<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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 number 0-23059
HEALTHWORLD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3922288
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Avenue of the Americas
New York, New York 10013
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 966-7640
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
As at August 13, 1999, 8,080,292 shares of Common Stock of the Registrant were
issued and outstanding.
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HEALTHWORLD CORPORATION AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION Page No.
Item 1 Financial Statements
Consolidated Balance Sheets as of
December 31, 1998 and June 30, 1999................... 1
Consolidated Statements of Income
for the Three Months and Six Months
Ended June 30, 1998 and 1999.......................... 2
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1999............... 3
Notes to the Consolidated Financial Statements........ 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders..... 17
Item 6 Exhibits and Reports on Form 8-K........................ 19
SIGNATURES............................................................... 20
EXHIBIT INDEX............................................................ 21
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HEALTHWORLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
----------------- -----------------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................. $ 6,472 17,529
Accounts receivable, net.............................. 18,889 18,727
Unbilled production charges........................... 3,151 3,751
Other current assets.................................. 1,501 1,013
----------------- -----------------
Total current assets....................................... 30,013 41,020
Restricted cash............................................ 1,860 1,784
Property and equipment, net................................ 4,443 4,505
Goodwill, net.............................................. 14,266 14,025
Other assets............................................... 289 574
----------------- -----------------
Total assets............................................... $ 50,871 $ 61,908
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank loans and overdrafts............................. $ -- $ 41
Current portion of long-term debt..................... 135 110
Current portion of capitalized lease obligations...... 74 56
Accounts payable...................................... 4,247 3,987
Accrued expenses...................................... 7,739 6,397
Advance billings...................................... 7,982 19,059
Other current liabilities............................. 302 268
----------------- -----------------
Total current liabilities.................................. 20,479 29,918
Long-term debt............................................. 116 55
Capitalized lease obligations.............................. 59 112
Minority interests......................................... 111 97
Deferred rent.............................................. 888 931
Other liabilities.......................................... 17 63
----------------- -----------------
Total liabilities.......................................... 21,670 31,176
----------------- -----------------
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding................. - -
Common stock, $.01 par value; 20,000,000 shares
authorized; 7,430,195, and 7,431,180 shares
outstanding, respectively......................... 74 74
Additional paid-in capital............................ 22,748 22,891
Retained earnings..................................... 6,357 8,071
Accumulated other comprehensive income................ 22 (304)
----------------- -----------------
Total stockholders' equity................................. 29,201 30,732
----------------- -----------------
Total liabilities and stockholders' equity................. $ 50,871 $ 61,908
================= =================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
1
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
June 30, June 30, June 30, June 30,
1998 1999 1998 1999
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues................................... $ 14,877 $ 17,963 $ 28,865 $ 33,067
-------------- ------------- -------------- -------------
Operating expenses:
Salaries and related costs.............. 10,923 12,524 22,465 24,491
General and office expenses............. 1,998 2,697 3,902 5,009
Depreciation and amortization........... 225 404 443 778
-------------- ------------- -------------- -------------
13,146 15,625 26,810 30,278
Income from operations..................... 1,731 2,338 2,055 2,789
Interest income, net....................... 213 170 403 277
-------------- ------------- -------------- -------------
Income before provision for income
taxes and minority interests............. 1,944 2,508 2,458 3,066
Provision for income taxes (Note 2)........ 813 1,104 1,023 1,349
Minority interests in net earnings of
subsidiaries............................. -- -- -- 3
-------------- ------------- -------------- -------------
Net income................................. $ 1,131 $ 1,404 $ 1,435 $ 1,714
============== ============= ============== =============
Per share information (Note 3):
Net income per common share:
Basic................................ $ 0.15 $ 0.19 $ 0.19 $ 0.23
============== ============= ============== =============
Diluted.............................. $ 0.15 $ 0.19 $ 0.19 $ 0.23
============== ============= ============== =============
Common shares used in computing
per share amounts:
Basic................................ 7,415 7,431 7,415 7,426
============== ============= ============== =============
Diluted.............................. 7,615 7,584 7,616 7,598
============== ============= ============== =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
2
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------------
June 30, 1998 June 30, 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 1,435 $ 1,714
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................. 443 778
Deferred rent.................................................. 49 43
Deferred income taxes.......................................... (22) 19
Minority interests in net earnings of subsidiaries............. -- 3
Loss on sale of fixed assets................................... -- 14
Changes in operating assets and liabilities:
Accounts receivable............................................ (221) (557)
Unbilled production charges.................................... (944) (637)
Other current assets........................................... (243) 435
Other assets................................................... 58 (284)
Accounts payable............................................... 2,576 (41)
Advance billings............................................... 251 11,317
Accrued expenses............................................... (969) (992)
Other liabilities.............................................. (33) 50
--------------- ---------------
Net cash provided by operating activities............................ 2,380 11,862
--------------- ---------------
Cash flows from investing activities:
Capital expenditures........................................... (428) (770)
Proceeds from the sale of fixed assets......................... 37 119
--------------- ---------------
Net cash used in investing activities................................ (391) (651)
--------------- ---------------
Cash flows from financing activities:
Proceeds from line of credit................................... -- 43
Repayment of bank loans and long term debt..................... (742) (76)
Capital lease repayments....................................... (79) (84)
Proceeds from exercise of stock options........................ -- 143
--------------- ---------------
Net cash (used in) provided by financing activities.................. (821) 26
--------------- ---------------
Effect of exchange rates on cash..................................... 6 (180)
--------------- ---------------
Net increase in cash and cash equivalents............................ 1,174 11,057
Cash and cash equivalents at beginning of period..................... 18,092 6,472
--------------- ---------------
Cash and cash equivalents at end of period........................... $ 19,266 $ 17,529
=============== ===============
Supplemental disclosure of cash flow information: Cash paid for:
Taxes.......................................................... $ 652 $ 1,536
=============== ===============
Interest....................................................... $ 34 $ 78
=============== ===============
Supplemental schedule of noncash investing activities:
Capital leases for new equipment .............................. $ 42 $ 126
=============== ===============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
3
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
(In thousands, except per share data)
1. ORGANIZATION AND BASIS OF PRESENTATION
On November 12, 1997, Healthworld Corporation acquired (the
"Consolidation"), in exchange for shares of its Common Stock, all of
the issued and outstanding common stock of each of (i) Girgenti,
Hughes, Butler & McDowell, Inc. and its affiliated entities ("GHB&M")
and (ii) Milton Marketing Group Limited and its subsidiaries
("Milton"). Unless otherwise indicated, all references herein to the
"Company" give effect to the Consolidation and include GHBM, Milton and
each of the Company's other subsidiaries. The Consolidation was
accounted for under the pooling of interests method of accounting.
The Company is an international communications and contract
sales marketing organization specializing in healthcare. The Company
provides many of the world's largest pharmaceutical and healthcare
companies with a comprehensive range of integrated strategic marketing
services designed to accelerate the acceptance of new products and to
sustain their growth. These integrated services include advertising and
promotion, contract sales, consulting, medical education, public
relations, marketing research, publishing, interactive multimedia and
database marketing services. The Company offers its clients global
reach and expertise through its operations in the United States,
France, Spain and the United Kingdom and through Healthworld B.V., a
world-wide network of marketing and communications agencies operating
under exclusive licensing agreements.
The accompanying unaudited consolidated financial statements
reflect all adjustments, consisting of normal recurring accruals, which
are, in the opinion of the Company's management, necessary to present
fairly the financial position as of June 30, 1999 and the results of
operations and cash flows for the interim periods ended June 30, 1998
and 1999. Interim results are not necessarily indicative of results for
a full year. For further information, refer to the consolidated
financial statements and the accompanying notes included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1998.
Certain amounts in the financial statements for prior periods
have been reclassified to conform to the current year presentation for
comparative purposes.
2. INCOME TAXES
Income taxes have been provided using the liability method in
accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes". The provision for income taxes
(recorded at an effective rate of 41.8% and 44.0% for the three months
ended June 30, 1998 and 1999, respectively, and at an effective rate of
41.6% and 44.0% for the six months ended June 30, 1998 and 1999,
respectively) reflects management's estimation of the effective tax
rate that was and is expected to be applicable for the respective
fiscal years. This estimate is evaluated by management each quarter.
4
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
(In thousands, except per share data)
3. NET INCOME PER COMMON SHARE
In accordance with SFAS No. 128, "Earnings Per Share", basic
earnings per common share amounts were computed by dividing net
earnings by the weighted average number of common shares outstanding,
excluding any potential dilution. Diluted earnings per common share
amounts were computed by reflecting potential dilution from the
exercise of stock options.
The following chart provides a reconciliation of information
used in calculating the per share amounts for the three-month and
six-month periods ended June 30, 1998 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income............................. $ 1,131 $ 1,404 $ 1,435 $ 1,714
------------- -------------- -------------- --------------
Denominator for basic
net income per common share............ 7,415 7,431 7,415 7,426
Effect of dilutive securities:
Stock options.......................... 200 153 201 172
------------- -------------- -------------- --------------
Denominator for diluted
net income per share................... 7,615 7,584 7,616 7,598
============= ============== ============== ==============
Basic net income per common share $ 0.15 $ 0.19 $ 0.19 $ 0.23
============= ============== ============== ==============
Diluted net income per common share $ 0.15 $ 0.19 $ 0.19 $ 0.23
============= ============== ============== ==============
</TABLE>
5
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
(In thousands, except per share data)
4. COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income consists of
net income and foreign currency translation adjustments. No provision
for income taxes has been made with respect to foreign currency
translation adjustments because all earnings of foreign subsidiaries
are expected to be permanently reinvested outside the United States.
These amounts have been included on the Balance Sheet under the caption
"Accumulated Other Comprehensive Income".
Comprehensive income is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income......................................... $ 1,131 $ 1,404 $ 1,435 $ 1,714
Other comprehensive income:
Foreign currency translation adjustments........ 6 (122) 6 (326)
----------- ----------- ----------- -----------
Comprehensive income............................... $ 1,137 $ 1,282 $ 1,441 $ 1,388
=========== =========== =========== ===========
</TABLE>
5. SEGMENT INFORMATION
In 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131
establishes standards for reporting information about operating
segments and related disclosures about products and services,
geographic areas and major customers.
The Company is organized based on the services that it offers.
Under this organizational structure, the Company operates in two
principal operating segments: communications and contract sales. The
Company's communications operations provide integrated services to
clients which includes advertising and promotion, consulting, medical
education, public relations, publishing, database marketing,
interactive media and marketing research services. The Company's
contract sales operations involve forming dedicated sales teams which
provide clients with substantial flexibility in selecting the extent
and cost of promoting products as well as the clients' level of
involvement in managing its sales effort.
6
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
(In thousands, except per share data)
Segment information is as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------------------------------------------------
1998 1999 1998 1999
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Communications........... $ 7,105 $ 9,357 $ 12,558 $ 17,168
Contract Sales........... 7,772 8,606 16,307 15,899
----------------- ----------------- ----------------- ----------------
$ 14,877 $ 17,963 $ 28,865 $ 33,067
================= ================= ================= ================
Income from operations:
Communications........... $ 1,395 $ 1,810 $ 1,424 $ 2,254
Contract Sales........... 336 528 631 535
----------------- ----------------- ----------------- ----------------
$ 1,731 $ 2,338 $ 2,055 $ 2,789
================= ================= ================= ================
</TABLE>
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the
Balance Sheet as either an asset or liability measured at its fair
value. The statement requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company must
formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.
Pursuant to SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133 - An Amendment of FASB Statement No. 133",
issued in June 1999, SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. While the Company operates in
international markets, it does so presently without the use of
derivative instruments and therefore SFAS No. 133 is not currently
applicable.
7
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(UNAUDITED)
(In thousands, except per share data)
7. SUBSEQUENT EVENTS
In August 1999, the Company acquired 100% of the capital stock of
Falk Communications, Inc., a Delaware corporation ("Falk"). The
Company's initial purchase price, including expenses related to the
acquisition, was $16,952, consisting of approximately
$9,000 in cash and approximately 649 shares of the Company's Common
Stock. Total amounts to be paid in cash and the Company's Common Stock
in connection with the acquisition, including potential, future
earn-out payments to take place on or prior to April 30, 2000, 2001,
2002 and 2003 based upon a multiple of operating income of Falk, are
not to exceed $36,952. The acquisition will be accounted for using the
purchase method of accounting, whereby the excess purchase price over
the fair value of the net assets acquired will be recorded as goodwill.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This June 30, 1999 Quarterly Report on Form 10-Q contains
statements which constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those
statements include statements regarding the intent, belief or current
expectations of the Company and its management team. The Company's
stockholders and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements. Such
risks and uncertainties include, among other things, competitive,
economic and regulatory factors in the healthcare marketing and
communications industry and the pharmaceutical and healthcare industry,
general economic conditions, the ability of the Company to manage its
growth and successfully implement its business strategy and other risks
and uncertainties that are discussed herein, and in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
The following discussion and analysis should be read in
conjunction with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.
Results of Operations
The following table sets forth certain consolidated income
statement data of the Company as a percentage of revenues for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------ ------------------------------
1998 1999 1998 1999
-------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Statement of Income Data:
Revenues........................................ 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries and related costs................. 73.4 69.7 77.8 74.1
General and office expenses................ 13.5 15.0 13.5 15.1
Depreciation and amortization.............. 1.5 2.3 1.6 2.4
-------------- ------------- -------------- ------------
88.4 87.0 92.9 91.6
Income from operations.......................... 11.6 13.0 7.1 8.4
Interest income, net ........................... 1.5 0.9 1.4 0.9
-------------- ------------- -------------- ------------
Income before provision for income taxes
and minority interests..................... 13.1 13.9 8.5 9.3
Provision for income taxes...................... 5.5 6.1 3.5 4.1
-------------- ------------- -------------- ------------
Net income ..................................... 7.6% 7.8% 5.0% 5.2%
============== ============= ============== ============
</TABLE>
Note: Percentages may not correspond to financial statements due to
rounding.
9
<PAGE>
The following table sets forth certain operating data with
respect to the Company's communications and contract sales operations
for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------------------------------------------------
1998 1999 1998 1999
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Communications........... $ 7,105 $ 9,357 $ 12,558 $ 17,168
Contract Sales........... 7,772 8,606 16,307 15,899
----------------- ----------------- ----------------- ----------------
$ 14,877 $ 17,963 $ 28,865 $ 33,067
================= ================= ================= ================
Income from operations:
Communications........... $ 1,395 $ 1,810 $ 1,424 $ 2,254
Contract Sales........... 336 528 631 535
----------------- ----------------- ----------------- ----------------
$ 1,731 $ 2,338 $ 2,055 $ 2,789
================= ================= ================= ================
</TABLE>
Fiscal Three Months Ended June 30, 1999 Compared to Fiscal Three Months
Ended June 30, 1998
Revenues
Revenues for the three months ended June 30, 1999 was $18.0
million, an increase of $3.1 million, or 20.7%, from $14.9 million for
the three months ended June 30, 1998.
Communications revenues for the quarter ended June 30, 1999
increased to $9.4 million, an increase of $2.3 million, or 31.7%, from
$7.1 million in the second quarter of 1998. Of such increase,
approximately $2.1 million was attributable to revenues derived as a
result of the acquisitions of HFT and its subsidiaries (together, "the
HFT Group Companies"), Colwood House Medical Publications (UK) Limited
("Colwood") and CPA Espana, S.L. ("CPA Spain"), collectively referred
to herein as the "1998 Acquisitions", while the remaining increase was
attributable to the growth of advertising and promotion services in the
U.S.
