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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
---------
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 1-11008
CATALINA MARKETING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0499007
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
11300 9TH STREET NORTH
ST. PETERSBURG, FLORIDA 33716-2329
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 579-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH
EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
Common Stock, $.01 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based on the closing price of such stock as of May 21, 1997,
as reported by the New York Stock Exchange, Inc., was $38.00. The number of
common shares, par value $0.01 per share, outstanding as of May 21, 1997, was
18,209,340.
DOCUMENTS INCORPORATED BY REFERENCE
Catalina Marketing Corporation Definitive Proxy Statement for
1997--Part III
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TABLE OF CONTENTS
FORM 10-K
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PAGE NO.
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PART I
Item 1 Business .................................................................. 1
Item 2 Properties ................................................................ 4
Item 3 Legal Proceedings ......................................................... 4
Item 4 Submission of Matters to a Vote of Security Holders ....................... 4
PART II
Item 5 Market for Registrant's Common Stock and Related Stockholder Matters ...... 4
Item 6 Selected Financial Data ................................................... 5
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations ................................................................ 5
Item 8 Consolidated Financial Statements and Supplementary Data .................. 9
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ................................................................ 24
PART III
Item 10 Directors and Executive Officers of the Registrant ........................ 24
Item 11 Executive Compensation .................................................... 24
Item 12 Security Ownership of Certain Beneficial Owners and Management ............ 24
Item 13 Certain Relationships and Related Transactions ............................ 24
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K ........... 24
</TABLE>
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PART I
ITEM 1. BUSINESS
General
Catalina Marketing Corporation and subsidiaries (Catalina Marketing, or
the "Company"), through its Catalina Marketing(R) Network, provides
manufacturers of consumer and pharmaceutical products and retailers with a
cost-effective method of delivering advertising messages and promotional
incentives directly to "targeted" consumers based on their purchasing behavior.
The Company helps manufacturers and retailers execute long-term marketing
strategies to build consumer loyalty, promote products, and increase brand
awareness and sales. The Company's principal operating units are Catalina
Marketing Services, Catalina Marketing International, Health Resource Publishing
Company, and Supermarkets Online. Additionally, in October 1996, the Company
purchased a 51% interest in a Japanese outdoor media company as part of the
planned commencement of electronic marketing services on a joint venture basis
in Japan. Catalina Marketing has 767 employees principally in the U.S. as well
as in the United Kingdom, France, Mexico and Japan.
The Catalina Marketing Network
Catalina Marketing, founded in 1983, developed a proprietary Electronic
Marketing Network designed to utilize the Universal Product Code ("UPC")
labeling convention and the widespread use of UPC scanning technology in retail
stores. The Company developed a technological capability to make coupon and
related promotion delivery more responsive to consumer behavior while
maintaining an advantage in terms of cost efficiency relative to alternative
methods. The Catalina Marketing Network provides manufacturers and retailers
with a high level of consumer targeting precision previously unavailable.
The Company's primary business is the delivery of promotions at the
checkout stand through the Catalina Marketing Network, which links the Company's
software, personal computers, central data bases and specially designed thermal
printers to point of scan controllers and scanning equipment. The system prints
promotion incentives based upon information generated at the point of sale, from
the purchased products' UPC. The Company's system evaluates scanner data,
matches it with manufacturer or retailer programmed promotions and directs the
thermal printer, which is located near the cash register, to print the
appropriate promotion or message. Printing occurs throughout the checkout
process and the promotions are handed directly to the shopper at the end of the
shopping transaction.
The Company enters into agreements with retail chains to install the
Catalina Marketing Network in all or selected stores, either regionally or
nationally. Upon installation, the retailer pays a one-time charge for each
installation and generally agrees to use the Catalina Marketing Network in its
stores for a minimum of five years. The Company pays distribution fees to the
retailer based upon the number of manufacturer promotions printed. The equipment
installed in each retail store includes a thermal printer at each checkout lane
linked by a central personal computer to the retailer's point of scan controller
and scanning equipment. One of the Company's two U.S. hub data processing
facilities communicates via modem with the personal computer installed in each
store to send new promotional instructions and to retrieve performance data. The
Company contracts with manufacturers and retailers to print promotions and
receives a fee for each promotion distributed.
All of the equipment and supplies necessary for operation of the
Catalina Marketing Network, including computer hardware, printers and paper, are
purchased by the Company from outside sources. The Company currently obtains
most or all of its requirements from two suppliers for each of these items,
except printers, for which there is one primary supplier. The Company believes
that, as required, alternate sources of supply are available for these items
without material interruptions of the Company's business.
The Catalina Marketing Network's design is flexible and easily
upgradable, and can support new applications developed by the Company. The
Network is driven by proprietary software. The system's flexibility permits the
Network to expand and to evolve as industry or customer requirements change.
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The Company, through its majority owned subsidiaries, provides in-store
electronic marketing services for consumers in the United Kingdom, Mexico,
France and Japan. As of March 31, 1997, the Company's network was in 941 retail
stores throughout the United Kingdom, Mexico and France. A test pilot program in
Japan is expected to commence in fiscal 1998.
Beginning in fiscal 1994 through March 31, 1997, the Company, through a
majority owned subsidiary, Catalina Electronic Clearing Services, Inc. ("CECS"),
operated a coupon clearing business. CECS utilized Catalina Marketing's existing
in-store network linked to scanners manufactured by Spectra-Physics Scanning
Systems, Inc. and others to electronically clear coupons. As of March 31, 1997,
CECS ceased offering electronic coupon clearing services due to operational
challenges and less than anticipated market demand.
In fiscal 1995, the Company formed Health Resource Publishing Company
("HRP") to develop a new application of the Company's patented, in-store
scanner-based technology. This application includes customized newsletters
targeted to pharmacy customers based on their individual prescription purchases.
The laser-printed publication offers medical condition-specific health
information and savings on related products. The Health Resource Publishing
Company newsletter is triggered by the National Drug Code found on all
prescription drugs. When a prescription is processed, a customized newsletter
with therapeutically relevant editorials and product advertising is printed at
the pharmacy counter on a standard laser printer and handed to the customer
along with the customer's filled prescription. As of March 31, 1997, the HRP
system is in 1,195 stores in the United States.
Services
The majority of services executed on the Catalina Marketing Network are
linked to the core Checkout Coupon(R) application. These include manufacturers'
coupons or other incentives delivered directly to targeted shoppers based on
their purchases of competitive products, the same products or complimentary
products. By specifying exactly which UPCs will trigger the printing of
promotions, manufacturers and retailers develop promotions bearing customized
messages and target them directly to shoppers they want to reach. The Company
offers manufacturers and retailers 13 four-week cycles annually for more than
500 product categories. These product categories are generally based on standard
industry classifications of household and consumer products available in
supermarkets, such as coffee, baby food and frozen entrees. The purchaser of a
particular category is given the exclusive right to have Checkout Coupons
printed for that category for each cycle purchased. The Company's policy
generally is to offer its manufacturer clients a right of first acceptance, for
a limited period of time, to purchase a national category cycle for each year
with respect to the identical category cycle which was purchased for the
immediately preceding year. The Company's U.S. Checkout Coupon programs
generated approximately 87 percent of the Company's revenues in fiscal 1997, 91
percent in fiscal 1996, and 95 percent in fiscal 1995.
The Company has developed several additional proprietary electronic
marketing products and program enhancements for the Catalina Marketing Network
that, combined with the Checkout Coupon programs, offer a broad range of
products that can satisfy all of the marketing objectives of a consumer goods
company and enable the Company's clients to impact every phase of the purchase
cycle--before, during and after the purchase. For example, the Checkout
Direct(R) program links the Catalina Marketing Network with a retailer's
check-cashing or other card-based shopper program allowing marketers to monitor
the buying patterns of specific households over time and issue promotions based
on those patterns. In addition, the Company actively assists, implements or
otherwise encourages retailer support to supplement manufacturer Checkout Coupon
programs with "tie-ins," such as newspaper advertising, posters and on-shelf
signs.
The Company's main revenue source is a function of total promotions
distributed based on a per-promotion charge, with a minimum category fee
determined with reference to the shopper reach of the Catalina Marketing
Network, and category unit volume. The minimum category fee is generally payable
to the Company prior to the commencement of the purchased cycle. The redemption
process of Checkout Coupon incentives is similar to that of regular
manufacturer coupons. Retailers provide discounts to consumers who present
coupons, then send redeemed coupons to clearinghouses and receive
reimbursements for the discounts provided, plus handling fees, from the
manufacturers.
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Sales and Marketing
Sales Force. The primary focus of the Company's marketing effort is to
attract national consumer product manufacturers to purchase category cycles. The
Company's sales and client service force focuses its services on current and
prospective customers by working with them to develop and execute customized,
targeted marketing programs that fit each brand's strategy and objectives.
Retailer Marketing. The Company's strategy has been to focus its retail
marketing efforts on installing its Network under contracts with the chain
retailers which have stores in major markets through the Company's retail sales
and service force. The Company encourages retailers to use Network-generated
incentives to promote private label brands or high margin departments, and
incorporate third-party "tie-ins."
At March 31, 1997, the Catalina Marketing Network was installed in
10,745 U.S. Checkout Coupon stores, which reach approximately 144 million
shoppers each week. Outside the United States, the Catalina Marketing Network
was installed in 941 stores, which reach approximately 18 million shoppers each
week.
Research and Development
The Company's expenditures for research and development are generally
for market research, software development, system upgrades and pilot-project
execution in order to create, test, and support new applications for the
Catalina Marketing Network. The Company believes that new service and
application development along with market expansion are vital to maintain the
Company's continued growth.
Competition
The Company competes for manufacturers' advertising and promotional
budgets with a wide range of alternative media, including television, radio,
print and direct mail advertising, as well as several alternative in-store and
point-of-sale programs. Within the coupon industry, the Company competes with
various traditional coupon delivery methods that are more widely accepted and
less expensive per delivered coupon, including free standing inserts (FSIs),
newspapers, direct mail, magazines and in or on-product packaging, as well as
other "in-store" marketing companies using a variety of coupon delivery methods.
The Company competes for promotional dollars based on the efficiency and
efficacy of the Catalina Marketing Network, its ability to accurately and
effectively target potential customers, the shopper "reach" of its network and
its general ability to influence consumer buying behavior, thereby enabling a
manufacturer or retailer to meet its strategic objectives and measure results
based on units moved versus number of coupons delivered.
Employees
The Company employed 767 persons (634 in the U.S.) as of March 31,
1997, substantially all of whom were full-time employees, and none of whom were
covered by a collective bargaining arrangement. Approximately 29 percent of the
Company's employees are located in the St. Petersburg, Florida headquarters.
Patents, Proprietary Information and Trademarks
The Company currently holds several United States and foreign patents
on certain aspects of the Catalina Marketing Network and its services and has
several patent applications pending. The Company believes that its patents
provide it with a competitive advantage and plans to defend its proprietary
rights vigorously in all appropriate circumstances. While the Company believes
that its patent position is important, it also believes that its ability to
market its services to retailers and manufacturers, and to develop new products
will be the major factor affecting its future performance.
The Company believes that product recognition is an important
competitive factor in the electronic marketing and promotion industry.
Accordingly, the Company promotes its service marks and trademarks in connection
with its marketing activities and has registered, and is in the process of
registering several marks. The Company also regards certain computer software
included in the Catalina Marketing Network and each additional service
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application as proprietary and seeks to protect it with copyrights, trade secret
laws and internal non-disclosure agreements and safeguards, as well as by other
means. Such methods may not afford complete protection and there can be no
assurance that others will not independently develop such know-how, concepts or
ideas.
ITEM 2. PROPERTIES
The Company's headquarters facility, which includes its principal
administrative, marketing, management information systems and product
development offices, is located in 65,207 square feet of leased space in St.
Petersburg, Florida. The Company leases an additional 18 sales and support
offices across the United States, consisting of approximately 101,500 square
feet in the aggregate and 4 offices for its foreign operations. The Company
believes that its existing facilities are adequate to meet current requirements
and that suitable additional space will be available as needed to accommodate
growth of its operations and additional sales and support offices for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
Catalina Marketing is involved in routine litigation incidental to the
normal course of business, including litigation initiated by the Company to
protect its intellectual property. In the opinion of management of Catalina
Marketing, the ultimate outcome of this litigation will not have a material
adverse effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
A. Market Prices of Stock
The Company's Common Stock, par value $0.01 per share ("Common Stock"),
is traded on the New York Stock Exchange ("NYSE") under the symbol POS. The
following table sets forth the high and low closing prices as reported by the
NYSE for the Common Stock of the Company for the quarters ended as follows:
<TABLE>
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HIGH LOW
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FISCAL 1997
March 31, 1997 ............... $59 3/8 $39
December 31, 1996 ............ $55 1/8 $46
September 30, 1996 ........... $53 7/8 $42 1/8
June 30, 1996 ................ $45 3/4 $36 3/16
FISCAL 1996:
March 31, 1996 ............... $40 3/8 $29 5/16
December 31, 1995 ............ $32 3/16 $24 3/4
September 30, 1995 ........... $31 $26 3/8
June 30, 1995 ................ $26 7/8 $21 1/8
</TABLE>
B. Stockholders
As of March 31, 1997, there were approximately 619 registered holders
of Company common stock.
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C. Dividends
The Company has not paid any cash dividends to date, and there are no
current plans to pay a cash dividend.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
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FISCAL YEAR ENDED MARCH 31,
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1997 1996 1995 1994 1993
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Revenues ........................................... $172,143 $134,155 $113,254 $ 91,448 $ 71,947
Costs and expenses:
Direct operating expenses ...................... 62,482 47,661 41,389 35,383 27,100
Selling, general and administrative ............ 48,379 37,358 28,616 26,093 23,266
Depreciation and amortization .................. 17,939 14,328 15,073 11,428 9,266
-------- -------- -------- -------- --------
Total costs and expenses ........................... 128,800 99,347 85,078 72,904 59,632
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Income from operations ............................. 43,343 34,808 28,176 18,544 12,315
Net income ......................................... $ 27,241 $ 22,028 $ 17,229 $ 12,670 $ 8,229
Net income per common and common equivalent share .. $ 1.33 $ 1.11 $ 0.86 $ 0.62 $ 0.41
Weighted average common and common equivalent
shares outstanding (in thousands) ................ 20,491 19,922 20,128 20,388 20,264
OTHER DATA:
U.S. Checkout Coupon stores installed at end of
period ........................................... 10,745 9,766 9,004 7,481 5,609
International Checkout Coupon stores installed at
end of period .................................... 941 558 168 137 --
Capital expenditures ............................... $ 34,687 $ 23,561 $ 20,301 $ 25,220 $ 12,183
BALANCE SHEET DATA:
Cash and cash equivalents .......................... $ 13,698 $ 25,778 $ 30,729 $ 26,863 $ 25,613
Property and equipment, net ........................ $ 69,578 $ 46,253 $ 37,440 $ 32,944 $ 20,424
Total assets ....................................... $154,696 $114,187 $ 96,556 $ 82,504 $ 60,961
Long term debt ..................................... $ 869 -- -- -- --
Total stockholders' equity ......................... $ 96,938 $ 71,222 $ 55,494 $ 44,858 $ 29,337
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements in the following paragraphs may be forward looking, and
actual results may differ materially. Statements not based on historical facts
involve risks and uncertainties, including, but not limited to, the changing
market for promotional activities, especially as it relates to policies and
programs of packaged goods manufacturers for the issuance of certain product
coupons, the effect of economic and competitive conditions and seasonal
variations, the success and timing of growth of the Company's international and
other ventures outside its core business, actual promotional activities and
programs with the Company's customers, the pace of installation of the Company's
Network, the timing and success of the introduction of new product and program
offerings by the Company, and the Company's ability to maintain favorable client
relationships with packaged goods manufacturers and retailers.
Overview
The Company provides in-store electronic marketing services. Through
its proprietary network, the Company provides manufacturers of consumer and
pharmaceutical products and retailers with cost-effective methods of delivering
promotional incentives and advertising messages directly to consumers based on
their purchasing behavior. These programs offer manufacturers and retailers 13
four-week cycles each year in which to offer highly targeted product promotions
or advertisements directly to consumers. Manufacturers and retailers may utilize
the Catalina Marketing Network to create and deliver ads and promotions on an
exclusive basis within any one of more than 500 product categories. Revenues
from the Checkout Coupon program vary directly with the total number of coupons
printed, subject to minimum category fees which are set based on the reach of
the Catalina Marketing Network and the level of unit sales within each category.
Additionally, in October 1996, the Company purchased a
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51% interest in a Japanese outdoor media company as part of the planned
commencement of electronic marketing services on a joint venture basis in Japan.
Results of Operations
Year Ended March 31, 1997 compared to Year Ended March 31, 1996
Revenues were $172.1 million in fiscal 1997, up 28 percent over
revenues of $134.2 million in fiscal 1996. The increase in revenues is primarily
due to a greater distribution of Checkout Coupon incentives worldwide. In the
U.S., the Catalina Marketing Network printed 2.31 billion promotions during
fiscal 1997, up 18 percent compared to fiscal 1996 (1.95 billion promotions).
Catalina Marketing Services contributed approximately $153.8 million of revenues
in fiscal 1997, up 22.4 percent over revenues of $125.6 million in fiscal 1996.
The greater distribution of Checkout Coupon promotions is attributable to the
broader reach of the Catalina Marketing Network and additional sales of category
cycles. In the U.S., the Catalina Marketing Network was in 10,745 stores at
March 31, 1997, which reach 144 million shoppers each week, as compared to 9,766
stores reaching 127 million shoppers each week at March 31, 1996.
Direct operating expenses consist of retailer fees, paper, sales
commissions and the expenses of operating and maintaining the Catalina Marketing
Network (primarily expenses relating to operations personnel and service
offices), provision for doubtful accounts and the direct expenses associated
with operating the outdoor media business in a majority-owned subsidiary in
Japan (purchased in October 1996). Direct operating expenses increased in
absolute terms to $62.5 million in fiscal 1997 from $47.7 million in fiscal
1996. Direct operating expenses in fiscal 1997 as a percentage of revenues
increased to 36.3 percent from 35.5 percent in fiscal 1996. This increase in
fiscal 1997 is principally attributable to the addition of the direct costs
associated with running the outdoor media business in Japan, expansion of the
HRP operating unit and costs associated with the discontinuance of CECS'
operations.
Selling, general and administrative expenses include personnel-related
costs of selling and administrative staff, overhead and new product development
expenses. Selling, general and administrative expenses in fiscal 1997 were $48.4
million, compared to approximately $37.4 million for fiscal 1996, an increase of
29.5 percent or $11 million. The increase relates primarily to higher costs
associated with a larger sales force, and administrative expenses of new
business ventures and products. As a percentage of revenues, selling, general
and administrative expenses increased 0.3 percent in fiscal 1997, to 28.1
percent from 27.8 percent for the comparable period of fiscal 1996.
Depreciation and amortization increased to $17.9 million for fiscal
1997 from $14.3 million for fiscal 1996. Depreciation increased due to the
increase in capital expenditures associated with new business ventures and was
partially offset by a decrease in depreciation expense on U.S. installed store
equipment. Amortization in fiscal 1997 includes approximately $0.5 million in
amortization of intangible assets arising from the purchase in the first quarter
of fiscal 1997 by the Company of the remaining 46 percent of its U.K. operation
from its minority stockholders.
The provision for income taxes increased to $17.9 million, 40% of
income before income taxes and minority interest, for fiscal 1997 compared to
$14.9 million, 41% of income before income taxes and minority interest, for the
same period in fiscal 1996. The Company's effective tax rate is higher than the
federal statutory tax rate due to state and foreign income taxes and the
inability to currently utilize losses of majority owned foreign subsidiaries for
tax purposes.
Year Ended March 31, 1996 compared to Year Ended March 31, 1995
Revenues were $134.2 million in fiscal 1996, up 18.5 percent over
revenues of $113.3 million in fiscal 1995. The increase in revenues is primarily
due to a greater distribution of Checkout Coupon incentives resulting from a
larger number of shopper transactions scanned by the Catalina Marketing Network
as well as increased
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manufacturer and retailer utilization of the available categories and cycles in
the Catalina Marketing Network. In the U.S., the Catalina Marketing Network
printed 1.95 billion promotions in fiscal 1996, up 11.8 percent compared to 1.75
billion promotions for fiscal 1995. Catalina Marketing Services contributed
approximately $125.6 million of revenues in fiscal 1996, up 15.3 percent over
revenues of $108.9 million in fiscal 1995. In the U.S., the Catalina Marketing
Network was in 9,766 stores at March 31, 1996, which reach 127 million shoppers
each week, as compared to 9,004 stores reaching 120 million shoppers each week
at March 31, 1995.
Direct operating expenses consist of retailer fees, paper and sales
commissions and the expenses of operating and maintaining the Catalina Marketing
Network (primarily expenses relating to operations personnel and service
offices) and provision for doubtful accounts. Direct operating expenses
increased to $47.7 million for fiscal 1996 from $41.4 million for fiscal 1995
but decreased as a percent of revenues to 35.5 percent from 36.5 percent,
respectively. This percent decrease is due primarily to economies in paper
purchasing.
