<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Nine Months Ended August 2, 1996
Or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________________ to ______________________
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5658129
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, New York, New York 10020
- ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Not Applicable
------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
----- -----
The number of shares of Common Stock, $.10 par value, outstanding as of
September 9, 1996 was 9,690,143.
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Nine Months and Three Months Ended
August 2, 1996 and July 28, 1995 3
Condensed Consolidated Balance Sheets
August 2, 1996 and November 3, 1995 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended August 2, 1996 and July 28, 1995 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Nine Months and Three Months Ended August 2, 1996
Compared to the Nine Months and Three Months Ended
July 28, 1995, Respectively 16
PART II - OTHER INFORMATION
Item 2. Changes in Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURE 28
</TABLE>
-2-
<PAGE> 3
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ----- ------------
August 2, July 28, August 2, July 28,
1996 1995 1996 1995
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
REVENUES:
Sales of services $ 672,483 $ 551,017 $ 237,533 $ 209,493
Sales of products 63,533 48,799 21,357 16,431
Equity in net income of joint ventures--Note F 82 415 1,865 1,768
Gain on sale of interest in subsidiaries--Note I 3,666
Interest income 1,729 1,427 547 474
Other income (expense) - net--Note B (775) (656) (59) (414)
---------- ---------- ----------- ----------
740,718 601,002 261,243 227,752
---------- ---------- ----------- ----------
COSTS AND EXPENSES:
Cost of sales
Services--Note J 615,372 503,990 216,732 191,213
Products 42,455 32,291 13,933 10,893
Selling and administrative 38,732 31,223 13,635 11,090
Research, development & engineering 9,952 6,064 4,294 1,807
Depreciation and amortization 10,251 8,817 3,486 3,052
Foreign exchange loss - net 304 12 27 22
Interest expense 3,537 4,739 1,177 1,317
---------- ---------- ----------- ----------
720,603 587,136 253,284 219,394
---------- ---------- ----------- ----------
Income before income tax provision,
minority interests and extraordinary item 20,115 13,866 7,959 8,358
Income tax provision--Note H 8,745 5,357 3,815 3,302
Minority interests in net loss of
consolidated subsidiaries--Note I 521 549
---------- ---------- ----------- ----------
Income before extraordinary item 11,891 8,509 4,693 5,056
Extraordinary item--Note D (62) (62)
---------- ---------- ----------- ----------
Net income $ 11,891 $ 8,447 $ 4,693 $ 4,994
========== ========== =========== ==========
<CAPTION>
(Per Share Data)
<S> <C> <C> <C> <C>
Income before extraordinary item $ 1.21 $ .88 $ .47 $ .53
Extraordinary item (.01) (.01)
---------- ---------- ----------- ----------
Net income $ 1.21 $ .87 $ .47 $ .52
========== ========== =========== ==========
Number of shares used in computation
-- Note G 9,798,944 9,627,068 10,035,486 9,640,476
========== ========== =========== ==========
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
August 2, November 3,
1996 1995(a)
-------- ----------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 28,721 $ 25,350
Short-term investments 4,349 1,047
Trade accounts receivable less allowances of
$5,354 (1996) and $3,943 (1995)--Note B 99,754 111,696
Inventories--Note C 33,046 28,207
Deferred income taxes 11,105 8,711
Prepaid expenses and other assets 8,164 7,204
-------- --------
TOTAL CURRENT ASSETS 185,139 182,215
INVESTMENTS IN SECURITIES 252 4,136
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES--Note F 18,423 13,903
PROPERTY, PLANT AND EQUIPMENT--
at cost--Note D
Land and buildings 33,689 33,591
Machinery and equipment 61,568 51,233
Leasehold improvements 2,796 2,818
-------- --------
98,053 87,642
Less allowances for depreciation
and amortization 36,879 32,057
-------- --------
61,174 55,585
DEPOSITS, RECEIVABLES AND OTHER
ASSETS 870 2,764
INTANGIBLE ASSETS--net of accumulated
amortization of $6,004 (1996) and $4,181
(1995) 15,972 5,408
-------- --------
$281,830 $264,011
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 4,864 $ 5,154
Current portion of long-term debt--Note D 3,049 2,000
Accounts payable 28,223 30,786
Accrued expenses
Wages and commissions 25,619 23,403
Taxes other than income taxes 11,139 10,059
Insurance 8,816 18,893
Other 8,770 6,686
Customer advances and other liabilities 18,410 15,250
Income taxes 1,620 12,401
-------- --------
TOTAL CURRENT LIABILITIES 110,510 124,632
LONG-TERM DEBT--Note D 29,873 28,819
DEFERRED INCOME TAXES 951 3,433
-------- --------
141,334 156,884
MINORITY INTERESTS--Note I 20,748
STOCKHOLDERS' EQUITY--Notes
D, E, F, and G
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued - 9,688,143 shares (1996)
and 9,664,794 shares (1995) 969 966
Paid-in capital 27,678 27,098
Retained earnings 91,048 79,157
Cumulative foreign currency
translation adjustment 34 (168)
Unrealized gain on
marketable securities 19 74
-------- --------
119,748 107,127
-------- --------
$281,830 $264,011
======== ========
</TABLE>
(a) The Balance Sheet at November 3, 1995 has been derived from the audited
financial statements at that date.
See accompanying notes.
-4-
<PAGE> 5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
August 2, July 28,
1996 1995
----------- --------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $11,891 $ 8,447
Adjustments to reconcile net income to cash
provided by operating activities:
Extraordinary loss 62
Depreciation and amortization 10,251 8,817
Equity in net income of joint ventures (82) (415)
Gain on sale of interest in subsidiaries (3,666)
Distributions from joint ventures 2,282 904
Accounts receivable provisions 2,315 1,640
Minority interests (521)
Amortization of deferred costs and intangibles 1,863 662
(Gains) losses on foreign currency translation (364) 234
(Gains) losses on dispositions of fixed assets 35 (198)
Deferred income tax provision 1,160 1,115
Gains on sales of securities (14)
Other 11 47
Changes in operating assets and liabilities,
excluding the effect of acquired companies:
(Increase) decrease in accounts receivable 14,094 (1,182)
Increase in inventories (2,603) (2,281)
Increase in prepaid expenses
and other current assets (2,571) (2,888)
(Increase) decrease in deposits, receivables
and other assets 1,781 (1,388)
Increase (decrease) in accounts payable (741) 340
Increase (decrease) in accrued expenses (9,369) 3,939
Increase in customer advances and
other liabilities 2,247 4,200
Increase (decrease) in income tax liability (10,972) 2,589
-------- ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 17,041 25,630
-------- -------
</TABLE>
-5-
<PAGE> 6
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Nine Months Ended
August 2, July 28,
1996 1995
---------- -------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of investments 3,159 9,740
Purchases of investments (3,182) (7,641)
Investments in and advances to joint ventures (6,403) (4,323)
Cash of acquired subsidiaries, less
transaction costs 8,421
Proceeds from disposals of property,
plant and equipment 82 606
Purchases of property, plant and equipment (13,192) (9,973)
Other (2,122) (1,125)
-------- -------
NET CASH APPLIED TO INVESTING
ACTIVITIES (13,237) (12,716)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (1,500) (11,500)
Exercise of stock options 71 209
Increase in minority interest 331
Increase (decrease) in notes payable to banks 148 (282)
-------- -------
NET CASH APPLIED TO FINANCING
ACTIVITIES (950) (11,573)
-------- -------
Effect of exchange rate changes on cash 517 (531)
-------- -------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,371 810
Cash and cash equivalents, beginning of period 25,350 17,049
-------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $28,721 $17,859
======= ========
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest expense $ 4,220 $ 5,585
Income taxes $18,494 $ 1,525
</TABLE>
See accompanying notes.
-6-
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and Article 10 of
Regulation S-X and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting principles. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the Company's
financial position at August 2, 1996 and results of operations for the nine and
three months ended August 2, 1996 and July 28, 1995 and cash flows for the nine
months ended August 2, 1996 and July 28, 1995. Operating results for the nine
and three months ended August 2, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending November 1, 1996.
These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended November 3, 1995. The accounting policies used in preparing these
financial statements are the same as those described in the Company's Annual
Report.
The Company's fiscal year ends on the Friday nearest October 31.
Note B--Accounts Receivable
In October 1993, the Company entered into a three-year agreement to sell, on a
limited recourse basis, up to $25,000,000 of undivided interests in a designated
pool of certain eligible accounts receivable. In March 1995, the limit was
increased to $45,000,000 and the agreement was extended to March 1998. As
collections reduce previously sold undivided interests, new receivables may be
sold up to the $45,000,000 level. At August 2, 1996, and November 3, 1995,
$40,000,000 and $30,000,000, respectively, of interests in accounts receivable
had been sold under this agreement. The sold accounts receivable are reflected
as a reduction of receivables in the accompanying balance sheets. The Company
pays fees based primarily on the purchaser's borrowing costs incurred on
short-term commercial paper which financed the purchase of receivables. Other
income (expense) in the accompanying statements of income includes fees related
to the agreement of $1,664,000 and $1,479,000 in the nine months ended, and
$606,000 and $789,000 in the three months ended, August 2, 1996 and July 28,
1995, respectively.
The purchaser may terminate the agreement on a minimum of six months' notice. In
addition, the agreement may be terminated if the Company does not maintain a
stated minimum tangible net worth, as defined, or exceeds a maximum ratio of
debt to tangible net worth.
-7-
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note C--Inventories
Inventories consist of:
<TABLE>
<CAPTION>
August 2, November 3,
1996 1995
--------- -----------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $18,998 $15,909
Long-term contracts 2,026 2,980
------ -----
21,023 18,889
------- ------
Products:
Materials and work-in-process 7,494 4,818
Service parts 2,228 1,124
Finished goods 2,301 3,376
------ -------
12,023 9,318
------ -------
Total $33,046 $28,207
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, of
$3,247,000 at August 2, 1996 and $3,469,000 at November 3, 1995 are credited
against the related costs in inventory. Substantially all of the amounts billed
have been collected.
Note D--Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
August 2, November 3,
1996 1995
--------- -----------
(Dollars in thousands)
<S> <C> <C>
12-3/8% Senior Subordinated Debentures, due
July 1, 1998--net of unamortized discount of
$26,000 - 1996 and $36,000 - 1995 (a) $22,829 $22,819
Term loan (b) 6,500 8,000
Notes payable (c) (d) 3,593
------- --------
32,922 30,819
Less amounts due within one year 3,049 2,000
-------- --------
Total long-term debt $29,873 $28,819
======= =======
</TABLE>
-8-
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note D--Long Term Debt (Continued)
On August 28, 1996, the Company issued $50,000,000 of Senior Notes in a private
placement with institutional investors. The notes, which have a term of eight
years bear interest at 7.92% per annum payable semiannually and provide for
amortization of principal in five equal annual installments beginning in August
2000. A portion of the proceeds of the notes will be used to retire the
outstanding 12-3/8% Senior Subordinated Debentures. The notes were issued
pursuant to Note Purchase Agreements which contain various affirmative and
negative covenants.
(a) The debentures provide for interest to be paid semi-annually on January 1
and July 1 and are redeemable at the option of the Company, in whole or in part,
at 100% plus accrued interest. The debentures are subordinated to all existing
and future senior indebtedness (as defined) of the Company. On August 28, 1996,
the Company notified its bondholders that the remaining $22,855,000 of
outstanding debentures will be redeemed on September 27, 1996 at par plus
accrued interest. The accompanying statement of income for the nine months ended
July 28, 1995 reflects an extraordinary charge of $62,000, net of income tax
benefits of $42,000 related to the redemption in May 1995 of $10,000,000 of the
Company's debentures.
(b) In October 1994, the Company entered into a $10,000,000 five-year loan
agreement with Fleet Bank, which is secured by a deed of trust on land and
buildings (book value at August 2, 1996 - $15,182,000). The term loan bears
interest at 7.86% per annum and is repayable in twenty quarterly principal
installments of $500,000, together with interest. In October 1996, if certain
conditions are met, the loan may be extended for two years with a subsequent
reduction of principal payments to $225,000 per quarter and a final payment of
$1,725,000 due October, 2001. The agreement contains various financial
covenants, the most restrictive of which requires the Company to maintain a
tangible net worth of $86,000,000.
(c) Includes two notes payable (which bear interest at 90 day commercial paper
rates), each for $550,000, due on January 2, 1997 and January 2, 1998,
respectively.
(d) An unsecured loan of $2,493,000 from Chase Bank was made to a foreign
subsidiary on January 18, 1996 to finance a printing press. The five-year loan,
guaranteed by the Company, is to be repaid in ten semi-annual payments including
interest calculated at LIBOR (5.53% at August 2, 1996) plus .25% beginning
September 15, 1996.
-9-
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the nine
months ended August 2, 1996 are as follows:
<TABLE>
<CAPTION>
Common Paid-In Retained
Stock Capital Earnings
------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at November 3, 1995 $966 $27,098 $79,157
Net income for the nine months 11,891
Issuance of 18,349 shares to ESOP 2 498
Stock options exercised - 4,400 shares 1 70
Stock Award - 600 shares 12
------ --------- -------
Balance at August 2, 1996 $969 $27,678 $91,048
==== ======= =======
</TABLE>
The other components of stockholders' equity are the unrealized gain on
marketable securities and the cumulative foreign currency translation adjustment
due to the Company's investment in its Australian joint venture, whose
functional currency is the Australian dollar.
On April 22, 1996, the Company granted stock options to acquire 446,250 shares
of the Company's common stock to key employees at $27-1/8 per share, the average
of the high and low prices on such date. The options were granted under the
Company's 1995 Non-Qualified Stock Option Plan.
On June 28, 1996, the shareholders authorized an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock to 30,000,000 shares.
Note F--Summarized Financial Information of Joint Ventures
The Company owns 12-1/2% of the voting stock of Pacific Access Pty. Ltd.
("Pacific Access"), an international joint venture in Australia. This venture,
which commenced operations in July 1991, assumed responsibility throughout
Australia for the marketing, sales and compilation functions of all yellow pages
directories of Telstra Corporation Ltd., ("Telstra"), the Australian
government-owned telephone company, under the terms of a twelve-year contract.
The venture produces a major portion of its revenues and significantly all of
its profits in the Company's second and third fiscal quarters. Telstra owns 50%
of the voting stock of Pacific Access. In the event of a change in control of
the Company, as defined, the Company may be required to sell its shares in the
venture to Telstra at a formula price based on various factors, including
earnings.
In July 1994, the Company entered into a long-term joint venture agreement to
publish the official White Pages, Yellow Pages and Street Guides for Rio de
Janeiro. As of August 2, 1996, the Company has made an aggregate of $13,971,000
of investments in and loans and advances to Telelistas Editora Ltda., a
Brazilian company which has a contract to publish Rio's telephone directories on
behalf of TELERJ, the government-owned telephone company. Such investment
-10-
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures (Continued)
resulted in the acquisition of a 50% interest in the common shares together with
75% of the issued preferred stock. The agreement, as amended, requires the
Company to provide technology, expertise and key personnel in directory
production, sales and marketing. It is likely that additional advances will be
made by the Company to the joint venture. Such advances will be repaid before
any other distributions of the net assets of the venture. As a result of the
funding requirements, during the start-up period, the Company has recognized 75%
through May 3, 1996, and 100% thereafter, of the losses incurred by the venture.