Contract sales revenues for the quarter ended June 30, 1999
increased to $8.6 million, an increase of $834,000 or 10.7%, from $7.8
million in the second quarter of 1998. This increase was attributable
to (i) revenues generated by the U.S. contract sales division from new
clients, and (ii) the growth of the contract sales operation in the
United Kingdom, which resulted primarily from additional business from
new clients. These increases were partially offset by a decrease in
medical contract sales revenue of $572,000 resulting from the
discontinuation of the U.K. syndicated, medical contract sales
business.
Salaries and Related Costs
Salaries and related costs for the three months ended June 30,
1999 was $12.5 million, an increase of $1.6 million, or 14.7%, from
$10.9 million for the three months ended June
10
<PAGE>
30, 1998. Salaries and related costs include all compensation and
related benefits for all employees and contracted talent. Such increase
was primarily attributable to approximately $1.2 million of salaries
and related costs associated with staffing to support revenues in
connection with the 1998 Acquisitions and $323,000 relating to the
increased contract sales business. Salaries and related costs
represented 69.7% of revenues in the second quarter of 1999, compared
to 73.4% in the second quarter of 1998. Such decrease, as a percentage
of revenues, was primarily attributable to the revenue growth of the
Company's communications operations as a percentage of total revenues.
Generally, labor costs associated with the Company's communications
operations are less as a percentage of corresponding revenues than
those for the contract sales services.
General and Office Expenses
General and office expenses for the three months ended June 30,
1999 was $2.7 million, an increase of $699,000, or 35.0%, from $2.0
million for the three months ended June 30, 1998. General and office
expenses include occupancy and related costs, client development and
other related administrative costs. Such increase was attributable to
(i) $391,000 of expenses in connection with the 1998 Acquisitions, (ii)
$131,000 of increased occupancy and related costs, and (iii) increased
business development activities in the U.K. General and office expenses
represented 15.0% of revenues in the second quarter of 1999, compared
to 13.4% of the revenues in the second quarter of 1998.
Depreciation and Amortization
Depreciation and amortization expense for the three months ended
June 30, 1999 was $404,000, an increase of $179,000, or 79.6%, from
$225,000 for the three months ended June 30, 1998. The increase was
primarily related to (i) amortization expense associated with the
goodwill generated in connection with the 1998 Acquisitions, which
acquisitions were accounted for by the purchase method of accounting,
and (ii) additional depreciation expense attributable to property and
equipment acquired in connection with the 1998 Acquisitions.
Depreciation and amortization expense represented 2.2% of revenues for
the second quarter of 1999, compared to 1.5% for the second quarter of
1998.
Income From Operations
Income from operations for the three months ended June 30, 1999
was $2.3 million, an increase of $607,000, or 35.1%, from $1.7 million
for the three months ended June 30, 1998. Income from operations
represented 13.0% of revenues in the second quarter of 1999, compared
to 11.6% in the second quarter of 1998.
Interest Income, net
Interest income, net for the three months ended June 30, 1999
was $170,000, a decrease of $43,000 from $213,000 for the three months
ended June 30, 1998, primarily due to the lower cash and cash
equivalents balances during the second quarter of 1999.
11
<PAGE>
Such decrease in cash and cash equivalents balances was primarily
attributable to the initial cash payments in connection with the 1998
Acquisitions, partially offset by an increase in advance billings.
Provision for Income Taxes
The provision for income taxes for the three months ended June
30, 1999 was $1.1 million, an increase of $291,000 from $813,000 for
the three months ended June 30, 1998. The provision for income taxes,
based on management's estimates of the effective year-end rate, was
recorded at effective rates of 41.8% and 44.0% for the three months
ended June 30, 1998 and 1999, respectively. The increase in the
estimated effective rate primarily reflects nondeductible amortization
expense in connection with the 1998 Acquisitions.
Net Income
Net income for the three months ended June 30, 1999 was $1.4
million, an increase of $273,000, or 24.1%, from $1.1 million for the
three months ended June 30, 1998. Net income represented 7.8% of
revenues in the second quarter of 1999 compared to 7.6% in the second
quarter of 1998.
Fiscal Six Months Ended June 30, 1999 Compared to Fiscal Six Months
Ended June 30, 1998
Revenues
Revenues for the six months ended June 30, 1999 was $33.1
million, an increase of $4.2 million, or 14.6%, from $28.9 million for
the six months ended June 30, 1998.
Communications revenues for the six months ended June 30, 1999
increased to $17.2 million, an increase of $4.6 million, or 36.7%, from
$12.6 million for the same period in the prior year. Of such increase,
approximately $4.0 million was attributable to revenues derived
as a result of the 1998 Acquisitions, while the remaining increase was
primarily attributable to the growth of advertising and promotion
services in the U.S.
Contract sales revenues decreased to $15.9 million, a decrease
of $408,000, or 2.5%, from $16.3 million for the same period in the
prior year. This decrease was attributable to a decrease in medical
contract sales revenue of approximately $1.3 million resulting from the
discontinuation of the U.K. syndicated, medical contract sales
business, partially offset by revenues generated by the U.S. contract
sales division from new clients.
Salaries and Related Costs
Salaries and related costs for the six months ended June 30,
1999 was $24.5 million, an increase of $2.0 million, or 9.0%, from
$22.5 million for the six months ended June 30, 1998. Salaries and
related costs include all compensation and related benefits for all
employees and contracted talent. Such increase was primarily
attributable to (i)
12
<PAGE>
approximately $2.4 million of salaries and related costs associated
with staffing to support revenues in connection with the 1998
Acquisitions, and (ii) approximately $422,000 relating to additional
staffing costs to support the growth in U.S. communications services.
These increases were partially offset by a net decrease in contract
sales salaries of $696,000 primarily resulting from reduced staffing
requirements related to the discontinuation of the U.K. syndicated,
medical contract sales business. Salaries and related costs represented
74.1% of revenues for the first six months of 1999, compared to 77.8%
for the first six months of 1998. Such decrease, as a percentage of
revenues, was primarily attributable to the growth of the Company's
communications operations as a percentage of total revenues. Generally,
labor costs associated with the Company's communications operations are
less as a percentage of corresponding revenues than those for the
contract sales services.
General and Office Expenses
General and office expenses for the six months ended June 30,
1999 was $5.0 million, an increase of $1.1 million, or 28.4%, from $3.9
million for the six months ended June 30, 1998. General and office
expenses include occupancy and related costs, client development and
other related administrative costs. Such increase was primarily
attributable to (i) $828,000 of expenses in connection with the 1998
Acquisitions, and (ii) $201,000 of increased occupancy and related
costs. General and office expenses represented 15.1% of revenues for
the first six months of 1999, compared to 13.5% of revenues for the
first six months of 1998.
Depreciation and Amortization
Depreciation and amortization expense for the six months ended
June 30, 1999 was $778,000, an increase of $335,000, or 75.6%, from
$443,000 for the six months ended June 30, 1998. The increase was
related to (i) amortization expense associated with the goodwill
generated in connection with the 1998 Acquisitions, which acquisitions
were accounted for by the purchase method of accounting, and (ii)
additional depreciation expense attributable to property and equipment
acquired in connection with the 1998 Acquisitions. Depreciation and
amortization expense represented 2.4% of revenues for the first six
months of 1999, compared to 1.5% for the first six months of 1998.
Income From Operations
Income from operations for the six months ended June 30, 1999
was $2.8 million, an increase of $734,000, or 35.7%, from $2.1 million
for the six months ended June 30, 1998. Income from operations
represented 8.4% of revenues for the first six months of 1999, compared
to 7.1% for the first six months of 1998.
Interest Income, net
Interest income, net for the six months ended June 30, 1999 was
$277,000, a decrease of $126,000 from $403,000 for the six months ended
June 30, 1998, primarily due to the lower cash and cash equivalents
balances for the six months ended June 30, 1999. Such
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<PAGE>
decrease in cash and cash equivalents balances was attributable to the
initial cash payments in connection with the 1998 Acquisitions
partially offset by an increase in advance billings.
Provision for Income Taxes
The provision for income taxes for the six months ended June 30,
1999 was $1.3 million, an increase of $326,000 from $1.0 million for
the six months ended June 30, 1998. The provision for income taxes,
based on management's estimates of the effective year-end rate, was
recorded at effective rates of 41.6% and 44.0% for the six months ended
June 30, 1998 and 1999, respectively. The increase in the estimated
effective rate reflects nondeductible amortization expense in
connection with the 1998 Acquisitions.
Net Income
Net income for the six months ended June 30, 1999 was $1.7
million, an increase of $279,000, or 19.4%, from $1.4 million for the
six months ended June 30, 1998. Net income represented 5.2% of revenues
for the six months ended June 30, 1999 compared to 5.0% for the six
months ended June 30, 1998.
Liquidity and Capital Resources
During the first six months of 1999, cash provided by
operations was approximately $11.9 million, which consisted of net
income for the period of $1.7 million, non-cash charges of $857,000 and
an increase in advance billings of $11.3 million. This was partially
offset by a decrease in accrued expenses of approximately $992,000, and
an aggregate increase in accounts receivable, unbilled production
charges and other assets of approximately $1.5 million. Cash used in
investing activities was $651,000 and was primarily attributable to
capital expenditures of $770,000. Cash provided by financing activities
was $26,000, and primarily resulted from $143,000 received by the
Company in connection with the exercise of stock options less payments
for bank loans and capital leases of $160,000.
The Company's working capital was approximately $11.1 million
at June 30, 1999, compared to approximately $9.5 million at December
31, 1998. The increase in working capital at June 30, 1999, as compared
to December 31, 1998, was primarily attributable to an increase in cash
and cash equivalents of $11.1 million and a combined decrease in
accounts payable and accrued expenses of $1.6 million offset by an
increase in advance billings of $11.1 million.
The Company maintains relationships with a number of banks in
the United States and Europe which have extended various secured and
unsecured, committed and uncommitted lines of credit in amounts
sufficient to meet the Company's cash needs. In July 1999, Girgenti,
Hughes, Butler and McDowell, Inc., a wholly-owned subsidiary of the
Company, with operations in the U.S., entered into a $5.0 million
uncommitted line of credit with a bank of which no amounts are
outstanding to date. Amounts outstanding under the line of credit
accrue interest at the bank's prime rate or at LIBOR plus 1.75%.
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The line of credit is guaranteed by the other entities comprising the
Company's U.S. operations, including Healthworld Corporation, and is
secured by a security interest in all of the personal property owned by
certain of the entities comprising the Company's U.S. operations. The
Company is also a party to various secured and unsecured, committed
lines of credit and overdraft facilities outside of the United States
in an aggregate amount of approximately $1.9 million. The Company has
$41,000 outstanding to date under such facilities outside of the United
States.
In July 1998, the Company acquired the HFT Group
Companies, a French healthcare communications agency. The Company's
initial cash purchase price was 20.3 million French Francs
(approximately US$3.4 million) including expenses related to the
acquisition. Total amounts to be paid in connection with the
acquisition, including potential, future earn-out payments to take
place on or prior to April 15, 2000 and April 15, 2002 based upon a
multiple of operating income of the HFT Group Companies and the
seller's option to sell and the Company's option to purchase the
remaining 20% of the capital stock of HFT, will not exceed 48.0 million
French Francs (approximately US$8.1 million).
In July 1998, the Company acquired all of the capital stock of
Colwood, a United Kingdom medical education company. The Company's
initial cash purchase price was (pound)4.5 million (approximately
US$7.5 million) including expenses related to the acquisition. Total
amounts to be paid in connection with the acquisition, including
potential, future earn-out payments to take place in April 2000 and
August 2001 based upon Colwood achieving certain targeted operating
profits, are not to exceed approximately (pound)8.0 million
(approximately US$13.3 million).
Pursuant to the acquisition agreement with respect to the
Colwood transaction, the Company deposited an amount equal to
(pound)1.0 million (approximately US$1.7 million) in an
interest-bearing escrow account to be applied towards the potential,
future earn-out payments to be made in April 2000 and August 2001, and
may be required to deposit into such escrow account additional amounts
based on net operating profits to be applied towards such potential,
future earn-out payments. Accordingly, such committed amounts will not
be available for working capital purposes.
In October 1998, the Company acquired all of the capital stock
of CPA Spain, a healthcare communications agency located in Madrid,
Spain. The Company's initial cash purchase price was approximately 261
million Spanish Pesetas (approximately US$1.9 million) including
expenses related to the acquisition. Total amounts to be paid in
connection with the acquisition, including potential, future earn-out
payments to take place in April 2000 and April 2003 based upon CPA
Spain achieving certain targeted operating profits, are not to exceed
approximately 710 million Spanish Pesetas (approximately US$5.1
million).
In August 1999, the Company acquired 100% of the capital stock
of Falk Communications, Inc. ("Falk"), a healthcare communications
agency located in New York, New York. The Company's initial purchase
price, including expenses related to the acquisition, was approximately
$17.0 million, consisting of approximately $9.0 million in
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<PAGE>
cash and 649,111 shares of the Company's Common Stock. Total amounts to
be paid in cash and the Company's Common Stock in connection with the
acquisition, including potential, future earn-out payments to take
place on or prior to April 30, 2000, 2001, 2002 and 2003 based upon a
multiple of operating income of Falk, are not to exceed $37.0 million.
Management believes that cash generated from the Company's
operations and available to the Company under various lines of credit
are adequate to support its short-term cash requirements for capital
expenditures and maintenance of working capital.
Impact of Year 2000
The Year 2000 issue results from the inability of some
computer programs to identify the year 2000 properly, potentially
leading to errors or system failure. A company's business may be
adversely affected if it, or any of its suppliers, customers or other
third parties with whom it transacts business (including banks and
governmental agencies) have not resolved the Year 2000 issue in a
timely manner.
The Company's internal computing systems are primarily limited
to hardware and software for its financial systems, such as general
ledger, accounts receivable and accounts payable systems, and word
processing, database and graphic design systems. The Company is not
dependent on large legacy systems, and the Company believes that it
could replace any of its software or systems, if necessary, quickly and
at reasonable expense.
The Company has completed its internal review with respect to
Year 2000 issues. The Company does not believe Year 2000 issues, within
its internal information systems, will have a material adverse effect
on the Company's business, financial condition or results of
operations. The Company believes that its internal computer systems
used in its U.S. Operations and France are currently Year 2000
compliant, and that those used in its United Kingdom and Spanish
operations, to the extent not already Year 2000 compliant, will be made
Year 2000 compliant by September 1999.
The Company has completed its review of the Year 2000
readiness of its material clients and vendors in the United States and
France and believes, based solely upon inquiries made to such clients
and vendors, that such parties should not cause a material disruption
in the Company's business due to Year 2000 issues. The Company is
currently working with critical third parties in the United Kingdom and
Spain to determine the impact of Year 2000 issues on the various third
party businesses and operations in the United Kingdom and Spain and the
collateral impact, if any, on the business and operations of the
Company and the plans to address Year 2000 issues where third party
systems interface with the Company's systems.
To date, the cost of the Company's Year 2000 assessment and
compliance efforts has not been material to the Company's results of
operations or liquidity and the Company does not anticipate that the
cost of completing its assessment and compliance project will
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be material to its results of operations or liquidity in 1999. The
Company is not aware, at this time, of any Year 2000 non-compliance
that will materially affect the Company.
