-----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, MwrBk591brV/1B4C0YCW3QHqqcjX1f/eEukPAnmWmuSjzMMarpdGfkxMdVG5hp33 KoQnUCSs9t0JpzZo/GY4hw== 0000950144-97-006326.txt : 19970526 0000950144-97-006326.hdr.sgml : 19970526 ACCESSION NUMBER: 0000950144-97-006326 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970523 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CATALINA MARKETING CORP/DE CENTRAL INDEX KEY: 0000883977 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 330499007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11008 FILM NUMBER: 97613980 BUSINESS ADDRESS: STREET 1: 11300 9TH ST NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 8135795000 MAIL ADDRESS: STREET 1: 11300 9TH STREET NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716-2329 10-K 1 CATALINA MARKETING CORPORATION FORM 10-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K --------- [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER: 1-11008 CATALINA MARKETING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 33-0499007 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 11300 9TH STREET NORTH ST. PETERSBURG, FLORIDA 33716-2329 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 579-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ---------------- Common Stock, $.01 Par Value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of such stock as of May 21, 1997, as reported by the New York Stock Exchange, Inc., was $38.00. The number of common shares, par value $0.01 per share, outstanding as of May 21, 1997, was 18,209,340. DOCUMENTS INCORPORATED BY REFERENCE Catalina Marketing Corporation Definitive Proxy Statement for 1997--Part III ================================================================================ 2 TABLE OF CONTENTS FORM 10-K
PAGE NO. -------- PART I Item 1 Business .................................................................. 1 Item 2 Properties ................................................................ 4 Item 3 Legal Proceedings ......................................................... 4 Item 4 Submission of Matters to a Vote of Security Holders ....................... 4 PART II Item 5 Market for Registrant's Common Stock and Related Stockholder Matters ...... 4 Item 6 Selected Financial Data ................................................... 5 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations ................................................................ 5 Item 8 Consolidated Financial Statements and Supplementary Data .................. 9 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................................................................ 24 PART III Item 10 Directors and Executive Officers of the Registrant ........................ 24 Item 11 Executive Compensation .................................................... 24 Item 12 Security Ownership of Certain Beneficial Owners and Management ............ 24 Item 13 Certain Relationships and Related Transactions ............................ 24 PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K ........... 24
3 PART I ITEM 1. BUSINESS General Catalina Marketing Corporation and subsidiaries (Catalina Marketing, or the "Company"), through its Catalina Marketing(R) Network, provides manufacturers of consumer and pharmaceutical products and retailers with a cost-effective method of delivering advertising messages and promotional incentives directly to "targeted" consumers based on their purchasing behavior. The Company helps manufacturers and retailers execute long-term marketing strategies to build consumer loyalty, promote products, and increase brand awareness and sales. The Company's principal operating units are Catalina Marketing Services, Catalina Marketing International, Health Resource Publishing Company, and Supermarkets Online. Additionally, in October 1996, the Company purchased a 51% interest in a Japanese outdoor media company as part of the planned commencement of electronic marketing services on a joint venture basis in Japan. Catalina Marketing has 767 employees principally in the U.S. as well as in the United Kingdom, France, Mexico and Japan. The Catalina Marketing Network Catalina Marketing, founded in 1983, developed a proprietary Electronic Marketing Network designed to utilize the Universal Product Code ("UPC") labeling convention and the widespread use of UPC scanning technology in retail stores. The Company developed a technological capability to make coupon and related promotion delivery more responsive to consumer behavior while maintaining an advantage in terms of cost efficiency relative to alternative methods. The Catalina Marketing Network provides manufacturers and retailers with a high level of consumer targeting precision previously unavailable. The Company's primary business is the delivery of promotions at the checkout stand through the Catalina Marketing Network, which links the Company's software, personal computers, central data bases and specially designed thermal printers to point of scan controllers and scanning equipment. The system prints promotion incentives based upon information generated at the point of sale, from the purchased products' UPC. The Company's system evaluates scanner data, matches it with manufacturer or retailer programmed promotions and directs the thermal printer, which is located near the cash register, to print the appropriate promotion or message. Printing occurs throughout the checkout process and the promotions are handed directly to the shopper at the end of the shopping transaction. The Company enters into agreements with retail chains to install the Catalina Marketing Network in all or selected stores, either regionally or nationally. Upon installation, the retailer pays a one-time charge for each installation and generally agrees to use the Catalina Marketing Network in its stores for a minimum of five years. The Company pays distribution fees to the retailer based upon the number of manufacturer promotions printed. The equipment installed in each retail store includes a thermal printer at each checkout lane linked by a central personal computer to the retailer's point of scan controller and scanning equipment. One of the Company's two U.S. hub data processing facilities communicates via modem with the personal computer installed in each store to send new promotional instructions and to retrieve performance data. The Company contracts with manufacturers and retailers to print promotions and receives a fee for each promotion distributed. All of the equipment and supplies necessary for operation of the Catalina Marketing Network, including computer hardware, printers and paper, are purchased by the Company from outside sources. The Company currently obtains most or all of its requirements from two suppliers for each of these items, except printers, for which there is one primary supplier. The Company believes that, as required, alternate sources of supply are available for these items without material interruptions of the Company's business. The Catalina Marketing Network's design is flexible and easily upgradable, and can support new applications developed by the Company. The Network is driven by proprietary software. The system's flexibility permits the Network to expand and to evolve as industry or customer requirements change. 1 4 The Company, through its majority owned subsidiaries, provides in-store electronic marketing services for consumers in the United Kingdom, Mexico, France and Japan. As of March 31, 1997, the Company's network was in 941 retail stores throughout the United Kingdom, Mexico and France. A test pilot program in Japan is expected to commence in fiscal 1998. Beginning in fiscal 1994 through March 31, 1997, the Company, through a majority owned subsidiary, Catalina Electronic Clearing Services, Inc. ("CECS"), operated a coupon clearing business. CECS utilized Catalina Marketing's existing in-store network linked to scanners manufactured by Spectra-Physics Scanning Systems, Inc. and others to electronically clear coupons. As of March 31, 1997, CECS ceased offering electronic coupon clearing services due to operational challenges and less than anticipated market demand. In fiscal 1995, the Company formed Health Resource Publishing Company ("HRP") to develop a new application of the Company's patented, in-store scanner-based technology. This application includes customized newsletters targeted to pharmacy customers based on their individual prescription purchases. The laser-printed publication offers medical condition-specific health information and savings on related products. The Health Resource Publishing Company newsletter is triggered by the National Drug Code found on all prescription drugs. When a prescription is processed, a customized newsletter with therapeutically relevant editorials and product advertising is printed at the pharmacy counter on a standard laser printer and handed to the customer along with the customer's filled prescription. As of March 31, 1997, the HRP system is in 1,195 stores in the United States. Services The majority of services executed on the Catalina Marketing Network are linked to the core Checkout Coupon(R) application. These include manufacturers' coupons or other incentives delivered directly to targeted shoppers based on their purchases of competitive products, the same products or complimentary products. By specifying exactly which UPCs will trigger the printing of promotions, manufacturers and retailers develop promotions bearing customized messages and target them directly to shoppers they want to reach. The Company offers manufacturers and retailers 13 four-week cycles annually for more than 500 product categories. These product categories are generally based on standard industry classifications of household and consumer products available in supermarkets, such as coffee, baby food and frozen entrees. The purchaser of a particular category is given the exclusive right to have Checkout Coupons printed for that category for each cycle purchased. The Company's policy generally is to offer its manufacturer clients a right of first acceptance, for a limited period of time, to purchase a national category cycle for each year with respect to the identical category cycle which was purchased for the immediately preceding year. The Company's U.S. Checkout Coupon programs generated approximately 87 percent of the Company's revenues in fiscal 1997, 91 percent in fiscal 1996, and 95 percent in fiscal 1995. The Company has developed several additional proprietary electronic marketing products and program enhancements for the Catalina Marketing Network that, combined with the Checkout Coupon programs, offer a broad range of products that can satisfy all of the marketing objectives of a consumer goods company and enable the Company's clients to impact every phase of the purchase cycle--before, during and after the purchase. For example, the Checkout Direct(R) program links the Catalina Marketing Network with a retailer's check-cashing or other card-based shopper program allowing marketers to monitor the buying patterns of specific households over time and issue promotions based on those patterns. In addition, the Company actively assists, implements or otherwise encourages retailer support to supplement manufacturer Checkout Coupon programs with "tie-ins," such as newspaper advertising, posters and on-shelf signs. The Company's main revenue source is a function of total promotions distributed based on a per-promotion charge, with a minimum category fee determined with reference to the shopper reach of the Catalina Marketing Network, and category unit volume. The minimum category fee is generally payable to the Company prior to the commencement of the purchased cycle. The redemption process of Checkout Coupon incentives is similar to that of regular manufacturer coupons. Retailers provide discounts to consumers who present coupons, then send redeemed coupons to clearinghouses and receive reimbursements for the discounts provided, plus handling fees, from the manufacturers. 2 5 Sales and Marketing Sales Force. The primary focus of the Company's marketing effort is to attract national consumer product manufacturers to purchase category cycles. The Company's sales and client service force focuses its services on current and prospective customers by working with them to develop and execute customized, targeted marketing programs that fit each brand's strategy and objectives. Retailer Marketing. The Company's strategy has been to focus its retail marketing efforts on installing its Network under contracts with the chain retailers which have stores in major markets through the Company's retail sales and service force. The Company encourages retailers to use Network-generated incentives to promote private label brands or high margin departments, and incorporate third-party "tie-ins." At March 31, 1997, the Catalina Marketing Network was installed in 10,745 U.S. Checkout Coupon stores, which reach approximately 144 million shoppers each week. Outside the United States, the Catalina Marketing Network was installed in 941 stores, which reach approximately 18 million shoppers each week. Research and Development The Company's expenditures for research and development are generally for market research, software development, system upgrades and pilot-project execution in order to create, test, and support new applications for the Catalina Marketing Network. The Company believes that new service and application development along with market expansion are vital to maintain the Company's continued growth. Competition The Company competes for manufacturers' advertising and promotional budgets with a wide range of alternative media, including television, radio, print and direct mail advertising, as well as several alternative in-store and point-of-sale programs. Within the coupon industry, the Company competes with various traditional coupon delivery methods that are more widely accepted and less expensive per delivered coupon, including free standing inserts (FSIs), newspapers, direct mail, magazines and in or on-product packaging, as well as other "in-store" marketing companies using a variety of coupon delivery methods. The Company competes for promotional dollars based on the efficiency and efficacy of the Catalina Marketing Network, its ability to accurately and effectively target potential customers, the shopper "reach" of its network and its general ability to influence consumer buying behavior, thereby enabling a manufacturer or retailer to meet its strategic objectives and measure results based on units moved versus number of coupons delivered. Employees The Company employed 767 persons (634 in the U.S.) as of March 31, 1997, substantially all of whom were full-time employees, and none of whom were covered by a collective bargaining arrangement. Approximately 29 percent of the Company's employees are located in the St. Petersburg, Florida headquarters. Patents, Proprietary Information and Trademarks The Company currently holds several United States and foreign patents on certain aspects of the Catalina Marketing Network and its services and has several patent applications pending. The Company believes that its patents provide it with a competitive advantage and plans to defend its proprietary rights vigorously in all appropriate circumstances. While the Company believes that its patent position is important, it also believes that its ability to market its services to retailers and manufacturers, and to develop new products will be the major factor affecting its future performance. The Company believes that product recognition is an important competitive factor in the electronic marketing and promotion industry. Accordingly, the Company promotes its service marks and trademarks in connection with its marketing activities and has registered, and is in the process of registering several marks. The Company also regards certain computer software included in the Catalina Marketing Network and each additional service 3 6 application as proprietary and seeks to protect it with copyrights, trade secret laws and internal non-disclosure agreements and safeguards, as well as by other means. Such methods may not afford complete protection and there can be no assurance that others will not independently develop such know-how, concepts or ideas. ITEM 2. PROPERTIES The Company's headquarters facility, which includes its principal administrative, marketing, management information systems and product development offices, is located in 65,207 square feet of leased space in St. Petersburg, Florida. The Company leases an additional 18 sales and support offices across the United States, consisting of approximately 101,500 square feet in the aggregate and 4 offices for its foreign operations. The Company believes that its existing facilities are adequate to meet current requirements and that suitable additional space will be available as needed to accommodate growth of its operations and additional sales and support offices for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS Catalina Marketing is involved in routine litigation incidental to the normal course of business, including litigation initiated by the Company to protect its intellectual property. In the opinion of management of Catalina Marketing, the ultimate outcome of this litigation will not have a material adverse effect on the Company's financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS A. Market Prices of Stock The Company's Common Stock, par value $0.01 per share ("Common Stock"), is traded on the New York Stock Exchange ("NYSE") under the symbol POS. The following table sets forth the high and low closing prices as reported by the NYSE for the Common Stock of the Company for the quarters ended as follows:
HIGH LOW ------ ----- FISCAL 1997 March 31, 1997 ............... $59 3/8 $39 December 31, 1996 ............ $55 1/8 $46 September 30, 1996 ........... $53 7/8 $42 1/8 June 30, 1996 ................ $45 3/4 $36 3/16 FISCAL 1996: March 31, 1996 ............... $40 3/8 $29 5/16 December 31, 1995 ............ $32 3/16 $24 3/4 September 30, 1995 ........... $31 $26 3/8 June 30, 1995 ................ $26 7/8 $21 1/8
B. Stockholders As of March 31, 1997, there were approximately 619 registered holders of Company common stock. 4 7 C. Dividends The Company has not paid any cash dividends to date, and there are no current plans to pay a cash dividend. ITEM 6. SELECTED FINANCIAL DATA SELECTED CONSOLIDATED FINANCIAL DATA
FISCAL YEAR ENDED MARCH 31, --------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Revenues ........................................... $172,143 $134,155 $113,254 $ 91,448 $ 71,947 Costs and expenses: Direct operating expenses ...................... 62,482 47,661 41,389 35,383 27,100 Selling, general and administrative ............ 48,379 37,358 28,616 26,093 23,266 Depreciation and amortization .................. 17,939 14,328 15,073 11,428 9,266 -------- -------- -------- -------- -------- Total costs and expenses ........................... 128,800 99,347 85,078 72,904 59,632 -------- -------- -------- -------- -------- Income from operations ............................. 43,343 34,808 28,176 18,544 12,315 Net income ......................................... $ 27,241 $ 22,028 $ 17,229 $ 12,670 $ 8,229 Net income per common and common equivalent share .. $ 1.33 $ 1.11 $ 0.86 $ 0.62 $ 0.41 Weighted average common and common equivalent shares outstanding (in thousands) ................ 20,491 19,922 20,128 20,388 20,264 OTHER DATA: U.S. Checkout Coupon stores installed at end of period ........................................... 10,745 9,766 9,004 7,481 5,609 International Checkout Coupon stores installed at end of period .................................... 941 558 168 137 -- Capital expenditures ............................... $ 34,687 $ 23,561 $ 20,301 $ 25,220 $ 12,183 BALANCE SHEET DATA: Cash and cash equivalents .......................... $ 13,698 $ 25,778 $ 30,729 $ 26,863 $ 25,613 Property and equipment, net ........................ $ 69,578 $ 46,253 $ 37,440 $ 32,944 $ 20,424 Total assets ....................................... $154,696 $114,187 $ 96,556 $ 82,504 $ 60,961 Long term debt ..................................... $ 869 -- -- -- -- Total stockholders' equity ......................... $ 96,938 $ 71,222 $ 55,494 $ 44,858 $ 29,337
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The statements in the following paragraphs may be forward looking, and actual results may differ materially. Statements not based on historical facts involve risks and uncertainties, including, but not limited to, the changing market for promotional activities, especially as it relates to policies and programs of packaged goods manufacturers for the issuance of certain product coupons, the effect of economic and competitive conditions and seasonal variations, the success and timing of growth of the Company's international and other ventures outside its core business, actual promotional activities and programs with the Company's customers, the pace of installation of the Company's Network, the timing and success of the introduction of new product and program offerings by the Company, and the Company's ability to maintain favorable client relationships with packaged goods manufacturers and retailers. Overview The Company provides in-store electronic marketing services. Through its proprietary network, the Company provides manufacturers of consumer and pharmaceutical products and retailers with cost-effective methods of delivering promotional incentives and advertising messages directly to consumers based on their purchasing behavior. These programs offer manufacturers and retailers 13 four-week cycles each year in which to offer highly targeted product promotions or advertisements directly to consumers. Manufacturers and retailers may utilize the Catalina Marketing Network to create and deliver ads and promotions on an exclusive basis within any one of more than 500 product categories. Revenues from the Checkout Coupon program vary directly with the total number of coupons printed, subject to minimum category fees which are set based on the reach of the Catalina Marketing Network and the level of unit sales within each category. Additionally, in October 1996, the Company purchased a 5 8 51% interest in a Japanese outdoor media company as part of the planned commencement of electronic marketing services on a joint venture basis in Japan. Results of Operations Year Ended March 31, 1997 compared to Year Ended March 31, 1996 Revenues were $172.1 million in fiscal 1997, up 28 percent over revenues of $134.2 million in fiscal 1996. The increase in revenues is primarily due to a greater distribution of Checkout Coupon incentives worldwide. In the U.S., the Catalina Marketing Network printed 2.31 billion promotions during fiscal 1997, up 18 percent compared to fiscal 1996 (1.95 billion promotions). Catalina Marketing Services contributed approximately $153.8 million of revenues in fiscal 1997, up 22.4 percent over revenues of $125.6 million in fiscal 1996. The greater distribution of Checkout Coupon promotions is attributable to the broader reach of the Catalina Marketing Network and additional sales of category cycles. In the U.S., the Catalina Marketing Network was in 10,745 stores at March 31, 1997, which reach 144 million shoppers each week, as compared to 9,766 stores reaching 127 million shoppers each week at March 31, 1996. Direct operating expenses consist of retailer fees, paper, sales commissions and the expenses of operating and maintaining the Catalina Marketing Network (primarily expenses relating to operations personnel and service offices), provision for doubtful accounts and the direct expenses associated with operating the outdoor media business in a majority-owned subsidiary in Japan (purchased in October 1996). Direct operating expenses increased in absolute terms to $62.5 million in fiscal 1997 from $47.7 million in fiscal 1996. Direct operating expenses in fiscal 1997 as a percentage of revenues increased to 36.3 percent from 35.5 percent in fiscal 1996. This increase in fiscal 1997 is principally attributable to the addition of the direct costs associated with running the