At such time as the venture becomes profitable, the Company will recognize a
greater than 50% portion of the venture's net income until start-up losses are
recovered and 50% of any profits subsequent thereto. No tax benefit has been
recognized by the venture for operating loss carry forwards. Accordingly, tax
benefits from such losses will be recognized at such time that the venture
becomes profitable.
Consolidated retained earnings at August 2, 1996 includes $5,907,000,
representing the undistributed earnings of Pacific Access. Income taxes have
been paid or provided on such earnings.
The following summarizes the financial information of the joint ventures:
<TABLE>
<CAPTION>
August 2, 1996 November 3, 1995
----------------------- ------------------------
(Dollars in thousands)
Company's
Advances Company's
Total and Equity Total Equity
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Current assets $ 347,240 $ 270,495
Noncurrent assets 16,662 17,207
Current liabilities (290,777) (227,749)
Due to Volt (1,640) $ 1,640
Noncurrent liabilities (224) (259)
--------- ---------
Equity of combined joint ventures $ 71,261 $ 59,694
========= =========
Equity of Australian joint venture (a) $ 65,765 11,687 $ 55,733 $10,436
Equity of Brazilian joint venture 5,496 5,096 3,961 3,467
--------- ------- --------- -------
$ 71,261 $ 59,694
========= --=======
Investments in and advances to
joint ventures $18,423 $13,903
======== =======
</TABLE>
(a)-Pursuant to the Australian venture agreement, the initial capital
contributions of all venturers, other than Telstra, exceeded their proportionate
share of ownership interest in the corporate joint venture. The agreement
provides that, upon liquidation of the venture, the venturers will be entitled
to recover such excess contributions from the net assets of the venture.
-11-
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
August 2, 1996 July 28, 1995
------------------------ -----------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- --------- -------- ----------
<S> <C> <C> <C> <C>
Revenues $488,425 $440,188
Costs and expenses 451,578 411,156
Income tax provision 14,127 9,091
-------- -------
Net income $22,720 $19,941
======= =======
Net income of Australian joint venture $26,508 $3,216 $23,438 $2,871
Net loss of Brazilian joint venture (3,788) (3,134) (3,497) (2,456)
-------- -------- ------- -------
$22,720 $19,941
======= =======
Company's equity in net income
of joint ventures $82 $415
=== ====
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------
August 2, 1996 July 28, 1995
------------------------- ---------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $266,730 $224,452
Costs and expenses 230,714 200,838
Income tax provision 12,818 4,861
-------- -------
Net income $23,198 $18,753
======= =======
Net income of Australian joint venture $24,340 $2,971 $19,731 $2,423
Net loss of Brazilian joint venture (1,142) (1,106) (978) (655)
-------- ------- ------ -------
$23,198 $18,753
======= =======
Company's equity in net income of
joint ventures $1,865 $1,768
====== =======
</TABLE>
-12-
<PAGE> 13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note G--Per Share Data
Per share data are computed on the basis of the weighted average number of
shares of common stock outstanding and, if applicable, the assumed exercise of
dilutive outstanding stock options based on the treasury stock method.
Note H--Income Taxes
Significant components of the income tax provision attributable to operations
are as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
--------------------------- -------------------------
August 2, July 28, August 2, July 28,
1996 1995 1996 1995
---------- --------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Current:
Federal $6,018 $2,151 $3,564 $2,914
Foreign 775 995 493 476
State and local 792 1,096 111 871
------ ----- ------ -----
7,585 4,242 4,168 4,261
------ ----- ------ -----
Deferred:
Federal 938 885 (267) (773)
Foreign (14) 20 (14)
State and local 236 210 (72) (186)
------- ------ ------ -----
1,160 1,115 (353) (959)
------- ------ ------ -----
$8,745 $5,357 $3,815 $3,302
====== ====== ====== ======
</TABLE>
-13-
<PAGE> 14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note I--Acquisition and Sale of Subsidiaries
During the nine months ended August 2, 1996, the Company acquired a technical
services business and a temporary services business for a total of $3,111,000 in
cash and notes which resulted in an increase in intangible assets of $3,057,000.
On January 29, 1996, the Company merged its wholly-owned subsidiary, Autologic,
Incorporated and related foreign subsidiaries ("Autologic"), representing its
Electronic Publication and Typesetting Systems segment, with Information
International, Inc. ("Triple-I"), resulting in the formation of a new publicly
traded company, Autologic Information International, Inc. ("AII"). Triple-I was
a publicly traded company in the business of electronic publishing prepress
systems.
In connection with the merger, the stockholders of Triple-I received 41% of
AII's common stock based on one share of AII being issued for each outstanding
share of Triple-I and the Company received 59% of the outstanding shares of AII
common stock.
The merger has been accounted for as a purchase of a 59% interest in Triple-I
and a corresponding sale of a 41% interest in Autologic to the former
shareholders of Triple-I. The accompanying 1996 financial statements include the
accounts of AII with the former Triple-I shareholders' 41% interest in AII,
shown as a minority interest in the condensed consolidated balance sheet. The
results of operations of Triple-I are included in the accompanying consolidated
statement of income since the date of acquisition. The sale of 41% of Autologic
resulted in a pretax gain of $3,666,000, net of transaction costs, and also
resulted in 41% of Autologic's assets being reflected in the 1996 balance sheet
at fair value, resulting in an intangible of $5,215,000 with a corresponding
increase in the minority interest. Amortization of such intangible, which
amounted to $522,000 and $261,000 in the nine and three months periods ended
August 2, 1996 is being charged to the minority interest. In addition, the
purchase of the assets of Triple-I resulted in an intangible of $3,847,000.
These intangibles are being amortized over a period of five years.
In connection with the merger, Autologic restructured its operations and
incurred a charge of $700,000 related principally to the termination of
employees. Such charge is included in the results of operations for the nine
months ended August 2, 1996.
-14-
<PAGE> 15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note I--Acquisition and Sale of Subsidiaries (Continued)
The following unaudited pro forma information presents a summary of consolidated
results of operations as if the acquisitions had occurred at the beginning of
the respective periods with pro forma adjustments to give effect to amortization
of intangibles, minority interest share in operations and certain income tax
adjustments. The pro forma financial information is not necessarily indicative
of the results of operations as they would have been had the transactions been
effected on the assumed dates or of future results of operations of the
consolidated entities.
<TABLE>
<CAPTION>
Nine Months Ended
August 2, July 28,
1996 1995
(Dollars in thousands, except
per share amounts)
<S> <C> <C>
Revenue $752,723 $634,731
Net income $12,341 $5,558*
Net income per share $1.26 $.60*
</TABLE>
* Reduced by $1,421,000 ($.15 per share) for discontinued operations of Triple-I
Note J--Significant Item in Operating Results
Net income for the nine months ended August 2, 1996 includes first and second
quarter cost reductions aggregating $2,625,000 ($1,600,000, net of taxes, or
$.16 per share) as a result of an agreement to pay a premium to an insurance
carrier to close out prior years' retrospective insurance policies at an amount
less than related liabilities for workers' compensation insurance previously
provided by the Company. This adjustment had a favorable impact primarily on the
operating profit of the Technical Services and Temporary Personnel segment for
the nine months ended August 2, 1996 of $2,100,000. In addition, due to a new
arrangement with its insurance carrier, the Company's ongoing premiums are at a
significantly lower rate.
-15-
<PAGE> 16
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NINE MONTHS AND THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS
AND THREE MONTHS ENDED JULY 28, 1995
The information which appears below relates to the current and prior periods,
the results of operations for which periods are not necessarily indicative of
the results which may be expected for any subsequent periods.
This discussion and analysis contains certain forward-looking statements which
are subject to a number of known and unknown risks that, in addition to general
economic and business conditions, could cause actual results, performance and
achievements to differ materially from those described or implied in the
forward-looking statement.
The following summarizes the results of operations by segment:
<TABLE>
<CAPTION>
FOR THE NINE FOR THE THREE
MONTHS ENDED MONTHS ENDED
----------------------------- -------------------------
August 2, July 28, August 2, July 28,
1996 1995 1996 1995
-------- -------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues:
Technical Services and Temporary Personnel $506,599 $395,309 $180,677 $141,357
Electronic Publication and Typesetting Systems 64,059 49,369 21,567 16,666
Telephone Directory 48,955 45,433 18,659 18,777
Engineering and Construction 62,962 45,620 20,420 16,483
Computer Systems 56,815 67,454 18,931 33,912
Equity in net income of joint ventures 82 415 1,865 1,768
Gain on sale of interest in subsidiaries 3,666
Interest and other income (expense) - net 954 771 488 60
Elimination of intersegment revenues (3,374) (3,369) (1,364) (1,271)
-------- -------- -------- ----------
$740,718 $601,002 $261,243 $227,752
======== ======== ======== ========
Income Before Income Taxes, Minority Interests
and Extraordinary Item:
Operating Profit (Loss):
Technical Services and Temporary Personnel $19,264 $18,050 $6,114 $6,159
Electronic Publication and Typesetting Systems (3,065) 409 (1,610) 22
Telephone Directory (1,171) (1,210) 399 241
Engineering and Construction 5,587 2,838 1,859 1,662
Computer Systems 6,029 4,413 2,632 2,157
Eliminations (69) (92) (71) (61)
------- ------- ------ --------
Total Operating Profit 26,575 24,408 9,323 10,180
Equity in net income of joint ventures 82 415 1,865 1,768
Gain on sale of interest in subsidiaries 3,666
Interest and other income (expense) - net 954 771 488 60
General corporate expenses (7,321) (6,977) (2,513) (2,311)
Interest expense (3,537) (4,739) (1,177) (1,317)
Foreign exchange loss - net (304) (12) (27) (22)
------- ------- ------- -------
Income Before Income Taxes, Minority Interests
and Extraordinary Item $20,115 $13,866 $7,959 $8,358
======= ======= ====== ======
</TABLE>
-16-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
Results of Operations - Summary
In the nine-month period of fiscal 1996, revenues increased by $139,716,000, or
23%, from fiscal 1995, as sales increased by $136,200,000, or 23%. Revenues in
the 1996 period also included a pretax gain of $3,666,000 from the sale of an
interest in the Company's Electronic Publication and Typesetting Systems
segment. The increase in sales resulted primarily from a $111,290,000 increase
in sales of the Technical Services and Temporary Personnel segment, a
$17,342,000 increase in sales of the Engineering and Construction segment and a
$14,690,000 increase in the sales of the Electronic Publication and Typesetting
Systems segment, partially offset by a $10,639,000 decrease in the sales of the
Computer Systems segment.
The Company's pretax income before minority interests was $20,115,000 in 1996,
compared to $13,866,000 in 1995. The 1996 income included the $3,666,000 pretax
gain discussed above. The operating profit of the Company's segments increased
by $2,167,000 to $26,575,000 in 1996. The principal increases in the segments'
operating income were from the Engineering and Construction segment, with an
increase of $2,749,000 to $5,587,000; the Computer Systems segment, with an
increase of $1,616,000 to $6,029,000 and the Technical Services and Temporary
Personnel segment, with an increase of $1,214,000 to $19,264,000; partially
offset by the Electronic Publication and Typesetting Systems segment, with a
decrease of $3,474,000, to a loss of $3,065,000 compared to a profit of $409,000
in 1995.
Net income in the nine months of 1996 was $11,891,000 compared to net income of
$8,447,000 in the nine months of 1995.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$111,290,000, or 28%, in 1996 to $506,599,000, and the segment's operating
profit increased by $1,214,000, or 7%, to $19,264,000 compared to $18,050,000 in
1995. Approximately $30,500,000, or 27%, of the segment's 1996 sales increase
was due to pass-through costs primarily related to subcontractors to service
large national contracts and $19,500,000 of the sales increase was the result of
business with new customers. The remainder of the increased business was with
existing customers, partially offset by a $17,035,000 sales decrease to a high
margin customer who no longer requires the segment's services. The increase in
the segment's operating profit was due to the $2,100,000 retrospective workers'
compensation insurance adjustment referred to in Note J in the accompanying
financial statements and the increase in sales volume. The increase was
partially offset by a decrease in gross margin of approximately 2 percentage
points, primarily due to higher subcontractor usage billed without a mark-up,
the loss of the high margin customer discussed above, lower margins on
-17-
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
the increasing business with the large national contracts, and an increase in
unemployment insurance costs. Overhead costs expressed as a percentage of sales
decreased slightly in 1996 compared to 1995. Normal efficiencies resulting from
increased revenue were partially offset by start-up costs to service several
large national customers which are in the initial stages of their contracts.
The Electronic Publication and Typesetting Systems segment's sales increased by
$14,690,000, or 30%, to $64,059,000 in 1996, while the segment incurred an
operating loss of $3,065,000 compared to a profit of $409,000 in 1995. The sales
increase and the related effects on operating profit described below were
primarily due to the first quarter merger with Triple-I, described in Note I in
the accompanying financial statements. The decrease in operating profit was due
to a 3 percentage point increase in total operating expenses expended per sales
dollar, partially offset by the increased sales volume. In addition, the segment
incurred $700,000 of restructuring charges and a charge of $1,068,000 for
amortization of intangibles resulting from the merger. The markets in which the
segment competes are marked by rapidly changing technology, with sales in fiscal
1996 of equipment introduced within the last three years comprising
approximately 97% of equipment sales.
The Telephone Directory segment's sales increased by $3,522,000, or 8%, to
$48,955,000 in fiscal 1996, while the segment incurred an operating loss of
$1,171,000 compared to a loss of $1,210,000 in 1995. The sales increase is due
to a $1,904,000 increase in telephone directory production volume, an increase
in independent directory sales by the segment's DataNational division of 5% and
increased sales by the Uruguayan printing operation of 35%. The operating losses
in 1996 and 1995 were due to costs to enter a new regional independent directory
market, higher operating costs in the Uruguayan printing operations (resulting,
in 1996, from a move to a new facility and installation of new equipment)
partially offset in 1996 by higher telephone directory production revenues and
profits. This segment's services are rendered under various short and long-term
contracts. Certain contracts expire in fiscal 1998 through 2001, and there can
be no assurance that they will be renewed on similar terms or replaced.
The Engineering and Construction segment's sales increased by $17,342,000, or
38%, to $62,962,000 in fiscal 1996 and its operating profit increased by
$2,749,000, or 97%, to $5,587,000 compared to $2,838,000 in 1995. The sales
increase was due to a 59% increase in the construction division and a 6%
increase in the business systems division. Operating results improved due to the
increased sales volume and a 3 percentage point decrease in overhead expended
per sales dollar.
