-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, So/bBMWZhzCcjy0gyc8l8hN+9HkSIwUVsGpY8GUC7ZenM7LF0HiYmf/hzMGOTTiV rBpWOorDu2cmleIeNeZQZw== /in/edgar/work/20000811/0000912057-00-036430/0000912057-00-036430.txt : 20000921 0000912057-00-036430.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-036430 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION HOLDINGS INC CENTRAL INDEX KEY: 0001063744 STANDARD INDUSTRIAL CLASSIFICATION: [2731 ] IRS NUMBER: 061518007 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14371 FILM NUMBER: 692975 BUSINESS ADDRESS: STREET 1: 2777 SUMMER STREET STREET 2: SUITE 209 CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2034665055 MAIL ADDRESS: STREET 1: 2777 SUMMER STREET STREET 2: SUITE 209 CITY: STAMFORD STATE: CT ZIP: 06905 10-Q 1 a10-q.txt 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2000 Commission File Number: 1-14371 INFORMATION HOLDINGS INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1518007 (State of incorporation) (IRS Employer Identification Number) 2777 SUMMER STREET, SUITE 209 STAMFORD, CONNECTICUT 06905 (Address of principal executive offices) (Zip Code) (203) 961-9106 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No As of June 30, 2000, there were 21,569,072 shares of the Company's common stock, par value $0.01 per share outstanding. ================================================================================ INFORMATION HOLDINGS INC. INDEX
PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets 1 As of June 30, 2000 (Unaudited) and December 31, 1999 Consolidated Statements of Operations (Unaudited) for the 2 Three Months Ended June 30, 2000 and 1999 and Six Months Ended June 30, 2000 and 1999 Consolidated Statements of Cash Flows (Unaudited) for the 3 Six Months Ended June 30, 2000 and 1999 Notes to Consolidated Financial Statements (Unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition 8 and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 14 Signature 15
INFORMATION HOLDINGS INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 2000 1999 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $166,499 $ 7,551 Accounts receivable (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES RETURNS OF $2,745 AND $2,621, RESPECTIVELY) 17,669 16,997 Inventories 5,748 5,078 Prepaid expenses and other current assets 2,817 2,173 Deferred income taxes 2,137 2,137 -------- -------- Total current assets 194,870 33,936 Property and equipment, net 4,705 4,377 Pre-publication costs (NET OF ACCUMULATED AMORTIZATION OF $4,043 AND $3,249, RESPECTIVELY) 3,340 3,478 Publishing rights and other identified intangible assets, net 76,429 78,260 Goodwill (NET OF ACCUMULATED AMORTIZATION OF $746 AND $320, RESPECTIVELY) 15,794 15,629 Other assets 5,963 2,978 -------- -------- TOTAL $301,101 $138,658 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of capitalized lease obligations $ 289 $ 279 Accounts payable 16,506 13,339 Accrued expenses 3,250 3,360 Accrued income taxes 1,155 2,119 Royalties payable 1,380 1,304 Deferred subscription revenue 9,274 9,280 -------- -------- Total current liabilities 31,854 29,681 Capital leases 2,265 2,415 Deferred income taxes 15,145 14,976 Other long-term liabilities 780 651 -------- -------- Total liabilities 50,044 47,723 -------- -------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued $ -- $ -- Common stock, $.01 par value; 50,000,000 shares authorized; 21,569,072 issued at June 30, 2000 and 16,953,550 at December 31, 1999 216 170 Additional paid-in capital 241,224 84,874 Retained earnings 9,617 5,891 -------- -------- Total stockholders' equity 251,057 90,935 -------- -------- TOTAL $301,101 $138,658 ======== ========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. -1- INFORMATION HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------- ---------------------- 2000 1999 2000 1999 Revenues $ 16,180 $ 12,977 $ 32,270 $ 25,032 Cost of sales 4,581 3,542 9,151 6,743 -------- -------- -------- -------- Gross profit 11,599 9,435 23,119 18,289 -------- -------- -------- -------- Operating expenses: Selling, general and administrative 7,887 7,100 14,783 13,682 Depreciation and amortization 2,247 1,056 4,437 2,058 -------- -------- -------- -------- Total operating expenses 10,134 8,156 19,220 15,740 -------- -------- -------- -------- Income from operations 1,465 1,279 3,889 2,549 -------- -------- -------- -------- Other income (expense): Interest income 2,414 640 2,857 1,251 Interest expense (142) (75) (287) (144) Other income (expense) 3 (18) 3 (18) -------- -------- -------- -------- Income before income taxes 3,740 1,826 6,472 3,638 Provision for income taxes 1,569 719 2,746 1,419 -------- -------- -------- -------- Net income $ 2,171 $ 1,107 $ 3,726 $ 2,219 ======== ======== ======== ======== Net income per common share amounts: Basic earnings $ 0.10 $ 0.07 $ 0.19 $ 0.13 ======== ======== ======== ======== Diluted earnings $ 0.10 $ 0.06 $ 0.19 $ 0.13 ======== ======== ======== ========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. -2- INFORMATION HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, 2000 1999 ------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,726 $ 2,219 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 939 755 Amortization of goodwill and other intangibles 3,498 1,303 Amortization of pre-publication costs 1,110 1,247 (Gain) loss on disposal of property and equipment (3) 18 Deferred income taxes (422) -- Other 71 -- Changes in operating assets and liabilities: Accounts receivable, net (660) 2,592 Inventories (670) (361) Prepaid expenses and other current assets (644) (920) Accounts payable and accrued expenses 1,853 (2,952) Royalties payable 76 28 Deferred subscription revenue (57) (1,096) Other, net (948) (176) --------- --------- Net Cash Provided by Operating Activities 7,869 2,657 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 14 11 Purchases of property and equipment (1,244) (719) Pre-publication costs (985) (816) Acquisitions of businesses and titles (2,962) (3,539) --------- --------- Net Cash Used in Investing Activities (5,177) (5,063) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock in public offering 155,000 -- Common stock issued from stock options exercised 1,396 -- Principal payments on capital leases (140) (134) --------- --------- Net Cash Provided by (Used in) Financing Activities 156,256 (134) --------- --------- NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 158,948 (2,540) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,551 57,270 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 166,499 $ 54,730 ========= =========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. -3- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) A. BASIS OF PRESENTATION The consolidated balance sheet of Information Holdings Inc. (IHI, or the Company) at December 31, 1999 has been derived from IHI's Annual Report on Form 10-K for the year then ended. All other consolidated financial statements contained herein have been prepared by IHI and are unaudited. The financial statements should be read in conjunction with the financial statements for the year ended December 31, 1999 and the notes thereto contained in IHI's Annual Report on Form 10-K. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position of IHI as of June 30, 2000, and the consolidated results of their operations and their cash flows for the periods presented herein. Results for the three and six months ended June 30, 2000 are not necessarily indicative of the results to be expected for the full fiscal year. B. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventories at June 30, 2000 and December 31, 1999 consist solely of finished goods. The vast majority of inventories are books, which are reviewed periodically on a title-by-title basis for salability. The cost of inventory determined to be impaired is charged to income in the period of determination. C. PRE-PUBLICATION COSTS Certain expenses related to books, primarily comprised of design and other pre-production costs, are deferred and charged to expense over the estimated product life. These costs are primarily amortized over a four-year period following release of the applicable book, using an accelerated amortization method. During 2000 and 1999, the Company removed from its Balance Sheets fully amortized pre-publication costs with a cost of approximately $3,554,000 and $1,645,000, respectively. D. INVESTMENT IN TECHEX On May 2, 2000, the Company formed an alliance with Intellectual Property Technology Exchange, Inc. (TechEx) to jointly develop and market products to address the online needs of the technology licensing industry. As part of the alliance, the Company acquired a preferred interest which is convertible into a 21.5% equity interest in TechEx for cash consideration of approximately $2,000,000. TechEx is a leader in intellectual property exchange for the biomedical industry. -4- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) E. SECONDARY OFFERING On March 14, 2000, the Securities and Exchange Commission declared effective the Company's registration statement on Form S-3, pursuant to which the Company completed a public offering on March 20, 2000 of 4,500,000 shares of its common stock at a price of $36.50 per share. The net proceeds to the Company, after deducting underwriting discounts, commissions and offering expenses was approximately $155,000,000. The net proceeds from this offering will be used to develop and market the CorporateIntelligence.com website, to finance future acquisitions and for general corporate purposes. F. EARNINGS PER SHARE DATA The following table sets forth the computation of basic and diluted earnings per share for the periods indicated.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Basic: Net income $ 2,171 $ 1,107 $ 3,726 $ 2,219 Average shares outstanding 21,542 16,943 19,555 16,943 ----------- ----------- ----------- ----------- Basic EPS $ 0.10 $ 0.07 $ 0.19 $ 0.13 =========== =========== =========== =========== Diluted: Net income $ 2,171 $ 1,107 $ 3,726 $ 2,219 =========== =========== =========== =========== Average shares outstanding 21,542 16,943 19,555 16,943 Net effect of dilutive stock options - based on the treasury stock method 251 202 270 180 ----------- ----------- ----------- ----------- Total 21,793 17,145 19,825 17,123 =========== =========== =========== =========== Diluted EPS $ 0.10 $ 0.06 $ 0.19 $ 0.13 =========== =========== =========== ===========
During the first half of 2000, employees exercised stock options to acquire 115,522 shares at an exercise price of between $12.00 and $19.125 per share. G. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities". This standard amends SFAS No. 133. "Accounting for Derivative Instruments and Hedging Activities", and addresses a limited number of issues causing implementation difficulties. The adoption of SFAS No. 138 is not expected to have a material effect on the Company's consolidated financial position or results of operations. -5- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) H. ACQUISITIONS The pro forma unaudited results of operations for the three and six months ended June 30, 1999, assuming consummation of the 1999 acquisitions of MDC and Faxpat as of January 1, 1999 are as follows:
THREE MONTHS SIX MONTHS ENDED ENDED ------------- ----------- JUNE 30, JUNE 30, (IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1999 Revenues $ 16,154 $ 31,176 Net income 799 1,518 Basic earnings per common share $ 0.05 $ 0.09 ============== ============= Diluted earnings per common share $ 0.05 $ 0.09 ============== =============
These pro forma results of operations have been prepared for comparative purposes only and do not purport to be indicative of the operating results that would have occurred had the acquisitions been consummated as of the above date, nor are they necessarily indicative of future operating results. I. SEGMENT INFORMATION The Company has identified the following two reportable segments: intellectual property (IP) and scientific and technology information (STI). The intellectual property segment, through its CorporateIntelligence.com unit, which includes MicroPatent and MDC, provides a broad array of databases, information products and complementary services for intellectual property professionals. The scientific and technology information segment is CRC Press, which publishes professional and academic books, journals, newsletters and electronic databases covering areas such as life sciences, environmental sciences, engineering, mathematics, physical sciences and business.