PART II
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 9, 1999, the Company held its Annual Meeting of
Stockholders (the "Annual Meeting"). The holders of record of
6,173,233 shares of Common Stock were present in person or represented
by proxy at the meeting. At the Annual Meeting, the Company's
stockholders approved the following:
(1) Election of Directors
The stockholders elected the following persons to serve as
directors of the Company until the next Annual Meeting, or until their
successors are duly elected and qualified. Votes were cast as follows:
Number Of Number Of
Votes For Votes Against
----------------- --------------------
Steven Girgenti 6,270,927 98,896
William Leslie Milton 6,270,927 98,896
Francis Hughes 6,217,327 152,496
Peter Knight 6,217,327 152,496
Colin Lloyd 6,270,927 98,896
Jonah Shacknai 6,270,927 98,896
Alex Spizz 6,270,927 98,896
(2) Amendment of 1997 Stock Option Plan, as amended (the "1997 Plan").
(a) The Stockholders approved the amendment of the Company's 1997 Plan to
increase by 500,000 the aggregate number of shares of the Company's
Common Stock available under the 1997 Plan. Votes were cast as follows:
Number Of Number Of Number Of
Votes For Votes Against Votes Abstaining
----------- --------------- ------------------
4,690,889 806,426 8,933
(b) The Stockholders approved the amendment of the Company's 1997 Plan to
increase the amount of stock options to be granted automatically to each
non-employee director annually from options to purchase 10,000 shares of
Common Stock to options to purchase 20,000 shares of Common Stock, to
provide that such options be granted on the date of each annual meeting
of stockholders of the Company instead of on the date of the first
meeting of the Board of Directors immediately following the annual
meeting of stockholders and to
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<PAGE>
provide that such options shall become exercisable on the date of grant
instead of becoming exercisable one year from the date of grant. Votes
were cast as follows:
Number Of Number Of Number Of
Votes For Votes Against Votes Abstaining
----------- --------------- ------------------
5,735,591 581,326 20,516
(3) Appointment of Auditors
The stockholders approved the appointment of Arthur Andersen LLP
as independent auditors of the Company for the 1999 fiscal year. Votes
were casts as follows:
Number Of Number Of Number Of
Votes For Votes Against Votes Abstaining
----------- --------------- ------------------
6,105,957 256,100 7,766
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits-The exhibits to this Form 10-Q are listed in the accompanying
Exhibit Index.
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
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SIGNATURES
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.
HEALTHWORLD CORPORATION
Date: August 13, 1999 By: /s/ STEVEN GIRGENTI
------------------------------------------
Steven Girgenti
Chairman of the Board and
Chief Executive Officer
Date: August 13, 1999 By: /s/ STUART DIAMOND
------------------------------------------
Stuart Diamond
Executive Vice President,
Chief Financial Officer, Treasurer
and Secretary
20
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EXHIBIT INDEX
Number Description of Exhibits
- ------ -----------------------
10.01 -- Employment Agreement, dated as of June 1, 1999, between
Girgenti, Hughes, Butler & McDowell, Inc. and Herbert
Ehrenthal.
10.02 -- Grid Time Promissory Note dated August 2, 1999 by
Girgenti, Hughes, Butler & McDowell, Inc. in favor of The
Chase Manhattan Bank.
10.03* -- Guaranty dated August 2, 1999 by Healthworld Corporation
in favor of The Chase Manhattan Bank.
10.04** -- General Security Agreement dated July 29, 1999 by
Girgenti, Hughes, Butler & McDowell, Inc. in favor of The
Chase Manhattan Bank.
27 -- Financial Data Schedule.
SCHEDULE OF OMITTED DOCUMENTS
* The following documents have been omitted because they are substantially
identical to Exhibit 10.03 except for the identity of the guarantor party:
-- Guaranty by Black Cat Graphics, Inc. in favor of The Chase
Manhattan Bank.
-- Guaranty by Brand Research Corporation in favor of The Chase
Manhattan Bank.
-- Guaranty by GHBM, Inc. in favor of The Chase Manhattan Bank.
-- Guaranty by Medical Education Technologies, Inc. in favor of The
Chase Manhattan Bank.
-- Guaranty by Healthworld International Holdings, Inc. in favor of
The Chase Manhattan Bank.
-- Guaranty by Headcount LLC in favor of The Chase Manhattan Bank.
** The following documents have been omitted because they are substantially
identical to Exhibit 10.04 except for the identity of the party granting a
security interest:
-- General Security Agreement by GHBM, Inc. in favor of The Chase
Manhattan Bank.
-- General Security Agreement by Medical Education Technologies, Inc.
in favor of The Chase Manhattan Bank.
-- General Security Agreement by Healthworld International Holdings,
Inc. in favor of The Chase Manhattan Bank.
-- General Security Agreement by Headcount LLC in favor of The Chase
Manhattan Bank.
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<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1999, between
GIRGENTI, HUGHES, BUTLER & McDOWELL, INC., a New York corporation with offices
at 100 Avenue of the Americas, New York, New York 10013 (the "Company"), and
HERBERT EHRENTHAL, an individual residing at 301 East 79th Street Apt 26C, New
York, New York 10021 ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is a wholly-owned subsidiary of
Healthworld Corporation, a Delaware corporation (the "Parent"); and
WHEREAS, the Company desires to engage Employee to perform
services for the Company, the Parent, Black Cat Graphics, Inc., a New York
corporation and a wholly-owned subsidiary of the Parent ("Black Cat"), Brand
Research Corporation, a New York corporation and a wholly-owned subsidiary of
the Parent ("Brand Research"), and Food Com (a division of the Company
("FoodCom"), and their successors and assigns, and Employee desires to perform
such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the representations,
warranties and mutual covenants set forth herein, the parties agree as follows:
1. Term.
The Company agrees to employ Employee, and Employee agrees to
serve, on the terms and conditions of this Agreement, for a period commencing on
June 1, 1999 (the "Commencement Date") and ending on May 31, 2001 (the
"Termination Date"), or such shorter period as may be provided for herein;
provided, however, that the term of this Agreement may be extended (subject to
earlier termination as provided herein), at the option of Employee, for an
additional one year period by means of written notice made no later than
[February 15, 2001] by Employee to the Company informing the Company of his
election to exercise his option to extend the Employment Period by one year. The
period during which Employee is employed hereunder is hereinafter referred to as
the "Employment Period." As used herein, the term "Employment Year" shall mean a
one-year period of Employee's employment hereunder commencing on each January 1
during the Employment Period, provided that the first Employment Year shall be
the period commencing on January 1, 1999 and ending on December 31, 1999. For
the avoidance of doubt, with respect to any calculations made under this
Agreement by reference to the first Employment Year, the terms of this Agreement
shall be deemed to supersede the terms of that certain Employment Agreement
between the Company and Employee dated as of November 1997.
<PAGE>
2. Duties and Services.
During the Employment Period, Employee shall be employed as the
President and Chief Operating Officer--Global Communications Services of the
Company, and shall perform the duties incident to that position which shall
include responsibility for global communications services for the Companies (as
defined below). In the performance of his duties, Employee shall be subject to
the direction of the Chief Executive Officer of the Parent and the Board of
Directors of the Company. In addition, during the Employment Period, Employee
shall be elected to and shall serve, if so elected, as a member of the Board of
Directors of the Parent and any of the Companies as may from time to time be
prescribed by the Chief Executive Officer of the Parent or the Board of
Directors of the Company. Employee agrees to his employment as described in this
Section 2. Employee agrees to devote all of his business time and efforts to the
performance of his duties under this Agreement. Employee shall perform his
duties from the Company's principal offices located in New York City and
Employee shall be available to travel as the needs of the business require. As
used herein the term "Companies" shall mean and include the Company, the Parent,
Black Cat, Brand Research and FoodCom, but shall specifically exclude
Syberactive, Inc., Medical Education Technologies, Inc./Strategic Solutions, Rx
Click, Headcount LLC and any other companies or divisions acquired or formed
directly or indirectly by the Parent or the Company after the date hereof.
3. Compensation.
(a) The Company shall pay Employee, during the Employment Period, a
base salary at the annual rate of $350,000 (prorated for periods that are less
than one year) payable at such intervals as salaries are paid by the Company to
other executives of the Company.
(b) During the Employment Period, Employee shall receive an annual
incentive bonus (the "Annual Incentive Bonus") for each Employment Year, payable
not later than 110 days after the end of the applicable Employment Year, in an
amount to be determined as follows:
(i) if EBIT (as defined below) for the fiscal year
corresponding to the applicable Employment Year does not exceed the
Base EBIT (as defined below), Employee shall not be entitled to an
Annual Incentive Bonus with respect to such Employment Year;
(ii) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount equal to
or less than 10%, Employee shall receive an Annual Incentive Bonus with
respect to such Employment Year in an amount equal to 12.5% of
Employee's annual base salary for such Employment Year, subject to
reduction pursuant to Section 3(c) below;
(iii) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount in excess
of 10% but less than or equal to 15%, Employee shall receive an Annual
Incentive Bonus with respect to such Employment Year in an amount equal
to 18.5% of Employee's
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<PAGE>
annual base salary for such Employment Year, subject to reduction
pursuant to Section 3(c) below;
(iv) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount in excess
of 15% but less than or equal to 20%, Employee shall receive an Annual
Incentive Bonus with respect to such Employment Year in an amount equal
to 26% of Employee's annual base salary for such Employment Year,
subject to reduction pursuant to Section 3(c) below; and
(v) if EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount in excess
of 20%, Employee shall receive an Annual Incentive Bonus with respect
to such Employment Year in an amount equal to 35% of Employee's annual
base salary for such Employment Year, subject to reduction pursuant to
Section 3(c) below.
(c) The amount of the Annual Incentive Bonus which Employee may be
entitled to receive for each Employment Year as calculated above shall be
subject to the following reductions:
(i) if Revenues (as defined below) for the fiscal year
corresponding to the applicable Employment Year do not exceed the Base
Revenues (as defined below), Employee shall only be entitled to an
Annual Incentive Bonus with respect to such Employment Year in an
amount equal to 25% of the amount calculated in Section 3(b) above;
(ii) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount equal
to or less than 4.0%, Employee shall receive an Annual Incentive Bonus
with respect to such Employment Year in an amount equal to 40% of the
amount calculated in Section 3(b) above;
(iii) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
excess of 4.0% but less than or equal to 7.5%, Employee shall receive
an Annual Incentive Bonus with respect to such Employment Year in an
amount equal to 50% of the amount calculated in Section 3(b) above;
(iv) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
excess of 7.5% but less than or equal to 10.0%, Employee shall receive
an Annual Incentive Bonus with respect to such Employment Year in an
amount equal to 60% of the amount calculated in Section 3(b) above;
(v) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
excess of 10.0%, but less than or equal to 12.5%, Employee shall
receive an Annual Incentive
3
<PAGE>
Bonus with respect to such Employment Year in an amount equal to 70%
of the amount calculated in Section 3(b) above;
(vi) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
excess of 12.5%, but less than or equal to 15.0%, Employee shall
receive an Annual Incentive Bonus with respect to such Employment Year
in an amount equal to 85% of the amount calculated in Section 3(b)
above; and
(vii) if Revenues for the fiscal year corresponding to the
applicable Employment Year exceed the Base Revenues by an amount in
excess of 15.0%, Employee shall receive an Annual Incentive Bonus in an
amount calculated in Section 3(b) above.
The Company shall deliver to Employee a calculation of the Annual
Incentive Bonus together with its payment thereof.
(d) During the Employment Period, Employee shall receive
deferred compensation ("Deferred Compensation") for each Employment Year, 50%
of which shall be payable six months after the end of the applicable
Employment Year and the other 50% of which shall be payable one year after the
end of the applicable Employment Year, in an amount to be determined as follows:
(i) if (A) EBIT for the fiscal year corresponding to the
applicable Employment Year does not exceed the Base EBIT by at least
15%, or (B) Revenues for the fiscal year corresponding to the
applicable Employment Year do not exceed the Base Revenues by at least
15%, Employee shall not be entitled to Deferred Compensation with
respect to such Employment Year;
(ii) if (A) EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount equal to
at least 15%, (B) Revenues for the fiscal year corresponding to the
applicable Employment Year exceeds the Base Revenues by an amount equal
to at least 15%, and (C) EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount less than
20% or Revenues for the fiscal year corresponding to the applicable
Employment Year exceeds the Base Revenues by an amount less than 20%,
Employee shall receive Deferred Compensation with respect to such
Employment Year in an aggregate amount equal to $25,000;
(iii) if (A) EBIT for the fiscal year corresponding to the
applicable Employment Year exceeds the Base EBIT by an amount equal to
or in excess of 20%, and (B) Revenues for the fiscal year corresponding
to the applicable Employment Year exceed the Base Revenues by an amount
equal to or in excess of 20%, Employee shall receive Deferred
Compensation with respect to such Employment Year in an aggregate
amount equal to $50,000.
4
<PAGE>
In calculating Deferred Compensation for any Employment Year
during which Employee is employed by the Company hereunder for part of such
Employment Year, the Deferred Compensation payable with respect to such partial
Employment Year shall be reduced pro rata to reflect the portion of the
Employment Year worked, and EBIT and Revenues for the fiscal period within the
applicable partial Employment Year shall be compared to the Base EBIT and the
Base Revenues as calculated for the same fiscal period within the base year.
The Company shall deliver to Employee a calculation of the Deferred
Compensation together with its payment thereof.
(e) As used herein, the term "EBIT" shall mean the earnings from
operations of the Companies before interest, taxes and extraordinary items,
determined in accordance with generally accepted accounting principles ("GAAP").
As used herein, the term "Revenues" shall mean the net commissions and fees of
the Companies, determined in accordance with GAAP.
(f) As used herein, the term "Base EBIT" shall mean (i) with
respect to calculating the Annual Incentive Bonus and Deferred Compensation for
the first Employment Year, the EBIT for the fiscal year ending December 31,
1998, and (ii) the "Base EBIT" used to calculate the Annual Incentive Bonus and
Deferred Compensation for each successive Employment Year shall be determined by
increasing the Base EBIT used for calculating the Annual Incentive Bonus for the
prior Employment Year by 7%, compounded annually. As used herein, the term "Base
Revenues", shall mean (x) with respect to calculating the Annual Incentive Bonus
and Deferred Compensation for the first Employment Year, the Revenues for the
fiscal year ending December 31, 1998, and (y) the "Base Revenues" used to
calculate the Annual Incentive Bonus and Deferred Compensation for each
successive Employment Year shall be determined by increasing the Base Revenues
used for calculating the Annual Incentive Bonus for the prior Employment Year by
7%, compounded annually.
(g) In addition, Employee may be entitled to receive an additional
annual bonus at the sole discretion of the Board of Directors of the Parent and
the Company.
(h) All compensation hereunder (whether in the form of base salary,
incentive compensation or Deferred Compensation) shall be subject to payroll
deductions as may be necessary or customary in respect of salaried personnel of
the Company.
(i) Employee will be granted access to the financial information
used to calculate Employee's bonus and Deferred Compensation hereunder.
(j) To the extent Employee ceases to be employed by the Company
during any Employment Year, calculations of EBIT and Revenues shall be prorated
for periods of less than such Employment Year up to the date of Employee's
termination.
