<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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 number 0-22554
---------
OPINION RESEARCH CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3118960
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23 Orchard Road, Skillman, New Jersey 08558
- ------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 281-5100
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock by non-affiliates of the
Registrant, based on the closing sale price of its common stock on February 27,
1998, a date within 60 days prior to the date of filing, as quoted on the Nasdaq
National Market, was approximately $19,969,000.*
As of February 27, 1998, 4,193,889 shares of common stock, par value $.01
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of the Registrant's definitive Proxy Statement, which will
be filed with the Securities and Exchange Commission in connection
with the Registrant's 1998 Annual Meeting of Stockholders, are
incorporated by reference into Part III of this report.
_______________________
*Calculated by excluding all shares that may be deemed to be beneficially owned
by executive officers, directors of the Registrant, without conceding that all
such persons are "affiliates" of the Registrant for purposes of the federal
securities laws.
<PAGE>
Readers of this report should be aware that the following important factors,
among others, in some cases have affected, and in the future could affect the
Company's actual results and could cause the Company's actual consolidated
results for the first quarter of 1998, and beyond, to differ materially from
those expressed in any forward-looking statements made by, or on behalf of, the
Company:
Reliance on Key Clients. The Company's success is dependent upon its ability
to maintain its existing clients and obtain new clients. The loss of one or
more of the Company's large clients or a significant reduction in business from
such clients could have a material adverse effect on the Company. The Company's
largest client is General Motors Corporation ("GM"). The Company's various
contracts with GM accounted for 17%, 25% and 22% of the Company's revenues for
the years ended 1997, 1996 and 1995, respectively. The Company's focus on
attracting larger projects and establishing long-term client relationships may
increase the Company's reliance on particular projects and clients. Although
the Company's ongoing projects may generally be terminated by its clients at any
time, funds for work completed are normally recoverable.
Fluctuations in Demand for Company Services. Demand for the Company's
services can be affected by a number of factors outside the Company's control,
including marketing budgets, economic conditions, consolidations and other
industry-specific trends, and changes in management or ownership of a client.
As a result, the Company's revenues and operating results may fluctuate.
Business Strategy Regarding Acquisitions and International Expansion. Part of
the Company's business strategy is to expand domestically, internationally, and
to extend into related businesses through strategic acquisitions. There can be
no assurance that the Company's services will be widely accepted as it seeks to
expand in international markets. International expansion will also subject the
Company to risks inherent in doing business abroad, including adverse
fluctuations in currency exchange rates, limitations on asset transfer, changes
in foreign regulations and political turmoil. Furthermore, there can be no
assurance that the Company will be able to integrate successfully the operations
of any subsequently acquired company with its own operations.
Dependence on Key Personnel. The Company is dependent upon the efforts and
skills of its Chairman and certain other key senior executives. The loss of the
services of one or more of these individuals could have a material adverse
effect on the Company.
Competition. The Company faces competition in connection with most of the
individual services and products it provides. Although the Company believes
that no single competitor offers a comparable combination of services and
products, there can be no assurance that other companies, some with greater
financial resources than the Company, will not attempt to offer a range of
services and products similar to those offered by the Company, or otherwise
compete more effectively in the business-to-business market research and
information services industry. For consumer market research services, the
Company regularly experiences significant competition from a large number of
competitors, including consumer market research companies, advertising agencies
and business consulting firms.
<PAGE>
PART I
Item 1. Business
--------
GENERAL
Opinion Research Corporation (the "Company") was established in 1938
to apply the principles of general public opinion polling to marketing issues
facing America's largest companies. The Company has evolved to provide primary
market research, information services, and marketing services, including a focus
on businesses selling primarily to other businesses. The Company assists
clients in evaluating, monitoring and optimizing the effectiveness of their
marketing and sales. The Company's services and products address issues such as
customer satisfaction, market demand and forecasting, corporate image,
competitive positioning, and telemarketing.
In August 1993 the Company acquired all of the stock of Gordon Simmons
Research Group, Ltd. ("GSR"), substantially increasing the Company's presence in
the U.K. and expanding the international aspects of its business. In April of
1994 the Company acquired all of the stock of Strategic Research and Consulting
("SRC"). The SRC acquisition gave the Company access to the U.S. automotive
industry. In August of 1995 the Company opened a branch office in Hong Kong and
continued to expand internationally with the formation of GSR/SIA Limited
("GSR/SIA") in the U.K. in the latter part of 1996. In purchasing the assets of
a division of an information technology company, GSR/SIA expanded the Company's
capabilities in servicing international clients and introduced the Company to
the U.K. public sector. During 1997, as part of its globalization strategy, the
Company acquired a presence in Korea, Taiwan, and Mexico and created ORC
TeleServices, a telemarketing company in Tampa, Florida. The year concluded
with the announcement of the acquisition of ProTel Marketing, Inc., a high
quality telemarketing company based in Lansing, Illinois. This acquisition was
completed on January 6, 1998. A Form 8-K was filed on January 20, 1998,
regarding this acquisition.
The Company collects customer and market information through computer
assisted telephone interviews, personal interviews, mail questionnaires and
specialized techniques such as business panels. Management believes that the
Company's substantive expertise in certain industries, including automotive,
financial services, and telecommunications enables it to provide reliable
customer and market information and advisory services to clients in those
industries. The Company also believes that its recognized name and long-
standing reputation enable it to obtain information from senior executives who
are difficult to access.
The Company's strategy focuses on client projects that require
periodic updating and tracking of information, thereby creating the potential
for higher-margin recurring revenues. The portion of the Company's revenues
from such projects was approximately 51% in 1997.
-1-
<PAGE>
THE COMPANY'S SERVICES AND PRODUCTS
The Company offers a variety of services and products to assist
clients with their strategies and plans for marketing and selling their products
to businesses and consumers.
Services
Customer Loyalty & Retention. The Company assists its clients in
quantifying customer loyalty and increasing customer retention. By capturing
and analyzing the perceptions and experiences of its clients, prospects and
employees, the Company provides analysis and feedback on customer loyalty which
drives superior customer retention and business performance. The Company
provides its clients with information on the elements of products or services
which are most important to their customers; on how well these products and
services compare to the competition; and on which customers will continue to
purchase and recommend such products and services.
Corporate Reputation & Branding. The Company works with clients
worldwide to manage their corporate and brand images; identify and achieve
optimal positioning in the marketplace; and strengthen equity with customers,
employees and the financial community. The strength of a client's image or
reputation is identified through interviews with constituency groups with whom
the client interacts and whose decisions influence the client's success. These
groups may include customers, potential customers, distributors, suppliers, the
media and the investment community.
Market Demand Analysis & Forecasting. The Company works with clients
worldwide to analyze and forecast market demand for new products and services.
The Company combines sophisticated analytic techniques with global reach to
provide clients with insight regarding optimal product/services configuration
and pricing, as well as market size information. This work supports clients'
business planning and capital generation for new ventures.
Advanced Analytics & Data Modeling. The Company's diagnostic and
statistical models are among the most sophisticated in market research and will
redefine the teleservices industry. The Company applies advanced market
research techniques and uses predictive segmentation learning models to improve
teleservices success rates. By focusing on its clients' business issues and the
application of the right analytic tools, the Company can effectively transform
data and analyses into intelligence and insight. This approach holds whether
the Company is designing traditional market research surveys, "data mining"
client databases to optimize marketing efforts or building dynamic models to
guide telemarketers on selecting target prospects and product offerings.
-2-
<PAGE>
Employee Survey Programs. The Company provides comprehensive
employee-related research services to measure satisfaction, increase staff
retention, reduce hiring and training costs, and improve customer service.
Using proprietary computer software, exclusive multi-industry benchmarking
databases and a combination of quantitative and qualitative methodologies, the
Company works with clients to identify strengths and weaknesses. The Company
implements all stages of program management, from questionnaire design and
processing through reporting, final analysis and recommendations for action.
Data Collection & Processing. The Company's telephone interviewing
Call Centers in North America and Europe combine research expertise,
verification and advanced telecommunications technology. These facilities,
staffed with multilingual interviewers, use Computer Assisted Telephone
Interviewing (CATI), which provides clients with highly efficient and cost
effective data and information collection.
TeleServices. The Company combines its market research expertise in
predictive segmentation modeling and database management with top quality
teleservices to quantify buyer behavior, optimize targeting of its clients'
customers and provide feedback from its clients' customers for "continuous loop"
marketing to improve sales. This breakthrough capability -- ORC TeleScience(sm)
- -- applies sophisticated modeling techniques to cutting-edge teleservices to
increase the overall success rate of telemarketing as measured by higher sales
yields and lower costs of customer acquisition.
Industries
Telecommunications and Information Technology. The Company provides
market knowledge for a range of telecommunications and information technology
companies, from wireless communications companies and telephone carriers to
Internet service providers and computer hardware and software firms. Its
services include market definition, segmentation, new product development,
customer retention, usage analysis, competitive profiling and market demand
analysis for satellite communications products.
Among its services, the Company helps clients determine pricing and
distribution systems, tracks service performance, gauges the success of products
and services, designs and configures new products, predicts customer needs and
defines competitive positions in new markets.
Financial Services. The Company provides market and customer
intelligence to banks, securities brokerage, insurance companies and other
financial institutions across a number of business issues: customer loyalty and
retention, image management, market segmentation and positioning, new product
development, pricing strategy and customer database management.
-3-
<PAGE>
By focusing its research efforts on key customer segments such as high
net worth individuals, corporate treasurers, active investors, policyholders,
etc. the Company can determine the specific factors that influence the target
groups' decisions, and design strategies to attract, retain and motivate them
effectively.
Automotive. Utilizing research methodologies developed for its
automotive industry clients, the Company has extensive experience working with a
wide range of companies around the world, including vehicle manufacturers,
original-equipment-manufacturers (OEM) suppliers, dealers, distributors,
trucking companies and heavy equipment manufacturers.
The Company provides sophisticated segmentation research and long-term
studies on retailing sales and service; brand image and equity; product
development, design and performance; and dealer/manufacturer relations. The
Company's exclusive consumer market analysis evaluates and tracks customer needs
as they relate to new vehicle purchase, financing and leasing, buying behavior
and brand loyalty.
Retail and Trade. To shape marketing strategy, the Company's areas of
specialization include understanding the determinants of store choice; customer
loyalty and satisfaction; mystery shopping; segmentation and positioning; store
location, layout, design and product positioning; merchandise performance;
development and appraisal of individual outlets and sites; and diversification
into new markets, both international and local.
The Company also works in partnership with manufacturers and suppliers
of consumer goods to understand the needs, behavior and attitudes of customers
at all stages in the distribution channel. The Company's aim is to enhance the
manufacturer/trade/consumer relationship.
Health Care. The Company's services include surveys and evaluations
to determine patient satisfaction, market segmentation and customer acquisition,
competitive analysis, community needs assessment, market segmentation and
corporate positioning. For pharmaceutical companies and HMOs and for hospitals
and health care providers, the Company also conducts loyalty and retention
modeling research as part of its clients' patient and employee satisfaction
programs.
Through its innovative methodologies, such as proprietary panels, the
Company establishes ongoing dialogues with difficult-to-reach decision-makers
such as physicians, plan administrators and benefits managers.
Products
The following products are used by the Company to deliver some of the
services listed above and are also marketed as stand-alone products:
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<PAGE>
Business Panels. The Company develops business panels to access
executives and professionals. Panels are composed of executives and
professionals who have agreed in advance to participate in an on-going series of
interviews with the Company for the purpose of gathering customer and market
information.
The Company owns and operates a number of proprietary panels. The
panels range in size from several hundred to several thousand panelists. These
panels have been created with no predetermined end date.
The creation of a business panel involves considerable planning, time
and expense. Once established, however, it provides a significant amount of
reliable information that can be collected and updated from a relatively
constant source with less time and expense than would be otherwise required. As
such, the Company believes that there are strong financial incentives for
clients to continue using a panel.
Business panels produce up-to-date market intelligence that can be
used by the client for decisions ranging from marketing and sales strategies to
"micro-marketing" plans for specific market niches or segments. Typical issues
addressed by business panels include customer satisfaction, pricing and sales
strategy, market receptivity to new or potential products or services and market
share information.
Shared-Cost Programs. For over 30 years, the Company has conducted
shared-cost telephone survey programs, marketed under the name "CARAVAN," in
which questions from a number of clients are combined in a series of interview
questionnaires. The CARAVAN programs provide multiple clients with high-
quality, timely information at a relatively low cost.
The general public CARAVAN is a weekly shared-cost national survey
combining questions of clients such as advertising agencies, public affairs
departments of large corporations and product managers. Typically, the
information collected from the CARAVAN survey provides measurement and
evaluation of advertising and products.
Developed in 1994, CORPerceptions profiles the image of major
corporations that serve the needs of other business establishments located in 16
countries around the world. Telephone or in-person interviews are completed
annually with approximately 1,200 senior business executives selected from the
largest industrial and services companies within these countries. Industries
profiled by executives include automotive, brokerage services, computer
hardware, electronics, information technology services, and management
consulting.
CORPerceptions' sister-study, BrandPerceptions, is an international
brand equity study conducted among 4,250 consumers in 16 countries throughout
Asia Pacific, Europe and North America. As a result of BrandPerceptions,
conducted for the first time in 1996, some of the world's leading companies
learn more about consumer awareness, preference, satisfaction and loyalty toward
their brand and competing brands in the international marketplace.
-5-
<PAGE>
Customers for Life is a software-based customer retention tool
designed to build and strengthen customer relationships and long-term customer
loyalty. Developed in 1997, Customers for Life is a comprehensive program that
provides the framework for direct customer feedback, real-time troubleshooting,
database management and structured reporting systems.
MARKETING
In 1997, the Company increased the number of initiatives to further
market its services and products. These include:
Global Corporate Identity Program. The Company established a unified
appearance and design to ensure the consistent delivery of marketing messages
and a uniform graphic treatment around the world.
Marketing and Sales-Support Program. The Company developed and
implemented a comprehensive communications program to support a systematic
business development effort. Elements include advertising, direct marketing,
sales-support materials, media relations, seminars and telemarketing to gain
access to a large number of prospective clients. The Company's web site allows
prospective clients to learn about its products and services at a time of their
choosing.
CLIENTS AND CLIENT RELATIONSHIPS
Some of the Company's largest clients in terms of revenues generated
include Bell Atlantic, Coopers & Lybrand, Dean Witter, EDS Corp., GE, General
Motors, Moody's Investor Service, Inc., PNC Bank, SBC, and the U.S. Postal
Service. In 1997, the Company served over 550 clients. For many clients, the
Company performed multiple projects, sometimes for different subsidiaries or
business units of the same client.
In 1997, the Company was engaged by 12 divisions of GM, including GM
Corporate, covering such issues as customer satisfaction, product positioning,
buyer behavior, and brand and corporate image. Collectively, these projects
generated approximately 17% of the Company's revenues. GM has been a client of
ORC's automotive practice, since 1985.
COMPETITION
Many other firms provide some of the services and products provided by
the Company, typically focusing on consumer markets. However, the Company
believes that no single competitor offers a comparable combination of services
and products.
-6-
<PAGE>
For business to business market research, the Company believes that it
competes for clients based on a variety of factors, including name recognition,
reputation, expertise in a variety of industries, ability to access executives
and other key constituencies, ability to collect accurate and representative
information, ability to enhance the value of the data collected through analysis
and consulting, technological competence, reliability, promptness and
efficiency. In the Company's experience, rather than price, its typical clients
are interested primarily in the quality and utility of the service received.
For consumer market research services, the Company regularly
experiences significant competition from a large number of competitors,
including marketing and research departments of various companies, advertising
agencies and business consulting firms. Price, reputation, and quality of
service are the dominant considerations.
The Company considers the relationship with its clients as well as its
know-how and expertise as invaluable assets. The Company seeks to safeguard
these assets by requiring each of its senior employees to execute
confidentiality and non-solicitation agreements.
GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
<CAPTION>
Results of Foreign Operations
----------------------------------------
1997 1996 1995
-------------- ----------- -----------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues from foreign operations $17,570 $11,963 $10,550
% of total Company revenues 31.0% 25.3% 23.9%
Operating income (loss) from foreign operations $ 99 ($215) ($474)
% of total Company operating income (loss) 3.7% N/A 35.3%
Identifiable assets from foreign operations $11,248 $10,077 $ 6,786
% of total Company assets 34.6% 30.8% 23.8%
</TABLE>
BACKLOG
As of December 31, 1997, revenues expected to be received by the
Company under its client contracts, which are based on budgeted amounts in those
contracts, were $26,092, as compared to $12,154 as of December 31, 1996. This
increase in backlog is due to the timing associated with the renewal of certain
projects as well as increased sales activity in the fourth quarter of 1997. All
of the 1997 amount is expected to be received by December 31, 1998. The
Company's engagements generally are terminable by the Company's clients at any
time, with the expectation of cost recovery for work completed by the Company.
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<PAGE>
EMPLOYEES
As of December 31, 1997, the Company employed a total of 357 full-time
employees and maintained a pool of part-time hourly employees in the United
States and the United Kingdom of approximately 1,000 people. The part-time
employees work as telephone interviewers and data processors. Of the full-time
employees, 257 are professionals engaged in direct client service and 100 are
engaged in support, administration and executive oversight.
The Company conducts special training programs for all telephone
interviewing staff and regularly monitors such staff to ensure that its high-
quality standards are maintained.
None of the Company's employees are subject to a collective bargaining
agreement, nor has the Company experienced any work stoppages. The Company
believes that its relationship with its employees is excellent.
Item 2. Properties
----------
The Company's executive offices are located in approximately 45,000
square feet of leased space in Skillman (Greater Princeton), New Jersey. The
term of the lease expires in August 2003. The Company has an option to renew
the lease for five years. The Company also leases 3,000 square feet in Chicago,
Illinois. This lease will expire in September 1998. The Company maintains a
telephone interviewing facility in Tucson, Arizona which it opened in November
1994. The lease on the Tucson facility is for 16,000 square feet and expires in
November 2004. ORC's U.K. companies are housed in two leased locations in
London and a third location in Manchester, England. One location is
approximately 16,000 square feet, and the lease for such premises expires in May
2002. The second London lease is for 2,600 square feet and expires December
1998. The Manchester lease is for 2,600 square feet and expires December 1998.
The ORC Automotive Group occupies approximately 25,000 square feet in Maumee
(Greater Toledo), Ohio under a lease that expires in June 2000 and 2,400 square
feet in Detroit, Michigan that expires in May 2000, with a five-year renewal
option.
The Tucson and London centers presently have a combined total of 272
computer assisted telephone interviewing stations. All of these facilities are
equipped with state-of-the-art hardware and software. In a typical telephone
interview, the computer assisted telephone interviewing system prompts the
interviewer's sequence of questions depending on the previous answers. All
responses are recorded directly into the computer, avoiding the need for
subsequent data entry and enabling prompt analysis of responses. The
interviewees communicate with live interviewers at all times.
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<PAGE>
Over the past several years the Company has installed database systems
and software to store information in its Toledo, Tucson, and London centers.
These systems and software expand the Company's reporting capabilities and
transform traditional tabular formats into graphic output, thereby improving the
utility and presentation of reports as well as the turnaround times.
The Company believes that its properties are sufficient for its
current operational needs.
Item 3. Legal Proceedings
-----------------
The Company is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1997.
Item 4A Executive Officers Of The Registrant
------------------------------------
The current term of office of each of the Company's executive officers
expires at the first meeting of the Board of Directors of the Company following
the 1998 Annual Meeting of Shareholders, or as soon thereafter as each of their
successors is duly elected and qualified.
The following table sets forth certain information concerning the
principal executive officers of the Company as of December 31, 1997.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael R. Cooper, Ph.D. 51 Chairman, President and Chief
Executive Officer
John F. Short 53 Vice-Chairman, Chief Financial
Officer, Treasurer, and Secretary
Gregory C. Ellis 41 Chief Operating Officer - ORC
Market Research
James C. Fink, Ph.D. 53 Executive Vice President
James T. Heisler, Ph.D. 51 Executive Vice President
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Jeffrey T. Resnick 41 Group Managing Director - ORC
Princeton Group
Gerard Miodus 41 Group Managing Director - ORC
Information Services Group
Nigel Maxfield 40 Group Managing Director - ORC U.K.
Richard Cornelius 36 Deputy Group Managing Director -
ORC U.K.
</TABLE>
Dr. Cooper joined the Company as its President and Chief Executive Officer
in 1989, was elected Chairman in 1991, and continues to serve in these
capacities. Dr. Cooper received a Ph.D. in Industrial and Organizational
Psychology from The Ohio State University.
Mr. Short joined the Company as its Chief Financial Officer in 1989 and was
appointed Vice Chairman in 1992.
Mr. Ellis joined the Company in October 1995 as the Chief Executive Officer
of the Princeton Group. In July 1997 Mr. Ellis was appointed Managing Director
- - ORC Automotive Group, and in December 1997, he was promoted to Chief Operating
Officer - ORC Market Research. Prior to joining ORC, Mr. Ellis was Senior Vice
President and General Manager of Testing, Analytics, and Media Services for AC
Nielsen Company. Mr. Ellis holds a M.S.I.A. degree from Carnegie-Mellon
University's Graduate School of Industrial Administration.
Dr. Fink joined the Company in 1982. Since 1990, Dr. Fink has held
various managerial positions within the Company and is currently responsible for
the Corporate Reputation and Branding Practice of the Princeton Group. Dr. Fink
received a Ph.D. in Economics from the Pennsylvania State University.
Dr. Heisler joined the Company in 1982. Since 1990, Dr. Heisler has held
various managerial positions, and he is currently responsible for the
Telecommunications and Technology Practice of the Princeton Group. Dr. Heisler
received a Ph.D. in Social Psychology from Illinois Institute of Technology.
Mr. Resnick joined the Company in 1984. Since 1990 Mr. Resnick has
directed the Financial Services Practice for the Princeton Group. In 1996 Mr.
Resnick was appointed Group Managing Director - ORC Princeton Group. Mr.
Resnick holds a Master of Arts degree from Western Michigan University and a
Bachelor of Science degree from the Pennsylvania State University.
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<PAGE>
Mr. Miodus joined the Company in 1982. Throughout the years Mr. Miodus has
served in various capacities in the Company's Data Collection arena. In 1997
Mr. Miodus was appointed Group Managing Director - ORC Information Services
Group. Mr. Miodus holds a Bachelor of Arts degree in Economics from Michigan
State University.
Mr. Maxfield joined the Company in 1996 when GSR/SIA purchased the assets
of a division of an information technology company ("SIA"). Mr. Maxfield had
served as a Director of SIA since 1992. In 1997 Mr. Maxfield was appointed
Group Managing Director ORC - U.K. Mr. Maxfield holds a Ph.D. in Mathematics
from the University of Sheffield.
Mr. Cornelius joined Gordon Simmons Research Group in 1984 and directed the
Telecommunications Practice for GSR Group until he became the Deputy Group
Managing Director in 1996. During 1997 Mr. Cornelius was appointed Deputy
Managing Director ORC - U.K. Mr. Cornelius received a Bachelor of Science
degree, with Honors, in Sociology from Kingston University.
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<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
Market Information
- ------------------
The Company's Common Stock has been traded on NASDAQ/NMS under the
symbol "ORCI" since the Company's initial public offering on October 26, 1993.
The table below sets forth the high and low closing sales prices for the
Company's Common Stock for each of the four quarters of 1997 and 1996:
<TABLE>
<CAPTION>
High Low
----------- ----------
Calendar Year 1997
- ---------------------------------------------------------
<S> <C> <C>
Fourth Quarter $5.750 $3.500
Third Quarter 4.000 3.375
Second Quarter 4.125 3.125
First Quarter 3.875 3.125
Calendar Year 1996
- ---------------------------------------------------------
Fourth Quarter $4.880 $3.130
Third Quarter 7.380 4.000
Second Quarter 7.130 6.250
First Quarter 7.130 5.880
</TABLE>
The closing price of the Company's Common Stock on February 27, 1998
was $6.437 per share. As of February 27, 1998, the Company had 55 holders of
record of its Common Stock (approximately 1,100 beneficial shareholders).
Dividends
- ---------
The Company has not paid any dividends on its Common Stock. The
Company currently intends to retain its earnings to finance future growth and
therefore does not anticipate paying dividends on its Common Stock in the
foreseeable future.
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<PAGE>
Item 6. Selected Financial Data
Selected Financial Data
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
For the Twelve Months Ended December 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Statement Data:
Revenues $ 56,673 $47,273 $ 44,101 $ 39,841 $24,537
Income (loss) from continuing operations(1) 2,801 2,425 (1,341) 3,267 1,380
Extraordinary gain on debt
restructuring, net of tax of $90(2) 365
Net income (loss) $ 1,151 $ 808 ($ 1,669) $ 1,295 $ 841
Weighted average common shares
outstanding (3), (4) 4,144 4,169 4,232 4,232 3,063
Income (loss) before extraordinary
gain per common share $ 0.28 $ 0.19 ($ 0.39) $ 0.31 $ 0.16
Extraordinary gain per common share 0.12
-------- -------- -------- -------- --------
Net income (loss) per common share $ 0.28 $ 0.19 ($ 0.39) $ 0.31 $ 0.28
-------- -------- -------- -------- --------
Adjusted weighted average common shares
and assumed conversions (3), (5) 4,146 4,213 4,874 3,599
Income before extraordinary
gain per diluted share $ 0.28 $ 0.19 $ 0.30 $ 0.16
Extraordinary gain per diluted share $0.10
-------- -------- -------- --------
Net income per diluted share $ 0.28 $ 0.19 $ 0.30 $ 0.26
-------- -------- -------- --------
Balance Sheet Data:
Total assets $ 32,480 $32,772 $ 28,537 $ 30,674 $24,604
Total debt 6,652 7,916 7,372 5,816 4,341
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) In the second quarter of 1995, the Company took an unusual pre-tax charge
of $3,489. This charge included a $1,958 write-down of capitalized
production costs; $178 for the disposal of fixed assets: $460 of
intangible assets associated with previous acquisitions; $380 in
severance costs; $414 provision for the abandonment of leases: and other
miscellaneous charges of $99.
(2) In June 1993, the Company realized an extraordinary pre-tax gain of $455
resulting from the cancellation of deferred interest in accordance with
an agreement with Arthur D. Little.
(3) The earnings per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Accounting Standards
No.128, Earnings Per Share.For further discussion of earnings per share
and the impact of Statement No. 128, see notes 1 and 11 to the
consolidated financial statements beginning on page F-6.