-18-
<PAGE> 19
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
The Computer Systems segment's sales decreased by $10,639,000, or 16%, to
$56,815,000 in 1996; however, its operating profit increased by $1,616,000 or
37% to $6,029,000, from $4,413,000 in 1995. The decrease in sales was primarily
due to higher sales of Delta Operating Service Systems (DOSS) in 1995, compared
to 1996, partially offset by increased sales on conservation services to
utilities. The increase in operating profit was primarily due to increased
profits on conservation services to utilities. Under the completed contract
method of accounting used by this segment, revenues together with related costs
are recognized in income upon acceptance by the customer. Deliveries and
installations under other DOSS contracts continue and customer acceptances are
anticipated later in 1996. Profitability rates on such contracts are not
anticipated to be at the same levels as those earned on the DOSS contracts
accepted in fiscal 1995. This segment's results on a quarter-to-quarter basis
fluctuate as they are highly dependent on the timing of acceptance by customers
under contract for the segment's directory assistance systems, which occurs
periodically rather than evenly.
Results of Operations: Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the nine-month periods were:
Interest income increased by $302,000, or 21%, in 1996, primarily due to the
availability of additional funds for investment.
Other income (expense) changed unfavorably by $119,000 in 1996 primarily due to
$185,000 of higher fees paid in connection with additional sales of receivables.
The Company's share of the net income of its joint ventures was $82,000 in 1996
compared to $415,000 in 1995. The decrease was due to the start-up losses
incurred by the Company's Brazilian joint venture which began operations in July
1994. The Company's share of the net income of its Australian joint venture,
which produces a major portion of its revenues and significantly all of its
profit in the Company's second and third fiscal quarters, increased by $345,000
due to an 11% or $48,000,000 increase in the venture's revenues.
Selling and administrative expenses increased by $7,509,000, or 24%, to
$38,732,000 in 1996 to support the increase in sales. However, these expenses
expressed as a percentage of sales were 5% in both 1996 and 1995.
-19-
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
Research, development and engineering expenditures increased by $3,888,000, or
64%, to $9,952,000 in 1996. The increase was due to additional product
development by the Computer Systems segment and the Electronic Publication and
Typesetting Systems segment.
Depreciation and amortization of property, plant & equipment increased by
$1,434,000, or 16%, to $10,251,000 in 1996. The increase was due to increased
fixed asset expenditures in fiscal 1995 and the nine months of 1996.
Interest expense decreased by $1,202,000, or 25%, to $3,537,000 in 1996. The
decrease was primarily due to the redemption of $10,000,000, in May 1995 of the
Company's 12-3/8% Subordinated Debentures and lower borrowings and interest
rates in Uruguay.
The Company's effective tax rate increased to 43% in 1996 from 39% in 1995. The
1996 tax provision was unfavorably impacted by the effect of increased
nondeductible Brazilian joint venture losses and intangible amortization related
to the Autologic merger and the 1995 tax provision was favorably impacted by the
utilization of a net operating loss carryforward.
-20-
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
Results of Operations - Summary
In the three-month period of fiscal 1996, revenues increased by $33,491,000, or
15%, from fiscal 1995, as sales increased by $32,966,000 or 15%. The increase in
sales resulted primarily from a $39,320,000 increase in sales of the Technical
Services and Temporary Personnel segment, an increase in sales of the Electronic
Publication and Typesetting Systems segment of $4,901,000 and a $3,937,000
increase in sales of the Engineering and Construction segment, partially offset
by a $14,981,000 decrease in the sales of the Computer Systems segment. The
Company's pretax income before minority interests was $7,959,000 in 1996
compared to $8,358,000 in 1995. The operating profit of the Company's segments
decreased by $857,000 to $9,323,000 in 1996. The decrease in the segments'
operating income was principally related to the Electronic Publication and
Typesetting Systems segment which experienced a decrease of $1,632,000, to a
loss of $1,610,000 compared to a $22,000 profit in 1995 partially offset by the
Computer Systems segment, with an increase of $475,000, to a profit of
$2,632,000 compared to $2,157,000 in 1995.
Net income in the third quarter of 1996 was $4,693,000 compared to net income of
$4,994,000 in 1995.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$39,320,000, or 28%, in 1996 to $180,677,000 and operating profit decreased by
$45,000, or 1%, to $6,114,000 compared to $6,159,000 in 1995. Approximately
$10,700,000, or 27%, of the segment's sales increase was due to pass-through
costs primarily related to subcontractors to service large national contracts
and $7,580,000 of the sales increase in 1996 was the result of business with new
customers. The remainder of the increased business was with existing customers,
partially offset by a $8,700,000 sales decrease to a high margin customer who no
longer requires the segment's services. The slight decrease in the segment's
operating profit was due to a decrease in gross margin of approximately 2
percentage points, primarily due to higher subcontractor usage billed without a
mark-up and the loss of the high margin customer discussed above, partially
offset by increased sales volume. Overhead costs expressed as a percentage of
sales decreased slightly in 1996 compared to 1995. Normal efficiencies resulting
from increased revenue were partially offset by start-up costs to service
several large national customers which are in the initial stages of their
contracts.
-21-
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
The Electronic Publication and Typesetting Systems segment's sales increased by
$4,901,000, or 29%, to $21,567,000 in 1996; however, the segment experienced an
operating loss of $1,610,000 compared to an operating profit of $22,000 in 1995.
The sales increase and the related effects on operating profit described below
were primarily due to the first quarter merger with Triple-I, described in Note
I in the accompanying financial statements. The decrease in operating profit was
due to a 7 percentage point increase in total operating expenses expended per
sales dollar, partially offset by the increased sales volume and a 2% increase
in gross margin. The increase in the gross margin percentage resulted from a
change in the product mix (an increase in sales of some high margin products and
a decrease in sales of some low margin items, which are in direct competition
with other manufacturers' products). As a result of the merger with Triple-I,
some of these high margin products which were previously purchased are now
manufactured by the segment. In addition, the segment's operating profit was
reduced by a charge of $534,000 for the amortization of intangibles resulting
from the merger. The markets in which the segment competes are marked by rapidly
changing technology, with sales in fiscal 1996 of equipment introduced within
the last three years comprising approximately 97% of equipment sales.
The Telephone Directory segment's sales decreased by $118,000, or 1%, to
$18,659,000 in fiscal 1996, and the segment's operating profit increased by
$158,000, or 66% to $399,000. The sales decrease is due to the publication in
1995 of certain independent telephone directories by the segment's DataNational
division that will be published in the 1996 fourth quarter, partially offset by
a $555,000 increase in telephone directory production volume and a 6% increase
in Uruguay printing revenue. The operating profit increase was due to higher
telephone directory production revenue partially offset by higher operating
costs in the Uruguayan printing operation (resulting, in 1996, from a move to a
new facility and installation of new equipment). This segment's services are
rendered under various short and long-term contracts. Certain contracts expire
in fiscal 1998 through 2001, and there can be no assurance that they will be
renewed on similar terms or replaced.
The Engineering and Construction segment's sales increased by $3,937,000, or
24%, to $20,420,000 in fiscal 1996 and its operating profit increased by
$197,000 or 12% to $1,859,000 compared to $1,662,000 in 1995. The sales increase
was due to a 31% increase in the construction division and a 23% increase in the
business systems division. Operating results improved due to the increased sales
volume partially offset by a decrease in the gross margin of 1 percentage point.
-22-
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
The Computer Systems segment's sales decreased by $14,981,000, or 44%, to
$18,931,000 in 1996 while the operating profit increased by $475,000 or 22% to
$2,632,000, compared to $2,157,000 in 1995. The decrease in sales was primarily
due to the absence, in 1996, of revenues from 1995 customer acceptance of a
major Delta Operating Service Systems (DOSS) project, partially offset by
increased sales on conservation services to utilities. The increase in operating
profit was primarily due to increased profits on conservation services to
utilities.
Results of Operations: Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the three-month periods were:
Interest income increased by $73,000, or 15%, in 1996 primarily due to
additional funds invested.
Other income (expense) changed favorably by $355,000 in 1996 primarily due to
$183,000 of lower fees paid in connection with sales of receivables and an
increase in sundry income.
The Company's equity in the net income of its joint ventures was $1,865,000 in
1996, as compared to $1,768,000 in 1995. The increase was due to the Company's
share of the net income of its Australian joint venture, which increased by
$548,000 due to an increase in the venture's revenue of $42,000,000 or 19% and
higher margins, partially offset by start-up losses incurred by the Company's
Brazilian joint venture which began operations in July 1994.
Selling and administrative expenses increased by $2,545,000, or 23%, to
$13,635,000 in 1996 to support the increase in sales. However, these expenses
expressed as a percentage of sales were 5% in both 1996 and 1995.
Research, development and engineering expenditures increased by $2,487,000, or
138%, to $4,294,000 in 1996. The increase was due to additional product
development by the Computer Systems segment and the Electronic Publication and
Typesetting Systems segment.
-23-
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
Depreciation and amortization of property, plant & equipment increased by
$434,000, or 14%, to $3,486,000 in 1996. The increase was due to increased fixed
asset expenditures in fiscal 1995 and the nine months of 1996.
Interest expense decreased by $140,000, or 11%, to $1,177,000 in 1996. The
decrease was primarily due to the redemption of $10,000,000, in May 1995 of the
Company's 12-3/8% Subordinated Debentures and lower borrowings and interest
rates in Uruguay.
The Company's effective tax rate increased to 48% in 1996, from 40% in 1995. The
1996 tax provision was unfavorably impacted by the effect of increased
nondeductible Brazilian joint venture losses and intangible amortization related
to the Autologic merger.
-24-
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
Liquidity and Source of Capital
Cash and cash equivalents increased by $3,371,000 in 1996 to $28,721,000, and
working capital increased by $17,046,000 to $74,629,000. Cash flows from
operating activities for the nine months ended August 2, 1996 were $17,041,000.
Many factors reflected in the accompanying consolidated statements of cash flows
affected the amount of cash flows from operating activities. The primary factors
in the cash provided by operating activities in 1996 were the net income of
$11,891,000, reduction in accounts receivable of $14,094,000 and the non-cash
expense of $12,114,000 for total depreciation and amortization, partially offset
by decreases in income taxes payable of $10,972,000, and accrued expenses of
$9,369,000.
The principal factors in the cash applied to investing activities of $13,237,000
were purchases of property, plant and equipment of $13,192,000 and investments
in and advances to the Brazilian joint venture of $6,403,000, partially offset
by the cash resulting from the acquisition of subsidiaries of $8,421,000, net of
transaction costs.
In addition to its cash and cash equivalents, at August 2, 1996, the Company's
investment portfolio, primarily U.S. Treasury Notes and certificates of deposit,
had a carrying value of $4,601,000. The Company also has a $10,000,000 credit
line with a domestic bank under a revolving credit agreement which expires
August 1, 1997, unless renewed. The Company had outstanding bank borrowings
under that line of $1,973,000 at August 2, 1996.
On August 28, 1996, the Company completed a $50,000,000 private placement Senior
debt financing. A portion of the proceeds of the debt financing will be used to
retire the outstanding $22,855,000 Senior Subordinated Debentures on September
27, 1996. The balance of the funds will be used for general corporate purposes.
The Company believes that its current financial position, working capital and
future cash flows will be sufficient to fund its presently contemplated
operations and satisfy its debt obligations. The Company has no material capital
commitments. The Company may determine, from time-to-time in the future, to buy
additional shares of its common stock in the market or in privately negotiated
transactions.
In October 1995, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
stock-based compensation plans. SFAS 123 encourages, but does not require,
adoption of a fair value based method. The company has determined it will
continue to report under Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees."
-25-
<PAGE> 26
PART II - OTHER INFORMATION
ITEM 2-- CHANGES IN SECURITIES
On August 28, 1996, the Company privately placed an aggregate of $50,000,000 of
its 7.92% Senior Notes due August 28, 2004 (the "Notes") to a group of qualified
institutional investors. Proceeds from the borrowing are being used to redeem
the remaining $22,855,000 principal amount of 12-3/8% Senior Subordinated
Debentures due 1998 at par plus accrued interest and for general corporate
purposes. The notes are payable in five equal annual installments beginning on
August 28, 2000. The notes were issued pursuant to a series of identical Note
Purchase Agreements which contain various affirmative and negative covenants
including, among other things, requirements that the Company maintain
consolidated net worth (as defined) of $80,000,000 plus 50% of the Company's
consolidated net income (as defined) commencing with the Company's fiscal year
ending November 1, 1996, a minimum fixed charge ratio coverage and certain
limitations on the extent to which the Company and its subsidiaries can incur
additional indebtedness, liens and sales of assets. The foregoing is a brief
description of the Note Purchase Agreements and is qualified in its entirety by
reference to the Composite Conformed Note Purchase Agreement which appears as
Exhibit 4.01 to this Report.
ITEM 4-- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 1996 Annual Meeting of Shareholders held on June 28, 1996,
shareholders:
(a) elected the following to serve as directors of the Corporation until the
1997 Annual Meeting of the Shareholders, by the following votes:
<TABLE>
<CAPTION>
For Vote Withheld
<S> <C> <C>
Irwin B. Robins 7,430,735 47,087
John R. Torrell III 7,430,830 46,992
Mark N. Kaplan 7,430,830 46,992
</TABLE>
(b) approved to Amend the Company's Certificate of Incorporation to increase
authorized Common Stock from 15,000,000 shares to 30,000,000 shares.
<TABLE>
<CAPTION>
<S> <C> <C>
For: 7,083,928 Against: 371,816 Abstain: 22,078
</TABLE>
-26-
<PAGE> 27
ITEM 4-- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Continued)
(c) reported that a majority of the votes cast at the meeting were voted in
favor of the resolution to ratify the action of the Board of Directors in
appointing Ernst & Young LLP as the Corporation's independent public accountants
for the fiscal year ending November 1, 1996, by the following vote:
<TABLE>
<CAPTION>
<S> <C> <C>
For: 7,460,556 Against: 5,878 Abstain: 11,388
</TABLE>
There were no broker non-votes on any matter voted upon.
ITEM 5-- OTHER INFORMATION
On August 28, 1996, the Company called for the redemption on September 27, 1996
of the remaining $22,855,000 principal amount of 12-3/8% Senior Subordinated
Debentures due 1998 at par plus accrued interest.
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
4.01 Composite Conformed Note Purchase Agreement drafted as of August 28,
1996 with respect to the issuance of the Company's $50,000,000, 7.92%
Senior Notes due August 28, 2004 (excluding disclosure schedules).
15.01 Acknowledgment letter from Ernst & Young LLP
15.02 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
27.01 Financial Data Schedule
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the quarter ended August 2, 1996.
-27-
<PAGE> 28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
(Registrant)
BY: s/ JACK EGAN
------------------------------------------
JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
Date: September 12, 1996
-28-
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EXHIBIT INDEX
4.01 Composite Conformed Note Purchase Agreement drafted as of August 28,
1996 with respect to the issuance of the Company's $50,000,000, 7.92%
Senior Notes due August 28, 2004 (excluding disclosure schedules).