outdoor media business in Japan, expansion of the HRP operating unit and costs associated with the discontinuance of CECS' operations. Selling, general and administrative expenses include personnel-related costs of selling and administrative staff, overhead and new product development expenses. Selling, general and administrative expenses in fiscal 1997 were $48.4 million, compared to approximately $37.4 million for fiscal 1996, an increase of 29.5 percent or $11 million. The increase relates primarily to higher costs associated with a larger sales force, and administrative expenses of new business ventures and products. As a percentage of revenues, selling, general and administrative expenses increased 0.3 percent in fiscal 1997, to 28.1 percent from 27.8 percent for the comparable period of fiscal 1996. Depreciation and amortization increased to $17.9 million for fiscal 1997 from $14.3 million for fiscal 1996. Depreciation increased due to the increase in capital expenditures associated with new business ventures and was partially offset by a decrease in depreciation expense on U.S. installed store equipment. Amortization in fiscal 1997 includes approximately $0.5 million in amortization of intangible assets arising from the purchase in the first quarter of fiscal 1997 by the Company of the remaining 46 percent of its U.K. operation from its minority stockholders. The provision for income taxes increased to $17.9 million, 40% of income before income taxes and minority interest, for fiscal 1997 compared to $14.9 million, 41% of income before income taxes and minority interest, for the same period in fiscal 1996. The Company's effective tax rate is higher than the federal statutory tax rate due to state and foreign income taxes and the inability to currently utilize losses of majority owned foreign subsidiaries for tax purposes. Year Ended March 31, 1996 compared to Year Ended March 31, 1995 Revenues were $134.2 million in fiscal 1996, up 18.5 percent over revenues of $113.3 million in fiscal 1995. The increase in revenues is primarily due to a greater distribution of Checkout Coupon incentives resulting from a larger number of shopper transactions scanned by the Catalina Marketing Network as well as increased 6 9 manufacturer and retailer utilization of the available categories and cycles in the Catalina Marketing Network. In the U.S., the Catalina Marketing Network printed 1.95 billion promotions in fiscal 1996, up 11.8 percent compared to 1.75 billion promotions for fiscal 1995. Catalina Marketing Services contributed approximately $125.6 million of revenues in fiscal 1996, up 15.3 percent over revenues of $108.9 million in fiscal 1995. In the U.S., the Catalina Marketing Network was in 9,766 stores at March 31, 1996, which reach 127 million shoppers each week, as compared to 9,004 stores reaching 120 million shoppers each week at March 31, 1995. Direct operating expenses consist of retailer fees, paper and sales commissions and the expenses of operating and maintaining the Catalina Marketing Network (primarily expenses relating to operations personnel and service offices) and provision for doubtful accounts. Direct operating expenses increased to $47.7 million for fiscal 1996 from $41.4 million for fiscal 1995 but decreased as a percent of revenues to 35.5 percent from 36.5 percent, respectively. This percent decrease is due primarily to economies in paper purchasing. Selling, general and administrative expenses include personnel-related costs of sales and administrative staff, overhead and new product development expenses. Selling, general and administrative expenses increased to $37.4 million in fiscal 1996 from $28.6 million for fiscal 1995 and increased as a percent of revenues to 27.8 percent from 25.3 percent, respectively. This increase is due primarily to higher costs associated with a larger sales force and administrative expenses of new business ventures and products. Depreciation and amortization decreased to $14.3 million for fiscal 1996 from $15.1 million in fiscal 1995. This decrease is due to the increase in fully depreciated store equipment in fiscal 1996. The provision for income taxes increased to $14.9 million, 41 percent of income before income taxes and minority interest, for fiscal 1996 compared to $11.3 million, 40.3 percent of income before income taxes and minority interest for fiscal 1995. The Company's effective tax rate is higher than the federal statutory tax rate due to state and foreign income taxes and the inability to currently utilize losses of majority owned foreign subsidiaries for tax purposes. Quarterly Results The following table presents certain unaudited quarterly results for the last eight quarters (dollars in thousands, except per share data):
THREE MONTHS ENDED ------------------ MAR 31, DEC 31, SEPT 30, JUNE 30, MAR 31, DEC 31, SEPT 30, JUNE 30, 1997 1996 1996 1996 1996 1995 1995 1995 -------- -------- -------- -------- -------- -------- -------- -------- Revenues .............................. $ 46,054 $ 46,344 $ 41,618 $ 38,127 $ 36,054 $ 36,546 $ 30,942 $ 30,613 Direct operating expenses ............. 18,428 16,055 14,863 13,136 12,544 13,033 11,142 10,942 Selling, general and administrative ... 13,372 12,195 11,658 11,154 10,922 10,635 8,140 7,661 Depreciation and amortization ......... 5,737 4,448 4,090 3,664 3,355 3,496 3,582 3,895 -------- -------- -------- -------- -------- -------- -------- -------- Income from operations ................ 8,517 13,646 11,007 10,173 9,233 9,382 8,078 8,115 Other income, net ..................... 378 273 341 232 479 286 435 209 Income taxes .......................... (3,631) (5,607) (4,371) (4,271) (4,391) (3,822) (3,277) (3,365) Minority interest in losses of subsidiaries ........................ 182 -- 212 160 282 107 98 179 -------- -------- -------- -------- -------- -------- -------- -------- Net income ............................ $ 5,446 $ 8,312 $ 7,189 $ 6,294 $ 5,603 $ 5,953 $ 5,334 $ 5,138 ======== ======== ======== ======== ======== ======== ======== ======== Net income per common and common ...... $ .27 $ .40 $ .35 $ .31 $ .28 $ .30 $ .27 $ .26 ======== ======== ======== ======== ======== ======== ======== ======== equivalent share Weighted average common and common equivalent shares outstanding ....... 20,539 20,635 20,608 20,432 20,238 19,840 19,728 19,870 ======== ======== ======== ======== ======== ======== ======== ======== U.S. Checkout Coupon Business: Stores at quarter end: ................ 10,745 10,741 10,470 10,085 9,766 9,465 9,197 9,049 Net stores installed during quarter: .. 4 271 385 319 301 268 148 45 Promotions printed (in millions): ..... 581 634 574 521 465 549 470 470 Weekly shopper reach at quarter end (in millions): .......................... 144 141 136 135 127 126 122 122
The Company expects its revenues to fluctuate in accordance with periods of higher promotional activity by manufacturers. The pattern of coupon distribution, however, is irregular and may change from period to period depending on many factors, including the economy, competition, the timing of new product introductions and the timing of manufacturers' promotion planning and implementation. These factors, as well as the overall growth in 7 10 the number of retailer and manufacturer contracts with the Company, tend to influence the Company's revenues and profits. Liquidity and Capital Resources The Company's primary capital expenditures are store equipment and third-party store installation costs, as well as data processing equipment in the Company's hub data processing facilities. Total store equipment and third-party store installation costs range from $5,000 to $13,000 per store. During fiscal 1997 and 1996, the Company made capital expenditures of $34.7 million and $23.6 million, respectively. The pace of installations varies depending on the timing of contracts entered into with retailers and the scheduling of store installations by mutual agreement. During fiscal 1997, the Company increased expenditures for data processing equipment, spending approximately $5.7 million, and had a faster pace of store installations compared to fiscal 1996. Catalina Marketing finances capital expenditures from internally generated cash flows. Management believes that expenditures for equipment and research and development will remain between $25 and $35 million annually for the foreseeable future. In fiscal 1997, the Company invested approximately $13.7 million for the purchase of the remaining interest in its United Kingdom subsidiary, utilizing both available cash and Company common stock. Additionally, on October 10, 1996, the Company purchased 51% of Pacific Media, K.K. (PMK), a Japanese outdoor media company, for $3.0 million in initial cash consideration. Terms of the purchase agreement call for the Company to make a series of three annual payments, which are contingent upon the financial performance of PMK for the 1996, 1997 and 1998 calendar years. The first annual payment, to be made in May 1997, will be approximately $2 million. During fiscal 1997 and 1996, management purchased $9.5 million and $11 million of Company common stock, respectively. As of March 31, 1997, management received board approval to purchase an additional $40 million of Company common stock subject to market conditions. As of April 22, 1997, the Company had completed the $40 million share repurchase program having purchased 1.4 million shares of Company common stock at a weighted average price of $28.50 per share. The Company expects share repurchases to be an ongoing and regular part of its financial strategy. As of March 31, 1997, the Company had an unsecured revolving bank credit facility under which it may borrow up to $30 million, and under which there were no borrowings outstanding. On April 14, 1997, the Company renegotiated this credit facility increasing its borrowing limit to $40 million. This renegotiated facility expires on August 31, 1998 and provides for interest at variable rates calculated with reference to the London Interbank Offering Rate (LIBOR) or the bank prime rate for certain advances. In April 1997, the Company borrowed approximately $19 million against this credit facility in connection with the completion of the $40 million common stock repurchase program referenced above. On May 8, 1997, the Company announced that it has adopted a Stockholder Protection Plan. To implement this plan, the Company has declared a dividend of one Preferred Share Purchase Right on each outstanding share of the Company's common stock. The dividend distribution was payable to stockholders of record on May 12, 1997. The rights will be exercisable for fractions of a share of the Company's Series X Junior Participating Preferred Stock only if a person or group acquires 15% or more of the Company's common stock or announces or commences a tender offer for 15% or more of the common stock, except for certain instances defined in the Stockholder Protection Plan. In accordance with coupon industry practice, the Company generally pre-bills manufacturers prior to the commencement of the purchased category cycle. The Company recognizes revenue as promotions are printed, and the amounts collected prior to printing are reflected as deferred revenue, which is classified as a current liability. The Company believes working capital generated by operations is sufficient to repay short term borrowings and for its capital requirements, although the Company may choose to utilize additional debt or lease financing, if available, on acceptable terms. 8 11 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO FINANCIAL INFORMATION
PAGE ---- Report of Independent Certified Public Accountants . . . . . . . 10 Consolidated Income Statements, Years ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . 11 Consolidated Balance Sheets at March 31, 1997 and 1996 . . . . . 12 Consolidated Statements of Stockholders' Equity, Years ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . 13 Consolidated Statements of Cash Flows, Years ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . 14 Notes to the Consolidated Financial Statements . . . . . . . . . 15
9 12 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To Catalina Marketing Corporation: We have audited the accompanying consolidated balance sheets of Catalina Marketing Corporation (a Delaware corporation) as of March 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Catalina Marketing Corporation as of March 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1997 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Tampa, Florida, April 18, 1997 10 13 CATALINA MARKETING CORPORATION CONSOLIDATED INCOME STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED MARCH 31, ---------------------- 1997 1996 1995 ---- ---- ---- Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $172,143 $134,155 $113,254 Costs and Expenses: Direct operating expenses . . . . . . . . . . . . . . . 62,482 47,661 41,389 Selling, general and administrative . . . . . . . . . . 48,379 37,358 28,616 Depreciation and amortization . . . . . . . . . . . . . 17,939 14,328 15,073 -------- -------- ------- Total costs and expenses . . . . . . . . . . . . . 128,800 99,347 85,078 -------- -------- ------- Income From Operations . . . . . . . . . . . . . . . . . . . 43,343 34,808 28,176 Other Income (Expense), net . . . . . . . . . . . . . . . . . 1,224 1,409 (247) -------- -------- ------- Income Before Income Taxes and Minority Interest . . . . . . 44,567 36,217 27,929 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 17,880 14,855 11,259 Minority Interest in Losses of Subsidiaries . . . . . . . . . 554 666 559 -------- -------- ------- Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 27,241 $ 22,028 $17,229 ======== ======== ======= Net Income per Common and Common Equivalent Share . . . . . . $ 1.33 $ 1.11 $ 0.86 ======== ======== ======= Weighted Average Common and Common Equivalent Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . 20,491 19,922 20,128 ======== ======== ========
The accompanying Notes are an integral part of these consolidated financial statements. 11 14 CATALINA MARKETING CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
MARCH 31, ----------- 1997 1996 ---- ---- ASSETS Current Assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,698 $ 25,778 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . 28,367 26,725 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935 502 Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,467 7,436 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . 11,282 4,850 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 61,749 65,291 ---------- ---------- Property and Equipment: Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,913 792 Billboards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,107 -- Furniture and office equipment . . . . . . . . . . . . . . . . . . . . . . . 19,597 10,316 Store equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,546 99,367 ---------- ---------- 142,163 110,475 Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . (72,585) (64,222) ---------- ---------- Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 69,578 46,253 Purchased intangible assets, net . . . . . . . . . . . . . . . . . . . . . . 18,805 -- Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,564 2,643 ---------- ---------- Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,696 $ 114,187 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,674 $ 10,832 Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928 620 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,433 17,049 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,611 11,960 Short term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,820 -- ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 53,466 40,461 ---------- ---------- Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,423 2,504 Long term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 869 -- Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . Stockholders' Equity: Preferred stock; $.01 par value; 5,000,000 authorized shares; none issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- Common stock; $.01 par value; 50,000,000 and 30,000,000 authorized shares, and 20,778,557 and 20,459,728 shares issued at March 31, 1997 and 1996, 208 205 respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,770 34,079 Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . 749 501 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,214 56,973 Less common stock in treasury, at cost (1,172,408 and 963,800 shares, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,003) (20,536) ---------- ---------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 96,938 71,222 ---------- ---------- Total Liabilities and Stockholders' Equity . . . . . . . . . . . . . . . $ 154,696 $ 114,187 ========== ==========
The accompanying Notes are an integral part of these consolidated financial statements. 12 15 CATALINA MARKETING CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK -------------- CUMULATIVE TREASURY STOCK TOTAL ISSUED PAR PAID-IN TRANSLATION RETAINED ----------------- STOCKHOLDERS' SHARES VALUE CAPITAL ADJUSTMENT EARNINGS SHARES AMOUNT EQUITY ------ ------ -------- ---------- -------- ------ --------- ----------- BALANCE AT MARCH 31, 1994 . . . . 19,708 $ 197 $ 26,942 $ 3 $ 17,716 -- $ -- $ 44,858 Proceeds from issuance of common stock . . . . . . . . . . . . . 340 3 2,022 -- -- -- -- 2,025 Amortization of option-related compensation . . . . . . . . . -- -- 142 -- -- -- -- 142 Tax benefit from exercise of non-qualified stock options and disqualified dispositions . . . -- -- 575 -- -- -- -- 575 Common stock repurchase . . . . . -- -- -- -- -- (448) (9,477) (9,477) Translation adjustment . . . . . -- -- -- 142 -- -- -- 142 Net income . . . . . . . . . . . -- -- -- -- 17,229 -- -- 17,229 ------ ---- -------- ---- -------- ------ --------- -------- BALANCE AT MARCH 31, 1995 . . . . 20,048 $ 200 $ 29,681 $145 $ 34,945 (448) $ (9,477) $ 55,494 Proceeds from issuance of common stock . . . . . . . . . . . . . 412 5 2,652 -- -- -- -- 2,657 Amortization of option-related compensation . . . . . . . . . -- -- 133 -- -- -- -- 133 Tax benefit from exercise of non-qualified stock options and disqualified dispositions . . . -- -- 1,613 -- -- -- -- 1,613 Common stock repurchase . . . . . -- -- -- -- -- (516) (11,059) (11,059) Translation adjustment . . . . . -- -- -- 356 -- -- -- 356 Net income . . . . . . . . . . . -- -- -- -- 22,028 -- -- 22,028 ------ ---- -------- ---- -------- ------ --------- -------- BALANCE AT MARCH 31, 1996 . . . . 20,460 $ 205 $ 34,079 $501 $ 56,973 (964) $ (20,536) $ 71,222 Proceeds from issuance of common stock . . . . . . . . . . . . . 266 3 4,628 -- -- -- -- 4,631 Amortization of option-related compensation . . . . . . . . . -- -- 202 -- -- -- -- 202 Tax benefit from exercise of non-qualified stock options and disqualified dispositions . . . -- -- 884 -- -- -- -- 884 Common stock repurchase . . . . . -- -- -- -- -- (208) (9,467) (9,467) Deferred compensation plan common stock units . . . . . . -- -- 189 -- -- -- -- 189 Issuance of common stock to replace Catalina Marketing U.K., Ltd. options . . . . . . 11 -- 157 -- -- -- -- 157 Issuance of common stock in purchase of minority shareholders of Catalina. . . . 42 -- 1,631 -- -- -- -- 1,631 Marketing U.K., Inc. . . . . . Translation adjustment . . . . . -- -- -- 248 -- -- -- 248 Net income . . . . . . . . . . . -- -- -- -- 27,241 -- -- 27,241 ------ ---- -------- ---- -------- ------ --------- -------- BALANCE AT MARCH 31, 1997 . . . . 20,779 $208 $ 41,770 $749 $ 84,214 (1,172) $ (30,003) $ 96,938 ====== ==== ======== ==== ======== ====== ========= ========
The accompanying Notes are an integral part of these consolidated financial statements. 13 16 CATALINA MARKETING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED MARCH 31, ------------------------------ 1997 1996 1995 -------- ------- ------- Cash Flows from Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,241 $ 22,028 $17,229 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest . . . . . . . . . . . . . . . . . . . . . . . (554) (666) (559) Loss attributable to joint venture . . . . . . . . . . . . . . . -- -- 950 Depreciation and amortization . . . . . . . . . . . . . . . . . 18,264 14,461 15,215 Provision for doubtful accounts . . . . . . . . . . . . . . . . 1,197 1,307 572 Deferred income tax . . . . . . . . . . . . . . . . . . . . . . 1,677 1,733 2,532 Deferred compensation plan common stock units . . . . . . . . . 189 -- -- Loss (gain) on sales of equipment . . . . . . . . . . . . . . . 4 (20) (407) Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . (4,180) (11,460) (8,184) Inventory, prepaid expenses and other assets . . . . . . . . . . (3,681) (3,698) 390 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 2,451 7,674 891 Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . 180 408 (2,320) Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 4,090 (33) (2,908) Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . (2,611) (6,382) 5,644 -------- ------- ------- Net cash provided by operating activities . . . . . . . . . 44,267 25,352 29,045 -------- ------- ------- Cash Flows From Investing Activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (34,687) (23,561) (20,301) Proceeds from sale of equipment . . . . . . . . . . . . . . . . . . . 82 440 1,253 Purchase of investments, net of cash acquired (18,028) (725) (357) -------- ------- ------- Net cash used in investing activities . . . . . . . . . . . (52,633) (23,846) (19,405) -------- ------- ------- Cash Flows From Financing Activities: Proceeds from debt obligations . . . . . . . . . . . . . . . . . . . 1,138 -- -- Principal payments on debt obligations . . . . . . . . . . . . . . . (1,458) -- -- Proceeds from issuance of common and subsidiary stock . . . . . . . . 5,090 2,990 3,063 Tax benefit from exercise of non-qualified stock options and disqualified dispositions . . . . . . . . . . . . . . . . . . . . 884 1,613 575 Payment for repurchase of company common stock . . . . . . . . . . . (9,467) (11,059) (9,477) -------- ------- ------- Net cash used in financing activities . . . . . . . . . . . (3,813) (6,456) (5,839) -------- ------- ------- Net Change in Cash and Cash Equivalents . . . . . . . . . . . . . . . (12,179) (4,950) 3,801 Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . . . . 99 (1) 65 Cash and Cash Equivalents, at beginning of year . . . . . . . . . . . 25,778 30,729 26,863 -------- ------- ------- Cash and Cash Equivalents, at end of year . . . . . . . . . . . . . . $ 13,698 $25,778 $30,729 ======== ======= ======= Supplemental Schedule of Other Transactions: Cash paid during the year for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70 -- -- Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,463 $14,906 $10,331