(4) The basic earnings per share calculations have given effect to the public
offering of stock by the Company on October 26, 1993 and all related
closing transactions.
(5) Shares attributable to the conversion of convertible debentures are not
included for 1996 as they expired on November 30, 1996, nor in 1995, as
their effect was anti-dilutive.
-13-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
OVERVIEW
The Company was established in 1938 to apply the principles of general
public opinion polling to marketing issues facing America's largest companies.
The Company has evolved to provide primary market research, information
services, and marketing services, including a focus on businesses selling
primarily to other businesses. The Company assists clients in evaluating,
monitoring and optimizing the effectiveness of their marketing and sales. The
Company's services and products address issues such as customer satisfaction,
market demand and forecasting, corporate image, competitive positioning, and
telemarketing.
In August 1993 the Company acquired all of the stock of GSR,
substantially increasing the Company's presence in the U.K. and expanding the
international aspects of its business. In April of 1994 the Company acquired
all of the stock of SRC. The SRC acquisition gave the Company access to the
U.S. automotive industry. In August of 1995 the Company opened a branch office
in Hong Kong and continued to expand internationally with the formation of
GSR/SIA in the U.K. in the latter part of 1996. In purchasing the assets of a
division of an information technology company, GSR/SIA expanded the Company's
capabilities in servicing international clients and introduced the Company to
the U.K. public sector. During 1997, as part of its globalization strategy, the
Company acquired a presence in Korea, Taiwan, and Mexico and created ORC
TeleServices, a telemarketing company in Tampa, Florida. The year concluded
with the announcement of the acquisition of ProTel Marketing, Inc., a high
quality telemarketing company based in Lansing, Illinois. This acquisition was
completed on January 6, 1998.
RESULTS OF OPERATIONS - 1997 COMPARED TO 1996
Revenues
Revenues from the U.S., GSR, and Hong Kong grew to $48,891, or 5.6%,
in 1997 from $46,299 in 1996. Additionally, revenues increased by 19.9% to
$56,673 in 1997 from $47,273 in 1996. $3,930, or 41.8% of this increase in
revenues resulted from the acquisition of Korea and Taiwan and the creation of
TeleServices in Tampa. An additional $2,878, or 30.6%, of this increase is
attributed to the inclusion of the results of operations of GSR/SIA for all of
1997 as opposed to only three months in 1996.
Cost of Revenues
Cost of revenues increased 13.5% to $34,374 in 1997 from $30,281 in
1996. As a percentage of total revenues, cost of revenues decreased to 60.7% in
1997 from 64.0% in 1996. The decrease in cost of revenues, as a percentage of
revenues, reflects the greatly increased revenues in 1997 generated by a
relatively stable workforce. Additionally, change in the mix of business to
more value added engagements contributed to the relative decline in the cost of
revenues.
-14-
<PAGE>
Selling, General, and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased to
$16,844 in 1997 from $12,214 in 1996. As a percentage of revenues, SG&A
increased to 29.7% in 1997 from 25.8% in 1996. $2,240 or 48.4% of the absolute
increase in SG&A can be attributable to the addition of Korea, Taiwan, and the
creation of TeleServices and GSR/SIA being present for an entire year. SG&A
expenditures increased throughout the year as the Company's performance improved
quarter over quarter. Expenditures in 1997 for such items as indirect
personnel, recruitment, placement fees, public relations and promotions, and
legal and accounting fees all exceeded 1996 levels.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 12.8 % to $2,654 in
1997 from $2,353 in 1996. As a percentage of revenues, depreciation and
amortization expense declined to 4.7% in 1997 from 5.0% in 1996. The increase
in the absolute amount of depreciation and amortization is principally
attributable to the addition of Korea, Taiwan and the inclusion of GSR/SIA for
the full year in 1997.
Provision for Income Taxes
The provision for income taxes for 1997 and 1996 are $976 and $840,
respectively. The provisions in 1997 and 1996 are higher than the amount which
results from applying the federal statutory rate to income primarily because of
the amortization of non-deductible goodwill generated from pre-1996 acquisitions
and the impact of state taxes.
Net Income
As a result of the items described above, net income for 1997
increased to $1,151, up from $808 in 1996.
RESULTS OF OPERATIONS - 1996 COMPARED TO 1995
Revenues
Revenues increased by 7.2% to $47,273 in 1996 from $44,101 in 1995.
$974, or 31% of this increase in revenues resulted from the acquisition of
GSR/SIA in London effective October 1, 1996. An additional $848, or 26.7%, of
this increase can be attributed to an increase in the Company's Asian
operations. The remaining increase in revenues was due to a general improvement
in business conditions.
Cost of Revenues
Cost of revenues increased 12.8% to $30,281 in 1996 from $26,854 in
1995. As a percentage of total revenues, cost of revenues increased to 64.0% in
1996 from 60.9% in 1995. The increase in the cost of revenues as a percentage
of total revenues was principally due to a management decision to maintain an
increased workforce despite experiencing delays in certain contract awards.
-15-
<PAGE>
Selling, General, and Administrative Expenses
SG&A decreased to $12,214 in 1996 from $12,422 in 1995. As a
percentage of revenues SG&A decreased to 25.8% in 1996 from 28.2% in 1995. The
decline in SG&A was the result of a deliberate strategy to control SG&A costs
and increase the leverage at the SG&A line as the Company continues to expand.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased 12.1% to $2,353 in
1996 from $2,677 in 1995. As a percentage of revenues, depreciation and
amortization expense declined to 5.0% in 1996 from 6.1% in 1995. The decline in
depreciation and amortization was the direct result of the write down of
capitalized production cost in the second quarter of 1995 which were amortized
over three years.
Unusual Charges
There were no unusual charges in 1996. During the second quarter of
1995, the Company announced a plan to restructure and consolidate operations,
concentrate resources, and better position itself to achieve its strategic
growth objectives. This plan resulted in a pre-tax charge of $3,489. This charge
included a $1,958 write-down of capitalized production costs related to products
discontinued as a result of the restructuring; $178 for the disposal of obsolete
fixed assets; $460 of intangible assets associated with previous acquisitions;
$380 in severance costs; $414 provision for the abandonment of leases; and other
miscellaneous charges of $99. Management does not anticipate incurring an
additional charge such as this in the foreseeable future.
Interest Expense
Net interest expense increased 4.3% to $777 in 1996 compared to $745
in 1995.
Provision for Income Taxes
The provision/(benefit) for income taxes for 1996 and 1995 are $840
and ($417), respectively. The tax benefit arising from the loss in 1995 was
less than the amount which results from applying the federal statutory rate to
the loss primarily because of foreign losses for which no tax benefit was
currently available. The provision in 1996 is higher than the amount which
results from applying the federal statutory rate to income primarily because of
the amortization of non-deductible goodwill and state taxes.
The Company has recognized for financial reporting purposes deferred
tax assets which consist primarily of a tax net operating loss carryforward.
These deferred tax assets are expected to be realized upon the reversal of
existing taxable temporary differences.
Net Income
Net income (loss) for the periods ending December 31, 1996 and 1995
were $808 and ($1,669), respectively. The Company's net income for the period
ended December 31, 1995 was materially impacted by the non-recurring unusual
item discussed previously. There were no such non-recurring items in 1996.
-16-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, working capital was $3,266, an increase of
$3,477 from December 31, 1996. The increase in working capital is due primarily
to the refinancing of $3,000 of subordinated debt and $1,203 of deferred
interest that were classified as current liabilities in 1996. The $1,203
repayment of deferred interest was the principal reason for the Company having
generated less cash from operations in 1997 than 1996. The cash generated from
operations in 1997 was $2,876 as compared to $3,392 in 1996.
Cash used in investing activities for 1997 was $2,375, comprised of
$1,382 in payment for the various acquisitions and $1,011 in capital
expenditures.
In 1997, the Company increased net borrowings from its senior lender
by $1,921. A portion of these funds was used to supplement cash generated from
operations to repay $3,000 of subordinated debt and $1,203 of deferred interest,
to repay principal under capital lease arrangements of $240, and to finance the
acquisitions noted previously.
In March of 1997, the Company negotiated a $15,000 senior debt
facility to be used for acquisitions, capital expenditures, and working capital.
The facility is comprised of a revolving credit line of $9,000 carrying an
interest rate of the bank's designated base rate (the "Base Rate") plus 25 basis
points and five year term notes of $6,000 of which (i.) one-third carries a
fixed interest rate of 10.25%; (ii.) one-third carries a fixed interest rate of
10.00%; and (iii.) one-third carries a variable rate of the Base Rate plus one
hundred and fifty basis points. In conjunction with the purchase of ProTel on
January 6, 1998, the Company's senior lender issued an additional five-year note
for $7,500. This note carries an interest rate of LIBOR plus 275 basis points or
the Base Rate plus 75 basis points. The agreement is for three years from the
date of the amendment and is secured by substantially all of the assets of the
Company. The Company believes that its current sources of liquidity and capital
will be sufficient to fund its long-term obligations and working capital needs
for the foreseeable future.
INFLATION AND FOREIGN CURRENCY EXCHANGE
Inflation has not had a significant impact on the Company's operating
results to date, nor does the Company expect it to have a significant impact
through 1997. As the Company continues to expand its international operations,
exposures to gains and losses from foreign currency fluctuations will increase.
The Company may choose to limit such exposure by the purchase of forward foreign
exchange contracts.
-17-
<PAGE>
IMPACT OF YEAR 2000
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has taken steps in recent years to ensure that all new
purchased software is year 2000 compliant. A recently completed internal study
by the Company estimates approximately $250 will be needed to modify or replace
its existing software in order to alleviate the year 2000 issue. The Company
estimates that by the end of 1998 all of its financial and operational computer
systems will be year 2000 compliant.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
Not Applicable.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Financial Statements are set forth at Page F-1 at the end of this
Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
----------------------
None.
-18-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year ended December 31, 1997, and is hereby
incorporated by reference thereto.
Item 11. Executive Compensation
----------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year ended December 31, 1997, and is hereby
incorporated by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year ended December 31, 1997, and is hereby
incorporated by reference thereto.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year ended December 31, 1997, and is hereby
incorporated by reference thereto.
-19-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-----------------------------------------------------------------
(a) The following documents are filed as part of this report.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Financial Statements Page Reference
-------------------- --------------
Report of Independent Auditors. F-1
Consolidated Balance Sheets as of December 31, F-2
1997 and 1996.
Consolidated Statements of Operations for F-3
the years ended December 31, 1997, 1996,
and 1995.
Consolidated Statements of Stockholders' F-4
Equity for the years ended December 31, 1997,
1996, and 1995.
Consolidated Statements of Cash Flows for F-5
the years ended December 31, 1997, 1996, and 1995.
Notes to Consolidated Financial Statements. F-6
2. Financial Statement Schedule
----------------------------
Schedule II - Valuation and Qualifying Accounts S-1
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable or the required
information is given in the Financial Statements or Notes thereto, and therefore
have been omitted.
-20-
<PAGE>
3. Exhibits
--------
Exhibit No.
- -----------
3.1 Restated Certificate of Incorporation of the Registrant - Incorporated
by reference to Exhibit 3.1 to the Registrant's Registration Statement
on Form S-1 (No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Registrant's Registration Statement on
Form S-1 (No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
9.1 Voting Trust Agreement dated June 23, 1992 between Michael R. Cooper
and the Trustees U/I/T of Michael R. Cooper dated June 18, 1992 f/b/o
Carolyn and Jordan Cooper - Incorporated by reference to Exhibit 9.1
to the Registrant's Registration Statement on Form S-1(No. 33-68428)
filed with the Securities and Exchange Commission on September 3,
1993.
9.2 Voting Trust Agreement dated August 23, 1993 between the Registrant,
Michael R. Cooper and certain members of the Registrant's Senior
Management - Incorporated by reference to Exhibit 9.2 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
9.3 Voting Trust Agreement by and among Michael R. Cooper and Ruth M.
Cooper, Trustee U/I/T of Michael R. Cooper dated December 23, 1994
f/b/o Carolyn and Jordan Cooper - Incorporated by reference to Exhibit
9.3 on Registrant's Form
10-K filed with the Securities and Exchange Commission on March 31,
1995.
*10.1 Employment Agreement between the Registrant and Michael R. Cooper.
Incorporated by reference to Exhibit 10.1 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 27, 1997.
*10.2 Employment Agreement between the Registrant and John F. Short.
Incorporated by reference to Exhibit 10.2 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 27, 1997.
*10.3 Employment Agreement between the Registrant and James C. Fink.
Incorporated by reference to Exhibit 10.5 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 31, 1995.
*10.4 Employment Agreement between the Registrant and James T. Heisler.
Incorporated by reference to Exhibit 10.6 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 31, 1995.
-21-
<PAGE>
*10.5 Employment Agreement between the Registrant and Gregory C. Ellis.
Incorporated by reference to Exhibit 10.5 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 29, 1996.
*10.6 The Registrant's Retirement Plan - Incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-
1(No. 33-68428) filed with the Securities and Exchange Commission on
September 3, 1993.
10.7 1997 Stock Incentive Plan.
10.8 Lease Agreement dated May 15, 1995 between the Registrant and the
Maumee Woodlands IV Company (Maumee Facility). Incorporated by
reference to Exhibit 10.15 on Registrant's Form 10-K filed with the
Securities and Exchange Commission on March 29, 1996.
10.9 Lease Agreement dated May 24, 1993 between the Registrant and Computer
Associates International, Inc. (for Princeton facility) - Incorporated
by reference to Exhibit 10.16 to the Registrant's Registration
Statement on Form S-1(No. 33-68428) filed with the Securities and
Exchange Commission on September 3, 1993.
10.10 Lease dated March 24, 1992 between Torin (Angel City) Investments
Limited and Davis Schottlander & Davis Limited (for second floor of
GSR facility) - Incorporated by reference to Exhibit 10.18 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.11 Lease dated February 1, 1984 between Torin (Angel City) Investments
Limited and Davis Schottlander & Davis Limited (for third floor of GSR
facility) - Incorporated by reference to Exhibit 10.19 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.12 Assignment of Lease dated December 20, 1989 between Torin (Angel
City) Davis Schottlander & Davis Limited and GSR and Lionel Lawrence
Gordon, Esq. and Martin Simmons, Esq. (for second and third floors of
GSR facility) - Incorporated by reference to Exhibit 10.20 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.13 Lease dated March 24, 1982 between Torin (Angel City) Davis
Schottlander & Davis Limited (for fourth floor of GSR facility) -
Incorporated by reference to Exhibit 10.21 to the Registrant's
Registration Statement on Form S-1(No. 33-68428) filed with the
Securities and Exchange Commission on September 3, 1993.
-22-
<PAGE>
10.14 Assignment of Lease dated October 27, 1989 between Davis Schottlander
and Davis Limited and GSR and Lionel Lawrence Gordon, Esq. and Martin
Simmons, Esq. (for fourth floor of GSR facility) - Incorporated by
reference to Exhibit 10.22 to the Registrant's Registration Statement
on Form S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
10.15 Lease dated August 25, 1994 between the Registrant and H.C.
Properties, USA, Inc. (Tucson Facility) - Incorporated by reference to
Exhibit 10.22 on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995.
10.16 Asset Purchase Agreement between registrant and Pro Tel Marketing,
Inc. Incorporated by reference to Exhibit 2.1 to the Registrant's
Form 8-K filed with the Securities and Exchange Commission on January
20, 1998.
10.17 Amended and Restated Loan and Security Agreement dated May 8, 1997
among Opinion Research Corporation, ORC TeleScience Corp., ORC, Inc.
and CoreStates Bank, N.A.
10.18 First Amendment and Joinder dated January 7, 1998 to Amended and
Restated Loan and Security Agreement dated May 8, 1997 among Opinion
Research Corporation, ORC TeleScience Corp., ORC, Inc. and ORC ProTel,
Inc. and CoreStates Bank, N.A.
21 Subsidiaries of the Registrant.
(b) Reports on Form 8-K
None.
- --------------------------------------------------------------------------------
* Constitutes a compensatory plan or arrangement required to be filed as an
exhibit to this report
-23-
<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.
OPINION RESEARCH CORPORATION
By: /s/ Michael R. Cooper
-----------------------------------------
Michael R. Cooper, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 23, 1998 by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/Michael R. Cooper Principal Executive Officer and Director
- ----------------------------
Michael R. Cooper
/s/John F. Short Principal Financial and Accounting
- -------------------------------
John F. Short Officer and Director
/s/James C. Fink Director
- ------------------------------
James C. Fink
/s/James T. Heisler Director
- ------------------------------
James T. Heisler
/s/George G. Gordon Director
- ------------------------------
George G. Gordon
-24-
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Opinion Research Corporation
We have audited the accompanying consolidated balance sheets of Opinion Research
Corporation and Subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and 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 consolidated financial position of Opinion
Research Corporation and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of its operations and its cash flows for each of the three
years in the 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 financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Princeton, New Jersey
February 6, 1998
F-1
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 160 $ 865
Accounts receivable:
Billed 7,242 7,480
Unbilled services 4,061 2,867
--------------- --------------
11,303 10,347
Less: allowance for doubtful accounts 170 162
--------------- --------------
11,133 10,185
Prepaid and other current assets 2,215 2,655
--------------- --------------
Total current assets 13,508 13,705
Property and equipment, net 5,041 5,511
Capitalized production costs, net 145 516
Intangible assets, net 1,316 1,427
Goodwill, net 11,063 10,971
Other assets 1,407 642
--------------- --------------
$ 32,480 $ 32,772
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 960 $ 1,979
Accrued expenses 2,800 1,305
Deferred revenues 4,024 2,782
Revolving credit line 990 380
Notes payable 1,251 6,047
Deferred interest payable 1,203
Current maturities of obligations under capital leases 217 220
--------------- --------------
Total current liabilities 10,242 13,916
Long term debt 4,100 993
Long term maturities of obligations under capital leases 94 276
Deferred income taxes 425 1,103
Other liabilities 1,259 839
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
none issued or outstanding
Common Stock, $.01 par value, 10,000,000 shares authorized,
4,231,747 shares issued and 4,193,889 outstanding in 1997
and 4,231,747 shares issued and 4,143,889 outstanding in 1996 42 42
Additional paid-in capital 13,976 14,011
Retained earnings 2,677 1,526
Foreign currency cumulative translation adjustment (149) 556
Treasury Stock, at cost, 37,858 shares in 1997, 87,858 in 1996 (186) (490)
--------------- --------------
Total stockholders' equity 16,360 15,645
--------------- --------------
$ 32,480 $ 32,772
=============== ==============
</TABLE>
See notes to financial statements.
F-2
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
<S> <C> <C> <C>
Revenues $ 56,673 $ 47,273 $ 44,101
Cost of revenues 34,374 30,281 26,854
--------------- --------------- --------------
Gross profit 22,299 16,992 17,247
Selling, general and administrative expenses 16,844 12,214 12,422
Depreciation and amortization 2,654 2,353 2,677
Unusual charge 3,489
--------------- --------------- --------------
Operating income (loss) 2,801 2,425 (1,341)
Interest expense, net 674 777 745
--------------- --------------- --------------
Income (loss) before income taxes 2,127 1,648 (2,086)
Provision (benefit) for income taxes 976 840 (417)
--------------- --------------- --------------
Net income (loss) $ 1,151 $ 808 $ (1,669)
=============== =============== ==============
Net income (loss) per common share:
Basic $ 0.28 $ 0.19 $ (0.39)
=============== =============== ==============
Diluted $ 0.28 $ 0.19
=============== ===============
Weighted average common shares outstanding:
Basic 4,144,164 4,169,327 4,231,812
Diluted 4,145,866 4,212,952
</TABLE>
See notes to financial statements.
F-3
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY TREASURY STOCK TOTAL
------------------- PAID IN RETAINED TRANSLATION ------------------ STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT EQUITY
-------- -------- ---------- --------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 4,232 $ 42 $ 14,067 $ 2,387 $ 199 $ 16,695
Stock repurchase 35 (207) (207)
Foreign currency translation
adjustment (74) (74)
Net loss (1,669) (1,669)
----- -------- -------- -------- -------- -------- -------- --------
Balance, December 31, 1995 4,232 42 14,067 718 125 35 (207) 14,745
Stock repurchase 102 (580) (580)
Stock issuance (56) (49) 297 241
Foreign currency translation
adjustment 431 431
Net income 808 808
----- -------- -------- ------- ------- -------- -------- -------
Balance, December 31, 1996 4,232 42 14,011 1,526 556 88 (490) 15,645
Stock issuance (35) (50) 304 269
Foreign currency translation
adjustment (705) (705)
Net income 1,151 1,151
----- -------- -------- -------- -------- -------- -------- --------
Balance, December 31, 1997 4,232 $ 42 $ 13,976 $ 2,677 $ (149) 38 $ (186) $ 16,360
===== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
-------------- --------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,151 $ 808 $ (1,669)
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization 2,654 2,353 2,677
Loss (gain) on disposal of fixed assets 4 (16) 179
Non-cash portion of unusual charge 2,420
Provision for doubtful accounts 10 30 (46)
Change in operating assets and liabilities net of effects
from acquisitions
Billed accounts receivable 228 (1,536) (678)
Unbilled services (1,236) 922 (383)
Other assets (379) (1,144) (685)
Accounts payable (1,033) 154 (543)
Accrued expenses 980 (630) 234
Advanced billing from customers 1,216 1,424 (1,116)
Deferred interest payable (1,203) 399 361
Deferred income taxes (677) 745 (683)
Other liabilities 1,161 (117) 4
-------------- --------------- --------------
Net cash provided by operating activities 2,876 3,392 72
-------------- --------------- --------------
Cash flows from investing activities:
Payment for acquisitions, net of cash acquired (1,382) (3,272) (891)
Proceeds from the sale of fixed assets 18 31
Capitalized production costs (442) (32)
Capital expenditures (1,011) (1,647) (586)
-------------- --------------- --------------
Net cash used in investing activities (2,375) (5,330) (1,509)
-------------- --------------- --------------
Cash flows from financing activities:
Borrowings under line-of-credit agreement 18,010 23,622 11,009
Repayments under line-of-credit agreement (17,400) (21,348) (11,238)
Issuance of note payable 6,151 1,404 1,410
Repayment of note payable (7,840) (643) (100)
Repayments under capital lease arrangements (240) (257) (324)
Capital stock repurchased, net (339) (207)
Proceeds from issuance of capital stock 269
-------------- --------------- --------------
Net cash provided by (used in) financing activities (1,050) 2,439 550
-------------- --------------- --------------
Effect of exchange rate changes on cash and cash equivalents (156) 24
-------------- --------------- --------------
Increase (decrease) in cash and cash equivalents (705) 525 (887)
Cash and cash equivalents at beginning of period 865 340 1,227
-------------- --------------- --------------
Cash and cash equivalents at end of period $ 160 $ 865 $ 340
============== =============== ==============
Non-cash investing and financing activities:
Acquisition of equipment under capital lease $ 55 $ 777
============== ==============
Capital stock issued in connection with acquisitions $ 241
===============
</TABLE>
See notes to financial statements.
F-5
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(in thousands, except share and per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Opinion Research Corporation and Subsidiaries (the Company, ORC), which was
founded in 1938, provides market research, marketing services, and business
information services. The Company offers a variety of products and services for
clients in the North American, European, Asian, and Latin American markets. The
Company offers such services as customer satisfaction, market demand and
forecasting, corporate image, competitive positioning, and telemarketing. Some
products such as business panels and shared-cost programs are marketed
independently as well as used by the Company to deliver the above listed
services. The Company operates in one industry segment.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany transactions are eliminated
upon consolidation.
REVENUE RECOGNITION
Revenues from professional services are recognized at the time services are
performed on a percentage of completion basis. Invoices to clients are
generated in accordance with the terms of the applicable contract, which are not
directly related to the performance of services. Unbilled services are
classified as a current asset. Advanced billings from clients in excess of
revenue earned are classified as a current liability. The Company grants credit
primarily to large public companies and performs periodic credit evaluations of
its clients' financial condition. The Company does not generally require
collateral. Credit losses relating to clients consistently have been within
management's expectations. As of December 31, 1997, two clients constituted 27%
of net accounts receivable. These clients accounted for 22% of the revenues for
the year ended December 31, 1997. As of December 31, 1996, two clients
constituted 21% of net accounts receivable and accounted for 29% of revenues for
the year ended December 31, 1996. At December 31, 1995, one client constituted
33% of net accounts receivable. Combined revenues for this client accounted for
22% of the Company's revenues for the year ended December 31, 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-6
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers as cash equivalents all highly liquid debt instruments
with an original maturity of three months or less when purchased.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets (3-10
years). Leasehold improvements are amortized using the straight-line method
over their estimated useful lives or the remaining life of the lease, whichever
is shorter.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets used in operations or
expected to be disposed when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amounts of those assets (see Note 12).
CAPITALIZED PRODUCTION COSTS
The costs of producing the Company's standardized computer models are
capitalized and amortized using the straight-line method over three years or the
estimated remaining periods for which the models provide future economic
benefits, whichever is shorter. The models are computer software which are
marketed and sold by the Company as separate products, along with research and
business information services. Capitalization of costs begins upon the
establishment of technological feasibility. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized costs
require considerable judgment by management with respect to certain factors
including anticipated future gross revenues, estimated economic life and changes
in technology. These factors are considered on a product-by-product basis.
Capitalized production costs were 0, $442, and $32 for the years ended December
31, 1997, 1996 and 1995, respectively. The amortization expense of capitalized
production costs for these same periods was $371, $226, and $683, respectively.
During 1995, the Company recorded a pre-tax write-down of capitalized production
costs of $1,958 (see Note 12).
F-7
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN OPERATIONS
The functional currency for the Company's UK subsidiaries is the British Pound.
The functional currencies for Korea, Taiwan and Mexico are the Korean Won, the
New Taiwan Dollar, and the Mexican Peso. The translation into U.S. dollars is
performed for assets and liabilities using the exchange rate in effect at the
balance sheet date and for revenue and expense accounts using a monthly average
exchange rate during the period. Translation adjustments are shown as a
separate component of shareholder's equity. Combined revenue, assets and other
financial information for foreign operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
------------- ------------ ----------
<S> <C> <C> <C>
Revenue $17,570 $11,963 $10,227
Net Income (loss) ($130) ($240) ($606)
DECEMBER 31,
-------------------
1997 1996
------- -------
Assets $11,248 $10,077
Liabilities $ 8,142 $ 7,129
Stockholders' equity $ 3,018 $ 2,948
</TABLE>
STOCK-BASED COMPENSATION
As permitted by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), the Company has elected to follow Accounting Principal
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations in accounting for its employee option plans. Under APB
25, no compensation expense is recognized at the time of option grant if the
exercise price of the Company's employee stock option equals or exceeds the fair
market value of the underlying common stock on the date of grant.
