SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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Commission file no. 0-15152
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FIND/SVP, Inc.
- --------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 13-2670985
- -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
625 Avenue of the Americas, New York, N.Y. 10011
- --------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (212) 645-4500
--------------
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
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common stock, par value $0.0001 per share: 7,107,519 shares as of May 1, 1998.
<PAGE>
FIND/SVP, Inc.
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CONTENTS
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PART I. FINANCIAL INFORMATION Page
Consolidated Condensed Balance Sheets 3
March 31, 1998(unaudited) and December 31, 1997
Consolidated Condensed Statements of Operations 5
Three Months Ended March 31, 1998 and 1997(unaudited)
Consolidated Condensed Statements of Cash Flows 6
Three Months Ended March 31, 1998 and 1997(unaudited)
Notes to Consolidated Condensed Financial 7
Statements
Management's Discussion and Analysis of 12
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURES 22
2
<PAGE>
FIND/SVP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1998 1997
------ ----------- -----------
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash $639,000 $139,000
Accounts receivable, net 3,083,000 3,394,000
Note receivable 62,000 62,000
Prepaid and refundable income taxes 299,000 299,000
Deferred tax assets 286,000 286,000
Prepaid expenses and other current assets 373,000 328,000
Assets held for sale 1,540,000 1,558,000
----------- -----------
Total current assets 6,282,000 6,066,000
----------- -----------
Equipment and leasehold improvements, net 4,504,000 4,546,000
Other assets:
Deferred charges 229,000 245,000
Goodwill, net 114,000 117,000
Note receivable 63,000 63,000
Cash surrender value of life insurance 448,000 479,000
Deferred tax assets 720,000 681,000
Deferred financing fees, net 131,000 141,000
Security deposits 148,000 143,000
----------- -----------
Total assets $12,639,000 $12,481,000
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
March 31, December 31,
Liabilities and Shareholders' Equity 1998 1997
------------------------------------ ----------- -----------
(unaudited) (audited)
<S> <C> <C>
Current liabilities:
Notes payable, current installments $500,000 $1,749,000
Trade accounts payable 920,000 1,305,000
Accrued expenses 1,766,000 1,872,000
Accrued interest, current installments 156,000 124,000
----------- -----------
Total current liabilities 3,342,000 5,050,000
----------- -----------
Unearned retainer income 3,027,000 2,023,000
Notes payable, excluding current installments 3,678,000 3,801,000
Accrued interest, excluding current installments 154,000 104,000
Accrued rent payable 86,000 112,000
Deferred compensation 178,000 173,000
Shareholders' equity Preferred stock, $0.0001 par value.
Authorized 2,000,000 shares; none
issued and outstanding -- --
Common stock, $0.0001 par value.
Authorized 10,000,000 shares
7,107,519 and 6,575,669 shares issued
and outstanding at March 31, 1998
and December 31, 1997, respectively 1,000 1,000
Capital in excess of par value 4,874,000 3,872,000
Accumulated (deficit) earnings (2,701,000) (2,655,000)
----------- -----------
Total shareholders' equity 2,174,000 1,218,000
----------- -----------
$12,639,000 $12,481,000
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues $8,197,000 $7,832,000
---------- ----------
Operating expenses:
Direct costs 4,324,000 4,504,000
Selling, general and administrative
expenses 3,508,000 3,772,000
Restructuring charge 321,000 --
---------- ----------
Operating income (loss) 44,000 (444,000)
Interest income 7,000 5,000
Other income 289,000 --
Interest expense (136,000) (115,000)
Other expense (289,000) --
---------- ----------
Loss before benefit for income taxes (85,000) (554,000)
Benefit for income taxes (39,000) (237,000)
---------- ----------
Net loss (46,000) (317,000)
========== ==========
Loss per share:
Basic ($0.01) ($0.05)
========= ==========
Diluted (0.01) (0.05)
========= ==========
Weighted average number of shares outstanding:
Basic 7,042,177 6,572,817
========== ==========
Diluted 7,042,177 6,572,817
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(46,000) $(317,000)
-------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 307,000 280,000
Amortization of discount on notes payable 2,000 1,000
Amortization of deferred financing fees 10,000 8,000
Provision for losses on accounts receivable 53,000 55,000
Common stock issued for services -- 38,000
Increase in deferred compensation 5,000 6,000
Decrease in accrued rent payable (26,000) (19,000)
Decrease (increase) in cash surrender value of life insurance 31,000 (23,000)
Increase in deferred income taxes (39,000) (30,000)
Decrease in assets held for sale 18,000 --
Change in assets and liabilities:
Decrease (increase) in accounts receivable 258,000 (332,000)
Increase in prepaid & refundable income taxes -- (208,000)
Decrease in inventories -- 12,000
Increase in prepaid expenses, deferred charges and
security deposits (102,000) (550,000)
(Decrease) increase in trade accounts payable
and accrued expenses (491,000) 20,000
Increase in accrued interest 82,000 74,000
Increase in unearned retainer income 1,004,000 1,145,000
---------- ----------
Total adjustments 1,112,000 477,000
---------- ----------
Net cash provided by operating activities 1,066,000 160,000
Investing Activities:
Capital expenditures (194,000) (374,000)
---------- ----------
Net cash used in investing activities (194,000) (374,000)
---------- ----------
Financing Activities:
Principal payments under notes payable (1,374,000) (130,000)
Proceeds from issuance of convertible note 250,000 --
Proceeds from exercise of stock options 2,000 26,000
Proceeds from issuance of common stock 750,000 --
Repurchase of treasury stock (206,000) --
Proceeds from insurance company, net of expenses 206,000 --
Increase in deferred financing fees -- (10,000)
---------- ----------
Net cash used in financing activities (372,000) (114,000)
---------- ----------
Net increase (decrease) in cash 500,000 (328,000)
Cash at December 31, 1997 and 1996 139,000 634,000
---------- ----------
Cash at March 31, 1998 and 1997 $639,000 $306,000
========== ==========
Non-cash financing activities:
Conversion of notes into common stock 250,000 --
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE>
FIND/SVP, INC. and Subsidiaries
-------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
A. MANAGEMENT'S STATEMENT
In the opinion of Management, the accompanying consolidated condensed financial
statements contain all normal and recurring adjustments necessary to present
fairly the financial position at March 31, 1998, and the results of operations
and cash flows for the three month periods ended March 31, 1998 and 1997.
Operating results for the three month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998.
The Company has reclassified certain prior year balances to conform with current
presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
condensed financial statements be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1997
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
B. ASSETS HELD FOR SALE
In the Company's Form 10-K for the year ended December 31, 1997, the Company
announced its intention to sell the majority of assets held in its Published
Research Division, and, accordingly, has retained the services of an investment
banking firm to effectuate the sale. As a result, the Company has reported the
carrying value of the assets held for sale at the lower of cost or their
estimated net realizable values. The Company has presented the assets held for
sale as a separate line item in its March 31, 1998 and December 31, 1997
consolidated balance sheets. In accordance with the provisions of the Statement
of Financial Accounting Standards Board No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," all assets
held for sale other than inventories and prepaid expenses are not being
amortized or depreciated.
In April 1998, the Company signed a letter of intent with a potential buyer of
the aforementioned assets. The due diligence process began on April 27, 1998.
The Company will review its estimated net realizable values as additional
information becomes available. During the quarter ended March 31, 1998, revenues
from the assets held for sale were $1,317,000.
7
<PAGE>
C. SALE OF COMMON STOCK AND CONVERTIBLE NOTE
On January 15, 1998, the Company entered into an agreement with SVP, S.A.
("SVP") for SVP to purchase $1,000,000 of the Company's common stock at $1.25
per share. The transaction was completed in two parts. The Company issued
600,000 shares and a $250,000 Convertible Note to SVP on January 15, 1998,
pending the availability of additional shares for issuance. The Note converted
into 200,000 shares on February 20, 1998, when those shares became available in
connection with the Company's litigation settlement (see note D).
With this transaction SVP and its affiliates currently own approximately 37% of
the then outstanding common shares in the Company, excluding outstanding
warrants.
D. LEGAL PROCEEDINGS
On May 30 1997, Asset Value Fund Limited Partnership ("Asset Value"), a
shareholder in the Company, commenced an action in the United States District
Court for the Southern District of New York entitled ASSET VALUE FUND LIMITED
PARTNERSHIP V. FIND/SVP, INC. AND ANDREW P. GARVIN, Civil Action No. 97 Civ.
3977 (LAK). The complaint alleged that between October 1995 and August 1996 the
Company and its president made certain oral misstatements to Paul Koether, the
principal of Asset Value, concerning the financial condition of the Company and
that those misstatements induced Asset Value to buy more shares of the Company
and to refrain from selling the shares it already held. The complaint alleged
that those misstatements give rise to causes of action for violation of Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and for
fraud, breach of fiduciary duty and negligent misrepresentation. The complaint
demanded compensatory damages in excess of $1.5 million and punitive damages in
excess of $5 million, as well as costs and attorneys' fees.
On August 13, 1997, the Company was served with an amended complaint which
alleged that between January 1996 and August 1996, the Company and its president
made certain misstatements concerning the financial condition of the Company and
that those misstatements induced Asset Value to buy more shares of the Company
and to refrain from selling the shares it already held. The amended complaint
alleged that those misstatements give rise to causes of action for violation of
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder
and for common law fraud. The complaint demanded compensatory and punitive
damages in an amount to be determined at trial, as well as costs and attorneys'
fees. On September 29, 1997, the Company and Mr. Garvin moved to dismiss the
amended complaint.
On December 3, 1997, Asset Value commenced an action in the Supreme Court of the
State of New York, County of New York entitled ASSET VALUE FUND LIMITED
PARTNERSHIP V. BRIGITTE DE GASTINES AND JEAN-LOUIS BODMER, Index No. 606165/97.
The defendants are two of the
8
<PAGE>
Company's directors. The complaint sought to remove the defendants as directors
under New York Business Corporation Law Section 706(d) because of their alleged
failure to attend meetings of the board and because they considered and approved
financing transactions by the Company involving Amalia, S.A. and/or SVP, S.A.
which allegedly constituted self-dealing by the defendants. On December 30,
1997, the defendants removed this action to the United States District Court for
the Southern District of New York.