(k) On July 26, 1999, Employee will be granted pursuant to the
Company's 1997 Stock Option Plan, as amended (the "Stock Option Plan"), stock
options to purchase 50,000 shares of the Parent's common stock, par value $.01
per share (the "Common Stock"), at a price equal to the then fair market value
of the Common Stock (as determined under the Stock Option Plan), which options
shall vest one-third after one year from the date of grant, two-thirds after two
years from the date of grant, and in their entirety after three years from the
date of
5
<PAGE>
grant. On July 26, 2000, provided that Employee is still in the employ of the
Company pursuant to this Agreement, Employee will be granted pursuant to
the Stock Option Plan stock options to purchase an additional 50,000 shares of
Common Stock at a price equal to the then fair market value of the Common Stock
(as determined under the Stock Option Plan), which options shall vest one-third
after one year from the date of grant, two-thirds after two years from the date
of grant, and in their entirety after three years from the date of grant.
4. Benefits.
(a) During the Employment Period, Employee may participate, to the
extent eligible, in each insurance (including, without limitation, any life,
travel and accident and medical and other health insurance), pension, disability
and other employee benefit plans maintained by the Company for its senior
management or employees generally (and, in particular, those employee benefit
plans in which the Chairman of the Board and Chief Executive Officer of the
Company is eligible to participate) in accordance with the terms thereof.
(b) Employee shall be entitled to such number of sick days every
year during the Employment Period as are generally provided from time to time by
the Company to its senior management. Any unused sick days at the end of the
calendar year shall not accrue or cumulate from year to year.
(c) During the Employment Period, Employee shall be entitled to
reimbursement for all lease payments, gasoline, maintenance and other costs and
expenses for his automobile in the aggregate amount not to exceed $12,000 per
year, upon submission and approval of written statements and bills in accordance
with the then regular procedures of the Company.
(d) During the Employment Period, Employee shall be entitled to
reimbursement for all reasonable travel, entertainment and other out-of-pocket
expenses necessarily incurred in the performance of his duties hereunder
(excluding automobile expenses as described in subsections (c) above), upon
submission and approval of written statements and bills in accordance with the
then regular procedures of the Company.
(e) During the Employment Period, Employee shall receive a country
club allowance of $10,000 per year, payable semi-annually, and Employee shall be
responsible for all dues, fees and expenses associated with his club membership.
(f) During the Employment Period, Employee shall receive an expense
allowance of $40,000 per year, payable monthly, which shall be in addition to
any reimbursement of reasonable expenses by the Company pursuant to Section
4(d).
5. Vacation.
Employee shall be entitled to such number of weeks of paid vacation
every year during the Employment Period as are generally provided from time to
time by the Company to its senior management. The time during which vacation
will be taken shall be coordinated with other senior management of the Company.
Any unused vacation time at the end of a calendar
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year shall not accrue or cumulate from year to year and Employee shall not be
entitled to compensation for unused vacation time.
6. Representations, Warranties
and Covenants of Employee.
Employee represents and warrants to the Company that (a) Employee
is under no contractual or other restriction or obligation which is inconsistent
with the execution of this Agreement, the performance of his duties hereunder,
or the other rights of the Company hereunder and (b) Employee is, to the best of
his knowledge, under no physical or mental disability that would hinder his
performance of his duties under this Agreement.
7. Non-Competition; Nonsolicitation.
(a) In view of the unique and valuable services it is expected
Employee will render to the Company, and in consideration of the compensation to
be received hereunder, Employee agrees (i) that he will not, during the period
he is employed by the Company under this Agreement, Participate In (as defined
below) any other business or organization, whether or not such business or
organization now is or shall then be competing with or of a nature similar to
the business or profession of the Company or any Companies, and (ii) for a
period of one year after he ceases to be employed by the Company under this
Agreement, he will not compete with or be engaged in the same business as or
Participate In any other business or organization which during such one year
period competes with or is engaged in the same business as the Company or any of
the Companies with respect to any product or service sold or proposed to be sold
or activity engaged in or proposed to be engaged in up to the time of such
cessation within a 100-mile radius of the location of the Company's executive
offices on the date on which Employee ceases to be employed by the Company under
this Agreement, except that in each case the provisions of this Section 7(a)
will not be deemed breached merely because Employee owns not more than 1% of the
outstanding common stock of a corporation, if, at the time of its acquisition by
Employee, such stock is listed on a national securities exchange, is reported on
Nasdaq, or is regularly traded in the over-the-counter market by a member of a
national securities exchange.
As used in this Agreement, the term "Participate In" shall mean:
"directly or indirectly, for his own benefit or for, with, or through any other
person, firm, or corporation, own, manage, operate, control, loan money to, or
participate in the ownership, management, operation, or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in."
(b) Employee will not directly or indirectly reveal the name of,
solicit or interfere with, or endeavor to entice away from the Company, the
Parent, any of the Companies or any of the Parent's other direct or indirect
subsidiaries or any of their respective employees for a period of one year after
Employee leaves the employment of the Company. Employee will not directly or
indirectly employ any person who is an employee of the Company, the Parent, any
of the Companies or any of the Parent's other direct or indirect subsidiaries
for a period of one year after the Employee leaves the employ of the Company.
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<PAGE>
(c) Since a breach of the provisions of this Section 7 could not
adequately be compensated by money damages, the Company shall be entitled, in
addition to any other right and remedy available to it, to an injunction
restraining such breach or a threatened breach, and in either case no bond or
other security shall be required in connection therewith, and Employee hereby
consents to the issuance of such injunction. Employee agrees that the provisions
of this Section 7 are necessary and reasonable to protect the Company, the
Parent or any of the Companies in the conduct of their respective business. If
any restriction contained in this Section 7 shall be deemed to be invalid,
illegal, or unenforceable by reason of the extent, duration, or geographical
scope thereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced form such restriction shall then be
enforceable in the manner contemplated hereby.
(d) In view of the unique and valuable services it is expected
Employee will render to the Company and in consideration of the compensation to
be received hereunder, Employee agrees that for a period of one year after
Employee ceases to be employed by the Company under this Agreement, Employee
will not, directly or indirectly, solicit or provide services for any accounts,
clients or customers of the Company, the Parent, any of the Companies or any of
the Parent's other direct or indirect subsidiaries existing on the date of
termination of employment hereunder or during the period of one year prior to
such termination of employment.
8. Copyrights, Patents, Etc.
Any interest in patents, patent applications, inventions,
technological innovations, copyrights, copyrightable works, developments,
discoveries, designs, and processes ("Such Inventions") which Employee now or
hereafter during the period he is employed by the Company under this Agreement
or otherwise and for ninety (90) days thereafter may own, conceive of, or
develop and either relating to the fields in which the Company or any of the
Companies may then be engaged or contemplates being engaged or conceived of or
developed utilizing the time, material, facilities, or information of the
Company or any of the Companies, shall belong to the Company or any of the
Companies, as the case may be. As soon as Employee owns, conceives of, or
develops any Such Invention, he agrees immediately to communicate such fact in
writing to the Company, and without further compensation, but at the Company's
expense (except as noted in clause (a) of this Section 8), forthwith upon
request of the Company, Employee shall execute all such assignments and other
documents (including applications for patents, copyrights, trademarks, and
assignments thereof) and take all such other action as the Company may
reasonably request in order (a) to vest in the Company all Employee's right,
title, and interest in and to Such Inventions, free and clear of liens,
mortgages, security interests, pledges, charges, and encumbrances ("Liens")
(Employee to take such action, at his expense as is necessary to remove all such
Liens) and (b), if patentable or copyrightable, to obtain patents or copyrights
(including extensions and renewals) therefor in any and all countries in such
name as the Company shall determine.
8
<PAGE>
9. Confidential Information.
All confidential information which Employee may now possess, may
obtain during or after the Employment Period, or may create prior to the end of
the period he is employed by the Company under this Agreement relating to the
business of the Parent, the Company, any of the Companies or any of the Parent's
other direct or indirect subsidiaries shall not be published, disclosed, or made
accessible by him to any other person, firm, or corporation either during or
after the termination of his employment or used by him except during the
Employment Period in the business and for the benefit of the Company and the
Companies, in each case without prior written permission of the Company.
Employee shall return all tangible evidence of such confidential information to
the Company prior to or at the termination of his employment.
10. Life Insurance.
If requested by the Company, Employee shall submit to such physical
examinations and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Company, at its expense
and for its own benefit, to obtain life insurance on the life of Employee.
11. Termination.
Notwithstanding anything herein contained, if, prior to the end of
the Employment Period:
(a) either (i) Employee shall be physically or mentally
incapacitated or disabled (as determined by an independent physician selected by
the Board of Directors of the Company) or otherwise unable fully to discharge
his duties hereunder for a period of 13 consecutive weeks or an aggregate of 13
weeks in any six-month period, (ii) Employee shall be convicted by, or shall
have entered a plea of guilty or nolo contendere in, a court of competent and
final jurisdiction for any crime involving moral turpitude, fraud, embezzlement,
misappropriation, or any other felony or crime punishable by imprisonment, (iii)
Employee shall commit any act of fraud, embezzlement or other act of
misappropriation affecting the Company, (iv) Employee shall fail or refuse to
perform his material duties as required hereunder or shall refuse to follow
direct instructions from the Chairman of the Board and Chief Executive Officer
of the Parent or the Board of Directors of the Company or the Parent or shall
materially violate his duty of loyalty to the Company, the Parent or any of the
other Companies or otherwise shall breach any term of this Agreement and fail to
correct such breach within 20 days after notice of commission thereof, then, in
each such case, the Company shall have the right to give notice of termination
of Employee's services hereunder as of a date (not earlier than ten days from
such notice) to be specified in such notice, and this Agreement shall terminate
on the date so specified; or
(b) Employee shall die, then this Agreement shall terminate on the
date of Employee's death.
(c) Upon termination of this Agreement pursuant to subsection
(a)(i) or (b) of this Section 11, neither party shall have any further
obligations hereunder except that (i)
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<PAGE>
Employee (or his estate in the event of his death) shall be entitled to receive
his salary which shall not have previously been paid to the date of termination,
any bonus (including, without limitation, the Annual Incentive Bonus and
Deferred Compensation) for the Employment Year prior to the Employment Year in
which Employee is terminated to the extent accrued but not yet paid, and any
bonus (including, without limitation, the Annual Incentive Bonus and Deferred
Compensation) for the Employment Year in which Employee is terminated pro rata
to the date of termination, and (ii) for obligations or covenants contained
herein that extend beyond the term of this Agreement.
(d) Upon termination of this Agreement as a result of Employee's
voluntary action or pursuant to subsections (a)(ii), (a)(iii) or (a)(iv) of this
Section 11, neither party shall have any further obligations hereunder except
(i) Employee shall be entitled to receive his salary which shall not have
previously been paid to the date of termination, and any bonus (including,
without limitation, the Annual Incentive Bonus and Deferred Compensation) for
the Employment Year prior to the Employment Year in which Employee is terminated
to the extent accrued but not yet paid, and solely in the event upon termination
of this Agreement as a result of Employee's voluntary action, Employee shall be
entitled to receive any bonus (including, without limitation, the Annual
Incentive Bonus and Deferred Compensation) for the Employment Year in which
Employee is terminated pro rata to the date of termination, and (ii) for
obligations or covenants contained herein that extend beyond the term of this
Agreement.
(e) In the event Employee's employment is terminated during the
term of this Agreement other than by Employee's voluntary action or pursuant to
subsection (a) or (b) of this Section 11, Employee shall be entitled to receive
(i) an amount equal to his current base salary for the period from the date of
termination through the later of (A) the balance of the scheduled term of this
Agreement, less any compensation received or receivable by Employee as a result
of any other employment obtained by Employee during such period, which amounts
shall be payable in accordance with the Company's normal payroll practices then
in effect, (ii) any bonus (including, with limitation, the Annual Incentive
Bonus and Deferred Compensation) for the Employment Year prior to the Employment
Year in which Employee is terminated, to the extent accrued but not yet paid,
and any bonus (including, with limitation, the Annual Incentive Bonus and
Deferred Compensation) for the Employment Year in which Employee is terminated
pro rata to the date of termination; (iii) any benefits then vested under any
benefit plans and otherwise payable in accordance with the provisions of the
applicable benefit plan and applicable laws, (iv) continued coverage (net of any
Employee contributions) to the extent any such coverage was provided immediately
prior to the termination of Employee for medical, health, hospital and
disability insurance from the date of termination through the balance of the
scheduled term of the Agreement or (B) eighteen months, under the benefit plans
maintained by the Company for its senior management or employees generally in
accordance with the terms thereof or, if the Company is unable to provide such
coverage under its benefits plans as they may from time to time be in effect,
the Company will provide or pay (without gross-up for taxes), at the Company's
sole discretion, for coverage (net of any Employee contributions) having
substantially the same aggregate value as the coverage provided under such
plans, and (v) continued coverage (net of any Employee contributions) from the
date of termination through the balance of the scheduled term of this Agreement
under any life insurance policies maintained for Employee immediately prior to
the termination of Employee (other than any policy under which the Company is
the beneficiary) or, if the Company is unable to provide such coverage, the
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<PAGE>
Company will pay (net of any Employee contributions) to Employee (without
gross-up for taxes) an amount sufficient for Employee to purchase such life
insurance policy and pay the premiums thereon through the balance of the
scheduled term of this Agreement. Employee shall promptly notify the Company in
writing of any other employment obtained or undertaken by Employee, and the
salary, compensation or other amounts received or to be received by Employee
therefrom. In the event Employee's employment is terminated during the term of
this Agreement other than by Employee's voluntary action or pursuant to
subsection (a) or (b) of this Section 11, this subsection (e) of this Section 11
will apply in place of any Company severance policies that might otherwise be
applicable, and the Company will have no obligation to make any payments to
Employee except those expressly set forth in this subsection (e) of this Section
11.
(f) If the Employee accepts other employment all compensation
payable to the Employee from services as an officer, consultant or employee of
any other business after the termination of the Employee's employment hereunder
with respect to the balance of the Employment Period whether paid during or
after such period shall be offset against and used to reduce any payments (but
not below zero) or benefits required to be paid to or received by Employee under
this Agreement, other than pursuant to Section 15 hereof.
12. Survival.
The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement shall survive Employee's
termination of employment.
13. Modification.
This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, supersedes all existing agreements
between them concerning such subject matter, and may be modified only by a
written instrument duly executed by each party.
14. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 14). Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 14. Any notice or other communication given by certified mail (or such
comparable method) shall be deemed given at the time of certification thereof
(or comparable act), except for a notice changing a party's address which shall
be deemed given at the time of receipt thereof.
15. Consulting Agreement
Upon expiration of the full Employment Period or if Employee is
terminated for any reason other than as a result of the termination of Employee
pursuant to Sections 11(a) or (b) hereof, the Company and Employee shall enter
into a consulting agreement (the "Consulting Agreement"), pursuant to which
Employee will serve as a consultant to the Company for a term
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of two years for a consulting fee equal to $325,000 per year for the first
year of such consulting arrangement and $175,000 per year for the second year
of such consulting arrangement and under which Employee will provide
consulting services to the Company for minimum of five full days per month
during the term thereof. The Consulting Agreement shall contain such terms and
provisions as shall be mutually agreed upon after good faith negotiation by
the Company and Employee provided however that if Employee's employment is
terminated during the term of this Agreement, other than pursuant to Section
11(a) or (b) hereof, or the term of this Agreement is not extended after the
Termination Date, Employee shall be entitled to receive the consulting fees
provided for in this Section 15 regardless of whether or not a Consulting
Agreement has been executed after good faith negotiation by Employee. Solely
for the purposes of Sections 7, 8 and 9 hereof, during the term of the
Consulting Agreement or during the two-year period during which Employee is
entitled to receive consulting fees pursuant to the preceding sentence,
Employee shall be deemed to be "employed" by the Company and in the "employ"
and "employment" of the Company.
