SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------------
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended DECEMBER 31, 1997
-----------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file no.0-15152
-------
FIND/SVP, INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 13-2670985
-------- ----------
(State or other juris- (I.R.S. employer
diction of incorporation identification no.)
or organization)
625 AVENUE OF THE AMERICAS, NEW YORK, NY 10011
- ----------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 645-4500
-------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
---------------------------------------------------------
Title of Class
******************************
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
--------------- ---------------
1
<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. []
As of March 16, 1998 the aggregate market value of the voting
stock held by non-affiliates of the registrant was $3,506,928.
-----------
As of March 16, 1998 there were 7,107,269 shares of Common
---------
Stock (par value $.0001 per share) outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.
2
<PAGE>
PART I
ITEM 1
BUSINESS
GENERAL
FIND/SVP, Inc. ("FIND/SVP" or the "Company") provides a broad
consulting and business intelligence service substantially by telephone
primarily to executives and other decision-making employees. The Company's
strategy is to build a base of regular clients who will utilize the Company's
resources for their research, business intelligence and information needs.
The Company was formed under the laws of New York in 1969. In 1971, the
Company became affiliated with SVP International S.A. ("SVP International")
through a licensing agreement which gave the Company the right to the SVP name
and provided access to the resources of 13 additional SVP affiliated companies
located around the world.
Through its Quick Consulting and Research Service Division ("QCS"),
FIND/SVP provides retainer clients with access to the subject and technical
expertise of its staff as well as the resources of a large information center.
Within each retainer client's organization, specific individuals receive a
Membership Card which entitles them to make telephone requests for consultation
and research assistance. In response, the staff of QCS provides customized
answers in rapid turnaround time, generally within two business days or less of
the request. The QCS service is positioned to be an indispensable daily partner
for decision-makers by providing, on a retainer basis, a cost-effective "quick
consulting" service accessible by telephone. The service is designed to be a
valuable resource to small and medium sized corporations that do not maintain
in-house information centers and as a supplement to in-house resource centers of
large corporations. At December 31, 1997, there were 2,266 QCS retainer clients
and 16,859 Membership Cardholders. The Company intends to seek to expand its
base of QCS retainer clients, and to offer these clients an expanded array of
business intelligence research and information services.
In addition to QCS, the Company offers the market research services of
its Strategic Consulting and Research Division ("SRD"), which is designed to
handle more extensive, in-depth custom market research and competitive
intelligence requests, as well as customer satisfaction and loyalty programs.
The QCS and SRD businesses represent the core competencies of the Company, which
is to provide the expertise of its staff in an on-demand, research-for-hire,
consulting relationship with small, medium and large sized corporations. The
Company also produces several information products and publications through its
Published Research Division.
FIND/SVP's research resources include access to approximately 4,000
computer databases, approximately 9,000 of its own files organized by subject
and by company, current and back issues of approximately 3,000 periodicals and
journals and several thousand books and reference works. Through a licensing
agreement, the Company is associated with the international SVP network of
companies and correspondents providing similar services. This enables FIND/SVP
to obtain information through approximately 1,000 additional consultants in the
SVP worldwide network.
3
<PAGE>
During the fourth quarter of 1997, the Company determined it would
re-focus its efforts on its core competencies. As such, the Company retained an
investment banking firm to assist in effectuating the sale of various product
lines included in its Published Research Division. It is the intention of
management to maximize the profitability of its QCS and SRD units through the
availability of management resources formerly utilized on the non-core business.
As a result, the Company has recorded an impairment loss of $1,047,000 related
to these assets. Additionally, as of December 31, 1997, as a result of this
re-focus onto the core businesses, the Company reduced its general and
administrative staffing and recorded a $155,000 restructuring charge related to
this reduction. See "Non-Continuing Products and Services" for further
discussion regarding the divestiture of the Company's Published Research
Division.
In order to further maximize the profitability of the QCS and SRD
businesses, during March 1998, the Company instituted a formal cost cutting plan
in its core businesses. The plan includes labor cuts of approximately 20
full-time employees along with reductions in part-time and independent
contractor costs. The Company estimates the savings to be in excess of
$1,000,000 annually prior to severance and related charges. The Company
anticipates recording a charge for severance and related costs of approximately
$325,000 in the first quarter of 1998. It is the expectation of management, but
there can be no assurance, that these cost savings, combined with the sale of
its Published Research Division assets and the vigorous cost cutting in
non-labor areas during the latter part of 1997, will restore the Company to
profitability from its ongoing operations during 1998.
SERVICES AND PRODUCTS
The Company's services and products offer business executives fully
integrated research, business intelligence and management advisory services in a
broad range of industries and disciplines. The Company provides services to help
clients acquire and use knowledge.
FIND/SVP's research resources at December 31, 1997 include a staff of
130 consultants and researchers, a reference center which contains approximately
9,000 of its own subject and company files, access to approximately 4,000
computer databases, current and back issues of approximately 3,000 titles, and
several thousand books and reference works, and a field investigation team with
entree into public and private libraries in the New York area. Through a
licensing agreement, the Company is associated with the international SVP
network of companies and correspondents, which enables it to obtain information
worldwide. See "SVP Network; Licensing Agreement With SVP International." The
materials used in the generation of the Company's services and products are
updated and checked by staff members. The Company has its own training program
in which its employees participate.
SERVICES
QUICK CONSULTING AND RESEARCH SERVICE ("QCS"). QCS provides clients
with access to the staff and resources of a large information center which
4
<PAGE>
seeks to handle research requests in rapid turnaround time. Through QCS, the
Company is in the business of providing, on a volume basis, customized answers
to business questions on a wide variety of topics. The average cost to the
client of each response is slightly more than $200. The service is offered only
on a retainer basis. Retainer client organizations pay in advance, either
monthly, quarterly, semi-annually or annually, a retainer fee. In return, the
client organizations receive Membership Cards for their designated executives or
employees. The Membership Card entitles each cardholder to use QCS and also
offers preferential use of, and/or discounts on, the Company's other services
and products. The dollar value of each client's question is measured based on
time and complexity factors and this value is charged against the retainer fee.
The Company monitors the client's "usage" of the service and if it proves to be
substantially more (or less) than anticipated its future retainer may be
adjusted to more accurately reflect the client's usage of QCS. Out-of-pocket
expenses incurred to answer questions are invoiced in addition to retainer fees.
Retainer clients call FIND/SVP with their research needs, give their
card number and explain their request to consultants who are divided into the
following six practice groups and four support teams:
(a) THE CONSUMER PRODUCTS & SERVICES GROUP is responsible for research
on retailing and apparel, home furnishings, cosmetics and toiletries,
food and beverages, media and entertainment, publishing, sports and
leisure, education, philanthropy, restaurants, food services, household
products, appliances and furniture;
(b) THE TECHNOLOGY, INFORMATION AND COMMUNICATIONS GROUP covers
Internet and on-line services, computers, software, electronic media
and office equipment;
(c) THE HEALTHCARE AND PHARMACEUTICALS GROUP covers products and
services manufactured by and marketed to businesses in healthcare
fields, including pharmaceuticals, medical and diagnostic equipment,
biotechnology, health resources and clinical information;
(d) THE FINANCIAL AND BUSINESS SERVICES GROUP handles requests on
specific companies (except credit reports), economic trends, corporate
finance, investment, insurance, real estate and mortgages, quality
management methods, and provides annual reports and Securities and
Exchange Commission documents on public companies;
(e) THE INDUSTRIAL PRODUCTS AND SERVICES GROUP covers manufacturing,
energy, chemicals, plastics, pulp and paper, metals and mining,
transportation, environment, construction and agriculture;
(f) THE MANAGEMENT ADVISORY GROUP handles requests on legal research,
human resources research and accounting and tax issues;
(g) THE INTERNATIONAL TEAM addresses executive's needs for
international finance and trade, global corporate competitive
intelligence and worldwide management strategies;
5
<PAGE>
(h) THE DOCUMENTS TEAM locates and obtains copies of articles,
documents, patents, books, pamphlets, catalogs, conference proceedings,
government reports and product samples;
(i) THE MARKETING TEAM covers direct marketing, advertising, sales
promotions and demographics; and
(j) INTERNET ADVISORY TEAM(TM) provides expert help with Internet
research, hands-on training, on-site seminars, competitive
intelligence, Web Site development assistance, Web marketing/trends and
Internet user demographics.
Client cardholders discuss their research needs with the Company's
consultants and may obtain assistance in formulating their requests. After the
request has been clarified, FIND/SVP's specialists find the needed information
using a combination of the Company's available resources. After sifting through
the findings, the consultants select what appears most relevant to the client's
need and report, with commentary, as needed. Answers are delivered generally
within two business days. Documentation of the findings can be sent by any one
or a combination of the following methods: facsimile, courier, messenger, mail
or electronic mail. QCS allows customers to benefit from a fast, convenient and
confidential way to gather knowledge and use the multitude of research resources
available today. Cardholders may ask questions on virtually any subject.
Those requests requiring business intelligence from overseas are answered
by one or more of the information centers in 13 SVP companies worldwide or by
using special SVP correspondents in selected countries where no official SVP
company exists.
QCS is designed to handle client questions requiring less than
approximately three hours of actual staff time. These are automatically covered
by the retainer fee. Requests requiring a more extensive search or a lengthy
written report are not covered by the QCS retainer program and are referred to
the Company's Strategic Consulting and Research Division to be handled
separately.
QCS activity is tracked and controlled by a proprietary management
information system called QUESTRAC, which uses recently upgraded
state-of-the-art software technology. The program is based on the know-how
provided by SVP France, the founders of the SVP concept of information by
telephone. Input into the QUESTRAC system provides an exclusive and confidential
database of information about each client and the information requested and
handled for clients.
At December 31, 1997, there were 2,266 retainer clients, a 0.7% decrease
from December 31, 1996, and 16,859 holders of the Membership Card, a 4.5%
decrease from December 31, 1996. However, the monthly fees billed to retainer
clients (the retainer base) grew by 8.8% to $1,604,429. Approximately 50% of the
top Fortune 100 industrial companies are QCS retainer clients. Revenues
generated by QCS represented 64%, 65% and 65% of the Company's total revenues
for the years ended December 31, 1997, 1996 and 1995, respectively.
STRATEGIC CONSULTING AND RESEARCH DIVISION ("SRD"). SRD is designed to
handle more in-depth custom market research and competitive intelligence
6
<PAGE>
assignments. The service is most often used by the Company's QCS retainer
clients as a supplement to that service. Common project requests include
customized market and industry studies, telephone surveys, competitive
intelligence data-gathering and analysis assignments, acquisition studies and
large information collection projects. Additionally, through the Customer
Satisfaction and Loyalty Division, SRD provides customer satisfaction and
loyalty programs. Through SRD, the Company provides research as well as
interpretation and analysis. All projects are quoted in advance and billed
separately. Revenues generated by SRD represented 17%, 15% and 14% of the
Company's total revenues for the years ended December 31, 1997, 1996 and 1995,
respectively.
NON-CONTINUING PRODUCTS AND SERVICES
On December 9, 1997, the Board of Directors voted in favor of a plan to
effectuate the sale of the Company's Published Research assets with the
intention of removing the related product lines from the Company's business. The
Company intends to sell virtually all assets held within its FIND/SVP Published
Products, Inc. subsidiary. These include Published Research Studies, The
Information Catalog and various newsletters, with the exception of a newsletter
which is directed towards its Quick Consulting and Research client base. The
Company has retained an investment banking firm to provide assistance to the
Company in connection with the transaction. As of March 30, 1998, the Company
has received several preliminary offers to purchase the assets held for sale.
The Company expects the due diligence process to begin in April 1998.
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. As a
result of the Company's decision, an impairment loss of $1,047,000 was recorded
in December 1997. The Company has presented the assets held for sale as a
separate line item on its consolidated balance sheet.
On November 4, 1997, pursuant to an Asset Purchase and Sale Agreement (the
"ETRG Sale Agreement") between FIND/SVP Published Products, Inc., a wholly owned
subsidiary of the Company, and Cyber Dialogue Inc., FIND/SVP Published Products,
Inc. sold certain assets held in its Emerging Technologies Research Group to
Cyber Dialogue Inc. In accordance with the ETRG Sale Agreement, the Company will
no longer operate its Multi-client Study business, its Continuous Advisory
service and its Interactive Consumer newsletter. The Company received a $125,000
two-year note bearing interest at an annual rate of 10%. A principal payment of
$31,250 plus accrued interest is due on May 4, 1998. Commencing on August 4,
1998 and on the fourth day of each November, February, May and August
thereafter, quarterly principal payments of $15,625 plus accrued interest is
due. The final payment is due November 4, 1999. The Company holds a security
interest in the Emerging Technologies Research Group database as collateral on
the note. The purchaser also assumed various liabilities in connection with the
delivery of the above services and the Company will receive a 5% royalty for a
two-year period on sales of the above services. Additionally, the Company
retains the rights to its currently published off-the-shelf studies produced
from data contained within previously issued multi-client studies.
7
<PAGE>
Revenues generated by FIND/SVP Published Products, Inc. represented 19%,
20% and 21% of the Company's total revenues for the years ended December 31,
1997, 1996 and 1995, respectively.
On December 9, 1997, the Board of Directors voted in favor of a plan to
cease operations of its FIND/SVP Internet Services, Inc. subsidiary as of
December 31, 1997. Accordingly, the Company recorded a charge of $500,000 in the
fourth quarter of 1997 related to the closing of the subsidiary. The charge
included $35,000 of severance, all of which will be paid by March 31, 1998. The
remainder of the charge included deferred charges of $408,000, $16,000 of
shut-down costs payable in the first quarter of 1998, and rent expense of
$41,000 for the first quarter of 1998 as the Company intends to sublease the
space or to be relieved of its obligation for 10,000 square feet of office space
by the landlord during the second quarter of 1998. The Company does not expect
additional charges in connection with this transaction.
Revenues from FIND/SVP Internet Services, Inc. represented less than 1% of
the Company's revenues for 1997.
Based on the decisions to effectuate the sale and discontinuance of various
product lines and services, the Company reduced its general and administrative
staff as of December 31, 1997. Accordingly, the Company recorded a $155,000
restructuring charge as of December 31, 1997.
POTENTIAL RELATED SERVICES AND PRODUCTS
The Company plans to expand its services through continued internal
development during 1998. Upon completion of the sale of the majority of the
assets held in FIND/SVP Published Products, Inc., the Company will consider
exploring possible acquisitions of consulting, research or information
properties and companies whose primary markets are the same as FIND/SVP's market
and which would be accretive to the Company's earnings. There are no commitments
or understandings in this regard and no assurance can be given that the Company
will in fact conclude any acquisitions or internally develop any related
services. The foregoing plans are subject to, among other things, the
availability of funds for these purposes.
SVP NETWORK; LICENSING AGREEMENT WITH SVP INTERNATIONAL
Through licensing agreements with SVP ("S'il Vous Plait") International, 14
companies (the "SVP companies"), including FIND/SVP, form an international
network of information centers. Since each SVP company is based in a different
country, the network has provided the means by which the Company can obtain
international information requested by its clients which it may not maintain in
its library or have access to if generated by or located in another country.
When an SVP company accesses the information center of another SVP company it is
charged a fee for the services provided thereby. Each SVP company is linked to
the SVP network primarily by virtue of its licensing agreement. In 1971, the
Company entered into its licensing agreement with SVP International (formerly
SVP Conseil), which was amended in 1981, and obtained the U.S. rights, in
perpetuity, to the SVP name and know-how and access to the SVP International
network. Pursuant thereto, SVP International assisted in the creation,
implementation, development and operation of the Company. The Company has
agreed, pursuant to such licensing agreement, to use its best
8
<PAGE>
efforts to have a person selected by SVP International elected to the Board of
Directors of the Company; pursuant to such provision, Brigitte de Gastines,
General Manager of SVP International, is also a director of the Company. In
addition, Jean-Louis Bodmer, Chief Executive Director, SVP, S.A., is a director
of the Company. Historically, SVP International has engaged in periodic
telephonic conversations and meetings with the Company. By virtue thereof, the
Company has benefited from exchanges of knowledge with SVP International with
respect to any enhancements made to SVP International's information retrieval or
billing systems or other proprietary know-how.
During the first quarter of 1998, SVP (including affiliates) increased its
ownership in the Company to approximately 37% of the then outstanding common
shares, excluding outstanding warrants, from 18.7% of the outstanding common
shares, excluding outstanding warrants, at December 31, 1997. Concurrent with
the increased ownership, SVP has increased their management involvement in and
physical presence at the Company during the first quarter of 1998, and it is
expected that this will continue into the future. SVP's management involvement
currently includes participation in management meetings and the key decision
making process as it relates to implementing the 1998 management plan.
The license agreement provides that SVP International will not compete with
the Company in the United States or enter into any agreement or arrangement with
respect to services similar to those offered by the Company with any entity
which operates or proposes to operate such services in the United States. The
Company, in return, agreed to pay SVP International royalties of $18,000 per
year, plus 1.2% of the gross profit from all publications included in FIND/SVP's
gross revenue less than $10,000,000 for such year, and 2% of the amount of
FIND/SVP's non-publishing gross revenues for each such year, derived from
certain of its services in excess of $2,000,000 but less than $4,000,000 and 1%
of the amount of such non-publishing gross revenues in excess of $4,000,000 but
less than $10,000,000. Royalty expense to SVP International totaled $131,000,
$137,000 and $139,000 in 1997, 1996 and 1995, respectively.
MARKETS AND CUSTOMERS
The market for FIND/SVP's services and products is comprised primarily of
business executives in a variety of functions, including top management and
marketing, planning, marketing research, sales, information/library, legal,
accounting, tax and new products. FIND/SVP's primary market, in terms of client
organizations, consists of medium to small sized companies. Larger corporations
are, however, among the Company's clients. In certain cases, the service is sold
to more than one department or division of a large corporation. The Company's
appeal to medium to small sized corporations is primarily based on the fact that
these companies do not ordinarily maintain their own resource libraries and when
they do, they are generally not comprehensive. Large corporations, on the other
hand, often maintain in-house resource centers. Consequently, these corporations
may perceive the Company's QCS service as unnecessary. The Company believes,
however, that in-house corporate libraries are generally not as comprehensive.
Therefore, QCS may be perceived as a valuable supplemental resource. In
addition, in-house centers are good prospects for the Company's other services.
Overall, the factors that will affect the growth of the Company's potential
market and its ability to penetrate it include:
9
<PAGE>
(1) the market's perception of the need for and value of consulting, business
intelligence and research services; (2) the trends in the use of internal
information centers and databases; and (3) the Company's ability to extend its
personal selling efforts throughout the country.
