10.2 to the Company's Annual Report on Form
10-K (File No. 33-63838) for the fiscal year ended December 31,
1993)
10.3 -- Second Amendment to Credit Agreement, dated as of January 1, 1994,
among the Company, CIT, and Heller, as Agent and Lender.
(incorporated by reference from Exhibit 10.3 to the Company's
Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
ended December 31, 1993)
10.4 -- Revolving Note, dated May 5, 1993, in the principal sum of
$15,000,000, executed by the Company, payable to Heller.
(incorporated by reference from Exhibit 10.2 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.5 -- Revolving Note, dated May 5, 1993, in the principal sum of
$15,000,000, executed by the Company, payable to The CIT
Group/Business Credit, Inc. (incorporated by reference from
Exhibit 10.3 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.6 -- Security Agreement, dated as of May 5, 1993, between the Company
and Heller, as Agent for the Lenders. (incorporated by reference
from Exhibit 10.4 to the Company's Registration Statement on Form
S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
30
<PAGE> 32
EXHIBIT NO. EXHIBIT
- ----------- -------
10.7 -- Registration Rights Agreement, dated as of May 5, 1993, between
the Company and Morgan Stanley & Co. Incorporated. (incorporated
by reference from Exhibit 10.6 to the Company's Registration
Statement on Form S-1 as declared effective by the Securities and
Exchange Commission on August 24, 1993 (Registration No.
33-63838))
10.8 -- Tax Sharing Agreement, dated as of May 5, 1993, among the Company,
Holding, Neodata Mailing Services, Inc. and Neodata Distribution
Services, Inc. (incorporated by reference from Exhibit 10.7 to the
Company's Registration Statement on Form S-1 as declared effective
by the Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.9+ -- Amended and Restated Employment Agreement, dated as of June 1,
1993, among Mr. Thomas O. Harbison, the Company, and Holding.
(incorporated by reference from Exhibit 10.57 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.10+ -- Letter Agreement between Hicks, Muse & Co. (TX) Incorporated and
Mr. Thomas O. Harbison executed in connection with the Amended and
Restated Employment Agreement. (incorporated by reference from
Exhibit 10.58 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.11+ -- Executive Employment Agreement, dated as of January 1, 1994,
between Mr. A. Laurence Jones and the Company. (incorporated by
reference from Exhibit 10.11 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1993)
10.12+ -- Stock Option Agreement, dated as of January 1, 1994, between Mr.
A. Laurence Jones and Holding. (incorporated by reference from
Exhibit 10.12 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
10.13+ -- Stock Option Agreement, dated as of January 1, 1994, between Mr.
William J. Turner and Holding. (incorporated by reference from
Exhibit 10.14 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
10.14+ -- Amendment and Restatement of Neodata Corporation Employee
Investment Plan, dated as of January 1, 1994. (incorporated by
reference from Exhibit 10.23 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1993)
10.15+ -- Neodata Corporation Amended and Restated Employee Incentive Plan,
dated as of March 9, 1994 (incorporated by reference from Exhibit
10.24 to the Company's Annual Report on Form 10-K (File No.
33-63838) for the fiscal year ended December 31, 1993)
10.16+ -- Neodata Corporation Supplemental Executive Investment Plan,
effective as of January 1, 1994. (incorporated by reference from
Exhibit 10.25 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
10.17+ -- Financial Advisory Agreement, dated as of August 22, 1990, among
Hicks, Muse, Holding, and the Company. (incorporated by reference
from Exhibit 10.14 to the Company's Registration Statement on Form
S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
10.18+ -- Amendment Number One to Financial Advisory Agreement, dated as of
September 30, 1992, among Hicks, Muse, Holding, and the Company.
(incorporated by reference from Exhibit 10.15 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.19+ -- Amendment Number Two to Financial Advisory Agreement, dated as of
May 5, 1993, among Hicks, Muse, Holding, and the Company.
(incorporated by reference from Exhibit 10.16 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
31
<PAGE> 33
EXHIBIT NO. EXHIBIT
- ----------- -------
10.20 -- Circulation Fulfillment Service Agreement, dated June 26, 1991,
between the Company (formerly Neodata Books/Distribution Services,
Inc. by name change and merger) and Meredith. (incorporated by
reference from Exhibit 10.48 to the Company's Registration
Statement on Form S-1 as declared effective by the Securities and
Exchange Commission on August 24, 1993 (Registration No.
33-63838))
10.21 -- Fulfillment Agreement, dated as of June 26, 1991, between the
Company (formerly Neodata Books/Distribution Services, Inc. by
name change and merger) and Meredith. (incorporated by reference
from Exhibit 10.49 to the Company's Registration Statement on Form
S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
10.22 -- Securities Purchase Agreement, dated as of May 5, 1993, among
Holding, HM/DBMS, and Wand. (incorporated by reference from
Exhibit 10.50 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.23 -- Amended and Restated Stockholders Agreement, dated as of May 5,
1993, among Holding, HMC/Neodata, HM/DBMS, Wand, and certain other
stockholders of Holding. (incorporated by reference from Exhibit
10.51 to the Company's Registration Statement on Form S-1 as
declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.24 -- Securities Purchase and Exchange Agreement, dated as of May 5,
1993, between Holding and EDS. (incorporated by reference from
Exhibit 10.52 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.25 -- Securityholders Agreement, dated as of May 5, 1993, among Holding,
HMC/Neodata, HM/DBMS, and EDS. (incorporated by reference from
Exhibit 10.53 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.26 -- Securities Repurchase Agreement, dated as of May 5, 1993, among
Holding, Continental Bank N.A., and Philadelphia Life.
(incorporated by reference from Exhibit 10.54 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.27 -- Nonexclusive License Agreement, dated as of May 5, 1993 and
effective as of April 15, 1993, between the Company and EDS.
(incorporated by reference from Exhibit 10.56 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.28 -- Financial Advisory Agreement, dated as of August 22, 1990, among
Holding, the Company, and Wand. (incorporated by reference from
Exhibit 10.60 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.29+ -- Amendment Number One to Financial Advisory Agreement, dated as of
September 30, 1992, among Holding, the Company, and Wand.
(incorporated by reference from Exhibit 10.61 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.30 -- Amended and Restated Lease Agreement, by and among Neoserv (Co.)
QRS 10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and the Company
dated as of June 8, 1994 (incorporated by reference from Exhibit
10.76 to the Company's Quarterly Report on Form 10-Q File No.
33-63838 for the quarterly period ended June 30, 1994)
32
<PAGE> 34
EXHIBIT NO. EXHIBIT
- ----------- -------
10.31 -- Construction Agreement, among the Company and Neoserv (Co.) QRS
10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and the Company dated
as of June 8, 1994 (incorporated by reference from Exhibit 10.77
to the Company's Quarterly Report on Form 10-Q File No. 33-63838
for the quarterly period ended June 30, 1994)
10.32 -- Amended and Restated Lease Agreement, by and among Neoserv (Co.)
QRS 10-13, Inc. and Neoserv (Co.) QRS 10-8 Inc. (as landlord) and
the Company (as tenant), dated as of June 8, 1994 (incorporated by
reference from Exhibit 10.78 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1994)
10.33 -- First Amendment to Amended and Restated Lease Agreement, by and
among Neoserv (Co.) QRS 10-13, Inc. and Neoserv (Co.) QRS 11-8,
Inc. (as landlord) and the Company (as tenant) (incorporated by
reference from Exhibit 10.79 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1994)
10.34 -- Fourth Amendment to Credit Agreement, dated as of March 28, 1995,
among the Company and Heller, as Agent and Lender. (incorporated
by reference from Exhibit 10.82 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1994)
10.35 -- Agreement for Information Technology Services, dated as of January
1, 1995, between the Company and EDS (incorporated by reference
from Exhibit 10.83 to the Company's Annual Report on Form 10-K
(File No. 33-63838) for the fiscal year ended December 31, 1995)
10.36 -- Agreement, dated as of October 10, 1995, between the Company and
Philip Morris Incorporated (incorporated by reference from Exhibit
10.85 to the Company's Annual Report on Form 10-K (File No.
33-63838) for the fiscal year ended December 31, 1995)**
10.37 -- Form of Fifth Amendment to Credit Agreement, dated as of March 26,
1996, among the Company and Heller, as Agent and Lender
(incorporated by reference from Exhibit 10.88 to the Company's
Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
ended December 31, 1995)
10.38 -- Form of Second Amendment to Amended and Restated Lease Agreement,
dated as of March 25, 1996, by and among Neoserv (Co.) QRS 10-13,
Inc. and Neoserv (Co.) QRS 11-8, Inc. (as landlord) and the
Company (as tenant) (incorporated by reference from Exhibit 10.89
to the Company's Annual Report on Form 10-K (File No. 33-63838)
for the fiscal year ended December 31, 1995)
10.39 -- Sixth Amendment to Credit Agreement, dated as of May 10, 1996,
among the Company and Heller, as Agent and Lender*
10.40 -- Stockholders Agreement, dated as of November 28, 1994, among
Holding, HMC/Neodata, HM/DBMS, Hicks, Muse, EDS, and other
stockholders*
10.41+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. Nicholas J. Cuccaro*
10.42+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Ms. Frances M. Anhut*
10.43+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. Ed L. Frazier*
10.44+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. J. Benjamin Gill*
10.45+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Ms. Susan L. Morse*
10.46+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. Richard L. Rosy*
33
<PAGE> 35
EXHIBIT NO. EXHIBIT
- ----------- -------
10.47+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Ms. Nancy S. Talmey*
10.48+ -- Letter Agreement, dated as of June 2, 1994, between the Company
and Mr. Nicholas J. Cuccaro*
10.49+ -- Letter Agreement, dated as of March 15, 1994, between the Company
and Ms. Frances M. Anhut*
10.50+ -- Memorandum Agreement, dated as of May 23, 1996, between the
Company and Mr. J. Benjamin Gill*
10.51+ -- Letter Agreement, dated as of August 14, 1995, between the Company
and Mr. Kevin G. Heery*
10.52+ -- Letter Agreement, dated as of September 23, 1993, between the
Company and Ms. Susan L. Morse*
10.53+ -- Letter Agreement, dated as of February 25, 1992, between the
Company and Mr. Richard L. Rosy*
10.54+ -- Letter Agreement, dated as of December 20, 1994, between the
Company and Ms. Nancy S. Talmey*
21 -- Subsidiaries of the Company. (incorporated by reference from
Exhibit 21 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
27 -- Financial Data Schedule*
- ----------------------
* Filed herewith.
** Confidential treatment has been requested with respect to certain portions
of such agreement and the confidential portions have been filed separately
with the Commission pursuant to the confidential treatment request.
+ Indicates a management contract or compensatory plan or arrangement.
REPORTS ON FORM 8-K
During the quarter ended June 30, 1996, the Company filed a report on Form
8-K dated April 9, 1996, reporting information pursuant to Item 8 with respect
to the Company's change in fiscal year end from December 31 to June 30.
34
<PAGE> 36
NEODATA SERVICES, INC.
ANNUAL REPORT ON FORM 10-K
ITEMS 8, 14(A) AND 14(D)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets -- as of June 30, 1996 and December 31, 1995 . . . . . . . . . . . F-3
Consolidated Statements of Operations -- for the year and six month period
ended June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . F-4
Consolidated Statements of Stockholders' (Deficit) Equity -- for the six month
period ended June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993 . . . . . F-5
Consolidated Statements of Cash Flows -- for the year and six month period
ended June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993. . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
F-1
<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS
NEODATA SERVICES, INC.
We have audited the consolidated financial statements and consolidated
financial statement schedule of Neodata Services, Inc. listed in the Index
appearing on page F-1 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Neodata Services, Inc. as of June 30, 1996 and December 31, 1995, and the
consolidated results of its operations and cash flows for the year and six
month period ended June 30, 1996 and each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. In addition, in our opinion, the consolidated financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
September 20, 1996
F-2
<PAGE> 38
NEODATA SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,304 $ 186
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,996 65,127
Prepaid expense and other . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,052 6,584
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,352 71,897
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 51,649 53,522
Computer software, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,819 17,262
Debt issue costs and other assets, net . . . . . . . . . . . . . . . . . . . . . 5,717 6,075
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $139,537 $148,756
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,323 $ 29,320
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,062 19,741
Current maturities of long-term debt and capital lease obligations . . . . . . 599 631
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 40,984 49,692
Long-term debt and capital lease obligations, net of current maturities . . . . . 184,651 178,852
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,522 10,441
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,757 5,698
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,914 244,683
-------- --------
Commitments and contingencies (See Notes 11, 12 and 16)
Stockholders' deficit:
Common stock, par value $.01 per share, 10,000 shares authorized,
1,173 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 28,029 28,029
Contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,522 57,347
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (187,018) (181,318)
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . 90 15
-------- --------
Total stockholders' deficit . . . . . . . . . . . . . . . . . . . . . . . (102,377) (95,927)
-------- --------
Total liabilities and stockholders' deficit . . . . . . . . . . . . . . . $139,537 $148,756
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 39
NEODATA SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR AND SIX MONTH PERIOD ENDED JUNE 30, 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31,
JUNE 30, JUNE 30, --------------------------------
1996 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . $237,061 $114,665 $244,255 $221,132 $192,004
-------- -------- -------- -------- --------
Expense:
Operating and production . . . . . . . . . . . . . 173,289 81,953 182,081 167,363 143,640
Selling, general and administrative . . . . . . . 33,763 18,662 32,301 32,974 33,394
Restructuring charges . . . . . . . . . . . . . 1,667 -- 1,667 (1,236) 20,280
Impairment of NCORE . . . . . . . . . . . . . -- -- -- 31,155 --
Impairment of intangible assets. . . . . . . . . . -- -- -- -- 37,011
Provision for doubtful accounts receivable . . . . 1,642 680 1,259 1,099 2,026
Depreciation and amortization of property,
plant and equipment . . . . . . . . . . . . . 9,266 4,361 9,869 9,615 8,424
Amortization of computer software. . . . . . . . . 5,399 2,741 4,892 3,631 8,818
Amortization of intangible assets. . . . . . . . . -- -- -- -- 12,028
-------- -------- -------- -------- --------
225,026 108,397 232,069 244,601 265,621
-------- -------- -------- -------- --------
Income (loss) before interest expense and other. . . 12,035 6,268 12,186 (23,469) (73,617)
Interest expense and other . . . . . . . . . . . . . 23,863 11,968 23,015 19,444 15,550
-------- -------- -------- -------- --------
Net loss before extraordinary loss. . . . . . (11,828) (5,700) (10,829) (42,913) (89,167)
Extraordinary loss -- early extinguishment of debt . -- -- -- -- (7,089)
-------- -------- -------- -------- --------
Net loss . . . . . . . . . . . . . . . . . . $(11,828) $ (5,700) $(10,829) $(42,913) $(96,256)
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 40
NEODATA SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
HOLDING
----------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK TREASURY STOCK
--------------- ------------ --------------
SHARES AMOUNT SHARES AMOUNT SHARES COST
------ ------ ------ ------ ------ ----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 . . . . . . . . . . 240,000 $ 2 16,811,027 $ 168 40,000 $ (39)
Issuance of Holding common stock
for cash . . . . . . . . . . . . . . . . . 1,923,077 19
Issuance of Holding common stock
for debt . . . . . . . . . . . . . . . . . 6,094,962 61
Issuance of Holding common stock
for Holding preferred stock . . . . . . . . (240,000) (2) 3,082,625 31
Assumption of Meredith Note by
Holding . . . . . . . . . . . . . . . . . .
Retirement of Holding warrants . . . . . . .
Capital contribution from Holding
for formation of the Company . . . . . . . (27,911,691) (279) (40,000) 39
Capital contribution from Holding
to the Company . . . . . . . . . . . . . .
Dividends to Holding to provide for
purchase of Holding treasury stock . . . .
Dividends to Holding to provide for
payments on Meredith Note . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . .
Balance December 31, 1993 . . . . . . . . . . .
Dividends to Holding to provide for purchase
of Holding treasury stock . . . . . . . . .
Capital contribution from Holding . . . . . .
Accrual for dividends to Holding to provide
for payment on Meredith Note . . . . . . .
Costs associated with a capital
contribution. . . . . . . . . . . . . . . .
Capital contribution from EDS as a result of
the release of certain obligations . . . .
Net loss . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . .
--------- ----- ----------- ----- -------- ------
Balance, December 31, 1994 . . . . . . . . . .
Dividends to Holding to provide for payments
on Meredith Note . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . .
--------- ----- ----------- ----- -------- ------
Balance, December 31, 1995 . . . . . . . . . . -- -- -- -- -- --
Dividends to Holding to provide for payments
on Meredith Note . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . .
--------- ----- ----------- ----- -------- ------
Balance, June 30, 1996 . . . . . . . . . . . . -- $ -- -- $ -- -- $ --
========= ===== =========== ===== ======== ======
<CAPTION>
COMPANY
----------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN CONTRIBUTED ACCUMULATED TRANSLATION
SHARES CAPITAL CAPITAL DEFICIT ADJUSTMENT TOTAL
------ --------- ----------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 . . . . . . . . . . 1,000 $ 32,574 $ (31,320) $(147) $ 1,238
Issuance of Holding common stock
for cash . . . . . . . . . . . . . . . . . 4,981 5,000
Issuance of Holding common stock
for debt . . . . . . . . . . . . . . . . . 15,786 15,847
Issuance of Holding common stock
for Holding preferred stock . . . . . . . . (29) --
Assumption of Meredith Note by
Holding . . . . . . . . . . . . . . . . . . 7,062 7,062
Retirement of Holding warrants . . . . . . . (1,500) (1,500)
Capital contribution from Holding
for formation of the Company . . . . . . . 173 (58,874) $ 59,114 --
Capital contribution from Holding
to the Company . . . . . . . . . . . . . . 3,469 3,469
Dividends to Holding to provide for
purchase of Holding treasury stock . . . . (475) (475)
Dividends to Holding to provide for
payments on Meredith Note . . . . . . . . . (963) (963)
Net loss . . . . . . . . . . . . . . . . . . (96,256) (96,256)
Foreign currency translation adjustment . . . (49) (49)
--------- -------- -------- --------- ----- ---------
Balance December 31, 1993 . . . . . . . . . . . 1,173 61,145 (127,576) (196) (66,627)
Dividends to Holding to provide for purchase
of Holding treasury stock . . . . . . . . . (310) (310)
Capital contribution from Holding . . . . . . 88 88
Accrual for dividends to Holding to provide
for payment on Meredith Note . . . . . . . (1,841) (1,841)
Costs associated with a capital
contribution. . . . . . . . . . . . . . . . (271) (271)
Capital contribution from EDS as a result of
the release of certain obligations . . . . 28,300 28,300
Net loss . . . . . . . . . . . . . . . . . . (42,913) (42,913)
Foreign currency translation adjustment . . . 155 155
--------- -------- -------- --------- ----- ---------
Balance, December 31, 1994 . . . . . . . . . . 1,173 28,029 59,082 (170,489) (41) (83,419)
Dividends to Holding to provide for payments
on Meredith Note . . . . . . . . . . . . . (1,735) (1,735)
Net loss . . . . . . . . . . . . . . . . . . (10,829) (10,829)
Foreign currency translation adjustment . . . 56 56
--------- -------- -------- --------- ----- ---------
Balance, December 31, 1995 . . . . . . . . . . 1,173 28,029 57,347 (181,318) 15 (95,927)
Dividends to Holding to provide for payments
on Meredith Note . . . . . . . . . . . . . (825) (825)
Net loss . . . . . . . . . . . . . . . . . . (5,700) (5,700)
Foreign currency translation adjustment . . . 75 75
--------- -------- -------- --------- ----- ---------
Balance, June 30, 1996 . . . . . . . . . . . . 1,173 $ 28,029 $ 56,522 $(187,018) $ 90 $(102,377)
========= ======== ======== ========= ===== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 41
NEODATA SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR AND SIX MONTH PERIOD ENDED JUNE 30, 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX
YEAR MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31,
JUNE 30, JUNE 30, ---------------------------------
1996 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $ (11,828) $ (5,700) $ (10,829) $(42,913) $(96,256)
----------- ---------- --------- -------- --------
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization.................. 14,665 7,102 14,761 13,246 29,270
Impairment of NCORE............................ -- -- -- 31,155 --
Impairment of intangible assets................ -- -- -- -- 37,011
Extraordinary loss............................. -- -- -- -- 7,089
Provision for doubtful accounts receivable..... 1,642 680 1,259 1,099 2,026
Non-cash restructuring charges................. -- -- -- -- 9,013
Accretion of interest on long-term debt........ 15,032 6,188 17,190 15,384 9,519
(Gain) loss on disposal of equipment........... 55 (15) 70 82 176
Changes in assets and liabilities:
Accounts receivable............................ (3,277) 9,451 4,196 (13,455) 1,131
Prepaid expense and other...................... 7,165 (468) 3,460 (5,682) 1,475
Debt issue costs and other assets.............. 1,072 358 707 (20) 2,402
Accounts payable............................... 1,636 (6,650) (1,347) 12,135 152
Accrued liabilities............................ 2,913 1,991 (1,242) (8,276) 8,426
Customer deposits.............................. (1,648) 81 (1,330) 726 1,162
Other liabilities.............................. (2,021) (1,287) (995) (4,146) 869
Other, net..................................... 6 -- 6 91 --
----------- ---------- --------- -------- --------
Total adjustments.............................. 37,240 17,431 36,735 42,339 109,721
----------- ---------- --------- -------- --------
Net cash provided by (used in)
operating activities.................... 25,412 11,731 25,906 (574) 13,465
----------- ---------- --------- -------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment........ (2,760) (1,002) (2,586) (12,101) (11,540)
Proceeds from sales of property,
plant and equipment............................. 197 59 138 29 726
Purchases and development of computer software.... (9,602) (4,298) (9,191) (5,271) (7,024)
----------- ---------- --------- -------- --------
Net cash used in investing activities..... (12,165) (5,241) (11,639) (17,343) (17,838)
----------- ---------- --------- -------- --------
Cash flows from financing activities:
Change in book overdrafts......................... (5,421) (4,757) 5,603 -- (2,614)
Net payments under lines of credit and
short-term debt................................. -- -- -- -- (3,768)
Borrowings under long-term debt................... -- -- -- -- 115,057
Borrowings under long-term line of credit 111,350 31,050 155,900 69,436 63,967
Payments on long-term line of credit (119,800) (31,050) (176,324) (49,012) (75,176)
Debt issue cost................................... -- -- (450) (374) (6,229)
Payments of long-term debt........................ (162) (66) (154) (113) (81,822)
Payments on capital leases........................ (473) (209) (611) (2,445) (2,103)
Payments for NCORE development ................... -- -- -- (709) (1,500)
Dividends to Holding for payments on
Meredith Note .................................. (415) (415) (442) -- (963)
Dividends to Holding for purchase of Holding
treasury stock.................................. -- -- -- (310) (475)
Capital contribution from Holding................. -- -- -- 88 --
Issuance of Holding common stock ................. -- -- -- -- 5,000
Costs associated with a capital contribution -- -- -- (271) --
Retirements of Holding warrants................... -- -- -- -- (1,500)
----------- ---------- --------- -------- --------
Net cash provided by (used in)
financing activities ................... (14,921) (5,447) (16,478) 16,290 7,874
----------- ---------- --------- -------- --------
Effect of exchange rate changes on cash............. 262 75 56 155 (49)
----------- ---------- --------- -------- --------
Net change in cash.................................. (1,412) 1,118 (2,155) (1,472) 3,452
Cash at beginning of year........................... 2,716 186 2,341 3,813 361
----------- ---------- --------- -------- --------
Cash at end of year................................. $ 1,304 $ 1,304 $ 186 $ 2,341 $ 3,813
=========== ========== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 42
NEODATA SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR AND SIX MONTH PERIOD ENDED JUNE 30, 1996
AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Total cash interest payments were $4,452,000 and $2,217,000 for the year
and six month period ended June 30, 1996, and $4,798,000, $2,717,000 and
$3,996,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
In 1995, the Company paid $129,000 in alternative minimum tax as a
result of an adjustment to the Company's net operating loss carryforwards (see
Note 13), and $54,000 in state income taxes.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In May 1996 the Company acquired assets in exchange for service credits
totaling $2,200,000, which were recorded at their estimated present value at
12% of $1,676,000.
In connection with the development of the Neodata Customer Oriented
Relational Environment System ("NCORE"), the Company incurred obligations of
$7,777,000 and $12,610,000 during the years ended December 31, 1994 and 1993,
respectively. (See Note 11).
The Company satisfied Holding's obligation under the Meredith Note (see
Notes 1 and 16) for the second, third, and fourth quarters of 1995, and for the
first three quarters of 1994, totaling $1,293,000 and $1,389,000, respectively,
by reducing accounts receivable. Amounts due of $452,000 and $410,000 under the
Meredith Note for the fourth quarter of 1994 and the second quarter of 1996,
respectively, are included in accounts payable.
On November 28, 1994, in connection with the Recapitalization (see Note
18), Holding issued preferred stock to EDS in exchange for a reduction in
obligations owed to EDS of $28,300,000. Liabilities reduced included certain
obligations incurred in the development of NCORE of $26,903,000 and certain
current obligations of $1,397,000.
In April 1993, the Company entered into a capital lease obligation (the
"Centennial Building Capital Lease") for a building in Boulder County, Colorado
("Centennial Phase I") in the amount of $9,000,000. In December 1994,
Centennial Building Capital Lease was amended to reflect a major addition to
the building ("Centennial Phase II"). In connection therewith, the Company
entered into an additional capital lease obligation of $11,991,000. In 1995,
the Company entered into capital lease obligations for equipment totaling
$400,000.
On May 5, 1993, $15,800,000 in certain debt and capital lease
obligations owed to EDS, along with accrued interest, were converted into
Holding common stock.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 43
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Neodata Services, Inc. (the "Company") was incorporated in August 1990
as a wholly owned subsidiary of Neodata Corporation ("Holding"), for the
purpose of acquiring certain net assets of the Neodata Division ("Subscription
Fulfillment") of A.C. Nielsen Company (which included two subsidiaries located
in Ireland), a subsidiary of Dun & Bradstreet Corporation (the "Services
Acquisition"). Concurrently, Holding acquired 100% of the common stock of TMI
Corporation ("Telemedia" and the "Telemedia Acquisition").
The Company provides comprehensive, integrated outsourced services to
organizations using direct marketing. These services include magazine, book,
and product fulfillment, product warehousing and distribution, telephone
customer service, and marketing database management. In addition, the Company
provides marketing and promotional services and Internet services to a
significant number of clients in various industries. The Company's services are
used by various organizations using direct marketing and are adaptable to a
broad variety of products and marketing activities.
The direct marketing industry is affected by a variety of regulatory
issues, including Federal Trade Commission ("FTC") regulations, U.S. Postal
Service ("USPS") reclassification, sales and use tax legislation, as well as
legislation on a variety of privacy acts. New bills are regularly introduced
in Congress and in state legislatures that propose restrictions concerning
distribution of personal information, privacy in telecommunications, and
taxation of periodicals and direct mail merchandise.
Effective April 24, 1991, Holding formed Neodata Product/Distribution
Holdings, Inc. and its wholly-owned subsidiary Neodata Product/Distribution
Services, Inc. (collectively "Product"). The companies were formed for the
purpose of acquiring substantially all the assets of the Fulfillment Services
Division of Meredith Corporation ("Product Acquisition").
Effective September 30, 1992, Holding formed Neodata Database Marketing
Services, Inc. ("Database") for the purpose of acquiring the stock of Wiland
Services, Inc. ("Database Acquisition").
On May 5, 1993 the Company issued $163,000,000 in Senior Deferred Coupon
Notes (the "Notes") to complete the Transaction (see Note 18). With the closing
of the Transaction, Telemedia, Product, and Database were merged into the
Company. After the mergers, the Company included all operations, assets and
liabilities of Holding with the exception of a note payable (the "Meredith
Note") totaling approximately $4,711,000 and $4,950,000 at June 30, 1996 and
December 31, 1995, respectively. The Meredith Note is not reflected in the
financial statements of the Company, as such note is not an obligation of the
Company or any of its subsidiaries. Holding's only asset is its equity
investment in the issued and outstanding shares of common stock of the Company,
and it does not conduct operations other than through the Company. Therefore,
the only source of payment on the Meredith Note is cash generated by the
Company. The financial statements represent the operations of Holding and its
subsidiaries through May 5, 1993 and the operations of the Company subsequent
to that date.
On November 28, 1994, the Company, Holding and EDS entered into a
transaction (the "Recapitalization") that resulted in the release of certain
financial obligations owed by the Company to EDS and an increase in EDS' equity
ownership in Holding (see Note 18).
F-8
<PAGE> 44
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Holding (with the exception of the Meredith Note) and its subsidiaries
through May 5, 1993 and the operations of the Company subsequent to that date.
Intercompany transactions and balances have been eliminated.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Property, plant and
equipment is depreciated over estimated useful lives of approximately five to
thirty-one years using the straight-line method. Assets recorded under capital
leases and leasehold improvements are amortized over the shorter of their
estimated useful lives or the term of the related leases using the
straight-line method.
The cost of normal maintenance and repairs is charged to expense as
incurred. Significant expenditures which increase the life of an asset are
capitalized and depreciated over the remaining estimated useful life of the
asset. Upon sale or retirement of assets, the costs and related accumulated
depreciation or amortization are eliminated from the respective accounts and
any resulting gains or losses are reflected in operations.
Computer Software
The Company capitalizes the costs of internal software development in
accordance with Statement of Financial Accounting Standards No. 86.
Capitalization of software development costs begins upon the establishment of
technological feasibility. The establishment of technological feasibility and
the ongoing assessment of recoverability of capitalized software development
costs require considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated future revenues,
estimated economic life and changes in software and hardware technologies. The
Company has also capitalized the direct and indirect allocable costs and
interest costs of internally developed software and the cost of purchased
software to be used for internal use. Currently, the Company is amortizing all
software costs using the straight-line method over estimated economic lives
ranging from one to five years.
Intangible and Long-Lived Assets
Goodwill represented the excess of cost over fair value of net assets
acquired and was amortized over ten years. Other intangible assets were
recorded at fair value, as determined by appraisals or estimates developed
internally as of the dates of acquisition and were amortized over estimated
useful lives of two to ten years using the straight-line method. The Company
evaluates the recoverability of goodwill, intangible assets, and other
long-lived assets annually to determine if impairment exists. A quantitative
analysis of future undiscounted operating income (before the amortization of
goodwill and intangible assets) is used to determine the recoverability of
these assets. In addition to reviewing the recoverability of assets annually,
at each quarterly balance sheet date the Company evaluated whether events,
changes of circumstances or changes in the Company's business plan indicates
that these assets might not be recoverable. If not, further quantitative
analysis of future undiscounted operating income (before the amortization of
goodwill and intangible assets) is then performed. Adjustments are made if the
sum of expected future cash flows is less than carrying value.
Debt Issue Costs
The costs related to the issuance of the Notes and the Senior Credit
Facility and the Centennial Building Capital Lease (see Note 9) are capitalized
and amortized to interest expense using the effective interest method over the
lives of the related debt.
F-9
<PAGE> 45
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Translation of Foreign Currencies
The accounts of the Company's foreign subsidiaries in Ireland are measured
using the local currency which has been designated as the functional currency.
Assets and liabilities of those subsidiaries are translated at the exchange rate
in effect at the end of each period. Revenues and expenses of those subsidiaries
are translated at the average exchange rate for the period. Translation
adjustments arising from the use of differing exchange rates from period to
period are included in a cumulative translation adjustment account in
stockholders' deficit.
Use of Estimates in the Preparation of Financial Statements
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 at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Significant Clients
The Company enters into contracts with its clients with various terms and
renewal provisions. Each of these contracts, with the exception of a contract
with a significant client as described in the following paragraph, are subject
to performance standards and certain contracts contain fixed price provisions
subject to cost of living adjustments. There are no annual volumes committed
under these contracts. Revenue is recognized when services are performed.
In December 1993, the Company entered into a contract with a significant
client that commenced in April 1994 and expired in October 1995 primarily to
perform product fulfillment, distribution, and telephone customer services. In
1995 the Company entered into a similar contract with the same client that
commenced in November 1995 and expires in December 1996. Under the most recent
contract the client is billed on a "cost-plus" basis rather than a fixed price
basis. Revenues are recorded as costs are incurred and include earned fees
based on a percentage of costs incurred to date. Fees under the contract may
be increased or decreased in accordance with cost or performance incentive
provisions which measure actual performance against established targets. Such
incentive fee awards or penalties are included in revenues at the time the
amounts can be reasonably determined. As of June 30, 1996, no incentive fee
awards or penalties had been recognized. Revenues from services provided were
approximately $40,816,000, $17,211,000, $44,083,000, and $20,375,000 for the
year and six month period ended June 30, 1996 and the years ended December 31,
1995 and 1994, respectively. Accounts receivable for revenue, postage, and
other reimbursables from this client at June 30, 1996 and December 31, 1995
totaled $4,728,000 and $5,978,000, respectively. Revenues for similar services
from an affiliate of this client were approximately $13,430,000, $7,303,000,
$12,589,000, and $10,808,000 for the year and six month period ended June 30,
1996 and the years ended December 31, 1995 and 1994, respectively, and accounts
receivable for revenue, postage, and other reimbursables from this affiliate at
June 30, 1996 and December 31, 1995 totaled $2,816,000 and $2,815,000,
respectively.
The Company provides various database, telephone customer service,
distribution, and magazine fulfillment services to Meredith Corporation
("Meredith"). Revenues related to these services were approximately
$20,640,000, $9,130,000, $23,342,000, $25,363,000 and $23,956,000, for the year
and six month period ended June 30, 1996 and the years ended December 31, 1995,
1994 and 1993, respectively. Accounts receivable from Meredith for revenue,
postage, and other reimbursables at June 30, 1996 and December 31, 1995 totaled
$2,961,000 and $4,846,000, respectively. Contracts with Meredith expire in 1996
and 1998. In 1995, Meredith sold its book club and continuity business,
resulting in a decrease in revenues to the Company of approximately $2.0
million for the six month period ended June 30, 1996 and $7.0 million annually
in fiscal years thereafter.
F-10
<PAGE> 46
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents
The Consolidated Statements of Cash Flows classify changes in cash or cash
equivalents (short-term, highly liquid investments readily convertible into
cash with an original maturity of three months or less) according to operating,
investing, or financing activities. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash and temporary cash investments. At times, cash balances held at financial
institutions were in excess of FDIC insurance limits. The Company places its
temporary cash investments with high- credit, quality financial institutions
and, by policy, limits the amount of credit exposure to any one financial
institution. The Company believes no significant concentration of credit risk
exists with respect to these cash investments.