16. Waiver.
Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
17. Binding Effect.
Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and assigns.
18. No Third Party Beneficiaries.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Section 17).
19. Headings.
The headings in this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
20. Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same
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instrument. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to conflict of
laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first above written.
GIRGENTI, HUGHES, BUTLER & McDOWELL, INC.
By: /s/ Steven Girgenti
--------------------------------------------
Name: STEVEN GIRGENTI
Title: Chief Executive Officer
/s/ Herbert Ehrenthal
--------------------------------------------
Herbert Ehrenthal
13
<PAGE>
[LOGO] CHASE
GRID TIME PROMISSORY NOTE
New York, New York
August 2, 1999
For value received, Girgenti, Hughes, Butler & McDowell, Inc. (the
"undersigned" or the "Borrower") unconditionally (and if more than one, jointly
and severally) promises to pay to the order of THE CHASE MANHATTAN BANK ("Chase"
or "Bank"), at its office located at 52 Broadway, 6th Floor, New York, New York
10004, or to such other address as Chase may notify the undersigned, the sum of
Five Million and No/100 Dollars ($5,000,000.00) or such unpaid principal amount
of each Loan made to the undersigned by Chase and outstanding under this Note,
on the maturity date(s) as shown on the attached schedule or any continuation of
the schedule.
This Note includes any Schedule or Rider attached hereto.
Definitions. As used in this Note:
"Banking Day" means any day on which commercial banks are not
authorized or required to close in New York and whenever such day relates to a
LIBOR Based Rate Loan or notice with respect to any LIBOR Based Rate Loan, a day
on which dealings in U.S. dollar deposits are also carried out in the London
interbank market.
"Interest Period" means, with respect to LIBOR Based Rate Loans, the
period as the Bank may offer and as the Borrower may select, commencing on the
date of the Loan and ending on the numerically corresponding day in the first,
second, third, sixth or twelfth calendar month thereafter, as Borrower may
select, provided that each such Interest Period which commences on the last
Banking Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Banking Day of the appropriate calendar month. In no event shall an
Interest Period have a duration of less than one month or exceed any applicable
Maturity Date contained in the Note. Notwithstanding the foregoing, each
Interest Period which would otherwise end on a day which is not a Banking Day
shall end on the next succeeding Banking Day.
"LIBOR Rate" means, with respect to any Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Telerate Service (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by Chase from time to time
for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, two Banking Days prior to the commencement of such Interest Period, as the
rate for dollar deposits with a maturity comparable to such Interest Period. In
the event that such rate is not available at such time for any reason, then the
"LIBOR Rate" with respect to such Borrowing for such Interest Period shall be
the rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of Chase in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Banking Days prior to the commencement of such
Interest Period.
"LIBOR Based Rate" means the LIBOR Rate plus the percentage referenced
below.
"Loans" means the Loans made under this Note.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower taken as a whole, (b) the ability of the Borrower to perform any of
its obligations under this Note or (c) the rights of or benefits available to
Chase under this Note.
<PAGE>
2
"Prepayment Date" means the date on which a Loan is prepaid prior to
the end of an Interest Period.
"Prime Rate Loan" means a Loan when and to the extent that the interest
rate therefor is determined by reference to the Prime Rate.
Maturity Date(s). Each Loan shall mature on the last day of the
Interest Period therefor, as noted on the Interest Period column on the attached
schedule. As to a Prime Rate Loan, if no Interest Period is noted, then such
Loan is payable on the Maturity Date. In any event, all such Loans shall mature
on June 30, 2000 (the "Maturity Date"), if outstanding on such date.
Interest. The undersigned promises to pay interest on the unpaid
balance of the principal amount of the Loan from and including the date of the
Loan to but excluding the date the Loan shall be paid in full at the following
applicable rates:
Prime Rate: On a Loan for which the Prime Rate option has
been selected, a rate of interest per year which
shall automatically increase or decrease from
time to time so that at all times such rate shall
remain equal to that rate of interest from time
to time announced by Chase at its head office as
its prime commercial lending rate (the "Prime
Rate"). Changes in the rate of interest hereunder
shall be effective as of and for the entire day
on which such change in the Prime Rate becomes
effective.
OR
LIBOR Based Rate: On a Loan for which the LIBOR Rate option has
been selected, a rate of interest per year for
each Interest Period for each Loan under the Note
equal to the sum of the LIBOR Rate plus one
hundred seventy-five basis points (1.75%). The
Borrower shall advise the Bank of its request to
have a LIBOR Based Rate quoted at least three
Banking Days prior to the commencement of the
requested Interest Period. Unless three Banking
Days prior to the expiration of an Interest
Period, the Borrower requests and the Bank quotes
a new LIBOR Based Rate for a subsequent Interest
Period on an existing LIBOR Based Rate Loan, such
LIBOR Based Rate Loan shall automatically convert
to a Prime Rate Loan on the day immediately
following the last day of the current Interest
Period. The Borrower acknowledges that Chase's
ability to quote a LIBOR Based Rate is dependent
on factors not wholly within Chase's control and
no liability or damages shall accrue as a result
of Chase's inability to quote a LIBOR Rate for
any reason or no reason whatsoever.
Interest shall be payable on the first day of each month, in respect of
the corresponding principal. Interest shall be calculated on the basis of a year
of 360 days and payable for the actual number of days elapsed.
Borrower may renew or convert the interest rate option selected for a
Loan; provided that:
(a) Borrower shall give notice of each conversion or renewal as
provided in the CERTAIN NOTICES provision of this Note;
(b) in the event that the LIBOR Based Rate is suspended or otherwise
not available as set forth in the Increased Cost, Limitation on
Types of Interest Rates and Change in Legality provisions of this
Note, the Borrower shall pay to Bank interest on the unpaid
principal amount of each Loan at the Prime Rate or the Money
Market Rate Option.
After the occurrence of an Event of Default set forth below, Chase, at
its option, by written notice to the undersigned may increase the interest rate
on this Note by an additional four percent (4%) per year effective on the date
of such notice.
<PAGE>
3
Prepayments. If the Borrower shall prepay any Loan in whole or in part,
under the Note (whether by voluntary payment, acceleration or otherwise) which
bears interest at the LIBOR Based Rate prior to the end of the corresponding
Interest Period, such prepayment shall be accompanied by a prepayment premium
equal to the amount, if any, by which:
(a) the product of the LIBOR Based Rate on the Loan multiplied by the
principal amount of the Loan being prepaid multiplied by a
fraction, the numerator of which is the remaining days in the
applicable Interest Period for such Loan and the denominator of
which is 360; exceeds
(b) the product of the LIBOR Rate in effect on the Prepayment Date
multiplied by the principal amount of the Loan being prepaid
multiplied by a fraction, the numerator of which is the remaining
days in the applicable Interest Period for such Loan and the
denominator of which is 360.
Anything to the contrary notwithstanding, no prepayment premium will be
payable upon the prepayment of the Loan if, on the Prepayment Date, (b) exceeds
(a).
Payments. All payments under this Note shall be made in lawful money of
the United States of America and in immediately available funds at Chase's
office specified above. Chase may (but shall not be obligated to) debit the
amount of any payment (principal or interest) under this Note when due to any
deposit account of (any of) the undersigned with Chase. Chase may apply any
money received or collected for payment of this Note to the principal of,
interest on or any other amount payable under, this Note in any order that Chase
may elect.
Whenever any payment to be made hereunder (including principal and
interest) shall be stated to be due on a day on which Chase's head office is not
open for business, that payment will be due on the next following banking day,
and any extension of time shall in each case be included in the computation of
interest payable on this Note.
If any payment (principal or interest) shall not be paid when due other
than a payment of the entire principal balance of the Note due upon demand, the
undersigned shall pay a late payment charge equal to five percent (5%) of the
amount of such delinquent payment, provided that the amount of such late payment
charge shall be not less than $25 nor more than $500.
All partial prepayments shall be applied to the reduction and payment
of principal in the inverse order of maturity.
Certain Notices. Notice by Borrower to Bank of each Loan request, and
to convert or renew the interest rate for a Loan, shall be irrevocable and shall
be effective on that Banking Day as provided herein only if received by Bank not
later than 11:00 a.m. New York time. In all cases of a request for a new Loan,
renewal of a LIBOR Based Rate Loan, conversion of a Loan to a LIBOR Based Rate
Loan, or conversion of a Loan from a LIBOR Based Rate Loan to a Prime Rate Loan,
such notice shall be given at least three (3) Banking Days prior to the date the
Loan would be made, converted or renewed.
In the event Borrower is obtaining a Loan, the notice shall specify the
date on which the Loan is to be obtained (which shall be a Banking Day), the
amount of the Loan and the Interest Period therefor. In the event Borrower is
requesting renewal of a LIBOR Based Rate Loan, each notice shall specify the
Loan for which the interest rate option is to be renewed, the date of the
renewal (which shall be a Banking Day) and the interest rate option requested,
and the Interest Period therefor (if applicable). In the event Borrower is
converting to a LIBOR Based Rate Loan, the notice shall specify the Loan for
which the interest rate option is to be converted, the date of the conversion
(which shall be a Banking Day) and the Interest Period therefor.
Increased Cost. If at any time after the date hereof, the Board of
Governors of the Federal Reserve System or any political subdivision of the
United States of America or any other government, governmental agency or central
bank shall impose or modify any reserve or capital requirement on or in respect
of Loans made
<PAGE>
4
by or deposits with the Bank or shall impose on the Bank or the Eurodollar
market any other conditions affecting LIBOR Based Rate Loans, and the result of
the foregoing is to increase the cost to (or, in the case of Regulation D, to
impose a cost on) the Bank of making or maintaining any LIBOR Based Rate Loans
or to reduce the amount of any sum receivable by the Bank in respect thereof, by
an amount deemed by the Bank to be material, then, within 30 days after notice
and demand by the Bank, the undersigned shall pay to the Bank such additional
amounts as will compensate the Bank for such increased cost or reduction. Any
such obligation by the undersigned to the Bank shall not be due and owing until
the Bank has delivered written notice to the undersigned. Failure by the Bank to
provide such notice shall not be deemed a waiver of any of its rights hereunder.
A certificate of the Bank claiming compensation hereunder and setting forth the
additional amounts to be paid to it hereunder and the method by which such
amounts were calculated shall be conclusive in the absence of manifest error.
Indemnity. The undersigned shall indemnify the Bank against any loss or
expense which the Bank may sustain or incur as a consequence of the occurrence
of any Event of Default or any loss or reasonable expense sustained or incurred
in liquidating or employing deposits from third parties acquired to effect or
maintain any LIBOR Based Rate Loans or any part thereof which the Bank may
sustain or incur as a consequence of any default in payment of the principal
amount of the Loan or any part thereof or interest accrued thereon. The Bank
shall provide to the undersigned a statement, supported where applicable by
documentary evidence, explaining the amount of any such loss or expense, which
statement shall be conclusive absent manifest error.
Limitation on Types of Interest Rates. Anything herein to the contrary
notwithstanding, if Bank determines (which determination shall be conclusive)
that the relevant rates of interest which are the basis of the LIBOR Rate do not
adequately cover the cost to Bank of making or maintaining the LIBOR Based Rate
Loans, then Bank shall give Borrower prompt notice thereof, and so long as such
condition remains in effect, Bank shall be under no obligation to make such
Loans and Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Loans of the affected type, pay such Loans in
accordance with this Note.
Change In Legality
(a) Notwithstanding anything to the contrary contained elsewhere in
this Note, if any change after the date hereof in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful (based on the opinion of any
counsel, whether in-house, special or general, for the Bank) for the Bank to
make or maintain any LIBOR Based Rate Loan to give effect to its obligations as
contemplated hereby with respect to any LIBOR Based Rate Loan, then, by written
notice to the Undersigned by the Bank, the Bank may require that all outstanding
LIBOR Based Rate Loans made hereunder be converted to Prime Rate Loans,
whereupon all such LIBOR Based Rate Loans shall be automatically converted to
Prime Rate Loans as of the effective date of such notice as provided in
paragraph (b) below.
(b) For purposes of this Section, a notice to the undersigned by the
Bank pursuant to paragraph (a) above shall be effective, if lawful and if any
LIBOR Based Rate Loans shall then be outstanding, on the last day of the then
current Interest Period; otherwise, such notice shall be effective on the date
of receipt by the undersigned.
Survival. The undertakings of the Borrower under the LIBOR Based Rate
provisions of this Note (including without limitation, Increased Cost, Indemnity
Limitation on Types of Interest Rates and Changes in Legality) shall survive
repayment of the Loans.
Authorizations. The undersigned hereby authorizes Chase to make Loans
and disburse the proceeds thereof to the account listed below and to make
repayments of such Loans by debiting such account upon oral, telephonic or
telecopied instructions made by any person purporting to be an officer or agent
of the undersigned who is empowered to make such requests and give such
instructions. The minimum amount of each LIBOR Based Rate Loan shall be
$500,000. The minimum amount of each Prime Rate Loan shall be $100,000. The
undersigned may amend these instructions, from time to time, effective upon
actual receipt of the amendment by Chase. Chase shall not be responsible for the
authority, or lack of authority, of any person giving such telephonic
instructions to Chase pursuant to these provisions. By executing this Note, the
undersigned agrees to be bound
<PAGE>
5
to repay any Loan obtained hereunder as reflected on Chase's books and records
and made in accordance with these authorizations, regardless of the actual
receipt of the proceeds thereof.
Records. The date, amount and maturity date of each Loan under this
Note and each payment of principal, Loan(s) to which such principal is applied
(which shall be at the discretion of Chase) and the outstanding principal
balance of Loans, shall be recorded by Chase on its books and prior to any
transfer of this Note (or, at the discretion of Chase at any other time)
endorsed by Chase on the schedule attached or any continuation of the schedule.
Any such endorsement shall be conclusive absent manifest error.
Representations and Warranties. The undersigned represents and warrants
upon the execution and delivery of this Note and upon each Loan request
hereunder, that: (a) it is duly organized and validly existing under the laws of
the jurisdiction of its organization or incorporation and, if relevant under
such laws, in good standing; (b) it has the power to execute and deliver this
Note and to perform its obligations hereunder and has taken all necessary action
to authorize such execution, delivery and performance; (c) such execution,
delivery and performance do not violate or conflict with any law applicable to
it, any provision of its organizational documents, any order or judgment of any
court or other agency of government applicable to it or any of its assets or any
material contractual restriction binding on or materially affecting it or any of
its assets; (d) to the best of undersigned's knowledge, all governmental and
other consents that are required to have been obtained by it with respect to
this Note have been obtained and are in full force and effect and all conditions
of any such consents have been complied with; (e) its obligations under this
Note constitute its legal, valid and binding obligations, enforceable in
accordance with its terms except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency or other similar laws affecting
creditors' rights generally; (f) all financial statements and related
information furnished and to be furnished to Chase from time to time by the
undersigned are true and complete and fairly present the financial or other
information stated therein as at such dates or for the periods covered thereby;
(g) there are no actions, suits, proceedings or investigations pending or, to
the knowledge of the undersigned, threatened against or affecting the
undersigned before any court, governmental agency or arbitrator, which involve
forfeiture of any assets of the undersigned or which may materially adversely
affect the financial condition, operations, properties or business of the
undersigned or the ability of the undersigned to perform its obligation under
this Note; (h) there has been no material adverse change in the financial
condition of the undersigned since the last such financial statements or
information; and (i) any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Borrower's computer
systems, and (ii) equipment containing embedded microchips (including systems
and equipment supplied by others or with which Borrower's systems interface) and
the testing of all such systems and equipment, as so reprogrammed, was completed
by January 1, 1999. The cost to the Borrower of such reprogramming and testing
and of the reasonably foreseeable consequences of year 2000 to the Borrower
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) will not result in an Event of Default or a Material
Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Borrower and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue to be, sufficient to permit the
Borrower to conduct its business without Material Adverse Effect.
