-----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, GIWBlaIU9E8W8yslPeTzmI1Gc9VfrcYgNcN7NlAlrSP9Pj20MDj+yV8HHsEnwzLa TQP+rbENF+g+SU0P5NcwbA== 0000912057-02-031969.txt : 20020814 0000912057-02-031969.hdr.sgml : 20020814 20020814141741 ACCESSION NUMBER: 0000912057-02-031969 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION HOLDINGS INC CENTRAL INDEX KEY: 0001063744 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 061518007 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14371 FILM NUMBER: 02734539 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 a2087352z10-q.txt FORM 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, 2002 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, 2002, there were 21,813,386 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, 2002 (Unaudited) and December 31, 2001 Consolidated Statements of Operations (Unaudited) for the 2 Three Months Ended June 30, 2002 and 2001 and Six Months Ended June 30, 2002 and 2001 Consolidated Statements of Cash Flows (Unaudited) for the 3 Six Months Ended June 30, 2002 and 2001 Notes to Consolidated Financial Statements (Unaudited) 4 Item 2. Management's Discussion and Analysis of 12 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 6. Exhibits and Reports on Form 8-K 20 Signature 21
INFORMATION HOLDINGS INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 2002 2001 (Unaudited) ASSETS CURRENT ASSETS: Cash and equivalents $ 37,797 $ 38,612 Short-term investments 14,555 17,762 Accounts receivable (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES RETURNS OF $3,935 AND $3,273, RESPECTIVELY) 37,931 35,130 Inventories 7,420 7,323 Prepaid expenses and other current assets 5,364 7,268 Deferred income taxes 3,423 3,423 ----------- ------------ Total current assets 106,490 109,518 Property and equipment, net 9,374 9,868 Pre-publication costs (NET OF ACCUMULATED AMORTIZATION OF $7,349 AND $5,758, RESPECTIVELY) 4,826 4,750 Identified intangible assets, net 105,114 111,463 Goodwill (NET OF ACCUMULATED AMORTIZATION OF $7,075 AND $6,624, RESPECTIVELY) 118,947 102,666 Other assets 9,150 8,292 ----------- ------------ TOTAL $ 353,901 $ 346,557 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of capitalized lease obligations $ 520 $ 490 Accounts payable 25,570 21,598 Accrued expenses 12,817 17,793 Royalties payable 2,022 1,625 Deferred revenue 21,031 18,293 ----------- ------------ Total current liabilities 61,960 59,799 Capital leases 1,689 1,959 Deferred income taxes 15,485 16,826 Other long-term liabilities 987 1,023 ----------- ------------ Total liabilities 80,121 79,607 ----------- ------------ STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued $ - $ - Common stock, $.01 par value; 50,000,000 shares authorized; issued and outstanding 21,813,386 shares at June 30, 2002 and 21,758,052 shares at December 31, 2001 218 218 Additional paid-in capital 246,990 245,911 Retained earnings 26,703 20,821 Accumulated other comprehensive loss (131) - ----------- ------------ Total stockholders' equity 273,780 266,950 ----------- ------------ TOTAL $ 353,901 $ 346,557 =========== ============
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, --------------------------- --------------------------- 2002 2001 2002 2001 Revenues $ 35,645 $ 25,314 $ 68,933 $ 49,558 Cost of sales 10,609 5,968 19,880 11,542 --------- ---------- ---------- ---------- Gross profit 25,036 19,346 49,053 38,016 --------- ---------- ---------- ---------- Operating expenses: Selling, general and administrative 15,943 12,336 31,560 23,556 Depreciation and amortization 4,412 4,747 8,551 8,598 --------- ---------- ---------- ---------- Total operating expenses 20,355 17,083 40,111 32,154 --------- ---------- ---------- ---------- Income from operations 4,681 2,263 8,942 5,862 --------- ---------- ---------- ---------- Other income (expense): Interest income 269 1,060 531 2,702 Interest expense (135) (136) (271) (272) Other expense (3) - (3) (3) --------- ---------- ---------- ---------- Income before income taxes 4,812 3,187 9,199 8,289 Provision for income taxes 1,744 1,283 3,317 3,381 --------- ---------- ---------- ---------- Net income $ 3,068 $ 1,904 $ 5,882 $ 4,908 ========= ========== ========== ========== Basic and diluted earnings per common share amounts: Net income $ 0.14 $ 0.09 $ 0.27 $ 0.23 ========= ========== ========== ==========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. -2- INFORMATION HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, --------------------------------- 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,882 $ 4,908 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,913 1,553 Amortization of goodwill - 2,257 Amortization of other intangible assets 5,638 4,788 Amortization of pre-publication costs 1,637 1,304 Change in non-current deferred income tax liabilities (826) (561) Other 87 73 Changes in operating assets and liabilities, net of effect of acquisitions: Increase in accounts receivable, net (2,085) (287) Increase in inventories (97) (327) Decrease (increase) in prepaid and other current assets 1,707 (1,214) Decrease in accounts payable and accrued expenses (5,399) (4,292) Income tax benefit from stock options exercised 321 306 Net change in income taxes (receivable) payable 3,556 (2,435) Increase (decrease) in deferred revenue 1,083 (410) Net change in other assets and liabilities (769) (412) ------------- ------------- Net Cash Provided by Operating Activities 13,648 5,251 ------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of businesses and equity interests (14,043) (34,066) Purchases of property and equipment (1,678) (2,006) Investment in pre-publication costs (1,713) (1,577) Sales (purchases) of short-term investments 3,207 (8,852) Capitalized internal-use software (434) (178) Capitalized software development costs (353) - Proceeds from disposal of property and equipment 33 2 ------------- ------------- Net Cash Used in Investing Activities (14,981) (46,677) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Common stock issued from stock options exercised 758 683 Principal payments on capital leases (240) (150) ------------- ------------- Net Cash Provided by Financing Activities 518 533 ------------- -------------- NET DECREASE IN CASH AND EQUIVALENTS (815) (40,893) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 38,612 96,375 ------------- -------------- CASH AND EQUIVALENTS AT END OF PERIOD $ 37,797 $ 55,482 ============= ============== 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, 2001 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. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2001 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 the instructions to Form 10-Q 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, 2002, and the consolidated results of operations and cash flows for the periods presented herein. Results for the three and six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the full fiscal year. Certain reclassifications have been made to the financial statements of the prior period to conform to the June 30, 2002 presentation. B. INVENTORIES Inventories, consisting primarily of finished goods, are stated at the lower of cost (first-in, first-out method) or market. Shipping costs, which consist of transportation costs associated with the delivery of the Company's products to customers, and handling costs are included in cost of sales. The vast majority of inventories are books, which are reviewed monthly 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. -4- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) C. EARNINGS PER SHARE DATA The following table sets forth the computation of basic and diluted earnings per common share for the periods indicated:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 2002 2001 2002 2001 Basic: Net income $ 3,068 $ 1,904 $ 5,882 $ 4,908 Average common shares outstanding 21,807 21,633 21,784 21,624 ----------- ----------- ----------- ----------- Basic EPS $ 0.14 $ 0.09 $ 0.27 $ 0.23 =========== =========== =========== =========== Diluted: Net income $ 3,068 $ 1,904 $ 5,882 $ 4,908 =========== =========== =========== =========== Average common shares outstanding 21,807 21,633 21,784 21,624 Net effect of dilutive stock options - based on the treasury stock method 197 163 186 164 ----------- ----------- ----------- ----------- Total 22,004 21,796 21,970 21,788 =========== =========== =========== =========== Diluted EPS $ 0.14 $ 0.09 $ 0.27 $ 0.23 =========== =========== =========== ===========
During the first half of 2002, employees exercised stock options to acquire 55,334 shares at an exercise price of between $12.00 and $21.09 per share. For the three and six months ended June 30, 2002, 372,248 and 462,773 stock options, respectively, were excluded from the computation of diluted earnings per common share due to their antidilutive effect. For the three and six months ended June 30, 2001, 324,248 stock options in each of the periods, respectively, were excluded from the computation of diluted earnings per common share due to their antidilutive effect. D. ACQUISITIONS On May 9, 2002, the Company acquired substantially all of the assets of Aurigin Systems, Inc. (Aurigin) for cash consideration of approximately $14,043,000 including the assumption of certain liabilities. Aurigin provides intellectual property management systems used primarily by corporations to search, analyze, annotate and group patent information, as well as proprietary corporate data. The purchase price was preliminarily allocated to net tangible liabilities of $1,592,000, identified intangible assets of $1,600,000 and goodwill of $14,035,000. The Company has obtained a preliminary independent appraisal of the fair value of the identified intangible assets and their remaining useful lives. The result of operations of the assets and liabilities acquired is not material to the current period or the comparable periods presented herein. -5- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) D. ACQUISITIONS (CONTINUED) On December 20, 2001, the Company completed a tender offer and acquired all of the outstanding common shares of Liquent, Inc. (Liquent) for cash consideration equal to $2.27 per share, or approximately $41,100,000. Liquent is a leading provider of software and service solutions that aid in content assembly and publishing for the life sciences industry. The purchase price was allocated to net tangible assets of $6,026,000, identified intangible assets of $6,790,000 and non-deductible goodwill of $25,875,000. The Company has obtained an independent appraisal of the fair value of the identified intangible assets and their remaining useful lives. The Company also recorded a deferred income tax asset as a result of Liquent's net operating loss carryforwards of $5,010,000, offset by a deferred income tax liability as a result of the gross up of acquired intangible assets in the amount of $2,565,000. On May 15, 2001, the Company acquired the stock of Parthenon Publishing Group (Parthenon), for cash consideration of approximately $8,300,000. Parthenon, based in the United Kingdom, is a leading provider of medical and environmental reference products, including books, journals and medical communication services. On March 29, 2001, the Company acquired the IDRAC business of IMS Health and entered into multiple perpetual agreements with IMS Health and certain affiliates, for aggregate cash consideration of approximately $20,400,000. IDRAC, based in France, is a leading provider to pharmaceutical companies worldwide of regulatory and intellectual property information related to pharmaceutical product registrations. All acquisitions have been accounted for using the purchase method of accounting and, accordingly, the results of their operations have been included in the Company's results of operations from their respective date of acquisition. In accordance with SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, no goodwill amortization was recorded for acquisitions after June 30, 2001, which includes Liquent and Aurigin. The following unaudited pro forma information presents the results of operations of the Company, as if the 2001 acquisitions of IDRAC and Liquent had taken place as of January 1, 2001, is as follows:
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, ----------------- ------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2001 Revenues $ 29,856 $ 60,928 ================== =================== Net loss $ (535) $ (1,186) ================== =================== Basic loss per common share $ (0.02) $ (0.05) ================== =================== Diluted loss per common share $ (0.02) $ (0.05) ================== ===================
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. -6- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) E. GOODWILL AND IDENTIFIED INTANGIBLE ASSETS Effective as of January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed at least annually, or more frequently if impairment indicators arise. During the year ended December 31, 2001, the Company began the required transitional impairment review of goodwill and intangible assets with indefinite lives. This review required the Company to estimate the fair value of its identified reporting units as of December 31, 2001. For each of the reporting units, the estimated fair value was determined utilizing the expected present value of the future cash flows of the units. In all instances, the estimated fair value of the reporting units exceeded their respective book values and therefore no write-down of goodwill or intangible assets with indefinite lives was required as of January 1, 2002. In addition, as of January 1, 2002, the Company ceased the amortization of goodwill and intangible assets with indefinite lives and reclassified the December 31, 2001 carrying value of its assembled workforce acquired intangible assets included in other identified intangibles to goodwill. The following unaudited reconciliation presents pro forma net income, basic and diluted EPS as if SFAS No. 142 had been adopted on January 1, 2001, is as follows:
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, ------------------ ------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2001 Reported net income $ 1,904 $ 4,908 Adjustment for goodwill amortization, net of tax 965 1,602 Adjustment for trademark and tradename amortization, net of tax 78 155 ------------------ ------------------ Pro forma net income $ 2,947 $ 6,665 ================== ================== Basic and diluted earning per common share: As reported $ 0.09 $ 0.23 ================== ================== Pro forma $ 0.14 $ 0.31 ================== ==================
-7- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) E GOODWILL AND IDENTIFIED INTANGIBLE ASSETS (CONTINUED) Identified intangible assets and goodwill subject to amortization consisted of the following (in thousands):
JUNE 30, 2002 --------------------------------------------------------------------- Gross Amortization Carrying Accumulated Net Period Amount Amortization Balance (Years) ---------------------------------------------------------------------------------------------------------------- Trademarks and tradenames $ 11,469 $ 2,167 $ 9,302 6-20 Publishing rights 23,571 5,290 18,281 7-20 Customer lists and relationships 46,548 8,976 37,572 10-20 Databases and content 27,400 5,986 21,414 5-20 Other identified intangibles 11,714 1,976 9,738 3-20 -------------- ------------------- ------------- $ 120,702 $ 24,395 $ 96,307 ============== =================== ============= DECEMBER 31, 2001 --------------------------------------------------------------------- Gross Amortization Carrying Accumulated Net Period Amount Amortization Balance (Years) ---------------------------------------------------------------------------------------------------------------- Trademarks and tradenames $ 21,129 $ 2,792 $ 18,337 6-20 Publishing rights 23,572 4,611 18,961 7-20 Customer lists and relationships 46,548 7,039 39,509 10-20 Databases and content 27,400 4,479 22,921 5-20 Other identified intangibles 20,531 8,796 11,735 2-20 -------------- ------------------- -------------- 139,180 27,717 111,463 Goodwill subject to amortization 82,367 6,624 75,743 10-20 -------------- ------------------- -------------- $ 221,547 $ 34,341 $ 187,206 ============== =================== ==============
Total amortization expense of goodwill and identified intangible assets amounted to $5,638,000 and $15,252,000 for the six months ended June 30, 2002 and the year ended December 31, 2001, respectively. During the first half of 2002, the Company removed from its Balance Sheet fully amortized other identified intangibles with a cost of approximately $7,300,000. -8- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) E. GOODWILL AND IDENTIFIED INTANGIBLE ASSETS (CONTINUED) Identified intangible assets and goodwill not subject to amortization consisted of the following (in thousands):
JUNE 30, 2002 ----------------------------------------------------- Gross Carrying Accumulated Amount Amortization Net Balance ------------------------------------------------------------------------------------------- Trademarks and tradenames $ 10,000 $ 1,193 $ 8,807 Goodwill 126,022 7,075 118,947 ------------------- ------------------ --------------- $ 136,022 $ 8,268 $ 127,754 =================== ================== =============== DECEMBER 31, 2001 ------------------------------------------------------ Gross Carrying Accumulated Amount Amortization Net Balance ------------------------------------------------------------------------------------------- Goodwill $ 26,923 $ - $ 26,923 =================== ================== ===============
Anntual pretax amortization for identified intangible assets over the next five years is estimated to be as follows (in thousands):