The accompanying Notes are an integral part of these consolidated financial statements. 14 17 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following summarizes the significant accounting and financial policies of Catalina Marketing Corporation and Subsidiaries (the "Company") which have been followed in preparing the accompanying consolidated financial statements. Certain prior balances have been reclassified to conform with the current year presentation. Description of the Business. The Company provides in-store electronic marketing services. Through its proprietary network, the Company provides consumer products manufacturers and retailers with cost-effective methods of delivering promotional incentives and advertising messages directly to consumers based on their purchasing behavior. Additionally, a majority-owned subsidiary of the Company operates an outdoor media business in Japan. As of March 31, 1997, the Company's network was installed in 10,745 retail stores and 1,195 pharmacies throughout the United States and 941 retail stores throughout the United Kingdom, Mexico and France. Principles of Consolidation and Preparation. The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of management's estimates. The accounts of the wholly-owned and majority-owned foreign subsidiaries are included as of December 31, which is their fiscal year end. All material intercompany profits, transactions and balances have been eliminated. The Company's investment in non-majority owned companies is accounted for on the equity method. Fair Value of Financial Instruments. The book value of all financial instruments approximates their fair value. Cash and Cash Equivalents. Cash and cash equivalents consist of cash and short-term investments. The short-term investments can be immediately converted to cash and are held at their market value. Allowance for Doubtful Accounts. The Company records a provision for estimated doubtful accounts as part of direct operating expenses. As of March 31, 1997 and 1996, the allowance for doubtful accounts was $1,613,000 and $3,016,000, respectively. Inventory. Inventory consists of paper used for promotion printing. Inventory is stated at the lower of cost, as determined by the first-in, first-out method, or market. Property and Equipment. Store equipment, billboards, leasehold improvements and furniture and office equipment are stated at cost. Depreciation of store equipment, billboards and furniture and office equipment is computed using the straight-line method based on the estimated useful lives of the related assets (generally three to eight years). Third party installation costs, net of amounts reimbursed by the retailer, are capitalized and amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the remaining term of the related retailer contract. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the remaining term of the related lease. Maintenance and repair costs are expensed as incurred. Foreign Currency Translation. For foreign subsidiaries whose functional currency is the local foreign currency, balance sheet accounts are translated at exchange rates in effect at the end of the subsidiaries' year and income statement accounts are translated at average exchange rates for the year. Translation gains and losses are included as a separate component of stockholders' equity. 15 18 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Revenue Recognition and Deferred Revenue. In accordance with coupon industry practice, the Company generally pre-bills manufacturers for purchased category cycles. The purchase of a category cycle gives a manufacturer the exclusive right to have promotions printed for a particular product category during the applicable period. The Company recognizes in-store electronic marketing service revenues as promotions are printed. Amounts collected prior to printing are reflected as deferred revenue until printing occurs. Income Taxes. Provision for income taxes includes federal, state and foreign income taxes currently payable. Deferred income taxes are provided for temporary differences between the recognition of income and expenses for financial reporting purposes and income tax purposes. Research and Development. Research and development costs relating to the development and testing of new service applications are expensed as incurred. If a contractual agreement exists to complete a test program that will result in a loss, the loss is recognized in the period it becomes known. Net Income Per Common and Common Equivalent Share. Net income per common and common equivalent share is based on the weighted average number of shares of common stock outstanding and dilutive common equivalent shares from stock options using the treasury stock method, effected for the two-for-one stock split (see Note 8). NOTE 2: SUPPLEMENTAL BALANCE SHEET INFORMATION Prepaid expenses and other current assets include (in thousands):
MARCH 31, ----------------- 1997 1996 ------- ------ Prepaid billboard rental . . . . . . . . . . . . . . . . . . . $ 3,972 $ -- Investments in deferred compensation plan . . . . . . . . . . . 4,923 -- Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,387 4,850 ------- ------ Total prepaid expenses and other current assets . . . . . . $11,282 $4,850 ======= ======
Purchased intangible assets, net (see Note 7) include (dollars in thousands):
USEFUL LIFE MARCH 31, (IN YEARS) 1997 ---------- --------- Patent license and retailer relationships in the United Kingdom . . . 20 $12,691 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6,661 Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . (547) ------- Purchased intangible assets, net . . . . . . . . . . . . . . $18,805 =======
In 1997 and 1996, other assets include approximately $0.3 and $0.7 million, respectively of loans to employees. Accrued expenses include (in thousands):
MARCH 31, ------------------ 1997 1996 ------- ------- Payroll related . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,262 $ 4,638 Deferred compensation plan . . . . . . . . . . . . . . . . . . . . . 4,832 3,324 Property, sales and use tax . . . . . . . . . . . . . . . . . . . . 2,349 2,558 Sales commissions . . . . . . . . . . . . . . . . . . . . . . . . . 1,798 1,290 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,192 5,239 ------- ------- Total accrued expenses . . . . . . . . . . . . . . . . . . . . $22,433 $17,049 ======= =======
16 19 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 3: INCOME TAXES Deferred income tax assets or liabilities are computed based on the temporary differences between the financial statement and income tax bases of assets and liabilities using the enacted marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expenses or credits are based on the changes in the deferred income tax assets or liabilities from period to period. Temporary differences for financial statement and income tax purposes result primarily from charges to operations for financial statement reporting purposes which are not currently tax deductible and revenues deferred for financial statement reporting purposes which are currently taxable. The components of the deferred tax asset and liability were as follows (in thousands):
MARCH 31, --------------- 1997 1996 ------ ------- Payroll related . . . . . . . . . . . . . . . . . . . $2,904 $2,287 Deferred revenue . . . . . . . . . . . . . . . . . . . 1,158 1,302 Provision for doubtful accounts . . . . . . . . . . . 670 1,176 Other . . . . . . . . . . . . . . . . . . . . . . . . 2,735 2,671 ------ ------ Deferred tax asset . . . . . . . . . . . . . . . $7,467 $7,436 ====== ====== Deferred tax liability--depreciation and amortization. $3,423 $2,504 ====== ======
The provision for income taxes consisted of the following (in thousands):
MARCH 31, ----------------------------- 1997 1996 1995 ------- ------- ------- Current taxes: Federal . . . . . . . . . . $13,678 $11,516 $ 7,676 State . . . . . . . . . . . 1,877 1,236 1,038 Foreign . . . . . . . . . . 648 370 13 ------- ------- ------- 16,203 13,122 8,727 ------- ------- ------- Deferred taxes: Federal . . . . . . . . . . 1,629 1,555 2,193 State . . . . . . . . . . . 187 178 339 Foreign . . . . . . . . . . (139) -- -- ------- ------- ------- 1,677 1,733 2,532 ------- ------- ------- Provision for income taxes . $17,880 $14,855 $11,259 ======= ======= =======
The reconciliation of the provision for income taxes based on the U.S. federal statutory income tax rate to the Company's provision for income taxes is as follows (dollars in thousands):
MARCH 31, ------------------------------ 1997 1996 1995 ------- ------- ------- Federal statutory rate . . . . . . . . . . . . . . . . 35% 35% 35% Expected federal statutory tax . . . . . . . . . . . . $15,792 $12,909 $ 9,971 State and foreign income taxes, net of federal benefit 1,829 1,257 576 Effect of foreign subsidiary losses . . . . . . . . . 744 522 250 Tax free municipal bonds . . . . . . . . . . . . . . . (245) (332) (187) Other . . . . . . . . . . . . . . . . . . . . . . . . (240) 499 649 ------- ------- ------- Provision for income taxes . . . . . . . . . . . $17,880 $14,855 $11,259 ======= ======= =======
17 20 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 4: SHORT TERM BORROWINGS AND LONG TERM DEBT As of March 31, 1997, the Company's short term borrowings and long term debt (all of which was incurred by the Company's majority-owned Japanese subsidiary, and is payable in yen) consisted of the following (in thousands):
MARCH 31, 1997 --------- Short term borrowings (including $1,309 current portion of long term debt) with several Japanese banks and agents, interest from 2.1% to 3.75%, maturing through December, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,820 Long term debt with several Japanese banks, interest from 2.1% to 3.75%, maturing through November, 2000 . . . . . . . . . . $ 869
Short term borrowings and long term debt are personally guaranteed by minority stockholders of Catalina-Pacific Media, L.L.C. and an employee of Pacific Media, K.K. The Company indemnifies these minority stockholders and employee for 51% of this debt. Maturities of long term debt are as follows as of March 31, 1997 (in thousands):
AMOUNT ------- 1990 . . . . . . 732 2000 . . . . . . 114 2001 . . . . . . 23 ------ $ 869 ======
On January 15, 1996, the Company entered into an unsecured revolving bank credit facility under which it may borrow up to $30 million, at variable rates calculated with reference to the London Interbank Offering Rate (LIBOR) or the bank prime rate for certain advances. There were no borrowings under this credit facility as of March 31, 1997. On April 14, 1997, the Company expanded this credit facility to $40 million and extended the term to August 31, 1998. NOTE 5: COMMITMENTS AND CONTINGENCIES Rental expense under operating leases was $1,622,000, $1,372,000 and $1,208,000 for the years ended March 31, 1997, 1996 and 1995, respectively. Future minimum rental commitments under operating leases with non-cancelable terms of more than one year (the longest of which expires in 2003) as of March 31, 1997, are as follows: $2,225,000 in 1998, $1,929,000 in 1999, $739,000 in 2000, $694,000 in 2001, $654,000 in 2002 and $553,000 thereafter. One manufacturer accounted for a total of approximately 11 percent of the Company's revenues during the year ended March 31, 1995. No single manufacturer accounted for 10 percent or more of the Company's revenues during the years ended March 31, 1996 or March 31, 1997. 18 21 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 6: STOCK-BASED COMPENSATION PLANS The Company has a stock option plan, the 1989 Incentive Stock Option Plan (the "1989 Plan"); a stock grant plan, the Catalina Marketing Corporation 1992 Director Stock Grant Plan ("Grant Plan"); and an employee stock purchase plan, the Employee Payroll Deduction Stock Purchase Plan (the "Purchase Plan"). 1989 Incentive Stock Option Plan. The 1989 Plan was approved by the Board of Directors in April 1989, and approved by the stockholders in July 1989. Pursuant to the 1989 Plan, 4,500,000 shares of the Company's common stock are reserved for issuance upon the exercise of options granted under the 1989 Plan. Options to purchase an aggregate of 4,288,892 shares have been granted under the 1989 Plan, of which options to purchase 2,115,420 shares were outstanding on March 31, 1997. The 1989 Plan provides for grants of Incentive Stock Options ("ISOs") to employees (including employee directors). Options granted under the 1989 Plan generally become exercisable at a rate of 25 percent per year (20 percent per year for initial grants to new employees), commencing one year after the date of grant and generally have terms of five to ten years. In 1994, the 1989 Plan was amended to limit the term to six years. The exercise price of all ISOs granted under the 1989 Plan must be equal to the fair market value of the shares on the date of grant. Aggregate Stock Option Activity. As of March 31, 1997, options to purchase an aggregate of 1,604,368 shares had been exercised, including options to purchase 10,000 shares granted outside of the 1989 Plan; options to purchase an aggregate of 2,135,420 shares were outstanding, including options to purchase 20,000 shares outside of the 1989 Plan; and 790,712 shares remained available for future grants under the 1989 Plan. Of the options outstanding at March 31, 1997 and at March 31, 1996, options to purchase 887,756 and 617,214 shares were immediately exercisable, with weighted average exercise prices of $19.89 and $16.79, respectively. Stock Option activity for the years ended March 31, 1995, 1996 and 1997 is as follows:
WEIGHTED NUMBER AVERAGE OF SHARES OPTION PRICES ---------- -------------- Options outstanding at March 31, 1994 . . 1,491,698 $11.09 Option activity: Granted . . . . . . . . . . . . . . 751,150 22.41 Exercised . . . . . . . . . . . . . (328,300) 5.52 Canceled or expired . . . . . . . . (84,014) 18.59 --------- Options outstanding at March 31, 1995 . . 1,830,534 16.37 Option activity: Granted . . . . . . . . . . . . . . 760,632 25.59 Exercised . . . . . . . . . . . . . (404,792) 6.38 Canceled or expired . . . . . . . . (157,286) 21.78 --------- Options outstanding at March 31, 1996 . . 2,029,088 21.48 Option activity: Granted . . . . . . . . . . . . . . 653,260 44.02 Exercised . . . . . . . . . . . . . (251,668) 15.93 Canceled or expired . . . . . . . . (295,260) 26.29 --------- Options outstanding at March 31, 1997 . . 2,135,420 28.37
19 22 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Stock Grant Plan. The Grant Plan provides for grants of common stock to non-employee board members. As of March 31, 1997, 24,454 shares have been granted and 2,200 have been canceled leaving 77,746 shares available for future grants under the Grant Plan. Stock granted under the Grant Plan vests ratably in annual installments over each Director's remaining term. Employee Stock Purchase Plan. In July 1994, the Purchase Plan was adopted by the Board of Directors and approved by the stockholders. Pursuant to the Purchase Plan, 300,000 shares of the Company's common stock were reserved for issuance. For the fiscal years ended March 31, 1997, 1996 and 1995, 28,375, 22,464, and 10,852 shares were purchased, respectively. Under the Purchase Plan, employees may purchase Company common stock at 85% of the market price on the first or last day of an offering period. The maximum each employee may purchase in an offering period shall not exceed $12,500 in market value of Company common stock. The Company will typically have two six- month offering periods each year. The Purchase Plan qualifies under Section 423 of the Internal Revenue Code of 1986. The Company accounts for the option and stock purchase plans under APB Opinion No. 25, under which no compensation cost has been recognized. The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS No. 123) for disclosure purposes in fiscal 1997. For SFAS No. 123 purposes, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in fiscal 1996 and 1997: risk-free interest rates ranging from 5.26 to 6.86 percent depending on the date of grant; expected dividend yield of zero percent; expected life of five years; and expected volatility of 33.68 percent. The fair values of options granted in fiscal 1996 and 1997 are $6,859,229 and $10,289,789, respectively, which would be amortized as compensation over the vesting period of the options.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ------------------------------------------------------------------------- ---------------------------------- Outstanding Weighted Average Exercisable Range of as of Remaining Weighted Average as of Weighted Average Exercise Prices March 31, 1997 Contractual Life Exercise Price March 31, 1997 Exercise Price - --------------- -------------- ---------------- ---------------- -------------- ---------------- $14.66 - $ 25.50 1,296,940 2.6 $20.63 824,856 $19.25 $25.87 - $ 53.50 838,480 4.6 $40.32 62,900 $28.34 --------- ------- ------ 2,135,420 887,756 $19.89
20 23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts (in thousands, except per share data):
MARCH 31, ----------- 1997 1996 -------- -------- Net Income: As Reported $ 27,241 $ 22,028 Pro Forma $ 24,351 $ 20,953 Primary EPS: As Reported $ 1.33 $ 1.11 Pro Forma $ 1.19 $ 1.05
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to April 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. Additionally, the pro forma amounts include approximately $257,000, and $142,000 related to the purchase discount offered under the Purchase Plan for fiscal 1997 and 1996, respectively. NOTE 7: ACQUISITIONS On April 10, 1996, the Company purchased from its minority stockholders the remaining 46% of Catalina Marketing UK, Inc. not owned by it for $11.9 million cash consideration and 41,672 newly issued shares of Company common stock. Catalina Marketing UK, Inc. owns all of the outstanding stock of Catalina Marketing UK, Ltd., the United Kingdom operating company. The Company also chose to replace existing options in the Catalina Marketing UK, Ltd. stock option plan by issuing 12,845 shares of Company common stock to the Catalina Marketing UK, Ltd. plan participants. The April 10, 1996 purchase has been accounted for on the purchase method. The intangible assets recorded in connection with the transaction primarily related to patent license and retailer relationships (see Note 2). If Catalina Marketing UK, Inc. had been 100% owned by the Company during fiscal 1996 and 1995, net income and earnings per common and common equivalent share would have been approximately $21.7 million or $1.09 per share, and $16.6 million or $0.83 per share, respectively. The information in the preceding sentence is unaudited. On October 10, 1996, the Company purchased 51% of Pacific Media, K.K. (PMK), a Japanese outdoor media company, for approximately $3.0 million in initial cash consideration. As part of the transaction, the Company contributed its PMK shares, and the selling stockholders contributed their remaining PMK shares, to a newly established Delaware limited liability holding company, Catalina-Pacific Media, L.L.C., which is now owned 51% by a subsidiary of the Company. Terms of the purchase agreement call for the Company to make a series of three annual payments, which are contingent upon the financial performance of PMK for the 1996, 1997 and 1998 calendar years, respectively. The subsidiary will introduce Checkout Coupon(R) and other electronic marketing programs to Japan through a division to be called Catalina Marketing Japan (CMJ), and is part of the continued international expansion of the Catalina Marketing(R) Network. The October 10, 1996 purchase has been accounted for on the purchase method. 21 24 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8: TWO-FOR-ONE STOCK SPLIT On June 10, 1996 the Company's Board of Directors declared a two-for-one common stock split effected in the form of a stock dividend. The record date for the stock dividend was June 24, 1996, and the payment date was July 15, 1996. The financial statements and all other stock or option related information provided herein have been restated to include the effects of the stock split. NOTE 9: SAVINGS PLANS On June 1, 1992, the Company adopted a 401(k) Savings Plan (the "401(k) Plan"). The Company is required to match employee contributions to the 401(k) Plan. The match equals 100% of the first 2 percent of compensation the employee contributes plus 25 percent of employee contributions between 2 percent and 4 percent of the compensation. The Company may also make discretionary contributions. The Company's contributions during fiscal 1997 and 1996 were $349,000 and $325,000, respectively. On January 1, 1992, the Company adopted a non-qualified deferred compensation plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan is designed to permit select employees and directors of the Company to defer a portion of their compensation. Effective July 1, 1996, the Deferred Compensation Plan was amended and restated allowing participants to elect deferral of certain types of compensation , including directors fees, stock grants under the Grant Plan and shares issuable upon the exercise of stock options, into stock units (units in the Deferred Compensation Plan each of which represents a share of Company common stock) and creating the Catalina Marketing Corporation Deferred Compensation Trust (the "Trust"). Amounts deposited in stock unit accounts are distributed in the form of shares of Company common stock upon a payment event. Through the Trust, investment options such as mutual funds and money market funds are available to participants. The Company accounts for its investments in the Deferred Compensation Plan under Statement of Financial Accounting Standards No. 115 (SFAS No. 115). The investment in the Deferred Compensation Plan and related liability are included in prepaid expenses and other current assets and accrued expenses of the consolidated balance sheets, respectively. The Company determined all of its Deferred Compensation Plan investments currently held in mutual funds and money market funds are trading securities as defined by SFAS No. 115 and as such are reported at fair value. Stock units are also reported at fair value. Realized and unrealized holding gains and losses related to these investments, as well as the offsetting compensation expense, recognized in net income during fiscal 1997 were not significant. 22 25 CATALINA MARKETING CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10: DOMESTIC AND FOREIGN INFORMATION
FISCAL YEARS ENDED MARCH 31, ---------------------------------------------------- 1997 1996 1995 --------------- ---------------- --------------- (in thousands) REVENUES: United States $158,105 $126,744 $108,962 United Kingdom 7,797 6,022 3,392 Japan 2,909 - - Other Foreign 5,036 2,519 1,415 Foreign Eliminations (1,704) (1,130) (515) --------------- ---------------- --------------- $172,143 $134,155 $113,254 INCOME (LOSS) FROM OPERATIONS: United States $46,359 $36,449 $29,828 United Kingdom 1,159 847 (219) Japan (539) - - Other Foreign (3,636) (2,488) (1,433) --------------- ---------------- --------------- $43,343 $34,808 $28,176 IDENTIFIABLE ASSETS AT FISCAL YEAR END: United States $138,842 $110,024 $92,276 United Kingdom 20,703 6,162 4,514 Japan 16,354 - - Other Foreign 11,209 6,140 1,884 Foreign Eliminations (32,412) (8,139) (2,118) --------------- ---------------- --------------- $154,696 $114,187 $96,556
NOTE 11: EARNINGS PER SHARE UNDER SFAS NO. 128 In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (SFAS No. 128), effective for financial statements ending after December 15, 1997. SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. The effect of the adoption of SFAS No. 128 on the accompanying financial statements will be as follows (in thousands, except per share data):
FISCAL YEARS ENDED MARCH 31, ----------------------------------------- 1997 1996 1995 ------------ ------------ ------------- Net Income $27,241 $22,028 $17,229 PER SHARE AMOUNTS: Earnings per share, as reported $1.33 $1.11 $0.86 Effect of SFAS No. 128 $0.06 $0.03 $0.02 ------------ ------------ ------------- Basic Earnings per share $1.39 $1.14 $0.88
23 26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. ITEM 11. EXECUTIVE COMPENSATION. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information called for by Items 10, 11, 12 and 13 will be contained in Catalina Marketing's definitive Proxy Statement for the Annual Meeting of Stockholders under the captions "Compensation of Executive Officers and Non-Employee Directors," "Share Ownership of Certain Beneficial Owners and Management" and "Nomination and Election of Directors" and is incorporated herein by this reference. The definitive Proxy Statement will be filed with the Commission prior to August 30, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
PAGE ---- (a)1 Financial Statements. The following is a list of all the Consolidated Financial Statements included in Item 8 of Part II. Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . 9 Consolidated Income Statements, Years Ended March 31, 1997, 1996 and 1995 . . . . 10 Consolidated Balance Sheets at March 31, 1997 and 1996 . . . . . . . . . . . . . 11 Consolidated Statements of Stockholders' Equity, Years Ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Consolidated Statements of Cash Flows, Years Ended March 31, 1997, 1996 and 1995 13 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . 14 (a)2 Financial Statement Schedules. All other schedules are omitted because they are not applicable or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto.