THREE MONTHS ENDED THREE MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 -------------------------- -------------------------- SEGMENT SEGMENT IP STI IP STI -------- --------- --------- ---------- (IN THOUSANDS) Revenues from external customers $ 7,308 $ 8,872 $ 2,824 $ 10,153 EBITDA 2,341 2,472 1,115 2,240 Operating income 599 1,353 595 1,136 Segment assets 97,384 40,205 8,125 41,883
-6- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) I. SEGMENT INFORMATION (CONTINUED)
SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 -------------------------- -------------------------- SEGMENT SEGMENT IP STI IP STI -------- --------- --------- ---------- (IN THOUSANDS) Revenues from external customers $ 14,553 $ 17,717 $ 5,509 $ 19,523 EBITDA 5,585 4,713 2,145 4,463 Operating income 2,161 2,591 1,118 2,205 Segment assets 97,384 40,205 8,125 41,883
A reconciliation of combined EBITDA for the intellectual property and scientific and technology information segments to consolidated income before income taxes is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- (IN THOUSANDS) 2000 1999 2000 1999 Total EBITDA for reportable segments $ 4,813 $ 3,355 $ 10,298 $ 6,608 Corporate expenses (484) (451) (849) (772) Interest income 2,272 565 2,570 1,107 Depreciation and amortization (1) (2) (2,861) (1,643) (5,547) (3,305) ----------- ----------- ---------- ----------- Income before income taxes $ 3,740 $ 1,826 $ 6,472 $ 3,638 =========== =========== ========== ===========
(1) Depreciation and amortization includes $614,000 and $587,000 of amortization of pre-publication costs, included in operations in cost of sales for each of the three month periods ended June 30, 2000 and 1999, respectively. (2) Depreciation and amortization includes $1,110,000 and $1,247,000 of amortization of pre-publication costs, included in operations in cost of sales for each of the six month periods ended June 30, 2000 and 1999, respectively. -7- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999 - -------------------------------------------- REVENUES. In the second quarter of 2000, the Company had revenues of $16.2 million compared to revenues of $13.0 million in the second quarter of 1999, an increase of $3.2 million or 24.7%. The increase in revenues is primarily due to an increase in Internet-based sales of patent information of approximately $1.1 million at MicroPatent and an increase of $0.9 million in sales of patent file histories at Optipat and Faxpat, businesses acquired in fiscal 1999. Revenues at Master Data Center, which was acquired in August 1999, amounted to $2.5 million for the three months ended June 30, 2000. These increases were partially offset by a decline of $0.9 million in overall book sales at CRC Press, primarily the result of lower international book sales and the timing of new title releases. The international sales decline relates to the termination of a distribution agreement in the first quarter of fiscal 2000. International revenues while lower than the prior year have increased 54.4% over first quarter levels and are expected to continue to grow as the Company's use of its international sales force and non-exclusive distributors expand. COST OF SALES. Cost of sales increased $1.0 million or 29.3% to $4.5 million in the second quarter of 2000 compared to $3.5 million in the corresponding quarter in 1999. Cost of sales expressed as a percentage of revenues in the second quarter of 2000 increased to 28.3% from 27.3% for the corresponding quarter of 1999. The slight increase in the costs of sales over the comparable period in 1999 is primarily attributable to the acquisition of MDC, which has a higher cost structure than the other existing units. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A). S,G&A expenses increased $0.8 million or 11.1% in the second quarter of 2000, to $7.9 million from $7.1 million in the second quarter of 1999. Increased S,G&A expenses relate primarily to operating expenses of businesses acquired in 1999 and development expenses of CorporateIntelligence.com, partly offset by a decline in personnel costs and improved efficiency levels in marketing and production at CRC Press. S,G&A expenses as a percentage of revenues decreased to 48.7% in the second quarter of 2000, compared to 54.7% in the corresponding 1999 quarter. DEPRECIATION AND AMORTIZATION. Depreciation and amortization in the second quarter of 2000 increased $1.2 million, or 112.8%, to $2.3 million from $1.1 million in the corresponding quarter in 1999, primarily as a result of the amortization of intangible assets of businesses acquired in the last half of fiscal 1999. INTEREST INCOME (EXPENSE). Interest income (expense) increased to $2.3 million from $0.6 million due primarily to interest earned on the proceeds from the secondary public stock offering completed in March 2000. INCOME TAXES. The provision for income taxes as a percentage of pre-tax income for the three months ended June 30, 2000 is 42.0%, which differs from the statutory rate primarily as a result of state and local income taxes and non-deductible amortization in excess of the purchase price over net assets acquired. This compares with an effective tax rate of 39.4% in the prior year. -8- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 - ------------------------------------------ REVENUES. In the first six months of 2000, the Company had revenues of $32.3 million compared to revenues of $25.0 million in the first half of 1999, an increase of $7.3 million or 28.9%. The increase in revenues is primarily due to an increase in Internet-based sales of patent information of approximately $2.3 million at MicroPatent and an increase of $1.6 million in sales of patent file histories at Optipat and Faxpat, businesses acquired in fiscal 1999. Revenues at Master Data Center, which was acquired in August 1999, amounted to $4.9 million for the six months ended June 30, 2000. These increases were partially offset by a decline of $0.9 million in international book sales and $0.4 million of electronic product revenue at CRC Press. The Company had previously terminated an international distribution agreement in January 2000, and was contractually restricted from selling many of its scientific information products internationally for a 45-day period. Second quarter international sales increased from first quarter levels and further improvements are expected in the second half of 2000. COST OF SALES. Cost of sales increased $2.4 million or 35.7% to $9.1 million in the first half of 2000 compared to $6.7 million in the corresponding period in 1999. Cost of sales expressed as a percentage of revenues in the first six months of 2000 increased to 28.4% from 26.9% for the corresponding period of 1999. The increase in the cost of sales percentage over the comparable period in 1999 is primarily attributable to the acquisition of MDC, which has lower gross margins than the other existing units. Gross margins at CRC Press and MicroPatent improved, due to product mix and the successful integration of acquired businesses. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A). S,G&A expenses increased $1.1 million or 8.0% in the first six months of 2000, to $14.8 million from $13.7 million for the first half of 1999. Increased S,G&A expenses relate primarily to operating expenses of businesses acquired in 1999 and development expenses of CorporateIntelligence.com, partly offset by a decline in selling costs and improved efficiency levels in marketing and production at CRC Press. S,G&A expenses as a percentage of revenues decreased to 45.8% in the first half of 2000, compared with 54.7% in the corresponding 1999 period. DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the first half of 2000 increased $2.4 million, or 115.6%, to $4.4 million from $2.0 million in the corresponding period in 1999, primarily as a result of the amortization of intangible assets of businesses acquired in the last half of fiscal 1999. INTEREST INCOME (EXPENSE). Interest income (expense) increased to $2.6 million from $1.1 million due primarily to interest earned on the proceeds from the secondary public stock offering completed in March 2000. INCOME TAXES. The provision for income taxes as a percentage of pre-tax income for the six months ended June 30, 2000 is 42.4%, which differs from the statutory rate primarily as a result of state and local income taxes and non-deductible amortization in excess of the purchase price over net assets acquired. This compares with an effective tax rate of 39.0% in the prior year. -9- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES: In the first quarter of 2000, the Company sold 4,500,000 shares of its common stock in a public offering for approximately $155.0 million of net proceeds. The proceeds from this offering will be used for the development and marketing of the CorporateIntelligence.com website, to finance future acquisitions, and for general corporate purposes. The Company does not have any agreements or arrangements with respect to any prospective material acquisitions. Pending such uses, the proceeds will be invested in short-term, investment grade securities. On September 24, 1999, the Company entered into a seven-year revolving credit facility in an amount not to exceed $50,000,000 initially, including a $10,000,000 sublimit for the issuance of standby letters of credit (the Credit Facility). The proceeds from the Credit Facility are intended to be used to fund acquisitions, to meet short-term working capital needs and for general corporate purposes. Borrowings under the Credit Facility bear interest at either the higher of the bank's prime rate and one-half of 1% in excess of the overnight federal funds rate plus a margin of 0.50% to 1.25% or the Eurodollar Rate plus a margin of 1.5% to 2.25%, depending on the Company's ratio of indebtedness to earnings before interest, taxes, depreciation and amortization. The Company also pays a commitment fee of 0.375% on the unused portion of the Credit Facility. As of June 30, 2000, the Company had no outstanding borrowings under the Credit Facility. Under the terms of the Credit Facility, the Company is required to maintain certain financial ratios related to fixed charge coverage, leverage and interest coverage, in addition to certain other covenants. As of June 30, 2000, the Company was in compliance with all covenants. Cash and cash equivalents totaled $166.5 million at June 30, 2000 compared to $7.6 million at December 31, 1999. Excluding cash and cash equivalents, the Company had working capital deficit of $(3.5) million at June 30, 2000 compared to working capital deficit of $(3.3) million at December 31, 1999. Since the Company receives patent annuity payments and subscription payments in advance, the Company's existing operations are expected to maintain very low or negative working capital balances, excluding cash. Included in current liabilities at June 30, 2000 are obligations related to patent annuity payments and deferred subscription revenue of approximately $23.9 million. Cash generated by operating activities was $7.9 million for the six months ended June 30, 2000, derived from net income of $3.7 million plus non-cash charges of $5.2 million less an increase in operating assets, net of liabilities of $1.0 million. This increase in net operating assets is primarily the result of an increase in patent annuity payments offset by the payment of income tax liabilities and the payment of expenses related to book publishing operations and the development of the trademark databases. Cash used in investing activities was $5.2 million for the six months ended June 30, 2000 due to capital expenditures, including pre-publication costs, of $2.2 million and acquisition costs of $3.0 million. Excluding acquisitions of businesses and titles, the Company's existing operations are not capital intensive. -10- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Cash generated from financing activities was $156.3 million for the six months ended June 30, 2000, and primarily related to net cash proceeds received from the issuance of common stock as a result of the Company's secondary stock offering of 4,500,000 shares at a price of $36.50 per share. See Note E - SECONDARY OFFERING. The Company has no outstanding debt obligations as of June 30, 2000 related to the new Credit Facility. The Company believes that funds generated from operations, together with cash on hand and borrowings available under its Credit Facility will be sufficient to fund the cash requirements of its existing operations for the foreseeable future. The Company currently has no commitments for material capital expenditures. For the year 2000, the Company expects to incur expenditures ranging between $5.0 million and $10.0 million in connection with the rollout of CorporateIntelligence.com. Actual expenditures may vary depending on the timing of the commercial rollout, the development and integration of the databases, the hiring of additional technical staff and market acceptance of this web site, as well as other factors. As of June 30, 2000 the Company has incurred $1.2 million of costs related to CorporateIntelligence.com. Future operating requirements and capital needs may be subject to economic conditions and other factors, many of which are beyond the Company's control. SEASONALITY The Company's business is somewhat seasonal, with revenues typically reaching slightly higher levels during the third and fourth quarters of each calendar year, based on historical publication schedules. In 1999, 32% of the Company's revenues were generated during the fourth quarter with the first, second and third quarters accounting for 21%, 22% and 25% of revenues, respectively. In addition, the Company may experience fluctuation in revenues from period to period based on the timing of acquisitions and new product launches. EFFECTS OF INFLATION The Company believes that inflation has not had a material impact on the results of operations presented herein. FORWARD-LOOKING STATEMENTS The information above contains forward-looking statements, including, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, and intentions that are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that forward-looking statements contained in this Form 10-Q should be read in conjunction with the Company's disclosures under the heading IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS contained in the Company's 1999 Annual Report on Form 10-K. -11- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. The Company may be subject to market risks arising from changes in interest rates. Interest rate exposure results from changes in the Eurodollar or the prime rate, which are used to determine the interest rate applicable to borrowings under the Credit Facility. As of June 30, 2000, the Company had no outstanding borrowings under the Credit Facility. The Company routinely enters into forward contracts to acquire various international currencies in an effort to hedge foreign currency transaction exposures of its operations. At June 30, 2000, the Company had entered into forward contracts, all having maturities of less than three months, to acquire various international currencies, aggregating $7,854,000. Realized gains and losses relating to the forward contracts were immaterial for the three and six months ended June 30, 2000. -12- PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. The following report relates to the Company's secondary public stock offering:
Commission file number of registration statement: 333-30202 Effective Date: March 14, 2000 Expenses incurred through June 30, 2000: Underwriting discounts $ 8,595,000 Other expenses $ 655,000 Total expenses $ 9,250,000 Application of proceeds through June 30, 2000: Acquisitions of businesses and titles $ 2,962,250 Temporary investments (US Treasury Bills) $ 152,037,750
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Company's Annual Meeting of Stockholders on April 25, 2000 a total of 19,068,770 shares, or 89%, of outstanding shares were represented and entitled to vote. (a) The following members were elected to the Board of Directors:
Total Vote For Total Vote Withheld Each Director From Each Director ------------- ------------------ Michael E. Danzinger 18,968,805 99,965 David R. Haas 18,968,805 99,965 Sidney Lapidus 18,962,995 105,775 David E. Libowitz 18,962,970 105,800 Mason P. Slaine 18,962,970 105,800
(b) The following proposal was approved: The amendment to the 1998 Stock Option Plan. Affirmative Votes 16,426,285 Negative Votes 2,639,955 Abstain 2,530
(c) The following proposal was approved: Ratification of Ernst & Young LLP as the independent public accountants for the Company for the 2000 fiscal year. Affirmative Votes 19,064,180 Negative Votes 2,510 Abstain 2,080
-13- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 10.1 Employment Agreement, dated as of March 15, 2000 between Information Ventures LLC and Mason Slaine 27.1 Financial Data Schedule (b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the three months ended June 30, 2000. -14- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INFORMATION HOLDINGS INC. Date: August 11, 2000 By: /s/ Vincent A. Chippari ------------------------ ----------------------------------------- Vincent A. Chippari Executive Vice President and Chief Financial Officer Signing on behalf of the registrant and as principal financial and accounting officer
-15- EX-10.1 2 ex-10_1.txt EXHIBIT 10.1 Exhibit 10.1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of this 15th day of March, 2000, between INFORMATION HOLDINGS INC. (the "Company"), and Mason Slaine (the "Executive"). R E C I T A L S: WHEREAS, Information Ventures LLC, a limited liability company with respect to which the Company is the Managing Member ("Ventures") and Executive have previously entered into an Employment Agreement dated as of December 31, 1996 (the "Original Agreement") pursuant to which Executive is currently employed by Ventures as President and Chief Executive Officer; and WHEREAS, the Company, Ventures and Executive desire to replace the Original Agreement with this Agreement which will supersede the Original Agreement in all respects; NOW, THEREFORE, on the basis of the foregoing premises and in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: Section 1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the Executive hereby accepts employment with the Company, on the terms and subject to the conditions hereinafter set forth. Subject to the terms and conditions contained herein, the Executive shall serve as a President and Chief Executive Officer of the Company and, in such capacity, shall report directly to the Board of Directors and shall have such duties as are typically performed by a president and chief executive officer of a corporation, together with such additional duties, commensurate with the Executive's position as a President of the Company, as may be assigned to the Executive from time to time by the Board of Directors of the Company (the "Board of Directors"). The principal location of the Executive's employment shall be at the Company's principal executive office located in the Greater New York Area, or such other place that the Company and Executive shall jointly deem appropriate to locate the office, although the Executive understands and agrees that he may be required to travel from time to time for business reasons. Section 2. (a). TERM. Unless terminated pursuant to Section 6 hereof, the Executive's employment hereunder shall commence on the date hereof and shall continue until June 30, 2001 (the "Initial Term"). Thereafter, the Initial Term shall extend automatically for an indeterminate number of consecutive periods of one (1) year unless either party shall provide notice of termination not less than sixty (60) days prior to the end of the Initial Term or any subsequent one-year extension thereof. The Initial Term, together with any extension pursuant to this Section 2, is referred to herein as the "Employment Term". Section 3. COMPENSATION. (a). SALARY. As compensation for the performance of the Executive's services hereunder, the Company shall pay to the Executive an annual salary (the "Salary"). From the date hereof until June 30, 2000, the Company shall pay to Executive the Salary currently in effect under the Original Agreement. For the year from July 1, 2000 through June 30, 2001, the Company shall pay to Executive a Salary of $700,000. For the year from July 1, 2001 through June 30, 2002, the Company shall pay to Executive a Salary of $750,000. The Salary shall be payable in accordance with the payroll practices of the Company as the same shall exist from time to time. In no event shall the Salary be decreased during the Employment Term. (b). BONUS PLAN. The Executive shall be eligible to receive an annual cash bonus ("Bonus") which shall be determined by the Board of Directors. (c). BENEFITS. In addition to the Salary and Bonus, if any, the Executive shall be entitled to participate in health, insurance, pension, automobile and other benefits provided to other senior executives of the Company on terms no less favorable than those available to such senior executives of the Company. The Executive shall also be entitled to the same number of vacation days, holidays, sick days and other benefits as are generally allowed to other senior executives of businesses of comparable size and geography as the Company, including a leased car. In addition to the regular health insurance provided to other senior executives of the Company, the Company shall provide Executive with supplemental health insurance providing for up to $25,000 reimbursement to Executive for medical bills not covered by the Company's regular health insurance plan. (d). STOCK OPTIONS. On the date hereof, the Company shall grant (the "Initial Grant") to Executive options to purchase 200,000 shares of the common stock of the Company, par value $0.01 per share (the "Common Stock") (the option to purchase any one share of Common Stock hereafter referred to as -2- an "Option"). With respect to the Initial Grant, the grant of 6,000 Options shall be subject to the approval of the shareholders of the Company at the next annual meeting of shareholders. On the date that is the first anniversary of the date hereof, provided Executive is then employed by the Company, the Company shall grant to Executive additional Options to purchase 200,000 shares of Common Stock. Each Option shall have an exercise price equal to the fair market value of one share of Common Stock as of its respective date of its grant. The Options shall be unexercisable until vested. The Options shall vest and become exercisable at the rate of 100,000 on the first anniversary of the respective date of grant and an additional 100,000 on the second anniversary of the respective date of grant. To the extent not already vested, all outstanding Options shall become immediately vested and exercisable upon a Change of Control, as defined herein. The Options shall be granted pursuant to the Information Holdings Inc. 1998 Stock Option Plan (the "Option Plan") and shall have such other terms and conditions as are set forth in the Option Agreement attached hereto as Exhibit A. Section 4. EXCLUSIVITY. During the