<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Act of
1934 [Fee Required]
For the fiscal year ended December 31, 1996 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required] For the transition period from _________ to ________
Commission file number: 0-19598
AMERICAN BUSINESS INFORMATION, INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0751545
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5711 South 86th Circle, Omaha, Nebraska 68127
(Address of principal executive offices)
Registrant's telephone number, including area code: (402) 593-4500
__________________________________________
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0025 par value
__________________________________________
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]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
-----
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on March 7,
1997 as reported on the NASDAQ National Market System, was approximately
$203,975,000. Shares of Common Stock held by each officer and director and by
each person who owns 5% of more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of March 7, 1997 registrant had outstanding 24,479,007 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 23, 1997, which will be filed within 120 days of
the end of fiscal year 1996, is incorporated into Part III hereof by reference.
<PAGE>
PART I
ITEM 1. BUSINESS.
--------
The Company is a leading provider of business-to-business marketing
information which it supplies from its proprietary database containing
information on approximately 10 million businesses in the United States and 1
million businesses in Canada. The increased cost of marketing efforts has caused
many businesses to seek more efficient methods to identify and target potential
customers. These efforts have been hindered by the lack of comprehensive,
accurate and affordable information on such prospects from a single source. To
address this business opportunity, the Company has made substantial investments
to create, maintain and enhance its database. In 1996, over 500,000 customers
purchased the Company's products and services for market analysis, customer
profile analysis, sales lead generation, direct mail and telemarketing
campaigns, competitive analysis, sales territory assignment, business reference
and other purposes.
The Company believes its business information database is one of the most
comprehensive and accurate in the United States. The Company's database is
compiled and updated annually from approximately 5,000 yellow page telephone
directories as well as other publicly available sources including business white
pages directories, annual reports and other SEC information, press releases,
business magazines, newsletters and top newspapers. The Company then places
telephone calls to each business to verify the information and capture or verify
additional information such as: name of owner or manager, number of employees,
and primary line of business. The Company makes approximately 15 million of
these calls per year. From this database, the Company extracts, manipulates and
sorts information to create multiple products and services, such as prospect
lists, mailing labels, 3x5 sales lead cards, diskettes, magnetic tapes, CD-ROMs,
business directories, maps, market research services, internet/on-line
information services and 800-number telephone and fax information services.
Information from the database can be readily customized to meet the user's
specific marketing needs.
The Company believes its future growth will be a combination of internal
growth and growth through acquisitions. During the second half of 1996, the
Company completed 4 strategic acquisitions including the acquisition of
Phonedisc, and in the first quarter of 1997 completed the acquisition of
Database America Companies, Inc.
BACKGROUND
The use of direct marketing by businesses to target and communicate with
the customers most likely to buy their products has increased rapidly in the
last decade. In the years prior to and during the 1970's, the costs associated
with selling products and services on a mass market basis were relatively low,
while the costs of computer processing and data management were prohibitive for
all but the largest businesses. In the 1980's, the cost of computer technology
declined while marketing and selling costs increased dramatically. Businesses
have responded to these trends by increasing the use of computer technology to
collect information about prospective customers thereby allowing them to use
direct marketing techniques to target potential customers more precisely and
efficiently. In addition, the declining cost of computer resources has afforded
businesses, particularly smaller businesses, the opportunity to develop and
implement more sophisticated marketing programs in-house.
Business-to-business marketing has created a substantial need for accurate
and timely information to identify potential purchasers from the millions of
businesses in the United States and Canada. Such information may be used in all
aspects of business marketing: market sizing, distribution channel selection
and balancing, sales lead generation, territorial resource allocation, and
customer prioritization and qualification. In the absence of this information,
the selling process often results in prohibitively high expense per sales
contact or lost revenues from unidentified prospects.
-2-
<PAGE>
These factors have created increasing demand for lower cost information
regarding the identity, location, and status of small businesses. For many small
businesses with limited resources, the purchase of business information can be
one of their most fundamental marketing tools.
Despite this need, comprehensive information from any single source was not
readily available. Moreover, the available information was often inaccurate due
to significant and frequent changes in the ownership, size, address, phone
number, or operating status of businesses. Publicly available sources including
the yellow pages, white pages, association membership lists and other available
resources are often fragmented by design and are therefore not comprehensive.
The Company was formed in 1972 in response to this market opportunity and
has made substantial investments to create and maintain its database. Since its
founding, the Company has continuously expanded the breadth and depth of its
database and developed new products and services. The Company has also expanded
its channels of distribution to include direct mail, telemarketing, internet,
mass merchandisers, direct sales through local field sales offices, licensees,
and sales through value-added resellers such as advertising agencies and list
brokers. Since mid-1996, the Company has completed five acquisitions of other
businesses including, among other acquisitions, Digital Directory Assistance,
Inc. and DBA Holdings, Inc., through merger of assets and liability acquisitions
for which the Company has paid an aggregate of approximately $62.8 million in
cash and issued approximately 3,628,000 shares of its common stock. Effective in
August 1996, the Company acquired certain of the assets and liabilities of
Digital Directory Assistance, Inc., a Maryland corporation, for approximately
$17.145 million in cash, promissory notes, and shares of the Company's Common
Stock. In February 1997, the Company acquired certain of the assets and
liabilities of DBA Holdings, Inc., for approximately $100 million in cash and
stock. See also Notes 3 and 17 of the Notes to Consolidated Financial
Statements. The Company believes the comprehensiveness and accuracy of its
database combined with the breadth of its product offerings present significant
barriers to entry to potential competitors.
STRATEGY
The Company's strategy is to focus on developing and marketing business
information products and services utilizing its copyrighted database. The
Company's strategy comprises the following elements:
Comprehensive, accurate database. The Company has invested significant
--------------------------------
resources to develop what the Company believes is one of the most comprehensive
and accurate business information databases available in the United States. The
Company continues to devote significant resources to increase the accuracy of
its database and to enhance its content.
Product delivery. Based on the customer requirements for timeliness, cost
----------------
and convenience, the Company extracts, manipulates and sorts information from
its database to create products and services which are available in various
formats. New product offerings are designed to leverage the Company's database,
to focus on increasing the efficiency and effectiveness of a customer's
marketing program and to ease access to the information.
Affordability. The Company has emphasized pricing and packaging options
-------------
that are generally affordable to even the smallest businesses. The Company is
able to achieve attractive margins at low price points based on the low variable
costs associated with incremental sales of its information and the overall
efficiency of its operations.
Focus on small business customers. The Company believes its combination of
---------------------------------
reliable information, broad product offerings, affordable pricing and a high
level of service are particularly attractive to small businesses. The Company
believes these factors have enabled it to maintain a leadership position within
the small business segment of the business information market and to achieve
high levels of repeat orders.
-3-
<PAGE>
Multiple distribution channels. The Company employs a multi-channel
------------------------------
distribution strategy. Historically, the Company has relied primarily on direct
mail to develop its customer base. In recent years, the Company has made
important acquisitions to expand its distribution capabilities with national
accounts, sales through third party resellers and direct sales. The Company
intends to continue to expand its marketing efforts in each of these channels.
In 1995, the Company began to re-evaluate its field sales office activities, and
expects direct selling activities to become a more important component of its
overall distribution strategy over time. The Company currently has 11 field
sales offices which employ approximately 100 employees. In addition, the Company
seeks to establish strategic alliances, and may seek to make acquisitions, to
expand its distribution channels and customer base to further leverage the
Company's investment in its database.
Strategic Alliances. The Company believes that a significant opportunity
-------------------
exists to market additional business information that is not available from the
Company's database. An example of this relationship is the Company's agreement
with Experian, formerly TRW Business Credit Services ("TRW"), whereby the
Company offers business credit profiles to its customers to assist them in their
credit management decisions. Other possibilities include national information
services and additional databases.
Providing a total customer solution. The Company is looking for
opportunities to acquire businesses which will enhance its ability to provide
additional services to its customer base. In 1996 the Company completed four
such strategic acquisitions, which provide additional database information and
customer solutions. In addition, the Company's acquisition of Database America
Companies, Inc. during the first quarter of 1997 enhanced the Company's ability
to provide data processing services to its Fortune 1000 customers, and to
provide proprietary information on consumers.
THE COMPANY'S DATABASE
The Company's products and services are created from the information
contained in its database. Due to the formation of new businesses, entities
going out of business and changes among existing businesses, the database must
be continually maintained to keep the information up-to-date and accurate. The
Company believes it has developed one of the most comprehensive and accurate
databases of business information in the United States. This proprietary,
copyrighted database contains information on approximately 10 million U.S.
businesses and 1 million Canadian businesses. Information in the database is
compiled in two phases.
First, the Company inputs from over 5,000 yellow page telephone directories
as well as other publicly available sources the following information, where
available, for each business entry: name of business; contact person; street
address, city, state; phone number, fax number; yellow page classification, SIC
code; product brands sold by businesses; franchises; professional specialties
and size of yellow page advertisement; year of first appearance in the yellow
pages; zip code, zip+4, carrier route; county code, population code,
metropolitan statistical area and area code.
Second, the Company makes telephone calls to the businesses in the database
to verify the information and to obtain or confirm additional information for
inclusion in the database. This information includes: name of the owner or
manager; number of employees; primary business activity; and address
verification (including suite numbers).
The Company has devoted significant time and resources to the creation,
maintenance and enhancement of its proprietary database and related applications
software. The database requires sophisticated computer hardware and software to
handle rapid compilation, order processing, accounting, storage and sorting, and
quality control. The computer system must allow a sizable work force to
compile, program and process data simultaneously. More than 1,500 proprietary
software programs operate the data compilation, demographic enhancement and
order fulfillment process.
-4-
<PAGE>
On-line proprietary data compilation software allows the Company's data
entry clerks to access the database, update, change or verify each record at a
rate of approximately 1.5 million records per month. A separate quality control
group checks input quality to ensure that the information that reaches the
Company's database is approximately 99% accurate from the original source. The
Company has implemented a proprietary automated dialing system and a predictive
dialing system which greatly improves the overall efficiency of the telephone
verification process. The Company has also developed proprietary software to
check the database for spelling, abbreviations and phone prefixes, and to verify
that no inappropriate language appears in the database.
PRODUCTS AND SERVICES
The Company offers an extensive suite of business information products
designed to assist business-to-business marketers with a variety of marketing
activities, such as identifying and qualifying prospective business customers,
initiating direct mail programs, telemarketing, estimating market potential,
monitoring the effectiveness of marketing efforts, and surveying competitive
markets. The Company offers its products in multiple formats at the cutting
edge of information delivery: customers can obtain information on CD-ROM or
internet/online as well as on hard copy, on diskettes, and by telephone or fax.
Due to the continuous change in business information, the Company's customers
often need to obtain new information-based products and services regularly. With
the addition of our Non-Stop Sales Leads program, customers can now subscribe to
obtain continuous sales leads and updates every month. The Company's
acquisition of County Data Corporation clearly enhances its Non-Stop Sales Leads
product by providing customers with information on newly formed business on a
much more timely basis. For each of the last three years, approximately two-
thirds of the Company's revenues were from existing customers.
Sales Lead Generation Products
The Company's principal products are its sales lead generation products
which are used by its customers primarily for new customer acquisitions. Lead
generation products are compiled from the Company's database using any
combination of sorting criteria to meet the specific marketing objectives of the
customer. Typically, a business wants to learn basic information about its
prospective customers to market efficiently to that targeted group. The
customer may wish to sort the information according to type of business,
geographic area, size of business or credit rating code. For example, a
customer may want a list of manufacturers and service companies with over 20
employees in the Phoenix area in order to market its fax machines to such
businesses.
Lead generation products can be delivered in the following formats:
prospect lists, mailing labels, 3x5 sales lead cards, computer diskettes and
magnetic tapes. In addition, the Company offers a mailing list software package
for IBM-compatible personal computers that facilitates the sorting of
information and the generation of mailing labels, lists, cards and reports.
Because a substantial amount of the Company's revenue is derived from small
businesses that are not large enough to employ sophisticated marketing
techniques, the Company believes that customer service is an important part of
its custom business information products. Larger, more sophisticated businesses
generally can specify their orders with a higher degree of precision. Small
businesses, however, are often unsure of the type of information they want or
how to use it. The Company's telemarketing sales representatives work with
prospective customers to help them understand how the
-5-
<PAGE>
database can be sorted and how the information can be used. The Company believes
that this emphasis on service leads to greater usage of the Company's products
by both its prospective and existing customers.
Generally, business information products are priced on a per name basis.
Pricing varies according to the number of names supplied, the type of
information delivered (standard database information or enhanced database
information) and the medium on which the information is delivered.
Business Directories
The Company offers a variety of printed business directories derived from
its database including State Business Directories, SIC Business Directories, an
American Manufacturers Directory, a Big Business Directory and a Credit
Reference Directory, which are updated and printed annually. The business
directories were developed to serve the special needs of both small and large
business-to-business marketers. The Company found many companies were not
initially interested in lists, but were receptive to the use of directories for
lead generation, telemarketing and reference. Customers are attracted to
business directories due to their affordability, convenience and reference
value. In addition, to provide a full range of services to its customers, the
Company also resells government directories that provide listings of federal,
state, county and municipal agencies and officials. The Company now bundles its
directories with a CD-Rom for those customers wanting to view the information
via their personal computer.
Information Brokerage Services
As a result of its marketing efforts to prospective customers, the Company
receives numerous customer requests for other information. In response to these
customer needs, the Company leases information from other compilers and owners
for resale to its customers. This service allows the Company to be a single
source for virtually all information requested by a customer and also generates
additional sales of the Company's other products. Examples of brokered
information include consumers identified by age or income, millionaires, car and
boat owners, high school and college students, international businesses, and
real estate and insurance agents. Business-to-consumer marketers can select a
consumer list by age group, income ranges, homeowners, hobbies or interests, or
geographical area and order from the Company a range of lead generation
products. Brokered information is priced on a per name basis.
Market Research Services
The Company uses its database to offer a variety of market research
services to its customers. These services include customer and market profile
analyses, market segmentation reports, statistical marketing reports, list
enhancements to update a customers in-house database, a computerized name search
service, and other analytical tools and reports. The information provided by
these services allows customers to make more informed business decisions,
whether for identifying the highest potential prospect group, determining the
size of a market, budgeting, lead generation, competitive analysis or
determining sales goals, marketing plans, site locations, or territory
assignments. The Company's acquisition of Marketing Data Systems enhances our
ability to sell data warehousing, research and analysis services to our small
and medium sized customers.
-6-
<PAGE>
The Company's market research services provide an effective way to cross-
sell the Company's other products and services. For example, when the Company's
statistical reports or market profiles suggest industries or geographic areas of
opportunity, a customer may subsequently order a business information product to
identify and target specific prospects in those industries or geographic areas.
Internet/ On-Line Information Services
During 1996, the Company continued to build its product offering through
Internet and On-Line services. The Company introduced its own Internet services
called Lookup USA in March 1996. The service contains free Directory Assistance
and Yellow Page listings as well as Business Profiles for $3.00. American
Business Lists-Online provides a customer with immediate access to the Company's
database 24-hours a day, seven days a week. Using a personal computer with a
modem, a customer can define a target, retrieve a count of the number of
businesses in a particular market or obtain a profile on a particular company,
and then download the information directly into a personal computer. Through a
licensing arrangement with Experian, American Business Lists-Online customers
download full Experian credit reports on current or potential customers or
suppliers. Customers may either pay for individual sessions using a major
credit card or may pay an annual subscription fee and be billed according to
their usage. Billing is based on connect time and the number of names
retrieved. Additionally, American Business Lists-Online is available to Dialog,
Compuserve and America Online; national on-line information services that
license the Company's service and offer it to their customers as part of an
integrated information package.
CD-ROM Products
The Company has developed a variety of CD-ROM products, which allow
customers to access and manipulate the Company's database on a personal
computer. The Company has products for both businesses and consumers. The
Company's "desktop marketing" or business CD-ROM products allow the customer to
research markets, generate sales leads and create direct mail and telemarketing
lists. These products include Business America on CD-ROM, which contains the
Company's complete database of U.S. businesses, 177,000 Big Businesses, 575,000
Physicians and Surgeons, 4.5 Million Small Business Owners and many others. The
Company's consumer CD-ROM products are the perfect reference tool for home or
office. They are an affordable way to look up addresses and phone numbers of
businesses and people anywhere in the country. Theses products include 130
Million Listings; The Ultimate Phone Book, 104 Million Businesses and
Households, Streets USA and many others. The Company also purchased Digital
Directory Assistance, Inc., the publisher of PhoneDisc CD-ROM products which
adds depth to its existing line of CD-ROM phone directory products. These
products include PhoneDisc Powerfinder, Powerfinder Pro and U.S. Homes and
Businesses. The customer can view and select information for printing lists,
labels or cards or download information to a disk drive. An annual license fee
enables a customer to access and use a specified number of names. Proprietary
metering and clock technologies monitor the number of names printed or
downloaded, and the length of time since the product was installed. When the
specified number of names is reached, the customer must contact the Company to
purchase additional names. An internal clock prohibits use of the product after
one year from the installation date. Customers that renew the annual license
receive an updated version of the product immediately.
-7-
<PAGE>
Telephone Business Information Services
The Company's InfoAccess service provides business directory assistance for
business and consumer callers, company profiles and business credit profiles for
use in making credit management decisions. This service enables callers dialing
1-800-808-INFO to obtain business information quickly from live operators, which
often cannot be obtained using telephone company directory assistance. For
example, through InfoAccess, a caller can learn, within seconds, the name of all
the Mazda dealers in the Chicago area or detailed information on a company known
as "ACME Manufacturing" which the caller believes is located somewhere in the
Midwest.
Business Credit Profiles allows callers to obtain Experian credit reports
over the phone or fax machine to determine whether a prospective customer is
likely to pay bills on time, or to check credit histories on suppliers or
competitors.
Products for Niche Markets
As existing customers seek greater amounts of information on narrower
ranges of potential customers, the Company expects products directed at niche
markets to play an increasingly important part in its business in the future.
The Company currently offers products specific to the healthcare and medical
industry, small business owners and female executives and will continue to
specialize information as market opportunities are identified.
SALES AND MARKETING
The Company markets its products and services through direct marketing,
sales through third party resellers, licensees, and direct sales. The Company
maintains separate marketing staffs for each product category described above
which enables the marketing personnel to keep abreast of customer demands and
market developments. The Company advertises its products and services through
direct mail, space advertising and trade shows. The Company is currently
expanding its marketing efforts through third party resellers, direct sales to
national accounts and local sales offices.
COMPUTER AND TELECOMMUNICATIONS OPERATIONS
The Company's computer system consists of redundant systems located at its
Omaha, Nebraska and Carter Lake, Iowa facilities. The computers in Omaha are
used primarily for compiling and enhancing the database. By maintaining its
data entry operations in one location, the Company believes it enhances its
ability to control the accuracy and costs of the compilation process. The
computers in the Carter Lake facility are used to fulfill orders, produce
directories and develop new software applications.
The Company's decision to maintain redundant computer equipment at each of
its two data centers provides the Company with backup in the event of a
disaster. Each of the data centers is protected by a Halon fire suppression
system which is designed to extinguish a fire without damaging the computer
equipment. The centers are further protected by uninterrupted power supply
battery backup systems. The data is backed up nightly and stored off-site
weekly. The Company believes its computer systems are adequate for its present
requirements although configured to permit expansion.