Selling, general and administrative expenses include personnel-related
costs of sales and administrative staff, overhead and new product development
expenses. Selling, general and administrative expenses increased to $37.4
million in fiscal 1996 from $28.6 million for fiscal 1995 and increased as a
percent of revenues to 27.8 percent from 25.3 percent, respectively. This
increase is due primarily to higher costs associated with a larger sales force
and administrative expenses of new business ventures and products.
Depreciation and amortization decreased to $14.3 million for fiscal
1996 from $15.1 million in fiscal 1995. This decrease is due to the increase in
fully depreciated store equipment in fiscal 1996.
The provision for income taxes increased to $14.9 million, 41 percent
of income before income taxes and minority interest, for fiscal 1996 compared to
$11.3 million, 40.3 percent of income before income taxes and minority interest
for fiscal 1995. The Company's effective tax rate is higher than the federal
statutory tax rate due to state and foreign income taxes and the inability to
currently utilize losses of majority owned foreign subsidiaries for tax
purposes.
Quarterly Results
The following table presents certain unaudited quarterly results for
the last eight quarters (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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MAR 31, DEC 31, SEPT 30, JUNE 30, MAR 31, DEC 31, SEPT 30, JUNE 30,
1997 1996 1996 1996 1996 1995 1995 1995
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues .............................. $ 46,054 $ 46,344 $ 41,618 $ 38,127 $ 36,054 $ 36,546 $ 30,942 $ 30,613
Direct operating expenses ............. 18,428 16,055 14,863 13,136 12,544 13,033 11,142 10,942
Selling, general and administrative ... 13,372 12,195 11,658 11,154 10,922 10,635 8,140 7,661
Depreciation and amortization ......... 5,737 4,448 4,090 3,664 3,355 3,496 3,582 3,895
-------- -------- -------- -------- -------- -------- -------- --------
Income from operations ................ 8,517 13,646 11,007 10,173 9,233 9,382 8,078 8,115
Other income, net ..................... 378 273 341 232 479 286 435 209
Income taxes .......................... (3,631) (5,607) (4,371) (4,271) (4,391) (3,822) (3,277) (3,365)
Minority interest in losses of
subsidiaries ........................ 182 -- 212 160 282 107 98 179
-------- -------- -------- -------- -------- -------- -------- --------
Net income ............................ $ 5,446 $ 8,312 $ 7,189 $ 6,294 $ 5,603 $ 5,953 $ 5,334 $ 5,138
======== ======== ======== ======== ======== ======== ======== ========
Net income per common and common ...... $ .27 $ .40 $ .35 $ .31 $ .28 $ .30 $ .27 $ .26
======== ======== ======== ======== ======== ======== ======== ========
equivalent share
Weighted average common and common
equivalent shares outstanding ....... 20,539 20,635 20,608 20,432 20,238 19,840 19,728 19,870
======== ======== ======== ======== ======== ======== ======== ========
U.S. Checkout Coupon Business:
Stores at quarter end: ................ 10,745 10,741 10,470 10,085 9,766 9,465 9,197 9,049
Net stores installed during quarter: .. 4 271 385 319 301 268 148 45
Promotions printed (in millions): ..... 581 634 574 521 465 549 470 470
Weekly shopper reach at quarter end (in
millions): .......................... 144 141 136 135 127 126 122 122
</TABLE>
The Company expects its revenues to fluctuate in accordance with
periods of higher promotional activity by manufacturers. The pattern of coupon
distribution, however, is irregular and may change from period to period
depending on many factors, including the economy, competition, the timing of new
product introductions and the timing of manufacturers' promotion planning and
implementation. These factors, as well as the overall growth in
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the number of retailer and manufacturer contracts with the Company, tend to
influence the Company's revenues and profits.
Liquidity and Capital Resources
The Company's primary capital expenditures are store equipment and
third-party store installation costs, as well as data processing equipment in
the Company's hub data processing facilities. Total store equipment and
third-party store installation costs range from $5,000 to $13,000 per store.
During fiscal 1997 and 1996, the Company made capital expenditures of $34.7
million and $23.6 million, respectively. The pace of installations varies
depending on the timing of contracts entered into with retailers and the
scheduling of store installations by mutual agreement. During fiscal 1997, the
Company increased expenditures for data processing equipment, spending
approximately $5.7 million, and had a faster pace of store installations
compared to fiscal 1996. Catalina Marketing finances capital expenditures from
internally generated cash flows. Management believes that expenditures for
equipment and research and development will remain between $25 and $35 million
annually for the foreseeable future.
In fiscal 1997, the Company invested approximately $13.7 million for
the purchase of the remaining interest in its United Kingdom subsidiary,
utilizing both available cash and Company common stock. Additionally, on October
10, 1996, the Company purchased 51% of Pacific Media, K.K. (PMK), a Japanese
outdoor media company, for $3.0 million in initial cash consideration. Terms of
the purchase agreement call for the Company to make a series of three annual
payments, which are contingent upon the financial performance of PMK for the
1996, 1997 and 1998 calendar years. The first annual payment, to be made in May
1997, will be approximately $2 million.
During fiscal 1997 and 1996, management purchased $9.5 million and $11
million of Company common stock, respectively. As of March 31, 1997, management
received board approval to purchase an additional $40 million of Company common
stock subject to market conditions. As of April 22, 1997, the Company had
completed the $40 million share repurchase program having purchased 1.4 million
shares of Company common stock at a weighted average price of $28.50 per share.
The Company expects share repurchases to be an ongoing and regular part of its
financial strategy.
As of March 31, 1997, the Company had an unsecured revolving bank
credit facility under which it may borrow up to $30 million, and under which
there were no borrowings outstanding. On April 14, 1997, the Company
renegotiated this credit facility increasing its borrowing limit to $40 million.
This renegotiated facility expires on August 31, 1998 and provides for interest
at variable rates calculated with reference to the London Interbank Offering
Rate (LIBOR) or the bank prime rate for certain advances. In April 1997, the
Company borrowed approximately $19 million against this credit facility in
connection with the completion of the $40 million common stock repurchase
program referenced above.
On May 8, 1997, the Company announced that it has adopted a Stockholder
Protection Plan. To implement this plan, the Company has declared a dividend of
one Preferred Share Purchase Right on each outstanding share of the Company's
common stock. The dividend distribution was payable to stockholders of record on
May 12, 1997. The rights will be exercisable for fractions of a share of the
Company's Series X Junior Participating Preferred Stock only if a person or
group acquires 15% or more of the Company's common stock or announces or
commences a tender offer for 15% or more of the common stock, except for certain
instances defined in the Stockholder Protection Plan.
In accordance with coupon industry practice, the Company generally
pre-bills manufacturers prior to the commencement of the purchased category
cycle. The Company recognizes revenue as promotions are printed, and the amounts
collected prior to printing are reflected as deferred revenue, which is
classified as a current liability. The Company believes working capital
generated by operations is sufficient to repay short term borrowings and for its
capital requirements, although the Company may choose to utilize additional debt
or lease financing, if available, on acceptable terms.
8
<PAGE> 11
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . 10
Consolidated Income Statements, Years ended March 31,
1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . 11
Consolidated Balance Sheets at March 31, 1997 and 1996 . . . . . 12
Consolidated Statements of Stockholders' Equity, Years ended
March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . 13
Consolidated Statements of Cash Flows, Years ended March 31,
1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . 14
Notes to the Consolidated Financial Statements . . . . . . . . . 15
</TABLE>
9
<PAGE> 12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Catalina Marketing Corporation:
We have audited the accompanying consolidated balance sheets of Catalina
Marketing Corporation (a Delaware corporation) as of March 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended March 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Catalina
Marketing Corporation as of March 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
April 18, 1997
10
<PAGE> 13
CATALINA MARKETING CORPORATION
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $172,143 $134,155 $113,254
Costs and Expenses:
Direct operating expenses . . . . . . . . . . . . . . . 62,482 47,661 41,389
Selling, general and administrative . . . . . . . . . . 48,379 37,358 28,616
Depreciation and amortization . . . . . . . . . . . . . 17,939 14,328 15,073
-------- -------- -------
Total costs and expenses . . . . . . . . . . . . . 128,800 99,347 85,078
-------- -------- -------
Income From Operations . . . . . . . . . . . . . . . . . . . 43,343 34,808 28,176
Other Income (Expense), net . . . . . . . . . . . . . . . . . 1,224 1,409 (247)
-------- -------- -------
Income Before Income Taxes and Minority Interest . . . . . . 44,567 36,217 27,929
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 17,880 14,855 11,259
Minority Interest in Losses of Subsidiaries . . . . . . . . . 554 666 559
-------- -------- -------
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 27,241 $ 22,028 $17,229
======== ======== =======
Net Income per Common and Common Equivalent Share . . . . . . $ 1.33 $ 1.11 $ 0.86
======== ======== =======
Weighted Average Common and Common Equivalent Shares
Outstanding . . . . . . . . . . . . . . . . . . . . . . . 20,491 19,922 20,128
======== ======== ========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
11
<PAGE> 14
CATALINA MARKETING CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
-----------
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,698 $ 25,778
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . 28,367 26,725
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935 502
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,467 7,436
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . 11,282 4,850
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 61,749 65,291
---------- ----------
Property and Equipment:
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,913 792
Billboards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,107 --
Furniture and office equipment . . . . . . . . . . . . . . . . . . . . . . . 19,597 10,316
Store equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,546 99,367
---------- ----------
142,163 110,475
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . (72,585) (64,222)
---------- ----------
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 69,578 46,253
Purchased intangible assets, net . . . . . . . . . . . . . . . . . . . . . . 18,805 --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,564 2,643
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,696 $ 114,187
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,674 $ 10,832
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928 620
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,433 17,049
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,611 11,960
Short term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,820 --
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 53,466 40,461
---------- ----------
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,423 2,504
Long term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
869 --
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders' Equity:
Preferred stock; $.01 par value; 5,000,000 authorized shares; none issued and
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock; $.01 par value; 50,000,000 and 30,000,000 authorized shares, and
20,778,557 and 20,459,728 shares issued at March 31, 1997 and 1996, 208 205
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,770 34,079
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . 749 501
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,214 56,973
Less common stock in treasury, at cost (1,172,408 and 963,800 shares,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,003) (20,536)
---------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 96,938 71,222
---------- ----------
Total Liabilities and Stockholders' Equity . . . . . . . . . . . . . . . $ 154,696 $ 114,187
========== ==========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
12
<PAGE> 15
CATALINA MARKETING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------- CUMULATIVE TREASURY STOCK TOTAL
ISSUED PAR PAID-IN TRANSLATION RETAINED ----------------- STOCKHOLDERS'
SHARES VALUE CAPITAL ADJUSTMENT EARNINGS SHARES AMOUNT EQUITY
------ ------ -------- ---------- -------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1994 . . . . 19,708 $ 197 $ 26,942 $ 3 $ 17,716 -- $ -- $ 44,858
Proceeds from issuance of common
stock . . . . . . . . . . . . . 340 3 2,022 -- -- -- -- 2,025
Amortization of option-related
compensation . . . . . . . . . -- -- 142 -- -- -- -- 142
Tax benefit from exercise of
non-qualified stock options and
disqualified dispositions . . . -- -- 575 -- -- -- -- 575
Common stock repurchase . . . . . -- -- -- -- -- (448) (9,477) (9,477)
Translation adjustment . . . . . -- -- -- 142 -- -- -- 142
Net income . . . . . . . . . . . -- -- -- -- 17,229 -- -- 17,229
------ ---- -------- ---- -------- ------ --------- --------
BALANCE AT MARCH 31, 1995 . . . . 20,048 $ 200 $ 29,681 $145 $ 34,945 (448) $ (9,477) $ 55,494
Proceeds from issuance of common
stock . . . . . . . . . . . . . 412 5 2,652 -- -- -- -- 2,657
Amortization of option-related
compensation . . . . . . . . . -- -- 133 -- -- -- -- 133
Tax benefit from exercise of
non-qualified stock options and
disqualified dispositions . . . -- -- 1,613 -- -- -- -- 1,613
Common stock repurchase . . . . . -- -- -- -- -- (516) (11,059) (11,059)
Translation adjustment . . . . . -- -- -- 356 -- -- -- 356
Net income . . . . . . . . . . . -- -- -- -- 22,028 -- -- 22,028
------ ---- -------- ---- -------- ------ --------- --------
BALANCE AT MARCH 31, 1996 . . . . 20,460 $ 205 $ 34,079 $501 $ 56,973 (964) $ (20,536) $ 71,222
Proceeds from issuance of common
stock . . . . . . . . . . . . . 266 3 4,628 -- -- -- -- 4,631
Amortization of option-related
compensation . . . . . . . . . -- -- 202 -- -- -- -- 202
Tax benefit from exercise of
non-qualified stock options and
disqualified dispositions . . . -- -- 884 -- -- -- -- 884
Common stock repurchase . . . . . -- -- -- -- -- (208) (9,467) (9,467)
Deferred compensation plan
common stock units . . . . . . -- -- 189 -- -- -- -- 189
Issuance of common stock to
replace Catalina Marketing
U.K., Ltd. options . . . . . . 11 -- 157 -- -- -- -- 157
Issuance of common stock in
purchase of minority
shareholders of Catalina. . . . 42 -- 1,631 -- -- -- -- 1,631
Marketing U.K., Inc. . . . . .
Translation adjustment . . . . . -- -- -- 248 -- -- -- 248
Net income . . . . . . . . . . . -- -- -- -- 27,241 -- -- 27,241
------ ---- -------- ---- -------- ------ --------- --------
BALANCE AT MARCH 31, 1997 . . . . 20,779 $208 $ 41,770 $749 $ 84,214 (1,172) $ (30,003) $ 96,938
====== ==== ======== ==== ======== ====== ========= ========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
13
<PAGE> 16
CATALINA MARKETING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
------------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,241 $ 22,028 $17,229
Adjustments to reconcile net income to net cash provided by operating
activities:
Minority interest . . . . . . . . . . . . . . . . . . . . . . . (554) (666) (559)
Loss attributable to joint venture . . . . . . . . . . . . . . . -- -- 950
Depreciation and amortization . . . . . . . . . . . . . . . . . 18,264 14,461 15,215
Provision for doubtful accounts . . . . . . . . . . . . . . . . 1,197 1,307 572
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . 1,677 1,733 2,532
Deferred compensation plan common stock units . . . . . . . . . 189 -- --
Loss (gain) on sales of equipment . . . . . . . . . . . . . . . 4 (20) (407)
Changes in operating assets and liabilities, net of effects from
acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . (4,180) (11,460) (8,184)
Inventory, prepaid expenses and other assets . . . . . . . . . . (3,681) (3,698) 390
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 2,451 7,674 891
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . 180 408 (2,320)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 4,090 (33) (2,908)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . (2,611) (6,382) 5,644
-------- ------- -------
Net cash provided by operating activities . . . . . . . . . 44,267 25,352 29,045
-------- ------- -------
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (34,687) (23,561) (20,301)
Proceeds from sale of equipment . . . . . . . . . . . . . . . . . . . 82 440 1,253
Purchase of investments, net of cash acquired (18,028) (725) (357)
-------- ------- -------
Net cash used in investing activities . . . . . . . . . . . (52,633) (23,846) (19,405)
-------- ------- -------
Cash Flows From Financing Activities:
Proceeds from debt obligations . . . . . . . . . . . . . . . . . . . 1,138 -- --
Principal payments on debt obligations . . . . . . . . . . . . . . . (1,458) -- --
Proceeds from issuance of common and subsidiary stock . . . . . . . . 5,090 2,990 3,063
Tax benefit from exercise of non-qualified stock options and
disqualified dispositions . . . . . . . . . . . . . . . . . . . . 884 1,613 575
Payment for repurchase of company common stock . . . . . . . . . . . (9,467) (11,059) (9,477)
-------- ------- -------
Net cash used in financing activities . . . . . . . . . . . (3,813) (6,456) (5,839)
-------- ------- -------
Net Change in Cash and Cash Equivalents . . . . . . . . . . . . . . . (12,179) (4,950) 3,801
Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . . . . 99 (1) 65
Cash and Cash Equivalents, at beginning of year . . . . . . . . . . . 25,778 30,729 26,863
-------- ------- -------
Cash and Cash Equivalents, at end of year . . . . . . . . . . . . . . $ 13,698 $25,778 $30,729
======== ======= =======
Supplemental Schedule of Other Transactions:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70 -- --
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,463 $14,906 $10,331
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
14
<PAGE> 17
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting and financial policies
of Catalina Marketing Corporation and Subsidiaries (the "Company") which have
been followed in preparing the accompanying consolidated financial statements.
Certain prior balances have been reclassified to conform with the current year
presentation.
Description of the Business. The Company provides in-store electronic
marketing services. Through its proprietary network, the Company provides
consumer products manufacturers and retailers with cost-effective methods of
delivering promotional incentives and advertising messages directly to
consumers based on their purchasing behavior. Additionally, a majority-owned
subsidiary of the Company operates an outdoor media business in Japan. As of
March 31, 1997, the Company's network was installed in 10,745 retail stores and
1,195 pharmacies throughout the United States and 941 retail stores throughout
the United Kingdom, Mexico and France.
Principles of Consolidation and Preparation. The consolidated financial
statements include the accounts of the Company and its wholly-owned and
majority-owned subsidiaries. The preparation of financial statements in
conformity with generally accepted accounting principles requires the use of
management's estimates.
The accounts of the wholly-owned and majority-owned foreign subsidiaries
are included as of December 31, which is their fiscal year end. All material
intercompany profits, transactions and balances have been eliminated. The
Company's investment in non-majority owned companies is accounted for on the
equity method.
Fair Value of Financial Instruments. The book value of all financial
instruments approximates their fair value.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash and
short-term investments. The short-term investments can be immediately converted
to cash and are held at their market value.
Allowance for Doubtful Accounts. The Company records a provision for
estimated doubtful accounts as part of direct operating expenses. As of March
31, 1997 and 1996, the allowance for doubtful accounts was $1,613,000 and
$3,016,000, respectively.
Inventory. Inventory consists of paper used for promotion printing.
Inventory is stated at the lower of cost, as determined by the first-in,
first-out method, or market.
Property and Equipment. Store equipment, billboards, leasehold
improvements and furniture and office equipment are stated at cost.
Depreciation of store equipment, billboards and furniture and office equipment
is computed using the straight-line method based on the estimated useful lives
of the related assets (generally three to eight years). Third party
installation costs, net of amounts reimbursed by the retailer, are capitalized
and amortized using the straight-line method over the shorter of the estimated
useful lives of the assets or the remaining term of the related retailer
contract. Leasehold improvements are amortized using the straight-line method
over the shorter of the estimated useful lives of the assets or the remaining
term of the related lease. Maintenance and repair costs are expensed as
incurred.
Foreign Currency Translation. For foreign subsidiaries whose functional
currency is the local foreign currency, balance sheet accounts are translated
at exchange rates in effect at the end of the subsidiaries' year and income
statement accounts are translated at average exchange rates for the year.
Translation gains and losses are included as a separate component of
stockholders' equity.
15
<PAGE> 18
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition and Deferred Revenue. In accordance with coupon
industry practice, the Company generally pre-bills manufacturers for purchased
category cycles. The purchase of a category cycle gives a manufacturer the
exclusive right to have promotions printed for a particular product category
during the applicable period. The Company recognizes in-store electronic
marketing service revenues as promotions are printed. Amounts collected prior
to printing are reflected as deferred revenue until printing occurs.
Income Taxes. Provision for income taxes includes federal, state and
foreign income taxes currently payable. Deferred income taxes are provided for
temporary differences between the recognition of income and expenses for
financial reporting purposes and income tax purposes.
Research and Development. Research and development costs relating to the
development and testing of new service applications are expensed as incurred.
If a contractual agreement exists to complete a test program that will result
in a loss, the loss is recognized in the period it becomes known.
Net Income Per Common and Common Equivalent Share. Net income per common
and common equivalent share is based on the weighted average number of shares
of common stock outstanding and dilutive common equivalent shares from stock
options using the treasury stock method, effected for the two-for-one stock
split (see Note 8).
NOTE 2: SUPPLEMENTAL BALANCE SHEET INFORMATION
Prepaid expenses and other current assets include (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
------- ------
<S> <C> <C>
Prepaid billboard rental . . . . . . . . . . . . . . . . . . . $ 3,972 $ --
Investments in deferred compensation plan . . . . . . . . . . . 4,923 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,387 4,850
------- ------
Total prepaid expenses and other current assets . . . . . . $11,282 $4,850
======= ======
</TABLE>
Purchased intangible assets, net (see Note 7) include (dollars in thousands):
<TABLE>
<CAPTION>
USEFUL LIFE MARCH 31,
(IN YEARS) 1997
---------- ---------
<S> <C> <C>
Patent license and retailer relationships in the United Kingdom . . . 20 $12,691
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6,661
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . (547)
-------
Purchased intangible assets, net . . . . . . . . . . . . . . $18,805
=======
</TABLE>
In 1997 and 1996, other assets include approximately $0.3 and $0.7 million,
respectively of loans to employees.