Employment Term, the Executive shall devote his full time to the business of the Company, shall faithfully serve the Company, shall in all respects conform to and comply with the lawful and reasonable directions and instructions given to him by the Board of Directors in accordance with the terms of this Agreement, shall use his best efforts to promote and serve the interests of the Company and shall not engage in any other business activity, whether or not such activity shall be engaged in for pecuniary profit, except that the Executive may (i) participate in the activities of professional trade organizations related to the business of the Company, (ii) serve on the board of directors of other companies which do not have competing interests with the business interests of the Company and (iii) engage in personal investing activities with respect to companies and other entities that do not have competing interests with those of the Company; PROVIDED that activities set forth in these clauses (i), (ii) and (iii), either singly or in the aggregate, do not interfere in any material respect with the services to be provided by the Executive hereunder or conflict with Executive's duty of loyalty to the Company; and FURTHER PROVIDED that the foregoing shall not preclude the Executive from owning less than 2% of the shares of a public company. Section 5. REIMBURSEMENT FOR EXPENSES. The Executive is authorized to incur reasonable expenses in the discharge of -3- the services to be performed hereunder, including expenses for travel, entertainment, lodging and similar items in accordance with the Company's expense reimbursement policy, as the same may be modified by the Board of Directors from time to time. The Company shall reimburse the Executive for all such proper expenses upon presentation by the Executive of itemized accounts of such expenditures in accordance with the financial policy of the Company, as in effect from time to time. Section 6. TERMINATION AND DEFAULT. (a). DEATH. This Agreement shall automatically terminate upon the death of the Executive and upon such event, either prior to or following a Change of Control, the Executive's estate shall be entitled to receive the amounts specified in Section 6(f) below as if termination had occurred for Good Reason prior to a Change of Control. In addition, in the event of the death of Executive, all outstanding stock options then held by Executive, issued pursuant to the Option Plan (or any successor plan), shall become fully vested and exercisable. (b). DISABILITY. If the Executive is unable to perform the duties required of him under this Agreement because of illness, incapacity, or physical or mental disability, this Agreement shall remain in full force and effect and the Company shall pay all compensation required to be paid to the Executive hereunder, unless the Executive is unable to perform the duties required of him under this Agreement for an aggregate of 180 days (whether or not consecutive) during any 12-month period during the term of this Agreement, in which event this Agreement (other than Sections 6(f), 7, 8, and 10 hereof), including, but not limited to, the Company's obligations to pay any Salary or to provide any privileges under this Agreement, shall terminate at the end of the 180 days of complete disability. In addition, in the event of such termination upon disability, all outstanding stock options then held by Executive, issued pursuant to the Option Plan (or any successor plan), shall become fully vested and exercisable. (c). JUST CAUSE. The Company may terminate the Executive's employment during any term hereunder with or without "Just Cause" as that term is defined below. In the event of termination pursuant to this Section 6(c) for Just Cause, the Company shall deliver to the Executive written notice setting forth the basis for such termination, which notice shall specifically set forth the nature of the Just Cause which is the reason for such termination. Termination of the Executive's employment hereunder shall be effective upon delivery of such -4- notice of termination. For purposes of this Agreement, "Just Cause" shall mean: (i) the Executive's willful failure (other than a failure resulting from Executive's complete or partial incapacity due to physical or mental illness or impairment), neglect or refusal to perform the material duties of his position hereunder which failure, neglect or refusal shall not have been corrected by the Executive within 30 days of receipt by the Executive of written notice from the Company of such failure, neglect or refusal, which notice shall specifically set forth the nature of said failure, neglect or refusal, (ii) any willful or intentional act of the Executive that has the effect of materially injuring the business of the Company or its affiliates in any material respect; (iii) conviction of the Executive for the commission of a felony; or (iv) the commission by the Executive of an act of fraud or embezzlement against the Company. No act, or failure to act, by the Executive shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was in the Company's best interest. (d). GOOD REASON. The Executive may resign for "Good Reason" if he resigns from his employment hereunder following a Substantial Breach (as hereinafter defined) and such Substantial Breach shall not have been corrected by the Company within thirty (30) days of receipt by the Company of written notice from the Executive of the occurrence of such Substantial Breach, which notice shall specifically set forth the nature of the Substantial Breach which is the reason for such resignation. The term "Substantial Breach" means (i) such actions taken by the Company or its Members which prevent the Executive from performing his responsibilities hereunder; PROVIDED, HOWEVER, that the Members' exercise of its right to approve or not approve any transaction shall not be deemed to be an action which would prevent the Executive from performing his responsibilities hereunder; (ii) the failure by the Company to pay to the Executive the Salary and Bonus, if any, in accordance with Sections 3(a) and 3(b) hereof; (iii) the failure by the Company to allow the Executive to participate in the Company's employee benefit plans generally available from time to time to senior executives of the Company; (iv) a material diminution in the Executive's responsibilities or authority or a requirement to relocate that is not in accordance with the provisions of Section 1 hereof; or (v) the failure of any successor to all or substantially all of the business and/or assets of the Company to assume this Agreement; PROVIDED, HOWEVER, that the term "Substantial Breach" shall not include a termination of the Executive's employment hereunder pursuant to Sections 6(b) or (c) -5- hereof. The date of termination of the Executive's employment under this Section 6(d) shall be the effective date of any resignation specified in writing by the Executive, which shall not be less than thirty (30) days after receipt by the Company of written notice of such resignation, provided that such resignation shall not be effective pursuant to this Section 6(d) and the Substantial Breach shall be deemed to have been cured if such Substantial Breach is corrected by the Company during such 30-day period. (e). CHANGE OF CONTROL. During the 90-day period following a Change of Control, the Executive shall have the right to immediately resign his employment. A Change of Control shall be deemed to have occurred: (i) upon the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person"), other than Warburg, Pincus Ventures, L.P., either directly or indirectly through one or more affiliated entities (collectively "Warburg"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (x) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition by the Company, (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or (C) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B), and (C) of subsection (iii) of this Section 6(e); or (ii) if individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; PROVIDED, HOWEVER, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or -6- other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) upon the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding (1) Warburg, (2) any corporation resulting from such Business Combination, or (3) any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) upon the approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. In the event that Executive resigns pursuant to this Section 6(e) or if the Company terminates Executive's employment without Just Cause following a Change of Control, the Company shall pay to Executive in a lump sum an amount equal to three times (i) the Salary in effect immediately prior to the termination of employment plus (ii) the Bonus Executive received for the fiscal year immediately prior to the fiscal year in which -7- his termination of employment occurred. Payments pursuant to this Section 6(e) shall not apply to termination of Executive's employment on account of his death. (f). PAYMENTS. In the event that the Executive resigns without Good Reason or the Executive's employment hereunder terminates for Just Cause, the Company shall pay to the Executive all amounts accrued but unpaid hereunder through the date of termination in respect of Salary, unused vacation or unreimbursed expenses. In the event the Executive's employment hereunder is terminated by the Company without Just Cause or by the Executive with Good Reason, in addition to the amounts specified in the foregoing sentence, (i) the Executive shall continue to receive the Salary (less any applicable withholding or similar taxes) at the rate in effect hereunder on the date of such termination periodically, in accordance with the Company's prevailing payroll practices, for a period of twelve months following the date of such termination (the "Severance Term") and (ii) the Executive (and/or his covered dependents) shall continue to receive any health or insurance benefits provided to him as of the date of such termination in accordance with Section 3(c) hereof during the Severance Term. The severance amounts payable in Section 6(f)(i) above upon a termination of employment shall only be payable in the event that Executive terminates employment prior to a Change of Control. Any severance payment to Executive for termination of employment following a Change of Control shall be governed by Section 6(e); provided, however, that the payments and benefits pursuant to the first sentence of this Section 6(f) and subsection (ii) above shall continue to apply for a termination of Executive's employment following a Change of Control. Amounts owed by the Company in respect of the Salary or reimbursement for expenses under the provisions of Section 5 hereof shall, except as otherwise set forth in this Section 6(f), be paid promptly upon any termination. Upon any termination of this Agreement, all of the rights, privileges and duties of the Executive hereunder shall cease, except for his rights under this Section 6(f) and his obligations under Sections 7, 8, 9, 10, and 11 hereunder. (g) TAX RESTORATION PAYMENT. In the event it is determined that any payment or distribution of any type to or for the benefit of the Executive, pursuant to this Agreement or otherwise, by the Company, any person who acquires ownership or effective control of the Corporation, or ownership of a substantial portion of the assets of the Corporation (within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any -8- affiliate of such Person (the "Total Payments") would be subject to the excise tax imposed by section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as , the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Tax Restoration Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Tax Restoration Payment, the Executive retains an amount of the Tax Restoration Payment equal to the Excise Tax imposed upon the Total Payments. Section 7. NON-DISCLOSURE NON-INTERFERENCE AND INVENTIONS. (a). NO COMPETING EMPLOYMENT. The Executive acknowledges that the agreements and covenants contained in this Section 7 are essential to protect the value of the Company's business and assets and by his current employment with the Company and its subsidiaries, the Executive has obtained and will obtain such knowledge, contacts, know-how, training and experience and there is a substantial probability that such knowledge, know-how, contacts, training and experience could be used to the substantial advantage of a competitor of the Company and to the Company's substantial detriment. Therefore, the Executive agrees that for the period commencing on the date of this Agreement and ending on the second anniversary of the termination of the Executive's employment hereunder (such period is hereinafter referred to as the "Restricted Period" and the two-year period during the Restricted Period following executive's termination of employment is hereinafter referred to as the "Post Termination Period"), the Executive shall not participate or engage, directly or indirectly, for himself or on behalf of or in conjunction with any person, partnership, corporation or other entity, whether as an employee, agent, officer, director, shareholder, partner, joint venturer, investor or otherwise, in any business activities in the United States if such activity consists of any activity undertaken or expressly contemplated to be undertaken by the Company or any of its subsidiaries or by the Executive at any time during the Employment Term; PROVIDED, HOWEVER, that the foregoing shall not preclude the Executive from owning less than 2% of the shares of a public company. Notwithstanding the foregoing, this Section 7(a) shall not apply if the Company terminates the Executive's employment without Just Cause or the Executive resigns for Good Reason pursuant to Section 6(d). -9- (b). NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive, except in connection with his employment hereunder, shall not disclose to any person or entity or use, either during the Employment Term or at any time thereafter, any information not in the public domain or generally known in the industry, in any form, acquired by the Executive while employed by the Company or any predecessor to the Company's business or, if acquired following the Employment Term, such information which, to the Executive's knowledge, has been acquired, directly or indirectly, from any person or entity owing a duty of confidentiality to the Company or any of its subsidiaries or affiliates, relating to the Company, its subsidiaries or affiliates. The Executive agrees and acknowledges that all of such information, in any form, and copies and extracts thereof, are and shall remain the sole and exclusive property of the Company, and upon termination of his employment with the Company, the Executive shall return to the Company the originals and all copies of any such information provided to or acquired by the Executive in connection with the performance of his duties for the Company, and shall return to the Company all files, correspondence and/or other communications received, maintained and/or originated by the Executive during the course of his employment. (c). NO INTERFERENCE. During the Restricted Period, the Executive shall not, whether for his own account or for the account of any other individual, partnership, firm, corporation or other business organization (other than the Company), directly or indirectly