3. TRANSITION PERIOD
In April 1996 the Company changed its fiscal year end from December 31 to
June 30. The change was made in order to conform the Company's fiscal year to
its natural business cycle. Results of operations for the six-month periods
ended June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114,665 $ 121,859
--------- ---------
Expense:
Operating and production . . . . . . . . . . . . . . . . . . . . . . . 81,953 90,745
Selling, general and administrative . . . . . . . . . . . . . . . . . 18,662 17,200
Provision for doubtful accounts receivable . . . . . . . . . . . . . . 680 297
Depreciation and amortization of property, plant and equipment . . . . 4,361 4,964
Amortization of computer software . . . . . . . . . . . . . . . . . . 2,741 2,234
--------- ---------
108,397 115,440
--------- ---------
Income (loss) before interest expense and other . . . . . . . . . . . . 6,268 6,419
Interest expense and other . . . . . . . . . . . . . . . . . . . . . . . 11,968 11,120
--------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,700) $ (4,701)
========= =========
</TABLE>
4. ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 1996 and December 31, 1995 consist of billed
and unbilled amounts as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accounts receivable, trade. . . . . . . . . . . . . . . . . . . . . . . . $42,014 $50,124
Unbilled revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,374 8,298
Unbilled postage cost and other reimbursables . . . . . . . . . . . . . . 6,201 8,524
------- -------
56,589 66,946
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . (1,593) (1,819)
------- -------
$54,996 $65,127
======= =======
</TABLE>
F-11
<PAGE> 47
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1996 and December 31, 1995 consist
of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,414 $ 1,320
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . 53,804 52,797
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . 36,375 35,383
-------- --------
91,593 89,500
Accumulated depreciation and amortization. . . . . . . . . . . . . . (39,944) (35,978)
-------- --------
$ 51,649 $ 53,522
======== ========
</TABLE>
Included in machinery and equipment above is computer and other equipment
held under capital leases, with a cost of $447,000 and $685,000, and accumulated
depreciation of $89,000 and $109,000 at June 30, 1996 and December 31, 1995,
respectively. Included in buildings and improvements are the Centennial Building
Capital Leases (see Note 9) with a cost of $22,299,000 and accumulated
depreciation of $2,720,000 and $2,162,000 at June 30, 1996 and December 31,
1995, respectively.
Repairs and maintenance expense was $4,194,000, $1,974,000, $4,879,000,
$5,759,000 and $4,777,000 for the year and six month period ended June 30, 1996
and the years ended December 31, 1995, 1994 and 1993, respectively.
6. COMPUTER SOFTWARE
Computer software at June 30, 1996 and December 31, 1995 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Purchased and developed software . . . . . . . . . . . . . . . . . . $22,795 $18,622
Software acquired in acquisitions. . . . . . . . . . . . . . . . . . 6,952 6,952
NCOREaccess . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,409 3,314
------- -------
33,156 28,888
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . (14,337) (11,626)
------- -------
$18,819 $17,262
======= =======
</TABLE>
NCORE was developed for the Company by EDS to replace and enhance software
components of existing systems. Associated costs included developed software,
system integration, systems conversion, purchased software packages, and costs
of re-engineering certain input and output business processes. Amortization of
NCORE applications commenced in December 1994. As discussed in Note 18, the
Company determined that the NCORE development asset was not fully recoverable,
resulting in a $31,155,000 write down of NCORE in the fourth quarter of 1994.
The portion of NCORE determined to be recoverable is known as "NCOREaccess," a
relational database tool that clients can use to access, analyze, and download
information on their customers.
7. ACCOUNTS PAYABLE
Accounts payable at June 30, 1996 and December 31, 1995 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accounts payable, trade. . . . . . . . . . . . . . . . . . . . . . . $ 9,264 $11,136
Book overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . 846 5,603
Amounts due to EDS . . . . . . . . . . . . . . . . . . . . . . . . . 8,213 12,581
------- -------
$18,323 $29,320
======= =======
</TABLE>
F-12
<PAGE> 48
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. ACCRUED LIABILITIES
Accrued liabilities at June 30, 1996 and December 31, 1995 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accrued compensation cost . . . . . . . . . . . . . . . . . . . . . . . $ 6,340 $ 5,867
EDS license fee and other . . . . . . . . . . . . . . . . . . . . . . . 656 518
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,796 2,551
Current portion of Meredith service credits . . . . . . . . . . . . . . 1,424 1,325
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,436 296
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 8,410 9,184
------- -------
$22,062 $19,741
======= =======
</TABLE>
9. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
A summary of long-term debt and capital lease obligations at June 30, 1996
and December 31, 1995 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Notes with interest at 12% and semi-annual interest payments
commencing on November 1, 1996. . . . . . . . . . . . . . . . . . . . $163,000 $156,812
Senior Credit Facility. . . . . . . . . . . . . . . . . . . . . . . . . -- --
Centennial Building Capital Lease with imputed interest at 14.5%. . . . 7,248 7,297
Centennial Phase II Capital Lease with interest at 10%. . . . . . . . . 13,136 13,257
Other notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,441 1,507
Capital lease obligations, varying terms through 2001,
interest from 12.0% to 14.5%. . . . . . . . . . . . . . . . . . . . . 425 610
-------- --------
185,250 179,483
Less current maturities. . . . . . . . . . . . . . . . . . . . . . . . (599) (631)
-------- --------
$184,651 $178,852
======== ========
</TABLE>
On May 5, 1993, the Company issued $163,000,000 aggregate principal amount
($115,057,000 initial accreted value) of the Notes. Interest on the Notes is
payable at 12% per annum. Interest was accreted on the Notes through May 1,
1996 and accrued for payment thereafter. Interest payments of $9,780,000 begin
on November 1, 1996 and are due semi-annually on May 1 and November 1
thereafter. The Notes mature on May 1, 2003 and are general unsecured
obligations of the Company.
The Notes are not subject to redemption prior to May 1, 1998. On and after
such date, the Company may redeem the Notes, in whole or in part, at the
redemption prices set forth below plus accrued and unpaid interest to the date
of redemption. Redemption prices are 106% of par value at May 1, 1998, 103% at
May 1, 1999 and 100% at May 1, 2000 and thereafter. If less than all of the
Notes are to be redeemed, the trustee may elect the Notes or portions thereof
to be redeemed pro rata, by lot or by any other method the trustee shall deem
fair and reasonable. The Notes contain covenants that, among other things,
restrict (with certain exceptions) the payment of dividends, and limit (with
certain exceptions) other indebtedness, investments, asset sales,
consolidations, mergers, and transactions with shareholders and affiliates.
On May 5, 1993, the Company entered into the Senior Credit Facility, a five
year revolving line of credit facility, which provides for advances up to the
lesser of (a) $30,000,000 or (b) the sum of (i) 85% of eligible billed accounts
receivable and (ii) the lesser of 50% of unbilled revenue and reimbursables or
$7,500,000. The Senior Credit facility is collateralized by accounts
receivable. At the Company's option, the revolving loans bear interest at
F-13
<PAGE> 49
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
either (i) the prime rate, plus 1%, payable quarterly in arrears, or (ii) the
London Interbank Offer Rate (LIBOR), plus 3%, for periods one, two, three or
six months (the "Interest Rate Periods"), payable at the end of each Interest
Rate Period. Interest on all obligations under the Facility is calculated daily
on the basis of a 360 day year for the actual number of days elapsed. The
creditors receive an unused line fee equal to .25% per annum computed on the
average daily unutilized portion of the facility. The Senior Credit Facility
contains certain covenants that, among other things, limit the Company's
ability to incur additional debt, create liens, pay cash dividends (with
certain exceptions) or make certain other payments, and which require the
Company to meet certain financial provisions on a quarterly basis. The Company
may not meet one of these financial provisions during fiscal 1997. In the
event that this financial provision is not met management believes it will be
able to obtain a waiver for the provision. If management is unsuccessful in
obtaining such a waiver all amounts outstanding under the Senior Credit
Facility could become currently payable.
At June 30, 1996, the Company's availability under the Senior Credit
Facility was $30,000,000 less $4,886,000 outstanding under letters of credit.
In April 1993, the Company entered into a capital lease obligation in the
amount of $9,000,000 (the "Centennial Building Capital Lease") for a building
in Louisville, Colorado ("Centennial Phase I"). In December 1994, the
Centennial Building Capital Lease was amended to reflect a major addition to
the building ("Centennial Phase II"). In connection therewith, the Company
entered into an additional capital lease obligation of $11,991,000. Certain
financing received for Centennial Phase I in the amount of $1,500,000 has been
included in the Centennial Phase II obligation. Interest on Centennial Phase I
is imputed at approximately 14.5%, and the remaining obligation at June 30,
1996 and December 31, 1995 totaled approximately $7,248,000 and $7,297,000,
respectively. Interest on Centennial Phase II is at 10%, and the remaining
obligation at June 30, 1996 and December 31, 1995 totaled approximately
$13,135,000 and $13,257,000, respectively. The Centennial Building Capital
Lease contains certain covenants that, among other things, limit the Company's
ability to incur additional debt, create liens, pay cash dividends (with
certain exceptions) or make certain other payments, and which require the
Company to meet certain financial provisions on a quarterly basis. The Company
may not meet one of these financial provisions (similar to the provision under
the Senior Credit Facility referred to above) during fiscal 1997. In the event
that this financial provision is not met management believes it will be able to
obtain a waiver for the provision. If management is unsuccessful in obtaining
such a waiver all amounts outstanding under the Centennial Building Capital
Lease could become currently payable.
The initial term of the Centennial Building Capital Lease is 20 years, with
four successive five year renewals. The Company may purchase the Centennial
Building at fair market value during the ninth year of the lease, or at the end
of the first five year renewal period. Total monthly payments amount to
approximately $104,000 and $136,000 for Centennial Phase I and Centennial Phase
II, respectively. On June 1, 2001 and every 5th year thereafter, total annual
payments under the Centennial Building Capital Lease will be increased by the
lesser of 22.10% or the cumulative rate of inflation for the preceding five
years.
Holding has guaranteed performance on all terms of the Centennial Building
Capital Lease. The Centennial Building Capital Lease is collateralized by the
buildings.
F-14
<PAGE> 50
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future maturities of long-term debt and capital leases are as follows (in
thousands):
<TABLE>
<CAPTION>
Year ending June 30:
<S> <C>
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,015
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,104
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,803
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,802
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,752
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,663
----------
213,139
Less amounts representing interest on capital lease obligations . . . . . . (27,889)
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . (599)
----------
Long-term debt and capital lease obligations, net of current maturities . . $ 184,651
==========
</TABLE>
10. OTHER LIABILITIES
Other liabilities at June 30, 1996 and December 31, 1995 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Service credits. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,638 $ 2,194
EDS license fee and contract obligation. . . . . . . . . . . . . . . 2,435 2,810
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 694
------- -------
$ 5,757 $ 5,698
======= =======
</TABLE>
In June 1991 the Company entered into an agreement which granted service
credits to Meredith of approximately $146,000 per month through June 1998. In
the event that revenue from Meredith is insufficient to offset the scheduled
service credits, the Company is obligated to pay cash. As a result of service
issues, the Company granted additional service credits to Meredith of $100,000
per month for one year beginning January 1995, which were charged to operations
during the fourth quarter of 1994. Meredith service credits included in other
liabilities amounted to $1,466,000 and $2,194,000 at June 30, 1996 and December
31, 1995, respectively.
Pursuant to prior technology agreements (see Note 11), EDS purchased
certain computer equipment used in the Company's data center for $4,603,000 and
prepaid a $1,600,000 license fee for a ten-year license to use certain of the
Company's proprietary data processing information. The license fee is
recognized in income on a straight-line basis over ten years. The proceeds from
the sale of the equipment have been deferred as a long-term contract
obligation.
The amortization on the license fee and obligation is as follows (in
thousands):
<TABLE>
<CAPTION>
LICENSE
FEE AND
Year ending June 30: OBLIGATION
----------
<S> <C>
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 958
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
---------
3,368
Less amounts representing interest and current portion. . . . . . . (933)
---------
$ 2,435
=========
</TABLE>
F-15
<PAGE> 51
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. NCORE DEVELOPMENT AND TECHNOLOGY AGREEMENT
Through December 31, 1994, the Company incurred liabilities totaling
$29,333,000 related to NCORE development. Payments through December 31, 1994
reduced these liabilities by $2,430,000. In connection with the
Recapitalization, EDS liminated the Company's remaining liabilities of
$26,903,000 in exchange for Holding preferred stock (see Note 18). This
reduction in liabilities together with a reduction in certain trade payables of
approximately $1,397,000 has been accounted for as a capital contribution.
In connection with the Recapitalization, EDS and the Company entered into
the Amended IT Agreement effective as of January 1, 1995. The Amended IT
Agreement amended and restated the terms upon which EDS will (i) continue to
supply to the Company information technology services (the "IT Services") and
(ii) assist the Company in reducing costs and improving its business
operations. Under the Amended IT Agreement, the Company has control over the
management direction of the IT Services and EDS's delivery of the IT Services.
The Amended IT Agreement amends, restates and supersedes the terms and
conditions of all prior information technology services agreements between the
Company and EDS as of the effective date of the Amended IT Agreement. Certain
information technology functions formerly performed by the Company are included
in the IT Services. Effective January 1, 1995, approximately 112 Company
employees were transferred to EDS, as well as certain operating lease
obligations for equipment and software. The Company's obligation for the
remaining balance of NCORE prior development service charges plus accrued
interest (as defined in prior information technology services agreements) was
released in connection with the Recapitalization.
The Amended IT Agreement provides for an initial term concluding on March
31, 2003 unless earlier terminated or subsequently renewed in accordance with
the terms of the Amended IT Agreement. Under the Amended IT Agreement, EDS
supplies to the Company substantially all of the Company's information
technology, equipment, and services needs, with certain exceptions. Any
information technology services of the Company which are beyond the scope of
the Amended IT Agreement must be agreed to in writing in advance by the
parties. If either party materially defaults in the performance of any of its
duties or obligations under the Amended IT Agreement, and such default shall
not be substantially cured within sixty (60) days after written notice is given
to the defaulting party specifying the default, then the other party may
terminate the Amended IT Agreement as of a date specified in such notice of
termination.
The Company compensates EDS for IT Services on a "cost-plus" basis. The
term "cost-plus" means that the Company reimburses EDS for EDS's direct
out-of-pocket expenses incurred by EDS in performing the IT Services and pays
EDS an amount based on a percentage of the reimbursed costs. EDS is required to
use its reasonable efforts to obtain the various third party resources and
services to be provided to the Company at the lowest vendor charges
commercially available to EDS. In addition, EDS must take any and all
reasonable steps to minimize the amount and level of reimbursed service costs
consistent with the performance of its obligations under the Amended IT
Agreement. The Company currently estimates continuing annual expenditures to be
approximately $48,700,000 under the Amended IT Agreement, including
approximately $5,500,000 in capitalized expenditures. EDS has also agreed to
provide the Company with related financing on commercially customary terms and
conditions.
Fees incurred under the Amended IT Agreement for the year and six month
period ended June 30, 1996 were $47,177,000 and $23,583,000, respectively
(including $8,380,000 and $4,659,000, respectively, of capitalized
expenditures), of which $8,213,000 and $656,000 was included at June 30, 1996
in accounts payable and accrued liabilities, respectively. Fees incurred under
the Amended IT Agreement for the year ended December 31, 1995 were $44,773,000
(including $7,553,000 of capitalized expenditures), of which $12,581,000 and
$518,000 was included at year-end in accounts payable and accrued liabilities,
respectively. Fees incurred under the then-existing EDS information technology
services agreement for the year ended December 31, 1994 were $31,664,000
(including $5,271,000 of capitalized expenditures), of which $7,208,000 and
$592,000 was included at year-end in accounts payable and accrued liabilities,
respectively. Fees incurred under the then-existing information technology
F-16
<PAGE> 52
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
services agreement for the year ended December 31, 1993 were $35,891,000
(including $7,024,000 of capitalized expenditures), of which $7,098,000 was
included at year-end in accounts payable.
12. COMMITMENTS, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS
Financial Advisory Agreements
The Company has engaged each of Hicks, Muse, Tate & Furst Incorporated
("Hicks, Muse") and Wand/Neodata Investments, L.P. ("Wand"), to provide
financial advisory services during the ten-year period ending August 22, 2000,
in consideration for which Hicks, Muse and Wand will receive aggregate fees of
approximately $1,800,000 and $350,000, respectively, which are currently
payable in quarterly installments of $45,000 and $8,750, respectively. Hicks,
Muse and Wand are also entitled to reimbursement for all reasonable and
customary disbursements and out-of-pocket expenses incurred in the performance
of those financial advisory services and will be indemnified by the Company
against certain liabilities and expenses. Hicks, Muse and Wand received fees
during the six month period ended June 30, 1996 pursuant to such agreements of
$90,000 and $17,500, respectively. Hicks, Muse and Wand received fees during
the year ended June 30, 1996 the years ended December 31, 1995 and 1994
pursuant to such agreements of $180,000 and $35,000, respectively, and received
fees during 1993 pursuant to such agreements of $150,000 and $35,000,
respectively.
Expenses
At June 30, 1996, an affiliate of Hicks, Muse owed the Company $250,000 for
the affiliate's share of certain expenses paid by the Company to common
vendors.
Leases
The Company leases various office and warehouse space and certain property
and equipment under noncancelable operating lease agreements. Most leases
contain options to renew at varying terms and some contain purchase options.
Under contracts existing at June 30, 1996, the future minimum annual rentals
applicable to these leases that have initial or remaining lease terms in excess
of one year are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending June 30:
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,001
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,540
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,281
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,668
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,469
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,303
--------
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . $ 78,262
========
</TABLE>
Rental expense for operating leases was $15,918,000, $8,119,000,
$14,328,000, $12,888,000 and $8,885,000 for the year and six month period ended
June 30, 1996 and the years ended December 31, 1995, 1994 and 1993,
respectively.
Employment Agreements
The Company has employment agreements with certain executive officers with
variable terms. The agreements provide for annual base salaries and additional
annual merit bonuses as established by the Board of Directors. Under certain
circumstances, including termination without cause (as defined), certain
executive officers will be entitled to receive (i) monthly severance payments
in an amount equal to their monthly base salary for a period of 3-18 months,
(ii) a pro-rated portion of the bonus that would have been payable for the
year in which such termination
F-17
<PAGE> 53
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
occurs, and (iii) certain other benefits. The maximum aggregate commitment for
future salaries, excluding bonuses, under these employment agreements is
approximately $1,537,000.
Ireland Grants
On November 25, 1994, the Company signed an agreement (the "Agreement")
with the Industrial Development Agency of Ireland (the "IDA") to provide the
Company's foreign subsidiary in Ireland cash payments in various installments
totaling approximately $2,018,000. Through June 30, 1996, the Company has
received cash payments of $1,009,000 under the Agreement, which the Company has
recorded as deferred income.
The Company also assumed contingent obligations for grants acquired in
connection with the Services Acquisition totaling approximately $867,000 at the
time of the Services Acquisition (the "Assumed Obligation").
The terms of the Agreement and the Assumed Obligation require, among other
things, that the Company maintain a minimum level of local employees (as
specified) through 1999. The Company maintained the specified employment
levels in 1995 but did not achieve the specified levels in 1996 due to the 1995
restructuring of the Company's Ireland operations (see Note 18). In September
1996, the Agreement was modified to reduce the required minimum level of local
employees. A cash payment of $783,000 was received in September 1996 and the
remaining payment of approximately $226,000 will be received in 1999 subject to
the Company's continued compliance with the Agreement.
Under the terms of the Agreement the IDA may, through July 1999, demand
reimbursement of amounts previously advanced if the employment levels are not
sufficient. Under the terms of the Assumed Obligation the IDA may, through
January 1997, demand reimbursement of approximately $400,000 if the employment
levels are not sufficient. In the opinion of management, the aggregate amount
reimbursed to the IDA in excess of the deferred income, if any, will not be
material to the financial position, results of operations, or cash flows of the
Company.
Telecommunications Agreement
In December 1994, the Company entered into a three-year noncancelable
agreement with a telecommunications provider pursuant to which the Company will
receive, among other things, interstate and international telecommunications
services at a discount from the telecommunications provider if certain minimum
billing levels are maintained. During 1995, the agreement was amended to extend
the term for an additional year. Under the amendment, the minimum billing
levels escalate annually, from $4,000,000 in the first year to $4,400,000 in
the final year, and include monthly usage charges and minimum levels of 800
level service. During 1996, the agreement was amended to provide to the
Company a credit of approximately $200,000 to be applied against future monthly
usage charges. The Company believes that it will satisfy the requirements
under the agreement.
Real Estate Partnership
The Company has a minority interest in a real estate partnership which owns
one of the Company's facilities. Rental expense paid to this partnership
amounted to $382,000, $179,000, $412,000, $400,000, and $389,000 during the
year and six month period ended June 30, 1996 and the years ended December 31,
1995, 1994, and 1993, respectively. At June 30, 1996 and December 31, 1995,
the partnership owed the Company $129,000 for certain expenses paid on its
behalf by the Company.
Other Contingencies
In the normal course of business, the Company is subject to certain legal
proceedings. In management's opinion, the outcome of such litigation will not
have a material adverse effect on the Company's financial position or operating
results.
F-18
<PAGE> 54
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME TAXES
Holding and the Company file a consolidated federal income tax return and
are parties to a tax sharing agreement for the purpose of allocating the
federal income tax liability of the group among its members. The tax sharing
agreement generally allocates the consolidated federal income tax liability to
each member according to the ratio of what that member's tax liability would be
if it filed a separate federal income tax return (subject to certain
modifications) to the similarly computed separate return tax liability of the
members of the group. Pursuant to the agreement, a member is permitted to
utilize the net operating loss of another member (a "Loss Member") to reduce
its share of consolidated federal income tax liability and is not required to
compensate the Loss Member for such tax benefit unless and to the extent that
the Loss Member generates taxable income which would have permitted the Loss
Member to utilize the net operating loss in a separate federal income tax
return.
The Company's principal temporary differences between the financial
reporting and tax basis of assets and liabilities at June 30, 1996 and December
31, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . $ 795 $ 691
Property, plant and equipment depreciation. . . . . . . . . . . . . 3,505 2,894
Computer software amortization and intangible and other assets. . . 4,836 6,522
Original issue discount . . . . . . . . . . . . . . . . . . . . . . 18,196 15,867
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 3,316 1,159
Stock of foreign subsidiaries . . . . . . . . . . . . . . . . . . . 2,424 2,432
Alternative minimum tax payments. . . . . . . . . . . . . . . . . . 137 --
Net operating loss carryforwards. . . . . . . . . . . . . . . . . . 17,723 20,105
-------- --------
Total gross deferred tax assets. . . . . . . . . . . . . . . . . 50,932 49,670
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . (50,855) (49,497)
-------- --------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . 77 173
-------- --------
Deferred tax liabilities:
Meredith service credits. . . . . . . . . . . . . . . . . . . . . . (77) (173)
-------- --------
Total gross deferred tax liabilities . . . . . . . . . . . . . . (77) (173)
-------- --------
Net deferred income tax asset (liability) . . . . . . . . . . . . . $ 0 $ 0
======== ========
</TABLE>
The Company has incurred cumulative losses in recent years. Therefore, in
accordance with SFAS 109, the Company has concluded that a full valuation
allowance must be applied to the gross deferred tax asset, resulting in a net
deferred tax asset of zero, except to the extent that the benefit of operating
loss carryforwards can be used to offset future reversals of existing deferred
tax liabilities. The net increase in the valuation allowance for the six month
period ended June 30, 1996 and for the years ended December 31, 1995, 1994 and
1993 was $1,358,000, $6,351,000, $8,350,000, and $34,796,000, respectively.
The Company has net operating loss carryforwards for income tax purposes of
approximately $46,600,000 at June 30, 1996 that expire beginning in 2006. Net
operating loss carryforwards for alternative minimum tax purposes at June 30,
1996 are approximately $46,000,000. These carryforwards expire beginning in
2006. In September 1995, the Internal Revenue Service completed its examination
of the Company's federal income tax returns for the years 1991 through 1993.
Adjustments relating to this examination capitalized amounts originally
expensed and reduced original purchase price allocations. Additional deferred
tax assets resulting from the audit consist primarily of accrued but unpaid
original issue discount which will be deductible when paid. This resulted in
the payment of $129,000 in alternative minimum tax.
Any future change of control of the Company could, under certain
circumstances, result in the limitation of net operating loss carryforwards.
F-19
<PAGE> 55
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Reconciliation of the United States federal statutory rate and state income
tax rates to the Company's effective tax rate for the six month period ended
June 30, 1996 and for the years ended December 31, 1995, 1994, and 1993 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
U.S. statutory rate of tax. . . . . . . . . . . . . 34.0% 34.0% 34.0% 34.0%
State income tax rates. . . . . . . . . . . . . . . 4.0 4.0 4.0 4.0
Operating losses with no current tax benefit. . . . (38.0) (38.0) (38.0) (38.0)
---- ---- ---- ----
0.0% 0.0% 0.0% 0.0%
==== ==== ==== ====
</TABLE>
14. RETIREMENT SAVINGS PLAN
The Neodata Corporation 401(k) Savings Plan (the "Plan") is a defined
contribution plan and covers all non-union employees of Neodata. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA") as amended and Section 401(k) of the Internal Revenue Code.
The assets of the Plan are held and the related investment transactions are
executed by the Plan's trustee. Participants in the Plan have four investment
alternatives in which to place their funds and may place their funds in one or
more of these investment alternatives. Administrative fees, including audit and
attorney fees, are paid by the Company on behalf of the Plan. The Company may
make contributions to the Plan at its sole discretion. In conjunction with the
benefit plan implemented as a part of the Restructuring (see Note 18),
beginning January 1, 1994, the Company is matching one-half of participants'
contributions to the Plan up to 6% of compensation. The Company contributed
$1,041,000, $553,000, $960,000 and $1,012,000 to the Plan for the year and six
month period ended June 30, 1996 and the years ended December 31, 1995 and
1994, respectively. No contributions were made for the year ended December 31,
1993.
15. HOLDING EQUITY
Holding's only asset is its equity investment in the issued and outstanding
shares of common stock of the Company. The Recapitalization resulted in the
issuance of additional Holding equity and the recapitalization of other Holding
equity as discussed below. Information relating to Holding equity is presented
to provide a more complete description of the Company's equity transactions.
The Financial Accounting Standards Board issued SFAS No. 123, Accounting
for Stock-Based Compensation, which establishes financial accounting and
reporting standards for stock based employee compensation plans. Holding and
the Company are expected to continue accounting for stock based compensation
under Accounting Principles Board Opinion No. 25. The disclosure requirements
of SFAS No. 123 will be effective for the financial statements of Holding and
the Company beginning in 1997. Management does not believe that the
implementation of SFAS No. 123 will have a material effect on the financial
statements of Holding or the Company.
Holding Common Stock
Holding's certificate of incorporation, as amended pursuant to the
recapitalization, authorizes 63,000,000 shares of New Common Stock. All shares
of New Common Stock have voting rights. As of June 30, 1996 and December 31,
1995, outstanding shares of New Common Stock amounted to 388,395.
Holding Class A Convertible Preferred Stock
Holding's certificate of incorporation authorizes 18,000,000 shares of
Class A Convertible Preferred Stock. The stock consists of 9,000,000 shares
designated as Series 1 Preferred Stock and 9,000,000 shares designated as
Series
F-20
<PAGE> 56
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2 Preferred Stock. Class A Convertible Preferred Stock is convertible, under
certain conditions, into shares of New Common Stock. Each share of the Class A
Convertible Preferred Stock has an initial liquidation preference of $10.
Dividends accumulate on the Class A Convertible Preferred Stock, without
interest, at the rate of 10% per year; such dividends are added to the
liquidation preference of the stock whether or not they have been declared by
the Board of Directors.
Holding Class A Convertible Preferred Stock has no voting rights except
that holders of Series 1 Preferred Stock have the right to designate an
advisory director who may attend meeting of the board of directors but will not
have the right to vote on any matters.
As of June 30, 1996 and December 31, 1995, outstanding shares of Class A
Convertible Preferred Stock amounted to 15,280,394.
Holding Class B Junior Convertible Preferred Stock
Holding's certificate of incorporation authorizes 3,090,000 shares of Class
B Preferred Stock. Class B Convertible Preferred Stock is convertible, under
certain conditions, into shares of New Common Stock. Each share of the Class B
Convertible Preferred Stock has an initial liquidation preference of $10.
Dividends cumulate on the Class B Convertible Preferred Stock, without
interest, at the rate of 10% per year; such dividends are added to the
liquidation preference of the stock whether or not they have been declared by
the Board of Directors. The liquidation preference of the Class B Convertible
Preferred Stock is junior to that of the Class A Convertible Preferred Stock.
Class B Convertible Preferred Stock has no voting rights.
As of June 30, 1996 and December 31, 1995, outstanding shares of Class B
Convertible Preferred Stock amounted to 3,090,000.
Warrants
In connection with the Services Acquisition, Holding granted warrants to
purchase 65,000 shares of Old Common Stock at $.10 per share to affiliates of
certain stockholders. The warrants expire in August 2000. Pursuant to the
Recapitalization, these warrants were converted into warrants to purchase 1,308
and 22,492 shares of New Common Stock and Series 2 Preferred Stock,
respectively.
In connection with the Company's senior subordinated debt issuance on
August 27, 1990, Holding issued warrants (the "Subdebt Warrants") to acquire
3,016,250 shares of nonvoting Old Common Stock at no cost. The Subdebt Warrants
were valued at the fair value of the Old Common Stock, and treated as a
reduction of Service's senior subordinated debt, similar to a discount.
Concurrent with the Transaction, $1,500,000 in proceeds was used to retire
certain Subdebt Warrants exercisable into 857,143 shares of nonvoting Old
Common Stock. Pursuant to the Recapitalization, the remaining Subdebt Warrants
were converted into warrants to acquire 28,266 and 486,179 shares of New Common
Stock and Series 2 Preferred Stock, respectively.
Options
1990 Employee Incentive Plan. Effective August 27, 1990, Holding adopted
the 1990 Employee Incentive Plan (the "1990 Plan"). Under the 1990 Plan,
Holding granted to certain officers and employees both incentive stock options
and non-qualified stock options to purchase shares of nonvoting Old Common
Stock. All outstanding options became exercisable in varying amounts beginning
one year after grant at prices ranging from $1.00 to $2.60 per share.
Immediately prior to the Recapitalization, options granted under the 1990 Plan
exercisable for an aggregate of 2,969,000 shares of Old Common Stock at an
exercise price of $2.60 per share were canceled and replaced with options
exercisable for a like number of shares of Old Common Stock at an exercise
price of $1.60
F-21
<PAGE> 57
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
per share. No more options will be granted under the 1990 Plan. Pursuant to
the Recapitalization, the 1990 Plan options were converted into options to
purchase shares of New Common Stock and Series 2 Preferred Stock.
Performance Options. In December 1990, Holding granted options to
executive officers to purchase 835,526 shares of nonvoting Old Common Stock
(the "Performance Options") at an exercise price of $1.00 per share.
Performance Options for 278,509 shares became vested in 1991. Performance
Options for 309,297 shares became vested in 1993 in connection with separation
agreements with certain former executives. Performance Options for 247,720
shares were terminated in 1994. Pursuant to the Recapitalization, the
Performance Options were converted into options to purchase shares of New
Common Stock and Series 2 Preferred Stock.
1994 Stock Option Plan. Effective November 28, 1994, Holding adopted the
1994 Stock Option Plan (the "1994 Plan"). Under the 1994 Plan, the maximum
aggregate number of shares of New Common Stock as to which options may be
granted is 2,631,579, subject to adjustment in the event of a Reorganization
(as defined) that affects the New Common Stock. Under the New Plan, Holding may
grant to officers and any employees both incentive stock options and
non-qualified stock options to acquire shares of New Common Stock. Incentive
stock options and non-qualified stock options must have an exercise price of at
least 100% of fair market value of the shares on the date of grant. All
outstanding options shall become exercisable in varying amounts as deemed
appropriate by the Board of Directors at the time of the grant or as limited by
Section 422 of the Internal Revenue Code of 1986, as amended. As of June 30,
1996, no options had been issued under the 1994 Plan.
Shares under option for the six month period ended June 30, 1996 and for
the years ended December 31, 1995, 1994, and 1993 are summarized as follows:
1990 Plan
<TABLE>
<CAPTION>
Old New
Common Common Series 2
Stock Stock Preferred
----- ----- ---------
<S> <C> <C> <C>
Outstanding at December 31, 1992 . . . . . . . . . . . . . 1,365,220 -- --
Granted . . . . . . . . . . . . . . . . . . . . . . . . . 129,000 -- --
Exercised . . . . . . . . . . . . . . . . . . . . . . . . (112,500) -- --
Canceled . . . . . . . . . . . . . . . . . . . . . . . . (472,720) -- --
---------
Outstanding at December 31, 1993 . . . . . . . . . . . . . 909,000 -- --
Granted . . . . . . . . . . . . . . . . . . . . . . . . . 2,732,759 -- --
Exercised . . . . . . . . . . . . . . . . . . . . . . . . (41,998) -- --
Canceled . . . . . . . . . . . . . . . . . . . . . . . . (445,049) -- --
Conversion of Old Common Stock into New
Common Stock and Series 2 Preferred . . . . . . . . . . (3,154,712) 63,465 1,091,606
--------- -------- ---------
Outstanding at December 31, 1994 . . . . . . . . . . . . . -- 63,465 1,091,606
Canceled . . . . . . . . . . . . . . . . . . . . . . . . -- (9,567) (164,567)
--------- -------- ---------
Outstanding at December 31, 1995 . . . . . . . . . . . . . -- 53,898 927,039
Canceled . . . . . . . . . . . . . . . . . . . . . . . . -- (1,630) (28,028)
--------- -------- ---------
Outstanding at June 30, 1996 . . . . . . . . . . . . . . . -- 52,268 899,011
========= ======== =========
Exercisable at December 31, 1993 . . . . . . . . . . . . . 584,870 -- --
========= ======== =========
Exercisable at December 31, 1994 . . . . . . . . . . . . . -- 9,633 165,693
========= ======== =========
Exercisable at December 31, 1995 . . . . . . . . . . . . . -- 37,366 642,698
========= ======== =========
Exercisable at June 30, 1996 . . . . . . . . . . . . . . . -- 44,136 759,148
========= ======== =========
</TABLE>
F-22
<PAGE> 58
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Performance Options
<TABLE>
<CAPTION>
Old Common New Common Series 2
Stock Stock Preferred
----- ----- ---------
<S> <C> <C> <C>
Outstanding at December 31, 1992 . . . . . . . . . . . . . 835,526 -- --
-------- ------ -------
Outstanding at December 31, 1993 . . . . . . . . . . . . . 835,526 -- --
Canceled . . . . . . . . . . . . . . . . . . . . . . . . (247,720) -- --
Conversion of Old Common Stock into New
Common Stock and Series 2 Preferred . . . . . . . . . . (587,806) 11,825 203,395
-------- ------ -------
Outstanding at December 31, 1994 . . . . . . . . . . . . . -- 11,825 203,395
-------- ------ -------
Outstanding at December 31, 1995 . . . . . . . . . . . . . -- 11,825 203,395
-------- ------ -------
Outstanding at June 30, 1996 . . . . . . . . . . . . . . . -- 11,825 203,395
======== ====== =======
Exercisable at December 31, 1993 . . . . . . . . . . . . . 587,806 -- --
======== ====== =======
Exercisable at December 31, 1994 and 1995
and June 30, 1996 . . . . . . . . . . . . . . . . . . . . -- 11,825 203,395
======== ====== =======
</TABLE>
16. TRANSACTIONS WITH HOLDING
Concurrent with the Transaction on May 5, 1993, Holding assumed the
obligation for the Meredith Note from Product as a result of the mergers. The
Meredith Note was issued in connection with the Product Acquisition in June
1991, with an original principal balance of $7,000,000 and bearing interest at
9%. Interest was compounded quarterly through June 30, 1993, at which time
such accrued and unpaid interest became principal on the note. Payments are due
in decreasing quarterly installments ranging from $415,000 in 1996 to $363,000
in 1998. The remaining principal balance on the note of $2,831,000 is due in
June 1998. Holding and Product have used an imputed interest rate of 14.5% to
record this note in the financial statements. The balance of the note using
this rate is $4,711,000 and $4,950,000 at June 30, 1996 and December 31, 1995,
respectively. The only source of payment of the note is cash flow generated by
the Company or reductions in the Company's accounts receivable from Meredith.