-8-
<PAGE>
The Company's telecommunication equipment is also redundant. In the event
of a disaster at either location, calls could be redirected to the other
location within 12 hours, thereby minimizing the effect of the disaster.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company regards its database and software as proprietary. The Company's
database is copyrighted, and the Company depends on trade secret and non-
disclosure safeguards for protection of its software. The Company distributes
its products under agreements that grant customers a license to use the
Company's products in the ordinary course of their businesses and contain terms
and conditions prohibiting the unauthorized reproduction of the Company's
products. In addition, the Company generally enters into confidentiality
agreements with its management and programming staff and limits access to and
distribution of its proprietary information. While there can be no assurance
that the steps taken by the Company will be adequate to deter misappropriation
of its proprietary rights or independent third party development of
substantially similar products and technology, the Company believes that legal
protection of its database and software is less significant than the knowledge
and experience of the Company's management and personnel, and their ability to
develop, enhance and market existing and new products and services.
COMPETITION
The business environment in which the Company competes is highly
competitive and fragmented. A number of small and large competitors are active
in specific aspects of the Company's business. The Company faces competition
from different types of companies including data vendors, directory publishers,
list brokers, marketing consultants, advertising agencies, and the Regional Bell
Operating Companies ("RBOCs"). Many such competitors have substantially greater
financial, technical and marketing resources than the Company.
Data vendors, such as Dun's Marketing Services ("DMS"), a division of Dun &
Bradstreet, Inc., Equifax Inc. ("Equifax") and Experian compete with the Company
with respect to customized business information products. DMS, which relies
upon information compiled from Dun & Bradstreet's credit database, tends to
focus on large companies. Equifax and Experian primarily provide information on
consumers rather than businesses. The Company believes that its focus on small
businesses enables it to compete effectively against these companies.
In business directory publishing, the Company competes primarily with
RBOCs, Donnelley Marketing, Inc., and many smaller, regional directory
publishers. In contrast to the broad directory offerings of the Company,
competing directory publishers tend to serve narrow markets, either focusing on
a single industry or on a limited region. In market research services the
Company competes with many computer services bureaus.
In information brokerage services, the Company both competes with and sells
to a variety of list brokers, marketing consultants and advertising agencies,
and competes with DMS, Acxiom Corporation and many regional computer service
bureaus. Competition in this area is significantly dependent upon the level of
service provided, particularly for smaller business which rely upon the vendor
to provide a variety of consulting and creative marketing services.
-9-
<PAGE>
In the Company's markets, the primary competitive factors include the
quality, accuracy and completeness of the database, the quality and timeliness
of service provided and pricing. The Company believes that its business
information database is one of the most comprehensive and accurate in the United
States and Canada and enables the Company to compete favorably on the basis of
these factors.
EMPLOYEES
As of December 31, 1996, the Company employed a total of 1,100 persons on a
full-time basis. None of the Company's employees is represented by a labor
union or is the subject of a collective bargaining agreement. The Company has
never experienced a work stoppage and believes that its employee relations are
good.
ITEM 2. PROPERTIES.
----------
The Company's headquarters are located in a 108,000 square foot facility in
Omaha, Nebraska, where the Company performs data compilation, telephone
verification, data development services, and sales and administrative
activities. Order fulfillment and shipping are conducted at the Company's 30,000
square foot Carter Lake, Iowa facility, which is located 15 miles from its
headquarters. The Company owns both of these facilities, as well as adjacent
land for possible future expansion. The Company also leases sales office space
at various locations, the aggregate rental obligations of which are not
significant. The Company is currently expanding its headquarters in Omaha to
accommodate growth. The expansion is expected to be complete sometime in mid-
1997.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
--------------------------------------------------
Not Applicable.
-10-
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Positions Held Age
---- -------------- ---
<S> <C> <C>
Vinod Gupta Chairman of the Board and Chief Executive Officer 50
since its incorporation in 1972, President since
its inception in 1972 through September 1991 and
from December 1995 to January 1997.
Jon H. Wellman President & Chief Operating Officer since January 45
1997; Executive Vice President from 1996 to 1997;
Chief Financial Officer and Secretary from 1995
to present. Vice President and Chief Financial
Officer at Signal Technology Corporation from
1994 to 1995; Partner with Coopers and Lybrand
from 1989 to 1994.
Edward C. Mallin Senior Vice President since August 1994; Vice 47
President from 1990-1994.
Fred Vakili Senior Vice President since January 1994; Vice 43
President from 1992-1994; various other marketing
and sales management positions; joined the Company
in 1985.
Monica Messer Executive Vice President since January 1997;
Senior Vice President from 1996 - 1997; Vice 34
President from 1988-1996; Vice President of Data
Processing from 1985-1988; Research and
Development Manager from 1984-1985.
Jack Betts Senior Vice President from January 1996; Vice 46
President from 1994-1995; Senior Vice President
from 1988-1994; other various management
positions; joined the Company in 1982.
William Chasse Executive Vice President since October 1996; 38
Senior Vice President from 1995-1996; Vice
President from 1992-1995; Director of Online
Information from 1988-1991.
William Kerrey Senior Vice President since August 1994; Vice 49
President from 1989-1994.
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Name Positions Held Age
---- -------------- ---
<S> <C> <C>
Ed Fuxa Corporate Controller since 1991; Audit Supervisor 34
for Coopers & Lybrand from 1985-1991.
Eric Groves Vice President since September 1996; Director of 32
Corporate Development for MFS Communications
Company, Inc. during 1996; Manager, Corporate
Development for SBC Communications, Inc. from
1993-1996; Graduate School of Management -
University of Iowa from 1991-1993.
Tom Lingelbach Senior Vice President since October 1996; Vice 49
President from 1991-1996; Senior Vice President of
Custom Products from 1988-1991; Senior Vice
President of Marketing and Sales from 1987-1988;
Vice President of Sales 1986-1987; various others
sales management positions from 1983-1985.
Elliott Katz Senior Vice President since January 1997; Vice 53
President from 1996-1997; Vice President of
Corporate Development and Sales Training for
Superior Coffee and Foods, a division of the Sara
Lee Corporation from 1981-1996.
Claude Schoch Senior Vice President since 1996; President of 42
Digital 42 Directory Assistance, Inc. from
1986-1996.
</TABLE>
-12-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS.
-------
The Company's Common Stock $0.0025 par value, is traded on the NASDAQ
National Market System under the symbol ABII. The high and low closing prices
for the Company's Common Stock during 1995 and 1996, as adjusted for the stock
dividend in August 1995, were as follows:
<TABLE>
<CAPTION>
1995 High Low
---- ------ -----
<S> <C> <C>
First Quarter............................. $14.83 $10.83
Second Quarter............................ $19.83 $14.17
Third Quarter............................. $21.50 $17.17
Fourth Quarter............................ $21.25 $16.75
1996 High Low
---- ------ -----
First Quarter............................. $19.38 $15.00
Second Quarter............................ $19.75 $16.00
Third Quarter............................. $18.63 $11.75
Fourth Quarter............................ $22.75 $16.38
</TABLE>
As of March 7, 1997, there were 134 stockholders of record.
The Company currently intends to retain future earnings to fund the
development and growth of its business and, therefore, does not anticipate
paying cash dividends within the foreseeable future. Any future payment of
dividends will be determined by the Company's Board of Directors and will depend
on the Company's financial condition, results of operations and other factors
deemed relevant by its Board of Directors.
Recent Sales of Unregistered Common Stock
- - -----------------------------------------
In September 1996, the Company issued 600,000 unregistered shares of its
Common Stock, $.0025 par value, to Digital Directory Assistance, Inc. ("DDAI"),
as partial consideration for certain assets and liabilities of DDAI. In
addition, in the fourth quarter of 1996, the Company issued 828,000 unregistered
shares of its Common Stock, $.0025 par value, in a series of unrelated
acquisitions. In February 1997, the Company issued approximately 2,200,000
unregistered shares of its Common Stock, $.0025 par value, as partial
consideration for the acquisition of the outstanding stock of DBA Holdings, Inc.
The shares were issued either to the stockholders of the acquired companies in
exchange for their stock, or to the acquired companies themselves in exchange
for certain of the assets and liabilities of such companies. In each of the
above referenced transactions, the Company relied upon the exemption provided
for under Section 4(2) of the Securities Act of 1933, as amended, for
transactions by an issuer not involving a public offering. Exemption under
Section 4(2) was claimed in each instance because each of the above referenced
transactions was an unrelated negotiated transaction, in no single transaction
did more than 7 entities or individuals become the direct or indirect owners of
the Company's Common Stock, and in no case was there any form of general
solicitation, advertising or plan of distribution. See also Notes 3 and 17 of
the Notes to Consolidated Financial Statements.
-13-
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
------------------------------------
The selected consolidated financial data below have been derived from the
Company's Consolidated Financial Statements and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Consolidated Financial Statements and related notes appearing
elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- -----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................................................... $108,298 $86,766 $69,603 $55,752 $48,517
Costs and expenses:
Database and production costs................................ 29,272 23,999 18,321 13,973 11,774
Selling, general and administrative.......................... 45,766 34,000 28,249 23,072 20,051
Depreciation and amortization................................ 4,855 3,469 2,957 2,651 -
One-time, non-cash items (1)................................. 21,500 - - - -
-------- ------- ------- ------- -------
Total costs and expenses....................................... 101,393 61,468 49,527 39,696 34,235
-------- ------- ------- ------- -------
Operating income............................................... 6,905 25,298 20,076 16,056 14,282
Other income (expense):
Investment income............................................ 3,194 1,322 1,109 1,172 607
Interest expense............................................. (209) (157) (247) (298) (605)
Other........................................................ (943) - - - 58
-------- ------- ------- ------- -------
Income before income taxes and discontinued
operation.................................................... 8,947 26,463 20,938 16,930 14,342
Income taxes................................................... 3,400 9,800 7,710 5,941 4,435
-------- ------- ------- ------- -------
Income from continuing operations.............................. 5,547 16,663 13,228 10,989 9,907
Loss on discontinued operation................................. (355) (2,317) (404) (214) -
Loss from abandonment of subsidiary............................ (1,373) - - - -
-------- ------- ------- ------- -------
Net income..................................................... $ 3,819 $14,346 $12,824 $10,775 $ 9,907
======== ======= ======= ======= =======
Historical and pro forma information(2)
Net income................................................... $ 3,819 $14,346 $12,824 $10,775 $ 9,162
======== ======= ======= ======= =======
Earnings per share:
Income from continuing operations............................ $0.26 $0.80 $0.64 $0.53 $0.45
Loss on discontinued operation and
abandonment of subsidiary.................................. (0.08) (0.11) (0.02) (0.01) -
-------- ------- ------- ------- -------
Net income................................................... $0.18 $0.69 $0.62 $0.52 $0.45
======== ======= ======= ======= =======
Weighted average shares outstanding............................ 21,033 20,738 20,678 20,658 20,165
======== ======= ======= ======= =======
<CAPTION>
December 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- -----
(In thousands)
<S>
BALANCE SHEET DATA: <C> <C> <C> <C> <C>
Working capital................................................ $ 46,668 $47,708 $35,411 $30,765 $23,465
Total assets................................................... 108,576 90,791 77,783 61,027 47,807
Long-term debt, including current portion...................... 1,135 2,039 3,821 4,587 5,306
Shareholders' equity........................................... 88,052 78,429 63,326 50,665 39,508
</TABLE>
____________________
(1) Represents charges for the purchased research and development of
approximately $10 million relating to the acquisition of Digital Directory
Assistance, Inc. in August 1996, and the change in estimated useful lives
of approximately $11.5 million due to management's evaluation of the
remaining lives of certain intangibles related to acquisitions prior to
1995.
(2) Prior to February 1992, the Company was taxed as an S corporation.
Accordingly, net income prior to February 1992 contained no provision for
federal and state income taxes. Pro forma net income reflects a pro forma
tax combined federal and state income tax rate of 36% in 1992. The Company
ceased being taxed as an S corporation February 1992.
-14-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
OVERVIEW
The Company is a leading provider of business-to-business marketing
information which it supplies from its proprietary database containing
information on approximately 10 million businesses in the United States and 1
million businesses in Canada.
The Company generally recognizes revenues from sales of its products and
services at the time the product is delivered or the service is performed. The
pricing of the products and services varies according to the number of names
supplied, the type of information purchased, the medium through which the
information is delivered, and the channel of distribution. In 1996, over
100,000 customers purchased the Company's products and services.
The Company's primary expenses relate to maintaining, updating, and
telephone verifying its database and the direct marketing costs associated with
selling its products and services. The Company has been profitable on an
operating basis in each year since its inception in 1972. The Company believes
inflation has not had a significant impact on its operations.
The Company's net sales on a quarterly basis can be affected by seasonal
characteristics, the timing of acquisitions, and certain other factors including
the timing and extent of the Company's own direct marketing activity.
The Company completed five acquisitions in the second half of 1996 and the
first quarter 1997. As a result of the acquisitions in 1996, the Company wrote-
off $10 million of in-process research and development costs. The Company will
be taking a significant write-off in the first quarter of 1997 as a result of
its acquisition of Database America Companies, Inc. (DBA). The write off will
amount to roughly $70 million and will result in a net loss for the Company in
1997. In addition, the Company entered into a $65 million credit facility to
finance a portion of the DBA acquisition, which prohibits the Company from
declaration of dividends without prior approval from the lenders. Borrowings
under the facility will result in a significant increase in interest expense.
This discussion and analysis contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933, which are subject to the "safe harbor" created by
that section. The Company's actual future results could differ materially from
those projected in the forward-looking statements. Some factors which could
cause future actual results to differ materially from the company's recent
results or those projected in the forward-looking statements are described in
"Factors Affecting Operating Results" below. The Company assumes no obligation
to update the forward-looking statements or such factors.
-15-
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's statement of operations data expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales........................................................ 100% 100% 100%
Costs and expenses:
Database and production costs................................. 27 28 26
Selling, general and administrative........................... 42 39 41
Depreciation and amortization................................. 5 4 4
One-time, non-cash items...................................... 20 - -
---- ---- ----
Total costs and expenses......................................... 94 71 71
---- ---- ----
Operating income................................................. 6 29 29
Other income (expense)........................................... 2 1 1
---- ---- ----
Income before income taxes and discontinued operation............ 8 30 30
Income taxes..................................................... 3 11 11
---- ---- ----
Income from continuing operations................................ 5 19 19
Loss on discontinued operation and abandonment of subsidiary.. 1 2 1
---- ---- ----
Net income....................................................... 4% 17% 18%
==== ==== ====
</TABLE>
_______________
1996 COMPARED TO 1995
Net sales increased 25% to $108.3 million in 1996 from $86.8 million in
1995. The Company's sales lead and directory products accounted for $10.0
million of this increase while sales from CD-ROM products increased $7.3 million
from the prior year.
Database and production costs for 1996 increased to $29.3 million, or 27%
of net sales, from $24.0 million, or 28% of net sales, in 1995. These amounts
primarily represent the costs of compiling and telephone verifying information
in the database, fulfilling customer orders, the direct costs associated with
the production of CD-ROM titles, and royalty costs.
Selling, general and administrative expenses increased in 1996 to $45.8
million, or 42% of net sales, from $34.0 million, or 39% of net sales in 1995.
The increased spending as a percentage of net sales was primarily attributable
to an overall increase in direct marketing activities for all of the Company's
products and services, continued investment in a field sales organization and
promotional marketing of CD-ROM products.
Depreciation and amortization expense increased to $4.9 million in 1996
from $3.5 million in 1995, primarily due to the increased amortization related
to acquisitions.
During the third quarter of 1996, the Company recorded one-time, non-cash
charges to continuing operation of $10.0 million for purchased in-process
research and development associated with the August 1996 acquisition of Digital
Directory Assistance, Inc. and $11.5 million associated with a change in the
estimated useful lives of certain intangible assets related to acquisitions
prior to 1995.
Operating income in 1996 was $6.9 million, or 6% of net sales, compared to
$25.3 million, or 29% of net sales, in 1995. Excluding the one-time, non-cash
items described above, operating income for 1996 would have been $28.4 million,
or 26% of net sales.
-16-
<PAGE>
Investment income during 1996 increased to $3.2 million from $1.3 million
in 1995, due to net realized gains of $1.3 million on the sale of marketable
securities during 1996 compared to net realized losses of $339 thousand on the
sale of marketable securities during 1995. Interest expense increased slightly
to $209 thousand in 1996 from $157 thousand in 1995 due to the addition of
capitalized equipment leases during early 1996. Other expenses consists of a
$740 thousand permanent write-down on an equity investment included in other
assets of the consolidated balance sheet and $203 thousand of costs associated
with the pooling-of-interests transaction.
1995 COMPARED TO 1994
Net sales increased 25% to $86.8 million in 1995 from $69.6 million in
1994. The Company's sales lead and directory products accounted for $9.6 million
of this increase with the remaining $7.6 million increase coming from CD-ROM
products. Revenue increases for all products were the result of an increase in
both the number and average size of orders placed by customers. There were no
significant price increases for the Company's products and services during the
year.
Database and production costs for 1995 increased to $24.0 million, or 28%
of net sales, from $18.3 million, or 26% of net sales, in 1994. These amounts
primarily represent the costs of compiling and telephone verifying information
in the database and fulfilling customer orders, the direct costs associated with
the production of CD-ROM titles, and royalty costs. The increase in database and
production costs as a percentage of net sales was primarily attributable to
increased sales of CD-ROM products which bear a slightly higher level of costs
then the Company's traditional lead generation products.
Selling, general and administrative expenses increased in 1995 to $34.0
million from $28.2 million in 1994. The increased spending was primarily
attributable to an overall increase in direct marketing activities for all of
the Company's products and services, continued investment in a field sales
organization and promotional marketing of CD-ROM products. Overall spending
levels were in line with revenue generation as selling, general and
administrative expenses decreased in 1995 to 39% of net sales compared to 41% of
net sales in 1994.
Depreciation and amortization expense increased to $3.5 million in 1995
from $3.0 million in 1994, primarily due to the increased amortization related
to acquisitions.
Operating income in 1995 was $25.3 million, or 29% of net sales, compared
to $20.1 million, or 29% of net sales, in 1994.
Investment income during 1995 increased to $1.3 million compared to $1.1 in
1994 due to the increase in cash and cash equivalents and investments. Interest
expense decreased to $157 thousand in 1995 from $247 thousand in 1994 due to
lower outstanding debt balances during 1995.
-17-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company's principal sources of liquidity
included cash and cash equivalents of $7.5 million and short term investments of
$22.8 million. The Company has revolving lines of credit totaling $10.0 million,
which had no outstanding balance at December 31, 1996.
Net cash provided by operating activities for 1996 totaled $13.7 million
compared to $15.8 million in the same period of 1995. The decrease is due
primarily to a higher level of outstanding trade accounts receivable. The
Company spent $2.9 million on upgrades to data processing equipment and $1.8
million for land and building improvements to its Omaha, Nebraska and Carter
Lake, Iowa facilities. The Company anticipates spending an additional $4.0
million over the next twelve months for equipment and facility expansion.
The Company paid $4.0 million in September 1996 as part of the estimated
purchase price of $17.1 million for Digital Directory Assistance, Inc. A
promissory note of $7.9 million was paid the Seller in January 1997, which was
funded using the Company's cash equivalents. The remaining amount due the
Seller of approximately $5.2 million was paid through the issuance of the
Company's common stock.
Subsequent to December 31, 1996, the Company entered into a $65 million
Credit Facility with First Union Bank. The purpose of the facility was to
finance a portion of the acquisition of Database America Companies, Inc. In
addition, the bank syndicate led by First Union Bank recently approved an
additional $10 million of availability under the Credit Facility. This will
increase the Credit Facility to $75 million and provide the Company with
additional access to working capital.
The Company believes that cash flows from operations and its cash and short
term investments will be sufficient to fund its foreseeable operating and
capital expenditure needs for at least the next twelve months. Additional
financing may be required in the event that other capital investment, business
expansion or acquisition opportunities arise.