15.01 Acknowledgment letter from Ernst & Young LLP
15.02 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
27.01 Financial Data Schedule
<PAGE> 1
[COMPOSITE CONFORMED COPY WITH
SUBSTANTIALLY ALL EXHIBITS
CONFORMED AS EXECUTED]
VOLT INFORMATION SCIENCES, INC.
NOTE PURCHASE AGREEMENT
DATED AS OF AUGUST 28, 1996
$50,000,000 7.92% SENIOR NOTES DUE AUGUST 28, 2004
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. AUTHORIZATION OF NOTES.............................................. 1
2. SALE AND PURCHASE OF NOTES.......................................... 1
3. CLOSING............................................................. 2
4. CONDITIONS TO CLOSING............................................... 2
4.1 Representations and Warranties............................. 2
4.2 Performance; No Default.................................... 2
4.3 Compliance Certificates.................................... 2
4.4 Opinions of Counsel........................................ 3
4.5 Purchase Permitted By Applicable Law, etc.................. 3
4.6 Sale of Other Notes........................................ 3
4.7 Payment of Special Counsel Fees............................ 3
4.8 Private Placement Number................................... 4
4.9 Rating..................................................... 4
4.10 Changes in Corporate Structure............................. 4
4.11 Receivables Securitization Facility Documents.............. 4
4.12 Proceedings and Documents.................................. 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 4
5.1 Organization; Power and Authority.......................... 4
5.2 Authorization, etc......................................... 5
5.3 Disclosure................................................. 5
5.4 Organization and Ownership of Shares of Subsidiaries;
Affiliates............................ .................. 5
5.5 Financial Statements....................................... 6
5.6 Compliance with Laws, Other Instruments, etc............... 6
5.7 Governmental Authorizations, etc........................... 7
5.8 Litigation; Observance of Agreements, Statutes and Orders.. 7
5.9 Taxes...................................................... 7
5.10 Title to Property; Leases.................................. 7
5.11 Licenses, Permits, etc..................................... 8
5.12 Compliance with ERISA...................................... 8
5.13 Private Offering by the Company............................ 9
5.14 Use of Proceeds; Margin Regulations........................ 9
5.15 Existing Debt; Future Liens................................ 10
5.16 Foreign Assets Control Regulations, etc.................... 10
5.17 Status under Certain Statutes.............................. 10
5.18 Environmental Matters...................................... 10
6. REPRESENTATIONS OF THE PURCHASER.................................... 11
6.1 Purchase for Investment.................................... 11
6.2 Source of Funds............................................ 11
7. INFORMATION AS TO COMPANY........................................... 12
7.1 Financial and Business Information......................... 12
7.2 Officer's Certificate...................................... 15
7.3 Inspection................................................. 16
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS (CONT.)
PAGE
8. PREPAYMENT OF THE NOTES............................................. 16
8.1 Required Prepayments....................................... 16
8.2 Optional Prepayments with Make-Whole Amount................ 17
8.3 Allocation of Partial Prepayments.......................... 17
8.4 Maturity; Surrender, etc................................... 17
8.5 No Other Optional Prepayments or Purchase of Notes......... 17
8.6 Make-Whole Amount.......................................... 17
9. AFFIRMATIVE COVENANTS............................................... 19
9.1 Compliance with Law........................................ 19
9.2 Insurance.................................................. 19
9.3 Maintenance of Properties.................................. 19
9.4 Payment of Taxes and Claims................................ 20
9.5 Corporate Existence, etc................................... 20
9.6 Pari Passu................................................. 20
10. NEGATIVE COVENANTS.................................................. 20
10.1 Transactions with Affiliates............................... 20
10.2 Consolidated Net Worth..................................... 21
10.3 Fixed Charges Coverage Ratio............................... 21
10.4 Ratio of Consolidated Debt to Total Capitalization......... 21
10.5 Subsidiary Debt............................................ 21
10.6 Liens...................................................... 22
10.7 Merger, Consolidation, etc................................. 25
10.8 Sale of Assets, etc........................................ 26
10.9 Sales of Receivables; Limited Recourse..................... 27
11. EVENTS OF DEFAULT................................................... 28
12. REMEDIES ON DEFAULT, ETC............................................ 30
12.1 Acceleration............................................... 30
12.2 Other Remedies............................................. 31
12.3 Rescission................................................. 31
12.4 No Waivers or Election of Remedies, Expenses, etc.......... 31
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES....................... 31
13.1 Registration of Notes...................................... 31
13.2 Transfer and Exchange of Notes............................. 32
13.3 Replacement of Notes....................................... 32
14. PAYMENTS ON NOTES................................................... 33
14.1 Place of Payment........................................... 33
14.2 Home Office Payment........................................ 33
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TABLE OF CONTENTS (CONT.)
PAGE
15. EXPENSES, ETC....................................................... 33
15.1 Transaction Expenses....................................... 33
15.2 Survival................................................... 34
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT........ 34
17. AMENDMENT AND WAIVER................................................ 34
17.1 Requirements............................................... 34
17.2 Solicitation of Holders of Notes........................... 34
17.3 Binding Effect, etc........................................ 35
17.4 Notes held by Company, etc................................. 35
18. NOTICES............................................................. 35
19. REPRODUCTION OF DOCUMENTS........................................... 36
20. CONFIDENTIAL INFORMATION............................................ 36
21. SUBSTITUTION OF PURCHASER........................................... 38
22. MISCELLANEOUS....................................................... 38
22.1 Successors and Assigns..................................... 38
22.2 Payments Due on Non-Business Days.......................... 38
22.3 Severability............................................... 38
22.4 Construction............................................... 38
22.5 Counterparts............................................... 39
22.6 Governing Law.............................................. 39
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 4.10 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of
Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.14 -- Use of Proceeds
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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<TABLE>
<CAPTION>
<S> <C>
SCHEDULE 5.15 -- Existing Debt
EXHIBIT 1 -- Form of 7.92% Senior Note due August 28, 2004
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of the General Counsel of the Company
EXHIBIT 4.4(c) -- Form of Opinion of Special Counsel for the Purchasers
</TABLE>
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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VOLT INFORMATION SCIENCES, INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
7.92% SENIOR NOTES DUE AUGUST 28, 2004
Dated as of August 28, 1996
To the Purchaser Named on the
Signature Page Hereto
Ladies and Gentlemen:
Volt Information Sciences, Inc., a New York corporation (together with its
successors and assigns, the "COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES
The Company will authorize the issue and sale of $50,000,000 aggregate
principal amount of its 7.92% Senior Notes due August 28, 2004 (the "Notes,"
such term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements (as hereinafter defined)).
The Notes shall be substantially in the form set out in Exhibit 1, with such
changes therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified opposite your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (as they may from time to time
be amended, supplemented or restated, the "Other Agreements") identical with
this Agreement with each of the other purchasers named in Schedule A (the "Other
Purchasers"), providing for the sale at such Closing to each of the Other
Purchasers of Notes in the principal amount specified opposite its name in
Schedule A. Your obligation hereunder and the obligations of the Other
Purchasers under the Other Agreements are several and not joint obligations and
you shall have no obligation under any Other Agreement and no liability to any
Person for the performance or non-performance by any Other Purchaser thereunder.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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3. CLOSING
3. CLOSING
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Hebb & Gitlin, One State Street,
Hartford, Connecticut 06103, at 10:00 a.m., Hartford time, at a closing (the
"Closing") on August 28, 1996. At the Closing the Company will deliver to you
the Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as you may request) dated
the date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
150-0- 21157 at Chase Manhattan Bank, One Chase Manhattan Plaza, New York, New
York 10081, ABA Number 021000021, Notify David Sunderwirth at (212) 622-4108. If
at the Closing the Company shall fail to tender such Notes to you as provided
above in this Section 3, or any of the conditions specified in Section 4 shall
not have been fulfilled to your satisfaction, you shall, at your election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
1 Representations and Warranties.
The representations and warranties of the Company in this Agreement shall
be correct when made and at the time of the Closing.
2 Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
Section 10.1, Section 10.5 or Section 10.6 hereof had such Sections applied
since such date.
3 Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to
you an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.10 have been
fulfilled.
(b) Secretary's Certificate. The Company shall have delivered
to you a certificate of its Secretary or one of its Assistant
Secretaries, dated the date of Closing, certifying as to the
resolutions attached thereto and other corporate
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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4. CONDITIONS TO CLOSING
proceedings relating to the authorization, execution and delivery of
the Notes, this Agreement and the Other Agreements.
4 Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to you,
dated the date of the Closing,
(a) from Parker Chapin Flattau & Klimpl, LLP, counsel for the
Company, covering the matters set forth in Exhibit 4.4(a) and covering
such other matters incident to the transactions contemplated hereby as
you or your counsel may reasonably request (and the Company hereby
instructs such counsel to deliver such opinion to you),
(b) from Howard B. Weinreich, Esq., General Counsel of the
Company, covering the matters set forth in Exhibit 4.4(b) and covering
such other matters incident to the transactions contemplated hereby as
you or your counsel may reasonably request (and the Company hereby
instructs such counsel to deliver such opinion to you), and
(c) from Hebb & Gitlin, your special counsel in connection with
such transactions, substantially in the form set forth in Exhibit
4.4(c) and covering such other matters incident to such transactions as
you may reasonably request.
5 Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall (a) be permitted by
the laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation G, T or X of the
Board of Governors of the Federal Reserve System) and (c) not subject you to any
tax, penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
6 Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
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4. CONDITIONS TO CLOSING
7 Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the reasonable fees, charges and disbursements of
your special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
8 Private Placement Number.
A Private Placement number issued by Standard & Poor's CUSIP Service Bureau
(in cooperation with the Securities Valuation Office of the National Association
of Insurance Commissioners) shall have been obtained for the Notes.
9 Rating.
You shall have received a copy of a letter from Duff & Phelps Credit Rating
Co. to the Company assigning a rating to the Notes of at least BBB- and such
rating shall continue to be in force and effect (not having been withdrawn) at
the time of the Closing.
10 Changes in Corporate Structure.
Except as specified in Schedule 4.10, the Company shall not have changed
its jurisdiction of incorporation or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
11 Receivables Securitization Facility Documents.
The Company shall have delivered to you an Officer's Certificate, dated the
date of Closing, certifying that attached thereto are true and complete copies
of the Primary Asset Purchase and Sale Agreement, the Secondary Asset Purchase
and Sale Agreement and all amendments, modifications and supplements thereto.
12 Proceedings and Documents.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to you, as of the date of this
Agreement and (if different) as of the date of the Closing, that:
1 Organization; Power and Authority.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York, and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Other
Agreements and the Notes and to perform the provisions hereof and thereof.
2 Authorization, etc.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3 Disclosure.
The Company, through its agent, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, has delivered to you and each Other Purchaser a copy of a Private
Placement Memorandum, dated July 1996 (including the appendices and any other
attachments thereto, the "Memorandum"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by or
on behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since November 3, 1995, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
4 Organization and Ownership of Shares of Subsidiaries;
Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete
and correct lists of (i) the Company's Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and
each other Subsidiary, (ii) the Company's Affiliates, other than
Subsidiaries, and (iii) the Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 as being
owned by the Company and its Subsidiaries have been validly issued, are
fully paid and nonassessable and are owned by the Company or another
Subsidiary free and clear of any Lien (except as otherwise disclosed in
Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign corporation or other legal entity
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or
other power and authority to own or hold
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
under lease the properties it purports to own or hold under lease and
to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 5.4 and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to
pay dividends out of profits or make any other similar distributions of
profits to the Company or any of its Subsidiaries that owns outstanding
shares of capital stock or similar equity interests of such Subsidiary.
5 Financial Statements.
The Company has delivered to you and each Other Purchaser copies of the
financial statements of the Company and its Subsidiaries listed on Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
6 Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this Agreement
and the Notes will not
(a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any
property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to
which the Company or any Subsidiary is bound or by which the Company or
any Subsidiary or any of their respective properties may be bound or
affected,
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of
any court, arbitrator or Governmental Authority applicable to the
Company or any Subsidiary, or
(c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or
any Subsidiary.
7 Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
8 Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under
any term of any agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
9 Taxes.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of which is not
individually or in the aggregate Material or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended October 31, 1988.
10 Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of under
the Receivables Securitization Facility or in the ordinary course of business),
in each case free and clear of Liens prohibited by this Agreement. All leases
that individually or in the aggregate are Material are valid and subsisting and
are in full force and effect.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
11 Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict
with the rights of others;
(b) to the best knowledge of the Company, no product or
practice of the Company infringes in any material respect any license,
permit, franchise, authorization, patent, copyright, service mark,
trademark, trade name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or
any of its Subsidiaries.
12 Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate, in either case pursuant
to Title I or IV of ERISA or to such penalty or excise tax provisions
or to section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans), determined as
of the end of such Plan's most recently ended plan year on the basis of
the actuarial assumptions specified for funding purposes in such Plan's
most recent actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to such benefit
liabilities. The term "Benefit Liabilities" has the meaning specified
in section 4001 of ERISA and the terms "Current Value" and "Present
Value" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(d) The expected postretirement benefit obligation (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its
Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406 of ERISA
or in connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
first sentence of this Section 5.12(e) is made in reliance upon and
subject to the accuracy of your representation in Section 6.2 as to the
sources of the funds used to pay the purchase price of the Notes to be
purchased by you.
13 Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the Other Purchasers and not more than 105 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of section 5 of the Securities Act.
14 Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes as set forth
in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 1% (or, to the extent that capital stock of
Autologic may be deemed to constitute margin stock, 20%) of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 1% (or,
to the extent that capital stock of Autologic may be deemed to constitute margin
stock, 20%) of the value of such assets. As used in this Section, the terms
"margin stock" and "purpose of buying or carrying" shall have the meanings
assigned to them in said Regulation G.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
15 Existing Debt; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a
complete and correct list of all outstanding Debt of the Company and
its Subsidiaries as of August 2, 1996, since which date there has been
no Material change in the amounts, interest rates, sinking funds,
instalment payments or maturities of the Debt of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and
no waiver of default is currently in effect, in the payment of any
principal or interest on any Debt of the Company or such Subsidiary and
no event or condition exists with respect to any Debt of the Company or
any Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Debt to
become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company
nor any Subsidiary has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a
Lien not permitted by Section 10.6(a).
16 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
17 Status under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Transportation Acts, as amended, or the Federal
Power Act, as amended.
18 Environmental Matters.
Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
on or in any way related to real properties now or formerly owned,
leased or operated by any of them or to other assets or their use,
except, in each case, such as could not reasonably be expected to
result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored
any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them and has not disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case
in any manner that could reasonably be expected to result in a Material
Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.