Accrued expenses include (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Payroll related . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,262 $ 4,638
Deferred compensation plan . . . . . . . . . . . . . . . . . . . . . 4,832 3,324
Property, sales and use tax . . . . . . . . . . . . . . . . . . . . 2,349 2,558
Sales commissions . . . . . . . . . . . . . . . . . . . . . . . . . 1,798 1,290
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,192 5,239
------- -------
Total accrued expenses . . . . . . . . . . . . . . . . . . . . $22,433 $17,049
======= =======
</TABLE>
16
<PAGE> 19
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3: INCOME TAXES
Deferred income tax assets or liabilities are computed based on the
temporary differences between the financial statement and income tax bases of
assets and liabilities using the enacted marginal income tax rate in effect for
the year in which the differences are expected to reverse. Deferred income tax
expenses or credits are based on the changes in the deferred income tax assets
or liabilities from period to period.
Temporary differences for financial statement and income tax purposes
result primarily from charges to operations for financial statement reporting
purposes which are not currently tax deductible and revenues deferred for
financial statement reporting purposes which are currently taxable. The
components of the deferred tax asset and liability were as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31,
---------------
1997 1996
------ -------
<S> <C> <C>
Payroll related . . . . . . . . . . . . . . . . . . . $2,904 $2,287
Deferred revenue . . . . . . . . . . . . . . . . . . . 1,158 1,302
Provision for doubtful accounts . . . . . . . . . . . 670 1,176
Other . . . . . . . . . . . . . . . . . . . . . . . . 2,735 2,671
------ ------
Deferred tax asset . . . . . . . . . . . . . . . $7,467 $7,436
====== ======
Deferred tax liability--depreciation and amortization. $3,423 $2,504
====== ======
</TABLE>
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal . . . . . . . . . . $13,678 $11,516 $ 7,676
State . . . . . . . . . . . 1,877 1,236 1,038
Foreign . . . . . . . . . . 648 370 13
------- ------- -------
16,203 13,122 8,727
------- ------- -------
Deferred taxes:
Federal . . . . . . . . . . 1,629 1,555 2,193
State . . . . . . . . . . . 187 178 339
Foreign . . . . . . . . . . (139) -- --
------- ------- -------
1,677 1,733 2,532
------- ------- -------
Provision for income taxes . $17,880 $14,855 $11,259
======= ======= =======
</TABLE>
The reconciliation of the provision for income taxes based on the U.S.
federal statutory income tax rate to the Company's provision for income taxes
is as follows (dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31,
------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Federal statutory rate . . . . . . . . . . . . . . . . 35% 35% 35%
Expected federal statutory tax . . . . . . . . . . . . $15,792 $12,909 $ 9,971
State and foreign income taxes, net of federal benefit 1,829 1,257 576
Effect of foreign subsidiary losses . . . . . . . . . 744 522 250
Tax free municipal bonds . . . . . . . . . . . . . . . (245) (332) (187)
Other . . . . . . . . . . . . . . . . . . . . . . . . (240) 499 649
------- ------- -------
Provision for income taxes . . . . . . . . . . . $17,880 $14,855 $11,259
======= ======= =======
</TABLE>
17
<PAGE> 20
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4: SHORT TERM BORROWINGS AND LONG TERM DEBT
As of March 31, 1997, the Company's short term borrowings and long term
debt (all of which was incurred by the Company's majority-owned Japanese
subsidiary, and is payable in yen) consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
1997
---------
<S> <C>
Short term borrowings (including $1,309 current portion of long
term debt) with several Japanese banks and agents,
interest from 2.1% to 3.75%, maturing through December,
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,820
Long term debt with several Japanese banks, interest from 2.1%
to 3.75%, maturing through November, 2000 . . . . . . . . . . $ 869
</TABLE>
Short term borrowings and long term debt are personally guaranteed by
minority stockholders of Catalina-Pacific Media, L.L.C. and an employee of
Pacific Media, K.K. The Company indemnifies these minority stockholders and
employee for 51% of this debt.
Maturities of long term debt are as follows as of March 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
1990 . . . . . . 732
2000 . . . . . . 114
2001 . . . . . . 23
------
$ 869
======
</TABLE>
On January 15, 1996, the Company entered into an unsecured revolving bank
credit facility under which it may borrow up to $30 million, at variable rates
calculated with reference to the London Interbank Offering Rate (LIBOR) or the
bank prime rate for certain advances. There were no borrowings under this
credit facility as of March 31, 1997. On April 14, 1997, the Company expanded
this credit facility to $40 million and extended the term to August 31, 1998.
NOTE 5: COMMITMENTS AND CONTINGENCIES
Rental expense under operating leases was $1,622,000, $1,372,000 and
$1,208,000 for the years ended March 31, 1997, 1996 and 1995, respectively.
Future minimum rental commitments under operating leases with non-cancelable
terms of more than one year (the longest of which expires in 2003) as of March
31, 1997, are as follows: $2,225,000 in 1998, $1,929,000 in 1999, $739,000 in
2000, $694,000 in 2001, $654,000 in 2002 and $553,000 thereafter.
One manufacturer accounted for a total of approximately 11 percent of the
Company's revenues during the year ended March 31, 1995. No single
manufacturer accounted for 10 percent or more of the Company's revenues during
the years ended March 31, 1996 or March 31, 1997.
18
<PAGE> 21
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6: STOCK-BASED COMPENSATION PLANS
The Company has a stock option plan, the 1989 Incentive Stock Option Plan
(the "1989 Plan"); a stock grant plan, the Catalina Marketing Corporation 1992
Director Stock Grant Plan ("Grant Plan"); and an employee stock purchase plan,
the Employee Payroll Deduction Stock Purchase Plan (the "Purchase Plan").
1989 Incentive Stock Option Plan. The 1989 Plan was approved by the Board
of Directors in April 1989, and approved by the stockholders in July 1989.
Pursuant to the 1989 Plan, 4,500,000 shares of the Company's common stock are
reserved for issuance upon the exercise of options granted under the 1989 Plan.
Options to purchase an aggregate of 4,288,892 shares have been granted under
the 1989 Plan, of which options to purchase 2,115,420 shares were outstanding
on March 31, 1997.
The 1989 Plan provides for grants of Incentive Stock Options ("ISOs") to
employees (including employee directors). Options granted under the 1989 Plan
generally become exercisable at a rate of 25 percent per year (20 percent per
year for initial grants to new employees), commencing one year after the date
of grant and generally have terms of five to ten years. In 1994, the 1989 Plan
was amended to limit the term to six years. The exercise price of all ISOs
granted under the 1989 Plan must be equal to the fair market value of the
shares on the date of grant.
Aggregate Stock Option Activity. As of March 31, 1997, options to purchase
an aggregate of 1,604,368 shares had been exercised, including options to
purchase 10,000 shares granted outside of the 1989 Plan; options to purchase an
aggregate of 2,135,420 shares were outstanding, including options to purchase
20,000 shares outside of the 1989 Plan; and 790,712 shares remained available
for future grants under the 1989 Plan. Of the options outstanding at March 31,
1997 and at March 31, 1996, options to purchase 887,756 and 617,214 shares
were immediately exercisable, with weighted average exercise prices of $19.89
and $16.79, respectively.
Stock Option activity for the years ended March 31, 1995, 1996 and 1997 is
as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF SHARES OPTION PRICES
---------- --------------
<S> <C> <C>
Options outstanding at March 31, 1994 . . 1,491,698 $11.09
Option activity:
Granted . . . . . . . . . . . . . . 751,150 22.41
Exercised . . . . . . . . . . . . . (328,300) 5.52
Canceled or expired . . . . . . . . (84,014) 18.59
---------
Options outstanding at March 31, 1995 . . 1,830,534 16.37
Option activity:
Granted . . . . . . . . . . . . . . 760,632 25.59
Exercised . . . . . . . . . . . . . (404,792) 6.38
Canceled or expired . . . . . . . . (157,286) 21.78
---------
Options outstanding at March 31, 1996 . . 2,029,088 21.48
Option activity:
Granted . . . . . . . . . . . . . . 653,260 44.02
Exercised . . . . . . . . . . . . . (251,668) 15.93
Canceled or expired . . . . . . . . (295,260) 26.29
---------
Options outstanding at March 31, 1997 . . 2,135,420 28.37
</TABLE>
19
<PAGE> 22
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Grant Plan. The Grant Plan provides for grants of common stock to
non-employee board members. As of March 31, 1997, 24,454 shares have been
granted and 2,200 have been canceled leaving 77,746 shares available for future
grants under the Grant Plan. Stock granted under the Grant Plan vests ratably
in annual installments over each Director's remaining term.
Employee Stock Purchase Plan. In July 1994, the Purchase Plan was adopted
by the Board of Directors and approved by the stockholders. Pursuant to the
Purchase Plan, 300,000 shares of the Company's common stock were reserved for
issuance. For the fiscal years ended March 31, 1997, 1996 and 1995, 28,375,
22,464, and 10,852 shares were purchased, respectively.
Under the Purchase Plan, employees may purchase Company common stock at 85%
of the market price on the first or last day of an offering period. The maximum
each employee may purchase in an offering period shall not exceed $12,500 in
market value of Company common stock. The Company will typically have two six-
month offering periods each year. The Purchase Plan qualifies under Section 423
of the Internal Revenue Code of 1986.
The Company accounts for the option and stock purchase plans under APB
Opinion No. 25, under which no compensation cost has been recognized. The
Company adopted Statement of Financial Accounting Standards No. 123 (SFAS No.
123) for disclosure purposes in fiscal 1997. For SFAS No. 123 purposes, the
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in fiscal 1996 and 1997: risk-free interest rates
ranging from 5.26 to 6.86 percent depending on the date of grant; expected
dividend yield of zero percent; expected life of five years; and expected
volatility of 33.68 percent. The fair values of options granted in fiscal 1996
and 1997 are $6,859,229 and $10,289,789, respectively, which would be amortized
as compensation over the vesting period of the options.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------- ----------------------------------
Outstanding Weighted Average Exercisable
Range of as of Remaining Weighted Average as of Weighted Average
Exercise Prices March 31, 1997 Contractual Life Exercise Price March 31, 1997 Exercise Price
- --------------- -------------- ---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
$14.66 - $ 25.50 1,296,940 2.6 $20.63 824,856 $19.25
$25.87 - $ 53.50 838,480 4.6 $40.32 62,900 $28.34
--------- ------- ------
2,135,420 887,756 $19.89
</TABLE>
20
<PAGE> 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Had compensation cost for these plans been determined consistent with SFAS
No. 123, the Company's net income and earnings per share would have been
reduced to the following pro forma amounts (in thousands, except per share
data):
<TABLE>
<CAPTION>
MARCH 31,
-----------
1997 1996
-------- --------
<S> <C> <C> <C>
Net Income: As Reported $ 27,241 $ 22,028
Pro Forma $ 24,351 $ 20,953
Primary EPS: As Reported $ 1.33 $ 1.11
Pro Forma $ 1.19 $ 1.05
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to April 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
Additionally, the pro forma amounts include approximately $257,000, and
$142,000 related to the purchase discount offered under the Purchase Plan for
fiscal 1997 and 1996, respectively.
NOTE 7: ACQUISITIONS
On April 10, 1996, the Company purchased from its minority
stockholders the remaining 46% of Catalina Marketing UK, Inc. not owned by it
for $11.9 million cash consideration and 41,672 newly issued shares of Company
common stock. Catalina Marketing UK, Inc. owns all of the outstanding stock of
Catalina Marketing UK, Ltd., the United Kingdom operating company. The Company
also chose to replace existing options in the Catalina Marketing UK, Ltd. stock
option plan by issuing 12,845 shares of Company common stock to the Catalina
Marketing UK, Ltd. plan participants. The April 10, 1996 purchase has been
accounted for on the purchase method. The intangible assets recorded in
connection with the transaction primarily related to patent license and
retailer relationships (see Note 2).
If Catalina Marketing UK, Inc. had been 100% owned by the Company
during fiscal 1996 and 1995, net income and earnings per common and common
equivalent share would have been approximately $21.7 million or $1.09 per
share, and $16.6 million or $0.83 per share, respectively. The information in
the preceding sentence is unaudited.
On October 10, 1996, the Company purchased 51% of Pacific Media, K.K.
(PMK), a Japanese outdoor media company, for approximately $3.0 million in
initial cash consideration. As part of the transaction, the Company
contributed its PMK shares, and the selling stockholders contributed their
remaining PMK shares, to a newly established Delaware limited liability holding
company, Catalina-Pacific Media, L.L.C., which is now owned 51% by a subsidiary
of the Company. Terms of the purchase agreement call for the Company to make a
series of three annual payments, which are contingent upon the financial
performance of PMK for the 1996, 1997 and 1998 calendar years, respectively.
The subsidiary will introduce Checkout Coupon(R) and other electronic marketing
programs to Japan through a division to be called Catalina Marketing Japan
(CMJ), and is part of the continued international expansion of the Catalina
Marketing(R) Network. The October 10, 1996 purchase has been accounted for on
the purchase method.
21
<PAGE> 24
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8: TWO-FOR-ONE STOCK SPLIT
On June 10, 1996 the Company's Board of Directors declared a
two-for-one common stock split effected in the form of a stock dividend. The
record date for the stock dividend was June 24, 1996, and the payment date was
July 15, 1996. The financial statements and all other stock or option related
information provided herein have been restated to include the effects of the
stock split.
NOTE 9: SAVINGS PLANS
On June 1, 1992, the Company adopted a 401(k) Savings Plan (the "401(k)
Plan"). The Company is required to match employee contributions to the 401(k)
Plan. The match equals 100% of the first 2 percent of compensation the employee
contributes plus 25 percent of employee contributions between 2 percent and 4
percent of the compensation. The Company may also make discretionary
contributions. The Company's contributions during fiscal 1997 and 1996 were
$349,000 and $325,000, respectively.
On January 1, 1992, the Company adopted a non-qualified deferred
compensation plan (the "Deferred Compensation Plan"). The Deferred
Compensation Plan is designed to permit select employees and directors of the
Company to defer a portion of their compensation. Effective July 1, 1996, the
Deferred Compensation Plan was amended and restated allowing participants to
elect deferral of certain types of compensation , including directors fees,
stock grants under the Grant Plan and shares issuable upon the exercise of
stock options, into stock units (units in the Deferred Compensation Plan each
of which represents a share of Company common stock) and creating the Catalina
Marketing Corporation Deferred Compensation Trust (the "Trust"). Amounts
deposited in stock unit accounts are distributed in the form of shares of
Company common stock upon a payment event. Through the Trust, investment
options such as mutual funds and money market funds are available to
participants.
The Company accounts for its investments in the Deferred Compensation Plan
under Statement of Financial Accounting Standards No. 115 (SFAS No. 115). The
investment in the Deferred Compensation Plan and related liability are included
in prepaid expenses and other current assets and accrued expenses of the
consolidated balance sheets, respectively. The Company determined all of its
Deferred Compensation Plan investments currently held in mutual funds and money
market funds are trading securities as defined by SFAS No. 115 and as such are
reported at fair value. Stock units are also reported at fair value. Realized
and unrealized holding gains and losses related to these investments, as well
as the offsetting compensation expense, recognized in net income during fiscal
1997 were not significant.
22
<PAGE> 25
CATALINA MARKETING CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10: DOMESTIC AND FOREIGN INFORMATION
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
----------------------------------------------------
1997 1996 1995
--------------- ---------------- ---------------
(in thousands)
<S> <C> <C> <C>
REVENUES:
United States $158,105 $126,744 $108,962
United Kingdom 7,797 6,022 3,392
Japan 2,909 - -
Other Foreign 5,036 2,519 1,415
Foreign Eliminations (1,704) (1,130) (515)
--------------- ---------------- ---------------
$172,143 $134,155 $113,254
INCOME (LOSS) FROM OPERATIONS:
United States $46,359 $36,449 $29,828
United Kingdom 1,159 847 (219)
Japan (539) - -
Other Foreign (3,636) (2,488) (1,433)
--------------- ---------------- ---------------
$43,343 $34,808 $28,176
IDENTIFIABLE ASSETS AT FISCAL YEAR END:
United States $138,842 $110,024 $92,276
United Kingdom 20,703 6,162 4,514
Japan 16,354 - -
Other Foreign 11,209 6,140 1,884
Foreign Eliminations (32,412) (8,139) (2,118)
--------------- ---------------- ---------------
$154,696 $114,187 $96,556
</TABLE>
NOTE 11: EARNINGS PER SHARE UNDER SFAS NO. 128
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), effective
for financial statements ending after December 15, 1997. SFAS No. 128 replaces
the presentation of primary EPS with a presentation of basic EPS, requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. The effect of the adoption of SFAS
No. 128 on the accompanying financial statements will be as follows (in
thousands, except per share data):
<TABLE>
<CAPTION> FISCAL YEARS ENDED MARCH 31,
-----------------------------------------
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Net Income $27,241 $22,028 $17,229
PER SHARE AMOUNTS:
Earnings per share, as reported $1.33 $1.11 $0.86
Effect of SFAS No. 128 $0.06 $0.03 $0.02
------------ ------------ -------------
Basic Earnings per share $1.39 $1.14 $0.88
</TABLE>
23
<PAGE> 26
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.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Items 10, 11, 12 and 13 will be contained in
Catalina Marketing's definitive Proxy Statement for the Annual Meeting of
Stockholders under the captions "Compensation of Executive Officers and
Non-Employee Directors," "Share Ownership of Certain Beneficial Owners and
Management" and "Nomination and Election of Directors" and is incorporated
herein by this reference. The definitive Proxy Statement will be filed with the
Commission prior to August 30, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(a)1 Financial Statements. The following is a list of all the Consolidated Financial
Statements included in Item 8 of Part II.
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . 9
Consolidated Income Statements, Years Ended March 31, 1997, 1996 and 1995 . . . . 10
Consolidated Balance Sheets at March 31, 1997 and 1996 . . . . . . . . . . . . . 11
Consolidated Statements of Stockholders' Equity, Years Ended March 31, 1997, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Consolidated Statements of Cash Flows, Years Ended March 31, 1997, 1996 and 1995 13
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . 14
(a)2 Financial Statement Schedules.
All other schedules are omitted because they are not applicable or
not required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
</TABLE>
24
<PAGE> 27
(a)3 Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -------------------------
<S> <C>
*3.3 Restated Certificate of Incorporation
3.3.1 Certificate of Amendment of Certificate of Incorporation
3.3.2 Certificate of Designation, Preferences and Rights setting forth the terms of the Company's
Series X Junior Participating Preferred Stock, par value $.01 per share
*3.4 Restated Bylaws
**10.4 Amended and Restated 1989 Stock Option Plan, a copy of which is attached as an exhibit to the
Company's Annual Report on Form 10-K for the year ended March 31, 1994
*10.12 Form of Director and Officer Indemnification Agreement
**10.18 Lease Agreement dated as of June 30, 1993 by and between QP One Corporation, a Minnesota
corporation, as landlord, and Registrant, as tenant, a copy of which is attached as an exhibit to
the Company's Annual Report on Form 10-K for the year ended March 31, 1994
**10.18.1 First Amendment dated as of December 20, 1993, to the Lease Agreement dated as of June 30,
1993, by and between QP One Corporation, a Minnesota corporation, as landlord, and Registrant,
as tenant, a copy of which is attached as an exhibit to the Company's Annual Report on Form 10-K
for the year ended March 31, 1994
10.21 1992 Director Stock Grant Plan, as amended on July 23, 1996
**10.22 Employee Payroll Deduction Stock Purchase Plan, a copy of which is attached as an exhibit to the
Company's Annual Report on Form 10-K for the year ended March 31, 1995
**10.23 Credit Agreement dated as of January 15, 1996, by and between the Registrant and SunTrust Bank,
Tampa Bay, a copy of which is attached as an exhibit to the Company's Report on Form 10-Q for
the quarter ended December 31, 1995
10.23.1 First Amendment dated as of April 14, 1997, to the Credit Agreement dated as of January 15, 1996
by and between the Registrant and SunTrust Bank, Tampa Bay
10.24 Lease Agreement dated as of September 5, 1996 by and between Interior Design Services, Inc., a
Florida corporation, as landlord, and Registrant, as tenant
**10.25 Stockholder Protection Agreement, dated May 8, 1997, between the Registrant and ChaseMellon
Shareholder Services, L.L.C., as rights agent, a copy of which is attached as an exhibit to the
Company's Current Report on Form 8-K filed on May 8, 1997
21 List of subsidiaries.
23 Consent of independent certified public accountants
27 Financial Data Schedule (for SEC use only)
- --------
</TABLE>
* Incorporated by reference to the Company's Registration Statement on Form
S-1 Registration No. 33-45732, originally filed with the Securities and
Exchange Commission on February 14, 1992, and declared effective (as
amended) on March 26, 1992.