On January 20, 1998, Asset Value and the Company entered into a settlement
agreement pursuant to which Asset Value dismissed with prejudice the two pending
actions described above. Furthermore, Asset Value agreed that for five years
neither Asset Value nor Paul Koether will purchase, either directly or
indirectly, any shares of stock in the Company, or own or control, either
directly or indirectly, any shares of stock in the Company. As part of the
settlement, the Company purchased 274,400 shares of the Company's common stock
from the plaintiff for $1.25 per share, totaling $343,000. The purchase price
contained a premium of $0.50 per share over the closing trade price of the
Company's common stock on the date of settlement, or $137,000. As a result of
the above, the Company recorded treasury stock of $206,000 and expense of
$137,000. The Company used proceeds from its insurance company of $495,000 to
purchase the shares and to pay plaintiff and Company legal fees in the amount of
$110,000 and $42,000, respectively. Accordingly, the Company recorded other
income and other expense of $289,000, respectively, related to this matter, with
the remaining balance of $206,000 offset against the aforementioned treasury
stock repurchase amount, thus reducing the net treasury stock transaction to
zero. Of the 274,400 shares purchased by the Company, 200,000 shares were issued
to SVP to convert the convertible note issued on January 15, 1998 into common
stock and 74,400 shares were retired (see Note C). SVP, S.A. purchased the
remaining 625,600 shares held by Asset Value for $1.25 per share. In addition,
the Company agreed that if within two years (a) the Company sells all or
substantially all of its assets, (b) the Company is merged into or combined with
another company, (c) any person acquires a majority of the outstanding shares of
the Company pursuant to a tender offer, (d) the Company is taken private, or (e)
the Company undergoes a recapitalization or restructuring, and in any such case
the shareholders of the Company receive consideration (whether cash, securities
or otherwise) of more than $1.25 per share, then, immediately after the
consummation of such transaction, the Company will pay to Asset Value an amount
equal to 900,000 times the difference between $1.25 and the amount paid to the
shareholders up to a maximum difference of $1.75 per share (i.e., a maximum
price of $3.00 per share).
E. RESTRUCTURING CHARGE
On March 27, 1998, the Company reduced its full-time labor force in its core
business by 20 positions. As a result, the Company has recorded a restructuring
charge of $321,000 during the quarter ended
9
<PAGE>
March 31, 1998. The charge consists mainly of severance payments, which will be
made in their entirety during 1998, outplacement services and legal costs
associated with the elimination of the positions.
F. BORROWINGS
On April 3, 1998, the Company signed an amendment to the Commercial Revolving
Promissory Note (the "Note") with State Street Bank and Trust ("the Bank"),
dated April 27, 1995, extending the availability of the Note until March 25,
1999. The credit available under the Note has been reduced from $3,000,000 to
$1,000,000, less $148,000 of currently outstanding letters of credit (as
described in the next paragraph). The interest rate on the Note is the Bank's
prime rate plus one-quarter of one percent (currently 8.75%).
The Company's Revolving and Term Promissory Notes with the Bank are secured by a
$2,000,000 letter of credit posted on March 27, 1998, by SVP S.A., a major
shareholder of the Company, and all of the assets of the Company. As of March
31, 1998, there was $1,225,000 outstanding on the term loans and zero
outstanding under the revolving credit agreement. The revolving credit agreement
is used to secure certain long-term letters of credit in the amount of $148,000.
As such, as of March 31, 1998, the availability under the revolving credit
agreement was $2,852,000. However, this amount was subsequently reduced to
$852,000 on April 3, 1998, in accordance with the amendment signed on that date.
Under the terms of the agreement, the Company has been required to retain the
services of an outside management consultant, originally retained in October,
1997, through September 30, 1998.
G. INCOME TAXES
The benefit for income taxes consists of federal, state and local income taxes.
The $39,000 tax benefit recognized as of March 31, 1998 represents 45.9% of the
loss before benefit for income taxes as of March 31, 1998. The benefit
represents a deferred tax benefit from a net operating loss carryforward for
federal, state and local income taxes. Based on the Company's history of prior
operating earnings related to its research-for-hire businesses, management has
determined that a valuation allowance of $519,000 is necessary at March 31, 1998
and December 31, 1997, due to the uncertainty of future earnings to realize the
entire net deferred tax asset. The effective tax benefit was 42.8% as of March
31, 1997.
H. MARKET FOR COMPANY'S COMMON EQUITY
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ recently made changes in the criteria for continued NASDAQ
eligibility. The Company's failure to meet NASDAQ's
10
<PAGE>
maintenance criteria in the future may result in the discontinuance of the
inclusion of its securities on NASDAQ. In such event, trading, if any, in the
securities may then continue to be conducted in the non-NASDAQ over-the-counter
market in what are commonly referred to as the electronic bulletin board and the
"pink sheets". As a result, an investor may find it more difficult to dispose of
or to obtain accurate quotations as to the market value of the securities. In
addition, the Company would be subject to a Rule promulgated by the Securities
and Exchange Commission (the "Commission") that, if the Company fails to meet
criteria set forth in such rule, imposes various practice requirements on
broker-dealers who sell securities governed by the Rule to persons other than
established customers and accredited investors. For these types of transactions,
the broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transactions
prior to sale. Consequently, the rule may have an adverse effect on the ability
of brokers-dealers to sell the securities, which may affect the ability of
purchasers in the offering to sell the securities in the secondary market.
On February 27, 1998, the Company received notification from the NASDAQ Stock
Market, Inc. ("NASDAQ") that the Company was not in compliance with the new
minimum bid price requirement which became effective on February 23, 1998. In
order to regain compliance with this standard the Company's common shares must
have a closing bid price at or above the minimum for at least ten consecutive
trading days by no later than May 28, 1998. The standard requires a minimum
closing bid price of $1.00 per share. If compliance is not met, NASDAQ will
issue a delisting letter, which will identify the review procedures. The Company
may request a review at that time, which will generally stay delisting. As of
March 31, 1998, the Company had not met such requirement. However, during April
1998, the Company's common shares met the closing bid requirement for ten
consecutive trading days. Accordingly, the Company is currently in compliance
with the new minimum bid requirement.
As of December 31, 1997, the Company's balance sheet was not in compliance with
the NASDAQ net tangible asset requirement. Per discussions with NASDAQ, the
Company included a pro-forma net tangible asset statement including the
$1,000,000 capital contribution from SVP, S.A. received in 1998 (see note C) in
its Form 10-K for the year-ended December 31, 1997. NASDAQ has informed the
Company that since the statement showed pro-forma net tangible assets which are
in compliance with the NASDAQ requirement, it considers the Company to be in
compliance.
11
<PAGE>
FIND/SVP, Inc.
--------------
Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Three months ended March 31, 1998 compared to three months ended March 31, 1997.
GENERAL
- -------
FIND/SVP, Inc. provides a broad consulting and business intelligence service to
executives and other decision making employees of client companies, primarily in
the United States. The Company operates in one business segment, providing
information services and products including: the Quick Consulting and Research
Service ("QCS") which provides retainer clients with access to the expertise of
the Company's staff and information resources; the Strategic Consulting and
Research Division ("SRD") which provides more extensive, in-depth custom market
research and competitive intelligence information as well as customer
satisfaction and loyalty programs; and the Published Research Division which
provides copyrighted, syndicated and off-the-shelf studies on various industries
and markets. The Company considers its QCS and SRD service businesses, which
operate as "research-for-hire" businesses, to be its core competencies.
During the fourth quarter of 1997, the Company determined it would re-focus its
efforts on its core competencies. Along with selling certain assets and ceasing
the operation of a subsidiary during the fourth quarter of 1997, the Board of
Directors voted in favor of a plan to effectuate the sale of virtually all
assets in its Published Research Division, as reported in the Company's Form
10-K filed for the year-ended December 31, 1997. The Company's remaining
services will come from its research-for-hire businesses. In April 1998, the
Company signed a letter of intent with a potential buyer. The Company
anticipates the sale to occur during the latter part of the second quarter of
1998, but there can be no assurances in this regard. The revenues from Published
Research accounted for 19%, 20% and 21% of the Company's total revenues during
1997, 1996 and 1995, respectively. Revenues of $1,317,000 were generated from
the assets held for sale for the quarter ended March 31, 1998. As such, overall
revenues for 1998 are expected to decline versus 1997.
On January 15, 1998, the Company entered into an agreement with SVP, S.A.
("SVP") pursuant to which SVP purchased $1,000,000 of the common stock, par
value $.0001 per share, of the Company ("common stock") at $1.25 per share. The
transaction was completed in two parts. The Company issued 600,000 shares and a
$250,000 Convertible Note to SVP on January 15, 1998. The Note converted into
200,000
12
<PAGE>
shares on February 20, 1998 when those shares became available to issue in
connection with the settlement of certain litigation.
With this transaction, coupled with additional shares purchased by SVP in
conjunction with the settlement of a lawsuit, SVP and its affiliates, as of
February 20, 1998, own approximately 37% of the then outstanding shares in the
Company, excluding outstanding warrants. This ownership percentage has triggered
clauses in the employment contract of the President of the Company and in the
severance agreements for two executive officers, which would allow them to
resign due to a defined change in control and receive severance in accordance
with their respective agreements. In consideration of SVP providing a $2,000,000
letter of credit, in March 1998, to secure the Company's debt agreements with a
commercial bank, on March 29, 1998, the President waived his rights related to
the change of control provision in his contract, only as it relates to the
holdings of SVP and its affiliates, in the Company. To date the two executive
officers have not expressed intent on exercising such clause in their respective
agreements. If the two executive officers were to tender their resignation based
on this event, the liability would be approximately $340,000, payable over a one
year period, plus the vesting of 78,833 currently non-exercisable options.
During the first quarter of 1998, the Company continued its initiative to reduce
operating expenses which began during the quarter ended September 30, 1997, as
reported in the Company's Form 10-Q filed for that period. Primarily as a result
of the initiative, there was a reduction in direct costs as a percentage of
revenues to 52.8% for the quarter ended March 31, 1998, as compared to 57.5% for
the quarter ended March 31, 1997, and 56.7% for the quarter ended December 31,
1997. Additionally, selling, general and administrative expenses were 42.8% of
revenues for the quarter ended March 31, 1998, versus 48.2% for the quarter
ended March 31, 1997, and 44.9% for the quarter ended December 31, 1997.
Further, on March 27, 1998, the Company reduced its full-time labor force in its
core businesses by 20 positions. As a result, the Company recorded a
restructuring charge of $321,000 during the quarter ended March 31, 1998. The
Company believes this action, coupled with the significant cost reductions in
operating expenses and non full-time labor over the past three quarters, has
significantly improved its ability to return to profitability for 1998, but
there can be no assurances in this regard.
The Company had operating income of $44,000 for the quarter ended March 31,
1998, inclusive of the $321,000 restructuring charge. This compares favorably to
an operating loss of $444,000 for the quarter ended March 31, 1997. The net loss
for the quarter ended March 31, 1998 was $46,000 versus a $317,000 net loss for
the quarter ended March 31, 1997.
13
<PAGE>
During the first quarter of 1998, the Company's cash flow from operating
activities provided $1,066,000 versus $160,000 for the first quarter of 1997.
This, coupled with the $1,000,000 capital contribution from SVP received during
the first quarter of 1998, enabled the Company to pay down its Commercial
Revolving Promissory Note with State Street Bank and Trust Company to zero from
$1,249,000 as of December 31, 1997. At March 31, 1998, letters of credit
totaling $148,000 remain outstanding..