INCOME TAXES
The Company files a consolidated federal income tax return. Separate income tax
returns are filed for foreign, state, and local income taxes.
F-8
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement 128 requirements.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company is required to adopt the
provisions of these Statements in fiscal year 1998. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in a primary financial statement. The Company is currently evaluating the
reporting formats recommended under this Statement. SFAS No. 131 establishes a
new method by which companies will report operating segment information. This
method is based on the manner in which management organizes the segments within
a company for making operating decisions and assessing performance. The Company
continues to evaluate the provisions of SFAS No. 131 and, upon adoption, the
Company may report operating segments.
2. ACQUISITIONS
On April 29, 1994 the Company purchased the stock of Strategic Research and
Consulting, Inc., (SRC), an Ohio corporation, for a price of $3,000. The
acquisition was accounted for as a purchase and accordingly, the purchase price
was allocated to the assets acquired and liabilities assumed. During 1995, cash
payments totaling $891 were made to the previous owners of SRC as part of the
purchase price which was contingent upon achieving specific performance
criteria. The additional consideration is recorded as goodwill and is being
amortized over the 24 years remaining on the original goodwill. Based on 1995
operating performance, a second payment of $667 was made to the principals of
Strategic Research and Consulting, Inc. during 1996. This payment consisted of
a cash payment of $426 and the issuance of stock valued at $241. This payment
has been recorded as goodwill and is being amortized over the 23 years remaining
on the original goodwill. During 1997, a final cash payment of $171 was made
and recorded as goodwill and is being amortized over 22 years.
F-9
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. ACQUISITIONS (CONTINUED)
During 1996, the Company created GSR/SIA, Limited, to purchase the assets of a
division of an information technology company. This operating company is a
wholly owned subsidiary of ORC Holdings, Limited, a holding company created in
1996 to hold the shares of all the Company's U.K. holdings. To that end, the
shares of Gordon Simmons Research Group were exchanged by the Company for shares
in ORC Holdings, Limited. Also during 1996, the Company purchased the stock of
a Chicago based market research company that now serves as the Healthcare
Practice for the Company.
In 1997 the Company completed a stock purchase of a company in Korea and the
asset purchase of companies in Taiwan and Mexico. Additionally, Gordon Simmons
Research Group was renamed ORC International, Limited, into which GSR/SIA,
Limited, was merged.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Leasehold improvements $ 1,837 $ 1,714
Computer equipment and software 7,496 6,221
Furniture, fixtures, and equipment 3,330 3,501
Equipment under capital lease obligations 844 1,143
------- -------
13,507 12,579
Less accumulated depreciation & amortization 8,466 7,068
------- -------
Property and equipment, net $ 5,041 $ 5,511
======= =======
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Capitalized production costs $1,076 $1,076
less accumulated amortization 931 560
------ ------
Capitalized production costs, net $ 145 $ 516
====== ======
</TABLE>
F-10
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. INTANGIBLE ASSETS (CONTINUED)
<TABLE>
<S> <C> <C>
Intangible assets $ 3,805 $ 3,703
less accumulated amortization 2,489 2,276
------- -------
Intangible assets, net $ 1,316 $ 1,427
======= =======
Goodwill $12,699 $12,165
less accumulated amortization 1,636 1,194
------- -------
Goodwill, net $11,063 $10,971
======= =======
</TABLE>
5. INCOME TAXES
For financial reporting purposes, income (loss) before income taxes consists of
the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
-------------- ----------- -----------
<S> <C> <C> <C>
United States $2,343 $1,973 ($1,480)
Foreign (216) (325) (606)
------ ------ -------
$2,127 $1,648 ($2,086)
====== ====== =======
</TABLE>
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995
------------- --------------- ---------------
<S> <C> <C> <C>
Current:
Federal $1,520 $ 84 $ 96
State 117 110 170
Foreign (14) (70)
------ ----- ------
Total current 1,623 124 266
------ ----- ------
Deferred:
Federal (496) 553 (496)
State (146) 163 (187)
Foreign (5)
------ ----- ------
Total deferred (647) 716 (683)
------ ----- ------
$ 976 $ 840 ($417)
====== ===== ======
</TABLE>
The difference between tax expense and the amount computed by applying the
statutory federal income tax rate (34%) to income before income taxes is as
follows:
F-11
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
-------------- ------------- -----------
<S> <C> <C> <C>
Statutory rate applied to pre-tax income (loss) $ 723 $ 560 ($710)
Add (deduct):
State income taxes, net of federal benefit 77 73 (75)
Foreign operating losses for which a tax
benefit has not been recorded 55 42 206
Effect of non-deductible expenses 46 55 20
Effect of goodwill amortization 107 98 61
Decrease in valuation allowance (30)
Other (2) 12 81
----- ----- -----
$ 976 $ 840 ($417)
===== ===== =====
</TABLE>
The Company's deferred tax liabilities and assets consists of the following
temporary differences:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1997 1996
-------------------- ---------------
<S> <C> <C>
Deferred tax liabilities:
Capitalized production costs $ 929 $1,296
Tax basis adjustment of acquired subsidiary 227
----- ------
Total deferred tax liabilities 929 1,523
----- ------
Deferred tax assets:
Reserves for doubtful accounts 50 44
Fixed assets 117 134
Deferred compensation 162
Net operating loss carryforwards 110 199
Valuation allowance (34) (64)
Other 99 107
----- ------
Total deferred tax assets 504 420
----- ------
Net deferred tax liabilities $ 425 $1,103
===== ======
</TABLE>
The Company has fully utilized its U.S. federal tax net operating loss
carryforwards at December 31, 1997. At December 31, 1997 and 1996, unremitted
earnings of foreign subsidiaries were approximately $424 and $170, respectively.
Since it is the Company's intention to indefinitely reinvest these earnings, no
U.S. taxes have been provided. Determination of the amount of unrecognized
deferred tax liability on these unremitted earnings is not practicable.
F-12
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. INCOME TAXES (CONTINUED)
Income taxes paid in the U.S. for 1997, 1996, and 1995 were $841, $677, and
$109, respectively.
Income taxes of $383 were paid in the U.K. in 1995. No income taxes were paid
in the U.K. in 1997 and 1996.
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
---------------- ----------
<S> <C> <C>
Working capital facilities $ 990 $2,509
Notes payable to bank 5,351 1,911
Notes payable 3,000
------ ------
Total debt 6,341 7,420
Less current maturities 2,241 6,427
------ ------
Long-term portion $4,100 $ 993
====== ======
</TABLE>
At December 31, 1997, the Company had a credit facility with a U.S. bank
totaling $15 million: $9 million of revolving credit and $6 million in three,
five year notes.
As of December 31, 1997, the Company had outstanding $990 on the revolving
credit facility and $5,351 remaining on the term loans. The revolving credit
facility carries an interest rate of the bank's designated base rate ("Base
Rate") (8.5% at December 31, 1997) plus 25 basis points. Of the outstanding
term loans, 2/3 carry fixed interest rates of 10.25% and 10%, respectively. The
remaining 1/3 carries an interest rate of the Base Rate plus one hundred and
fifty basis points. Payments of interest only were required on these notes for
the first six months. The weighted average interest rate on short term
borrowings at December 31, 1997 and 1996, were 9.49% and 8.98%, respectively.
The interest rates on the revolving credit facility and on one of the notes are
based on current market rates. The rates on the remaining two notes were fixed
based on the bank's designated prime rate which has remained unchanged since the
issuance of the notes. Consequently, the carrying value of the amounts due
under the credit facility approximates their fair value at December 31, 1997.
On August 13, 1993, the Company issued a subordinated 10% convertible note for
$3,000. The $3,000 in principal and $1,203 of deferred interest were repaid
from the above mentioned credit facility in May 1997.
On January 6, 1998, the credit facility was extended by the Company's senior
lender to $21 million. An additional term loan was issued for $7.5 million
carrying an interest rate of the Base Rate plus
F-13
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. DEBT (CONTINUED)
75 basis points or LIBOR plus 275 basis points. The proceeds from this
additional note, as well as drawings on the revolving credit facility, were used
for the purchase of Pro Tel Marketing, Inc. (see Note 14).
Aggregate maturities of debt for the years ending December 31, inclusive of the
term loan discussed above, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998............................................................. $3,074
1999............................................................. 2,917
2000............................................................. 2,917
2001............................................................. 2,867
2002............................................................. 2,066
</TABLE>
The Company paid interest of $679, $379, and $445 during the years ended
December 31, 1997, 1996, and 1995, respectively. Also during 1997, the Company
paid $1,203 of deferred interest associated with the repayment of its
subordinated debt.
7. PENSION
The Company maintains a defined contribution pension and profit sharing plan
covering substantially all employees. Employees may contribute from 1% to 15%
of their annual salary, up to the maximum allowable under the Internal Revenue
Code. The Board of Directors may elect to match employees' contributions or
contribute to the profit sharing plan. Plan assets include 310,625 and 317,563
shares of common stock of the Company at December 31, 1997 and 1996,
respectively. The Company contributed $104, $75, and $65 to the plan in 1997,
1996, and 1995, respectively.
8. LEASES
Future minimum payments required under capital and operating leases that have
noncancelable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ------------
<S> <C> <C>
1998...................................................... $227 $2,100
1999...................................................... 87 1,827
2000...................................................... 12 1,750
2001...................................................... 1,478
2002...................................................... 1,100
Thereafter................................................ 992
---- ------
Total minimum lease payments.............................. $326 $9,247
======
</TABLE>
F-14
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. LEASES (CONTINUED)
<TABLE>
<S> <C>
Less amounts representing interest........................ 15
----
Capitalized lease obligations............................. 311
Less current portion...................................... 217
----
Long term portion......................................... $ 94
====
</TABLE>
Rent expense under operating leases was $2,178, $1,480, and $1,641, for the
years ended December 31, 1997, 1996 and 1995, respectively. Real estate taxes,
insurance and maintenance expenses generally are obligations of the Company and,
accordingly, are not included as part of rental payments. It is expected that,
in the normal course of business, leases that expire will be renewed or replaced
by leases on similar properties.
9. STOCKHOLDERS' EQUITY
On May 8, 1995, the Board of Directors authorized the Company to buy back up to
500,000 shares of the Company's common stock. During the fourth quarter of 1995,
the Company repurchased 34,625 shares at a cost of $207. During 1996 the Company
repurchased 102,182 shares at a cost of $580. Also, during 1996, 48,949 shares
valued at $241 were issued to the three senior principals of SRC (see Note 2).
In December 1997, the Company sold 50,000 shares to a senior executive of the
Company for $269, the fair market value at the time of the transaction.
10. STOCK OPTIONS
The 1994 Stock Incentive Plan provided for the grant of up to 350,000 options to
purchase common stock to directors and key employees of the Company. No
employee could be granted options to acquire more than 100,000 shares of Company
common stock in any one calendar year. The options granted under the 1994 plan
had an exercise price that was at least equal to the fair market value of the
stock on the grant date and were exercisable for seven years. Options granted
under this plan vested equally over a period of three years. The plan
terminates on April 25, 2004.
The 1993 Stock Incentive Plan provided for the grant of up to 375,000 options to
purchase common stock to directors and key employees of the Company. The
exercise price of options granted to employees under this plan was at least
equal to the fair market value of the stock on the date of grant. These options
vested equally over a three year period. The plan terminates in August 2003.
As amended in 1996, each Non-employee Director on the date of the Annual Meeting
of Stockholders is automatically granted options to acquire the "formula number"
of shares of common stock. The option exercise price for these options will be
equal to the fair market value of the underlying shares on the date of the
grant. The options granted under this provision will be non-qualified stock
options. The Non-employee Directors' options will become exercisable on the
F-15
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. STOCK OPTIONS (CONTINUED)
first anniversary of the date of grant provided the Non-employee Director is a
member of the Board of Directors on that date. The "formula number" for 1997
and 1996 was 15,000 shares for those Non-employee Directors who have served as a
member of the Board of Directors for a period of three full years or more, and
5,000 shares for all other Non-employee Directors.
Non-employee Directors' options terminate seven years from the date of grant or
90 days after the optionee ceases to serve as a member of the Board of Directors
for any reason. Any options of a Non-employee Director that are not exercisable
when he or she ceases to serve as a member of the Board of Directors will
terminate as of the termination of the Non-employee Director's service on the
Board of Directors.
On June 17, 1997 the shareholders of the Company approved the merger of the 1993
and 1994 Stock Incentive Plans into the 1997 Stock Incentive Plan. This merger
was undertaken in order to simplify administration and record keeping otherwise
required in operating the plans separately. The 1997 Stock Incentive Plan was
also amended to increase the number of shares available for grant from 725,000
to 875,000. The 1997 Stock Incentive Plan terminates on April 16, 2007. Stock
option transactions for the 1997 Stock Incentive Plan (and its predecessors)
were as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
--------------- ---------------------
<S> <C> <C>
Outstanding balance at December 31, 1994 371,958 $6.35
1995
- -----
Granted 246,750 $5.11
Canceled (53,332) $6.16
--------
Outstanding Balance at December 31, 1995 565,376 $5.82
1996
- ----
Granted 174,000 $6.50
Canceled (49,084) $5.55
--------
Outstanding Balance at December 31, 1996 690,292 $6.01
1997
- ----
Granted 595,206 $5.55
Canceled (327,458) $6.22
--------
Outstanding Balance at December 31, 1997 958,040 $5.65
========
</TABLE>
F-16
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. STOCK OPTIONS (CONTINUED)
Included above in the 1997 figures are 307,706 options that were issued in 1993
and 1994, cancelled in December 1997, and reissued in December 1997. The
reissued options retained all of the original attributes except for expiration
dates which are six years from the date of grant for options initially granted
in 1993 and seven years for those options originally granted in 1994. All
reissued options have an exercise price equal to or greater than the market
value of the stock on the date of grant.
Additionally, in December 1997, 200,000 non-plan options were granted to three
senior executives. These non-plan options were issued with an exercise price
equal to the market value of the stock at the date of grant. These options have
a vesting period of three years and a life of seven years. These options are
included in the previously presented option table.
Options exercisable at December 31, 1997, 1996 and 1995 were 533,791, 386,709,
and 305,536, respectively. Exercise prices for options outstanding as of
December 31, 1997 for the plan ranged from $3.63 to $8.38 per share. The
weighted average remaining term of the outstanding options is 5.76 years.
During 1995 the Board of Directors voted to reduce the exercise price of the
options granted prior to 1994 from $8.00 to $5.875 per share.
In accordance with the provisions of SFAS No. 123, the Company applies APB 25
and related interpretations in accounting for its stock option plans and,
accordingly, does not recognize compensation expense. If the Company had
elected to recognize compensation expense based on the fair value of the options
granted at grant date as prescribed by SFAS No. 123, net income (loss) and
earnings (loss) per share would have been reduced to the pro forma amounts
indicated in the table below:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) - as reported................................ $1,151 $ 808 $(1,669)
Net income (loss) - pro forma.................................. $ 593 $ 341 $(1,817)
Earnings (loss) per share - as reported........................ $ .28 $ .19 $ (0.39)
Earnings (loss) per share - pro forma.......................... $ .14 $ .08 $ (0.42)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Expected dividend yield........................................ 0% 0% 0%
Expected stock price volatility................................ 40.2% 34.9% 34.9%
Risk-free interest rate........................................ 5.5% 5.7% 7.6%
Expected life of options....................................... 7 years 7 years 7 years
</TABLE>
F-17
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. STOCK OPTIONS (CONTINUED)
The weighted average fair value of options granted during 1997 and 1996 were
$2.15 and $3.17 per share, respectively.
11. EARNINGS PER SHARE
- -
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-----------------------------------------
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
(000's omitted, except per share data)
Numerator:
Net income (loss) $1,151 $ 808 ($1,669)
------ ------ -------
Numerator for basic and diluted earnings per share $1,151 $ 808 ($1,669)
====== ====== =======
Denominator:
Denominator for basic earnings per share
weighted-average shares 4,144 4,169 4,232
Effect of dilutive stock options 2 44
------ ------
Denominator for diluted earnings per share
adjusted weighted-average shares 4,146 4,213
====== ======
Basic earnings per share $ 0.28 $ 0.19 ($0.39)
====== ====== =======
Diluted earnings per share $ 0.28 $ 0.19
====== ======
</TABLE>
Shares attributable to the conversion of convertible debentures were not
included in 1996 as they expired on November 30, 1996, nor 1995, as their
effect was anti-dilutive.
12. UNUSUAL CHARGE
During the second quarter of 1995, the Company announced a plan to restructure
and consolidate operations, concentrate resources, and better position itself to
achieve its strategic growth objectives. This plan resulted in a pre-tax charge
of $3,489 in 1995. This charge included a $1,958 write-down of capitalized
production costs; $178 for the disposal of obsolete fixed assets; $460 of
impaired intangible assets associated with previous acquisitions; $380 in
severance costs; $414 provision for the abandonment of leases; and other
miscellaneous charges of $99.
F-18
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. SPLIT-DOLLAR LIFE INSURANCE
During 1995, the Company entered into certain agreements with trusts established
in the names of two officers of the Company. Under these agreements, the
Company pays certain premiums on life insurance policies on the officers, to
which the trusts are the beneficiaries. The Company has been assigned certain
rights to the assets of the trusts as collateral for the premiums paid on these
life insurance policies. The amounts paid by the Company for the premiums on
these policies, an aggregate of $292 and $178 at December 31, 1997 and 1996,
respectively, are included in other assets in the accompanying consolidated
balance sheets. In the event the policies are terminated, the officers have
guaranteed the repayment of the amounts due from their respective trusts, and
have pledged certain of their personal assets to the Company to collateralize
such guarantees.
14. SUBSEQUENT EVENTS
Pursuant to an Asset Purchase Agreement dated January 6, 1998, ORC ProTel
("ProTel"), a newly created subsidiary of the Company, purchased certain assets
(not including cash or accounts receivable) and assumed certain liabilities of
Pro Tel Marketing, Inc. The acquisition was accounted for as a purchase and
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed. The purchase price was comprised of a $10,000 cash payment
and 400,000 options to purchase common shares of the Company's stock, with the
provision that such options may, at the option of the holders, be returned to
the Company for cash payment of $2,000 on the second anniversary of the closing.
The fair value of these options was $1,691 at the acquisition date. The fair
value of the assets acquired and liabilities assumed was $632 and $143,
respectively. The Company incurred $543 of costs related to the acquisition.
Identifiable intangible assets valued at $1,250 are being amortized using the
straight-line method over a period of five years. The excess consideration paid
over the estimated fair value of net assets acquired in the amount of $10,495
has been recorded as Goodwill to be amortized using the straight-line method
over a period of fifteen years. In addition, over the next three years, the
sellers may earn up to an additional $10,000 of cash payments, contingent upon
ProTel achieving certain future targets for revenues and earnings before
interest, income taxes, depreciation, and amortization.
F-19
<PAGE>
Schedule II - Valuation and Qualifying Accounts
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
(in Thousands of Dollars)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Rule 12-09. Valuation and Qualifying Accounts
- -------------------------------------------------------------------------------------------------------------------------
Additions
Balance at -------------------------------------
Description beginning Charged to costs Charged to other Deductions - Balance at
of Period and Expenses accounts - describe describe End of Period
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Deducted from asset account:
Allowance for Doubtful Accounts $ 162 $ 153 $ 145(1) $170
Accumulated Amortization:
Capitalized Production Costs 560 371 931
Goodwill 1,194 442 1,636
Intangible Assets 2,276 213 2,489
------ ------ ------ ------ -------
Totals $4,192 $1,179 $ 145 $ 5,226
------ ------ ------ ------ -------
Year ended December 31, 1996:
Deducted from asset account:
Allowance for Doubtful Accounts $ 129 $ 105 $ 72(1) $162
Accumulated Amortization:
Capitalized Production Costs 334 226 560
Goodwill 806 388 1,194
Intangible Assets 1,734 542 2,276
------ ------ ------ ------ -------
Totals $3,003 $1,261 $ 72 $ 4,192
------ ------ ------ ------ -------
Year ended December 31, 1995:
Deducted from asset account:
Allowance for Doubtful Accounts $ 166 $ 26 $ 63(1) $ 129
Accumulated Amortization:
Capitalized Production Costs 1,604 683 1,953(2) 334
Goodwill 638 297 129(2) 806
Intangible Assets 1,208 526 1,734
------ ------ ------ ------ -------
Totals $3,616 $1,532 $2,145 $ 3,003
------ ------ ------ ------ -------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Uncollectible accounts written-off
(2) Write-off as unusual charge in second quarter
S-1
<PAGE>
OPINION RESEARCH CORPORATION
Annual Report on Form 10-K
EXHIBIT INDEX
Exhibit No.
- -----------
3.1 Restated Certificate of Incorporation of the Registrant - Incorporated
by reference to Exhibit 3.1 to the Registrant's Registration Statement
on Form S-1 (No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Registrant's Registration Statement on
Form S-1 (No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
9.1 Voting Trust Agreement dated June 23, 1992 between Michael R. Cooper
and the Trustees U/I/T of Michael R. Cooper dated June 18, 1992 f/b/o
Carolyn and Jordan Cooper - Incorporated by reference to Exhibit 9.1
to the Registrant's Registration Statement on Form S-1(No. 33-68428)
filed with the Securities and Exchange Commission on September 3,
1993.
9.2 Voting Trust Agreement dated August 23, 1993 between the Registrant,
Michael R. Cooper and certain members of the Registrant's Senior
Management - Incorporated by reference to Exhibit 9.2 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
9.3 Voting Trust Agreement by and among Michael R. Cooper and Ruth M.
Cooper, Trustee U/I/T of Michael R. Cooper dated December 23, 1994
f/b/o Carolyn and Jordan Cooper - Incorporated by reference to Exhibit
9.3 on Registrant's Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995.
10.1 Employment Agreement between the Registrant and Michael R. Cooper.
Incorporated by reference to Exhibit 10.1 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 27, 1997.
<PAGE>
10.2 Employment Agreement between the Registrant and John F. Short.
Incorporated by reference to Exhibit 10.2 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 27, 1997.
10.3 Employment Agreement between the Registrant and James C. Fink.
Incorporated by reference to Exhibit 10.5 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 31, 1995.
10.4 Employment Agreement between the Registrant and James T. Heisler.
Incorporated by reference to Exhibit 10.6 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 31, 1995.
10.5 Employment Agreement between the Registrant and Gregory C. Ellis.
Incorporated by reference to Exhibit 10.5 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 29, 1996.
10.6 The Registrant's Retirement Plan - Incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-
1(No. 33-68428) filed with the Securities and Exchange Commission on
September 3, 1993.
10.7 1997 Stock Incentive Plan.
10.8 Lease Agreement dated May 15, 1995 between the Registrant and the
Maumee Woodlands IV Company (Maumee Facility). Incorporated by
reference to Exhibit 10.15 on Registrant's Form 10-K filed with the
Securities and Exchange Commission on March 29, 1996.
10.9 Lease Agreement dated May 24, 1993 between the Registrant and Computer
Associates International, Inc. (for Princeton facility) - Incorporated
by reference to Exhibit 10.16 to the Registrant's Registration
Statement on Form S-1(No. 33-68428) filed with the Securities and
Exchange Commission on September 3, 1993.
10.10 Lease dated March 24, 1992 between Torin (Angel City) Investments
Limited and Davis Schottlander & Davis Limited (for second floor of
GSR facility) - Incorporated by reference to Exhibit 10.18 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
<PAGE>
10.11 Lease dated February 1, 1984 between Torin (Angel City) Investments
Limited and Davis Schottlander & Davis Limited (for third floor of GSR
facility) - Incorporated by reference to Exhibit 10.19 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.12 Assignment of Lease dated December 20, 1989 between Torin (Angel
City) Davis Schottlander & Davis Limited and GSR and Lionel Lawrence
Gordon, Esq. and Martin Simmons, Esq. (for second and third floors of
GSR facility) - Incorporated by reference to Exhibit 10.20 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.13 Lease dated March 24, 1982 between Torin (Angel City) Davis
Schottlander & Davis Limited (for fourth floor of GSR facility) -
Incorporated by reference to Exhibit 10.21 to the Registrant's
Registration Statement on Form S-1(No. 33-68428) filed with the
Securities and Exchange Commission on September 3, 1993.
10.14 Assignment of Lease dated October 27, 1989 between Davis Schottlander
and Davis Limited and GSR and Lionel Lawrence Gordon, Esq. and Martin
Simmons, Esq. (for fourth floor of GSR facility) - Incorporated by
reference to Exhibit 10.22 to the Registrant's Registration Statement
on Form S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
10.15 Lease dated August 25, 1994 between the Registrant and H.C.
Properties, USA, Inc. (Tucson Facility) - Incorporated by reference to
Exhibit 10.22 on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995.
10.16 Asset Purchase Agreement between registrant and Pro Tel Marketing,
Inc. Incorporated by reference to Exhibit 2.1 to the Registrant's
Form 8-K filed with the Securities and Exchange Commission on January
20, 1998.
10.17 Amended and Restated Loan and Security Agreement dated May 8, 1997
among Opinion Research Corporation, ORC TeleScience Corp., ORC, Inc.
and CoreStates Bank, N.A.
10.18 First Amendment and Joinder dated January 7, 1998 to Amended and
Restated Loan and Security Agreement dated May 8, 1997 among Opinion
Research Corporation, ORC TeleScience Corp., ORC, Inc. and ORC ProTel,
Inc. and CoreStates Bank, N.A.
<PAGE>
21 Subsidiaries of the Registrant.
(b) Reports on Form 8-K
None.