FACTORS THAT MAY AFFECT OPERATING RESULTS.
Fluctuations in Operating Results. The Company believes that future
operating results may be subject to quarterly and annual fluctuations based on
numerous factors. The Company's net sales on a quarterly basis can be affected
by seasonal characteristics and certain other factors including the timing and
extent of the Company's own direct marketing activity. In addition, the
expenses associated with acquiring data, direct marketing campaigns and the
timing of acquisitions and the costs and expenses associated therewith may also
affect operating results.
Risks Associated With Recent and Future Acquisitions. During the past
year, the Company has made a number of strategic acquisitions. Acquisitions may
result in the diversion of management's attention from day-to-day operations and
may include numerous other risks and costs, including risks and costs relating
to difficulties in the integration of operations, products and personnel. To the
extent that efforts to pursue acquisition opportunities have in the past
resulted, or may in the future result, in a diversion of resources or that
efforts to integrate recent and future acquisitions fail, there could be a
material adverse effect on the Company's business, results of operations and
financial condition. Acquisitions may result in dilutive issuances of equity
securities, the incurrence of additional debt, and amortization expenses related
to goodwill and other intangible assets. While there are currently no
commitments with respect to any particular material acquisitions, the Company's
mamagement has historically evaluated on an ongoing basis the strategic
opportunities available to the Company. The Company may in the near- or
long-term future pursue acquisitions of complementary products, technologies or
businesses.
Competition. The business information industry is highly competitive. In
particular, the rapid expansion of the Internet creates a substantial new
channel for distributing business information to the market, and a new avenue
for future entrants to the business information industry. There is no guarantee
that the Company will be successful in this new market. Many of the Company's
principal competitors have substantially greater resources than the Company. In
addition, the Company has no control over the possible future entry into the
marketplace of other potential competitors, some of which may be much larger
than the Company and may have much larger capital bases from which to develop
and compete with the Company.
-18-
<PAGE>
Direct Marketing Regulation and Postal Rates. The Company and many of its
customers engage in direct marketing. Any negative impact on direct marketing,
including changes to existing laws or regulations or future laws and
regulations, may adversely affect the Company's operating results. The direct
mail industry depends and will continue to depend upon the services of the
United States Postal Service and other private mail carriers. Any modification
by the Postal Service of its rate structure or any increase in public or private
postal rates generally could have a negative impact on the demand for business
information, direct mail activities and the cost of the Company's direct mail
activities. In addition to the risk of rate increases, the direct mail
industry, and thus the Company's operating results, could be adversely affected
by postal strikes.
Loss of Data Centers. The Company's business depends on computer systems
contained in the Company's two data centers. The Company's disaster recovery
program is based upon maintaining redundant computer equipment at each of its
data centers. The data centers are protected by Halon fire suppression systems,
designed to extinguish a fire without damaging the computer equipment. The
centers are further protected by uninterrupted power supply backup systems.
There can be no guarantee that a fire or other disaster affecting one or both of
its data centers would not disable the Company's computer systems. Any
significant damage to either or both of the data centers could have a material
adverse affect on the Company.
Limited Protection of Intellectual Property and Proprietary Rights. The
Company relies on a combination of copyright, trademark and trade secret laws,
employee and third-party nondisclosure agreements and other methods to protect
its proprietary rights. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of the company's products or
reverse engineer or obtain and use information that the Company regards as
proprietary. The Company generally licenses its software products to end-users
on a "right to use" basis pursuant to a perpetual license. The Company licenses
some of its products under "shrink-wrap" licenses (i.e., licenses included as
part of the product packaging). Shrink-wrap licenses are not negotiated with or
signed by individual licensees, and purport to take effect upon the opening of
the product package. Certain license provisions protecting against unauthorized
use, copying, transfer and disclosure of the licensed program may be
unenforceable under the laws of certain jurisdictions and foreign countries. In
addition, the laws of some foreign countries do not protect proprietary rights
to the same extent as do the laws of the United States. There can be no
assurance that the foregoing measures will be adequate to protect the Company's
intellectual property.
-19-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
The information required by this item (other than selected quarterly
financial data which is set forth below) is incorporated by reference to the
Consolidated Financial Statements set forth on pages F-1 through F-17 hereof.
The following table sets forth selected financial information for each of
the eight quarters in the two-year period ended December 31, 1996. This
information has been prepared by the Company on the same basis as the
consolidated financial statements and includes all normal recurring adjustments
necessary to present fairly this information when read in conjunction with the
Company's audited consolidated financial statements and the notes thereto.
<TABLE>
<CAPTION>
1996 Quarter Ended 1995 Quarter Ended
------------------------------------------ ----------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- ------- -------- ------- -------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......................... $24,785 $24,325 $ 27,585 $31,603 $20,696 $21,209 $21,501 $23,360
Costs and expenses:
Database and production costs... 6,274 6,654 7,745 8,599 5,141 5,986 6,149 6,723
Selling, general and
administrative................ 10,152 10,113 11,409 14,092 8,255 8,103 8,366 9,276
Depreciation and amortization... 1,164 1,165 962 1,564 790 807 796 1,076
One-time, non-cash items........ - - 21,500 - - - - -
------- ------- -------- ------- ------- ------- ------- -------
Total costs and expenses.......... 17,590 17,932 41,616 24,255 14,186 14,896 15,311 17,075
------- ------- -------- ------- ------- ------- ------- -------
Operating income (loss)........... 7,195 6,393 (14,031) 7,348 6,510 6,313 6,190 6,285
Other income (expense), net...... 399 613 (238) 1,268 (25) 430 334 426
------- ------- -------- ------- ------- ------- ------- -------
Income before income taxes and
discontinued operation........... 7,594 7,006 (14,269) 8,616 6,485 6,743 6,524 6,711
Income taxes...................... 2,885 2,630 (5,389) 3,274 2,420 2,465 2,420 2,495
------- ------- -------- ------- ------- ------- ------- -------
Income (loss) from
continuing operations............ 4,709 4,376 (8,880) 5,342 4,065 4,278 4,104 4,216
Loss on discontinued operation.. - - (355) - (251) (1,896) - (170)
Loss from abandonment
of subsidiary.................. - - (1,373) - - - - -
------- ------- -------- ------- ------- ------- ------- -------
Net income (loss)................. $ 4,709 $ 4,376 $(10,608) $ 5,342 $ 3,814 $ 2,382 $ 4,104 $ 4,046
======= ======= ======== ======= ======= ======= ======= =======
Earnings (loss) per share:
Income (loss) from continuing
operations....................... $ 0.23 $ 0.21 $ (0.43) $ 0.25 $ 0.20 $ 0.20 $ 0.20 $ 0.20
Loss on discontinued operation
and abandonment of
subsidiary.................... - - (.08) - (0.01) (0.09) - (0.01)
------- ------- -------- ------- ------- ------- ------- -------
Net income (loss)................. $0.23 $0.21 $(0.51) $0.25 $0.19 $0.11 $0.20 $0.19
======= ======= ======== ======= ======= ======= ======= =======
Weighted average shares
outstanding...................... 20,783 20,801 20,840 21,701 20,685 20,719 20,768 20,775
======= ======= ======== ======= ======= ======= ======= =======
<CAPTION>
1996 Quarter Ended 1995 Quarter Ended
------------------------------------------ ----------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF NET SALES:
Net sales......................... 100% 100% 100% 100% 100% 100% 100% 100%
Costs and expenses:
Database and production costs.. 25 27 28 27 25 28 29 29
Selling, general and
administrative................ 41 42 41 45 40 38 39 40
Depreciation and amortization.. 5 5 4 5 4 4 4 5
One-time, non-cash items....... - - 78 - - - - -
---- ---- ---- ----- ----- ---- ---- ----
Operating income (loss)........ 29 26 (51) 23 31 30 29 27
</TABLE>
-20-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
---------------------------------------------------
The required information regarding Directors of the registrant is
incorporated by reference to the information under the caption "Nominees for
Election at the Annual Meeting" and "Incumbent Directors whose Terms of Office
Continue After the Annual Meeting" in the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held on May 23, 1997.
The required information regarding Executive Officers of the registrant is
contained in Part I of this Form 10-K.
The required information regarding compliance with Section 16(a) of the
Securities Exchange Act is incorporated by reference to the information under
the caption "Compliance with Section 16(a) of the Exchange Act" in the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held on
May 23, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
Incorporated by reference to the information under the captions "Executive
Compensation" and "Certain Transactions" in the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on May 23, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------------------------------------
Incorporated by reference to the information under the caption "Stock
Ownership" in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 23, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
Incorporated by reference to the information under the captions "Certain
Transactions" in the Company's definitive proxy statement for the Annual Meeting
of Stockholders to be held on May 23, 1997.
-21-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------------------------------------
(a) The following documents are filed as a part of this Report:
1. Financial Statements. The following Consolidated Financial
--------------------
Statements of American Business Information, Inc. and Report of Independent
Accountants are included at pages F-1 through F-17 of this Form 10-K:
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
-------------------------- --------
<S> <C>
Report of Independent Accountants.......................... F-2
Consolidated Balance Sheets as of December 31, 1996
and 1995................................................... F-3
Consolidated Statements of Operations for the Years
Ended December 31, 1996, 1995, and 1994.................... F-4
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1996, 1995, and 1994.......... F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995, and 1994.................... F-6
Notes to Consolidated Financial Statements................. F-7
</TABLE>
2. Financial Statement Schedule. The following consolidated
----------------------------
financial statement schedule of American Business Information, Inc. and
Subsidiaries for the years ended December 31, 1996, 1995 and 1994 is filed as
part of this Report and should be read in conjunction with the Consolidated
Financial Statements.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
-------------------------- --------
<S> <C>
Schedule II Valuation and Qualifying Accounts........... S-1
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the consolidated financial statements or notes thereto.
-22-
<PAGE>
3. Exhibits. The following Exhibits are filed as part of, or
--------
incorporated by reference into, this report:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- ------------------------------------
<S> <C>
3.1 Certificate of Incorporation, Amended as of September,
1996
3.2 (1) By-laws
4.1 (1) Specimen Certificate representing the Common Stock
10.1 1992 Stock Option Plan, Amended as of March, 1997
10.2 (2) Form of Indemnification Agreement with Officers and
Directors
10.8 (4) Asset Purchase Agreement between the Company and Digital
Directory Assistance, Inc.
10.9 (5) Agreement and Plan of Reorganization between the Company
and the Shareholders of DBA Holdings, Inc.
10.10 (5) Agreement and Plan of Merger between the Company and DBA
Holdings, Inc.
10.11 (5) Loan Agreement between the Company and First Union
National Bank of North Carolina
10.12 Registration Rights Agreement between the Company and
3319977 Canada Inc.
10.13 Registration Rights Agreement between the Company and the
Shareholders of Digital Directory Assistance, Inc.
10.14 Registration Rights Agreement between the Company and the
Shareholders of County Data Corp.
11 Statement re: computation of per share earnings
21 Subsidiaries and State of Incorporation
23 Consent of Independent Accountants
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
</TABLE>
_________
(1) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-1 (No. 33-42887) which became effective February 18,
1992.
-23-
<PAGE>
(2) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-1 (No. 33-51352) which became effective September 16,
1992.
(3) Incorporated by reference to exhibits filed with Registrant's year end
report on Form 10-K for the year ended December 31, 1993.
(4) Incorporated by Reference to exhibits filed with registrant's current
report on Form 8-K dated September 10, 1996.
(5) Incorporated by reference to exhibits filed with Registrant's report on
Form 8-K dated February 28, 1997.
(b) Reports on Form 8-K:
On September 10, 1996, the Company filed a current report on Form 8-K,
which was subsequently amended by a Form 8-K/A, related to the acquisition of
Digital Directory Assistance, Inc.
On February 28, 1997, the Company filed a current report on Form 8-K
related to the acquisition of DBA Holdings, Inc.
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN BUSINESS INFORMATION, INC.
By: /s/ Vinod Gupta
--------------------------------
Vinod Gupta
Chairman of the Board and
Chief Executive Officer
Dated: March 28, 1997
-25-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vinod Gupta and Jon Wellman, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Report on Form 10-K,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - ------------------- ----------------- --------
<S> <C> <C>
/s/ Vinod Gupta Chairman of the Board, Chief March 28, 1997
- - ------------------------- Executive Officer (principal
Vinod Gupta executive officer)
/s/ Jon H. Wellman President, Chief Operating Officer, March 28, 1997
- - ------------------------- acting Chief Financial Officer
Jon H. Wellman (principal financial and accounting officer)
/s/ Jon D. Hoffmaster Director March 28, 1997
- - -------------------------
Jon D. Hoffmaster
/s/ Gautam Gupta Director March 28, 1997
- - -------------------------
Gautam Gupta
/s/ Elliot S. Kaplan Director March 28, 1997
- - -------------------------
Elliot S. Kaplan
/s/ Harold Andersen Director March 28, 1997
- - -------------------------
Harold Andersen
/s/ George F. Haddix Director March 28, 1997
- - -------------------------
George F. Haddix
/s/ George J. Kubat Director March 28, 1997
- - -------------------------
George J. Kubat
/s/ Paul A. Goldnor Director March 28, 1997
- - -------------------------
Paul A. Goldnor
</TABLE>
-26-
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American Business Information, Inc. and Subsidiaries:
Report of Independent Accountants..................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995.......... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994................................... F-6
Notes to Consolidated Financial Statements............................ F-7
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
American Business Information, Inc.:
We have audited the consolidated financial statements and the financial
statement schedule of American Business Information, Inc. and subsidiaries
listed in Item 14(a) of this Form 10-K. These financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Business
Information, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion the 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.
Omaha, Nebraska
January 24, 1997, except for Note 17,
for which the date is February 15, 1997
F-2
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
_____________________________________
AS OF DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................. 7,497 $11,999
Marketable securities................................................. 22,810 23,350
Trade accounts receivable, net of allowances of $2,061 and
$1,161, respectively................................................ 30,293 19,215
Income taxes receivable............................................... 1,141 -
Prepaid expenses...................................................... 3,761 1,733
Deferred marketing costs.............................................. 1,263 996
------- -------
Total current assets................................................ 66,765 57,293
------- -------
Property and equipment, net............................................ 18,886 13,885
Net assets of business transferred under contractual arrangement....... - 2,972
Intangible assets, net of accumulated amortization..................... 16,916 14,642
Deferred income taxes.................................................. 5,388 -
Other assets........................................................... 621 1,999
------- -------
$108,576 $90,791
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt..................................... 708 $ 969
Note payable to shareholders.......................................... 7,925 -
Accounts payable...................................................... 5,520 4,254
Accrued payroll expenses.............................................. 2,352 2,205
Accrued expenses...................................................... 711 241
Income taxes payable.................................................. - 143
Deferred revenue...................................................... 2,117 1,650
Deferred income taxes................................................. 764 123
------- ------
Total current liabilities........................................... 20,097 9,585
------- ------
Long-term debt, net of current portion................................. 427 1,070
Deferred income taxes.................................................. - 1,707
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0025 par value. Authorized 5,000,000 shares;
none issued or outstanding......................................... - -
Common stock, $.0025 par value. Authorized 25,000,000 shares;
issued and outstanding 22,100,960 shares at December 31, 1996,
and 20,776,860 shares at December 31, 1995......................... 55 51
Paid-in capital....................................................... 35,370 27,342
Retained earnings..................................................... 55,287 51,282
Treasury stock, at cost, 165,000 shares held at December 31, 1996,
and 0 shares held at December 31, 1995.............................. (2,281) -
Unrealized holding loss, net of tax................................... (379) (246)
------- -------
Total stockholders' equity........................................... 88,052 78,429
------- -------
$108,576 $90,791
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
______________________________________
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales................................................. $108,298 $86,766 $69,603
Costs and expenses:
Database and production costs........................... 29,272 23,999 18,321
Selling, general and administrative..................... 45,766 34,000 28,249
Depreciation and amortization........................... 4,855 3,469 2,957
One-time, non-cash items................................ 21,500 - -
-------- ------- -------
101,393 61,468 49,527
-------- ------- -------
Operating income.......................................... 6,905 25,298 20,076
Other income (expense):
Investment income....................................... 3,194 1,322 1,109
Interest expense........................................ (209) (157) (247)
Other................................................... (943) - -
-------- ------- -------
Income before income taxes and discontinued operation..... 8,947 26,463 20,938
Income taxes.............................................. 3,400 9,800 7,710
-------- ------- -------
Income from continuing operations......................... 5,547 16,663 13,228
Loss on discontinued operation.......................... (355) (2,317) (404)
Loss from abandonment of subsidiary..................... (1,373) - -
-------- ------- -------
Net income................................................ $ 3,819 $14,346 $12,824
======== ======= =======
Earnings per share:
Income from continuing operations........................ $ 0.26 $ 0.80 $ 0.64
Loss on discontinued operation and abandonment of
subsidiary........................................... (0.08) (0.11) (0.02)
-------- ------- -------
Net income............................................... $ 0.18 $ 0.69 $ 0.62
======== ======= =======
Weighted average shares outstanding....................... 21,033 20,738 20,678
======== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
_____________________________________
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Net Total
Common Paid-in Retained Treasury Unrealized Stockholders
Stock Capital Earnings Stock Holdings Loss Equity
----- ------- -------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993.................... $34 $26,519 $24,112 $ - $ - $50,665
Issuance of 6,750 shares of common stock....... - 54 - - - 54
Unrealized holding loss, net of tax............ - - - - (217) (217)
Net income..................................... - - 12,824 - - 12,824
--- ------- ------- ------- ----- -------
Balances, December 31, 1994.................... 34 26,573 36,936 - (217) 63,326
Issuance of 94,125 shares of common stock...... - 786 - - - 786
Unrealized holding loss, net of tax............ - - - - (29) (29)
3 for 2 stock split............................ 17 (17) - - - -
Net income..................................... - - 14,346 - - 14,346
--- ------- ------- ------- ----- -------
Balances, December 31, 1995.................... 51 27,342 51,282 - (246) 78,429
Issuance of 1,220,975 shares of common stock... 3 12,155 - - - 12,158
Issuance of 560,000 shares of common stock.....
in pooling-of-interests transaction......... 2 86 186 - - 274
Repurchase and retirement of 291,875
shares of common stock...................... (1) (5,588) - - - (5,589)
Tax benefit related to employee stock options.. - 1,375 - - - 1,375
Acquisition of treasury stock.................. - - - (2,281) - (2,281)
Unrealized holding loss, net of tax............ - - - - (133) (133)
Net income..................................... - - 3,819 - - 3,819
--- ------- ------- ------- ----- -------
Balances, December 31, 1996 $55 $35,370 $55,287 $(2,281) $(379) $88,052
=== ======= ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
________________________________
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 3,819 $ 14,346 $ 12,824
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 4,855 3,469 3,125
Deferred income taxes.......................................... (6,307) 914 574
Impairment of other assets..................................... 740 630 -
One-time non-cash items........................................ 21,500 - -
Loss on discontinued operation and abandonment of subsidiary... 2,788 1,833 -
Net realized (gains) losses on sale of marketable securities... (1,267) 339 -
Changes in assets and liabilities, net of effect of
acquisitions and disposals:
Trade accounts receivable...................................... (7,762) (4,771) (2,166)
Prepaid expenses............................................... (1,611) (796) 211
Deferred marketing costs....................................... (267) (996) -
Accounts payable............................................... (1,422) 2,480 615
Income taxes receivable and payable............................ (1,291) (203) 573
Accrued expenses............................................... (50) (1,426) 2,330
-------- -------- --------
Net cash provided by operating activities................ 13,725 15,819 18,086
Cash flows from investing activities:
Proceeds from sales of marketable securities................... 18,865 15,787 15,248
Purchases of marketable securities............................. (17,348) (24,792) (15,316)
Purchases of property and equipment............................ (6,755) (3,554) (3,580)
Acquisitions of businesses, including minority interest........ (6,484) (1,174) (8,246)
Software development costs..................................... (1,955) (512) -
Other.......................................................... 347 (660) (500)
-------- -------- --------
Net cash used in investing activities.................... (13,330) (14,905) (12,394)
Cash flows from financing activities:
Repayment of long-term debt.................................... (1,450) (3,192) (5,566)
Proceeds from long-term debt................................... - - 4,800
Issuance of common stock....................................... 3,048 786 54
Tax benefit related to employee stock options.................. 1,375 - -
Acquisition of treasury stock.................................. (2,281) - -
Repurchase and retirement of common stock...................... (5,589) - -
-------- -------- --------
Net cash used in financing activities.................... (4,897) (2,406) (712)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents............... (4,502) (1,492) 4,980
Cash and cash equivalents, beginning............................... 11,999 13,491 8,511
-------- -------- --------
Cash and cash equivalents, ending.................................. $ 7,497 $ 11,999 $ 13,491
======== ======== ========
Supplemental cash flow information:
Interest paid.................................................. $ 78 $ 165 $ 259
======== ======== ========
Income taxes paid.............................................. $ 8,280 $ 8,226 $ 6,328
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
American Business Information, Inc. ("ABI") and its subsidiaries, ("the
Company"), provide business information to organizations engaged in business-to-
business marketing through products and services derived from the Company's
database. These products include customized business lists, business
directories and other information services.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates and Assumptions: The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation: The consolidated financial statements include
the accounts of ABI and its subsidiaries. Intercompany accounts and transactions
have been eliminated.