24 27 (a)3 Index to Exhibits
EXHIBIT NO. DESCRIPTION OF DOCUMENT - ----------- ------------------------- *3.3 Restated Certificate of Incorporation 3.3.1 Certificate of Amendment of Certificate of Incorporation 3.3.2 Certificate of Designation, Preferences and Rights setting forth the terms of the Company's Series X Junior Participating Preferred Stock, par value $.01 per share *3.4 Restated Bylaws **10.4 Amended and Restated 1989 Stock Option Plan, a copy of which is attached as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 *10.12 Form of Director and Officer Indemnification Agreement **10.18 Lease Agreement dated as of June 30, 1993 by and between QP One Corporation, a Minnesota corporation, as landlord, and Registrant, as tenant, a copy of which is attached as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 **10.18.1 First Amendment dated as of December 20, 1993, to the Lease Agreement dated as of June 30, 1993, by and between QP One Corporation, a Minnesota corporation, as landlord, and Registrant, as tenant, a copy of which is attached as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 10.21 1992 Director Stock Grant Plan, as amended on July 23, 1996 **10.22 Employee Payroll Deduction Stock Purchase Plan, a copy of which is attached as an exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1995 **10.23 Credit Agreement dated as of January 15, 1996, by and between the Registrant and SunTrust Bank, Tampa Bay, a copy of which is attached as an exhibit to the Company's Report on Form 10-Q for the quarter ended December 31, 1995 10.23.1 First Amendment dated as of April 14, 1997, to the Credit Agreement dated as of January 15, 1996 by and between the Registrant and SunTrust Bank, Tampa Bay 10.24 Lease Agreement dated as of September 5, 1996 by and between Interior Design Services, Inc., a Florida corporation, as landlord, and Registrant, as tenant **10.25 Stockholder Protection Agreement, dated May 8, 1997, between the Registrant and ChaseMellon Shareholder Services, L.L.C., as rights agent, a copy of which is attached as an exhibit to the Company's Current Report on Form 8-K filed on May 8, 1997 21 List of subsidiaries. 23 Consent of independent certified public accountants 27 Financial Data Schedule (for SEC use only) - --------
* Incorporated by reference to the Company's Registration Statement on Form S-1 Registration No. 33-45732, originally filed with the Securities and Exchange Commission on February 14, 1992, and declared effective (as amended) on March 26, 1992. ** Previously filed as indicated. (b) Reports on Form 8-K: None 25 28 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida, on May 23, 1997 CATALINA MARKETING CORPORATION (Registrant) By: /S/ PHILIP B. LIVINGSTON ------------------------- Philip B. Livingston, Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /S/ TOMMY D. GREER Chairman of the Board 5/23/97 - ------------------ ------- TOMMY D. GREER /S/ GEORGE W. OFF Chief Executive Officer, President, 5/23/97 - ----------------- and Director (Principal Executive ------- GEORGE W. OFF and Operating Officer ) /S/ FRANK H. BARKER Director 5/23/97 - ------------------- ------- FRANK H. BARKER /S/ FREDERICK W. BEINECKE Director 5/23/97 - ------------------------- ------- FREDERICK W. BEINECKE /S/ PATRICK W. COLLINS Director - ---------------------- 5/23/97 PATRICK W. COLLINS ------- /S/ STEPHEN I. D'AGOSTINO Director 5/23/97 - ------------------------- ------- STEPHEN I. D'AGOSTINO /S/ THOMAS G. MENDELL Director 5/23/97 - --------------------- ------- THOMAS G. MENDELL /S/ HELENE MONAT Director 5/23/97 - ---------------- ------- HELENE MONAT /S/ THOMAS W. SMITH Director 5/23/97 - ------------------- ------- THOMAS W. SMITH /S/ MICHAEL B. WILSON Director 5/23/97 - --------------------- ------- MICHAEL B. WILSON /S/ PHILIP B. LIVINGSTON Senior Vice President and 5/23/97 - ------------------------ Chief Financial Officer ------- PHILIP B. LIVINGSTON /S/ TAMARA L. ZEPH Corporate Controller and 5/23/97 - ------------------ Principal Accounting Officer ------- TAMARA L. ZEPH
26 EX-3.3.1 2 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CATALINA MARKETING CORPORATION Catalina Marketing Corporation, a Delaware corporation (the "Corporation"), pursuant to Section 242 of the General Corporation Law of Delaware, certifies that: FIRST: The Corporation's Board of Directors and stockholders have adopted resolutions authorizing the following amendment to the Corporation's Certificate of Incorporation as follows: 1. The Certificate of Incorporation of the Corporation is hereby amended by deleting Article Fourth in its entirety and restating said Article in its entirety as follows: "A. The Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock," respectively. The number of shares of Common Stock authorized to be issued is 50,000,000, par value $.01 per share, and the number of shares of Preferred Stock authorized to be issued is 5,000,000, par value $.01 per share. B. The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation is hereby authorized, by adopting appropriate resolutions and causing one or more certificates of designation to be executed, acknowledged, filed, recorded and to become effective in accordance with the GCL, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof, including but not limited to the fixing or alteration of the dividend rights, dividend rate, conversion rights, exchange rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of shares of Preferred Stock, or any of them; and to increase or decrease the number of shares of any series subsequent to the issue of the shares of that series, but not above the total number of authorized shares of Preferred Stock and not below the number of shares of such series then outstanding. In case the number of 2 shares of any series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. Except as may otherwise be required by law or this Certificate of Incorporation, the terms of any series of Preferred Stock may be amended without the consent of the holders of any other series of Preferred Stock or of Common Stock." SECOND: The foregoing amendment to the Certificate of Incorporation of the Corporation has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of Delaware. IN WITNESS WHEREOF, Catalina Marketing Corporation, has caused this Certificate to be signed and attested by its duly authorized officer this 23rd day of July, 1996. CATALINA MARKETING CORPORATION By ---------------------------------- Name: Title: EX-3.3.2 3 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS 1 EXHIBIT 3.3.2 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES X JUNIOR PARTICIPATING PREFERRED STOCK OF CATALINA MARKETING CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, George W. Off, President and Chief Executive Officer, and Barry A. Brooks, Secretary of CATALINA MARKETING CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation, as amended, of the said Corporation, the said Board of Directors on April 22, 1997, adopted the following resolution creating a series of 2,000,000 shares of Preferred Stock designated as Series X Junior Participating Preferred Stock: RESOLVED, that a series of the Corporation's Preferred Stock consisting of 2,000,000 shares of Preferred Stock, par value $.01 per share, be and hereby is, designated as "Series X Junior Participating Preferred Stock" (the "Series X Preferred Stock"), and that the Series X Preferred Stock shall have the designations, powers, preferences, rights and qualifications, limitations and restrictions substantially as set forth in the Certificate of Designation, Preferences and Rights of Series X Junior Participating Preferred Stock (the "Certificate") attached as Exhibit A. This Certificate states that the Board of Directors does hereby fix and herein state and express such designations, powers, preferences and relative and other special rights and qualifications, limitations and restrictions thereof as follows (all terms used herein which are defined in the Certificate of Incorporation shall be deemed to have the meanings provided therein). SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as "Series X Junior Participating Preferred Stock" (the "Series X Preferred Stock") and the number of shares constituting such series shall be 2,000,000. Such number of shares of Series X Preferred Stock may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series X Preferred Stock to a number less than the number of shares of 2 Series X Preferred Stock then outstanding plus the number of shares of Series X Preferred Stock reserved for issuance upon the exercise of outstanding options, rights or warrants exercisable for, or upon the conversion of any outstanding securities issued by the Corporation convertible into, Series X Preferred Stock. SECTION 2. DIVIDENDS AND DISTRIBUTIONS. (A) Subject to the prior and superior rights of the holders of any shares of any series of preferred stock ranking prior and superior to the shares of Series X Preferred Stock with respect to dividends, the holders of shares of Series X Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, dividends payable in cash in an amount per share (rounded to the nearest cent), subject to the provision for adjustment hereinafter set forth, equal to 100 (the "Dividend Factor") times the aggregate per share amount of all cash dividends, and the Dividend Factor times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions (other than a dividend payable in shares of the Common Stock, par value $.01 per share, of the Corporation (the "Common Stock") or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise)), declared on the Common Stock since the first issuance of any share or fraction of a share of Series X Preferred Stock. In the event the Corporation shall at any time after April 22, 1997 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Dividend Factor in the immediately preceding sentence shall be adjusted by multiplying the Dividend Factor by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series X Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock). (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series X Preferred Stock from the date of declaration of dividends on the Common Stock (other than a dividend payable in shares of Common Stock). Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series X Preferred Stock in an amount less than the total amount of such accrued dividends shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series X Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. SECTION 3. VOTING RIGHTS. The holders of shares of Series X Preferred Stock shall have the following voting rights: 3 (A) Subject to the provision for adjustment hereinafter set forth, each share of Series X Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation for each matter with respect to which the holders of Common Stock are entitled to vote. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each case the number of votes per share to which holders of shares of Series X Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series X Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as otherwise provided herein or provided by law, the holders of shares of Series X Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. SECTION 4. CERTAIN RESTRICTIONS. (A) Whenever dividends or distributions payable on the Series X Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series X Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, make any other distribution on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series X Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series X Preferred Stock, except dividends paid or distributions made ratably on the Series X Preferred Stock and all such stock ranking on a parity with respect to the particular dividend or distribution in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series X Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon dissolution, liquidation or winding up) to the Series X Preferred Stock; or 4 (iv) purchase or otherwise acquire for consideration any shares of Series X Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series X Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. REACQUIRED SHARES. Any shares of Series X Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series X Preferred Stock unless, prior thereto, the holders of shares of Series X Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series X Liquidation Preference"). Following the payment of the full amount of the Series X Liquidation Preference, no additional distributions shall be made to the holders of shares of Series X Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Stock Liquidation Amount") equal to the quotient obtained by dividing (i) the Series X Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series X Liquidation Preference and the Common Stock Liquidation Amount in respect of all outstanding shares of Series X Preferred Stock and Common Stock, respectively, holders of Series X Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series X Liquidation Preference and the liquidation 5 preferences of all other series of preferred stock, if any, which rank on a parity with the Series X Preferred Stock, then such remaining assets shall be distributed ratably to the holders of the Series X Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, (iv) reclassify the Common Stock or (v) effect a recapitalization of the Common Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series X Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series X Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. SECTION 8. NO REDEMPTION. The shares of Series X Preferred Stock shall not be redeemable. SECTION 9. RANKING. The Series X Preferred Stock shall rank junior to all other series of the Corporation's preferred stock, if any, as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Nothing in this Certificate shall limit the power of the Board of Directors to create a new series of preferred stock ranking senior to the Series X Preferred Stock in any respect. SECTION 10. AMENDMENT. The Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series X Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series X Preferred Stock, voting separately as a class. 6 SECTION 11. FRACTIONAL SHARES. Series X Preferred Stock may be issued in fractions of a share, which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series X Preferred Stock. IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 8th day of May, 1997. /s/George W. Off ------------------------ George W. Off, President Attest: /s/ Barry A. Brooks - -------------------------- Barry A. Brooks, Secretary EX-10.21 4 1992 DIRECTOR STOCK GRANT PLAN 1 EXHIBIT 10.21 Final, As Amended 7/23/96 CATALINA MARKETING CORPORATION 1992 DIRECTOR STOCK GRANT PLAN 1. PURPOSE. The Plan is intended to provide incentive to outside directors of the Corporation, to encourage proprietary interest in the Corporation, and to attract new outside directors with outstanding qualifications. 2. DEFINITIONS. Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates otherwise. (a) "Act" shall mean the Securities Act of 1933, as amended. (b) "Administrator" shall mean the Board or the Committee, whichever shall be administering the Plan from time to time in the discretion of the Board, as described in Section 4(a) of the Plan. (c) "Annual Meeting Date" shall have the meaning assigned to it in Section 6(e) hereof. (d) "Board" shall mean the Board of Directors of the Corporation. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. (f) "Committee" shall mean the committee appointed by the Board in accordance with Section 4(a) of the Plan. (g) "Common Stock" shall mean the Common Stock, par value $.01 per share, of the Corporation. (h) "Corporation" shall mean Catalina Marketing Corporation, a Delaware corporation. 2 (i) "Directors" shall mean, collectively, all outside (non-employee) directors, duly elected to the Board by the Corporation's stockholders or otherwise in accordance with the Corporation's Bylaws, and all outside (non-employee) directors appointed to fill a vacancy or a newly created directorship position of the Board. (j) "Disability" shall mean the condition of a Director who is unable to substantially fulfill his responsibilities as a member of the Board by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (l) "Fair Market Value" shall mean the value of one (1) Share of Common Stock, determined as follows, without regard to any restriction other than a restriction which, by its terms, will never lapse: (i) If the Shares are traded on an exchange or the National Market System (the "NMS") of the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the last sale price as reported for composite transactions on the date of valuation or, if no sales occurred on that date, then the average of the highest bid and lowest asked prices on such exchange or the NMS at the end of the day on such date; (ii) If the Shares are not traded on an exchange or the NMS but are otherwise traded over-the-counter, the average of the highest bid and lowest asked prices quoted in the NASDAQ system as of the close of business on the date of valuation, or, if on such day such security is not quoted in the NASDAQ system, the average of the representative bid and asked prices on such date in the domestic over-the-counter market as reported by the National Quotation Bureau, Inc., or any similar successor organization; and (iii) If neither (i) nor (ii) applies, the fair market value as determined by the Administrator in good faith. Such determination shall be conclusive and binding on all persons. -2- 3 (m) "Grant" shall mean any stock award granted pursuant to the Plan. (n) "Grantee" shall mean a Director who has received a Grant pursuant to Section 4(b) hereof. (o) "Plan" shall mean this Catalina Market- ing Corporation 1992 Director Stock Grant Plan, as it may be amended from time to time. (p) "Share" shall mean one (1) share of Common Stock, adjusted in accordance with Section 8 of the Plan (if applicable). (q) "Term of Directorship" shall have the meaning assigned to it in Section 6(b) hereof. (r) "Transition Grants" shall have the meaning assigned to it in Section 6(c) hereof. (s) "Valuation Date" shall have the meaning assigned to it in Section 6(c) hereof. (t) "Vested Shares" and "Non-Vested Shares" shall have the meanings assigned to such terms in Section 6(e) hereof. 3. EFFECTIVE DATE. The Plan was adopted by the Board effective October 27, 1992, subject to the approval of the Corporation's stockholders pursuant to Section 12 hereof. 4. ADMINISTRATION AND ELIGIBILITY. (a) Administrator. The Plan shall be administered, in the discretion of the Board from time to time, by the Board or by the Committee. The Committee shall be appointed by the Board and shall consist of not less than two (2) members of the Board. The Board may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, however caused, shall be filled by the Board. The Board shall appoint one of the members of the Committee as Chairman. The Administrator shall hold meetings at such times and places as it may determine. Acts of a majority of the Administrator at a meeting at which a quorum is present, or acts reduced to or approved in writing by unanimous consent of the members of the Administrator, shall be the valid acts of the Administrator. -3- 4 The Administrator shall maintain a list of the Directors who have been awarded Grants, and determine the number of Shares granted to each Director in accordance with Section 6(b) hereof. Subject to the express provisions of the Plan, the Administrator shall have the authority to construe and interpret the Plan and to define the terms used in the Plan, to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The interpretation and construction by the Administrator of any provisions of the Plan or of any Grant granted thereunder shall be final. No member of the Administrator shall be liable for any action or determination made in good faith with respect to the Plan or any Grant awarded thereunder. (b) Participation. The Grantees shall consist exclusively of Directors of the Corporation; provided, however, that no Director shall be eligible to be a Grantee if and to the extent that such Director is prohibited from personally accepting or benefiting from a Grant hereunder due to such Director's affiliation with a business organization; provided further, however, that if at any time a Director who has not been eligible under the Plan due to the immediately preceding proviso becomes eligible to participate, such Director shall be treated as having been elected to a term of less than three years at the time such Director becomes so eligible, and at such time shall receive a Grant as though such Director had been elected at such time, pursuant to Section 6(b) of the Plan. If a Director is not eligible to be a Grantee due to the first proviso of the immediately preceding sentence, then such Director shall be entitled to cash compensation of $10,000 per year during the Term of Directorship, with such compensation to be paid on a quarterly basis or as otherwise directed by the Administrator. 5. STOCK. The stock subject to Grants awarded under the Plan shall be Shares of the Corporation's authorized but unissued or reacquired Common Stock. The aggregate number of Shares which may be issued upon exercise of Grants under the Plan shall not exceed fifty thousand (50,000), subject to the occurrence of any of the events specified in Section 8 hereof. The number of Shares subject to additional Grants at any time shall not exceed the number of Shares remaining available for issuance under the Plan. In the event that any Shares subject to any outstanding grants for any reason -4- 5 are forfeited and returned to the Corporation in accordance with Section 6(f) of the Plan, the Shares so forfeited may again be subject to Grants. 