<PAGE>
EXHIBIT 10.7
OPINION RESEARCH CORPORATION
1997 STOCK INCENTIVE PLAN
1. Purpose. OPINION RESEARCH CORPORATION (the "Company") has
-------
heretofore maintained two stock incentive plans, the Opinion Research
Corporation 1993 Stock Incentive Plan (the "1993 Plan") and the Opinion Research
Corporation 1994 Stock Incentive Plan (the "1994 Plan"). The Company hereby,
effective April 16, 1997, merges the 1993 Plan and the 1994 Plan and further,
amends, restates and redesignates the combined 1993 Plan and 1994 Plan as the
OPINION RESEARCH CORPORATION 1997 STOCK INCENTIVE PLAN (the "Plan") as set forth
herein, subject to the approval of the Plan by the Company's stockholders. The
Plan is intended to recognize the contributions made to the Company by key
employees (including employees who are members of the Board of Directors) of the
Company or any Affiliate (as defined below), to provide such persons with
additional incentive to devote themselves to the future success of the Company
or an Affiliate, and to improve the ability of the Company or an Affiliate to
attract, retain, and motivate individuals upon whom the Company's sustained
growth and financial success depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the Company
through receipt of rights to acquire the Company's Common Stock, par value $.01
per Share (the "Common Stock") and through receipt of Common Stock subject to
conditions of forfeiture. In addition, the Plan is intended as an additional
incentive to certain Directors of the Company who are not employees of the
Company or an Affiliate to serve on the Board of Directors and to devote
themselves to the future success of the Company by providing them with an
opportunity to acquire or increase
<PAGE>
their proprietary interest in the Company through the receipt of rights to
acquire Common Stock and through receipt of Common Stock subject to conditions
of forfeiture.
2. Definitions. Unless the context clearly indicates otherwise, the
-----------
following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of Section
424(e) or (f) of the Code.
(b) "Award" shall mean a grant of Common Stock subject to conditions
of forfeiture made pursuant to the terms of the Plan.
(c) "Award Agreement" shall mean the agreement between the Company and
a Grantee with respect to an Award made pursuant to the Plan.
(d) "Awardee" shall mean a person to whom an Award has been granted
pursuant to the Plan.
(e) "Board of Directors" means the Board of Directors of the Company.
(f) "Change of Control" shall have the meaning as set forth in
Section 10 of the Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" shall have the meaning set forth in Section 3 of the
Plan.
(i) "Company" means Opinion Research Corporation, a Delaware
corporation.
2
<PAGE>
(j) "Director" means a member of the Board of Directors.
(k) "Disability" shall have the meaning set forth in Section
22(e)(3) of the Code.
(l) "Fair Market Value" shall have the meaning set forth in
Subsection 8(b) of the Plan.
(m) "Grantee" shall mean a person to whom an Option or an Award
has been granted pursuant to the Plan.
(n) "ISO" means an Option granted under the Plan which is
intended to qualify as an "incentive stock option" within the meaning of Section
422(b) of the Code.
(o) "Non-employee Director" shall mean a Director who is not an
employee of the Company or an Affiliate.
(p) "Non-qualified Stock Option" means an Option granted under
the Plan which is not intended to qualify, or otherwise does not qualify, as an
"incentive stock option" within the meaning of Section 422(b) of the Code.
(q) "Option" means either an ISO or a Non-qualified Stock Option
granted under the Plan.
(r) "Optionee" means a person to whom an Option has been granted
under the Plan, which Option has not been exercised and has not expired or
terminated.
(s) "Option Document" means the document described in Section 8
or Section 9 of the Plan, as applicable, which sets forth the terms and
conditions of each grant of Options.
3
<PAGE>
(t) "Option Price" means the price at which Shares may be purchased
upon exercise of an Option, as calculated pursuant to Subsection 8(b) or
Subsection 9(a) of the Plan.
(u) "Outside Director" means a member of the Board of Directors who
qualifies as an "outside director" as that term is used for purposes of Section
162(m) of the Code.
(v) "Restricted Stock" means Common Stock subject to conditions of
forfeiture and transfer granted to any person pursuant to an Award under the
Plan.
(w) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended.
(x) "Section 16 Officer" means any person who is an "officer" within
the meaning of Rule 16a-1(f) promulgated under the Securities Exchange Act of
1934, as amended, or any successor rule.
(y) "Shares" means the shares of Common Stock of the Company which are
the subject of Options or Awards under the Plan.
3. Administration of the Plan. The Plan shall be administered by
--------------------------
the Board of Directors of the Company; provided, however, the Board of Directors
may, at its discretion, designate a committee or committees composed of two or
more of its members to operate and administer the Plan in its stead, in which
case the Board of Directors shall, to the extent possible and to the extent it
deems it necessary or appropriate, designate one committee which consists
exclusively of two or more Outside Directors. Any of such committees designated
by the Board of Directors, and the Board of Directors itself in its
administrative capacity with respect to the Plan, is referred to as the
"Committee." Options granted under the Plan to Non-employee
4
<PAGE>
Directors, and the Plan with respect to such Options, shall be administered by
the Board of Directors other than the Non-employee Directors.
(a) Meetings. The Committee shall hold meetings at such times and
--------
places as it may determine. Acts approved at a meeting by a majority of the
members of the Committee or acts approved in writing by the unanimous consent of
the members of the Committee shall be the valid acts of the Committee.
(b) Grants and Awards. Except with respect to Options granted to Non-
-----------------
employee Directors pursuant to Section 9, the Committee shall from time to time
at its discretion direct the Company to grant Options and Awards pursuant to the
terms of the Plan. The Committee shall have plenary authority to (i) determine
the persons to whom, and the times at which Options and Awards are to be granted
as well as the terms applicable to Options and Awards, (ii) determine the type
of Option to be granted and the number of Shares subject thereto, (iii)
determine the Awardees to whom, and the times at which, Restricted Stock is
granted, the number of Shares awarded, and the purchase price per Share, if any,
and (iv) approve the form and terms and conditions of the Option Documents and
Award Agreements; all subject, however, to the express provisions of the Plan.
In making such determinations, the Committee may take into account the nature of
the Grantee's services and responsibilities, the Grantee's present and potential
contribution to the Company's success and such other factors as it may deem
relevant. The interpretation and construction by the Committee of any provisions
of the Plan or of any Option or Award granted under it shall be final, binding
and conclusive.
(c) Exculpation. No member of the Board of Directors shall be
-----------
personally liable for monetary damages for any action taken or any failure to
take any action in
5
<PAGE>
connection with the administration of the Plan or the granting of Options or
Awards under the Plan, provided that this Subsection 3(c) shall not apply to (i)
any breach of such member's duty of loyalty to the Company, any Affiliate, or
the Company's stockholders, (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, (iii) acts or
omissions that would result in liability under Section 174 of the General
Corporation Law of the State of Delaware, as amended, and (iv) any transaction
from which the member derived an improper personal benefit.
(d) Indemnification. Service on the Committee shall constitute
---------------
service as a member of the Board of Director. Each member of the Committee
shall be entitled without further act on his part to indemnity from the Company
to the fullest extent provided by applicable law and the Company's Certificate
of Incorporation and/or By-laws in connection with or arising out of any action,
suit or proceeding with respect to the administration of the Plan or the
granting of Options and Awards thereunder in which he or she may be involved by
reason of his or her being or having been a member of the Committee, whether or
not he or she continues to be such member of the Committee at the time of the
action, suit or proceeding.
4. Grants and Awards under the Plan. Options under the Plan may be
--------------------------------
in the form of a Non-qualified Stock Option and/or an ISO at the discretion of
the Committee, and Awards under the Plan shall be in the form of Restricted
Stock.
5. Eligibility. All key employees and members of the Board of
-----------
Directors shall be eligible to receive Options and Awards hereunder. The
Committee, in its sole discretion, shall determine whether an individual
qualifies as a key employee. Non-employee
6
<PAGE>
Directors may be granted Options under Section 8 of the Plan notwithstanding the
automatic grant of Options to such Non-employee Directors under Section 9.
6. Shares Subject to Plan. The aggregate maximum number of Shares
----------------------
for which Options and Awards may be granted pursuant to the Plan (taking into
account all Options and Awards granted under the 1993 Plan and the 1994 Plan
prior to their merger and restatement set forth herein) is eight hundred seventy
five thousand (875,000), subject to adjustment as provided in Section 11 of the
Plan. The Shares shall be issued from authorized and unissued Common Stock or
Common Stock held in or hereafter acquired for the treasury of the Company. If
an Option terminates or expires without having been fully exercised for any
reason, or if Shares granted pursuant to an Award are forfeited for any reason,
such Shares may again be the subject of one or more Options or Awards granted
pursuant to the Plan.
7. Term of the Plan. This amended and restated Plan is effective as
----------------
of April 16, 1997, the date on which it was adopted by the Board of Directors,
subject to approval prior to April 16, 1998 by a majority of the votes cast by
stockholders entitled to vote, or by a method and in a degree that would be
treated as adequate under applicable state law in the case of an action
requiring shareholder approval. No Option or Award may be granted under the
Plan after April 16, 2007. If the Plan is not so approved on or before April
__, 1997, all Options granted under the Plan as amended and restated shall be
null and void, except to the extent such options could have been granted under
the 1993 Plan or the 1994 Plan as in effect without regard to this merger and
restatement.
8. Option Documents and Terms. Each Option granted under the Plan
--------------------------
shall be a Non-qualified Stock Option unless the Option shall be specifically
designated at the time of
7
<PAGE>
grant to be an ISO for federal income tax purposes. If any Option designated an
ISO is determined for any reason not to qualify as an incentive stock option
within the meaning of Section 422 of the Code, such Option shall be treated as a
Non-qualified Stock Option for all purposes under the provisions of the Plan.
Options granted pursuant to the Plan shall be evidenced by the Option Documents
in such form as the Committee shall from time to time approve, which Option
Documents shall comply with and be subject to the following terms and conditions
and such other terms and conditions as the Committee shall from time to time
require which are not inconsistent with the terms of the Plan.
(a) Number of Option Shares. Each Option Document shall state the
-----------------------
number of Shares to which it pertains. An Optionee may receive more than one
Option, which may include Options which are intended to be ISO's and Options
which are not intended to be ISO's, but only on the terms and subject to the
conditions and restrictions of the Plan. Notwithstanding anything to the
contrary contained herein, no employee shall be granted Options to acquire more
than one hundred thousand (100,000) Shares during any one calendar year.
(b) Option Price. Each Option Document shall state the Option Price
------------
which, for a Non-qualified Stock Option, may be less than, equal to, or greater
than the Fair Market Value of the Shares on the date the Option is granted and,
for an ISO, shall be at least 100% of the Fair Market Value of the Shares on the
date the Option is granted as determined by the Committee in accordance with
this Subsection 8(b); provided, however, that if an ISO is granted to an
Optionee who then owns, directly or by attribution under Section 424(d) of the
Code, shares possessing more than ten percent of the total combined voting power
of all classes
8
<PAGE>
of stock of the Company or an Affiliate, then the Option Price shall be at least
110% of the Fair Market Value of the Shares on the date the Option is granted.
If the Common Stock is traded in a public market, then the Fair Market Value per
Share shall be, if the Common Stock is listed on a national securities exchange
or included in the NASDAQ National Market System, the last reported sale price
thereof on the relevant date, or, if the Common Stock is not so listed or
included, the mean between the last reported "bid" and "asked" prices thereof on
the relevant date, as reported on NASDAQ or, if not so reported, as reported by
the National Daily Quotation Bureau, Inc. or as reported in a customary
financial reporting service, as applicable and as the Committee determines.
(c) Exercise. No Option shall be deemed to have been exercised prior
--------
to the receipt by the Company of written notice of such exercise and of payment
in full of the Option Price for the Shares to be purchased. Each such notice
shall specify the number of Shares to be purchased and shall (unless the Shares
are covered by a then current registration statement or a Notification under
Regulation A under the Securities Act of 1933, as amended (the "Act")), contain
the Optionee's acknowledgment in form and substance satisfactory to the Company
that (a) such Shares are being purchased for investment and not for distribution
or resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (b) the Optionee has been advised and understands that
(i) the Shares have not been registered under the Act and are "restricted
securities" within the meaning of Rule 144 under the Act and are subject to
restrictions on transfer and (ii) the Company is under no obligation to register
the Shares under the Act or to take any action which would make available to the
Optionee any exemption
9
<PAGE>
from such registration, (c) such Shares may not be transferred without
compliance with all applicable federal and state securities laws, and (d) an
appropriate legend referring to the foregoing restrictions on transfer and any
other restrictions imposed under the Option Documents may be endorsed on the
certificates. Notwithstanding the foregoing, if the Company determines that
issuance of Shares should be delayed pending (A) registration under federal or
state securities laws, (B) the receipt of an opinion of counsel satisfactory to
the Company that an appropriate exemption from such registration is available,
(C) the listing or inclusion of the Shares on any securities exchange or an
automated quotation system or (D) the consent or approval of any governmental
regulatory body whose consent or approval is necessary in connection with the
issuance of such Shares, the Company may defer exercise of any Option granted
hereunder until any of the events described in this sentence has occurred.
(d) Medium of Payment. An Optionee shall pay for Shares (i) in cash,
-----------------
(ii) by certified or cashier's check payable to the order of the Company, or
(iii) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board. Furthermore, the Committee may provide in an
Option Document that payment may be made in whole or in part in shares of the
Company's Common Stock held by the Optionee. If payment is made in whole or in
part in shares of Common Stock, then the Optionee shall deliver to the Company
certificates registered in the name of such Optionee representing the shares of
Common Stock owned by such Optionee, free of all liens, claims and encumbrances
of every kind and having an aggregate Fair Market Value on the date of delivery
that is at least as great as the Option Price of the Shares (or relevant portion
thereof) with respect to which such Option is
10
<PAGE>
to be exercised by payment in shares of Common Stock, the stock certificate
issued to the Optionee shall represent (i) the Shares in respect of which
payment is made, and (ii) such excess number of shares of Common Stock.
Notwithstanding the foregoing, the Committee may impose from time to time such
limitations and prohibitions on the use of shares of Common Stock to exercise an
Option as it deems appropriate.
(e) Termination of Options.
----------------------
(i) No Option shall be exercisable after the first to
occur of the following:
(A) Expiration of the Option term specified in the
Option Document, which, in the case of an ISO, shall not occur after (1) ten
years from the date of grant, or (2) five years from the date of grant of an ISO
if the Optionee on the date of grant owns, directly or by attribution under
Section 424(d) of the Code, shares possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of an
Affiliate;
(B) Expiration of two years from the date such
employment or service with the Company or its Affiliates terminates due to the
Optionee's death or one year
11
<PAGE>
from the date such employment or service with the Company or its Affiliates
terminates due to the Optionee's Disability;
(C) A finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the Optionee has materially breached his or her employment or
service contract with the Company or an Affiliate, or has been engaged in
disloyalty to the Company or an Affiliate, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his or her employment or service, or has disclosed trade secrets or
confidential information of the Company or an Affiliate. In such event, in
addition to immediate termination of the Option, the Optionee shall
automatically forfeit all Shares for which the Company has not yet delivered the
share certificates upon refund by the Company of the Option Price.
Notwithstanding anything herein to the contrary, the Company may withhold
delivery of share certificates pending the resolution of any inquiry that could
lead to a finding resulting in a forfeiture;
(D) The date, if any, set by the Board of Directors
as an accelerated expiration date in the event of the liquidation or dissolution
of the Company; or
(E) The occurrence of such other event as may be
specified in the Option Document at the discretion of the Committee.
(ii) Notwithstanding the foregoing, the Committee may
extend the period during which all or any portion of an Option may be exercised
to a date no later than the Option term specified in the Option Document
pursuant to Subsection 8(e)(i)(A), provided that any change pursuant to this
Subsection 8(e)(ii) which would cause an ISO to become a Non-qualified Stock
Option may be made only with the consent of the Optionee. The terms of
12
<PAGE>
an executive severance agreement or other agreement between the Company and an
Optionee, approved by the Committee, whether entered into prior or subsequent to
the grant of an Option, which provide for Option exercise dates later than those
set forth in Subsection 8(e)(i) but permitted by this Subsection 8(e)(ii) shall
be deemed to be Option terms approved by the Committee and consented to by the
Optionee.
(iii) Except as may otherwise be provided in an Option
Document, no Option shall be exercisable after the date the Optionee's
employment or service with the Company or its Affiliates terminates to any
extent greater than such Option could have been exercised immediately prior to
the date such employment or service terminated.
(f) Transfers. No Option granted under the Plan may be
---------
transferred, except by will or by the laws of descent and distribution. During
the lifetime of the person to whom an Option is granted, such Option may be
exercised only by such person. Notwithstanding the foregoing, a Non-qualified
Stock Option may be transferred pursuant to the terms of a "qualified domestic
relations order," within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of the Employee Retirement Income Security
Act of 1974, as amended.
(g) Limitation on ISO Grants. In no event shall the aggregate
------------------------
Fair Market Value of the Shares of Common Stock (determined at the time the ISO
is granted) with respect to which incentive stock options under all incentive
stock option plans of the Company or its Affiliates are exercisable for the
first time by the Optionee during any calendar year exceed $100,000, or such
other amount as may be specified in lieu of the $100,000 limit in applicable
provisions of the Code.
13
<PAGE>
(h) Other Provisions. Subject to the provisions of the Plan, the
----------------
Option Documents shall contain such other provisions including, without
limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to the Plan,
additional restrictions upon the exercise of the Option or additional
limitations upon the term of the Option, as the Committee shall deem advisable.
(i) Amendment. Subject to the provisions of the Plan, the
---------
Committee shall have the right to amend Option Documents issued to an Optionee,
subject to the Optionee's consent if such amendment is not favorable to the
Optionee, except that the consent of the Optionee shall not be required for any
amendment made pursuant to Subsection 8(e)(i)(D) or Section 10 of the Plan, as
applicable.
9. Special Provisions Relating to Grants of Options to Non-employee
----------------------------------------------------------------
Directors. Options granted pursuant to this Section 9 shall be granted only to
- ---------
Non-employee Directors. Options granted under this Section 9 shall be granted,
without any further action by the Committee, in accordance with the terms and
conditions set forth in this Section 9, and shall be evidenced by Option
Documents in such form as the Committee shall from time to time approve, which
Option Documents shall comply with and be subject to the following terms and
conditions and such other terms and conditions as the Committee shall from time
to time require which are not inconsistent with the terms of the Plan.
(a) Timing of Grants; Number of Shares Subject of Options;
------------------------------------------------------
Exercisability of Options; Option Price. Each Non-employee Director shall be
- ---------------------------------------
granted annually, commencing on his or her "Initial Grant Date" (as defined
below) and on each anniversary
14
<PAGE>
thereafter, an Option to purchase a number of Shares equal to the Formula Number
(as hereinafter defined).
(i) Options granted under this Section 9 shall be Non-
qualified Stock Options.
(ii) Options granted under this Section 9 shall vest and
become fully exercisable on the first anniversary of the date of grant, provided
such Optionee is a Director of the Company as of such first anniversary of the
date of grant.
(iii) The Option Price shall be equal to the Fair Market
Value of the Shares on the date the Option is granted.
For purposes of this Subsection 9(a), the "Initial Grant Date" of a Non-employee
Director shall be the date of the Company's Annual Meeting of Stockholders with
respect to those Non-employee Directors who are serving, or are elected to
serve, as Directors on that date. The "Formula Number" shall be Fifteen
Thousand (15,000) with respect to any Non-employee Director who has served as a
member of the Board of Directors for a period of three (3) full years or more,
and shall be Five Thousand (5,000) with respect to all other Non-employee
Directors. The Formula Number applicable to each Non-employee Director shall be
determined annually with respect to each Non-employee Director as of the date of
grant of his or her Option under this Section 9.
(b) Termination of Options Granted Pursuant to Section 9. All
----------------------------------------------------
Options granted pursuant to this Section 9 shall be exercisable until the first
to occur of the following:
(i) Expiration of seven (7) years from the date of grant; or
15
<PAGE>
(ii) Expiration of one year from the date the Optionee's
service as a Director terminates for any reason; provided, however, that options
that are not exercisable as of the date the Optionee's service as a Director
terminates shall not become exercisable thereafter, and shall terminate as of
the date such Optionee's service as a Director terminates.
(c) Applicability of Provisions of Section 8 to Options Granted
-----------------------------------------------------------
Pursuant to Section 9. Except as may be otherwise specifically required under
- ---------------------
this Section 9, the following provisions of Section 8 shall be applicable to
Options granted pursuant to this Section 9: Subsection 8(a); the last sentence
of Subsection 8(b); Subsection 8(c); Subsection 8(d) (provided that Option
Documents relating to Options granted pursuant to this Section 9 shall provide
that payment may be made in whole or in part in Shares of Company Common Stock);
Subsection 8(f); and Subsection 8(i).
10. Change of Control. In the event of a Change of Control, the
-----------------
Committee may take whatever action it deems necessary or desirable with respect
to the Options and Awards outstanding (other than Options granted pursuant to
Section 9), including, without limitation, accelerating the expiration or
termination date in the respective Option Documents to a date no earlier than
thirty (30) days after notice of such acceleration is given to the Optionees.
In addition to the foregoing, in the event of a Change of Control, Options
granted pursuant to the Plan and held by Optionees who are employees or members
of the Board of Directors at the time of a Change of Control shall become
immediately exercisable in full and the restrictions applicable to Restricted
Stock awarded to Awardees who are employees or members of the Board of Directors
at the time of a Change of Control shall immediately lapse and the Restricted
Stock held by the Company shall be delivered to the Grantees. Any amendment to
this Section
16
<PAGE>
10 which diminishes the rights of Optionees shall not be effective with respect
to Options outstanding at the time of adoption of such amendment, whether or not
such outstanding Options are then exercisable.
A "Change of Control" shall be deemed to have occurred upon the
earliest to occur of the following events: (i) the date the stockholders of the
Company (or the Board of Directors, if stockholder action is not required)
approve a plan or other arrangement pursuant to which the Company will be
dissolved or liquidated, or (ii) the date the stockholders of the Company (or
the Board of Directors, if stockholder action is not required) approve a
definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company, or (iii) the date the stockholders of the Company (or the
Board of Directors, if stockholder action is not required) and the stockholders
of the other constituent corporation (or its board of directors if stockholder
action is not required) have approved a definitive agreement to merge or
consolidate the Company with or into such other corporation, other than, in
either case, a merger or consolidation of the Company in which holders of shares
of the Company's Common Stock immediately prior to the merger or consolidation
will have at least a majority of the ownership of common stock of the surviving
corporation (and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the surviving
corporation, a majority of the voting power of the surviving corporation's
voting securities) immediately after the merger or consolidation, which common
stock (and, if applicable, voting securities) is to be held in the same
proportion as such holders' ownership of Common Stock of the Company immediately
before the merger or consolidation, or (iv) the date any entity, person or
group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of
17
<PAGE>
1934, as amended, other than the Company or any of its subsidiaries or any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any of its subsidiaries or Michael R. Cooper or John F. Short shall have
become the beneficial owner of, or shall have obtained voting control over, more
than forty percent (40%) of the outstanding Shares of the Company's Common
Stock, or (v) the first day after the date this Plan is effective when directors
are elected such that a majority of the Board of Directors shall have been
members of the Board of Directors for less than two (2) years, unless the
nomination for election of each new director who was not a director at the
beginning of such two (2) year period was approved by a vote of at least two-
thirds of the directors then still in office who were directors at the beginning
of such period.
11. Adjustments on Changes in Capitalization. The aggregate number
----------------------------------------
of Shares and class of shares as to which Options and Awards may be granted
hereunder, the number and class or classes of shares covered by each outstanding
Option and the Option Price thereof shall be appropriately adjusted in the event
of a stock dividend, stock split, recapitalization or other change in the number
or class of issued and outstanding equity securities of the Company resulting
from a subdivision or consolidation of the Common Stock and/or, if appropriate,
other outstanding equity securities or a recapitalization or other capital
adjustment (not including the issuance of Common Stock on the conversion of
other securities of the Company which are convertible into Common Stock)
affecting the Common Stock which is effected without receipt of consideration by
the Company. The Committee shall have authority to determine the adjustments to
be made under this Section, and any such determination by the Committee shall be
final, binding and conclusive.
18
<PAGE>
12. Terms and Conditions of Awards. Awards granted pursuant to the
------------------------------
Plan shall be evidenced by written Award Agreements in such form as the
Committee shall from time to time approve, which Award Agreements shall comply
with and be subject to the following terms and conditions and such other terms
and conditions as the Committee shall from time to time require which are not
inconsistent with the terms of the Plan. The Committee may, in its sole
discretion, shorten or waive any term or condition with respect to all or any
portion of any Award.
(a) Number of Shares. Each Award Agreement shall state the
----------------
number of Shares of Common Stock to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify the
--------------
purchase price, if any, which applies to the Award. If the Board specifies a
purchase price, the Awardee shall be required to make payment on or before the
date specified in the Award Agreement. An Awardee shall pay for such Shares (i)
in cash, (ii) by certified check payable to the order of the Company, or (iii)
by such other mode of payment as the Committee may approve.
(c) Restrictions on Transfer and Forfeitures. A stock
----------------------------------------
certificate representing the Restricted Stock granted to an Awardee shall be
registered in the Awardee's name but shall be held in escrow by the Company's
Treasurer, together with an undated stock power executed by the Awardee with
respect to each stock certificate representing Restricted Stock Registered in
such Awardee's name. The Awardee shall generally have the rights and privileges
of a shareholder as to such Restricted Stock including the right to vote such
Restricted Stock and to receive and retain all cash dividends with respect to
them, except that the following restrictions shall apply: (i) the employee shall
not be entitled to delivery of the certificate until
19
<PAGE>
the expiration or termination of any period designated by the Committee
("Restricted Period") and the satisfaction of any other conditions prescribed by
the Committee; (ii) all distributions with respect to the Restricted Stock other
than cash dividends, such as stock dividends, stock splits or distributions of
property, and any distributions (other than cash dividends) subsequently made
with respect to other distributions, shall be delivered to the Treasurer of the
Company, together with appropriate stock powers or other instruments of transfer
signed and delivered to the Treasurer by the Grantee, to be held by the
Treasurer and released to either the Grantee or the Company, as the case may be,
together with the Shares to which they relate; (iii) the Grantee will have no
right to sell, exchange, transfer, pledge, hypothecate or otherwise dispose of
any of the Restricted Stock or distributions (other than cash dividends) with
respect thereto; and (iv) all of the Restricted Stock shall be forfeited and all
rights of the Awardee with respect to such Restricted Stock shall terminate
without further obligation on the part of the Company unless the Awardee has
remained an employee of the Company, any of its affiliates or any combination
thereof until the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee applicable to
such Restricted Stock. Upon the forfeiture of any Restricted Stock, such
forfeited shares shall be transferred to the Company without further action by
the Awardee.