OPERATING REVENUES
- ------------------
Operating revenues increased by $365,000 or 4.7% to $8,197,000 for the
three-month period ended March 31, 1998, as compared to the comparable period of
the prior year.
The Company's Quick Consulting and Research Service revenues grew by $268,000 or
5.4% to $5,264,000 for the three-month period ended March 31, 1998, as compared
to the comparable period of the prior year. The increase was due primarily to an
increase in the average fee paid per client.
Revenues in the Strategic Consulting and Research area increased by $345,000 or
28.2% to $1,567,000 for the three-month period ended March 31, 1998, as compared
to the comparable period of the prior year. The increase reflects increases in
the number of assignments and their average size, resulting from improved
marketing.
Published Research revenues decreased by $247,000 or 15.8% to $1,320,000 for the
three-month period ended March 31, 1998, as compared to the comparable period of
the prior year. The decrease in revenues for the three month period was due
primarily to the decline in revenues from the Emerging Technologies Research
Group ("ETRG") caused by the sale of certain assets and the primary businesses
of ETRG during the fourth quarter of 1997, as previously reported in the
Company's Form 10-Q for the period ended September 30, 1997. The Company did
retain rights to certain published off-the-shelf studies at the time of the
sale, and did recognize revenues and direct costs from those assets in its
Published Research area during the first quarter of 1998. The Company
anticipates these studies will be included in the sale of assets of the
Published Research Division.
The Company operates a small newsletter publishing operation. However, the
newsletters that are produced generated less than 1% of the Company's revenues
in 1998 and 1997. All except one of the Company's newsletters are expected to be
included in the sale of assets of the Published Research Division.
Revenues of $1,317,000 were generated from assets held for sale for the quarter
ended March 31, 1998. The revenues include Published Research and newsletter
revenues. The Company anticipates the sale of
14
<PAGE>
assets will occur during the latter part of the second quarter, but there can be
no assurance in this regard. As such, overall revenues for 1998 are expected to
decline versus 1997.
DIRECT COSTS
- ------------
Direct costs decreased by 4.0% or $180,000 to $4,324,000 for the three-month
period ended March 31, 1998, as compared to the comparable period of 1997. As a
percent of revenues, direct costs decreased to 52.8% for the three-month period
ended March 31, 1998, from 57.5% for the corresponding period in 1997. The
decrease in total direct costs and direct costs as a percentage of revenues are
due primarily to the sale of the ETRG assets in the fourth quarter of 1997 and
the cost reduction of direct operating expenses which began during the third
quarter of 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
- -------------------------------------------
Selling, general and administrative expenses declined by 7.0% or $264,000 to
$3,508,000 for the three-month period ended March 31, 1998, as compared to the
corresponding period of the prior year. As a percent of revenues, selling,
general and administrative expenses decreased to 42.8% for the three-month
period ended March 31, 1998, from 48.2% for the corresponding period in 1997.
The decrease in expenses in the selling, general and administrative areas is due
primarily to the reduction of labor in the general and administrative area
during the fourth quarter of 1997 (as reported in the Company's Form 10-K for
the year ended December 31, 1997) and the cost reduction of general operating
expenses which began during the third quarter of 1997, coupled with the sale of
the ETRG assets in the fourth quarter of 1997.
RESTRUCTURING CHARGE
- --------------------
On March 27, 1998, the Company reduced its full-time labor force in its core
business by 20 positions. As a result the Company has recorded a restructuring
charge of $321,000 during the quarter ended March 31, 1998. The charge consists
mainly of severance payments, which will be made in their entirety during 1998,
outplacement services and legal costs associated with the elimination of the
positions.
OPERATING INCOME (LOSS)
- -----------------------
Operating income was $44,000 for the three-month period ended March 31, 1998, as
compared to an operating loss of $444,000 for the corresponding period in 1997.
The operating income for the quarter ended March 31, 1998 was due primarily to
the reduction of direct costs and selling and general and administrative costs
as a percentage
15
<PAGE>
of revenues, partially offset by the $321,000 restructuring charge related to
the elimination of full-time positions during the period. The operating loss for
the period ending March 31, 1997 was due primarily to an increase in costs
associated with a growth strategy implemented during the fourth quarter of 1996.
During the fourth quarter of 1997, the Company abandoned that strategy and has
re-focused its efforts on its core "research-for-hire" businesses.
INTEREST INCOME AND EXPENSE
- ---------------------------
Interest income was $7,000 for the three-month period ended March 31, 1998, and
$5,000 for the corresponding period in 1997. Interest expense was $136,000 for
the three-month period ended March 31, 1998, as compared to $115,000 for the
corresponding period in 1997. The increase in interest expense for the period
ended March 31, 1998 was due to the issuance of Subordinated Notes of the
Company in the third quarter of 1997, coupled with borrowings under the
Commercial Revolving Promissory Note during the first quarter of 1998, partially
offset by a reduction in interest expense on outstanding term notes during the
first quarter of 1998, compared to the first quarter of 1997.
OTHER INCOME AND EXPENSE
- ------------------------
During the quarter ended March 31, 1998, the Company settled litigation which
began during the second quarter of 1997. As part of the settlement, the Company
purchased 274,400 shares of the Company's common stock from the plaintiff for
$1.25 per share, totaling $343,000. The purchase price contained a premium of
$0.50 per share over the closing trade price of the Company's common stock on
the date of settlement, or $137,000. As a result of the above, the Company
recorded treasury stock of $206,000 and expense of $137,000. The Company used
proceeds from its insurance company of $495,000 to purchase the shares and to
pay plaintiff and Company legal fees in the amount of $110,000 and $42,000,
respectively. Accordingly, the Company recorded other income and other expense
of $289,000, respectively, related to this matter, with the remaining balance of
$206,000 offset against the aforementioned treasury stock repurchase amount,
thus reducing the net treasury stock transaction to zero. Of the 274,400 shares
purchased by the Company, 200,000 shares were issued to SVP to convert the
convertible note issued on January 15, 1998 into common stock and 74,400 shares
were retired (See Note C).
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
For the three months ended March 31, 1998, there was a positive cash flow from
operations of $1,066,000 which resulted from an increase in unearned retainer
income of $1,004,000, a decrease in accounts receivable of $258,000, a provision
for losses on accounts receivable of $53,000, an increase in accrued interest of
$82,000, a decrease in
16
<PAGE>
assets held for sale of $18,000, a decrease in cash surrender value of life
insurance of $31,000, an increase in deferred compensation of $5,000,
depreciation and amortization of $307,000, amortization of discount on notes
payable of $2,000 and amortization of deferred financing fees of $10,000. This
was partially offset by a net loss of $46,000, a decrease in accrued rent
payable of $26,000, an increase in deferred income taxes of $39,000, an increase
in prepaid expenses and deferred charges of $102,000 and a decrease in trade
accounts payable and accrued expenses of $491,000.
For the three months ended March 31, 1997, there was a positive cash flow from
operating activities of $160,000 which resulted primarily from an increase in
unearned retainer income of $1,145,000, an increase in trade accounts payable
and accrued expenses of $20,000, a decrease in inventories of $12,000, an
increase in deferred compensation of $6,000, amortization of discount on notes
payable of $1,000, depreciation and amortization of $280,000, a provision for
losses on accounts receivable of $55,000, an increase in accrued interest of
$74,000 and common stock issued for services of $38,000. This was partially
offset by a net loss of $317,000, an increase in prepaid expenses and deferred
charges of $550,000, an increase in accounts receivable of $332,000, an increase
in prepaid and refundable income taxes of $208,000, an increase in deferred
income taxes of $30,000, an increase in cash surrender value of life insurance
of $23,000 and a decrease in accrued rent payable of $19,000.
The Company's financing activities for the three months ended March 31, 1998
include principal payments under notes payable of $1,374,000, which includes the
pay down of $1,249,000 on the Company's credit line and $125,000 on outstanding
term debt and $206,000 repurchase of treasury stock, partially offset by
proceeds from the issuance of common stock to SVP of $750,000, proceeds from the
sale of convertible note to SVP of $250,000, proceeds from insurance company,
net of expenses of $206,000 and proceeds from exercise of stock options of
$2,000, resulting in net cash used in financing activities of $372,000. This
compares to principal payments under notes payable of $130,000 on outstanding
term debt and an increase in deferred financing fees of $10,000, partially
offset by proceeds from exercise of stock options of $26,000, resulting in net
cash used in financing activities of $114,000 for the three months ended March
31, 1997.
The Company had investing activities of $194,000 for capital expenditures for
the three months ended March 31, 1998. This compares to $374,000 for capital
expenditures for the three months ended March 31, 1997. The major portion of the
expenditures for the three months ended March 31, 1998 was for the enhancement
of Questrac III, the Company's internal proprietary management information
system, and the purchase of computer equipment.
17
<PAGE>
The Company's working capital increased by $1,924,000 to $2,940,000 on March 31,
1998, as compared to December 31, 1997, due primarily to the $1,066,000 net cash
provided by operating activities and the $750,000 and $250,000 proceeds from the
issuance of common stock and the convertible note, respectively, to SVP,
partially offset by capital expenditures of $194,000. Cash balances were
$639,000 and $139,000 on March 31, 1998 and December 31, 1997, respectively.
On April 3, 1998, the Company signed an amendment to the Commercial Revolving
Promissory Note (the "Note") with State Street Bank and Trust (the "Bank") to
extend until March 25, 1999, the terms of the existing Note dated April 27,
1995. The amount available under the Note was reduced to $1,000,000, less
outstanding letters of credit, which was $148,000 as of March 31, 1998. On March
27, 1998, SVP provided credit support for the Note in the form of a $2,000,000
letter of credit. This includes $1,000,000 to secure the two five-year term
notes. The dollar amount of the letter of credit will, at a minimum, equal
$1,000,000 plus the lesser of (a) the aggregate principal amount of the term
loans or (b) $1,000,000. The interest rate on the Note is the Bank's prime rate
plus one-quarter of one percent (currently 8.75%). Under the terms of the
Agreement with the Bank, the Company must continue to retain the services of an
outside management consultant, originally retained in October 1997, through
September 30, 1998.
On March 27, 1998, the Company signed an amendment to the Note with the Bank
extending its then existing terms until April 3, 1998 (which was further
extended as set forth above).
On January 15, 1998, the Company signed an amendment to the Note with the Bank.
This amendment was in accordance with terms agreed to in an October 1997
amendment which modified the terms of the existing Note. The Bank had extended
the terms of the Note from September 30, 1997 to December 31, 1997 (which was
further extended as set forth above) and amended the financial convenants and
certain terms of the Note. The interest rate, as amended, was one and one-half
percent above the Bank's prime rate. The agreement included an automatic
extension of the term of the Note to March 26, 1998 provided the Company was in
compliance with the terms and conditions of the agreement and either the Company
had entered into an agreement with a third party to sell assets in an amount
sufficient to pay off the outstanding term loans or the Company had received a
capital contribution of no less than $1,000,000. The Company received a
$1,000,000 capital contribution from SVP during the first quarter of 1998. The
Bank required the Company to hire an outside management consulting firm during
October 1997, to assist the Company in formulating its 1998 management plan. The
plan was approved by the Board of Directors on December 9, 1997, and the Board
required the Company to retain the services of this firm to assist the
management of the Company with the implementation of the 1998 plan.