Cash paid to service the note payable is reflected in the financing activities
section on the statement of cash flows. The Company satisfied Holding's
obligation under the Meredith Note for the second, third, and fourth quarters
of 1995, and for the first three quarters of 1994, totaling $1,293,000 and
$1,389,000, respectively, by reducing accounts receivable. Amounts due of
$452,000 and $410,000 under the Meredith Note for the fourth quarter of 1994
and the second quarter of 1996, respectively, are included in accounts payable.
Scheduled maturities under this obligation are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending June 30:
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,602
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,496
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,831
------
5,929
Less amount representing interest. . . . . . . . . . . . . . . (1,218)
-------
$ 4,711
=======
</TABLE>
F-23
<PAGE> 59
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
For cash and cash equivalents the carrying amount approximates fair value.
For long-term debt, the fair value of the Company's fixed rate long-term
debt is estimated based on the quoted market prices for the same or similar
issues or on the Company's current incremental rate of borrowing. The variable
rate long-term debt is computed at current quoted market rates.
The Company enters into forward foreign exchange contracts to protect
against future fluctuations in foreign currency exchange rates. At June 30,
1996, the Company had approximately $1,114,000 in contracts outstanding to buy
foreign currency in the future. The contracts, which expire through August 31,
1996, have an estimated fair value of $1,094,000, based on the June 30, 1996
exchange rate.
The estimated fair values of the Company's financial instruments at June
30, 1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Capital leases and long-term debt, including current
portion, net of original issue discount . . . . . . . $185,250 $187,369 $179,483 $181,145
</TABLE>
18. SIGNIFICANT EVENTS
The Transaction
On May 5, 1993, Holding, together with its subsidiaries, including the
Company (the "Neodata Companies"), implemented a plan (the "Transaction") which
included the following primary components: (i) the sale of $163,000,000
aggregate principal amount of the Company's 12% Senior Deferred Coupon Notes
due 2003; (ii) the sale of an aggregate of $5,000,000 of Holding's common stock
to an affiliate of Hicks, Muse and to Wand/Neodata Investments, L.P., existing
stockholders of Holding; (iii) the issuance of 9,177,587 shares of Holding
Common Stock to EDS in exchange for approximately $8,000,000 of Holding Senior
Exchangeable Preferred Stock held by EDS (including the discharge of
approximately $2,000,000 of accrued and unpaid dividends thereon) and the
cancellation of approximately $15,800,000 of indebtedness (including $800,000
of accrued and unpaid interest thereon) owed to EDS by the Company; (iv) the
repayment of approximately $92,400,000 of debt, which, together with the
indebtedness owed to EDS described in the preceding clause, was substantially
all of the debt of the Neodata Companies outstanding prior to the time of the
Transaction; (v) the Company's entering into the $30,000,000 Senior Credit
Facility; (vi) a series of transactions that resulted in all of the operations
and substantially all of the assets of the Neodata Companies being held by the
Company and its subsidiaries; and (vii) the retirement of certain outstanding
warrants, exercisable into 857,143 shares of Holding's nonvoting common stock
for $1,500,000. In addition, in conjunction with the Transaction, the Company
and EDS entered into an Amended and Restated Agreement for Information
Technology, which replaced existing EDS facilities management and technology
development agreements between EDS and the Neodata Companies and required EDS
to manage the Company's data processing centers (other than the center relating
to database marketing services) and to develop NCORE.
F-24
<PAGE> 60
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company incurred a charge to operations as a result of the Transaction as
follows:
<TABLE>
<S> <C>
To write off debt issuance costs related to the early retirement of certain
indebtedness existing prior to the Transaction............................... $2,138,000
To write off original issue discount upon the early retirement of certain
certain indebtedness existing prior to the Transaction ...................... 2,789,000
Payment of prepayment penalties on early retirement of certain
indebtedness existing prior to the Transaction............................... 2,162,000
----------
$7,089,000
==========
</TABLE>
Restructuring Charges and Impairment of Intangible Assets
In the fourth quarter of 1995, the Company, as part of its continuing
efforts to reduce the cost of delivering its services, adopted a plan to close
its facilities in Kilmallock and Newcastle West, Ireland. The plan included
separating 110 employees. The cost associated with these separations was
approximately $1,667,000, all of which was paid in 1995.
In 1993 the Company entered a plan (the "Restructuring") whereby it revised
its delivery plan from function-based operations to customer-based service
centers. The plan also changed the strategic direction of the NCORE
technology. Components of the 1993 Restructuring charges were as follows:
<TABLE>
<S> <C>
Employee separations............................................................. $11,990
Asset write-downs................................................................ 5,569
Relocation and other............................................................. 2,058
Lease terminations ............................................................. 663
-------
Total Restructuring costs........................................................ $20,280
=======
</TABLE>
A summary of restructuring activity for the years ended December 31, 1993,
1994, and 1995 is as follows:
<TABLE>
<S> <C>
1993 activity:
1993 provision ................................................................ $20,280
Cash payments ................................................................ (2,280)
Non-cash items ................................................................ (9,013)
----------
Balance, December 31, 1993....................................................... 8,987
1994 activity:
Cash payments ................................................................ (7,261)
Adjustments to reserves........................................................ (1,236)
----------
Balance, December 31, 1994....................................................... 490
1995 activity:
1995 provision ................................................................ 1,667
Cash payments ................................................................ (2,038)
Adjustments to reserves........................................................ (119)
----------
Balance, December 31, 1995....................................................... $ --
==========
</TABLE>
In connection with the Restructuring, the Company reviewed its business
plan and determined that its expected future results of operations would not
support the amortization of the Company's remaining intangible assets balance
of $37,011,000 at December 31, 1993. Accordingly, the Company incurred a charge
to earnings of $37,011,000 during the fourth quarter of 1993 for impairment of
such intangible assets. This charge was based on a
F-25
<PAGE> 61
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
comparison of the projected undiscounted future income, before amortization of
intangible assets, of the Company with the carrying value of the intangible
assets. Based on this analysis, it was determined that the cumulative income
before amortization of intangible assets was insufficient to recover the
intangible assets balance.
Amortization expense for intangible assets for the year ended December 31,
1993 consisted of the following (in thousands):
<TABLE>
<S> <C>
Noncompete agreements . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,508
Customer, contractual and other relationships . . . . . . . . . . . . . 4,016
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,289
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
--------
$ 12,028
========
</TABLE>
Recapitalization
The Company, Holding, and EDS entered into a transaction (the
"Recapitalization") in November of 1994 which reduced the Company's obligations
owed to EDS by approximately $28.3 million and resulted in the issuance of
additional Holding equity and the recapitalization of other Holding equity.
The Recapitalization was consummated on November 28, 1994, in two steps.
First, Holding and EDS entered into a Securities Exchange Agreement dated
November 15, 1994, pursuant to which EDS (i) released certain financial
obligations relating to the development of NCORE owed by the Company to EDS at
the time of the consummation of the Recapitalization (the "Closing"), (ii)
transferred to Holding all of the Holding Common Stock then owned by EDS
representing approximately 27.8% (on a fully-diluted basis) of the Holding
Common Stock (the "Old Common Stock"), and (iii) terminated portions of the
then-existing Technology Agreement and entered into a new Agreement for
Information Technology Services (the "Amended IT Agreement") with the Company.
In exchange for the above, Holding issued to EDS (a) 8,600,000 shares of Class A
Convertible Preferred Stock - Series 1 of Holding ("Series 1 Preferred Stock")
having an initial aggregate liquidation preference of $86.0 million, and,
subject to certain antidilution adjustments, convertible under certain
conditions into a number of shares of new voting common stock ("New Common
Stock") of Holding equal to 50.0% of the New Common Stock outstanding (on a
fully-diluted basis, assuming no conversion of the Class B Preferred Stock)
immediately following the Closing, and (b) 3,090,000 shares of Class B Junior
Convertible Preferred Stock (the "Class B Preferred Stock") having an initial
aggregate liquidation preference of $30.9 million and convertible under certain
conditions into a number of shares of New Common Stock having a fair market
value equal to the liquidation preference of such Class B Preferred Stock.
Second, all remaining shares of Old Common Stock not owned by EDS (assuming
the exercise of all warrants and options to purchase Old Common Stock
outstanding on the date of the Closing) were converted into (i) an aggregate of
500,000 shares of New Common Stock representing 1.0% of the New Common Stock
outstanding (on a fully-diluted basis, assuming no conversion of the Class B
Preferred Stock) immediately following the Closing, and (ii) an aggregate of
8,600,000 shares of Class A Convertible Preferred Stock - Series 2 of Holding
(the "Series 2 Preferred Stock") having an initial aggregate liquidation
preference of $86.0 million and convertible under certain conditions into shares
of New Common Stock representing 49.0% of the New Common Stock outstanding (on a
fully-diluted basis, assuming no conversion of the Class B Preferred Stock)
immediately following the Closing.
Impairment of NCORE
During 1993 management reviewed the Company's business including its
technology direction for NCORE. The NCORE development project was originally
expected to result in a major single deliverable software project becoming
available from the development efforts of EDS on behalf of the Company. During
the month of June 1993, management decided to implement a new plan for the
deliverable projects and hardware platform for NCORE
F-26
<PAGE> 62
NEODATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
that would be focused primarily on client needs and individual "short-term
deliverable" projects that would utilize the software developed to date to
deliver substantially upgraded services. This new direction for NCORE
represented a change in the timing of expected deliverable projects from that
employed by previous management and was initiated as a result of a
determination that the existing development plan was resulting in a rate of
expenditure that was deemed unacceptable. The deliverable project related to
the development of NCORE software still represented a fully relational database
processing software system that would replace substantially all of the
Company's client's operations software. Management reallocated resources from
the project to focus on short-term deliverable projects and scaled down the
rate of expenditures originally contemplated but not the size of the project.
The Company proceeded to focus its efforts on how to disaggregate the project
into specific discrete projects that could be delivered over a shorter period
of time.
The Company, Holding and EDS consummated the Recapitalization on November
28, 1994, which resulted in the release of certain financial obligations owed
by the Company to EDS. The Recapitalization reduced the Company's obligations
owed to EDS relating to the development of NCORE by approximately $28.3 million
and resulted in the issuance of additional Holding equity and the
recapitalization of other Holding equity. A significant component of the
Recapitalization was the Amended IT Agreement.
In connection with its decision to effect the Recapitalization and the
Amended IT Agreement with EDS, the Company reevaluated its business plan and
strategic technology direction. As a result of such reevaluation and in view of
the Company's need to focus its financial and management attention on achieving
short-term improvements in financial and operational performance in other areas
of the business, the Company decided to utilize the software developed to date
and discontinue all uncompleted portions of NCORE. Because of the departure
from the technology employed in the development of NCORE, the Company reviewed
NCORE between November 1994 and January 1995 to determine whether its full
value would be recoverable. In January 1995 management determined that the full
value would not be recoverable, and a $31.2 million writedown of the NCORE
development asset was recorded in the fourth quarter of 1994. Costs capitalized
in connection with the development of NCORE were funded under a long-term
obligation to EDS, which was released as part of the Recapitalization and as a
result, the writedown of these costs does not affect operating cash flows. The
net realizable value of the remaining aspects of NCORE was determined by
estimating the future gross revenues from the product reduced by the estimated
future costs of maintenance and customer support required at the time of sale.
The remaining balance of NCORE at December 31, 1994 was $4.2 million and
amortization of this asset commenced in December 1994 using an estimated life
of five years.
F-27
<PAGE> 63
SCHEDULE II
NEODATA SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- ---------
Additions
---------
Balance at Charged to Balance
Beginning Charged to Other at End of
Description of Period Expenses Accounts Deductions(1) Period
----------- ---------- -------- -------- ------------- --------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Current . . . . . . . . . . . . . . . . $ 1,819 $ 680 -- $ (906) $ 1,593
Long-term . . . . . . . . . . . . . . . -- -- -- -- --
------- ------- -------- ------- -------
Six month period ended June 30, 1996 . . $ 1,819 $ 680 -- $ (906) $ 1,593
======= ======= ======== ======= =======
Current . . . . . . . . . . . . . . . . $ 2,284 $ 1,259 -- $(1,724) $ 1,819
Long-term . . . . . . . . . . . . . . . -- -- -- -- --
------- ------- -------- ------- -------
Year ended December 31, 1995 . . . . . . $ 2,284 $ 1,259 -- $(1,724) $ 1,819
======= ======= ======== ======= =======
Current . . . . . . . . . . . . . . . . $ 4,086 $ 1,099 -- $(2,901) $ 2,284
Long-term . . . . . . . . . . . . . . . 476 -- -- (476) --
------- ------- -------- ------- -------
Year ended December 31, 1994 . . . . . . $ 4,562 $ 1,099 -- $(3,377) $ 2,284
======= ======= ======== ======= =======
Current . . . . . . . . . . . . . . . . $ 3,786 $ 1,846 $ -- $(1,546) $ 4,086
Long-term . . . . . . . . . . . . . . . -- 180 314 (18) 476
------- ------- -------- ------- -------
Year ended December 31, 1993 . . . . . . $ 3,786 $ 2,026 $ 314 $(1,564) $ 4,562
======= ======= ======== ======= =======
Valuation allowance for NCORE:
Year ended December 31, 1994(2) . . . . . -- $31,155 -- -- $31,155
======= ======= ======== ======= =======
Valuation allowance for computer
software:
Year ended December 31, 1993(3) . . . . . -- $ 5,000 -- -- $ 5,000
======= ======= ======== ======= =======
Valuation allowance for intangible
assets:
Year ended December 31, 1993(3) . . . . . -- $37,011 -- -- $37,011
======= ======= ======== ======= =======
Valuation for deferred tax asset:
Six month period ended June 30, 1996 . . $49,497 -- $ 1,358 -- $50,855
======= ======= ======== ======= =======
Year ended December 31, 1995 . . . . . . $43,146 -- $ 6,351 -- $49,497
======= ======= ======== ======= =======
Year ended December 31, 1994 . . . . . . $34,796 -- $ 8,350 -- $43,146
======= ======= ======== ======= =======
Year ended December 31, 1993 . . . . . . -- -- $ 34,796 -- $34,796
======= ======= ======== ======= =======
- ---------------------------
</TABLE>
(1) Represents uncollectible accounts written off to the allowance account
and transfers to long-term valuation accounts.
(2) No valuation allowance was recorded in the year ended December 31, 1993.
(3) No valuation allowance was recorded in the six month period ended June
30, 1996 or in the years ended December 31, 1995 or 1994.
S-1
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NEODATA SERVICES, INC.
Date: September 20, 1996 /s/ A. LAURENCE JONES
-------------------------------------
A. Laurence Jones
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
Date: September 20, 1996 /s/ A. LAURENCE JONES
-------------------------------------------
A. Laurence Jones
President and Chief Executive Officer
(principal executive officer of the Company)
Date: September 20, 1996 /s/ NICHOLAS J. CUCCARO
-------------------------------------------
Nicholas J. Cuccaro
Senior Vice President and Chief Financial
Officer (principal financial and
accounting officer of the Company)
Date: September 20, 1996 /s/ KURT J. BURGHARDT
-------------------------------------------
Kurt J. Burghardt
Director
Date: September 20, 1996 /s/ JACK D. FURST
-------------------------------------------
Jack D. Furst
Director
Date: September 20, 1996 /s/ THOMAS O. HARBISON
-------------------------------------------
Thomas O. Harbison
Director
Date: September 20, 1996 /s/ THOMAS O. HICKS
-------------------------------------------
Thomas O. Hicks
Director
Date: September 20, 1996 /s/ BRUCE W. SCHNITZER
-------------------------------------------
Bruce W. Schnitzer
Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(D) OF THE ACT BY COMPANIES WHICH
HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
The Company has not sent to its security holders any annual report to
security holders covering the Company's last fiscal year or sent any proxy
statement, form of proxy or other proxy soliciting material with respect to any
annual or special meeting of security holders to more than ten of the Company's
security holders.
<PAGE> 65
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
- ----------- -------
3.1 -- Certificate of Incorporation of the Company. (incorporated by
reference from Exhibit 3.1 to the Company's Registration Statement
on Form S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
3.2 -- By-Laws of the Company. (incorporated by reference from Exhibit
3.2 to the Company's Registration Statement on Form S-1 as
declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
4.1 -- Indenture, dated as of May 5, 1993, between the Company, as
Issuer, and Ameritrust Texas National Association, as Trustee.
(incorporated by reference from Exhibit 4.1 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
4.2 -- Form of 12% Series B Senior Deferred Coupon Note due 2003.
(incorporated by reference from Exhibit 4.3 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.1 -- Credit Agreement, dated as of May 5, 1993, among the Company,
certain Lenders named therein and Heller Financial, Inc.
("Heller"), as Agent and Lender. (incorporated by reference from
Exhibit 10.1 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.2 -- Waiver and Amendment to Credit Agreement, dated as of January 1,
1994, among the Company, the CIT Group/Business Credit, Inc.
("CIT"), and Heller, as Agent and Lender. (incorporated by
reference from Exhibit 10.2 to the Company's Annual Report on Form
10-K (File No. 33-63838) for the fiscal year ended December 31,
1993)
10.3 -- Second Amendment to Credit Agreement, dated as of January 1, 1994,
among the Company, CIT, and Heller, as Agent and Lender.
(incorporated by reference from Exhibit 10.3 to the Company's
Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
ended December 31, 1993)
10.4 -- Revolving Note, dated May 5, 1993, in the principal sum of
$15,000,000, executed by the Company, payable to Heller.
(incorporated by reference from Exhibit 10.2 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.5 -- Revolving Note, dated May 5, 1993, in the principal sum of
$15,000,000, executed by the Company, payable to The CIT
Group/Business Credit, Inc. (incorporated by reference from
Exhibit 10.3 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.6 -- Security Agreement, dated as of May 5, 1993, between the Company
and Heller, as Agent for the Lenders. (incorporated by reference
from Exhibit 10.4 to the Company's Registration Statement on Form
S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
<PAGE> 66
EXHIBIT NO. EXHIBIT
- ----------- -------
10.7 -- Registration Rights Agreement, dated as of May 5, 1993, between
the Company and Morgan Stanley & Co. Incorporated. (incorporated
by reference from Exhibit 10.6 to the Company's Registration
Statement on Form S-1 as declared effective by the Securities and
Exchange Commission on August 24, 1993 (Registration No.
33-63838))
10.8 -- Tax Sharing Agreement, dated as of May 5, 1993, among the Company,
Holding, Neodata Mailing Services, Inc. and Neodata Distribution
Services, Inc. (incorporated by reference from Exhibit 10.7 to the
Company's Registration Statement on Form S-1 as declared effective
by the Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.9+ -- Amended and Restated Employment Agreement, dated as of June 1,
1993, among Mr. Thomas O. Harbison, the Company, and Holding.
(incorporated by reference from Exhibit 10.57 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.10+ -- Letter Agreement between Hicks, Muse & Co. (TX) Incorporated and
Mr. Thomas O. Harbison executed in connection with the Amended and
Restated Employment Agreement. (incorporated by reference from
Exhibit 10.58 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.11+ -- Executive Employment Agreement, dated as of January 1, 1994,
between Mr. A. Laurence Jones and the Company. (incorporated by
reference from Exhibit 10.11 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1993)
10.12+ -- Stock Option Agreement, dated as of January 1, 1994, between Mr.
A. Laurence Jones and Holding. (incorporated by reference from
Exhibit 10.12 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
10.13+ -- Stock Option Agreement, dated as of January 1, 1994, between Mr.
William J. Turner and Holding. (incorporated by reference from
Exhibit 10.14 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
10.14+ -- Amendment and Restatement of Neodata Corporation Employee
Investment Plan, dated as of January 1, 1994. (incorporated by
reference from Exhibit 10.23 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1993)
10.15+ -- Neodata Corporation Amended and Restated Employee Incentive Plan,
dated as of March 9, 1994 (incorporated by reference from Exhibit
10.24 to the Company's Annual Report on Form 10-K (File No.
33-63838) for the fiscal year ended December 31, 1993)
10.16+ -- Neodata Corporation Supplemental Executive Investment Plan,
effective as of January 1, 1994. (incorporated by reference from
Exhibit 10.25 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
10.17+ -- Financial Advisory Agreement, dated as of August 22, 1990, among
Hicks, Muse, Holding, and the Company. (incorporated by reference
from Exhibit 10.14 to the Company's Registration Statement on Form
S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
10.18+ -- Amendment Number One to Financial Advisory Agreement, dated as of
September 30, 1992, among Hicks, Muse, Holding, and the Company.
(incorporated by reference from Exhibit 10.15 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.19+ -- Amendment Number Two to Financial Advisory Agreement, dated as of
May 5, 1993, among Hicks, Muse, Holding, and the Company.
(incorporated by reference from Exhibit 10.16 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
<PAGE> 67
EXHIBIT NO. EXHIBIT
- ----------- -------
10.20 -- Circulation Fulfillment Service Agreement, dated June 26, 1991,
between the Company (formerly Neodata Books/Distribution Services,
Inc. by name change and merger) and Meredith. (incorporated by
reference from Exhibit 10.48 to the Company's Registration
Statement on Form S-1 as declared effective by the Securities and
Exchange Commission on August 24, 1993 (Registration No.
33-63838))
10.21 -- Fulfillment Agreement, dated as of June 26, 1991, between the
Company (formerly Neodata Books/Distribution Services, Inc. by
name change and merger) and Meredith. (incorporated by reference
from Exhibit 10.49 to the Company's Registration Statement on Form
S-1 as declared effective by the Securities and Exchange
Commission on August 24, 1993 (Registration No. 33-63838))
10.22 -- Securities Purchase Agreement, dated as of May 5, 1993, among
Holding, HM/DBMS, and Wand. (incorporated by reference from
Exhibit 10.50 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.23 -- Amended and Restated Stockholders Agreement, dated as of May 5,
1993, among Holding, HMC/Neodata, HM/DBMS, Wand, and certain other
stockholders of Holding. (incorporated by reference from Exhibit
10.51 to the Company's Registration Statement on Form S-1 as
declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.24 -- Securities Purchase and Exchange Agreement, dated as of May 5,
1993, between Holding and EDS. (incorporated by reference from
Exhibit 10.52 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.25 -- Securityholders Agreement, dated as of May 5, 1993, among Holding,
HMC/Neodata, HM/DBMS, and EDS. (incorporated by reference from
Exhibit 10.53 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.26 -- Securities Repurchase Agreement, dated as of May 5, 1993, among
Holding, Continental Bank N.A., and Philadelphia Life.
(incorporated by reference from Exhibit 10.54 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.27 -- Nonexclusive License Agreement, dated as of May 5, 1993 and
effective as of April 15, 1993, between the Company and EDS.
(incorporated by reference from Exhibit 10.56 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.28 -- Financial Advisory Agreement, dated as of August 22, 1990, among
Holding, the Company, and Wand. (incorporated by reference from
Exhibit 10.60 to the Company's Registration Statement on Form S-1
as declared effective by the Securities and Exchange Commission on
August 24, 1993 (Registration No. 33-63838))
10.29+ -- Amendment Number One to Financial Advisory Agreement, dated as of
September 30, 1992, among Holding, the Company, and Wand.
(incorporated by reference from Exhibit 10.61 to the Company's
Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on August 24, 1993
(Registration No. 33-63838))
10.30 -- Amended and Restated Lease Agreement, by and among Neoserv (Co.)
QRS 10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and the Company
dated as of June 8, 1994 (incorporated by reference from Exhibit
10.76 to the Company's Quarterly Report on Form 10-Q File No.
33-63838 for the quarterly period ended June 30, 1994)
<PAGE> 68
EXHIBIT NO. EXHIBIT
- ----------- -------
10.31 -- Construction Agreement, among the Company and Neoserv (Co.) QRS
10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and the Company dated
as of June 8, 1994 (incorporated by reference from Exhibit 10.77
to the Company's Quarterly Report on Form 10-Q File No. 33-63838
for the quarterly period ended June 30, 1994)
10.32 -- Amended and Restated Lease Agreement, by and among Neoserv (Co.)
QRS 10-13, Inc. and Neoserv (Co.) QRS 10-8 Inc. (as landlord) and
the Company (as tenant), dated as of June 8, 1994 (incorporated by
reference from Exhibit 10.78 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1994)
10.33 -- First Amendment to Amended and Restated Lease Agreement, by and
among Neoserv (Co.) QRS 10-13, Inc. and Neoserv (Co.) QRS 11-8,
Inc. (as landlord) and the Company (as tenant) (incorporated by
reference from Exhibit 10.79 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1994)
10.34 -- Fourth Amendment to Credit Agreement, dated as of March 28, 1995,
among the Company and Heller, as Agent and Lender. (incorporated
by reference from Exhibit 10.82 to the Company's Annual Report on
Form 10-K (File No. 33-63838) for the fiscal year ended December
31, 1994)
10.35 -- Agreement for Information Technology Services, dated as of January
1, 1995, between the Company and EDS (incorporated by reference
from Exhibit 10.83 to the Company's Annual Report on Form 10-K
(File No. 33-63838) for the fiscal year ended December 31, 1995)
10.36 -- Agreement, dated as of October 10, 1995, between the Company and
Philip Morris Incorporated (incorporated by reference from Exhibit
10.85 to the Company's Annual Report on Form 10-K (File No.
33-63838) for the fiscal year ended December 31, 1995)**
10.37 -- Form of Fifth Amendment to Credit Agreement, dated as of March 26,
1996, among the Company and Heller, as Agent and Lender
(incorporated by reference from Exhibit 10.88 to the Company's
Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
ended December 31, 1995)
10.38 -- Form of Second Amendment to Amended and Restated Lease Agreement,
dated as of March 25, 1996, by and among Neoserv (Co.) QRS 10-13,
Inc. and Neoserv (Co.) QRS 11-8, Inc. (as landlord) and the
Company (as tenant) (incorporated by reference from Exhibit 10.89
to the Company's Annual Report on Form 10-K (File No. 33-63838)
for the fiscal year ended December 31, 1995)
10.39 -- Sixth Amendment to Credit Agreement, dated as of May 10, 1996,
among the Company and Heller, as Agent and Lender*
10.40 -- Stockholders Agreement, dated as of November 28, 1994, among
Holding, HMC/Neodata, HM/DBMS, Hicks, Muse, EDS, and other
stockholders*
10.41+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. Nicholas J. Cuccaro*
10.42+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Ms. Frances M. Anhut*
10.43+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. Ed L. Frazier*
10.44+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. J. Benjamin Gill*
10.45+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Ms. Susan L. Morse*
10.46+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Mr. Richard L. Rosy*
<PAGE> 69
EXHIBIT NO. EXHIBIT
- ----------- -------
10.47+ -- Executive Employment Agreement, dated as of June 14, 1996, between
the Company and Ms. Nancy S. Talmey*
10.48+ -- Letter Agreement, dated as of June 2, 1994, between the Company
and Mr. Nicholas J. Cuccaro*
10.49+ -- Letter Agreement, dated as of March 15, 1994, between the Company
and Ms. Frances M. Anhut*
10.50+ -- Memorandum Agreement, dated as of May 23, 1996, between the
Company and Mr. J. Benjamin Gill*
10.51+ -- Letter Agreement, dated as of August 14, 1995, between the Company
and Mr. Kevin G. Heery*
10.52+ -- Letter Agreement, dated as of September 23, 1993, between the
Company and Ms. Susan L. Morse*
10.53+ -- Letter Agreement, dated as of February 25, 1992, between the
Company and Mr. Richard L. Rosy*
10.54+ -- Letter Agreement, dated as of December 20, 1994, between the
Company and Ms. Nancy S. Talmey*
21 -- Subsidiaries of the Company. (incorporated by reference from
Exhibit 21 to the Company's Annual Report on Form 10-K (File
No. 33-63838) for the fiscal year ended December 31, 1993)
27 -- Financial Data Schedule*
- ----------------------
* Filed herewith.
** Confidential treatment has been requested with respect to certain portions
of such agreement and the confidential portions have been filed separately
with the Commission pursuant to the confidential treatment request.
+ Indicates a management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.39
SIXTH AMENDMENT
TO CREDIT AGREEMENT
This Sixth Amendment to Credit Agreement, dated May 10, 1996 (this
"Agreement") is among NEODATA SERVICES, INC., a Delaware corporation
("Borrower"), and HELLER FINANCIAL, INC., a Delaware corporation in its
individual capacity as a Lender and in its capacity as agent for the Lenders,
"Agent".
WITNESSETH:
WHEREAS, Agent and Borrower are parties to that certain Credit
Agreement dated as of May 5, 1993 (as amended from time to time thereafter, the
"Credit Agreement"; capitalized terms not otherwise defined herein shall have
the definitions provided therefor in the Credit Agreement) and to certain other
documents executed in connection with the Credit Agreement; and
WHEREAS, Borrower has requested that Agent consent to the change of
Borrower's Fiscal Year to a year ending on June 30 of each year; and
WHEREAS, the parties wish to further amend the Credit Agreement as
provided herein;
NOW, THEREFORE, the parties agree as follows:
1. Amendments to the Credit Agreement. The Credit Agreement shall
be amended as follows:
(a) Fiscal Year. The definition of Fiscal Year shall be amended by
adding the following sentence to the end of such definition: "Notwithstanding
the foregoing, beginning on and after July 1, 1996, "Fiscal Year" means a
twelve month period ending on the last day of June in each year."
(b) Letters of Credit and Guaranties. Maximum Amount. Subsection
2.1(B)(1) of the Credit Agreement shall be amended by adding the following
sentence to the end of such subsection: "Notwithstanding the foregoing, from
the date of the dosing of Borrower's purchase of the operating assets of
International Subscription Services Limited ("ISS") the aggregate amount of
Lender Guaranty Liability with respect to all Lender Letters of Credit and
Lender Guaranties outstanding at any time shall not exceed $7,600,000; provided
however, that $1,600,000 of this amount may be used solely to collateralize
Borrower's obligations to ISS with respect to that certain payment of the
purchase price for the ISS assets that is due and owing by March 31, 1997 (the
"1997 Purchase Payment").
2
<PAGE> 2
Contemporaneously with the payment by Borrower of the 1997 Purchase Payment,
the aggregate amount of Lender Guaranty Liability to all Lender Letters of
Credit and Lender Guaranties outstanding at any time shall be decreased to
$6,000,000.
(c) Indebtedness. Subsection 7.1 shall be amended by adding the
following new subsection (k) as follows:
(k) certain seller financed Indebtedness in the following
amounts, (i) with respect to the acquisition of the fixed
assets of Newfield Publications, Inc. up to $2,200,000.00; and
(ii) with respect to the assets or shares of International
Subscription Services Limited, up to L.2,500,000.00.
2. Representations and Warranties. To induce Agent to enter into
this Agreement, Borrower represents and warrants to Agent that the execution,
delivery and performance by Borrower of this Agreement are within its corporate
powers, have been duly authorized by all necessary corporate action and do not
and will not contravene or conflict with any provision of law applicable to
Borrower, the Certificate of Incorporation or Bylaws of Borrower, or any order,
judgment or decree of any court or other agency of government or any
contractual obligation binding upon Borrower; and the Credit Agreement as
amended as of the date hereof is the legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance with its terms.
3. Conditions. The effectiveness of the amendments stated in this
Agreement is subject to each of the following conditions precedent or
concurrent:
(a) No Default. No Default or Event of Default under the
Credit Agreement, as amended hereby, shall have occurred and be continuing; and
(b) Warranties and Representations. The warranties and
representations of Borrower contained in this Agreement, the Credit Agreement,
as amended hereby, and the other Loan Documents, shall be true and correct as
of the effective date hereof, with the same effect as though made on such date;
and
(c) Related Documents. Borrower shall have executed and
delivered to Agent that certain Waiver and Consent of even date herewith.
4. Miscellaneous.
(a) Captions. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract
made under and governed by the laws of the State of Illinois, without regard
to conflict of
3
<PAGE> 3
laws principles. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(c) Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Agreement.
(d) Successors and Assigns. This Agreement shall be
binding upon Agent, Borrower and Lenders and their respective successors and
assigns, and shall inure to the sole benefit of Agent, Borrower and Lenders and
the successors and assigns of Agent, Borrower and Lenders.
(e) References. Any reference to the Credit Agreement
contained in any notice, request, certificate, or other document executed
concurrently with or after the execution and delivery of this Agreement shall
be deemed to include this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to and do not
serve to effect a novation as to the Credit Agreement. The parties hereto
expressly do not intend to extinguish the Credit Agreement. Instead, it is the
express intention of the parties hereto to reaffirm the indebtedness created
under the Credit Agreement which is evidenced by the Revolving Note and secured
by the Collateral. The Credit Agreement as amended hereby and each of the other
Loan Documents remains in full force and effect.
(g) Costs, Expenses and Taxes. Borrower affirms and
acknowledges that subsection 10.1 of the Credit Agreement applies to this
Agreement and the transactions and Agreements and documents contemplated
hereunder.
Delivered at Chicago, Illinois, as of the day and year first above
written.
NEODATA SERVICES, INC.
By: /s/ NICHOLAS J. CUCCARO
------------------------------------
Name Printed: Nicholas J. Cuccaro
--------------------------
Title: CFO
---------------------------------
[SIGNATURES TO FOLLOW ON NEXT PAGE]
4
<PAGE> 4
HELLER FINANCIAL, INC.,
Individually and as Agent
By: /s/ ELLEN T. COOK
------------------------------------
Name Printed: Ellen T. Cook
--------------------------
Title: Asst. Vice President
---------------------------------
5
<PAGE> 1
EXHIBIT 10.40
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is entered into
and effective as of November 28, 1994, by and among Neodata Corporation, a
Delaware corporation (the "Company"), HMTF (as hereinafter defined) and the
Holders (as hereinafter defined).