Revenue Recognition: The Company recognizes revenue from the sale of
product or license of information at the time of delivery. A portion of the
revenue is deferred and recognized over the license term when the Company is
required to provide updated information. Allowance is made currently for
estimated returns and for estimated uncollectable amounts. Actual experience has
been within management's expectations.
Database Costs: Costs to maintain and enhance the Company's database are
expensed as incurred.
Advertising Costs: Certain direct-response advertising costs are
capitalized and amortized over periods that correspond to the estimated revenue
stream of the individual advertising activity. All other advertising costs are
expensed as the advertising takes place. Total unamortized marketing costs at
December 31, 1996 and 1995, was $1.3 million and $1.0 million, respectively.
Total advertising expense included in net income for the years ending December
31, 1996, 1995, and 1994 was $11.0 million, $10.8 million and $8.6 million,
respectively.
Software Capitalization: Until technological feasibility is established,
software development costs are expensed as incurred. After that time, direct
costs are capitalized and amortized using the straight-line method over the
estimated economic life, generally one to three years. Unamortized software
costs included in intangible assets at December 31, 1996 and 1995, was $1.4
million and $431 thousand, respectively. Amortization of capitalized costs
during 1996 and 1995 totaled approximately $1.0 million and $81 thousand,
respectively.
F-7
<PAGE>
Income taxes: The Company recognizes income taxes using the liability
method, under which deferred tax assets and liabilities are determined based on
the difference between financial and tax bases of assets and liabilities using
enacted tax rates.
Earnings Per Share: Earnings per share are based on the weighted average
number of common shares outstanding. Common equivalent shares arise as a result
of stock options and have not been included in the calculation since their
dilutive effect is less than 3%.
Financial Accounting Standards No. 128, Earnings Per Share, (FASB 128) was
------------------
issued in February 1997 and is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. The standard
revises the calculation and presentation of earnings per share and requires the
presentation of "basic earnings per share" and "diluted earnings per share."
Management believes the amount reported as earnings per share in the
accompanying income statement would approximate basic earnings per share under
FASB 128. Management has not calculated diluted earnings per share under FASB
128, which requires the assumption that options, including those that expired or
are canceled during the period, were exercised at the beginning of the period,
using the treasury stock method.
Invested Cash: Cash equivalents consist of highly liquid debt instruments
purchased with an original maturity of three months or less and are carried at
cost which approximates fair value. Marketable securities have been classified
as available-for-sale and therefore net unrealized gains and losses are reported
as a separate component of stockholders' equity. Unrealized and realized gains
and losses are determined by specific identification and fair values are
estimated based on quoted market prices.
Long-Lived Assets: Property and equipment are stated at cost. Depreciation
and amortization are computed using primarily the straight-line method, based on
the following estimated useful lives: buildings and improvements - 30 years;
office furniture and equipment - 5 to 7 years; and capitalized equipment leases-
5 years. Intangible assets are stated at cost and are amortized over the periods
benefited on a straight-line basis. Prior to 1996, goodwill, distribution
networks, and noncompete agreements were amortized on a straight-line basis over
30 years, 15 years, and the terms of the agreements, respectively. In 1996, the
Company shortened the lives for goodwill and distribution networks in
recognition of more rapid changes in the businesses acquired to 8 years and 2
years, respectively.
All of the Company's long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future cash flows is less than the
carrying amount of the asset, a loss is recognized.
Reclassifications: Certain reclassifications were made to the 1994 and 1995
financial statements to conform to the 1996 presentation.
F-8
<PAGE>
(3) ACQUISITIONS
Effective August 1996, the Company acquired certain assets and assumed
certain liabilities of Digital Directory Assistance, Inc. ("DDA"), a publisher
of PhoneDisc CD-ROM products. The total purchase price, subject to adjustment,
was estimated to be approximately $17.1 million of which $4.0 million was paid
in September 1996, $7.9 million in the form of a promissory note issued to the
sellers due January 1997, and the remaining amount through the issuance of
600,000 unregistered shares of the Company's common stock in September 1996. The
acquisition was accounted for under the purchase method of accounting.
Substantially all of the purchase price consisted of intangibles and resulted in
a one-time charge of approximately $10 million ($6.2 million after tax)
representing purchased in-process research and development which relates to
projects that have not met technological feasibility and that management
believes has no alternative future use. The Company has allocated substantially
all of the remaining purchase price to goodwill which is being amortized over
its useful life of 8 years. Subsequent to December 31, 1996, the purchase price
was adjusted to be $13.3 million pursuant to the purchase price calculation, and
is subject to additional re-valuation at future determination dates. The next
determination date is as of March 31, 1997. Adjustments to the purchase price
will be reflected as adjustments to goodwill. The $7.9 million promissory note
due in January 1997 was used to fund an escrow account for holding funds
potentially due the sellers, of which $2.3 million was paid to the sellers in
February 1997 based on the first determination date of December 31, 1996.
Effective November 1996, the Company acquired the common stock of County
Data Corporation (CDC), the leading national new business database compiler.
Total consideration for the acquisition was 560,000 unregistered shares of the
Company's common stock. The acquisition was accounted for under the pooling-of-
interests method of accounting. The accompanying consolidated financial
statements have not been restated to reflect this acquisition, as the net sales
and net income of CDC were not significant for the periods presented.
Effective November 1996, the Company acquired certain assets and assumed
certain liabilities of Marketing Data Systems, Inc. (MDS), a provider of data
warehousing, research and analysis services for target marketing applications to
Fortune 1000 companies. Total consideration for the acquisition was $2.4
million, consisting of $1.0 million in cash and 118,000 unregistered shares of
the Company's common stock. The acquisition has been accounted for under the
purchase method of accounting. The Company has allocated substantially all of
the purchase price to goodwill which is being amortized over its useful life of
8 years.
Effective December 1996, the Company acquired certain assets and assumed
certain liabilities of BJ Hunter, the Canadian leader in the sale of lead
generation products. Total consideration for the acquisition was $3.1 million,
consisting of $876 thousand in cash and 150,000 unregistered shares of the
Company's common stock. The acquisition has been accounted for under the
purchase method of accounting. The Company has allocated substantially all of
the purchase price to goodwill which is being amortized over its useful life of
8 years.
Effective August 1994, the Company acquired certain assets of Zeller &
Letica ("Z&L") and Nationwide Mail Marketing ("NMM") for total consideration of
$2.4 million which was accounted for under the purchase method. The Company has
allocated substantially all of the purchase price to a distribution network
which is being amortized over its estimated useful life of 2 years.
Effective March 1994, the Company acquired certain assets from Business
Mailers, Inc. ("BMI") for total consideration of $5.8 million which was
accounted for under the purchase method. The Company has allocated
substantially all of the purchase price to a distribution network which is being
amortized over its estimated useful life of 2 years.
F-9
<PAGE>
Operating results for each of these acquisitions are included in the
accompanying consolidated statements of operations from the respective
acquisition dates. Assuming the above described companies had been acquired on
January 1, 1995, unaudited pro forma consolidated revenues, net income and net
income per share would have been as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
---- ----
(In thousands except per
share amounts)
<S> <C> <C>
Net sales..................... $120,111 $101,404
Net income.................... $ 3,131 $ 13,922
Net income per share.......... $ 0.14 $ 0.63
</TABLE>
The pro forma information provided above does not purport to be indicative
of the results of operations that would actually have resulted if the
acquisitions were made as of those dates or of results which may occur in the
future.
The Company paid $48 thousand, $148 thousand, and $280 thousand in 1996,
1995 and 1994, respectively, to Annapurna Corporation for consulting services
and related expenses in connection with acquisition activity conducted by the
Company. Annapurna Corporation is 100% owned by a significant stockholder. The
Company also paid $156 thousand in 1996 to a Director of the Company for
consulting services in connection with acquisition activity conducted by the
Company.
(4) MARKETABLE SECURITIES
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gross Gain Gross Loss Value
--------- ---------- ---------- -----
At December 31, 1996 (In thousands)
<S> <C> <C> <C> <C>
Municipal bonds $11,450 $ 35 $ (132) $11,354
U.S. government and agency 808 7 (5) 811
Corporate bonds 5,751 17 (58) 5,709
Common stock 5,365 18 (496) 4 ,886
Preferred stock 47 3 - 50
------- ----- ------- -------
$23,421 $ 80 $ (691) $22,810
======= ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Holding Gain Holding Loss Value
--------- ------------ ------------ -----
At December 31, 1995 (In thousands)
<S> <C> <C> <C> <C>
Municipal bonds $12,027 $ 68 $ (55) $12,040
U.S. government and agency 1,513 46 - 1,559
Corporate bonds 7,189 114 (5) 7,298
Common stock 1,148 11 (248) 911
Preferred stock 1,804 4 (266) 1,542
------- ----- ------- -------
$23,681 $ 243 $ (574) $23,350
======= ===== ======= =======
</TABLE>
F-10
<PAGE>
Scheduled maturities of marketable debt securities at December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
Less Than One to Five to More than
1 Year 5 Years 10 Years 10 Years
--------- ------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Municipal bonds $1,738 $ 6,294 $ 732 $2,589
U.S. government and agency - 811 - -
Corporate bonds 1,869 3,840 - -
----- ------ ----- -----
$3,607 $10,945 $ 732 $2,589
===== ====== ===== =====
</TABLE>
During 1996, proceeds from sales of available-for-sale securities
approximated $18.9 million with realized gains of $1.6 million and realized
losses of $343 thousand. In 1995, proceeds approximated $15.8 million with
realized gains of $747 thousand and realized losses of $1.1 million.
(5) PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Land and improvements.................... $ 1,220 $ 1,032
Buildings and improvements............... 9,084 7,157
Furniture and equipment.................. 21,597 15,439
Capitalized equipment leases............. 1,437 1,437
------- -------
33,338 25,065
Less accumulated depreciation and
amortization:
Owned property.......................... 14,188 11,036
Capitalized equipment leases............ 264 144
------- -------
Property and equipment, net............ $18,886 $13,885
======= =======
</TABLE>
Under the terms of its capital lease agreements, the Company is required to
pay ownership costs, including taxes, licenses and maintenance. The Company
also leases office space under operating leases expiring at various dates
through February, 2005. Certain of these leases contain renewal options. Rent
expense was $952 thousand in 1996, $593 thousand in 1995, and $603 thousand in
1994.
Following is a schedule of the future minimum lease payments under these
leases as of December 31, 1996.
<TABLE>
<CAPTION>
Capital Operating
------- ---------
(In thousands)
<S> <C> <C>
1997..................................... $516 $1,009
1998..................................... 438 784
1999..................................... 35 551
2000..................................... - 358
2001..................................... - 238
---- ------
Total future minimum lease payments 989 $2,940
======
Less amounts representing interest 79
----
Present value of net minimum lease payments.. $910
====
</TABLE>
F-11
<PAGE>
(6) OTHER INVESTMENTS
Included in other assets at December 31, 1996 and 1995, are investments of
$571 thousand and $1.3 million, respectively, in two companies that are
partially owned by certain members of the Board of Directors of the Company. At
December 31, 1996, the investments include $500 thousand in Trident Capital
Partners CSG Acquisition Fund, L.P. and $71 thousand in IDE Corporation. The
Company owns less than 10% of either company and accounts for these investments
on the cost method. No dividends have been received from these investments.
(7) INTANGIBLE ASSETS
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Goodwill......................... $18,188 $ 6,331
Distribution networks............ - 11,871
Noncompete agreements............ - 150
Software development costs....... 1,955 512
------ ------
20,143 18,864
Less accumulated amortization.... 3,227 4,222
------ ------
$16,916 $14,642
====== ======
</TABLE>
(8) FINANCING ARRANGEMENTS
The Company has two secured revolving lines of credit totaling $10.0
million, none of which was outstanding at December 31, 1996. One $5.0 million
line of credit expires in May 1997. A second line of credit of $5.0 million
expires in January 2000. Any borrowings would accrue interest at the bank's base
rate and would be payable upon demand.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Bank note, repaid in March 1996.............................. $ - $ 687
Bank note assumed in acquisition, repaid in January 1997..... 225 -
Computer lease obligations, discounted at 4.9% (See Note 5).. 910 1,352
------ ------
1,135 2,039
Less current portion......................................... 708 969
------ ------
Long-term debt............................................ $ 427 $1,070
====== ======
</TABLE>
The maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997..................................... $ 708
1998..................................... 427
-----
$1,135
=====
</TABLE>
F-12
<PAGE>
(9) INCOME TAXES
The provision for income taxes on continuing operations consists of the
following:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Current:
Federal $ 8,782 $8,249 $6,559
State 925 637 577
------ ----- -----
9,707 8,886 7,136
------ ----- -----
Deferred:
Federal (6,159) 849 443
State (148) 65 131
------ ----- -----
(6,307) 914 574
------ ----- -----
$ 3,400 $9,800 $7,710
====== ===== =====
</TABLE>
Loss on discontinued operation and abandonment of subsidiary is presented
net of income tax benefits of $1.1 million in 1996, $1.3 million in 1995 and
$235 thousand in 1994.
The effective income tax rate varied from the federal statutory rate as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Tax provision computed at statutory rate of 35%........ $3,131 $9,262 $7,328
State taxes, net....................................... 530 471 418
Nondeductible expense, nontaxable income and other..... (261) 67 (36)
----- ----- -----
$3,400 $9,800 $7,710
===== ===== ======
</TABLE>
The components of the net deferred tax asset (liability) were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Deferred tax assets:
Marketable securities.................. $ 232 $ 85
Intangible assets...................... 5,758 -
Accrued vacation....................... 291 185
Accrued expenses....................... 369 409
Accounts receivable.................... 65 137
Other assets........................... 521 239
Other.................................. - 208
------ ------
7,236 1,263
------ ------
Deferred tax liabilities:
Intangible assets...................... - (1,439)
Depreciation........................... (824) (801)
Prepaid expenses and other............. (1,788) (853)
------ ------
(2,612) (3,093)
------ ------
Net deferred tax asset (liability)....... $ 4,624 $(1,830)
====== ======
</TABLE>
F-13
<PAGE>
(10) STOCK INCENTIVES
The Company has a stock option plan under which a total of 4.0 million
(1.9 million prior to 1996) shares of the Company's common stock have been
reserved for issuance to officers, key employees and non-employee directors.
Options are generally granted at the stock's fair market value on the date
of grant, vest generally over a four year period and expire five years from date
of grant. Options issued to shareholders holding 10% or more of the Company's
stock are generally issued at 110% of the stock's fair market value on the date
of grant and vest over periods ranging from five to six years with early vesting
if certain financial goals are met. Certain options issued to directors at the
stock's fair market value vested immediately and expire five years from grant
date. The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". Accordingly, no compensation cost has been recognized for the
stock option plan. Had compensation cost for the Company's stock option plan
been determined based on the fair value at the grant date for awards in 1995 and
1996 consistent with the provisions of SFAS No. 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995
----------------------- ---- ----
(In thousands, expect per share amounts)
<S> <C> <C>
Net income - as reported $3,819 $14,346
Net income - pro forma $3,103 $14,124
Earnings per share - as reported $ 0.18 $ 0.69
Earnings per share - pro forma $ 0.15 $ 0.68
</TABLE>
The above pro forma results are not likely to be representative of the
effects on reported net income for future years since options vest over several
years and additional awards generally are made each year.
The fair value of the weighted average of each year's option grants is
estimated as of the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in 1996 and
1995, respectively: dividend yield of 0%; expected volatility of 15.52%; risk
free interest rate based on the U.S. Treasury strip yield at the date of grant;
and expected lives of 4.0 years for options other than those issued to 10% or
more shareholders for which the expected lives were equal to the vesting periods
of 5 to 6 years.
F-14
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Exercise Average Exercise Average Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding on January 1, 1,456,875 $10.97 1,094,250 $ 8.65 694,500 $ 8.28
Granted 1,937,000 $16.34 498,000 $15.38 436,500 $ 9.18
Exercised (352,975) $ 8.63 (94,125) $ 8.36 (6,750) $ 7.94
Forfeited / Expired (484,000) $12.00 (41,250) $ 8.45 (30,000) $ 8.13
--------- ----- --------- ----- --------- ----
Outstanding on December 31, 2,556,900 $15.16 1,456,875 $10.97 1,094,250 $ 8.65
========= ===== ========= ===== ========= ====
Options exercisable at end of year 292,525 $11.07 378,750 $10.99 189,000 $12.54
========= ===== ========= ===== ========= =====
Shares available on December 31,
for options that may be granted 1,443,100 443,125 805,750
========= ========= =========
Weighted-average grant date fair
value of options, granted during the
year - exercise price equals stock
market price at grant $3.94 $3.82
==== ====
Weighted-average grant date fair value
of options granted during the
year - exercise price exceeds stock
market price at grant $4.19 $ -
==== ====
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ---------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ----------- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$8.00 36,500 0.3 years $ 8.00 36,500 $ 8.00
$7.59 71,375 1.3 years $ 7.77 46,250 $ 7.79
$8.66 to $9.50 197,025 2.5 years $ 9.03 87,525 $ 8.98
$11.00 to $11.50 157,500 3.1 years $11.48 39,375 $11.48
$15.50 to $17.50 157,500 3.5 years $17.12 61,875 $16.53
$13.25 to $18.50 1,937,000 4.4 years $16.34 21,000 $15.50
--------- ------ ------- ------
$7.59 to $18.50 2,556,900 $15.16 292,525 $11.07
========= ====== ======= ======
</TABLE>
F-15
<PAGE>
(11) SAVINGS PLAN
Employees who meet certain eligibility requirements can participate in the
Company's 401(k) Savings and Investment Plan. Under the plan, the Company may,
at its discretion, match a percentage of the employee contributions. The Company
recorded expenses related to its matching contributions of $115 thousand, $80
thousand and $71 thousand in 1996, 1995 and 1994, respectively.
(12) DISCONTINUED OPERATIONS
On June 1, 1995, the Company transferred substantially all of the assets
and liabilities of its wholly-owned subsidiary, American Business
Communications, Inc. ("ABC") to a wholly-owned subsidiary of Baker University.