(d) Lapse of Restrictions. Upon the expiration or termination of the
---------------------
Restricted Period and the satisfaction of any other conditions prescribed by the
Committee as provided for in the Plan, the restrictions applicable to the
Restricted Stock shall lapse and a stock certificate for the number of shares of
Common Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, except any that may be imposed by law,
to
20
<PAGE>
the Awardee or the beneficiary or estate, as the case may be. The Company shall
not be required to deliver any fractional share of Common Stock but will pay, in
lieu thereof, the fair market value (determined as of the date the restrictions
lapse) of such fractional share to the Awardee or the Awardee's beneficiary or
estate, as the case may be. The Award may provide for the lapse of restrictions
on transfer and forfeiture conditions in installments.
(e) Section 83(b) Elections. An Awardee shall agree as a condition to
-----------------------
receipt of any Award under the Plan, to make an election with the Internal
Revenue Service under Section 83(b) of the Code to include the fair market value
of any Restricted Stock in gross income while they are still subject to
restrictions ("83(b) Election"), only after obtaining the written consent of the
Company to such Election. An Awardee who files an 83(b) Election shall promptly
furnish the Company with a copy of such Election together with the amount of any
federal, state, local or other taxes required to be withheld to enable the
Company to claim an income tax deduction with respect to such Election.
(f) Breach of Contract or Disloyalty. Upon a finding by the
--------------------------------
Committee, after full consideration of the facts presented on behalf of both the
Company and the Awardee, that the Awardee has breached his or her employment or
service contract with the Company or an Affiliate, or has been engaged in
disloyalty to the Company or an Affiliate, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his or her employment or service, or has disclosed trade secrets or
confidential information of the Company or an Affiliate, Awardee shall
automatically forfeit all Restricted Stock for which (1) the Company has not yet
delivered the Share certificates to the Awardee; (ii) the Restricted Period has
not expired or (iii) any restrictions applicable to the
21
<PAGE>
Restricted Stock have not lapsed. Notwithstanding anything herein to the
contrary, the Company may withhold delivery of Restricted Stock certificates
pending the resolution of any inquiry that could lead to a finding resulting in
a forfeiture.
(g) Amendment. Subject to the provisions of the Plan, the Committee
---------
shall have the right to amend Awards issued to an Awardee, subject to the
Awardee's consent if such amendment is not favorable to the Awardee, except that
the consent of the Awardee shall not be required for any amendment made pursuant
to Section 10 of the Plan.
13. Amendment of the Plan. The Board of Directors of the Company may
---------------------
amend the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of Shares
as to which Options may be granted without obtaining approval, within twelve
months before or after such action, by vote of a majority of the votes cast at
a duly called meeting of the stockholders at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the matter, or by a method and in a degree that
would be treated as adequate under applicable state law in the case of an action
requiring shareholder approval. No amendment to the Plan shall adversely affect
any outstanding Option or Award, however, without the consent of the Grantee.
14. No Commitment to Retain. The grant of an Option or Award
------------------------
pursuant to the Plan shall not be construed to imply or to constitute evidence
of any agreement, express or implied, on the part of the Company or any
Affiliate to retain the Grantee in the employ of the
22
<PAGE>
Company or an Affiliate and/or as a member of the Company's Board of Directors
or in any other capacity.
15. Withholding of Taxes. Whenever the Company proposes or is
--------------------
required to deliver or transfer Shares in connection with the exercise of an
Option or Award, the Company shall have the right to (a) require the recipient
to remit or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery or transfer of any certificate or certificates for such Shares or
(b) take whatever other action it deems necessary to protect its interests with
respect to tax liabilities. The Company's obligation to make any delivery or
transfer of Shares shall be conditioned on the Optionee's compliance, to the
Company's satisfaction, with any withholding requirement.
16. Interpretation. The Plan is intended to enable transactions
--------------
under the Plan with respect to directors and officers (within the meaning of
Section 16(a) under the Securities Exchange Act of 1934, as amended) to satisfy
the conditions of Rule 16b-3; to the extent that any provision of the Plan would
cause a conflict with such conditions or would cause the administration of the
Plan as provided in Section 3 to fail to satisfy the conditions of Rule 16b-3,
such provision shall be deemed null and void to the extent permitted by
applicable law. This section shall not be applicable if no class of the
Company's equity securities is then registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
23
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and among
Opinion Research Corporation
ORC TeleScience Corp.
ORC, Inc.
and
CoreStates Bank, N.A.
Dated May 8, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION..................... 1
1.1 Terms Defined............................................ 1
-------------
1.2 Accounting Principles.................................... 13
---------------------
SECTION 2. THE LOANS.......................................... 13
2.1 Revolving Credit......................................... 14
----------------
2.2 Letters of Credit........................................ 15
-----------------
2.3 Term Loan A.............................................. 19
-----------
2.4 Term Loan B.............................................. 20
-----------
2.5 Term Loan C.............................................. 20
-----------
2.6 Payments................................................. 21
--------
2.7 Revolving Credit Interest................................ 21
-------------------------
2.8 Term Loan Interest....................................... 22
------------------
2.9 Additional Interest Provisions:.......................... 23
------------------------------
2.10 Fees..................................................... 24
----
2.11 Prepayments.............................................. 24
-----------
2.12 Capital Adequacy......................................... 25
----------------
2.13 Use of Proceeds.......................................... 26
---------------
2.14 Joint and Several Liability.............................. 26
---------------------------
2.15 Release of Certain Borrowers............................. 26
----------------------------
SECTION 3. COLLATERAL............................................. 26
3.1 Description.............................................. 26
-----------
3.2 Lien Documents............................................ 28
--------------
3.3 Other Actions............................................. 28
-------------
3.4 Searches.................................................. 28
--------
3.5 Landlord's Waivers........................................ 29
------------------
3.6 Filing Security Agreement................................. 29
-------------------------
3.7 Power of Attorney......................................... 29
-----------------
3.8 Existing Liens............................................ 29
--------------
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO LOAN ADVANCES...... 30
4.1 Resolutions, Opinions, and Other Documents................ 30
------------------------------------------
4.2 Absence of Certain Events................................. 31
-------------------------
4.3 Warranties and Representations at Closing................. 31
-----------------------------------------
4.4 Compliance with this Agreement............................ 31
------------------------------
4.5 Officer's Certificate..................................... 31
---------------------
4.6 Closing................................................... 31
-------
4.7 Waiver of Rights.......................................... 31
----------------
4.8 Conditions for Future Advances............................ 31
------------------------------
SECTION 5. REPRESENTATIONS AND WARRANTIES......................... 32
5.1 Corporate Organization and Validity....................... 32
-----------------------------------
i
<PAGE>
5.2 Places of Business........................................ 33
------------------
5.3 Pending Litigation........................................ 33
------------------
5.4 Title to Properties....................................... 33
-------------------
5.5 Governmental Consent...................................... 34
--------------------
5.6 Taxes..................................................... 34
-----
5.7 Financial Statements...................................... 34
--------------------
5.8 Full Disclosure........................................... 34
---------------
5.9 Subsidiaries.............................................. 35
------------
5.10 Guarantees, Contracts, etc................................ 35
--------------------------
5.11 Government Regulations, etc............................... 35
---------------------------
5.12 Business Interruptions.................................... 36
----------------------
5.13 Names..................................................... 37
-----
5.14 Other Associations........................................ 37
------------------
5.15 Environmental Matters..................................... 37
---------------------
5.16 Regulation O.............................................. 38
------------
5.17 Capital Stock............................................. 38
-------------
5.18 Solvency.................................................. 38
--------
5.19 Interrelatedness of Borrowers............................. 39
-----------------------------
SECTION 6. BORROWERS' AFFIRMATIVE COVENANTS....................... 39
6.1 Payment of Taxes and Claims............................... 39
---------------------------
6.2 Maintenance of Properties and Corporate Existence......... 40
-------------------------------------------------
6.3 Business Conducted........................................ 41
------------------
6.4 Litigation................................................ 42
----------
6.5 Taxes..................................................... 42
-----
6.6 Bank Accounts............................................. 42
-------------
6.7 Employee Benefit Plans.................................... 42
----------------------
6.8 Financial Covenants....................................... 43
-------------------
6.9 Financial and Business Information........................ 44
----------------------------------
6.10 Officer's Certificates.................................... 45
----------------------
6.11 Inspection................................................ 45
----------
6.12 Tax Returns and Reports................................... 45
-----------------------
6.13 Information to Participant................................ 46
--------------------------
6.14 Material Adverse Developments............................. 46
-----------------------------
6.15 Places of Business........................................ 46
------------------
6.16 Changes in Management..................................... 46
---------------------
6.17 Governmental Contracts.................................... 46
----------------------
SECTION 7. BORROWERS' NEGATIVE COVENANTS:......................... 47
7.1 Merger, Consolidation, Dissolution or Liquidation.......... 47
-------------------------------------------------
7.2 Acquisitions............................................... 47
------------
7.3 Liens and Encumbrances..................................... 47
----------------------
7.4 Transactions With Affiliates or Subsidiaries............... 48
--------------------------------------------
7.5 Guarantees................................................. 48
----------
7.6 Loans and Investments...................................... 48
---------------------
7.7 Use of Lender's Name....................................... 49
--------------------
7.8 Miscellaneous Covenants.................................... 49
-----------------------
7.9 Distributions, Redemption and Other Indebtedness........... 49
------------------------------------------------
SECTION 8. DEFAULT................................................ 49
8.1 Events of Default.......................................... 49
-----------------
ii
<PAGE>
8.2 Cure....................................................... 51
----
8.3 Rights and Remedies on Default............................. 51
------------------------------
8.4 Nature of Remedies......................................... 53
------------------
8.5 Set-Off.................................................... 53
-------
SECTION 9. MISCELLANEOUS.......................................... 54
9.1 GOVERNING LAW.............................................. 54
-------------
9.2 Integrated Agreement....................................... 54
--------------------
9.3 Waiver..................................................... 54
------
9.4 Indemnification............................................ 54
---------------
9.5 Time....................................................... 55
----
9.6 Expenses of Lender......................................... 55
------------------
9.7 Brokerage.................................................. 55
---------
9.8 Notices.................................................... 55
-------
9.9 Headings................................................... 56
--------
9.10 Survival................................................... 56
--------
9.11 Successors and Assigns..................................... 57
----------------------
9.12 Duplicate Originals........................................ 57
-------------------
9.13 Modification............................................... 57
------------
9.14 Signatories................................................ 57
-----------
9.15 Third Parties.............................................. 57
-------------
9.16 Discharge of Taxes, Borrower's Obligations, Etc............ 57
-----------------------------------------------
9.17 Withholding and Other Tax Liabilities...................... 58
-------------------------------------
9.18 Consent to Jurisdiction.................................... 58
-----------------------
9.19 Waiver of Jury Trial....................................... 58
--------------------
iii
<PAGE>
EXHIBIT LIST
------------
Exhibit A -- Borrowing Base Certificate
Exhibit B -- Quarterly Compliance Certificate
<TABLE>
<CAPTION>
SCHEDULE LIST
------------------
<S> <C> <C>
Schedule 2.2(b) - Existing L/C's
Schedule 5.1 - Borrower's States of Qualifications
Schedule 5.2 - Places of Business
Schedule 5.3 - Judgements, Proceedings, Litigation and Orders
Schedule 5.4 - Existing Liens and Claims
Schedule 5.7 - Borrower's Federal Tax Identification Number
Schedule 5.9 - Subsidiaries and Affiliates
Schedule 5.10 - Existing Guaranties, Investments and Borrowings,
Leases and Employment Agreements
Schedule 5.11 - Employee Benefit Plans
Schedule 5.13(a) - Schedule of Names
Schedule 5.13(b) - Trademarks, Patents and Copyrights
Schedule 5.14 - Other Associations
Schedule 5.15 - Environmental Matters
Schedule 5.17 - Capital Stock
Schedule 5.20 - Perfection
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
------------------------------------------------
This Amended and Restated Loan and Security Agreement ("Agreement") is
dated this 8th day of May, 1997, by and among Opinion Research Corporation
("Opinion"), a Delaware corporation, ORC TeleScience Corp., a Delaware
corporation ("Telescience"), and ORC, Inc. ("ORC"), a Delaware corporation
(collectively, "Borrowers" and singly, each is a "Borrower") and CoreStates
Bank, N.A. (successor by merger to Meridian Bank), a national banking
association ("Lender").
BACKGROUND
----------
A. On or about April 29, 1994, Opinion, ORC and Gordon Simmons Research
Company, an English limited company ("GSR") entered into a Loan and Security
Agreement, as modified or amended on April 29, 1994, May 20, 1994, October 24,
1995, November 1, 1996 and November __, 1996 (collectively, "Existing Loan
Agreement"). Pursuant to the Existing Loan Agreement, Lender established
certain credit facilities for Opinion, ORC and GSR as well as for Strategic
Research and Consulting, Inc., an Ohio corporation ("Strategic"), GSR/SIA
Limited, an English limited company ("GSR/SIA") and ORC Holdings, Ltd.
("Holdings"), an English limited company which, pursuant to certain joinders
became parties to the Existing Loan Agreement.
B. Borrowers desire to amend and restate the Existing Loan Agreement and
to borrow additional funds and obtain other credit accommodations from Lender
and Lender is willing to amend and restate the Existing Loan Agreement and to
lend additional funds and extend other credit accommodations to Borrowers
pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms have
-------------
the following respective meanings:
Account - All of the "accounts," as that term is defined in Section
-------
9106 of the UCC, of Borrowers whether now existing or hereafter arising, created
or acquired.
Account Debtor - Any Person obligated on any Account to any Borrower;
--------------
provided that for the purposes of clause (iii)
<PAGE>
of the definition of both Eligible Billed Accounts and Eligible Unbilled
Accounts, any separate division of a Fortune 500 company that is directly
responsible for making payments on Accounts shall be deemed an Account Debtor
separate and distinct from any other separate division of such Fortune 500
company.
Advance(s) - Any monies advanced or credit extended to Borrowers by
----------
Lender under the Revolving Credit, including, without limitation, cash advances
or the issuance of Letters of Credit.
Affiliate - Any Person (other than a Subsidiary) (i) which directly or
---------
indirectly through one or more intermediaries controls or is controlled by or is
under common control with any Borrower; (ii) which beneficially owns or holds
five percent (5%) or more of any class of the Capital Stock of a Person; or
(iii) of which five percent (5%) or more of the Capital Stock is beneficially
owned or held by a Person or Subsidiary of a Person. Control may be by
ownership, contract, or otherwise.
Asset Sale - The sale, transfer, lease, license or other disposition
----------
outside of the ordinary course of business, by any Borrower, or any Subsidiary
of a Borrower to any Person (other than a Borrower) of any Property now owned or
hereafter acquired, of any nature whatsoever in any transaction or series of
related transactions.
Authorized Officer - Any officer of any Borrower authorized by
------------------
specific resolution of such Borrower to request Advances as set forth in the
incumbency certificate referred to in Section 4.1(d) of this Agreement.
Base Rate - The higher of (i) Lender's Prime Rate or (ii) the Fed
---------
Funds Rate plus fifty (50) basis points.
Base Rate Loans - Loans accruing interest based on the Base Rate.
---------------
Borrowing Base - The sum of seventy percent (70%) of Eligible Billed
--------------
Accounts plus forty percent (40%) of Eligible Unbilled Accounts.
----
Borrowing Base Certificate - Section 6.9.
--------------------------
Business Day - A day other than Saturday or Sunday when Lender is
------------
open for business in Philadelphia, Pennsylvania.
Capital Lease - A lease under which the obligations of the lessee
-------------
would, in accordance with GAAP, be included in determining total liabilities as
shown on the liability side of a balance sheet of the lessee.
<PAGE>
Capital Stock - Any and all shares, interests, participations or other
-------------
equivalents (however designated) of capital stock of a corporation, any and all
other ownership interests in a Person (other than a corporation) and any and all
warrants, options or rights to purchase any of the foregoing.
Capitalized Lease Obligations - The amount of the liability reflecting
-----------------------------
the aggregate discounted amount of future payments under all Capital Leases
determined in accordance with GAAP and with Financial Accounting Standards No.
13.
Closing - Section 4.6.
-------
Closing Date - Section 4.6.
------------
Closing Fee - A non-refundable fee equal to One Hundred Twenty Five
-----------
Thousand Dollars ($125,000).
Collateral - All of the Property and interests in Property described
----------
in Section 3.1 of this Agreement and all other Property and interests in
Property that now or hereafter secure payment of the Obligations and
satisfaction of Borrowers of all of the covenants and undertakings contained in
the Agreement and the other Loan Documents.
Consolidated Amortization Expense - For any period, the aggregate
---------------------------------
consolidated amount of amortization expenses of Borrowers, as determined in
accordance with GAAP.
Consolidated Capital Expenditures - For any period, the aggregate of
---------------------------------
all expenditures (including that portion of Capitalized Lease Obligations
incurred during that period) made by Borrowers during such period in respect of
the purchase, construction or other acquisition of fixed or capital assets, as
determined in accordance with GAAP.
Consolidated Capitalization - At any date, the sum of Borrowers' (i)
---------------------------
Funded Debt plus (ii) Consolidated Net Worth.
Consolidated Capitalized Production Costs - At any date, the aggregate
-----------------------------------------
consolidated amount of Borrowers' Capitalized Production Costs as would be shown
on a consolidated balance sheet prepared in accordance with GAAP.
Consolidated Depreciation Expense - For any period, the aggregate
---------------------------------
consolidated amount of depreciation expenses of Borrowers, as determined in
accordance with GAAP.
Consolidated EBIT - For any period, Borrowers' Consolidated Net Income
-----------------
(or deficit) plus (i) Consolidated Interest Expense plus (ii) Consolidated Tax
---- ----
Expense minus (iii) Consolidated Capitalized Production Costs plus (iv)
----- ----
extraordinary
<PAGE>
losses and minus (v) extraordinary gains, all as determined in accordance
-----
with GAAP.
Consolidated Earnings Available for Fixed Charges - For any period,
-------------------------------------------------
Borrowers' Consolidated Net Income (or deficit) plus (i) Consolidated Interest
----
Expense, (ii) Consolidated Tax Expense, plus (iii) Consolidated Depreciation
----
Expense, plus (iv) Consolidated Amortization Expense, plus (v) Consolidated
---- ----
Rental Payments, minus (vi) Consolidated Capitalized Production Costs, minus
----- -----
(vii) extraordinary gains and plus (viii) extraordinary losses, all as
----
determined in accordance with GAAP.
Consolidated Interest Expense - For any period, the aggregate
-----------------------------
consolidated amount of interest expense required to be paid or accrued (without
duplication) during such period on all Indebtedness of Borrowers outstanding
during all or any part of such period, as determined in accordance with GAAP.
Consolidated Liabilities - At any date, the aggregate consolidated
------------------------
amount of Borrowers' liabilities as would be shown on a consolidated balance
sheet prepared in accordance with GAAP.
Consolidated Net Income - For any period, the consolidated net income
-----------------------
after taxes of Borrowers as would be shown on Borrowers' consolidated statement
of income, prepared in accordance with GAAP.
Consolidated Net Worth - At any date, the amount by which the
----------------------
consolidated assets of Borrowers exceed Consolidated Liabilities, as determined
in accordance with GAAP.
Consolidated Operating Cash Flow - For any period, Borrowers'
--------------------------------
Consolidated Net Income (or deficit) plus (i) Consolidated Interest Expense,
----
(ii) Consolidated Tax Expense, plus (iii) Consolidated Depreciation Expense,
----
plus (iv) Consolidated Amortization Expense minus (v) Consolidated Capitalized
- ---- -----
Production Costs minus (vi) extraordinary gains and (vii) plus extraordinary
----- ----
losses, all as determined in accordance with GAAP.
Consolidated Rental Payments - For any period, the aggregate
----------------------------
consolidated amount of all principal payments paid or to be paid under
Borrowers' Capital Leases, as determined in accordance with GAAP.
Consolidated Tax Expense - For any period, the aggregate consolidated
------------------------
amount of income tax expense of Borrowers, as determined in accordance with
GAAP.
<PAGE>
Contract Value - At any time, the aggregate amount which may be paid
--------------
to a Borrower (assuming such Borrower's full performance) with respect to a
Government Contract.
Default - Any event or occurrence which, with the passage of time or
-------
giving of notice, or both would constitute an Event of Default.
Distribution -
------------
(1) Dividends or other distributions on any now or hereafter
outstanding Capital Stock of any Borrower;
(2) The redemption, repurchase, defeasance or acquisition of such
Capital Stock or of warrants, rights or other options to purchase such Capital
Stock; and
(3) Any loans or advances to shareholder of any Borrower.
Eligible Billed Accounts - All Accounts of any Borrower or any
------------------------
Subsidiary of a Borrower meeting all of the following specifications: (i) the
Account is lawfully and exclusively owned by such Borrower or Subsidiary and
subject to no Lien (other than Permitted Liens, if applicable, and Liens granted
under this Agreement) and such Borrower has the right of assignment thereof and
the power to grant a security interest therein; (ii) the Account is valid and
enforceable representing the undisputed indebtedness of an Account Debtor for
the purchase of goods or performance of services not more than ninety (90) days
past the invoice date (which invoice date shall not be more than ten (10) days
after completion of the delivery of goods or performance of services) and does
not represent a rebilling; (iii) not more than 50% of the aggregate balance of
all Accounts owing from an Account Debtor obligated on the Account are
outstanding more than ninety (90) days past their invoice date; (iv) the Account
is not subject to any advance payments, defense, set-off, or counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance or adjustment
of any kind; (v) the Account is net of any portion thereof attributable to the
sale of goods that have been returned, rejected, lost or damaged or the
performance of any services that have been refused or rejected; (vi) if the
Account arises from the sale of goods by a Borrower or any Subsidiary of a
Borrower, such sale was an absolute sale and not on consignment or on approval
or on a sale-or-return basis nor subject to any other repurchase or return
agreement, and such goods have been shipped to the Account Debtor or its
designee; (vii) if the Account arises from the performance of services, such
services have actually been performed; (viii) the Account arose in the ordinary
course of such Borrower's or subsidiary's business; (ix) no notice of the
<PAGE>
bankruptcy, receivership, reorganization, liquidation, dissolution, or
insolvency of the Account Debtor has been received by Lender or any Borrower or
any Subsidiary of any Borrower; (x) the Account Debtor is not a Subsidiary or
Affiliate of any Borrower or Subsidiary of any Borrower; (xi) the Account does
not represent a sale or provision of services to the government of the United
States or any department, instrumentality, subdivision or agency thereof unless
Borrowers have complied, for the benefit of Lender, with Section 6.17 of this
Agreement; (xii) the Account is not an Account on which the Account Debtor is
obligated to any Borrower of any Subsidiary of Borrower under any instrument;
(xiii) the transaction which gave rise to the Account complies in all respects
with all applicable laws, rules and regulations of any Governmental Authority;
and (xiv) the Account meets such other reasonable specifications and
requirements which may from time to time be mutually established by Borrowers
and Lender. Eligible Accounts shall not include that portion of an Account
representing interest charges for past due balances or debit memos.
Eligible Unbilled Accounts - The reimbursable fees for services
--------------------------
rendered or goods sold by a Borrower to a client or customer; provided that such
fees and services have been entered into such Borrowers' or Subsidiary's
accounting system but have not yet been billed to such client or customer
(which, upon billing, will be an Account Debtor); and provided further that upon
billing, such fees shall become an Account meeting each and every one of the
following specifications: (i) the Account is lawfully and exclusively owned by
such Borrower or Subsidiary and subject to no Lien (other than Permitted Liens,
if applicable, and Liens granted under this Agreement) and such Borrower has the
right of assignment thereof and the power to grant a security interest therein;
(ii) the Account is valid and enforceable representing the undisputed
indebtedness of an Account Debtor for the purchase of goods or performance of
services not more than ninety (90) days past the invoice date (which invoice
date shall not be more than ten (10) days after completion of the delivery of
goods or performance of services) and does not represent a rebilling; (iii) not
more than 50% of the aggregate balance of all Accounts owing from an Account
Debtor obligated on the Account are outstanding more than ninety (90) days past
their invoice date; (iv) the Account is not subject to any advance payments,
defense, set-off, or counterclaim, deduction, discount, credit, chargeback,
freight claim, allowance or adjustment of any kind; (v) the Account is net of
any portion thereof attributable to the sale of goods that have been returned,
rejected, lost or damaged or the performance of any services that have been
refused or rejected; (vi) if the Account arises from the sale of goods by a
Borrower or a Subsidiary of a Borrower, such sale was an absolute sale and not
on consignment or on approval or on a sale-or-return basis nor subject to any
other repurchase or return agreement, and such goods have been shipped to the
Account Debtor
<PAGE>
or its designee; (vii) if the Account arises from the performance
of services, such services have actually been performed; (viii) the Account
arose in the ordinary course of such Borrower's or Subsidiary's business; (ix)
no notice of the bankruptcy, receivership, reorganization, liquidation,
dissolution, or insolvency of the Account Debtor has been received by Lender or
any Borrower or any Subsidiary of Borrower; (x) the Account Debtor is not a
Subsidiary or Affiliate of any Borrower or any Subsidiary of Borrower; (xi) the
Account does not represent a sale or provision of services to the government of
the United States or any department, instrumentality, subdivision or agency
thereof unless Borrowers have complied, for the benefit of Lender, with Section
6.17 of this Agreement; (xii) the Account is not an Account on which the Account
Debtor is obligated to any Borrower of any Subsidiary of any Borrower under any
instrument; (xiii) the transaction which gave rise to the Account complies in
all respects with all applicable laws, rules and regulations of any Governmental
Authority; (xiv) the Account will be billed in accordance with contractual
provisions (if subject to a written contract), or Borrowers' usual and customary
procedures; and (xv) the Account meets such other reasonable specifications and
requirements which may from time to time be mutually established by Lender and
Borrowers. Eligible Unbilled Accounts shall not include that portion of an
Account representing interest charges for past due balances or debit memos. For
the purpose of determining borrowing availability under the Borrowing Base, no
Account may exist concurrently as an Eligible Billed Account and Eligible
Unbilled Account.
Existing Indebtedness - The aggregate Indebtedness owing to Lender by
---------------------
certain Borrowers, and certain of their Subsidiaries and Affiliates under the
Existing Loan Agreement.
Existing L/C's - Section 2.2(b).
--------------
Existing Loan Agreement - Shall have the meaning set forth in the
-----------------------
Background to this Agreement.
Existing Revolving Credit Note - The Revolving Credit Note issued by
------------------------------
certain Borrowers, and certain of their Subsidiaries and Affiliates to Lender
pursuant to the Existing Loan Agreement, together with all allonges,
modifications and supplements thereto.