Year ending December 31, 2003 $ 11,411 2004 $ 11,154 2005 $ 10,756 2006 $ 9,774 2007 $ 8,902
The following table sumarizes the change in the carrying amount of goodwill for the periods indicated (in thousands):
SIX MONTHS TWELVE MONTHS ENDED ENDED JUNE 30, DECEMBER 31, ------------------ ------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) 2002 2001 Beginning balance $ 102,666 $ 61,272 Net change from acquisitions 14,487 46,729 Amortization expense - (5,002) Reclassification of assembled workforce, net 1,834 - Other (40) (333) ------------------ ------------------ Total $ 118,947 $ 102,666 ================== ==================
-9- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) F. SEGMENT INFORMATION The Company has three reportable segments: intellectual property (IP), scientific and technology information (STI) and information technology learning (ITL). The intellectual property segment, which includes MicroPatent, Master Data Center, Liquent and IDRAC, provides a broad array of databases, information products and complementary services for intellectual property and regulatory 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. The information technology learning segment is Transcender, which is a leading online provider of IT certification test preparation products. Transfers between geographic areas are recorded at agreed upon prices and intercompany revenue and profits are eliminated. The following tables set forth the information for the Company's reportable segments based on the nature of the products and services offered for the periods indicated:
THREE MONTHS ENDED THREE MONTHS ENDED JUNE 30, 2002 JUNE 30, 2001 --------------------------------- ------------------------------ SEGMENT SEGMENT IP STI ITL IP STI ITL ----------- --------- -------- -------- -------- --------- (IN THOUSANDS) Revenues from external customers $ 19,455 $ 12,864 $ 3,326 $ 10,569 $ 9,576 $ 5,169 EBITDA 6,204 3,509 1,187 4,128 1,942 2,540 Operating income 3,435 1,860 361 1,627 674 897 Segment assets excluding goodwill 136,068 53,393 12,157 105,322 52,857 16,046 Goodwill, net 69,479 5,868 43,600 31,902 150 44,615 SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2002 JUNE 30, 2001 ----------------------------------- ------------------------------ SEGMENT SEGMENT IP STI ITL IP STI ITL ----------- --------- -------- -------- -------- --------- (IN THOUSANDS) Revenues from external customers $ 38,374 $ 23,920 $ 6,639 $ 18,674 $ 18,587 $ 12,297 EBITDA 12,970 6,073 2,066 6,695 4,204 6,500 Operating income 7,588 2,934 412 2,466 1,814 3,229 Segment assets excluding goodwill 136,068 53,393 12,157 105,322 52,857 16,046 Goodwill, net 69,479 5,868 43,600 31,902 150 44,615
-10- INFORMATION HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) F. SEGMENT INFORMATION (CONTINUED) A reconciliation of combined EBITDA for the intellectual property, scientific and technology information, and information technology learning segments to consolidated income before income taxes is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- (IN THOUSANDS) 2002 2001 2002 2001 Total EBITDA for reportable segments $ 10,900 $ 8,610 $ 21,109 $ 17,399 Corporate expenses (970) (930) (1,982) (1,638) Interest income, net 134 924 260 2,430 Depreciation and amortization (1) (2) (5,252) (5,417) (10,188) (9,902) ----------- ----------- ---------- ----------- Income before income taxes $ 4,812 $ 3,187 $ 9,199 $ 8,289 =========== =========== =========== ===========
(1) Depreciation and amortization includes $840,000 and $670,000 of amortization of pre-publication costs, included in operations in cost of sales for each of the three month periods ended June 30, 2002 and 2001, respectively. (2) Depreciation and amortization includes $1,637,000 and $1,304,000 of amortization of pre-publication costs, included in operations in cost of sales for each of the six month periods ended June 30, 2002 and 2001, respectively. G. COMPREHENSIVE INCOME The following table is a reconciliation of the Company's net income to comprehensive income:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- (IN THOUSANDS) 2002 2001 2002 2001 Net income $ 3,068 $ 1,904 $ 5,882 $ 4,908 Other comprehensive loss, net of tax: Foreign currency translation adjustment (74) (70) (81) (70) ----------- ----------- ---------- ----------- Comprehensive income $ 2,994 $ 1,834 $ 5,801 $ 4,838 =========== =========== ========== ===========
-11- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION AND ANALYSIS PRESENTS A REVIEW OF THE COMPANY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001. THIS REVIEW SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES PRESENTED HEREIN AS WELL AS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINED IN THE COMPANY'S 2001 ANNUAL REPORT ON FORM 10-K. OVERVIEW Impact of Acquisitions and Outlook A key component of the Company's growth strategy is to pursue acquisitions in attractive niche markets where opportunities exist to internally grow the acquired companies' revenues and increase profitability through operating efficiencies. Since beginning operations in January 1997, the Company has completed fourteen strategic acquisitions, including eight in the intellectual property area, five in scientific and technology information and one in the information technology learning market, as well as some minor acquisitions. The Company continues to actively seek acquisitions that will further the Company's growth and operating strategies. As the Company acquires additional companies, its sales mix, market focus, cost structure and operating leverage may change significantly. Consequently, the Company's historical and future results of operations reflect and will reflect the impact of acquisitions from the date of acquisition, and period-to-period comparisons may not be meaningful in some respects. Historical information for companies