solicit, endeavor to entice away from the Company or its subsidiaries, or otherwise directly interfere with the relationship of the Company or its subsidiaries with any person who, to the knowledge of the Executive, is employed by or otherwise engaged to perform services for the Company or its subsidiaries (including, but not limited to, any independent sales representatives or organizations) or who is, or was within the then most recent twelve-month period, a customer or client, of the Company, its predecessors or any of its subsidiaries. The placement of any general classified or "help wanted" advertisements and/or general solicitations to the public at large shall not constitute a violation of this Section 7(c) unless the Executive's name is contained in such advertisements or solicitations. (d). INVENTIONS, ETC. The Executive hereby sells, transfers and assigns to the Company or to any person or entity designated by the Company all of the entire right, title and -10- interest of the Executive in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by the Executive, solely or jointly, during his employment by the Company which relate to methods, apparatus, designs, products, processes or devices, sold, leased, used or under consideration or development by the Company, or which otherwise relate to or pertain to the business, functions or operations of the Company or which arise from the efforts of the Executive during the course of his employment for the Company. The Executive shall communicate promptly and disclose to the Company, in such form as the Company requests, all information, details and data pertaining to the aforementioned inventions, ideas, disclosures and improvements; and the Executive shall execute and deliver to the Company such formal transfers and assignments and such other papers and documents as may be necessary or required of the Executive to permit the Company or any person or entity designated by the Company to file and prosecute the patent applications and, as to copyrightable material, to obtain copyright thereof. Any invention relating to the business of the Company and disclosed by the Executive within one year following the termination of his employment with the Company shall be deemed to fall within the provisions of this paragraph unless proved to have been first conceived and made following such termination. (e). NON-COMPETE PAYMENT. In consideration for the covenants made by Executive in this Section 7, the Company shall pay to Executive during the Post Termination Period an annual amount equal to 50% of Executive's Salary in effect as of the date immediately prior to Executive's termination of employment with the Company (the "Non-Compete Payment"). The Non-Compete Payment shall be payable in installments over the course of the Post Termination Period in accordance with the normal payroll practices of the Company as in effect from time to time; provided, however, that in the event that Executive resigns for Good Reason or is terminated without Just Cause and receives severance payments pursuant to Section 6(f)(i) herein, the Non-Compete Payment, during the first 12 months of the Post Termination Period, shall be fully offset by such severance payments and the Company's only obligation under this Section 7(e) shall be to pay the Non-Compete Payment to Executive during the second 12 months of the Post Termination Period. Section 8. INJUNCTIVE RELIEF. Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in Section 7 hereof may result in material irreparable injury to the -11- Company or its subsidiaries or affiliates for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction, without the necessity of proving irreparable harm or injury as a result of such breach or threatened breach of Section 7 hereof, restraining the Executive from engaging in activities prohibited by Section 7 hereof or such other relief as may be required specifically to enforce any of the covenants in Section 7 hereof. Section 9. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the parties, including, but not limited to, the Executive's heirs and the personal representatives of the Executive's estate; PROVIDED, -12- HOWEVER, that neither party shall assign or delegate any of the obligations created under this Agreement without the prior written consent of the other party. Notwithstanding the foregoing, the Company shall have the unrestricted right to assign this Agreement and to delegate all or any part of its obligations hereunder to any of its subsidiaries or affiliates, but in such event such assignee shall expressly assume all obligations of the Company hereunder and the Company shall remain fully liable for the performance of all of such obligations in the manner prescribed in this Agreement. Nothing in this Agreement shall confer upon any person or entity not a party to this Agreement, or the legal representatives of such person or entity, any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement. Section 10. WAIVER AND AMENDMENTS. Any waiver, alteration, amendment or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by the parties hereto; PROVIDED, HOWEVER, that any such waiver, alteration, amendment or modification is consented to on the Company's behalf by the Board of Directress. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver. Section 11. SEVERABILITY AND GOVERNING LAW. The Executive acknowledges and agrees that the covenants set forth in Section 7 hereof are reasonable and valid in geographical and temporal scope and in all other respects. If any of such covenants or such other provisions of this Agreement are found to be invalid or unenforceable by a final determination of a court of competent jurisdiction (a) the remaining terms and provisions hereof shall be unimpaired and (b) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. Section 12. NOTICES. (i) All communications under this Agreement shall be in writing and shall be delivered by hand or mailed by overnight courier or by registered or certified mail, postage prepaid: -13- (1) if to the Executive such address as the Executive may have furnished the Company in writing, (2) if to the Company, at c/o Warburg, Pincus Ventures, L.P., 466 Lexington Avenue, New York, New York 10017, marked for the attention of the Board of Directors, or at such other address as it may have furnished in writing to the Executive, or (ii) Any notice so addressed shall be deemed to be given: if delivered by hand, on the date of such delivery; if mailed by courier, on the first business day following the date of such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing. Section 13. SECTION HEADINGS. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof, affect the meaning or interpretation of this Agreement or of any term or provision hereof. Section 14. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding and agreement of the parties hereto regarding the employment of the Executive. This Agreement supersedes the Original Agreement and all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement. Section 15. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. -14- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. INFORMATION HOLDINGS INC. By: /S/ LISA RUNDLE ---------------- INFORMATION VENTURES LLC BY WARBURG, PINCUS INFORMATION VENTURES, INC. MEMBER By: /S/ DAVID E. LIBOWITZ --------------------- Name: David E. Libowitz Title: Managing Director By: /S/ MASON SLAINE ------------- MASON SLAINE -15- EX-27.1 3 ex-27_1.txt EXHIBIT 27.1
5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 166499 0 20414 2745 5748 194870 9072 4367 301101 31854 2265 0 0 216 250841 301101 32270 32270 9151 9151 0 257 287 6472 2746 3726 0 0 0 3726 0.19 0.19
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