SALES AND MARKETING
The Company's primary marketing focus is to expand its QCS retainer client
base. In addition to generating revenues from the QCS services, the retainer
client base serves as a ready-made marketplace for SRD and other potential
services of the Company. QCS is marketed through a combination of advertising,
direct mail, exhibits and sales promotion activities. Qualified leads are
followed up by FIND/SVP's sales force. These leads are supplemented by referrals
and cold-call selling efforts. The Company's other services are promoted through
flyers, newsletters and personal sales efforts. The cost of the Company's
advertising and public relations efforts are modest.
The Company currently signs 75 to 100 new retainer clients annually which
are generated from leads within the Published Research area. The Company intends
to negotiate with potential buyers of the Published Research assets the right to
continue to receive leads into the future. There can be no assurance that the
lead flow from these assets will continue.
COMPETITION
The Company faces competition from three distinct sources: (1) other
research and information services, (2) in-house corporate research centers, and
(3) institutions that sell information directly to end-users.
The Company is aware of several other smaller fee-based on-demand business
information services in the United States. The Company believes that of these
companies it is the largest in terms of revenues and staff size. The Company
believes that the competition may be more significant from organizations such as
Arthur D. Little, Stanford Research Institute and The Conference Board which
have research capabilities with call-in-service for reference type questions. To
date, however, the call-in-service feature has not been emphasized by these
companies. Although the Company is not aware of direct competitive companies
with larger staffs and revenues, there is no assurance that as the information
industry expands, more competitive companies will not enter the market. In
addition, there is no assurance that a competitive company will not develop a
superior product or service. The Company believes, however, that by reason of
its experience in the industry, its association with the SVP network and its
intent to closely monitor the information industry, it will be able to compete
effectively with any potential competitors.
In-house corporate information and research centers present perhaps the
most significant source of competition for the Company today. Large
corporations, in an effort to stay on top of the vast amount of information
available, began to develop in increasing numbers, in-house libraries and
information centers for their employees. While the Company believes that its own
information center serves the added functions of analysis and generation of
information and is larger and better staffed than a majority of these corporate
resource centers, there is no assurance that a
10
<PAGE>
significant number of these large companies will choose to utilize the Company's
services and products.
The advent of on-line databases, the Internet and CD-ROM products has
increased the ability of companies to perform information searches and other
research for themselves. Consequently, to the extent companies perceive they can
directly access on-line databases and CD-ROM products, FIND/SVP competes with
information producers that sell to end-users. The Company believes, however,
that its consultants deliver a value-added service based on their technical
expertise and their ability to search more information products more quickly
than most end users, thereby delivering a more thorough and economical service.
There is no assurance, however, that companies which develop extensive resource
centers will not accordingly staff them with equally productive personnel.
EMPLOYEES
As of December 31, 1997, the Company had 228 full-time employees, including
3 executive officers, 38 marketing and sales employees, 130 consultants and
research employees, 18 publishing employees, and 39 administrative and general
personnel. During March 1998, the Company instituted a formal cost cutting plan
which eliminated approximately 20 full time positions.
The Company's ability to develop, market and sell its services and to
establish and maintain its competitive position will depend, in part, on its
ability to attract and retain qualified personnel. While the Company believes
that it has been successful to date in attracting such personnel, there can be
no assurance that it will continue to do so in the future. The Company is not a
party to any collective bargaining agreements with its employees. It considers
its relations with its employees to be good.
ITEM 2
PROPERTIES
In December 1986, the Company entered into a fifteen and one-half year
lease agreement relating to premises at 625 Avenue of the Americas, New York,
New York, which premises became the offices of the Company on May 7, 1987.
During 1992, the lease was extended an additional three years. The annual rental
payment in 1997 was $864,000 and is subject to scheduled fluctuations in
succeeding periods. For financial statement reporting purposes, rent has been
recorded on a straight line basis. Accordingly, scheduled payments on this lease
through December 31, 1997 exceeded rent recorded through December 31, 1997 by
$44,000. As of December 31, 1996 rent recorded on this lease exceeded scheduled
payments by $126,000. (See Note 3 of Notes to Consolidated Financial
Statements.) The lease agreement covers approximately 32,000 square feet of
space.
In August 1994, the Company entered into a five year lease agreement
relating to premises at 641 Avenue of the Americas, New York, New York, which
premises became the offices of the Company's wholly-owned subsidiary, FIND/SVP
Published Products, Inc., on September 1, 1994. The rental payments in 1997
totaled $267,000. This lease agreement covers approximately 20,000 square feet
of space, of which 10,000 square feet was
11
<PAGE>
occupied in September 1994 and the additional 10,000 square feet was occupied in
April 1995. In March 1995, the Company executed a separate ten year lease
covering an additional 20,000 square feet of space at 641 Avenue of the
Americas, which was occupied in August 1995 by the Strategic Consulting and
Research Division. The rental payments in 1997 totaled $436,000, and is subject
to scheduled increases in succeeding periods. For financial statement reporting
purposes, rent has been recorded on a straight line basis. Accordingly, rent
recorded through December 31, 1997 and 1996 on these leases exceeded scheduled
payments by $156,000 and $71,000, respectively. (See Note 3 of Notes to
Consolidated Financial Statements.) In connection with the execution of the
March 1995 lease, the August 1994 lease was extended to a ten year term.
In conjunction with the closing of FIND/SVP Internet Services, Inc., the
Company is currently negotiating with its landlord for its release from its
obligation for 10,000 square feet originally occupied in April 1995 of the
office space at 641 Avenue of the Americas, noted above. The Company believes
that if it is granted a release, it would be at no cost to the Company. Further,
the Company intends to sublease the space if it is not granted a release, and it
expects this can be done at terms similar to its existing lease. The outcome of
these discussions should occur early in the second quarter of 1998. As of
December 31, 1997 the Company has accrued $41,000 for rent expense on this space
through March 31, 1998 in connection with the closing of FIND/SVP Internet
Services, Inc. Additionally, the Company has begun discussions with the landlord
regarding an additional 10,000 square feet of space, noted above, at 641 Avenue
of the Americas originally occupied in September 1994, pending the sale of
assets in its FIND/SVP Published Products, Inc. subsidiary. The Company believes
a similar outcome will occur in regards to this 10,000 square feet as occurs in
regards to the previously mentioned discussions. Any rent expense incurred
during the negotiating period will be expensed when incurred. The Company will
continue to maintain the 20,000 square feet of space at 641 Avenue of the
Americas, occupied in August 1995, noted above.
ITEM 3
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
12
<PAGE>
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 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. In return, the
Company, through proceeds from its insurance company, paid Asset Value legal
fees and disbursements in the amount of $110,000 and together with SVP, S.A.
bought Asset Value's 900,000 shares of stock in the Company at a price of $1.25
per share on February 20, 1998. As such, there will be no financial statement
impact from this transaction. (The Company bought 274,400 of those shares, and
SVP, S.A. bought 625,600 of those shares.) 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).
13
<PAGE>
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no matters submitted to a vote of security holders
during the quarter ended December 31, 1997.
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Common Stock, par value $.0001 per share, of the Company ("Common
Stock") is traded on the over-the-counter market with quotations reported on the
National Association of Securities Dealers Automated Quotation System (NASDAQ)
under the symbol "FSVP". The following table sets forth the high and low closing
trade prices for the Common Stock for the periods indicated.
PRICE RANGE HIGH LOW
1997
COMMON STOCK
1st Quarter 2 1 1/4
2nd Quarter 1 1/2 1 3/16
3rd Quarter 1 3/8 1
4th Quarter 1 9/32 3/4
1996
COMMON STOCK
1st Quarter 2 3/8 1 13/16
2nd Quarter 3 1/16 2 1/8
3rd Quarter 3 1/4 2
4th Quarter 2 1/4 1 13/16
On December 31, 1997, there were approximately 994 holders of record of the
Common Stock. Such numbers do not include shares held in "street name."
On February 27, 1998, the Company received notification from the NASDAQ
Stock Market, Inc. ("NASDAQ") that the Company is 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 review at that time, which will generally stay delisting. As of
March 30, 1998, the Company has not met such requirement.
14
<PAGE>
As of December 31, 1997, the Company is not in compliance with the NASDAQ
net tangible asset requirement. Per discussions with NASDAQ, the Company is
including a pro-forma net tangible asset statement including the $1,000,000
capital contribution from SVP, S.A. received in 1998. NASDAQ has informed the
Company that since this statement shows pro-forma net tangible assets which are
in compliance with the NASDAQ requirement, it will consider the Company to be in
compliance.
Pro-Forma Net Tangible Assets
Total assets at December 31,
1997 $12,481,000
Less: Goodwill, net (117,000)
Less: Liabilities (11,263,000)
-----------
1,101,000
Capital received from SVP,
S.A. during first quarter
of 1998 1,000,000
------------
Pro-Forma Net Tangible Assets $2,101,000
============
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 maintenance criteria in the
future may result in the discontinuance of the inclusion of its securities in
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 broker-dealers to sell the
securities, which may affect the ability of purchasers in the offering to sell
the securities in the secondary market.
DIVIDEND HISTORY AND POLICY
The Company has never paid cash dividends on its Common Stock and
anticipates that, for the foreseeable future, it will continue to follow a
policy of retaining earnings to finance the expansion and development of its
business. The Company's debt agreements restrict the payment of dividends.
RECENT FINANCING
In connection with the sale of notes and warrants to SVP, S.A. in
August 1997, as described in Item 7, the Company relied on the exemption
provided by Section 4(2) of the Securities Act of 1933, as amended, and utilized
the net proceeds of the financing for working capital purposes.
15
<PAGE>
ITEM 6
SELECTED FINANCIAL DATA
The following financial data set forth below is derived from the
consolidated financial statements of the Company.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(Amounts in thousands)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $32,027 $30,525 $28,606 $24,357 $20,257
Operating (Loss) Income (3,136) (824) 1,050 1,144 726
Cumulative effect of
change in Accounting for
income taxes - - - - 157
Net (Loss) Income (2,852) (719) 476 673 726
(Loss) Earnings per Common
and Common Stock Equivalent Share
(Loss) Income before
cumulative effect of
change in accounting
Basic (.43) (.11) .08 .11 .09
Diluted (.43) (.11) .07 .10 .09
Cumulative effect of
change in accounting for
income taxes
Basic - - - - .03
Diluted - - - - .02
Net (Loss) Income Per
Common and Common Stock
Equivalent Share
Basic (.43) (.11) .08 .11 .12
Diluted (.43) (.11) .07 .10 .11
Weighted Average Number
of Common and Common Stock
Equivalent Shares
Outstanding
Basic 6,593 6,434 6,217 6,198 6,175
Diluted 6,593 6,434 6,672 6,660 6,537
Cash Dividends Declared
Per Common Share - - - - -
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
DECEMBER 31,
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Working Capital $1,016 $3,930 $3,854 $2,796 $2,713
Total Assets 12,481 12,946 11,445 9,705 7,050
Long-Term indebtedness
excluding amounts
currently payable 3,801 3,826 2,896 1,191 207
Shareholders' Equity 1,218 4,059 4,659 4,160 3,495
</TABLE>
16
<PAGE>
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The growth strategy implemented by the Company during the fourth
quarter of 1996 when the Company closed a $2.5 million financing arrangement
(12% subordinated notes, and warrants to purchase common stock, of the Company)
has resulted in a significant increase in operating expenses during 1997.
However, revenues, which grew by 4.9% to $32,027,000 for 1997, were
significantly below expectation for the year. The Company reported in its
Quarterly Report on Form 10-Q for the three months ended September 30, 1997,
that it began slowing the growth of operating expenses, and reported a decline
in its direct costs as a percentage of revenues to 56.7% for the third quarter
of 1997 compared to 58.2% for the first six months of 1997. The trend remained
steady during the fourth quarter of 1997 as direct costs were 56.7% of fourth
quarter 1997 revenues. Additionally, during the fourth quarter of 1997, selling,
general and administrative expenses were reduced to 44.9% of revenues, compared
to 47.7% of revenues for the first nine months of 1997.
During the fourth quarter of 1997, the Company decided to abandon the
growth strategy implemented during the fourth quarter of 1996 and to re-focus
its efforts on its core competencies. The Company's remaining services will come
from the Quick Consulting and Research Service ("QCS") and the Strategic
Consulting and Research Division ("SRD"), its research-for-hire businesses. As
such, during the fourth quarter of 1997 the Company sold virtually all the
assets of its Emerging Technologies Research Group ("ETRG"), and retained an
investment banking firm to effectuate the sale of virtually all the remaining
assets of its Published Research Division. During the fourth quarter of 1997,
the Company recognized a loss on the sale of the ETRG assets of $28,000 and
recorded an impairment loss of $1,047,000 on the remaining assets of the
Published Research Division held for sale. The Company anticipates the sale to
occur during the second quarter of 1998, but there can be no assurances in this
regard. The revenues from Published Research accounted 19%, 20% and 21% of the
Company's total revenues during 1997, 1996 and 1995, respectively. As such,
overall revenues for 1998 are expected to decline versus 1997.
Additionally, the Company ceased operation of its FIND/SVP Internet
Services, Inc. subsidiary as of December 31, 1997. The original intention of
this subsidiary was to provide services to the consumer oriented market via the
Internet. The Company decided not to make any additional investments in this
service. Accordingly, the Company has written down the assets in this subsidiary
by $408,000, to zero. Additionally, the Company has accrued $35,000 of severance
cost, all of which will be paid by March 31, 1998, $16,000 of shut-down costs to
be paid in the first quarter of 1998 and rent expense of $41,000 to cover rents
payable in the first quarter of 1998 while the Company negotiates the
17
<PAGE>
release of its obligations with the landlord. If any additional rents are
incurred, they will be expensed in 1998.
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 to SVP
and issued a $250,000 Convertible Note on January 15, 1998. The Note converted
into 200,000 shares on February 20, 1998 when those shares became available to
issue in connection with the Company's litigation settlement. See Item 3, Legal
Proceedings.
With this transaction, coupled with additional shares purchased by SVP in
conjunction with the settlement of a lawsuit (See Item 3, Legal Proceedings),
SVP and its affiliates currently 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
two $1,000,000 letters 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, S.A. 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 77,000 currently
non-exercisable options.
During 1997, the Company had net borrowings of $1,249,000 under its
Commercial Revolving Promissory Notes (the "Note") with State Street Bank and
Trust Company (the "Bank"). The original note with the Bank was scheduled to
expire in April 1997, but was extended in April and October 1997. The Company
signed an additional $1,000,000 line of credit with the Bank in October 1997
secured by SVP, S.A. The second extension of the Note included terms which
expired on December 31, 1997, but which would be automatically renewed through
March 26, 1998, if the Company received a capital contribution of no less than
$1,000,000. The Company had a letter of intent as of December 31, 1997 for the
required capital contribution. The capital was received during the first quarter
of 1998 and the extension was granted through March 26, 1998.
On March 30, 1998, the Company signed a term sheet with the Bank to extend
the terms of the Note until March 25, 1999. The amount available under the Note
will be reduced to $1,000,000, less outstanding letters of credit, which were
$148,000 as of March 30, 1998. On March 27, 1998, SVP provided credit support
for the Note in the form of a $1,000,000 letter of credit. Additionally, SVP
provided a second letter of credit to secure the two five-year term notes. The
dollar amount of the second letter of credit will at all times equal the lesser
of (a) the aggregate principal amount of the term loans or (b) $1,000,000. The
interest rate on the Note will be the Bank's prime rate plus one-quarter of one
percent (currently 8.75%).
18
<PAGE>
Based on the financial circumstances of the Company, and the decision to
sell or shut down various product lines and services, as of December 31, 1997
the Company reduced its general and administrative staffing. Accordingly, a
restructuring charge of $155,000 was recorded at December 31, 1997.
On March 27, 1998, the Company implemented a cost cutting plan which
includes the reduction of approximately 20 full-time positions in its core
businesses. As such, the Company expects to record a charge for severance and
related costs of approximately $325,000 during the quarter ended March 31, 1998.
The Company believes this action, coupled with the reduction in general and
administrative staff at the end of 1997 and significant cost reductions in non
full-time labor during the second half of 1997, will significantly improve its
ability to return to profitability in 1998, but there can be no assurances in
this regard.
REVENUES
The Company's revenues increased by $1,502,000 or 4.9% to $32,027,000 in
1997 and by $1,919,000 or 6.7% to $30,525,000 in 1996 from $28,606,000 in 1995.
The increase in 1997 was due to revenue increases in the Company's Quick
Consulting and Research Service area and the Strategic Consulting and Research
area, partially offset by a decline in Published Research revenues. The increase
in 1996 was due to revenue increases in all facets of the Company.
The Company's Quick Consulting and Research Service revenues grew by
$798,000 or 4.1% to $20,516,000 in 1997 and by $1,086,000 or 5.8% to $19,718,000
in 1996. The increases in 1997 and 1996 were due to an increase in the average
retainer fee paid per client, due primarily to an increase in fees.
Revenues in the Strategic Consulting and Research area of the Company
increased $993,000 or 22.3% to $5,443,000 in 1997 and $496,000 or 12.5% to
$4,450,000 in 1996. The increases were due primarily to an increase in the
number of assignments and their average size, resulting from improved marketing.
The increase in 1997 versus 1996 as a percentage of revenue was stronger than
that of 1996 versus 1995 as this unit experienced weakness during the third
quarter of 1996 which reduced the overall increase compared to 1995. The
Customer Satisfaction and Loyalty Division accounted for 15.7%, 17.8% and 18.5%
of the Strategic Consulting and Research area's revenue for 1997, 1996 and 1995,
respectively.
Revenues of Published Research decreased $210,000 or 3.5% to $5,839,000 in
1997 and increased $872,000 or 16.8% to $6,049,000 in 1996. The decrease in 1997
was primarily due to lower revenues from the Emerging Technologies Research
Group which was sold during the fourth quarter of 1997, coupled with reduced
print sales of published studies, partially offset by increased revenues from
third-party on-line vendors. The increase in 1996 was due primarily to increased
sales of published studies both in print and electronic format and the sales of
the Emerging Technologies Research Group's multi-client studies and the
Continuous Advisory Service (which began in June 1996).
19
<PAGE>
The Company operates a small newsletter publishing operation. However the
newsletters that are produced generated less than 1% of the Company's revenues
in 1997, 1996 and 1995.