** Previously filed as indicated.
(b) Reports on Form 8-K: None
25
<PAGE> 28
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 be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of St.
Petersburg, State of Florida, on May 23, 1997
CATALINA MARKETING CORPORATION
(Registrant)
By: /S/ PHILIP B. LIVINGSTON
-------------------------
Philip B. Livingston,
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/S/ TOMMY D. GREER Chairman of the Board 5/23/97
- ------------------ -------
TOMMY D. GREER
/S/ GEORGE W. OFF Chief Executive Officer, President, 5/23/97
- ----------------- and Director (Principal Executive -------
GEORGE W. OFF and Operating Officer )
/S/ FRANK H. BARKER Director 5/23/97
- ------------------- -------
FRANK H. BARKER
/S/ FREDERICK W. BEINECKE Director 5/23/97
- ------------------------- -------
FREDERICK W. BEINECKE
/S/ PATRICK W. COLLINS Director
- ---------------------- 5/23/97
PATRICK W. COLLINS -------
/S/ STEPHEN I. D'AGOSTINO Director 5/23/97
- ------------------------- -------
STEPHEN I. D'AGOSTINO
/S/ THOMAS G. MENDELL Director 5/23/97
- --------------------- -------
THOMAS G. MENDELL
/S/ HELENE MONAT Director 5/23/97
- ---------------- -------
HELENE MONAT
/S/ THOMAS W. SMITH Director 5/23/97
- ------------------- -------
THOMAS W. SMITH
/S/ MICHAEL B. WILSON Director 5/23/97
- --------------------- -------
MICHAEL B. WILSON
/S/ PHILIP B. LIVINGSTON Senior Vice President and 5/23/97
- ------------------------ Chief Financial Officer -------
PHILIP B. LIVINGSTON
/S/ TAMARA L. ZEPH Corporate Controller and 5/23/97
- ------------------ Principal Accounting Officer -------
TAMARA L. ZEPH
</TABLE>
26
<PAGE> 1
EXHIBIT 3.3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CATALINA MARKETING CORPORATION
Catalina Marketing Corporation, a Delaware corporation (the
"Corporation"), pursuant to Section 242 of the General Corporation Law of
Delaware, certifies that:
FIRST: The Corporation's Board of Directors and stockholders
have adopted resolutions authorizing the following amendment to the
Corporation's Certificate of Incorporation as follows:
1. The Certificate of Incorporation of the Corporation is
hereby amended by deleting Article Fourth in its entirety and restating said
Article in its entirety as follows:
"A. The Corporation is authorized to issue two classes of shares
designated "Common Stock" and "Preferred Stock," respectively. The number of
shares of Common Stock authorized to be issued is 50,000,000, par value $.01
per share, and the number of shares of Preferred Stock authorized to be issued
is 5,000,000, par value $.01 per share.
B. The shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of the Corporation is hereby
authorized, by adopting appropriate resolutions and causing one or more
certificates of designation to be executed, acknowledged, filed, recorded and
to become effective in accordance with the GCL, 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, including but not
limited to the fixing or alteration of the dividend rights, dividend rate,
conversion rights, exchange rights, voting rights, rights and terms of
redemption (including sinking fund provisions), the redemption price or prices,
and the liquidation preferences of any wholly unissued series of shares of
Preferred Stock, or any of them; and to increase or decrease the number of
shares of any series subsequent to the issue of the shares of that series, but
not above the total number of authorized shares of Preferred Stock and not
below the number of shares of such series then outstanding. In case the number
of
<PAGE> 2
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series. Except as may
otherwise be required by law or this Certificate of Incorporation, the terms of
any series of Preferred Stock may be amended without the consent of the holders
of any other series of Preferred Stock or of Common Stock."
SECOND: The foregoing amendment to the Certificate of Incorporation
of the Corporation has been duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, Catalina Marketing Corporation, has caused this
Certificate to be signed and attested by its duly authorized officer this 23rd
day of July, 1996.
CATALINA MARKETING CORPORATION
By
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 3.3.2
CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES X JUNIOR PARTICIPATING PREFERRED STOCK
OF
CATALINA MARKETING CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, George W. Off, President and Chief Executive Officer, and
Barry A. Brooks, Secretary of CATALINA MARKETING CORPORATION, a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, as amended, of the said
Corporation, the said Board of Directors on April 22, 1997, adopted the
following resolution creating a series of 2,000,000 shares of Preferred Stock
designated as Series X Junior Participating Preferred Stock:
RESOLVED, that a series of the Corporation's
Preferred Stock consisting of 2,000,000 shares of
Preferred Stock, par value $.01 per share, be and hereby
is, designated as "Series X Junior Participating Preferred
Stock" (the "Series X Preferred Stock"), and that the
Series X Preferred Stock shall have the designations,
powers, preferences, rights and qualifications,
limitations and restrictions substantially as set forth in
the Certificate of Designation, Preferences and Rights of
Series X Junior Participating Preferred Stock (the
"Certificate") attached as Exhibit A.
This Certificate states that the Board of Directors does hereby
fix and herein state and express such designations, powers, preferences and
relative and other special rights and qualifications, limitations and
restrictions thereof as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein).
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series X Junior Participating Preferred Stock" (the "Series X
Preferred Stock") and the number of shares constituting such series shall be
2,000,000. Such number of shares of Series X Preferred Stock may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series X Preferred Stock to a number less
than the number of shares of
<PAGE> 2
Series X Preferred Stock then outstanding plus the number of shares of Series X
Preferred Stock reserved for issuance upon the exercise of outstanding options,
rights or warrants exercisable for, or upon the conversion of any outstanding
securities issued by the Corporation convertible into, Series X Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of preferred stock ranking prior and superior to the shares
of Series X Preferred Stock with respect to dividends, the holders of shares of
Series X Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
dividends payable in cash in an amount per share (rounded to the nearest cent),
subject to the provision for adjustment hereinafter set forth, equal to 100 (the
"Dividend Factor") times the aggregate per share amount of all cash dividends,
and the Dividend Factor times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions (other than a dividend payable
in shares of the Common Stock, par value $.01 per share, of the Corporation (the
"Common Stock") or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise)), declared on the Common Stock since the first
issuance of any share or fraction of a share of Series X Preferred Stock. In the
event the Corporation shall at any time after April 22, 1997 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Dividend Factor in the immediately preceding sentence shall be adjusted by
multiplying the Dividend Factor by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series X Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series X Preferred Stock from the date of declaration of
dividends on the Common Stock (other than a dividend payable in shares of Common
Stock). Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series X Preferred Stock in an amount less than the total amount
of such accrued dividends shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series X Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Series X
Preferred Stock shall have the following voting rights:
<PAGE> 3
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series X Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation
for each matter with respect to which the holders of Common Stock are entitled
to vote. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each case the
number of votes per share to which holders of shares of Series X Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series X Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as otherwise provided herein or provided by law, the
holders of shares of Series X Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever dividends or distributions payable on the Series X
Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series X Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other
distribution on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series X Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series X Preferred Stock, except dividends paid or
distributions made ratably on the Series X Preferred Stock and all
such stock ranking on a parity with respect to the particular
dividend or distribution in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series X Preferred Stock, provided that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the
Corporation ranking junior (both as to dividends and upon
dissolution, liquidation or winding up) to the Series X Preferred
Stock; or
<PAGE> 4
(iv) purchase or otherwise acquire for consideration any
shares of Series X Preferred Stock, or any shares of stock ranking
on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series X Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series X Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series X Preferred Stock unless, prior
thereto, the holders of shares of Series X Preferred Stock shall have received
$100 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series X Liquidation Preference"). Following the payment of the full amount of
the Series X Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series X Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Stock Liquidation Amount") equal to the quotient obtained by dividing
(i) the Series X Liquidation Preference by (ii) 100 (as appropriately adjusted
as set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series X Liquidation Preference and the Common Stock
Liquidation Amount in respect of all outstanding shares of Series X Preferred
Stock and Common Stock, respectively, holders of Series X Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series X Liquidation Preference and
the liquidation
<PAGE> 5
preferences of all other series of preferred stock, if any, which rank on a
parity with the Series X Preferred Stock, then such remaining assets shall be
distributed ratably to the holders of the Series X Preferred Stock and the
holders of such parity shares in proportion to their respective liquidation
preferences.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii)
combine the outstanding Common Stock into a smaller number of shares, (iv)
reclassify the Common Stock or (v) effect a recapitalization of the Common
Stock, then in each such case the Adjustment Number in effect immediately prior
to such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series X Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series X Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
SECTION 8. NO REDEMPTION. The shares of Series X Preferred Stock
shall not be redeemable.
SECTION 9. RANKING. The Series X Preferred Stock shall rank junior
to all other series of the Corporation's preferred stock, if any, as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise. Nothing in this Certificate shall limit the
power of the Board of Directors to create a new series of preferred stock
ranking senior to the Series X Preferred Stock in any respect.
SECTION 10. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series X
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of two-thirds or more of the outstanding shares of Series X
Preferred Stock, voting separately as a class.
<PAGE> 6
SECTION 11. FRACTIONAL SHARES. Series X Preferred Stock may be
issued in fractions of a share, which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series X Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this 8th day of May, 1997.
/s/George W. Off
------------------------
George W. Off, President
Attest:
/s/ Barry A. Brooks
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Barry A. Brooks, Secretary
<PAGE> 1
EXHIBIT 10.21
Final, As Amended
7/23/96
CATALINA MARKETING CORPORATION
1992 DIRECTOR STOCK GRANT PLAN
1. PURPOSE.
The Plan is intended to provide incentive to
outside directors of the Corporation, to encourage proprietary interest in the
Corporation, and to attract new outside directors with outstanding
qualifications.
2. DEFINITIONS.
Whenever the following terms are used in this
Plan, they shall have the meaning specified below unless the context clearly
indicates otherwise.
(a) "Act" shall mean the Securities Act of
1933, as amended.
(b) "Administrator" shall mean the Board or
the Committee, whichever shall be administering the Plan from time to time in
the discretion of the Board, as described in Section 4(a) of the Plan.
(c) "Annual Meeting Date" shall have the
meaning assigned to it in Section 6(e) hereof.
(d) "Board" shall mean the Board of
Directors of the Corporation.
(e) "Code" shall mean the Internal Revenue
Code of 1986, as amended.
(f) "Committee" shall mean the committee
appointed by the Board in accordance with Section 4(a) of
the Plan.
(g) "Common Stock" shall mean the Common
Stock, par value $.01 per share, of the Corporation.
(h) "Corporation" shall mean Catalina
Marketing Corporation, a Delaware corporation.
<PAGE> 2
(i) "Directors" shall mean, collectively,
all outside (non-employee) directors, duly elected to the Board by the
Corporation's stockholders or otherwise in accordance with the Corporation's
Bylaws, and all outside (non-employee) directors appointed to fill a vacancy or
a newly created directorship position of the Board.
(j) "Disability" shall mean the condition of
a Director who is unable to substantially fulfill his responsibilities as a
member of the Board by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve (12) months.
(k) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(l) "Fair Market Value" shall mean the value
of one (1) Share of Common Stock, determined as follows, without regard to any
restriction other than a restriction which, by its terms, will never lapse:
(i) If the Shares are traded on an exchange or
the National Market System (the "NMS") of the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"),
the last sale price as reported for composite transactions on the
date of valuation or, if no sales occurred on that date, then the
average of the highest bid and lowest asked prices on such
exchange or the NMS at the end of the day on such date;
(ii) If the Shares are not traded on an exchange
or the NMS but are otherwise traded over-the-counter, the average
of the highest bid and lowest asked prices quoted in the NASDAQ
system as of the close of business on the date of valuation, or,
if on such day such security is not quoted in the NASDAQ system,
the average of the representative bid and asked prices on such
date in the domestic over-the-counter market as reported by the
National Quotation Bureau, Inc., or any similar successor
organization; and
(iii) If neither (i) nor (ii) applies, the fair
market value as determined by the Administrator in good faith.
Such determination shall be conclusive and binding on all persons.
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<PAGE> 3
(m) "Grant" shall mean any stock award
granted pursuant to the Plan.
(n) "Grantee" shall mean a Director who has
received a Grant pursuant to Section 4(b) hereof.
(o) "Plan" shall mean this Catalina Market-
ing Corporation 1992 Director Stock Grant Plan, as it may be amended from time
to time.
(p) "Share" shall mean one (1) share of
Common Stock, adjusted in accordance with Section 8 of the Plan (if applicable).
(q) "Term of Directorship" shall have the
meaning assigned to it in Section 6(b) hereof.
(r) "Transition Grants" shall have the
meaning assigned to it in Section 6(c) hereof.
(s) "Valuation Date" shall have the meaning
assigned to it in Section 6(c) hereof.
(t) "Vested Shares" and "Non-Vested Shares"
shall have the meanings assigned to such terms in Section
6(e) hereof.
3. EFFECTIVE DATE.
The Plan was adopted by the Board effective
October 27, 1992, subject to the approval of the Corporation's stockholders
pursuant to Section 12 hereof.
4. ADMINISTRATION AND ELIGIBILITY.
(a) Administrator. The Plan shall be
administered, in the discretion of the Board from time to time, by the Board or
by the Committee. The Committee shall be appointed by the Board and shall
consist of not less than two (2) members of the Board. The Board may from time
to time remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board. The Board shall appoint
one of the members of the Committee as Chairman. The Administrator shall hold
meetings at such times and places as it may determine. Acts of a majority of the
Administrator at a meeting at which a quorum is present, or acts reduced to or
approved in writing by unanimous consent of the members of the Administrator,
shall be the valid acts of the Administrator.
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<PAGE> 4
The Administrator shall maintain a list of the
Directors who have been awarded Grants, and determine the number of Shares
granted to each Director in accordance with Section 6(b) hereof. Subject to the
express provisions of the Plan, the Administrator shall have the authority to
construe and interpret the Plan and to define the terms used in the Plan, to
prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The interpretation and
construction by the Administrator of any provisions of the Plan or of any Grant
granted thereunder shall be final. No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Grant awarded thereunder.
(b) Participation. The Grantees shall
consist exclusively of Directors of the Corporation; provided, however, that no
Director shall be eligible to be a Grantee if and to the extent that such
Director is prohibited from personally accepting or benefiting from a Grant
hereunder due to such Director's affiliation with a business organization;
provided further, however, that if at any time a Director who has not been
eligible under the Plan due to the immediately preceding proviso becomes
eligible to participate, such Director shall be treated as having been elected
to a term of less than three years at the time such Director becomes so
eligible, and at such time shall receive a Grant as though such Director had
been elected at such time, pursuant to Section 6(b) of the Plan. If a Director
is not eligible to be a Grantee due to the first proviso of the immediately
preceding sentence, then such Director shall be entitled to cash compensation of
$10,000 per year during the Term of Directorship, with such compensation to be
paid on a quarterly basis or as otherwise directed by the Administrator.
5. STOCK.
The stock subject to Grants awarded under the Plan
shall be Shares of the Corporation's authorized but unissued or reacquired
Common Stock. The aggregate number of Shares which may be issued upon exercise
of Grants under the Plan shall not exceed fifty thousand (50,000), subject to
the occurrence of any of the events specified in Section 8 hereof. The number of
Shares subject to additional Grants at any time shall not exceed the number of
Shares remaining available for issuance under the Plan. In the event that any
Shares subject to any outstanding grants for any reason
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<PAGE> 5
are forfeited and returned to the Corporation in accordance with Section 6(f) of
the Plan, the Shares so forfeited may again be subject to Grants.
6. TERMS AND CONDITIONS OF GRANTS.
(a) Stock Grant Agreements. Grants shall be
evidenced by written stock grant agreements in such form as the Administrator
shall from time to time determine. Such agreements need not be identical but
shall comply with and be subject to the terms and conditions set forth below.
(b) Award of Grants. A Grant shall be
awarded to each Director as of the day that such Director takes office following
the election or re-election of such Director by the stockholders or by the
Board, as permitted in the Corporation's Bylaws, in partial consideration for
the fulfillment by such Director of such Director's duties as a director of the
Corporation. Subject to the availability of Shares as specified in Section 5 of
the Plan, each Grant AWARDED ON OR AFTER JULY 25, 1995 SHALL INCLUDE AN
AGGREGATE OF ONE THOUSAND (1,000) SHARES (SUBJECT TO ADJUSTMENTS IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 8 HEREOF)*as of the effective date of the Grant,
as determined by the Administrator*/; provided, however, that if the term (the
"Term of Directorship") for which the Director has been elected is not a full
three-year term, the number of Shares subject to a Grant shall be the number of
Shares calculated as set forth above, multiplied by a fraction, the numerator of
which is the number of full months during which the Grantee shall serve as
director following the award of the Grant and until the next annual meeting of
stockholders (the "Annual Meeting of Stockholders") at which the class of
directors to which the Grantee belongs is to be elected (assuming for purposes
of this calculation that the Annual Meeting Date (as hereinafter defined) is
July 31 of such fiscal year), and the denominator of which is thirty-six (36),
rounded up to the nearest whole number of Shares.
(c) Grants Upon Adoption of Plan. Notwith-
standing any provision to the contrary herein, upon the final ratification of
the Plan by the Board, and subject to the approval by stockholders as
contemplated by Section 12 of the Plan, all persons who were Directors upon the
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* The language appearing in bold-face herein was adopted and certain other
language deleted by the Board on July 25, 1995 and approved by the stockholders
on July 23, 1996.
-5-
<PAGE> 6
adoption by the Board of the Plan (October 27, 1992) (the "Valuation Date") will
receive Grants ("Transition Grants") effective upon the date of such final
ratification calculated as follows:
(i) Class I Directors shall receive Grants which
shall include the number of Shares obtained by dividing $30,000 by
the Fair Market Value as of the Valuation Date, as determined by
the Administrator, rounded up to the nearest whole number of
Shares;
(ii) Class II Directors shall receive Grants
which shall include one-third (1/3) of the number of Shares to be
received by Class I Directors, rounded up to the nearest whole
number of Shares; and
(iii) Class III Directors shall receive Grants
which shall include two-thirds (2/3) of the number of Shares to be
received by Class II Directors, rounded up to the nearest whole
number of Shares.
(d) Number of Shares. Each Grant shall
state the number of Shares to which it pertains and shall provide for the
adjustment thereof in accordance with the provisions of Section 8 hereof.
(e) Vesting. Shares included in Grants
shall be subject to the vesting provisions herein set forth. Shares which have
vested according to the schedule set forth below shall be considered "Vested
Shares" and Shares which have not so vested shall be considered "Non-Vested
Shares." The Shares included in each Grant shall vest on the date of each
successive Annual Meeting of Stockholders of the Corporation (the "Annual
Meeting Date") following the effective date of the Grant. The number of Shares
subject to a Grant which shall become Vested Shares as of each Annual Meeting
Date shall be calculated by multiplying the number of Shares included in the
Grant by a fraction, the numerator of which is equal to the number of months
which have elapsed since the later of (i) the election or re-election of such
Director or (ii) the last Annual Meeting Date, and the denominator of which is
the number of full months during which the Grantee shall serve as director
following the award of the Grant and until the next Annual Meeting of
Stockholders at which the class of directors to which the Grantee belongs is to
be elected (assuming for purposes of this calculation that the Annual Meeting
Date is July 31 of such fiscal year); provided, however, in the case of
Transition Grants, Directors shall be deemed to have
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<PAGE> 7
completed twelve (12) months of service as a Director on the Annual Meeting
Date. If no Annual Meeting of Stockholders shall have occurred in any fiscal
year on or before July 31 of such fiscal year, then unless the Board shall have
adopted a resolution adopting an alternative date, July 31 shall be considered
to be the Annual Meeting Date.
(f) Restrictions on Non-Vested Shares. A
Grantee may not assign, sell, pledge, hypothecate or otherwise transfer any
Grant or any Non-Vested Shares. If a Grantee ceases to be a Director for any
reason or no reason, including upon death or Disability, removal (with or
without cause) or resignation, the Grant shall be automatically terminated
immediately upon the effective date of such cessation and all Shares included in
Grants which are Non- Vested Shares as of the effective date of such cessation,
shall be forfeited automatically and shall, effective immediately upon such
cessation, be returned to the status of authorized to be issued pursuant to
Grants under the Plan. In the discretion of the Administrator, the Corporation
may devise any mechanism reasonable for the purpose of enforcing the
restrictions and limitations on Non-Vested Shares. In the absence of any other
such mechanism, the Corporation may retain possession of any certificates
representing Non-Vested Shares, but shall cause certificates representing Shares
which have become Vested Shares registered in the name of the Grantee to be
delivered to the Grantee entitled to the same promptly following the time at
which such Shares become Vested Shares as herein described.
(g) Rights as a Stockholder. Except as
provided in Section 6(f) of the Plan, a Grantee shall have and enjoy all rights
as a stockholder with respect to all Shares included in the Grant, regardless of
whether the Shares awarded are Vested or Non-Vested, including, without
limitation, the right to vote any such Shares, the right to receive all
communications addressed by the Corporation to its stockholders, and the right
to receive dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights as provided in the Certificate of
Incorporation or Bylaws of the Corporation. Notwithstanding any provision
hereof, a Director may not transfer any Shares received pursuant to a Grant for
a period of six (6) months immediately following the effective date of the
Grant.