Financial Statements. Borrower shall furnish to Chase:
(a) Within 90 days after and as at the close of each fiscal year, a
consolidated (and consolidating) balance sheets of the
undersigned's parent company, Healthworld Corporation and its
consolidated Subsidiaries, and consolidated (and consolidating)
statements of income, cash flows and changes in shareholders'
equity of the undersigned's parent company, Healthworld
Corporation and its consolidated Subsidiaries prepared in
accordance with GAAP consistently applied, on an audit basis,
prepared by an independent certified public accounting firm
satisfactory to Chase, accompanied by a satisfactory report of
such accountants which shall not contain any qualification of
opinion or disclaimer.
(b) Within 30 days after the end of each fiscal quarter a
consolidated (and consolidating) balance sheet(s) of the
undersigned's parent company, Healthworld Corporation and its
consolidated Subsidiaries as at the end of each such quarter and
related consolidated (and consolidating)
<PAGE>
6
statements of income, cash flow and changes in shareholders'
equity of the undersigned's parent company, Healthworld
Corporation and its consolidated Subsidiaries for the fiscal
quarter and from the beginning of such Fiscal Year to the end of
such fiscal quarter, together with comparisons to the previous
year, if appropriate, and to budget projections, prepared in
conformity with GAAP consistently applied, and certified by an
appropriate financial officer of undersigned.
(c) Such other books, records and reports as Chase may from time to
time reasonably request, including an equipment listing;
inventory listing, aging and locations; and accounts receivable
aging; which information, together with the above financial
reports, shall all be prepared in form and detail satisfactory to
Chase.
No Commitment. This Note does not create and shall not be deemed or
construed to create any contractual commitment to lend by Chase.
Annual Clean Up. For a period of thirty (30) consecutive days during
the period from the date hereof through the Maturity Date, there shall be no
Loans outstanding hereunder.
Security. As collateral security for the payment of this Note and of
any and all other obligations and liabilities of the undersigned to Chase, now
existing or hereafter arising, the undersigned grants to Chase a security
interest in and a lien upon and right of offset against all moneys, deposit
balances, securities or other property or interest therein of the undersigned
now or at any time hereafter held or received by or for or left in the
possession or control of Chase or any of its affiliates, including subsidiaries,
whether for safekeeping, custody, transmission, collection, pledge or for any
other or different purpose.
Default. IF any of the following events of default shall occur with
respect to any of the undersigned (each an "Event of Default"):
(a) the undersigned shall fail to pay the principal of, or interest
on, this Note, or any other amount payable under this Note, as
and when due and payable;
(b) any representation or warranty made or deemed made by the
undersigned in this Note or in any document granting security or
support for (or otherwise executed in connection with) this Note
or by any third party supporting or liable with respect to this
Note (whether by guaranty, subordination, grant of security or
any other credit support, a "Third Party") in any document
evidencing the obligations of a Third Party (this Note and all of
the foregoing documents and all agreements, instruments or other
documents executed by the undersigned or a Third Party being the
"Facility Documents") or which is contained in any certificate,
document, opinion, financial or other statement furnished at any
time under or in connection with any Facility Document, shall
prove to have been incorrect in any material respect on or as of
the date made or deemed made;
(c) the undersigned or any Third Party shall fail to perform or
observe any term, covenant or agreement contained in any Facility
Document on its part to be performed or observed, and such
failure shall continue for 30 consecutive days;
(d) the undersigned or any Third Party shall fail to pay when due any
indebtedness (including but not limited to indebtedness for
borrowed money) or if any such indebtedness shall become due and
payable, or shall be capable of becoming due and payable at the
option of any holder thereof, by acceleration of its maturity, or
if there shall be any default by the undersigned or any Third
Party under any agreement relating to such indebtedness;
(e) the undersigned or any Third Party: (i) shall generally not, or
be unable to, or shall admit in writing its inability to, pay its
debts as such debts become due; (ii) shall make an assignment for
the benefit of creditors; (iii) shall file a petition in
bankruptcy or for any relief under any law of any jurisdiction
relating to reorganization, arrangement, readjustment of debt,
dissolution or liquidation; (iv) shall have any such petition
filed against it and the same shall remain undismissed for a
period of 30 days or shall consent or acquiesce thereto; or (v)
shall have had a receiver, custodian or trustee appointed for all
or a substantial part of its property;
<PAGE>
7
(f) if the undersigned or any Third Party is an individual, such
individual shall die or be declared incompetent;
(g) any Third Party Facility Document shall at any time and for any
reason cease to be in full force and effect or shall be declared
null and void, or its validity or enforceability shall be
contested by the relevant Third Party or such Third Party shall
deny it has any further liability or obligation under any
Facility Document or shall fail to perform its obligations under
any Facility Document;
(h) any security agreement or other agreement (whether by the
undersigned or any Third Party) granting a security interest,
lien, mortgage or other encumbrance securing obligations under
any Facility Document shall at any time and for any reason cease
to create a valid and perfected first priority security interest,
lien, mortgage or other encumbrance in or on the property
purported to be subject to such agreement or shall cease to be in
full force and effect or shall be declared null and void, or the
validity or enforceability of any such agreement shall be
contested by any party to such agreement, or such party shall
deny it has any further liability or obligation under such
agreement or any such party shall fail to perform any of its
obligations under such agreement;
(i) the undersigned shall make or permit to be made any material
change in the character, management or direction of the
undersigned's business or operations (including, but not limited
to, a change in its executive management or in the ownership of
its capital stock which effects a change in the control of any
such business or operations), which is not satisfactory to Chase;
(j) the undersigned or any Third Party shall suffer a material
adverse change in its business, financial condition, properties
or prospects;
(k) any action, suit, proceeding or investigation against or
affecting the undersigned or a Third Party before any court or
governmental agency which involves forfeiture of any assets of
the undersigned or a Third Party shall have been commenced; or
(l) one or more judgments, decrees or orders for the payment of money
in excess of $50,000 in the aggregate shall be rendered against
the undersigned and shall continue unsatisfied and in effect for
a period of 30 consecutive days without being vacated,
discharged, satisfied or stayed or bonded pending appeal.
THEN, in any such case, if Chase shall elect by notice to the undersigned, the
unpaid principal amount of this Note, together with accrued interest, shall
become forthwith due and payable; provided that in the case of an event of
default under (e) above, the unpaid principal amount of this Note, together with
accrued interest, shall immediately become due and payable without any notice or
other action by Chase.
Certain Waivers. The undersigned waive(s) presentment, notice of
dishonor, protest and any other notice or formality with respect to this Note.
Costs. The undersigned agree(s) to reimburse Chase on demand for all
costs, expenses and charges (including, without limitation, fees and charges of
external legal counsel for Chase and costs allocated by its internal legal
department) in connection with the preparation, interpretation, performance or
enforcement of this Note and the Facility Documents.
Notices. All notices, requests, demands or other communications to or
upon the undersigned or Chase shall be in writing and shall be deemed to be
delivered upon receipt if delivered by hand or overnight courier or five days
after mailing to the address (a) of the undersigned as set forth next to the
undersigned's execution of this Note, (b) of Chase as first set forth above, or
(c) of the undersigned or Chase at such other address as the undersigned or
Chase shall specify to the other in writing.
Assignment. This Note shall be binding upon the undersigned and its or
their successors and shall inure to the benefit of Chase and its successors and
assigns.
Amendment and Waiver. This Note may be amended only by a writing signed
on behalf of each party and shall be effective only to the extent set forth in
that writing. No delay by Chase in exercising any power or right hereunder shall
operate as a waiver thereof or of any other power or right; nor shall any single
or partial exercise of any power or right preclude other or future exercise
thereof, or the exercise of any other power or right hereunder.
<PAGE>
8
Governing Law; Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of New York. The undersigned
consent(s) to the nonexclusive jurisdiction and venue of the state or federal
courts located in such state. In the event of a dispute hereunder, suit may be
brought against the undersigned in such courts or in any jurisdiction where the
undersigned or any of its assets may be located. Service of process by Chase in
connection with any dispute shall be binding on the undersigned if sent to the
undersigned by registered mail at the address(es) specified below or to such
further address(es) as the undersigned may specify to Chase in writing.
Maximum Interest. Notwithstanding any other provision of this Note, the
undersigned shall not be required to pay any amount pursuant to this Note which
is in excess of the maximum amount permitted to be charged by national banks
under applicable law and any such excess interest paid shall be refunded to the
undersigned or applied to principal owing hereunder.
Borrower Waivers. THE UNDERSIGNED HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE(S) (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY
RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS NOTE
OR ANY FACILITY DOCUMENT, AND AGREES THAT ANY SUCH DISPUTE SHALL, AT CHASE'S
OPTION, BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
IN ADDITION, THE UNDERSIGNED WAIVES THE RIGHT TO INTERPOSE ANY DEFENSE
BASED UPON ANY STATUTE OF LIMITATIONS OR ANY CLAIM OF DELAY BY CHASE AND ANY
SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION.
Chase Account No. to be charged for
Disbursements and Payments: _____________
Address for notices: GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC.
100 Avenue of the Americas By: /s/ Stuart Diamond
New York, N.Y. 10013 ------------------------------
Print Name STUART DIAMOND
-----------------------
Title:
----------------------------
Telecopier No.: ___________________
<PAGE>
[LOGO] CHASE
GUARANTY
(Unlimited Amount)
This Guaranty is granted by the Guarantor to THE CHASE MANHATTAN BANK,
having an office located at 52 Broadway, 6th Floor, New York, N.Y. 10004
("Business Office"), and/or any of its subsidiaries and/or affiliates and
wherever located (hereinafter with their respective successors and assigns,
collectively or individually, as the context may require, referred to as
"Chase").
Recitals. Girgenti, Hughes, Butler & McDowell, Inc. (the "Borrower")
has obtained or desires or may desire at some time and/or from time to time to
obtain financial accommodation from Chase; and each of the undersigned
(hereinafter collectively and individually referred to as the "Guarantor")
represents that it owns directly or indirectly a substantial amount of the stock
of or other ownership interest in the Borrower and/or is financially interested
in its affairs and expects to derive advantage from each and every such
accommodation;
Consideration. To induce Chase, at its option, at any time or from time
to time, to extend financial accommodation, with or without security, to or for
the account of the Borrower, or in respect of which the Borrower may be liable
in any capacity (the term "financial accommodation" including, without
limitation, extension of loans, credit or accommodation, issuance or
confirmation of letters of credit or creation of acceptances, or discount or
purchase of, or loans on, accounts, leases, instruments, securities, documents,
chattel paper and other security arrangements or other property, or entering
into any foreign exchange, precious metals or other contract or agreement
between Borrower and Chase), the Guarantor hereby agrees as follows:
Guaranty. The Guarantor (and if there is more than one Guarantor,
jointly and severally) absolutely and unconditionally guarantees to Chase that
the Borrower will promptly perform and observe every agreement and condition
contained in any instrument, writing or arrangement relating to or the subject
of any such financial accommodation (a "Credit Arrangement") to be performed or
observed by the Borrower, that all sums stated to be payable in, or which become
payable under, any Credit Arrangement, and all other sums which may be owing by
the Borrower to Chase now or hereafter, will be promptly paid in full when due,
whether at maturity or earlier by reason of acceleration or otherwise, or, if
now due, when payment thereof shall be demanded by Chase, together with interest
and any and all legal and other costs and expenses paid or incurred in
connection therewith by Chase (collectively, the "Guaranteed Obligations"), and,
in case of one or more extensions of time of payment or renewals, in whole or in
part, of any Credit Arrangement or obligation, that the same will be promptly
paid or performed when due, according to each such extension or renewal, whether
at maturity or earlier by reason of acceleration or otherwise. The Guarantor
agrees that, as between the Guarantor and Chase, the Guaranteed Obligations may
be declared to be due and payable for purposes of this Guaranty notwithstanding
any stay, injunction or other prohibition which may prevent, delay or vitiate
any such declaration as against the Borrower and that, in the event of any such
declaration (or attempted declaration), the Guaranteed Obligations (whether or
not due and payable by the Borrower) shall forthwith become due and payable by
the Guarantor for purposes of this Guaranty. The Guarantor further guarantees
that all payments made by the Borrower to Chase of any Guaranteed Obligation
will, when made, be final and agrees that if any such payment is recovered from,
or repaid by, Chase in whole or in part by reason of any bankruptcy, insolvency
or similar proceeding instituted by or against the Borrower, this Guaranty shall
continue to be fully applicable to such obligation to the same extent as though
the payment so recovered or repaid had never been originally made on such
obligation.
This is a guaranty of payment and performance and not a guaranty of
collection only.
This Guaranty is enforceable irrespective of the validity, regularity
or enforceability of any instrument, writing or arrangement relating to or the
subject of a Credit Arrangement or the obligations thereunder and irrespective
of any present or future law or order of any government (whether of right or in
fact and whether
<PAGE>
-2-
Chase shall have consented thereto) or of any agency thereof purporting to
reduce, amend, restructure or otherwise affect any obligation of the Borrower or
other obligor or to vary the terms of payment.
Consents and Waivers. The Guarantor hereby consents that from time to
time, without notice to or further consent of the Guarantor, the performance or
observance by the Borrower of any Credit Arrangement or Guaranteed Obligation
may be waived or the time of performance thereof extended by Chase, and payment
of any Guaranteed Obligation may be accelerated in accordance with any agreement
governing the same, or may be extended, or any Credit Arrangement may be renewed
in whole or in part, or the terms of any Credit Arrangement or any part thereof
may be changed, including increase or decrease in the rate of interest thereon,
or any collateral therefor may be exchanged, surrendered or otherwise dealt with
as Chase may determine, or any co-guarantor or any other party liable upon or in
respect of any obligation may be released, and any of the acts mentioned in any
Credit Arrangement may be done, all without notice to or affecting the liability
of the Guarantor hereunder. The Guarantor waives notice of acceptance of this
Guaranty and of the creation of any Guaranteed Obligations. The Guarantor hereby
waives presentment of any instrument, demand for payment, protest and notice of
non-payment or protest thereof or of any exchange, sale, surrender or other
handling or disposition of any such collateral, and any requirement that Chase
exhaust any right, power or remedy or proceed against the Borrower under any
Credit Arrangement or against any other person under any other guaranty of, or
security for, any of the Guaranteed Obligations. The Guarantor hereby further
waives any defense whatsoever which might constitute a defense available to, or
discharge of, the Borrower or a guarantor. No payment by the Guarantor pursuant
to any provision hereunder shall entitle the Guarantor, by subrogation to the
rights of Chase or otherwise, to any payment by the Borrower (or out of the
property of the Borrower) except after payment in full of all sums (including
interest, costs and expenses) which may be or become payable by the Borrower to
Chase at any time or from time to time, unless the Guaranteed Obligations shall
be paid in full.