6. REPRESENTATIONS OF THE PURCHASER
1 Purchase for Investment.
You represent that you are an "insurance company" (as such term is defined
in section 2(13) of the Securities Act) or another "accredited investor" (as
such term is defined in section 2(15) of the Securities Act) referred to in
section 2(15)(i) of the Securities Act and are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
2 Source of Funds.
You represent, with respect to the funds with which you are acquiring the
Notes, that all of such funds are from or are attributable to one or more of:
(a) General Account -- your "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and that, at the time of
the Closing, there is no "employee benefit plan" (within the meaning of
section 3(3) of ERISA) maintained by a single employer which when
aggregated with all other employee benefit plans maintained by such
employer, any employee organization of such employer and any
"affiliate" (as defined in section V(a)(1) of the PTE) of such employer
with respect to which the aggregate amount of the general account
reserves and liabilities for all contracts held by or on behalf of such
plans, exceeds ten percent (10%) of the total reserves and liabilities
of such general account (exclusive of separate account liabilities)
plus surplus, as set forth in the most recent National Association of
Insurance Commissioners Annual Statement filed with your state of
domicile; for purposes of determining
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6. REPRESENTATIONS OF THE PURCHASER
such percentage limitation, the amount of reserves and liabilities for
the general account contracts held by or on behalf of any employee
benefit plan shall be determined before reduction for credits on
account of any reinsurance ceded on a coinsurance basis;
(b) Separate Account -- a "separate account" (as defined in
section 3 of ERISA):
(i) 10% Pooled Separate Account -- in respect of which
all requirements for an exemption under DOL Prohibited
Transaction Class Exemption 90-1 are met with respect to the
use of such funds to purchase the Notes;
(ii) Identified Plan Assets -- that is comprised of
employee benefit plans identified by you in writing and with
respect to which the Company hereby warrants and represents
that, at the time of the Closing, neither the Company nor any
ERISA Affiliate is a "party in interest" (as defined in
section 3 of ERISA) or a "disqualified person" (as defined in
section 4975 of the Code) with respect to any plan so
identified; or
(iii) Guaranteed Separate Account -- that is maintained
solely in connection with fixed contractual obligations of an
insurance company, under which any amounts payable, or
credited, to any employee benefit plan having an interest in
such account and to any participant or beneficiary of such
plan (including an annuitant) are not affected in any manner
by the investment performance of the separate account (as
provided by 29 C.F.R. Section 2510.3-101(h)(1)(iii));
(c) Qualified Professional Asset Manager -- an "investment
fund" managed by a "qualified professional asset manager" (as such
terms are defined in Part V of DOL Prohibited Transaction Class
Exemption 84-14) and all the requirements for an exemption under such
Exemption are met with respect to the use of funds to purchase the
Notes;
(d) Excluded Plan -- an employee benefit plan that is excluded
from the provisions of section 406 of ERISA by virtue of section 4(b)
of ERISA; or
(e) Exempt Funds -- a separate investment account that is not
subject to ERISA and no funds of which come from assets of an "employee
benefit plan" or a "plan" or any other entity that is deemed to hold
assets (within the meaning of 29 C.F.R. Section 2510.3-101) of an
"employee benefit plan" or a "plan" ("employee benefit plan" is defined
in section 3 of ERISA, and "plan" is defined in section 4975(e)(1) of
the Code).
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7. INFORMATION AS TO COMPANY
7. INFORMATION AS TO COMPANY
1 Financial and Business Information.
The Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a) Quarterly Statements -- within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of operations,
stockholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the
consolidated financial position of the companies being reported on and
their consolidated results of operations and cash flows, subject to
changes resulting from year-end adjustments, provided that delivery
within the time period specified above of copies of the Company's
Quarterly Report on Form 10-Q (excluding exhibits thereto, unless
requested in the particular case or unless necessary to conform to any
of the requirements referred to above in this Section 7.1(a)) prepared
in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) Annual Statements -- within 100 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of operations,
stockholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with
GAAP, and accompanied by
(A) an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that such
financial statements present fairly, in all material
respects, the consolidated financial position of the
companies being reported upon and their consolidated
results of operations
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<PAGE> 20
7. INFORMATION AS TO COMPANY
and cash flows and have been prepared in conformity
with GAAP, and that the examination of such
accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating
that they have reviewed this Agreement and stating
further whether, in making their audit, they have
become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if
they are aware that any such condition or event then
exists, specifying the nature and period of the
existence thereof (it being understood that such
accountants shall not be liable, directly or
indirectly, for any failure to obtain knowledge of
any Default or Event of Default unless such
accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted
auditing standards or did not make such an audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K (excluding exhibits thereto,
unless requested in the particular case or unless necessary to conform
to any of the requirements referred to above in this Section 7.1(b))
for such fiscal year prepared in accordance with the requirements
therefor and filed with the Securities and Exchange Commission,
together with the accountant's certificate described in clause (B)
above, shall be deemed to satisfy the requirements of this Section
7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, annual or other
report (including, without limitation, each annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act), notice or proxy statement sent by the Company or any
Subsidiary to public securities holders generally, and (ii) each
regular or periodic report, each registration statement (without
exhibits except as expressly requested by such holder), and each
prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company
or any Subsidiary to the public concerning developments that are
Material;
(d) Notice of Default or Event of Default -- promptly, and in
any event within five days, after a Responsible Officer becoming aware
of the existence of any Default or Event of Default or that any Person
has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to
take with respect thereto;
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<PAGE> 21
7. INFORMATION AS TO COMPANY
(e) Erisa Matters -- promptly, and in any event within five
days, after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which the 30-day reporting requirement has not
been waived pursuant to such regulations as in effect on the
date hereof; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any
event within 30 days, after a Responsible Officer becomes aware
thereof, copies of any notice to the Company or any Subsidiary from any
Federal or state Governmental Authority relating to any order, ruling,
statute or other law or regulation that could reasonably be expected to
have a Material Adverse Effect;
(g) Actions, Proceedings -- promptly after a Responsible
Officer becomes aware of the commencement thereof, notice of any action
or proceeding relating to the Company or any Subsidiary in any court or
before any Governmental Authority or arbitration board or tribunal as
to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected to have
a Material Adverse Effect; and
(h) Requested Information -- with reasonable promptness, (i)
such other data and information (A) relating to the business,
operations, affairs, financial condition, assets or properties of the
Company or any of its Subsidiaries or (B) relating to the ability of
the Company to perform its obligations hereunder and under the Notes as
from time to time may be reasonably requested by any such holder of
Notes or (ii) such information regarding the Company required to
satisfy the requirements of 17 C.F.R. Section 230.144A, as amended from
time to time, in connection with any contemplated transfer of the
Notes.
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<PAGE> 22
7. INFORMATION AS TO COMPANY
2 Officer's Certificate.
Each set of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of
a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.2 through 10.9 hereof,
inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review has not
disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
3 Inspection.
The Company shall permit the representatives of each holder of Notes that
is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in
writing; and
(b) Default -- if a Default or Event of Default then exists, at
the expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective
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7. INFORMATION AS TO COMPANY
officers and independent public accountants (and by this provision the
Company authorizes said accountants to discuss the affairs, finances
and accounts of the Company and its Subsidiaries), all at such times
and as often as may be requested.
8. PREPAYMENT OF THE NOTES
1 Required Prepayments.
On August 28, 2000 and on each August 28 thereafter to and including August
28, 2003, the Company will prepay $10,000,000 principal amount (or such lesser
principal amount as shall then be outstanding) of the Notes at par and without
payment of the Make-Whole Amount or any premium, provided that any partial
prepayment of the Notes pursuant to Section 8.2 shall be applied first to the
payment required at the maturity date of the Notes and then to the required
prepayments of the Notes becoming due under this Section 8.1 on and after the
date of such prepayment in inverse chronological order.
2 Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes, in a principal amount
of not less than $5,000,000 or such lesser amount as shall then be outstanding,
at 100% of the principal amount so prepaid, plus the Make-Whole Amount
determined for the prepayment date with respect to such principal amount. The
Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date, the aggregate principal amount of the Notes to be prepaid on such
date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.3), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
3 Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof.
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8. PREPAYMENT OF THE NOTES
4 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment (which, in the case of Section
8.2, shall be the date specified for prepayment in the Company's notice of
prepayment delivered pursuant to Section 8.2), together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
5 No Other Optional Prepayments or Purchase of Notes.
Except as provided in Section 8.2, the Company will not make any optional
prepayment (whether directly or indirectly by purchase or other acquisition) in
respect of the Notes.
6 Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, .50% over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 678" on the
Telerate Access Service (or such other display as may replace Page 678
Telerate Access Service) for actively traded U.S. Treasury securities
having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of
the second Business Day preceding the Settlement Date with respect to
such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called
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8. PREPAYMENT OF THE NOTES
Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of
the second Business Day preceding the Settlement Date with respect to
such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date. Such implied yield will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating
linearly between (1) the actively traded U.S. Treasury security with
the duration closest to and greater than the Remaining Average Life and
(2) the actively traded U.S. Treasury security with the duration
closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
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9. AFFIRMATIVE COVENANTS
9. AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
1 Compliance with Law.
The Company will and will cause each of its Subsidiaries to comply with all
laws, ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
2 Insurance.
The Company will and will cause each of its Subsidiaries to maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
3 Maintenance of Properties.
The Company will and will cause each of its Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times, provided that this Section 9.3 shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company or such Subsidiary has concluded that such discontinuance could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
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9. AFFIRMATIVE COVENANTS
4 Payment of Taxes and Claims.
The Company will and will cause each of its Subsidiaries to file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes, assessments,
charges or levies have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that have
or might become a Lien on properties or assets of the Company or any Subsidiary,
provided that neither the Company nor any Subsidiary need pay any such tax or
assessment or claims if (a) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (b) the nonpayment of all such taxes, assessments and
claims in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
5 Corporate Existence, etc.
The Company will at all times preserve and keep in full force and effect
its corporate existence. Subject to Sections 10.7 and 10.8, the Company will
cause its Subsidiaries to at all times preserve and keep in full force and
effect their respective corporate existence (unless merged into the Company or a
Subsidiary), and the Company will (as to itself) and will cause each respective
Subsidiary (as to such Subsidiary) to preserve and keep in full force and effect
their respective rights and franchises unless, in the good faith judgment of the
Company or such Subsidiary, the termination of or failure to preserve and keep
in full force and effect such corporate existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.
6 Pari Passu.
The Company covenants that its obligations under the Notes and under this
Agreement and the Other Agreements do and will rank at least pari passu with all
its other present and future unsecured Senior Debt.
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10. NEGATIVE COVENANTS
10. NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
1 Transactions with Affiliates.
The Company will not and will not permit any Subsidiary to enter into,
directly or indirectly, any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate. For purposes of the
preceding sentence, transactions between the Company or any Subsidiary and any
joint venture partnership in which the Company or such Subsidiary is a partner
or another participant shall be deemed to be in the ordinary course of the
Company's or such Subsidiary's business.
2 Consolidated Net Worth.
The Company will not, at any time, permit Consolidated Net Worth to be less
than the sum of (a) $80,000,000 plus (b) an aggregate amount equal to 50% of
Consolidated Net Income (but, in each case, only if a positive number) for each
completed fiscal year beginning with the fiscal year ending November 1, 1996.
3 Fixed Charges Coverage Ratio.
The Company will not permit, as of the last day of any fiscal quarter of
the Company, the ratio of (a) Consolidated Income Available for Fixed Charges
for the period of four consecutive fiscal quarters of the Company ending on such
date, to (b) Fixed Charges for such period of four consecutive fiscal quarters,
to be less than 2.25 to 1.
4 Ratio of Consolidated Debt to Total Capitalization.
The Company will not at any time permit Consolidated Debt as of such time
to exceed 50% of Consolidated Total Capitalization as of such time.
5 Subsidiary Debt.
(a) The Company will not at any time permit any Subsidiary to,
directly or indirectly, create, incur, assume, guarantee, have
outstanding, or otherwise become or remain directly or indirectly
liable with respect to, any Funded Debt other than:
(i) Funded Debt of a Subsidiary owed to the Company
or another Subsidiary;
(ii) Funded Debt of a Subsidiary outstanding on the
date of the Closing and disclosed in Schedule 5.15;
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10. NEGATIVE COVENANTS
(iii) Funded Debt of a Subsidiary outstanding at the
time such Subsidiary becomes a Subsidiary, provided that (A)
such Funded Debt shall not have been incurred in contemplation
of such Subsidiary becoming a Subsidiary and (B) immediately
after such Subsidiary becomes a Subsidiary no Default or Event
of Default shall exist;
(iv) extensions, renewals or refundings of Funded Debt
permitted under subsection (ii) or subsection (iii) above,
provided that (A) in the case of Funded Debt permitted under
subsection (ii) above, the principal amount thereof shall not
exceed the principal amount outstanding on the date of the
Closing, and (B) in the case of Funded Debt permitted under
subsection (iii) above, the principal amount thereof shall not
exceed the principal amount outstanding immediately prior to
such extension, renewal or refunding; and
(v) Funded Debt of a Subsidiary in addition to that
otherwise permitted by the foregoing provisions of this
Section 10.5, provided that on the date the Subsidiary incurs
or otherwise becomes liable with respect to any such
additional Funded Debt and immediately after giving effect
thereto and the concurrent retirement of any other Funded
Debt,
(A) no Default or Event of Default exists,
and
(B) the sum, without duplication, of all
Funded Debt incurred pursuant to this subsection
(a)(v) plus all the then outstanding Debt of the
Company and its Subsidiaries secured by Liens
permitted solely under paragraph (xi) of Section
10.6(a), does not exceed 20% of Consolidated Net
Worth as of the end of the then most recent fiscal
quarter of the Company.
(b) The Company will not permit Volt Funding to, directly or
indirectly, create, incur, assume, guarantee, have outstanding, or
otherwise become or remain directly or indirectly liable with respect
to, any Debt other than Securitization Attributable Debt under the
Receivables Securitization Facility (not to exceed the amount specified
in paragraph (b) of Section 10.9).