ERISA - The Employee Retirement Income Security Act of 1974, as the
-----
same may be amended, from time to time.
Event of Default - Section 8.1.
----------------
Expenses - Section 9.6.
--------
<PAGE>
Facility Limit - The sum of Fifteen Million Dollars ($15,000,000).
--------------
Fed Funds Rate - The daily rate of interest announced from time to
--------------
time by the Board of Governors of the Federal Reserve System in publication H.15
as the "Federal Funds Rate".
Fixed Charge Coverage Ratio - The ratio of (i) the sum of (A)
---------------------------
Consolidated Earning Available for Fixed Charges minus (B) Unfunded Capital
-----
Expenditures and, to (ii) the sum of (x) Consolidated Interest Expense
(including interest on the Loans and L/C Fees) plus (y) scheduled current
----
maturities of long term Indebtedness during the next consecutive twelve (12)
month period (but excluding Advances under the Revolving Credit maturing as of
the Revolving Credit Maturity Date) plus (z) Consolidated Rental Payments, all
----
of the foregoing as would be shown on consolidated statements of earnings and
cash flows for Borrowers prepared in accordance with GAAP.
Funded Debt - On any date, without duplication, the aggregate
-----------
consolidated principal amount of Borrowers' Indebtedness (excluding Indebtedness
that consists of Seller Subordinated Debt) which has a final maturity date of
more than one (1) year from the date or origination, but including all Advances
under the Revolving Credit as determined in accordance with GAAP on a
consolidated basis.
Funded Debt to Consolidated Capitalization Ratio - The ratio of (i)
------------------------------------------------
Funded Debt to (ii) Consolidated Capitalization.
Funded Debt to Consolidated Operating Cash Flow Ratio - The ratio of
-----------------------------------------------------
(i) Funded Debt to (ii) Consolidated Operating Cash Flow.
GAAP - Generally accepted accounting principles as promulgated by the
----
Financial Accounting Standards Board, as in effect on the Closing Date applied
in a manner consistent with the most recent audited consolidated financial
statements of Borrowers furnished to Lender (subject to the provisions of
Section 1.2 hereof).
Government Acts - Section 2.2(g).
---------------
Government Authority - Any government or political subdivision, or any
--------------------
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury, or arbitration
(to the extent having jurisdiction over Borrowers or any of their Subsidiaries,
in each case whether foreign or domestic).
Government Contract - Section 6.17.
-------------------
<PAGE>
GSR - Shall have the meaning set forth in the Background to this
---
Agreement.
GSR/SIA - Shall have the meaning set forth in the Background to this
-------
Agreement.
Hazardous Substance - Section 5.15.
-------------------
Holdings - Shall have the meaning set forth in the Background to this
--------
Agreement.
Indebtedness - Of any Person at any date, without duplication, (i) all
------------
indebtedness of such Person for borrowed money (including, with respect to
Borrowers, the Obligations) or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all Capitalized Lease Obligations of such Person, (iv)
the face amount of all letters of credit issued for the account of such Person
and all drafts drawn thereunder, (v) all obligations of other Persons which such
Person has guaranteed, and (vi) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
Initial Revolving Credit Applicable Margin - Twenty-five (25) basis
------------------------------------------
points.
Initial Term Loan Applicable Margin - One hundred fifty (150) basis
-----------------------------------
points.
IRS - Internal Revenue Service.
---
Interest Coverage Ratio - The ratio of (i) Consolidated EBIT to (ii)
-----------------------
Consolidated Interest Expense.
L/C Fees - Section 2.10(c).
--------
Lien - Any interest of any kind or nature in property securing an
----
obligation owed to, or a claim of any kind or nature in Property by, a Person
other than the owner of the Property, whether such interest is based on the
common law, statute, regulation or contract, and including, but not limited to,
a security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt, a lease, consignment or bailment for security
purposes, a trust, or an assignment. The term "Lien" shall include without
limitation, reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property other than those which would not
<PAGE>
materially interfere with any Person's use of the Property and would not
materially detract from the value of the Property. For the purposes of this
Agreement, each Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Loans - Collectively, the unpaid principal balance of Advances under
-----
the Revolving Credit and the unpaid principal balance of the Term Loans.
Loan Documents - Collectively, this Agreement, the Revolving Credit
--------------
Note, the Term Loan Notes, the Pledge Agreements and all agreements, instruments
and documents executed and/or delivered in connection therewith, all as may be
amended, modified, supplemented or replaced from time to time.
Maximum Revolving Credit Amount - The sum of Nine Million Dollars
-------------------------------
($9,000,000.00), as such sum may be permanently reduced from time to time
pursuant to Section 2.1(e).
Moody's - Section 7.6.
-------
Net Proceeds - In the case of (i) any Asset Sale, the aggregate cash
------------
payments received by a Borrower or its Subsidiary therefrom, net of direct
expenses of sale and also net of the payment of Indebtedness secured by valid
and enforceable Permitted Liens on the assets sold, provided however that any
direct expenses constituting taxes imposed on such Asset Sale (excluding income
taxes) shall only be included to the extent such taxes are payable in cash
within twelve (12) months of the closing date of such Asset Sale or (ii) any
Offering, the aggregate cash payments received by a Borrower or its Subsidiary
therefrom, net of bona fide reasonable and customary direct costs of sale
---- ----
(including legal and other professional fees and underwriting fees).
Notes - Collectively, the Revolving Credit Note, and Term Loan Notes
-----
all as may be amended, modified, supplemented or replaced from time to time.
Obligations - All existing and future debts, liabilities and
-----------
obligations of every kind or nature at any time owing by Borrowers, or any of
them to Lender, whether joint or several, related or unrelated, primary or
secondary, matured or contingent, due or to become due, and whether principal,
interest, fees or Expenses, including, without limitation, Obligations in
respect of the Revolving Credit and Term Loans and any extensions,
modifications, substitutions, increases and renewals thereof; the payment of all
amounts advanced by Lender to preserve, protect and enforce rights hereunder and
in the
<PAGE>
Collateral; and all Expenses incurred by Lender in connection therewith.
Offering - The sale or issuance by any Borrower or any Subsidiary of a
--------
Borrower of any of its Capital Stock or any debt instrument in any public or
private transaction, or the receipt of capital contributions in the form of cash
by any Borrower or any Subsidiary of a Borrower.
Overadvance - Section 2.1(a).
-----------
PBGC - The Pension Benefit Guaranty Corporation.
----
Permitted Acquisition - The acquisition by a Borrower of all or
---------------------
substantially all of the Capital Stock, securities or assets of any Person in
any transaction or series of related transactions provided that (i) at the time
of such acquisition, no Default or Event of Default has occurred or after giving
effect to such acquisition would occur; (ii) such Person, at the time of the
acquisition, engages in an industry substantially similar to the industry in
which Opinion engages on the date hereof; (iii) the acquired Person (if a
domestic Person) joins in the terms of this Agreement and becomes a Borrower
hereunder (pursuant to documents in form and substance satisfactory to Lender)
or that any assets so acquired (including 65% of the Capital Stock of a foreign
Person) become part of the Collateral; (iv) at the time of such acquisition,
Borrowers shall have provided to Lender financial projections (certified by
Opinion's chief financial officer), for the twelve (12) month period immediately
subsequent to such acquisition, which projections shall show that after giving
effect to such acquisition, Borrowers shall be in compliance with Section 6.8 of
this Agreement; and (v) the aggregate consideration paid by all Borrowers for
such acquisitions (including, without limitation, by payment in cash, issuance
of Capital Stock, issuance of Seller Subordinated Debt or assumption of
Indebtedness) shall not exceed Five Hundred Thousand Dollars ($500,000) in the
fiscal year ending December 31, 1997 and One Million Dollars ($1,000,000.00) in
any fiscal year thereafter. No Permitted Acquisition shall include the purchase
of real estate without Lender's prior written consent.
Permitted Liens - Section 7.3.
---------------
Person - An individual, partnership, corporation, trust, estate,
------
limited liability company or partnership, unincorporated association or
organization, joint venture or any other entity.
Pledge Agreements - Collectively, those certain Amended and Restated
-----------------
Pledge Agreements dated this date between Lender and Opinion and Lender and
Holdings, in form and substance
<PAGE>
satisfactory to Lender all as may be amended, modified, supplemented or replaced
from time to time.
Prime Rate - That floating annual interest rate publicly designated by
----------
Lender from time to time as its prime rate which is not necessarily the lowest
or best rate of interest charged by Lender to any borrower or group or class of
borrowers.
Property - Any interest of any Borrower in any kind of property or
--------
asset, whether real, personal or mixed, or tangible or intangible.
Quarterly Compliance Certificate - Section 6.10.
--------------------------------
Reimbursement Obligations - Section 2.2(d).
-------------------------
Revolving Credit - Section 2.1(a).
----------------
Revolving Credit Maturity Date - The three (3) year anniversary of
------------------------------
the date hereof.
Revolving Credit Note - Section 2.1(b).
---------------------
S&P - Section 7.6.
---
Seller Subordinated Debt - Unsecured Indebtedness incurred by a
------------------------
Borrower to any seller(s) in connection with a Permitted Acquisition, which
Indebtedness shall be subject to payment terms, subordination provisions and a
written subordination agreement acceptable to Lender in its discretion.
Strategic - Shall have the meaning set forth in the Background to
---------
this Agreement.
Subordinated Debt - Collectively, all obligations of Opinion to the
-----------------
holders of those certain 10% Convertible Notes, in the original principal sum of
Three Million Dollars ($3,000,000), issued by Opinion.
Subsidiary - Any corporation more than fifty percent (50%) of whose
----------
voting stock is legally and beneficially owned by a Borrower or owned by a
corporation more than fifty percent (50%) of whose voting stock is legally and
beneficially owned by a Borrower.
Term Loan A - Section 2.3(a).
-----------
Term Loan A Note - Section 2.3(b).
----------------
Term Loan B - Section 2.4(a).
-----------
Term Loan B Note - Section 2.4(b).
----------------
<PAGE>
Term Loan C - Section 2.5(a).
-----------
Term Loan C Note - Section 2.5(b).
----------------
Term Loan Maturity Date - The five (5) year anniversary of the date
-----------------------
hereof.
Term Loan Notes - Collectively, Term Loan A Note, Term Loan B Note
---------------
and Term Loan C Note.
Term Loans - Collectively, Term Loan A, Term Loan B and Term Loan C.
----------
UCC - The Uniform Commercial Code as adopted in the Commonwealth of
---
Pennsylvania 13 Pa.C.S.A. (S)1101 et. seq.
-- ---
Unfunded Capital Expenditures - Consolidated Capital Expenditures that
-----------------------------
are not financed through interest bearing debt from a third party or that are
not specifically financed by Lender.
Usage Fee - Section 2.9(b).
---------
Other Capitalized Terms - All other capitalized terms not expressly
-----------------------
defined herein shall have the meanings ascribed to them in the UCC.
1.2 Accounting Principles: Where the classification, character or
---------------------
amount of any asset, liability, capital account or reserve, or item of income or
expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, this
shall be done in accordance with GAAP, consistently applied, to the extent
applicable, except as otherwise expressly provided in this Agreement; provided
that if because of a change in GAAP after the date of this Agreement, a Borrower
or Borrowers would be required to alter a previously utilized accounting
principle, method or policy in order to remain in compliance with GAAP, such
determination shall continue to be made in accordance with such Borrower's or
Borrowers' previous accounting principles, method and policies.
<PAGE>
SECTION 2. THE LOANS
2.1 Revolving Credit:
----------------
(a) Description. Subject to the terms and conditions of this
-----------
Agreement, Lender hereby establishes for the benefit of Borrowers a revolving
credit facility (collectively, the "Revolving Credit") which shall include
Advances extended by Lender to or for the benefit of Borrowers from time to time
hereunder. The aggregate principal amount of unpaid cash Advances, unreimbursed
draws on Letter(s) of Credit plus outstanding and undrawn Letter(s) of Credit
shall not, at any time exceed the lesser of (i) the Maximum Revolving Credit
Amount or (ii) the Borrowing Base. Subject to such limitation, the outstanding
balance of Advances under the Revolving Credit may fluctuate from time to time,
to be reduced by repayments made by Borrowers, to be increased by future
Advances which may be made by Lender, to or for the benefit of Borrowers, and,
subject to the provisions of Section 8 below, shall be due and payable on the
Revolving Credit Maturity Date. If the aggregate principal amount of unpaid
cash Advances, unreimbursed draws on Letters of Credit plus outstanding and
undrawn Letter(s) of Credit at any time exceeds the lesser of the Maximum
Revolving Credit Amount or the Borrowing Base (such excess referred to as
"Overadvance"), Borrowers shall immediately repay the Overadvance in full. Any
outstanding advances under the revolving credit established under the Existing
Loan Agreement shall be deemed an Advance hereunder.
(b) Revolving Credit Note. At Closing, Borrowers shall execute and
---------------------
deliver their amended and restated promissory note ("Revolving Credit Note") to
Lender for the total principal amount of the Revolving Credit. The Revolving
Credit Note shall evidence each Borrower's absolute and unconditional obligation
to repay Lender for all Advances made under the Revolving Credit, with interest
as herein and therein provided. The obligations of Borrowers under the
Revolving Credit and this Agreement shall at all times be joint and several.
The Revolving Credit Note shall be in form and substance satisfactory to Lender
and shall amend and restate (but shall not extinguish the absolute and
unconditional obligation to repay the Indebtedness evidenced by) the Existing
Revolving Credit Note.
(c) Term. The term of the Revolving Credit shall expire on the
----
Revolving Credit Maturity Date. On the Revolving Credit Maturity Date, unless
having been sooner accelerated by Lender pursuant to the terms hereof, all sums
owing under the Revolving Credit shall be due and payable in full; and on and
after the Revolving Credit Maturity Date, Borrowers shall not request and Lender
shall not make any further Advances under the Revolving Credit.
<PAGE>
(d) Method of Advances.
------------------
(i) All Advances requested by Borrowers under the Revolving Credit
must be requested by twelve o'clock (12:00) Noon, Philadelphia time, on the
Business Day such Advance is to be made. Lender may rely upon any telephone
request made or purported to be made by an Authorized Officer of Opinion (or
such other Person designated to Lender in writing by an Authorized Officer of
Opinion), which request shall be confirmed in writing by an Authorized Officer
of Opinion (or such other Person designated to Lender in writing by such
Authorized Officer). Such written confirmation may be sent by telecopy or
facsimile transmission on the same day as the request. Any check presented
against any Borrower's controlled disbursement account with Lender shall be
deemed a written request for an Advance.
(ii) Upon receiving a request for an Advance in accordance with
subparagraph (i) above, Lender shall make the requested Advance available to
Borrowers by crediting such amount to Borrowers' operating account with Lender
as soon as is reasonably practicable thereafter on the same Business Day the
requested Advance is made. Any requests for an Advance received after twelve
o'clock (12:00) P.M., Philadelphia Time will be made available, as set forth
above on the next Business Day.
(e) Commitment Reduction. Borrowers shall have the right at any time
--------------------
and from time to time, upon five (5) Business Days prior written notice to
Lender, to permanently reduce, without premium or penalty, the Maximum Revolving
Credit Amount in the minimum amount of Two Million Dollars ($2,000,000.00) and
integral multiples of One Million Dollars ($1,000,000.00) in excess thereof;
provided that Borrowers may not reduce the Maximum Revolving Credit Amount below
the aggregate stated amount of outstanding Letters of Credit plus all
----
outstanding unpaid Reimbursement Obligations with respect to Letters of Credit
unless, at Lender's sole discretion, Borrowers have provided Lender with cash
collateral in an amount reasonably determined by Lender. Any notice to reduce
the Maximum Revolving Credit Amount pursuant to this Section 2.1(e) shall be
permanent and may not be revoked. In the event of any such reduction (but
subject to the proviso of the first sentence of this Section 2.1(e)),
outstanding cash Advances in an amount in excess of the Maximum Revolving Credit
Amount, as so reduced, shall be paid on the effective date of such reduction,
with interest accrued on the amount so paid to the date of reduction.
2.2 Letters of Credit:
-----------------
(a) Establishment Letters of Credit. As a part of the Revolving
-------------------------------
Credit and subject to its terms and conditions (including, without limitation,
the Borrowing Base), Lender shall make available to Borrowers Letter(s) of
Credit which shall not
<PAGE>
exceed, in the aggregate at any one time outstanding, the L/C Commitment.
Notwithstanding the foregoing, all Letters of Credit shall be in form and
substance reasonably satisfactory to Lender and for purposes reasonably
satisfactory to Lender. No Letter of Credit shall be issued with an expiry date
later than the earlier of (i) three hundred sixty five (365) days from the date
of issuance or (ii) the Revolving Credit Maturity Date. Borrowers shall execute
and deliver to Lender all letter of credit agreements and other documents
reasonably required by Lender for such purposes, all such documents to be in
form and substance reasonably satisfactory to Lender in its sole discretion.
(b) Existing L/C's. All Letters of Credit issued by Lender under the
--------------
Existing Loan Agreement prior to and undrawn on the Closing Date (the "Existing
L/Cs") shall be part of, to the extent thereof, the L/C Commitment and shall be
deemed to have been issued by Lender as of the Closing Date. All Existing L/Cs
are listed on Schedule "2.2(b)" attached hereto and made a part hereof.
Borrowers hereby expressly assume all Reimbursement Obligations under, and adopt
all reimbursement agreements with respect to, the Existing L/Cs.
(c) Reduction to Revolving Credit. Each Letter of Credit issued from
-----------------------------
time to time under the Revolving Credit which remains undrawn (and the amounts
of draws on Letters of Credit prior to payment as hereinafter set forth),
including, without limitation, the Existing L/Cs, shall reduce dollar for dollar
the amount available to be borrowed by Borrowers under the Revolving Credit.
(d) Reimbursement. In the event of any request for drawing under any
-------------
Letter of Credit by the beneficiary thereof, Lender shall promptly notify
Borrowers and Borrowers shall immediately reimburse Lender on the day when such
drawing is honored, by either a cash payment by Borrowers, or, in the absence of
such payment by Borrowers, and at Lender's sole discretion, by Lender
automatically making, or having been deemed to have made, (without further
request or approval of Borrowers and irrespective of the existence of a Default
or Event of Default) a cash Advance under the Revolving Credit on such date to
reimburse Lender. Borrowers' reimbursement obligation for draws under Letters
of Credit along with the obligation to pay L/C Fees shall herein be referred to
collectively as Borrowers' "Reimbursement Obligations". All of Borrowers'
Reimbursement Obligations hereunder with respect to Letters of Credit shall
apply unconditionally and absolutely to, and shall be joint and several with
respect to, Letters of Credit issued hereunder on behalf of Borrowers.
(e) Obligations Absolute. The obligation of Borrowers to reimburse
--------------------
Lender for drawings made (or for cash Advances made to cover drawings made)
under the Letters of Credit
<PAGE>
shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right that
Borrowers or any other Person may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom any such
beneficiary or transferee may be acting), Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction;
(iii) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(iv) payment by Lender under any Letter of Credit against presentation
of a demand, draft or certificate or other document that does not substantially
comply with the terms of such Letter of Credit unless Lender shall have acted
with willful misconduct or gross negligence in issuing such payment;
(v) any other circumstance or happening whatsoever that is similar to
any of the foregoing; or
(vi) the fact that a Default or Event of Default shall have occurred
and be continuing.
(f) Added Cost. If by reason of (i) any change after the Closing
----------
Date in applicable law, regulation, rule, decree or regulatory requirement or
any change in the interpretation or application by any Governmental Authority of
any law, regulation, rule, decree or regulatory requirement or (ii) compliance
by Lender with any direction, reasonable request or requirement (whether or not
having the force of law) of any monetary authority or Governmental Authority
including, without limitation, Regulation D of the Board of Governors of the
Federal Reserve System:
(A) Lender shall be subject to any tax or other levy or charge of any
nature or to any variation thereof (except for changes in the rate of any tax on
the net income of Lender or its applicable lending office) or to any penalty
with respect to the maintenance or fulfillment of its obligations under this
Section 2.2, whether directly or by such being imposed on or suffered by Lender;
<PAGE>
(B) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit issued by
Lender; or
(C) there shall be imposed on Lender any other condition regarding
this Section 2.2, any Letter of Credit or any participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to Lender of issuing, creating, making or maintaining any Letter of Credit, or
to reduce the amount receivable in respect thereof by Lender, then and in any
such case Lender shall, after the additional cost is incurred or the amount
received is reduced, notify Borrowers and Borrowers shall pay on demand such
amounts as may be necessary to compensate Lender for such additional cost or
reduced receipt, together with interest on such amount from the date demanded
until payment in full thereof at a rate per annum equal at all times to the
applicable interest rate under the Revolving Credit. A certificate signed by an
officer of Lender as to the amount of such increased cost or reduced receipt
showing in reasonable detail the basis for the calculation thereof, submitted to
Borrowers by Lender shall, be prima facie evidence of the amount due and absent
written notice from Borrowers to Lender within thirty (30) days from submission,
be final, conclusive and binding for all purposes.
(g) Indemnification. (i) In addition to amounts payable as elsewhere
---------------
provided in this Section 2.2, without duplication, Borrowers hereby agree to
protect, indemnify, pay and save Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) which Lender may incur or be subject to
as a consequence, direct or indirect, of (A) the issuance of the Letters of
Credit or (B) the failure of Lender to honor a drawing under any Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority (all
------- --------
such acts or omissions herein called "Government Acts").
(ii) As between Borrowers and Lender, Borrowers assume all risks of
the acts and omissions of, or misuse of the Letters of Credit issued by Lender
by the respective beneficiaries of such Letters of Credit. In furtherance and
not in limitation of the foregoing, Lender shall not be responsible: (A) for the
form, validity, sufficiency, accuracy, genuineness or legal effects of any
document submitted by any party in connection with the application for and
issuance of such Letters of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for
the validity or sufficiency of any instrument transferring or
<PAGE>
assigning or purporting to transfer or assign any such Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (C) for failure of the
beneficiary of any such Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit unless pursuant to Lender's
gross negligence or willful misconduct; (D) for errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they are in cipher, unless any of
the foregoing are caused by Lender's gross negligence or willful misconduct; (E)
for errors in interpretation of technical terms; (F) for any loss or delay in
the transmission of any document required in order to make a drawing under any
such Letter of Credit or of the proceeds thereof, unless caused by Lender's
gross negligence or willful misconduct; (G) for the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; and (H) for any consequences arising from causes beyond
the control of Lender, including, without limitation, any Government Acts. None
of the above shall affect, impair, or prevent the vesting of any of Lender's
rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by Lender
in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not create any liability
on the part of Lender to Borrowers.
2.3 Term Loan A :
-----------
(a) Description. Lender hereby advances to Borrowers, subject to the
-----------
terms of this Agreement, the original principal sum of Two Million Dollars
($2,000,000.00) ("Term Loan A").
(b) Term Loan A Note. At Closing, Borrowers shall execute and deliver
----------------
their promissory note (the "Term Loan A Note") to Lender for the total principal
amount of Term Loan A. The Term Loan A Note shall evidence each Borrower's
absolute and unconditional obligation to repay Lender for Term Loan A with
interest as herein and therein provided. The obligations of Borrowers under the
Term Loan A Note shall at all times be joint and several. The Term Loan A Note
shall be in form and substance satisfactory to Lender.
(c) Amortization. The principal amount of Term Loan A shall be
------------
payable in fifty nine (59) equal consecutive monthly installments of principal
in the amount of Thirty Three Thousand Three Hundred Thirty Three Dollars and
Thirty Four Cents ($33,333.34) plus interest thereon at the rate set forth
herein. The first such installment shall be due on June 1, 1997 and the
<PAGE>
remaining such installments shall be due on the first Business Day of each
calendar month thereafter. A final sixtieth (60th) installment of the remaining
outstanding principal together with all accrued and unpaid interest on Term Loan
A shall be due and payable on the Term Loan Maturity Date, unless having been
sooner accelerated by Lender pursuant to the terms hereof.
2.4 Term Loan B :
-----------
(a) Description. Lender hereby advances to Borrowers, subject to the
-----------
terms of this Agreement, the original principal sum of Two Million Dollars
($2,000,000.00) ("Term Loan B").
(b) Term Loan B Note. At Closing, Borrowers shall execute and deliver
----------------
their promissory note (the "Term Loan B Note") to Lender for the total principal
amount of Term Loan B. The Term Loan B Note shall evidence each Borrowers'
absolute and unconditional obligation to repay Lender for Term Loan B with
interest as herein and therein provided. The obligations of Borrowers under the
Term Loan B Note shall at all times be joint and several. The Term Loan B Note
shall be in form and substance satisfactory to Lender.
(c) Amortization. The principal amount of Term Loan B shall be
------------
payable in fifty nine (59) equal consecutive monthly installments of principal
in the amount of Thirty Three Thousand Three Hundred Thirty Three Dollars and
Thirty Four Cents ($33,333.34) plus interest thereon at the rate set forth
herein. The first such installment shall be due and payable on June 1, 1997 and
the remaining such installment shall be due on the first Business day of each
calendar month thereafter. A final sixtieth (60th) installment of the remaining
outstanding principal together with all accrued and unpaid interest on Term Loan
B shall be due and payable on the Term Loan Maturity Date unless having been
sooner accelerated pursuant to the terms hereof.
2.5 Term Loan C :
-----------
(a) Description. Lender hereby advances to Borrowers, subject to the
-----------
terms of this Agreement, the original principal sum of Two Million Dollars
($2,000,000.00) ("Term Loan C").
(b) Term Loan C Note. At Closing, Borrowers shall execute and deliver
----------------
their promissory note (the "Term Loan C Note") to Lender for the total principal
amount of Term Loan C. The Term Loan C Note shall evidence each Borrowers'
absolute and unconditional obligation to repay Lender for Term Loan C with
interest as herein and therein provided. The obligations of Borrowers under the
Term Loan C Note shall at all times be joint and several. The Term Loan C Note
shall be in form and substance satisfactory to Lender.
<PAGE>
(c) Amortization. The principal amount of Term Loan C shall be
------------
payable in fifty nine (59) equal consecutive monthly installments of principal
in the amount of Thirty Three Thousand Three Hundred Thirty Three Dollars and
Thirty Four Cents ($33,333.34) plus interest thereon at the rate set forth
herein. The first such installment shall be due and payable on June 1, 1997 and
the remaining such installment shall be due on the first Business day of each
calendar month thereafter. A final sixtieth (60th) installment of the remaining
outstanding principal together with all accrued and unpaid interest on Term Loan
C shall be due and payable on the Term Loan Maturity Date unless having been
sooner accelerated pursuant to the terms hereof.