Section 1. Definitions. In addition to the terms defined elsewhere in
this Agreement, for purposes of this Agreement, except as otherwise set forth
herein or unless the context otherwise requires, the following terms shall have
the following meanings:
"Accredited Investor" shall have the meaning set forth in Rule
501(a) (or any successor rule then in effect) promulgated under the Securities
Act.
"Affiliate" means, with respect to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with that Person.
"Business Day" means any day except a Saturday, Sunday, or other
day on which commercial banks in the City of New York are authorized by law to
close.
"Class B Preferred" means the Company's Class B Junior
Convertible Preferred Stock, par value $0.01 per share.
"Common Stock" means the common stock par value $0.01 per share,
of the Company, and any other class or series of capital stock issued by the
Company which has the unlimited right to participate in dividends and
distributions upon liquidation of the Company.
"Common Stock Equivalents" means (without duplication with any
other Common Stock or Common Stock Equivalents) rights, warrants, options,
convertible securities or convertible indebtedness, exchangeable securities or
exchangeable indebtedness, or other rights, exercisable for or convertible or
exchangeable into, directly or indirectly, Common Stock, whether at the time or
upon the occurrence of some future event, including without limitation, the
Series 1 Preferred and the Series 2 Preferred; provided, that it is expressly
understood and
<PAGE> 2
agreed that the Class B Preferred is not, and shall not be treated as, a Common
Stock Equivalent.
"Company" means Neodata Corporation, a Delaware corporation.
"Demand Registration" has the meaning set forth in Section 3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully-Diluted Common Stock" means, at any time, the then
outstanding shares of Common Stock of the Company plus (without duplication)
all shares of Common Stock issuable, whether at such time or upon passage of
time or the occurrence of future events, upon the exercise, conversion, or
exchange of all then-outstanding Common Stock Equivalents.
"Holders" means, collectively, the HMC Holders and the Other
Holders.
"HMC Holders" means HMC/Neodata, L.P., a Delaware limited
partnership, and HM/Neodata DBMS, L.P., a Delaware limited partnership, HMTF
and each officer, director and Affiliate thereof, including those Persons
identified as HMC Holders on the signature pages hereof, and the transferees of
such holders who have agreed to be bound by the terms of this Agreement
pursuant to Section 6(a) hereof.
"HMTF" means Hicks, Muse, Tate & Furst Incorporated, a Texas
corporation.
"HMTF Partnerships" means HMC/Neodata, L.P., a Delaware limited
partnership, and HM/Neodata DBMS, L.P., a Delaware limited partnership, or
either of them.
"Indemnified Party" has the meaning set forth in Section
5(d)(iii).
"Indemnifying Party" has the meaning set forth in Section
5(d)(iii).
"Inspector" has the meaning set forth in Section 5(b)(viii).
2
<PAGE> 3
"Other Holders" means each Person who is now or hereafter a party
to this Agreement and who is not an HMC Holder.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, or other entity.
"Qualifying IPO" has the meaning set forth in Section 3(a).
"Records" has the meaning set forth in Section 5(b)(viii).
"Registrable Securities" means the (i) Common Stock of the
Company, $.01 par value per share, and (ii) the Common Stock of the Company
into which the Series 1 Preferred, Series 2 Preferred, and Class B Preferred
are convertible; provided, that any Registrable Security will cease to be a
Registrable Security when (i) a registration statement covering such
Registrable Security has been declared effective by the SEC and it has been
disposed of pursuant to such effective registration statement; (ii) it is sold
under circumstances in which all of the applicable conditions of Rule 144 (or
any similar provisions then in force) under the Securities Act are met; or
(iii) it has been otherwise transferred, and the Company has delivered a new
certificate or other evidence of ownership for it not bearing the legend
required pursuant to the agreement to which these registration rights are
attached and it may be resold without subsequent registration under the
Securities Act.
"Registration Expenses" has the meaning set forth in Section
5(c).
"Registration Notice" has the meaning set forth in Section 3(a).
"SEC" means the Securities and Exchange Commission or any
successor governmental agency.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time.
3
<PAGE> 4
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement.
"Series 1 Preferred" means the Company's Class A Convertible
Preferred Stock - Series 1, par value $0.01 per share.
"Series 2 Preferred" means the Company's Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share.
"Shares" means any shares of Common Stock and any Common Stock
Equivalents held by a party hereto.
"Subsidiary" means, with respect to any Person, any other Person
at least a majority of whose outstanding shares of capital stock or other
equity interests (having ordinary voting power for the election of directors or
comparable managers of such other Person) are owned, directly or indirectly, by
that Person.
"Underwriter" means a securities dealer which purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
"Withdrawing Director" has the meaning set forth in Section 2(b).
Section 2. Board of Directors.
(a) Composition. The HMC Holders, the Other Holders, and the
Company shall take all action within their respective power, including, but not
limited to, the voting of capital stock of the Company, required to cause all
members of the Board of Directors of the Company to at all times consist of
Persons designated by HMTF.
(b) Inability of Directors to Serve. In the event that any
director (a "Withdrawing Director") designated in the manner set forth in
Section 2(a) is unable to serve, or once having commenced to serve, is removed
or withdraws from the Board of Directors of the Company, such Withdrawing
Director's replacement on such Board of directors (and, if applicable, any
executive or similar committee thereof) shall be designated in accordance with
Section 2(a).
4
<PAGE> 5
(c) Failure to Designate a Director. In the event any Person
entitled to designate a director or directors pursuant to this Agreement
chooses not to designate any director or directors, such directorship or
directorships shall remain vacant unless such vacancy results in less than the
minimum number of directors required by law, in which case such vacancy shall
be filled by an individual elected by a majority of the directors then serving.
(d) Voting of Capital Stock.
(i) Each of the Holders agrees that it will at
all times vote as a stockholder of the Company, and use all reasonable
efforts to cause those individuals whom it has designated or elected
to the Board of Directors of the Company, if any, to vote as a
director of the Company, in such a manner as to ensure that the terms
and intention of this Agreement, the certificate of incorporation, and
the bylaws of the Company are carried out and observed and to insure
that the certificate of incorporation and bylaws as in effect on the
date hereof do not, at any time hereafter, conflict in any respect
with the provisions of this Agreement. In addition, each of the
Holders agrees that it or he will not vote any capital stock of the
Company to cause the removal from the Board of Directors of any
directors designated by HMTF except with the written consent (or upon
the written direction) of HMTF. Each of the Holders agrees that, in
the event that any proposal is made to the stockholders of the Company
which is required to be submitted to such stockholder for a vote under
the General Corporation Law of the State of Delaware or the Company's
certificate of incorporation, he or it will vote his or its capital
stock of the Company in accordance with the direction of the Holders
of a majority of the Fully-Diluted Common Stock held by such Holders.
(ii) If HMTF requests that any director be removed
(with or without cause) by written notice thereof to the Company, then
each of the Company and the Holders shall vote all its or his capital
stock in favor of such removal upon such request.
(e) Other Activities of the Parties; Fiduciary Duties.
It is understood and accepted that the Holders and their respective Affiliates
have interests in other business
5
<PAGE> 6
ventures which may be competitive with the activities of the Company and its
Subsidiaries and that, to the fullest extent permitted by law, nothing in this
Agreement shall limit the current or future business activities of any of the
Holders or any of their respective Affiliates whether or not such activities
are competitive with those of the Company or any of its Subsidiaries. Except
as expressly provided herein, nothing in this Agreement shall limit the ability
of any Holder to exercise its rights under this Agreement or as a stockholder
of the Company in accordance with its own best judgment and applicable law.
Nothing in this Agreement, express or implied, shall relieve any officer or
director of the Company or any of its Subsidiaries or Affiliates, as such, of
any fiduciary duties they may have to the stockholders of the Company or such
Subsidiary or Affiliate.
Section 3. Demand Registration.
(a) Request for Registration. Following a "Qualifying
IPO," as defined in the Company's certificate of incorporation, Holders of
Registrable Securities representing not less than 25% of the Registrable
Securities may make a written request for registration under the Securities Act
(a "Demand Registration") of all or part of its or their Registrable
Securities; provided that (i) the Company shall not be obligated to honor any
such request unless at the time thereof the Company's Common Stock is listed
for trading on a national securities exchange or regularly traded in the
national over-the-counter market, (ii) the number of shares of Registrable
Securities to be so registered shall reasonably be expected to generate gross
proceeds of not less than $5 million, and (iii) the Company need effect only
three Demand Registrations (subject to Section 3(c) hereof). Such request
shall specify the number of shares of Registrable Securities proposed to be
sold and shall also specify the intended method of disposition thereof. Within
ten Business Days after receipt of such request, the Company will give written
notice of such registration request to all other Holders (a "Registration
Notice") and include in such registration all Holders' Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 Business Days after the mailing of the Registration Notice.
Each such request shall also specify the number of shares of Registrable
Securities to be registered and the intended method of disposition thereof.
Unless the Holder or Holders of a majority of the Registrable Securities to be
registered in such Demand Registration shall consent in writing, no
6
<PAGE> 7
other party, including the Company (but excluding another Holder), shall be
permitted to offer securities under any such Demand Registration.
(b) Effective Registration and Expenses. A registration
will not count as a Demand Registration until it has become effective (unless
the Holders demanding such registration withdraw the Registrable Securities, in
which case such demand will count as a Demand Registration unless the holders
of such Registrable Securities agree to pay all Registration Expenses, as
hereinafter defined). Except as provided above, the Company will pay all
Registration Expenses in connection with any registration initiated as a Demand
Registration, whether or not it becomes effective.
(c) Priority on Demand Registrations. If the Holders of
a majority of the shares of Registrable Securities to be registered in a Demand
Registration so elect, the offering of such Registrable Securities pursuant to
such Demand Registration shall be in the form of an underwritten offering. In
such event, if the managing Underwriter or Underwriters of such offering advise
the Company and the Holders in writing that in their opinion the number of
shares of Registrable Securities requested to be included in such offering is
sufficiently large to materially and adversely affect the success of such
offering, the Company will include in such registration the aggregate number of
Registrable Securities which in the opinion of such managing Underwriter or
Underwriters can be sold without any such material adverse effect, and such
amount shall be allocated pro rata among the Holders on the basis of the amount
of Registrable Securities requested to be included in such registration by each
such Holder. To the extent Registrable Securities so requested to be
registered are excluded from the offering, the Holders of such Registrable
Securities, as a group, shall have the right to one additional Demand
Registration under this Section with respect to the Registrable Securities.
(d) Selection of Underwriters. If any Demand
Registration is in the form of an underwritten offering, the Company shall
select the book-running managing Underwriter and such additional investment
bankers and managers to be used in connection with the offering; provided, that
such Underwriter and additional investment bankers and managers must be
reasonably satisfactory to the Holders making such Demand Registration.
7
<PAGE> 8
Section 4. Piggy-Back Registration.
(a) (i) If the Company proposes to file a registration
statement under the Securities Act with respect to an equity offering by the
Company for its own account or (ii) if the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any of its security
holders (provided that, in the case of a registration on demand of such
security holders, the holders of a majority in aggregate principal amount or
number of shares of any such debt securities or equity securities, as the case
may be, consent in writing) of any class of security (other than a registration
statement on Form S-4 or S-8 or any substitute form that may be adopted by the
SEC or any registration statement filed in connection with an exchange offer or
offering of securities solely to the Company's existing security holders), then
the Company shall give written notice of such proposed filing to the Holders of
the Registrable Securities as soon as practicable (but in no event less than 30
days before the anticipated effective date of such registration statement), and
such notice shall offer such Holders the opportunity to register such number of
Registrable Securities as each such Holder may request.
(b) The Company shall use its best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in the registration
statement for such offering to be included on the same terms and conditions as
any similar securities of the Company included therein. Notwithstanding the
foregoing, if the managing Underwriter or Underwriters of such offering deliver
a written opinion to the Holders of such Registrable Securities that (i)
because of the size of the offering which the Holders, the Company and such
other persons intend to make, the success of the offering would be materially
and adversely affected by inclusion of the Registrable Securities requested to
be included, then the amount of securities to be offered for the accounts of
Holders shall be reduced pro rata (according to the Registrable Securities
proposed for registration) to the extent necessary to reduce the total amount
of securities to be included in such offering to the amount recommended by such
managing Underwriter or Underwriters (provided that if securities are being
offered for the account of other persons or entities as well as the Company
other than in connection with a
8
<PAGE> 9
registration on demand for the benefit of such other persons or entities, then
with respect to the Registrable Securities intended to be offered by Holders,
the proportion by which the amount of such class of securities intended to be
offered by Holders is reduced shall not exceed the proportion by which the
amount of such class of securities intended to be offered by such other persons
or entities (other than the Company) is reduced); or (ii) because of the kind
or combination of securities which the Holders, the Company and any other
persons or entities intend to include in such offering, the success of the
offering would be materially and adversely affected by inclusion of the
Registrable Securities requested to be included, then (A) the Registrable
Securities to be included in such offering shall be reduced as described in
clause (i) above or, (B) if the actions described in clause (A) would, in the
judgment of the managing Underwriter, be insufficient to substantially
eliminate the adverse effect that inclusion of the Registrable Securities
requested to be included would have on such offering, such Registrable
Securities will be excluded from such offering.
Section 5. Miscellaneous Registration Rights Provisions.
(a) Holdback Agreements.
(i) Restrictions on Public Sale by Holder of
Registrable Securities. Each Holder whose securities are included in
a registration statement agrees not to effect any public sale or
distribution of the issue being registered or a similar security of
the Company or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144
under the Securities Act, during the 14 days prior to, and during the
90-day period beginning on, the effective date of such registration
statement except as part of such registration, if and to the extent
requested by the Company in the case of a non- underwritten public
offering or if and to the extent requested by the managing Underwriter
or Underwriters in the case of an underwritten public offering.
9
<PAGE> 10
(ii) Restrictions on Public Sale by the Company
and Others. The Company agrees (i) not to effect any public sale or
distribution of any securities similar to those being registered, or
any securities convertible into or exchangeable or exercisable for
such securities, during the 14 days prior to, and during the 90-day
period beginning on, the effective date of any registration statement
which includes Registrable Securities; and (ii) that any agreement
entered into after the date of the Agreement pursuant to which the
Company issues or agrees to issue any privately placed securities
shall contain a provision under which holders of such securities agree
not to effect any public sale or distribution of any such securities
during the period described in (i) above, in each case including a
sale pursuant to Rule 144 under the Securities Act (except as part of
any such registration, if permitted); provided, however, that the
provisions of this paragraph (b) shall not prevent the conversion or
exchange of any securities pursuant to their terms into or for other
securities.
(b) Registration Procedures. Whenever the Holders have
requested that any Registrable Securities be registered pursuant to Section 3
hereof, the Company will use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof as quickly as practicable, and in connection with any
such request, the Company will as expeditiously as possible:
(i) prepare and file with the SEC a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration
statement to become effective; provided that if the Company shall
furnish to the Holders making a request pursuant to Section 3 a
certificate signed by the chief executive officer of the Company
stating that in his good faith judgment it would be significantly
disadvantageous to the Company or its stockholders for such a
registration statement to be filed as expeditiously as possible, the
Company shall have a period of not more than 90 days within which to
file such registration statement
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<PAGE> 11
measured from the date of receipt of the request in accordance with
Section 3; and provided further (i) that before filing a registration
statement or prospectus or any amendments or supplements thereto, the
Company will furnish to all Selling Holders and to one counsel
selected by the Holders of a majority of the shares of Registrable
Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to the
review of such counsel, and (ii) that after the filing of the
registration statement, the Company will promptly notify each Selling
Holder of Registrable Securities covered by such registration
statement of any stop order issued or threatened by the SEC and take
all reasonable actions required to prevent the entry of such stop
order or to remove it if entered;
(ii) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective pursuant to Section 3 for a period of not less
than 270 days or, if shorter, the period terminating when all
Registrable Securities covered by such registration statement have
been sold (but not before the expiration of the applicable period
referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable) and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in
accordance with the intended methods of disposition by the Selling
Holders thereof set forth in such registration statement;
(iii) furnish to each Selling Holder, prior to
filing the registration statement, if requested, copies of such
registration statement as proposed to be filed, and thereafter furnish
to such Selling Holder such number of copies of such registration
statement, each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and
such other documents as such Selling Holder may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by such Selling Holder;
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<PAGE> 12
(iv) use its best efforts to register or qualify
such Registrable Securities under such other securities or blue sky
laws of such jurisdictions as any Selling Holder or managing
Underwriter reasonably (in light of the intended plan of distribution)
requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Selling Holder or
managing Underwriter to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Selling
Holder; provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (iv); (ii)
subject itself to taxation in any such jurisdiction; or (iii) consent
to general service of process in any such jurisdiction;
(v) use its best efforts to cause such Registrable
Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company to enable the Selling
Holder or Selling Holders thereof to consummate the disposition of
such Registrable Securities;
(vi) notify each Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly make available to each
Selling Holder any such supplement or amendment;
(vii) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
12
<PAGE> 13
(viii) make available for inspection by any Selling
Holder of such Registrable Securities, any Underwriter participating
in any disposition pursuant to such registration statement and any
attorney, accountant, or other professional retained by any such
Selling Holder or Underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents, and
properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors, and
employees to supply all information reasonably requested by any such
Inspectors in connection with such registration statement. Records
which the Company determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records
is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each Selling Holder of such Registrable Securities
agrees that information obtained by it as a result of such inspections
shall be deemed confidential and shall not be used by it as the basis
for any market transactions in the securities of the Company or its
Affiliates unless and until such is made generally available to the
public. Each Selling Holder of such Registrable Securities further
agrees that it will, as soon as practicable upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(ix) in the event such sale is pursuant to an
underwritten offering, use its best efforts to obtain a comfort letter
or comfort letters from the Company's independent public accountants
in customary form and covering such matters of the type customarily
covered by comfort letters as the Selling Holders of a majority of the
shares of Registrable Securities being sold or the managing
Underwriter reasonably requests;
13
<PAGE> 14
(x) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering a period of twelve months, beginning within three
months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act; and
(xi) use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Company are then listed.
The Company may require each Selling Holder of Registrable
Securities to promptly furnish in writing to the Company such information
regarding the distribution of the Registrable Securities as it may from time to
time reasonably require in connection with such registration.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
5(b)(vi) hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(b)(vi) hereof,
and, if so directed by the Company, such Selling Holder will deliver to the
Company all copies, other than permanent file copies, then in such Selling
Holder's possession, of the most recent prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event the Company
shall give such notice, the Company shall extend the period during which such
registration statement shall be maintained effective (including the period
referred to in Section 5(b) (ii) hereof) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
5(b)(vi) hereof to the date when the Company shall make available to the
Selling Holders of Registrable Securities covered by such registration
statement a prospectus supplemented or amended to conform with the requirements
of Section 5(b)(vi) hereof.
14
<PAGE> 15
(c) Registration Expenses. In connection with any
registration statement required to be filed hereunder, the Company shall pay
the following registration expenses (the "Registration Expenses"): (a) all
registration and filing fees, (b) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (c) printing expenses, (d) internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (e) the fees and expenses incurred in connection
with the listing on an exchange of the Registrable Securities if the Company
shall choose to list such Registrable Securities, (f) reasonable fees and
disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort letters
requested pursuant to Section 5(b)(ix) hereof), (g) the reasonable fees and
expenses of any special experts retained by the Company in connection with such
registration, and (h) reasonable fees and expenses of one counsel (who shall be
reasonably acceptable to the Company) for the Holders incurred in connection
with the registration of Registrable Securities hereunder. The Company shall
not have any obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities or, except as provided by
clause (b) or (h) above, any out-of-pocket expenses of the Holders (or the
agents who manage their accounts) or the fees and disbursements of counsel for
any Underwriter.
(d) Indemnification; Contribution.
(i) Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Selling Holder of
Registrable Securities, its officers, directors and agents, and each
person, if any, who controls such Selling Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities, and
expenses (including reasonable costs of investigation) arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus
relating to the
15
<PAGE> 16
Registrable Securities or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages,
liabilities, or expenses arising out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such Selling Holder
or on such Selling Holder's behalf expressly for use therein;
provided, however, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this
paragraph shall not apply to the extent that any such loss, claim,
damage, liability, or expense results from the fact that a current
copy of the prospectus was not sent or given to the persons asserting
any such loss, claim, damage, liability, or expense at or prior to the
written confirmation of the sale of the Registrable Securities
concerned to such person if it is determined that it was the
responsibility of such Selling Holder to provide such person with a
current copy of the prospectus and such current copy of the prospectus
would have cured the defect giving rise to such loss, claim, damage,
liability, or expense. The Company also agrees to indemnify any
Underwriters of the Registrable Securities, their officers and
directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the
Selling Holders provided in this Section 5(d)(i).
(ii) Indemnification by Holder of Registrable
Securities. Each Selling Holder agrees to indemnify and hold harmless
the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Selling Holder, but
only with respect to information furnished in writing by such Selling
Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable
Securities, any amendment or supplement thereto or any preliminary
prospectus. Each Selling Holder agrees to indemnify and hold harmless
Underwriters of the Registrable Securities, their
16
<PAGE> 17
officers and directors and each person who controls such Underwriters
on substantially the same basis as that of the indemnification of the
Company provided in this Section 5(d)(ii).
(iii) Conduct of Indemnification Proceedings. If
any action or proceeding (including any governmental investigation)
shall be brought or asserted against any person or entity entitled to
indemnification under clauses (i) or (ii) above (an "Indemnified
Party") in respect of which indemnity may be sought from any party who
has agreed to provide such indemnification under clauses (i) or (ii)
above (an "Indemnifying Party"), the Indemnifying Party shall assume
the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Party, and shall assume the payment
of all related expenses. Such Indemnified Party shall have the right
to employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Party unless (i) the
Indemnifying Party has agreed to pay such fees and expenses or (ii)
the named parties to any such action or proceeding (including any
impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that there is a conflict of interest on the part of counsel
employed by the Indemnifying Party to represent such Indemnified Party
(in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Party). Notwithstanding the foregoing, the
Indemnifying Party shall not, in connection with any one such action
or proceeding or separate but substantially similar or related actions
or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such Indemnified
Parties, which firm shall be designated in writing by such Indemnified
Parties. The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its
written consent, but if settled
17
<PAGE> 18
with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Indemnifying Party
shall indemnify and hold harmless such Indemnified Party from and
against any loss or liability (to the extent stated above) by reason
of such settlement or judgment.
(iv) Contribution. If the indemnification
provided for in this Section 5(d) is unavailable to the Indemnified
Parties in respect of any losses, claims, damages, liabilities, or
judgments referred to herein, then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages, liabilities, and judgments (i) as between the
Company and the Selling Holders on the one hand and the Underwriters
on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Holders on
the one hand and the Underwriters on the other, from the offering of
the Registrable Securities, or if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company
and the Selling Holders on the one hand and of the Underwriters on the
other in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities, or judgments, as well as
any other relevant equitable considerations and (ii) as between the
Company on the one hand and each Selling Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the
Company and of each Selling Holder in connection with such statements
or omissions, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Holders
on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total proceeds from the offering (net
of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Holders bear to the
total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page
of the prospectus. The relative fault of the Company and the Selling
Holders on the one hand and of the Underwriters on the other shall be
determined by
18
<PAGE> 19
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company
and the Selling Holders or by the Underwriters. The relative fault of
the Company on the one hand and of each Selling Holder on the other
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 5(d)(iv) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages, liabilities, or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5(d)(iv), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission, and
no Selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
Selling Holder were offered to the public exceeds the amount of any damages
which such Selling Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
19
<PAGE> 20
(e) Participation in Underwritten Registrations. No
Holder may participate in any underwritten registration hereunder unless such
Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the person entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements and this Agreement.
(f) Rule 144. The Company covenants that, so long as it
is required by law to do so, it will file any reports required to be filed by
it under the Securities Act and the Exchange Act so as to enable Holders to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 6. Transfer Restrictions.
(a) Transfers Subject to this Agreement. Other than (i)
transfers to the public pursuant to an effective registration statement and
(ii) sales to the public pursuant to Rule 144 (other than subsection (k)
thereof) under the Securities Act, each Holder, as a condition to the
effectiveness of such transfer, shall cause any proposed transferee of any
Common Stock or Common Stock Equivalents or any interest therein held by it to
agree, pursuant to a written agreement reasonably satisfactory to the Company,
to take and hold such Common Stock or Common Stock Equivalents subject to the
provisions and upon the conditions specified in this Agreement. In addition,
as a condition to the effectiveness of any transfer of Common Stock or Common
Stock Equivalents (other than a transfer of the type specified in clauses (i)
or (ii) of the preceding sentence), the Company may require, among other
things, evidence satisfactory to it that the transferee is an Accredited
Investor.
(b) Legends. Each certificate evidencing shares subject
to this Agreement and each certificate issued to any
20
<PAGE> 21
subsequent transferee of such shares, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE.
SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED, OR OTHERWISE ASSIGNED, EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) PURSUANT TO
RULE 144 UNDER SUCH ACT, OR (iii) UPON THE FURNISHING TO THE
COMPANY BY THE HOLDER OF THIS CERTIFICATE OF AN OPINION OF
COUNSEL (OR OTHER EVIDENCE) SATISFACTORY TO THE COMPANY THAT
SUCH TRANSACTION IS NOT REQUIRED TO BE REGISTERED UNDER SUCH
ACT OR ANY APPLICABLE "BLUE SKY" LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS REGARDING THE VOTING OF SUCH SECURITIES AND
CERTAIN TRANSFER RESTRICTIONS SET FORTH IN THE STOCKHOLDERS
AGREEMENT DATED AS OF NOVEMBER __, 1994, A COPY OF WHICH MAY
BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICES.
(c) Termination of Certain Restrictions. The legend as
to securities law compliance required by Section 6(b) shall terminate as to any
shares (i) when and so long as such shares shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (ii)
when the Company shall have received an opinion of counsel satisfactory to it
that such shares may be transferred without registration thereof under the
Securities Act and that such legend may be removed. The legend as to the
applicable provisions of this Agreement required by Section 6(b) shall
terminate as to any shares (A) upon the termination of this Agreement or (B)
upon the valid transfer of such shares to a transferee who is not required to
agree to take and hold such shares subject to the provisions of this Agreement.
Whenever the legend requirements of Section 6(b) shall terminate as to any
shares, the holder thereof shall be entitled to receive from the Company, at
the Company's expense, a new certificate evidencing such shares not bearing the
restrictive legend set forth in Section 6(b) hereof.
21
<PAGE> 22
Section 7. Drag Along Rights.
(a) In the event that one or more HMC Holders desire to
effect a sale, transfer or other disposition of Shares (whether in one
transaction or a series of related transactions) representing more than 50% of
the Fully-Diluted Common Stock owned by the HMC Holders (a "Significant Sale"),
the HMTF Partnerships shall have the right to require each Holder to sell a
portion of each Holder's Shares and, if requested by the HMTF Partnerships as
provided below, each Holder shall sell Shares which represent the same
percentage of such Holder's aggregate Fully-Diluted Common Stock as the Shares
being disposed of by the HMC Holders represent of their Fully-Diluted Common
Stock. (For example, if the HMC Holders are selling 50% of their Fully-Diluted
Common Stock position, each Holder shall be required to sell 50% of its
Fully-Diluted Common Stock position represented by such Holder's Shares). All
Shares sold or transferred by Holders pursuant to this Section 7 shall be sold
at the same price and otherwise treated substantially identically with the
Shares being sold by the HMC Holders in all respects; provided, that the Holder
shall not be required to make any representations or warranties in connection
with such sale or transfer other than representations and warranties as to (i)
such Holder's ownership of its Shares to be sold or transferred free and clear
of all liens, claims, and encumbrances, (ii) such Holder's power and authority
to effect such transfer, and (iii) such matters pertaining to compliance with
securities laws as the transferee may reasonably require.
(b) The HMTF Partnerships shall give each Holder at least
30 days' prior written notice of any Significant Sale as to which the HMTF
Partnerships intend to exercise their rights under Section 7(a). If the HMTF
Partnerships elect to exercise their rights under Section 7(a), the Holders
shall take such actions as may be reasonably required and otherwise cooperate
in good faith with the HMTF Partnerships in connection with consummating the
Significant Sale (including, without limitation, the voting of any Common Stock
or other voting capital stock of the Company to approve such Significant Sale).
At the closing of such Significant Sale, the Holders shall deliver certificates
for all Shares to be sold by the Holders, duly endorsed for transfer, with the
signature guaranteed, to the purchaser against payment of the appropriate
purchase price.
22
<PAGE> 23
Section 8. Termination.
(a) The provisions of this Agreement shall terminate (i)
as to all Holders, 10 years from the date hereof, (ii) as to any Holder, when
such Holder no longer holds any Common Stock or Common Stock Equivalents, and
(iii) as to all Holders, when the Fully-Diluted Common Stock of all such
Holders who are then parties hereto represents less than 10% of the
Fully-Diluted Common Stock outstanding at such time.
Section 9. Miscellaneous.
(a) Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages caused by reason of any breach of any
provision of this Agreement, and to exercise all other rights granted by law or
otherwise available to such Persons.
(b) Amendments and Waivers. The provisions of this
Agreement may be amended or waived at any time by the written agreement of the
Company, a majority of the HMC Holders, and a majority of the Holders.
(c) Assignment. No Person may assign any of its rights
or obligations under this Agreement (except in connection with sales and
transfers of Common Stock or Common Stock Equivalents which are subject to this
Agreement or to a successor by merger or similar succession to the business or
assets of such Person).
(d) Notices. All notices, requests, consents, or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given or delivered by any party (i) when
received by such party if delivered by hand, (ii) upon confirmation when
delivered by telecopy, (iii) within one day after being sent by recognized
overnight delivery service, or (iv) within five business days after being
mailed by first-class mail, postage prepaid, and in each case addressed as
follows:
23
<PAGE> 24
(i) If to HMTF:
HMC/Neodata, L.P.
c/o Hicks, Muse, Tate & Furst Incorporated
300 Crescent Court
Suite 1600
Dallas, Texas 75201
Telecopy No.: (214) 740-7313
with a copy to:
Lawrence D. Stuart, Jr., Esq.
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy No.: (214) 746-7777
(ii) If to the Company:
Neodata Corporation
833 W. South Boulder Road
Louisville, Colorado 80027
Attention: Chief Executive Officer
Telecopy No.: (303) 666-3999
with a copy to:
Lawrence D. Stuart, Jr., Esq.
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy No.: (214) 746-7777
(iii) If to any other HMC Holder or Other Holder,
at his or its address as reflected in the Company's records.
Any party by written notice to the other parties pursuant to this
Section may change the address or the Persons to whom notices or copies thereof
shall be directed.
(e) Construction. This Agreement shall be construed and
enforced in accordance with and governed by the internal substantive laws of
the State of Delaware.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so
24
<PAGE> 25
executed and delivered shall be deemed an original, and such counterparts
together shall constitute one instrument. Each party shall receive a duplicate
original of the counterpart copy or copies executed by it and the Company.
(g) Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 10. Termination of Registration Rights under Prior
Agreement.
Each Holder who was also a party to that certain Amended and
Restated Stockholders Agreement dated as of May 5, 1993, among the Company and
each of the parties thereto (the "Old Stockholders Agreement") hereby
acknowledges and agrees that the registration rights granted to such Holder
pursuant to Sections 3, 4 and 5 hereof are in lieu of, and in full satisfaction
of, the registration rights granted in Article 4 of the Old Stockholders
Agreement and Exhibit A thereto, and each such Holder furthermore agrees that
he or it, as applicable, in consideration for the execution and delivery of
this Agreement by the Company and the other Holders, has no further rights
under such Old Stockholders Agreement.
25
<PAGE> 26
IN WITNESS WHEREOF, this Stockholders Agreement has been
executed and delivered as of the date first set forth above.
THE COMPANY
NEODATA CORPORATION
By: /s/ A. LAURENCE JONES
---------------------------------
Name: A. Laurence Jones
Title: President and Chief
Executive Officer
<PAGE> 27
IN WITNESS WHEREOF, this Stockholders Agreement has been
executed and delivered as of the date first set forth above.
HMC HOLDERS
HMC/NEODATA, L.P.,
a Delaware limited partnership
By: HMC Partners, L.P.,
its General Partner
By: Hicks, Muse & Co. (TX)
Incorporated, its
Managing General Partner
By: /s/ JACK D. FURST
-----------------------------------
Name: Jack D. Furst
--------------------------------
Title: Managing Director and Principal
--------------------------------
HM/NEODATA DBMS, L.P.,
a Delaware limited partnership
By: HMC Partners, L.P.,
its General Partner
By: Hicks, Muse & Co. (TX)
Incorporated, its
Managing General Partner
By: /s/ JACK D. FURST
-----------------------------------
Name: Jack D. Furst
---------------------------------
Title: Managing Director and Principal
--------------------------------
HICKS, MUSE, TATE & FURST INCORPORATED,
a Texas corporation
By: /s/ JACK D. FURST
-----------------------------------------
Name: Jack D. Furst
---------------------------------------
Title: Managing Director and Principal
--------------------------------------
<PAGE> 28
IN WITNESS WHEREOF, this Stockholders Agreement has been
executed and delivered as of the date first set forth above.
HMC HOLDERS - CONT.
/s/ DANIEL S. DROSS
------------------------------------
Daniel S. Dross
/s/ JEFFRY S. FRONTERHOUSE
------------------------------------
Jeffry S. Fronterhouse
/s/ JACK D. FURST
------------------------------------
Jack D. Furst
/s/ THOMAS O. HICKS
------------------------------------
Thomas O. Hicks
JOHN ALEXANDER HICKS 1984 TRUST
MACK HARDIN HICKS 1984 TRUST
ROBERT BRADLEY HICKS 1984 TRUST
THOMAS O. HICKS, JR. 1984 TRUST
WILLIAM CREE HICKS 1992 TRUST
By: /s/ THOMAS O. HICKS
---------------------------------
Thomas O. Hicks, Trustee
/s/ A. LAURENCE JONES
------------------------------------
A. Laurence Jones
/s/ HENRY S. LAGER
------------------------------------
Henry S. Lager
<PAGE> 29
IN WITNESS WHEREOF, this Stockholders Agreement has been
executed and delivered as of the date first set forth above.
HMC HOLDERS - CONT.
/s/ WILLIAM F. LOFTUS
------------------------------------
William F. Loftus
/s/ REBECCA A. MCCONNELL
------------------------------------
Rebecca A. McConnell
/s/ JOHN R. MUSE
------------------------------------
John R. Muse
/s/ JOHN R. MUSE
------------------------------------
John R. Muse, Custodian or Trustee
JOHN R. MUSE, CUSTODIAN FOR
ELIZABETH REYNOLDS MUSE
JOHN R. MUSE, CUSTODIAN FOR,
J. TYLER MUSE
JOHN R. MUSE, CUSTODIAN FOR
MICHAEL J. MUSE
JOHN R. MUSE, CUSTODIAN FOR
MORGAN EMMA MUSE
JOHN R. MUSE, CUSTODIAN FOR
WHITNEY JEANNE MUSE
By: /s/ JOHN R. MUSE
---------------------------------
John R. Muse, Custodian
/s/ KEVIN P. O'MEARA
------------------------------------
Kevin P. O'Meara
/s/ MICHAEL D. SALIM
------------------------------------
Michael D. Salim
<PAGE> 30
/s/ PAUL D. STONE
------------------------------------
Paul D. Stone
/s/ CHARLES W. TATE
------------------------------------
Charles W. Tate
CHARLES W. TATE DESCENDANTS TRUST
By: /s/ CHARLES W. TATE
--------------------------------
Charles W. Tate, Trustee
/s/ WILLIAM J. TURNER
------------------------------------
William J. Turner
<PAGE> 31
IN WITNESS WHEREOF, this Stockholders Agreement has been
executed and delivered as of the date first set forth above.