subsequent to their acquisition may include integration and other costs that are not expected to continue in the future. CONSOLIDATED RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001 The Company reported net income of $3.1 million, or $0.14 per diluted common share, for the second quarter of 2002 compared with $1.9 million, or $0.09 per diluted common share, in the second quarter of 2001. Results for the second quarter of 2001 include amortization of goodwill and certain other acquired intangible assets of approximately $1.0 million, net of tax. Upon adoption of Statement of Financial Accounting Standard (SFAS) No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, the Company ceased amortizing goodwill as well as certain other acquired intangible assets. Excluding amortization of these items net income for the three months ended June 30, 2001 would have been $2.9 million, or $0.14 per diluted common share, compared with $3.1 million, or $0.14 per diluted common share, for the second quarter of 2002. The overall increase in second quarter 2002 earnings over the prior year was due primarily to increased gross profits in the Company's IP and STI segments, including both a positive impact from businesses acquired in 2001 and growth in core businesses, the impact of the accounting change pursuant to SFAS No. 142, as well as a decrease in the Company's effective income tax rate. The positive factors were partially offset by decreased earnings in the Company's ITL segment, increased depreciation related to capital expenditures, increased amortization of acquired intangible assets and lower interest income. -12- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net interest income (expense) decreased to $0.1 million from $0.9 million due primarily to the use of cash from the secondary public stock offering to acquire businesses during 2001 and 2002 (See Note D - ACQUISITIONS). Additionally, the average interest rate decreased to 1.9% in the second quarter of 2002 from 4.5% in the comparable prior year period. The provision for income taxes as a percentage of pre-tax income for the three months ended June 30, 2002 was 36.2%, compared to 40.3% for the second quarter of 2001, due primarily to the adoption of SFAS No. 142, which eliminates goodwill amortization, a significant amount of which was not tax-deductible. Additionally, the Company was also subject to foreign taxes during the second quarter of 2002 and 2001, which were immaterial in the periods. SEGMENT REVIEW INTELLECTUAL PROPERTY (IP) IP revenue for the second quarter of 2002 increased 84.1%, or $8.9 million, to $19.5 million compared to $10.6 million in the comparable period in 2001. The increase in revenues includes $0.8 million from continued strong internal growth in existing IP information and IP management businesses, $0.9 million of revenues from Aurigin products acquired in 2002 and an increase of $7.2 million in revenue at Liquent-IDRAC, primarily as a result of the acquisition of Liquent in fiscal 2001. Operating income increased 111.1%, or $1.8 million, to $3.4 million for 2002, compared to $1.6 million of operating income in the prior year quarter. The increase in operating income includes an increase of $1.0 million at Liquent-IDRAC and an increase of $0.8 million in core IP information and IP management businesses. IP cost of sales, expressed as a percentage of revenues, increased from 27.5% to 30.2%, due primarily to the inclusion of Liquent in fiscal 2002 results. Selling, general and administrative (S,G&A) expenses, increased $3.8 million or 108.4%, due primarily to the expenses of Liquent and Aurigin, businesses acquired in December 2001 and in May 2002, respectively. Included in S,G&A expenses for the quarter ended June 30, 2002 is an unrealized foreign exchange loss of $0.3 million, due primarily to the revaluation of U.S. dollar denominated cash held by the Company's French subsidiary. IP depreciation and amortization increased $0.3 million, or 10.8%, primarily as a result of the amortization of intangible assets and depreciation of purchased equipment related to the above acquisitions, partially offset by the impact of the accounting change pursuant to SFAS No. 142. SCIENTIFIC AND TECHNOLOGY INFORMATION (STI) STI revenue for the second quarter of 2002 increased 34.3%, or $3.3 million, to $12.9 million from $9.6 million in the comparable period in 2001. The revenue increase includes an increase of $0.8 million in international reference product sales at CRC Press and an increase of $2.0 million at Parthenon Press (acquired in May 2001), including an increase of approximately $0.8 million in its medical communication division. Operating income increased 176.1%, or $1.2 million, to $1.9 million for 2002, compared to $0.7 million in the prior year quarter, due primarily to contributions from increased revenues. STI cost of sales, expressed as a percentage of revenues, increased from 28.9% to 35.0%, due primarily to increased contributions from Parthenon Press, which has lower gross margins than CRC Press. S,G&A expenses were relatively constant in the periods. STI depreciation and amortization increased $0.2 million, or 35.1%, primarily as result of depreciation on new software systems. -13- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) INFORMATION TECHNOLOGY LEARNING (ITL) ITL revenue for the second quarter of 2002 decreased 35.7%, or $1.8 million, to $3.3 million compared to $5.1 million in the comparable period in 2001. The revenue decline is a result of continued difficult overall market conditions in information technology and a lack of significant new certifications by major software companies in recent months. Operating income in the second quarter of 2002 decreased 59.8%, or $0.5 million, to $0.4 million, compared to prior year operating income of $0.9 million, as a result of the revenue decline. Cost of sales, expressed as a percentage of revenues, was relatively