18
<PAGE>
Additionally, in October 1997, the Company signed a Commercial Revolving
Promissory Note for up to an additional $1,000,000 with the Bank. The terms are
similar to those of the amended $2,500,000 Note dated July 24, 1997 (see below).
The $1,000,000 facility was secured by a standby letter of credit provided by
SVP. This facility was renewed on January 15, 1998. The $1,000,000 standby
letter of credit remained in place.
On October 31, 1996, the Company and its subsidiaries entered into a Note and
Warrant Purchase Agreement (the "Agreement") with Furman Selz SBIC, L.P.
("Furman Selz"). Pursuant to the Agreement, Furman Selz purchased from the
Company and its subsidiaries, for an aggregate consideration of $2,025,000,
five-year promissory notes ("Notes") in the principal amount of $2,025,000, and
ten-year warrants ("Warrants") to purchase 900,000 shares of the Company's
common stock, at $2.25 per share.
The Agreement also provided that the Company and its subsidiaries may enter into
an agreement on similar terms with SVP or affiliates thereof , pursuant to which
SVP may purchase Notes from the Company and its subsidiaries up to the principal
amount of $475,000, and Warrants to purchase up to 211,111 shares of Common
Stock at $2.25 per share. On November 30, 1996, the Company and SVP entered into
such a Note and Warrant Agreement as described above, for an aggregate
consideration of $475,000.
The Notes accrue interest at an annual rate of 12% on the unpaid principal
balance. Accrued but unpaid interest is due and payable on November 30, 1997,
November 30, 1998 and on May 30 and November 30 of each year thereafter,
commencing on May 30, 1999, except that final payment of interest shall be due
and payable on October 31, 2001, and one-half of the interest due and payable on
November 30, 1997 shall be deferred and payable on November 30, 2000 and
one-half of the interest due and payable on November 30, 1998, May 30, 1999 and
November 30, 1999, shall be deferred and payable on October 31, 2001. Any
interest deferred shall compound and accrue interest at the rate of the Notes
until paid.
The Agreement further provided that Furman Selz and SVP, at their option, can
purchase up to the amount of their respective initial investments, up to an
additional $2,500,000 in Notes and Warrants on the same terms and conditions as
the first $2,500,000, at any time before December 31, 1997. On August 25, 1997,
SVP purchased 475,000 units, consisting of $475,000 principal amount of Option
Notes and Option Warrants to purchase 211,111 shares of Common Stock at $2.25
per share. SVP, at March 31, 1998, are beneficial owners of 3,075,085 shares of
Common Stock, including shares issuable under outstanding Warrants, or
approximately 40.8% of the outstanding shares if the Warrants are exercised.
On May 31, 1996, the Company signed a Commercial Term Loan and Security
Agreement with the Bank for $500,000. The Term Loan is for a period of five
years at .75 percentage points above the prime rate and
19
<PAGE>
requires quarterly principal payments of $25,000. As of March 31, 1998, the
balance outstanding was $325,000
On April 27, 1995, in conjunction with a refinancing of the Company's prior
banking arrangements, the Company signed a Commercial Revolving Loan, Term Loan
and Security Agreement with State Street Bank and Trust Company for a $2,000,000
Commercial Revolving Promissory Note (since reduced to $1,000,000 as described
above) and a $2,000,000 Commercial Term Promissory Note. The Commercial
Revolving Promissory Note is for a period of two years at .25 percentage points
above the prime rate, and the Commercial Term Note is for a period of five years
at an interest rate of 8.86% per annum. The principal payment schedule for the
Term Promissory Note is $100,000 per quarter. As of March 31, 1998, the balance
outstanding was $900,000.
The Company's Revolving and Term Promissory Notes with the Bank are secured by a
$2,000,000 letter of credit posted by SVP, S.A. and all of the assets of the
Company. As of March 31, 1998, there was $1,225,000 outstanding on the term
loans and zero outstanding under the revolving credit agreement. The revolving
credit agreement is used to secure certain long-term letters of credit. As such,
as of March 31, 1998, the availability under the revolving credit agreement was
reduced by $148,000 to $2,852,000. This amount was reduced to $852,000 on April
3, 1998, in accordance with the amendment signed on that date.
The Company expects to spend approximately $550,000 for capital items for the
remainder of 1998, the major portion of which will be for the continued
enhancement of internal software and for computer equipment.
The Company believes that cash flow from operations and borrowings under the
lines of credit, along with the potential proceeds from the sale of assets held
for sale at March 31, 1998, will be sufficient to cover its expected capital
expenditures for the next 12 months and that it will have sufficient liquidity
for the next 12 months.
INFLATION
- ---------
The Company has in the past been able to increase the price of its products and
services sufficiently to offset the effects of inflation on wages and other
expenses, and anticipates that it will be able to do so in the future.
FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
- ----------------------------------------------------------
Certain statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Form 10-Q
that are not related to historical results, are forward looking statements.
Actual results may differ materially from those projected or implied in the
forward looking
20
<PAGE>
statements. Further, certain forward looking statements are based upon
assumptions of future events, which may not prove to be accurate. These forward
looking statements involve risks and uncertainties, including but not limited to
the Company's future cash flows, sales, gross margins and operating costs, the
effect of conditions in the industry and the economy in general. Subsequent
written and oral forward looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by
cautionary statements in this paragraph and elsewhere in this Form 10-Q, and in
other reports filed by the Company with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
--------
(1) Copy of the Fifth Modification Agreement as of March 27, 1998 between
the Bank and the Company
(2) Copy of the Sixth Modification Agreement as of April 3, 1998 between
the Bank and the Company
B. REPORTS ON FORM 8-K
-------------------
None
21
<PAGE>
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.
FIND/SVP INC.
- -------------
(REGISTRANT)
DATE: MAY 14, 1998 /s/ ANDREW P. GARVIN
- ------------------ ---------------------------------
Andrew P. Garvin, Chairman and
President
DATE: MAY 14, 1998 /s/ PETER J. FIORILLO
- ------------------ ---------------------------------
Peter J. Fiorillo
Executive Vice President
(Principal Financial Officer
and Principal Accounting Officer)
22
<PAGE>
EXHIBIT (1)
FIFTH MODIFICATION AGREEMENT
----------------------------
Agreement, made as of March 26, 1998, among FIND/SVP, INC., a New York
corporation ("FIND/SVP") with an office located at 625 Avenue of the Americas,
New York, New York 10011-2002; FIND/SVP PUBLISHED PRODUCTS, INC., a Delaware
corporation, ("FIND/SVP PUBLISHED") with an office located at 625 Avenue of the
Americas, New York, New York 10011-2002 (FIND/SVP and Find/SVP Published are
collectively referred to as the "BORROWERS"); FIND/SVP INTERNET SERVICES, INC.,
a Delaware corporation with an office located at 625 Avenue of the Americas, New
York, New York 10011-2002 (the "GUARANTOR") (the Borrowers and the Guarantor are
sometimes collectively referred to as the "OBLIGORS"); and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts bank and trust company with an office located at
225 Franklin Street, Boston, Massachusetts 02110-2804 (the "LENDER").
RECITALS
A. Pursuant to the Commercial Revolving Loan, Term Loan and Security
Agreement dated April 27, 1995 (the "1995 LOAN AGREEMENT"), the Lender extended
to the Borrowers the following: (a) a $2,000,000 revolving loan facility (the
"ORIGINAL $2,000,000 REVOLVING LOAN") and (b) a $2,000,000 term loan facility
(the "$2,000,000 TERM LOAN") as evidenced by the $2,000,000 Commercial Revolving
Promissory Note dated April 27, 1995 (the "ORIGINAL $2,000,000 REVOLVING NOTE")
and the $2,000,000 Commercial Term Promissory Note dated April 27, 1995 (the
"$2,000,000 TERM NOTE"), respectively.
B. Pursuant to the Commercial Term Loan and Security Agreement dated
May 31, 1996 (the "1996 LOAN AGREEMENT"), the Lender extended to the Borrowers a
$500,000 term loan facility (the "$500,000 TERM LOAN") as evidenced by the
$500,000 Commercial Term Promissory Note dated May 31, 1996 (the "$500,000 TERM
NOTE").
C. The Lender replaced the Original $2,000,000 Revolving Loan and the
Original $2,000,000 Revolving Note with a replacement $2,500,000 revolving loan
facility that reduced in accordance with its terms to a $2,000,000 revolving
loan facility (the "FIRST $2,000,000 REPLACMENT REVOLVING LOAN") as evidenced by
the $2,500,000 Replacement Commercial Revolving Promissory Note dated July 24,
1997 (the "FIRST $2,000,000 REPLACMENT REVOLVING NOTE").
D. Pursuant to the Guaranties dated July 24, 1997 and October 23, 1997
(the "GUARANTIES"), the Guarantor guarantied the performance of the Borrowers'
obligations to the Lender, including, but not limited to, the loans set forth
herein.
E. Pursuant to the Security Agreements dated July 24, 1997 and October
23, 1997 (the
<PAGE>
"SECURITY AGREEMENT"), the Guarantor granted to the Lender a continuing first
priority security interest in and to its Collateral (as defined therein) to
secure its performance under the Guaranties.
F. Pursuant to the Modification Agreement dated July 24, 1997 (the
"MODIFICATION AGREEMENT"), the Borrowers and the Lender modified the 1995 Loan
Agreement and the 1996 Loan Agreement.
G. Pursuant to the Second Modification Agreement dated as of September 30,
1997 (the "SECOND MODIFICATION AGREEMENT"), the Borrowers and the Lender
modified the 1995 Loan Agreement and the 1996 Loan Agreement.
H. Pursuant to the Third Modification Agreement dated as of December 31,
1997 (the "THIRD MODIFICATION AGREEMENT"), the Borrowers and the Lender modified
the 1995 Loan Agreement and the 1996 Loan Agreement.
I. The Lender replaced the First $2,000,000 Replacment Revolving Loan and
the First Replacment $2,000,000 Revolving Note with a replacement $2,000,000
revolving loan facility (the "SECOND $2,000,000 REPLACEMENT REVOLVING LOAN") as
evidenced by the $2,000,000 Replacement Commercial Revolving Promissory Note
dated as of January 15, 1998 (the "SECOND $2,000,000 REPLACEMENT REVOLVING
NOTE").
J. Pursuant to the Fourth Modification Agreement dated as of January 15,
1998 (the "FOURTH MODIFICATION AGREEMENT"), the Borrowers and the Lender
modified the 1995 Loan Agreement.