DIRECT COSTS
Direct costs increased by $1,053,000 or 6.1% to $18,402,000 in 1997 and by
$1,684,000 or 10.8% to $17,349,000 in 1996 from $15,665,000 in 1995. Direct
costs represented 57.5%, 56.8% and 54.8% of revenues, respectively, in those
years. The increase in total direct costs is due to new service offerings, such
as the Continuous Advisory Service in the Emerging Technologies Research Group,
a part of Published Research, which began in June 1996, and the planned
expansion of current services. The changes in the percentage of revenue is due
mainly to the timing of costs related to the expansion of services versus the
timing of the incremental revenue. Virtually all of the assets of the Emerging
Technologies Research Group were sold during the fourth quarter of 1997. During
the fourth quarter of 1997, direct costs were $4,592,000 or 56.7% of the fourth
quarter 1997 revenues. This compares to 1996 fourth quarter direct costs of
4,661,000 or 62.6% of fourth quarter 1996 revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by $1,861,000 or
14.1% to $15,059,000 or 47.0% of revenues in 1997 and by $1,307,000 or 11.0% to
$13,198,000 or 43.2% of revenues in 1996 from $11,891,000 or 41.6% of revenues
in 1995. The increase in expenses in the selling, general and administrative
areas is due to the investment in sales and promotional efforts to generate
incremental revenues in accordance with the Company's growth plans and to
support the planned growth of the operating units. During the fourth quarter of
1997, the Company began slowing down the rate of growth in these areas. As such,
as a percentage of revenues in the fourth quarter of 1997, selling, general and
administrative expenses were 44.9% of fourth quarter revenues versus 47.7%
through the first nine months of 1997.
Additionally, on December 31, 1997, the Company reduced its general and
administrative staff, and accordingly, the Company recorded a severance charge
of $155,000 in the fourth quarter of 1997.
The Company's lease for its main premises includes scheduled rent increases
over the 15-year lease term. Financial Accounting Standards Board Statement No.
13 ("FASB No. 13") requires that rent expense under these circumstances be
recognized on a straight-line basis. Accordingly, rent expense will exceed the
amount actually paid in the first third of the lease, will be approximately
equal to the amount actually paid in the middle third of the lease and will be
less than the amount actually paid in the final third of the lease. Partly as
the result of the lease renegotiations in 1992 which extended the lease term for
three additional years with a reduced base rent for those years, rent payable
exceeded rent expense by $170,000 in 1997 for the main premises. The Company's
lease for additional premises includes scheduled rent increases over the 10-year
lease term. FASB No. 13 requires that rent expense be recognized on a
straight-line basis. As a result, rent expense exceeded rent payable by
20
<PAGE>
$85,000 in 1997 for the additional premises. In 1997, 1996 and 1995, total
accrued rent payable decreased by $85,000, $71,000 and $182,000, respectively.
See Note 3 of Notes to Consolidated Financial Statements.
IMPAIRMENT LOSS
Due to continued weakness in the Published Research Division, and a plan to
re-focus the Company's attention on its core competencies, during the fourth
quarter of 1997, the Company decided to sell the majority of assets held in this
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. As a result of the Company's decision, an impairment loss of
$1,047,000 was recorded in December 1997. The Company has presented the assets
held for sale as a separate line item in its December 31, 1997 consolidated
balance sheet. Discussions with potential buyers are in the early stages, and,
accordingly, the Company will review its estimated net realizable values as
additional information becomes available.
The aforementioned charge included write-downs of inventory of $517,000,
fixed assets of $405,000, goodwill of $102,000 and deferred charges of $23,000.
There are no cash implications relating to this charge.
SALE OF ETRG ASSETS AND ASSET DISPOSAL
During the fourth quarter of 1997, the Company sold certain assets held in
its Emerging Technologies Research Group ("ETRG"). The Company recorded a
$28,000 loss related to this sale. In accordance with the terms of the
Agreement, the Company received a two-year $125,000 Note bearing interest at an
annual rate of 10% and has retained a security interest in the ETRG database. A
principal payment of $31,250 plus accrued interest is due on May 4, 1998.
Commencing on August 4, 1998, and on the fourth day of each November, February,
May and August thereafter, quarterly principal payments of $15,625 plus accrued
interest is due. The final payment is due November 4, 1999. As a result of this
transaction, the Company will no longer operate its multi-client study business,
its Continuous Advisory Service and its Interactive Consumer Newsletter. The
Company has retained the rights to its currently published off-the-shelf studies
and will receive a 5% royalty on sales of the above services for a two-year
period.
During the fourth quarter of 1997, the Company ceased operations of its
FIND/SVP Internet Services, Inc. subsidiary. Accordingly, the Company has
written down the assets in this subsidiary by $408,000, to zero. Additionally,
the Company has accrued $35,000 of severance cost, all of which will be paid by
March 31, 1998; $16,000 of shut-down costs to be paid in the first quarter of
1998; and, rent expense of $41,000 to cover rents payable in the first quarter
of 1998 while the Company negotiates the release of its obligations with the
landlord. If any additional rents are incurred, they will be expensed in 1998.
21
<PAGE>
RESTRUCTURING CHARGE
In conjunction with the Company's decision to re-focus its efforts on
its core competencies, the Company reduced its general and administrative staff
on December 31, 1997. Accordingly, the Company recorded a $155,000 restructuring
charge during the fourth quarter of 1997, all of which will be paid in 1998.
Due to lower than expected revenues and profits in the Published
Research Division during the third quarter of 1996, and due to the anticipation
of a more aggressive growth strategy which integrated the products and services
of the Company, the Company announced and immediately began implementing a plan
to restructure and consolidate operations, which included the re-organization of
its operating units and a change in the method of marketing and cross-selling
its various products. This plan resulted in a pre-tax charge of $802,000 during
the third quarter of 1996.
The charge included a writedown of certain Published Research products
and deferred charges of $490,000, severance and retirement charges of $167,000,
charges relating to marketing and planning materials which will not be used
after the restructuring of $117,000 and charges for the consolidation and
reduction of several small, unprofitable product groups of $28,000, of which
$47,000 and $122,000 in severance and retirement payments has been included in
accrued expenses as of December 31, 1997 and 1996.
OPERATING (LOSS) INCOME
The Company's operating losses were $3,136,000 in 1997 and $824,000 in
1996 as compared to operating income of $1,050,000 in 1995. The operating loss
in 1997 was primarily due to increased operating expenses during 1997 without
the commensurate level of increased revenues resulting in a loss from operations
of $1,434,000, coupled with the recording of an impairment loss on assets held
for sale of $1,047,000, a charge of $500,000 for an asset disposal and
restructuring charges of $155,000. The operating loss in 1996 was due primarily
to an $802,000 restructuring charge in the third quarter of 1996, coupled with
an increase in direct costs and selling, general and administrative expenses as
a percentage of revenues.
INTEREST INCOME AND EXPENSE; OTHER ITEMS
In 1997, the Company earned $13,000 in interest income, which
decreased from $19,000 in 1996 and $49,000 in 1995. The decrease was a result of
a lower level of cash invested.
Interest expense in 1997 was $597,000, which was an increase from
$320,000 in 1996 and $255,000 in 1995. The increase in interest expense for 1997
was primarily due to the issuance of subordinated notes in the fourth quarter of
1996 and the third quarter of 1997, slightly offset by a reduction in interest
on term notes. The increase in interest expense in 1996 was primarily due to
additional bank borrowings during the second quarter of 1996 for equipment,
additional borrowings under the Company's revolving credit line during the first
ten months of 1996 and the issuance of subordinated notes during the fourth
quarter of 1996.
22
<PAGE>
In 1996, the Company recorded a loss on sale of marketable investment
securities of $8,000, resulting from the sale of certain securities classified
as available for sale for $168,000. The Company also recorded a loss on sale of
assets of $73,000 resulting from the sale of certain assets.
In 1995, the Company recorded a gain on sale of marketable investment
securities of $10,000, resulting from the sale of certain securities classified
as available for sale for $209,000.
INCOME TAXES
The provision for income taxes consists of federal, state and local
income taxes. The $896,000 tax benefit recognized for 1997 represents 24% of the
1997 loss before benefit for income taxes. The 1997 benefit includes a net
operating loss carryback for federal purposes, a deferred tax benefit from a net
operating loss carryforward for federal, state and local taxes, a net deferred
tax benefit for temporary items, partially offset by a valuation allowance and
expired tax credits. Based on the Company's history of prior operating earnings
relating to its research-for-hire businesses, management has determined that a
valuation allowance of $519,000 is necessary due to the uncertainty of future
earnings to realize the entire net deferred tax asset.
The $487,000 tax benefit recognized for 1996 represents 40% of the
1996 loss before benefit for income taxes. The 1996 benefit represents a net
operating loss carryback for federal purposes, a deferred tax benefit from a net
operating loss carryforward for state and local taxes, and a net deferred tax
benefit for temporary items, partially offset by a prior period under accrual.
The effective tax rate was 44% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its business primarily from operating revenues,
working capital provided by deferred revenues in the form of prepaid retainer
fees, bank debt and subordinated notes.
In 1997, there was a positive cash flow from operating activities of
$236,000. This resulted from a net loss of $2,852,000, a decrease in accrued
rent payable of $85,000, an increase in cash surrender value of life insurance
of $55,000, an increase in deferred income taxes of $668,000 and an increase in
accounts receivable of $799,000. These items were more than offset by
depreciation and amortization of $1,147,000, the non-cash portion of impairment
loss of $1,047,000, the non-cash portion of asset disposal of $408,000, a loss
on sale of net assets of $28,000, amortization of discount on notes payable of
$5,000, amortization of deferred financing fees of $39,000, a $254,000 provision
for losses on accounts receivable, an increase in deferred compensation of
$21,000, an increase in accounts payable and accrued expenses of $305,000, a
decrease in prepaid and refundable income taxes of $250,000, a decrease in
inventory of $413,000, a decrease in prepaid expenses, deferred charges and
goodwill of $75,000, an increase in accrued interest of $170,000 and an increase
in unearned retainer income of $533,000.
23
<PAGE>
In 1996, there was a positive cash flow from operating activities of
$458,000. This resulted from a net loss of $719,000, a decrease in accrued rent
payable of $71,000, an increase in cash surrender value of life insurance of
$110,000, an increase in deferred income taxes of $107,000, an increase in
accounts receivable of $180,000, an increase in inventory of $585,000, an
increase in prepaid expenses, deferred charges and goodwill of $430,000, an
increase in security deposits of $7,000, and an increase in prepaid and
refundable income taxes of $543,000. These items were more than offset by
depreciation and amortization of $974,000, amortization of discount on notes
payable of $1,000, the non-cash portion of restructuring charge of $610,000, a
$287,000 provision for losses on accounts receivable, a loss on sale of
marketable investment securities of $8,000, a loss on sale of assets of $73,000,
common stock issued for services of $40,000, an increase in deferred
compensation of $25,000, an increase in accounts payable and accrued expenses of
$590,000, amortization of deferred financing fees of $15,000, and increase in
accrued interest of $34,000 and an increase in unearned retainer income of
$553,000.
In 1995, there was a negative cash flow from operating activities of
$504,000. Positive cash flow resulted from net income of $476,000 adjusted for
depreciation and amortization of $865,000, a $179,000 provision for losses on
accounts receivable, an increase in accounts payable and accrued expenses of
$71,000, an increase in unearned income of $35,000, an increase in deferred
compensation of $21,000, a decrease in security deposits of $1,000, amortization
of deferred financing fees of $7,000, an increase in accrued interest of $24,000
and a write-down of investment in joint venture of $1,000. These items were more
than offset by a $479,000 increase in accounts receivable, a $488,000 increase
in prepaid expenses, deferred charges and goodwill, a $716,000 increase in
inventory, a $216,000 decrease in taxes payable, a $182,000 decrease in accrued
rent, a $10,000 gain on the sale of marketable investment securities, a $54,000
increase in cash surrender value of life insurance, a $33,000 increase in
deferred income taxes and a $6,000 increase in prepaid and refundable income
taxes.
Capital expenditures were $1,939,000, $1,509,000, and $1,246,000 in
1997, 1996 and 1995, respectively, and consisted principally of migration of the
Company's 10 year old management information systems from a Wang VS 65 to a
Windows NT based system, computer equipment to improve the consultants' ability
to communicate with clients, access the Internet and integrate the Company's
products, as well as to expand the Company's enterprise network.
In 1997 the Company received $50,000 for the repayment of a note
receivable.
On March 30, 1998 the Company signed a term sheet with State Street
Bank and Trust (the "Bank") to extend, until March 25, 1999, the terms of the
existing Commercial Revolving Promissory Note (the "Note") dated April 27, 1995.
The amount available under the Note will be reduced to $1,000,000, less
outstanding letters of credit, which were $148,000 as of March 30, 1998. On
March 27, 1998, SVP provided credit support for the Note in the form of a
$1,000,000 letter of credit. Additionally, SVP provided a second letter of
credit to secure the two five-year term notes. The dollar amount of the second
letter of credit will at all times equal the lesser of (a) the aggregate
principal amount of the term loans or (b) $1,000,000. The interest rate on the
Note will be the Bank's prime rate plus one-quarter of one percent (currently
8.75%). The Company must
24
<PAGE>
continue to retain the services of an outside management consultant, originally
retained in October 1997, through September 30, 1998.
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 and
amended the financial convenants and certain terms of the Note. The interest
rate, as amended, is 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 is in compliance with the terms and conditions of the
agreement and either the Company has 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 has 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.
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 is 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 July 24, 1997, the Company signed an amendment to the Note with the
Bank increasing the available credit to $2,500,000 from $2,000,000. The $500,000
additional credit was secured by the anticipated tax refund related to the
Company's 1996 loss. During the fourth quarter of 1997, the Company received the
refund and the available credit was reduced accordingly.
The Company's Revolving and Term Promissory Notes with the Bank are
secured by all of the assets of the Company. As of December 31, 1997, there was
$1,350,000 outstanding on the term loans and $1,249,000 outstanding under the
revolving credit agreements. The revolving credit agreement is used to secure
certain long-term letters of credit in the amount of $148,000. As such, as of
December 31, 1997, the availability under the revolving credit agreements was
$1,603,000.
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, S.A. or affiliates thereof
("SVP"), pursuant to which SVP may purchase Notes from the
25
<PAGE>
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 December 31, 1997, were beneficial owners of 1,649,485 shares
of Common Stock, including shares issuable under outstanding Warrants, or
approximately 23.6% of the outstanding shares if the Warrants are exercised.
During the first quarter of 1998, SVP increased its ownership in the Company to
approximately 37% of the then outstanding shares, excluding outstanding
warrants.
On September 19, 1996, the Company signed a thirty-day Commercial Revolving
Promissory Note with the Bank for $500,000 at .25 percentage points above the
prime rate. The Note expired on October 18, 1996 and was accordingly paid in
full and cancelled on that date. The Note was in addition to the $2,000,000
Commercial Revolving Promissory Note with State Street Bank signed on April 27,
1995.
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 requires quarterly
principal payments of $25,000. As of December 31, 1997, the balance outstanding
was $350,000.
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 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 Revolving and
Term Promissory Notes are secured by all of the assets of the Company. The
principal payment schedule for the Term Promissory Note is $100,000 per quarter.
As of December 31, 1997, the balance outstanding was $1,000,000. Additionally,
there was $1,249,000 outstanding under the $2,000,000 revolving credit agreement
with State Street Bank at December 31, 1997.
26
<PAGE>
During the fourth quarter of 1997, the Company recorded an impairment loss
on assets held for sale of $1,047,000. None of this charge required a cash
outlay.
During the fourth quarter of 1997, the Company ceased operations of its
FIND/SVP Internet Services, Inc. subsidiary and recorded a charge for the asset
disposal of $500,000, which will include $92,000 of cash expenditures in 1998.
The Company recorded a restructuring charge of $155,000 in the fourth
quarter of 1997, requiring cash expenditures of $155,000 in 1998.
During 1997, the Company issued 25,000 shares of common stock with a value
of $37,000 to a third party for services rendered.
In connection with the Company's sale of ETRG's assets during 1997, the
Company received a $125,000 two-year note.
The Company recorded an $802,000 restructuring charge to operations in the
third quarter of 1996, which included $70,000 of cash expenditures in 1996 and
future cash expenditures of $122,000.
During 1996, the Company issued 21,940 shares of common stock with a value
of $40,000 to a third party for services rendered.
The Company's working capital was $1,016,000 at December 31, 1997, as
compared to $3,930,000 at December 31, 1996. Cash balances were $139,000 and
$634,000 on December 31, 1997 and 1996, respectively.
The Company expects to spend approximately $750,000 for capital items in
1998, the major portion of which will be to complete the migration of the
Company's proprietary management information system to its new platform.
The Company believes that cash flow from operations and borrowings under
the line of credit, along with the potential proceeds from the sale of assets
held for sale at December 31, 1997, will be sufficient to cover its operations
and expected capital expenditures for the next 12 months and that it has
sufficient liquidity for the next 12 months.
The Company had non-cash financing activities relating to the cashless
exercise of stock options. In the 12-month period ended December 31, 1997, 8,000
options were exercised at $0.63, in exchange for 2,000 shares of common stock of
the Company at prices ranging from $1.125 to $1.25. Such shares were held for a
period of at least six months before the respective exchange. The value of these
transactions was $2,000.
In the 12-month period ended December 31, 1996, 275,686 options were
exercised at prices ranging from $0.275 to $2.1875, in exchange for 51,041
shares of common stock of the Company at prices ranging from $2.125 to $3.00.
Such shares were held for a period of at least six months before the respective
exchange. The value of these transactions was $119,000.
27
<PAGE>
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.
YEAR 2000
The Company has initiated a comprehensive review of all computer
systems to determine any Year 2000 ("Y2K") issues. Included in the review are
all operating systems, application systems and computer BIOS. All application
programs in place are packages from software vendors. The Company is utilizing
in house staff familiar with the operating systems and application systems to
complete the review. Application vendors have been contacted to determine the
readiness of their packages for Y2K. The Company presently believes that, with
modifications to existing software and converting to new software, the Y2K
problem should not pose significant operational problems for the Company's
computer systems as so modified and converted.
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-K 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 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 dependence on regulatory approvals, its future cash
flows, sales, gross margins and operating costs, the effect of conditions in the
industry and the economy in general, and legal proceedings. 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-K, and in other
reports filed by the Company with the Securities and Exchange Commission.
ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and schedule of the Company are
set forth on pages F-1 through F-32 of this report.