Continuing Guaranty; Termination. This Guaranty shall be a continuing
guaranty, and Chase may continue to act in reliance hereon until the receipt by
Chase of written notice from the Guarantor not to give further financial
accommodation in reliance hereon, provided that such notice shall not affect the
obligations, absolute or contingent, of the Guarantor hereunder with respect to
any such accommodation given prior to such notice. Such notice shall be
effective only after receipt by Chase at its Business Office, and Chase shall
have had a reasonable time to act upon such notice at each of its offices
extending financial accommodation to Borrower.
Financial Statements. The Guarantor shall furnish to Chase, after the
end of the Guarantor's fiscal year or at such other times or intervals as Chase
may request, financial statements certified by the Guarantor showing the
Guarantors financial condition at the end of and for the entire fiscal year.
Such statements shall fairly present the financial condition of the Guarantor as
at the end of such fiscal year or periods in accordance with generally accepted
accounting principles consistently applied. Upon demand by Chase, the Guarantor
shall retain an independent certified public accountant acceptable to Chase to
prepare such financial statements, on an audited, review or compilation basis,
as selected by Chase, and as to audited statements, accompanied by a
satisfactory report of such accountants which shall not contain any
qualification of opinion or disclaimer by reason of audit limitations imposed by
the Guarantor. Further, Guarantor agrees to furnish to Chase copies of its tax
returns, as soon as available and in any event not later than 15 days after such
tax returns are required to be filed.
Foreign Currencies. With respect to each obligation (or portion
thereof) hereby guaranteed that is payable in a foreign currency, the following
provisions shall apply: the Guarantor shall be obligated to pay to Chase the
unpaid amount of such Guaranteed Obligation in the same foreign currency and
place in which such Guaranteed Obligation is payable by its terms; provided,
however, that the Guarantor may, at its option (or, if for any reason whatsoever
the Guarantor is unable to effect payment of such unpaid amount as aforesaid,
the Guarantor shall be obligated to) pay to Chase at its principal office in New
York City the equivalent of such unpaid amount in United States currency
computed at Chase's selling rate, most recently in effect on or prior to the
date such Guaranteed Obligation becomes due, for cable transfers of such foreign
currency to the place where such Guaranteed Obligation is payable. In any case
in which the Guarantor shall make or shall be obligated to make such payment in
United States currency, the Guarantor shall hold Chase harmless from any loss
incurred by Chase arising from any change in the value of United States currency
in relation to such foreign currency
<PAGE>
-3-
between the date such Guaranteed Obligation becomes due and the date Chase is
actually able, following the conversion of the United States currency paid by
the Guarantor into such foreign currency and remittance of such foreign currency
to the place where such Guaranteed Obligation is payable, to apply such foreign
currency to such obligation. The term "foreign currency" as used herein shall be
deemed to refer to that type of such currency which under applicable laws and
regulations may be used to pay and discharge such Guaranteed Obligation.
Rights Cumulative. The rights, powers and remedies granted to Chase
herein shall be cumulative and in addition to any rights, powers and remedies to
which Chase may be entitled either by operation of law or pursuant to any other
document or instrument delivered or from time to time to be delivered to Chase
in connection with any Credit Arrangement.
Security. As collateral security for the payment of any and all
obligations and liabilities of the Guarantor to Chase, now existing or hereafter
arising, the Guarantor grants to Chase a security interest in and a lien upon
and right of offset against all moneys, deposit balances, securities or other
property or interest therein of the Guarantor now or at any time hereafter held
or received by or for or left in the possession or control of Chase or any of
its affiliates, whether for safekeeping, custody, transmission, collection,
pledge or for any other or different purpose.
Representations and Warranties. Each Guarantor which is other than an
individual represents and warrants that: (a) it is duly organized and validly
existing under the laws of the jurisdiction of its organization or incorporation
and, if relevant under such laws, in good standing; (b) it has the power to
execute and deliver this Guaranty and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance; (c) such execution, delivery and performance do not violate or
conflict with any law applicable to it, any provision of its organizational
documents, any order or judgment of any court or other agency of government
applicable to it or any of its assets or any material contractual restriction
binding on or materially affecting it or any of its assets; (d) to the best of
Guarantor's knowledge, all governmental and other consents that are required to
have been obtained by it with respect to this Guaranty have been obtained and
are in full force and effect and all conditions of any such consents have been
complied with; (e) its obligations under this Guaranty constitute its legal,
valid and binding obligations, enforceable in accordance with its terms except
to the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or other similar laws affecting creditors' rights generally; (f) all
financial statements and related information furnished and to be furnished to
Chase from time to time by the Guarantor are true and complete and fairly
present the financial or other information stated therein as at such dates or
for the periods covered thereby; (g) there are no actions, suits, proceedings or
investigations pending or, to the knowledge of the Guarantor, threatened against
or affecting the Guarantor before any court, governmental agency or arbitrator,
which involve forfeiture of any assets of the Guarantor or which may materially
adversely affect the financial condition, operations, properties or business of
the Guarantor or the ability of the Guarantor to perform its obligation under
this Guaranty; and (h) there has been no material adverse change in the
financial condition of the Guarantor since the last such financial statements or
information. If the Guarantor is an individual, the Guarantor represents and
warrants the correctness of clauses (c), (d), (e), (f), (g) and (h) above to the
extent applicable to an individual.
Costs. The Guarantor agrees to reimburse Chase on demand for all costs,
expenses and charges (including, without limitation, fees and charges of
external legal counsel for Chase and costs allocated by its internal legal
department) in connection with the enforcement of this Guaranty.
Entire Agreement, Amendment and Waivers. This Guaranty constitutes the
entire agreement between the Guarantor and Chase in respect of the subject
matter hereof and may be amended only by a writing signed on behalf of each
party and shall be effective only to the extent set forth in that writing. No
delay by Chase in exercising any power or right hereunder shall operate as a
waiver thereof or of any other power or right; nor shall any single or partial
exercise of any power or right preclude other or future exercise thereof, or the
exercise of any other power or right hereunder. No waiver shall be deemed to be
made by Chase of any of its rights hereunder unless the same shall be in writing
signed on behalf of Chase, and each waiver, if any, shall be a
<PAGE>
-4-
waiver only with respect to the specific instance involved and shall in no way
impair the rights of Chase or the obligations of the Guarantor to Chase in any
other respect at any other time.
As to each Guarantor who is an individual, this Guaranty is being
signed by such Guarantor in an individual capacity and any descriptive terms
placed after the Guarantor's name shall not affect the Guarantor's personal
liability under this Guaranty.
Successors. This agreement shall be immediately binding upon the
Guarantor, and the successors of the Guarantor. Chase may assign this Guaranty
or any of its rights and powers hereunder, with all or any of the obligations
hereby guaranteed, and may assign and/or deliver to any such assignee any of the
security herefor and, in the event of such assignment, the assignee hereof or of
such rights and powers and of such security, if any such security be so assigned
and/or delivered, shall have the same rights and remedies as if originally named
herein in place of Chase, and Chase shall be thereafter fully discharged from
all responsibility with respect to any such Security so assigned and/or
delivered.
Governing Law; Jurisdiction. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New York, Connecticut or
New Jersey, depending on the location of the Chase office set forth in this
Guaranty. The undersigned consent(s) to the nonexclusive jurisdiction and venue
of the state or federal courts located in such state. In the event of a dispute
hereunder, suit may be brought against the undersigned in such courts or in any
jurisdiction where the undersigned or any of its assets may be located. Service
of process by Chase in connection with any dispute shall be binding on the
undersigned if sent to the undersigned by registered mail at the address(es)
specified below or to such further address(es) as the undersigned may specify to
Chase in writing.
Commercial Transaction. IF THE UNDERSIGNED IS A CONNECTICUT DOMICILED
ENTITY OR RESIDENT, EACH OF THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THIS
GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY CONSTITUTE COMMERCIAL
TRANSACTIONS WITHIN THE MEANING OF SECTION 52-278a OF THE CONNECTICUT GENERAL
STATUTES. EACH OF THE UNDERSIGNED EXPRESSLY WAIVES ANDY AND ALL RIGHTS,
CONSTITUTIONAL OR OTHERWISE, WITH RESPECT TO NOTICE AND HEARING AND ANY RIGHTS
UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES IN CONNECTION WITH ANY
PREJUDGMENT REMEDY AVAILABLE TO CHASE.
Guarantor Waivers. EACH GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY
RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS
GUARANTY, AND AGREES THAT ANY SUCH DISPUTE SHALL, AT CHASE'S OPTION, BE TRIED
BEFORE A JUDGE SITTING WITHOUT A JURY.
IN ADDITION, EACH GUARANTOR WAIVES THE RIGHT TO INTERPOSE ANY DEFENSE
BASED UPON ANY STATUTE OF LIMITATIONS OR ANY CLAIM OF DELAY BY CHASE AND ANY
SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION.
IN WITNESS WHEREOF, the Guarantor has executed this instrument or has
caused this instrument to be duly executed by its proper officer(s) or
partner(s) this 2nd day of August, 1999.
Address for notices: Healthworld Corporation
By: /s/ Stuart Diamond
------------------------------
100 Avenue of the Americas Print Name STUART DIAMOND
New York, N.Y. 10013 -----------------------
Title:
-----------------------
<PAGE>
[LOGO] CHASE
GENERAL SECURITY AGREEMENT
The undersigned executes and delivers this General Security Agreement
(the "Security Agreement") to THE CHASE MANHATTAN BANK and its affiliates,
including subsidiaries, whether now existing or hereafter created (collectively,
"Chase"), having an office located at 52 Broadway New York, N.Y. 10004, in
consideration of one or more loans, letters of credit or other financial
accommodation made, issued or extended by Chase to the undersigned or to any
person in respect of whose Liabilities (as defined below) the undersigned now or
hereafter guarantees or otherwise becomes liable for payment. Accordingly, Chase
shall have the rights, remedies and benefits hereinafter set forth.
Definitions. The term "Liabilities" shall include any and all
indebtedness, obligations and liabilities of the undersigned to Chase and also
to others to the extent of their participations granted to or interests therein
created or acquired for them by Chase, now or hereafter existing, arising
directly between the undersigned and Chase or acquired outright, conditionally,
as a participation or as collateral security from another by Chase, absolute or
contingent, joint and/or several, secured or unsecured, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, direct or indirect, including, but without limiting the generality
of the foregoing, indebtedness, obligations or liabilities to Chase of the
undersigned as a member of any partnership, syndicate, association or other
group, and whether incurred by the undersigned as principal, surety, indorser,
guarantor, accommodation party or otherwise.
The term "Collateral" means all personal property and fixtures of the
undersigned, whether now or hereafter existing or now owned or hereafter
acquired and wherever located, of every kind and description, tangible or
intangible, including but not limited to, the balance of every deposit account,
now or hereafter existing, of the undersigned with Chase and any other claim of
the undersigned against Chase, now or hereafter existing, and all money, goods
(including equipment, farm products and inventory), instruments, securities,
documents, chattel paper, accounts, contract rights, general intangibles,
credits, claims, demands, precious metals and any other property, rights and
interests of the undersigned, and shall include the proceeds, products and
accessions of and to any thereof.
The term "Obligor" means the undersigned or any maker, drawer,
acceptor, indorser, guarantor, surety, accommodation party or other person
liable upon or for any of the Liabilities or Collateral.
Unless the context otherwise requires, all terms used herein which are
defined in the Uniform Commercial Code shall have the meanings therein stated.
Grant of Security Interest. As security for the payment of the
Liabilities, the undersigned hereby grant(s) to Chase a security interest in, a
general lien upon and/or right of set-off against the Collateral.
Maintenance of Collateral. At any time and from time to time, the
undersigned will: (a) deliver and pledge to Chase, indorsed and/or accompanied
by such instruments of assignment and transfer in such form and substance as
Chase may request, any and all instruments, documents and/or chattel paper as
Chase may specify in its demand; (b) give, execute, deliver, file and/or record
any notice, statement, instrument, document, agreement or other papers that may
be necessary or desirable, or that Chase may request, in order to create,
preserve, perfect, or validate any security interest granted pursuant hereto or
to enable Chase to exercise and enforce its rights hereunder or with respect to
such security interest; (c) keep and stamp or otherwise mark any and all
documents and chattel paper and its individual books and records relating to
inventory, accounts and contract rights in such manner as Chase may require; (d)
permit representatives of Chase at any time to inspect its inventory and to
inspect and make abstracts from the undersigned books and records pertaining to
inventory, accounts, contract rights, chattel paper, instruments and documents;
and (e) obtain Chase's consent prior to any change of name, address, legal
entity status, location of books and records or location of Collateral. The
right is expressly granted to Chase, at its discretion, to notify warehousemen
or any other persons in possession of Collateral of Chase's security interest
therein and to file one or more financing statements under the Uniform
<PAGE>
-2-
Commercial Code executed by Chase alone naming the undersigned as debtor and
Chase as secured party and indicating therein the types or describing the items
of Collateral herein specified. A photographic or other reproduction of this
Security Agreement shall be sufficient as a financing statement. Without the
prior written consent of Chase the undersigned will not file or authorize or
permit to be filed in any jurisdiction any such financing or like statement in
which Chase is not named as the sole secured party. With respect to the
Collateral, or any part thereof, which at any time shall come into the
possession or custody or under the control of Chase or any of its agents,
associates or correspondents, for any purpose, the right is expressly granted to
Chase, at its discretion, to transfer to or register in the name of itself or
its nominee any of the Collateral; to exchange any of the Collateral for other
property upon any reorganization, recapitalization or other readjustment and in
connection therewith to deposit any of the Collateral with any committee or
depositary upon such terms as it may determine; to notify any account debtor or
obligor on an instrument to make payment to Chase; and to exercise or cause its
nominee to exercise all or any powers with respect to the Collateral with same
force and effect as an absolute owner thereof; all without notice (except such
notice as may be required by applicable law and cannot be waived) and without
liability except to account for property actually received by it. Without
limiting the generality of the foregoing, payments, distributions and/or
dividends, in securities, property or cash, including without limitation
dividends representing stock or liquidating dividends or a distribution or
return of capital upon or in respect of the Collateral or any part thereof or
resulting from any split-up, revision or reclassification of the Collateral or
any part thereof or received in exchange for the Collateral or any part thereof
as a result of a merger, consolidation or otherwise, shall be paid directly to
and retained by Chase and held by it until applied as herein provided, as
additional collateral security pledged under and subject to the terms hereof.
Chase shall be deemed to have possession of any of the Collateral in transit to
or set apart for it or any of its agents, associates, or correspondents.
Insurance. The undersigned shall keep insured all Collateral which is
tangible property for full value, with such coverage as Chase may approve, at
the undersigned's expense, and, upon Chase's request, the policies shall be duly
endorsed in Chase's favor and delivered to Chase. If the undersigned shall
default in this regard, Chase shall have the right to insure and charge the cost
to the undersigned. Chase assumes no risk or responsibility in connection with
the payment or nonpayment of losses, Chase's only responsibility being to credit
the undersigned with any insurance payment received on account of losses. In the
event of any default under this Security Agreement, Chase shall have power of
attorney to cancel, assign or surrender any insurance policy or policies and to
collect the return premiums due thereon and to apply the proceeds thereof to the
Liabilities secured hereby. The undersigned will immediately notify Chase in
writing of any damage to or loss of any of the Collateral which is tangible
property.