K. The Borrowers have requested that the Lender modify the 1995 Loan
Agreement and the Second $2,000,000 Replacement Revolving Note subject to the
terms and conditions set forth below.
AGREEMENT
---------
In consideration of the Recitals, which are incorporated by this
reference, other good and valuable consideration, the receipt and sufficiency of
which is acknowledged, and the mutual promises and covenants contained in this
Agreement, the parties intending to be bound legally, agree as follows:
1. DEFINITIONS AND DOCUMENT REFERENCES. All terms defined in the 1995 Loan
Agreement and the 1996 Loan Agreement and all other documents executed in
connection therewith (collectively, the "LOAN DOCUMENTS") shall have the same
definitions set forth therein and are incorporated by this reference. All
references to the Loan Documents are as modified by the Modification Agreement,
the Second Modification Agreement, the Third Modification Agreement and the
2
<PAGE>
Fourth Modification Agreement.
2. AMENDMENTS. All of the provisions of the Loan Documents shall remain in
full force and effect except as follows or as otherwise set forth in this
Agreement:
(a) Section 1.01(f) of the 1995 Loan Agreement is deleted in its entirety
and the following is substituted therefor:
"(f) "BORROWING BASE" shall mean an amount equal to the lesser of (i)
$1,000,000; or (ii) seventy percent (70.0%) of the net balance due on
Acceptable Accounts."
(b) The date "March 26, 1998" in Section 1.01(aq) of the 1995 Loan
Agreement is deleted and the date "April 3, 1998" is substituted therefor.
(c) The amount "Two Million and 00/100 Dollars ($2,000,000.00)" in
Paragraph 1 of the Second $2,000,000 Replacement Note and the EXHIBIT "A"
attached to the 1995 Loan Agreement is deleted and the amount `ONE MILLION and
00/100 DOLLARS ($1,000,000.00)" is substituted therefor.
(d) The phrase "the Fourth Modification Agreement dated as of January 15,
1998 and the Fifth Modification Agreement dated as of March 26, 1998" is
inserted after the date "December 31, 1997" in Paragraph 1 of the Second
$2,000,000 Replacement Note and the EXHIBIT "A" attached to the 1995 Loan
Agreement.
(e) The date "March 26, 1998" in Paragraph 4 of the Second $2,000,000
Replacement Note and the EXHIBIT "A" attached to the 1995 Loan Agreement is
deleted and the date "April 3, 1998" is substituted therefor.
3. FURTHER DOCUMENTATION. Simultaneous with the execution and delivery of
this Agreement, the Obligors shall deliver to Lender such documentation as is
required by the Lender including, but not limited to, Corporate Resolutions and
such other documents as the Lender deems necessary or appropriate, all in form
and content satisfactory to the Lender.
4. ACKNOWLEDGMENTS. Each of the Obligors acknowledges and agrees that:
(a) The aggregate amount of indebtedness of which the Obligors are
jointly, severally, legally, validly and enforceably indebted to the Lender
under the Loan Documents, as amended, replaced and supplemented by this
Agreement and all other documents executed in connection herewith (collectively,
the "AMENDED LOAN DOCUMENTS") without defense, counterclaim or offset as of
March 26, 1998 is: (i) $900,000.00 with respect to the $2,000,000 Term Loan;
(ii) $147,968.00 with respect to the Second Replacment $2,000,000 Revolving
Loan; and (iii)
3
<PAGE>
$325,000.00 with respect to the $500,000 Term Loan (the "EXISTING DEBT") plus
interest accruing therein.
(b) The Obligors are jointly and severally legally, validly and
enforceably liable for any and all reasonable costs and expenses of collection
and attorneys' fees related to or in any way arising out of the Amended Loan
Documents and the Existing Debt.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the representations,
warranties and covenants contained in the Amended Loan Documents are true and
correct on and as of the date hereof except to the extent that any of the
foregoing are amended or restated as set forth below. Without limiting the
generality of the foregoing, the Obligors jointly and severally represent,
warrant and covenant that:
(a) NO LIQUIDATION. There are no liquidation or dissolution proceedings
pending or threatened against the Obligors and no other event has occurred which
affects or threatens the corporate existence of the Obligors.
(b) ADVISED BY COUNSEL. The Obligors each acknowledge that (i) they have
been advised by counsel in the preparation, negotiation, execution and delivery
of this Agreement; (ii) they have made an independent decision to enter into
this Agreement without reliance on any representation, warranty, covenants or
undertaking by the Lender, (iii) the Lender has no fiduciary obligation toward
any of the Obligors with respect to this Agreement or the other Amended Loan
Documents, (iv) the relationship between the Obligors and the Lender pursuant to
this Agreement and the other Amended Loan Documents is and shall be solely that
of debtor and creditor, respective; and (v) each of the Obligors understands the
meaning and legal effect of this Agreement.
(c) SECRETARIES' CERTIFICATE. The resolutions contained in the
Secretaries' Certificates of the Borrowers dated April 27, 1995, May 31, 1996,
July 21, 1997, October 21, 1997 and January 15, 1998 and the resolutions
contained in the Secretary's Certificate of the Guarantor dated July 21, 1997,
October 21, 1997 and January 15, 1998 (collectively, the "RESOLUTIONS") have not
in any way been rescinded or modified and have been in full force and effect
since their adoption to and including the date hereof and are now in effect. The
Resolutions are the only proceedings of the Obligors now in force relating to or
affecting the matters referred to therein except for the resolution dated March
23, 1998 and authorize the Obligors to make the modifications described herein.
(d) NO LITIGATION. Except as set forth in SCHEDULE 5(D) attached hereto,
there are no pending, or to any of the Obligors' knowledge threatened, legal
proceedings to which any of the Obligors is a party and which materially
adversely affect the transactions contemplated by this Agreement or the other
Amended Loan Documents or materially adversely affect their abilities to conduct
their businesses.
4
<PAGE>
(e) COMPLIANCE WITH LAW. The execution and delivery of this Agreement,
the consummation of the transactions contemplated herein, the fulfillment of or
compliance with the terms and conditions of this Agreement or any of the other
Amended Loan Documents is not prevented or limited by, or conflicts with or
results in a breach of terms, conditions or provisions of the Obligers'
certificate of incorporation and bylaws or any evidence of indebtedness,
agreement or instrument of whatever nature to which the Obligors are now a party
or by which any of the Borrowers are bound, or constitutes a default under any
of the foregoing.
(f) NO VIOLATION OF LAW. To the best of their knowledge, each of the
Obligors is not in violation of any federal, state or local law, regulation or
order, and each of the Obligors has not received any notice of any such
violation.
(g) PRESERVED COLLATERAL. Each of the Obligors shall preserve, maintain
and protect the security provided for in the Amended Loan Documents and shall
defend the rights and interests of the Lender in the Collateral (as defined in
the Security Agreement) against the claims and demands of all persons.
(h) NOTICE OF DEFAULT. As soon as any of the Obligors becomes aware that
any Event of Default exists or has occurred, whether under this Agreement, any
of the other Amended Loan Documents or any other agreements for borrowed money
regardless of whether such other agreement has been entered into with the
Lender, such Obligors will immediately notify and thereafter deliver to the
Lender a written notice specifying the nature and duration thereof, and what
action such Obligor is taking or proposes to take with respect thereof.
(i) GOOD STANDING AND QUALIFICATION. Each of the Obligors is a
corporation duly organized, validly existing and in good standing under the laws
of the state of incorporation as set forth on the first page of this Agreement.
Each of the Obligors has all requisite corporate power and authority to own and
operate its properties and to carry on its businesses as presently conducted and
is qualified to do business and to be in good standing as a foreign corporation
in each jurisdiction where the character of the property owned or leased by it
therein or in which the transaction of its business therein makes such
qualifications necessary.
(j) CORPORATE AUTHORITY. The Obligors have full corporate power and
authority to enter into and perform the obligations under this Agreement, to
execute and deliver the Amended Loan Documents and to incur the obligations
provided for herein and therein, all of which have been duly authorized by all
necessary and proper corporate action. No other consent or approval or the
taking of any other action in respect of shareholders or any public authority is
required as a condition to the validity or enforceability of this Agreement, or
any of the other Amended Loan Documents. The execution and delivery of this
Agreement is for valid corporate purposes.
(k) BINDING AGREEMENT. This Agreement and the other Amended Loan
Documents constitute valid and legally binding obligations of the Borrowers
enforceable against each in accordance with their respective terms, except as
enforcement may be limited by bankruptcy,
5
<PAGE>
insolvency or similar laws affecting the enforcement of creditors' rights
generally.
(l) COMPLIANCE. Each of the Obligors is not in default with respect to
or in violation of any order, writ, injunction or decree of any court or of any
federal, state municipal or other governmental department, commission, board,
bureau, agency, authority or official, or in violation of any law, statute, rule
or regulation to which they or their properties is or are subject, where such
default or violation would materially and adversely affect the financial
condition of any of the Borrowers. Each of the Borrowers represents that it has
not received notice of any such default from any party. Each of the Borrowers is
not in default from the payment or performance of any of its respective
obligations to any third parties or in the performance of any mortgage,
indenture, lease, contract or other agreement to which it is a party or by which
any of its assets or properties are bound.
6. FORBEARANCE. The Lender agrees that for so long as each of the Obligors
is in compliance with the terms and conditions of this Agreement, and no Event
of Default has occurred hereunder or under any of the Amended Loan Documents,
the Lender shall forbear from the date hereof through and including April 3,
1998 from the Enforcement of the Amended Loan Documents (the "FORBEARANCE
PERIOD"). Notwithstanding the foregoing, nothing contained herein shall be
deemed to be a waiver of any existing default or any default arising hereafter
by the Obligors under the Amended Loan Documents or a waiver of any right or
remedy as provided for in the Amended Loan Documents or at available to the
Lender at law or equity.
7. SECURITY AGREEMENT REAFFIRMATION. (a) The Borrowers acknowledge, agree
and reaffirm that the 1995 Loan Agreement and the 1996 Loan Agreement shall
secure all of the obligations of the Borrowers to the Lender including, but not
limited to, the obligations of the Borrowers under (i) the $2,000,000 Term Note
and the $2,000,000 Second Replacement Revolving Note and (ii) the $500,000 Term
Note.
(b) The Guarantor acknowledges, agrees and reaffirms that its Security
Agreements shall secure all of the obligations of the Guarantor to the Lender
including, but not limited to, the obligations of the Guarantor under the
Guaranties.
8. GUARANTIES. (a) The Guarantor acknowledges that it is unconditionally
liable and legally and validly indebted to the Lender in accordance with the
terms of its Guaranties.