28
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
PAGE
----
Independent Auditors' Report F-2
Consolidated Balance Sheets as of
December 31, 1997 and 1996 F-3
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
Schedule:
Schedule II - Valuation and Qualifying Accounts F-32
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
FIND/SVP, Inc.:
We have audited the consolidated financial statements of FIND/SVP, Inc. and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FIND/SVP, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/S/ KPMG PEAT MARWICK LLP
New York, New York
March 30, 1998
F-2
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash $ 139,000 $ 634,000
Accounts receivable, less allowance for doubtful accounts of
$118,000 in 1997 and $103,000 in 1996 3,394,000 2,837,000
Note receivable (note 13) 62,000 50,000
Inventories - 2,281,000
Prepaid and refundable income taxes (note 7) 299,000 549,000
Deferred tax assets (note 7) 286,000 99,000
Prepaid expenses and other current assets 328,000 495,000
Assets held for sale (note 12) 1,558,000 -
---------- -----------
Total current assets 6,066,000 6,945,000
Equipment and leasehold improvements, at cost, less
accumulated depreciation and amortization (note 2) 4,546,000 3,935,000
Other assets:
Deferred charges 245,000 900,000
Goodwill, net 117,000 276,000
Note receivable (note 13) 63,000 -
Cash surrender value of life insurance 479,000 424,000
Deferred tax assets (note 7) 681,000 200,000
Deferred financing fees, net 141,000 123,000
Security deposits 143,000 143,000
----------- -----------
$12,481,000 12,946,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, current installments (note 4) 1,749,000 516,000
Trade accounts payable 1,305,000 1,082,000
Accrued expenses (notes 10, 13 and 14) 1,872,000 1,381,000
Accrued interest, current installments (note 4) 124,000 36,000
----------- -----------
Total current liabilities 5,050,000 3,015,000
----------- -----------
Unearned retainer income 2,023,000 1,675,000
Notes payable, net, excluding current installments (note 4) 3,801,000 3,826,000
Accrued interest, excluding current installments (note 4) 104,000 22,000
Accrued rent payable (note 3) 112,000 197,000
Deferred compensation (note 8(b)) 173,000 152,000
Shareholders' equity (note 5):
Preferred stock, $.0001 par value. Authorized 2,000,000 shares;
none issued and outstanding - -
Common stock, $.0001 par value. Authorized 10,000,000 shares;
issued and outstanding 6,575,669 shares in 1997;
issued and outstanding 6,548,184 shares in 1996 1,000 1,000
Capital in excess of par value 3,872,000 3,861,000
Accumulated (deficit) earnings (2,655,000) 197,000
------------ -----------
Total shareholders' equity 1,218,000 4,059,000
------------ -----------
Commitments and contingencies (notes 3 through 8, 11, 15 and 16)
$12,481,000 $12,946,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $32,027,000 $30,525,000 $28,606,000
----------- ----------- -----------
Operating expenses:
Direct costs 18,402,000 17,349,000 15,665,000
Selling, general and administrative
expenses (notes 3, 6 and 8) 15,059,000 13,198,000 11,891,000
Impairment loss (note 12) 1,047,000 - -
Asset disposal (note 13) 500,000 - -
Restructuring charge (note 14) 155,000 802,000 -
------------ ----------- -----------
Operating (loss) income (3,136,000) (824,000) 1,050,000
Interest income 13,000 19,000 49,000
Loss on sale of net assets (note 13) (28,000) (73,000) -
(Loss) gain on sale of marketable investment
securities - (8,000) 10,000
Interest expense (note 4) (597,000) (320,000) (255,000)
------------ ------------ ----------
(Loss) income before (benefit)
provision for income taxes (3,748,000) (1,206,000) 854,000
(Benefit) provision for income taxes (note 7) (896,000) (487,000) 378,000
------------ ----------- ----------
Net (loss) income $(2,852,000) (719,000) 476,000
============ =========== ==========
(Loss) earnings per common and common stock equivalent share:
Basic $ (.43) (.11) .08
===== ===== ===
Diluted (.43) (.11) .07
===== ===== ===
Weighted average number of common and common stock
equivalent shares outstanding:
Basic 6,592,773 6,433,966 6,216,756
========= ========= =========
Diluted 6,592,773 6,433,966 6,672,480
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK CAPITAL IN
-------------------- --------------------- EXCESS OF
SHARES AMOUNT SHARES AMOUNT PAR VALUE
------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 - $ - 6,204,648 $ 1,000 3,748,000
Net income - - - - -
Purchase of treasury stock - - - - -
Exercise of stock options and warrants - - 21,200 - 24,000
Retirement of common stock - - (15,000) - (30,000)
Change in market value of available-
for-sale securities (net of tax
effect of $14,000) - - - - -
Investment in joint venture - - - - 1,000
---------- ------- ------------- ------- ------------
Balance at December 31, 1995 - - 6,210,848 1,000 3,743,000
---------- ------- ------------- ------- ------------
Net loss - - - - -
Exercise of stock options and warrants - - 315,396 - 53,000
Common stock issued for services - - 21,940 - 40,000
Sale of warrants in connection with
Series A Senior Subordinated Notes - - - - 25,000
Change in market value of available-
for-sale securities (net of tax effect of $0) - - - - -
---------- ------- ------------- ------- ------------
Balance at December 31, 1996 - - 6,548,184 1,000 3,861,000
---------- ------- ------------- ------- ------------
Net loss - - - - -
Purchase of treasury stock - - - - -
Exercise of stock options and warrants - - 74,985 - 57,000
Retirement of treasury shares - - (72,500) - (88,000)
Common stock issued for services - - 25,000 - 37,000
Sale of warrants in connection with
Series A Senior Subordinated Notes - - - - 5,000
---------- ------- ------------- ------- ------------
Balance at December 31, 1997 - $ - 6,575,669 $ 1,000 3,872,000
========== ========= ============= ======= ============
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED TREASURY STOCK GAINS (LOSSES) TOTAL
EARNINGS ----------------------- ON MARKETABLE SHAREHOLDERS'
(DEFICIT) SHARES AMOUNT EQUITY SECURITIES EQUITY
--------- ------ ------ ----------------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 440,000 - $ - (29,000) 4,160,000
Net income 476,000 - - - 476,000
Purchase of treasury stock - 15,000 (30,000) - (30,000)
Exercise of stock options and warrants - - - - 24,000
Retirement of common stock - (15,000) 30,000 - -
Change in market value of available-
for-sale securities (net of tax
effect of $14,000) - - - 28,000 28,000
Investment in joint venture - - - - 1,000
---------- ---------- ----------- ---------- ------------
Balance at December 31, 1995 916,000 - - (1,000) 4,659,000
---------- ---------- ----------- ------------ ------------
Net loss (719,000) - - - (719,000)
Exercise of stock options and warrants - - - - 53,000
Common stock issued for services - - - - 40,000
Sale of warrants in connection with
Series A Senior Subordinated Notes - - - - 25,000
Change in market value of available-
for-sale securities (net of tax effect of $0) - - - 1,000 1,000
---------- ---------- ----------- ---------- ------------
Balance at December 31, 1996 197,000 - - - 4,059,000
---------- ---------- ----------- ---------- ------------
Net loss (2,852,000) - - - (2,852,000)
Purchase of treasury stock 72,500 (88,000) - (88,000)
Exercise of stock options and warrants - - - - 57,000
Retirement of treasury shares - (72,500) 88,000 - -
Common stock issued for services - - - - 37,000
Sale of warrants in connection with
Series A Senior Subordinated Notes - - - - 5,000
---------- ---------- ----------- ---------- ------------
Balance at December 31, 1997 (2,655,000) - $ - - 1,218,000
========== ========== =========== ========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(2,852,000) (719,000) 476,000
----------- --------- -------
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,147,000 974,000 865,000
Amortization of discount on notes payable 5,000 1,000 -
Amortization of deferred financing fees 39,000 15,000 7,000
Non-cash portion of impairment loss 1,047,000 - -
Non-cash portion of asset disposal 408,000 - -
Non-cash portion of restructuring charge - 610,000 -
Provision for losses on accounts receivable 254,000 287,000 179,000
Loss (gain) on sale of marketable investment
securities - 8,000 (10,000)
Loss on sale of net assets 28,000 73,000 -
Common stock issued for services - 40,000 -
Writedown of investment in joint venture - - 1,000
Increase in deferred compensation 21,000 25,000 21,000
Decrease in accrued rent payable (85,000) (71,000) (182,000)
Increase in cash surrender value of life insurance (55,000) (110,000) (54,000)
Increase in deferred income taxes (668,000) (107,000) (33,000)
Changes in assets and liabilities, net of non-cash
effect of asset disposal, impairment loss
and restructuring charges:
Increase in accounts receivable (799,000) (180,000) (479,000)
Decrease (increase) in prepaid and refundable
income taxes 250,000 (543,000) (6,000)
Decrease (increase) in inventory 413,000 (585,000) (716,000)
Decrease (increase) in prepaid expenses, deferred
charges and goodwill 75,000 (430,000) (488,000)
(Increase) decrease in security deposits - (7,000) 1,000
Increase in accounts payable
and accrued expenses 305,000 590,000 71,000
Decrease in taxes payable - - (216,000)
Increase in accrued interest payable 170,000 34,000 24,000
Increase in unearned retainer income 533,000 553,000 35,000
------------ ------------ -------------
Total adjustments 3,088,000 1,177,000 (980,000)
------------ ------------ -------------
Net cash provided by (used in) operating activities 236,000 458,000 (504,000)
------------ ------------ -------------
Cash flows from investing activities:
Capital expenditures (1,939,000) (1,509,000) (1,246,000)
Repayment of notes receivable 50,000 - -
Proceeds from sale of net assets - 3,000 -
Proceeds from sale of marketable investment securities - 168,000 209,000
------------ ------------- -------------
Net cash used in investing activities (1,889,000) (1,338,000) (1,037,000)
------------- ------------ -------------
Cash flows from financing activities:
Principal borrowings under notes payable 1,719,000 2,975,000 3,381,000
Principal payments under notes payable (516,000) (1,956,000) (1,893,000)
Proceeds from exercise of stock options 57,000 53,000 24,000
Proceeds from sale of warrants in connection with Series A
Senior Subordinated Notes 5,000 25,000 -
Payments to acquire treasury stock (88,000) - (30,000)
Increase in deferred financing fees (19,000) (105,000) (41,000)
------------- ------------- --------------
Net cash provided by financing activities 1,158,000 992,000 1,441,000
------------ ------------ -------------
Net (decrease) increase in cash and
cash equivalents (495,000) 112,000 (100,000)
Cash and cash equivalents at beginning of year 634,000 522,000 622,000
------------ ------------ -------------
Cash and cash equivalents at end of year $ 139,000 634,000 522,000
============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION AND BASIS OF PRESENTATION
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 competetive
intelligence information; the Published Research Division which
provides copyrighted, syndicated and off-the-shelf studies on
various industries and markets; the Emerging Technologies Research
Group, which includes multi-client studies and a Continuous
Advisory Service, which provides information on emerging
technologies; and a consumer based information resource service,
Find/SVP Internet Services, Inc. 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. As such, the
Company sold virtually all of the assets within its Emerging
Technologies Research Group and ceased operations of its consumer
based information resource service (see note 13). Additionally, in
December 1997, the Board of Directors voted in favor of a plan to
effectuate the sale of virtually all assets in its Published
Research Division (see note 12). The Company's remaining services
will come from its research-for-hire businesses.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
FIND/SVP, Inc. and its wholly owned subsidiaries (the "Company").
All significant intercompany balances and transactions have been
eliminated in consolidation.
(C) CASH EQUIVALENTS
Cash equivalents of $33,000 at December 31, 1995 consist solely of
money market accounts. For purposes of the Consolidated Statements
of Cash Flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be
cash equivalents. There were no cash equivalents outstanding at
December 31, 1997 and 1996.
F-7
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
(D) INVENTORIES
Inventories comprise costs of studies, printing and other
publication costs of research reports held for sale. They are
valued at the lower of amortized cost or market. The cost of
reports is amortized over periods not exceeding eighteen months
using the straight-line method beginning with the date of
publication. As of December 31, 1997, inventories of $1,410,000
were included in assets held for sale (see note 12).
(E) EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost.
Depreciation of equipment is computed by the straight-line method
over the estimated useful lives of the assets, which are five
years for electronic equipment and ten years for the Company's
proprietary management information system. Computer software is
depreciated over five years in general. Leasehold improvements are
amortized by the straight-line method over the shorter of the term
of the lease or the estimated life of the asset.
(F) DEFERRED CHARGES AND GOODWILL
Deferred charges primarily comprise the cost of acquired library
information files and electronic databases, which are amortized to
expense over the estimated period of benefit of three years using
the straight-line method and certain costs, offset by cash
advances relating to multi-client studies. Revenues and expenses
of multi-client studies are recognized when the studies are
published.
Goodwill arising from various acquisitions represents excess
purchase price over fair market value and is being amortized on a
straight-line basis over 15 to 40 years.
(G) DEFERRED FINANCING FEES
The deferred financing fees balances primarily relates to costs
incurred with respect to the issuance of the Senior Subordinated
Notes ("Senior Notes") (see note 4). Deferred financing fees are
being amortized on a straight-line basis over the life of the
Senior Notes which are due in 2001 and 2002. The related
amortization is included in interest expense.
F-8
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
(H) INCOME TAXES
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating losses
and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(I) (LOSS) EARNINGS PER SHARE
During March 1997, the Financial Accounting Standards Board
released the Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share." The Company adopted the provisions
of SFAS No. 128 on December 31, 1997. SFAS No. 128, which
supersedes Accounting Principles Board ("APB") Opinion No. 15,
requires dual presentation of basic and diluted (loss) earnings
per share on the face of the income statement. Basic (loss)
earnings per share excludes dilution and is computed by dividing
net income or loss attributable to common stockholders by the
weighted-average number of common shares outstanding for the
period. During 1997, 1996 and 1995 there were 6,592,773, 6,433,966
and 6,216,756, respectively, weighted-average common shares
outstanding. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in
the earnings of the entity. Diluted earnings per share is computed
similarly to fully diluted earnings per share under APB Opinion
No. 15. During 1995, there were 6,672,480 diluted weighted-average
common and common equivalent shares outstanding. For 1997 and
1996, diluted earnings per share is the same as basic as all
common share equivalents were antidilutive as the Company had a
net loss for those periods.
Common share equivalents that could potentially dilute basic
(loss) earnings per share in the future and that were not included
in the computation of diluted (loss) earnings per share because
they were antidilutive were 2,723,077, 1,560,914 and 181,208 at
December 31, 1997, 1996 and 1995, respectively (see note 15).
(J) REVENUE RECOGNITION
Revenues from annual retainer fees are recognized ratably over the
contractual period. Other revenues are recognized as earned.
Revenues include certain out-of-pocket and other expenses billed
to clients which aggregated approximately $3,191,000, $3,376,000,
and $3,428,000 in 1997, 1996 and 1995, respectively.
F-9
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
(K) MARKETABLE INVESTMENT SECURITIES
The Company classifies its debt and marketable equity securities
in one of three categories: trading, available-for-sale, or
held-to-maturity. Trading securities are bought and held
principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities in which the
Company has the ability and intent to hold the security until
maturity. All other securities not included in trading or
held-to-maturity are classified as available-for-sale. There were
no marketable investment securities held as of December 31, 1997
and 1996.
Trading and available-for-sale securities are recorded at fair
value. Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from
earnings and are reported as a separate component of shareholders'
equity until realized. Realized gains and losses from the sale of
available-for-sale securities are included in earnings and are
derived using the specific identification method for determining
the cost of securities sold. Transfers of securities between
categories are recorded at fair value at the date of transfer.
A decline in the market value of any available-for-sale security
below cost that is deemed other than temporary is charged to
earnings and results in the establishment of a new cost basis for
the security. Dividend and interest income are recognized when
earned.
The net change in market value of securities available-for-sale
for 1997, 1996 and 1995 resulted in a $0, $1,000 and a $28,000
unrealized gain, respectively, which was recorded as a separate
component of shareholders' equity.
During 1997, 1996 and 1995, proceeds from the sale of marketable
investment securities available for sale were $0, $168,000 and
$209,000, respectively, and gross realized losses included in
income were $8,000 in 1996 and gross realized gains included in
income were $10,000 in 1995.
(L) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating the
fair value of financial instruments:
The carrying values reported in the balance sheets for cash,
accounts receivable, prepaid expenses and other current assets,
accounts payable and accrued expenses approximates fair values
because of their short maturities.
The fair value of notes payable, which approximates its carrying
value, is estimated based on the current rates offered to the
Company for debt of the same remaining maturities.
F-10
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
(M) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed of," on January 1, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
undiscounted future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. This Statement did not
have a material impact on the Company's financial position,
results of operations, or liquidity, except for certain long-lived
assets to be disposed of (see note 12 "Impairment Loss").
(N) COMPREHENSIVE INCOME AND SEGMENTS OF AN ENTERPRISE
In June 1997, Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information," were issued. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components
(revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS No. 131 establishes
standards for the way that public companies report selected
information about operating segments in annual financial
statements and requires that those companies report selected
information about segments in interim financial reports issued to
shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and
major customers. SFAS No. 130 and SFAS No. 131 are effective for
financial statements for periods beginning after December 15,
1997. The Company has determined that these pronouncements will
not have a material impact in its Consolidated Financial
Statements.
(O) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities and the
reported amounts of revenue and expenses to prepare these
consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
F-11
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1), CONTINUED
(P) RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with
current year presentation.
(2) EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
At December 31, 1997 and 1996, equipment and leasehold improvements
consist of the following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Furniture, fixtures and equipment, including
computer software $ 7,569,000 6,097,000
Leasehold improvements 1,535,000 1,841,000
------------ ------------
9,104,000 7,938,000
Less: accumulated depreciation and amortization 4,558,000 4,003,000
------------ ------------
$ 4,546,000 3,935,000
============ ============
</TABLE>
(3) LEASES
In December 1986, the Company entered into an operating lease agreement
for its principal offices. The lease agreement provided for a term of
approximately 15 years, commencing in May 1987. The initial annual rental
was $576,000 with scheduled increases in succeeding periods. During 1991,
modifications were made to the timing of certain payments. During 1992,
the lease was extended an additional three years. Rental expense under
this lease is recorded on a straight-line basis. Accordingly, scheduled
payments through December 31, 1997 exceeded rental expense recorded on
this lease through such date by $44,000 and rental expense recorded
through December 31, 1996 exceeded scheduled payments through such date
by $126,000.
In August 1994, the Company entered into a five-year operating lease
agreement for office space. The initial annual rental was $267,000 with
scheduled increases in succeeding periods. In March 1995, the Company
entered into a ten-year lease, expiring June 30, 2005, for additional
office space with an initial annual rental of $414,000 with scheduled
increases in succeeding periods. In connection with this lease, the
Company extended the August 1994 lease through June 30, 2005. Rental
expense on this lease is recorded on a straight-line basis. Accordingly,
rent recorded through December 31, 1997 and 1996 exceeded scheduled
payments by $156,000 and $71,000, respectively.
F-12
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3), CONTINUED
The Company's leases of office space include standard escalation clauses.