OTHER HOLDERS
WAND/NEODATA INVESTMENTS, L.P.,
a Delaware limited partnership
By: Wand Partners Inc.,
its General Partner
By: /s/ BRUCE W. SCHNITZER
-----------------------------------
Name: Bruce W. Schnitzer
---------------------------------
Title: Chairman
--------------------------------
FIDUCIARY CAPITAL PARTNERS, L.P., a
Delaware limited partnership
By: FFCA FIDUCIARY CAPITAL
MANAGEMENT COMPANY, a
Delaware general partnership
By: FFCA FIDUCIARY CAPITAL
CORPORATION, a Delaware
corporation, Managing
General Partner
By: /s/ W. DUKE DEGRASSI
-----------------------------------
Name: W. Duke DeGrassi
---------------------------------
Title: President
--------------------------------
FIDUCIARY CAPITAL PENSION PARTNERS,
L.P., a Delaware limited
partnership
By: FFCA FIDUCIARY CAPITAL
MANAGEMENT COMPANY, a
Delaware general partnership
By: FFCA FIDUCIARY CAPITAL
CORPORATION, a Delaware
corporation, Managing
General Partner
By: /s/ W. DUKE DEGRASSI
-----------------------------------
Name: W. Duke DeGrassi
---------------------------------
Title: President
--------------------------------
<PAGE> 32
IN WITNESS WHEREOF, this Stockholders Agreement has been
executed and delivered as of the date first set forth above.
OTHER HOLDERS - CONT.
/s/ LARRY W. CARTER
------------------------------------
Larry W. Carter
/s/ THOMAS O. HARBISON
------------------------------------
Thomas O. Harbison
/s/ STEVEN L. KORBY
------------------------------------
Steven L. Korby
/s/ JAMES J. SCHINCO
------------------------------------
James J. Schinco
<PAGE> 1
EXHIBIT 10.41
EXECUTIVE EMPLOYMENT AGREEMENT
Nick Cuccaro
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), made and entered
into effective June 14, 1996, by and between Neodata Services, Inc., a Delaware
corporation (hereinafter, together with its successors, referred to as the
"Company), and Nick Cuccaro (hereinafter referred to as the "Executive").
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company (i) to provide the Executive with a special
incentive to encourage the Executive to maintain the Executive's current
employment relationship with the Company in the event of a Sale of the Company
(as hereinafter defined) for a period of up to eighteen months following any
such Sale, thereby promoting the Company's stability both before and after any
Sale and (ii) to provide for certain of the obligations of the Executive to the
Company during and following the Executive's termination of the Executive's
employment relationship with the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. CERTAIN DEFINITION.
a. "ACCRUED BENEFITS" means (i) all salary earned or accrued
through the date the Executive's employment is terminated, (ii) reimbursement
for any and all monies advanced by the Executive in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive through the date the Executive's employment is terminated, and (iii)
all other payments and benefits to which the Executive may be entitled under
the terms of any generally applicable compensation arrangement or benefit plan
or program of the Company, including any unused vacation pay; but excluding any
severance or termination benefits.
b. "BOARD" means, so long as Holding owns all the outstanding
capital stock of the Company, the board of directors of Holding. In all other
cases, Board means the board of directors of the Company.
c. "CAUSE" means the Executive's (i) conviction of, or plea
of nolo contendere to, a felony, (ii) illegal use of drugs, (iii) material
breach of this Agreement, fraud, dishonesty in connection with the Executive's
employment, competition with the Company, Holding or their respective
Subsidiaries, unauthorized use of any trade secret or other confidential
information of the Company, Holding or their respective Subsidiaries, or
continued gross neglect of the Executive's duties or responsibilities or (iv)
failure to properly perform the Executive's duties in the reasonable judgment
of the Board. In the case of a termination for
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<PAGE> 2
Cause as described in clause (ii), (iii) or (iv) above, the Executive shall be
given the opportunity, during the period of not less than 30 days after the
receipt of written notice from the Company that such event constitutes Cause,
to meet with the Board to defend the Executive's acts or failures to act, prior
to termination. The company may suspend the Executive's title and authority
pending such meeting, and such suspension shall not constitute "Good Reason",
as defined below. After such meeting, the Board may rule whether the subject
conduct constituted "Cause," and the Board's determination shall be conclusive
and binding.
d. "EDS" means Electronic Data Systems Corporation, a Texas
corporation.
e. "EDS COMPANY" means any Person in which EDS beneficially
owns more than 50% of the fully-diluted common stock.
f. "GOOD REASON" means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual base salary or any adverse change, approved by the Board, in the manner
in which the Executive's opportunity for an annual bonus is determined, (ii)
any significant reduction, approved by the Board without the Executive's
written consent, in the aggregate value of the Executive's benefits provided by
contract with the Executive or generally available to all senior executives of
the Company (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), or (iii) any significant
reduction, approved by the Board without the Executive's written consent, in
the Executive's title, duties or responsibilities; provided, however, that Good
Reason shall not exist at any time after the Executive has received written
notice from the Company that an event has occurred constituting Cause, unless
the Board, after a meeting with the Executive, determines that the noticed
event did not constitute Cause. Notwithstanding the above, the occurrence of
any of the events described above will not constitute Good Reason unless the
Executive gives the Company written notice that such event constitutes Good
Reason, and the Company thereafter fails to cure such event or events within 30
days after receipt of such notice.
g. "HICKS, MUSE" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation, its successors and assigns, and its
affiliates and its and their respective officers, directors, and employees (and
members of their respective families and trusts for the primary benefit of such
family members), collectively.
h. "HICKS, MUSE COMPANY" means any Person in which Hicks,
Muse beneficially owns more than 25% of the fully-diluted common stock or has
an unrecovered investment of $1,000,000 or more, and each Subsidiary thereof.
i. "HOLDING" means Neodata Corporation, a Delaware
corporation which is the parent of the Company, together with its successors.
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<PAGE> 3
j. "MARKETABLE SECURITIES" means securities (i) of a class or
series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the NASDAQ National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be (or which at the date of acquisition
are legally committed to become within six months after the date of
acquisition) freely saleable in unlimited quantities by each Person acquiring
such securities to the public, either pursuant to an effective registration
statement under the Securities Act of 1933, as amended (including a current
prospectus which is available for delivery), or without the necessity of such
registration.
k. "PERSON" means any "person", within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, including a
"group" as determined thereby.
l. "PREFERRED STOCK" means the Class A Convertible Preferred
Stock, par value $0.01 per share, of Holding.
m. "SALE OF THE COMPANY" or "Sale" means the consummation of
any transaction or series of related transactions after the date hereof whereby
(i) the Company sells or otherwise transfers all or substantially all of its
assets to another Person (other than Hicks, Muse, a Hicks, Muse Company, EDS,
or an EDS Company), (ii) any Person (other than Hicks, Muse, a Hicks, Muse
Company, EDS, or an EDS Company) purchases or otherwise acquires all or
substantially all of the common stock of the Company or Holding, (iii) the
Company is merged with another corporation (a "Merger") and the holders of the
Company's fully-diluted common stock immediately prior to such Merger hold less
than 25% of the surviving corporation's fully-diluted common stock immediately
after such Merger or (iv) Holding is merged with another corporation (a
"Holding Merger") and the holders of Holding's fully- diluted common stock
immediately prior to such Holding Merger hold less than 25% of the surviving
corporation's fully-diluted common stock immediately after such Holding Merger.
n. "SERIES 2 PREFERRED" means the Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share, of Holding.
o. "SUBSIDIARY" means with respect to any Person, any other
Person of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
2. SALE OF THE COMPANY.
In the event of a Sale of the Company:
a. The Executive, except for Good Reason, shall not terminate
the Executive's employment with the Company in such Executive's position with
the Company (or
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<PAGE> 4
such other position as the Board and Executive shall mutually agree to in
writing) at the time of the Sale or for a period beginning on the date of such
Sale and ending on the date which is eighteen months following the date on
which such Sale is consummated (such period to be referred to herein as the
"Retention Period"); provided, however, if the Executive terminates the
Executive's employment relationship with the Company for Good Reason during the
Retention Period, the Executive shall be deemed to have continued the
Executive's employment with the Company for the Retention Period and the
Executive shall be entitled to the Termination Benefits (as hereinafter
defined) as set forth in Section 2c. herein.
b. On the date upon which the Sale is consummated, all
options to purchase common stock of Holding and Series 2 Preferred which have
been granted to the Executive pursuant to the Neodata Corporation amended and
Restated 1990 Executive Incentive Plan and any options and stock appreciation
rights granted to the Executive under any other plan approved by the Board
shall, to the extent not previously vested, immediately vest in full.
c. In the event the Company terminates the Executive for any
reason (other than Cause) during the Retention Period, the Executive shall be
entitled to, and the Company shall be obligated to pay, the following
termination benefits (the "Termination Benefits"), which Termination Benefits
shall be the Executive's exclusive right and remedy in respect of such
termination:
i. The Company shall pay the Executive the Executive's
Accrued Benefits, except that, for this purpose, Accrued Benefits shall not
include any entitlement to severance under any Company severance policy
generally applicable to the Company's salaried employees, it being understood
that, if the Executive is terminated during the Retention Period, the payments
under Section 2c(ii) and Section 3 of this Agreement shall be treated as a
credit against any amount owed to the Executive under any general severance
benefit; and
ii. The Company shall pay the Executive severance pay
equal to the Executive's then current monthly base salary, payable in
accordance with the Company's regular pay schedule, for the remainder of the
Retention Period ("Salary Continuance").
d. Notwithstanding the other provisions of this Section 2,
if, at any time during the Retention Period, (i) the Executive shall terminate
the Executive's Employment with the Company for any reason other than Good
Reason, (ii) the Company shall terminate the Executive for Cause or (iii) the
Executive shall cease to be employed by the Company by reason of death,
permanent disability (as defined in the Company's Board-approved disability
plan or policy, as in effect from time to time) or retirement (as defined in
the Company's Board-approved retirement plan or policy, as in effect from time
to time), then the Executive shall not be entitled to any Salary Continuance,
and shall only be entitled to receive from the Company (x) in the case of
clause (i) or (ii) of this sentence, the Executive's Accrued Benefit or (y) in
the case of clause (iii) of this sentence, any applicable death, disability or
retirement benefits, as the case may be, then generally provided by the Company
to its similarly situated employees.
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<PAGE> 5
3. RETENTION BONUS.
a. In the event of a Sale of the Company that results in the
holders of Preferred Stock receiving, net of all selling, brokerage, investment
banking, and all related costs and expenses, upon the consummation of the Sale,
cash or Marketable Securities having a fair market value of at least
$125,000,000 in the aggregate, the Executive shall be entitled to a retention
bonus (the "Retention Bonus") in an amount equal to 100% of such Executive's
then-existing base salary, payable in four installments, with 25% being payable
upon consummation of the Sale, and 25% on each of the dates six months, twelve
months, and eighteen months following such sale.
b. Notwithstanding the provisions of Section 3(a) above, if
at any time prior to the termination of the Retention Period the Executive
terminates the Executive's employment for any reason other than Good Reason or
because of the Executive's death or disability, or the Company terminates the
Executive for Cause, the Executive shall forfeit the Executive's right to any
unpaid installments of the Retention Bonus which would otherwise be due under
this Agreement.
4. LIMITATION ON OBLIGATIONS OF COMPANY.
The Company's aggregate obligations under this Agreement and all
agreements with other executives of the Company which have provisions similar
to Sections 2 and 3 hereof (whether or not dated concurrently herewith) (the
"Other Retention Agreements") with respect to all Salary Continuance and
Retention Bonus payments payable thereunder shall be subject to an aggregate
maximum dollar limitation such that the Company shall not be obligated to pay
aggregate Salary Continuances and Retention Bonuses hereunder and pursuant to
the Other Retention Agreements in an aggregate amount of more than $3,000,000.
In the event the aggregate amount that the Company would be obligated to pay in
Salary Continuances and Retention Bonuses hereunder and pursuant to the Other
Retention Agreements exceeds $3,000,000, the Salary Continuances and Retention
Bonuses payable in the aggregate hereunder and thereunder shall be reduced
ratably among the Executive and the parties to the Other Retention Agreements
in accordance with the amount of the then-existing base salary of each
individual who is a party to an executive retention agreement. Notwithstanding
anything to the contrary elsewhere herein, after the first Sale of the Company,
no further Termination Benefits, Salary Continuance or Retention Bonus shall
accrue to the Executive with respect to any subsequent Sale of the Company.
Any interpretation of the provisions of this or any other provision of this
Agreement shall be made by the Board, whose decision concerning such matters
shall be conclusive.
5. EFFECTIVENESS OF PROVISIONS.
The Company's and the Executive's rights and obligations under Section 2
and 3 of this Agreement shall vest upon the occurrence of a Sale of the Company
as defined herein, and
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<PAGE> 6
nothing in this Agreement shall be construed as conferring any obligations or
benefits upon the parties hereunder prior to any such Sale. Nothing contained
herein shall be deemed to obligate the Board or the Company to engage in, or
negotiate towards, a Sale. In the event the Executive is not employed by the
Company for any reason at the time of a Sale of the Company, the provisions of
Section 2 and Section 3 of this Agreement shall cease to be of any force and
effect and neither party hereto shall have any obligations or be entitled to
any benefits thereunder, and the remaining provisions of this Agreement,
including but not limited to Section 6 and Section 7, shall survive such
termination of employment and remain in full force and effect.
6. NON-COMPETITION COVENANT.
The Executive shall not, during the period in which the Executive is
employed by the Company and for the eighteen-month period immediately following
the last day of the Executive's employment by the Company (as such last day of
employment is reasonably determined by the Company's Board of Directors), (a)
unless the Executive's employment by the Company was terminated by the Company
without Cause, act as an officer, director, employee, partner, or agent of, or
invest in or lend money to, or own, directly or indirectly, any interest in, or
participate in the control of, any corporation, partnership, joint venture or
other business organization which is engaged in the sale of any product or
service which is sold by the Company from time to time in the future prior to
the end of the Executive's employment, or (b) solicit to accept or negotiate
with concerning or offer to, any person employed by the Company or whose
employment by the Company has ended less than 180 days prior thereto,
employment with any business entity with which Executive may become associated
in any capacity other than the Company.
7. CONFIDENTIAL INFORMATION OF THE COMPANY.
The Executive shall not, except in the performance of the Executive's
duties hereunder and for the benefit of the Company, disclose or reveal to any
unauthorized person any trade secrets or other confidential information of the
Company, Holding or their respective Subsidiaries relating to the Company,
Holding or their respective Subsidiaries or to any of the businesses operated
by them, and the Executive confirms that such trade secrets and confidential
information constitute the exclusive property of the Company, Holding or their
respective Subsidiaries, as the case may be.
8. REMEDIES UPON BREACH.
The Executive acknowledges that the remedy at law for a breach by the
Executive of the provisions of Sections 6 or 7 hereof will be inadequate.
Accordingly, in the event of the breach or threatened breach by the Executive
of any of the provisions of Sections 6 or 7 hereof, the Company, Holding or
their respective Subsidiaries, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy to which it may be entitled.
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<PAGE> 7
9. SUCCESSORS.
The Company may assign its rights under this Agreement to any successor
to all or substantially all the assets of the Company, by merger or otherwise,
and may assign or encumber this Agreement and its rights hereunder as security
for indebtedness of the Company, Holding, and their respective Subsidiaries.
The rights of Executive under this Agreement may not be assigned or encumbered
by the Executive, voluntarily or involuntarily, during the Executive's
lifetime, and any such purported assignment shall be void.
10. ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
11. AMENDMENT.
This Agreement may not be amended or modified at any time except by a
written instrument approved by the Board and executed by the Company and the
Executive.
12. WITHHOLDING.
The Company shall be entitled to withhold from amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes of charges which it is from time to time required to withhold. The
company shall be entitled to rely on an opinion of counsel if any question as
to the amount or requirement of any such withholding shall arise.
13. GOVERNING LAW.
This Agreement and the rights and obligation s hereunder shall be
governed by and construed in accordance with the laws of the State of Colorado
without regard to principles of conflicts of law of the State of Colorado or
any other jurisdiction. Any dispute arising out of this Agreement shall be
determined by arbitration in Boulder, Colorado under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
14. NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall
be deemed given when received and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid: if to the Company, c/o Hicks, Muse, Tate & Furst Incorporated, 200
Crescent Court, Suite 1600, Dallas, Texas 75201, Attention: Thomas O. Hicks
and Lawrence D. Stuart, with a copy to Weil, Gotshal & Manges, 100 Crescent
Court,
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Suite 1300, Dallas, Texas 75201, Attention: Mary R. Korby, Esq.; or if to the
Executive, at the address set forth below the Executive's signature line of
this Agreement; or to such other address as the party to be notified shall have
given to the other in writing.
15. NO WAIVER.
No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at any time.
16. HEADINGS.
The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
NEODATA SERVICES, INC.
By: /s/ SUSAN L. MORSE
---------------------------------
Name: Susan L. Morse
Title: Senior Vice President
Human Resources
EXECUTIVE
/s/ NICK CUCCARO
----------------------------------------
Address:
------------------------------
----------------------------------------
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EXHIBIT 10.42
EXECUTIVE EMPLOYMENT AGREEMENT
Francie Anhut
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), made and entered
into effective June 14, 1996, by and between Neodata Services, Inc., a Delaware
corporation (hereinafter, together with its successors, referred to as the
"Company), and Francie Anhut (hereinafter referred to as the "Executive").
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company (i) to provide the Executive with a special
incentive to encourage the Executive to maintain the Executive's current
employment relationship with the Company in the event of a Sale of the Company
(as hereinafter defined) for a period of up to eighteen months following any
such Sale, thereby promoting the Company's stability both before and after any
Sale and (ii) to provide for certain of the obligations of the Executive to the
Company during and following the Executive's termination of the Executive's
employment relationship with the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. CERTAIN DEFINITION.
a. "ACCRUED BENEFITS" means (i) all salary earned or accrued
through the date the Executive's employment is terminated, (ii) reimbursement
for any and all monies advanced by the Executive in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive through the date the Executive's employment is terminated, and (iii)
all other payments and benefits to which the Executive may be entitled under
the terms of any generally applicable compensation arrangement or benefit plan
or program of the Company, including any unused vacation pay; but excluding any
severance or termination benefits.
b. "BOARD" means, so long as Holding owns all the outstanding
capital stock of the Company, the board of directors of Holding. In all other
cases, Board means the board of directors of the Company.
c. "CAUSE" means the Executive's (i) conviction of, or plea
of nolo contendere to, a felony, (ii) illegal use of drugs, (iii) material
breach of this Agreement, fraud, dishonesty in connection with the Executive's
employment, competition with the Company, Holding or their respective
Subsidiaries, unauthorized use of any trade secret or other confidential
information of the Company, Holding or their respective Subsidiaries, or
continued gross neglect of the Executive's duties or responsibilities or (iv)
failure to properly perform the Executive's duties in the reasonable judgment
of the Board. In the case of a termination for
1
<PAGE> 2
Cause as described in clause (ii), (iii) or (iv) above, the Executive shall be
given the opportunity, during the period of not less than 30 days after the
receipt of written notice from the Company that such event constitutes Cause,
to meet with the Board to defend the Executive's acts or failures to act, prior
to termination. The company may suspend the Executive's title and authority
pending such meeting, and such suspension shall not constitute "Good Reason",
as defined below. After such meeting, the Board may rule whether the subject
conduct constituted "Cause," and the Board's determination shall be conclusive
and binding.
d. "EDS" means Electronic Data Systems Corporation, a Texas
corporation.
e. "EDS COMPANY" means any Person in which EDS beneficially
owns more than 50% of the fully-diluted common stock.
f. "GOOD REASON" means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual base salary or any adverse change, approved by the Board, in the manner
in which the Executive's opportunity for an annual bonus is determined, (ii)
any significant reduction, approved by the Board without the Executive's
written consent, in the aggregate value of the Executive's benefits provided by
contract with the Executive or generally available to all senior executives of
the Company (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), or (iii) any significant
reduction, approved by the Board without the Executive's written consent, in
the Executive's title, duties or responsibilities; provided, however, that Good
Reason shall not exist at any time after the Executive has received written
notice from the Company that an event has occurred constituting Cause, unless
the Board, after a meeting with the Executive, determines that the noticed
event did not constitute Cause. Notwithstanding the above, the occurrence of
any of the events described above will not constitute Good Reason unless the
Executive gives the Company written notice that such event constitutes Good
Reason, and the Company thereafter fails to cure such event or events within 30
days after receipt of such notice.
g. "HICKS, MUSE" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation, its successors and assigns, and its
affiliates and its and their respective officers, directors, and employees (and
members of their respective families and trusts for the primary benefit of such
family members), collectively.
h. "HICKS, MUSE COMPANY" means any Person in which Hicks,
Muse beneficially owns more than 25% of the fully-diluted common stock or has
an unrecovered investment of $1,000,000 or more, and each Subsidiary thereof.
i. "HOLDING" means Neodata Corporation, a Delaware
corporation which is the parent of the Company, together with its successors.
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<PAGE> 3
j. "MARKETABLE SECURITIES" means securities (i) of a class or
series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the NASDAQ National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be (or which at the date of acquisition
are legally committed to become within six months after the date of
acquisition) freely saleable in unlimited quantities by each Person acquiring
such securities to the public, either pursuant to an effective registration
statement under the Securities Act of 1933, as amended (including a current
prospectus which is available for delivery), or without the necessity of such
registration.
k. "PERSON" means any "person", within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, including a
"group" as determined thereby.
l. "PREFERRED STOCK" means the Class A Convertible Preferred
Stock, par value $0.01 per share, of Holding.
m. "SALE OF THE COMPANY" or "Sale" means the consummation of
any transaction or series of related transactions after the date hereof whereby
(i) the Company sells or otherwise transfers all or substantially all of its
assets to another Person (other than Hicks, Muse, a Hicks, Muse Company, EDS,
or an EDS Company), (ii) any Person (other than Hicks, Muse, a Hicks, Muse
Company, EDS, or an EDS Company) purchases or otherwise acquires all or
substantially all of the common stock of the Company or Holding, (iii) the
Company is merged with another corporation (a "Merger") and the holders of the
Company's fully-diluted common stock immediately prior to such Merger hold less
than 25% of the surviving corporation's fully-diluted common stock immediately
after such Merger or (iv) Holding is merged with another corporation (a
"Holding Merger") and the holders of Holding's fully-diluted common stock
immediately prior to such Holding Merger hold less than 25% of the surviving
corporation's fully-diluted common stock immediately after such Holding Merger.
n. "SERIES 2 PREFERRED" means the Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share, of Holding.
o. "SUBSIDIARY" means with respect to any Person, any other
Person of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
2. SALE OF THE COMPANY.
In the event of a Sale of the Company:
a. The Executive, except for Good Reason, shall not terminate
the Executive's employment with the Company in such Executive's position with
the Company (or
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such other position as the Board and Executive shall mutually agree to in
writing) at the time of the Sale or for a period beginning on the date of such
Sale and ending on the date which is eighteen months following the date on
which such Sale is consummated (such period to be referred to herein as the
"Retention Period"); provided, however, if the Executive terminates the
Executive's employment relationship with the Company for Good Reason during the
Retention Period, the Executive shall be deemed to have continued the
Executive's employment with the Company for the Retention Period and the
Executive shall be entitled to the Termination Benefits (as hereinafter
defined) as set forth in Section 2c. herein.
b. On the date upon which the Sale is consummated, all
options to purchase common stock of Holding and Series 2 Preferred which have
been granted to the Executive pursuant to the Neodata Corporation amended and
Restated 1990 Executive Incentive Plan and any options and stock appreciation
rights granted to the Executive under any other plan approved by the Board
shall, to the extent not previously vested, immediately vest in full.
c. In the event the Company terminates the Executive for any
reason (other than Cause) during the Retention Period, the Executive shall be
entitled to, and the Company shall be obligated to pay, the following
termination benefits (the "Termination Benefits"), which Termination Benefits
shall be the Executive's exclusive right and remedy in respect of such
termination:
(i) The Company shall pay the Executive the Executive's
Accrued Benefits, except that, for this purpose, Accrued Benefits shall not
include any entitlement to severance under any Company severance policy
generally applicable to the Company's salaried employees, it being understood
that, if the Executive is terminated during the Retention Period, the payments
under Section 2c(ii) and Section 3 of this Agreement shall be treated as a
credit against any amount owed to the Executive under any general severance
benefit; and
(ii) The Company shall pay the Executive severance pay
equal to the Executive's then current monthly base salary, payable in
accordance with the Company's regular pay schedule, for the remainder of the
Retention Period ("Salary Continuance").
d. Notwithstanding the other provisions of this Section 2,
if, at any time during the Retention Period, (i) the Executive shall terminate
the Executive's Employment with the Company for any reason other than Good
Reason, (ii) the Company shall terminate the Executive for Cause or (iii) the
Executive shall cease to be employed by the Company by reason of death,
permanent disability (as defined in the Company's Board-approved disability
plan or policy, as in effect from time to time) or retirement (as defined in
the Company's Board-approved retirement plan or policy, as in effect from time
to time), then the Executive shall not be entitled to any Salary Continuance,
and shall only be entitled to receive from the Company (x) in the case of
clause (i) or (ii) of this sentence, the Executive's Accrued Benefit or (y) in
the case of clause (iii) of this sentence, any applicable death, disability or
retirement benefits, as the case may be, then generally provided by the Company
to its similarly situated employees.
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3. RETENTION BONUS.
a. In the event of a Sale of the Company that results in the
holders of Preferred Stock receiving, net of all selling, brokerage, investment
banking, and all related costs and expenses, upon the consummation of the Sale,
cash or Marketable Securities having a fair market value of at least
$125,000,000 in the aggregate, the Executive shall be entitled to a retention
bonus (the "Retention Bonus") in an amount equal to 100% of such Executive's
then-existing base salary, payable in four installments, with 25% being payable
upon consummation of the Sale, and 25% on each of the dates six months, twelve
months, and eighteen months following such sale.
b. Notwithstanding the provisions of Section 3(a) above, if
at any time prior to the termination of the Retention Period the Executive
terminates the Executive's employment for any reason other than Good Reason or
because of the Executive's death or disability, or the Company terminates the
Executive for Cause, the Executive shall forfeit the Executive's right to any
unpaid installments of the Retention Bonus which would otherwise be due under
this Agreement.
4. LIMITATION ON OBLIGATIONS OF COMPANY.
The Company's aggregate obligations under this Agreement and all
agreements with other executives of the Company which have provisions similar
to Sections 2 and 3 hereof (whether or not dated concurrently herewith) (the
"Other Retention Agreements") with respect to all Salary Continuance and
Retention Bonus payments payable thereunder shall be subject to an aggregate
maximum dollar limitation such that the Company shall not be obligated to pay
aggregate Salary Continuances and Retention Bonuses hereunder and pursuant to
the Other Retention Agreements in an aggregate amount of more than $3,000,000.
In the event the aggregate amount that the Company would be obligated to pay in
Salary Continuances and Retention Bonuses hereunder and pursuant to the Other
Retention Agreements exceeds $3,000,000, the Salary Continuances and Retention
Bonuses payable in the aggregate hereunder and thereunder shall be reduced
ratably among the Executive and the parties to the Other Retention Agreements
in accordance with the amount of the then-existing base salary of each
individual who is a party to an executive retention agreement. Notwithstanding
anything to the contrary elsewhere herein, after the first Sale of the Company,
no further Termination Benefits, Salary Continuance or Retention Bonus shall
accrue to the Executive with respect to any subsequent Sale of the Company.
Any interpretation of the provisions of this or any other provision of this
Agreement shall be made by the Board, whose decision concerning such matters
shall be conclusive.
5. EFFECTIVENESS OF PROVISIONS.
The Company's and the Executive's rights and obligations under Section 2
and 3 of this Agreement shall vest upon the occurrence of a Sale of the Company
as defined herein, and
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nothing in this Agreement shall be construed as conferring any obligations or
benefits upon the parties hereunder prior to any such Sale. Nothing contained
herein shall be deemed to obligate the Board or the Company to engage in, or
negotiate towards, a Sale. In the event the Executive is not employed by the
Company for any reason at the time of a Sale of the Company, the provisions of
Section 2 and Section 3 of this Agreement shall cease to be of any force and
effect and neither party hereto shall have any obligations or be entitled to
any benefits thereunder, and the remaining provisions of this Agreement,
including but not limited to Section 6 and Section 7, shall survive such
termination of employment and remain in full force and effect.
6. NON-COMPETITION COVENANT.
The Executive shall not, during the period in which the Executive is
employed by the Company and for the eighteen-month period immediately following
the last day of the Executive's employment by the Company (as such last day of
employment is reasonably determined by the Company's Board of Directors), (a)
unless the Executive's employment by the Company was terminated by the Company
without Cause, act as an officer, director, employee, partner, or agent of, or
invest in or lend money to, or own, directly or indirectly, any interest in, or
participate in the control of, any corporation, partnership, joint venture or
other business organization which is engaged in the sale of any product or
service which is sold by the Company from time to time in the future prior to
the end of the Executive's employment, or (b) solicit to accept or negotiate
with concerning or offer to, any person employed by the Company or whose
employment by the Company has ended less than 180 days prior thereto,
employment with any business entity with which Executive may become associated
in any capacity other than the Company.
7. CONFIDENTIAL INFORMATION OF THE COMPANY.
The Executive shall not, except in the performance of the Executive's
duties hereunder and for the benefit of the Company, disclose or reveal to any
unauthorized person any trade secrets or other confidential information of the
Company, Holding or their respective Subsidiaries relating to the Company,
Holding or their respective Subsidiaries or to any of the businesses operated
by them, and the Executive confirms that such trade secrets and confidential
information constitute the exclusive property of the Company, Holding or their
respective Subsidiaries, as the case may be.
8. REMEDIES UPON BREACH.
The Executive acknowledges that the remedy at law for a breach by the
Executive of the provisions of Sections 6 or 7 hereof will be inadequate.
Accordingly, in the event of the breach or threatened breach by the Executive
of any of the provisions of Sections 6 or 7 hereof, the Company, Holding or
their respective Subsidiaries, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy to which it may be entitled.
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9. SUCCESSORS.
The Company may assign its rights under this Agreement to any successor
to all or substantially all the assets of the Company, by merger or otherwise,
and may assign or encumber this Agreement and its rights hereunder as security
for indebtedness of the Company, Holding, and their respective Subsidiaries.
The rights of Executive under this Agreement may not be assigned or encumbered
by the Executive, voluntarily or involuntarily, during the Executive's
lifetime, and any such purported assignment shall be void.
10. ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
11. AMENDMENT.
This Agreement may not be amended or modified at any time except by a
written instrument approved by the Board and executed by the Company and the
Executive.
12. WITHHOLDING.
The Company shall be entitled to withhold from amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes of charges which it is from time to time required to withhold. The
company shall be entitled to rely on an opinion of counsel if any question as
to the amount or requirement of any such withholding shall arise.
13. GOVERNING LAW.
This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of Colorado
without regard to principles of conflicts of law of the State of Colorado or
any other jurisdiction. Any dispute arising out of this Agreement shall be
determined by arbitration in Boulder, Colorado under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
14. NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall
be deemed given when received and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid: if to the Company, c/o Hicks, Muse, Tate & Furst Incorporated, 200
Crescent Court, Suite 1600, Dallas, Texas 75201, Attention: Thomas O. Hicks
and Lawrence D. Stuart, with a copy to Weil, Gotshal & Manges, 100 Crescent
Court,
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<PAGE> 8
Suite 1300, Dallas, Texas 75201, Attention: Mary R. Korby, Esq.; or if to the
Executive, at the address set forth below the Executive's signature line of
this Agreement; or to such other address as the party to be notified shall have
given to the other in writing.
15. NO WAIVER.
No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at any time.
16. HEADINGS.
The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
NEODATA SERVICES, INC.
By: /s/ SUSAN L. MORSE
-----------------------------------
Name: Susan L. Morse
Title: Senior Vice President
Human Resources
EXECUTIVE
/s/ FRANCIE ANHUT
------------------------------------------
Francie Anhut
Address:
--------------------------------
--------------------------------
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EXHIBIT 10.43
EXECUTIVE EMPLOYMENT AGREEMENT
Ed Frazier
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), made and entered
into effective June 14, 1996, by and between Neodata Services, Inc., a Delaware
corporation (hereinafter, together with its successors, referred to as the
"Company), and Ed Frazier (hereinafter referred to as the "Executive").