6. TERMS AND CONDITIONS OF GRANTS. (a) Stock Grant Agreements. Grants shall be evidenced by written stock grant agreements in such form as the Administrator shall from time to time determine. Such agreements need not be identical but shall comply with and be subject to the terms and conditions set forth below. (b) Award of Grants. A Grant shall be awarded to each Director as of the day that such Director takes office following the election or re-election of such Director by the stockholders or by the Board, as permitted in the Corporation's Bylaws, in partial consideration for the fulfillment by such Director of such Director's duties as a director of the Corporation. Subject to the availability of Shares as specified in Section 5 of the Plan, each Grant AWARDED ON OR AFTER JULY 25, 1995 SHALL INCLUDE AN AGGREGATE OF ONE THOUSAND (1,000) SHARES (SUBJECT TO ADJUSTMENTS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8 HEREOF)*as of the effective date of the Grant, as determined by the Administrator*/; provided, however, that if the term (the "Term of Directorship") for which the Director has been elected is not a full three-year term, the number of Shares subject to a Grant shall be the number of Shares calculated as set forth above, multiplied by a fraction, the numerator of which is the number of full months during which the Grantee shall serve as director following the award of the Grant and until the next annual meeting of stockholders (the "Annual Meeting of Stockholders") at which the class of directors to which the Grantee belongs is to be elected (assuming for purposes of this calculation that the Annual Meeting Date (as hereinafter defined) is July 31 of such fiscal year), and the denominator of which is thirty-six (36), rounded up to the nearest whole number of Shares. (c) Grants Upon Adoption of Plan. Notwith- standing any provision to the contrary herein, upon the final ratification of the Plan by the Board, and subject to the approval by stockholders as contemplated by Section 12 of the Plan, all persons who were Directors upon the - -------- * The language appearing in bold-face herein was adopted and certain other language deleted by the Board on July 25, 1995 and approved by the stockholders on July 23, 1996. -5- 6 adoption by the Board of the Plan (October 27, 1992) (the "Valuation Date") will receive Grants ("Transition Grants") effective upon the date of such final ratification calculated as follows: (i) Class I Directors shall receive Grants which shall include the number of Shares obtained by dividing $30,000 by the Fair Market Value as of the Valuation Date, as determined by the Administrator, rounded up to the nearest whole number of Shares; (ii) Class II Directors shall receive Grants which shall include one-third (1/3) of the number of Shares to be received by Class I Directors, rounded up to the nearest whole number of Shares; and (iii) Class III Directors shall receive Grants which shall include two-thirds (2/3) of the number of Shares to be received by Class II Directors, rounded up to the nearest whole number of Shares. (d) Number of Shares. Each Grant shall state the number of Shares to which it pertains and shall provide for the adjustment thereof in accordance with the provisions of Section 8 hereof. (e) Vesting. Shares included in Grants shall be subject to the vesting provisions herein set forth. Shares which have vested according to the schedule set forth below shall be considered "Vested Shares" and Shares which have not so vested shall be considered "Non-Vested Shares." The Shares included in each Grant shall vest on the date of each successive Annual Meeting of Stockholders of the Corporation (the "Annual Meeting Date") following the effective date of the Grant. The number of Shares subject to a Grant which shall become Vested Shares as of each Annual Meeting Date shall be calculated by multiplying the number of Shares included in the Grant by a fraction, the numerator of which is equal to the number of months which have elapsed since the later of (i) the election or re-election of such Director or (ii) the last Annual Meeting Date, and the denominator of which is the number of full months during which the Grantee shall serve as director following the award of the Grant and until the next Annual Meeting of Stockholders at which the class of directors to which the Grantee belongs is to be elected (assuming for purposes of this calculation that the Annual Meeting Date is July 31 of such fiscal year); provided, however, in the case of Transition Grants, Directors shall be deemed to have -6- 7 completed twelve (12) months of service as a Director on the Annual Meeting Date. If no Annual Meeting of Stockholders shall have occurred in any fiscal year on or before July 31 of such fiscal year, then unless the Board shall have adopted a resolution adopting an alternative date, July 31 shall be considered to be the Annual Meeting Date. (f) Restrictions on Non-Vested Shares. A Grantee may not assign, sell, pledge, hypothecate or otherwise transfer any Grant or any Non-Vested Shares. If a Grantee ceases to be a Director for any reason or no reason, including upon death or Disability, removal (with or without cause) or resignation, the Grant shall be automatically terminated immediately upon the effective date of such cessation and all Shares included in Grants which are Non- Vested Shares as of the effective date of such cessation, shall be forfeited automatically and shall, effective immediately upon such cessation, be returned to the status of authorized to be issued pursuant to Grants under the Plan. In the discretion of the Administrator, the Corporation may devise any mechanism reasonable for the purpose of enforcing the restrictions and limitations on Non-Vested Shares. In the absence of any other such mechanism, the Corporation may retain possession of any certificates representing Non-Vested Shares, but shall cause certificates representing Shares which have become Vested Shares registered in the name of the Grantee to be delivered to the Grantee entitled to the same promptly following the time at which such Shares become Vested Shares as herein described. (g) Rights as a Stockholder. Except as provided in Section 6(f) of the Plan, a Grantee shall have and enjoy all rights as a stockholder with respect to all Shares included in the Grant, regardless of whether the Shares awarded are Vested or Non-Vested, including, without limitation, the right to vote any such Shares, the right to receive all communications addressed by the Corporation to its stockholders, and the right to receive dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights as provided in the Certificate of Incorporation or Bylaws of the Corporation. Notwithstanding any provision hereof, a Director may not transfer any Shares received pursuant to a Grant for a period of six (6) months immediately following the effective date of the Grant. (h) Payment of Taxes; Related Matters. In the event the Corporation determines it is required to -7- 8 withhold state, local or Federal income tax as a result of the grant of a Grant or the vesting of any Shares subject to a Grant, the Corporation may require a Grantee to make arrangements satisfactory to the Corporation to enable it to satisfy such withholding requirements. Payment of such withholding requirements may be made, in the discretion of the Administrator, (i) in cash, (ii) by delivery of Shares registered in the name of the Grantee, or by the Corporation not issuing such number of Shares subject to the Grant having a Fair Market Value at the effective date of the Grant or the date of such vesting equal to the amount to be withheld, or (iii) any combination of (i) and (ii) above. An election under the preceding sentence may only be made during the period beginning on the third business day following the date of release of quarterly and annual summary statements of sales and earnings as provided by Rule 16b-3(e)(3)(iii) (or Rule 16b-3(e)(3) following the scheduled amendment of Rule 16b-3) of the Securities and Exchange Commission and ending on the twelfth business day following such date and only if such period occurs before the date the Corporation requires payment of the withholding tax. The election need not be made during the ten-day window if (a) it is made at least six (6) months prior to the date of the Grant or (b) counsel to the Corporation determines that compliance with such requirement is unnecessary. THE STOCK GRANT AGREEMENTS SHALL APPRISE THE GRANTEE OF THE TAX CONSEQUENCES TO THE GRANTEE OF SECTION 83 OF THE CODE (INCLUDING THE TAX CONSEQUENCES TO THE GRANTEE OF FILING OF AN ELECTION PURSUANT TO SECTION 83(b) OF THE CODE), AND SHALL ALLOCATE THE RESPONSIBILITY FOR RECEIVING APPROPRIATE ADVICE WITH RESPECT THERETO TO THE GRANTEE. (i) DEFERRAL OF GRANT. PRIOR TO HIS OR HER ELECTION OR RE-ELECTION TO THE BOARD OF DIRECTORS, EACH DIRECTOR MAY ELECT TO DEFER, IN ACCORDANCE WITH THE TERMS OF THE CORPORATION'S DEFERRED COMPENSATION PLAN, ALL OR A PORTION OF THE GRANT HE OR SHE SHALL RECEIVE IF ELECTED OR RE-ELECTED, PURSUANT TO SECTION 6(B). IN SUCH CASE, NO SHARES WILL BE ISSUED TO THE DIRECTOR AND A CREDIT WILL BE MADE TO THE COMMON STOCK UNIT ACCOUNT MAINTAINED FOR SUCH DIRECTOR UNDER THE DEFERRED COMPENSATION PLAN IN A NUMBER OF UNITS EQUAL TO THE NUMBER OF SHARES DEFERRED ON THE DATE OF GRANT.** - -------- ** The language appearing in bold-face herein was adopted by the Board of Directors on April 30, 1996 and approved by the stockholders on July 23, 1996. -8- 9 (j) Other Provisions. The stock grant agreements authorized under the Plan may contain such other provisions not inconsistent with the terms of the Plan (including, without limitation, restrictions upon the transfer of Shares of stock following the award of the Grant) as the Administrator shall deem advisable. 7. TERM OF PLAN. Grants may be awarded pursuant to the Plan until the expiration of the Plan on October 27, 2002. 8. RECAPITALIZATIONS AND OTHER TRANSACTIONS. Subject to any required action by stockholders, the aggregate number of Shares covered by the Plan as provided in Section 5 hereof and the number of Shares covered by each Grant shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, stock dividend (but only of Common Stock), combination of shares or any other change, by reclassification, reorganization, redesignation, recapitalization or otherwise, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Corporation. If any such adjustment results in a fractional share, such fraction shall be disregarded. Subject to any required action by stockholders, if the Corporation shall merge with another corporation and the Corporation is the surviving corporation in such merger and under the terms of such merger the shares of Common Stock outstanding immediately prior to the merger remain outstanding and unchanged, each outstanding Grant shall continue to apply to the Shares subject thereto, and any Shares awarded pursuant to a Grant prior to a merger, which have yet to fully vest in accordance with the schedule set forth in Section 6(e) of the Plan, shall continue to be subject to the same vesting schedule. In addition, in the event of a merger where the Corporation is the surviving corporation, each outstanding Grant shall also pertain and apply to any additional securities and other property, if any, to which a holder of the number of Shares subject to the Grant would have been entitled as a result of the merger. If the Corporation sells all, or substantially all, of its assets, or the Corporation merges (other than a merger of the type described in the immediately preceding sentence) or consolidates with another corporation (SUCH EVENT BEING A -9- 10 "FORFEITURE EVENT,")***, this Plan and each outstanding Grant shall terminate and each Non-Vested Share awarded hereunder pursuant to a Grant shall be forfeited; PROVIDED, HOWEVER, THAT UNLESS THE CONSUMMATION OF THE FORFEITURE EVENT TAKES PLACE WITHIN THIRTY (30) DAYS FOLLOWING AN ANNUAL MEETING DATE, IN THE EVENT OF A FORFEITURE EVENT, ANY SHARES THAT WOULD HAVE BECOME VESTED SHARES AT THE NEXT SUCCEEDING ANNUAL MEETING DATE FOLLOWING THE CONSUMMATION OF THE FORFEITURE EVENT SHALL BE VESTED SHARES UPON AND FOR A PERIOD OF THIRTY (30) DAYS PRECEDING THE CONSUMMATION OF THE FORFEITURE EVENT, BUT CONTINGENT UPON THE CONSUMMATION OF THE FORFEITURE EVENT.***/ A dissolution or liquidation of the Corporation, other than a dissolution or liquidation immediately following a sale of all or substantially all of the assets of the Corporation, which shall be governed by the immediately preceding sentence, shall also cause this Plan and each Grant hereunder to terminate and each Non- Vested Share under any Grant to be forfeited. To the extent that the foregoing adjustments relate to securities of the Corporation, such adjustments shall be made by the Administrator, whose determination shall be conclusive and binding on all persons. Except as expressly provided in this Section, the Grantee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation, and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to a Grant. The award of a Grant pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. - -------- *** The language appearing in bold-face herein was adopted by the Board on April 19, 1994 and approved by the stockholders on July 26, 1994. -10- 11 9. SECURITIES LAW REQUIREMENTS. (a) Legality of Issuance. No Shares shall be issued upon the award of any Grant unless and until the Corporation has determined that: (i) it and the Grantee have taken all actions required to register the award of the Shares under the Act, or to perfect an exemption from the registration requirements thereof; (ii) any applicable listing requirement of any stock exchange on which the Common Stock is listed has been satisfied; and (iii) any other applicable provision of state or Federal law has been satisfied. (b) Restrictions on Transfer; Representa- tions of Grantee; Legends. Regardless of whether the award of Shares under the Plan has been registered under the Act or has been registered or qualified under the securities laws of any state, the Corporation may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Corporation and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state or any other law. In the event that the award of Shares under the Plan is not registered under the Act but an exemption is available which requires an investment representation or other representation, each Grantee shall be required to represent that such Shares are being acquired for investment, and not with a view to the sale or distribution thereof, and to make such other representations as are deemed necessary or appropriate by the Corporation and its counsel. Stock certificates evidencing Shares acquired under the Plan pursuant to an unregistered transaction shall bear the following restrictive legend (or similar legend in the discretion of the Administrator) and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law: -11- 12 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND CONTENT TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT." Any determination by the Corporation and its counsel in connection with any of the matters set forth in this Section shall be conclusive and binding on all persons. (c) Registration or Qualification of Securities. The Corporation may, but shall not be obligated to, register or qualify the award of Shares pursuant to the Plan under the Act or any other applicable law. The Corporation shall not be obligated to take any affirmative action in order to cause the award of Shares under the Plan to comply with any law. (d) Exchange of Certificates. If, in the opinion of the Corporation and its counsel, any legend placed on a stock certificate representing Shares awarded under the Plan is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend. 10. INFORMATION TO GRANTEES. The Corporation shall provide each Grantee on an annual or other periodic basis financial and other information regarding the Corporation. The Corporation may provide this information to each Grantee in any manner reasonably calculated to insure receipt of the information by each Grantee. -12- 13 11. AMENDMENT OF THE PLAN. The Board may, from time to time, with respect to any Shares at the time not subject to Grants, suspend or discontinue the Plan or revise or amend it in any respect whatsoever, provided that the Board shall not revise or amend the Plan more than once every six (6) months (other than to comport with changes in the Code or the Employee Retirement Income Security Act, or the rules or regulations thereunder), and provided, further, that no amendment or revision shall adversely affect, without the affected Grantee's written consent, the rights of any Grantee to whom the Shares have been issued pursuant to the Plan. In addition, without the approval of the Corporation's stockholders, no such revision or amendment shall: (a) Materially increase the benefits accruing to the Grantees under the Plan; (b) Increase the number of Shares which may be issued under the Plan; (c) Change the designation in Section 4 hereof with respect to the classes of persons eligible to receive Grants; (d) Modify the Plan such that it fails to meet the requirements of Rule 16b-3 of the Securities and Exchange Commission for the exemption of the acquisition, cancellation, expiration or surrender of Grants from the operation of Section 16(b) of the Exchange Act; or (e) Amend this Section to defeat its purpose. 12. APPROVAL OF STOCKHOLDERS. The Plan shall be subject to approval by the affirmative vote of the holders of a majority of the outstanding shares present or represented and entitled to vote at the first annual meeting of stockholders of the Corporation following the adoption of the Plan, and in no event later than October 27, 1993. Following the adoption of the Plan by the Board on October 27, 1992, but prior to stockholder approval, Grants may be awarded to Directors duly elected or appointed to serve on the Board of the Corporation, pending stockholder approval, and upon such approval by the stockholders, the actions of the Administrator by which the Grants were awarded shall be -13- 14 ratified. Any amendment described in Section 11 shall also be subject to approval by the Corporation's stockholders. 13. EXECUTION. To record the adoption of the Plan by the Board on October 27, 1992, and its subsequent amendment through July 23, 1996, the Corporation has caused its authorized officers to affix the corporate name and seal hereto. CATALINA MARKETING CORPORATION By /s/ Tommy D. Greer --------------------------- Tommy D. Greer, Chairman By /s/ Barry A. Brooks --------------------------- Barry A. Brooks, Secretary [Seal] -14- EX-10.23.1 5 FIRST AMENDMENT TO THE CREDIT AGREEMENT 1 EXHIBIT 10.23.1 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT is made and entered into as of this 14th day of April, 1997, by and between CATALINA MARKETING CORPORATION, a Delaware corporation (together with its successors and permitted assigns, "Borrower"), the Lenders (as defined in the Agreement), and SUNTRUST BANK, TAMPA BAY, a Florida banking corporation, as agent for the Lenders (together with any successor agent, the "Agent"). BACKGROUND Borrower, Agent and Lenders executed a credit agreement dated as of January 15, 1996 (as amended, supplemented, restated, replaced, or otherwise modified from time to time, the "Agreement"). Pursuant to the provisions of the Agreement, the Lenders established a revolving line of credit facility in the maximum aggregate principal amount of $30,000,000.00 in favor of Borrower (the "Revolving Credit Facility") Borrower has now requested Agent and Lenders to increase the Revolving Credit Facility to the maximum principal amount of $40,000,000.00 and to extend the maturity thereof. Agent and Lenders have agreed to the request of Borrower on the terms and conditions of this First Amendment. NOW, THEREFORE, in consideration of the foregoing and the promises contained herein, the parties agree as follows: 1. RECITALS. All of the above recitals are true and correct in every respect and are incorporated herein and made a part hereof. 2. DEFINED TERMS. Any capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. 3. REVOLVING CREDIT FACILITY. (a) The parties agree that the amount of the Revolving Credit Commitment of one of the Lenders shall be increased, as evidenced by the Revolving Credit Commitments of the Lenders set forth on the signature pages hereto. The parties further agree that the Revolving Credit Termination Date shall be extended for an additional year. (b) Accordingly, the definition of "Revolving Credit Commitment" contained in Subsection 1.1 of the Agreement is hereby amended to read as follows: "Revolving Credit Commitment" means the amount set forth with respect to a Lender on the signature pages 2 of this Agreement or any amendment thereto, or, if there has been a subsequent full or partial assignment of a Revolving Credit Commitment pursuant to the provisions of Subsection 10.17 hereof, as may be reflected on the records of Agent with respect to such assignment based on the respective Assignment and Acceptance Agreement. (c) The definition of "Revolving Credit Termination Date" contained in Subsection 1.1 of the Agreement is hereby amended by replacing the date "August 31, 1997" with the date "August 31, 1998." 4. NEW REVOLVING CREDIT NOTE. (a) The increase in the Revolving Credit Commitment of the Lender shall be evidenced by a renewal promissory note of Borrower to the Lender in the principal amount equal to such Lender's Revolving Credit Commitment. Such note shall be deemed a "Revolving Credit Note" and shall be deemed issued pursuant to and subject to the terms of the Agreement, as amended hereby. 5. FINANCIAL COVENANT AMENDMENT. (a) The financial covenant governing Consolidated Senior Debt to Consolidated Cash Flow at Subsection 5.15(b) of the Agreement is hereby replaced with the following: A ratio of Consolidated Senior Debt to the difference of Consolidated EBITDA and Consolidated Capital Expenditures which is less than or equal to 2.0 to 1.0 at the end of each fiscal quarter, with Consolidated Senior Debt calculated as of such quarter end and Consolidated EBITDA and Consolidated Capital Expenditures calculated for the four fiscal quarters then ending. (b) The definition of "Consolidated EBITDA" is hereby added in alphabetical order to the definitions contained in Subsection 1.1 of the Agreement as follows: "Consolidated EBITDA" means net income or loss of Borrower and its Subsidiaries plus depreciation expense, amortization expense, interest expense, income taxes, and other non-cash charges, minus extraordinary income and gains and non-cash income, if any, and plus extraordinary losses, if any, all calculated on a consolidated basis and in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. (c) The definition of "Consolidated Capital Expenditures," is hereby added in alphabetical order to the 3 definitions contained in Subsection 1.1 of the Agreement as follows: "Consolidated Capital Expenditures" means capital expenditures of Borrower and its Subsidiaries, calculated on a consolidated basis and in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. 6. REQUIRED LENDERS. The parties agree that the Required Lender percentage under the Agreement shall increase from 67% to 76%, and accordingly, the definition of "Required Lenders" continued in Subsection 1.1 of the Agreement is amended by replacing each reference to "67%" with "76%." 7. EXPENSES. Without limiting the provisions of Subsection 10.2 of the Agreement, Borrower covenants and agrees to pay all costs and expenses of Agent and Lenders in connection with the closing of the transaction evidenced hereby, including, but not limited to, Agent's or Lender's attorneys' fees, recording or filing costs or expenses, intangible taxes, documentary stamps, surtax and other revenue fees, and similar items. 8. LOAN AGREEMENT, RATIFICATION, NO NOVATION. Each of the new Revolving Credit Note and this Amendment shall be deemed to be a "Loan Document" for the purposes of the Agreement and hereof. Except as expressly modified or supplemented hereby, the Loan Documents and all agreements, instruments, and documents executed or delivered pursuant thereto have remained and shall remain at all times in full force and effect in accordance with their respective terms, and have not been novated by the provisions of this Amendment. 9. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to enter into this Amendment and to perform the transactions described herein, Borrower hereby makes the representations and warranties contained in Section 3 of the Agreement (other than Subsection 3.4, which is updated herein), on and as of the date of this Amendment and with respect to the new Loan Documents as well, and represents and warrants to Agent and Lenders that (a) Borrower is in compliance with all terms and conditions of the Agreement, and no Event of Default or event which, with the giving of notice of the passage of time, would constitute an Event of Default, has occurred and is continuing, (b) the financial statements and other information most recently provided to Agent and Lenders are correct, complete, and fairly present the financial condition of Borrower as at the date thereof and fairly present the results of the operations of Borrower for the period covered thereby, and that (c) there has been no material adverse change in the business, properties, or condition, financial or otherwise, of Borrower since the date of such financial statements or other information. 10. NO WAIVER OF DEFAULT. The execution of this Amendment 4 and the new Loan Documents shall not constitute a waiver of any default or Event of Default in the Agreement or any other Loan Document existing on the date hereof, nor shall it eliminate any right which Agent or Lenders may otherwise have to accelerate the indebtedness subject to the Agreement or exercise any other remedies by virtue of any default or Event of Default. 11. ESTOPPEL AND RELEASE. Borrower hereby acknowledges and agrees that, as of the date hereof, there exists no right of offset, defense, counterclaim, claim, or objection in favor of such party as against Agent and the Lenders with respect to the Revolving Credit Facility, or any aspect of the transactions contemplated thereby, or alternatively, that any such right of offset, defense, counterclaim, claim, or objection is hereby expressly waived. In connection with the foregoing, Borrower hereby releases and discharges Agent and the Lenders, their subsidiaries, affiliates, directors, officers, employees, attorneys, agents, successors, and assigns from any and all rights, claims, demands, actions, causes of action, suits, proceedings, agreements, contracts, judgments, damages, debts, duties, liabilities, or obligations, of any kind or character, including without limitation such claims and defenses as fraud, mistake, duress, and usury, whether in law or in equity, known or unknown, choate or inchoate, which it has had, now has, or hereafter may have, arising under or in any manner relating to, whether directly or indirectly, the Revolving Credit Facility, or any aspect of the transactions contemplated thereby from the beginning of time until the date hereof. 12. COMPLETE AGREEMENT; NO OTHER CONSIDERATION. This Amendment and the other new Loan Documents contain the final, complete, and exclusive expression of the understanding of the parties hereto with respect to the specific matters contained herein, and they supersede any prior negotiations or any prior or contemporaneous agreement or representation, oral or written, express or implied, by or between the parties related to the specific subject matter hereof. Without limiting the generality of the foregoing, there does not exist any consideration or inducement other than as stated herein for the execution, delivery, and performance by Borrower of this Amendment and the other new Loan Documents. 13. CONSULTATION WITH COUNSEL. Borrower has had the opportunity to consult with counsel of its own choosing, and have discussed with such counsel the provisions of this Amendment and the other new Loan Documents or have freely and voluntarily elected not to discuss such provisions with counsel. 14. COOPERATION, FURTHER ASSURANCES. Borrower agrees to cooperate with Agent and the Lenders so that the interests of Agent and the Lenders are protected and the intent of the Loan Documents and this Amendment can be effectuated. Borrower agrees to execute whatever further documents and to provide whatever further assurances Agent or the Lenders may reasonably request or 5 deem necessary to effectuate the terms of the Revolving Credit Facility and this Amendment. 15. COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be signed in original counterparts and by facsimile transmission of signed counterparts, each of which shall be deemed an original, in any number, no one of which need contain all of the signatures of the parties, and as many as such counterparts as shall together contain all of the signatures of the parties shall be deemed to constitute one and the same instrument. This Amendment shall become effective upon the receipt by Agent of original signed counterparts of this Amendment from each of the parties or telecopy confirmation of the signing of such counterparts by each of the parties hereto. 16. HEADINGS. The headings preceding the text of the paragraphs of this Amendment have been inserted solely for convenience of reference and shall neither constitute a part of this Amendment nor affect its meaning, interpretation, or effect. IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written. 6 SIGNATURE PAGE First Amendment to Credit Agreement Among Catalina Marketing Corporation, SunTrust Bank, Tampa Bay, as Agent, and the Lenders party thereto. CATALINA MARKETING CORPORATION, a Delaware corporation By:____________________________ Bruce Valentine Treasurer (SEAL) Address: 11300 9th Street North St. Petersburg, Florida 33716 Attn: Bruce Valentine Fax No. (813) 579-5297 Confirming Tel. No. (813) 579-5006 With a copy to: PAUL, HASTINGS, JANOFSKY & WALKE 399 Park Avenue New York, New York 10022 Fax No. (212) 319-4090 Confirming Tel. No. (212) 318-6521 Attn: Barry A. Brooks, Esq. 7 SIGNATURE PAGE First Amendment to Credit Agreement Among Catalina Marketing Corporation, SunTrust Bank, Tampa Bay, as Agent, and the Lenders party thereto. SUNTRUST BANK, TAMPA BAY, a Florida banking corporation, individually and as Agent By: ----------------------------- Frank A. Coe Vice President Address and Lending Office: 3601 34th Street North St. Petersburg, Florida 33713 Attn: Corporate Banking Division Fax No. (813) 892-4810 Confirming Tel. No. (813) 892-4954 Revolving Credit Commitment: $30,000,000.00 8 SIGNATURE PAGE First Amendment to Credit Agreement Among Catalina Marketing Corporation, SunTrust Bank, Tampa Bay, as Agent, and the Lenders party thereto. FLEET NATIONAL BANK, SUCCESSOR BY MERGER TO FLEET BANK OF MASSACHUSETTS, N.A., Lender By: ------------------------------ Name: Title: Address and Lending Office: Mail Code MAOFO320 75 State Street, 1 Federal Street Boston, Massachusetts 02110 Fax No. (617) 346-0689 Confirming Tel. No. (617) 346-0146 Attn: Thomas J. Bullard Revolving Credit Commitment: $10,000,000.00 EX-10.24 6 LEASE AGREEMENT 1 EXHIBIT 10.24 REALTY LEASE THIS REALTY LEASE ("Lease") is made and entered into as of September 5, 1996, by and between Interior Design Services, Inc., a Florida corporation ("Landlord") and Catalina Marketing Corporation, a Delaware corporation ("Tenant"). WITNESSETH: Landlord and Tenant hereby covenant and agree as follows: 1. Premises 1.1 Premises. Landlord owns real property and improvements located at 11200 9th Street North, St. Petersburg, Florida 33716 ("11200 Realty"), which includes a single story section of the building currently used as a warehouse consisting of approximately 54,859 rentable square feet ("Warehouse"). Upon and subject to the terms, covenants and conditions hereunder, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord approximately 20,500 rentable square feet on the west end of the Warehouse, as shown on the floorplan of the Warehouse attached hereto as Exhibit A and incorporated herein ("Premises"), together with the parking areas identified as "Tenant Parking" on Exhibit A. Tenant shall cooperate with Landlord in the use of such Tenant Parking areas so as to provide Landlord with unobstructed access to the Warehouse dock doors identified on Exhibit A. 1.2 Condition of the Premises. Tenant acknowledges that it has been given the opportunity to inspect the Premises prior to the Commencement Date (as defined in Section 2.1 below). Landlord leases the Premises to Tenant and Tenant accepts the Premises from Landlord on the Commencement Date in "as is" condition, without any representation or warranty as to any patent or latent defects or of habitability or fitness for a particular purpose. Notwithstanding the foregoing, Landlord shall be responsible for ensuring that the Premises comply with the requirements of the American with Disabilities Act, 42 U.S.C. 12101, except to the extent that any Tenant Improvement Work or Alterations (as those terms are hereinafter defined) made to the Premises by Tenant may initiate the need for such compliance, in which event, Tenant shall be responsible for such compliance. 2. Term 2.1 Term. This Lease term (the "Primary Term") shall commence on November 1, 1996 ("Commencement Date") and expire on November 30, 2003 ("Expiration Date"), unless the Term shall sooner terminate or be extended as hereinafter provided. 2.2 Early Occupancy. Tenant may occupy the Premises commencing September 15, 1996 ("Early Occupancy Period") provided that during the Early Occupancy Period, Tenant shall perform all of its obligations set forth in this Lease, but Tenant's obligation to pay Monthly Rent (as defined in Section 3.1 below) shall not commence until November 1, 1996. 2.3 Tenant's Option to Renew. Tenant shall have the option to renew this Lease for one additional term of five (5) years commencing at the end of the Primary Term, which option Tenant may only exercise by giving Landlord written notice not less than one hundred eighty (180) days prior to the expiration of the Primary Term, and provided no event of default under Article 17 has occurred and is continuing on or after the date of Tenant's notice. Such renewal term shall be on the same terms and conditions as the Primary Term, except that Monthly Rent payable during 2 the renewal term shall be as follows:
================================================================================ Year Rent - -------------------------------------------------------------------------------- December 1, 2003 - November 30, 2004 $7,109.94 - -------------------------------------------------------------------------------- December 1, 2004 - November 30, 2005 $7,216.59 - -------------------------------------------------------------------------------- December 1, 2005 - November 30, 2006 $7,324.84 - -------------------------------------------------------------------------------- December 1, 2006 - November 30, 2007 $7,434.72 - -------------------------------------------------------------------------------- December 1, 2007 - November 30, 2008 $7,546.24 ================================================================================
The terms "Term" or "Term of this Lease," as used in this Lease, shall include the Primary Term as well as the renewal term, if exercised. 2.4 Tenant's Expansion Option. Tenant shall have the Right of First Opportunity to Lease on any available space in the Warehouse ("Additional Space"). When the Additional Space becomes available, Landlord shall notify Tenant in writing of such availability and Tenant shall be granted ten (10) business days in order to accept or reject the offer in writing. Failure to respond within ten (10) business days shall be deemed a rejection of such Additional Space. If Tenant rejects such Additional Space, Landlord shall then be free to lease such Additional Space to others on such terms and conditions as Landlord may chose, and Tenant shall have no further rights with respect to such Additional Space. As to any Additional Space, if warehouse space ("Additional Warehouse Space"), during the first twelve (12) months for which any such Additional Warehouse Space is included within this Lease ("Initial Period For Additional Warehouse Space"), the rental rate to be paid for the Additional Warehouse Space ("Additional Warehouse Space Rental Rate") shall be the then current per square foot rate paid by Tenant for the warehouse portion of the Premises under this Lease,which rate shall then subsequently increase annually by one and one-half percent (1 1/2%) from and after the conclusion of the Initial Period For Additional Warehouse Space. As to any Additional Space, if office space ("Additional Office Space"), during the first twelve (12) months for which any such Additional Office Space is included within this Lease ("Initial Period For Additional Office Space"), the rental rate to be paid for the Additional Office Space ("Additional Office Space Rental Rate") shall be the then current market rate per square foot for comparable office space situated in St. Petersburg, Florida, which rate shall then subsequently increase annually by one and one-half percent (1 1/2%) from and after the conclusion of the Initial Period For Additional Office Space. The lease term of the Additional Space shall be co-terminous with the Term and Tenant shall lease the Additional Space in as-is condition. 3. Rent 3.1 From and after the Commencement Date, Tenant shall pay to Landlord monthly base rent ("Monthly Rent") as follows: 2 3
============================================================================================================ Year Rent - ------------------------------------------------------------------------------------------------------------ November 1, 1996 - November 30, 1997 $6,406.25 - ------------------------------------------------------------------------------------------------------------ December 1, 1997 - November 30, 1998 $6,502.34 - ------------------------------------------------------------------------------------------------------------ December 1, 1998 - November 30, 1999 $6,599.88 - ------------------------------------------------------------------------------------------------------------ December 1, 1999 - November 30, 2000 $6,698.88 - ------------------------------------------------------------------------------------------------------------ December 1, 2000 - November 30, 2001 $6,799.36 - ------------------------------------------------------------------------------------------------------------ December 1, 2001 - November 30, 2002 $6,901.35 - ------------------------------------------------------------------------------------------------------------ December 1, 2002 - November 30, 2003 $7,004.87 ============================================================================================================
Monthly Rent shall be payable on or before the first day of each calendar month, in advance, at the address specified for Landlord in Section 21 below, or such other place as Landlord shall designate, without any prior demand therefor and without any abatement, deduction or setoff whatsoever except to the extent of Landlord's breach of its obligations hereunder. In addition, Tenant shall pay Landlord all state and local sales taxes and surtaxes payable with respect to rents, which shall be paid together with each installment of Monthly Rent. 3.2 Notwithstanding any other provisions of this Lease, if Tenant shall fail to pay any Monthly Rent by the date five (5) days after the date it is due and payable, such unpaid amount shall be subject to a late payment charge equal to five percent (5%) of such unpaid amount in each instance to cover Landlord's additional administrative costs resulting from Tenant's failure. Such late payment charge has been agreed upon by Landlord and Tenant, after negotiation, as a reasonable estimate of the additional administrative costs and detriment to Landlord's ability to meet its own obligations relating to the Warehouse in a timely manner that will be incurred by Landlord as a result of any such failure by Tenant, the actual cost thereof in each instance being extremely difficult, if not impossible, to determine. Such late payment charge shall constitute liquidated damages to compensate Landlord for its damages resulting from such failure to pay and shall be paid to Landlord together with such unpaid amounts; provided, however, that the payment of such charges shall not constitute a waiver of any default by Tenant hereunder. 3.3 Notwithstanding any other provisions of this Lease, any installment of Monthly Rent not paid to Landlord by the date five (5) days after the date when due hereunder, shall bear interest from the date due or from the date of expenditure by Landlord for the account of Tenant, until the same have been fully paid, at a rate ("Default Rate") equal to the lesser of (a) two percent (2%) above the Prime Rate of interest published in the Wall Street Journal, or (b) the highest rate permitted by law. The payment of such interest shall not constitute a waiver of any default by Tenant hereunder. 4. Reservation of Rights 4.1 Landlord reserves the right, from time to time, to grant such easements, rights and dedications as Landlord deems necessary or desirable, and to cause the recordation of parcel maps and covenants, conditions and restrictions affecting the Premises, provided they do not unreasonably interfere with the use and enjoyment of the Premises by Tenant. At Landlord's 3 4 request, Tenant shall join in the execution of any such documents. The Premises may be known by any name that Landlord may choose, which name may be changed from time to time in Landlord's sole discretion. 4.2 Tenant hereby acknowledges that Landlord shall have no obligation whatsoever to provide guard services or other security measures for the benefit of the Premises or the Warehouse. Tenant assumes all responsibility for the protection of Tenant, its employees, suppliers, shippers, customers and invitees and the property of Tenant and of Tenant's employees, suppliers, shippers, customers and invitees from acts of third parties. Nothing herein contained shall prevent Landlord, at Landlord's sole option, from providing security protection for the Premises or any part thereof, and in such event Tenant shall comply with Landlord's security procedures. 5. Conduct of Business by Tenant 5.1 During the Term, Tenant shall use and occupy the Premises solely for general business office and computer service activities and storage related to such permitted use. Tenant shall not use the Premises for any other use or uses without Landlord's prior written consent, which may be withheld in Landlord's sole and absolute discretion. 5.2 Tenant shall not use or occupy, or permit the use or occupancy of, the Premises or any part thereof for any use other than the use specifically set forth in Section 5.1, or in any manner that, in Landlord's judgment, would adversely affect or interfere with (a) any services required to be furnished by Landlord to Tenant, or (b) the proper and economical rendition of any such service. 5.3 Tenant will not cause any Hazardous Substance (as defined in this Section 5.3) to be brought, kept or stored on or about the Premises that violates any applicable law, rule, regulation or ordinance, and Tenant will not engage in or permit any other person to engage in any activity, operation or business upon the Premises that involves the use, generation, manufacture, refining, transportation, treatment, storage, handling or disposal of any Hazardous Substance that would or could result in Tenant, Landlord or the Premises to be in violation of any law, statute, ordinance or regulation or rule law pertaining to Hazardous Substances, health, industrial hygiene or the environment. Tenant shall be liable for all clean-up of the Premises due to any violation of this Section 5.3 by Tenant. "Hazardous Substance" shall include, without limitation, those substances, materials and wastes that are or become regulated under applicable local, state or federal law, or the United States government, or which are classified as hazardous or toxic under federal, state or local laws or regulations. Tenant shall indemnify, defend and hold harmless Landlord of, from and against, any and all loss, cost, liability, claim, cause of action, right of action, damage and expense, including, without limitation, penalties, fines and counsel fees, arising from or related to Tenant's violation of this Section 5.3, which indemnity shall survive the expiration or sooner termination of this Lease. 6. Improvements to the Premises 6.1 Tenant shall have the right to perform (or cause to be performed), at its sole cost and expense, the work outlined and generally described in Exhibit B ("Tenant Improvement Work"). Landlord shall have the right to approve the plans and specifications for the Tenant Improvement Work which approval shall not be arbitrarily or unreasonably withheld. Tenant shall 4 5 obtain all required permits and approvals, and provide Landlord with all copies thereof prior to commencement of any Tenant Improvement Work. Landlord shall not arbitrarily or unreasonably withhold or delay approval of any nonstructural, interior alterations, revisions or supplements to the "Tenant Improvement Work" provided that Tenant complies with the requirement of Section 7 in all respects. 7. Alterations and Tenant's Property 7.1 Tenant shall make no alterations, installations, additions or improvements whether structural or non-structural, including without limitation Tenant's Improvement Work (collectively "Alterations") in or to the Premises without Landlord's prior written consent, which shall not be unreasonably withheld or delayed. Tenant shall submit such information as Landlord may require, including without limitation, (a) plans and specifications for the Alterations, (b) permits, licenses and bonds and (c) evidence of insurance coverage in such types and amounts and from such insurers as Landlord deems satisfactory. All Alterations shall be done at Tenant's expense, in compliance with all applicable laws, regulations and permits as more fully described in Section 10.1 below, at such times and in such manner as will not unnecessarily interfere with activities on the adjacent property, and only by such contractors or mechanics as are approved in advance by Landlord, which approval will not be unreasonably withheld. In no event shall any Alterations affect the structure of the Premises or its exterior appearance, except as approved in writing by Landlord. 7.2 All appurtenances, fixtures, improvements, additions and other property attached to or installed in the Premises, whether by Landlord or by or on behalf of Tenant, and whether at Landlord's expense or Tenant's expense, or at the joint expense of Landlord and Tenant, shall be and remain the property of Landlord. Any furnishings and personal property installed in the Premises that are removable without material damage to the Premises, whether the property of Tenant or leased by Tenant, are herein sometimes called "Tenant's Property." Any replacements of any property of Landlord, whether made at Tenant's expense or otherwise, shall be and remain the property of Landlord. Tenant shall not install any machines or equipment that would compromise the structural integrity of the Premises without Landlord's prior written consent, which consent may be conditioned upon such terms as Landlord may require. 7.3 Any of Tenant's Property remaining on the Premises at the expiration or sooner termination of the Term shall be removed by Tenant at Tenant's cost and expense, and Tenant shall, at its cost and expense, repair any damage to the Premises caused by such removal. Any of Tenant's Property not removed from the Premises prior to the expiration or sooner termination of the Term shall, at Landlord's option, become the property of Landlord, or Landlord may remove such Tenant's Property, and Tenant shall pay to Landlord Landlord's cost of removal with ten (10) days after delivery of a bill therefor. 7.4 Landlord shall have the right at all times to post and keep posted on the premises any notices permitted or required by law, or that Landlord shall deem proper, for the protection of Landlord, the Premises, and any other party having an interest therein, from construction liens, and Tenant shall give to Landlord at least ten (10) business days' prior notice of commencement of any construction on the Premises, including in connection with any Alteration or otherwise. 8. Repairs 5 6 8.1 Tenant, at Tenant's cost and expense, shall make all repairs and replacements as and when Landlord deems necessary to preserve in good working order and condition the Premises and every part thereof except for the parts of the Premises Landlord must repair under Section 8.3 below. Without limiting the foregoing and to the extent that the following are exclusive to Tenant and are not shared with Landlord, any other tenant or any third party, Tenant shall be responsible for windows, doors, interior walls, and plumbing, electrical, sprinkler, security, lighting (including light bulb replacement), heating, ventilating and air conditioning systems. If any of the foregoing are shared with Landlord, or any other tenant or third party, Tenant shall only be responsible for its proportionate share of such cost and expense unless such cost and expense is a) attributable to Tenant's negligent or intentional act, in which case Tenant shall be solely liable, or b) attributable to the negligent or intentional act of Landlord, other tenants or third parties (excluding agents, customers, employees, principals, consultants, assigns, subtenants or invitees of Tenant), in which case Tenant shall not be liable for any such cost or expense. 8.2 All repairs and replacements made by or on behalf of Tenant or any person claiming through or under Tenant shall be made and performed (a) at Tenant's cost and expense and at such time and in such manner as Landlord may designate, (b) by contractors or mechanics approved by Landlord, (c) so that same shall be at least equal in quality, value and utility to the original work or installation, and in accordance with all applicable laws and regulations of governmental authorities having jurisdiction over the Premises. Landlord shall endeavor to respond to any request for approval complying with the foregoing requirements within five (5) business days after receipt of the same. 8.3 Landlord, at Landlord's cost and expense, shall make all repairs and replacements as and when Landlord reasonably deems necessary to the foundation, exterior walls, structural members and roof (except to the extent that repairs to the roof may be attributable to Tenant Improvement Work or Alterations) of the Premises, as well as the parking lots, walkways, driveways, landscaping, fences and signs. 8.4 Landlord, at its sole cost and expense, shall be responsible for all customary and normal landscaping services for the Premises. 9. Liens 9.1 All work performed by Tenant on the Premises prior to the Commencement Date and during the Term shall be performed without cost, expense or liability of any nature to Landlord or the Warehouse, and all costs and expenses incurred in connection therewith shall be paid for entirely by Tenant. Tenant shall and does hereby indemnify and hold harmless Landlord and the Warehouse from and against any lien or claim of lien against the fee title to the Warehouse arising out of any work performed by or for Tenant or any party holding under Tenant, or otherwise arising out of the exercise of Tenant's rights under this Lease. Without limiting the generality of the foregoing, neither the Tenant nor anyone claiming by, through or under Tenant, including without limitation contractors, subcontractors, materialmen, mechanics and laborers, shall have any right to file or place any construction lien of any sort whatsoever upon the interest of Landlord in the Warehouse, and, on the contrary, any such lien is hereby specifically prohibited. All parties with whom the Tenant may deal are hereby put on notice that the Tenant has no power to subject the interest of the Landlord in the Warehouse to any claim or lien of any kind or character, and all such persons so dealing with Tenant must look solely to the Tenant for payment, and not to the 6 7 Landlord's interest in the Warehouse or any other asset of Landlord. The foregoing prohibition shall be incorporated in a short form lease between the parties hereto which shall be executed contemporaneously herewith and may be recorded at the option of Landlord or Tenant. Tenant shall forthwith cause any lien filed against the Warehouse to be immediately canceled, released and extinguished, and Tenant shall and does hereby indemnify Landlord against any such lien and shall and does hereby agree to pay any and all costs, charges and expenses, including reasonable attorneys' fees, incurred in connection with the prosecution or defense of any suit in connection therewith. If Tenant shall not, within ten (10) days following the imposition of any such lien, cause same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right but not the obligation to cause such lien to be released by such means as it shall deem proper, including without limitation payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith shall be payable to it by Tenant with interest at the Default Rate from the date of payment and shall be due and payable to Landlord by Tenant on demand. 