(b) The Guarantor consents to the modification of the Second $2,000,000
Replacement Revolving Loan, and affirms that the Guaranties are in full force
and effect and include, without limitation, the indebtedness, liabilities and
obligations arising under or in any way connected with the Amended Loan
Documents whether now existing or hereafter arising including, without
limitation, principal, interest, costs and expenses of collection, and
attorneys' fees, their paralegal fees and related disbursements.
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<PAGE>
(c) The Guarantor further affirms that the Guaranties shall continue in
full force and effect for so long as the Borrowers is indebted, liable or
obligated to the Lender under the Amended Loan Documents.
9. EVENTS OF DEFAULT. The occurrence of any Event of Default under any of
the other Amended Loan Documents or the non-compliance with any of the material
terms, or material misrepresentation or inaccuracy of any of the acknowledgments
or representations hereof shall constitute an Event of Default under this
Agreement.
10. REMEDIES. Upon the occurrence of any Event of Default, the Lender
shall have in any jurisdiction where enforcement hereof is sought, in addition
to all other rights and remedies which the Lender may have under law and equity,
all of the rights and remedies set forth in the Amended Loan Documents.
11. CUMULATIVE REMEDIES. The enumeration of the Lender's rights and
remedies set forth in this Agreement and the other Amended Loan Documents is not
intended to be exhaustive and the exercise by the Lender of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative and shall be in addition to any other right or remedy given
hereunder or under any other agreement between the parties or which may now or
hereafter exist in law or at equity or by suit or otherwise. No delay or failure
to take action on the part of the Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between any of the Obligors and the Lender or their employees shall be effective
to change, modify or discharge any provision of this Agreement or to constitute
a waiver of any default.
12. AMENDMENT AND RESTATEMENT. Upon the execution of this Agreement and
all other documents executed in connection herewith, the Loan Documents are
restated to the extent that this Agreement and all other documents executed in
connection herewith, restates them and are amended to the extent that this
Agreement and all other documents executed in connection herewith amends them.
Except as specifically amended by the terms of this Agreement or any other
documents executed in connection herewith, all terms and conditions set forth in
the Loan Documents, together with all schedules and exhibits attached thereto,
shall remain in full force and effect. This Agreement and all other documents
executed in connection herewith, to the extent that any of them are inconsistent
with the Loan Documents, supersedes the Loan Documents and any and all prior
written or oral amendments to the Loan Documents.
13. NOTICES. All notices, requests, consents, demands and other
communications hereunder shall be in writing and shall be mailed by registered
or certified first class mail or delivered by an overnight courier to the
respective parties to this Agreement as follows:
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If to the Borrowers:
Find/SVP, Inc.
625 Avenue of the Americas
New York, New York 10011-2002
Attn: Mr. Peter Fiorillo
Executive Vice President
Find/SVP Published Products, Inc.
625 Avenue of the Americas
New York, New York 10011-2002
Attn: Mr. Peter Fiorillo
Executive Vice President
If to the Guarantor:
Find/SVP Internet Services, Inc.
625 Avenue of the Americas
New York, New York 10011-2001
Attn: Mr. Peter Fiorillo
President
With a copy to:
Breslow & Walker, LLP
767 Third Avenue
New York, New York 10017
Attn: Gary T. Moomjian, Esq.
If to the Lender:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110-2804
Attn: Ms. Arlene M. Doherty
Vice President
With a copy to:
Diserio Martin O'Connor & Castiglioni LLP
One Atlantic Street
Stamford, Connecticut 06901
8
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Attn: Kevin T. Katske, Esq.
14. EXPENSES. The Obligors agree that each is jointly and severally
responsible for the payment to the Lender for the preparation, negotiation and
consummation of this Agreement and the other Amended Loan Documents which
includes without limitation, reasonable attorneys' fees and related
disbursements.
15. MISCELLANEOUS.
(a) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures were upon the same instrument. It shall not be necessary in making
proof of this Agreement to produce or account for more than one counterpart.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Obligors shall not assign this Agreement, or any
related document, or any of their rights without the prior written consent of
the Lender.
(c) FAILURE OR DELAY NOT A WAIVER. No delay or omission by the Lender to
exercise any right under this Agreement or the other Amended Loan Documents
shall impair any such right, and any such delay or omission shall not be
construed to be a waiver thereof. A waiver of any single breach or default under
this Agreement or the other Amended Loan Documents shall not be deemed a waiver
of any other breach or default. Any waiver, amendment to, consent or approval
under this Agreement or the other Amended Loan Documents by the Lender must be
in writing to be effective and must be signed by the Lender.
(d) SEVERABILITY. If any provision of this Agreement or the other
Amended Loan Documents shall be determined to be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions, and of such provision in other jurisdictions, shall
not be affected or impaired thereby.
(e) HEADINGS. Section headings are for convenience of reference only,
and shall not affect the interpretation or meaning of any provision of this
Agreement.
(f) GOVERNING LAW. This Agreement and the other Amended Loan Documents,
and all transactions, assignments and transfers hereunder and thereunder, and
all the rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the Commonwealth of
Massachusetts without giving effect to its conflicts of laws principles. The
Obligors agree that the courts of the Commonwealth of Massachusetts or the
United States District Courts in the Commonwealth of Massachusetts shall have
jurisdiction to hear and determine any claims or disputes pertaining to the
financing transactions of which this Agreement is a part and/or to any matter
arising or in any way related to this Agreement or any other
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<PAGE>
agreement between the Lender and the Obligors expressly submit and consent in
advance to such jurisdiction in any action or proceeding.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior discussions and negotiations
relating to the subject matter hereof. The terms of this Agreement cannot be
changed or terminated orally, and shall be deemed effective as of the date
accepted by the Lender by its duly authorized officer. This Agreement and the
other Amended Loan Documents may not be amended or terminated except by a
writing signed by the party against whom enforcement thereof is sought.
16. RELEASE. EACH OF THE OBLIGORS RELEASES, REMISES AND DISCHARGES THE
LENDER, JOINTLY AND SEVERALLY, FROM ALL ACTIONS, CAUSES OF ACTIONS, SUITS, SUMS
OF MONEY, COVENANTS, CONTRACTS, CONTROVERSIES, AGREEMENTS, PROMISES, VACANCIES,
TRESPASSES, DAMAGES, JUDGMENTS, EXTENTS, EXECUTIONS, CLAIMS AND DEMANDS IN LAW
OR EQUITY WHICH ANY OF THE OBLIGORS EVER HAD, NOW HAS OR WHICH ANY OF THEM SHALL
HAVE AGAINST THE LENDER ARISING OUT OF ANY ACTION, OR INACTION OF THE LENDER IN
CONNECTION WITH THE LOAN DOCUMENTS OCCURRING PRIOR TO THE DATE OF THIS
AGREEMENT.
17. JURY TRIAL WAIVER. EACH OF THE OBLIGORS WAIVES TRIAL BY JURY IN ANY
COURT AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION
WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AND THE
OTHER AMENDED LOAN DOCUMENTS ARE A PART OR THE ENFORCEMENT OF ANY OF THE BANK'S
RIGHTS AND REMEDIES. THE OBLIGORS ACKNOWLEDGE THAT EACH MAKES THIS WAIVER
KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF
THE RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS.
[signature page follows]
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<PAGE>
The parties hereto have executed this Agreement on the date first written
above.
FIND/SVP, INC.
By /s/PETER FIORILLO
----------------------------
Peter Fiorillo
Its Executive Vice President
FIND/SVP PUBLISHED PRODUCTS, INC.
By /s/PETER FIORILLO
----------------------------
Peter Fiorillo
Its Executive Vice President
FIND/SVP INTERNET SERVICES, INC.
By /s/ PETER FIORILLO
----------------------------
Peter Fiorillo
Its President
STATE STREET BANK AND TRUST COMPANY
By /s/ ARLENE M. DOHERTY
----------------------------
Arlene M. Doherty
Vice President
11
<PAGE>
EXHIBIT (2)
SIXTH MODIFICATION AGREEMENT
----------------------------
Agreement, made as of April 3, 1998, among FIND/SVP, INC., a New York
corporation ("FIND/SVP") with an office located at 625 Avenue of the Americas,
New York, New York 10011-2002; FIND/SVP PUBLISHED PRODUCTS, INC., a Delaware
corporation, ("FIND/SVP PUBLISHED") with an office located at 625 Avenue of the
Americas, New York, New York 10011-2002 (FIND/SVP and Find/SVP Published are
collectively referred to as the "BORROWERS"); FIND/SVP INTERNET SERVICES, INC.,
a Delaware corporation with an office located at 625 Avenue of the Americas, New
York, New York 10011-2002 (the "GUARANTOR") (the Borrowers and the Guarantor are
sometimes collectively referred to as the "OBLIGORS"); and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts bank and trust company with an office located at
225 Franklin Street, Boston, Massachusetts 02110-2804 (the "LENDER").
RECITALS
--------
A. Pursuant to the Commercial Revolving Loan, Term Loan and Security
Agreement dated April 27, 1995 (the "1995 LOAN AGREEMENT"), the Lender extended
to the Borrowers the following: (a) a $2,000,000 revolving loan facility (the
"ORIGINAL $2,000,000 REVOLVING LOAN") and (b) a $2,000,000 term loan facility
(the "$2,000,000 TERM LOAN") as evidenced by the $2,000,000 Commercial Revolving
Promissory Note dated April 27, 1995 (the "ORIGINAL $2,000,000 REVOLVING NOTE")
and the $2,000,000 Commercial Term Promissory Note dated April 27, 1995 (the
"$2,000,000 TERM NOTE"), respectively.
B. Pursuant to the Commercial Term Loan and Security Agreement dated May
31, 1996 (the "1996 LOAN AGREEMENT"), the Lender extended to the Borrowers a
$500,000 term loan facility (the "$500,000 TERM LOAN") as evidenced by the
$500,000 Commercial Term Promissory Note dated May 31, 1996 (the "$500,000 TERM
NOTE").
C. The Lender replaced the Original $2,000,000 Revolving Loan and the
Original $2,000,000 Revolving Note with a replacement $2,500,000 revolving loan
facility that reduced in accordance with its terms to a $2,000,000 revolving
loan facility (the "FIRST $2,000,000 REPLACMENT REVOLVING LOAN") as evidenced by
the $2,500,000 Replacement Commercial Revolving Promissory Note dated July 24,
1997 (the "FIRST $2,000,000 REPLACMENT REVOLVING NOTE").
D. Pursuant to the Modification Agreement dated July 24, 1997 (the
"MODIFICATION AGREEMENT"), the Borrowers and the Lender modified the 1995 Loan
Agreement and the 1996 Loan Agreement.
E. Pursuant to the Guaranties dated July 24, 1997 and October 23, 1997
(the "GUARANTIES"), the Guarantor guarantied the performance of the Borrowers'
obligations to the Lender, including, but not limited to, the loans set forth
herein.
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<PAGE>
F. Pursuant to the Security Agreements dated July 24, 1997 and October 23,
1997 (the "SECURITY AGREEMENT"), the Guarantor granted to the Lender a
continuing first priority security interest in and to its Collateral (as defined
therein) to secure its performance under the Guaranties.