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company (i) to provide the Executive with a special
incentive to encourage the Executive to maintain the Executive's current
employment relationship with the Company in the event of a Sale of the Company
(as hereinafter defined) for a period of up to eighteen months following any
such Sale, thereby promoting the Company's stability both before and after any
Sale and (ii) to provide for certain of the obligations of the Executive to the
Company during and following the Executive's termination of the Executive's
employment relationship with the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. CERTAIN DEFINITION.
a. "ACCRUED BENEFITS" means (i) all salary earned or accrued
through the date the Executive's employment is terminated, (ii) reimbursement
for any and all monies advanced by the Executive in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive through the date the Executive's employment is terminated, and (iii)
all other payments and benefits to which the Executive may be entitled under
the terms of any generally applicable compensation arrangement or benefit plan
or program of the Company, including any unused vacation pay; but excluding any
severance or termination benefits.
b. "BOARD" means, so long as Holding owns all the outstanding
capital stock of the Company, the board of directors of Holding. In all other
cases, Board means the board of directors of the Company.
c. "CAUSE" means the Executive's (i) conviction of, or plea
of nolo contendere to, a felony, (ii) illegal use of drugs, (iii) material
breach of this Agreement, fraud, dishonesty in connection with the Executive's
employment, competition with the Company, Holding or their respective
Subsidiaries, unauthorized use of any trade secret or other confidential
information of the Company, Holding or their respective Subsidiaries, or
continued gross neglect of the Executive's duties or responsibilities or (iv)
failure to properly perform the Executive's duties in the reasonable judgment
of the Board. In the case of a termination for
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<PAGE> 2
Cause as described in clause (ii), (iii) or (iv) above, the Executive shall be
given the opportunity, during the period of not less than 30 days after the
receipt of written notice from the Company that such event constitutes Cause,
to meet with the Board to defend the Executive's acts or failures to act, prior
to termination. The company may suspend the Executive's title and authority
pending such meeting, and such suspension shall not constitute "Good Reason",
as defined below. After such meeting, the Board may rule whether the subject
conduct constituted "Cause," and the Board's determination shall be conclusive
and binding.
d. "EDS" means Electronic Data Systems Corporation, a Texas
corporation.
e. "EDS COMPANY" means any Person in which EDS beneficially
owns more than 50% of the fully-diluted common stock.
f. "GOOD REASON" means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual base salary or any adverse change, approved by the Board, in the manner
in which the Executive's opportunity for an annual bonus is determined, (ii)
any significant reduction, approved by the Board without the Executive's
written consent, in the aggregate value of the Executive's benefits provided by
contract with the Executive or generally available to all senior executives of
the Company (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), or (iii) any significant
reduction, approved by the Board without the Executive's written consent, in
the Executive's title, duties or responsibilities; provided, however, that Good
Reason shall not exist at any time after the Executive has received written
notice from the Company that an event has occurred constituting Cause, unless
the Board, after a meeting with the Executive, determines that the noticed
event did not constitute Cause. Notwithstanding the above, the occurrence of
any of the events described above will not constitute Good Reason unless the
Executive gives the Company written notice that such event constitutes Good
Reason, and the Company thereafter fails to cure such event or events within 30
days after receipt of such notice.
g. "HICKS, MUSE" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation, its successors and assigns, and its
affiliates and its and their respective officers, directors, and employees (and
members of their respective families and trusts for the primary benefit of such
family members), collectively.
h. "HICKS, MUSE COMPANY" means any Person in which Hicks,
Muse beneficially owns more than 25% of the fully-diluted common stock or has
an unrecovered investment of $1,000,000 or more, and each Subsidiary thereof.
i. "HOLDING" means Neodata Corporation, a Delaware
corporation which is the parent of the Company, together with its successors.
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<PAGE> 3
j. "MARKETABLE SECURITIES" means securities (i) of a class or
series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the NASDAQ National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be (or which at the date of acquisition
are legally committed to become within six months after the date of
acquisition) freely saleable in unlimited quantities by each Person acquiring
such securities to the public, either pursuant to an effective registration
statement under the Securities Act of 1933, as amended (including a current
prospectus which is available for delivery), or without the necessity of such
registration.
k. "PERSON" means any "person", within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, including a
"group" as determined thereby.
l. "PREFERRED STOCK" means the Class A Convertible Preferred
Stock, par value $0.01 per share, of Holding.
m. "SALE OF THE COMPANY" or "Sale" means the consummation of
any transaction or series of related transactions after the date hereof whereby
(i) the Company sells or otherwise transfers all or substantially all of its
assets to another Person (other than Hicks, Muse, a Hicks, Muse Company, EDS,
or an EDS Company), (ii) any Person (other than Hicks, Muse, a Hicks, Muse
Company, EDS, or an EDS Company) purchases or otherwise acquires all or
substantially all of the common stock of the Company or Holding, (iii) the
Company is merged with another corporation (a "Merger") and the holders of the
Company's fully-diluted common stock immediately prior to such Merger hold less
than 25% of the surviving corporation's fully-diluted common stock immediately
after such Merger or (iv) Holding is merged with another corporation (a
"Holding Merger") and the holders of Holding's fully-diluted common stock
immediately prior to such Holding Merger hold less than 25% of the surviving
corporation's fully-diluted common stock immediately after such Holding Merger.
n. "SERIES 2 PREFERRED" means the Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share, of Holding.
o. "SUBSIDIARY" means with respect to any Person, any other
Person of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
2. SALE OF THE COMPANY.
In the event of a Sale of the Company:
a. The Executive, except for Good Reason, shall not terminate
the Executive's employment with the Company in such Executive's position with
the Company (or
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<PAGE> 4
such other position as the Board and Executive shall mutually agree to in
writing) at the time of the Sale or for a period beginning on the date of such
Sale and ending on the date which is eighteen months following the date on
which such Sale is consummated (such period to be referred to herein as the
"Retention Period"); provided, however, if the Executive terminates the
Executive's employment relationship with the Company for Good Reason during the
Retention Period, the Executive shall be deemed to have continued the
Executive's employment with the Company for the Retention Period and the
Executive shall be entitled to the Termination Benefits (as hereinafter
defined) as set forth in Section 2c. herein.
b. On the date upon which the Sale is consummated, all
options to purchase common stock of Holding and Series 2 Preferred which have
been granted to the Executive pursuant to the Neodata Corporation amended and
Restated 1990 Executive Incentive Plan and any options and stock appreciation
rights granted to the Executive under any other plan approved by the Board
shall, to the extent not previously vested, immediately vest in full.
c. In the event the Company terminates the Executive for any
reason (other than Cause) during the Retention Period, the Executive shall be
entitled to, and the Company shall be obligated to pay, the following
termination benefits (the "Termination Benefits"), which Termination Benefits
shall be the Executive's exclusive right and remedy in respect of such
termination:
i) The Company shall pay the Executive the Executive's
Accrued Benefits, except that, for this purpose, Accrued Benefits shall not
include any entitlement to severance under any Company severance policy
generally applicable to the Company's salaried employees, it being understood
that, if the Executive is terminated during the Retention Period, the payments
under Section 2c(ii) and Section 3 of this Agreement shall be treated as a
credit against any amount owed to the Executive under any general severance
benefit; and
ii) The Company shall pay the Executive severance pay
equal to the Executive's then current monthly base salary, payable in
accordance with the Company's regular pay schedule, for the remainder of the
Retention Period ("Salary Continuance").
d. Notwithstanding the other provisions of this Section 2,
if, at any time during the Retention Period, (i) the Executive shall terminate
the Executive's Employment with the Company for any reason other than Good
Reason, (ii) the Company shall terminate the Executive for Cause or (iii) the
Executive shall cease to be employed by the Company by reason of death,
permanent disability (as defined in the Company's Board-approved disability
plan or policy, as in effect from time to time) or retirement (as defined in
the Company's Board-approved retirement plan or policy, as in effect from time
to time), then the Executive shall not be entitled to any Salary Continuance,
and shall only be entitled to receive from the Company (x) in the case of
clause (i) or (ii) of this sentence, the Executive's Accrued Benefit or (y) in
the case of clause (iii) of this sentence, any applicable death, disability or
retirement benefits, as the case may be, then generally provided by the Company
to its similarly situated employees.
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<PAGE> 5
3. RETENTION BONUS.
a. In the event of a Sale of the Company that results in the
holders of Preferred Stock receiving, net of all selling, brokerage, investment
banking, and all related costs and expenses, upon the consummation of the Sale,
cash or Marketable Securities having a fair market value of at least
$125,000,000 in the aggregate, the Executive shall be entitled to a retention
bonus (the "Retention Bonus") in an amount equal to 100% of such Executive's
then-existing base salary, payable in four installments, with 25% being payable
upon consummation of the Sale, and 25% on each of the dates six months, twelve
months, and eighteen months following such sale.
b. Notwithstanding the provisions of Section 3(a) above, if
at any time prior to the termination of the Retention Period the Executive
terminates the Executive's employment for any reason other than Good Reason or
because of the Executive's death or disability, or the Company terminates the
Executive for Cause, the Executive shall forfeit the Executive's right to any
unpaid installments of the Retention Bonus which would otherwise be due under
this Agreement.
4. LIMITATION ON OBLIGATIONS OF COMPANY.
The Company's aggregate obligations under this Agreement and all
agreements with other executives of the Company which have provisions similar
to Sections 2 and 3 hereof (whether or not dated concurrently herewith) (the
"Other Retention Agreements") with respect to all Salary Continuance and
Retention Bonus payments payable thereunder shall be subject to an aggregate
maximum dollar limitation such that the Company shall not be obligated to pay
aggregate Salary Continuances and Retention Bonuses hereunder and pursuant to
the Other Retention Agreements in an aggregate amount of more than $3,000,000.
In the event the aggregate amount that the Company would be obligated to pay in
Salary Continuances and Retention Bonuses hereunder and pursuant to the Other
Retention Agreements exceeds $3,000,000, the Salary Continuances and Retention
Bonuses payable in the aggregate hereunder and thereunder shall be reduced
ratably among the Executive and the parties to the Other Retention Agreements
in accordance with the amount of the then-existing base salary of each
individual who is a party to an executive retention agreement. Notwithstanding
anything to the contrary elsewhere herein, after the first Sale of the Company,
no further Termination Benefits, Salary Continuance or Retention Bonus shall
accrue to the Executive with respect to any subsequent Sale of the Company.
Any interpretation of the provisions of this or any other provision of this
Agreement shall be made by the Board, whose decision concerning such matters
shall be conclusive.
5. EFFECTIVENESS OF PROVISIONS.
The Company's and the Executive's rights and obligations under Section 2
and 3 of this Agreement shall vest upon the occurrence of a Sale of the Company
as defined herein, and
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nothing in this Agreement shall be construed as conferring any obligations or
benefits upon the parties hereunder prior to any such Sale. Nothing contained
herein shall be deemed to obligate the Board or the Company to engage in, or
negotiate towards, a Sale. In the event the Executive is not employed by the
Company for any reason at the time of a Sale of the Company, the provisions of
Section 2 and Section 3 of this Agreement shall cease to be of any force and
effect and neither party hereto shall have any obligations or be entitled to
any benefits thereunder, and the remaining provisions of this Agreement,
including but not limited to Section 6 and Section 7, shall survive such
termination of employment and remain in full force and effect.
6. NON-COMPETITION COVENANT.
The Executive shall not, during the period in which the Executive is
employed by the Company and for the eighteen-month period immediately following
the last day of the Executive's employment by the Company (as such last day of
employment is reasonably determined by the Company's Board of Directors), (a)
unless the Executive's employment by the Company was terminated by the Company
without Cause, act as an officer, director, employee, partner, or agent of, or
invest in or lend money to, or own, directly or indirectly, any interest in, or
participate in the control of, any corporation, partnership, joint venture or
other business organization which is engaged in the sale of any product or
service which is sold by the Company from time to time in the future prior to
the end of the Executive's employment, or (b) solicit to accept or negotiate
with concerning or offer to, any person employed by the Company or whose
employment by the Company has ended less than 180 days prior thereto,
employment with any business entity with which Executive may become associated
in any capacity other than the Company.
7. CONFIDENTIAL INFORMATION OF THE COMPANY.
The Executive shall not, except in the performance of the Executive's
duties hereunder and for the benefit of the Company, disclose or reveal to any
unauthorized person any trade secrets or other confidential information of the
Company, Holding or their respective Subsidiaries relating to the Company,
Holding or their respective Subsidiaries or to any of the businesses operated
by them, and the Executive confirms that such trade secrets and confidential
information constitute the exclusive property of the Company, Holding or their
respective Subsidiaries, as the case may be.
8. REMEDIES UPON BREACH.
The Executive acknowledges that the remedy at law for a breach by the
Executive of the provisions of Sections 6 or 7 hereof will be inadequate.
Accordingly, in the event of the breach or threatened breach by the Executive
of any of the provisions of Sections 6 or 7 hereof, the Company, Holding or
their respective Subsidiaries, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy to which it may be entitled.
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<PAGE> 7
9. SUCCESSORS.
The Company may assign its rights under this Agreement to any successor
to all or substantially all the assets of the Company, by merger or otherwise,
and may assign or encumber this Agreement and its rights hereunder as security
for indebtedness of the Company, Holding, and their respective Subsidiaries.
The rights of Executive under this Agreement may not be assigned or encumbered
by the Executive, voluntarily or involuntarily, during the Executive's
lifetime, and any such purported assignment shall be void.
10. ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
11. AMENDMENT.
This Agreement may not be amended or modified at any time except by a
written instrument approved by the Board and executed by the Company and the
Executive.
12. WITHHOLDING.
The Company shall be entitled to withhold from amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes of charges which it is from time to time required to withhold. The
company shall be entitled to rely on an opinion of counsel if any question as
to the amount or requirement of any such withholding shall arise.
13. GOVERNING LAW.
This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of Colorado
without regard to principles of conflicts of law of the State of Colorado or
any other jurisdiction. Any dispute arising out of this Agreement shall be
determined by arbitration in Boulder, Colorado under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
14. NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall
be deemed given when received and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid: if to the Company, c/o Hicks, Muse, Tate & Furst Incorporated, 200
Crescent Court, Suite 1600, Dallas, Texas 75201, Attention: Thomas O. Hicks
and Lawrence D. Stuart, with a copy to Weil, Gotshal & Manges, 100 Crescent
Court,
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Suite 1300, Dallas, Texas 75201, Attention: Mary R. Korby, Esq.; or if to the
Executive, at the address set forth below the Executive's signature line of
this Agreement; or to such other address as the party to be notified shall have
given to the other in writing.
15. NO WAIVER.
No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at any time.
16. HEADINGS.
The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
NEODATA SERVICES, INC.
By: /s/ SUSAN L. MORSE
--------------------------------------
Name: Susan L. Morse
Title: Senior Vice President
Human Resources
EXECUTIVE
/s/ ED FRAZIER
---------------------------------------------
Ed Frazier
Address:
-------------------------------------
---------------------------------------------
8
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EXHIBIT 10.44
EXECUTIVE EMPLOYMENT AGREEMENT
Ben Gill
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), made and entered
into effective June 14, 1996, by and between Neodata Services, Inc., a Delaware
corporation (hereinafter, together with its successors, referred to as the
"Company), and Ben Gill (hereinafter referred to as the "Executive").
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company (i) to provide the Executive with a special
incentive to encourage the Executive to maintain the Executive's current
employment relationship with the Company in the event of a Sale of the Company
(as hereinafter defined) for a period of up to eighteen months following any
such Sale, thereby promoting the Company's stability both before and after any
Sale and (ii) to provide for certain of the obligations of the Executive to the
Company during and following the Executive's termination of the Executive's
employment relationship with the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. CERTAIN DEFINITION.
a. "ACCRUED BENEFITS" means (i) all salary earned or accrued
through the date the Executive's employment is terminated, (ii) reimbursement
for any and all monies advanced by the Executive in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive through the date the Executive's employment is terminated, and (iii)
all other payments and benefits to which the Executive may be entitled under
the terms of any generally applicable compensation arrangement or benefit plan
or program of the Company, including any unused vacation pay; but excluding any
severance or termination benefits.
b. "BOARD" means, so long as Holding owns all the outstanding
capital stock of the Company, the board of directors of Holding. In all other
cases, Board means the board of directors of the Company.
c. "CAUSE" means the Executive's (i) conviction of, or plea
of nolo contendere to, a felony, (ii) illegal use of drugs, (iii) material
breach of this Agreement, fraud, dishonesty in connection with the Executive's
employment, competition with the Company, Holding or their respective
Subsidiaries, unauthorized use of any trade secret or other confidential
information of the Company, Holding or their respective Subsidiaries, or
continued gross neglect of the Executive's duties or responsibilities or (iv)
failure to properly perform the Executive's duties in the reasonable judgment
of the Board. In the case of a termination for
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Cause as described in clause (ii), (iii) or (iv) above, the Executive shall be
given the opportunity, during the period of not less than 30 days after the
receipt of written notice from the Company that such event constitutes Cause,
to meet with the Board to defend the Executive's acts or failures to act, prior
to termination. The company may suspend the Executive's title and authority
pending such meeting, and such suspension shall not constitute "Good Reason",
as defined below. After such meeting, the Board may rule whether the subject
conduct constituted "Cause," and the Board's determination shall be conclusive
and binding.
d. "EDS" means Electronic Data Systems Corporation, a Texas
corporation.
e. "EDS COMPANY" means any Person in which EDS beneficially
owns more than 50% of the fully-diluted common stock.
f. "GOOD REASON" means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual base salary or any adverse change, approved by the Board, in the manner
in which the Executive's opportunity for an annual bonus is determined, (ii)
any significant reduction, approved by the Board without the Executive's
written consent, in the aggregate value of the Executive's benefits provided by
contract with the Executive or generally available to all senior executives of
the Company (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), or (iii) any significant
reduction, approved by the Board without the Executive's written consent, in
the Executive's title, duties or responsibilities; provided, however, that Good
Reason shall not exist at any time after the Executive has received written
notice from the Company that an event has occurred constituting Cause, unless
the Board, after a meeting with the Executive, determines that the noticed
event did not constitute Cause. Notwithstanding the above, the occurrence of
any of the events described above will not constitute Good Reason unless the
Executive gives the Company written notice that such event constitutes Good
Reason, and the Company thereafter fails to cure such event or events within 30
days after receipt of such notice.
g. "HICKS, MUSE" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation, its successors and assigns, and its
affiliates and its and their respective officers, directors, and employees (and
members of their respective families and trusts for the primary benefit of such
family members), collectively.
h. "HICKS, MUSE COMPANY" means any Person in which Hicks,
Muse beneficially owns more than 25% of the fully-diluted common stock or has
an unrecovered investment of $1,000,000 or more, and each Subsidiary thereof.
i. "HOLDING" means Neodata Corporation, a Delaware
corporation which is the parent of the Company, together with its successors.
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j. "MARKETABLE SECURITIES" means securities (i) of a class or
series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the NASDAQ National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be (or which at the date of acquisition
are legally committed to become within six months after the date of
acquisition) freely saleable in unlimited quantities by each Person acquiring
such securities to the public, either pursuant to an effective registration
statement under the Securities Act of 1933, as amended (including a current
prospectus which is available for delivery), or without the necessity of such
registration.
k. "PERSON" means any "person", within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, including a
"group" as determined thereby.
l. "PREFERRED STOCK" means the Class A Convertible Preferred
Stock, par value $0.01 per share, of Holding.
m. "SALE OF THE COMPANY" or "Sale" means the consummation of
any transaction or series of related transactions after the date hereof whereby
(i) the Company sells or otherwise transfers all or substantially all of its
assets to another Person (other than Hicks, Muse, a Hicks, Muse Company, EDS,
or an EDS Company), (ii) any Person (other than Hicks, Muse, a Hicks, Muse
Company, EDS, or an EDS Company) purchases or otherwise acquires all or
substantially all of the common stock of the Company or Holding, (iii) the
Company is merged with another corporation (a "Merger") and the holders of the
Company's fully-diluted common stock immediately prior to such Merger hold less
than 25% of the surviving corporation's fully-diluted common stock immediately
after such Merger or (iv) Holding is merged with another corporation (a
"Holding Merger") and the holders of Holding's fully-diluted common stock
immediately prior to such Holding Merger hold less than 25% of the surviving
corporation's fully-diluted common stock immediately after such Holding Merger.
n. "SERIES 2 PREFERRED" means the Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share, of Holding.
o. "SUBSIDIARY" means with respect to any Person, any other
Person of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
2. SALE OF THE COMPANY.
In the event of a Sale of the Company:
a. The Executive, except for Good Reason, shall not terminate
the Executive's employment with the Company in such Executive's position with
the Company (or
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such other position as the Board and Executive shall mutually agree to in
writing) at the time of the Sale or for a period beginning on the date of such
Sale and ending on the date which is eighteen months following the date on
which such Sale is consummated (such period to be referred to herein as the
"Retention Period"); provided, however, if the Executive terminates the
Executive's employment relationship with the Company for Good Reason during the
Retention Period, the Executive shall be deemed to have continued the
Executive's employment with the Company for the Retention Period and the
Executive shall be entitled to the Termination Benefits (as hereinafter
defined) as set forth in Section 2c. herein.
b. On the date upon which the Sale is consummated, all
options to purchase common stock of Holding and Series 2 Preferred which have
been granted to the Executive pursuant to the Neodata Corporation amended and
Restated 1990 Executive Incentive Plan and any options and stock appreciation
rights granted to the Executive under any other plan approved by the Board
shall, to the extent not previously vested, immediately vest in full.
c. In the event the Company terminates the Executive for any
reason (other than Cause) during the Retention Period, the Executive shall be
entitled to, and the Company shall be obligated to pay, the following
termination benefits (the "Termination Benefits"), which Termination Benefits
shall be the Executive's exclusive right and remedy in respect of such
termination:
(i) The Company shall pay the Executive the Executive's
Accrued Benefits, except that, for this purpose, Accrued Benefits shall not
include any entitlement to severance under any Company severance policy
generally applicable to the Company's salaried employees, it being understood
that, if the Executive is terminated during the Retention Period, the payments
under Section 2c(ii) and Section 3 of this Agreement shall be treated as a
credit against any amount owed to the Executive under any general severance
benefit; and
(ii) The Company shall pay the Executive severance pay
equal to the Executive's then current monthly base salary, payable in
accordance with the Company's regular pay schedule, for the remainder of the
Retention Period ("Salary Continuance").
d. Notwithstanding the other provisions of this Section 2,
if, at any time during the Retention Period, (i) the Executive shall terminate
the Executive's Employment with the Company for any reason other than Good
Reason, (ii) the Company shall terminate the Executive for Cause or (iii) the
Executive shall cease to be employed by the Company by reason of death,
permanent disability (as defined in the Company's Board-approved disability
plan or policy, as in effect from time to time) or retirement (as defined in
the Company's Board-approved retirement plan or policy, as in effect from time
to time), then the Executive shall not be entitled to any Salary Continuance,
and shall only be entitled to receive from the Company (x) in the case of
clause (i) or (ii) of this sentence, the Executive's Accrued Benefit or (y) in
the case of clause (iii) of this sentence, any applicable death, disability or
retirement benefits, as the case may be, then generally provided by the Company
to its similarly situated employees.
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3. RETENTION BONUS.
a. In the event of a Sale of the Company that results in the
holders of Preferred Stock receiving, net of all selling, brokerage, investment
banking, and all related costs and expenses, upon the consummation of the Sale,
cash or Marketable Securities having a fair market value of at least
$125,000,000 in the aggregate, the Executive shall be entitled to a retention
bonus (the "Retention Bonus") in an amount equal to 100% of such Executive's
then-existing base salary, payable in four installments, with 25% being payable
upon consummation of the Sale, and 25% on each of the dates six months, twelve
months, and eighteen months following such sale.
b. Notwithstanding the provisions of Section 3(a) above, if
at any time prior to the termination of the Retention Period the Executive
terminates the Executive's employment for any reason other than Good Reason or
because of the Executive's death or disability, or the Company terminates the
Executive for Cause, the Executive shall forfeit the Executive's right to any
unpaid installments of the Retention Bonus which would otherwise be due under
this Agreement.
4. LIMITATION ON OBLIGATIONS OF COMPANY.
The Company's aggregate obligations under this Agreement and all
agreements with other executives of the Company which have provisions similar
to Sections 2 and 3 hereof (whether or not dated concurrently herewith) (the
"Other Retention Agreements") with respect to all Salary Continuance and
Retention Bonus payments payable thereunder shall be subject to an aggregate
maximum dollar limitation such that the Company shall not be obligated to pay
aggregate Salary Continuances and Retention Bonuses hereunder and pursuant to
the Other Retention Agreements in an aggregate amount of more than $3,000,000.
In the event the aggregate amount that the Company would be obligated to pay in
Salary Continuances and Retention Bonuses hereunder and pursuant to the Other
Retention Agreements exceeds $3,000,000, the Salary Continuances and Retention
Bonuses payable in the aggregate hereunder and thereunder shall be reduced
ratably among the Executive and the parties to the Other Retention Agreements
in accordance with the amount of the then-existing base salary of each
individual who is a party to an executive retention agreement. Notwithstanding
anything to the contrary elsewhere herein, after the first Sale of the Company,
no further Termination Benefits, Salary Continuance or Retention Bonus shall
accrue to the Executive with respect to any subsequent Sale of the Company.
Any interpretation of the provisions of this or any other provision of this
Agreement shall be made by the Board, whose decision concerning such matters
shall be conclusive.
5. EFFECTIVENESS OF PROVISIONS.
The Company's and the Executive's rights and obligations under Section 2
and 3 of this Agreement shall vest upon the occurrence of a Sale of the Company
as defined herein, and
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nothing in this Agreement shall be construed as conferring any obligations or
benefits upon the parties hereunder prior to any such Sale. Nothing contained
herein shall be deemed to obligate the Board or the Company to engage in, or
negotiate towards, a Sale. In the event the Executive is not employed by the
Company for any reason at the time of a Sale of the Company, the provisions of
Section 2 and Section 3 of this Agreement shall cease to be of any force and
effect and neither party hereto shall have any obligations or be entitled to
any benefits thereunder, and the remaining provisions of this Agreement,
including but not limited to Section 6 and Section 7, shall survive such
termination of employment and remain in full force and effect.
6. NON-COMPETITION COVENANT.
The Executive shall not, during the period in which the Executive is
employed by the Company and for the eighteen-month period immediately following
the last day of the Executive's employment by the Company (as such last day of
employment is reasonably determined by the Company's Board of Directors), (a)
unless the Executive's employment by the Company was terminated by the Company
without Cause, act as an officer, director, employee, partner, or agent of, or
invest in or lend money to, or own, directly or indirectly, any interest in, or
participate in the control of, any corporation, partnership, joint venture or
other business organization which is engaged in the sale of any product or
service which is sold by the Company from time to time in the future prior to
the end of the Executive's employment, or (b) solicit to accept or negotiate
with concerning or offer to, any person employed by the Company or whose
employment by the Company has ended less than 180 days prior thereto,
employment with any business entity with which Executive may become associated
in any capacity other than the Company.
7. CONFIDENTIAL INFORMATION OF THE COMPANY.
The Executive shall not, except in the performance of the Executive's
duties hereunder and for the benefit of the Company, disclose or reveal to any
unauthorized person any trade secrets or other confidential information of the
Company, Holding or their respective Subsidiaries relating to the Company,
Holding or their respective Subsidiaries or to any of the businesses operated
by them, and the Executive confirms that such trade secrets and confidential
information constitute the exclusive property of the Company, Holding or their
respective Subsidiaries, as the case may be.
8. REMEDIES UPON BREACH.
The Executive acknowledges that the remedy at law for a breach by the
Executive of the provisions of Sections 6 or 7 hereof will be inadequate.
Accordingly, in the event of the breach or threatened breach by the Executive
of any of the provisions of Sections 6 or 7 hereof, the Company, Holding or
their respective Subsidiaries, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy to which it may be entitled.
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9. SUCCESSORS.
The Company may assign its rights under this Agreement to any successor
to all or substantially all the assets of the Company, by merger or otherwise,
and may assign or encumber this Agreement and its rights hereunder as security
for indebtedness of the Company, Holding, and their respective Subsidiaries.
The rights of Executive under this Agreement may not be assigned or encumbered
by the Executive, voluntarily or involuntarily, during the Executive's
lifetime, and any such purported assignment shall be void.
10. ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
11. AMENDMENT.
This Agreement may not be amended or modified at any time except by a
written instrument approved by the Board and executed by the Company and the
Executive.
12. WITHHOLDING.
The Company shall be entitled to withhold from amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes of charges which it is from time to time required to withhold. The
company shall be entitled to rely on an opinion of counsel if any question as
to the amount or requirement of any such withholding shall arise.
13. GOVERNING LAW.
This Agreement and the rights and obligation s hereunder shall be
governed by and construed in accordance with the laws of the State of Colorado
without regard to principles of conflicts of law of the State of Colorado or
any other jurisdiction. Any dispute arising out of this Agreement shall be
determined by arbitration in Boulder, Colorado under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
14. NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall
be deemed given when received and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid: if to the Company, c/o Hicks, Muse, Tate & Furst Incorporated, 200
Crescent Court, Suite 1600, Dallas, Texas 75201, Attention: Thomas O. Hicks
and Lawrence D. Stuart, with a copy to Weil, Gotshal & Manges, 100 Crescent
Court,
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Suite 1300, Dallas, Texas 75201, Attention: Mary R. Korby, Esq.; or if to the
Executive, at the address set forth below the Executive's signature line of
this Agreement; or to such other address as the party to be notified shall have
given to the other in writing.
15. NO WAIVER.
No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at any time.
16. HEADINGS.
The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
NEODATA SERVICES, INC.
By: /s/ SUSAN L. MORSE
---------------------------------
Name: Susan L. Morse
Title: Senior Vice President
Human Resources
EXECUTIVE
/s/ BEN GILL
----------------------------------------
Ben Gill
Address:
--------------------------------
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EXHIBIT 10.45
EXECUTIVE EMPLOYMENT AGREEMENT
Sue Morse
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), made and
entered into effective June 14, 1996, by and between Neodata Services, Inc., a
Delaware corporation (hereinafter, together with its successors, referred to as
the "Company), and Sue Morse (hereinafter referred to as the "Executive").
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company (i) to provide the Executive with a special
incentive to encourage the Executive to maintain the Executive's current
employment relationship with the Company in the event of a Sale of the Company
(as hereinafter defined) for a period of up to eighteen months following any
such Sale, thereby promoting the Company's stability both before and after any
Sale and (ii) to provide for certain of the obligations of the Executive to the
Company during and following the Executive's termination of the Executive's
employment relationship with the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. CERTAIN DEFINITION.
a. "ACCRUED BENEFITS" means (i) all salary earned or accrued
through the date the Executive's employment is terminated, (ii) reimbursement
for any and all monies advanced by the Executive in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive through the date the Executive's employment is terminated, and (iii)
all other payments and benefits to which the Executive may be entitled under
the terms of any generally applicable compensation arrangement or benefit plan
or program of the Company, including any unused vacation pay; but excluding any
severance or termination benefits.
b. "BOARD" means, so long as Holding owns all the
outstanding capital stock of the Company, the board of directors of Holding.
In all other cases, Board means the board of directors of the Company.
c. "CAUSE" means the Executive's (i) conviction of, or plea
of nolo contendere to, a felony, (ii) illegal use of drugs, (iii) material
breach of this Agreement, fraud, dishonesty in connection with the Executive's
employment, competition with the Company, Holding or their respective
Subsidiaries, unauthorized use of any trade secret or other confidential
information of the Company, Holding or their respective Subsidiaries, or
continued gross neglect of the Executive's duties or responsibilities or (iv)
failure to properly perform the Executive's duties in the reasonable judgment
of the Board. In the case of a termination for
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Cause as described in clause (ii), (iii) or (iv) above, the Executive shall be
given the opportunity, during the period of not less than 30 days after the
receipt of written notice from the Company that such event constitutes Cause,
to meet with the Board to defend the Executive's acts or failures to act, prior
to termination. The company may suspend the Executive's title and authority
pending such meeting, and such suspension shall not constitute "Good Reason",
as defined below. After such meeting, the Board may rule whether the subject
conduct constituted "Cause," and the Board's determination shall be conclusive
and binding.
d. "EDS" means Electronic Data Systems Corporation, a Texas
corporation.
e. "EDS COMPANY" means any Person in which EDS beneficially
owns more than 50% of the fully-diluted common stock.
f. "GOOD REASON" means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual base salary or any adverse change, approved by the Board, in the manner
in which the Executive's opportunity for an annual bonus is determined, (ii)
any significant reduction, approved by the Board without the Executive's
written consent, in the aggregate value of the Executive's benefits provided by
contract with the Executive or generally available to all senior executives of
the Company (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), or (iii) any significant
reduction, approved by the Board without the Executive's written consent, in
the Executive's title, duties or responsibilities; provided, however, that Good
Reason shall not exist at any time after the Executive has received written
notice from the Company that an event has occurred constituting Cause, unless
the Board, after a meeting with the Executive, determines that the noticed
event did not constitute Cause. Notwithstanding the above, the occurrence of
any of the events described above will not constitute Good Reason unless the
Executive gives the Company written notice that such event constitutes Good
Reason, and the Company thereafter fails to cure such event or events within 30
days after receipt of such notice.
g. "HICKS, MUSE" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation, its successors and assigns, and its
affiliates and its and their respective officers, directors, and employees (and
members of their respective families and trusts for the primary benefit of such
family members), collectively.
h. "HICKS, MUSE COMPANY" means any Person in which Hicks,
Muse beneficially owns more than 25% of the fully-diluted common stock or has
an unrecovered investment of $1,000,000 or more, and each Subsidiary thereof.
i. "HOLDING" means Neodata Corporation, a Delaware
corporation which is the parent of the Company, together with its successors.
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j. "MARKETABLE SECURITIES" means securities (i) of a class
or series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the NASDAQ National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be (or which at the date of acquisition
are legally committed to become within six months after the date of
acquisition) freely saleable in unlimited quantities by each Person acquiring
such securities to the public, either pursuant to an effective registration
statement under the Securities Act of 1933, as amended (including a current
prospectus which is available for delivery), or without the necessity of such
registration.
k. "PERSON" means any "person", within the meaning of
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended,
including a "group" as determined thereby.
l. "PREFERRED STOCK" means the Class A Convertible Preferred
Stock, par value $0.01 per share, of Holding.
m. "SALE OF THE COMPANY" or "Sale" means the consummation of
any transaction or series of related transactions after the date hereof whereby
(i) the Company sells or otherwise transfers all or substantially all of its
assets to another Person (other than Hicks, Muse, a Hicks, Muse Company, EDS,
or an EDS Company), (ii) any Person (other than Hicks, Muse, a Hicks, Muse
Company, EDS, or an EDS Company) purchases or otherwise acquires all or
substantially all of the common stock of the Company or Holding, (iii) the
Company is merged with another corporation (a "Merger") and the holders of the
Company's fully-diluted common stock immediately prior to such Merger hold less
than 25% of the surviving corporation's fully-diluted common stock immediately
after such Merger or (iv) Holding is merged with another corporation (a
"Holding Merger") and the holders of Holding's fully-diluted common stock
immediately prior to such Holding Merger hold less than 25% of the surviving
corporation's fully-diluted common stock immediately after such Holding Merger.
n. "SERIES 2 PREFERRED" means the Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share, of Holding.
o. "SUBSIDIARY" means with respect to any Person, any other
Person of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
2. SALE OF THE COMPANY.
In the event of a Sale of the Company:
a. The Executive, except for Good Reason, shall not
terminate the Executive's employment with the Company in such Executive's
position with the Company (or
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such other position as the Board and Executive shall mutually agree to in
writing) at the time of the Sale or for a period beginning on the date of such
Sale and ending on the date which is eighteen months following the date on
which such Sale is consummated (such period to be referred to herein as the
"Retention Period"); provided, however, if the Executive terminates the
Executive's employment relationship with the Company for Good Reason during the
Retention Period, the Executive shall be deemed to have continued the
Executive's employment with the Company for the Retention Period and the
Executive shall be entitled to the Termination Benefits (as hereinafter
defined) as set forth in Section 2c. herein.
b. On the date upon which the Sale is consummated, all
options to purchase common stock of Holding and Series 2 Preferred which have
been granted to the Executive pursuant to the Neodata Corporation amended and
Restated 1990 Executive Incentive Plan and any options and stock appreciation
rights granted to the Executive under any other plan approved by the Board
shall, to the extent not previously vested, immediately vest in full.
c. In the event the Company terminates the Executive for any
reason (other than Cause) during the Retention Period, the Executive shall be
entitled to, and the Company shall be obligated to pay, the following
termination benefits (the "Termination Benefits"), which Termination Benefits
shall be the Executive's exclusive right and remedy in respect of such
termination:
(i) The Company shall pay the Executive the
Executive's Accrued Benefits, except that, for this purpose, Accrued Benefits
shall not include any entitlement to severance under any Company severance
policy generally applicable to the Company's salaried employees, it being
understood that, if the Executive is terminated during the Retention Period,
the payments under Section 2c(ii) and Section 3 of this Agreement shall be
treated as a credit against any amount owed to the Executive under any general
severance benefit; and
(ii) The Company shall pay the Executive severance pay
equal to the Executive's then current monthly base salary, payable in
accordance with the Company's regular pay schedule, for the remainder of the
Retention Period ("Salary Continuance").
d. Notwithstanding the other provisions of this Section 2,
if, at any time during the Retention Period, (i) the Executive shall terminate
the Executive's Employment with the Company for any reason other than Good
Reason, (ii) the Company shall terminate the Executive for Cause or (iii) the
Executive shall cease to be employed by the Company by reason of death,
permanent disability (as defined in the Company's Board-approved disability
plan or policy, as in effect from time to time) or retirement (as defined in
the Company's Board-approved retirement plan or policy, as in effect from time
to time), then the Executive shall not be entitled to any Salary Continuance,
and shall only be entitled to receive from the Company (x) in the case of
clause (i) or (ii) of this sentence, the Executive's Accrued Benefit or (y) in
the case of clause (iii) of this sentence, any applicable death, disability or
retirement benefits, as the case may be, then generally provided by the Company
to its similarly situated employees.