2.6 Payments: Except to the extent otherwise set forth in this
---------
Agreement, all payments of principal and of interest on the Revolving Credit,
the Term Loans, the Expenses, and all other charges and any other Obligations of
Borrowers, shall be made to Lender at its main banking office, at Philadelphia,
Pennsylvania, in United States dollars, in immediately available funds. Lender
will send to Opinion, on behalf of Borrowers, on a monthly basis, bills for all
sums owing hereunder. Lender shall have the unconditional right and discretion,
and each Borrower hereby authorizes Lender to charge any Borrower's operating
account with Lender for all of Borrowers' Obligations as they become due from
time to time under this Agreement including, without limitation, interest,
principal, fees and reimbursement of Expenses.
2.7 Revolving Credit Interest :
-------------------------
(a) Rate. Subject to Section 2.7(b), the unpaid cash Advances under
----
the Revolving Credit shall bear interest at the Base Rate plus the Initial
Revolving Credit Applicable Margin.
(b) Reduction. So long as Borrowers on a consolidated basis maintain
---------
a Funded Debt to Operating Cash Flow Ratio of less than 3.0 to 1.0, tested
quarterly on a rolling four (4) quarter basis beginning with the fiscal quarter
ending March 31, 1998, the interest rate applicable to the unpaid principal
balance of cash Advances under the Revolving Credit shall be adjusted quarterly
and, upon the effectiveness of such adjustment, interest shall accrue at the per
annum rate equal to the Base Rate. In no event, however, may a downward
adjustment occur (or be maintained) if a Default or Event of Default has
occurred and is continuing. Any such adjustment shall be effective on the later
of (i) five (5) days after, or (ii) the first day of the calendar month after,
Lender's receipt of the Quarterly Compliance Certificate demonstrating the
financial test is satisfied. If Borrowers fail to meet the requirement for any
period (and irrespective of any prior rate reduction), then
<PAGE>
interest on the Revolving Credit shall bear interest at the Base Rate plus the
Initial Revolving Credit Applicable Margin.
(c) Payment Dates. Interest on the Revolving Credit shall be payable
-------------
monthly, in arrears, on the first Business Day of each calendar month, beginning
on the first Business Day of the first full calendar month after the Closing
Date.
2.8 Term Loan Interest :
------------------
(a) Term Loan A. The outstanding principal balance of Term Loan A
-----------
shall bear interest at the fixed per annum rate of ten and one quarter percent
(10.25%).
(b) Term Loan B. The outstanding principal balance of Term Loan B
-----------
shall, from the Closing Date through October 31, 1998, bear interest at the
fixed per annum rate of ten percent (10%) and shall, beginning November 1, 1998
(and subject to Section 2.8(d)), bear interest at the Base Rate plus the Initial
Term Loan Applicable Margin.
(c) Term Loan C. Subject to Section 2.8(d), the outstanding principal
-----------
balance of Term Loan C shall bear interest at the Base Rate plus the Initial
Term Loan Applicable Margin.
(d) Reduction. So long as Borrowers on a consolidated basis satisfy
---------
the financial test set forth below, tested quarterly on a rolling four (4)
quarter basis beginning with the fiscal quarter ending March 31, 1998, the
interest rate applicable to the unpaid principal balance of each of Term Loan B
(but only if interest accruing on Term Loan B is at a floating rate) and Term
Loan C shall be adjusted quarterly and, upon the effectiveness of such
adjustment, interest shall be reduced (from the applicable floating rates set
forth in Sections 2.8(b) or (c) above), by the amount set forth below. In no
event, however may a downward adjustment occur (or be maintained) if a Default
or Event of Default has occurred and is continuing. Any such adjustment shall
be effective on the later of (i) five (5) days after, or (ii) the first day of
the calendar month after, Lender's receipt of the Quarterly Compliance
Certificate demonstrating the financial test is satisfied. The rate reduction
shall be determined in accordance with the chart set forth below:
<TABLE>
<CAPTION>
Funded Debt to Operating
Cash Flow Ratio Rate Reduction
------------------------ -----------------
<S> <C>
1. Greater than 3.0 to 1.0 No reduction
2. Greater than 2.5 to 1.0 but less 25 basis points
than or equal to 3.0 to 1.0
3. Less than or equal to 2.5 to 1.0 75 basis points
</TABLE>
<PAGE>
If Borrowers fail to meet the requirements of numbers 2 and 3 of the above
chart, for any period (and irrespective of any prior rate reduction), then Term
Loan B and Term Loan C shall bear interest at the floating applicable rates
under Sections 2.8(b) and (c).
(e) Payment Dates. Interest on each of the Term Loans shall be
-------------
payable monthly, in arrears, on the first Business Day of each calendar month,
beginning on the first Business Day of the first full calendar month after the
Closing Date hereof.
2.9 Additional Interest Provisions:
------------------------------
(a) Calculation of Interest. Interest on the Loans, regardless of the
-----------------------
rate option, shall be calculated on the basis of a three hundred sixty (360) day
year but charged for the actual number of days elapsed. Changes in the interest
rate applicable to Base Rate Loans shall become effective on the same day as
Lender announces a change in its Prime Rate or, if applicable, the date the Feds
Fund Rate changes.
(b) Default Rate. Upon the occurrence of an Event of Default
------------
hereunder, the per annum effective rate of interest on all outstanding principal
under the Loans, regardless of the rate option, shall be increased by two
hundred (200) basis points.
(c) Continuation of Interest Charges. All contractual rates of
--------------------------------
interest chargeable on outstanding principal under the Loans, regardless of the
rate option, shall continue to accrue and be paid even after Default, an Event
of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings
of any kind or the happening of any event or occurrence similar or dissimilar.
(d) Applicable Interest Limitations. In no contingency or event
-------------------------------
whatsoever shall the aggregate of all amounts deemed interest hereunder and
charged or collected pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such court
determines Lender has charged or received interest hereunder in excess of the
highest applicable rate, Lender shall apply, in its sole discretion, and set off
such excess interest received by Lender against other Obligations due or to
become due and such rate shall automatically be reduced to the maximum rate
permitted by such law.
<PAGE>
2.10 Fees :
----
(a) Closing Fee. At Closing, Lender shall have fully earned and
-----------
Borrower shall unconditionally pay to Lender the Closing Fee.
(b) Usage Fee. So long as the Revolving Credit is outstanding and has
---------
not been terminated, Borrowers shall unconditionally pay to Lender, a non-
refundable fee ("Usage Fee") equal to one-half of one percent (.50%) per annum
of the daily unused portion of the Revolving Credit (which shall be calculated
as the Maximum Revolving Credit Amount minus the average daily outstanding
principal balance of Advances (including issued and outstanding or drawn and
unreimbursed Letter(s) of Credit). The Usage Fee shall be computed and paid on
a quarterly basis, in arrears, on the first Business Day of each of Borrowers'
fiscal calendar quarters, beginning on the first Business Day of the first
fiscal calendar quarter after the Closing Date and on the day the Revolving
Credit Maturity Date. The Usage Fee shall be calculated on the basis of a three
hundred sixty (360) day year but charged for the actual number of days elapsed.
(c) L/C Fees. Borrowers shall pay to Lender, upon issuance, letter of
--------
credit fees equal to one and one half percent (1.5%) of the face amount of each
Letter of Credit (as a condition to the issuance thereof), plus all of Lender's
standard charges for the issuance, amendment, extension or cancellation of each
such Letter of Credit (collectively, "L/C Fees").
2.11 Prepayments :
-----------
(a) Base Rate Loans. Term Loans accruing interest based on the Base
---------------
Rate, may be permanently prepaid upon one (1) Business Day's prior notice at any
time and from time to time in whole or in part without premium or penalty. Any
prepayments shall be accompanied by all accrued and unpaid interest thereon.
(b) Fixed Rate Loans. Term Loans accruing interest based on a fixed
----------------
rate, may be permanently prepaid upon one (1) Business Days' prior notice in
whole at any time or in part from time to time; provided, however, that any such
prepayment shall be accompanied by all accrued and unpaid interest thereon and a
prepayment premium equal to the amount, if any, by which the aggregate present
value of scheduled principal and interest payments eliminated by the prepayment
exceeds the principal amount being prepaid. Such present value shall be
calculated by application of a discount rate determined by Lender in its
reasonable judgement to be the yield-to-maturity, at the date of prepayment, on
U.S. Treasury securities having a maturity which most closely approximates the
final maturity date of the principal balance then outstanding.
<PAGE>
(c) Mandatory Prepayments. Borrowers shall promptly upon the receipt
---------------------
of Net Proceeds from any Offering, permanently prepay the Term Loans (in such
order as Borrowers may designate, but subject in any event to Section 2.11(b);
provided that if such prepayment may trigger a prepayment premium under Section
2.11(b), Borrowers may elect to have Lender retain such portion of the Net
Proceeds that would trigger a prepayment premium as cash collateral to be
released and applied to the applicable Term Loan in accordance with the
repayment schedule set forth in this Agreement) in an amount equal to such Net
Proceeds. If the Term Loans have been prepaid in full then the Net Proceeds (or
balance thereof) shall be used to permanently reduce the Maximum Revolving
Credit Amount. Any Overadvance resulting therefrom shall be paid in full on the
date of receipt of such Net Proceeds. If a Default or Event of Default has
occurred and is continuing, the Net Proceeds may be applied to the Obligations
in such order as Lender may, in its discretion, determine but subject, in any
event to Section 2.11(b).
(d) Application to Principal. All partial prepayments of every kind
------------------------
on account of a Term Loan shall be applied to the principal balance of such Term
Loan in the inverse order of maturity.
2.12 Capital Adequacy : If any present or future law, governmental rule,
----------------
regulation, policy, guideline, directive or similar requirement (whether or not
having the force of law) imposes, modifies, or deems applicable any capital
adequacy, capital maintenance or similar requirement which affects the manner in
which Lender allocates capital resources to its commitments (including any
commitments hereunder), and as a result thereof, the rate of return on Lender's
capital with regard to the Loans is reduced to a level below that which Lender
could have achieved but for such circumstances, then in such case and upon
notice from Lender to Borrowers, from time to time, Borrowers shall pay Lender
such additional amount or amounts as shall compensate Lender for such reduction
in Lender's rate of return. Such notice shall contain the statement of Lender
with regard to any such amount or amounts which shall, be prima facie evidence
of such amount owing from Borrowers. In determining such amount, Lender may use
any reasonable method of averaging and attribution that it deems applicable.
2.13 Use of Proceeds : Proceeds of the Loans shall be used to (a) repay
---------------
in full the Subordinated Debt, (b) refinance the Existing Indebtedness, (c)
provide working capital; and (d) finance Permitted Acquisitions and capital
expenditures.
<PAGE>
2.14 Joint and Several Liability :
---------------------------
(a) Joint and Several Liability. Opinion and, subject only to the
---------------------------
terms of Subsection 2.14(c) hereof, the other Borrowers, shall be jointly and
severally liable for all Obligations regardless of, inter alia which Borrower
----- ----
requested (or received the proceeds of) a particular Loan Advance.
(b) Authorization of Opinion by Other Borrowers. Each of the other
-------------------------------------------
Borrowers hereby irrevocably authorizes Opinion to give notices, make requests,
make payments, receive payments and notices, give receipts and otherwise take
action on behalf of such Borrower under and with respect to any Loan Document,
including, without limitation, with regard to provisions herein referring to
notices or requests being given by or to "Opinion, on behalf of the Borrowers"
and similar provisions.
(c) Maximum Amount of Joint and Several Liability. Without limiting
---------------------------------------------
the effect of Section 9.1 hereof, to the extent that mandatory and non-waivable
provisions of applicable law (including but not limited to any applicable laws
pertaining to fraudulent conveyance and any applicable business corporation and
partnership laws) otherwise would render the full amount of any Borrower's
obligations hereunder and under the other Loan Documents invalid or
unenforceable, such Borrower's obligations hereunder and under the other Loan
Documents shall be limited to the maximum amount which does not result in such
invalidity or unenforceability.
2.15 Release of Certain Borrowers: GSR, GSR/SIA and Holdings are each
-----------------------------
hereby released as a Borrower under the Existing Loan Agreement; provided that
any indemnification obligation of GSR, GSR/SIA and Holding thereunder shall
continue in full force and effect.
SECTION 3. COLLATERALSECTION 3. COLLATERAL
3.1 Description : As security for the payment of the Obligations, and
-----------
satisfaction by Borrowers of all covenants and undertakings contained in this
Agreement and the other Loan Documents each Borrower hereby confirms its prior
assignment and grant to Lender and hereby further assigns and grants to Lender,
a continuing first lien on and security interest in, upon and to the following
Property;
(i) Accounts, Contract Rights, Inventory, Etc. - All of such
------------------------------------------
Borrower's now owned and hereafter acquired, created, or arising Accounts,
accounts receivable, notes receivable,
<PAGE>
contract rights, Chattel Paper, Documents (including documents of title),
Instruments and letters of credit;
(ii) Inventory - All of such Borrower's now owned or hereafter
---------
acquired Inventory of every nature and kind, wherever located;
(iii) General Intangibles - All of such Borrower's now owned and
-------------------
hereafter acquired, created or arising General Intangibles of every kind and
description, including, but not limited, to all existing and future customer
lists, choses in action, claims, books, records, patents and patent
applications, copyrights, trademarks, tradenames, tradestyles, trademark
applications, blueprints, drawings, designs and plans, trade secrets, contracts,
contract rights license agreements, formulae, tax and any other types of
refunds, returned and unearned insurance premiums, rights and claims under
insurance policies including without limitation, credit insurance and key man
life insurance policies, and computer information, software, records and data;
(iv) Equipment - All of such Borrower's now owned and hereafter
---------
acquired Equipment, including, without limitation, machinery, vehicles,
furniture and Fixtures, wherever located, and all replacements, parts,
accessories, substitutions and additions thereto;
(v) Deposit Accounts - All of such Borrower's now existing and
----------------
hereafter acquired or arising deposit accounts of every nature, wherever
located, and all documents and records associated therewith;
(vi) Property in Lender's Possession - All Property of such
-------------------------------
Borrower, now or hereafter in Lender's possession;
(vii) Investment Property - Subject only to the terms of the Pledge
-------------------
Agreements, all of such Borrower's now owned or hereafter acquired Investment
Property whether registered or unregistered including, without limitation, the
Investment Property of any Person acquired pursuant to a Permitted Acquisition;
and
(viii) Proceeds - The proceeds (including, without limitation,
--------
insurance proceeds), whether cash or non-cash, of all of the foregoing.
3.2 Lien Documents : At Closing and thereafter as Lender deems
--------------
necessary, Borrowers shall execute and deliver to Lender, or have executed and
delivered (all in form and substance reasonably satisfactory to Lender):
<PAGE>
(a) Financing Statements - Financing statements pursuant to the UCC,
--------------------
or such other appropriate documents which Lender, may file in any jurisdiction
where any Collateral is or may be located and in any other jurisdiction that
Lender deems appropriate; and
(b) Other Agreements - Any other agreements, documents, instruments
----------------
and writings, including, without limitation, trademark security agreements,
required by Lender to evidence, perfect or protect Lender's Liens and security
interest in the Collateral or as Lender may reasonably request from time to
time.
3.3 Other Actions : In addition to the foregoing, Borrowers shall do
-------------
anything further that may be lawfully and reasonably required by Lender to
secure Lender and effectuate the intentions and objects of this Agreement,
including, but not limited to, continuation statements, amendments to financing
statements, security agreements, contracts and any other documents required
hereunder. At Lender's request, Borrowers shall also immediately deliver (with
execution by Borrowers of all necessary documents or forms to reflect Lender's
Lien thereon) to Lender all items for which Lender must receive possession to
obtain a perfected security interest, including without limitation, all
Investment Property either endorsed in blank or accompanied by stock powers or
assignments separate from certificate undated and duly executed in blank
sufficient, in Lender's determination, to transfer title thereto, and all notes,
letters of credit, certificates and documents of title, Chattel Paper, warehouse
receipts, Instruments, and any other similar instruments constituting
Collateral. Lender reserves the right to request and receive certificates of
title at any future date with respect to any and all other vehicles.
3.4 Searches : Lender shall, prior to or at Closing, and thereafter as
--------
Lender may determine from time to time, at Borrowers' expense, obtain the
following searches (the results of which are to be consistent with the
warranties made by Borrowers in this Agreement):
(a) UCC searches with the Secretary of State and local filing office
of each state where each Borrower maintains its executive office, a place of
business, or assets and corresponding searches as would be required in any
foreign country where any Borrower operates;
(b) Judgment, federal tax lien and corporate tax lien searches, in all
applicable filing offices of each state searched under subparagraph (a) above
and corresponding searches as would be required in any foreign country where any
Borrower operates;
<PAGE>
(c) Borrowers shall, prior to or at Closing and at their sole expense,
obtain and deliver to Lender good standing certificates showing each Borrower to
be in good standing in its respective state or country of incorporation and in
each other state or foreign country in which it is doing and presently intends
to do business for which qualification is required.
3.5 Landlord's Waivers : Borrowers will cause each owner of any premises
------------------
occupied by any Borrower or to be occupied by any Borrower where Collateral is
held, to, within thirty (30) days of the date of this Agreement, execute and
deliver to Lender an instrument, in form and substance satisfactory to Lender,
under which such owner(s) subordinates its/his/their interests in and waives
its/his/their right to distrain on or foreclose against the Collateral and
agrees to allow Lender to remain on such premises to dispose of or deal with any
Collateral located thereon.
3.6 Filing Security Agreement : A carbon, photographic or other
-------------------------
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
3.7 Power of Attorney : Each of the officers of Lender is hereby
-----------------
irrevocably made, constituted and appointed the true and lawful attorney for
each Borrower (without requiring any of them to act as such) with full power of
substitution to do the following: (a) endorse the name of such Borrower upon
any and all checks, drafts, money orders and other instruments for the payment
of monies that are payable to such Borrower and constitute collections on that
Borrower's Accounts; (b) execute in the name of any Borrower any financing
statements, schedules, assignments, instruments, documents and statements that
such Borrower is obligated to give Lender hereunder or is necessary to perfect
Lender's security interest or Lien in the Collateral; and (c) do such other and
further acts and deeds in the name of any Borrower that Lender may reasonably
deem necessary or desirable to enforce any Account or other Collateral.
3.8 Existing Liens: While this Agreement shall amend and restate the
---------------
Existing Loan Agreement, all existing Liens and security interests held by
Lender with respect to Borrowers or any Subsidiary or Affiliate shall, except as
set forth in Section 2.15, remain in full force and effect, shall not be
released or deemed released and shall secure the Obligations.
<PAGE>
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO LOAN ADVANCES
Closing under this Agreement and the making of future Advances are subject
to the following conditions precedent (all documents to be in form and substance
satisfactory to Lender and Lender's counsel):
4.1 Resolutions, Opinions, and Other Documents Required for the Closing:
-------------------------------------------------------------------
Borrowers shall deliver or shall cause to be delivered to Lender the following
on or before the Closing Date:
(a) this Agreement, the Revolving Credit Note, the Term Loan Notes,
the Pledge Agreements and the other Loan Documents all properly executed;
(b) each document and agreement required to be executed or delivered
by any Borrower or by any other Person under any provision of this Agreement or
any related agreements including, without limitation, under Section 3 of this
Agreement;
(c) certified copies of (i) the resolution of each Borrower's board of
directors authorizing the execution of this Agreement, the Notes to be issued
hereunder and each document required to be delivered by any Section hereof and
(ii) each Borrower's Articles or Certificate of Incorporation and By-laws;
(d) an incumbency certificate for each Borrower identifying all
Authorized Officers, with specimen signatures;
(e) a written opinion of Borrowers' independent counsel addressed to
Lender and opinions of such other counsel as Lender deems necessary;
(f) such financial statements, reports, certifications and other
operational information as Lender may require;
(g) certification by the chief financial officer of Opinion that there
has not occurred any material adverse change in the operations and condition
(financial or otherwise) of Opinion or any of the other Borrowers since December
31, 1996;
(h) balance of the payment by Borrower of all fees including, without
limitation, the Closing Fee and Expenses associated with the Loans;
(i) assignment to Lender of Key Man life insurance policies on the
lives of Dr. Michael Cooper in the amount of $3,000,000 and Mr. John Short in
the amount of $1,000,000 with insurers acceptable to Lender; and
<PAGE>
(j) a pay-off letter and disbursement instructions from the holders of
the Subordinated Debt to facilitate the payment in full of the Subordinated
Debt.
4.2 Absence of Certain Events : At the Closing Date, no Default or Event
-------------------------
of Default hereunder shall have occurred and be continuing.
4.3 Warranties and Representations at Closing : The warranties and
-----------------------------------------
representations contained in Section 5 as well as any other Section of this
Agreement shall be true and correct in all material respects on the Closing Date
with the same effect as though made on and as of that date. No Borrower shall
have taken any action or permitted any condition to exist which would have been
prohibited by any Section hereof.
4.4 Compliance with this Agreement : Each Borrower shall have performed
------------------------------
and complied with all agreements, covenants and conditions contained herein
including, without limitation, the provisions of Sections 6 and 7 hereof, which
are required to be performed or complied with by such Borrower before or at the
Closing Date.
4.5 Officer's Certificate : Lender shall have received a certificate
---------------------
dated the Closing Date and signed by the chief financial officer of each
Borrower certifying that all of the conditions specified in this Section have
been fulfilled.
4.6 Closing : Subject to the conditions of this Section, the Revolving
-------
Credit and Term Loans shall be made available on such date (the "Closing Date")
and at such time as may be mutually agreeable to the parties contemporaneously
with the execution hereof ("Closing") at Philadelphia, Pennsylvania.
4.7 Waiver of Rights : By completing the Closing hereunder, or by making
----------------
Advances hereunder, Lender does not thereby waive a breach of any warranty or
representation made by any Borrower hereunder or any agreement, document, or
instrument delivered to Lender or otherwise referred to herein, and any claims
and rights of Lender resulting from any breach or misrepresentation by any
Borrower are specifically reserved by Lender.
4.8 Conditions for Future Advances : Each request by Opinion, on behalf
------------------------------
of the Borrowers for an Advance under the Revolving Credit, in any form
following the Closing Date is subject to the following conditions:
<PAGE>
(a) This Agreement and the other Loan Documents shall be effective;
(b) There has been no material adverse change in any Borrower's
operations or condition (financial or otherwise) since December 31, 1996;
(c) No Default or Event of Default then exists;
(d) Each Advance is within and complies with the terms and conditions
of this Agreement (including the notice provisions under Section 2.1(d));
(e) No Lien (other than a Permitted Lien) has been imposed on any
Borrower or Subsidiary of a Borrower;
(f) Each representation and warranty set forth in Section 5 of this
Agreement is then true and correct in all material respects; and
(g) Each such request hereunder shall be deemed to be an automatic
certification by Borrowers that the conditions specified in Sections 4.8(a)
through (g) have been fully satisfied as of such time.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, each Borrower jointly and
severally warrants and represents to Lender that:
5.1 Corporate Organization and Validity :
-----------------------------------
(a) Due Organization. Each Borrower is a corporation duly organized
----------------
and validly existing under the laws of its state of incorporation, is duly
qualified, is validly existing and in good standing and has lawful power and
authority to engage in the business it conducts in each state and each foreign
country where the nature and extent of its business requires qualification,
except where the failure to so qualify would not have a material adverse effect
on such Borrower's business, financial condition, Property or prospects. All
states and foreign countries where each Borrower is qualified to do business is
shown on Schedule "5.1" attached hereto and made a part hereof.
(b) No Violation. The making and performance of this Agreement and
------------
related agreements, and each document required by any Section hereof will not
violate any law, government rule or regulation, or the charter, minutes or bylaw
provisions of any Borrower or violate or result in a default (immediately or
with
<PAGE>
the passage of time) under any contract, agreement or instrument to which
any Borrower is a party, or by which it is bound. No Borrower is in violation
of any material term of any agreement or instrument to which it is a party or by
which it may be bound or of its charter, minutes or its bylaws.
(c) Corporate Power. Each Borrower has all requisite corporate power
---------------
and authority to enter into and perform this Agreement and to incur the
obligations herein provided for, and has taken all proper and necessary
corporate action to authorize the execution, delivery and performance of this
Agreement, and the documents and related agreements required hereby.
(d) Valid, Binding and Enforceable. This Agreement, the Notes to be
------------------------------
issued hereunder, and all related agreements and documents required to be
executed and delivered by Borrowers hereunder, when executed and delivered, will
be valid and binding upon each Borrower and enforceable in accordance with their
respective terms subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors'
rights generally and to general equity principles.
5.2 Places of Business : The only places of business of each Borrower,
------------------
and the places where it keeps and intends to keep its Property, are at the
addresses shown on Schedule "5.2" attached hereto and made a part hereof.
5.3 Pending Litigation : There are no judgments or judicial or
------------------
administrative orders, proceedings or investigations (civil or criminal)
pending, or to the knowledge of any Borrower, threatened, against or affecting
any Borrower or any Subsidiary of any Borrower, in any court or before any
Governmental Authority which may materially and adversely affect the business,
financial condition, Property or prospects of such Borrower or its Subsidiary or
the ability of such Borrower or its Subsidiary to perform under this Agreement,
except as shown on Schedule "5.3" attached hereto and made a part hereof. No
Borrower nor any Subsidiary of any Borrower is in default with respect to any
order of any Governmental Authority, the effect of which would materially and
adversely affect the business, financial condition, Property or prospects of
such Borrower or its Subsidiary. To the best of the knowledge of each Borrower,
no executive officer of any Borrower or any Subsidiary of any Borrower, has been
indicted in connection with or convicted or engaged in any criminal conduct, or
is currently subject to any lawsuit or proceeding or under investigation in
connection with any anti-racketeering or other conduct or activity which may
result in the forfeiture of any Property to any Governmental Authority.
<PAGE>
5.4 Title to Properties : Each Borrower and each Subsidiary of each
-------------------
Borrower has good and marketable title to all the Property it respectively
purports to own, free from Liens and free from the claims of any other Person,
except for those Liens shown on Schedule "5.4" attached hereto and made a part
hereof.