constant in the periods, while S,G&A expenses decreased by $0.4 million, or 18.5%, as a result of cost reduction initiatives. ITL depreciation and amortization decreased by 50%, or $0.8 million, based on the impact of the accounting change pursuant to SFAS No. 142. SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001 The Company reported net income of $5.9 million, or $0.27 per diluted common share, for the first six months of 2002 compared with $4.9 million, or $0.23 per diluted common share, in the first six months of 2001. Results for the first half of 2001 include amortization of goodwill and certain other acquired intangible assets of approximately $1.8 million, net of tax. Upon adoption of SFAS No. 142, the Company ceased amortizing goodwill as well as certain other acquired intangible assets. Excluding amortization of these items net income for the six months ended June 30, 2001 would have been $6.7 million, or $0.31 per diluted common share, compared with $5.9 million, or $0.27 per diluted common share, for the first half of 2002. The overall increase in earnings in the first six months of 2002 over the prior year period was due primarily to increased gross profits in the Company's IP and STI segments, including both a positive impact from businesses acquired in 2001 and growth in core businesses, and a decrease in the Company's effective income tax rate. The positive factors were partially offset by decreased earnings in the Company's ITL segment and lower interest income. Depreciation and amortization was relatively constant in the periods with increases in depreciation related to capital expenditures and amortization of acquired intangible assets, offset by the effect of the adoption of SFAS No. 142. Net interest income (expense) decreased to $0.3 million from $2.4 million due primarily to the use of cash from the secondary public stock offering to acquire businesses during 2001 and 2002 (See Note D - ACQUISITIONS). Additionally, the average interest rate decreased to 1.9% in the first six months of 2002 from 5.0% in the comparable prior year period. The provision for income taxes as a percentage of pre-tax income for the six months ended June 30, 2002 was 36.1%, compared to 40.8% for the first six months of 2001, due primarily to the adoption of SFAS No. 142, which eliminates goodwill amortization, a significant amount of which was not tax-deductible. Additionally, the Company was also subject to foreign taxes during the first half of 2002 and 2001, which were immaterial in the period. -14- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) SEGMENT REVIEW INTELLECTUAL PROPERTY (IP) IP revenue for the first six months of 2002 increased 105.5%, or $19.7 million, to $38.4 million compared to $18.7 million in the comparable period in 2001. The increase in revenues includes $1.8 million from continued strong internal growth in existing IP information and IP management businesses, $0.9 million of revenues from Aurigin products acquired in 2002 and an increase of $17.0 million in revenue at Liquent-IDRAC, primarily as a result of the acquisition of Liquent in fiscal 2001. Operating income increased 207.7%, or $5.1 million, to $7.6 million for 2002, compared to $2.5 million of operating income in the prior year period. The increase in operating income includes an increase of $2.8 million at Liquent-IDRAC, an increase of $1.6 million in core IP information and IP management businesses, and a decrease of operating expenses of $0.7 million at LPS. IP cost of sales, expressed as a percentage of revenues, increased from 28.4% to 29.6%, due primarily to the inclusion of Liquent in fiscal 2002 results. SG&A expenses, excluding costs of Liquent, increased $0.6 million, or 9.2%, primarily as a result of expenses related to Aurigin and increases at IDRAC (acquired in March 2001), partially offset by decreased spending levels in the LPS Group. IP depreciation and amortization increased $1.2 million, or 27.2%, primarily as a result of the amortization of intangible assets and depreciation of purchased equipment related to acquisitions, partially offset by the impact of the accounting change pursuant to SFAS No. 142. SCIENTIFIC AND TECHNOLOGY INFORMATION (STI) STI revenue for the first six months of 2002 increased 28.7%, or $5.3 million, to $23.9 million from $18.6 million in the comparable period in 2001. The revenue increase includes an increase of $1.0 million in reference product sales at CRC Press and an increase of $4.0 million at Parthenon Press, which was acquired in May 2001. Operating income increased 61.8%, or $1.1 million, to $2.9 million for 2002, compared to $1.8 million in the prior year period, due primarily to contributions from increased revenues. STI cost of sales, expressed as a percentage of revenues, increased from 29.7% to 33.9%, due primarily to increased contributions from Parthenon Press, which has lower gross margins than CRC Press. S,G&A expenses increased $1.2 million, or 11.9%, due primarily to the acquisition of Parthenon Press. STI depreciation and amortization increased $0.4 million, or 38.2%, primarily as result of amortization of Parthenon Press intangible assets and depreciation on new software systems. INFORMATION TECHNOLOGY LEARNING (ITL) ITL revenue for the first six months of 2002 decreased 46.0%, or $5.7 million, to $6.6 million compared to $12.3 million in the comparable period in 2001. The revenue decline is a result of continued difficult overall market conditions in information technology and a lack of significant new certifications by major software companies in recent months. Operating income in the first half of 2002 decreased 87.2%, or $2.8 million, to $0.4 million, compared to prior year operating income of $3.2 million, as a result of the revenue decline. Cost of sales, expressed as a percentage of revenues, was relatively constant in the periods, while S,G&A expenses decreased by $0.9 million, or 18.3%, as