6 Liens.
(a) Negative Pledge. The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly create, incur,
assume or permit to exist (upon the happening of a contingency or
otherwise) any Lien on or with respect to any property or asset
(including, without limitation, any document or instrument in respect
of goods or accounts receivable) of the Company or any such Subsidiary,
whether now owned or held or hereafter acquired, or any income or
profits therefrom or assign or otherwise convey any right to receive
income or profits, except:
(i) Liens for taxes, assessments or other governmental
charges or levies, and statutory Liens of landlords and Liens
of carriers,
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10. NEGATIVE COVENANTS
warehousemen, mechanics, materialmen and other similar Liens,
in each case incurred in the ordinary course of business and
not yet due and payable or the payment of which is not at the
time required by Section 9.4;
(ii) Liens of or resulting from any judgment or award
the time for the appeal or petition for rehearing of which
shall not have expired, or in respect of which the Company or
a Subsidiary shall at any time in good faith be prosecuting an
appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review
shall have been secured, provided that the aggregate amount so
secured (net of any amount thereof covered by insurance
maintained by the Company or a Subsidiary, the issuer of which
insurance is an independent commercial insurer that, in the
good faith judgment of the Company, is capable of discharging
its payment obligations in connection with such insurance and
which insurer has not denied such coverage) does not at any
time exceed $5,000,000 (or equivalent) (provided further that,
notwithstanding the foregoing, if the Company discharges any
such Liens within (A) 60 days after the expiration of such
time for appeal or petition for rehearing or the expiration of
such stay in the case of such aggregate amount so secured
being $1,000,000 (or equivalent) or less or (B) five Business
Days after the expiration of such time for appeal or petition
for rehearing or the expiration of such stay in the case of
such aggregate amount so secured being more than $1,000,000
(or equivalent) but less than $5,000,000 (or equivalent), then
during the applicable period referred to in the foregoing
clause (A) or (B), as the case may be, such Liens shall be
deemed to be permitted pursuant to this paragraph (ii));
(iii) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business
(A) in connection with workers' compensation, unemployment
insurance and other types of social security or retirement
benefits, or (B) to secure (or to obtain letters of credit
that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other
than Capital Leases), performance bonds, purchase,
construction or sales contracts and other similar obligations,
in each case not incurred or made in connection with the
borrowing of money or the obtaining of advances or the payment
of the deferred purchase price of property;
(iv) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or
encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of the business of the Company or
any of its Subsidiaries, provided that such Liens do not, in
the aggregate, materially detract from the value of such
property for the purpose of such business;
(v) (A) Liens on property or assets of the Company or
any of its Subsidiaries securing Debt owing to the Company or
to any of its Wholly-Owned Subsidiaries and (B) Liens on
property or assets of any of the
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10. NEGATIVE COVENANTS
Subsidiaries of Autologic securing Debt owing to Autologic or
to any of the Subsidiaries of Autologic;
(vi) Liens existing on the date of this Agreement and
securing the Debt of the Company and its Subsidiaries referred
to in Schedule 5.15 (other than any Liens granted under the
Receivables Securitization Facility, such Liens being
addressed in paragraph (x) of this Section 10.6(a));
(vii) any Lien created to secure all or any part of the
purchase price, or to secure Debt incurred or assumed to pay
all or any part of the purchase price or cost of construction,
of property (or any improvement thereon) acquired or
constructed by the Company or a Subsidiary after the date of
the Closing, provided that
(A) any such Lien shall extend solely to the
item or items of such property (or improvement
thereon) so acquired or constructed and, if required
by the terms of the instrument originally creating
such Lien, other property (or improvement thereon)
which is an improvement to or is acquired for
specific use in connection with such acquired or
constructed property (or improvement thereon) or
which is real property being improved by such
acquired or constructed property (or improvement
thereon),
(B) the principal amount of the Debt secured
by any such Lien shall not exceed an amount equal to
the Fair Market Value (as determined in good faith by
the board of directors of the Company) of such
property (or improvement thereon) at the time of such
acquisition or construction, and
(C) any such Lien shall be created
contemporaneously with, or within 120 days after, the
acquisition or construction of such property;
(viii) any Lien existing on property of a Person
immediately prior to its being consolidated with or merged
into the Company or a Subsidiary or its becoming a Subsidiary,
or any Lien existing on any property acquired by the Company
or any Subsidiary at the time such property is so acquired
(whether or not the Debt secured thereby shall have been
assumed), provided that (A) no such Lien shall have been
created or assumed in contemplation of such consolidation or
merger or such Person's becoming a Subsidiary or such
acquisition of property, and (B) each such Lien shall extend
solely to the item or items of property so acquired and, if
required by the terms of the instrument originally creating
such Lien, other property which is an improvement to or is
acquired for specific use in connection with such acquired
property;
(ix) any Lien renewing, extending or refunding any Lien
permitted by paragraph (vi), paragraph (vii) or paragraph
(viii) of this Section
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10. NEGATIVE COVENANTS
10.6(a), provided that (A) the principal amount of Debt
secured by such Lien immediately prior to such extension,
renewal or refunding is not increased, (B) such Lien is not
extended to any other property, and (C) immediately after such
extension, renewal or refunding no Default or Event of Default
would exist;
(x) Liens granted by Volt Funding pursuant to the
Receivables Securitization Facility to the "Investor" and to
the "Banks" (as such terms are defined in the Primary Asset
Purchase and Sale Agreement and the Secondary Asset Purchase
and Sale Agreement), provided that (A) such Liens encumber
only accounts receivable (which accounts receivable are from
time to time originated in the Temporary Services division,
the Technical Services division and the Directory Services
division of the Company and certain Subsidiaries and sold from
time to time to Volt Funding) and certain other related
property of the types (and such Liens secure only obligations
of the types) referred to in Section 2.16 of the Primary Asset
Purchase and Sale Agreement and Section 2.15 of the Secondary
Asset Purchase and Sale Agreement, as such agreements are in
effect on the date of Closing, and (B) this paragraph (x)
shall not apply at any time when the Company is not in
compliance with Section 10.9; and
(xi) other Liens not otherwise permitted by paragraphs
(i) through (x) of this Section 10.6(a), provided that, at the
time of the creation or incurrence thereof and after giving
effect thereto, the sum (without duplication) of (A) the
aggregate amount of Debt secured by Liens permitted solely
under this paragraph (xi) plus (B) the aggregate amount of
then outstanding Funded Debt of Subsidiaries incurred pursuant
to Section 10.5(a)(v) does not exceed 20% of Consolidated Net
Worth as of the end of the then most recent fiscal quarter of
the Company.
(b) Equal and Ratable Lien; Equitable Lien. If,
notwithstanding the prohibition contained herein, the Company shall, or
shall permit any of its Subsidiaries to, directly or indirectly create,
incur, assume or permit to exist any Lien securing Debt for borrowed
money, other than those Liens permitted by the provisions of paragraphs
(i) through (xi) of Section 10.6(a), it will make or cause to be made
effective provision whereby the Notes will be secured equally and
ratably with any and all other obligations thereby secured, such
security to be pursuant to agreements reasonably satisfactory to the
Required Holders and, in any such case, the Notes shall have the
benefit, to the fullest extent that, and with such priority as, the
holders of the Notes may be entitled under applicable law, of an
equitable Lien on such property. Such violation of Section 10.6(a) will
constitute an Event of Default, whether or not provision is made for an
equal and ratable Lien pursuant to this Section 10.6(b).
(c) Financing Statements. The Company will not, and will not
permit any Subsidiary to, sign or file a financing statement under the
Uniform Commercial Code of any jurisdiction that names the Company or
such Subsidiary as debtor, or sign any security agreement authorizing
any secured party thereunder to file any such financing statement,
except, in any such case, a financing statement filed or to be filed to
perfect or protect a security interest that the Company or
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10. NEGATIVE COVENANTS
such Subsidiary is entitled to create, assume or incur, or permit to
exist, under the foregoing provisions of this Section 10.6 or to
evidence for informational purposes a lessor's or a consignor's
interest in property leased or consigned to the Company or any such
Subsidiary.
7 Merger, Consolidation, etc.
The Company will not consolidate with or merge with any other Person or
convey, transfer or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person, provided that the foregoing
restriction does not apply to the consolidation or merger of the Company with,
or the conveyance, transfer or lease of all or substantially all of the assets
of the Company in a single transaction or series of transactions to, any Person
so long as:
(a) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer or
lease all or substantially all of the assets of the Company as an
entirety, as the case may be (the "Successor Corporation"), shall be a
solvent corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes
its assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement, the Other Agreements and
the Notes (pursuant to such agreements and instruments as shall be
reasonably satisfactory to the Required Holders), and the Company shall
have caused to be delivered to each holder of Notes an opinion of
independent counsel referred to in Section 4.4(a), other nationally
recognized independent counsel, or other independent counsel reasonably
satisfactory to the Required Holders, to the effect that all agreements
or instruments effecting such assumption are enforceable in accordance
with their terms and comply with the terms hereof; and
(c) immediately after giving effect to such transaction no
Default or Event of Default would exist.
No such conveyance, transfer or lease of all or substantially all of the
assets of the Company shall have the effect of releasing the Company or any
Successor Corporation from its liability under this Agreement or the Notes.
8 Sale of Assets, etc.
Except as permitted under Section 10.7 or Section 10.9, the Company will
not, and will not permit any of its Subsidiaries to, make any Asset Disposition,
provided that the Company and its Subsidiaries may engage in Asset Dispositions
involving assets other than accounts receivable if:
(a) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair Market Value
at least equal to that of
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10. NEGATIVE COVENANTS
the property exchanged and is in the best interest of the Company or
such Subsidiary; and
(b) immediately after giving effect to the Asset Disposition,
no Default or Event of Default would exist; and
(c) immediately after giving effect to the Asset Disposition,
(i) the Disposition Value of all property that was
the subject of an Asset Disposition permitted by this Section
10.8 during the then current fiscal year of the Company would
not exceed 15% of Consolidated Assets as of the end of the
then most recently ended fiscal year of the Company, and
(ii) the Disposition Value of all property that was
the subject of an Asset Disposition permitted by this Section
10.8 on or after the date of the Closing would not exceed 30%
of Consolidated Assets as of the end of the then most recently
ended fiscal year of the Company.
If the Net Proceeds Amount for any Transfer is applied, within 365 days
after such Transfer, to the acquisition by the Company or a Subsidiary of
operating assets of the Company or any Subsidiary to be used in the ordinary
course of business of such Person, then such Transfer, only for the purpose of
determining compliance with subsection (c) as of a date on or after the Net
Proceeds Amount is so applied, shall be deemed not to be an Asset Disposition.
9 Sales of Receivables; Limited Recourse.
Notwithstanding the provisions of Section 10.8, Volt Funding may, at any
time and from time to time, sell, pursuant to the Receivables Securitization
Facility, "Eligible Assets" (as such term is defined under both the Primary
Asset Purchase and Sale Agreement and the Secondary Asset Purchase and Sale
Agreement) to the "Investor" (as such term is defined in the Primary Asset
Purchase and Sale Agreement) and to the "Banks" (as such term is defined in the
Secondary Asset Purchase and Sale Agreement), provided that:
(a) such "Eligible Assets" shall consist of undivided percentage
ownership interests in accounts receivable (which accounts receivable are
from time to time originated in the Temporary Services division, the
Technical Services division and the Directory Services division of the
Company and certain Subsidiaries and sold from time to time to Volt
Funding) and certain other related property described in the Receivables
Securitization Facility;
(b) the aggregate amount (without duplication) of Securitization
Attributable Debt of Volt Funding, the Company and the other Subsidiaries
in connection with any such sale (or otherwise under the Receivables
Securitization Facility) shall not at any time exceed 25% of the proceeds
received by Volt Funding from such sale (provided that, solely for purposes
of this paragraph (b), the amount of any such Securitization Attributable
Debt attributable to the "Collection Agent Fee Reserve" (as such term is
defined
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10. NEGATIVE COVENANTS
under both the Primary Asset Purchase and Sale Agreement and the
Secondary Asset Purchase and Sale Agreement) shall be excluded); and
(c) after giving effect to any such sale, the aggregate face amount
(without duplication) of uncollected accounts receivable required under
GAAP to be treated (or otherwise actually accounted for by the Company or
any Subsidiary) as having been sold in such sale and all prior sales by
Volt Funding, the Company and the other Subsidiaries (excluding sales to
Volt Funding, the Company or any other Subsidiary) under the Receivables
Securitization Facility does not exceed the greater of (i) $45,000,000 (or
equivalent) or (ii) 15% of Consolidated Assets.
The Company shall promptly establish or cause to be established a reserve for
the recourse liability of Volt Funding, the Company and the other Subsidiaries
arising from all sales of accounts receivable in such amount as the Company in
good faith determines to be prudent and consistent with sound financial and
business practice. For so long as the Receivables Securitization Facility
remains in use, the Company will maintain Volt Funding as a Wholly-Owned
Subsidiary, the sole purpose, business and activities of which shall relate
directly to the Receivables Securitization Facility.
11. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any
Note for more than five Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Section 7.1(d) or any of Sections 10.2
through 10.9, inclusive; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is not
remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a "notice of default" and to
refer specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
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11. EVENTS OF DEFAULT
(f) (i) the Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any Debt
that is outstanding in an aggregate principal amount in excess of
$5,000,000 (or equivalent) beyond any period of grace provided with
respect thereto, or (ii) the Company or any Subsidiary is in default in
the performance of or compliance with any term of any evidence of any
Debt in an aggregate outstanding principal amount in excess of
$5,000,000 (or equivalent) or of any mortgage, indenture or other
agreement relating thereto or any other condition exists, and as a
consequence of such default or condition such Debt has become, or has
been declared, due and payable before its stated maturity or before its
regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the
passage of time or the right of the holder of Debt to convert such Debt
into equity interests), (x) the Company or any Subsidiary has become
obligated to purchase or repay Debt before its regular maturity or
before its regularly scheduled dates of payment in an aggregate
outstanding principal amount in excess of $5,000,000 (or equivalent),
or (y) one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such Debt; or
(g) the Company or any Material Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of
its Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving
a petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of its Material
Subsidiaries, or any such petition shall be filed against the Company
or any of its Material Subsidiaries and such petition shall not be
dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 (or equivalent) are rendered
against one or more of the Company and its Material Subsidiaries and
which judgments are not, within 60 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 60
days after the expiration of such stay; or
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11. EVENTS OF DEFAULT
(j) if any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code,
(i) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC
or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer
any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings,
(ii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of
ERISA) under all Plans, determined in accordance with Title IV
of ERISA, shall exceed $2,000,000 (or equivalent),
(iii) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans,
(iv) the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan, or
(v) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary
thereunder;
and any such event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could reasonably
be expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
1 Acceleration.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or (h) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (g) or described in clause
(vi) of paragraph (g) by virtue of the fact that such clause
encompasses clause (i) of paragraph (g)) has occurred, all the Notes
then outstanding shall automatically become immediately due and
payable.
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12. REMEDIES ON DEFAULT, ETC.
(b) If any other Event of Default has occurred and is
continuing, the Required Holders may at any time at its or their
option, by notice or notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or
paragraph (b) of Section 11 has occurred and is continuing, any holder
or holders of Notes at the time outstanding affected by such Event of
Default may at any time, at its or their option, by notice or notices
to the Company, declare all the Notes held by it or them to be
immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) except in the case of the Notes becoming due and payable under
Section 12.1(a), the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
2 Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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12. REMEDIES ON DEFAULT, ETC.
3 Rescission.
At any time within the 90-day period after any Notes have been declared due
and payable pursuant to clause (b) or (c) of Section 12.1, the Required Holders,
by written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that is due and
payable other than by reason of such declaration, and all interest on such
overdue principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
4 No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
1 Registration of Notes.
The Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
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13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
2 Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the Company
for registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Note or his attorney
duly authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company's expense (except as provided below), one or more new Notes (as
requested by the holder thereof) in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1. Each such new Note shall be dated and
bear interest from the date to which interest shall have been paid on the
surrendered Note or dated the date of the surrendered Note if no interest shall
have been paid thereon. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in denominations of less than
$100,000, provided that if necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in a denomination of less
than $100,000. Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.