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3. RETENTION BONUS.
a. In the event of a Sale of the Company that results in the
holders of Preferred Stock receiving, net of all selling, brokerage, investment
banking, and all related costs and expenses, upon the consummation of the Sale,
cash or Marketable Securities having a fair market value of at least
$125,000,000 in the aggregate, the Executive shall be entitled to a retention
bonus (the "Retention Bonus") in an amount equal to 100% of such Executive's
then-existing base salary, payable in four installments, with 25% being
payable upon consummation of the Sale, and 25% on each of the dates six months,
twelve months, and eighteen months following such sale.
b. Notwithstanding the provisions of Section 3(a) above, if
at any time prior to the termination of the Retention Period the Executive
terminates the Executive's employment for any reason other than Good Reason or
because of the Executive's death or disability, or the Company terminates the
Executive for Cause, the Executive shall forfeit the Executive's right to any
unpaid installments of the Retention Bonus which would otherwise be due under
this Agreement.
4. LIMITATION ON OBLIGATIONS OF COMPANY.
The Company's aggregate obligations under this Agreement and all
agreements with other executives of the Company which have provisions similar
to Sections 2 and 3 hereof (whether or not dated concurrently herewith) (the
"Other Retention Agreements") with respect to all Salary Continuance and
Retention Bonus payments payable thereunder shall be subject to an aggregate
maximum dollar limitation such that the Company shall not be obligated to pay
aggregate Salary Continuances and Retention Bonuses hereunder and pursuant to
the Other Retention Agreements in an aggregate amount of more than $3,000,000.
In the event the aggregate amount that the Company would be obligated to pay in
Salary Continuances and Retention Bonuses hereunder and pursuant to the Other
Retention Agreements exceeds $3,000,000, the Salary Continuances and Retention
Bonuses payable in the aggregate hereunder and thereunder shall be reduced
ratably among the Executive and the parties to the Other Retention Agreements
in accordance with the amount of the then-existing base salary of each
individual who is a party to an executive retention agreement. Notwithstanding
anything to the contrary elsewhere herein, after the first Sale of the Company,
no further Termination Benefits, Salary Continuance or Retention Bonus shall
accrue to the Executive with respect to any subsequent Sale of the Company.
Any interpretation of the provisions of this or any other provision of this
Agreement shall be made by the Board, whose decision concerning such matters
shall be conclusive.
5. EFFECTIVENESS OF PROVISIONS.
The Company's and the Executive's rights and obligations under Section
2 and 3 of this Agreement shall vest upon the occurrence of a Sale of the
Company as defined herein, and
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nothing in this Agreement shall be construed as conferring any obligations or
benefits upon the parties hereunder prior to any such Sale. Nothing contained
herein shall be deemed to obligate the Board or the Company to engage in, or
negotiate towards, a Sale. In the event the Executive is not employed by the
Company for any reason at the time of a Sale of the Company, the provisions of
Section 2 and Section 3 of this Agreement shall cease to be of any force and
effect and neither party hereto shall have any obligations or be entitled to
any benefits thereunder, and the remaining provisions of this Agreement,
including but not limited to Section 6 and Section 7, shall survive such
termination of employment and remain in full force and effect.
6. NON-COMPETITION COVENANT.
The Executive shall not, during the period in which the Executive is
employed by the Company and for the eighteen-month period immediately following
the last day of the Executive's employment by the Company (as such last day of
employment is reasonably determined by the Company's Board of Directors), (a)
unless the Executive's employment by the Company was terminated by the Company
without Cause, act as an officer, director, employee, partner, or agent of, or
invest in or lend money to, or own, directly or indirectly, any interest in, or
participate in the control of, any corporation, partnership, joint venture or
other business organization which is engaged in the sale of any product or
service which is sold by the Company from time to time in the future prior to
the end of the Executive's employment, or (b) solicit to accept or negotiate
with concerning or offer to, any person employed by the Company or whose
employment by the Company has ended less than 180 days prior thereto,
employment with any business entity with which Executive may become associated
in any capacity other than the Company.
7. CONFIDENTIAL INFORMATION OF THE COMPANY.
The Executive shall not, except in the performance of the Executive's
duties hereunder and for the benefit of the Company, disclose or reveal to any
unauthorized person any trade secrets or other confidential information of the
Company, Holding or their respective Subsidiaries relating to the Company,
Holding or their respective Subsidiaries or to any of the businesses operated
by them, and the Executive confirms that such trade secrets and confidential
information constitute the exclusive property of the Company, Holding or their
respective Subsidiaries, as the case may be.
8. REMEDIES UPON BREACH.
The Executive acknowledges that the remedy at law for a breach by the
Executive of the provisions of Sections 6 or 7 hereof will be inadequate.
Accordingly, in the event of the breach or threatened breach by the Executive
of any of the provisions of Sections 6 or 7 hereof, the Company, Holding or
their respective Subsidiaries, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy to which it may be entitled.
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9. SUCCESSORS.
The Company may assign its rights under this Agreement to any successor
to all or substantially all the assets of the Company, by merger or otherwise,
and may assign or encumber this Agreement and its rights hereunder as security
for indebtedness of the Company, Holding, and their respective Subsidiaries.
The rights of Executive under this Agreement may not be assigned or encumbered
by the Executive, voluntarily or involuntarily, during the Executive's
lifetime, and any such purported assignment shall be void.
10. ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
11. AMENDMENT.
This Agreement may not be amended or modified at any time except by a
written instrument approved by the Board and executed by the Company and the
Executive.
12. WITHHOLDING.
The Company shall be entitled to withhold from amounts to be paid to
the Executive hereunder any federal, state, local, or foreign withholding or
other taxes of charges which it is from time to time required to withhold. The
company shall be entitled to rely on an opinion of counsel if any question as
to the amount or requirement of any such withholding shall arise.
13. GOVERNING LAW.
This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of Colorado
without regard to principles of conflicts of law of the State of Colorado or
any other jurisdiction. Any dispute arising out of this Agreement shall be
determined by arbitration in Boulder, Colorado under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
14. NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall
be deemed given when received and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid: if to the Company, c/o Hicks, Muse, Tate & Furst Incorporated, 200
Crescent Court, Suite 1600, Dallas, Texas 75201, Attention: Thomas O. Hicks
and Lawrence D. Stuart, with a copy to Weil, Gotshal & Manges, 100 Crescent
Court,
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Suite 1300, Dallas, Texas 75201, Attention: Mary R. Korby, Esq.; or if to the
Executive, at the address set forth below the Executive's signature line of
this Agreement; or to such other address as the party to be notified shall have
given to the other in writing.
15. NO WAIVER.
No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at any time.
16. HEADINGS.
The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
NEODATA SERVICES, INC.
By: /s/ A. LAURENCE JONES
-----------------------
Name: A. Laurence Jones
Title: CEO & President
EXECUTIVE
/s/ SUSAN L. MORSE
-------------------------------
Susan L. Morse
Address:
-----------------------
-------------------------------
<PAGE> 1
EXHIBIT 10.46
EXECUTIVE EMPLOYMENT AGREEMENT
Rich Rosy
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), made and entered
into effective June 14, 1996, by and between Neodata Services, Inc., a Delaware
corporation (hereinafter, together with its successors, referred to as the
"Company), and Rich Rosy (hereinafter referred to as the "Executive").
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company (i) to provide the Executive with a special
incentive to encourage the Executive to maintain the Executive's current
employment relationship with the Company in the event of a Sale of the Company
(as hereinafter defined) for a period of up to eighteen months following any
such Sale, thereby promoting the Company's stability both before and after any
Sale and (ii) to provide for certain of the obligations of the Executive to the
Company during and following the Executive's termination of the Executive's
employment relationship with the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. CERTAIN DEFINITION.
a. "ACCRUED BENEFITS" means (i) all salary earned or accrued
through the date the Executive's employment is terminated, (ii) reimbursement
for any and all monies advanced by the Executive in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive through the date the Executive's employment is terminated, and (iii)
all other payments and benefits to which the Executive may be entitled under
the terms of any generally applicable compensation arrangement or benefit plan
or program of the Company, including any unused vacation pay; but excluding any
severance or termination benefits.
b. "BOARD" means, so long as Holding owns all the outstanding
capital stock of the Company, the board of directors of Holding. In all other
cases, Board means the board of directors of the Company.
c. "CAUSE" means the Executive's (i) conviction of, or plea
of nolo contendere to, a felony, (ii) illegal use of drugs, (iii) material
breach of this Agreement, fraud, dishonesty in connection with the Executive's
employment, competition with the Company, Holding or their respective
Subsidiaries, unauthorized use of any trade secret or other confidential
information of the Company, Holding or their respective Subsidiaries, or
continued gross neglect of the Executive's duties or responsibilities or (iv)
failure to properly perform the Executive's duties in the reasonable judgment
of the Board. In the case of a termination for
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Cause as described in clause (ii), (iii) or (iv) above, the Executive shall be
given the opportunity, during the period of not less than 30 days after the
receipt of written notice from the Company that such event constitutes Cause,
to meet with the Board to defend the Executive's acts or failures to act, prior
to termination. The company may suspend the Executive's title and authority
pending such meeting, and such suspension shall not constitute "Good Reason",
as defined below. After such meeting, the Board may rule whether the subject
conduct constituted "Cause," and the Board's determination shall be conclusive
and binding.
d. "EDS" means Electronic Data Systems Corporation, a Texas
corporation.
e. "EDS COMPANY" means any Person in which EDS beneficially
owns more than 50% of the fully-diluted common stock.
f. "GOOD REASON" means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual base salary or any adverse change, approved by the Board, in the manner
in which the Executive's opportunity for an annual bonus is determined, (ii)
any significant reduction, approved by the Board without the Executive's
written consent, in the aggregate value of the Executive's benefits provided by
contract with the Executive or generally available to all senior executives of
the Company (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), or (iii) any significant
reduction, approved by the Board without the Executive's written consent, in
the Executive's title, duties or responsibilities; provided, however, that Good
Reason shall not exist at any time after the Executive has received written
notice from the Company that an event has occurred constituting Cause, unless
the Board, after a meeting with the Executive, determines that the noticed
event did not constitute Cause. Notwithstanding the above, the occurrence of
any of the events described above will not constitute Good Reason unless the
Executive gives the Company written notice that such event constitutes Good
Reason, and the Company thereafter fails to cure such event or events within 30
days after receipt of such notice.
g. "HICKS, MUSE" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation, its successors and assigns, and its
affiliates and its and their respective officers, directors, and employees (and
members of their respective families and trusts for the primary benefit of such
family members), collectively.
h. "HICKS, MUSE COMPANY" means any Person in which Hicks,
Muse beneficially owns more than 25% of the fully-diluted common stock or has
an unrecovered investment of $1,000,000 or more, and each Subsidiary thereof.
i. "HOLDING" means Neodata Corporation, a Delaware
corporation which is the parent of the Company, together with its successors.
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j) "MARKETABLE SECURITIES" means securities (i) of a class or
series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the NASDAQ National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be (or which at the date of acquisition
are legally committed to become within six months after the date of
acquisition) freely saleable in unlimited quantities by each Person acquiring
such securities to the public, either pursuant to an effective registration
statement under the Securities Act of 1933, as amended (including a current
prospectus which is available for delivery), or without the necessity of such
registration.
k) "PERSON" means any "person", within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, including a
"group" as determined thereby.
l) "PREFERRED STOCK" means the Class A Convertible Preferred
Stock, par value $0.01 per share, of Holding.
m) "SALE OF THE COMPANY" or "Sale" means the consummation of
any transaction or series of related transactions after the date hereof whereby
(i) the Company sells or otherwise transfers all or substantially all of its
assets to another Person (other than Hicks, Muse, a Hicks, Muse Company, EDS,
or an EDS Company), (ii) any Person (other than Hicks, Muse, a Hicks, Muse
Company, EDS, or an EDS Company) purchases or otherwise acquires all or
substantially all of the common stock of the Company or Holding, (iii) the
Company is merged with another corporation (a "Merger") and the holders of the
Company's fully-diluted common stock immediately prior to such Merger hold less
than 25% of the surviving corporation's fully-diluted common stock immediately
after such Merger or (iv) Holding is merged with another corporation (a
"Holding Merger") and the holders of Holding's fully-diluted common stock
immediately prior to such Holding Merger hold less than 25% of the surviving
corporation's fully-diluted common stock immediately after such Holding Merger.
n) "SERIES 2 PREFERRED" means the Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share, of Holding.
o) "SUBSIDIARY" means with respect to any Person, any other
Person of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
2. SALE OF THE COMPANY.
In the event of a Sale of the Company:
a) The Executive, except for Good Reason, shall not terminate
the Executive's employment with the Company in such Executive's position with
the Company (or
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such other position as the Board and Executive shall mutually agree to in
writing) at the time of the Sale or for a period beginning on the date of such
Sale and ending on the date which is eighteen months following the date on
which such Sale is consummated (such period to be referred to herein as the
"Retention Period"); provided, however, if the Executive terminates the
Executive's employment relationship with the Company for Good Reason during the
Retention Period, the Executive shall be deemed to have continued the
Executive's employment with the Company for the Retention Period and the
Executive shall be entitled to the Termination Benefits (as hereinafter
defined) as set forth in Section 2c. herein.
b) On the date upon which the Sale is consummated, all
options to purchase common stock of Holding and Series 2 Preferred which have
been granted to the Executive pursuant to the Neodata Corporation amended and
Restated 1990 Executive Incentive Plan and any options and stock appreciation
rights granted to the Executive under any other plan approved by the Board
shall, to the extent not previously vested, immediately vest in full.
c) In the event the Company terminates the Executive for any
reason (other than Cause) during the Retention Period, the Executive shall be
entitled to, and the Company shall be obligated to pay, the following
termination benefits (the "Termination Benefits"), which Termination Benefits
shall be the Executive's exclusive right and remedy in respect of such
termination:
(i) The Company shall pay the Executive the Executive's
Accrued Benefits, except that, for this purpose, Accrued Benefits shall not
include any entitlement to severance under any Company severance policy
generally applicable to the Company's salaried employees, it being understood
that, if the Executive is terminated during the Retention Period, the payments
under Section 2c(ii) and Section 3 of this Agreement shall be treated as a
credit against any amount owed to the Executive under any general severance
benefit; and
(ii) The Company shall pay the Executive severance pay
equal to the Executive's then current monthly base salary, payable in
accordance with the Company's regular pay schedule, for the remainder of the
Retention Period ("Salary Continuance").
d) Notwithstanding the other provisions of this Section 2,
if, at any time during the Retention Period, (i) the Executive shall terminate
the Executive's Employment with the Company for any reason other than Good
Reason, (ii) the Company shall terminate the Executive for Cause or (iii) the
Executive shall cease to be employed by the Company by reason of death,
permanent disability (as defined in the Company's Board-approved disability
plan or policy, as in effect from time to time) or retirement (as defined in
the Company's Board-approved retirement plan or policy, as in effect from time
to time), then the Executive shall not be entitled to any Salary Continuance,
and shall only be entitled to receive from the Company (x) in the case of
clause (i) or (ii) of this sentence, the Executive's Accrued Benefit or (y) in
the case of clause (iii) of this sentence, any applicable death, disability or
retirement benefits, as the case may be, then generally provided by the Company
to its similarly situated employees.
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3. RETENTION BONUS.
a. In the event of a Sale of the Company that results in the
holders of Preferred Stock receiving, net of all selling, brokerage, investment
banking, and all related costs and expenses, upon the consummation of the Sale,
cash or Marketable Securities having a fair market value of at least
$125,000,000 in the aggregate, the Executive shall be entitled to a retention
bonus (the "Retention Bonus") in an amount equal to 100% of such Executive's
then-existing base salary, payable in four installments, with 25% being payable
upon consummation of the Sale, and 25% on each of the dates six months, twelve
months, and eighteen months following such sale.
b. Notwithstanding the provisions of Section 3(a) above, if
at any time prior to the termination of the Retention Period the Executive
terminates the Executive's employment for any reason other than Good Reason or
because of the Executive's death or disability, or the Company terminates the
Executive for Cause, the Executive shall forfeit the Executive's right to any
unpaid installments of the Retention Bonus which would otherwise be due under
this Agreement.
4. LIMITATION ON OBLIGATIONS OF COMPANY.
The Company's aggregate obligations under this Agreement and all
agreements with other executives of the Company which have provisions similar
to Sections 2 and 3 hereof (whether or not dated concurrently herewith) (the
"Other Retention Agreements") with respect to all Salary Continuance and
Retention Bonus payments payable thereunder shall be subject to an aggregate
maximum dollar limitation such that the Company shall not be obligated to pay
aggregate Salary Continuances and Retention Bonuses hereunder and pursuant to
the Other Retention Agreements in an aggregate amount of more than $3,000,000.
In the event the aggregate amount that the Company would be obligated to pay in
Salary Continuances and Retention Bonuses hereunder and pursuant to the Other
Retention Agreements exceeds $3,000,000, the Salary Continuances and Retention
Bonuses payable in the aggregate hereunder and thereunder shall be reduced
ratably among the Executive and the parties to the Other Retention Agreements
in accordance with the amount of the then-existing base salary of each
individual who is a party to an executive retention agreement. Notwithstanding
anything to the contrary elsewhere herein, after the first Sale of the Company,
no further Termination Benefits, Salary Continuance or Retention Bonus shall
accrue to the Executive with respect to any subsequent Sale of the Company.
Any interpretation of the provisions of this or any other provision of this
Agreement shall be made by the Board, whose decision concerning such matters
shall be conclusive.
5. EFFECTIVENESS OF PROVISIONS.
The Company's and the Executive's rights and obligations under Section 2
and 3 of this Agreement shall vest upon the occurrence of a Sale of the Company
as defined herein, and
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nothing in this Agreement shall be construed as conferring any obligations or
benefits upon the parties hereunder prior to any such Sale. Nothing contained
herein shall be deemed to obligate the Board or the Company to engage in, or
negotiate towards, a Sale. In the event the Executive is not employed by the
Company for any reason at the time of a Sale of the Company, the
provisions of Section 2 and Section 3 of this Agreement shall cease to be of
any force and effect and neither party hereto shall have any obligations or be
entitled to any benefits thereunder, and the remaining provisions of this
Agreement, including but not limited to Section 6 and Section 7, shall survive
such termination of employment and remain in full force and effect.
6. NON-COMPETITION COVENANT.
The Executive shall not, during the period in which the Executive is
employed by the Company and for the eighteen-month period immediately following
the last day of the Executive's employment by the Company (as such last day of
employment is reasonably determined by the Company's Board of Directors), (a)
unless the Executive's employment by the Company was terminated by the Company
without Cause, act as an officer, director, employee, partner, or agent of, or
invest in or lend money to, or own, directly or indirectly, any interest in, or
participate in the control of, any corporation, partnership, joint venture or
other business organization which is engaged in the sale of any product or
service which is sold by the Company from time to time in the future prior to
the end of the Executive's employment, or (b) solicit to accept or negotiate
with concerning or offer to, any person employed by the Company or whose
employment by the Company has ended less than 180 days prior thereto,
employment with any business entity with which Executive may become associated
in any capacity other than the Company.
7. CONFIDENTIAL INFORMATION OF THE COMPANY.
The Executive shall not, except in the performance of the Executive's
duties hereunder and for the benefit of the Company, disclose or reveal to any
unauthorized person any trade secrets or other confidential information of the
Company, Holding or their respective Subsidiaries relating to the Company,
Holding or their respective Subsidiaries or to any of the businesses operated
by them, and the Executive confirms that such trade secrets and confidential
information constitute the exclusive property of the Company, Holding or their
respective Subsidiaries, as the case may be.
8. REMEDIES UPON BREACH.
The Executive acknowledges that the remedy at law for a breach by the
Executive of the provisions of Sections 6 or 7 hereof will be inadequate.
Accordingly, in the event of the breach or threatened breach by the Executive
of any of the provisions of Sections 6 or 7 hereof, the Company, Holding or
their respective Subsidiaries, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy to which it may be entitled.
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9. SUCCESSORS.
The Company may assign its rights under this Agreement to any successor
to all or substantially all the assets of the Company, by merger or otherwise,
and may assign or encumber this Agreement and its rights hereunder as security
for indebtedness of the Company, Holding, and their respective Subsidiaries.
The rights of Executive under this Agreement may not be assigned or encumbered
by the Executive, voluntarily or involuntarily, during the Executive's
lifetime, and any such purported assignment shall be void.
10. ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
11. AMENDMENT.
This Agreement may not be amended or modified at any time except by a
written instrument approved by the Board and executed by the Company and the
Executive.
12. WITHHOLDING.
The Company shall be entitled to withhold from amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes of charges which it is from time to time required to withhold. The
company shall be entitled to rely on an opinion of counsel if any question as
to the amount or requirement of any such withholding shall arise.
13. GOVERNING LAW.
This Agreement and the rights and obligation s hereunder shall be
governed by and construed in accordance with the laws of the State of Colorado
without regard to principles of conflicts of law of the State of Colorado or
any other jurisdiction. Any dispute arising out of this Agreement shall be
determined by arbitration in Boulder, Colorado under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
14. NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall
be deemed given when received and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid: if to the Company, c/o Hicks, Muse, Tate & Furst Incorporated, 200
Crescent Court, Suite 1600, Dallas, Texas 75201, Attention: Thomas O. Hicks
and Lawrence D. Stuart, with a copy to Weil, Gotshal & Manges, 100 Crescent
Court,
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Suite 1300, Dallas, Texas 75201, Attention: Mary R. Korby, Esq.; or if to the
Executive, at the address set forth below the Executive's signature line of
this Agreement; or to such other address as the party to be notified shall have
given to the other in writing.
15. NO WAIVER.
No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at any time.
16. HEADINGS.
The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
NEODATA SERVICES, INC.
By: /s/ Susan L. Morse
---------------------------------
Name: Susan L. Morse
Title: Senior Vice President
Human Resources
EXECUTIVE
/s/ Rich Rosy
-------------
Rich Rosy
Address:
-------------------------------
-------------------------------
<PAGE> 1
EXHIBIT 10.47
EXECUTIVE EMPLOYMENT AGREEMENT
Nancy Talmey
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), made and entered
into effective June 14, 1996, by and between Neodata Services, Inc., a Delaware
corporation (hereinafter, together with its successors, referred to as the
"Company), and Nancy Talmey (hereinafter referred to as the "Executive").
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company (i) to provide the Executive with a special
incentive to encourage the Executive to maintain the Executive's current
employment relationship with the Company in the event of a Sale of the Company
(as hereinafter defined) for a period of up to eighteen months following any
such Sale, thereby promoting the Company's stability both before and after any
Sale and (ii) to provide for certain of the obligations of the Executive to the
Company during and following the Executive's termination of the Executive's
employment relationship with the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. CERTAIN DEFINITION.
a. "ACCRUED BENEFITS" means (i) all salary earned or accrued
through the date the Executive's employment is terminated, (ii) reimbursement
for any and all monies advanced by the Executive in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive through the date the Executive's employment is terminated, and (iii)
all other payments and benefits to which the Executive may be entitled under
the terms of any generally applicable compensation arrangement or benefit plan
or program of the Company, including any unused vacation pay; but excluding any
severance or termination benefits.
b. "BOARD" means, so long as Holding owns all the outstanding
capital stock of the Company, the board of directors of Holding. In all other
cases, Board means the board of directors of the Company.
c. "CAUSE" means the Executive's (i) conviction of, or plea
of nolo contendere to, a felony, (ii) illegal use of drugs, (iii) material
breach of this Agreement, fraud, dishonesty in connection with the Executive's
employment, competition with the Company, Holding or their respective
Subsidiaries, unauthorized use of any trade secret or other confidential
information of the Company, Holding or their respective Subsidiaries, or
continued gross neglect of the Executive's duties or responsibilities or (iv)
failure to properly perform the Executive's duties in the reasonable judgment
of the Board. In the case of a termination for
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Cause as described in clause (ii), (iii) or (iv) above, the Executive shall be
given the opportunity, during the period of not less than 30 days after the
receipt of written notice from the Company that such event constitutes Cause,
to meet with the Board to defend the Executive's acts or failures to act, prior
to termination. The company may suspend the Executive's title and authority
pending such meeting, and such suspension shall not constitute "Good Reason",
as defined below. After such meeting, the Board may rule whether the subject
conduct constituted "Cause," and the Board's determination shall be conclusive
and binding.
d. "EDS" means Electronic Data Systems Corporation, a Texas
corporation.
e. "EDS COMPANY" means any Person in which EDS beneficially
owns more than 50% of the fully-diluted common stock.
f. "GOOD REASON" means (i) without the Executive's written
consent, any reduction, approved by the Board, in the amount of the Executive's
annual base salary or any adverse change, approved by the Board, in the manner
in which the Executive's opportunity for an annual bonus is determined, (ii)
any significant reduction, approved by the Board without the Executive's
written consent, in the aggregate value of the Executive's benefits provided by
contract with the Executive or generally available to all senior executives of
the Company (other than annual salary or bonus) as in effect from time to time
(unless such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company), or (iii) any significant
reduction, approved by the Board without the Executive's written consent, in
the Executive's title, duties or responsibilities; provided, however, that Good
Reason shall not exist at any time after the Executive has received written
notice from the Company that an event has occurred constituting Cause, unless
the Board, after a meeting with the Executive, determines that the noticed
event did not constitute Cause. Notwithstanding the above, the occurrence of
any of the events described above will not constitute Good Reason unless the
Executive gives the Company written notice that such event constitutes Good
Reason, and the Company thereafter fails to cure such event or events within 30
days after receipt of such notice.
g. "HICKS, MUSE" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation, its successors and assigns, and its
affiliates and its and their respective officers, directors, and employees (and
members of their respective families and trusts for the primary benefit of such
family members), collectively.
h. "HICKS, MUSE COMPANY" means any Person in which Hicks,
Muse beneficially owns more than 25% of the fully-diluted common stock or has
an unrecovered investment of $1,000,000 or more, and each Subsidiary thereof.
i. "HOLDING" means Neodata Corporation, a Delaware
corporation which is the parent of the Company, together with its successors.
2
<PAGE> 3
j. "MARKETABLE SECURITIES" means securities (i) of a class or
series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the NASDAQ National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be (or which at the date of acquisition
are legally committed to become within six months after the date of
acquisition) freely saleable in unlimited quantities by each Person acquiring
such securities to the public, either pursuant to an effective registration
statement under the Securities Act of 1933, as amended (including a current
prospectus which is available for delivery), or without the necessity of such
registration.
k. "PERSON" means any "person", within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, including a
"group" as determined thereby.
l. "PREFERRED STOCK" means the Class A Convertible Preferred
Stock, par value $0.01 per share, of Holding.
m. "SALE OF THE COMPANY" or "Sale" means the consummation of
any transaction or series of related transactions after the date hereof whereby
(i) the Company sells or otherwise transfers all or substantially all of its
assets to another Person (other than Hicks, Muse, a Hicks, Muse Company, EDS,
or an EDS Company), (ii) any Person (other than Hicks, Muse, a Hicks, Muse
Company, EDS, or an EDS Company) purchases or otherwise acquires all or
substantially all of the common stock of the Company or Holding, (iii) the
Company is merged with another corporation (a "Merger") and the holders of the
Company's fully-diluted common stock immediately prior to such Merger hold less
than 25% of the surviving corporation's fully-diluted common stock immediately
after such Merger or (iv) Holding is merged with another corporation (a
"Holding Merger") and the holders of Holding's fully-diluted common stock
immediately prior to such Holding Merger hold less than 25% of the surviving
corporation's fully-diluted common stock immediately after such Holding Merger.
n. "SERIES 2 PREFERRED" means the Class A Convertible
Preferred Stock - Series 2, par value $0.01 per share, of Holding.
o. "SUBSIDIARY" means with respect to any Person, any other
Person of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
2. SALE OF THE COMPANY.
In the event of a Sale of the Company:
a. The Executive, except for Good Reason, shall not terminate
the Executive's employment with the Company in such Executive's position with
the Company (or
3
<PAGE> 4
such other position as the Board and Executive shall mutually agree to in
writing) at the time of the Sale or for a period beginning on the date of such
Sale and ending on the date which is eighteen months following the date on
which such Sale is consummated (such period to be referred to herein as the
"Retention Period"); provided, however, if the Executive terminates the
Executive's employment relationship with the Company for Good Reason during the
Retention Period, the Executive shall be deemed to have continued the
Executive's employment with the Company for the Retention Period and the
Executive shall be entitled to the Termination Benefits (as hereinafter
defined) as set forth in Section 2c. herein.
b. On the date upon which the Sale is consummated, all
options to purchase common stock of Holding and Series 2 Preferred which have
been granted to the Executive pursuant to the Neodata Corporation amended and
Restated 1990 Executive Incentive Plan and any options and stock appreciation
rights granted to the Executive under any other plan approved by the Board
shall, to the extent not previously vested, immediately vest in full.
c. In the event the Company terminates the Executive for any
reason (other than Cause) during the Retention Period, the Executive shall be
entitled to, and the Company shall be obligated to pay, the following
termination benefits (the "Termination Benefits"), which Termination Benefits
shall be the Executive's exclusive right and remedy in respect of such
termination:
(i) The Company shall pay the Executive the Executive's
Accrued Benefits, except that, for this purpose, Accrued Benefits shall not
include any entitlement to severance under any Company severance policy
generally applicable to the Company's salaried employees, it being understood
that, if the Executive is terminated during the Retention Period, the payments
under Section 2c(ii) and Section 3 of this Agreement shall be treated as a
credit against any amount owed to the Executive under any general severance
benefit; and
(ii) The Company shall pay the Executive severance pay
equal to the Executive's then current monthly base salary, payable in
accordance with the Company's regular pay schedule, for the remainder of the
Retention Period ("Salary Continuance").
d. Notwithstanding the other provisions of this Section 2,
if, at any time during the Retention Period, (i) the Executive shall terminate
the Executive's Employment with the Company for any reason other than Good
Reason, (ii) the Company shall terminate the Executive for Cause or (iii) the
Executive shall cease to be employed by the Company by reason of death,
permanent disability (as defined in the Company's Board-approved disability
plan or policy, as in effect from time to time) or retirement (as defined in
the Company's Board-approved retirement plan or policy, as in effect from time
to time), then the Executive shall not be entitled to any Salary Continuance,
and shall only be entitled to receive from the Company (x) in the case of
clause (i) or (ii) of this sentence, the Executive's Accrued Benefit or (y) in
the case of clause (iii) of this sentence, any applicable death, disability or
retirement benefits, as the case may be, then generally provided by the Company
to its similarly situated employees.
4
<PAGE> 5
3. RETENTION BONUS.
a. In the event of a Sale of the Company that results in the
holders of Preferred Stock receiving, net of all selling, brokerage, investment
banking, and all related costs and expenses, upon the consummation of the Sale,
cash or Marketable Securities having a fair market value of at least
$125,000,000 in the aggregate, the Executive shall be entitled to a retention
bonus (the "Retention Bonus") in an amount equal to 100% of such Executive's
then-existing base salary, payable in four installments, with 25% being payable
upon consummation of the Sale, and 25% on each of the dates six months, twelve
months, and eighteen months following such sale.
b. Notwithstanding the provisions of Section 3(a) above, if
at any time prior to the termination of the Retention Period the Executive
terminates the Executive's employment for any reason other than Good Reason or
because of the Executive's death or disability, or the Company terminates the
Executive for Cause, the Executive shall forfeit the Executive's right to any
unpaid installments of the Retention Bonus which would otherwise be due under
this Agreement.
4. LIMITATION ON OBLIGATIONS OF COMPANY.
The Company's aggregate obligations under this Agreement and all
agreements with other executives of the Company which have provisions similar
to Sections 2 and 3 hereof (whether or not dated concurrently herewith) (the
"Other Retention Agreements") with respect to all Salary Continuance and
Retention Bonus payments payable thereunder shall be subject to an aggregate
maximum dollar limitation such that the Company shall not be obligated to pay
aggregate Salary Continuances and Retention Bonuses hereunder and pursuant to
the Other Retention Agreements in an aggregate amount of more than $3,000,000.
In the event the aggregate amount that the Company would be obligated to pay in
Salary Continuances and Retention Bonuses hereunder and pursuant to the Other
Retention Agreements exceeds $3,000,000, the Salary Continuances and Retention
Bonuses payable in the aggregate hereunder and thereunder shall be reduced
ratably among the Executive and the parties to the Other Retention Agreements
in accordance with the amount of the then-existing base salary of each
individual who is a party to an executive retention agreement. Notwithstanding
anything to the contrary elsewhere herein, after the first Sale of the Company,
no further Termination Benefits, Salary Continuance or Retention Bonus shall
accrue to the Executive with respect to any subsequent Sale of the Company.
Any interpretation of the provisions of this or any other provision of this
Agreement shall be made by the Board, whose decision concerning such matters
shall be conclusive.
5. EFFECTIVENESS OF PROVISIONS.
The Company's and the Executive's rights and obligations under Section 2
and 3 of this Agreement shall vest upon the occurrence of a Sale of the Company
as defined herein, and
5
<PAGE> 6
nothing in this Agreement shall be construed as conferring any obligations or
benefits upon the parties hereunder prior to any such Sale. Nothing contained
herein shall be deemed to obligate the Board or the Company to engage in, or
negotiate towards, a Sale. In the event the Executive is not employed by the
Company for any reason at the time of a Sale of the Company, the provisions of
Section 2 and Section 3 of this Agreement shall cease to be of any force and
effect and neither party hereto shall have any obligations or be entitled to
any benefits thereunder, and the remaining provisions of this Agreement,
including but not limited to Section 6 and Section 7, shall survive such
termination of employment and remain in full force and effect.