(h) Payment of Taxes; Related Matters. In
the event the Corporation determines it is required to
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<PAGE> 8
withhold state, local or Federal income tax as a result of the grant of a Grant
or the vesting of any Shares subject to a Grant, the Corporation may require a
Grantee to make arrangements satisfactory to the Corporation to enable it to
satisfy such withholding requirements. Payment of such withholding requirements
may be made, in the discretion of the Administrator, (i) in cash, (ii) by
delivery of Shares registered in the name of the Grantee, or by the Corporation
not issuing such number of Shares subject to the Grant having a Fair Market
Value at the effective date of the Grant or the date of such vesting equal to
the amount to be withheld, or (iii) any combination of (i) and (ii) above. An
election under the preceding sentence may only be made during the period
beginning on the third business day following the date of release of quarterly
and annual summary statements of sales and earnings as provided by Rule
16b-3(e)(3)(iii) (or Rule 16b-3(e)(3) following the scheduled amendment of Rule
16b-3) of the Securities and Exchange Commission and ending on the twelfth
business day following such date and only if such period occurs before the date
the Corporation requires payment of the withholding tax. The election need not
be made during the ten-day window if (a) it is made at least six (6) months
prior to the date of the Grant or (b) counsel to the Corporation determines that
compliance with such requirement is unnecessary.
THE STOCK GRANT AGREEMENTS SHALL APPRISE THE
GRANTEE OF THE TAX CONSEQUENCES TO THE GRANTEE OF SECTION 83 OF THE CODE
(INCLUDING THE TAX CONSEQUENCES TO THE GRANTEE OF FILING OF AN ELECTION PURSUANT
TO SECTION 83(b) OF THE CODE), AND SHALL ALLOCATE THE RESPONSIBILITY FOR
RECEIVING APPROPRIATE ADVICE WITH RESPECT THERETO TO THE GRANTEE.
(i) DEFERRAL OF GRANT. PRIOR TO HIS OR HER
ELECTION OR RE-ELECTION TO THE BOARD OF DIRECTORS, EACH DIRECTOR MAY ELECT TO
DEFER, IN ACCORDANCE WITH THE TERMS OF THE CORPORATION'S DEFERRED COMPENSATION
PLAN, ALL OR A PORTION OF THE GRANT HE OR SHE SHALL RECEIVE IF ELECTED OR
RE-ELECTED, PURSUANT TO SECTION 6(B). IN SUCH CASE, NO SHARES WILL BE ISSUED TO
THE DIRECTOR AND A CREDIT WILL BE MADE TO THE COMMON STOCK UNIT ACCOUNT
MAINTAINED FOR SUCH DIRECTOR UNDER THE DEFERRED COMPENSATION PLAN IN A NUMBER OF
UNITS EQUAL TO THE NUMBER OF SHARES DEFERRED ON THE DATE OF GRANT.**
- --------
** The language appearing in bold-face herein was adopted by the Board of
Directors on April 30, 1996 and approved by the stockholders on July 23, 1996.
-8-
<PAGE> 9
(j) Other Provisions. The stock grant
agreements authorized under the Plan may contain such other provisions not
inconsistent with the terms of the Plan (including, without limitation,
restrictions upon the transfer of Shares of stock following the award of the
Grant) as the Administrator shall deem advisable.
7. TERM OF PLAN.
Grants may be awarded pursuant to the Plan until
the expiration of the Plan on October 27, 2002.
8. RECAPITALIZATIONS AND OTHER TRANSACTIONS.
Subject to any required action by stockholders,
the aggregate number of Shares covered by the Plan as provided in Section 5
hereof and the number of Shares covered by each Grant shall be proportionately
adjusted for any increase or decrease in the number of issued Shares resulting
from a stock split, stock dividend (but only of Common Stock), combination of
shares or any other change, by reclassification, reorganization, redesignation,
recapitalization or otherwise, or any other increase or decrease in the number
of issued Shares effected without receipt of consideration by the Corporation.
If any such adjustment results in a fractional share, such fraction shall be
disregarded.
Subject to any required action by stockholders, if
the Corporation shall merge with another corporation and the Corporation is the
surviving corporation in such merger and under the terms of such merger the
shares of Common Stock outstanding immediately prior to the merger remain
outstanding and unchanged, each outstanding Grant shall continue to apply to the
Shares subject thereto, and any Shares awarded pursuant to a Grant prior to a
merger, which have yet to fully vest in accordance with the schedule set forth
in Section 6(e) of the Plan, shall continue to be subject to the same vesting
schedule. In addition, in the event of a merger where the Corporation is the
surviving corporation, each outstanding Grant shall also pertain and apply to
any additional securities and other property, if any, to which a holder of the
number of Shares subject to the Grant would have been entitled as a result of
the merger. If the Corporation sells all, or substantially all, of its assets,
or the Corporation merges (other than a merger of the type described in the
immediately preceding sentence) or consolidates with another corporation (SUCH
EVENT BEING A
-9-
<PAGE> 10
"FORFEITURE EVENT,")***, this Plan and each outstanding Grant shall terminate
and each Non-Vested Share awarded hereunder pursuant to a Grant shall be
forfeited; PROVIDED, HOWEVER, THAT UNLESS THE CONSUMMATION OF THE FORFEITURE
EVENT TAKES PLACE WITHIN THIRTY (30) DAYS FOLLOWING AN ANNUAL MEETING DATE, IN
THE EVENT OF A FORFEITURE EVENT, ANY SHARES THAT WOULD HAVE BECOME VESTED SHARES
AT THE NEXT SUCCEEDING ANNUAL MEETING DATE FOLLOWING THE CONSUMMATION OF THE
FORFEITURE EVENT SHALL BE VESTED SHARES UPON AND FOR A PERIOD OF THIRTY (30)
DAYS PRECEDING THE CONSUMMATION OF THE FORFEITURE EVENT, BUT CONTINGENT UPON THE
CONSUMMATION OF THE FORFEITURE EVENT.***/ A dissolution or liquidation of the
Corporation, other than a dissolution or liquidation immediately following a
sale of all or substantially all of the assets of the Corporation, which shall
be governed by the immediately preceding sentence, shall also cause this Plan
and each Grant hereunder to terminate and each Non- Vested Share under any Grant
to be forfeited.
To the extent that the foregoing adjustments
relate to securities of the Corporation, such adjustments shall be made by the
Administrator, whose determination shall be conclusive and binding on all
persons.
Except as expressly provided in this Section, the
Grantee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger or consolidation or spin-off of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number of Shares subject to a Grant.
The award of a Grant pursuant to the Plan shall
not affect in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.
- --------
*** The language appearing in bold-face herein was adopted by the Board on April
19, 1994 and approved by the stockholders on July 26, 1994.
-10-
<PAGE> 11
9. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance. No Shares shall
be issued upon the award of any Grant unless and until the
Corporation has determined that:
(i) it and the Grantee have taken all
actions required to register the award of the Shares
under the Act, or to perfect an exemption from the
registration requirements thereof;
(ii) any applicable listing requirement of
any stock exchange on which the Common Stock is listed
has been satisfied; and
(iii) any other applicable provision of state or
Federal law has been satisfied.
(b) Restrictions on Transfer; Representa-
tions of Grantee; Legends. Regardless of whether the award of Shares under the
Plan has been registered under the Act or has been registered or qualified under
the securities laws of any state, the Corporation may impose restrictions upon
the sale, pledge or other transfer of such Shares (including the placement of
appropriate legends on stock certificates) if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the securities laws
of any state or any other law. In the event that the award of Shares under the
Plan is not registered under the Act but an exemption is available which
requires an investment representation or other representation, each Grantee
shall be required to represent that such Shares are being acquired for
investment, and not with a view to the sale or distribution thereof, and to make
such other representations as are deemed necessary or appropriate by the
Corporation and its counsel. Stock certificates evidencing Shares acquired under
the Plan pursuant to an unregistered transaction shall bear the following
restrictive legend (or similar legend in the discretion of the Administrator)
and such other restrictive legends as are required or deemed advisable under the
provisions of any applicable law:
-11-
<PAGE> 12
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY
IN FORM AND CONTENT TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH
ACT."
Any determination by the Corporation and its
counsel in connection with any of the matters set forth in this Section shall be
conclusive and binding on all persons.
(c) Registration or Qualification of
Securities. The Corporation may, but shall not be obligated to, register or
qualify the award of Shares pursuant to the Plan under the Act or any other
applicable law. The Corporation shall not be obligated to take any affirmative
action in order to cause the award of Shares under the Plan to comply with any
law.
(d) Exchange of Certificates. If, in the
opinion of the Corporation and its counsel, any legend placed on a stock
certificate representing Shares awarded under the Plan is no longer required,
the holder of such certificate shall be entitled to exchange such certificate
for a certificate representing the same number of Shares but without such
legend.
10. INFORMATION TO GRANTEES.
The Corporation shall provide each Grantee on
an annual or other periodic basis financial and other information regarding the
Corporation. The Corporation may provide this information to each Grantee in any
manner reasonably calculated to insure receipt of the information by each
Grantee.
-12-
<PAGE> 13
11. AMENDMENT OF THE PLAN.
The Board may, from time to time, with
respect to any Shares at the time not subject to Grants, suspend or discontinue
the Plan or revise or amend it in any respect whatsoever, provided that the
Board shall not revise or amend the Plan more than once every six (6) months
(other than to comport with changes in the Code or the Employee Retirement
Income Security Act, or the rules or regulations thereunder), and provided,
further, that no amendment or revision shall adversely affect, without the
affected Grantee's written consent, the rights of any Grantee to whom the Shares
have been issued pursuant to the Plan. In addition, without the approval of the
Corporation's stockholders, no such revision or amendment shall:
(a) Materially increase the benefits
accruing to the Grantees under the Plan;
(b) Increase the number of Shares which may
be issued under the Plan;
(c) Change the designation in Section 4
hereof with respect to the classes of persons eligible to receive Grants;
(d) Modify the Plan such that it fails to
meet the requirements of Rule 16b-3 of the Securities and Exchange Commission
for the exemption of the acquisition, cancellation, expiration or surrender of
Grants from the operation of Section 16(b) of the Exchange Act; or
(e) Amend this Section to defeat its
purpose.
12. APPROVAL OF STOCKHOLDERS.
The Plan shall be subject to approval by the
affirmative vote of the holders of a majority of the outstanding shares present
or represented and entitled to vote at the first annual meeting of stockholders
of the Corporation following the adoption of the Plan, and in no event later
than October 27, 1993. Following the adoption of the Plan by the Board on
October 27, 1992, but prior to stockholder approval, Grants may be awarded to
Directors duly elected or appointed to serve on the Board of the Corporation,
pending stockholder approval, and upon such approval by the stockholders, the
actions of the Administrator by which the Grants were awarded shall be
-13-
<PAGE> 14
ratified. Any amendment described in Section 11 shall also be subject
to approval by the Corporation's stockholders.
13. EXECUTION.
To record the adoption of the Plan by the Board on
October 27, 1992, and its subsequent amendment through July 23, 1996, the
Corporation has caused its authorized officers to affix the corporate name and
seal hereto.
CATALINA MARKETING CORPORATION
By /s/ Tommy D. Greer
---------------------------
Tommy D. Greer, Chairman
By /s/ Barry A. Brooks
---------------------------
Barry A. Brooks, Secretary
[Seal]
-14-
<PAGE> 1
EXHIBIT 10.23.1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT is made and entered into as of
this 14th day of April, 1997, by and between CATALINA MARKETING CORPORATION, a
Delaware corporation (together with its successors and permitted assigns,
"Borrower"), the Lenders (as defined in the Agreement), and SUNTRUST BANK, TAMPA
BAY, a Florida banking corporation, as agent for the Lenders (together with any
successor agent, the "Agent").
BACKGROUND
Borrower, Agent and Lenders executed a credit agreement dated as of
January 15, 1996 (as amended, supplemented, restated, replaced, or otherwise
modified from time to time, the "Agreement"). Pursuant to the provisions of the
Agreement, the Lenders established a revolving line of credit facility in the
maximum aggregate principal amount of $30,000,000.00 in favor of Borrower (the
"Revolving Credit Facility")
Borrower has now requested Agent and Lenders to increase the Revolving
Credit Facility to the maximum principal amount of $40,000,000.00 and to extend
the maturity thereof. Agent and Lenders have agreed to the request of Borrower
on the terms and conditions of this First Amendment.
NOW, THEREFORE, in consideration of the foregoing and the promises
contained herein, the parties agree as follows:
1. RECITALS. All of the above recitals are true and correct in
every respect and are incorporated herein and made a part hereof.
2. DEFINED TERMS. Any capitalized terms used but not defined
herein shall have the meanings set forth in the Agreement.
3. REVOLVING CREDIT FACILITY.
(a) The parties agree that the amount of the Revolving Credit
Commitment of one of the Lenders shall be increased, as evidenced by the
Revolving Credit Commitments of the Lenders set forth on the signature pages
hereto. The parties further agree that the Revolving Credit Termination Date
shall be extended for an additional year.
(b) Accordingly, the definition of "Revolving Credit Commitment"
contained in Subsection 1.1 of the Agreement is hereby amended to read as
follows:
"Revolving Credit Commitment" means the amount set forth with respect
to a Lender on the signature pages
<PAGE> 2
of this Agreement or any amendment thereto, or, if there has been a
subsequent full or partial assignment of a Revolving Credit Commitment
pursuant to the provisions of Subsection 10.17 hereof, as may be
reflected on the records of Agent with respect to such assignment based
on the respective Assignment and Acceptance Agreement.
(c) The definition of "Revolving Credit Termination Date" contained in
Subsection 1.1 of the Agreement is hereby amended by replacing the date "August
31, 1997" with the date "August 31, 1998."
4. NEW REVOLVING CREDIT NOTE.
(a) The increase in the Revolving Credit Commitment of the
Lender shall be evidenced by a renewal promissory note of Borrower to the Lender
in the principal amount equal to such Lender's Revolving Credit Commitment. Such
note shall be deemed a "Revolving Credit Note" and shall be deemed issued
pursuant to and subject to the terms of the Agreement, as amended hereby.
5. FINANCIAL COVENANT AMENDMENT.
(a) The financial covenant governing Consolidated Senior Debt
to Consolidated Cash Flow at Subsection 5.15(b) of the Agreement is hereby
replaced with the following:
A ratio of Consolidated Senior Debt to the difference of Consolidated
EBITDA and Consolidated Capital Expenditures which is less than or
equal to 2.0 to 1.0 at the end of each fiscal quarter, with
Consolidated Senior Debt calculated as of such quarter end and
Consolidated EBITDA and Consolidated Capital Expenditures calculated
for the four fiscal quarters then ending.
(b) The definition of "Consolidated EBITDA" is hereby added in
alphabetical order to the definitions contained in Subsection 1.1 of the
Agreement as follows:
"Consolidated EBITDA" means net income or loss of Borrower and its
Subsidiaries plus depreciation expense, amortization expense, interest
expense, income taxes, and other non-cash charges, minus extraordinary
income and gains and non-cash income, if any, and plus extraordinary
losses, if any, all calculated on a consolidated basis and in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis.
(c) The definition of "Consolidated Capital Expenditures," is
hereby added in alphabetical order to the
<PAGE> 3
definitions contained in Subsection 1.1 of the Agreement as follows:
"Consolidated Capital Expenditures" means capital expenditures of
Borrower and its Subsidiaries, calculated on a consolidated basis and
in accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis.
6. REQUIRED LENDERS. The parties agree that the Required Lender
percentage under the Agreement shall increase from 67% to 76%, and accordingly,
the definition of "Required Lenders" continued in Subsection 1.1 of the
Agreement is amended by replacing each reference to "67%" with "76%."
7. EXPENSES. Without limiting the provisions of Subsection 10.2 of the
Agreement, Borrower covenants and agrees to pay all costs and expenses of Agent
and Lenders in connection with the closing of the transaction evidenced hereby,
including, but not limited to, Agent's or Lender's attorneys' fees, recording or
filing costs or expenses, intangible taxes, documentary stamps, surtax and other
revenue fees, and similar items.
8. LOAN AGREEMENT, RATIFICATION, NO NOVATION. Each of the new
Revolving Credit Note and this Amendment shall be deemed to be a "Loan Document"
for the purposes of the Agreement and hereof. Except as expressly modified or
supplemented hereby, the Loan Documents and all agreements, instruments, and
documents executed or delivered pursuant thereto have remained and shall remain
at all times in full force and effect in accordance with their respective terms,
and have not been novated by the provisions of this Amendment.
9. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to enter
into this Amendment and to perform the transactions described herein, Borrower
hereby makes the representations and warranties contained in Section 3 of the
Agreement (other than Subsection 3.4, which is updated herein), on and as of the
date of this Amendment and with respect to the new Loan Documents as well, and
represents and warrants to Agent and Lenders that (a) Borrower is in compliance
with all terms and conditions of the Agreement, and no Event of Default or event
which, with the giving of notice of the passage of time, would constitute an
Event of Default, has occurred and is continuing, (b) the financial statements
and other information most recently provided to Agent and Lenders are correct,
complete, and fairly present the financial condition of Borrower as at the date
thereof and fairly present the results of the operations of Borrower for the
period covered thereby, and that (c) there has been no material adverse change
in the business, properties, or condition, financial or otherwise, of Borrower
since the date of such financial statements or other information.
10. NO WAIVER OF DEFAULT. The execution of this Amendment
<PAGE> 4
and the new Loan Documents shall not constitute a waiver of any default or Event
of Default in the Agreement or any other Loan Document existing on the date
hereof, nor shall it eliminate any right which Agent or Lenders may otherwise
have to accelerate the indebtedness subject to the Agreement or exercise any
other remedies by virtue of any default or Event of Default.
11. ESTOPPEL AND RELEASE. Borrower hereby acknowledges and agrees that,
as of the date hereof, there exists no right of offset, defense, counterclaim,
claim, or objection in favor of such party as against Agent and the Lenders with
respect to the Revolving Credit Facility, or any aspect of the transactions
contemplated thereby, or alternatively, that any such right of offset, defense,
counterclaim, claim, or objection is hereby expressly waived. In connection with
the foregoing, Borrower hereby releases and discharges Agent and the Lenders,
their subsidiaries, affiliates, directors, officers, employees, attorneys,
agents, successors, and assigns from any and all rights, claims, demands,
actions, causes of action, suits, proceedings, agreements, contracts, judgments,
damages, debts, duties, liabilities, or obligations, of any kind or character,
including without limitation such claims and defenses as fraud, mistake, duress,
and usury, whether in law or in equity, known or unknown, choate or inchoate,
which it has had, now has, or hereafter may have, arising under or in any manner
relating to, whether directly or indirectly, the Revolving Credit Facility, or
any aspect of the transactions contemplated thereby from the beginning of time
until the date hereof.
12. COMPLETE AGREEMENT; NO OTHER CONSIDERATION. This Amendment and the
other new Loan Documents contain the final, complete, and exclusive expression
of the understanding of the parties hereto with respect to the specific matters
contained herein, and they supersede any prior negotiations or any prior or
contemporaneous agreement or representation, oral or written, express or
implied, by or between the parties related to the specific subject matter
hereof. Without limiting the generality of the foregoing, there does not exist
any consideration or inducement other than as stated herein for the execution,
delivery, and performance by Borrower of this Amendment and the other new Loan
Documents.
13. CONSULTATION WITH COUNSEL. Borrower has had the opportunity to
consult with counsel of its own choosing, and have discussed with such counsel
the provisions of this Amendment and the other new Loan Documents or have
freely and voluntarily elected not to discuss such provisions with counsel.
14. COOPERATION, FURTHER ASSURANCES. Borrower agrees to cooperate with
Agent and the Lenders so that the interests of Agent and the Lenders are
protected and the intent of the Loan Documents and this Amendment can be
effectuated. Borrower agrees to execute whatever further documents and to
provide whatever further assurances Agent or the Lenders may reasonably request
or
<PAGE> 5
deem necessary to effectuate the terms of the Revolving Credit Facility and
this Amendment.
15. COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be signed in
original counterparts and by facsimile transmission of signed counterparts, each
of which shall be deemed an original, in any number, no one of which need
contain all of the signatures of the parties, and as many as such counterparts
as shall together contain all of the signatures of the parties shall be deemed
to constitute one and the same instrument. This Amendment shall become effective
upon the receipt by Agent of original signed counterparts of this Amendment from
each of the parties or telecopy confirmation of the signing of such counterparts
by each of the parties hereto.
16. HEADINGS. The headings preceding the text of the paragraphs of this
Amendment have been inserted solely for convenience of reference and shall
neither constitute a part of this Amendment nor affect its meaning,
interpretation, or effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
<PAGE> 6
SIGNATURE PAGE
First Amendment to Credit Agreement Among Catalina Marketing Corporation,
SunTrust Bank, Tampa Bay, as Agent, and the Lenders party thereto.