3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it from
the registered holder of any Note of the loss, theft, destruction or mutilation
of any such Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original purchaser or a Qualified
Institutional Buyer, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver to such registered
holder, in lieu thereof, a new Note, dated and bearing interest from the date to
which interest shall have been paid on such lost, stolen, destroyed or mutilated
Note or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
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14. PAYMENTS ON NOTES
14. PAYMENTS ON NOTES
1 Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on the Notes shall be made in New York,
New York at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
2 Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
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15. EXPENSES, ETC.
15. EXPENSES, ETC.
1 Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required, local or other counsel) incurred
by you and each Other Purchaser or holder of a Note in connection with such
transactions (but not including attorneys' fees in connection with any transfer
after the Closing of a Note from a holder thereof to another Person) and in
connection with any amendments, waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs and expenses incurred
in enforcing or defending (or determining whether or how to enforce or defend)
any rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the Notes, or by reason of being a holder of any Note, and (b)
the costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Subsidiary or
in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The Company will pay, and will save you
and each other holder of a Note harmless from, all claims in respect of any
fees, costs or expenses if any, of brokers and finders (other than those
retained by you).
2 Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
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17. AMENDMENT AND WAIVER
17. AMENDMENT AND WAIVER
1 Requirements.
This Agreement and the Notes may be amended, and the observance of any term
hereof or of the Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company and the Required Holders
(whether or not you are one of the Required Holders so consenting), except that
(a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6
or 21 hereof, or any defined term (as it is used therein), will be effective as
to you unless consented to by you in writing, and (b) no such amendment or
waiver may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes. The
Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of
this Section 17 to each holder of outstanding Notes promptly following
the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(B) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the
entering into by any holder of Notes or any waiver or amendment of any
of the terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to each holder of Notes then outstanding even if such
holder did not consent to such waiver or amendment.
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17. AMENDMENT AND WAIVER
3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17 applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended, supplemented or restated.
4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Chief Financial
Officer, with a copy to General Counsel (Telephone: (212) 704-2400;
facsimile (212) 704-2417), or at such other address as the Company
shall have specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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19. REPRODUCTION OF DOCUMENTS
19. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that
(a) was publicly known or otherwise known to you prior to the
time of such disclosure,
(b) subsequently becomes publicly known through no act or
omission by you or any person acting on your behalf,
(c) otherwise becomes known to you other than through
disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to
(i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes),
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<PAGE> 46
20. CONFIDENTIAL INFORMATION
(ii) your financial advisors and other professional advisors
who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20,
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or offer to
sell such Note or any part thereof or any participation therein (if
such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section
20),
(v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions
of this Section 20),
(vi) any federal or state regulatory authority having
jurisdiction over you,
(vii) the National Association of Insurance Commissioners or
any similar organization, or any nationally recognized rating agency
that requires access to information about your investment portfolio or
(viii) any other Person to which such delivery or disclosure
may be necessary or appropriate (w) to effect compliance with any law,
rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation
to which you are a party or (z) if an Event of Default has occurred and
is continuing, to the extent you may reasonably determine such delivery
and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under your Notes and this
Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
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21. SUBSTITUTION OF PURCHASER
21. SUBSTITUTION OF PURCHASER
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS
1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
2 Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-whole Amount or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day, provided that if all or any portion of such payment shall consist
of a payment of interest, for purposes of calculating such interest, such
payment shall be deemed to have been originally due on such first following
Business Day, such interest shall accrue and be payable to (but not including)
the actual date of payment and the amount of the next succeeding interest
payment shall be adjusted accordingly.
3 Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
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22. MISCELLANEOUS
4 Construction.
Each covenant contained herein shall be construed (absent express provision
to the contrary) as being independent of each other covenant contained herein,
so that compliance with any one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other covenant.
Where any provision herein refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
5 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Each counterpart may consist of a number of copies hereof, each signed by less
than all, but together signed by all, of the parties hereto.
6 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank. Next page is signature page.]
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<PAGE> 49
If you are in agreement with the foregoing, please sign the form
of agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
VOLT INFORMATION SCIENCES, INC.
By /s/ James J. Groberg
---------------------------------
Name: James J. Groberg
Title: Senior Vice President
The foregoing is hereby
agreed to as of the
date thereof.
[Separately executed by each of
following Purchasers]
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By /s/ Beatriz M. Cuervo
---------------------------------
Name: Beatriz M. Cuervo
Title: Investment Officer
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
By /s/ E. A. Marr
---------------------------------
Name: E. A. Marr
Title: Assistant Vice President
Private Placement Investments
By /s/ James G. Lowery
---------------------------------
Name: James G. Lowery
Title: Assistant Vice President
Private Placement Investments
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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<PAGE> 50
NORTHERN LIFE INSURANCE COMPANY
By /s/ James V. Wittich
---------------------------------
Name: James V. Wittich
Title: Assistant Treasurer
UNITED SERVICES LIFE INSURANCE COMPANY
By /s/ James V. Wittich
---------------------------------
Name: James V. Wittich
Title: Assistant Treasurer
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By /s/ James V. Wittich
---------------------------------
Name: James V. Wittich
Title: Assistant Treasurer
THE CANADA LIFE ASSURANCE COMPANY
By /s/ Brian J. Lynch
---------------------------------
Name: Brian J. Lynch
Title: Associate Treasurer
CANADA LIFE INSURANCE COMPANY
OF AMERICA
By /s/ Brian J. Lynch
---------------------------------
Name: Brian J. Lynch
Title: Assistant Treasurer
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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RGA REINSURANCE COMPANY
By /s/ Terri Tanaka
---------------------------------
Name: Terri Tanaka
Title: Senior Vice President
SAFECO LIFE INSURANCE COMPANY
By /s/ Rod Pierson
---------------------------------
Name: Rod Pierson
Title: Senior Vice President, Secretary
MODERN WOODMEN OF AMERICA
By /s/ G.E. Stoefen
---------------------------------
Name: G.E. Stoefen
Title: Director, Treasurer & Investment Manager
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
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<PAGE> 52
DEFINED TERMS
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
Affiliate -- means at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly through
one or more intermediaries Controls, or is Controlled by, or is under
common Control with, such first Person, and
(b) any Person beneficially owning or holding, directly or indirectly,
10% or more of any class of voting or equity interests of the Company or
any Subsidiary or any corporation of which the Company and its Subsidiaries
beneficially own or hold, in the aggregate, directly or indirectly, 10% or
more of any class of voting or equity interests.
As used in this definition, "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
Agreement, this -- is defined in Section 17.3.
Asset Disposition -- means any Transfer except:
(a) any Transfer from a Subsidiary to the Company or a Wholly-Owned
Subsidiary,
(b) any Transfer from the Company to Volt Funding of accounts
receivable originated in the Temporary Services division, the Technical
Services division and the Directory Services division of the Company and
certain Subsidiaries pursuant to the Receivables Securitization Facility,
(c) any Transfer from a Subsidiary of Autologic to Autologic or a
Subsidiary of Autologic, and
(d) any Transfer made in the ordinary course of business and
involving only property that is either (i) inventory held for sale or (ii)
equipment, fixtures, supplies or materials no longer required in the
operation of the business of the Company or any of its Subsidiaries or that
is obsolete.
Autologic -- means Autologic Information International, Inc., a Delaware
corporation.
Business Day -- means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York, New York are required or authorized to be
closed.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-1
<PAGE> 53
DEFINED TERMS
Capital Lease -- means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
Capital Lease Obligation -- means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
Closing -- is defined in Section 3.
Code -- means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
Company -- is defined in the introductory sentence of this Agreement.
Confidential Information -- is defined in Section 20.
Consolidated Assets -- means, at any time, the total assets of the Company
and its Subsidiaries which would be shown as assets on a consolidated balance
sheet of the Company and its Subsidiaries as of such time prepared in accordance
with GAAP.
Consolidated Debt -- means, as of any date of determination, the total of
all Debt of the Company and its Subsidiaries outstanding on such date, after
eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP, provided that Debt constituted by Swaps of
the Company and its Subsidiaries shall be included in such determination only to
the extent that the aggregate amount thereof (after such eliminations) exceeds
$4,000,000 (or equivalent).
Consolidated Income Available for Fixed Charges -- means, with respect to
any period, Consolidated Net Income (subject to the adjustments specified below
in this definition) for such period plus all amounts deducted in the computation
thereof on account of (a) Fixed Charges, (b) the amortization of all assets of
the Company and its Subsidiaries that would be considered intangible under GAAP,
and (c) taxes imposed on or measured by income or excess profits. Solely for
purposes of determining Consolidated Income Available for Fixed Charges,
Consolidated Net Income shall be subject to the following adjustments:
(i) in connection with any pooling of interests under GAAP, the
exclusion provided for by clause (a) of the definition of Consolidated Net
Income shall not apply to the income of any Person referred to in such
clause, except to the extent that such income exceeds the aggregate amount
of charges constituting a portion of Fixed Charges attributed to such
Person in any calculation of Fixed Charges for any period all or a portion
of which period is prior to the date referred to in such clause (a);
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-2
<PAGE> 54
DEFINED TERMS
(ii) the exclusion provided for by clause (c) of the definition of
Consolidated Net Income shall not apply to the undistributed earnings of
any Subsidiary referred to in such clause, except to the extent that such
undistributed earnings with respect to any period exceed the aggregate
amount of charges constituting a portion of Fixed Charges attributed to
such Subsidiary in any calculation of Fixed Charges for such period; and
(iii) the exclusion provided for by clause (l) of the definition of
Consolidated Net Income shall not apply to any portion of net income
referred to in such clause attributable to a Subsidiary, except to the
extent that such portion of net income attributable to such Subsidiary with
respect to any period exceeds the aggregate amount of charges constituting
a portion of Fixed Charges attributed to such Subsidiary in any calculation
of Fixed Charges for such period which charges were payable in a currency
the same as that in which such portion of net income is properly
denominated (or the currency in which such portion of net income is
properly denominated is freely convertible by such Subsidiary into the
currency in which such charges were payable).
Consolidated Net Income -- means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP, provided that there shall be excluded (to the extent
otherwise included in such calculation of net income (or loss)):
(a) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Company or
a Subsidiary, and the income (or loss) of any Person, substantially all of
the assets of which have been acquired in any manner, realized by such
other Person prior to the date of acquisition,
(b) the income (or loss) of any Person (other than a Subsidiary) in
which the Company or any Subsidiary has an ownership interest, except to
the extent that any such income has been actually received by the Company
or such Subsidiary in the form of cash dividends or similar cash
distributions,
(c) the undistributed earnings of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary,
(d) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of income accrued
during such period (provided that, in the case of any period of four
consecutive fiscal quarters of the Company, such exclusion shall apply only
to any excess of the aggregate amount of any such restorations to income
during such period over $1,500,000 (or equivalent)),
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-3
<PAGE> 55
DEFINED TERMS
(e) any aggregate net gain (or net loss) during such period arising
from the sale, conversion, exchange or other disposition (other than in the
ordinary course of business of the Company and the Subsidiaries) of capital
assets (such term to include, without limitation, (i) all non-current
assets and, without duplication, (ii) the following, whether or not
current: all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets, and all
Securities),
(f) any gains or losses resulting from any write-up or write-down of
any assets,
(g) any net gain from the collection of the proceeds of life
insurance policies,
(h) any gain or loss (other than any loss arising from any
requirement that the Company or any Subsidiary pay any premium, penalty or
make-whole amount in connection with a prepayment of any Debt) arising from
the acquisition of any Security of the Company or any Subsidiary, or the
extinguishment, under GAAP, of any Debt, of the Company or any Subsidiary
(provided that if the aggregate amount of any such losses incurred during
any period of four consecutive fiscal quarters of the Company exceeds
$500,000 (or equivalent) then the amount of such excess losses shall not be
excluded in determining Consolidated Net Income for such period),
(i) any net income or gain (or net loss) during such period from (A)
any change in accounting principles in accordance with GAAP, (B) any prior
period adjustments resulting from any change in accounting principles in
accordance with GAAP, (C) any extraordinary items, or (D) any discontinued
operations or the disposition thereof,
(j) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in
such Subsidiary,
(k) in the case of a successor to the Company by consolidation or
merger or as a transferee of its assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets, and
(l) any portion of such net income that cannot be freely converted
into United States dollars.
Consolidated Net Worth -- means, at any time,
(a) the sum of (i) the par value (or value stated on the books of the
corporation) of the capital stock (but excluding treasury stock and capital
stock subscribed and unissued) of the Company and its Subsidiaries plus
(ii) the amount of the paid-in capital and retained earnings of the Company
and its Subsidiaries, plus (or minus) (iii) unrealized foreign currency
translation adjustments and unrealized gain (loss) on marketable
securities, in each case
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-4
<PAGE> 56
DEFINED TERMS
as such amounts would be shown on a consolidated balance sheet of the
Company and its Subsidiaries as of such time prepared in accordance with
GAAP, minus
(b) to the extent included in clause (a), all amounts properly
attributable to Minority Interests, if any, in the stock and surplus of
Subsidiaries.
Consolidated Total Capitalization -- means, at any time, the sum of (a)
Consolidated Net Worth, plus (b) Minority Interests, plus (c) Consolidated Debt.
Debt -- means, at any time, with respect to any Person, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such property);
(c) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money), but excluding contingent liabilities in
respect of any such letters of credit or instruments in respect of any
available amounts thereunder that are at such time undrawn or otherwise
unutilized;
(f) Swaps of such Person;
(g) all Securitization Attributable Debt of such Person; and
(h) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (g) hereof.
Without limitation of the foregoing, Debt of any Person shall include all
obligations of such Person of the character described in clauses (a) through (h)
to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished under
GAAP.
Default -- means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-5
<PAGE> 57
DEFINED TERMS
Default Rate -- means that rate of interest that is the greater of (i) 2%
per annum above the rate of interest stated in clause (a) of the first paragraph
of the Notes or (ii) 2% over the rate of interest publicly announced by The
Chase Manhattan Bank (or its successor) in New York, New York as its "base" or
"prime" rate.
Disposition Value -- means, at any time, with respect to any property,
(a) in the case of property that does not constitute Subsidiary Stock,
the book value thereof, valued at the time of such disposition in good
faith by the Company, and
(b) in the case of property that constitutes Subsidiary Stock, an
amount equal to that percentage of book value of the assets of the
Subsidiary that issued such stock as is equal to the percentage that the
book value of such Subsidiary Stock represents of the book value of all of
the outstanding capital stock of such Subsidiary (assuming, in making such
calculations, that all Securities convertible into such capital stock are
so converted and giving full effect to all transactions that would occur or
be required in connection with such conversion) determined at the time of
the disposition thereof, in good faith by the Company.
Environmental Laws -- means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
ERISA Affiliate -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
Event of Default -- is defined in Section 11.