6. NON-COMPETITION COVENANT.
The Executive shall not, during the period in which the Executive is
employed by the Company and for the eighteen-month period immediately following
the last day of the Executive's employment by the Company (as such last day of
employment is reasonably determined by the Company's Board of Directors), (a)
unless the Executive's employment by the Company was terminated by the Company
without Cause, act as an officer, director, employee, partner, or agent of, or
invest in or lend money to, or own, directly or indirectly, any interest in, or
participate in the control of, any corporation, partnership, joint venture or
other business organization which is engaged in the sale of any product or
service which is sold by the Company from time to time in the future prior to
the end of the Executive's employment, or (b) solicit to accept or negotiate
with concerning or offer to, any person employed by the Company or whose
employment by the Company has ended less than 180 days prior thereto,
employment with any business entity with which Executive may become associated
in any capacity other than the Company.
7. CONFIDENTIAL INFORMATION OF THE COMPANY.
The Executive shall not, except in the performance of the Executive's
duties hereunder and for the benefit of the Company, disclose or reveal to any
unauthorized person any trade secrets or other confidential information of the
Company, Holding or their respective Subsidiaries relating to the Company,
Holding or their respective Subsidiaries or to any of the businesses operated
by them, and the Executive confirms that such trade secrets and confidential
information constitute the exclusive property of the Company, Holding or their
respective Subsidiaries, as the case may be.
8. REMEDIES UPON BREACH.
The Executive acknowledges that the remedy at law for a breach by the
Executive of the provisions of Sections 6 or 7 hereof will be inadequate.
Accordingly, in the event of the breach or threatened breach by the Executive
of any of the provisions of Sections 6 or 7 hereof, the Company, Holding or
their respective Subsidiaries, as the case may be, shall be entitled to
injunctive relief in addition to any other remedy to which it may be entitled.
6
<PAGE> 7
9. SUCCESSORS.
The Company may assign its rights under this Agreement to any successor
to all or substantially all the assets of the Company, by merger or otherwise,
and may assign or encumber this Agreement and its rights hereunder as security
for indebtedness of the Company, Holding, and their respective Subsidiaries.
The rights of Executive under this Agreement may not be assigned or encumbered
by the Executive, voluntarily or involuntarily, during the Executive's
lifetime, and any such purported assignment shall be void.
10. ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
11. AMENDMENT.
This Agreement may not be amended or modified at any time except by a
written instrument approved by the Board and executed by the Company and the
Executive.
12. WITHHOLDING.
The Company shall be entitled to withhold from amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes of charges which it is from time to time required to withhold. The
company shall be entitled to rely on an opinion of counsel if any question as
to the amount or requirement of any such withholding shall arise.
13. GOVERNING LAW.
This Agreement and the rights and obligation s hereunder shall be
governed by and construed in accordance with the laws of the State of Colorado
without regard to principles of conflicts of law of the State of Colorado or
any other jurisdiction. Any dispute arising out of this Agreement shall be
determined by arbitration in Boulder, Colorado under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
14. NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall
be deemed given when received and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid: if to the Company, c/o Hicks, Muse, Tate & Furst Incorporated, 200
Crescent Court, Suite 1600, Dallas, Texas 75201, Attention: Thomas O. Hicks
and Lawrence D. Stuart, with a copy to Weil, Gotshal & Manges, 100 Crescent
Court,
7
<PAGE> 8
Suite 1300, Dallas, Texas 75201, Attention: Mary R. Korby, Esq.; or if to the
Executive, at the address set forth below the Executive's signature line of
this Agreement; or to such other address as the party to be notified shall have
given to the other in writing.
15. NO WAIVER.
No waiver by either party at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at any time.
16. HEADINGS.
The headings herein contained are for reference only and shall not
affect the meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
NEODATA SERVICES, INC.
By: /s/ Susan L. Morse
------------------------------------
Name: Susan L. Morse
Title: Senior Vice President
Human Resources
EXECUTIVE
/s/ Nancy Talmey
-------------------------------------------
Nancy Talmey
Address:
----------------------------------
----------------------------------
8
<PAGE> 1
[NEODATA LETTERHEAD]
EXHIBIT 10.48
June 2, 1994
Mr. Nicholas Cuccaro
Dear Nick:
I am very pleased to offer you employment with Neodata Services, Inc. as Vice
President, Chief Financial Officer reporting directly to Larry Jones. You will
be headquartered at Neodata's offices in Louisville, Colorado. Our offer
includes the following:
o Annualized base salary of $180,100 payable on a bi-weekly basis. You will
receive periodic performance reviews and these will determine the timing
and amount of future salary increases.
o Annual bonus plan participation up to 30% of base salary based on
performance standards still to be determined (but linked heavily to
Neodata's financial accomplishments versus business plans). Participation
will start in 1994 business year on prorated basis.
o Participation in Neodata's Employee Incentive Plan which is our stock
option program. We will recommend you for a grant of 75,000 shares at the
next Board Meeting. These shares would be granted at the then current fair
market value (currently $2.60 per share) and would vest in one-third
installments after each year of future employment.
o A monthly automobile allowance of $575 starting the first of the month
after you join us.
o A signing bonus of $25,000 payable in quarterly installments.
o Moving and relocation assistance/reimbursements including:
- movement of household goods and possessions;
- traditional selling costs on the sale of your current residence;
- normal closing costs (excluding points) on the purchase of a home in
Colorado;
- travel expenses for you and your spouse at the time of relocation;
- two trips home monthly until your relocation actually occurs or the
end of 1994;
- rent on temporary living quarters until your relocation actually
occurs or the end of 1994;
- tax gross-up (Federal and State) on any relocation reimbursements
to the extent applicable.
<PAGE> 2
Nicholas Cuccaro
June 2, 1994
Page 2
o Given the timing of your household move to Colorado and the market
realities of the real estate market in Massachusetts, the following is
offered with the understanding that you will be making "best efforts" to
sell your home in the Boston area at no loss. In the event that is not
possible, we will pay the difference between the purchase price and the
selling price. It will be in the company's sole discretion to ensure that
this selling price is the market price. Tax gross-up (Federal and State)
will be provided on this payment to the extent applicable.
o In the event your employment is terminated for any of the reasons set forth
in Neodata's Severance Policy, you will paid a minimum of six (6) months of
salary continuation payable bi-weekly and calculated based upon your annual
base salary in effect at that time less any taxes to be withheld as
required by law. If you do not find suitable alternative employment within
that six (6) month period, severance payments will continue for an
additional period equal to the lesser of six (6) months or until suitable
alternative employment commences.
o This offer is contingent upon pre-employment drug screening and completion
of the I-9 and relocation form.
Please indicate your acceptance of this offer by signing and returning a copy
of this letter to my attention by June 3, 1994. We look forward to your start
on June 21, 1994.
Sincerely,
/s/ Susan L. Morse
- -------------------------------------
Susan L. Morse
Vice President
Human Resources
AGREED AND ACCEPTED:
/s/ Nicholas Cuccaro /s/6-2-94
- ------------------------------------- ---------------------
Nicholas Cuccaro Date
cc: L. Jones
<PAGE> 1
EXHIBIT 10.49
[NEODATA LETTERHEAD]
March 15, 1994
Ms. Francie Anhut
Dear Francie:
I am very pleased to offer you employment with Neodata Services, Inc. as Sr.
Vice President, Sales and Marketing reporting directly to Larry Jones. You
will be headquartered at Neodata's offices in Louisville, Colorado. Our offer
includes the following:
O Annualized base salary of $175,000 payable on a bi-weekly basis. You
will receive periodic performance reviews and these will determine the
timing and amount of future salary increases.
O Annual bonus plan participation starting in 1994 business year up to
45% of base salary based on performance standards still to be
determined (but linked heavily to Neodata's financial accomplishments
versus business plans).
O Participation in Neodata's Employee Incentive Plan which is our stock
option program. We will recommend you for a grant of 60,000 shares at
the next Board Meeting. These shares would be granted at the then
current fair market value (currently $2.60 per share) and would vest
in one-third installments after each year of future employment.
O A monthly automobile allowance of $575 starting the first of the
month after you join us.
O Moving and relocation assistance/reimbursements including:
- movement of household goods and possessions;
- traditional selling costs on the sale of your current residence;
- normal closing costs on the purchase of a home in Colorado;
- you and your spouse's travel expenses at the time of relocation;
- bridge loan;
- one trip home monthly for business, for yourself and for your
spouse until the relocation actually occurs or the end of 1994;
- temporary living expenses through the end of 1994;
- tax gross-up (Federal and State) on any of the above items to
the extent applicable.
<PAGE> 2
Francie Anhut
March 15, 1994
Page 2
O You will be eligible for three (3) weeks vacation.
O If you are terminated for any reason other than violation of code of
conduct during the period of one year following your relocation to
Boulder, you will receive severance for one (1) year equal to one
year's base salary.
O This offer is contingent upon pre-employment drug screening and
completion of the I-9 form.
Please indicate your acceptance of this offer by signing and returning a copy
of this letter to my attention.
Sincerely,
/s/ SUSAN L. MORSE
- ----------------------------
Susan L. Morse
Vice President
Human Resources
ACCEPTED:
/s/ FRANCIE ANHUT 3/15/94
- ---------------------------- ----------------------
Francie Anhut Date
<PAGE> 1
EXHIBIT 10.50
NEODATA
Internal Memorandum
To: Ben Gill
From: Sue Morse
Date: May 23, 1996
Subject: Your Assignment
cc: Larry Jones
- --------------------------------------------------------------------------------
This letter is to summarize your conversations with Larry Jones and myself
regarding your future employment at Neodata.
Together we understand that the position you now hold as Senior Vice President
Database Marketing Division will be eliminated as a result of our recent
industry realignment. We are interested in determining other capacities in
which you could serve, as you are desirous of remaining with the organization.
While we require some time to work out final details, we have an understanding
of what is required in the next six months, and we would like to provide some
protection to you and your family during this transition.
1. You have agreed to remain with us through December 31, 1996. During that
period you will complete the industry realignment of Database Marketing.
2. Should you leave the Company in calendar 1997, the Company will provide you
with up to twelve (12) months salary continuation based on your then annual
base salary (excluding auto allowance, bonus eligibility, and applicable
taxes). Salary continuation would be paid on a payroll basis and would
effectively cease when you secured full-time employment elsewhere. If you
leave prior to January 1, 1997, no salary continuance would be paid.
3. Should the Company terminate you without cause, the Company will provide
you with up to six (6) months salary continuance based on your then annual
base salary (excluding auto allowance, bonus eligibility, and applicable
taxes).
<PAGE> 2
In the event you have not secured employment within the first six (6)
months of your salary continuation period, you will be eligible for up to
an additional six (6) months of salary continuation, calculated and payable
as described above. Such salary continuation during this additional six
month period will cease immediately upon securing employment.
4. Reasonable outplacement benefits would be provided to you. Medical
benefits and life insurance would be effective during the salary
continuation period.
5. In consideration of the above you agree to a non-compete for a period of
twelve (12) months after termination and to waiver certain rights
pertaining to legal actions. If termination occurs a more detailed
agreement would be provided.
Ben we are very pleased to work with you on this issue and look forward to your
continued participation in Neodata's success.
<PAGE> 1
EXHIBIT 10.51
[NEODATA LETTERHEAD]
Mr. Kevin Heery,
14 August 1995
Dear Kevin,
Following our recent meetings and discussions, I write to offer you the
position of Managing Director of Neodata Services Limited upon the terms and
conditions set out below.
It is a condition of this offer of employment that you are certified as fit for
work following full medical examination carried out by the Company's nominated
Medical Doctor. Subject to such medical certification, your employment will
commence on the 18th of September 1995. The first three months of your
employment will be probationary, during which period the Company will assess
your performance and suitability to the position. Both you and the Company
shall have the right for any reason to terminate your employment on one month's
notice in writing (or, in the case of the Company, one month's salary in lieu
of notice) at any time during or at the end of this probationary period.
Unless your employment is terminated during this probationary period, it is
agreed that you shall be afforded the protection of the Unfair Dismissals Acts,
1977-93 thereafter as if your employment by the Company had continued for
twelve months ending on the last day of the probationary period.
The other terms and conditions of this offer of employment are as follows:
1.00 REMUNERATION
1.01 Your basic salary shall be IRL.65,000.00 per annum payable
monthly in arrears on the last day of each month. Your salary
for September 1995 will be apportioned on a daily basis (as it
will in the event that your employment ceases other than on
the first day of any month).
1.02 Subject to your employment commencing on the 18th of September
1995 and continuing beyond the 31st of December 1995, you will
become eligible under Neodata Services, Inc's executive bonus
scheme to be paid a bonus of IRL.4,000.00 on the 31st of
December 1995.
<PAGE> 2
/2 Continued
1.03 Subject to your employment with the Company continuing beyond
this date, you shall, with effect from the 1st of January
1996, become eligible to participate in Neodata Services,
Inc's corporate bonus scheme which will make you eligible for
a target annual bonus of 20% of your basic salary subject to
achievement by you, primarily, and also by Neodata Services,
Inc of annual targets to be set on an annual basis by the
Chief Executive Officer of Neodata Services, Inc.
1.04 Neodata Services Inc. is currently reviewing its corporate
stock option scheme for executives. Once the terms of this
scheme are settled and introduced by Neodata Services Inc.,
you will become eligible to participate in this scheme at a
level which will equate to the participation entitlements of
peer executives within Neodata.
1.05 Commencing 1st of January 1996 the Company will, subject to
your contributing not less than 3% of your monthly basic
salary to the Company's defined Contribution Pension Scheme,
contribute a further 6.75% of your basic salary on a monthly
basis to this Pension scheme for your benefit on the last day
of each month subject to your employment continuing through
each such date.
1.06 The Company shall pay, on a monthly basis, the premiums to
continue VHI membership (with Hospital Plan D) for you and
your immediate family i.e. spouse and minor children.
1.07 You will be obliged to purchase and maintain at your own
expense a motor vehicle reasonably commensurate with your
position as Managing Director of the Company. The Company
will reimburse to you travel expenses monthly as agreed.
1.08 The Company shall reimburse to you on a monthly basis all
expenses wholly and necessarily incurred by you in connection
with your employment with the Company subject to production of
appropriate vouchers.
1.09 Your entire remuneration package shall be subject to review
entirely at the discretion of the Board of Directors of the
Company and such reviews shall be generally based on the
financial performance of the Company and on your overall
performance as Managing Director. Your remuneration package
will not necessarily be revised on an annual basis.
1.10 You will, for the duration of your employment with the Company,
be entitled to both the death in service benefits (currently 4
times annual basic salary) and permanent disability benefits
(currently 75% of basic salary payable after 6 months
disability) available under the Company's existing scheme for
employees.
2.00 POWERS AND DUTIES
2.01 While your overall day to day responsibilities shall be to
manage the businesses of Neodata Services Limited, your powers
and duties as Managing Director shall
<PAGE> 3
/3 Continued
at all times be subject to and governed by the decisions from
time to time of the Board of Directors of the Company who may
impose such restrictions from time to time as they deem
appropriate and to whom you shall be answerable to in relation
to the exercise of all your powers and duties. You shall be
obliged to keep the members of the Board properly and fully
informed of your managing to the Company and provide such
explanations as the Board may reasonably require.
2.02 During the continuance of your employment with the Company you
shall be obliged to devote the whole of your time, attention,
skill and ability to the Company's businesses and use your
best endeavours to promote the businesses and welfare of the
Company.
3.00 HOLIDAYS
3.01 With effect from the 1st day of January 1996 you shall be
entitled to 20 working days holidays (exclusive of all Bank
and other Public holidays) in each year to be taken at such
times as are reasonably convenient with regard to the
requirements of the Company's business in your position as
Managing Director.
4.00 OTHER TERMS AND CONDITIONS
4.01 Your employment by the Company shall be subject to the terms
and conditions set out in the Schedule attached hereto which
govern such matters as confidentiality, restraint of trade,
sickness and termination provisions and other normal
employment terms.
I trust that this offer of employment is acceptable to you. If so, please
indicate your acceptance of this offer by signing, dating and returning to me
the attached copy of this letter by no later than the 24th day of August 1995.
Yours sincerely,
/s/ A. LAURENCE JONES
- ------------------------------
A. LAURENCE JONES for
Neodata Services Limited
To: Neodata Services Limited
I, Kevin Heery, hereby accept your offer of employment on the terms set out
above.
Dated this 24th day of August 1995.
Signed: /s/ KEVIN HEERY
------------------------------
KEVIN HEERY
<PAGE> 4
SCHEDULE
1.00 CONFIDENTIALITY & RESTRAINT OF TRADE
1.01 CONFIDENTIAL INFORMATION: You shall not except as authorised
or required by your duties reveal to any person, persons or
company any of the trade secrets, secret or confidential
operations, processes or dealings or any information
concerning the organisation, business, finances, transactions
or affairs of the Company which may come to our knowledge
during the period of your employment hereunder and shall keep
with complete secrecy all confidential information entrusted
to you and shall not use or attempt to use any such
information in any manner which may injure or cause loss
either directly or indirectly to the Company (or any part
thereof) or may be likely so to do. This restriction shall
continue to apply after the termination of your employment
without limit in point of time but shall cease to apply to
information or knowledge which may reasonably be said to have
come into the public domain other than through a breach of
this covenant by you.
1.02 NOTES: You shall not during the continuance of your employment
make, otherwise than for the benefit of the Company, any notes
or memoranda (on any form of medium whatsoever) relating to
any matter within the scope of the business of the Company or
concerning any of the dealings or affairs of the Company nor
shall you either during the continuance of your employment or
afterwards use or permit to be used any such notes or
memoranda otherwise than for the benefit of the Company, it
being the intention of the parties hereto that all such notes
or memoranda made by you shall be the property of the Company
and (together with all keys obtained by you pursuant to your
employment) left at its registered office upon the termination
of your employment.
1.03 RESTRAINT OF TRADE: You shall not for a period of 6 months
after the termination of your employment hereunder, howsoever
arising (and whether or not such termination arises due to a
default on your part or arises simply on the expiry of any
contract of employment with the Company), except with the
prior consent in writing of the Company (such consent to be
withheld only as is reasonably necessary to protect the
legitimate interests of the Business or the Company):
(a) be directly or indirectly engaged concerned
or interested in any capacity whether as Director, Principal,
Agent, Partner, Consultant, Advisor, Employee or otherwise in
any business whatsoever which is or could reasonably
considered to be competitive with the businesses then carried
on by the Company PROVIDED HOWEVER that this provision shall
not restrain you from engaging in or accepting employment with
any business concern where your duties or work shall relate to
services goods or materials of a kind or nature with which you
were not concerned to a material extent during the period of
your employment hereunder; and.
(b) directly or indirectly (and whether on your
own behalf or on behalf of any other business concern,
persons, partnership, firm, company or any other body which is
or could reasonably be considered to be in a business
competitive
<PAGE> 5
with that carried on by the Company):
(i) canvas solicit or approach
or cause to be canvassed or
solicited or approached for
contracts or orders in
respect of services provided
or goods dealt in by the
Company, any person or
persons who at the date of
the termination of your
employment were negotiating
with the Company for the
supply of services or goods
or within a two year period
prior to such date is or was
a client or customer of the
Company or was in the habit
of dealing with the Company;
(ii) interfere or seek to
interfere or take such steps
as may interfere with the
continuance of supplies to
the Company (or the terms
relating to such supplies)
from any suppliers who have
been supplying components
materials or services to the
Company at any time during
the course of your
employment; or
(iii) solicit or entice or
endeavour to solicit or
entice away from the Company
any person employed by the
Company in any capacity at
the date of such termination;
2.00 INCAPACITY
2.01 If you shall at any time during the course of your employment
become incapacitated or be prevented by illness, injury,
accident or any other circumstance whatsoever from properly
performing and discharging in full your duties hereunder you
shall report this fact forthwith to the chairman of the
Company and if you are so prevented for ten or more
consecutive days you shall provide to the chairman a medical
practitioner's certificate on the eleventh day and weekly
thereafter at the request of the Board of Directors of the
Company ("the Board").
2.02 SICK PAY
If you shall be unable to perform your duties hereunder due to
any circumstances which have been duly certified in accordance
with the provisions of 2.01 hereof you shall be paid your full
remuneration hereunder for the first 6 months and thereafter
such remuneration (if any) as the Board shall at its sole
discretion from time to time allow PROVIDED HOWEVER that there
shall be deducted from or set off against such remuneration
any Statutory Sick Pay to which you are entitled pursuant to
Social Welfare Legislation and other benefits recoverable by
you arising out of such incapacity.
3.00 TERMINATION
3.01 AUTOMATIC TERMINATION
Your employment hereunder shall automatically terminate
without prior notice to you:-
<PAGE> 6
(a) if you become prohibited or prevented by law from
carrying out the duties delegated to you by the
Company, or
(b) if the Company shall go into liquidation (otherwise
than for the purposes of reconstruction or
amalgamation), or
(c) on your death.
3.02 IMMEDIATE DISMISSAL
The Company may by notice immediately terminate your
employment if at any time hereafter you shall:-
(a) commit any act of gross misconduct gross default or
wilful neglect or commit any material breach or
continue (after written warning) any other breach or
non-observance of any of your duties or obligations
under this Agreement, or
(b) be guilty of any conduct which in the reasonable
opinion of the Board brings the Company into
disrepute, or
(c) be convicted of any criminal offence other than an
offence which in the reasonable opinion of the Board
does not affect your position as Managing Director of
the Company, or
(d) commit any serious or repeated acts of dishonesty
relating to the Company or any of its employees or
otherwise, or
(e) becomes bankrupt.
3.03 DISMISSAL ON SHORT NOTICE
The Company may (notwithstanding the terms of paragraph 2.00
hereof), at any time while you are incapacitated by any
circumstance from performing your duties under this Agreement
and you have been so incapacitated for a period or periods
aggregating 180 working days in any 12 month period, terminate
your employment by service of not less than three months
notice in writing PROVIDED HOWEVER that the Company shall
withdraw any such notice if during the currency of the notice
you return to full time duty and provide a Medical
Practitioner's Certificate which indicates to the satisfaction
of the Board that you have fully recovered your health and
that no recurrence of your incapacity can reasonably be
anticipated.
3.04 In order to investigate any complaint of misconduct against
you the Company shall be entitled to suspend you on full pay
for so long as may be necessary to carry out a proper
investigation of such complaint and hold any disciplinary
hearing that may be necessary or that the Board may require.
3.05 On serving notice for any reason to terminate your employment
the Company
<PAGE> 7
shall be entitled to pay to you your remuneration (at the rate
then current) for the unexpired portion of the duration of
this Agreement whereupon your powers and duties shall be
immediately terminated.
3.06 On the termination of your employment for whatever reason you
shall at the request of the Company resign from all
appointments or offices which you hold as nominee or
representative of the Company and in the event that you refuse
so to do having been so requested, you hereby appoint the
Company to be your Power of Attorney and in your name and on
your behalf to effect such resignation. The parties hereto
acknowledge that such resignations shall be without prejudice
to any claims which either party may have against the other
arising out of this Agreement.
3.07 DISPOSAL OF THE COMPANY OR ITS BUSINESS
In the event that, during the continuance of your employment
with the Company, the Company is sold by Neodata Services,
Inc. to an unconnected third party or in the event that the
business of the Company (or a substantial part thereof) is
disposed of by the Company to an unconnected third party then
in so far as your employment with the Company (or the business
disposed of) does not continue for a period of twelve
months following such disposal, the Company agrees to pay to
you such sum which will equate to the shortfall in the annual
basic salary which the Company would have paid to you in the
twelve months immediately following the date of such disposal
had such disposal not occurred PROVIDED HOWEVER that no such
payment shall be made to you if the disposal is to a business
or entity in which you have a proprietory or equity interest.
The Company agrees that it shall review the sum payable to you
pursuant to this clause in 4 years time (in the light of
equivalent payments being made in Ireland at such time to
persons in positions such as yours) should your employment
with the Company continue beyond this date.
3.08 REDUNDANCY ENTITLEMENT
In the event of your being made redundant by the Company, the
Company agrees to pay you a sum equal to your annual basic
salary applicable on the date of such redundancy. The Company
agrees that it shall review the sum payable to you pursuant to
this clause in 4 years time (in the light of equivalent
payments being made in Ireland at such time to persons in
positions such as yours) should your employment with the
Company continue beyond this date.
3.09 In the event of your employment with the Company ceasing for
any reason other than default of the terms of employment by
you, the Company agrees to make available to you all
appropriate administrative and secretarial facilities as you
may reasonably require for a reasonable period of time.
3.10 You shall be obliged to serve on the Board not less than 3O
days notice in writing of your intention to resign your
position or terminate your employment with the Company.
<PAGE> 8
4.00 GENERAL PROVISIONS
4.01 SURVIVAL OF OBLIGATIONS
The expiration or determination of this Agreement howsoever
arising shall not affect such of the provisions hereof as are
expressed or intended to operate or have effect thereafter and
shall be without prejudice to any right of action already
accrued to either party in respect of any breach of this
Agreement by the other party.
4.02 WAIVER
A waiver by either party of any breach by the other party of
any of the terms provisions or conditions of this Agreement or
the acquiescence of such party in any act (whether of
commission or omission) which but for such acquiescence would
be a breach as aforesaid shall not constitute a general waiver
of such term provision or condition or of any subsequent act
contrary thereto.
4.03 SEVERANCE
In the event that any covenant or provision herein shall be
determined to be void or unenforceable in whole or in part for
any reason whatsoever such unenforceability or invalidity
shall not affect the enforceability or validity of the
remaining covenants or provisions or parts thereof contained
in this Agreement and such void or unenforceable covenants or
provisions shall be deemed to be severable from any other
covenants or provisions or parts thereof herein contained.
The parties hereto agree that the covenants set out herein are
separate and severable and enforceable accordingly and whilst
the parties acknowledge the reasonableness of same they
further acknowledge that certain of the covenants are of such
a nature that they may be invalid because of changing
circumstances or other unforeseen reasons and accordingly if
any of the covenants shall be adjudged to be void or
ineffective for whatever reason but would be adjudged to be
valid or effective if part of the wording thereof were deleted
or the periods thereof reduced or the area thereof reduced in
scope, then such covenants shall apply with such modifications
as may be necessary to make them valid and effective.
4.04 STATUTORY NOTICE
The provisions of this Agreement set out the terms of your
employment with the Company and accordingly you hereby agree
with the Company that the provisions of this Agreement furnish
to you sufficient particulars of your employment pursuant to
the obligation of the Company under Section 9(5) of the
Minimum Notice and Terms of Employment Act, 1973.
4.05 NOTICES
<PAGE> 9
Any notice or other communication whether required or
permitted to be given hereunder shall be given in writing and
shall be deemed to have been duly given if delivered by hand
against receipt of the addressee or his duly authorised agent
if transmitted by telefax or sent by prepaid registered post
addressed to the party to whom such notice is to be given at
the address for such party first herein written (or such other
address as such party may from time to time designate in
writing to the other party hereto). Any such notice shall be
deemed to have been duly given if delivered by hand at the
time of delivery if transmitted by telex at the time of
transmission and if sent by prepaid registered post as
aforesaid forty eight hours after the same shall have been
posted.
4.06 ENTIRE AGREEMENT
This Agreement embodies the entire agreement and understanding
between the Company and you and is in substitution for any
previous offers of employment made by the Company to you or
agreements made between the Company and you and any such
offers or agreements are hereby deemed to have been withdrawn
or terminated by mutual consent as and from the date hereof
and all rights arising thereunder hereby deemed to have been
waived.
4.07 HEADINGS
The headings in this Agreement are for convenience of
reference only and shall not be considered a part of or affect
the construction or interpretation of this Agreement.
4.08 INDUCEMENTS:
Save as may be from time to time authorised in writing by the
Board, you shall not receive or obtain directly or indirectly
any discount, rebate, commission or other inducement in
respect of any sale or purchase of any goods, services
effected or other business transacted (whether or not by you)
by or on behalf of the Company and, if you (or any other party
on your behalf or in which you are interested) shall so obtain
or receive any such discount rebate commission or inducement,
you shall account to the Company for the amount so obtained or
received.
4.09 PLACE OF WORK:
You shall perform your duties at the offices of the Company or
such other places of business as the Board may from time to
time require and your duties and responsibilities to the
Company are likely to require you to travel internationally on
a regular basis.
4.10 HOURS OF WORK:
You will be obliged to conform to such hours of work as are
normal in the context of your position in the Company and may
be requisite to fully discharge your responsibilities.
<PAGE> 1
EXHIBIT 10.52
[NEODATA LETTERHEAD]
September 23, 1993
Ms. Susan L. Morse
Dear Sue;
I am very pleased to offer you employment with Neodata Services, Inc. as Vice
President - Human Resources reporting directly to Larry Jones, Neodata's
President and Chief Executive Officer. You will be headquartered at Neodata's
offices in Louisville, Colorado and responsible for the Human Resources
function on a corporate-wide basis. As we have discussed, I will be available
to assist you, as needed, on a variety of issues both during the initial phases
of your employment and on an ongoing basis.
Our offer also includes the following:
o An annual base salary of $120,000 payable on a bi-weekly basis. You
will receive periodic performance reviews and those will determine the
timing and amount of future salary increases.
o Annual bonus plan participation starting in the 1994 business year up
to 30% of base salary based on performance standards still to be
determined (but linked heavily to Neodata's financial accomplishments
versus business plans).
o A signing bonus of $15,000 payable within ten (10) calendar days of
your start date with the Company.
o A monthly automobile allowance of $575 starting the first of the month
after you join us.
o Participation in all of the Company's group benefit programs effective
on your employment date. You may join the 401(K) Plan at the start of
the calendar quarter (January 1, 1995) after your first anniversary
with the Company.
o Participation in Neodata's Employee Incentive Plan which is an
incentive stock option arrangement. We will recommend you for a grant
of 30,000 shares at the Next Board Meeting. These shares would be
granted at the then current fair market value (currently $2.60 per
share) and would rest in one-third installments after each year of
future employment.
<PAGE> 2
Susan L. Morse
September 23, 1993
Page 2
o Moving and relocation assistance/reimbursements including:
- movement of household goods and possessions;
- traditional closing costs on the sale of your current residence;
- normal closing costs on the purchase of a home in Colorado;
- use of a Company leased, furnished apartment in the Boulder area
through June 1994;
- your family's travel expenses at the time they relocate;
- one trip home monthly until the relocation actually occurs;
- tax gross-ups (Federal and State) on any of the above items to the
extent applicable.
Please indicate your acceptance of this offer by signing and returning a copy
of this letter to my attention. We would also appreciate your best guess on a
starting date in Boulder for planning purposes.
I am looking forward to seeing you on September 27th at Larry's meeting. We
have a very challenging situation to work through in the next few years, but I
think you will find your association at Neodata to be very rewarding both in a
personal and financial sense. I am personally delighted to have you as a
general management partner.
Sincerely,
/s/ HENRY S. LAGER
- ------------------------------
Henry S. Lager
cc: A. Laurence Jones
ACCEPTED:
/s/SUSAN L. MORSE
- ------------------------------
Susan L. Morse
<PAGE> 1
EXHIBIT 10.53
[NEODATA LETTERHEAD]
February 25, 1992
Mr. Richard L. Rosy
Dear Richard:
On behalf of Neodata Services, Inc. it is a pleasure to offer you the position
of Senior Vice President - Sales reporting to me commencing March 5, 1992.
As per our agreement your compensation will be $135,000 per year payable on a
semi-month basis on the 15th and the last day of the month.
You will participate in the annual management bonus plan which will yield 30%
of base salary based on the achievement of defined objectives in the areas of
operating income (EBITDA), expense budget and individual goals. For the 1992
year your bonus will be pro-rated for the period of employment.
Subject to the final approval of the board and in accordance with the terms of
the stock option plan you will be granted the option to purchase 30,000 shares
of stock at a price of $2.50 per share vesting over a 3 year period. The
option to purchase stock will vest at the rate of 10,000 shares per year. In
addition, you will be granted the right to purchase 20,000 shares of stock
immediately at the rate of $2.50 per share. The shares will be subject to a
buy back option if you leave the employment of the company.
You will be paid a lump sum of $25,000 to cover all expenses which will be
incurred by you in relocating to the Dallas area where the position will be
based.
As an employee of Neodata, you will be eligible for our benefits program
effective the first day of employment. Our benefit program is as follows:
a. Non-contributory life insurance plan at the rate twice base salary
(limited to $250,000) with the option to purchase additional life
insurance coverage.
<PAGE> 2
Richard L. Rosy
Page 2
b. Non-contributory accidental death and dismemberment plan yielding
twice base salary (limited to $250,000) in the event of death with
the option to purchase additional coverage.
c. Non-contributory long term disability plan.
d. Medical and dental plans which are contributory.
e. You will be able to participate in our retirement savings (401K)
program on January 1, 1993.
We look forward to you joining our company and to a mutually beneficial working
relationship. Please sign and return one copy of this letter to my attention.
Sincerely,
/s/ LARRY W. CARTER
- ------------------------------
Larry W. Carter
President
LWC:jbn
I accept the offer of employment as Senior Vice President Sales
subject to the terms and conditions of this letter.
/s/ RICHARD L. ROSY 3-5-92
- ------------------------------ ----------------
Richard L. Rosy Date
<PAGE> 1
[NEODATA LETTERHEAD]
EXHIBIT 10.54
December 20, 1994
Nancy Talmey
Dear Nancy:
Congratulations on your promotion!
We are very pleased you have accepted your new assignment. Effective December
1, 1994, you will be Senior Vice President, Subscription Fulfillment Operation
reporting directly to Larry Jones.
Our offer includes the following:
o Annualized salary of $150,000 payable on a bi-weekly basis. You will
receive periodic performance reviews and these will determine the timing and
amount of future salary increases.
o Annual bonus plan participation up to 40% of base salary based on
performance standards still to be determined (but linked heavily to
Neodata's financial accomplishments versus business plans).
o In the event your employment is terminated for any of the reasons set forth
in Neodata's Severance Policy, you will be paid a minimum of three (3)
months of salary continuation payable bi-weekly and calculated based upon
your annual base salary in effect at that time less any taxes to be withheld
as required by law. If you do not find suitable alternative employment
within that three (3) month period, severance payments will continue for an
additional period equal to the lesser of three (3) months or until suitable
alternative employment commences.
o In exchange for the above consideration, you agree to not compete with the
Company in any fashion for six (6) months following your termination from
the Company without our written approval. Should we eventually sever you,
we will provide you with an agreement which will specify more fully the
non-compete and confidentiality arrangements.
Please indicate your acceptance of this offer by signing and returning a copy
of this letter to my attention by December 29, 1994.
Sincerely,
/s/ Susan L. Morse
- ------------------------------------
Susan L. Morse
Vice President
Human Resources
AGREED AND ACCEPTED:
/s/ Nancy Talmey /s/ 12-29-94
- ---------------------------- ------------
Nancy Talmey Date
cc: A. Laurence Jones
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<PERIOD-START> JAN-01-1996
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0
0
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