Rental expenses under leases for office space and certain items of
equipment accounted for as operating leases were $1,903,000, $1,794,000
and $1,396,000 in 1997, 1996 and 1995, respectively. Additionally,
$41,000 of rent expense was accrued at December 31, 1997 related to an
asset disposal (see note 13).
The future minimum lease payments under noncancellable operating leases
as of December 31, 1997 were as follows:
Operating
Year ending December 31 Leases
----------------------- -------
1998 $ 1,677,000
1999 1,629,000
2000 1,629,000
2001 1,639,000
2002 1,399,000
Thereafter 2,897,000
-----------
Total minimum lease payments $10,870,000
===========
F-13
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Borrowings under debt agreements with a bank:
$2,000,000 fixed rate five-year term note, payable
in quarterly installments of $100,000, at an
interest rate of 8.86% through April 2000 $ 1,000,000 1,400,000
$500,000 five-year term note, payable in quarterly
installments of $25,000, at an interest rate
of prime plus 0.75%, which was 9.25% at
December 31, 1997, through April 2001 350,000 450,000
Borrowings under a commercial revolving
promissory note at an interest rate of prime plus
1.5% at December 31, 1997 and prime plus .25%
at December 31, 1996. Prime was 8.5%
at December 31, 1997 and 1996. 1,249,000 -
------------ -----------
Subtotal 2,599,000 1,850,000
------------ -----------
Borrowings under debt agreements with investors:
$2,025,000 Series A Senior Subordinated Note,
issued at 99%, due October 31, 2001, at an
interest rate of 12%, net of unamortized
discount of $16,000 and $20,000 as of
December 31, 1997 and 1996, respectively 2,009,000 2,005,000
$475,000 Series A Senior Subordinated Note -
SVP, S.A., issued at 99%, due November 30,
2001, at an interest rate of 12%, net of
unamortized discount of $4,000 471,000 471,000
$475,000 Series A Senior Subordinated Note -
SVP, S.A., issued at 99%, due August 25,
2002, at an interest rate of 12%, net of
unamortized discount of $4,000 471,000 -
------------ ------------
Subtotal 5,550,000 4,326,000
------------ ------------
$60,000 note payable due in monthly installments of
$1,800, including interest at 8% through
October 1997 - 16,000
------------ ------------
Total debt 5,550,000 4,342,000
Less current installments 1,749,000 516,000
------------ ------------
Notes payable, excluding
current installments $ 3,801,000 3,826,000
============ ============
</TABLE>
F-14
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4), CONTINUED
(A) DEBT AGREEMENTS WITH BANK
On April 27, 1995, the Company entered into a financing agreement with a
commercial bank (the "Bank") for a $2,000,000 fixed rate term note ("Term
Note") through April 2000 and a Commercial Revolving Promissory Note (the
"Note") that permitted the Company to borrow up to $2,000,000 on a line
of credit facility through April 1997. During 1996, the Company amended
its financing agreement with the Bank to allow for an additional $500,000
term note ("Term Note") through April 2001. The Term Notes and the Note
are secured by all of the assets of the Company.
During July 1997, the Company signed an amendment to the Note with the
Bank increasing the available credit to $2,500,000 from $2,000,000. The
$500,000 additional credit was secured by the anticipated tax refund
related to the Company's 1996 loss. During the fourth quarter of 1997,
the Company received the refund and the available credit was reduced
accordingly.
During October 1997, the Company signed an additional Commercial
Revolving Promissory Note for up to an additional $1,000,000 with the
Bank, for a total available of $3,000,000. The interest rate on the
entire Revolving Promissory Notes was raised to prime plus one and
one-half percent. All other terms are similar to those of the amended
$2,500,000 Note dated July 1997. The additional $1,000,000 facility was
secured by a standby letter of credit provided by SVP, S.A. ("SVP"), a
major shareholder of the Company. This facility and the standby letter of
credit expired on March 26, 1998.
The Note had originally expired on April 27, 1997, and the Company
entered into an amended agreement during May which expired on September
30, 1997. The agreement was then extended until March 26, 1998, subject
to a $1,000,000 capital contribution which was provided by SVP during
January 1998 (see note 15).
On March 30, 1998, the Company signed a term sheet with the Bank to
extend, until March 25, 1999, the terms of the existing Note dated April
27, 1995 (see above). The amount available under the Note will be reduced
to $1,000,000, less outstanding letters of credit, which were $148,000 as
of March 30, 1998. The interest rate on the Note will be the Bank's prime
rate plus one-quarter of one percent (currently 8.75%). SVP has provided
credit support for the Note in the form of a $1,000,000 letter of credit.
Additionally, SVP will provide a second letter of credit to secure the
two outstanding five year term notes. The dollar amount of the second
letter of credit will at all times equal the lesser of (a) the aggregate
principal amount of the two Notes or (b) $1,000,000. Proceeds from any
sale of assets outside the normal course of business shall be applied
first to any outstanding balance under the letter of credit with the
remaining balance retained as working capital (see note 12).
F-15
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4), CONTINUED
The Company's debt agreements with the Bank at December 31, 1997 contain
numerous affirmative and negative covenants, including financial
covenants relating to the Company's net worth, working capital and
additional borrowings, and restrict payment of dividends. In accordance
with the amended agreements to the Note and the term sheet signed March
30, 1998, all defaults have been waived. Future covenants will be
determined with the new agreement.
The Company's line of credit agreement calls for quarterly payments of a
$1,000 nonrefundable facility fee.
(B) DEBT AGREEMENTS WITH INVESTORS
On October 31, 1996, the Company entered into a Note and Warrant Purchase
Agreement with Furman Selz SBIC, L.P. ("Furman Selz"). Pursuant to the
agreement, Furman Selz purchased from the Company $2,025,000 Series A
Senior Subordinated Note, issued at 99%. The Company sold warrants to
purchase 900,000 shares of common stock at a price of $2.25 per share in
conjunction with the note (see note 5 (a)). In connection with these
transactions, the Company recorded debt discount of $20,000.
On November 30, 1996, the Company entered into a Note and Warrant
Purchase Agreement with SVP. Pursuant to the agreement, SVP purchased
from the Company $475,000 Series A Senior Subordinated Note, issued at
99%. The Company sold warrants to purchase 211,111 shares of common stock
at a price of $2.25 per share in conjunction with the note (see note 5
(a)). In connection with these transactions, the Company recorded debt
discount of $5,000.
The Senior Subordinated Notes ("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 Note and Warrant Purchase Agreements further provide 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 ("Option Notes and Warrants"). On
August 25, 1997, SVP purchased 475,000 units, consisting of $475,000
principal amount of Option Notes and Warrants to purchase 211,111 shares
of Common Stock at $2.25 per share (see note 5 (a)). In connection with
this transaction, the Company recorded debt discount of $5,000.
F-16
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4), CONTINUED
The aggregate maturities of long-term debt, excluding borrowings under
the Commercial Revolving Promissory Note, for each of the five years subsequent
to December 31, 1997 are as follows:
Year Ending December 31 Amount
----------------------- ------
1998 $ 500,000
1999 500,000
2000 300,000
2001 2,550,000
2002 475,000
------------
$ 4,325,000
============
(5) SHAREHOLDERS' EQUITY
(A) COMMON STOCK WARRANTS
On June 22, 1993, the Company issued warrants to a vice president
of the Company under which he is entitled to purchase 4,000 shares
of common stock for $1.31 per share during the five-year period
commencing from that date. No warrants have been exercised to
date.
On February 10, 1995, the Company issued warrants to a company
under which it is entitled to purchase 150,000 shares of the
Company's common stock at $2.25 per share, the estimated fair
market value at date of grant. The warrant becomes exercisable at
the rate of 50,000 shares each year beginning February 13, 1996
and expires ten years from the date of grant. No warrants have
been exercised to date.
On October 31, 1996, in conjunction with the issuance of the
Series A Subordinated Note (see note 4), the Company sold warrants
to Furman Selz, under which it is entitled to purchase 900,000
shares of the Company's common stock at $2.25 per share for ten
years commencing from that date. No warrants have been exercised
to date.
On November 30, 1996, in conjunction with the issuance of the
Series A Subordinated Note (see note 4), the Company sold warrants
to SVP, S.A., under which it is entitled to purchase 211,111
shares of the Company's common stock at $2.25 per share for ten
years commencing from that date. No warrants have been exercised
to date.
F-17
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5), CONTINUED
On August 25, 1997, in conjunction with the issuance of the Series
A Subordinated Note (see note 4), the Company sold warrants to
SVP, S.A., under which it is entitled to purchase 211,111 shares
of the Company's common stock at $2.25 per share for ten years
commencing from that date. No warrants have been exercised to
date.
(B) STOCK OPTION PLAN
In January 1996, the Company adopted the FIND/SVP, Inc. 1996 Stock
Option Plan (the "Plan"). The Plan authorizes grants of options to
purchase up to 650,000 shares of common stock, issuable to
employees, directors and consultants of the Company, at prices at
least equal to fair market value at the date of grant (110% of the
fair market value for holders of 10% or more of the outstanding
shares of common stock).
The options to be granted under the Plan will be designated as
incentive stock options or non-incentive stock options by the
Stock Option Committee. Options granted under the Plan are
exercisable during a period of no more than ten years from the
date of the grant (five years for options granted to holders of
10% or more of the outstanding shares of common stock). All
options outstanding at December 31, 1997 expire within the next
five years if not exercised. Options which are cancelled or expire
during the term of the Plan are eligible to be re-issued under the
Plan and, therefore, are considered available for grant.
There were 21,000 options available for grant under the FIND/SVP,
Inc. 1986 Stock Option plan (the "1986 Plan") upon its expiration
in August 1996. These options, along with an additional 126,265
options from the 1986 Plan which either expired or were cancelled
after August 1996, were no longer available for grant at December
31, 1997.
F-18
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5), CONTINUED
Activity under the stock option plans is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Outstanding options at January 1 1,252,963 966,000 861,100
Granted - option prices ranging from
$0.781 to $1.8125 per share in 1997,
$1.875 to $2.875 per share in 1996
and $1.9375 to $2.25 per share in 1995 140,000 689,350 129,500
Exercised (76,985) (366,437) (21,200)
Cancelled and expired (139,265) (35,950) (3,400)
------------ ------------ ----------
Outstanding (in 1997, exercisable at $0.781
to $2.875 per share) at December 31 1,176,713 1,252,963 966,000
============ ============ ==========
Exercisable (in 1997, exercisable at $0.781
to $2.875 per share) at December 31 605,746 589,713 776,383
============ ========== ==========
Available for grant at December 31 128,100 238,150 279,500
============ ========== ==========
</TABLE>
Included in the options granted in 1996 are 300,000 options the
Company granted to the President of the Company. Contingent upon
meeting certain earnings levels over the life of his employment
agreement, these options will vest on the certification date of
the targeted earnings levels. The exercise price of these options
will be equal to the fair market value of the common stock on the
vesting date or 110% of such fair market value if the President is
a holder of 10% or more of the outstanding shares of common stock
on such date.
At December 31, 1997, 1996 and 1995, the number of options
exercisable was 605,746, 589,713 and 776,383, respectively, and
the weighted-average exercise price of those options was $1.79,
$1.61 and $1.04, respectively.
F-19
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5), CONTINUED
The Company applies APB Opinion No. 25 in accounting for its Plan
and, accordingly, no compensation costs has been recognized for
its stock options in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net (loss) income would
have been (increased) reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net (loss) income As reported $(2,852,000) (719,000) 476,000
Proforma (2,931,000) (781,000) 427,000
----------- --------- --------
(Loss) earnings Basic
per share As reported (.43) (.11) .08
Proforma (.44) (.12) .07
----- ----- ---
Diluted
As reported (.43) (.11) .07
Proforma (.44) (.12) .06
----- ----- ---
</TABLE>
The per share weighted-average fair value of stock options granted
during 1997, 1996 and 1995 was $0.57, $1.17 and $1.35,
respectively, on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average
assumptions: 1997 - expected dividend yield of 0%, risk-free
interest rate of 6.5%, volatility of 56.4% and an expected life of
3 years; 1996 - expected dividend yield of 0%, risk-free interest
rate of 6.5%, volatility of 87.8% and an expected life of 3 years;
1995 - expected dividend yield of 0%, risk-free interest rate of
6.5%, volatility of 92.1% and an expected life of 3 years.
Volatility is calculated over the five preceding years for 1997,
1996 and 1995, respectively.
Proforma net (loss) income reflects only options granted beginning
in 1995. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in the
proforma net income amounts presented above because compensation
cost for options granted prior to January 1, 1995 is not
considered and compensation cost is reflected over the options'
vesting period of up to 5 years.
At December 31, 1997, the range of exercise prices and
weighted-average remaining contractual life of outstanding options
was $0.7810 to $2.875 and 2.19 years, respectively.
F-20
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5), CONTINUED
(C) COMMON STOCK ISSUED FOR SERVICES
In 1997, the Company issued 25,000 shares of common stock with a
value of $37,000 to a third party for services rendered.
In 1996, the Company issued 21,940 shares of common stock with a
value of $40,000 to a third party for services rendered.
(D) PREFERRED STOCK
Effective June 1995, the Company amended its Certificate of
Incorporation to authorize an additional class of stock consisting
of 2,000,000 shares of $.0001 par value preferred stock. No shares
have been issued as of December 31, 1997.
(6) SVP INTERNATIONAL
The Company entered into an agreement in 1971, amended in 1981, with SVP
International ("SVP"), a Swiss company which, including its affiliated
companies, is the beneficial owner of 23.6% of the outstanding stock of
the Company as of December 31, 1997 (see note 15). The agreement provides
that SVP will aid and advise the Company in the operation of an
information service and permit access to other foreign SVP information
centers and the use of the SVP trademark and logo. The agreement shall
continue in perpetuity, unless amended by the parties thereto. It
provides that the Company will pay to SVP royalties computed on an annual
basis at the following rates: $18,000 per year, plus 1.2% of the gross
profit from all publications included in the Company's gross revenues
less than $10 million for such year, and 2% of the amount of the
Company's nonpublishing gross revenues for each such year derived from
the "FIND/SVP Service" in excess of $2 million but less than $4 million
and 1% of the amount of such nonpublishing gross revenues in excess of $4
million but less than $10 million.
Royalty charges under the agreement were $131,000, $137,000 and $139,000
in 1997, 1996 and 1995, respectively. Royalties accrued but unpaid were
approximately $84,000 and 74,000 at December 31, 1997 and 1996,
respectively, and are included in accrued expenses in the consolidated
balance sheets.
The Company receives and renders information services to other members of
the SVP network. Charges for such services are made at rates similar to
those used for the Company's other clients.
F-21
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) INCOME TAXES
The provision for income taxes consists of the following:
1997 1996 1995
---- ---- ----
Current:
Federal $ (228,000) (342,000) 255,000
State and local - 6,000 156,000
---------- ---------- ---------
(228,000) (342,000) 411,000
---------- ---------- ---------
Deferred:
Federal (983,000) (52,000) (22,000)
State and local (204,000) (99,000) (11,000)
---------- ---------- ---------
(1,187,000) (151,000) (33,000)
Valuation allowance 519,000 - -
---------- ---------- ---------
(668,000) (151,000) (33,000)
---------- ---------- ---------
$ (896,000) (487,000) 378,000
========== ========== =========
Income tax (benefit) expense differs from the amount computed by
multiplying the statutory rate of 34% to income before income taxes due to the
following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income tax (benefit) expense at statutory rate $ (1,274,000) (410,000) 290,000
Increase (reduction) in income taxes
resulting from:
State and local income taxes, net of
Federal income tax benefit (204,000) (99,000) 83,000
Nontaxable income (34,000) (33,000) (22,000)
Nondeductible expenses 18,000 38,000 34,000
Expiring tax credits 93,000 - -
Other (14,000) 17,000 (7,000)
---------- --------- ---------
(1,415,000) (487,000) 378,000
Increase in valuation allowance 519,000 - -
---------- --------- ---------
$ (896,000) (487,000) 378,000
========== ========= =========
</TABLE>
F-22
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7), CONTINUED
The significant components of deferred tax expense for the years ended
December 31, 1997, 1996 and 1995 are attributable to the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Accounts receivable, principally due to
allowance for doubtful accounts $ (6,000) 1,000 (3,000)
Leasehold improvements, principally
due to differences in amortization (38,000) (34,000) (41,000)
Deferred compensation, principally due to
accrual for financial reporting purposes (9,000) (11,000) (20,000)
Equipment, principally due to differences
in depreciation 34,000 46,000 30,000)
Federal net operating loss carryforward (512,000) - -
State and local net operating loss
Carryforward (204,000) (99,000) -
Impairment loss (461,000) - -
Restructuring charge 10,000 (54,000) -
Other (1,000) - 1,000
---------- ---------- --------
(1,187,000) (151,000) (33,000)
Increase in valuation allowance 519,000 - -
--------- ---------- --------
$ (668,000) (151,000) (33,000)
=========== ========== ========
</TABLE>
F-23
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7), CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets, net of deferred tax liabilities at
December 31, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts $ 52,000 46,000
Leasehold improvements, principally
due to differences in amortization 193,000 155,000
Deferred compensation, principally due to
accrual for financial reporting purposes 76,000 67,000
Federal net operating loss carryforward 512,000 -
State and local net operating loss carryforward 303,000 99,000
Impairment loss 461,000 -
Restructuring charge 44,000 54,000
Deferred tax liability:
Equipment, principally due to differences
in depreciation (154,000) (120,000)
Goodwill, principally due to difference
in amortization (1,000) (1,000)
Other - (1,000)
---------- --------
1,486,000 299,000
Valuation allowance (519,000) -
---------- --------
Net deferred tax asset $ 967,000 299,000
========== ========
</TABLE>
Management of the Company has determined, based on the Company's history
of prior years' operating earnings relating to its research-for-hire
businesses, that a valuation allowance of $519,000 was necessary due to
the uncertainty of future earnings to realize the net deferred tax asset.
Of the net deferred tax asset, $286,000 has been classified as current.
F-24
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) EMPLOYEE BENEFITS AND DEFERRED COMPENSATION
(A) PENSION PLANS
The Company established a 401(k) and profit sharing plan for all
eligible employees. Participants may elect to defer up to 12% of
their annual compensation which is subject to annual limitation as
provided in Internal Revenue Code Section 415(d). The Company will
contribute 20% of the employees' contributions up to 1% of their
annual compensation. Profit sharing contributions are at the
discretion of the Company. Participants vest in the employer's
contribution at 20% after three years of service increasing by 20%
for each additional year of service. The Company's contribution,
accrued but unpaid, to this plan was $75,000 and $77,000 at
December 31, 1997 and 1996, respectively.