10. Compliance with Laws and Insurance Requirements 10.1 In addition and not in derogation of Tenant's obligations under Section 5.3 above, Tenant, at Tenant's cost and expense, shall comply with all laws, codes, orders and regulations of federal, state, county and municipal authorities, and with all directions, pursuant to law, of all public officers, that shall impose any duty upon Landlord or Tenant with respect to the Premises or the particular use or occupancy thereof by Tenant. Any Alteration or other work or installation made or performed by or on behalf of Tenant or any person claiming through or under Tenant pursuant to the provisions of this Article 10 shall be made in conformity with, and subject to the provisions of Section 7.1. In the event and to the extent that any such requisite compliance does not arise from or result from any particular use of the Premises by Tenant, AND the said alteration or other work or installation ("Work") necessary to achieve and satisfy such requisite compliance has a projected useful life greater than the then remaining Term of the Lease (not including the renewal option), ("Remaining Term"), THEN the Tenant shall be obligated to pay only a portion of the cost of the Work, which portion shall be that fraction of which the numerator is the number of months in the Remaining Term and the denominator is the projected useful life of the Work, in months. 10.2 Tenant shall not do anything, or permit anything to be done, in or about the Premises that shall: (a) invalidate or be in conflict with the provisions of any fire or other insurance policies covering the Premises or any property located therein, (b) result in a refusal by fire insurance companies of good standing to insure the Premises or any such property in amounts reasonably satisfactory to Landlord, (c) subject Landlord to any liability or responsibility for injury to any person or property by reason of any business operation being conducted in or about the Premises, or (d) be in violation of any certificate of occupancy for the Warehouse. Tenant, at Tenant's sole expense, shall comply with all rules, orders, regulations and requirements of its insurance policy. If Tenant's particular or peculiar use of the Premises causes any increase in the fire insurance rates applicable to the Premises or property located therein on the Commencement Date or at any time thereafter, Tenant shall be responsible for such increase and shall pay the same to Landlord upon request. 11. Subordination 11.1 Without the necessity of any additional document being executed by Tenant 7 8 for the purpose of effecting a subordination, Tenant agrees that this Lease shall be subject and subordinate at all times to (a) all ground leases or underlying leases that may now exist or hereafter be executed affecting the Premises, and (b) the lien of any mortgage or deed of trust that may now exist or hereafter be executed in any amount for which the Premises, any ground leases or underlying leases, or Landlord's interest or estate in any of such items is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated to this Lease any such ground leases or underlying leases or any such liens. If any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination to this Lease of any ground lease, underlying lease or lien, attorn to and become the Tenant of the successor in interest to Landlord at the option of such successor in interest. Tenant covenants and agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord and not reasonably objected to by legal counsel for Tenant, any additional documents evidencing the subordination of this Lease with respect to any such ground leases or underlying leases or the lien of any such mortgage or deed of trust. Notwithstanding the foregoing, any subordination of this Lease shall be conditioned upon Tenant's being furnished a nondisturbance agreement in connection therewith, in form and content reasonably satisfactory to legal counsel for Tenant. 12. Right to Cure 12.1 Landlord shall not be deemed to be in default in the performance of any obligation required to be performed by it hereunder unless and until it has failed to perform such obligation within thirty (30) calendar days after written notice by Tenant to Landlord specifying the nature of Landlord's failure to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be deemed to be in default if it shall commence such performance within such thirty (30) day period and thereafter shall diligently prosecute the same to completion. All rights to cure provided to Landlord under this Section 12.1 shall also be accorded to any mortgagee or beneficiary under a deed of trust encumbering the Premises. Except to the extent resulting from the act or neglect of Landlord, Landlord shall not be liable for any injury or damage to persons or property resulting from loss, theft, fire, explosion, falling plaster, cessation or variation or shortage or interruption of services or utilities, steam, gas, electricity, earthquake, acts of god, rain or water or dampness from any source or any other cause whatsoever. Without limiting the generality of the foregoing, in no event shall Landlord be liable for damages by reason of lost profits, business interruption or other consequential damages. 8 9 13. Destruction 13.1 If the Premises shall be damaged by fire (or by other casualty insured against by Landlord's fire and extended coverage insurance policy covering the Premises), and if Tenant shall give prompt notice to Landlord of such damage, Landlord, at Landlord's expense, shall repair such damage and restore the Premises to substantially the condition it was in prior to such fire or casualty; provided, however, that Landlord shall have no obligation to repair any damage to or to replace Tenant's Property, Alterations or any other property or effects of Tenant. Except as otherwise provided in this Article 13, if the entire Premises shall be rendered untenantable by reason of any such damage, Monthly Rent shall abate for the period from the date of such damage to the date when such damage to the Premises shall have been repaired. If only a part of the Premises shall be rendered untenantable, Monthly Rent shall abate for such period in the proportion that the area of the part of the premises so rendered untenantable bears to the total area of the Premises; provided however, that if the part of the Premises which had not been rendered untenantable is considered by Tenant to be inadequate or insufficient for efficient use by Tenant, and the area rendered untenantable cannot reasonably be restored by Landlord within ninety (90) days after the occurrence of such fire or casualty to substantially the same condition it was in prior to such fire or casualty then Tenant may terminate this Lease immediately upon written notice to Landlord. Notwithstanding the foregoing, if, prior to the date when all of such damage shall have been repaired, any part of the Premises so damaged shall be rendered tenantable and shall be used or occupied by Tenant or any person or persons claiming through or under Tenant, then the amount by which Monthly Rent shall abate shall be equitably apportioned for the period from the date of any such use or occupancy to the date when all such damage shall have been repaired. 13.2 Notwithstanding the provisions of Section 13.2, if during the Term, the Premises (whether or not the Premises shall have been damaged or rendered untenantable) shall be so damaged by fire or other casualty that, in Landlord's opinion, it is impractical to restore the Premises, then, in any of such events, Landlord, at Landlord's option, may give to Tenant, within sixty (60) days after such fire or other casualty, thirty (30) days' notice of termination of this Lease and, in the event such notice is given, this Lease and the Term shall terminate effective upon the date of the occurrence of such casualty with the same effect as if such date were the Expiration Date; and Monthly Rent shall be apportioned as of such date and any prepaid portion of Monthly Rent for any period after such date shall be refunded by Landlord to Tenant, provided Tenant is not otherwise in default hereunder. 13.3 Notwithstanding anything contained in this Article 13 to the contrary, in no event shall Landlord be required to spend for any repair, replacement or reconstruction of the Premises an amount greater than the insurance proceeds actually received by Landlord as a result of the fire or other casualty causing such loss, damage or destruction, plus the amount of any deductible. 13.4 Nothing contained in this Lease shall relieve Tenant of any liability to Landlord or to its insurance carriers that Tenant may have under law or under the provisions of this Lease in connection with any damage to the Premises or the Warehouse by fire or other casualty. 13.5 Notwithstanding the provisions of Section 13.1, if any such damage is due to the fault or neglect of Tenant, any person claiming through or under Tenant, or any of their employees, suppliers, shippers, customers or invitees, then there shall be no abatement of Monthly Rent by reason of such damage. 9 10 14. Eminent Domain 14.1 If all or substantially all of the Premises or the Warehouse is damaged, condemned or taken in any manner for public or quasi-public use, including but not limited to a transfer, conveyance or assignment made in anticipation of or in lieu thereof, either temporarily or permanently (a "Taking"), this Lease shall automatically terminate as of the earlier of the date of the vesting of title or the date of dispossession of Tenant as a result of such Taking (the "Taking Date"). If less than all or substantially all of the Premises is so condemned or taken, this Lease shall automatically terminate only as to the portion of the Premises so taken as of the Taking Date provided, however, if a Taking would require, in the opinion of Landlord, a substantial alteration or reconstruction of the remaining portions of the Premises or the Warehouse, this Lease may be terminated by Landlord, as of the Taking Date, by written notice to Tenant within sixty (60) days following notice to Landlord of the Taking Date; provided further that if the portion of the Premises remaining after said taking is, in the reasonable opinion of Tenant, insufficient or inadequate for continued use by Tenant, Tenant may terminate this Lease on notice to the Landlord. 14.2 Landlord shall be entitled to the entire award in the Taking, including, without limitation, any award made for the value of or damages to the leasehold estate created by this Lease. No award for any partial or entire Taking shall be apportioned, and Tenant hereby assigns to Landlord any award that may be made in connection with any such Taking, whether for the value of the property taken or for damages, together with any and all rights of Tenant now or hereafter arising in or to same or any part thereof; provided, however, that nothing contained herein shall be deemed to give Landlord any interest in, or to require Tenant to assign to Landlord, any award made to Tenant specifically for its relocation expenses, the taking of personal property and fixtures belonging to Tenant, or the interruption of or damage to Tenant's business if such award is made separately to Tenant and not as part of the damages recoverable by Landlord. Tenant shall fully cooperate with and assist Landlord in establishing and pursuing any claims Landlord may have relating to any Taking, and without limiting the foregoing, (i) Tenant shall upon Landlord's request file a "Disclaimer of Interest" in any litigation pertaining to a Taking, (ii) Tenant shall not assert any defenses or file any motions, including but not limited to, motions to dismiss, or counterclaims, in any such litigation, and (iii) Tenant shall be bound by any negotiations for the settlement, pre-suit or otherwise, of any litigation, which negotiations shall be conducted by Landlord on behalf of both Landlord and Tenant, and shall be binding on Tenant. 14.3 In the event of a partial Taking that does not result in a termination of this Lease as to the entire Premises pursuant to Section 14.1, the Monthly Rent shall abate in proportion to the portion of the Premises taken by such condemnation or other taking. 14.4 If all or any portion of the Premises is taken for a limited period of time, this Lease shall remain in full force and effect and Tenant shall continue to perform all terms, conditions and covenants of this Lease; provided, however, the Monthly Rent shall abate during such limited period in proportion to the portion of the Premises that is rendered untenantable and unusable as a result of such Taking. Landlord shall be entitled to receive the entire award made in connection with any such temporary Taking, whether for the value of the property taken or for damages. Provided however that all costs incurred by Tenant in obtaining, relocating to, additional charges, vacating, and moving back to the Premises during such limited period of time, are to be paid by Landlord. 10 11 14.5 Landlord may, without any obligation to Tenant, agree to sell and/or convey to a condemnor the Premises, or any portion thereof sought by the condemnor, free from this Lease and the rights of Tenant hereunder, without first requiring that any action or proceeding be instituted or, if instituted, pursued to a judgment. 15. Assignment and Subletting 15.1 Tenant shall not directly or indirectly, voluntarily or by operation of law, sell, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of the Premises or Tenant's leasehold estate hereunder (collectively, "Assignment"), or permit the Premises to be occupied by anyone other than Tenant or sublet the Premises or any portion thereof (collectively, "Sublease") without Landlord's prior written consent in each instance, which consent shall not be unreasonably withheld; provided however, that any such transaction between Tenant and any entity controlling, controlled by, or under common control with Tenant shall not constitute such prohibited assignment or sublease. 15.2 If Tenant desires at any time to enter into an Assignment of this Lease or a Sublease of the Premises or any portion thereof, it shall first give written notice to Landlord of its desire to do so, which notice shall contain (a) the name of the proposed assignee, subtenant or occupant, (b) the nature of the proposed assignee's, subtenant's or occupant's business to be carried on in the Premises, (c) the terms and provisions of the proposed Assignment or Sublease, and (d) such financial information as Landlord may reasonably request concerning the proposed assignee, subtenant or occupant. Tenant shall reimburse Landlord for Landlord's reasonable counsel fees incurred in connection with the processing and documentation of any requested Assignment of this Lease or Sublease of the Premises. 15.3 No consent by Landlord to any Assignment or Sublease by Tenant shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after the Assignment or Sublease. The consent by Landlord to any Assignment or Sublease shall not relieve Tenant of the obligation to obtain Landlord's express written consent to any other Assignment or Sublease. Any Assignment or Sublease that is not in compliance with this Article 15 shall be void and, at the option of Landlord, shall constitute a material default by Tenant under this Lease. The acceptance of Monthly Rent by Landlord from a proposed assignee or sublessee shall not constitute the consent by Landlord to such Assignment or Sublease. 15.4 Any sale or other transfer, including transfer by consolidation, merger or reorganization, of a majority of the voting stock of Tenant, if Tenant is a corporation, or any sale or other transfer of a majority of the partnership interests in Tenant, if Tenant is a partnership, shall be an Assignment for purposes of this Article 15. As used in this Section 15.4, the term "Tenant" shall also mean any entity that has guaranteed Tenant's obligations under this Lease, and the prohibition hereof shall be applicable to any sales or transfers of the stock or partnership interests of said guarantor. 15.5 Each assignee, sublessee, or other transferee, shall assume, as provided in this Section 15.5, all obligations of Tenant under this Lease and shall be and remain liable jointly and severally with Tenant for the payment of Monthly Rent, and for the performance of all the terms, covenants, conditions and agreements herein contained on Tenant's part to be performed for the Term; provided, however, that the assignee, sublessee, or other transferee shall be liable to Landlord for rent only in the amount set forth in the Assignment or Sublease. No Assignment shall 11 12 be binding on Landlord unless the assignee or Tenant shall deliver to Landlord a counterpart of the Assignment and an instrument that contains a covenant of assumption by the assignee satisfactory in substance and form to Landlord, consistent with the requirements of this Section 15.5, but the failure or refusal of the assignee to execute such instrument of assumption shall not release or discharge the assignee from its liability as set forth above. 16. Utilities 16.1 Tenant shall pay for all electricity (to be separately metered at Landlord's cost), telephone and trash removal and janitorial services supplied to the Premises. All such utilities shall be separately metered and Tenant shall make such payments when due directly to the utility company providing such service. Tenant shall have all utility bills for services provided under this Section 16.1 transferred to its name prior to taking occupancy of the Premises. Landlord shall be responsible for water and sanitary sewer charges related to the Premises. 16.2 If any governmental entity promulgates or revises any statute, ordinance or building, fire or other code or imposes mandatory or voluntary controls or guidelines on Landlord or the Premises or any part thereof, relating to the use or conservation of energy, water, gas, light or electricity or the reduction of automobile or other emissions or the provision of any other utility or service provided with respect to this Lease, or in the event Landlord is required to make alterations to the Premises or any other part of the Premises in order to comply with such mandatory or voluntary controls or guidelines, Landlord may, in its sole discretion, require Tenant to comply with such mandatory or voluntary controls or guidelines or Landlord may, in its sole discretion, make such alterations to the Premises. The portion of the costs incurred by Landlord in connection with such laws, ordinances, guidelines or controls that is attributable to the Premises, shall be amortized over the useful life of such alterations, and Tenant shall pay such amortization during the Term as additional rent hereunder. Such compliance and the making of such alterations shall in no event entitle Tenant to any damages, relieve Tenant of the obligation to pay the full Monthly Rent reserved hereunder or constitute or be construed as a constructive or other eviction of Tenant. 17. Default 17.1 The failure of Tenant to perform or observe any term, covenant, condition or representation made under this Lease shall constitute a default hereunder by Tenant upon the expiration of the appropriate grace period hereinafter provided. Tenant shall have a period of five (5) business days after notice of nonpayment to cure any default in the payment of Monthly Rent, provided that after Landlord has given two (2) such notices to Tenant in any twelve (12) month period, Tenant shall only have a period of ten (10) days after the due date to cure any such failure, without any requirement of notice from Landlord to Tenant of such failure; provided, however, that the obligation of Tenant to pay a late charge pursuant to Section 3.2 or interest pursuant to Section 3.3 shall commence as of the date ten (10) days after the due date of the Monthly Rent. Tenant shall have a period of thirty (30) days from the date of written notice from Landlord within which to cure any other default under this Lease; provided, however, that with respect to any default other than the payment of Monthly Rent that cannot reasonably be cured within thirty (30) days, the default shall not be deemed to be uncured if Tenant promptly commences to cure within thirty (30) days from Landlord's notice and continues to prosecute diligently the curing thereof to completion within a reasonable time. 17.2 Upon the occurrence of a default by Tenant that is not cured by Tenant 12 13 within the grace periods specified in Section 17.1 hereof, Landlord shall have the following rights and remedies in addition to all other rights and remedies available to Landlord at law or in equity: (a) The right to accelerate all Monthly Rent due under the Lease for the remainder of the Term and to recover from Tenant the following: (i) all unpaid Monthly Rent which had been earned at the time of such acceleration; (ii) the unpaid Monthly Rent which would have been earned after such acceleration until the time of entry of judgment; (iii) the worth at the time of award of the amount of Monthly Rent for the balance of the Term. The "worth at the time of award" of the amounts referred to in this Section 17.2(a) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of Atlanta at the time of award plus one percent (1%); and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom. (b) The right to continue this Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover Monthly Rent as it becomes due, for as long as Landlord does not terminate Tenant's right to possession. Acts of maintenance or preservation, efforts to relet the Premises or the appointment of a receiver upon Landlord's initiative to protect its interest under the Lease shall not constitute a termination of Tenant's right to possession. (c) The right to terminate this lease by giving notice to Tenant in accordance with applicable law without waiving any right to damages for breach of this Lease. (d) The right and power to re-rent and lease ("New Lease") the Premises or any part thereof for such term or terms (which may extend beyond the Term) and at such rent and such other terms as Landlord can reasonably obtain, with the right to make alterations in and repairs to the Premises. Upon each such subletting, Tenant shall be immediately liable for payment to Landlord of any monthly deficiency between the monthly rental payable hereunder and the rent to be received by Landlord pursuant to the New Lease, in addition to the cost of such re-letting and such alterations and repairs incurred by Landlord. No taking possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate this Lease unless a written notice of such intention is given to Tenant. Notwithstanding any such re- letting, Landlord may at any time thereafter elect to terminate this Lease for such previous breach. 18. Insolvency or Bankruptcy 18.1 The appointment of a receiver to take possession of all or substantially all of the assets of Tenant, which if involuntary is not dismissed within thirty (30) days after the commencement thereof, or an assignment by Tenant for the benefit of creditors, or any action 13 14 voluntarily taken by or instituted against Tenant under any insolvency, bankruptcy, reorganization, moratorium or other debtor relief act or statute, whether now existing or hereafter amended or enacted, or if Tenant shall admit in writing its inability to pay its debts or shall generally not be paying its debts as they mature, shall at Landlord's option constitute a breach of this Lease by Tenant. Upon the happening of any such event or at any time thereafter, this Lease shall terminate five (5) days after written notice of termination from Landlord to Tenant. In no event shall this Lease be assigned or assignable by operation of law or by voluntary or involuntary bankruptcy proceedings or otherwise, and in no event shall this Lease or any rights or privileges hereunder be an asset of Tenant under any bankruptcy, insolvency, reorganization or other debtor relief proceedings. 19. Fees and Expenses; Indemnity 19.1 If Tenant shall default in the performance of its obligations under this Lease, Landlord, at any time thereafter and without notice, may remedy such default for Tenant's account and at Tenant's expense, without thereby waiving any other right or remedies of Landlord with respect to such default. 19.2 Tenant shall indemnify, defend and hold harmless Landlord and Landlord's agents of, from and against any and all Claims incurred in connection with or arising from any cause whatsoever in, on or about the Premises and Tenant Parking, including, without limiting the generality of the foregoing, (a) any default by Tenant in the observance or performance of any of the terms, covenants or conditions of this Lease on Tenant's part to be observed or performed, (b) the use or occupancy or manner of use or occupancy of the Premises by Tenant or any person claiming through or under Tenant, (c) the condition of any portion of the Premises that is the responsibility of Tenant or any occurrence or happening on the Premises from any cause whatsoever, or (d) any act, omission or negligence of Tenant or any person claiming through or under Tenant, or of the employees, suppliers, shoppers, customers or invitees of Tenant or any such person, in, on or about the Premises or the Warehouse, whether prior to, during, or after the expiration of, the Term including, without limitation, any act, omission or negligence in the making or performing of any Alterations, all of the foregoing except to the extent caused by the act or negligence of Landlord or any third party (excluding agents, customers, employees, principals, consultants, assigns, subtenants or invitees of Tenant); and Landlord shall otherwise indemnify, defend and hold harmless Tenant from all such claims. 