G. Pursuant to the Second Modification Agreement dated as of September 30,
1997 (the "SECOND MODIFICATION AGREEMENT"), the Borrowers and the Lender
modified the 1995 Loan Agreement and the 1996 Loan Agreement.
H. Pursuant to the Third Modification Agreement dated as of December 31,
1997 (the "THIRD MODIFICATION AGREEMENT"), the Borrowers and the Lender modified
the 1995 Loan Agreement and the 1996 Loan Agreement.
I. The Lender replaced the First $2,000,000 Replacment Revolving Loan and
the First $2,000,000 Replacment Revolving Note with a replacement $2,000,000
revolving loan facility (the "SECOND $2,000,000 REPLACEMENT REVOLVING LOAN") as
evidenced by the $2,000,000 Replacement Commercial Revolving Promissory Note
dated as of January 15, 1998 (the "SECOND $2,000,000 REPLACEMENT REVOLVING
NOTE").
J. Pursuant to the Fourth Modification Agreement dated as of January 15,
1998 (the "Fourth Modification Agreement"), the Borrowers and the Lender
modified the 1995 Loan Agreement.
K. Pursuant to the Fifth Modification Agreement dated as of March 26, 1998
(the "FIFTH MODIFICATION AGREEMENT"), the Borrowers and the Lender modified the
1995 Loan Agreement.
L. The Borrowers have requested that the Lender modify the 1995 Loan
Agreement and, in replacement of the Second $2,000,000 Replacement Revolving
Loan and the Second $2,000,000 Replacement Revolving Note, extend to the
Borrowers a replacement $1,000,000 revolving loan facility (the "$1,000,000
Replacement Revolving Loan") as evidenced by the the $1,000,000 Replacement
Commercial Revolving Promissory Note, in the form of the attached Exhibit "A"
(the "$1,000,000 REPLACMENT REVOLVING NOTE"), subject to the terms and
conditions set forth below.
AGREEMENT
---------
In consideration of the Recitals, which are incorporated by this
reference, other good and valuable consideration, the receipt and sufficiency of
which is acknowledged, and the mutual promises and covenants contained in this
Agreement, the parties intending to be bound legally, agree as follows:
1. DEFINITIONS AND DOCUMENT REFERENCES. All terms defined in the 1995 Loan
Agreement and the 1996 Loan Agreement and all other documents executed in
connection therewith (collectively, the "LOAN DOCUMENTS") shall have the same
definitions set forth therein and are
2
<PAGE>
incorporated by this reference. All references to the Loan Documents are as
modified by the Modification Agreement, the Second Modification Agreement, the
Third Modification Agreement, the Fourth Modification Agreement and the Fifth
Modification Agreement.
2. AMENDMENTS. All of the provisions of the Loan Documents shall remain in
full force and effect except as follows or as otherwise set forth in this
Agreement:
(a) The date "April 3, 1998" in Section 1.01(aq) of the 1995 Loan
Agreement is deleted and the date "March 25, 1999" is substituted therefor.
(b) Section 3.06 (a) in the 1995 Loan Agreement is deleted in its
entirety and the following is substituted therefor:
(c) FACILITY FEE. As additional consideration for the Revolving Loan
Commitment, the Borrowers shall pay to the Lender each quarter a
non-refundable facility fee in arrears in the amount of $1,000.00
commencing on July 1, 1998, and continuing on each October 1, January 1,
April 1 and July 1 thereafter continuing throughout the Revolving Loan
Commitment Period."
(d) MANAGEMENT ADVISOR. The Borrowers shall maintain, through and
including September 30, 1998, Claymore Partners or some other management
advisor from the list of approved advisors provided to the Borrower by
the Lender to serve as management advisor to the Borrowers and to assist
the Borrowers in the implementation of the Borrowers' business plan for
the period ending December 31, 1998."
(e) Section 6.04 of the 1995 Loan Agreement and the 1996 Loan Agreement
is deleted and the following is substituted therefor:
6.04 FINANCIAL COVENANTS. The Borrowers agree and covenant that from
the date hereof until payment in full and performance of all Obligations, it
shall not:
(a) TANGIBLE NET WORTH. Permit its consolidated Tangible Net Worth to be
less than the following:
Dates Tangible Net Worth
----- ------------------
March 31, 1998 $800,000
June 30, 1998 $980,000
September 30, 1998 $1,135,000
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<PAGE>
December 31, 1998 $1,300,000
(b) CURRENT RATIO. Permit its ratio of Total Current Assets to Total
Current Liabilities to be less than 1.2 to 1.0 at any time.
(c) NET INCOME. Permit its quarterly Net Income to be less than the
following:
Dates Net Income
----- ----------
March 31, 1998 a loss of $225,000
June 30, 1998 $330,000
September 30, 1998 $285,000
December 31, 1998 $305,000
(f) EXHIBIT "A" attached to the 1995 Loan Agreement is deleted in its
entirety and the EXHIBIT "A" attached hereto is substituted therefor.
3. FURTHER DOCUMENTATION. Simultaneous with the execution and delivery of
this Agreement, the Borrowers shall deliver to the Lender the following:
(a) delivery of an irrevocable stand-by letter of credit in the amount
of $2,000,000 which shall name the Lender as beneficiary and shall be issued by
Societe Nanceienne Varin-Bernier Nancy or some other financial institution
acceptable to the Lender in its sole discretion;
(b) evidence of settlement of all litigation with and release by Asset
Value Fund Limited Partnership in form and content acceptable to the Lender;
(c) payment of an extension fee in the amount of $10,000.00 and payment
of all prior fees previously deferred by the Lender;
(d) evidence satisfactory to the Lender of the completion of the
$1,000,000 private placement with SVP, S.A. in form content and with such terms
as are acceptable to the Lender;
(e) an opinion of counsel in form and content acceptable to the Lender
and its counsel;
(f) a Good Standing Certificate issued by the Secretary of State of the
State
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<PAGE>
of incorporation for each Borrower and from each state the Borrowers are
qualified to do business as a foreign corporation;
(g) resolutions of the boards of directors for each of the Borrowers and
the Guarantor approving the transactions contemplated by this Agreement to be in
form and content acceptable to the Lender;
(h) certificate of insurance for casualty, liability and business
interruption in such amounts and with such companies satisfactory to the Lender
naming the Lender as a loss payee on all such insurance; and
(i) such other documentation as is required by the Lender, all in form
and content satisfactory to the Lender.
1. ACKNOWLEDGMENTS. Each of the Obligors acknowledges and agrees that:
(a) The aggregate amount of indebtedness of which the Obligors are
jointly, severally, legally, validly and enforceably indebted to the Lender
under the Loan Documents, as amended, replaced and supplemented by this
Agreement and all other documents executed in connection herewith (collectively,
the "AMENDED LOAN DOCUMENTS") without defense, counterclaim or offset as of
March 31, 1998 is: (i) $900,000 with respect to the $2,000,000 Term Loan; (ii)
$147,968.12 with respect to the $1,000,000 Replacment Revolving Loan; and (iii)
$325,000 with respect to the $500,000 Term Loan (the "EXISTING DEBT") plus
interest accruing therein.
(b) The Obligors are jointly and severally legally, validly and
enforceably liable for any and all reasonable costs and expenses of collection
and attorneys' fees related to or in any way arising out of the Amended Loan
Documents and the Existing Debt.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the representations,
warranties and covenants contained in the Amended Loan Documents are true and
correct on and as of the date hereof except to the extent that any of the
foregoing are amended or restated as set forth below. Without limiting the
generality of the foregoing, the Obligors jointly and severally represent,
warrant and covenant that:
(a) NO LIQUIDATION. There are no liquidation or dissolution proceedings
pending or threatened against the Obligors and no other event has occurred which
affects or threatens the corporate existence of the Obligors.
(b) ADVISED BY COUNSEL. The Obligors each acknowledge that (i) they have
been advised by counsel in the preparation, negotiation, execution and delivery
of this Agreement; (ii) they have made an independent decision to enter into
this Agreement without reliance on any representation, warranty, covenants or
undertaking by the Lender, (iii) the Lender has no fiduciary obligation toward
any of the Obligors with respect to this Agreement or the other Amended Loan
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<PAGE>
Documents, (iv) the relationship between the Obligors and the Lender pursuant to
this Agreement and the other Amended Loan Documents is and shall be solely that
of debtor and creditor, respective; and (v) each of the Obligors understands the
meaning and legal effect of this Agreement.
(c) SECRETARIES' CERTIFICATE. The resolutions contained in the
Secretaries' Certificates of the Borrowers dated April 27, 1995, May 31, 1996,
July 21, 1997, October 21, 1997 and January 15, 1998 and the resolutions
contained in the Secretary's Certificate of the Guarantor dated July 21, 1997,
October 21, 1997 and January 15, 1998 (collectively, the "RESOLUTIONS") have not
in any way been rescinded or modified and have been in full force and effect
since their adoption to and including the date hereof and are now in effect. The
Resolutions are the only proceedings of the Obligors now in force relating to or
affecting the matters referred to therein except for the resolutions dated March
23, 1998 and authorize the Obligors to make the modifications described herein.
(d) NO LITIGATION. Except as set forth in SCHEDULE 5(d) attached hereto,
there are no pending, or to any of the Obligors' knowledge threatened, legal
proceedings to which any of the Obligors is a party and which materially
adversely affect the transactions contemplated by this Agreement or the other
Amended Loan Documents or materially adversely affect their abilities to conduct
their businesses.
(e) COMPLIANCE WITH LAW. The execution and delivery of this Agreement,
the consummation of the transactions contemplated herein, the fulfillment of or
compliance with the terms and conditions of this Agreement or any of the other
Amended Loan Documents is not prevented or limited by, or conflicts with or
results in a breach of terms, conditions or provisions of the Obligers'
certificate of incorporation and bylaws or any evidence of indebtedness,
agreement or instrument of whatever nature to which the Obligors are now a party
or by which any of the Borrowers are bound, or constitutes a default under any
of the foregoing.
(f) NO VIOLATION OF LAW. To the best of their knowledge, each of the
Obligors is not in violation of any federal, state or local law, regulation or
order, and each of the Obligors has not received any notice of any such
violation.
(g) PRESERVED COLLATERAL. Each of the Obligors shall preserve, maintain
and protect the security provided for in the Amended Loan Documents and shall
defend the rights and interests of the Lender in the Collateral (as defined in
the Security Agreement) against the claims and demands of all persons.
(h) NOTICE OF DEFAULT. As soon as any of the Obligors becomes aware that
any Event of Default exists or has occurred, whether under this Agreement, any
of the other Amended Loan Documents or any other agreements for borrowed money
regardless of whether such other agreement has been entered into with the
Lender, such Obligors will immediately notify and thereafter deliver to the
Lender a written notice specifying the nature and duration thereof, and what
action such Obligor is taking or proposes to take with respect thereof.