During 1997, the Company ceased funding its Target Benefit Pension
Plan, and is in the process of closing the plan which will include
filing for an IRS Determination Letter. As such, all participants
were declared 100% vested on January 1, 1997. The Company's
contribution, accrued but unpaid, to this plan was $0 and $68,000
at December 31, 1997 and 1996, respectively. The Company has
accrued $40,000 for estimated closing costs of the plan as of
December 31, 1997.
(B) DEFERRED COMPENSATION
The Company maintains deferred compensation agreements for two
officers, with benefits commencing upon retirement, death or
disability. Deferred compensation expense under these agreements
was approximately $21,000, $25,000 and $21,000 in 1997, 1996 and
1995, respectively.
(C) EMPLOYMENT AGREEMENTS
Effective January 1, 1996, the Company entered into an employment
agreement (the "Agreement") with the President of the Company. The
Agreement terminates on December 31, 2001. The Agreement
supersedes a May 1991 agreement and provides for a base salary
with cost of living escalations. The agreement provides a
performance bonus equal to 10% per annum of the pre-tax profits of
the Company in excess of $1,000,000 for each year through the end
of the Agreement. The Agreement was amended in December 1996 to
limit the amount of bonus to a maximum of $250,000 in any year,
and to pay a $50,000 cash bonus in each of January 1997 and
January 1998. In addition, the Agreement contains certain
severance provisions, as defined in the Agreement, entitling the
President to receive compensation through the end of the Agreement
upon termination without cause, or voluntary termination upon
certain conditions, which includes the acquisition by a party of
30% or more of the outstanding shares of common stock of the
Company or a change in the majority of incumbent Board members,
and certain other occurrences. If termination occurs at a time
when there is less than one year left in the Agreement,
compensation will continue for a two-year period from the date of
termination.
F-25
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8), CONTINUED
On January 11, 1995, the Company entered into severance agreements
with two of its executive officers, which call for payment of
their current base salary for a period of one year from the date
of termination, without cause or voluntary termination upon
certain conditions, as defined in the agreement, which includes
the acquisition by a party of 30% or more of the outstanding
shares of common stock of the Company or a change in the majority
of incumbent Board members. In addition, if the individuals are
terminated, all options granted to the respective individuals
shall become immediately exercisable. At December 31, 1997, 77,700
options in the aggregate were not exercisable by the two officers.
During February 1998, SVP, S.A. purchased additional shares of the
Company. The purchase of the shares has triggered the change of
control provisions in the above agreements. In consideration of
SVP, S.A. providing two $1,000,000 letters of credit to secure the
Company's debt agreements with a commercial bank during March
1998, the President waived his rights related to the change of
control provision in his Agreement, only as it relates to the
holdings of SVP, S.A. and its affiliates, in the Company. The two
executive officers have not expressed intent on exercising such
clause in their respective agreements. If two such executive
officers exercise their right of voluntary termination based on
this clause, the maximum exposure to the Company is approximately
$340,000 to be paid over a one year period, plus the vesting of
77,000 currently non-exercisable options (see notes 4 and 15).
(9) SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid for interest and income taxes during the years ended
December 31, 1997, 1996 and 1995 was as follows:
1997 1996 1995
Interest $ 383,000 270,000 224,000
========== ======= ==========
Income taxes $ 3,000 164,000 631,000
========== ======= ==========
The Company had the following non-cash financing activities in 1997:
In connection with the Company's sale of ETRG's assets during 1997, the
Company received a $125,000 two-year note (see note 13).
During 1997, the Company issued 25,000 shares of common stock with a
value of $37,000 to a third party for services rendered.
During 1996, the Company issued 21,940 shares of common stock with a
value of $40,000 to a third party for services rendered.
F-26
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9), CONTINUED
During 1997, the Company recorded the cashless exercise of 8,000 options
at $0.63 in exchange for 2,000 shares of common stock at prices ranging
from $1.125 to $1.25. Such shares were held for a period of at least six
months before the respective exchange. The value of these transactions
was $2,000.
During 1996, the Company recorded the cashless exercise of 275,686
options at prices ranging from $0.275 to $2.1875 in exchange for 51,041
shares of common stock at prices ranging from $2.125 to $3.00. Such
shares were held for a period of at least six months before the
respective exchange. The value of these transactions was $119,000.
(10) ACCRUED EXPENSES
Accrued expenses at December 31, 1997 and 1996 consisted of the
following:
1997 1996
---- ----
Accrued bonuses and
employee benefits (note 8) $ 812,000 696,000
Accrued severance and
retirement (notes 13 and 14) 233,000 122,000
Accrued expenses billed to clients 233,000 167,000
Accrued SVP royalty (note 6) 84,000 74,000
Other accrued expenses 510,000 322,000
------------ ----------
$ 1,872,000 1,381,000
============ ==========
(11) LITIGATION
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.
F-27
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11), CONTINUED
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 Company's directors. The
complaint sought to remove the defendants as directors under New York
Business Corporation Law 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. In return, the Company, through proceeds from its
insurance company, paid Asset Value legal fees and disbursements in the
amount of $110,000 and together with SVP, S.A., bought Asset Value's
900,000 shares of stock in the Company at a price of $1.25 per share on
February 20, 1998. As such, there will be no financial statement impact
for this transaction. (The Company bought 274,400 of those shares, and
SVP, S.A. bought 625,600 of those shares.) 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).
F-28
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) IMPAIRMENT LOSS
During the fourth quarter of 1997, the Company decided to sell the
majority of assets held in the 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. As a result of the Company's decision, an
impairment loss of $1,047,000 was recorded in December 1997. The Company
has presented the assets held for sale as a separate line item in its
December 31, 1997 consolidated balance sheet. Discussions with potential
buyers are in the early stages, and the Company will review its estimated
net realizable values as additional information becomes available.
The aforementioned charge included write-downs of inventory of $517,000,
fixed assets of $405,000, goodwill of $102,000 and deferred charges of
$23,000. There are no cash implications relating to this charge.
(13) SALE OF ETRG'S ASSETS AND ASSET DISPOSAL
During the fourth quarter of 1997, the Company sold certain assets held
in its Emerging Technologies Research Group ("ETRG"). The Company
recorded a $28,000 loss related to this sale. In accordance with the
terms of the Agreement, the Company received a two year $125,000 Note
bearing interest at an annual rate of 10% and has retained a security
interest in the ETRG database. A principal payment of $31,250 plus
accrued interest is due on May 4, 1998. Commencing on August 4, 1998, and
on the fourth day of each November, February, May and August thereafter,
quarterly principal payments of $15,625 plus accrued interest is due. The
final payment is due November 4, 1999. As a result of this transaction,
the Company will no longer operate its multi-client study business, its
Continuous Advisory Service and its Interactive Consumer Newsletter. The
Company has retained the rights to its currently published off-the-shelf
studies and will receive a 5% royalty on sales of the above services for
a two year period.
During the fourth quarter of 1997, the Company ceased operation of its
FIND/SVP Internet Services, Inc. subsidiary. Accordingly, the Company has
written down the assets in this subsidiary by $408,000 to zero.
Additionally, the Company has accrued $35,000 of severance cost, all of
which will be paid by March 31, 1998; $16,000 of shut-down costs to be
paid in the first quarter of 1998; and rent expenses of $41,000 to cover
rents payable in the first quarter of 1998 while the Company negotiates
the release of its obligations with the landlord. If any additional rents
are incurred, they will be expensed in 1998.
(14) RESTRUCTURING CHARGES
In conjunction with the Company's decision to re-focus its efforts on its
core competencies (see note 1(a)), the Company reduced its general and
administrative staff on December 31, 1997. Accordingly, the Company
recorded a $155,000 restructuring charge during the fourth quarter of
1997, all of which will be paid in 1998.
F-29
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14), CONTINUED
During the third quarter of 1996, the Company implemented a plan to
restructure and consolidate operations, which included the reorganization
of its operating units and a change in the method of marketing and
cross-selling its various products. As a result, the Company recorded a
pre-tax restructuring charge of $802,000 during the third quarter of
1996.
The restructuring charge included a writedown of certain inventories and
deferred charges of $490,000, severance and retirement charges of
$167,000, charges relating to marketing and planning materials which will
not be used after the restructuring of $117,000 and charges for the
consolidation and reduction of several small and unprofitable product
groups of $28,000, of which $122,000 and $47,000 of the remaining
severance and retirement payments has been included in accrued expenses
at December 31, 1996 and 1997.
(15) SUBSEQUENT EVENTS
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 to SVP and issued a $250,000 Convertible Note on
January 15, 1998, pending the availability of 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 11).
With this transaction SVP and its affiliates currently own approximately
37% of the then outstanding common shares in the Company, excluding
outstanding warrants.
(16) SUBSEQUENT EVENTS - UNAUDITED
On March 27, 1998, the Company implemented a cost cutting plan which
includes the reduction of approximately 20 full-time positions in its
core businesses. As such, the Company expects to record a charge for
severance and related costs of approximately $325,000 during the quarter
ended March 31, 1998.
On February 27, 1998, the Company received notification from the NASDAQ
Stock Market, Inc. ("NASDAQ") that the Company is 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 30, 1998, the
Company has not met such requirement.
F-30
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(16), CONTINUED
As of December 31, 1997, the Company is not in compliance with the NASDAQ
net tangible asset requirement. Per discussions with NASDAQ, the Company
is including a pro-forma net tangible asset statement including the
$1,000,000 capital contribution received from SVP, S.A. in 1998 (see note
15). NASDAQ has informed the Company that since this statement shows
pro-forma net tangible assets which are in compliance with the NASDAQ
requirement, it will consider the Company to be in compliance.
Pro-Forma Net Tangible Assets
Total assets at December 31, 1997 $12,481,000
Less: Goodwill, net (117,000)
Less: Liabilities (11,263,000)
------------
1,101,000
Capital received from SVP, S.A. during
first quarter of 1998 1,000,000
-----------
Pro-forma Net Tangible Assets $ 2,101,000
===========
F-31
<PAGE>
SCHEDULE II
-----------
FIND/SVP, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1997, 1996 and 1995
(in thousands of dollars)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO DEDUC- BALANCE AT
CLASSIFICATION OF YEAR EARNINGS TIONS (1) END OF YEAR
------- -------- --------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful accounts $ 103 254 239 118
==== ==== ===== ===
Year ended December 31, 1996:
Allowance for doubtful accounts $ 105 287 289 103
=== === === ===
Year ended December 31, 1995:
Allowance for doubtful accounts $ 131 179 205 105
==== === === ===
</TABLE>
Note: (1) Amounts written off, net of recoveries.
F-32
<PAGE>
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No change in the accountants has taken place within the three-year
period ended, or in any period subsequent to, December 31, 1997.
PART III
ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Andrew P. Garvin 52 Chairman of the Board, President, Chief
Executive Officer and Director
Peter J. Fiorillo 38 Executive Vice President, Chief
Financial Officer, Chief Information
Officer, Treasurer and Corporate Secretary
John D. Kuranz 50 Vice President, Managing Director,
Published Research Division
Brigitte de Gastines 54 Director
Howard S. Breslow 58 Director
Frederick H. Fruitman 47 Director
Charles Baudoin 78 Director
Jean-Louis Bodmer 56 Director
Each director is elected for a period of one year at the Company's annual
meeting of shareholders and serves until his successor is duly elected by
shareholders. Officers are elected by and serve at the will of the Board of
Directors.
Ms. de Gastines was elected a director of the Company in accordance with
the Company's licensing agreement with SVP International. See "Item 1. Business
- - SVP Network; Licensing Agreement with SVP International."
Mr. Garvin is a founder of the Company and has served as its Chief
Executive Officer and Chairman of the Board since 1972 and as its President
since 1978. Mr. Garvin has been a director of the Company since its inception
and treasurer until 1997. From 1979 to 1982, Mr. Garvin was a member of the
Board of Directors of the Information Industry Association and served as
Chairman of the 1979 National Information Conference and Exposition. Mr. Garvin
is the author of THE ART OF BEING WELL INFORMED, an information resource
handbook for executives. Mr. Garvin was Vice President of his own public
relations and marketing firm. Mr. Garvin received a B.A. degree in political
science from Yale University and an M.S. degree in journalism from the Columbia
Graduate School of Journalism. Mr. Garvin is a
61
<PAGE>
director of Esquire Communications, Ltd., a publicly held company engaged in
court reporting services.
Mr. Fiorillo has been the Company's Executive Vice President since November
1994, Chief Financial Officer since 1991 and Treasurer, Corporate Secretary and
Chief Information Officer since 1997, and was Vice President Finance and
Administration from 1991 to November 1994 and Assistant Corporate Secretary from
1994 to 1997. Since 1996, Mr. Fiorillo had served as President of FIND/SVP
Internet Services, Inc. which ceased operations on December 31, 1997. From 1987
until 1991, Mr. Fiorillo was employed by Robert Half of New York, Inc., a
financial executive recruiting firm, including as President from 1989 to 1991.
Prior thereto he was the Controller of Profit Freight Systems, Inc., a large
publicly held international freight forwarder; the Vice President of Finance of
Carl Byoir & Associates, the third largest international public relations firm;
and a Certified Public Accountant with Arthur Young & Company. Mr. Fiorillo
received a B.A. degree from Franklin & Marshall College and is a Certified
Public Accountant in New York State.
Mr. Kuranz has been the Managing Director of FIND/SVP Published Products,
Inc. since January 1994 and a Vice President of the Company since November 1994.
From 1990 to 1994, he served as an independent consultant to the electronic
publishing industry. From 1985 to 1989, he served as President of Schneck
Aviation, an aircraft engine manufacturing firm. From 1981 to 1985, he was an
Executive Vice President of Ziff-Davis, a privately held computer publishing
company. From 1975 to 1980, he was President of Management Contents, Inc., a
database publishing company. From 1971 to 1974, he was employed by G.D. Searle,
a pharmaceutical company, as a Bio-Medical Researcher. Mr. Kuranz received his
B.S. degree in Biochemistry from St. Mary's College in 1969.
Ms. De Gastines has been a director of the Company since 1982. She has
served as the General Manager of SVP International since 1985 and SVP S.A. since
1976.
Mr. Breslow has been a director of the Company since 1986. He has been a
practicing attorney in New York for more than 25 years and a member of the law
firm of Breslow & Walker, LLP, New York, New York for more than 20 years.
Breslow & Walker, LLP is currently the Company's general counsel. Mr. Breslow
currently serves as a director of Cryomedical Sciences, Inc., a publicly held
company engaged in the research, development and sale of products for use in low
temperature medicine, Vikonics Inc., a publicly held company engaged in the
design and sale of computer-based security systems, Lucille Farms, Inc., a
publicly held company engaged in the manufacturing and marketing of cheese
products, and Excel Technology, Inc., a publicly held company engaged in the
development and sale of laser products.
Mr. Fruitman has been a director of the Company since June 1989. Since
April 1990, Mr. Fruitman has been a Managing Director of Loeb Partners
Corporation, an investment banking firm. From January 1989 to April 1990, he was
an independent Financial Consultant. From 1986 to December 1988, Mr. Fruitman
was a Senior Vice President of The Stuart-James Company Incorporated, an
investment banking firm. From 1984 to 1986, he was an associate at E.M. Warburg,
Pincus & Co., Inc. From 1982 to 1984, Mr. Fruitman was a Vice President of
Investors in Industry Corporation, a venture capital firm. Mr. Fruitman is a
director of Micro Warehouse, Inc.,
62
<PAGE>
a publicly held company which is a direct marketer of microcomputer software and
peripheral products.
Mr. Baudoin has been a director of the Company since November 1990 and
previously served as a director of the Company from 1981 to June 1989. Since
1951, Mr. Baudoin has served as the President of Bova Trading, Inc., a financial
management firm. From 1954 to 1963, he served as President of the Dutch America
Mercantile Corporation, a finance company. From 1963 to 1967, he was the
President of C.I.F. Inc., a finance company. From 1967 to 1983, Mr. Baudoin
served as the President of the Merban Corporation, a finance company. From 1983
to 1987, he also served as Chairman and Chief Executive Officer of Contitrade
Services Corporation and Merban Americas Corporation, finance companies. Since
1987, Mr. Baudoin has served as the Chairman of ECOBAN Finance Ltd.
Mr. Bodmer has served as General Manager of SVP France since 1974. Other
positions which he currently holds are Chief Executive Director of SVP, S.A.,
President and Chief Executive Officer of SVP Participation, President of SVP
Belgium, and President of SVP United Kingdom.
63
<PAGE>
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following persons have failed to file on a timely basis certain
reports required by Section 16(a) of the Exchange Act of 1934 (the "Exchange
Act"): During the year ended December 31, 1997, SVP and its affiliates did not
file Forms 4 with respect to the following transactions (as described in this
and prior reports filed by the Company): the purchases by SVP in November 1996
and August 1997 of Notes and warrants from the Company. The Company understands
that the Forms 4 are currently being prepared.
64
<PAGE>
ITEM 11
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company during each of the Company's last three years to the
Company's Chief Executive Officer and to each of the Company's executive
officers who received salary and bonus payments in excess of $100,000 during the
year ended December 31, 1997:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
LONG TERM COMPENSATION
-----------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------------------- -----------
SECURITIES
NAMES AND PRINCIPAL SALARY BONUS($) OTHER RESTRICTED STOCK UNDERLYING LTIP ALL
POSITIONS YEAR ($) ------- ANNUAL AWARDS($) OPTIONS PAYOUT OTHER
--------- ---- --- COMP. --------- (#)(1) ($) COMP.
----- ------ --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Andrew P. Garvin 1997 253,867 50,000 - - - - -
Chairman of the Board,
President, Chief 1996 249,976 12,500 - - 350,000 - -
Executive Officer and
Director 1995 235,937 25,000 - - 69,000 - -
Peter J. Fiorillo 1997 185,671 11,500 - - - - -
Executive Vice President,
Chief Financial Officer, 1996 154,476 12,000 - - 125,000 - -
Chief Information
Officer, Treasurer and 1995 154,476 10,000 - - 6,000 - -
Corporate Secretary
John D. Kuranz 1997 150,200 - - - - - -
Vice President, Managing
Director, Published 1996 149,976 - - - - - -
Research Division
1995 149,976 12,850 - - - - -
</TABLE>
- -----------------------
(1) Options to acquire Common Stock.
OPTION GRANTS DURING 1997
-------------------------
During 1997 there were no options granted to the named executive officers.