CATALINA MARKETING CORPORATION,
a Delaware corporation
By:____________________________
Bruce Valentine
Treasurer
(SEAL)
Address:
11300 9th Street North
St. Petersburg, Florida 33716
Attn: Bruce Valentine
Fax No. (813) 579-5297
Confirming Tel. No. (813) 579-5006
With a copy to:
PAUL, HASTINGS, JANOFSKY & WALKE
399 Park Avenue
New York, New York 10022
Fax No. (212) 319-4090
Confirming Tel. No. (212) 318-6521
Attn: Barry A. Brooks, Esq.
<PAGE> 7
SIGNATURE PAGE
First Amendment to Credit Agreement Among Catalina Marketing
Corporation, SunTrust Bank, Tampa Bay, as Agent, and the Lenders party thereto.
SUNTRUST BANK, TAMPA BAY, a
Florida banking corporation,
individually and as Agent
By:
-----------------------------
Frank A. Coe
Vice President
Address and Lending Office:
3601 34th Street North
St. Petersburg, Florida 33713
Attn: Corporate Banking Division
Fax No. (813) 892-4810
Confirming Tel. No. (813) 892-4954
Revolving Credit Commitment: $30,000,000.00
<PAGE> 8
SIGNATURE PAGE
First Amendment to Credit Agreement Among Catalina Marketing Corporation,
SunTrust Bank, Tampa Bay, as Agent, and the Lenders party thereto.
FLEET NATIONAL BANK, SUCCESSOR BY MERGER
TO FLEET BANK OF MASSACHUSETTS, N.A.,
Lender
By:
------------------------------
Name:
Title:
Address and Lending Office:
Mail Code MAOFO320
75 State Street, 1 Federal Street
Boston, Massachusetts 02110
Fax No. (617) 346-0689
Confirming Tel. No. (617) 346-0146
Attn: Thomas J. Bullard
Revolving Credit Commitment: $10,000,000.00
<PAGE> 1
EXHIBIT 10.24
REALTY LEASE
THIS REALTY LEASE ("Lease") is made and entered into as of
September 5, 1996, by and between Interior Design Services, Inc., a Florida
corporation ("Landlord") and Catalina Marketing Corporation, a Delaware
corporation ("Tenant").
WITNESSETH:
Landlord and Tenant hereby covenant and agree as follows:
1. Premises
1.1 Premises. Landlord owns real property and improvements
located at 11200 9th Street North, St. Petersburg, Florida 33716 ("11200
Realty"), which includes a single story section of the building currently used
as a warehouse consisting of approximately 54,859 rentable square feet
("Warehouse"). Upon and subject to the terms, covenants and conditions
hereunder, Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord approximately 20,500 rentable square feet on the west end of the
Warehouse, as shown on the floorplan of the Warehouse attached hereto as Exhibit
A and incorporated herein ("Premises"), together with the parking areas
identified as "Tenant Parking" on Exhibit A. Tenant shall cooperate with
Landlord in the use of such Tenant Parking areas so as to provide Landlord with
unobstructed access to the Warehouse dock doors identified on Exhibit A.
1.2 Condition of the Premises. Tenant acknowledges that it has
been given the opportunity to inspect the Premises prior to the Commencement
Date (as defined in Section 2.1 below). Landlord leases the Premises to Tenant
and Tenant accepts the Premises from Landlord on the Commencement Date in "as
is" condition, without any representation or warranty as to any patent or latent
defects or of habitability or fitness for a particular purpose. Notwithstanding
the foregoing, Landlord shall be responsible for ensuring that the Premises
comply with the requirements of the American with Disabilities Act, 42 U.S.C.
12101, except to the extent that any Tenant Improvement Work or Alterations (as
those terms are hereinafter defined) made to the Premises by Tenant may initiate
the need for such compliance, in which event, Tenant shall be responsible for
such compliance.
2. Term
2.1 Term. This Lease term (the "Primary Term") shall commence
on November 1, 1996 ("Commencement Date") and expire on November 30, 2003
("Expiration Date"), unless the Term shall sooner terminate or be extended as
hereinafter provided.
2.2 Early Occupancy. Tenant may occupy the Premises commencing
September 15, 1996 ("Early Occupancy Period") provided that during the Early
Occupancy Period, Tenant shall perform all of its obligations set forth in this
Lease, but Tenant's obligation to pay Monthly Rent (as defined in Section 3.1
below) shall not commence until November 1, 1996.
2.3 Tenant's Option to Renew. Tenant shall have the option to
renew this Lease for one additional term of five (5) years commencing at the end
of the Primary Term, which option Tenant may only exercise by giving Landlord
written notice not less than one hundred eighty (180) days prior to the
expiration of the Primary Term, and provided no event of default under Article
17 has occurred and is continuing on or after the date of Tenant's notice. Such
renewal term shall be on the same terms and conditions as the Primary Term,
except that Monthly Rent payable during
<PAGE> 2
the renewal term shall be as follows:
<TABLE>
<CAPTION>
================================================================================
Year Rent
- --------------------------------------------------------------------------------
<S> <C>
December 1, 2003 - November 30, 2004 $7,109.94
- --------------------------------------------------------------------------------
December 1, 2004 - November 30, 2005 $7,216.59
- --------------------------------------------------------------------------------
December 1, 2005 - November 30, 2006 $7,324.84
- --------------------------------------------------------------------------------
December 1, 2006 - November 30, 2007 $7,434.72
- --------------------------------------------------------------------------------
December 1, 2007 - November 30, 2008 $7,546.24
================================================================================
</TABLE>
The terms "Term" or "Term of this Lease," as used in this Lease, shall include
the Primary Term as well as the renewal term, if exercised.
2.4 Tenant's Expansion Option.
Tenant shall have the Right of First Opportunity to Lease on
any available space in the Warehouse ("Additional Space"). When the Additional
Space becomes available, Landlord shall notify Tenant in writing of such
availability and Tenant shall be granted ten (10) business days in order to
accept or reject the offer in writing. Failure to respond within ten (10)
business days shall be deemed a rejection of such Additional Space. If Tenant
rejects such Additional Space, Landlord shall then be free to lease such
Additional Space to others on such terms and conditions as Landlord may chose,
and Tenant shall have no further rights with respect to such Additional Space.
As to any Additional Space, if warehouse space ("Additional
Warehouse Space"), during the first twelve (12) months for which any such
Additional Warehouse Space is included within this Lease ("Initial Period For
Additional Warehouse Space"), the rental rate to be paid for the Additional
Warehouse Space ("Additional Warehouse Space Rental Rate") shall be the then
current per square foot rate paid by Tenant for the warehouse portion of the
Premises under this Lease,which rate shall then subsequently increase annually
by one and one-half percent (1 1/2%) from and after the conclusion of the
Initial Period For Additional Warehouse Space.
As to any Additional Space, if office space ("Additional
Office Space"), during the first twelve (12) months for which any such
Additional Office Space is included within this Lease ("Initial Period For
Additional Office Space"), the rental rate to be paid for the Additional Office
Space ("Additional Office Space Rental Rate") shall be the then current market
rate per square foot for comparable office space situated in St. Petersburg,
Florida, which rate shall then subsequently increase annually by one and
one-half percent (1 1/2%) from and after the conclusion of the Initial Period
For Additional Office Space.
The lease term of the Additional Space shall be co-terminous
with the Term and Tenant shall lease the Additional Space in as-is condition.
3. Rent
3.1 From and after the Commencement Date, Tenant shall pay to
Landlord monthly base rent ("Monthly Rent") as follows:
2
<PAGE> 3
<TABLE>
<CAPTION>
============================================================================================================
Year Rent
- ------------------------------------------------------------------------------------------------------------
<S> <C>
November 1, 1996 - November 30, 1997 $6,406.25
- ------------------------------------------------------------------------------------------------------------
December 1, 1997 - November 30, 1998 $6,502.34
- ------------------------------------------------------------------------------------------------------------
December 1, 1998 - November 30, 1999 $6,599.88
- ------------------------------------------------------------------------------------------------------------
December 1, 1999 - November 30, 2000 $6,698.88
- ------------------------------------------------------------------------------------------------------------
December 1, 2000 - November 30, 2001 $6,799.36
- ------------------------------------------------------------------------------------------------------------
December 1, 2001 - November 30, 2002 $6,901.35
- ------------------------------------------------------------------------------------------------------------
December 1, 2002 - November 30, 2003 $7,004.87
============================================================================================================
</TABLE>
Monthly Rent shall be payable on or before the first day of each calendar month,
in advance, at the address specified for Landlord in Section 21 below, or such
other place as Landlord shall designate, without any prior demand therefor and
without any abatement, deduction or setoff whatsoever except to the extent of
Landlord's breach of its obligations hereunder. In addition, Tenant shall pay
Landlord all state and local sales taxes and surtaxes payable with respect to
rents, which shall be paid together with each installment of Monthly Rent.
3.2 Notwithstanding any other provisions of this Lease, if
Tenant shall fail to pay any Monthly Rent by the date five (5) days after the
date it is due and payable, such unpaid amount shall be subject to a late
payment charge equal to five percent (5%) of such unpaid amount in each instance
to cover Landlord's additional administrative costs resulting from Tenant's
failure. Such late payment charge has been agreed upon by Landlord and Tenant,
after negotiation, as a reasonable estimate of the additional administrative
costs and detriment to Landlord's ability to meet its own obligations relating
to the Warehouse in a timely manner that will be incurred by Landlord as a
result of any such failure by Tenant, the actual cost thereof in each instance
being extremely difficult, if not impossible, to determine. Such late payment
charge shall constitute liquidated damages to compensate Landlord for its
damages resulting from such failure to pay and shall be paid to Landlord
together with such unpaid amounts; provided, however, that the payment of such
charges shall not constitute a waiver of any default by Tenant hereunder.
3.3 Notwithstanding any other provisions of this Lease, any
installment of Monthly Rent not paid to Landlord by the date five (5) days after
the date when due hereunder, shall bear interest from the date due or from the
date of expenditure by Landlord for the account of Tenant, until the same have
been fully paid, at a rate ("Default Rate") equal to the lesser of (a) two
percent (2%) above the Prime Rate of interest published in the Wall Street
Journal, or (b) the highest rate permitted by law. The payment of such interest
shall not constitute a waiver of any default by Tenant hereunder.
4. Reservation of Rights
4.1 Landlord reserves the right, from time to time, to grant
such easements, rights and dedications as Landlord deems necessary or desirable,
and to cause the recordation of parcel maps and covenants, conditions and
restrictions affecting the Premises, provided they do not unreasonably interfere
with the use and enjoyment of the Premises by Tenant. At Landlord's
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request, Tenant shall join in the execution of any such documents. The Premises
may be known by any name that Landlord may choose, which name may be changed
from time to time in Landlord's sole discretion.
4.2 Tenant hereby acknowledges that Landlord shall have no
obligation whatsoever to provide guard services or other security measures for
the benefit of the Premises or the Warehouse. Tenant assumes all responsibility
for the protection of Tenant, its employees, suppliers, shippers, customers and
invitees and the property of Tenant and of Tenant's employees, suppliers,
shippers, customers and invitees from acts of third parties. Nothing herein
contained shall prevent Landlord, at Landlord's sole option, from providing
security protection for the Premises or any part thereof, and in such event
Tenant shall comply with Landlord's security procedures.
5. Conduct of Business by Tenant
5.1 During the Term, Tenant shall use and occupy the Premises
solely for general business office and computer service activities and storage
related to such permitted use. Tenant shall not use the Premises for any other
use or uses without Landlord's prior written consent, which may be withheld in
Landlord's sole and absolute discretion.
5.2 Tenant shall not use or occupy, or permit the use or
occupancy of, the Premises or any part thereof for any use other than the use
specifically set forth in Section 5.1, or in any manner that, in Landlord's
judgment, would adversely affect or interfere with (a) any services required to
be furnished by Landlord to Tenant, or (b) the proper and economical rendition
of any such service.
5.3 Tenant will not cause any Hazardous Substance (as defined
in this Section 5.3) to be brought, kept or stored on or about the Premises that
violates any applicable law, rule, regulation or ordinance, and Tenant will not
engage in or permit any other person to engage in any activity, operation or
business upon the Premises that involves the use, generation, manufacture,
refining, transportation, treatment, storage, handling or disposal of any
Hazardous Substance that would or could result in Tenant, Landlord or the
Premises to be in violation of any law, statute, ordinance or regulation or rule
law pertaining to Hazardous Substances, health, industrial hygiene or the
environment. Tenant shall be liable for all clean-up of the Premises due to any
violation of this Section 5.3 by Tenant. "Hazardous Substance" shall include,
without limitation, those substances, materials and wastes that are or become
regulated under applicable local, state or federal law, or the United States
government, or which are classified as hazardous or toxic under federal, state
or local laws or regulations. Tenant shall indemnify, defend and hold harmless
Landlord of, from and against, any and all loss, cost, liability, claim, cause
of action, right of action, damage and expense, including, without limitation,
penalties, fines and counsel fees, arising from or related to Tenant's violation
of this Section 5.3, which indemnity shall survive the expiration or sooner
termination of this Lease.
6. Improvements to the Premises
6.1 Tenant shall have the right to perform (or cause to be
performed), at its sole cost and expense, the work outlined and generally
described in Exhibit B ("Tenant Improvement Work"). Landlord shall have the
right to approve the plans and specifications for the Tenant Improvement Work
which approval shall not be arbitrarily or unreasonably withheld. Tenant shall
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obtain all required permits and approvals, and provide Landlord with all copies
thereof prior to commencement of any Tenant Improvement Work. Landlord shall not
arbitrarily or unreasonably withhold or delay approval of any nonstructural,
interior alterations, revisions or supplements to the "Tenant Improvement Work"
provided that Tenant complies with the requirement of Section 7 in all respects.
7. Alterations and Tenant's Property
7.1 Tenant shall make no alterations, installations, additions
or improvements whether structural or non-structural, including without
limitation Tenant's Improvement Work (collectively "Alterations") in or to the
Premises without Landlord's prior written consent, which shall not be
unreasonably withheld or delayed. Tenant shall submit such information as
Landlord may require, including without limitation, (a) plans and specifications
for the Alterations, (b) permits, licenses and bonds and (c) evidence of
insurance coverage in such types and amounts and from such insurers as Landlord
deems satisfactory. All Alterations shall be done at Tenant's expense, in
compliance with all applicable laws, regulations and permits as more fully
described in Section 10.1 below, at such times and in such manner as will not
unnecessarily interfere with activities on the adjacent property, and only by
such contractors or mechanics as are approved in advance by Landlord, which
approval will not be unreasonably withheld. In no event shall any Alterations
affect the structure of the Premises or its exterior appearance, except as
approved in writing by Landlord.
7.2 All appurtenances, fixtures, improvements, additions and
other property attached to or installed in the Premises, whether by Landlord or
by or on behalf of Tenant, and whether at Landlord's expense or Tenant's
expense, or at the joint expense of Landlord and Tenant, shall be and remain the
property of Landlord. Any furnishings and personal property installed in the
Premises that are removable without material damage to the Premises, whether the
property of Tenant or leased by Tenant, are herein sometimes called "Tenant's
Property." Any replacements of any property of Landlord, whether made at
Tenant's expense or otherwise, shall be and remain the property of Landlord.
Tenant shall not install any machines or equipment that would compromise the
structural integrity of the Premises without Landlord's prior written consent,
which consent may be conditioned upon such terms as Landlord may require.
7.3 Any of Tenant's Property remaining on the Premises at the
expiration or sooner termination of the Term shall be removed by Tenant at
Tenant's cost and expense, and Tenant shall, at its cost and expense, repair any
damage to the Premises caused by such removal. Any of Tenant's Property not
removed from the Premises prior to the expiration or sooner termination of the
Term shall, at Landlord's option, become the property of Landlord, or Landlord
may remove such Tenant's Property, and Tenant shall pay to Landlord Landlord's
cost of removal with ten (10) days after delivery of a bill therefor.
7.4 Landlord shall have the right at all times to post and
keep posted on the premises any notices permitted or required by law, or that
Landlord shall deem proper, for the protection of Landlord, the Premises, and
any other party having an interest therein, from construction liens, and Tenant
shall give to Landlord at least ten (10) business days' prior notice of
commencement of any construction on the Premises, including in connection with
any Alteration or otherwise.
8. Repairs
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8.1 Tenant, at Tenant's cost and expense, shall make all
repairs and replacements as and when Landlord deems necessary to preserve in
good working order and condition the Premises and every part thereof except for
the parts of the Premises Landlord must repair under Section 8.3 below. Without
limiting the foregoing and to the extent that the following are exclusive to
Tenant and are not shared with Landlord, any other tenant or any third party,
Tenant shall be responsible for windows, doors, interior walls, and plumbing,
electrical, sprinkler, security, lighting (including light bulb replacement),
heating, ventilating and air conditioning systems. If any of the foregoing are
shared with Landlord, or any other tenant or third party, Tenant shall only be
responsible for its proportionate share of such cost and expense unless such
cost and expense is a) attributable to Tenant's negligent or intentional act, in
which case Tenant shall be solely liable, or b) attributable to the negligent or
intentional act of Landlord, other tenants or third parties (excluding agents,
customers, employees, principals, consultants, assigns, subtenants or invitees
of Tenant), in which case Tenant shall not be liable for any such cost or
expense.
8.2 All repairs and replacements made by or on behalf of
Tenant or any person claiming through or under Tenant shall be made and
performed (a) at Tenant's cost and expense and at such time and in such manner
as Landlord may designate, (b) by contractors or mechanics approved by Landlord,
(c) so that same shall be at least equal in quality, value and utility to the
original work or installation, and in accordance with all applicable laws and
regulations of governmental authorities having jurisdiction over the Premises.
Landlord shall endeavor to respond to any request for approval complying with
the foregoing requirements within five (5) business days after receipt of the
same.
8.3 Landlord, at Landlord's cost and expense, shall make all
repairs and replacements as and when Landlord reasonably deems necessary to the
foundation, exterior walls, structural members and roof (except to the extent
that repairs to the roof may be attributable to Tenant Improvement Work or
Alterations) of the Premises, as well as the parking lots, walkways, driveways,
landscaping, fences and signs.
8.4 Landlord, at its sole cost and expense, shall be
responsible for all customary and normal landscaping services for the Premises.
9. Liens
9.1 All work performed by Tenant on the Premises prior to the
Commencement Date and during the Term shall be performed without cost, expense
or liability of any nature to Landlord or the Warehouse, and all costs and
expenses incurred in connection therewith shall be paid for entirely by Tenant.
Tenant shall and does hereby indemnify and hold harmless Landlord and the
Warehouse from and against any lien or claim of lien against the fee title to
the Warehouse arising out of any work performed by or for Tenant or any party
holding under Tenant, or otherwise arising out of the exercise of Tenant's
rights under this Lease. Without limiting the generality of the foregoing,
neither the Tenant nor anyone claiming by, through or under Tenant, including
without limitation contractors, subcontractors, materialmen, mechanics and
laborers, shall have any right to file or place any construction lien of any
sort whatsoever upon the interest of Landlord in the Warehouse, and, on the
contrary, any such lien is hereby specifically prohibited. All parties with whom
the Tenant may deal are hereby put on notice that the Tenant has no power to
subject the interest of the Landlord in the Warehouse to any claim or lien of
any kind or character, and all such persons so dealing with Tenant must look
solely to the Tenant for payment, and not to the
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Landlord's interest in the Warehouse or any other asset of Landlord. The
foregoing prohibition shall be incorporated in a short form lease between the
parties hereto which shall be executed contemporaneously herewith and may be
recorded at the option of Landlord or Tenant. Tenant shall forthwith cause any
lien filed against the Warehouse to be immediately canceled, released and
extinguished, and Tenant shall and does hereby indemnify Landlord against any
such lien and shall and does hereby agree to pay any and all costs, charges and
expenses, including reasonable attorneys' fees, incurred in connection with the
prosecution or defense of any suit in connection therewith. If Tenant shall not,
within ten (10) days following the imposition of any such lien, cause same to be
released of record by payment or posting of a proper bond, Landlord shall have,
in addition to all other remedies provided herein and by law, the right but not
the obligation to cause such lien to be released by such means as it shall deem
proper, including without limitation payment of the claim giving rise to such
lien. All such sums paid by Landlord and all expenses incurred by it in
connection therewith shall be payable to it by Tenant with interest at the
Default Rate from the date of payment and shall be due and payable to Landlord
by Tenant on demand.
10. Compliance with Laws and Insurance Requirements
10.1 In addition and not in derogation of Tenant's obligations
under Section 5.3 above, Tenant, at Tenant's cost and expense, shall comply with
all laws, codes, orders and regulations of federal, state, county and municipal
authorities, and with all directions, pursuant to law, of all public officers,
that shall impose any duty upon Landlord or Tenant with respect to the Premises
or the particular use or occupancy thereof by Tenant. Any Alteration or other
work or installation made or performed by or on behalf of Tenant or any person
claiming through or under Tenant pursuant to the provisions of this Article 10
shall be made in conformity with, and subject to the provisions of Section 7.1.