a result of cost reduction initiatives. ITL depreciation and amortization decreased by 49.4%, or $1.6 million, based primarily on the impact of the accounting change pursuant to SFAS No. 142. -15- 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 and received approximately $155 million of net proceeds. As of June 30, 2002, proceeds of approximately $147 million have been used from this offering to fund acquisitions in the Company's information and publishing businesses. See Note D - ACQUISITIONS for details on fiscal 2002 and 2001 acquisitions. The remaining net proceeds will be used to finance future acquisitions and for general corporate purposes. The Company currently does not have any other agreements, arrangements or understandings 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 sub-limit for the issuance of standby letters of credit (the Credit Facility). Total commitments under the Credit Facility shall be permanently reduced to $45,000,000 at the end of the third year, $37,500,000 at the end of the fourth year, $25,000,000 at the end of the fifth year and $12,500,000 at the end of the sixth year. The proceeds from the Credit Facility are 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 and for the quarter ended June 30, 2002, 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, 2002, the Company was in compliance with all covenants. The Credit Facility is secured by a first priority perfected pledge of all notes and capital stock owned by the Company's subsidiaries and a first priority perfected security interest in all other assets of the Company and its subsidiaries, subject to certain exceptions. Obligations under the Credit Facility will be guaranteed by the Company and its subsidiaries. The Credit Facility also prohibits the Company from incurring certain additional indebtedness, limits certain investments, mergers or consolidations and restricts substantial asset sales, and dividends. Cash and equivalents, including short-term investments, totaled $52.4 million at June 30, 2002, compared to $56.4 million at December 31, 2001. Excluding cash, cash equivalents and short-term investments, the Company had a working capital deficit of $(7.8) million at June 30, 2002 compared to a working capital deficit of $(6.6) million at December 31, 2001. The Company receives patent annuity payments and subscription payments in advance and is, therefore, expected to maintain very low or negative working capital balances, excluding cash. Included in current liabilities at June 30, 2002 are obligations related to patent annuity payments and deferred revenue of approximately $41.1 million. -16- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Cash generated from operating activities was $13.6 million for the six months ended June 30, 2002, derived from net income of $5.9 million plus non-cash charges of $9.4 million less a decrease in operating assets and liabilities of $1.7 million. The overall decrease in operating assets and liabilities is primarily due to the timing of and the increase in the number of patent annuity payments, and an increase in income tax liabilities offset primarily by a decrease in accrued expenses related to acquisition deal costs for Liquent. Cash used in investing activities was $15.0 million for the six months ended June 30, 2002 primarily due to acquisition costs for Aurigin of $14.0 million (See Note D - ACQUISITIONS). Spending related to capital expenditures, including pre-publication costs and capitalized software, was $4.2 million in the first half of 2002. Excluding acquisitions of businesses, the Company's existing operations are not capital intensive. Cash generated from financing activities was $0.5 million for the six months ended June 30, 2002, primarily due to net cash proceeds received from the issuance of common stock from stock option exercises. The Company has no outstanding debt obligations as of June 30, 2002 related to the 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 or agreements with respect to any prospective material acquisitions. The Company may choose to obtain additional capital or financing to consummate future acquisitions. 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 publication schedules and other factors. In 2001, 28% of the Company's revenues were generated during the fourth quarter with the first, second and third quarters accounting for 23%, 24% and 25% of revenues, respectively. In addition, the Company may experience fluctuations 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. -17- INFORMATION HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CRITICAL ACCOUNTING POLICIES The Company's accounting policies are disclosed in the Company's 2001 Annual Report on Form 10-K. There have been no material changes to these policies during the first six months of fiscal 2002. FORWARD-LOOKING STATEMENTS Certain statements in this report contain 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 2001 Annual Report on Form 10-K. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK INTEREST RATE RISK - 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, 2002, the Company had no outstanding borrowings under the Credit Facility. FOREIGN CURRENCY EXCHANGE RATE RISK - The financial statements of the Company's foreign subsidiaries are translated from the local currency into U.S. dollars. Assets and liabilities are translated using current exchange rates, except certain accounts of subsidiaries whose functional currency is the U.S. dollar and translation adjustments are accumulated in a separate component of stockholders' equity. Revenue and expenses are translated at average monthly exchange rates, and translation adjustments are charged and credited to income. As such, the Company's operating results are affected by fluctuations in the value of the U.S. dollar compared to the British pound and the Euro. Foreign exchange translation losses for the three and six