65
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
The following table provides information related to options exercised by
each of the named executive officers during the year ended December 31, 1997 and
the number and value of options held at fiscal year end. The Company does not
have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS
OPTIONS AT FISCAL YEAR END ($)(1)
AT FISCAL YEAR END (#) -------------------------
----------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- --- ----------- ------------- ----------- -------------
(#)
<S> <C> <C> <C> <C> <C> <C>
Andrew P. Garvin 5,000 $2,475 143,500 340,000 - -
Peter J. Fiorillo - - 95,500 66,500 - -
John D. Kuranz - - 49,800 11,200 - -
</TABLE>
(1) The closing trade price of the Company's Common Stock as reported by NASDAQ
on December 31, 1997 was $0.75. Value is calculated on the difference between
the option exercise price of in-the-money options and $0.75 multiplied by the
number of shares of Common Stock underlying the option.
EMPLOYMENT AND RELATED AGREEMENTS
On January 1, 1996, the Company entered into an Employment Agreement with
Andrew P. Garvin commencing on January 1, 1996 and terminating on December 31,
2001 (the "Employment Agreement"). Such Employment Agreement was amended and
restated on December 12, 1996. The Employment Agreement provides for a base
salary of $250,000 which will be adjusted each January 1 for a cost of living
increase based on the Consumer Price Index for New York City for the twelve
month period immediately preceding such January 1 date. Mr. Garvin will also be
entitled to additional increases in base salary as may be determined from time
to time by the Board of Directors or any compensation committee appointed by the
Board of Directors. Mr. Garvin received a $12,500 signing bonus upon execution
of the Employment Agreement. In addition, Mr. Garvin will be entitled to receive
performance bonuses equal to 10% per annum of the pre-tax profits of the Company
in excess of $1,000,000 for each of the years ended December 31, 1996, 1997,
1998, 1999, 2000, and 2001. The Employment Agreement limits the bonus to
$250,000 in any year, and states that Mr. Garvin is entitled to receive a cash
bonus of $50,000 in each of January 1997 and January 1998. During August 1997
Mr. Garvin voluntarily took a 5% salary cut for the balance of 1997.
The Employment Agreement provides that (i) if Mr. Garvin voluntarily leaves
the employ of the Company on account of the Company being acquired and its
principal office being moved to a location which is greater than 50 miles from
New York City; and (ii) if Mr. Garvin voluntarily leaves the employ of the
Company on account of a Change in Control, then, in each such case, he shall be
entitled to receive the compensation described in the immediately preceding
paragraph for the balance of the term; provided,
66
<PAGE>
however, that if such termination occurs at a time when there is less than one
year left in the term, the compensation shall continue for a period of two years
from the date of termination on the same basis that the employee received
compensation during the last year of the term. Change of control is defined in
the Employment Agreement to include the acquisition by a party of 30% or more of
the outstanding shares of Common Stock of the Company or a change in the
majority of the Incumbent Board of Directors (as defined in the Employment
Agreement). In the event that the Company terminates Mr. Garvin's employment for
cause, and a court of law or other tribunal ultimately determines that such
termination was without cause, then he shall be entitled to receive double the
amount of compensation described above until the end of the term. Mr. Garvin has
agreed to a non-competition covenant for a period of two years after the term of
the Employment Agreement.
The Company has entered into a deferred compensation agreement with
Mr. Garvin, which provides for a schedule of payments to him or his designated
beneficiary(ies). The agreement entered into in 1984 provides that in the event
during the course of employment Mr. Garvin (i) dies, (ii) becomes totally
disabled or (iii) elects to retire after June 30, 1994 and prior to age 65, he
or, in the event of death, his designated beneficiaries, shall receive monthly
payments ranging from $1,250 to $1,800 for a period of ten years from the date
of death, disability or retirement. In the event Mr. Garvin retires at age 65 or
over, Mr. Garvin shall receive $4,750 per month for ten years from the date of
his retirement.
The Company entered into an additional Deferred Compensation Agreement
with Mr. Garvin in 1990. Pursuant thereto, in the event during the course of
employment Mr. Garvin (i) dies, (ii) becomes totally disabled or (iii) elects to
retire after July 25, 1992 and prior to age 65, he or, in the event of death,
his designated beneficiary(ies), shall receive monthly payments ranging from
$618.81 to $2,351. These payments are to continue for a period of ten years from
the date of death, disability or retirement. In the event he retires at age 65
or over, Mr. Garvin shall receive $2,475.24 per month for ten years from the
date of his retirement. The benefits under the two agreements are cumulative.
On January 11, 1995, the Company entered into severance agreements
with Peter J. Fiorillo and John D. Kuranz. The severance agreements provide for
the payment of the current base salary (with set minimum limits for purposes of
the payment) to the respective individual for a period of one year from the date
of termination for (i) termination without cause; and (ii) if the individual
voluntarily leaves the employ of the Company because of a change of control or
because Andrew P. Garvin is no longer Chief Executive Officer. Additionally, if
the above occurs, all options granted to the respective individual by the
Company shall become immediately vested and exercisable. Change of control is
defined in the severance agreements to include the acquisition by a party of 30%
or more of the outstanding shares of common stock of the Company or a change in
the majority of the incumbent Board of Directors. In the event that the Company
terminates Mr. Fiorillo or Mr. Kuranz for cause, and a court of law or other
tribunal ultimately determines that such termination was without cause, then the
respective individual shall be entitled to receive double the amount of
compensation described above.
During February 1998 SVP, S.A. acquired additional shares in the
Company which brought their total holdings, including its affiliates, in
67
<PAGE>
the Company above 30% of the then outstanding shares. As such, Mr. Garvin, Mr.
Fiorillo and Mr. Kuranz would be entitled to receive their respective severance
packages should they choose to resign due to this previously defined change in
control, and their unvested options would immediately vest. In consideration of
SVP, S.A. providing two $1,000,000 letters of credit, in March 1998, to secure
the Company's debt agreements with a commercial bank, on March 29, 1998, Mr.
Garvin waived his rights related to the change of control provision in his
agreement, only as it relates to the holdings of SVP, S.A. and its affiliates,
in the Company. To date, Mr. Fiorillo and Mr. Kuranz have not expressed their
intent to resign. If such two executive officers were to tender their
resignation based on this occurrence, the liability would be approximately
$340,000, payable over a one year period, plus the vesting of 77,000 currently
non-exercisable options.
Directors are not compensated in cash for their services as such. The Stock
Option Plan of the Company was amended in June 1995 to provide for the automatic
grant to outside directors of five-year non-incentive options to purchase 2,500
shares of Common Stock on the first business day of each new year beginning in
1996, the exercise price being the fair market value on the date of the grant.
68
<PAGE>
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth, as of December 31, 1997, certain information with
respect to the beneficial ownership of the Common Stock by each person known by
the Company to be the beneficial owner of 5% or more of its outstanding Common
Stock, by the directors of the Company individually, the named executive
officers set forth in Item 11 individually and by all officers and directors as
a group.
NAME AND ADDRESS NUMBER OF
BENEFICIAL OWNER SHARES OWNED(1) PERCENT
---------------- --------------- -------
Andrew P. Garvin
625 Avenue of the Americas
New York, NY 10011 (2) 1,254,754 17.8%
Peter J. Fiorillo (3) 212,000 3.1%
John D. Kuranz (4) 61,000 Less than 1%
Amalia S.A.
70, rue des Rosiers
F-93585 Saint-Ouen, Cedex
FRANCE (5) 1,649,485 23.6%
Brigitte de Gastines (6) 20,500 Less than 1%
Howard S. Breslow (6)(7) 29,320 Less than 1%
Frederick H. Fruitman (8) 56,179 Less than 1%
Charles Baudoin (6)(9) 59,725 Less than 1%
Jean-Louis Bodmer (6) 10,500 Less than 1%
Furman Selz SBIC, L.P.
230 Park Avenue
New York, NY 10169 (10) 900,000 12.0%
Asset Value Fund Ltd.
c/o Asset Value Mgmt., Inc.
PT 376 Main St., Box 74
Bedminster, NJ 07921-2602 900,000 13.7%
All Officers and Directors as a Group
(9 persons) (11) 1,703,978 23.2%
69
<PAGE>
(1) Unless otherwise indicated below, all shares are shares of Common Stock
owned beneficially and of record.
(2) Includes 483,500 shares issuable under outstanding options.
(3) Includes 162,000 shares issuable under outstanding options.
(4) Includes 57,000 shares issuable under outstanding options and 4,000
shares issuable under outstanding warrants.
(5) Includes the 732,500 shares of Common Stock owned by SVP, S.A., 422,222
shares issuable under outstanding Warrants held by SVP, S.A., and the
494,763 shares of Common Stock owned by SVP International which are
subsidiaries of Amalia S.A. Brigitte de Gastines owns in excess of 99%
of the stock of Amalia S.A. In addition, Ms. de Gastines is President,
General Manager and a director of SVP, S.A., and General Manager of SVP
International. The shares owned by Amalia S.A. are not shown in the
table as being owned by Ms. Gastines.
(6) Includes 10,500 shares issuable under outstanding options.
(7) Includes all of the 13,820 shares of Common Stock owned by record of
Breslow & Walker, LLP, a law firm in which Mr. Breslow is a partner.
(8) Includes 8,000 shares issuable under outstanding options.
(9) Includes 39,225 shares of Common Stock owned by Bova Trading, to which
Charles Baudoin has beneficial ownership.
(10) Includes all of the 900,000 shares issuable under outstanding Warrants.
(11) Includes 752,500 shares issuable under outstanding options and 4,000
shares issuable under outstanding warrants.
70
<PAGE>
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1971, the Company has been a licensee of SVP International.
Pursuant to this license agreement, the Company pays royalties to SVP
International for the use of the SVP name and participation in the SVP
International network. For a description of Ms. de Gastines and Mr. Bodmer's
relationship to SVP International see "Item 10. Directors and Executive Officers
of the Registrant." The accrued royalties payable as of December 31, 1997 to SVP
International were approximately $84,000.
Howard S. Breslow, a director of the Company, is a member of Breslow &
Walker, LLP, general counsel to the Company. During 1997, Breslow & Walker, LLP
received legal fees of $75,653.
Andrew P. Garvin, Chairman of the Board, Chief Executive Officer and
President and a director of the Company, entered into an Agreement (the "First
Refusal Agreement"), dated as of November 6, 1992, with Amalia S.A. and its
subsidiaries, SVP International and SVP S.A. (collectively "Amalia"). Amalia
beneficially owns 1,649,485 shares of Common Stock, or 23.6% of outstanding
shares, and Brigitte de Gastines, a director of the Company, owns in excess of
99% of the stock of Amalia, S.A. The First Refusal Agreement provides for mutual
rights of first refusal in the event that either Mr. Garvin or Amalia desires to
dispose, in a public or private transaction, any of the shares of Common Stock
owned by them. In the event that a party declines to exercise its right of first
refusal, the proposed selling party may consummate such sale within the time
period permitted under the First Refusal Agreement. The First Refusal Agreement
terminated in October 1997.
71
<PAGE>
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following Financial Statements are filed as part of this
10-K:
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Operations for the years ended
December 1997, 1996 and 1995.
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
(2) SCHEDULE
The following Financial Statement schedule is filed as part of
this 10-K:
Schedule II - Valuation and Qualifying Accounts
Other Financial Statement schedules are omitted because they
are not applicable or because the information required is
provided in the Consolidated Financial Statements or Notes
thereto included herein.
(3) EXHIBITS
EXHIBIT
NUMBER DOCUMENT
3(a) Copy of restated Certificate of
Incorporation as amended(1), and amendment
thereto.
(b) Copy of By-Laws, as amended.(3)
4(a) Copy of specimen of Common Stock
Certificate.(1)
10(a) Copy of License Agreement, dated October 11,
1971, between the Company and SVP
International (formerly SVP Conseil) and an
amendment thereto, dated March 23, 1981.(1)
72
<PAGE>
(b) Copy of 1986 Stock Option Plan.(1)
(c) Copy of Deferred Compensation and Salary
Continuation Agreement, dated June 30, 1984,
between the Company and Andrew P. Garvin .
(1)
(d) Copy of the lease related to premises at 625
Avenue of the Americas, NY, NY.(2) and
amendment related thereto.(6)
(e) Copy of Target Benefit Plan of the Company.
(4)
(f) Copy of Deferred Compensation and Salary
Continuation Agreement, dated July 25,
1990, between the Company and Andrew P.
Garvin.(5)
(g) Copy of Lease dated July 19, 1994
related to premises on 3rd floor at 641
Avenue of the Americas, NY, N.Y. (8)
(h) Copy of lease dated March 15, 1995 related
to premises on 4th floor at 641 Avenue of
the Americas, NY, N.Y. (8)
(i) Copy of Commercial Revolving Loan, Term Loan
and Security Agreement dated April 27, 1995
between State Street Bank and Trust Company
and the Company. (9)
(j) Copy of 401(k) and Profit Sharing Plan of
the Company.(10)
(k) Copy of Severance Agreement, dated January
11, 1995 between the Company and Peter J.
Fiorillo. (11)
(l) Copy of Severance Agreement, dated January
11, 1995 between the Company and John D.
Kuranz. (11)
(m) Copy of Employment Agreement, amended and
restated as of December 12, 1996, between
the Company and Andrew P. Garvin.(13)
(n) Copy of the Note and Warrant Purchase
Agreement with Furman Selz SBIC, L.P., dated
October 31, 1996. (12)
73
<PAGE>
(o) Copy of the Note and Warrant Purchase
Agreement with SVP, S.A. dated November 30,
1996. (13)
(p) FIND/SVP, Inc. 1996 Stock Option Plan. (14)
(q) Copy of ETRG Sale Agreement. (15)
(r) Copy of Commercial Revolving Loan, dated
October 22, 1997, between the Bank and the
Company. (15)
(s) Copy of Second Modification Agreement,
as of September 30, 1997, between the Bank
and the Company. (15)
(t) January 20, 1998 Agreement between Asset
Value Fund and the Company.
(u) Copy of the Third Modification Agreement
as of December 31, 1997, between the Bank
and the Company
(v) Copy of Fourth Modification Agreement,
as of January 15, 1998, between the Bank and
the Company.
21 List of Subsidiaries. (11)
23 Letter of Consent by KPMG Peat Marwick LLP.
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement
on Form S-18 (Reg. No. 33-8634-NY) which became effective with
the Securities and Exchange Commission on October 31, 1986.
(2) Incorporated by reference to the Company's Form 8-K filed
with the Securities and Exchange Commission on
February 2, 1987.
(3) Incorporated by reference to the Company's Form 10-K filed
for the year ended December 31, 1987.
(4) Incorporated by reference to the Company's Form 10-K filed
for the year ended December 31, 1989.
(5) Incorporated by reference to the Company's Form 10-K filed
for the year ended December 31, 1990.
(6) Incorporated by reference to the Company's Form 10-K filed
for the year ended December 31, 1992.
(7) Incorporated by reference to the Company's Form 10-K filed
for the year ended December 31, 1993.
(8) Incorporated by reference to the Company's Form 10-K filed for
the year ended December 31, 1994.
74
<PAGE>
(9) Incorporated by reference to the Company's Form 10-Q
filed for the Quarter ended March 31, 1995.
(10) Incorporated by reference to the Company's Form S-8 filed on
March 29, 1996.
(11) Incorporated by reference to the Company's Form 10-K filed for
the year ended December 31, 1995.
(12) Incorporated by reference to the Company's Form 8-K, filed on
November 13, 1996, and amended by Form 8-K/A No. 1 on November
21, 1996.
(13) Incorporated by reference to the Company's Form 10-K filed for
the year-ended December 31, 1996.
(14) Incorporated by reference to the Company's Form S-8, filed on
February 27, 1997.
(15) Incorporated by reference to the Company's Form 10-Q, filed for
the quarter ended September 30, 1997.
75
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIND/SVP, INC.
Date: March 30, 1998 BY: /S/ ANDREW P. GARVIN
------------------------
Andrew P. Garvin, President
(Principal Executive Officer)
Date: March 30, 1998 BY: /S/ PETER J. FIORILLO
-------------------------
Peter J. Fiorillo,
Executive Vice President
(Principal Financial Officer
and Principal Accounting
Officer)
Pursuant to the requirement(s) of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 30, 1998 /S/ ANDREW P. GARVIN
--------------------------
Andrew P. Garvin, Director
Date: March 30, 1998 ---------------------------
Brigitte de Gastines, Director
Date: March 30, 1998 /S/ HOWARD S. BRESLOW
---------------------------
Howard S. Breslow, Director
Date: March 30, 1998 /S/ FREDERICK H. FRUITMAN
----------------------------
Frederick H. Fruitman,
Director
Date: March 30, 1998 /S/ CHARLES BAUDOIN
----------------------------
Charles Baudoin, Director
Date: March 30, 1998 ----------------------------
Jean-Louis Bodmer, Director
76
<PAGE>
EXHIBIT INDEX
Exhibit # Description
- --------- -----------
10(t) Agreement
10(u) Third Modification Agreement
10(v) Fourth Modification Agreement
23 Independent Auditor's Consent
27 Financial Data Schedule
AGREEMENT
WHEREAS, Asset Value Fund Limited Partnership ("Asset Value")
owns 900,000 shares of stock in FIND/SVP, Inc., (the "Company"); and
WHEREAS, Asset Value has 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, 97 Civ 3977
(LAK), which seeks damages for alleged violations of Section 10(b) of the
Securities Exchange Act of 1934 and for common law fraud; and
WHEREAS, Asset Value has also 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, which seeks to remove two directors of the Company pursuant to
New York Business Corporation Law Section 706(d), and defendants have removed
this action to the United States District Court for the Southern District of New
York, where it was assigned Docket No. 97 Civ. 9545 (LAK); and
WHEREAS, the parties wish to settle those actions and resolve
all of their disputes relating to Asset Value's purchases and ownership of
shares of stock in the Company and to the governance of the Company without any
acknowledgement of wrongdoing by any party,
IT IS HEREBY AGREED as follows:
<PAGE>
1. The Company will pay to Asset Value legal fees and
disbursements in the amount of $110,000 on or before February 20, 1998.
2. The Company will cause Asset Value's 900,000 shares of
stock in the Company to be purchased at $1.25 per share on or before February
20, 1998.
3. If within two years of the date of the payments referred to
in paragraphs 1 and 2 above, (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).
4. At the time of the payments referred to in paragraphs 1 and
2 above, Asset Value and the Company will execute and deliver to each other a
general release in the form annexed as Exhibit A hereto.
5. At the time of the payments referred to in paragraphs 1 and
2 above, Asset Value will execute and deliver to the Company a stipulation and
order of dismissal with prejudice of the pending actions in the forms annexed as
Exhibit B hereto.
6. For a period of five years from the date of this Agreement,
neither Asset Value nor Paul Koether will purchase, either directly or
indirectly, any shares of
<PAGE>
stock in the Company, and after the sale of shares referred to in paragraph 2
above, neither Asset Value nor Paul Koether will own or control, either directly
or indirectly, any shares of stock in the Company.