The Company received $3.0 million in the form of a 7.52% non-recourse promissory
note, due in equal monthly installments through 2005. The note is listed as "net
assets of business transferred under contractual arrangement" on the
accompanying consolidated balance sheet since it is non-recourse to Baker
University. ABC recorded net sales of $2.9 million and $6.7 million during 1995
and 1994, respectively.
During 1996, Baker University defaulted on the note and the Company
abandoned any remaining net assets of the business. As a result, the Company
recorded a loss from abandonment of subsidiary of $1.4 million, net of tax.
The Company originally reported the transfer of assets in 1995 as a loss on
sale of discontinued operations. However, the prior year amount has been
reclassified in accordance with Staff Accounting Bulletins 5-E and 5-Z, as an
impairment of net assets transferred under contractual arrangement. Since the
remaining net assets have been abandoned in 1996, all 1995 amounts related to
ABC have been reclassified as discontinued operations.
(13) SUPPLEMENTAL CASH FLOW INFORMATION
The Company made certain acquisitions in 1996 and 1994 (See Note 3) and
assumed liabilities as follows:
<TABLE>
<CAPTION>
1996 1994
---- ----
(In thousands)
<S> <C> <C>
Fair value of assets $28,107 $ 9,333
Cash paid (5,910) (8,200)
Promissory note issued (7,925) -
Common stock issued (9,382) -
------ ------
Liabilities assumed $ 4,890 $ 1,133
====== ======
</TABLE>
In conjunction with the transfer of ABC in 1995, approximately $6.8 million
of assets, less liabilities of $1.0 million, were exchanged for a $3.0 million
note receivable. As a result, the Company recognized an impairment of $1.8
million net of a tax benefits, which is included in loss on discontinued
operations.
F-16
<PAGE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments approximates
their estimated fair value at December 31, 1996. The fair value of cash and cash
equivalents was based on the carrying value of such assets. The estimated fair
value of marketable securities were based on quoted market prices. The fair
value of notes receivable and long-term debt, including capital lease
obligations, were estimated based on discounted cash flows using market rates at
the balance sheet date. The use of discounted cash flows can be significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. The derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument.
(15) CONTINGENCIES
The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. Management believes
that any resulting liability should not materially affect the Company's
financial position, results of operations, or cash flows.
(16) ONE-TIME, NON-CASH ITEMS
One-time, non-cash items represent charges for the purchased in-process
research and development of approximately $10 million relating to the
acquisition of DDA (See Note 3) and the change in estimated useful lives of
approximately $11.5 million due to management's evaluation of the remaining
lives of certain intangibles related to acquisitions prior to 1995.
(17) SUBSEQUENT EVENT
Effective February 15, 1997, the Company acquired all issued and
outstanding common stock of DBA Holdings, Inc., the parent company of Database
America Companies, Inc. (DBA), a leading provider of data processing and
analytical services for marketing applications, and compiler of information on
consumers and businesses in the United States. Total consideration for the
acquisition was approximately $100 million, consisting of approximately $50
million in cash and approximately 2.2 million shares of the Company's common
stock. The acquisition will be accounted for under the purchase. The Company
expects to immediately write-off a significant portion of the purchase price in
the first quarter of 1997. The remaining intangibles and goodwill will be
written off over 8 years.
F-17
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
----------- --------- -------- -------------- ---------- ------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:
December 31, 1994............................... $250 $ 936 $ - $ 782 $ 404
December 31, 1995............................... $404 $ 922 $ - $ 965 $ 361
December 31, 1996............................... $361 $1,485 $ 364 * $1,284 $ 926
Allowance for sales returns:
December 31, 1994............................... $ - $ - $ - $ - $ -
December 31, 1995............................... $ - $ 800 $ - $ - $ 800
December 31, 1996............................... $800 $3,401 $ 929 * $ 3,995 $1,135
</TABLE>
* Recorded as a result of acquisitions
S-1
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
AMERICAN BUSINESS INFORMATION, INC.
The undersigned, for the purpose of incorporating and organizing a
corporation under the General Corporation Law of Delaware, does hereby certify
and adopt the following Certificate of Incorporation:
ARTICLE I.
Name
The name of the Corporation shall be American Business Information, Inc.
ARTICLE II.
Registered Office and Agent
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801,
and the name of the Registered Agent at such address is The Corporation Trust
Company.
ARTICLE III.
Purpose
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV.
Authorized Stock
The aggregate number of shares which the Corporation shall have authority
to issue is Eighty Million (80,000,000), divided into Seventy-five Million
(75,000,000) shares of Common Stock with a par value of One Fourth of One Cent
($0.0025) per share, and Five Million (5,000,000) shares of Preferred Stock with
a par value of One Fourth of One Cent ($0.0025) per share.
Each holder of shares of Common Stock of the Corporation shall be entitled
to one vote for each share of Common Stock held in the name of such holder on
the books of the Corporation. The holder of each share of a series of Preferred
Stock shall be entitled to such voting rights as may be authorized by the Board
of Directors pursuant to Article V of this Certificate.
<PAGE>
ARTICLE V.
Rights and Preferences of Holders
of Preferred Stock
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of Article IV, to provide for the issuance of the shares
of Preferred Stock in series, and by filing a Certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
A. The number of shares constituting that series and the distinctive
designation of that series;
B. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and if so, from which data or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
C. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and if so, the terms of such voting rights;
D. Whether that series shall have conversion privileges, and if so, the terms
and conditions of such conversion privileges, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
E. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the date or date upon
or after which they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates;
F. Whether that series shall have a sinking fund for the redemption or purchase
of shares of that series, and, if so, the terms and amount of such sinking
funds;
G. The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that
series;
H. Any other relative rights, preferences and limitations of that series.
<PAGE>
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividend shall be paid or declared
and set apart for payment on the Common Stock with respect to the same dividend
period.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, the assets available for distribution to holders of shares
of Preferred Stock of all series shall be insufficient to pay such holders the
full preferential amount to which they are entitled, then such assets shall be
distributed ratably among the shares of each series of Preferred Stock in
accordance with each such series respective preferential amounts (including
unpaid cumulative dividends, if any).
ARTICLE VI.
Incorporator
The name and mailing address of the Incorporator is Vinod Gupta, 5711 South
86/th/ Circle, Omaha, Nebraska 68127. Until the directors are elected, the
Incorporator shall manage the affairs of the Corporation and may do whatever is
necessary and proper to effect the organization of the Corporation and the
election of directors.
ARTICLE VII.
Preemptive Rights
The holders of Common Stock or Preferred Stock of the Corporation shall
have no preemptive rights to subscribe for any shares of any class of stock of
the Corporation whether now or hereafter authorized.
ARTICLE VIII.
Board of Directors
A. The number of Directors constitution the entire Board shall be not less
than three (3) nor more than fifteen (15), as fixed from time to time by
vote of the majority of the entire Board; provided, however, that the
number of Directors shall not be reduced so as to shorten the term of any
Director at the time in office.
B. The Board of Directors shall be divided into three classes, as nearly equal
in numbers as the then total number of Directors constitution the entire
Board permits with the term of office of one class expiring each year. At
the first annual meeting of shareholders in 1992, the term of office of the
first class of Directors will expire and at which them their successors
shall be elected for a term expiring at the third succeeding annual meeting
after their election. At the annual meeting of the shareholders in 1993,
the term of office of the second class of Directors will expire and at
which time their successors shall be elected for a term expiring at the
third succeeding annual meeting after their election. At the annual meeting
of the shareholders in 1994, the term of office of the third class of
Directors will expire and at which time their
<PAGE>
successors shall be elected for a term expiring at the third succeeding
annual meeting after their election. Any vacancies in the Board of
Directors, acting by a majority of the Directors then in office, although
less than a quorum, and any Director so chosen shall hold office until the
next election of the class for which such Director shall have been chosen.
Subject to the foregoing, at each annual meeting of shareholders, the
successors to the class of Directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting after their election.
C. Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that some
lesser percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only
for cause and only by affirmative vote of the holders of fifty percent
(50%) or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of Directors (considered for
this purpose as one class) cast at a meeting of the shareholders called for
that purpose.
ARTICLE IX.
Bylaws
All of the powers of the Corporation, insofar as the same may be lawfully
vested by this Certificate of Incorporation in the Board of Directors, are
hereby conferred upon the Board of Directors of the Corporation. Except as
otherwise provided in this Article IX, and in furtherance, and not in limitation
of that power, the Board of Directors shall have the power to make, adopt,
alter, amend and repeal from time to time the Bylaws of the corporation, subject
to the right of the shareholders entitled to vote with respect thereto to adopt,
alter, amend and repeal Bylaws made by the Board of Directors. The shareholders
may expressly provide in any bylaw that such bylaw may not be altered, amended
or repealed by the Board of Directors; and a bylaw so providing may not be
altered, amended or repealed by the Board of Directors.
ARTICLE X.
Amendment of Articles
Notwithstanding any other provision of this Certificate of Incorporation or
the Bylaws of the Corporation (in addition to any other vote that may be
required by law, this Certificate of Incorporation or the Bylaws), the
affirmative vote of the holders of at least sixty percent (60%) of the
outstanding shares of the Common Stock of the Corporation, and any series of
Preferred Stock entitled to vote generally in the election of Directors
(considered for this purpose as one class) shall be required to amend, alter or
repeal any provision of this Certificate of Incorporation.
<PAGE>
ARTICLE XI.
Liability of Directors
No Director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach or fiduciary
duty as a Director; provided, however, that the foregoing clause shall not apply
to any liability of a Director: ( i ) for any breach of the Director's duty of
loyalty to the Corporation or its shareholders; ( ii ) for acts or omissions not
in good faith or which involved intentional misconduct or a knowing violation of
law; ( iii ) under Section 174 of the General Corporation Law of the State of
Delaware; or ( iv ) for any transaction from which the Director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of the Directors, then the liability of the
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this Article XI shall not adversely
effect any right or protection of a Director of the Corporation existing
hereunder with respect to any act or omission occurring prior to such repeal or
modification.
ARTICLE XII.
Director Voting
Unless otherwise provided by resolution by the Board of Directors, it shall
not be required that elections of Directors be conducted by written ballot.
ARTICLE XIII.
Indemnification
The Corporation shall to the extent required, and may, to the extent
permitted, by Section 145 of the Delaware General Corporation Law, as amended
from time to time, indemnify and reimburse all persons whom it may indemnify and
reimburse pursuant thereto. Notwithstanding the foregoing, the indemnification
provided for in this Article XIII shall not be deemed exclusive of any other
rights to which those entitled to receive indemnification or reimbursement
hereunder may be entitled under any bylaw of this Corporation, agreement, vote
or consent of shareholders or disinterested directors or otherwise.
The undersigned Incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed and that the facts stated
therein are true.
DATED: September 5, 1996 /s/ Vinod Gupta
---------------------------
Vinod Gupta, Incorporator
/s/ Jon H. Wellman
---------------------------
Jon H. Wellman, Secretary
<PAGE>
Exhibit 10.1
AMERICAN BUSINESS INFORMATION, INC.
1992 STOCK OPTION PLAN
(as amended March, 1997)
1. Purpose. The purpose of the 1992 Stock Option Plan (hereinafter called
the "Plan"), is to promote the interests of American Business Information, Inc.,
a Delaware corporation (hereinafter called the "Company"), by affording an
incentive to certain directors, officers, key employees and consultants to
remain in the employ of the Company and to use their best efforts in its behalf;
and further to aid the Company in attracting, maintaining, and developing
capable personnel of a caliber required to insure the Company's continued
success, by means of an offer to such persons of an opportunity to acquire or
increase their proprietary interest in the Company through the granting of
options to purchase the Company's stock pursuant to the terms of this Plan.
2. Shares Subject to Plan.
(a) The shares to be delivered upon exercise of options granted under
the Plan shall be made available, at the discretion of the Board of Directors
(the "Board"), from the authorized unissued shares of the Company's quarter cent
($.0025) Common Stock of the Company (herein the "Common Stock"), or from shares
of Common Stock reacquired by the Company, including shares purchased in the
open market.
(b) Subject to adjustments made pursuant to provisions of Section 13,
the aggregate number of shares which may be issued upon exercise of all options
which may be granted under the Plan shall not exceed 4,000,000 shares of the
Common Stock of the Company.
(c) In the event that any option granted under the Plan expires or
terminates for any reason whatsoever without having been exercised in full, the
shares subject to, but not delivered under, such option shall become available
for other options to the same optionee or other eligible persons without
decreasing the aggregate number of shares which may be granted under the Plan;
or shall be available for any lawful corporate purpose.
(d) The following limitations shall apply to grants of options to
employees:
(i) No employee shall be granted, in any fiscal year of the
company, options to purchase more than 900,000 Shares.
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iii) If an option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the
<PAGE>
canceled option shall be counted against the limit set forth in subsection (i)
above. For this purpose, if the exercise price of an option is reduced, the
transaction will be treated as a cancellation of the option and the grant of a
new option.
3. Option Agreements.
-----------------
(a) Each option under the Plan shall be evidenced by an option
agreement, which shall be signed by an officer of the Company and by the
optionee and which shall contain such provisions as may be approved by the
Administrator (as defined in Section 4).
(b) The option agreements shall constitute binding contracts between
the Company and the optionee, and every optionee, upon acceptance of such option
agreement, shall be bound by the terms and restrictions of this Plan and of the
option agreement.
(c) The terms of the option agreement shall be in accordance with
this Plan, but may include additional provisions and restrictions, provided that
the same are not inconsistent with the Plan.
4. Administration.
--------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be
administered by different bodies with respect to different groups of employees,
directors or consultants.
(ii) Section 162(m). To the extent that the Board determines
it to be desirable to qualify options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), the Plan shall be administered by a committee
of two or more "outside directors" within the meaning of Section 162(m) of the
Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3 of the Securities Exchange Act
of 1934, as amended ("Rule 16b-3"), the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a committee which shall be
constituted to satisfy applicable laws.
(b) Powers of the Board or its Committee (hereinafter the
"Administrator"). Subject to the provisions of this Plan, and in the case of a
committee, subject to the specific duties delegated by the Board to such
committee, the Administrator shall have the authority, in its discretion:
-2-
<PAGE>
(i) to determine the fair market value of the Common Stock, in
accordance with Section 6 of this Plan;
(ii) to select the persons to whom options may be granted
hereunder provided such persons are eligible to receive option under the Plan as
provided in Section 5 hereof;
(iii) to determine the number of shares of Common Stock to be
covered by each option granted hereunder;
(iv) to approve forms of agreement for use under this Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of this Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any option to the then
current fair market value if the fair market value of the Common Stock covered
by such option shall have declined since the date the option was granted;
(vii) to construe and interpret the terms of this Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to this Plan;
(ix) to modify or amend each option (subject to Section 14 of
this Plan);
(x) to allow optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the shares to be issued upon
exercise of an option that number of shares having a fair market value equal to
the amount required to be withheld. The fair market value of the shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an optionee to have shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an option previously
granted by the Administrator; and
(xii) to make all other determinations deemed necessary or
advisable for administering this Plan.
-3-
<PAGE>
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
optionees and any other holders of options.
5. Eligibility. Nonstatutory Stock Options (options not intended to
qualify as Incentive Stock Options) may be granted to employees (including
officers and directors who are also employees), non-employee directors and
consultants. Incentive Stock Options (as defined below) may be granted only to
employees (including officers and directors who are also employees).
An employee shall not cease to be an employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its parent, any subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option.
Neither service as a director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.
If otherwise eligible, an optionee who has been granted an option may
be granted additional options. The fact that an optionee has been granted an
option under this Plan shall not in any way affect or qualify the right of the
Company employer to terminate his or her employment relationship, directorship
or consulting relationship at any time. Nothing contained in this Plan shall be
construed to limit the right of the Company to grant options otherwise than
under the Plan for any proper and lawful corporate purpose, including but not
limited to options granted to persons eligible to receive options under the
Plan. Eligible persons to whom options may be granted under the Plan will be
those selected by the Administrator from time to time who, in the sole
discretion of the Administrator, have contributed in the past or who may be
expected to contribute materially in the future to the successful performance of
the Company.
6. Option Price. The per share exercise price for the shares to be issued
pursuant to exercise of an option shall be determined by the Administrator,
subject to the following:
(a) In the case of an Incentive Stock Option granted to any employee,
the per share exercise price shall be no less than 100% of the fair market value
per share on the date of grant. However, under no circumstances shall the fair
market value as determined by the Administrator be less than the book value of
the Company's Common Stock as reflected in the Company's most recent financial
statements, prepared by the certified public accountant who is then servicing
the Company's account, which are prepared in accordance with generally accepted
accounting principles. For all purposes of this Plan, the fair market value of
shares subject to option shall be deemed conclusive, upon the determination of
the Administrator made in good faith. The option price will be subject to
adjustments in accordance with provisions of Section 13 herein.
-4-
<PAGE>
(b) In the case of a Nonstatutory Stock Option, the per share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per share
exercise price shall be no less than 100% of the fair market value per share on
the date of grant.
(c) Notwithstanding the foregoing, options may be granted with a per
share exercise price of less than 100% of the fair market value per share on the
date of grant pursuant to a merger or other corporate transaction.
7. Exercise of Options.
-------------------
(a) Subject to the provisions of the Plan with respect to termination
of employment under Section 12 herein, the period during which each option may
be exercised shall be fixed by the Administrator at the time such option is
granted, but in the case of an Incentive Stock Option, such period shall expire
not later than ten years from the date the option is granted.
(b) Each option granted under the Plan may be exercised, except as
provided in Section 12, only during the continuance of the optionee's employment
relationship, directorship or consulting relationship with the Company or one of
its subsidiaries. Subject to the foregoing limitations and the terms and
conditions of the option agreement, each option shall be exercisable in whole or
in part in installments at such time or times as the Administrator may prescribe
and specify in the applicable option agreement.
(c) No shares shall be delivered pursuant to any exercise of an
option until the requirements of such laws and regulations as may be deemed by
the Administrator to be applicable to them are satisfied and until payment in
full of the option price for them is received by the Company. Payment of the
option price may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other shares which (A) in the case of shares acquired upon
exercise of an option, have been owned by the optionee for more than six months
on the date of surrender, and (B) have a fair market value on the date of
surrender equal to the aggregate exercise price of the shares as to which said
option shall be exercised;
(v) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the option and delivery to
the Company of the sale or loan proceeds required to pay the
-5-
<PAGE>
exercise price;
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the
issuance of shares to the extent permitted by applicable laws.
(d) No optionee, or the legal representative, legatee, or distributee
of an optionee, shall be deemed to be a holder of any shares subject to any
option unless and until the certificate or certificates for them have been
issued.
8. Ten-Percent Owners. Notwithstanding the provisions of paragraphs 6
and 7 above, the following terms and conditions shall apply to Incentive Stock
Options granted hereunder to a "10-percent owner." For this purpose, a "10-
percent-owner" shall mean an optionee who, at the time the option is granted,
owns stock possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or of any subsidiary thereof. With respect
to a 10-percent owner:
(a) the price at which shares of stock may be purchased under an
Incentive Stock Option granted pursuant to this Plan shall be not less than 110%
of the fair market value thereof, said fair market value being determined in the
manner described at Section 6, above; and
(b) the period during which any such Incentive Stock Option may be
exercised, to be fixed by the Administrator in the manner described at paragraph
7, above, shall expire not later than five years from the date the option is
granted.