In the event and to the extent that any such requisite compliance does not arise
from or result from any particular use of the Premises by Tenant, AND the said
alteration or other work or installation ("Work") necessary to achieve and
satisfy such requisite compliance has a projected useful life greater than the
then remaining Term of the Lease (not including the renewal option), ("Remaining
Term"), THEN the Tenant shall be obligated to pay only a portion of the cost of
the Work, which portion shall be that fraction of which the numerator is the
number of months in the Remaining Term and the denominator is the projected
useful life of the Work, in months.
10.2 Tenant shall not do anything, or permit anything to be
done, in or about the Premises that shall: (a) invalidate or be in conflict with
the provisions of any fire or other insurance policies covering the Premises or
any property located therein, (b) result in a refusal by fire insurance
companies of good standing to insure the Premises or any such property in
amounts reasonably satisfactory to Landlord, (c) subject Landlord to any
liability or responsibility for injury to any person or property by reason of
any business operation being conducted in or about the Premises, or (d) be in
violation of any certificate of occupancy for the Warehouse. Tenant, at Tenant's
sole expense, shall comply with all rules, orders, regulations and requirements
of its insurance policy. If Tenant's particular or peculiar use of the Premises
causes any increase in the fire insurance rates applicable to the Premises or
property located therein on the Commencement Date or at any time thereafter,
Tenant shall be responsible for such increase and shall pay the same to Landlord
upon request.
11. Subordination
11.1 Without the necessity of any additional document being
executed by Tenant
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for the purpose of effecting a subordination, Tenant agrees that this Lease
shall be subject and subordinate at all times to (a) all ground leases or
underlying leases that may now exist or hereafter be executed affecting the
Premises, and (b) the lien of any mortgage or deed of trust that may now exist
or hereafter be executed in any amount for which the Premises, any ground leases
or underlying leases, or Landlord's interest or estate in any of such items is
specified as security. Notwithstanding the foregoing, Landlord shall have the
right to subordinate or cause to be subordinated to this Lease any such ground
leases or underlying leases or any such liens. If any ground lease or underlying
lease terminates for any reason or any mortgage or deed of trust is foreclosed
or a conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination to this Lease of any ground lease, underlying
lease or lien, attorn to and become the Tenant of the successor in interest to
Landlord at the option of such successor in interest. Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in the form requested
by Landlord and not reasonably objected to by legal counsel for Tenant, any
additional documents evidencing the subordination of this Lease with respect to
any such ground leases or underlying leases or the lien of any such mortgage or
deed of trust. Notwithstanding the foregoing, any subordination of this Lease
shall be conditioned upon Tenant's being furnished a nondisturbance agreement in
connection therewith, in form and content reasonably satisfactory to legal
counsel for Tenant.
12. Right to Cure
12.1 Landlord shall not be deemed to be in default in the
performance of any obligation required to be performed by it hereunder unless
and until it has failed to perform such obligation within thirty (30) calendar
days after written notice by Tenant to Landlord specifying the nature of
Landlord's failure to perform such obligation; provided, however, that if the
nature of Landlord's obligation is such that more than thirty (30) days are
required for its performance, then Landlord shall not be deemed to be in default
if it shall commence such performance within such thirty (30) day period and
thereafter shall diligently prosecute the same to completion. All rights to cure
provided to Landlord under this Section 12.1 shall also be accorded to any
mortgagee or beneficiary under a deed of trust encumbering the Premises. Except
to the extent resulting from the act or neglect of Landlord, Landlord shall not
be liable for any injury or damage to persons or property resulting from loss,
theft, fire, explosion, falling plaster, cessation or variation or shortage or
interruption of services or utilities, steam, gas, electricity, earthquake, acts
of god, rain or water or dampness from any source or any other cause whatsoever.
Without limiting the generality of the foregoing, in no event shall Landlord be
liable for damages by reason of lost profits, business interruption or other
consequential damages.
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13. Destruction
13.1 If the Premises shall be damaged by fire (or by other
casualty insured against by Landlord's fire and extended coverage insurance
policy covering the Premises), and if Tenant shall give prompt notice to
Landlord of such damage, Landlord, at Landlord's expense, shall repair such
damage and restore the Premises to substantially the condition it was in prior
to such fire or casualty; provided, however, that Landlord shall have no
obligation to repair any damage to or to replace Tenant's Property, Alterations
or any other property or effects of Tenant. Except as otherwise provided in this
Article 13, if the entire Premises shall be rendered untenantable by reason of
any such damage, Monthly Rent shall abate for the period from the date of such
damage to the date when such damage to the Premises shall have been repaired. If
only a part of the Premises shall be rendered untenantable, Monthly Rent shall
abate for such period in the proportion that the area of the part of the
premises so rendered untenantable bears to the total area of the Premises;
provided however, that if the part of the Premises which had not been rendered
untenantable is considered by Tenant to be inadequate or insufficient for
efficient use by Tenant, and the area rendered untenantable cannot reasonably be
restored by Landlord within ninety (90) days after the occurrence of such fire
or casualty to substantially the same condition it was in prior to such fire or
casualty then Tenant may terminate this Lease immediately upon written notice to
Landlord. Notwithstanding the foregoing, if, prior to the date when all of such
damage shall have been repaired, any part of the Premises so damaged shall be
rendered tenantable and shall be used or occupied by Tenant or any person or
persons claiming through or under Tenant, then the amount by which Monthly Rent
shall abate shall be equitably apportioned for the period from the date of any
such use or occupancy to the date when all such damage shall have been repaired.
13.2 Notwithstanding the provisions of Section 13.2, if during
the Term, the Premises (whether or not the Premises shall have been damaged or
rendered untenantable) shall be so damaged by fire or other casualty that, in
Landlord's opinion, it is impractical to restore the Premises, then, in any of
such events, Landlord, at Landlord's option, may give to Tenant, within sixty
(60) days after such fire or other casualty, thirty (30) days' notice of
termination of this Lease and, in the event such notice is given, this Lease and
the Term shall terminate effective upon the date of the occurrence of such
casualty with the same effect as if such date were the Expiration Date; and
Monthly Rent shall be apportioned as of such date and any prepaid portion of
Monthly Rent for any period after such date shall be refunded by Landlord to
Tenant, provided Tenant is not otherwise in default hereunder.
13.3 Notwithstanding anything contained in this Article 13 to
the contrary, in no event shall Landlord be required to spend for any repair,
replacement or reconstruction of the Premises an amount greater than the
insurance proceeds actually received by Landlord as a result of the fire or
other casualty causing such loss, damage or destruction, plus the amount of any
deductible.
13.4 Nothing contained in this Lease shall relieve Tenant of
any liability to Landlord or to its insurance carriers that Tenant may have
under law or under the provisions of this Lease in connection with any damage to
the Premises or the Warehouse by fire or other casualty.
13.5 Notwithstanding the provisions of Section 13.1, if any
such damage is due to the fault or neglect of Tenant, any person claiming
through or under Tenant, or any of their employees, suppliers, shippers,
customers or invitees, then there shall be no abatement of Monthly Rent by
reason of such damage.
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14. Eminent Domain
14.1 If all or substantially all of the Premises or the
Warehouse is damaged, condemned or taken in any manner for public or
quasi-public use, including but not limited to a transfer, conveyance or
assignment made in anticipation of or in lieu thereof, either temporarily or
permanently (a "Taking"), this Lease shall automatically terminate as of the
earlier of the date of the vesting of title or the date of dispossession of
Tenant as a result of such Taking (the "Taking Date"). If less than all or
substantially all of the Premises is so condemned or taken, this Lease shall
automatically terminate only as to the portion of the Premises so taken as of
the Taking Date provided, however, if a Taking would require, in the opinion of
Landlord, a substantial alteration or reconstruction of the remaining portions
of the Premises or the Warehouse, this Lease may be terminated by Landlord, as
of the Taking Date, by written notice to Tenant within sixty (60) days following
notice to Landlord of the Taking Date; provided further that if the portion of
the Premises remaining after said taking is, in the reasonable opinion of
Tenant, insufficient or inadequate for continued use by Tenant, Tenant may
terminate this Lease on notice to the Landlord.
14.2 Landlord shall be entitled to the entire award in the
Taking, including, without limitation, any award made for the value of or
damages to the leasehold estate created by this Lease. No award for any partial
or entire Taking shall be apportioned, and Tenant hereby assigns to Landlord
any award that may be made in connection with any such Taking, whether for the
value of the property taken or for damages, together with any and all rights
of Tenant now or hereafter arising in or to same or any part thereof; provided,
however, that nothing contained herein shall be deemed to give Landlord any
interest in, or to require Tenant to assign to Landlord, any award made to
Tenant specifically for its relocation expenses, the taking of personal
property and fixtures belonging to Tenant, or the interruption of or damage to
Tenant's business if such award is made separately to Tenant and not as part
of the damages recoverable by Landlord. Tenant shall fully cooperate with and
assist Landlord in establishing and pursuing any claims Landlord may have
relating to any Taking, and without limiting the foregoing, (i) Tenant shall
upon Landlord's request file a "Disclaimer of Interest" in any litigation
pertaining to a Taking, (ii) Tenant shall not assert any defenses or file any
motions, including but not limited to, motions to dismiss, or counterclaims,
in any such litigation, and (iii) Tenant shall be bound by any negotiations
for the settlement, pre-suit or otherwise, of any litigation, which
negotiations shall be conducted by Landlord on behalf of both Landlord and
Tenant, and shall be binding on Tenant.
14.3 In the event of a partial Taking that does not result in
a termination of this Lease as to the entire Premises pursuant to Section 14.1,
the Monthly Rent shall abate in proportion to the portion of the Premises taken
by such condemnation or other taking.
14.4 If all or any portion of the Premises is taken for a
limited period of time, this Lease shall remain in full force and effect and
Tenant shall continue to perform all terms, conditions and covenants of this
Lease; provided, however, the Monthly Rent shall abate during such limited
period in proportion to the portion of the Premises that is rendered
untenantable and unusable as a result of such Taking. Landlord shall be entitled
to receive the entire award made in connection with any such temporary Taking,
whether for the value of the property taken or for damages. Provided however
that all costs incurred by Tenant in obtaining, relocating to, additional
charges, vacating, and moving back to the Premises during such limited period of
time, are to be paid by Landlord.
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14.5 Landlord may, without any obligation to Tenant, agree to
sell and/or convey to a condemnor the Premises, or any portion thereof sought by
the condemnor, free from this Lease and the rights of Tenant hereunder, without
first requiring that any action or proceeding be instituted or, if instituted,
pursued to a judgment.
15. Assignment and Subletting
15.1 Tenant shall not directly or indirectly, voluntarily or
by operation of law, sell, assign, encumber, pledge or otherwise transfer or
hypothecate all or any part of the Premises or Tenant's leasehold estate
hereunder (collectively, "Assignment"), or permit the Premises to be occupied by
anyone other than Tenant or sublet the Premises or any portion thereof
(collectively, "Sublease") without Landlord's prior written consent in each
instance, which consent shall not be unreasonably withheld; provided however,
that any such transaction between Tenant and any entity controlling, controlled
by, or under common control with Tenant shall not constitute such prohibited
assignment or sublease.
15.2 If Tenant desires at any time to enter into an Assignment
of this Lease or a Sublease of the Premises or any portion thereof, it shall
first give written notice to Landlord of its desire to do so, which notice shall
contain (a) the name of the proposed assignee, subtenant or occupant, (b) the
nature of the proposed assignee's, subtenant's or occupant's business to be
carried on in the Premises, (c) the terms and provisions of the proposed
Assignment or Sublease, and (d) such financial information as Landlord may
reasonably request concerning the proposed assignee, subtenant or occupant.
Tenant shall reimburse Landlord for Landlord's reasonable counsel fees incurred
in connection with the processing and documentation of any requested Assignment
of this Lease or Sublease of the Premises.
15.3 No consent by Landlord to any Assignment or Sublease by
Tenant shall relieve Tenant of any obligation to be performed by Tenant under
this Lease, whether arising before or after the Assignment or Sublease. The
consent by Landlord to any Assignment or Sublease shall not relieve Tenant of
the obligation to obtain Landlord's express written consent to any other
Assignment or Sublease. Any Assignment or Sublease that is not in compliance
with this Article 15 shall be void and, at the option of Landlord, shall
constitute a material default by Tenant under this Lease. The acceptance of
Monthly Rent by Landlord from a proposed assignee or sublessee shall not
constitute the consent by Landlord to such Assignment or Sublease.
15.4 Any sale or other transfer, including transfer by
consolidation, merger or reorganization, of a majority of the voting stock of
Tenant, if Tenant is a corporation, or any sale or other transfer of a majority
of the partnership interests in Tenant, if Tenant is a partnership, shall be an
Assignment for purposes of this Article 15. As used in this Section 15.4, the
term "Tenant" shall also mean any entity that has guaranteed Tenant's
obligations under this Lease, and the prohibition hereof shall be applicable to
any sales or transfers of the stock or partnership interests of said guarantor.
15.5 Each assignee, sublessee, or other transferee, shall
assume, as provided in this Section 15.5, all obligations of Tenant under this
Lease and shall be and remain liable jointly and severally with Tenant for the
payment of Monthly Rent, and for the performance of all the terms, covenants,
conditions and agreements herein contained on Tenant's part to be performed for
the Term; provided, however, that the assignee, sublessee, or other transferee
shall be liable to Landlord for rent only in the amount set forth in the
Assignment or Sublease. No Assignment shall
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be binding on Landlord unless the assignee or Tenant shall deliver to Landlord a
counterpart of the Assignment and an instrument that contains a covenant of
assumption by the assignee satisfactory in substance and form to Landlord,
consistent with the requirements of this Section 15.5, but the failure or
refusal of the assignee to execute such instrument of assumption shall not
release or discharge the assignee from its liability as set forth above.
16. Utilities
16.1 Tenant shall pay for all electricity (to be separately
metered at Landlord's cost), telephone and trash removal and janitorial services
supplied to the Premises. All such utilities shall be separately metered and
Tenant shall make such payments when due directly to the utility company
providing such service. Tenant shall have all utility bills for services
provided under this Section 16.1 transferred to its name prior to taking
occupancy of the Premises. Landlord shall be responsible for water and sanitary
sewer charges related to the Premises.
16.2 If any governmental entity promulgates or revises any
statute, ordinance or building, fire or other code or imposes mandatory or
voluntary controls or guidelines on Landlord or the Premises or any part
thereof, relating to the use or conservation of energy, water, gas, light or
electricity or the reduction of automobile or other emissions or the provision
of any other utility or service provided with respect to this Lease, or in the
event Landlord is required to make alterations to the Premises or any other part
of the Premises in order to comply with such mandatory or voluntary controls or
guidelines, Landlord may, in its sole discretion, require Tenant to comply with
such mandatory or voluntary controls or guidelines or Landlord may, in its sole
discretion, make such alterations to the Premises. The portion of the costs
incurred by Landlord in connection with such laws, ordinances, guidelines or
controls that is attributable to the Premises, shall be amortized over the
useful life of such alterations, and Tenant shall pay such amortization during
the Term as additional rent hereunder. Such compliance and the making of such
alterations shall in no event entitle Tenant to any damages, relieve Tenant of
the obligation to pay the full Monthly Rent reserved hereunder or constitute or
be construed as a constructive or other eviction of Tenant.
17. Default
17.1 The failure of Tenant to perform or observe any term,
covenant, condition or representation made under this Lease shall constitute a
default hereunder by Tenant upon the expiration of the appropriate grace period
hereinafter provided. Tenant shall have a period of five (5) business days after
notice of nonpayment to cure any default in the payment of Monthly Rent,
provided that after Landlord has given two (2) such notices to Tenant in any
twelve (12) month period, Tenant shall only have a period of ten (10) days after
the due date to cure any such failure, without any requirement of notice from
Landlord to Tenant of such failure; provided, however, that the obligation of
Tenant to pay a late charge pursuant to Section 3.2 or interest pursuant to
Section 3.3 shall commence as of the date ten (10) days after the due date of
the Monthly Rent. Tenant shall have a period of thirty (30) days from the date
of written notice from Landlord within which to cure any other default under
this Lease; provided, however, that with respect to any default other than the
payment of Monthly Rent that cannot reasonably be cured within thirty (30) days,
the default shall not be deemed to be uncured if Tenant promptly commences to
cure within thirty (30) days from Landlord's notice and continues to prosecute
diligently the curing thereof to completion within a reasonable time.
17.2 Upon the occurrence of a default by Tenant that is not
cured by Tenant
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<PAGE> 13
within the grace periods specified in Section 17.1 hereof, Landlord shall have
the following rights and remedies in addition to all other rights and remedies
available to Landlord at law or in equity:
(a) The right to accelerate all Monthly Rent due
under the Lease for the remainder of the Term and to recover from Tenant the
following:
(i) all unpaid Monthly Rent which had been
earned at the time of such acceleration;
(ii) the unpaid Monthly Rent which would
have been earned after such acceleration until the time of
entry of judgment;
(iii) the worth at the time of award of the
amount of Monthly Rent for the balance of the Term. The "worth
at the time of award" of the amounts referred to in this
Section 17.2(a) shall be computed by discounting such amount
at the discount rate of the Federal Reserve Bank of Atlanta at
the time of award plus one percent (1%); and
(iv) any other amount necessary to
compensate Landlord for all the detriment proximately caused
by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course of things would be
likely to result therefrom.
(b) The right to continue this Lease in effect
and to enforce all of its rights and remedies under this Lease, including the
right to recover Monthly Rent as it becomes due, for as long as Landlord does
not terminate Tenant's right to possession. Acts of maintenance or preservation,
efforts to relet the Premises or the appointment of a receiver upon Landlord's
initiative to protect its interest under the Lease shall not constitute a
termination of Tenant's right to possession.
(c) The right to terminate this lease by giving
notice to Tenant in accordance with applicable law without waiving any right to
damages for breach of this Lease.
(d) The right and power to re-rent and lease
("New Lease") the Premises or any part thereof for such term or terms (which may
extend beyond the Term) and at such rent and such other terms as Landlord can
reasonably obtain, with the right to make alterations in and repairs to the
Premises. Upon each such subletting, Tenant shall be immediately liable for
payment to Landlord of any monthly deficiency between the monthly rental payable
hereunder and the rent to be received by Landlord pursuant to the New Lease, in
addition to the cost of such re-letting and such alterations and repairs
incurred by Landlord. No taking possession of the Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant. Notwithstanding any such
re- letting, Landlord may at any time thereafter elect to terminate this Lease
for such previous breach.
18. Insolvency or Bankruptcy
18.1 The appointment of a receiver to take possession of all
or substantially all of the assets of Tenant, which if involuntary is not
dismissed within thirty (30) days after the commencement thereof, or an
assignment by Tenant for the benefit of creditors, or any action
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<PAGE> 14
voluntarily taken by or instituted against Tenant under any insolvency,
bankruptcy, reorganization, moratorium or other debtor relief act or statute,
whether now existing or hereafter amended or enacted, or if Tenant shall admit
in writing its inability to pay its debts or shall generally not be paying its
debts as they mature, shall at Landlord's option constitute a breach of this
Lease by Tenant. Upon the happening of any such event or at any time thereafter,
this Lease shall terminate five (5) days after written notice of termination
from Landlord to Tenant. In no event shall this Lease be assigned or assignable
by operation of law or by voluntary or involuntary bankruptcy proceedings or
otherwise, and in no event shall this Lease or any rights or privileges
hereunder be an asset of Tenant under any bankruptcy, insolvency, reorganization
or other debtor relief proceedings.
19. Fees and Expenses; Indemnity
19.1 If Tenant shall default in the performance of its
obligations under this Lease, Landlord, at any time thereafter and without
notice, may remedy such default for Tenant's account and at Tenant's expense,
without thereby waiving any other right or remedies of Landlord with respect to
such default.
19.2 Tenant shall indemnify, defend and hold harmless Landlord
and Landlord's agents of, from and against any and all Claims incurred in
connection with or arising from any cause whatsoever in, on or about the
Premises and Tenant Parking, including, without limiting the generality of the
foregoing, (a) any default by Tenant in the observance or performance of any of
the terms, covenants or conditions of this Lease on Tenant's part to be observed
or performed, (b) the use or occupancy or manner of use or occupancy of the
Premises by Tenant or any person claiming through or under Tenant, (c) the
condition of any portion of the Premises that is the responsibility of Tenant or
any occurrence or happening on the Premises from any cause whatsoever, or (d)
any act, omission or negligence of Tenant or any person claiming through or
under Tenant, or of the employees, suppliers, shoppers, customers or invitees of
Tenant or any such person, in, on or about the Premises or the Warehouse,
whether prior to, during, or after the expiration of, the Term including,
without limitation, any act, omission or negligence in the making or performing
of any Alterations, all of the foregoing except to the extent caused by the act
or negligence of Landlord or any third party (excluding agents, customers,
employees, principals, consultants, assigns, subtenants or invitees of Tenant);
and Landlord shall otherwise indemnify, defend and hold harmless Tenant from all
such claims.