<PAGE>
Dated: New York, New York
January 20, 1998
Asset Value Fund Limited Partnership FIND/SVP, Inc.
By: /s/ PAUL KOETHER By: /s/ ANDREW P. GARVIN
----------------- --------------------
Paul Koether Andrew P. Garvin
Exhibit 10 (u)
THIRD MODIFICATION AGREEMENT
Agreement, made as of December 31, 1997, among FIND/SVP, INC., a New
York corporation with an office located at 625 Avenue of the Americas, New York,
New York 10011-2002 ("FIND/SVP"); FIND/SVP PUBLISHED PRODUCTS, INC., a Delaware
corporation with an office located at 625 Avenue of the Americas, New York, New
York 10011-2002 ("FIND/SVP PUBLISHED"); 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") (FIND/SVP and FIND/SVP Published are
sometimes individually referred to as the "BORROWER" and collectively referred
to as the "BORROWERS" and the Borrowers and the Guarantor are sometimes
individually referred to as the "OBLIGOR" and 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 extending to the Borrowers
a $500,000 term loan facility (the "$500,000 TERM LOAN" and collectively with
the $2,000,000 Term Loan, the "TERM LOANS") as evidenced by the $500,000
Commercial Term Promissory Note dated May 31, 1996 (the "$500,000 TERM NOTE"
and collectively with the $2,000,000 Term Note, the "TERM NOTES").
C. The Lender has 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 accordance with its terms to a $2,000,000 revolving
loan facility (the "$2,000,000 REVOLVING LOAN") as evidenced by the $2,500,000
Replacement Commercial Revolving Promissory Note dated July 24, 1997 (the
"$2,000,000 REVOLVING NOTE").
D. Pursuant to the Guaranty dated July 24, 1997 (the "FIRST GUARANTY"),
the Guarantor guarantied the performance of the Borrowers' obligations to the
Lender, including, but not limited to, the loans set forth herein.
<PAGE>
E. 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.
F. 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.
G. Pursuant to the $1,000,000 Commercial Revolving Loan and Security
Agreement dated October 23, 1997 (the "1997 LOAN AGREEMENT"), the Lender
extended to the Borrowers a $1,000,000 revolving loan facility (the "$1,000,000
REVOLVING LOAN")as evidenced by the $1,000,000 Commercial Revolving Promissory
Note dated October 23, 1997 (the "$1,000,000 REVOLVING NOTE").
H. Pursuant to the Guaranty dated October 23, 1997 (the "SECOND
GUARANTY" and along with the First Guaranty the "GUARANTIES"), the Guarantor
guarantied the performance of the Borrowers' obligations to the Lender,
including, but not limited to, the loans set forth herein.
I. The Borrowers have requested and the Lender has agreed to extend the
maturity dates of the $2,000,000 Revolving Loan and the $1,000,000 Revolving
Loan and modify the terms of repayment of the Term Notes subject to the terms
and conditions below.
AGREEMENT
In consideration of the Recitals, which are incorporated by this
reference, other good and valuable consideration, the receipt and sufficiency of
which are 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, the 1996 Loan Agreement, the 1997 Loan Agreement and all other
documents executed in connection therewith (collectively, the "LOAN DOCUMENTS")
unless modified herein 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 and the Second Modification Agreement.
1. 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:
<PAGE>
(a) The date "December 31, 1997" in paragraph 4 of the $2,000,000 Revolving Note
and the Amended and Restated Exhibit A attached to the 1995 Loan Agreement is
deleted and the date "January 15, 1998" is substituted therefor.
(a) The date "December 31, 1997" in paragraph (aq) of Section 1.01 of the 1995
Loan Agreement is deleted and the date "January 15,1998"is substituted therefor.
(a) The date "December 31, 1997" in Section 3.02 (b) of the 1995 Loan Agreement
is deleted and the date "January 15, 1998" is substituted therefor.
(b) The letter "(a)" is inserted before the phrase "On an annual basis" in
Section 3.05 of the 1995 Loan Agreement.
(a) The following is inserted after the paragraph in Section 3.05 of the of the
1995 Loan Agreement:
"(b) In the event the Borrowers do not receive on or before January 15,
1998 a capital contribution of not less than $1,000,000.00 in form and
manner acceptable to the Lender, the Borrowers shall pay to the Lender
the lesser of the following: (i) $1,000,000.00 or (ii) the then
existing outstanding principal, interest and other charges due under
the Term Note which payment shall be applied first to accrued but
unpaid interest and other charges incurred in connection with the Term
Loan to the date of such payment and then to principal."
(a) The following is inserted at the end of Section 6.03 (j) of the 1995 Loan
Agreement:
"The Borrowers covenant and agree not to use the proceeds of the
Loans for any purpose other than as set forth in the Recitals herein."
(a) The following is inserted at the end of Section 6 of the $2,000,000 Term
Note:
"In the event the Makers do not receive on or before January 15, 1998 a
capital contribution of not less than $1,000,000.00 in form and manner
acceptable to the Holder, the Makers shall pay to the Holder the lesser
of the following: (i) $1,000,000.00 or (ii) the then existing
outstanding principal, interest and other charges due under this Note
which payment shall be applied first to accrued but unpaid interest and
other charges incurred in connection with the Loan to the date of such
payment and then to principal."
(a) The following is inserted after Section 3.04 of the 1996 Loan Agreement:
<PAGE>
"3.05 MANDATORY PREPAYMENT. In the event the Borrowers do not receive
on or before January 15, 1998 a capital contribution of not less than
$1,000,000.00 in form and manner acceptable to the Lender, the
Borrowers shall pay to the Lender an amount equal to $1,000,000.00 less
the amount of the January 15, 1998 payment under the $2,000,000
Commercial Term Promissory Note dated April 27, 1995 from the Borrowers
to the Lender which payment shall be applied first to accrued but
unpaid interest and other charges incurred in connection with the Term
Loan to the date of such payment and then to principal."
(a) The following is inserted at the end of Section 6 of the $500,000 Term Note:
"In the event the Makers do not receive on or before January 15, 1998 a
capital contribution of not less than $1,000,000.00 in form and manner
acceptable to the Holder, the Makers shall pay to the Holder an amount
equal to $1,000,000.00 less the amount of the January 15, 1998 payment
under the $2,000,000 Commercial Term Promissory Note dated April 27,
1995 from the Makers to the Lender which payment shall be applied first
to accrued but unpaid interest and other charges incurred in connection
with the Loan to the date of such payment and then to principal."
(a) The date "December 31, 1997" in Paragraph 4 of the $1,000,000 Revolving Note
and the Exhibit A attached to the 1997 Loan Agreement is deleted and the date
"January 15, 1998" is substituted therefor.
(a) The phrase "and repayment of existing term loan facilities with the Lender"
is inserted after the words "general working capital requirements" in item B of
the Recitals section of the 1997 Loan Agreement.
(a) The date "December 31, 1997" in paragraph (cc) of Section 1.01 the 1997 Loan
Agreement is deleted and the date "January 15, 1998" is substituted therefor.
(a) The date "December 31, 1997" in Section 3.02 (b) of the 1997 Loan
Agreement is deleted and the date "January 15, 1998" is substituted therefor.
1. FURTHER REQUIREMENTS. Simultaneous with the execution and delivery of this
Agreement, the Borrowers shall deliver to the Lender the following:
(a) a Good Standing Certificate issued by the Secretary of State of the State of
incorporation for each Borrower and from each state the Borrowers are qualified
to do business as a foreign corporation; and
<PAGE>
(a) 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 the Modification
Agreement, the Second Modification Agreement and this Agreement and all other
documents executed in connection herewith (collectively, the "AMENDED LOAN
DOCUMENTS") without defense, counterclaim or offset as of December 26, 1997 is:
(i) $1,000,000.00 with respect to the $2,000,000 Term Loan; (ii) $1,383,594.00
with respect to the $2,000,000 Revolving Loan; and (iii) $350,000.00 with
respect to the $500,000 Term Loan and $0.00 with respect to the $1,000,000
Revolving Loan (the "EXISTING DEBT") plus interest accruing therein.
(b) The Borrowers 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.
(c) The Borrowers covenant and agree to use the proceeds of
the Term Loans, the $2,000,000 Revolving Loan and the $1,000,000 Revolving Loan
for no purpose other than as stated in the Recitals of the Amended Loan
Documents unless the Lender expressly consents in writing to another or
additional purposes.
1. 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.
(a) 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.
<PAGE>
(a) SECRETARIES' CERTIFICATE. The resolutions contained in the Secretaries'
Certificates of the Borrowers dated April 27, 1995, May 31, 1996, July 21, 1997
and October 21, 1997 and the resolutions contained in the Secretary's
Certificate of the Guarantor dated July 21, 1997 and October 21, 1997
(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 October 26, 1996 and authorize the
Obligors to make the modifications described herein and the resolutions
referenced in the Officers' Certificates of FIND/SVP, Inc. dated October 21,
1997, FIND/SVP Published Products, Inc. dated October 21, 1997 and the Guarantor
dated October 21, 1997.
(a) 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.
(a) 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.
(a) 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.
(a) 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.
(a) 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.
<PAGE>
(a) 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.
(a) 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.
(a) 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.
(a) 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.
1. SECURITY AGREEMENT REAFFIRMATION. (a) The Borrowers acknowledge, agree and
reaffirm that the 1995 Loan Agreement, the 1996 Loan Agreement and the 1997 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 Revolving Note, (ii) the $500,000 Term
Note and (iii) the $1,000,000 Revolving Note.
<PAGE>
(b) The Guarantor acknowledges, agrees and reaffirms that its
Security Agreement dated July 27, 1997 and October 23, 1997 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.
(a) GUARANTIES. The Guarantor acknowledges that it is unconditionally liable and
legally and validly indebted to the Lender in accordance with the terms of its
Guaranties, as modified herein.
(a) The Guarantor consents to the modifications made herein, 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.
(a) 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.
1. 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.
1. 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.
1. 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.
<PAGE>
1. AMENDMENT AND RESTATEMENT. Upon the execution of this Agreement and all other
documents executed in connection herewith, the other 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.
1. 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
Chief Financial Officer
Find/SVP Published Products, Inc.
625 Avenue of the Americas
New York, New York 10011-2002
Attn: Mr. Peter Fiorillo
Chief Financial Officer
If to the Guarantor:
Find/SVP Internet Services, Inc.
625 Avenue of the Americas
New York, New York 10011-2001
Attn: Mr. Peter Fiorillo
Chief Financial Officer
With a copy to:
Breslow & Walker, LLP
767 Third Avenue
New York, New York 10017
<PAGE>
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
Attn: Kevin T. Katske, Esq.
1. 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.
1. 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.
(a) 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.
(a) 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.
(a) 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
<PAGE>
remaining provisions, and of such provision in other jurisdictions, shall not be
affected or impaired thereby.
(a) 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 AMENDED. This Agreement and the other 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.
1. 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.
1. 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
<PAGE>
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH THEIR
ATTORNEYS.
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 Vice President
STATE STREET BANK AND TRUST COMPANY
By /s/ ARLENE M. DOHERTY
---------------------
Arlene M. Doherty
Vice President
Exhibit 10(v)
FOURTH MODIFICATION AGREEMENT
Agreement, made as of January 15, 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 has 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 "$2,000,000 REVOLVING LOAN") as evidenced by the
$2,500,000 Replacement Commercial Revolving Promissory Note dated July 24, 1997
(the "$2,000,000 REVOLVING NOTE").
D. Pursuant to the Guaranty dated July 24, 1997 (the "FIRST GUARANTY"),
the Guarantor guarantied the performance of the Borrowers' obligations to the
Lender, including, but not limited to, the loans set forth herein.
<PAGE>
E. 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.
F. 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.
G. Pursuant to the $1,000,000 Commercial Revolving Loan and Security
Agreement dated October 23, 1997 (the "1997 LOAN AGREEMENT"), the Lender
extended to the Borrowers a $1,000,000 revolving loan facility (the "$1,000,000
REVOLVING LOAN") as evidenced by the $1,000,000 Commercial Revolving Promissory
Note dated October 23, 1997 (the "$1,000,000 REVOLVING NOTE").
H. Pursuant to the Guaranty dated October 23, 1997 (the "SECOND
GUARANTY" and along with the First Guaranty the "GUARANTIES"), the Guarantor
guarantied the performance of the Borrowers' obligations to the Lender,
including, but not limited to, the loans set forth herein.
I. 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, the 1996 Loan Agreement and the 1997 Loan
Agreement.
J. The Lender has extended to the Borrowers as of the date herein the
following: (i) a $2,000,000 revolving loan facility (the "$2,000,000 REPLACEMENT
REVOLVING LOAN") as evidenced by the $2,000,000 Replacement Commercial Revolving
Promissory Note dated the date herein (the "$2,000,000 REPLACEMENT REVOLVING
NOTE") to replace the $2,000,000 Revolving Loan and $2,000,000 Revolving Note;
and (ii) a $1,000,000 revolving loan facility (the "$1,000,000 REPLACEMENT
REVOLVING LOAN") as evidenced by the $1,000,000 Replacement Commercial Revolving
Promissory Note dated the date herein (the "$1,000,000 REPLACEMENT REVOLVING
NOTE") to replace the $1,000,000 Revolving Loan and the $1,000,000 Revolving
Note.
I. The Borrowers have requested that the Lender modify the 1995
Loan Agreement and the 1997 Loan Agreement 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:
<PAGE>
1. DEFINITIONS AND DOCUMENT REFERENCES. All terms defined in the 1995 Loan
Agreement, the 1996 Loan Agreement, the 1997 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 and the Third
Modification Agreement.
1. 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) EXHIBIT "A" attached to the 1995 Loan Agreement is deleted in its entirety
and EXHIBIT "A" TO THE COMMERCIAL REVOLVING LOAN, TERM LOAN AND SECURITY
AGREEMENT attached hereto is substituted therefor.
(a) The date "January 15, 1998" in Section 1.01(aq) of the 1995 Loan Agreement
is deleted and the date "March 26, 1998" is substituted therefor.
(a) EXHIBIT "A" attached to the 1997 Loan Agreement is deleted in its entirety
and EXHIBIT "A" TO THE COMMERCIAL REVOLVING LOAN AND SECURITY AGREEMENT attached
hereto is substituted therefor.
(a) The date "January 15, 1998" in Section 1.01(cc) of the 1997 Loan Agreement
is deleted and the date "March 26, 1998" is substituted therefor.
1. 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,
Good Standing Certificate, Certificate of Insurance and such other documents as
the Lender deems necessary or appropriate, 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 January 13, 1998 is:
(i) $900,000.00 with respect to the $2,000,000 Term Loan; (ii) $148,000.00 with
respect to the $2,000,000 Revolving Loan as replaced by the $2,000,000
Replacement Revolving Loan; (iii) $325,000.00 with respect to the $500,000 Term
Loan and (iv) $0.00 with respect to the $1,000,000 Revolving Loan as replaced by
the $1,000,000.00 Replacement Revolving Loan (the "EXISTING DEBT") plus interest
accruing therein.
<PAGE>
(a) 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.
1. 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.
(a) 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.
(a) SECRETARIES' CERTIFICATE. The resolutions contained in the Secretaries'
Certificates of the Borrowers dated April 27, 1995, May 31, 1996, July 21, 1997
and October 21, 1997 and the resolutions contained in the Secretary's
Certificate of the Guarantor dated July 21, 1997 and October 21, 1997
(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 January 15, 1998 and authorize the
Obligors to make the modifications described herein.
(a) 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.
(a) 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
<PAGE>
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.
(a) 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.
<PAGE>
(a) 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.
(a) 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.
(a) 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.
(a) 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.
(a) 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.
(a) 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
<PAGE>
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.
1. SECURITY AGREEMENT REAFFIRMATION. (a) The Borrowers acknowledge, agree and
reaffirm that the 1995 Loan Agreement, the 1996 Loan Agreement and the 1997 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 Replacement Revolving Note, (ii) the
$500,000 Term Note and (iii) the $1,000,000 Replacement Revolving Note.
(b) The Guarantor acknowledges, agrees and reaffirms that its
Security Agreement dated July 27, 1997 and October 23, 1997 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.
(a) GUARANTIES. The Guarantor acknowledges that it is unconditionally liable and
legally and validly indebted to the Lender in accordance with the terms of its
Guaranties.
(a) The Guarantor consents to the extension of the $2,000,000 Replacement
Revolving Loan and the $1,000,000 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.
(a) 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.
1. 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.
1. 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.
<PAGE>
1. 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.
1. 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.
1. 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
<PAGE>
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
Attn: Kevin T. Katske, Esq.
1. 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.
1. 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.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit
of the parties hereto and their respective successors and assigns;
<PAGE>
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.
(a) 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.
(a) 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.
(a) 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.
1. 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,
<PAGE>
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.
1. 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.
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
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
FIND/SVP, Inc.:
We consent to incorporation by reference in the registration statements (No.
33-42746, 33-75828, 333-03076, 333-22439 and 333-22445) on Form S-8 of FIND/SVP,
Inc. and subsidiaries of our report dated March 30, 1998, relating to the
consolidated balance sheets of FIND/SVP, Inc. and subsidiaries as of December
31, 1997, and 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997, and the related schedule, which report appears
in the December 31, 1997, annual report on Form 10-K of FIND/SVP, Inc. and
subsidiaries.
/S/KPMG PEAT MARWICK LLP
------------------------
KPMG Peat Marwick LLP
New York, New York
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>I
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 139 634
<SECURITIES> 0 0
<RECEIVABLES> 3,574 2,990
<ALLOWANCES> (118) (103)
<INVENTORY> 0 2,281
<CURRENT-ASSETS> 6,066 6,945
<PP&E> 9,104 7,938
<DEPRECIATION> (4,558) (4,003)
<TOTAL-ASSETS> 12,481 12,946
<CURRENT-LIABILITIES> 5,050 3,015
<BONDS> 0 0
0 0
0 0
<COMMON> 3,873 3,862
<OTHER-SE> (2,655) 197
<TOTAL-LIABILITY-AND-EQUITY> 12,481 12,946
<SALES> 0 0
<TOTAL-REVENUES> 32,027 30,525
<CGS> 0 0
<TOTAL-COSTS> 18,402 17,349
<OTHER-EXPENSES> 16,761 14,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (597) (320)
<INCOME-PRETAX> (3,748) (1,206)
<INCOME-TAX> (896) (487)
<INCOME-CONTINUING> (2,852) (719)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,852) (719)
<EPS-PRIMARY> (.43) (0.11)
<EPS-DILUTED> (.43) (0.11)
</TABLE>