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<PAGE>
(i) GOOD STANDING AND QUALIFICATION. Each of the Obligors is a
corporation duly organized, validly existing and in good standing under the laws
of the state of incorporation as set forth on the first page of this Agreement.
Each of the Obligors has all requisite corporate power and authority to own and
operate its properties and to carry on its businesses as presently conducted and
is qualified to do business and to be in good standing as a foreign corporation
in each jurisdiction where the character of the property owned or leased by it
therein or in which the transaction of its business therein makes such
qualifications necessary.
(j) CORPORATE AUTHORITY. The Obligors have full corporate power and
authority to enter into and perform the obligations under this Agreement, to
execute and deliver the Amended Loan Documents and to incur the obligations
provided for herein and therein, all of which have been duly authorized by all
necessary and proper corporate action. No other consent or approval or the
taking of any other action in respect of shareholders or any public authority is
required as a condition to the validity or enforceability of this Agreement, or
any of the other Amended Loan Documents. The execution and delivery of this
Agreement is for valid corporate purposes.
(k) BINDING AGREEMENT. This Agreement and the other Amended Loan
Documents constitute valid and legally binding obligations of the Borrowers
enforceable against each in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally.
(l) COMPLIANCE. Each of the Obligors is not in default with respect to
or in violation of any order, writ, injunction or decree of any court or of any
federal, state municipal or other governmental department, commission, board,
bureau, agency, authority or official, or in violation of any law, statute, rule
or regulation to which they or their properties is or are subject, where such
default or violation would materially and adversely affect the financial
condition of any of the Borrowers. Each of the Borrowers represents that it has
not received notice of any such default from any party. Each of the Borrowers is
not in default from the payment or performance of any of its respective
obligations to any third parties or in the performance of any mortgage,
indenture, lease, contract or other agreement to which it is a party or by which
any of its assets or properties are bound.
3. WAIVER. The Lender waives any outstanding financial convenant defaults
contained in ss.6.04 of the 1995 Loan Agreement and the 1996 Loan Agreement
through February 28, 1998.
4. SECURITY AGREEMENT REAFFIRMATION. (a) The Borrowers acknowledge, agree
and reaffirm that the 1995 Loan Agreement and the 1996 Loan Agreement shall
secure all of the obligations of the Borrowers to the Lender including, but not
limited to, the obligations of the Borrowers under (i) the $2,000,000 Term Note
and the $1,000,000 Replacement Revolving Note and (ii) the $500,000 Term Note.
(b) The Guarantor acknowledges, agrees and reaffirms that its Security
Agreements shall
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<PAGE>
secure all of the obligations of the Guarantor to the Lender including, but not
limited to, the obligations of the Guarantor under the Guaranties.
5. GUARANTIES. (a) The Guarantor acknowledges that it is unconditionally
liable and legally and validly indebted to the Lender in accordance with the
terms of its Guaranties.
(b) The Guarantor consents to extension of the $1,000,000 Replacment
Revolving Loan and the modification of the 1995 Loan Agreement, and affirms that
the Guaranties are in full force and effect and include, without limitation, the
indebtedness, liabilities and obligations arising under or in any way connected
with the Amended Loan Documents whether now existing or hereafter arising
including, without limitation, principal, interest, costs and expenses of
collection, and attorneys' fees, their paralegal fees and related disbursements.
(c) The Guarantor further affirms that the Guaranties shall continue in
full force and effect for so long as the Borrowers is indebted, liable or
obligated to the Lender under the Amended Loan Documents.
6. EVENTS OF DEFAULT. The occurrence of any Event of Default under any of
the other Amended Loan Documents or the non-compliance with any of the material
terms, or material misrepresentation or inaccuracy of any of the acknowledgments
or representations hereof shall constitute an Event of Default under this
Agreement.
7. REMEDIES. Upon the occurrence of any Event of Default, the Lender shall
have in any jurisdiction where enforcement hereof is sought, in addition to all
other rights and remedies which the Lender may have under law and equity, all of
the rights and remedies set forth in the Amended Loan Documents.
8. CUMULATIVE REMEDIES. The enumeration of the Lender's rights and
remedies set forth in this Agreement and the other Amended Loan Documents is not
intended to be exhaustive and the exercise by the Lender of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative and shall be in addition to any other right or remedy given
hereunder or under any other agreement between the parties or which may now or
hereafter exist in law or at equity or by suit or otherwise. No delay or failure
to take action on the part of the Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between any of the Obligors and the Lender or their employees shall be effective
to change, modify or discharge any provision of this Agreement or to constitute
a waiver of any default.
9. AMENDMENT AND RESTATEMENT. Upon the execution of this Agreement and all
other documents executed in connection herewith, the Loan Documents are restated
to the extent that this Agreement and all other documents executed in connection
herewith, restates them and are amended
8
<PAGE>
to the extent that this Agreement and all other documents executed in connection
herewith amends them. Except as specifically amended by the terms of this
Agreement or any other documents executed in connection herewith, all terms and
conditions set forth in the Loan Documents, together with all schedules and
exhibits attached thereto, shall remain in full force and effect. This Agreement
and all other documents executed in connection herewith, to the extent that any
of them are inconsistent with the Loan Documents, supersedes the Loan Documents
and any and all prior written or oral amendments to the Loan Documents.
10. NOTICES. All notices, requests, consents, demands and other
communications hereunder shall be in writing and shall be mailed by registered
or certified first class mail or delivered by an overnight courier to the
respective parties to this Agreement as follows:
If to the Borrowers:
Find/SVP, Inc.
625 Avenue of the Americas
New York, New York 10011-2002
Attn: Mr. Peter Fiorillo
Executive Vice President
Find/SVP Published Products, Inc.
625 Avenue of the Americas
New York, New York 10011-2002
Attn: Mr. Peter Fiorillo
Executive Vice President
If to the Guarantor:
Find/SVP Internet Services, Inc.
625 Avenue of the Americas
New York, New York 10011-2001
Attn: Mr. Peter Fiorillo
President
With a copy to:
Breslow & Walker, LLP
767 Third Avenue
New York, New York 10017
Attn: Gary T. Moomjian, Esq.
If to the Lender:
9
<PAGE>
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110-2804
Attn: Ms. Arlene M. Doherty
Vice President
With a copy to:
Diserio Martin O'Connor & Castiglioni LLP
One Atlantic Street
Stamford, Connecticut 06901
Attn: Kevin T. Katske, Esq.
11. EXPENSES. The Obligors agree that each is jointly and severally
responsible for the payment to the Lender for the preparation, negotiation and
consummation of this Agreement and the other Amended Loan Documents which
includes without limitation, reasonable attorneys' fees and related
disbursements.
12. MISCELLANEOUS.
(a) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures were upon the same instrument. It shall not be necessary in making
proof of this Agreement to produce or account for more than one counterpart.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Obligors shall not assign this Agreement, or any
related document, or any of their rights without the prior written consent of
the Lender.
(c) FAILURE OR DELAY NOT A WAIVER. No delay or omission by the Lender to
exercise any right under this Agreement or the other Amended Loan Documents
shall impair any such right, and any such delay or omission shall not be
construed to be a waiver thereof. A waiver of any single breach or default under
this Agreement or the other Amended Loan Documents shall not be deemed a waiver
of any other breach or default. Any waiver, amendment to, consent or approval
under this Agreement or the other Amended Loan Documents by the Lender must be
in writing to be effective and must be signed by the Lender.
(d) SEVERABILITY. If any provision of this Agreement or the
other Amended Loan Documents shall be determined to be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions, and of such provision in other jurisdictions, shall
not be affected or impaired thereby.
10
<PAGE>
(e) HEADINGS. Section headings are for convenience of reference only,
and shall not affect the interpretation or meaning of any provision of this
Agreement.
(f) GOVERNING LAW. This Agreement and the other Amended Loan Documents,
and all transactions, assignments and transfers hereunder and thereunder, and
all the rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the Commonwealth of
Massachusetts without giving effect to its conflicts of laws principles. The
Obligors agree that the courts of the Commonwealth of Massachusetts or the
United States District Courts in the Commonwealth of Massachusetts shall have
jurisdiction to hear and determine any claims or disputes pertaining to the
financing transactions of which this Agreement is a part and/or to any matter
arising or in any way related to this Agreement or any other agreement between
the Lender and the Obligors expressly submit and consent in advance to such
jurisdiction in any action or proceeding.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior discussions and negotiations
relating to the subject matter hereof. The terms of this Agreement cannot be
changed or terminated orally, and shall be deemed effective as of the date
accepted by the Lender by its duly authorized officer. This Agreement and the
other Amended Loan Documents may not be amended or terminated except by a
writing signed by the party against whom enforcement thereof is sought.
13. RELEASE. EACH OF THE OBLIGORS RELEASES, REMISES AND DISCHARGES THE
LENDER, JOINTLY AND SEVERALLY, FROM ALL ACTIONS, CAUSES OF ACTIONS, SUITS, SUMS
OF MONEY, COVENANTS, CONTRACTS, CONTROVERSIES, AGREEMENTS, PROMISES, VACANCIES,
TRESPASSES, DAMAGES, JUDGMENTS, EXTENTS, EXECUTIONS, CLAIMS AND DEMANDS IN LAW
OR EQUITY WHICH ANY OF THE OBLIGORS EVER HAD, NOW HAS OR WHICH ANY OF THEM SHALL
HAVE AGAINST THE LENDER ARISING OUT OF ANY ACTION, OR INACTION OF THE LENDER IN
CONNECTION WITH THE LOAN DOCUMENTS OCCURRING PRIOR TO THE DATE OF THIS
AGREEMENT.
14. JURY TRIAL WAIVER. EACH OF THE OBLIGORS WAIVES TRIAL BY JURY IN ANY
COURT AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION
WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AND THE
OTHER AMENDED LOAN DOCUMENTS ARE A PART OR THE ENFORCEMENT OF ANY OF THE BANK'S
RIGHTS AND REMEDIES. THE OBLIGORS ACKNOWLEDGE THAT EACH MAKES THIS WAIVER
KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EXTENSIVE CONSIDERATION OF
THE RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS.
The parties hereto have executed this Agreement on the date first written
above.
11
<PAGE>
FIND/SVP, INC.
By /s/PETER FIORILLO
----------------------------
Peter Fiorillo
Its Executive Vice President
FIND/SVP PUBLISHED PRODUCTS, INC.
By /s/PETER FIORILLO
----------------------------
Peter Fiorillo
Its Executive Vice President
FIND/SVP INTERNET SERVICES, INC.
By /s/ PETER FIORILLO
----------------------------
Peter Fiorillo
Its President
STATE STREET BANK AND TRUST COMPANY
By /s/ ARLENE M. DOHERTY
----------------------------
Arlene M. Doherty
Vice President
12
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