months ended June 30, 2002 were $299,000 and $134,000, respectively. A subsidiary of the Company routinely enters into forward contracts to acquire various international currencies in an effort to hedge foreign currency transaction exposures of its operations. Such forward contracts have been designated as hedges for future annual patent payments to related international regulatory agencies. At June 30, 2002, the subsidiary of the Company had entered into forward contracts to acquire various international currencies, all having maturities of less than seven months, aggregating approximately $15,735,000. Realized gains and losses relating to the forward contracts were immaterial for the quarter ended June 30, 2002. The Company does not use derivative financial instruments for trading purposes. -18- 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, 2002: Underwriting discounts $ 8,595,000 Other expenses $ 522,000 Total expenses $ 9,117,000 Application of proceeds through June 30, 2002: Acquisitions of businesses, titles and equity interests $ 147,476,000 Temporary investments $ 7,524,000 (Commercial paper and money market funds)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Company's Annual Meeting of Stockholders on April 29, 2002 a total of 18,061,777 shares, or 83% 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 17,894,867 166,910 David R. Haas 17,895,612 166,165 Sidney Lapidus 17,874,228 187,549 David E. Libowitz 17,826,099 235,678 John R. Purcell 17,895,412 166,365 Mason P. Slaine 16,383,241 1,678,536
(b) The following proposal was approved: The amendment to the 1998 Stock Option Plan. Affirmative Votes 16,618,405 Negative Votes 1,431,835 Abstain 11,534
(c) The following proposal was approved: Ratification of Ernst & Young LLP as the independent public accountants for the Company for the 2002 fiscal year. Affirmative Votes 17,827,391 Negative Votes 233,556 Abstain 830
-19- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the three months ended June 30, 2002. (c) Exhibits 10.1 Employment agreement, dated as of April 30, 2002, between Information Holdings Inc. and Mason Slaine 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -20- 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 14, 2002 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 -21- EX-10.1 3 a2087352zex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of this 30th day of April, 2002, between INFORMATION HOLDINGS INC. (the "Company"), and Mason Slaine (the "Executive"). RECITALS: WHEREAS, the Company and Executive have previously entered into an Employment Agreement dated as of March 15, 2002 (the "Original Agreement") pursuant to which Executive is currently employed by the Company as President and Chief Executive Officer; and WHEREAS, the Company 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. 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, 2003 (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, 2002, the Company shall pay to Executive the Salary currently in effect under the Original Agreement. For the year from July 1, 2002 through June 30, 2003, the Company shall pay to Executive a Salary of $825,000. For the year from July 1, 2003 through June 30, 2004, the Company shall pay to Executive a Salary of $900,000. 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 $35,000 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 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 an "Option"). Each Option shall have an exercise price equal to the fair market value of one share of Common Stock as of the 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 date of grant and an additional 100,000 on the second anniversary of the 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 -2- 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 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 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 -3- 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) 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 -4- (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 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 his termination of employment occurred; PROVIDED, HOWEVER, that if such Change of Control occurs in calendar year 2002, the Salary described in clause (i) above shall equal the Salary as currently in effect under the Original Agreement, and the Bonus described in clause (ii) above shall equal 50% of the Salary -5- as currently in effect under the Original Agreement. 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 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 -6- 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). (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. -7- (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 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 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, HOWEVER, that neither party shall assign or delegate any of the -8- 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: (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. -9- 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. -10- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. INFORMATION HOLDINGS INC. By: ------------------------------------ By: ------------------------------------ MASON SLAINE EX-99.1 4 a2087352zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Information Holdings Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mason Slaine, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Mason Slaine Mason Slaine Chief Executive Officer August 14, 2002 EX-99.2 5 a2087352zex-99_2.txt EXHIBIT 99.2 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Information Holdings Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Vincent A. Chippari, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Vincent A. Chippari Vincent A. Chippari Chief Financial Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----