9. Annual Limit on Incentive Stock Option Vesting. Each option shall be
designated in the option agreement as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such designations, to the
extent that the aggregate fair market value (i) of shares subject to an
optionee's Incentive Stock Options granted by the Company, any parent or
subsidiary, which (ii) become exercisable for the first time during any calendar
year (under all plans of the Company or any parent or subsidiary) exceeds
$100,000, such excess options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 9, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the fair market value of
the shares shall be determined as of the time of grant.
10. Other Terms and Conditions. Any option granted hereunder shall
contain such other and additional terms, not inconsistent with the terms of this
Plan, which are deemed necessary or desirable by the Administrator, which such
terms, together with the terms of this Plan, shall constitute such option as an
"Incentive Stock Option" within the meaning of Section 422 of the Code and
lawful regulations thereunder.
11. Transferability of Options. Unless determined otherwise by the
Administrator, an option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner
-6-
<PAGE>
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the optionee, only by the optionee. If the
Administrator makes an option transferable, such option shall contain such
additional terms and conditions as the Administrator deems appropriate.
12. Termination of Employment. In the event that employment of an
optionee by the Company or any subsidiary is terminated for any reason other
than disability or death, an option granted hereunder shall be exercisable by
the optionee at any time prior to the expiration date of the option or within
three months after the date of such termination, whichever is earlier, but only
to the extent the optionee had the right to exercise such option at the date of
such termination.
In the event optionee ceases to be an employee, director or consultant
as a result of the optionee's disability (a total and permanent disability as
defined in Section 22(e)(3) of the Code), the optionee may exercise his or her
option within such period of time as is specified in the option agreement to the
extent the option is vested on the date of termination (but in no event later
than the expiration of the term of such option as set forth in the option
agreement). In the absence of a specified time in the option agreement, the
option shall remain exercisable for three months following the optionee's
termination. If, on the date of termination, the optionee is not vested as to
his or her entire option, the shares covered by the unvested portion of the
option shall revert to the Plan. If, after termination, the optionee does not
exercise his or her option within the time specified herein, the option shall
terminate, and the shares covered by such option shall revert to the Plan.
In the event of the death of an optionee while in the employ of the
Company (or within three months after termination of employment by reasons of
retirement with the consent of the Company), his option shall be exercisable by
the person or persons to whom such optionee's rights pass by will or by the laws
of descent and distribution at any time prior to the expiration date of the
option or within three months after the date of such death, whichever is
earlier, but only to the extent the optionee had the right to exercise such
option on the date of his death.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
----------------------------------------------------------------------
Sale or Change of Control.
- - -------------------------
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an option, as well as the price per share of Common Stock covered
by each such outstanding option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the
-7-
<PAGE>
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any option shall terminate as of
a date fixed by the Board and give each optionee the right to exercise his or
her option as to all or any part of the stock covered by such option, including
shares as to which the option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding option shall be assumed or an equivalent option
substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the option, the optionee shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which it would not otherwise be exercisable. If an option is exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Administrator shall notify the optionee that the option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive,
for each share of optioned stock subject to the option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the merger or sale of assets was
not solely common stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the option, for each share
of optioned stock subject to the option to be solely common stock of the
successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. Amendments, Alteration, Suspension, or Termination.
--------------------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is listed or
-8-
<PAGE>
quoted). Such stockholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any optionee,
unless mutually agreed otherwise between the optionee and the Administrator,
which agreement must be in writing and signed by the optionee and the Company.
15. Effective Date, Term, and Approval. The Plan shall take effect on
January 1, 1992. This Plan will terminate on December 31, 2001, and no options
may be granted under the Plan after that date, unless an earlier termination
date after which no options may be granted under the Plan is fixed by action of
the Board, but any option granted prior thereto may be exercised in accordance
with its terms. The Plan and all options granted pursuant to it are subject to
all laws, approvals, requirements and regulations of any governmental authority
which may be applicable thereto and, notwithstanding any provisions of the Plan
or option agreement, the holder of an option shall not be entitled to exercise
his option nor shall the Company be obligated to issue any shares to the holder
if such exercise or issuance shall constitute a violation by the holder or the
Company of any provisions of any such approval requirements, law or regulation.
16. Unfunded Plan. The Plan is intended to constitute an "unfunded" plan
for incentive compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Administrator may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan, provided that the trusts or other arrangements are
consistent with the unfunded status of the Plan.
17. Long-Term Capital Gains. Incentive Stock Options granted pursuant to
this Plan are intended to qualify for long-term capital gains treatment, if
available, under the provisions of Section 422 of the Code. As of January 1,
1992, eligibility for such tax treatment required that no disposition of the
shares of stock be made by the optionee: (i) within two years from the date the
Incentive Stock Option is granted; or (ii) within one year of the date the stock
underlying the Incentive Stock Option is transferred to the employee.
18. General Provisions. The Administrator may require each person
purchasing shares pursuant to a stock option under the Plan to represent to and
agree with the Company in writing that the optionee is requiring the shares
without a view to distribution thereof. The certificate for such shares may
include any legend which the Administrator deems appropriate to reflect any
restriction on transfer. All certificates for shares delivered under the Plan
pursuant to any stock option shall be subject to such stock transfer orders and
other restrictions as the Administrator may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the stock is listed, and any applicable federal or
state securities laws, and the Administrator may cause a legend or legends to be
put on such certificates to make appropriate reference to such restrictions.
-9-
<PAGE>
Exhibit 10.12
AMERICAN BUSINESS INFORMATION, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made effective as
of December 10, 1996 (the "Effective Date"), by and among American Business
Information, Inc., a Delaware corporation (the "Company") and 3319971 Canada
Inc, a Canadian corporation (the "Shareholder").
RECITALS
--------
A. The Company and the Shareholder, among others, are parties to certain
Share Purchase Agreements dated December 10, 1996 (together with the exhibits
and schedules thereto, the "Purchase Agreement,") pursuant to which the Company,
through a wholly owned subsidiary, is acquiring all of the shares of Kadobec
Investments Inc. and CD-PowerMedia Productions Inc., both Canadian corporations.
B. Pursuant to the Purchase Agreement, Shareholder has agreed to
subscribe for 150,000 shares of Common Stock, U.S. $.0025 par value, of the
Company (the "Shares"), subject to certain escrow and other arrangements set
forth in the Purchase Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, all parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Black-Out Period" means any period during which executive officers
and directors of the Company are generally prohibited from engaging in trades in
the Company's securities pursuant to the Company's Insider Trading Policy,
including, without limitation, black-out periods for management related to
quarterly reports of financial results of the Company.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal rule or statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" means the Shareholder, for so long as the Shareholder
holds any
<PAGE>
Registrable Securities, or any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with Section 11
hereof.
"Insider Trading Policy" means the policy adopted by the Company's
Board of Directors, as such may be amended from time to time, relating to
transactions in the Company's securities by the Company's executive officers and
directors.
"Permitted Window" means the period during which a Holder entitled to
sell Registrable Securities pursuant to a registration statement under Section
5(a) of this Agreement shall be permitted to sell Registrable Securities
pursuant to such a registration. Except as otherwise set forth in this
Agreement, a Permitted Window shall (i) commence upon the tenth business day
following receipt by the Company of a written notice from a Holder to the
Company that such Holder intends to sell Shares pursuant to such registration
statement, or such earlier date as the Company may agree to (or, if such date
falls within a Blackout Period, then upon the termination of such Blackout
Period), and shall (ii) terminate upon the commencement of the next occurring
Black-Out Period. Without the Company's written consent, a Permitted Window
shall not commence prior to the first anniversary of the Effective Date.
"Registrable Securities" means the Shares and any Common Stock of the
Company issued or issuable in respect thereof upon any conversion, stock split,
stock dividend, recapitalization, merger or other reorganization; provided,
however, that securities shall only be treated as Registrable Securities if and
so long as they have not been registered or sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction.
"Register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" means all expenses, except as otherwise stated
below, incurred by the Company in complying with Section 5 hereof, including
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company).
"Restricted Securities" means the securities of the Company required
to bear a legend as described in Section 3 hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal rule or statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all underwriting discounts, selling
commissions and stock
-2-
<PAGE>
transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for any Holder.
2. Restrictions on Transferability. Without limitation to the holdback
and escrow provisions contemplated in the Purchase Agreement, the Restricted
Securities and any other securities issued in respect of such securities upon
any stock split, stock dividend, recapitalization, merger or other
reorganization, shall not be sold, assigned, transferred or pledged except upon
the conditions specified in this Agreement, which conditions are intended to
ensure compliance with the provisions of the Securities Act. Each Holder or
transferee will cause any proposed purchaser, assignee, transferee, or pledgee
of any such securities held by the Holder or transferee to agree to take and
hold such securities subject to the restrictions and upon the conditions
specified in this Agreement, including without limitation the restrictions set
forth in Section 4.
3. Restrictive Legend. Each certificate representing the Shares or any
other securities issued in respect of such securities upon any stock split,
stock dividend, recapitalization, merger or other reorganization shall be
stamped or otherwise imprinted with legends restricting the transferability
thereof, in substantially the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. SUCH SHARES GENERALLY MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
Each Holder consents to the Company making a notation on its records and
giving instructions to any transfer agent of its capital stock in order to
implement the restrictions on transfer established in this Agreement and the
Purchase Agreement.
4. Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Without in any way limiting the
immediately preceding sentence, the provisions of Section 2, or the holdback or
escrow provisions in the Purchase Agreement, no sale, assignment, transfer or
pledge (other than (i) a sale made pursuant to a registration statement filed
under the Securities Act and declared effective by the Commission or (ii) a sale
made in accordance with the applicable provisions of Rule 144 and Rule 145) of
Restricted Securities shall be made by any holder thereof to any person unless
such person shall first agree in writing to be bound by the restrictions of this
Agreement, including without limitation this Section 4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities, unless there
is in effect a registration statement under
-3-
<PAGE>
the Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and, if requested by the Company, the holder shall also
provide, at such holder's expense, a written opinion of legal counsel (who shall
be, and whose legal opinion shall be, reasonably satisfactory to the Company)
addressed to the Company, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act and under applicable state securities laws and regulations. Upon delivery to
the Company of such notice and, if required, such opinion, the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of such notice. The Company agrees that it shall
not request such an opinion of counsel with respect to (i) a transfer not
involving a change in beneficial ownership, including without limitation
interspousal transfer (ii) a transaction involving the distribution without
consideration of Restricted Securities by the holder to its constituent equity
holders in proportion to their equity holdings in the holder or (iii) a
transaction involving the transfer without consideration of Restricted
Securities by an individual holder during such holder's lifetime by way of gift
or on death by will or intestacy. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and counsel for the
Company, such legend is not required in order to establish or ensure compliance
with any provision of the Securities Act.
5. Registration on Form S-3.
(a) Registration. The Company shall use its commercially reasonable
efforts to cause a registration statement on Form S-3 covering all Registrable
Securities to be filed and declared effective no later than the first
anniversary of the date of this Agreement, and the initial Permitted Window (the
"Initial Permitted Window") for trading the Shares shall commence as of the
effective date of such registration (or, if such date falls within a Blackout
Period, then upon the termination of such Blackout Period), and continue until
the commencement of the next occurring Black-Out Period. The Company shall use
its commercially reasonable efforts to keep such registration statement
effective until the second anniversary of the date of this Agreement, or such
earlier date upon which no Holder holds any Registrable Securities. After the
Initial Permitted Window, upon receipt of a notice from any Holder that such
Holder intends to sell Registrable Securities during a Permitted Window, the
Company shall, prior to the commencement of the Permitted Window, inform the
other Holders of the commencement of the Permitted Window. The Company shall
notify each of the Holders of the termination of a Permitted Window no later
than the time the Company notifies its executive officers and directors of the
corresponding Black-Out Period; provided, however, that the Company need not
notify the Holders of regularly scheduled Black-Out Periods relating to the end
of the Company's fiscal quarters, which Black-Out Periods begin thirty days
prior to the end of each fiscal quarter and continue until 48 hours after the
announcement of results of operations for such period.
-4-
<PAGE>
(b) Limitations on Registration and Sale of Registrable Securities.
Notwithstanding anything in this Agreement to the contrary, the Company's
obligations and the Holders' rights under this Section 5 are subject to the
limitations and qualifications set forth below, which may be waived in writing
by the Company.
(i) The Holders will sell Registrable Securities pursuant to a
registration effected hereunder only during a Permitted Window.
(ii) If the Company furnishes to the Holders a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company for a Form S-3 registration to be effected, or a Permitted Window to
be in effect, due to (A) the existence of a material development involving the
Company which the Company would be obligated to disclose in the prospectus
contained in the Form S-3 registration statement, which disclosure would in the
good faith judgment of the Board of Directors be premature or otherwise
inadvisable, (B) the existence of other facts or circumstances as a result of
which the prospectus contained or to be contained in the Form S-3 registration
statement includes or would include an untrue statement of a material fact or
omits or would omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made or then existing or (C) the Company's
bona fide intention to effect the filing of a registration statement with the
Commission within sixty (60) days of the receipt of a notice from a Holder that
it intends to sell Registrable Securities during a Permitted Window, the Company
may defer the filing of the Form S-3 registration statement or delay the
commencement of a Permitted Window or may effect an early termination of a
Permitted Window that has commenced, as the case may be; provided however that
in the case of clause (A) or (B) above, that such deferral, delay or termination
shall expire upon the earlier of the termination of the existence of such
material development or other facts or forty-five days from the date such
certificate.
(iii) The obligations of the Company hereunder are conditioned
upon its being eligible to register its securities on Form S-3 at the time any
such registration is otherwise required hereunder; provided, however, that if
the Company ceases to be eligible to register its securities on Form S-3 at any
time during which any Holder would otherwise be entitled to sell Registrable
Securities pursuant to a registration in accordance with the terms of this
Agreement, the Company shall use its commercially reasonable efforts to become
eligible to register its securities on Form S-3 as soon as practicable.
(iv) At any time that the Company is obligated under this
Agreement to permit the Holders to sell Registrable Securities pursuant to a
registration statement on Form S-3, the Company may, instead of maintaining an
effective registration statement on Form S-3 for the benefit of the Holders,
include such Registrable Securities in a registration effected for the benefit
of the Company and/or other selling stockholders. In the event that such
registration is in connection with an underwritten offering, the Holders
participating in such registration shall enter into an underwriting agreement in
customary form with the managing underwriter selected by the Company,
-5-
<PAGE>
notwithstanding the provisions of Section 5(c).
(v) Notwithstanding anything to the contrary in this
Agreement, the Company shall have no obligation to effect a registration
hereunder, and no Permitted Window will exist, with respect to any Registrable
Securities during the time that such Registrable Securities are subject to the
escrow provisions of the Purchase Agreement (including any agreement which is an
exhibit thereto) or during the time that such Registrable Securities are subject
to an actual or contingent obligation to be returned to the Company or one of
its subsidiaries pursuant to Sections 2.5 and following of the Purchase
Agreement, and no Holder shall sell any such Registrable Securities pursuant to
a registration hereunder, or pursuant to Rule 144 or Rule 145, during any such
period.
(c) Underwriting. At the election of the Holders representing a
majority of the Registrable Securities that are proposed to be sold during a
Permitted Window (the "Deciding Holders"), all sales of Registrable Securities
under this Section 5 during such Permitted Window shall be made through an
underwriting managed by an underwriter selected by the Deciding Holders and
reasonably acceptable to the Company (the "Managing Underwriter"). The Company
shall, together with all Holders proposing to distribute their Registrable
Securities though such underwriting, enter into an underwriting agreement in
customary form with the Managing Underwriter. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such person may elect
to withdraw therefrom by written notice to the Company. Any Holder so
withdrawing shall not sell any Registrable Securities pursuant to a registration
effected under this Agreement until after the completion of such underwritten
distribution.
(d) Registration Procedures. In connection with any registration
required under this Agreement, the Company shall take the actions set forth
below.
(i) Prior to filing any registration statement, prospectus,
amendment or supplement with the Commission in connection with any registration
hereunder, the Company shall furnish to one counsel selected by the Holders of a
majority of the Registrable Securities copies of such documents.
(ii) The Company shall notify each Holder of any stop order
issued or threatened by the Commission and will take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
(iii) The Company shall comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by a
registration statement filed pursuant to this Agreement with respect to the
disposition of all Registrable Securities covered by such registration statement
in accordance with the intended methods of disposition by the Holders as set
forth in such registration statement.
(iv) The Company shall furnish to each Holder and each
underwriter, if
-6-
<PAGE>
any, of Registrable Securities covered by a registration statement filed
pursuant to this Agreement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits
thereto), and the prospectus included in such registration statement (including
each preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as a selling Holder may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Holder.
(v) The Company shall use its best efforts to register or
qualify the Registrable Securities under the securities or "blue sky" laws of
each State of the United States of America as any of the Holders or
underwriters, if any, of the Registrable Securities covered by a registration
statement filed hereunder reasonably requests, and shall do any and all other
acts and things which may be reasonably necessary or advisable to enable each
selling Holder and each underwriter, if any, to consummate the disposition in
such States of the Registrable Securities owned by such selling Holders;
provided that the Company shall not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subsection (v), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(vi) The Company shall immediately notify each Holder entitled
to sell Registrable Securities during a Permitted Window of the happening of any
event which comes to the Company's attention if, as a result of such event, the
prospectus included in the registration statement filed under this Agreement
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Company shall promptly
prepare and furnish to each Holder and file with the Commission a supplement or
amendment to such prospectus so that such prospectus will no longer contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(vi) The Company shall take all such other reasonable and
customary actions as each Holder or the underwriters, if any, may reasonably
request in order to expedite or facilitate the disposition of the Registrable
Securities in accordance with the terms of this Agreement.
(vii) The Company shall make available for inspection by the
Holders, any underwriter participating in any disposition pursuant to a
registration statement filed under this Agreement, and any attorney, accountant
or other agent retained by such Holders or underwriters, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, as such person may reasonably request for the purpose of
confirming that such registration statement does not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, provided that the Company obtains reasonably satisfactory
assurances that such information will be used solely for such purpose and will
be held in confidence
-7-
<PAGE>
(except to the extent that it is included in the registration statement). The
Company shall cause the officers, directors and employees of the Company and
each of its subsidiaries to supply such information and respond to such
inquiries as any Holder or underwriter may reasonably request or make for the
purpose of confirming that such registration statement does not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, provided that the Company obtains reasonably
satisfactory assurances that such information will be used solely for such
purpose and will be held in confidence (except to the extent that it is included
in the registration statement).
(ix) The Company shall use its commercially reasonable efforts
to obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as the Holders or the underwriters reasonably
request.
(x) The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as reasonably practicable, an
earnings statement covering a period (which may begin with the first fiscal
quarter ending after the effective date of the registration statement) of at
least twelve months after the effective date of the registration statement (as
the term "effective date" is defined in Rule 158(c) under the Securities Act),
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
(xi) The company shall use its best efforts to cause the Shares
to be listed on the same exchange and/or quotation system as its Common Stock is
traded generally.
6. Other Registration Rights. The Holders acknowledge that certain other
stockholders of the Company may now or hereafter have registration rights, and
that such other stockholders may be entitled to sell their securities at the
same time, or pursuant to the same registration and underwriting, as the Holders
hereunder.
7. Expenses of Registration. All Registration Expenses incurred in
connection with the Company's obligations hereunder shall be borne by the
Company. All Selling Expenses relating to securities proposed to be registered
hereunder shall be borne by the Holders of such securities pro rata on the basis
of the number of shares proposed to be sold by each of them during the
applicable Permitted Window.
8. Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors, members and partners, and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, with respect to which
registration has been effected pursuant to this Agreement, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including
-8-
<PAGE>
any of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act, the Exchange Act, state securities law or any rule or regulation
promulgated under the laws applicable to the Company in connection with any such
registration, and the Company will reimburse each such Holder, each of its
officers, directors members and partners, and each person controlling such
Holder, for any legal and any other expenses reasonably incurred, as such
expenses are incurred; in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder or controlling person, and stated to be
specifically for use therein; and provided further, that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any such
untrue statement, alleged untrue statement, omission or alleged omission made in
a preliminary prospectus, such indemnity agreement shall not inure to the
benefit of any person, if a copy of the final prospectus or an amended or
supplemented prospectus, as applicable, was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act, and if the final prospectus or the
amended or supplemented prospectus, as applicable, would have cured the defect
giving rise to the loss, liability, claim or damage. In no event, however, shall
the Company have any indemnification obligation to the extent that the expenses,
claims, losses, damages or liabilities as to which indemnification is sought are
in connection with an offer or sale made by a person other than the Company in
violation of the terms of this Agreement (a "Violation").
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which a registration hereunder is effected,
indemnify the Company, each of its directors and officers, each person who
controls the Company within the meaning of Section 15 of the Securities Act, and
each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on (i) a Violation by such Holder or (ii) any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or 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, and will reimburse the Company, such Holders, such directors,
officers or control persons for any legal or any other expenses reasonably
incurred, as such expenses are incurred, in connection with investigating or
defending any such claim, loss, damage, liability or action, but, in the case of
clause (ii) above, only to the extent that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with
-9-
<PAGE>
information furnished to the Company by such Holder in writing specifically for
use in a registration statement. Notwithstanding the foregoing, the liability of
each Holder under this subsection 5.7(b) shall be limited in an amount equal to
the initial public offering price of the shares sold by such Holder, unless such
liability arises out of or is based on a Violation or willful misconduct by such
Holder.
(c) Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or there are separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party (whose
consent may be withheld in each indemnified party's discretion), consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration hereunder shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration referred to in this Agreement.
10. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration the Company agrees to
use all reasonable efforts, at any time after the second anniversary of the
Effective Date, to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) So long as a Holder owns any Restricted Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting
-10-
<PAGE>
requirements of said Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
11. Transfer of Registration Rights. The rights to cause the Company to
register securities granted to Holders under Section 5 may be assigned to a
transferee or assignee reasonably acceptable to the Company in connection with
any transfer or assignment of Registrable Securities by the Holder, provided
that (i) such transfer is otherwise effected in accordance with applicable
securities laws and the terms of this Agreement, (ii) such assignee or
transferee acquires at least 75,000 shares of Registrable Securities (as
adjusted for stock splits, stock dividends, stock combinations and the like),
(iii) written notice is promptly given to the Company and (iv) such transferee
agrees to be bound by the provisions of this Agreement. Notwithstanding the
foregoing, the rights to cause the Company to register securities may be
assigned without compliance with item (ii) above to (x) any constituent equity
holder of a Holder which is a partnership, limited liability company, or a
corporation or (y) a family member or trust for the benefit of a Holder who is
an individual, or a trust for the benefit of a family member of such a Holder.
12. Amendment. Except as otherwise provided above, any provision of this
Agreement may be amended or the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and holders of two
thirds of the Registrable Securities.
13. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Delaware, without regard to conflict of laws
provisions.
14. Entire Agreement. This Agreement constitutes the full and entire
understanding and Agreement among the parties regarding the matters set forth
herein. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon the successors, assigns,
heirs, executors and administrators of the parties hereto.
15. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by facsimile
transmission, by hand or by messenger, addressed:
(a) if to a Holder, at such Holder's address as set forth below such
Holder's signature on this Agreement, or at such other address as such Holder
shall have furnished to the Company, with a copy to:
Mendelsohn Rosentzveig Shacter
1000 Sherbrooke West
27th Floor
-11-
<PAGE>
Montreal, Quebec, Canada
H3A 3G4
(b) if to the Company, to:
American Business Information, Inc.
5711 South 86th Circle
Omaha, NE 68127
Fax: (402) ____-______
Attn: Corporate Secretary
or at such other address as the Company shall have furnished to the Holders,
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Francis S. Currie, Esq.
Fax: (415) 493-6811
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by facsimile transmission, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
"THE COMPANY"
American Business Information, Inc.,
a Delaware corporation
By: _____________________________
Title: _____________________________
3319971 Canada Inc.,
a Canadian corporation
By: _____________________________
Title: _____________________________
Address: __________________________
__________________________
<PAGE>
Exhibit 10.13
AMERICAN BUSINESS INFORMATION, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made effective as
of September 10, 1996 (the "Effective Date"), by and among American Business
Information, Inc., a Delaware corporation (the "Company"), Digital Directory
Assistance, Inc., a Maryland corporation ("DDAI") and Claude M. Schoch, Robert
N. Snyder and Philip E. Hixon (each a "Shareholder" and collectively the
"Shareholders").
RECITALS
--------
A. The Company, the Company's wholly-owned subsidiary, American Business
Information Marketing, Inc., a Delaware corporation ("Buyer"), DDAI and the
Shareholders are parties to the Asset Purchase Agreement dated the date hereof
(together with the exhibits and schedules thereto, the "Purchase Agreement"),
pursuant to which Buyer is acquiring substantially all of the assets and certain
of the liabilities of DDAI.
B. As partial consideration for such acquisition, DDAI will receive 600,000
shares of Common Stock, $.0025 par value, of the Company (the "Shares"), subject
to certain escrow and other arrangements set forth in the Purchase Agreement.
C. Pursuant to the terms of the Purchase Agreement, DDAI may transfer some or
all of the Shares to the Shareholders.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, all parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Black-Out Period" means any period during which executive officers
and directors of the Company are prohibited from engaging in trades in the
Company's securities pursuant to the Company's Insider Trading Policy.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal rule or statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
<PAGE>
"Holder" means any of DDAI and the Shareholders, for so long as such
person holds any Registrable Securities, or any person holding Registrable
Securities to whom the rights under this Agreement have been transferred in
accordance with Section 11 hereof.
"Insider Trading Policy" means the policy adopted by the Company's
Board of Directors, as such may be amended from time to time, relating to
transactions in the Company's securities by the Company's executive officers and
directors, a copy of which shall be provided to each of the Shareholders within
7 days of the date hereof.
"Permitted Window" means the period during which a Holder entitled to
sell Registrable Securities pursuant to a registration statement under Section
5(a) of this Agreement, shall be permitted to sell Registrable Securities
pursuant to such a registration. Except as otherwise set forth in this
Agreement, a Permitted Window shall (i) commence upon the tenth business day
following receipt by the Company of a written notice from a Holder to the
Company that such Holder intends to sell Shares pursuant to such registration
statement, or such earlier date as the Company may agree to, and shall (ii)
terminate upon the commencement of a Black Out Period. Without the Company's
written consent, a Permitted Window shall not commence prior to the first
anniversary of the Effective Date.
"Registrable Securities" means the Shares and any Common Stock of the
Company issued or issuable in respect thereof upon any conversion, stock split,
stock dividend, recapitalization, merger or other reorganization; provided,
however, that securities shall only be treated as Registrable Securities if and
so long as they have not been registered or sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction.
"Register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" means all expenses, except as otherwise stated
below, incurred by the Company in complying with Section 5 hereof, including
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company).
"Restricted Securities" means the securities of the Company required
to bear a legend as described in Section 3 hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal rule or statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
-2-
<PAGE>
"Selling Expenses" means all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for any Holder.
2. Restrictions on Transferability. The Restricted Securities and any
other securities issued in respect of such securities upon any stock split,
stock dividend, recapitalization, merger or other reorganization, shall not be
sold, assigned, transferred or pledged except upon the conditions specified in
this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Holder or transferee will cause any
proposed purchaser, assignee, transferee, or pledgee of any such securities held
by the Holder or transferee to agree to take and hold such securities subject to
the restrictions and upon the conditions specified in this Agreement, including
without limitation the restrictions set forth in Section 4.
3. Restrictive Legend. Each certificate representing the Shares or any
other securities issued in respect of such securities upon any stock split,
stock dividend, recapitalization, merger or other reorganization shall be
stamped or otherwise imprinted with legends restricting the transferability
thereof, as described in the Purchase Agreement. Each Holder consents to the
Company making a notation on its records and giving instructions to any transfer
agent of its capital stock in order to implement the restrictions on transfer
established in this Agreement and the Purchase Agreement.
4. Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Without in any way limiting the
immediately preceding sentence or the provisions of Section 2, no sale,
assignment, transfer or pledge (other than (i) a sale made pursuant to a
registration statement filed under the Securities Act and declared effective by
the Commission or (ii) a sale made in accordance with the applicable provisions
of Rule 144 and Rule 145) of Restricted Securities shall be made by any holder
thereof to any person unless such person shall first agree in writing to be
bound by the restrictions of this Agreement, including without limitation this
Section 4. Prior to any proposed sale, assignment, transfer or pledge of any
Restricted Securities, unless there is in effect a registration statement under
the Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and, if requested by the Company, the holder shall also
provide, at such holder's expense, a written opinion of legal counsel (who shall
be, and whose legal opinion shall be, reasonably satisfactory to the Company)
addressed to the Company, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act and under applicable state securities laws and regulations. Upon delivery
to the Company of such notice and, if required, such opinion, the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of such notice. The Company agrees that it shall
not request such an opinion of counsel with respect to (i) a transfer not
involving a change in beneficial ownership, (ii) a transaction involving the
distribution without consideration of Restricted Securities by the holder to its
constituent equity
-3-
<PAGE>
holders in proportion to their equity holdings in the holder or (iii) a
transaction involving the transfer without consideration of Restricted
Securities by an individual holder during such holder's lifetime by way of gift
or on death by will or intestacy Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and counsel for the
Company, such legend is not required in order to establish or ensure compliance
with any provision of the Securities Act.
5. Registration on Form S-3.
-------------------------
Registration. The Company shall use its commercially reasonable
best efforts to cause a registration statement on Form S-3 covering all
Registrable Securities to be filed and declared effective no later than the
first anniversary of the date of this Agreement. The Company shall use its
commercially reasonable best efforts to keep such registration statement
effective until the fourth anniversary of the date of this Agreement, or such
earlier date upon which no Holder holds any Registrable Securities. Upon receipt
of a notice from any Holder that such Holder intends to sell Registrable
Securities during a Permitted Window, the Company shall, prior to the
commencement of the Permitted Window, inform the other Holders of the
commencement of the Permitted Window. The Company shall notify each of the
Holders of the termination of a Permitted Window no later than the time the
Company notifies its executive officers and directors of the corresponding
Black-Out Period; provided, however, that the Company need not notify the
Holders of regularly scheduled Black-Out Periods relating to the closing of the
Company's fiscal quarters.
(b) Limitations on Registration and Sale of Registrable Securities.
Notwithstanding anything in this Agreement to the contrary, the Company's
obligations and the Holders' rights under this Section 5 are subject to the
limitations and qualifications set forth below, which may be waived in writing
by the Company.
(i) The Company shall have no obligation to keep effective a
registration statement hereunder following such time as each Holder is eligible
to sell all of its Registrable Securities in a three month period under the
applicable provisions of Rule 144 and Rule 145.
(ii) The Holders will sell Registrable Securities pursuant to a
registration effected hereunder only during a Permitted Window.
(iii) Each of Robert N. Snyder and Philip E. Hixon may sell up
to 30,000 shares (and all Registrable Securities issued in respect thereof)
during any twelve-month period (with Messrs. Snyder's and Hixon's sales being
aggregated with the sale of their respective transferees for the purpose of
calculating such number).
(iv) Claude M. Schoch may sell up to 180,000 Shares (and all
Registrable Securities issued in respect thereof) during any twelve-month period
(with Mr.
-4-
<PAGE>
Schoch's sales being aggregated with the sales of his transferees for the
purposes of calculating such number).
(v) If the Company furnishes to the Holders a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company for a Form S-3 registration to be effected, or a Permitted Window to
be in effect, due to (A) the existence of a material development or potential
material development involving the Company which the Company would be obligated
to disclose in the prospectus contained in the Form S-3 registration statement,
which disclosure would in the good faith judgment of the Board of Directors be
premature or otherwise inadvisable, or (B) the existence of other facts or
circumstances as a result of which the prospectus contained or to be contained
in the Form S-3 registration statement includes or would include an untrue
statement of a material fact or omits or would omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made or then
existing, the Company may defer the filing of the Form S-3 registration
statement or delay the commencement of a Permitted Window or may effect an early
termination of a Permitted Window that has commenced, as the case may be. The
Company may elect to so defer, delay or terminate under clause (A) above only to
the extent that the event described in clause (A) also gives rise to a Black-Out
Period applicable to all of the Company's executive officers and directors under
the Company's Insider Trading Policy. If the Company elects to so defer, delay
or terminate under clause (B) above, the Company shall, subject to its
obligations under Section 5(d)(i), use its commercially reasonable best efforts
to amend the registration statement or take such other action as may be
necessary to eliminate the situation described in clause (B) as soon as
practicable. Any Holder receiving any notice from the Company with respect to
the matters covered by this Section 5(b)(v) shall keep the fact and content of
such notice, and the event or circumstances giving rise to such notice,
confidential.
(vi) The obligations of the Company hereunder are conditioned
upon its being eligible to register its securities on Form S-3 at the time any
such registration is otherwise required hereunder; provided, however, that if
the Company ceases to be eligible to register its securities on Form S-3 at any
time during which any Holder would otherwise be entitled to sell Registrable
Securities pursuant to a registration in accordance with the terms of this
Agreement, the Company shall use its commercially reasonable best efforts to
become eligible to register its securities on Form S-3 as soon as practicable.
(c) Underwriting. At the election of the Holders representing a
majority of the Registrable Securities that are proposed to be sold during a
Permitted Window (the "Deciding Holders"), all sales of Registrable Securities
under this Section 5 during such Permitted Window shall be made through an
underwriting managed by an underwriter selected by the Deciding Holders and
acceptable to the Company (the "Managing Underwriter"). The Company shall,
together with all Holders proposing to distribute their Registrable Securities
through such underwriting, enter into an underwriting agreement in customary
form with the
-5-
<PAGE>
Managing Underwriter. If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company. Any Holder so withdrawing shall not sell any
Registrable Securities pursuant to a registration effected under this Agreement
until after the completion of such underwritten distribution.
(d) Registration Procedures. In connection with any registration
required under this Agreement, the Company shall take the actions set forth
below.
(i) Prior to filing any registration statement, prospectus,
a mendment or supplement with the Commission in connection with any registration
hereunder, the Company shall furnish to one counsel selected by the Holders of a
majority of the Registrable Securities copies of all such documents, proposed to
be filed, which documents will be subject to review of such counsel.
(ii) The Company shall notify each Holder of any stop order
issued or threatened by the Commission and will take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
(iii) The Company shall comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by a
registration statement filed pursuant to this Agreement with respect to the
disposition of all Registrable Securities covered by such registration statement
in accordance with the intended methods of disposition by the Holders as set
forth in such registration statement.
(iv) The Company shall furnish to each Holder and each
underwriter, if any, of Registrable Securities covered by a registration
statement filed pursuant to this Agreement such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto), and the prospectus included in such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as a
selling Holder may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Holder.
(v) The Company shall use its commercially reasonable best
efforts to register or qualify the Registrable Securities under the securities
or "blue sky" laws of each State of the United States of America as any of the
Holders or underwriters, if any, of the Registrable Securities covered by a
registration statement filed hereunder reasonably requests, and shall do any and
all other acts and things which may be reasonably necessary or advisable to
enable each selling Holder and each underwriter, if any, to consummate the
disposition in such States of the Registrable Securities owned by such selling
Holders; provided that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise by
required to qualify but for this subsection (v), (B) subject itself to taxation
in any such jurisdiction or (C) consent to general service of process in any
such jurisdiction.
(vi) The Company shall immediately notify each Holder entitled
to sell Registrable Securities during a Permitted Window of the happening of any
event which comes to
-6-
<PAGE>
the Company's attention if, as a result of such event, the prospectus included
in the registration statement filed under this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the Company shall promptly prepare and furnish to each
Holder and file with the Commission a supplement or amendment to such prospectus
so that such prospectus will no longer contain any untrue statement of a
material fact or omit to state any material fact necessary to make the statement
therein, in light of the circumstances under which they were made, not
misleading.
(vii) The Company shall take all such other reasonable and
customary actions as each Holder or the underwriters, if any, may reasonably
request in order to expedite or facilitate the disposition of the Registrable
Securities in accordance with the terms of this Agreement.
(viii) The Company shall make available for inspection by the
Holders, any underwriter participating in any disposition pursuant to a
registration statement filed under this Agreement, and any attorney, accountant
or other agent retained by such Holders or underwriters, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, as such person may reasonably request for the purpose of
confirming that such registration statement does not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, provided that the Company obtains reasonably satisfactory
assurances that such information will be used solely for such purpose and will
be held in confidence (except to the extent that it is included in the
registration statement). The Company shall cause the officers, directors, and
employees of the Company and each of its subsidiaries to supply such information
and respond to such inquiries as any Holder or underwriter may reasonably
request or make for the purpose of confirming that such registration statement
does not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that the
Company obtains reasonably satisfactory assurances that such information will be
used solely for such purpose and will be held in confidence (except to the
extent that it is included in the registration statement).
(ix) The Company shall use its commercially reasonable best
efforts to obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as the Holders or the underwriters reasonably
request.
(x) The Company shall otherwise use its best commercially
reasonable best efforts to comply with all applicable rules and regulations of
the Commission, and make generally available to its security holders, as soon as
reasonably practicable, an earnings statement covering a period (which may begin
with the first fiscal quarter ending after the effective date of the
registration statement) of at least twelve months after the effective date of
the registration statement (as the term "effective date" is defined in Rule
158(c) under the
-7-
<PAGE>
Securities Act), which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
6. Other Registration Rights. The Holders acknowledge that certain
other stockholders of the Company may now or hereafter have registration rights,
and that such other stockholders may be entitled to sell their securities at the
same time, or pursuant to the same registration and underwriting, as the Holders
hereunder. The Company represents and warrants to the Holders that any such
rights of other stockholders will not diminish the rights of the Holders
hereunder, including without limitation the number of Registrable Securities
which the Holders are entitled to sell hereunder, or otherwise conflict with the
provisions of this Agreement.
7. Expenses of Registration. All Registration Expenses incurred in
connection with the Company's obligations, hereunder shall be borne by the
Company. Unless otherwise stated, all Selling Expenses relating to securities
proposed to be registered hereunder and all other registration expenses shall be
borne by the Holders of such securities pro rata on the basis of the number of
shares proposed to be sold by each of them during the applicable Permitted
Window.
8. Indemnification.
---------------
The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration
has been effected pursuant to this Agreement, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or any violation by the Company of the Securities Act, the Exchange
Act, state securities law or any rule or regulation promulgated under the such
laws applicable to the Company in connection with any such registration, and the
Company will reimburse each such Holder, each of its officers, directors and
partners, and each person controlling such Holder, for any legal and any other
expenses reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder or
controlling person, and stated to be specifically for use therein; provided,
however, that the foregoing indemnity Agreement is subject to the condition
that, insofar as it relates to any such untrue statement, alleged untrue
statement, omission or alleged omission made in a preliminary
-8-
<PAGE>
prospectus, such indemnity agreement shall not inure to the benefit of any
person, if a copy of the final prospectus or an amended or supplemented
prospectus, as applicable, was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act, and if the final prospectus or the amended or supplemented
prospectus, as applicable, would have cured the defect giving rise to the loss,
liability, claim or damage. In no event, however, shall the Company have any
indemnification obligation to the extent that the expenses, claims, losses,
damages, or liabilities as to which indemnification is sought are in connection
with an offer or sale made by a person other than the Company in violation of
the terms of this Agreement (a "Violation").
Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which a registration hereunder is effected,
indemnify the Company, each of its directors and officers, each person who
controls the Company within the meaning of Section 15 of the Securities Act, and
each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on (i) a Violation by such Holder or (ii) any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or 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, and will reimburse the Company, such Holders, such directors,
officers or control persons for any legal or any other expenses reasonably
incurred, as such expenses are incurred, in connection with investigating or
defending any such claim, loss, damage, liability or action, but, in the case of
clause (ii) above, only to the extent that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with information furnished to the Company by such Holder.
Notwithstanding the foregoing, the liability of each Holder under this
subsection 5.7(b) shall be limited in an amount equal to the initial public
offering price of the shares sold by such Holder, unless such liability arises
out of or is based on a Violation or willful misconduct by such Holder.
Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or there are separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party
-9-
<PAGE>
(whose consent shall not be unreasonably withheld), consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration hereunder shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall by required in connection with any
registration referred to in this Agreement.
10. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration the Company agrees to
use its commercially reasonable best efforts, at any time after the fourth
anniversary of the Effective Date, to:
Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act.
File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
So long as a Holder owns any Restricted Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as the Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing the Holder to sell any such securities
without registration.
11. Transfer of Registration Rights. The rights to cause the Company to
register securities granted to Holders under Section 5 may not be assigned.
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to transferees for whom the holding period under Rule
144 may be tacked onto that of the transferor.
12. Amendment. Except as otherwise provided above, any provision of this
Agreement may be amended or the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and each of the
Holders.
13. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Delaware, without regard to conflict of laws
provisions.
-10-
<PAGE>
14. Entire Agreement. This Agreement constitutes the full and entire
understanding and Agreement among the parties regarding the matters set forth
herein. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon the successors, assigns,
heirs, executors and administrators of the parties hereto.
15. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by facsimile
transmission, by hand or by messenger, addressed:
if to a Holder, at such Holder's address as set forth below such
Holder's signature on this Agreement, or at such other address as such Holder
shall have furnished to the Company.
if to the Company, to:
American Business Information, Inc.
5711 South 86/th/ Circle
Omaha, NE 68127
Fax: (402) 593-4584
Attn: Jon Wellman
or at such other address as the Company shall have furnished to the Holders,
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Francis S. Currie, Esq.
Fax: (415) 493-6811
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by facsimile transmission, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
"THE COMPANY"
American Business Information, Inc.,
a Delaware corporation
By: ___________________________________
Jon H. Wellman
Executive Vice President
"THE HOLDERS"
Digital Directory Assistance, Inc.,
a Maryland corporation
By: ____________________________________
Claude M. Schoch
President
Address: 6931 Arlington Road
Bethesda, MD 20814
________________________________________
Claude M. Schoch
Address: 7134 River Road
Bethesda, MD 20817
________________________________________
Robert N. Snyder
Address: c/o Cambridge Information Group
7200 Wisconsin Avenue
Bethesda, MD 20814
-12-
<PAGE>
________________________________________
Philip E. Hixon
Address: c/o Cambridge Information Group
7200 Wisconsin Avenue
Bethesda, MD 20814
-13-
<PAGE>
Exhibit 10.14
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Rights Agreement") is entered into
as of the 4th day of November, 1996 by and among each of the persons set forth
in Schedule 1 hereto (collectively referred to herein as "Shareholders") and
American Business Information, Inc. (the "Company").
Section 1. Definitions. Certain terms utilized in this Rights Agreement
shall have the meanings indicated herein:
"Commission" means the United States Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Registrable Securities" means the shares of the Company's Common Stock,
par value $.0025 per share, that have been issued to the Shareholders pursuant
to the terms of an Agreement and Plan of Reorganization, dated as of the date
hereof, by and among the Company, County Data Corporation, a Vermont
corporation, and the Shareholders. Registrable Securities shall not include, and
the Company shall have no obligation to keep effective a registration statement
hereunder with respect to, any such shares that are no longer subject to any
restrictions on transfer by the Shareholders pursuant to the applicable
provisions of Rules 144 or 145 under the Securities Act or which have been
registered or sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.
"Registration Expenses" means all expenses incurred by the Company in
connection with the registration of Registrable Securities pursuant to this
Rights Agreement, including (a) all registration and filing fees paid to the
Commission; (b) fees and expenses of compliance with state 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 the Company's officers and employees performing legal or accounting
duties); (e) the fees and expenses incurred in connection with any listing of
the Registrable Securities on the NASDAQ Stock Market or similar facility; (f)
fees and expenses of counsel for the Company and fees and expenses for
independent certified public accountants retained by the Company; and (g) the
reasonable fees and expenses of any special experts retained by the Company in
connection with such registration.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means all underwriting fees, discounts, commissions or
expenses attributable to any sale by a Shareholder of all or part of the
Registrable Securities.
Section 2. Registration on Form S-3. (a) The Company shall use its
commercially reasonable best efforts to cause a registration statement on
Form S-3 covering the resale (or pledge as collateral) by the Shareholders of
the Registrable Securities to be filed with Commission and declared effective
under the Securities Act by no later than March 1, 1997 and to keep such
registration statement effective under the Securities Act until the date which
is two
<PAGE>
(2) years from the date hereof, or such earlier date upon which no Shareholder
owns any Registrable Securities. If the Company is not eligible to register its
securities on Form S-3 at any such time, it shall use its commercially
reasonable best efforts to file such registration statement on a form (including
Form S-1) which it is eligible to use to register securities under the
Securities Act.
(b) Notwithstanding anything in this Rights Agreement to the contrary, if
the Board of Directors of the Company determines, in its sole discretion, that
it would be seriously detrimental to the Company for a Form S-3 registration to
be filed or become effective under the Securities Act due to (A) the existence
of a material development or potential material development involving the
Company which the Company would be obligated to disclose in the prospectus
contained in the Form S-3 registration statement, which disclosure would be
premature or otherwise inadvisable in the good faith judgment of the Board of
Directors, or (B) the existence of other facts or circumstances as a result of
which the prospectus contained or to be contained in the Form S-3 registration
statement includes or would include an untrue statement of a material fact or
omits or would omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made or then existing, the Company may defer
the filing or effective date of the Form S-3 registration statement to be filed
hereunder. If the Company elects to defer the filing or effective date of the
Form S-3 registration statement, it shall furnish prompt notice thereof to the
Shareholders, which notice shall specify the reason for the delay and the
estimated length of the delay, and will use its commercially reasonable best
efforts to amend the registration statement or take such other action as may be
necessary to allow for the filing or effectiveness of the registration statement
as soon as practicable. Shareholders receiving any notice from the Company with
respect to the matters covered by this Section 2(b) shall keep the fact and
content of such notice, and the event or circumstances giving rise to such
notice, confidential.
(c) In connection with the registration of Registrable Securities required
under this Rights Agreement, the Company shall take the actions set forth below:
(i) The Company shall notify each Shareholder of any stop
order issued or threatened by the Commission with respect to the
registration statement filed in connection therewith and will take all
reasonable actions required to prevent the entry of such stop order or to
remove it if entered.
(ii) The Company shall furnish to each Shareholder, such
number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto), and the
prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as a selling Shareholder may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Shareholder.
(iii) The Company shall use its commercially reasonable best
efforts to register or qualify the Registrable Securities under the
securities or "blue sky" laws of each state of the United States of America
as any Shareholder requests to the extent such request is deemed reasonable
by the Board of Directors of the Company in its sole discretion, and shall
do any and all other acts and things which may be reasonably necessary or
advisable to enable each selling Shareholder to consummate the disposition
in such states of the Registrable Securities owned by selling Shareholder;
provided that the Company shall not
2
<PAGE>
be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subsection
(iii), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction.
(iv) During any period in which a Shareholder is required to
deliver a prospectus in connection with the sale of Registrable Securities,
the Company shall immediately notify each Shareholder entitled to sell
Registrable Securities of the happening of any event which comes to the
Company's attention if, as a result of such event, the prospectus included
in the registration statement filed under this Rights Agreement contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Company shall promptly
prepare and furnish to each Shareholder and file with the Commission a
supplement or amendment to such prospectus so that such prospectus will no
longer contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that if the Board of Directors of the Company, in its sole
discretion, determines that the disclosure of such event would be seriously
detrimental to the Company, then the Company may defer the preparation of
such a supplement or amendment and, in such case, the Company shall furnish
prompt notice thereof to the Shareholders, which notice shall specify the
reason for the delay and the estimated length of the delay, and will use
its commercially reasonable best efforts to prepare and furnish such
amendment or supplement as soon as practicable. Shareholders receiving any
such notice from the Company shall (i) not sell or otherwise dispose of
Registrable Securities until such amendment or supplement to the prospectus
has been prepared and filed with the Commission and (ii) keep the fact and
content of such notice, and the event or circumstances giving rise to such
notice, confidential.
(v) The Company shall make available for inspection by the
Shareholders and any attorney, accountant or other agent retained by such
Shareholders all financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries, as such person may
reasonably request for the purpose of confirming that such registration
statement does not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
provided that the Company obtains reasonably satisfactory assurances that
such information will be used solely for such purpose and will be held in
confidence (except to the extent that it is included in the registration
statement). The Company shall cause the officers, directors and employees
of the Company and each of its subsidiaries to supply such information and
respond to such inquiries as any Shareholder or underwriter may reasonably
request or make for the purpose of confirming that such registration
statement does not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
provided that the Company obtains reasonably satisfactory assurances that
such information will be used solely for such purpose and will be held in
confidence (except to the extent that it is included in the registration
statement).
(vi) The Company shall otherwise use its commercially
reasonable best efforts to comply with all applicable rules and regulations
of the Commission, and make
3
<PAGE>
generally available to its security holders, as soon as reasonably
practicable, an earnings statement covering a period (which may begin with
the first fiscal quarter ending after the effective date of the
registration statement) of at least 12 months after the effective date of
the registration statement (as the term "effective date" is defined in Rule
158(c) under the Securities Act), which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
(vii) The Company shall use its commercially reasonable best
efforts (if the offering is underwritten) to furnish, at the request of any
Shareholder, on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such registration: (1) an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such Shareholder,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop
order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement, the
related prospectus, and each amendment or supplement thereof, comply as to
form in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need not express any opinion as to financial
statements contained therein) and (C) to such other effects as may
reasonable be requested by counsel for the underwriters or by such
Shareholder or his counsel; and (2) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such Shareholder, stating that they are independent
public accountants within the meaning of the Securities Act and that, in
the opinion of such accountants, the financial statements of the Company
included in the registration statement or prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including
information as to the period ending no more than five business days prior
to the date of such letter) with respect to the registration in respect of
which such letter is being given as such underwriters or such Shareholder
may reasonably request.
Section 3. Other Registration Rights. The Shareholders acknowledge that
certain other stockholders of the Company may now or hereafter have registration
rights, and that such other stockholders may be entitled to sell their
securities at the same time, or pursuant to the same registration statement, as
the Shareholders hereunder.
Section 4. Expenses of Registration. All Registration Expenses incurred
in connection with the Company's obligations hereunder shall be borne by the
Company. Unless otherwise stated, all Selling Expenses relating to securities
proposed to be registered hereunder and all other registration expenses shall be
borne by the Shareholders of such securities pro rata on the basis of the number
of shares proposed to be sold by each of them.
Section 5. Limitation on Timing of Sales. Notwithstanding the
registration of Registrable Shares pursuant to this Rights Agreement, Terry F.
Allen, Andrew F. Allen, Jared P. Allen and Seth W. Allen (the "Management
Shareholders") agree with the Company that they will not sell, assign or
otherwise dispose of Registrable Securities during any period in which executive
officers and directors of the Company are prohibited from engaging in trades in
the Company's securities pursuant to the Company's insider trading policy (a
"Black-out Period"). The Company will advise the Management Shareholders of the
commencement and termination
4
<PAGE>
of any Black-out Period no later than the time the Company notifies its
executive officers and directors thereof; provided, however, that the Company
need not notify the Management Shareholders of regularly scheduled Black-Out
Periods relating to the closing of the Company's fiscal quarters.
Section 6. Holdback Agreement. Each Management Shareholder agrees not to
effect any public sale or distribution of any security of the Company, including
a sale pursuant to Rule 144 or 145 under the Securities Act, during a period
beginning up to 14 days prior to the anticipated effective date and continuing
up to 180 days after the effective date of any registration statement filed by
the Company under the Securities Act, except as part of such registration, if
and to the extent requested in writing by the Company (in the case of a non-
underwritten public offering) or by the managing underwriter (in the case of an
underwritten public offering).
Section 7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each selling Shareholder and each person, if any, who controls such
selling Shareholder 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 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 (i) result from a breach
by the selling Shareholder of any of its obligations under this Rights Agreement
or (ii) arise out of, or are based upon, any such untrue statement or omission
or allegation thereof based upon information furnished to the Company by such
selling Shareholder or on such selling Shareholder's behalf; and provided,
further, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, the indemnity
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 or entities 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 persons
or entities 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 agrees to indemnify any underwriters of the
Registerable Securities, their officers and directors and each person who
controls such underwriters on terms consistent with industry standards in effect
at such time.
(b) Indemnification by Shareholders. Each selling Shareholder agrees to
indemnify and hold harmless the Company 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 Shareholder, but only with respect to losses,
claims, damages, liabilities or expenses which (i) result from a breach of such
selling Shareholders obligations under this Rights Agreement or (ii) arise out
of, or are based upon, information furnished in writing by such selling
Shareholder or on such selling Shareholder's behalf. Each seller Shareholder
agrees to indemnify and hold harmless the underwriters of the Registrable
Securities, their officers and directors and each person who controls such
underwriters on terms consistent with industry standards in effect at such time.
5
<PAGE>
(c) Contribution. If the indemnification provided for in this Section 7 is
unavailable to any indemnified parties in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each 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 Shareholders 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 Shareholders 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 Shareholders 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 Shareholder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each selling Shareholder in
connection with such statements or omissions, as well as any other relevant
equitable considerations.
Section 8. Miscellaneous. (a) Notices. All notices that are required
or may be given pursuant to the terms of this Rights Agreement shall be in
writing and shall be sufficient in all respects if given in writing and
delivered personally or by a recognized courier service or by registered or
certified mail, postage prepaid, to any party at its address set forth below,
with a copy of same by any of the authorized means to the indicated person or
persons:
If to Company: American Business Information, Inc.
Post Office Box 27347
5711 South 86th Circle
Omaha, NE 68127
Attention: Vinod Gupta and Jon H. Wellman
with a copy to: Kutak Rock
1650 Farnam Street
Omaha, NE 68102
Attention: Steven P. Amen, Esq.
If to a Shareholder: To the address set forth in Schedule 1
Any notice or other communication shall be deemed to have been given on the
day it is personally delivered or delivered by a recognized courier service as
aforesaid or, if mailed, on the fifth day after it is mailed. Any party may
change its address for notices or the person or persons authorized to receive
notices for it by providing notice to the other parties in accordance with this
Section.
(b) Invalidity of Provisions. If any provision of this Rights Agreement is
determined to be invalid, illegal or unenforceable, in whole or in part, then
the parties shall be relieved of all obligations arising under such provision to
the extent it is invalid, illegal or unenforceable, and such provision shall be
reformed to the extent necessary to make it legal and enforceable while
preserving its intent or, if that is not possible, by substituting therefor
another provision that is legal and enforceable and achieves the same
objectives.
6
<PAGE>
(c) Section Titles. All section titles and captions in this Rights
Agreement are for convenience only, shall not be deemed part of this Rights
Agreement and in no way shall define, limit, extend or describe the scope or
intent of any provisions of this Rights Agreement.
(d) Further Acts. The parties shall execute all documents, provide all
information and take all such actions as may be reasonably necessary or
appropriate to achieve the purposes of this Rights Agreement and to accomplish
the transactions contemplated hereby.
(e) Entire Agreement; Waiver. This Rights Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings relating to the subject
matter hereof. This Rights Agreement cannot be modified or amended except in
writing signed by the party against whom enforcement is sought. No waiver by a
party of any of the provisions of this Rights Agreement shall be deemed or shall
constitute a waiver of any other provision of this Rights Agreement, nor shall
any such waiver constitute a continuing waiver.
(f) Counterparts. This Rights Agreement may be executed in multiple
counterparts, all of which together shall constitute one agreement binding on
the parties hereto, notwithstanding that the parties are not signatories to the
same counterpart.
(g) Governing Law. This Rights Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Delaware and the United
States, as applicable, without giving effect to any conflict of laws provisions
that might result in the application of the laws of another jurisdiction.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of date first above written.
AMERICAN BUSINESS INFORMATION, INC.
By
---------------------------------
Its
--------------------------------
SHAREHOLDERS
-----------------------------------
Terry F. Allen
-----------------------------------
Andrew F. Allen
-----------------------------------
Jared P. Allen
-----------------------------------
Seth W. Allen
-----------------------------------
Winston Lewis
-----------------------------------
Brian L. O'Connell
-----------------------------------
Leslie P. Allen
8
<PAGE>
SCHEDULE 1
SHAREHOLDERS
<TABLE>
<CAPTION>
Shares of
Name/Address Company Stock
- - ------------ -------------
<S> <C>
Terry F. Allen 285,600
K-1 Gardenside Townhouses
Shelburne, VT 05482
Andrew F. Allen 44,800
1160 Old Stage Road
Westford, VT 05494
Jared P. Allen 44,800
P.O. Box 62
Winooski, VT 05404
Seth W. Allen 44,800
26 Grove Street
Burlington, VT 05401
Winston Lewis 67,200
152 DeForest Road
Burlington, VT 05401
Brian L. O'Connell 50,400
26 Harte Circle
Williston, VT 05495
Leslie P. Allen 22,400
26 Grove Street
Burlington, VT 05401
</TABLE>
<PAGE>
EXHIBIT 11
AMERICAN BUSINESS INFORMATION, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Average shares outstanding.............................. 21,033 20,738 20,678
Net additional common equivalent shares (1)............. 341 632 174
------- ------- -------
Average number of common and common equivalent
shares outstanding...................................... 21,374 21,370 20,852
======= ======= =======
Net income for per share computation (1)................ $ 3,819 $14,346 $12,824
======= ======= =======
Net income per average common and common
equivalent share outstanding............................ $ 0.18 $ 0.67 $ 0.62
======= ======= =======
</TABLE>
______________________________
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3 percent.
<PAGE>
EXHIBIT 21
AMERICAN BUSINESS INFORMATION, INC.
SUBSIDIARIES AND STATE OF INCORPORATION
American Business Communications, Inc.........................Delaware
BMI Medical Information, Inc..................................Delaware
County Data Corp..............................................Vermont
American Business Information Marketing, Inc..................Delaware
CD-ROM Technologies...........................................Delaware
Contacts Influential, Inc.....................................Delaware
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (File No. 33-59256) of American Business Information, Inc. of our
report dated January 24, 1997, on our audits of the consolidated financial
statements and financial statement schedule of American Business Information,
Inc. as of December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996, which report is included in this Annual Report
on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
March 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,497
<SECURITIES> 22,810
<RECEIVABLES> 30,293
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,775
<PP&E> 33,338
<DEPRECIATION> 14,452
<TOTAL-ASSETS> 108,576
<CURRENT-LIABILITIES> 20,097
<BONDS> 427
0
0
<COMMON> 55
<OTHER-SE> 87,997
<TOTAL-LIABILITY-AND-EQUITY> 108,576
<SALES> 0
<TOTAL-REVENUES> 108,298
<CGS> 0
<TOTAL-COSTS> 101,393
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209
<INCOME-PRETAX> 8,947
<INCOME-TAX> 3,400
<INCOME-CONTINUING> 5,547
<DISCONTINUED> 1,728
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,819
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