Collection and Disposition. Chase at its discretion may, whether any of
the Liabilities be due, in its name or in the name of the undersigned or
otherwise, demand, sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for, or make any compromise
or settlement deemed desirable with respect to, any of the Collateral, but shall
be under no obligation to do so, or Chase may extend the time of payment,
arrange for payment in installments, or otherwise modify the terms of, or
release, any of the Collateral, without thereby incurring responsibility to, or
discharging or otherwise affecting any liability of, the undersigned. Chase
shall not be required to take any steps necessary to preserve any rights against
prior parties to any of the Collateral. Chase may use or operate any of the
Collateral for the purpose of preserving the Collateral or its value in the
manner and to the extent Chase deems appropriate, but Chase shall be under no
obligation to do so.
Upon default hereunder or in connection with any of the Liabilities
(whether such default be that of the undersigned or of any other party obligated
thereon), the undersigned shall, at the request of Chase, assemble the
Collateral at such place or places as Chase designates in its request, and, to
the extent permitted by applicable law, Chase shall have the right, with or
without legal process and with or without prior notice or demand, to take
possession of the Collateral or any part thereof and to enter any premises for
the purpose of taking possession thereof. Chase shall have the rights and
remedies with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not such Code is in effect in the jurisdiction where
the rights and remedies are asserted).
<PAGE>
-3-
In addition, with respect to the Collateral, or any part thereof, which
shall then be or shall thereafter come into the possession or custody of Chase
or any of its agents, associates or correspondents, Chase may sell or cause to
be sold at any location selected by it and reasonable under the circumstances,
in one or more sales or parcels, at such price as Chase may deem best, and for
cash or on credit or for future delivery, without assumption of any credit risk,
all or any of the Collateral, at any broker's board or at public or private
sale, in any reasonable manner permissible under the Uniform Commercial Code
(except that, to the extent permitted thereunder, the undersigned hereby waives
the requirements of said Code), and Chase or anyone else may be the purchaser of
any or all of the Collateral so sold and thereafter hold the same absolutely,
free from any claim or right of whatsoever kind, including any equity or
redemption, of the undersigned, any such demand, notice or right and equity
being hereby expressly waived and released. The undersigned will pay to Chase
all expenses (including reasonable attorneys' fees and legal expenses incurred
by Chase) of, or incidental to, the enforcement of any of the provisions hereof
or of any of the Liabilities, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement of any of the Collateral or
receipt of the proceeds thereof, by litigation or otherwise, including expense
of insurance; and all such expenses shall be Liabilities secured by this
Security Agreement. Chase, at any time, at its option, may apply the net cash
receipts from the Collateral to the payment of principal of and/or interest on
any of the Liabilities, whether or not then due, making proper rebate of
interest or discount. Notwithstanding that Chase, whether in its own behalf
and/or on behalf of another or others, may continue to hold Collateral and
regardless of the value thereof, the undersigned shall be and remain liable for
the payment in full, principal and interest, of any balance of the Liabilities
and expenses at any time unpaid. Chase may exercise its rights with respect to
Collateral without resorting to or regard to other collateral or sources of
reimbursement for the Liabilities.
Representations and Warranties. If the undersigned is other than an
individual, the undersigned represents and warrants that: (a) it is duly
organized and validly existing under the laws of the jurisdiction of its
organization or incorporation and, if relevant under such laws, in good
standing; (b) it has the power to execute and deliver this Security Agreement
and to perform its obligations hereunder and has taken all necessary action to
authorize such execution, delivery and performance; (c) such execution, delivery
and performance do not violate or conflict with any law applicable to it, any
provision of its organizational documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any material
contractual restriction binding on or materially affecting it or any of its
assets; (d) to the best of undersigned's knowledge, all governmental and other
consents that are required to have been obtained by it with respect to this
Security Agreement have been obtained and are in full force and effect and all
conditions of any such consents have been complied with; (e) its obligations
under this Security Agreement constitute its legal, valid and binding
obligations, enforceable in accordance with its terms except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency or other
similar laws affecting creditors' rights generally; (f) all financial statements
and related information furnished and to be furnished to Chase from time to time
by the undersigned are true and complete and fairly present the financial or
other information stated therein as at such dates or for the periods covered
thereby; (g) there are no actions, suits, proceedings or investigations pending
or, to the knowledge of the undersigned, threatened against or affecting the
undersigned before any court, governmental agency or arbitrator, which involve
forfeiture of any assets of the undersigned or which may materially adversely
affect the financial condition, operations, properties or business of the
undersigned or the ability of the undersigned to perform its obligation under
this Security Agreement; and (h) there has been no material adverse change in
the financial condition of the undersigned since the last such financial
statements or information. If the undersigned is an individual, the undersigned
represents and warrants the correctness of clauses (c), (d), (e), (f), (g) and
(h) above to the extent applicable to an individual.
Additional Collateral. If at any time the Collateral shall be
unsatisfactory to Chase, upon the demand of Chase the undersigned will furnish
such further security or make such payment on account of the Liabilities as will
be satisfactory to Chase.
Default. IF any of the following events of default shall occur (each an
"Event of Default"):
<PAGE>
-4-
(a) any Obligor shall default in the performance of any of its
agreements herein or in any instrument or document delivered
pursuant to this Security Agreement or the Liabilities (including
a failure to comply with the preceding paragraph);
(b) if any Obligor is an individual, Obligor shall die or be declared
incompetent;
(c) any Obligor
(i) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts
become due;
(ii) shall make an assignment for the benefit of creditors;
(iii) shall file a petition in bankruptcy or for any relief
under any law of any jurisdiction relating to
reorganization, arrangement, readjustment of debt,
dissolution or liquidation;
(iv) shall have any such petition filed against it and the same
shall remain undismissed for a period of 30 days or shall
consent or acquiesce thereto; or
(v) shall have had a receiver, custodian or trustee appointed
for all or a substantial part of its property;
(d) any action, suit, proceeding or investigation against or
affecting any Obligor before any court or governmental agency
which involves forfeiture of any assets of any Obligor shall have
been commenced; or
(e) one or more judgments, decrees or orders for the payment of money
in excess of $50,000 in the aggregate shall be rendered against
any Obligor and shall continue unsatisfied and in effect for a
period of 30 consecutive days without being vacated, discharged,
satisfied or stayed or bonded pending appeal;
THEN, unless and to the extent that Chase shall otherwise elect, all of the
Liabilities shall become and be due and payable forthwith. THE RIGHTS OF CHASE
SET FORTH IMMEDIATELY ABOVE ARE WITHOUT LIMITATION OF, AND IN ADDITION TO, ANY
OTHER RIGHT OF CHASE UNDER ANY OTHER DOCUMENT EVIDENCING OR EXECUTED IN
CONNECTION WITH THE LIABILITIES (INCLUDING BUT NOT LIMITED TO ANY RIGHT OF
ACCELERATION OF PAYMENT PURSUANT TO THE PROVISIONS THEREOF OR ANY RIGHT OF CHASE
TO MAKE DEMAND FOR PAYMENT THEREUNDER WITHOUT REFERENCE TO ANY PARTICULAR
CONDITION OR EVENT).
Setoff. In the event that any amount becomes due and payable hereunder
and Chase shall have demanded payment thereof from the undersigned, in addition
to all other rights and remedies, Chase (including subsidiaries and each and
every affiliate) is hereby irrevocably authorized, without prior notice to the
undersigned, to set off any balances held for the account of or any other
liability owing by Chase or any such affiliate to the undersigned at any of
Chase's (or such subsidiary's or affiliate's) offices, in Dollars or any other
currency, against any of the obligations of the undersigned to Chase, as Chase
may elect.
Notices. All notices, requests, demands or other communications to or
upon the undersigned or Chase shall be in writing and shall be deemed to be
delivered upon receipt if delivered by hand or overnight courier or five days
after mailing to the address (a) of the undersigned set forth below the
undersigned's execution of this Security Agreement, (b) of Chase as first set
forth above, or (c) of the undersigned or Chase at such other address as the
undersigned or Chase shall specify to the other in writing.
Entire Agreement, Amendment and Waiver. This Security Agreement
constitutes the entire agreement between the undersigned and Chase in respect of
the subject matter hereof and may be amended only by a writing signed on behalf
of each party and shall be effective only to the extent set forth in that
writing. No delay by Chase in exercising any power or right hereunder shall
operate as a waiver thereof or of any other power or right; nor shall any single
or partial exercise of any power or right preclude other or future exercise
thereof, or the exercise of any other power or right hereunder.
<PAGE>
-5-
General Waivers. The undersigned hereby waive(s) presentment, notice of
dishonor and protest of all instruments included in or evidencing the
Liabilities or the Collateral and any and all other notices and demands
whatsoever, whether or not relating to such instruments (the "Secured
Documents"). The undersigned waives all demands, notices and protests of every
kind which are not expressly required under this Security Agreement which are
permitted by law to be waived, and which would, if not waived, impair Chase's
enforcement of this Security Agreement or release any Collateral from Chase's
security interest hereunder. By way of example, but not in limitation of Chase's
rights under this Security Agreement, Chase does not have to give any
undersigned notice of any of the following:
(a) notice of acceptance of this Security Agreement;
(b) notice of loans made, credit extended, Collateral received or
delivered;
(c) any Event of Default;
(d) any action which Chase does or does not take regarding any
Obligor or any other person or any other collateral securing the
Liabilities;
(e) except as otherwise provided herein, enforcement of this Security
Agreement against the Collateral; or
(f) any other action taken in reliance on this Security Agreement.
The undersigned waives all rules of suretyship law and any other law
whatsoever which is legally permitted to be waived and which would, if not
waived, impair Chase's enforcement of its security interests. By way of example,
but not in limitation of Chase's rights under this Security Agreement, Chase may
do any of the following without notice to the undersigned except to the extent
that notice to the undersigned is required under another Secured Document or in
each case in which the agreement of such undersigned is required because such
undersigned is a principal party to a Liability and, as a matter of contract,
the agreement of such undersigned is required:
(a) change, renew or extend the time for repayment of all or any part
of the Liabilities;
(b) change the rate of interest or any other provisions with respect
to all or any part of the Liabilities;
(c) release, surrender, sell or otherwise dispose of any money or
property which is in Chase's possession as collateral security
for the Liabilities;
(d) fail to perfect any security interest in any Collateral;
(e) release or discharge any party liable to Chase in whole or in
part for the Liabilities, or accept any additional parties or
guarantors;
(f) delay or refrain from exercising any of Chase's rights;
(g) settle or compromise any and all claims pertaining to the
Liabilities and the Collateral; and
(h) apply any money or property of undersigned or that of any other
party liable to Chase for any part of the Liabilities in any
order you choose.
THE UNDERSIGNED HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE(S) (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT TO A
TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS NOTE OR ANY
FACILITY DOCUMENT, AND AGREES THAT ANY SUCH DISPUTE SHALL, AT CHASE'S OPTION, BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
IN ADDITION, THE UNDERSIGNED WAIVES THE RIGHT TO INTERPOSE ANY DEFENSE
BASED UPON ANY STATUTE OF LIMITATIONS OR ANY CLAIM OF DELAY BY CHASE AND ANY
SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION.
Rights Cumulative. The rights, powers and remedies granted to Chase
herein shall be cumulative and in addition to any rights, powers and remedies to
which Chase may be entitled either by operation of law or pursuant to any other
document or instrument delivered or from time to time to be delivered to Chase
in connection with any of the Liabilities.
<PAGE>
-6-
Governing Law; Jurisdiction. This Security Agreement shall be governed
by and construed in accordance with the laws of the State of New York,
Connecticut or New Jersey, depending on the location of the Chase office set
forth in this Security Agreement. The undersigned consent(s) to the nonexclusive
jurisdiction and venue of the state or federal courts located in such state. In
the event of a dispute hereunder, suit may be brought against the undersigned in
such courts or in any jurisdiction where the undersigned or any of its assets
may be located. Service of process by Chase in connection with any dispute shall
be binding on the undersigned if sent to the undersigned by registered mail at
the address(es) specified below or to such further address(es) as the
undersigned may specify to Chase in writing.
Commercial Transaction. IF THE UNDERSIGNED IS A CONNECTICUT DOMICILED
ENTITY OR RESIDENT, EACH OF THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT THIS
SECURITY AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY CONSTITUTE
COMMERCIAL GENERAL STATUTES. EACH OF THE UNDERSIGNED EXPRESSLY WAIVES ANY AND
ALL RIGHTS, CONSTITUTIONAL OR OTHERWISE, WITH RESPECT TO NOTICE AND HEARING AND
ANY RIGHTS UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES IN CONNECTION
WITH ANY PREJUDGMENT REMEDY AVAILABLE TO CHASE.
Assignment. Chase may assign, transfer and/or deliver to any
transferee of any of the Liabilities any or all of the Collateral, and
thereafter shall be fully discharged from all responsibility with respect to the
Collateral so assigned, transferred and/or delivered. Such transferee shall be
vested with all the powers and rights of Chase hereunder with respect to such
Collateral, but Chase shall retain all rights and powers hereby given with
respect to any of the Collateral not so assigned, transferred or delivered.
Waiver of Presentment, etc. The undersigned hereby waive(s)
presentment, notice of dishonor and protest of all instruments included in or
evidencing the Liabilities or the Collateral and any and all other notices and
demands whatsoever, whether or not relating to such instruments.
Miscellaneous. The undersigned, if more than one, shall be jointly and
severally liable hereunder and all provisions hereof regarding the Liabilities
or Collateral of the undersigned shall apply to any Liability or any Collateral
of any or all of them. The Chase Manhattan Bank shall act for itself and its
affiliates as collateral agent hereunder. This Security Agreement shall be
binding upon the heirs, executors, administrators, assigns or successors of the
undersigned; shall constitute a continuing agreement, applying to all existing
as well as future transactions between Chase and the undersigned that shall be
at any time closed; and shall so continue in force notwithstanding any change in
any partnership party hereto, whether such change occurs through death,
retirement or otherwise.
IN WITNESS WHEREOF, the undersigned has executed this instrument or has
caused this instrument to be duly executed by its proper officer(s) this 29 day
of July 1999.
Address for notices: GIRGENTI, HUGHES, BUTLER & MCDOWELL, INC.
100 Avenue of the Americas By: /s/ Stuart Diamond
New York, N.Y. 10013 ------------------------------
Print Name: Stuart Diamond
Title: Secretary
By: ______________________________
Print Name: ______________________
Title: ___________________________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 17529
<SECURITIES> 0
<RECEIVABLES> 18727
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41020
<PP&E> 8694
<DEPRECIATION> 4189
<TOTAL-ASSETS> 61908
<CURRENT-LIABILITIES> 29918
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 30658
<TOTAL-LIABILITY-AND-EQUITY> 61908
<SALES> 0
<TOTAL-REVENUES> 33067
<CGS> 0
<TOTAL-COSTS> 30278
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (277)
<INCOME-PRETAX> 3066
<INCOME-TAX> 1349
<INCOME-CONTINUING> 1714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1714
<EPS-BASIC> 0.23
<EPS-DILUTED> 0.23
</TABLE>