19.3 Landlord shall not be responsible for or liable to Tenant for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying adjoining premises (other than Landlord) or any part of the premises adjacent to or connected with the Premises or any other part of the Premises or for any loss or damage resulting to Tenant or its property from burst, stopped or leaking water, gas, sewer or steam pipes or for any damage to or loss of property within the Premises from any causes whatsoever, including theft, all of the foregoing except to the extent caused by the act or negligence of Landlord. 19.4 Except where a longer or shorter period is specifically provided for in this Lease for a particular expenditure, Tenant shall pay to Landlord, within ten (10) days after delivery by Landlord to Tenant of bills or statements therefor: (a) sums equal to all expenditures made and monetary obligations incurred by Landlord including, without limitation, expenditures made and obligations incurred for reasonable counsel fees, in connection with the remedying by Landlord for Tenant's account pursuant to the provisions of Section 19.1; (b) sums equal to all Claims referred to 14 15 in Section 19.2; and (c) sums equal to all expenditures made and monetary obligations incurred by Landlord, including, without limitation, expenditures made and obligations incurred for reasonable counsel fees, in collecting or attempting to collect the Monthly Rent, or any other sum of money accruing under this Lease or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law. Tenant's obligations under this Section 19.4 shall survive the expiration or sooner termination of the Term. 20. Access to Premises 20.1 Landlord reserves and shall have the right at all times upon twenty-four (24) hours written notice and during regular business hours (except in case of emergency) to enter the Premises to inspect same, to show the Premises to prospective purchasers, mortgagees or tenants, and to alter, improve or repair the Premises and any other portion of the Premises, without abatement of Monthly Rent, and may for that purpose erect, use and maintain scaffolding, pipes, conduits and other necessary structures in and through the Premises where reasonably required by the character of the work to be performed, provided that the entrance to the Premises shall not be blocked thereby, and further provided that the business of Tenant and the use and enjoyment of the Premises by Tenant shall not be interfered with unreasonably. Tenant otherwise hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises or any other loss occasioned thereby unless caused by Landlord's intentional acts. Tenant will provide Landlord with a contact person or persons who, on behalf of Tenant, will be available on a twenty-four (24) hour, seven (7) day per week basis, to unlock the Premises to allow Landlord access thereto within thirty (30) minutes in the event of an emergency. 21. Notices 21.1 Except as otherwise expressly provided in this Lease, any bills, statements, notices, demands, requests or other communications given or required to be given under this Lease shall be effective only if rendered or given in writing, sent simultaneously by facsimile transmission to the numbers herein specified and by registered or certified mail return receipt requested, by nationally recognized overnight courier or delivered personally, (a) to Tenant at 11300 9th Street North, St. Petersburg, Florida 33716, Attn: Facilities Manager, facsimile number 813/570-8507, or (b) to Landlord at 11200 9th Street North, Suite 100, St. Petersburg, Florida 33716, Attn.: Chief Financial Officer, facsimile number 813/222-0792 or (c) to such other address as either Landlord or Tenant may designate as its new address for such purpose by notice given to the other in accordance with the provisions of this Section 21.1. Any such bill, statement, notice, demand, request or other communication shall be deemed to have been rendered or given two (2) days after the date when it shall have been mailed as provided in this Section 21.1 if sent by registered or certified mail, or upon the date personal delivery or delivery by nationally recognized overnight courier is made. If Tenant is notified of the identity and address of Landlord's mortgagee or beneficiary under a deed of trust, or ground or underlying lessor, Tenant shall give to such mortgagee, beneficiary or ground or underlying lessor notice of any default by Landlord under the terms of this Lease in writing sent by registered or certified mail return receipt requested, and such mortgagee, beneficiary or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant's exercising any remedy available to it. 22. No Waiver; No Oral Modification 15 16 22.1 No failure by Landlord to insist upon the strict performance of any obligation of Tenant under this Lease or to exercise any right, power or remedy consequent upon a breach thereof, no acceptance of full or partial Monthly Rent during the continuance of any such breach, and no acceptance of the keys to or possession of the Premises prior to the termination of the Term by any employee of Landlord shall constitute a waiver of any such breach or of such term, covenant or condition or operate as a surrender of this Lease. No payment by Tenant or receipt by Landlord of a lesser amount than the aggregate of all Monthly Rent then due under this Lease shall be deemed to be other than on account of the first items of such Monthly Rent then accruing or becoming due, unless Landlord elects otherwise; and no endorsement or statement on any check, no letter accompanying any check or other payment of Monthly Rent in any such lesser amount and no acceptance of any such check or other such payment by Landlord shall constitute an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Monthly Rent or to pursue any other legal remedy. 22.2 Neither this Lease nor any term or provision hereof may be changed, waived, discharged or terminated orally, and no breach thereof shall be waived, altered or modified, except by a written instrument signed by the party against which the enforcement of the change, waiver, discharge or termination is sought. No waiver of any breach shall affect or alter this Lease, but each and every term, covenant and condition of this Lease shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. 22.3 The review, approval, inspection or examination by Landlord of any item to be reviewed, approved, inspected or examined by Landlord under the terms of this Lease or the exhibits attached hereto shall not constitute the assumption of any responsibility by Landlord for either the accuracy or sufficiency of any such item or the equality or suitability of such item for its intended use. Any such review, approval, inspection or examination by Landlord is for the sole purpose of protecting Landlord's interests in the Premises and under this Lease, and no third parties, including, without limitation, Tenant or any person or entity claiming through or under Tenant, or the contractors, agents, servants, employees, visitors or licensees of Tenant or any such person or entity, shall have any rights hereunder. 16 17 23. Tenant's Certificates 23.1 Tenant, at any time and from time to time upon not less than ten (10) days' prior written notice from Landlord, will execute, acknowledge and deliver to Landlord and, at Landlord's request, to any prospective purchaser, ground or underlying lessor, beneficiary under a deed of trust or mortgagee of any part of the Premises, a certificate of Tenant stating: (a) that Tenant has accepted the Premises (or, if Tenant has not done so, that Tenant has not accepted the Premises and specifying the reasons therefor), (b) the Commencement and Expiration Dates of this Lease, (c) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the Lease, as modified is in full force and effect and stating the modifications), (d) whether or not there are then existing any defenses against the enforcement of any of the obligations of Tenant under this Lease (and, if so, specifying the same), (e) whether or not there are then existing any defaults by Landlord in the performance of its obligations under this Lease (and, if so, specifying same), (f) the dates, if any, to which the Monthly Rent and other charges under this Lease have been paid, and (g) any other information that may reasonably be required by any of such persons. It is intended that any such certificate of Tenant delivered pursuant to this Section 23.1 may be relied upon by Landlord and any prospective purchaser, ground or underlying lessor, beneficiary or mortgagee of any part of the Premises. 24. Tax on Tenant's Personal Property 24.1 At least ten (10) days prior to delinquency, Tenant shall pay all taxes levied or assessed upon Tenant's equipment, furniture, fixtures and other personal property located in or about the Premises. If the assessed value of Landlord's property is increased by the inclusion therein of a value placed upon Tenant's equipment, furniture, fixtures or other personal property, Tenant shall pay to Landlord, upon written demand, the taxes so levied against Landlord, or the proportion thereof resulting from said increase in assessment. 25. Authority 25.1 If Tenant signs as a corporation or a partnership, each of the persons executing this Lease on behalf of Tenant does hereby covenant and warrant that Tenant is a duly authorized and existing entity, that Tenant has and is qualified to do business in Florida, that Tenant has full right and authority to enter into this Lease, and that each and every person signing on behalf of Tenant is authorized to do so. Upon Landlord's request, Tenant shall provide Landlord with evidence satisfactory to Landlord confirming the foregoing covenants and warranties. 26. Broker 26.1 Both parties represent and warrant to each other that no broker was involved in the negotiations relating to this Lease. Landlord and Tenant shall indemnify, defend and hold harmless each other of, from and against, any and all claims, arising from or related to any breach of this Section 26.1, which indemnity shall survive the expiration or sooner termination of this Lease. 27. Liability of Landlord 27.1 The liability of Landlord hereunder or in connection with the Warehouse or the Premises shall be limited to its interest in the Warehouse, and in no event shall any other assets 17 18 of Landlord be subject to any claim arising out of or in connection with the Lease or the Premises. 28. Attorneys' Fees 28.1 If either Landlord or Tenant fails to perform any of its obligations under this Lease or in the event a dispute arises concerning the meaning or interpretation of any provision of this Lease, the basis of the dispute shall be settled by judicial proceeding and the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including without limitation, court costs and attorneys' fees. 29. Surrender and Holding Over 29.1 Upon the expiration or sooner termination of the Term, Tenant will quietly and peacefully surrender to Landlord the Premises in the condition in which they are required to be kept as provided in Section 8.1, ordinary wear and tear excepted. 29.2 Any holding over after the expiration of the Term with the consent of Landlord shall be construed to be a tenancy from month to month at double the Monthly Rent herein specified (prorated on a monthly basis), unless Landlord shall specify a different rent in its sole discretion, and shall otherwise be on the terms and conditions herein specified as far as applicable. 30. Quiet Enjoyment 30.1 Upon Tenant's paying the Monthly Rent and performing all of Tenant's obligations under this Lease, Tenant may peacefully and quietly enjoy the Premises during the Term as against all persons or entities lawfully claiming by or through Landlord. 31. Insurance 31.1 Tenant shall carry at its expense and maintain in force during the Term the following insurance: (a) Commercial General Liability Insurance (including protective liability coverage on operations of independent contractors engaged in construction and also blanket contractual liability insurance) on an "occurrence" basis for the benefit of Tenant and Landlord as additional insured against claims for "bodily injury" liability including without limitation bodily injury, death or property damage liability with a limit of not less than Three Million Dollars ($3,000,000.00) in the event of "bodily injury" to any number of persons or of damages to property arising out of any one "occurrence;" such insurance may be furnished under a "primary" policy and an "umbrella" policy, provided that it is primary insurance and not excess over or contributory with any insurance in force for Landlord; and such insurance shall provide for a waiver of the insurer's right of subrogation against Landlord; (b) Insurance against loss or damage by fire and such other risks and hazards (excluding earthquake and flood) as are insurable under present and future standard forms of fire and extended coverage insurance policies, to the personal property, furniture, furnishings and fixtures belonging to the Tenant located in the Premises for not less than one hundred percent 18 19 (100%) of the actual replacement value thereof. Such insurance shall provide for a waiver of the insurer's right of subrogation against Landlord; (c) Fire, extended coverage and vandalism and malicious mischief insurance on Tenant's improvements and property within the Premises in an amount not less than the full replacement value thereof without Tenant being deemed a co-insurer under the terms of the applicable policy, and against such additional periods and for such other amounts as may from time to time be required by Landlord without deduction for physical depreciation thereof. Such insurance on the Premises shall contain the "Replacement Cost Endorsement;" (d) Business interruption insurance against loss of income by reason of any hazard covered under the insurance required under subsections (c) and (d) of this Section for the benefit of Landlord as loss payee, in an amount sufficient to avoid any co-insurance penalty, but in any event for not less than one (1) year's Monthly Rent from the Premises. 31.2 All such insurance shall name Landlord as additional insured, shall be effected under policies issued by insurers, shall be approved by Landlord (such approval not to be unreasonably withheld) and shall provide that Landlord shall receive thirty (30) days' written notice from the insurer prior to any cancellation or change of coverage. 31.3 Tenant shall deliver copies of policies of such insurance or certificates thereof to Landlord on or before the Commencement Date, and thereafter at least thirty (30) days before the expiration dates of expiring policies; and, in the event Tenant shall fail to procure such insurance, or to deliver such policies or certificates, Landlord may, at its option and after written notice to Tenant and a reasonable opportunity for Tenant to cure, procure same for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within ten (10) days after delivery to Tenant of bills therefor. Nothing contained in this Article 31 shall in any way limit the extent of Tenant's liability under any of the other provisions of this Lease. 31.4 Landlord shall maintain hazard insurance on the Warehouse in conformity with the requirement of any mortgage, deed of trust or ground lease now or hereafter encumbering the Premises or, if no such mortgage, deed of trust or ground lease exists, such insurance shall conform to the industry standard for types and amounts of insurance coverage for similar type properties in the St. Petersburg, Florida market. Landlord shall cause its hazard insurance on the Warehouse to provide for a waiver of the insurer's right of subrogation against Tenant. 32. Short Form of Lease 32.1 If requested by Landlord or Tenant, the other party shall execute and acknowledge a memorandum of lease and the requesting party may record such memorandum of lease in the county where the Premises are located. If such memorandum is requested by Tenant, Tenant shall simultaneously execute, and deliver into escrow with Landlord's attorney, a recordable termination of such memorandum to be released to Landlord upon delivery to such attorney of Landlord's sworn statement that the Lease has been terminated. 33. Waiver of Jury Trial 33.1 Landlord and Tenant hereby waive trial by jury in any action or proceeding 19 20 brought by either of the parties hereto against the other on any matters arising out of or connected with this Lease, the relationship of Landlord and Tenant and Tenant's use or occupancy of the Premises. 34. Right of First Refusal to Purchase 34.1 If Landlord, at any time during the Term of this Lease shall receive any bona fide offer for the purchase of the 11200 Realty or the Warehouse, which offer Landlord shall be ready and willing to accept, then Tenant shall have the first right to purchase 11200 Realty or the Warehouse at the same price, and upon the same terms and conditions as shall be contained in such offer. Landlord shall inform Tenant in writing immediately upon the receipt of any written offer which Landlord shall be ready and willing to accept and shall also inform Tenant immediately upon Landlord's execution of any listing agreement for the sale of 11200 Realty or the Warehouse. Landlord shall deliver to Tenant a copy of such offer and Tenant shall have five (5) business days, from and after the receipt of the copy of such offer from Landlord, in which to elect to purchase 11200 Realty or the Warehouse at the same price and on the same terms and conditions as contained in such offer, by giving Landlord written notice thereof, and such notice by Tenant shall create a binding purchase agreement between the parties hereto upon the same price, terms and conditions of the offer. If Tenant shall elect not to purchase the 11200 Realty or the Warehouse or shall fail to give Landlord notice within the time provided for herein, then Landlord may sell 11200 Realty or the Warehouse but only at the same price, terms and conditions specified in the copy of the offer Landlord submitted to Tenant. If 11200 Realty or the Warehouse is not sold by Landlord on the terms set forth in the offer delivered to Tenant, Landlord shall submit all subsequent offers to Tenant, in the manner provided herein, prior to making any subsequent sale of 11200 Realty or the Warehouse. This Right of First Refusal shall terminate upon the sale of 11200 Realty or the Warehouse by Interior Design Services, Inc. to any third party. 35. Miscellaneous 35.1 Use of Terms The words "Landlord" and "Tenant" as used herein all include the plural as well as the singular. Words used in the neuter gender include the masculine and feminine. If there is more than one Tenant, the obligations under this Lease imposed on Tenant shall be joint and several. The captions preceding the articles of this Lease have been inserted solely as a matter of convenience, and such captions in no way define or limit the scope or intent of any provision of this Lease. 35.2 Binding Effect The terms, covenants and conditions contained in this Lease shall bind and inure to the benefit of Landlord and Tenant and, except as otherwise provided herein, their respective personal representatives and successors and assigns; provided, however, upon the sale, assignment or transfer by Landlord (or by any subsequent landlord) of its interest in the Warehouse, including any transfer by operation of law, Landlord (or subsequent landlord) shall be relieved of all obligations or liabilities under this Lease, and all obligations or liabilities shall be binding upon the grantee, assignee or other transferee of such interest, and any such grantee, assignee or 20 21 transferee, by ccepting such interest, shall be deemed to have assumed such obligations and liabilities. Tenant shall promptly execute all instruments requested by Landlord or its successor acknowledging such sale, transfer or assignment. 35.3 Severability If any provision of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, and in Landlord's opinion such invalid or unenforceable provision does not affect a material benefit or right hereunder, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and be enforced to the full extent permitted by law. 21 22 35.4 Florida Law This Lease shall be construed and enforced in accordance with the laws of the State of Florida. 35.5 Execution by Landlord Submission of this instrument for examination or signature by Tenant in the absence of signature by Landlord does not constitute a reservation of or an option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 35.6 Merger This instrument, including the exhibits hereto, which are made a part of this Lease, contains the entire agreement between the parties, and all prior negotiations and agreements are merged herein. Neither Landlord nor Landlord's agents have made any representations or warranties with respect to the Premises, the Warehouse, or this Lease except as expressly set forth herein, and no rights, easements or licenses are or shall be acquired by Tenant by implication or otherwise unless expressly set forth herein. 35.7 No Signs Except that Tenant may use exterior signage similar to that which it uses at 11300 9th Street North to indicate its presence in the Premises, Tenant shall not place any sign upon the Premises without Landlord's prior written consent, which consent shall not be unreasonably withheld. Under no circumstances shall Tenant place a sign on any roof of the Premises. IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed by their duly authorized officers as of the date first written above. WITNESSES: INTERIOR DESIGN SERVICES, INC., a Florida corporation - ----------------------------------- By: --------------------------------- - ----------------------------------- Its: -------------------------------- CATALINA MARKETING CORPORATION, a Delaware corporation - ----------------------------------- By: --------------------------------- - ----------------------------------- Its: -------------------------------- 22 23 STATE OF FLORIDA COUNTY OF _________________________ The foregoing instrument was acknowledged before me this ______ day of _______________, 1996 by _________________________, as _________________________ of INTERIOR DESIGN SERVICES, INC., a Florida corporation, on behalf of the corporation. He/she is personally known to me or has produced ___________________________________________ as identification and did/did not take an oath. ----------------------------- ----------------------------- (Name typed/printed) STATE OF _________________________ COUNTY OF ________________________ The foregoing instrument was acknowledged before me this _____ day of _________________________, 1996 by _________________________, as _______________ of CATALINA MARKETING CORPORATION, a Delaware corporation, on behalf of the corporation. He/she is personally known to me or has produced ___________________________________________ as identification and did/did not take an oath. ----------------------------- ----------------------------- (Name typed/printed) 23 EX-21 7 LIST OF SUBSIDIARIES 1 EXHIBIT 21 CATALINA MARKETING CORPORATION SUBSIDIARIES OF REGISTRANT Catalina Marketing Sales Corporation, a Delaware corporation Catalina Marketing Retail Sales Corporation, a Delaware corporation Catalina Marketing International, Inc., a Delaware corporation Catalina Marketing Worldwide, Inc., a Delaware corporation Catalina Electronic Clearing Services, Inc., a Delaware corporation Catalina Marketing of Mexico, Inc., a Delaware corporation Catalina Marketing de Mexico, S.A. de C.V. a Mexican corporation Reembolsos Promocionales de Mexico, S.A. de C.V. a Mexican corporation Catalina Marketing of France, Inc., a Delaware corporation Catalina Marketing de France, S.A., a French corporation Catalina Marketing U.K., Inc., a Delaware corporation Catalina Marketing U.K., Ltd., a United Kingdom corporation Catalina Marketing of Iberia, Inc., a Delaware corporation Health Resources Publishing Company, a Delaware corporation SuperMarkets Online, Inc., a Delaware corporation Catalina-Pacific Media, L.L.C., a Delaware limited liability company Pacific Media, K.K., a Japanese corporation EX-23 8 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCTS. 1 EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K into the Company's previously filed Registration Statement File Nos. 33-46793, 33-77100, 33-82456, 333-07525 and 333-13335. /S/ ARTHUR ANDERSEN LLP Tampa, Florida, May 20, 1997 EX-27 9 FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
5 1,000 YEAR MAR-31-1997 APR-01-1996 MAR-31-1997 13,698 0 31,383 3,016 935 61,749 142,163 72,585 154,696 53,466 869 0 0 208 96,730 154,696 172,143 172,143 62,482 128,800 (1,224) 1,197 0 44,567 17,880 27,241 0 0 0 27,241 1.33 1.33
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