19.3 Landlord shall not be responsible for or liable to Tenant
for any loss or damage that may be occasioned by or through the acts or
omissions of persons occupying adjoining premises (other than Landlord) or any
part of the premises adjacent to or connected with the Premises or any other
part of the Premises or for any loss or damage resulting to Tenant or its
property from burst, stopped or leaking water, gas, sewer or steam pipes or for
any damage to or loss of property within the Premises from any causes
whatsoever, including theft, all of the foregoing except to the extent caused by
the act or negligence of Landlord.
19.4 Except where a longer or shorter period is specifically
provided for in this Lease for a particular expenditure, Tenant shall pay to
Landlord, within ten (10) days after delivery by Landlord to Tenant of bills or
statements therefor: (a) sums equal to all expenditures made and monetary
obligations incurred by Landlord including, without limitation, expenditures
made and obligations incurred for reasonable counsel fees, in connection with
the remedying by Landlord for Tenant's account pursuant to the provisions of
Section 19.1; (b) sums equal to all Claims referred to
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<PAGE> 15
in Section 19.2; and (c) sums equal to all expenditures made and monetary
obligations incurred by Landlord, including, without limitation, expenditures
made and obligations incurred for reasonable counsel fees, in collecting or
attempting to collect the Monthly Rent, or any other sum of money accruing under
this Lease or in enforcing or attempting to enforce any rights of Landlord under
this Lease or pursuant to law. Tenant's obligations under this Section 19.4
shall survive the expiration or sooner termination of the Term.
20. Access to Premises
20.1 Landlord reserves and shall have the right at all times
upon twenty-four (24) hours written notice and during regular business hours
(except in case of emergency) to enter the Premises to inspect same, to show the
Premises to prospective purchasers, mortgagees or tenants, and to alter, improve
or repair the Premises and any other portion of the Premises, without abatement
of Monthly Rent, and may for that purpose erect, use and maintain scaffolding,
pipes, conduits and other necessary structures in and through the Premises where
reasonably required by the character of the work to be performed, provided that
the entrance to the Premises shall not be blocked thereby, and further provided
that the business of Tenant and the use and enjoyment of the Premises by Tenant
shall not be interfered with unreasonably. Tenant otherwise hereby waives any
claim for damages for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises or
any other loss occasioned thereby unless caused by Landlord's intentional acts.
Tenant will provide Landlord with a contact person or persons who, on behalf of
Tenant, will be available on a twenty-four (24) hour, seven (7) day per week
basis, to unlock the Premises to allow Landlord access thereto within thirty
(30) minutes in the event of an emergency.
21. Notices
21.1 Except as otherwise expressly provided in this Lease,
any bills, statements, notices, demands, requests or other communications given
or required to be given under this Lease shall be effective only if rendered or
given in writing, sent simultaneously by facsimile transmission to the numbers
herein specified and by registered or certified mail return receipt requested,
by nationally recognized overnight courier or delivered personally, (a) to
Tenant at 11300 9th Street North, St. Petersburg, Florida 33716, Attn:
Facilities Manager, facsimile number 813/570-8507, or (b) to Landlord at 11200
9th Street North, Suite 100, St. Petersburg, Florida 33716, Attn.: Chief
Financial Officer, facsimile number 813/222-0792 or (c) to such other address
as either Landlord or Tenant may designate as its new address for such purpose
by notice given to the other in accordance with the provisions of this Section
21.1. Any such bill, statement, notice, demand, request or other communication
shall be deemed to have been rendered or given two (2) days after the date when
it shall have been mailed as provided in this Section 21.1 if sent by
registered or certified mail, or upon the date personal delivery or delivery by
nationally recognized overnight courier is made. If Tenant is notified of the
identity and address of Landlord's mortgagee or beneficiary under a deed of
trust, or ground or underlying lessor, Tenant shall give to such mortgagee,
beneficiary or ground or underlying lessor notice of any default by Landlord
under the terms of this Lease in writing sent by registered or certified mail
return receipt requested, and such mortgagee, beneficiary or ground or
underlying lessor shall be given a reasonable opportunity to cure such default
prior to Tenant's exercising any remedy available to it.
22. No Waiver; No Oral Modification
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<PAGE> 16
22.1 No failure by Landlord to insist upon the strict
performance of any obligation of Tenant under this Lease or to exercise any
right, power or remedy consequent upon a breach thereof, no acceptance of full
or partial Monthly Rent during the continuance of any such breach, and no
acceptance of the keys to or possession of the Premises prior to the termination
of the Term by any employee of Landlord shall constitute a waiver of any such
breach or of such term, covenant or condition or operate as a surrender of this
Lease. No payment by Tenant or receipt by Landlord of a lesser amount than the
aggregate of all Monthly Rent then due under this Lease shall be deemed to be
other than on account of the first items of such Monthly Rent then accruing or
becoming due, unless Landlord elects otherwise; and no endorsement or statement
on any check, no letter accompanying any check or other payment of Monthly Rent
in any such lesser amount and no acceptance of any such check or other such
payment by Landlord shall constitute an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance of such Monthly Rent or to pursue any other legal remedy.
22.2 Neither this Lease nor any term or provision hereof may
be changed, waived, discharged or terminated orally, and no breach thereof shall
be waived, altered or modified, except by a written instrument signed by the
party against which the enforcement of the change, waiver, discharge or
termination is sought. No waiver of any breach shall affect or alter this Lease,
but each and every term, covenant and condition of this Lease shall continue in
full force and effect with respect to any other then existing or subsequent
breach thereof.
22.3 The review, approval, inspection or examination by
Landlord of any item to be reviewed, approved, inspected or examined by Landlord
under the terms of this Lease or the exhibits attached hereto shall not
constitute the assumption of any responsibility by Landlord for either the
accuracy or sufficiency of any such item or the equality or suitability of such
item for its intended use. Any such review, approval, inspection or examination
by Landlord is for the sole purpose of protecting Landlord's interests in the
Premises and under this Lease, and no third parties, including, without
limitation, Tenant or any person or entity claiming through or under Tenant, or
the contractors, agents, servants, employees, visitors or licensees of Tenant or
any such person or entity, shall have any rights hereunder.
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<PAGE> 17
23. Tenant's Certificates
23.1 Tenant, at any time and from time to time upon not less
than ten (10) days' prior written notice from Landlord, will execute,
acknowledge and deliver to Landlord and, at Landlord's request, to any
prospective purchaser, ground or underlying lessor, beneficiary under a deed of
trust or mortgagee of any part of the Premises, a certificate of Tenant stating:
(a) that Tenant has accepted the Premises (or, if Tenant has not done so, that
Tenant has not accepted the Premises and specifying the reasons therefor), (b)
the Commencement and Expiration Dates of this Lease, (c) that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that the Lease, as modified is in full force and effect and stating the
modifications), (d) whether or not there are then existing any defenses against
the enforcement of any of the obligations of Tenant under this Lease (and, if
so, specifying the same), (e) whether or not there are then existing any
defaults by Landlord in the performance of its obligations under this Lease
(and, if so, specifying same), (f) the dates, if any, to which the Monthly Rent
and other charges under this Lease have been paid, and (g) any other information
that may reasonably be required by any of such persons. It is intended that any
such certificate of Tenant delivered pursuant to this Section 23.1 may be relied
upon by Landlord and any prospective purchaser, ground or underlying lessor,
beneficiary or mortgagee of any part of the Premises.
24. Tax on Tenant's Personal Property
24.1 At least ten (10) days prior to delinquency, Tenant shall
pay all taxes levied or assessed upon Tenant's equipment, furniture, fixtures
and other personal property located in or about the Premises. If the assessed
value of Landlord's property is increased by the inclusion therein of a value
placed upon Tenant's equipment, furniture, fixtures or other personal property,
Tenant shall pay to Landlord, upon written demand, the taxes so levied against
Landlord, or the proportion thereof resulting from said increase in assessment.
25. Authority
25.1 If Tenant signs as a corporation or a partnership, each
of the persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing entity, that Tenant has
and is qualified to do business in Florida, that Tenant has full right and
authority to enter into this Lease, and that each and every person signing on
behalf of Tenant is authorized to do so. Upon Landlord's request, Tenant shall
provide Landlord with evidence satisfactory to Landlord confirming the foregoing
covenants and warranties.
26. Broker
26.1 Both parties represent and warrant to each other that no
broker was involved in the negotiations relating to this Lease. Landlord and
Tenant shall indemnify, defend and hold harmless each other of, from and
against, any and all claims, arising from or related to any breach of this
Section 26.1, which indemnity shall survive the expiration or sooner termination
of this Lease.
27. Liability of Landlord
27.1 The liability of Landlord hereunder or in connection with
the Warehouse or the Premises shall be limited to its interest in the Warehouse,
and in no event shall any other assets
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of Landlord be subject to any claim arising out of or in connection with the
Lease or the Premises.
28. Attorneys' Fees
28.1 If either Landlord or Tenant fails to perform any of its
obligations under this Lease or in the event a dispute arises concerning the
meaning or interpretation of any provision of this Lease, the basis of the
dispute shall be settled by judicial proceeding and the defaulting party or the
party not prevailing in such dispute, as the case may be, shall pay any and all
costs and expenses incurred by the other party in enforcing or establishing its
rights hereunder, including without limitation, court costs and attorneys' fees.
29. Surrender and Holding Over
29.1 Upon the expiration or sooner termination of the Term,
Tenant will quietly and peacefully surrender to Landlord the Premises in the
condition in which they are required to be kept as provided in Section 8.1,
ordinary wear and tear excepted.
29.2 Any holding over after the expiration of the Term with
the consent of Landlord shall be construed to be a tenancy from month to month
at double the Monthly Rent herein specified (prorated on a monthly basis),
unless Landlord shall specify a different rent in its sole discretion, and shall
otherwise be on the terms and conditions herein specified as far as applicable.
30. Quiet Enjoyment
30.1 Upon Tenant's paying the Monthly Rent and performing all
of Tenant's obligations under this Lease, Tenant may peacefully and quietly
enjoy the Premises during the Term as against all persons or entities lawfully
claiming by or through Landlord.
31. Insurance
31.1 Tenant shall carry at its expense and maintain in
force during the Term the following insurance:
(a) Commercial General Liability Insurance
(including protective liability coverage on operations of independent
contractors engaged in construction and also blanket contractual liability
insurance) on an "occurrence" basis for the benefit of Tenant and Landlord as
additional insured against claims for "bodily injury" liability including
without limitation bodily injury, death or property damage liability with a
limit of not less than Three Million Dollars ($3,000,000.00) in the event of
"bodily injury" to any number of persons or of damages to property arising out
of any one "occurrence;" such insurance may be furnished under a "primary"
policy and an "umbrella" policy, provided that it is primary insurance and not
excess over or contributory with any insurance in force for Landlord; and such
insurance shall provide for a waiver of the insurer's right of subrogation
against Landlord;
(b) Insurance against loss or damage by fire and
such other risks and hazards (excluding earthquake and flood) as are insurable
under present and future standard forms of fire and extended coverage insurance
policies, to the personal property, furniture, furnishings and fixtures
belonging to the Tenant located in the Premises for not less than one hundred
percent
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(100%) of the actual replacement value thereof. Such insurance shall provide for
a waiver of the insurer's right of subrogation against Landlord;
(c) Fire, extended coverage and vandalism and
malicious mischief insurance on Tenant's improvements and property within the
Premises in an amount not less than the full replacement value thereof without
Tenant being deemed a co-insurer under the terms of the applicable policy, and
against such additional periods and for such other amounts as may from time to
time be required by Landlord without deduction for physical depreciation
thereof. Such insurance on the Premises shall contain the "Replacement Cost
Endorsement;"
(d) Business interruption insurance against loss
of income by reason of any hazard covered under the insurance required under
subsections (c) and (d) of this Section for the benefit of Landlord as loss
payee, in an amount sufficient to avoid any co-insurance penalty, but in any
event for not less than one (1) year's Monthly Rent from the Premises.
31.2 All such insurance shall name Landlord as additional
insured, shall be effected under policies issued by insurers, shall be approved
by Landlord (such approval not to be unreasonably withheld) and shall provide
that Landlord shall receive thirty (30) days' written notice from the insurer
prior to any cancellation or change of coverage.
31.3 Tenant shall deliver copies of policies of such insurance
or certificates thereof to Landlord on or before the Commencement Date, and
thereafter at least thirty (30) days before the expiration dates of expiring
policies; and, in the event Tenant shall fail to procure such insurance, or to
deliver such policies or certificates, Landlord may, at its option and after
written notice to Tenant and a reasonable opportunity for Tenant to cure,
procure same for the account of Tenant, and the cost thereof shall be paid to
Landlord as Additional Rent within ten (10) days after delivery to Tenant of
bills therefor. Nothing contained in this Article 31 shall in any way limit the
extent of Tenant's liability under any of the other provisions of this Lease.
31.4 Landlord shall maintain hazard insurance on the Warehouse
in conformity with the requirement of any mortgage, deed of trust or ground
lease now or hereafter encumbering the Premises or, if no such mortgage, deed of
trust or ground lease exists, such insurance shall conform to the industry
standard for types and amounts of insurance coverage for similar type properties
in the St. Petersburg, Florida market. Landlord shall cause its hazard insurance
on the Warehouse to provide for a waiver of the insurer's right of subrogation
against Tenant.
32. Short Form of Lease
32.1 If requested by Landlord or Tenant, the other party shall
execute and acknowledge a memorandum of lease and the requesting party may
record such memorandum of lease in the county where the Premises are located. If
such memorandum is requested by Tenant, Tenant shall simultaneously execute, and
deliver into escrow with Landlord's attorney, a recordable termination of such
memorandum to be released to Landlord upon delivery to such attorney of
Landlord's sworn statement that the Lease has been terminated.
33. Waiver of Jury Trial
33.1 Landlord and Tenant hereby waive trial by jury in any
action or proceeding
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brought by either of the parties hereto against the other on any matters
arising out of or connected with this Lease, the relationship of Landlord and
Tenant and Tenant's use or occupancy of the Premises.
34. Right of First Refusal to Purchase
34.1 If Landlord, at any time during the Term of this Lease
shall receive any bona fide offer for the purchase of the 11200 Realty or the
Warehouse, which offer Landlord shall be ready and willing to accept, then
Tenant shall have the first right to purchase 11200 Realty or the Warehouse at
the same price, and upon the same terms and conditions as shall be contained in
such offer. Landlord shall inform Tenant in writing immediately upon the receipt
of any written offer which Landlord shall be ready and willing to accept and
shall also inform Tenant immediately upon Landlord's execution of any listing
agreement for the sale of 11200 Realty or the Warehouse. Landlord shall deliver
to Tenant a copy of such offer and Tenant shall have five (5) business days,
from and after the receipt of the copy of such offer from Landlord, in which to
elect to purchase 11200 Realty or the Warehouse at the same price and on the
same terms and conditions as contained in such offer, by giving Landlord written
notice thereof, and such notice by Tenant shall create a binding purchase
agreement between the parties hereto upon the same price, terms and conditions
of the offer.
If Tenant shall elect not to purchase the 11200 Realty or the
Warehouse or shall fail to give Landlord notice within the time provided for
herein, then Landlord may sell 11200 Realty or the Warehouse but only at the
same price, terms and conditions specified in the copy of the offer Landlord
submitted to Tenant. If 11200 Realty or the Warehouse is not sold by Landlord on
the terms set forth in the offer delivered to Tenant, Landlord shall submit all
subsequent offers to Tenant, in the manner provided herein, prior to making any
subsequent sale of 11200 Realty or the Warehouse. This Right of First Refusal
shall terminate upon the sale of 11200 Realty or the Warehouse by Interior
Design Services, Inc. to any third party.
35. Miscellaneous
35.1 Use of Terms
The words "Landlord" and "Tenant" as used herein all
include the plural as well as the singular. Words used in the neuter gender
include the masculine and feminine. If there is more than one Tenant, the
obligations under this Lease imposed on Tenant shall be joint and several. The
captions preceding the articles of this Lease have been inserted solely as a
matter of convenience, and such captions in no way define or limit the scope or
intent of any provision of this Lease.
35.2 Binding Effect
The terms, covenants and conditions contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and, except as
otherwise provided herein, their respective personal representatives and
successors and assigns; provided, however, upon the sale, assignment or transfer
by Landlord (or by any subsequent landlord) of its interest in the Warehouse,
including any transfer by operation of law, Landlord (or subsequent landlord)
shall be relieved of all obligations or liabilities under this Lease, and all
obligations or liabilities shall be binding upon the grantee, assignee or other
transferee of such interest, and any such grantee, assignee or
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transferee, by ccepting such interest, shall be deemed to have assumed such
obligations and liabilities. Tenant shall promptly execute all instruments
requested by Landlord or its successor acknowledging such sale, transfer or
assignment.
35.3 Severability
If any provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, and in Landlord's opinion such invalid or unenforceable provision
does not affect a material benefit or right hereunder, the remainder of this
Lease, or the application of such provision to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each provision of this Lease shall be valid and be enforced to the
full extent permitted by law.
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35.4 Florida Law
This Lease shall be construed and enforced in
accordance with the laws of the State of Florida.
35.5 Execution by Landlord
Submission of this instrument for examination or
signature by Tenant in the absence of signature by Landlord does not constitute
a reservation of or an option for lease, and it is not effective as a lease or
otherwise until execution and delivery by both Landlord and Tenant.
35.6 Merger
This instrument, including the exhibits hereto, which
are made a part of this Lease, contains the entire agreement between the
parties, and all prior negotiations and agreements are merged herein. Neither
Landlord nor Landlord's agents have made any representations or warranties with
respect to the Premises, the Warehouse, or this Lease except as expressly set
forth herein, and no rights, easements or licenses are or shall be acquired by
Tenant by implication or otherwise unless expressly set forth herein.
35.7 No Signs
Except that Tenant may use exterior signage similar
to that which it uses at 11300 9th Street North to indicate its presence in the
Premises, Tenant shall not place any sign upon the Premises without Landlord's
prior written consent, which consent shall not be unreasonably withheld. Under
no circumstances shall Tenant place a sign on any roof of the Premises.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed by their duly authorized officers as of the date first written above.
WITNESSES: INTERIOR DESIGN SERVICES, INC., a Florida
corporation
- ----------------------------------- By:
---------------------------------
- ----------------------------------- Its:
--------------------------------
CATALINA MARKETING CORPORATION, a
Delaware corporation
- ----------------------------------- By:
---------------------------------
- ----------------------------------- Its:
--------------------------------
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STATE OF FLORIDA
COUNTY OF _________________________
The foregoing instrument was acknowledged before me this ______ day of
_______________, 1996 by _________________________, as _________________________
of INTERIOR DESIGN SERVICES, INC., a Florida corporation, on behalf of the
corporation. He/she is personally known to me or has produced
___________________________________________ as identification and did/did not
take an oath.
-----------------------------
-----------------------------
(Name typed/printed)
STATE OF _________________________
COUNTY OF ________________________
The foregoing instrument was acknowledged before me this _____ day of
_________________________, 1996 by _________________________, as _______________
of CATALINA MARKETING CORPORATION, a Delaware corporation, on behalf of the
corporation. He/she is personally known to me or has produced
___________________________________________ as identification and did/did not
take an oath.
-----------------------------
-----------------------------
(Name typed/printed)
23
<PAGE> 1
EXHIBIT 21
CATALINA MARKETING CORPORATION
SUBSIDIARIES OF REGISTRANT
Catalina Marketing Sales Corporation,
a Delaware corporation
Catalina Marketing Retail Sales Corporation,
a Delaware corporation
Catalina Marketing International, Inc.,
a Delaware corporation
Catalina Marketing Worldwide, Inc.,
a Delaware corporation
Catalina Electronic Clearing Services, Inc.,
a Delaware corporation
Catalina Marketing of Mexico, Inc.,
a Delaware corporation
Catalina Marketing de Mexico, S.A. de C.V.
a Mexican corporation
Reembolsos Promocionales de Mexico, S.A. de C.V.
a Mexican corporation
Catalina Marketing of France, Inc.,
a Delaware corporation
Catalina Marketing de France, S.A.,
a French corporation
Catalina Marketing U.K., Inc.,
a Delaware corporation
Catalina Marketing U.K., Ltd.,
a United Kingdom corporation
Catalina Marketing of Iberia, Inc.,
a Delaware corporation
Health Resources Publishing Company,
a Delaware corporation
SuperMarkets Online, Inc.,
a Delaware corporation
Catalina-Pacific Media, L.L.C.,
a Delaware limited liability company
Pacific Media, K.K.,
a Japanese corporation
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K into the Company's
previously filed Registration Statement File Nos. 33-46793, 33-77100, 33-82456,
333-07525 and 333-13335.
/S/ ARTHUR ANDERSEN LLP
Tampa, Florida,
May 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
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0
0
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</TABLE>