Exchange Act -- means the Securities Exchange Act of 1934, as amended from
time to time.
Fair Market Value -- means, at any time and with respect to any property,
the sale value of such property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).
Fixed Charges -- means, with respect to any period, the sum of (a) Interest
Charges for such period and (b) 33-_% of Lease Rentals for such period.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-6
<PAGE> 58
DEFINED TERMS
Funded Debt -- means, with respect to any Person, all Debt of such Person
which by its terms or by the terms of any instrument or agreement relating
thereto matures, or which is otherwise payable or unpaid, more than one year
from, or is directly or indirectly renewable or extendible at the option of the
obligor in respect thereof to a date more than one year (including, without
limitation, an option of such obligor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year) from, the date of the creation thereof, provided that Funded
Debt shall, as at any date of determination, (a) include Current Maturities of
Funded Debt, and (b) if such Person is Volt Funding, exclude any Securitization
Attributable Debt of such Person within the limit provided by paragraph (b) of
Section 10.9.
Current Maturities of Funded Debt -- means, at any time and with
respect to any item of Funded Debt, the portion of such Funded Debt
outstanding at such time which by the terms of such Funded Debt or the
terms of any instrument or agreement relating thereto is due on demand or
one year or less from such time (whether by sinking fund, other required
prepayment or final payment at maturity) and is not directly or indirectly
renewable, extendible or refundable at the option of the obligor under an
agreement or firm commitment in effect at such time to a date more than one
year from such time.
GAAP -- means generally accepted accounting principles as in effect from
time to time in the United States of America.
GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America or any state or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary,
or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
Guaranty -- means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-7
<PAGE> 59
DEFINED TERMS
or otherwise to advance or make available funds for the purchase or payment
of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
Hazardous Material -- means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
holder -- means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to
Section 13.1.
Institutional Investor -- means (a) any original purchaser of a Note, (b)
any holder of a Note holding more than 5% of the aggregate principal amount of
the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
Interest Charges -- means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): (a) all interest in respect of Debt of the Company and its Subsidiaries
(including imputed interest on Capital Lease Obligations) deducted in
determining Consolidated Net Income for such period, together with all interest
capitalized or deferred during such period and not deducted in determining
Consolidated Net Income for such period, and (b) all debt discount and expense
amortized or required to be amortized in the determination of Consolidated Net
Income for such period.
Lease Rentals -- means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): the minimum amount of rental and other obligations required to be paid
during such period by the Company or any Subsidiary
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-8
<PAGE> 60
DEFINED TERMS
as lessee under all leases of real or personal property (other than Capital
Leases), excluding any amounts required to be paid by the lessee (whether or not
therein designated as rental or additional rental) (a) which are on account of
maintenance and repairs, insurance, taxes, assessments, water rates and similar
charges, or (b) which are based on profits, revenues or sales realized by the
lessee from the leased property or otherwise based on the performance of the
lessee.
Lien -- means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements, provided that the Shareholder Stock Voting Agreement, entered into
as of January 29, 1996, by and among the Company, Charles Ying, Leroy Bell, John
Kountz and Ralph Roth, which sets forth certain agreements among such parties
relating to nominations and voting and related matters with respect to the
members of the board of directors of Autologic, and which agreement expires in
1998, shall be deemed not to constitute a Lien).
Make-Whole Amount -- is defined in Section 8.6.
Material -- means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
Material Adverse Effect -- means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the Notes, or (c) the
validity or enforceability of this Agreement or the Notes.
Material Subsidiary -- means, at any time, any Subsidiary that satisfies at
least one of the following conditions:
(a) such Subsidiary had unconsolidated revenues of greater than
$10,000,000 (or equivalent) for the then most recently ended fiscal year of
the Company; or
(b) the sum of the fixed assets, whether tangible or intangible, plus
inventory of such Subsidiary as of the end of the then most recently ended
fiscal year of the Company was greater than $1,000,000 (or equivalent).
Without limitation of the foregoing, for purposes of paragraphs (g), (h) and (i)
of Section 11, any two or more Subsidiaries that, if considered together as
though they were a single Subsidiary, would satisfy at least one of the
foregoing conditions (and with respect to each of which Subsidiaries one or more
of the conditions or events referred to in such paragraphs (g), (h) and (i)
shall have occurred and be continuing at such time), shall be deemed together or
collectively to constitute a Material Subsidiary.
Memorandum -- is defined in Section 5.3.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-9
<PAGE> 61
DEFINED TERMS
Minority Interests -- means any shares of capital stock of a Subsidiary
(other than directors' qualifying shares as required by law) that are not owned
by the Company and/or one or more of its Subsidiaries. Minority Interests
constituting Preferred Stock shall be valued at the voluntary or involuntary
liquidation value of such Preferred Stock, whichever is greater, and Minority
Interests constituting common stock shall be valued at the book value of capital
and surplus applicable thereto adjusted, if necessary, to reflect any changes
from the book value of such common stock required by the foregoing method of
valuing Minority Interests in Preferred Stock.
Multiemployer Plan -- means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
Net Proceeds Amount -- means, with respect to any Transfer of any property
by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the Fair
Market Value of such consideration at the time of the consummation of such
Transfer) received by such Person in respect of such Transfer, minus
(b) the sum (without duplication) of
(i) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with such Transfer,
plus
(ii) the amount of any Debt secured by a Lien on such property
to the extent that such Debt is retired with all or a portion of such
consideration, plus
(iii) the amount of any tax on such Transfer or other tax
liability incurred by such Person as a result of such Transfer, but net of
the amount of any tax benefit realized by such Person in respect of such
Transfer.
Notes -- is defined in Section 1.
Officer'S Certificate -- means a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
(or equivalent) -- means, when used in connection with any reference to a
specified amount of United States dollars (designated in this Agreement by the
symbol "$"), such specified amount of United States dollars ($) or an equivalent
amount in one or more currencies (one of which may, but need not, be United
States dollars ($)), with the amount of each such currency other than United
States dollars ($) being converted to United States dollars ($) for such
purposes in accordance with the requirements of GAAP and in a manner consistent
with the accounting policies implemented in the most recent annual report of the
Company.
Other Agreements -- is defined in Section 2.
Other Purchasers -- is defined in Section 2.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-10
<PAGE> 62
DEFINED TERMS
PBGC -- means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
Person -- means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
Plan -- means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
Preferred Stock -- means any class of capital stock of a corporation that
is preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
Primary Asset Purchase and Sale Agreement -- is defined in the definition
of Receivables Securitization Facility.
property or properties -- means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
Qualified Institutional Buyer -- means any Person who is a "qualified
institutional buyer," within the meaning of such term as set forth in Rule
144A(a)(1) under the Securities Act.
Receivables Securitization Facility -- means, collectively, the Asset
Purchase and Sale Agreement, dated as of October 5, 1993 (as amended, modified,
supplemented or replaced from time to time, the "Primary Asset Purchase and Sale
Agreement"), among Volt Funding as "Seller," the Company as "Collection Agent,"
Omnibus Funding Corporation as "Investor," Chemical Bank Agency Services
Corporation as "Agent," Chemical Securities Inc. as "Referral Agent" and
National Westminster Bank USA and Chemical Bank as "Banks," and the Secondary
Asset Purchase and Sale Agreement, dated as of October 5, 1993 (as amended,
modified, supplemented or replaced from time to time, the "Secondary Asset
Purchase and Sale Agreement"), among Volt Funding as "Seller," the Company as
"Collection Agent," Chemical Bank Agency Services Corporation as "Agent" and
National Westminster Bank USA and Chemical Bank as "Banks," in each case as
amended by the First Omnibus Amendment, dated as of March 31, 1995, and as may
otherwise be amended, modified, supplemented or replaced, provided that such
agreements, as so otherwise amended, modified, supplemented or replaced, have
substantially the same terms and provisions (other than the termination dates
thereof) as such agreements as in effect on the date of Closing.
Required Holders -- means, at any time, the holder or holders of more than
50% in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-11
<PAGE> 63
DEFINED TERMS
Responsible Officer -- means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
Secondary Asset Purchase and Sale Agreement -- is defined in the definition
of Receivables Securitization Facility.
Securities Act -- means the Securities Act of 1933, as amended from time to
time.
Securitization Attributable Debt -- means, at any time, with respect to any
Person, without duplication,
(a) if such Person is Volt Funding, the remainder (but in no event
less than zero) of
(i) the sum of the "Aggregate Required Amount" (as such term
is defined in the Primary Asset Purchase and Sale Agreement) at
such time plus the "Aggregate Required Amount" (as such term is
defined under the Secondary Asset Purchase and Sale Agreement) at
such time (provided that if at any time such sum is less than the
aggregate face amount of uncollected accounts receivable, or
interests therein, required under the terms of the Receivables
Securitization Facility to be subject to ownership by the
"Owners" (as such term is defined under both the Primary Asset
Purchase and Sale Agreement and the Secondary Asset Purchase and
Sale Agreement) at such time, then the result of this paragraph
(i) shall be deemed to be such greater aggregate face amount of
uncollected accounts receivable), minus
(ii) the sum of the "Notes Outstanding" (as such term is
defined in the Primary Asset Purchase and Sale Agreement) at such
time plus the aggregate of the "Outstanding Amount" at such time
for all "Eligible Assets" (as both such terms are defined in the
Secondary Asset Purchase and Sale Agreement), and
(b) any amounts required at such time by GAAP to be reflected as
liabilities of such Person on a balance sheet of such Person (assuming,
for purposes of this paragraph (b) that a balance sheet of such Person
as of such time was prepared), or actually accounted for by such Person
as liabilities on any such balance sheet, directly or indirectly in
connection with any sale of accounts receivables or related property
(whether under the Receivables Securitization Facility or otherwise) of
such Person.
Security -- has the meaning set forth in Section 2(1) of the Securities
Act.
Senior Debt -- means any Debt of the Company other than Subordinated Debt.
Senior Financial Officer -- means the chief financial officer, principal
accounting officer, vice president - accounting operations, treasurer or
comptroller of the Company.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-12
<PAGE> 64
DEFINED TERMS
Subordinated Debt -- means any Debt of the Company that, by its terms, is
in any manner subordinated in right of payment in any respect to Debt evidenced
by the Notes.
Subsidiary -- means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries), provided that, notwithstanding the foregoing, TeleListas S.A., a
Brazilian company, shall be deemed not to be a Subsidiary of the Company unless
required by GAAP to be treated as (or unless actually treated by the Company in
its consolidated financial statements as) a subsidiary of the Company. Unless
the context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Company.
Subsidiary Stock -- means any class of capital stock, share capital or
similar equity interest (or any options or warrants to purchase any capital
stock, share capital or similar equity interest, or other Securities
exchangeable for or convertible into any capital stock, share capital or similar
equity interest) of any Subsidiary.
Successor Corporation -- is defined in Section 10.7.
Swaps -- means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
Transfer -- means, with respect to any Person, any transaction in which
such Person sells, conveys, transfers or leases (as lessor) any of its property,
including, without limitation, Subsidiary Stock, and including, without
limitation, any consolidation, merger or other transaction involving any
Subsidiary the direct or indirect result of which is a disposition of all or a
portion of any equity or other interest in or property of such Subsidiary. For
purposes of determining the application of the Net Proceeds Amount in respect of
any Transfer, the Company may designate any Transfer as one or more separate
Transfers each yielding a separate Net Proceeds Amount. In any such case, the
Disposition Value of any property subject to each such separate Transfer shall
be determined by ratably allocating the aggregate Disposition Value of all
property subject to all such separate Transfers to each such separate Transfer
on a proportionate basis.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-13
<PAGE> 65
DEFINED TERMS
Volt Funding -- means Volt Information Sciences Funding, Inc., a Delaware
corporation, and any successors thereto.
Wholly-Owned Subsidiary -- means, at any time, any Subsidiary one hundred
percent (100%) of all of the equity interests (except directors' qualifying
shares) and voting interests of which are owned by any one or more of the
Company and the Company's other Wholly-Owned Subsidiaries at such time.
VOLT INFORMATION SCIENCES, INC. NOTE PURCHASE AGREEMENT
Schedule B-14
<PAGE> 66
EXHIBIT 1
FORM OF NOTE
VOLT INFORMATION SCIENCES, INC.
7.92% SENIOR NOTE DUE AUGUST 28, 2004
No. R-__ [Date]
$_________ PPN 928703 A* 8
FOR VALUE RECEIVED, the undersigned, VOLT INFORMATION SCIENCES, INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of New York, hereby promises to pay to_________, or registered
assigns, the principal sum of __________ DOLLARS ($_________) on August 28,
2004, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.92% per annum from
the date hereof, payable semiannually, on the 28th day of February and August in
each year, commencing with the February 28th or August 28th next succeeding the
date hereof, until the principal hereof shall have become due and payable, and
(b) to the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.92% or (ii) 2% over the rate of interest publicly
announced by The Chase Manhattan Bank (or its successor) from time to time in
New York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to separate Note Purchase Agreements, dated as of August 28,
1996 (as from time to time amended, the "Note Purchase Agreements"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal
VOLT INFORMATION SCIENCES, INC. FORM OF NOTE
Exhibit 1-1
<PAGE> 67
amount will be issued to, and registered in the name of, the transferee. Prior
to due presentment for registration of transfer, the Company may treat the
person in whose name this Note is registered as the owner hereof for the purpose
of receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates and in
the amounts specified in the Note Purchase Agreements. This Note is also subject
to optional prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
VOLT INFORMATION SCIENCES, INC.
By
Name:
Title:
VOLT INFORMATION SCIENCES, INC. FORM OF NOTE
Exhibit 1-2
<PAGE> 1
September 12, 1996
To the Stockholders
Volt Information Sciences, Inc.
We are aware of the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988, and
Registration Statement No. 33-18565 on Form S-8 dated December 14, 1987 of Volt
Information Sciences, Inc., of our report dated September 3, 1996 relating to
the unaudited condensed consolidated interim financial statements of Volt
Information Sciences, Inc. and subsidiaries that are included in its Form 10-Q
for the quarter ended August 2, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
New York, New York
<PAGE> 1
ERNST & YOUNG LLP 787 Seventh Avenue Phone # 212-773-3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
TO THE STOCKHOLDERS
VOLT INFORMATION SCIENCES, INC.
We have reviewed the accompanying unaudited condensed consolidated balance sheet
of Volt Information Sciences, Inc. and subsidiaries as of August 2, 1996, and
the related condensed consolidated statements of income for the nine and three
month periods ended August 2, 1996 and July 28, 1995, and the related condensed
consolidated statements of cash flows for the nine month periods ended August 2,
1996 and July 28, 1995. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, which will be performed for the full
year with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Volt Information Sciences, Inc. and
subsidiaries as of November 3, 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended, not
presented herein; and in our report dated January 2, 1996, we expressed an
unqualified opinion on these consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of November 3, 1995, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
Ernst & Young LLP
September 3, 1996
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