5.5 Governmental Consent : Neither the nature of any Borrower nor any
--------------------
Subsidiary of any Borrower or of its business or Property, nor any relationship
between any Borrower or any Subsidiary of any Borrower and any other Person, nor
any circumstance affecting any Borrower or any Subsidiary of any Borrower in
connection with the issuance or delivery of this Agreement or the Notes is such
as to require a consent, approval or authorization of, or filing, registration
or qualification with, any Governmental Authority on the part of any Borrower or
any Subsidiary of any Borrower in connection with the execution and delivery of
this Agreement or the issuance or delivery of the Notes or other documents
contemplated hereby.
5.6 Taxes : All tax returns required to be filed by each Borrower and
-----
each Subsidiary of each Borrower in any jurisdiction have in fact been filed,
and all taxes, assessments, fees and other governmental charges upon each
Borrower and each Subsidiary of each Borrower, or upon any of its respective
Property, income or franchises, which are shown to be due and payable on such
returns have been paid, except for those taxes being contested in good faith
with due diligence by appropriate proceedings for which appropriate reserves
have been maintained under GAAP, consistently applied. No Borrower is aware of
any proposed additional tax assessment or tax to be assessed against or
applicable to such Borrower or any Subsidiary of such Borrower.
5.7 Financial Statements : The annual consolidated audited balance sheet
--------------------
of Opinion as of December 31, 1996 and the internally prepared consolidating
balance sheets of all Borrowers as of the fiscal quarter ending March 31, 1997,
and the related statements of earnings and retained earnings as of such dates,
all accompanied, with respect to the annual consolidated audited financial
statements of Opinion, by reports thereon from Borrowers' independent certified
public accountants, (complete copies of which have been delivered to Lender),
have been prepared in accordance with GAAP and present fairly the financial
position of Borrowers as of such dates and the results of its operations for
such periods. The fiscal year for all Borrowers currently ends on December 31.
Each Borrower's federal tax identification number is as shown on Schedule "5.7"
attached hereto and made a part hereof.
5.8 Full Disclosure : Neither the financial statements referred to in
---------------
Section 5.7, nor this
<PAGE>
Agreement or related agreements and documents or any written statement furnished
by Borrowers or any of them to Lender in connection with the negotiation of the
Revolving Credit and Term Loans and contained in any financial statements or
documents relating to any Borrower contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading. There is no fact known to any Borrower which such
Borrower has not disclosed to Lender in writing, which materially affects
adversely such Borrower's Property, business, financial condition or prospects.
5.9 Subsidiaries : Borrowers have no Subsidiaries or Affiliates, except
------------
as shown on Schedule "5.9" attached hereto and made a part hereof which Schedule
shows the capital structure and ownership of each such Subsidiary and Affiliate.
5.10 Guarantees, Contracts, etc. :
---------------------------
(a) Equity or Debt Investments. No Borrower and no Subsidiary of any
--------------------------
Borrower owns or hold equity or long term debt investments in, has any
outstanding advances to, or serves as guarantor, surety or accommodation maker
for the obligations of, any Person, and has not entered into any leases for real
or personal property (whether as landlord or tenant), except as shown on
Schedule "5.10", attached hereto and made a part hereof.
(b) Restrictive Agreements. No Borrower and no Subsidiary of any
----------------------
Borrower is a party to any contract or agreement, or subject to any charter or
other corporate restriction, which materially and adversely affects its
business, financial condition, Property or prospects.
(c) Liens. Except as otherwise specifically provided in this
-----
Agreement, no Borrower and no Subsidiary of any Borrower has agreed or consented
to cause or permit any of its Property whether now owned or hereafter acquired
to be subject in the future (upon the happening of a contingency or otherwise),
to a Lien not permitted by this Agreement.
<PAGE>
5.11 Government Regulations, etc. :
----------------------------
(a) Regulations. The use of the proceeds of and Borrowers' issuance
-----------
of the Notes will not directly or indirectly violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or Regulations U,
T, G and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II. No Borrower owns or intends to carry or purchase any "margin stock"
within the meaning of said Regulation U.
(b) Licenses and Permits. Each Borrower and each Subsidiary of each
--------------------
Borrower has obtained all licenses, permits, franchises or other governmental
authorizations necessary for the ownership of its Property and for the conduct
of its business, except for those which, if not obtained, would not have a
material adverse effect on the business, financial condition, Property or
prospects of such Borrower.
(c) ERISA. As of the date hereof, no employee benefit plan ("Pension
-----
Plan"), as defined in Section 3(2) of ERISA, (other than a multi employer plan
described in Section 3(37) of ERISA) maintained by any Borrower or under which
any Borrower could have any liability under ERISA (i) has failed to meet the
minimum funding standards established in Section 302 of ERISA, (ii) has failed
to comply in a material respect with all applicable requirements of ERISA and of
the Internal Revenue Code, including all applicable rulings and regulations
thereunder, (iii) has engaged in or been involved in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Internal Revenue Code which
would subject Borrowers to any material liability, or (iv) has been terminated
if such termination would subject any Borrower to any material liability. No
Borrower has assumed, or received notice of a claim asserted against such
Borrower for, withdrawal liability (as defined in Section 4207 of ERISA) with
respect to any multi employer pension plan and is not a member of any Controlled
Group (as defined in ERISA). Each Borrower has timely made all contributions
when due with respect to any multi employer pension plan in which it
participates and no event has occurred triggering a claim against such Borrower
for withdrawal liability with respect to any multi employer pension plan in
which such Borrower participates. All Employee Benefit Plans and multi employer
pension plans to which Borrower participates are shown on Schedule "5.11(c)"
attached hereto and made a part hereof.
(d) No Violation. No Borrower and no Subsidiary of any Borrower is in
------------
violation of or has received written notice that it is in violation of any
applicable statute, regulation or ordinance of either the United States of
America or any foreign country where it operates, or of any state, city, town,
municipality, county or of any other jurisdiction, or of any
<PAGE>
agency, or department thereof, (including without limitation, environmental laws
and regulations) which may materially and adversely affect its business,
financial condition, Property or prospects except as shown on Schedule
"5.11(d)", attached hereto and made a part hereof.
(e) Securities Reports. Each Borrower is current with all reports and
------------------
documents required to be filed with any state or federal securities commission
or similar agency and is in full compliance in all material respects with all
applicable rules and regulations of such commissions.
5.12 Business Interruptions : Within five (5) years prior to the date
----------------------
hereof, none of the business, Property or operations of Borrower or any
Subsidiary of any Borrower has been materially and adversely affected in any way
by any order of either the United States of America or any foreign country where
it operates, or any state or local government, or any political subdivision or
agency thereof, directed against such Borrower or such Subsidiary. There are no
pending or threatened labor disputes, strikes, lockouts or similar occurrences
or grievances affecting the business being operated by any Borrower or any
Subsidiary of any Borrower.
5.13 Names :
-----
(a) Within five (5) years prior to the Closing Date, no Borrower has
conducted business under or used any other name (whether corporate or assumed)
except for the names shown on Schedule "5.13(a)", attached hereto and made a
part hereof. Each Borrower is the sole owner of all names shown on such
Schedule "5.13(a)" and, to the best of Borrowers' knowledge, any and all
business done and all invoices issued in such trade names are such Borrower's
sales, business and invoices. Each trade name of each Borrower represents a
division or trading style of such Borrower and not a separate corporate
Subsidiary or Affiliate or independent entity.
(b) All trademarks, patents or copyrights which any Borrower uses,
plans to use or has a right to use are shown on Schedule "5.13(b) attached
hereto and made a part hereof. Each Borrower is the sole owner of such Property
except to the extent any other Person has claims or rights in such Property, as
such claims and rights are shown on such Schedule "5.13(b)." To the best of
each Borrower's knowledge, no Borrower is in violation of any rights of any
other Person with respect to such Property.
5.14 Other Associations : No Borrower and no Subsidiary of any Borrower
------------------
is engaged and has an interest in any joint venture or partnership with any
other Person except as shown on Schedule "5.14" hereto and made a part hereof.
<PAGE>
5.15 Environmental Matters : Except as shown on Schedule "5.15" attached
---------------------
hereto and made a part hereof, no Borrower has any knowledge:
(a) of the presence of any Hazardous Substances on any of the real
property where any Borrower or any Subsidiary of any Borrower conducts
operations or has its personal property, or
(b) of any on-site spills, releases, discharges, disposal or storage
of Hazardous Substances that have occurred or are presently occurring on any of
such real property, or
(c) of any spills, releases, discharges or disposal of Hazardous
Substances that have occurred, are presently occurring on any other real
property as a result of the conduct, action or activities of any Borrower or any
Subsidiary of any Borrower.
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of any Governmental Authority presently in effect and applicable to
such real property.
5.16 Regulation O : No director, executive officer or principal
------------
shareholder of any Borrower is a director, executive officer or principal
shareholder of Lender. For the purposes hereof the terms "director" "executive
officer" and "principal shareholder" (when used with reference to a Lender),
have the respective meanings assigned thereto in Regulation O issued by the
Board of Governors of the Federal Reserve System.
5.17 Capital Stock : All of the capital stock of Opinion has been duly
-------------
and validly authorized and issued and is fully paid and non-assessable and has
been sold and delivered to the holders thereof in compliance with all federal
and state laws (whether of the United States of America or any foreign country
in which it operates) and the rules and regulations of all regulatory bodies
thereof governing the sale and delivery of securities. The authorized and
outstanding Capital Stock (and owner thereof) of each Borrower (other than
Opinion) is as shown on Schedule "5.17" attached hereto and made part hereof.
All of the Capital Stock of each such Borrower has been duly and validly
authorized and issued and is fully paid and non-assessable and has been sold and
delivered to the holders thereof in compliance with, or under valid exemption
from, all Federal and state laws and the rules and regulations of all regulatory
bodies thereof governing the sale and delivery of securities. Except for the
rights and obligations shown on Schedule "5.17", there are no subscriptions,
warrants, options, calls, commitments, rights or agreements by which any such
<PAGE>
Borrower or any of the shareholders of such Borrower is bound relating to the
issuance, transfer, voting or redemption of shares of its Capital Stock or any
pre-emptive rights held by any Person with respect to the shares of Capital
Stock of any such Borrower. Except as shown on Schedule "5.17", no such
Borrower has issued any securities convertible into or exchangeable for shares
of its Capital Stock or any options, warrants or other rights to acquire such
shares or securities convertible into or exchangeable for such shares.
5.18 Solvency : Each Borrower is solvent, is able to pay its debts as
--------
they become due, and has capital sufficient to carry on its business and all
businesses in which it is about to engage, and now owns Property having a value
both at fair valuation and at present fair salable value greater than the amount
required to pay its debts. No Borrower will be rendered insolvent by the
execution and delivery of this Agreement or any of the other documents executed
in connection with this Agreement or by the transactions contemplated hereunder
or thereunder.
5.19 Interrelatedness of Borrowers : The business operations of each
-----------------------------
Borrower are interrelated and complement one another, and such companies have a
common business purpose. To permit their uninterrupted and continuous
operations, such companies now require and will from time to time hereafter
require funds for general business purposes. The proceeds of Advances under the
Revolving Credit and the making of the Term Loans will directly or indirectly
benefit each Borrower hereunder severally and jointly, regardless of which
Borrower requests or receives part or all of the proceeds of such advances.
5.20 Perfection and Priority. This Agreement and the other Loan Documents
-----------------------
are effective to create in favor of Lender legal, valid and enforceable Liens in
all right, title and interest of Borrowers in the Collateral, and when financing
statements have been filed in the offices in the jurisdictions shown on Schedule
"5.20" attached hereto and made a part hereof under Borrowers' names, Borrowers
will have granted to Lender, and Lender will have perfected first priority Liens
in the Collateral, superior in right to any and all other Liens, existing or
future.
5.21 Investment Company Act. No Borrower is an "investment company" or a
----------------------
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 6. BORROWERS' AFFIRMATIVE COVENANTS
<PAGE>
Each Borrower covenants that until all of Borrowers' Obligations to Lender
are indefeasibly paid and satisfied in full and the Revolving Credit has been
terminated that:
6.1 Payment of Taxes and Claims : Each Borrower shall pay, before they
---------------------------
become delinquent,
(a) all taxes, assessments and governmental charges or levies imposed
upon it or upon such Borrowers' Property, and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons entitled to the benefit of statutory
or common law Liens,
which, if unpaid, would result in the imposition of a Lien upon its Property;
provided, however, that such Borrower shall not be required to pay any such tax,
assessment, charge, levy, claim or demand if the amount, applicability or
validity thereof shall at the time be contested in good faith and by appropriate
proceedings by such Borrower, and if such Borrower shall have set aside on its
books adequate reserves in respect thereof, if so required in accordance with
GAAP, consistently applied; which deferment of payment is permissible so long as
no Lien has been entered and such Borrower's title to, and its right to use, its
Property are not materially adversely affected thereby.
6.2 Maintenance of Properties and Corporate Existence :
-------------------------------------------------
(a) Property. Each Borrower shall maintain its Property in good
--------
condition and make all necessary renewals, replacements, additions, betterments
and improvements thereto and will pay and discharge when due the cost of repairs
and maintenance to its Property and will pay all rentals when due for all real
estate leased by such Borrower.
(b) Property Insurance. Each Borrower shall maintain insurance on all
------------------
insurable tangible Property against fire, flood, casualty and such other hazards
(including, without limitation, extended coverage, workmen's compensation,
boiler and machinery, with inflation coverage by endorsement) in such amounts
(but not less than 80% of the insurable value of the assets), with such
deductibles and with such insurers as are customarily used by companies
operating in the same or similar business located in the same or similar area as
Borrowers. At or prior to Closing, Borrowers shall furnish Lender with
duplicate original policies of insurance or such other evidence of insurance as
Lender may require. In the event Borrowers fail to procure or cause to be
procured any such insurance or to timely pay or cause to be paid the premium(s)
on any such insurance, Lender may do so for Borrowers, but Borrowers shall
continue to be liable for the same. The policies of all such casualty insurance
shall contain standard Lender's Loss Payable Clauses issued in favor of Lender
<PAGE>
under which all losses thereunder shall be paid to Lender as Lender's interest
may appear. Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior written notice to
Lender and shall insure Lender notwithstanding the act or neglect of any
Borrower. Each Borrower hereby appoints Lender as such Borrower's attorney-in-
fact, exercisable at Lender's option to endorse any check which may be payable
to any Borrower in order to collect the proceeds of such insurance and any
amount or amounts collected by Lender pursuant to the provisions of this
paragraph may be applied by Lender, in its sole discretion, to any Obligations
or to repair, reconstruct or replace the loss of or damage to Collateral as
Lender in its judgment may from time to time determine. Borrowers further
covenant that all insurance premiums owing under its current casualty policy
have been paid. Borrowers also agree to notify Lender, promptly, upon any
Borrower's receipt of a notice of termination, cancellation, or non-renewal from
its insurance company of any such policy.
(c) Public and Products Liability Insurance. Each Borrower shall
---------------------------------------
maintain, and shall deliver to Lender upon Lender's request evidence of, public
liability, products liability and business interruption insurance in such
amounts as is customary for companies operating in the same or similar
businesses located in the same or similar area.
(d) Financial Records. Each Borrower shall keep current and accurate
-----------------
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
No Borrower shall change its fiscal year end date without the prior written
consent of Lender.
(e) Corporate Existence and Rights. Each Borrower shall do (or cause
------------------------------
to be done) all things necessary to preserve and keep in full force and effect
its existence, good standing, rights and franchises.
<PAGE>
(f) Compliance with Laws. Each Borrower shall be in compliance with
--------------------
any and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether foreign,
federal, state or local, (including without limitation environmental or
environmental-related laws, statutes, ordinances, rules, regulations and
notices), and shall obtain any and all licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its Property or to the
conduct of its businesses, which violation or failure to obtain may materially
adversely affect the business, Property, financial condition or prospects of
such Borrower. Borrowers shall timely satisfy all assessments, fines, costs and
penalties imposed by any governmental body against any Borrower or any Property
of any Borrower.
6.3 Business Conducted : Each Borrower shall continue in the business
------------------
presently operated by it using its best efforts to maintain its customers and
goodwill. No Borrower shall engage, directly or indirectly, in any material
respect in any line of business substantially different from the businesses
conducted by such Borrower immediately prior to the Closing Date.
6.4 Litigation : Each Borrower shall give prompt written notice to
----------
Lender of any litigation claiming in excess of $100,000.00 from any Borrower, or
which may otherwise have a material adverse effect on the business, financial
condition, Property or prospects of any Borrower.
6.5 Taxes : Each Borrower shall pay all taxes (other than taxes based
-----
upon or measured by any Lender's income or revenues or any personal property
tax), if any, in connection with the issuance of the Notes and the recording of
any lien documents. The obligations of Borrowers hereunder shall survive the
payment of Borrowers' Obligations hereunder and the termination of this
Agreement.
6.6 Bank Accounts : Opinion shall maintain its primary domestic
-------------
operating account(s) with Lender and shall establish with Lender a lockbox into
which all Borrowers shall direct all Account Debtors to remit payments on
Accounts.
6.7 Employee Benefit Plans : Each Borrower will (a) fund all its Pension
----------------------
Plan(s) in a manner that will satisfy the minimum funding standards of Section
302 of ERISA, or will promptly satisfy any accumulated funding deficiency that
arises under Section 302 of ERISA, (b) furnish Lender, promptly upon Lender's
request of the same, with copies of all reports or other statements filed with
the United States Department of Labor, the PBGC or the IRS with respect to all
<PAGE>
Pension Plan(s), or which any or any member of a Controlled Group, may receive
from the United States Department of Labor, the IRS or the PBGC, with respect to
all such Pension Plan(s), and (c) promptly advise Lender of the occurrence of
any reportable event (as defined in Section 4043 of ERISA, other than a
reportable event for which the thirty (30) day notice requirement has been
waived by the PBGC) or prohibited transaction (under Section 406 of ERISA or
Section 4975 of the Internal Revenue Code) with respect to any such Pension
Plan(s) and the action which any Borrower proposes to take with respect thereto.
Each Borrower will make all contributions when due with respect to any multi
employer pension plan in which it participates and will promptly advise Lender
(x) upon its receipt of notice of the assertion against such Borrower of a claim
for withdrawal liability, (y) upon the occurrence of any event which, to the
best of each Borrower's knowledge, would trigger the assertion of a claim for
withdrawal liability against Borrower, and (z) upon the occurrence of any event
which, to the best of each Borrower's knowledge, would place any Borrower in a
Controlled Group as a result of which any member (including such Borrower)
thereof may be subject to a claim for withdrawal liability, whether liquidated
or contingent.
6.8 Financial Covenants : Borrowers shall maintain and comply with the
-------------------
following financial covenants:
(a) Funded Debt to Consolidated Operating Cash Flow Ratio. Borrowers
-----------------------------------------------------
shall have and maintain a Funded Debt to Consolidate Operating Cash Flow Ratio,
on a consolidated basis, of not more than 3.50 to 1.0 (measured quarterly on a
rolling four (4) quarter basis).
(b) Funded Debt to Consolidated Capitalization Ratio. Borrowers shall
------------------------------------------------
have and maintain a Funded Debt to Consolidated Capitalization Ratio, on a
consolidated basis, at all times of not more than .55 to 1.0.
(c) Consolidated Net Worth. Borrowers shall have and maintain at all
----------------------
times from the Closing Date through December 31, 1997, a Consolidated Net Worth
on a consolidated basis, of not less than Fourteen Million Eighty Thousand
Dollars ($14,080,000). Effective January 1 of each year commencing January 1,
1998, the minimum Consolidated Net Worth (which shall be maintained at all
times) shall be increased by an amount equal to fifty percent (50%) of
Borrowers' Consolidated Net Income (with any loss being calculated as zero) from
the minimum Consolidated Net Worth required during the immediately preceding
year.
(d) Fixed Charge Coverage Ratio. Borrowers shall have and maintain a
---------------------------
Fixed Charge Coverage Ratio, on a consolidated
<PAGE>
basis, of not less than the following during the following periods (measured
quarterly on a rolling four (4) quarter basis):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
December 31, 1997 through 1.0 to 1.0
December 30, 1998
December 31, 1998 and 1.25 to 1.0
thereafter
</TABLE>
(e) Interest Coverage Ratio. Borrowers shall have and maintain an
-----------------------
Interest Coverage Ratio, on a consolidated basis, of not less than the following
during the following periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Three month period 1.25 to 1.0
ending March 31, 1997
Six month period 1.25 to 1.0
ending June 30, 1997
Nine month period 1.25 to 1.0
ending September 30, 1997
Twelve month period 1.50 to 1.0
ending December 31, 1997
</TABLE>
6.9 Financial and Business Information : Borrowers shall deliver to
----------------------------------
Lender the following:
(a) Financial Statements and Reports: such data, reports, statements
--------------------------------
and information, financial or otherwise, as Lender may reasonably request,
including, without limitation:
(i) within fifty (50) days after the end of each fiscal quarter
(other than the fiscal quarter coinciding with Borrowers' fiscal year end),
Borrowers' 10-Q report showing the Borrowers' balance sheet, profit and loss
statement and cash flow statements, all prepared in accordance with GAAP;
(ii) within one hundred (100) days after the end of Borrowers'
fiscal year, Borrowers' annual audited consolidated financial statements
accompanied by management letters, and form 10-K report as well as Borrowers'
internally prepared consolidating financial statements which will, when
consolidated, be consistent with the annual consolidated financial statements.
Such statements shall be audited and prepared by any Big 6 accounting firm or
any other independent certified public
<PAGE>
accountant satisfactory to Lender, all in accordance with GAAP, and be prepared
on a consolidated and consolidating basis;
(iii) as soon as practicable, and in any event within forty-five
(45) days after the end of each fiscal year, Borrowers shall prepare and deliver
to Lender a projected balance sheet, profit and loss and cash flow statements
for the upcoming twelve (12) month period; and
(iv) as soon as practicable, and in any event within five (5) days
of the end of each month, a borrowing base certificate ("Borrowing Base
Certificate") in the form of Exhibit "A" attached hereto and made a part hereof
and accompanied by each Borrower's accounts receivable aging report.
(b) Notice of Event of Default - promptly upon becoming aware of the
--------------------------
existence of any condition or event which constitutes a Default or an Event of
Default, a written notice specifying the nature and period of existence thereof
and what action Borrowers are taking (and propose to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by Borrowers,
-------------------------
notice of default, oral or written, given to Borrowers by any creditor for
Indebtedness of such Borrower in excess of Fifty Thousand Dollars ($50,000); and
(d) Securities Reports - copies of all reports required to be filed
------------------
with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d)
of The Securities Exchange Act of 1934, as amended, and any other statement,
report, notice or proxy sent by any Borrower to stockholders, or any federal or
state securities or exchange commission, generally.
6.10 Officer's Certificates : Along with the set of financial statements
----------------------
delivered to Lender at the end of each fiscal quarter and fiscal year pursuant
to Section 6.9(a) hereof, Opinion shall deliver to Lender a certificate in the
form of Exhibit "B" attached hereto and made a part hereof ("Quarterly
Compliance Certificate") from the chief financial officer of Opinion setting
forth:
(a) Event of Default - that the signer has reviewed the relevant terms
----------------
of this Agreement, and has made (or caused to be made under his supervision) a
review of the transactions and conditions of Borrowers from the beginning of the
accounting period covered by the statements being delivered therewith to the
date of the certificate, and that such review has not disclosed the existence
during such period of any Default or if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what action
Borrowers have taken or proposes to take with respect thereto.
<PAGE>
(b) Covenant Compliance - the information (including detailed
-------------------
calculations) required in order to establish that Borrowers are in compliance
with the requirements of Section 6.8 of this Agreement, as the end of the period
covered by the financial statements delivered.
6.11 Inspection : Borrowers will permit Lender's officers or other
----------
representatives to visit and inspect upon reasonable notice during business
hours any of the locations of Borrowers, to examine and audit all of Borrowers'
books of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its officers,
employees and independent certified public accountants all at Borrowers' expense
at the standard rates charged by the Lender for such activities (plus the
Lender's out-of-pocket expenses).
6.12 Tax Returns and Reports : At Lender's request from time to time,
-----------------------
each Borrower shall promptly furnish Lender with copies of its filed annual
federal and state income tax returns. Each Borrower agrees that, upon request
by Lender it will deliver to Lender copies of all reports filed with any
federal, state or local governmental authority or agency, board or commission.
6.13 Information to Participant : Lender may divulge to any participant
--------------------------
or co-lender or prospective participant or co-lender it may obtain in the Credit
Facility, or any portion thereof, all information, and furnish to such Person
copies of any reports, financial statements, certificates, and documents
obtained under any provision of this Agreement, or related agreements and
documents; provided that any material non-public confidential or proprietary
information shall be identified as such by Borrowers upon its delivery to Lender
and may not be disclosed by Lender to any such participant except with
appropriate confidentiality protection as agreed by Borrower and Lender.
6.14 Material Adverse Developments : Each Borrower agrees that
-----------------------------
immediately upon becoming aware of any development or other information outside
the ordinary course of business and excluding matters of a general economic,
financial or political nature which would reasonably be expected to materially
and adversely affect its businesses, financial condition, Property, prospects or
its ability to perform under this Agreement, it shall give to Lender telephonic
or telegraphic notice specifying the nature of such development or information
and such anticipated effect. In addition, such verbal communication shall be
confirmed by written notice thereof to Lender on the same day such verbal
communication is made on the next Business Day thereafter.
<PAGE>
6.15 Places of Business : Each Borrower shall give thirty (30) days
------------------
prior written notice to Lender of any changes in the location of any of its
places of business.
6.16 Changes in Management : Each Borrower shall notify Lender in
---------------------
writing within fifteen (15) Business Days of any change in the executive
officers and directors of such Borrower and specify the change.
6.17 Governmental Contracts: Each Borrower will immediately notify Lender
----------------------
in writing when it enters into a contract with the government of the United
States or any department, instrumentality, subdivision or agency thereof
("Government Contract") which individually, or when aggregated with all other
such Government Contracts then having a Contract Value of less than $500,000,
has a Contract Value equal to or greater than $500,000 and will execute any
instruments and take any steps required by Lender so that all monies due and to
become due under such Government Contract shall be assigned to Lender and notice
thereof given to and acknowledged by the appropriate government agency or
authority under the Assignment of Claims Act. Borrower will immediately notify
Lender in writing of any audits of such contracts by the United States of
America or any department, agency or instrumentality thereof as well as any
assertions by the United States of America or any department, agency or
instrumentality thereof any defaults under any such contract.
SECTION 7. BORROWERS' NEGATIVE COVENANTS:
Each Borrower covenants that until all of Borrowers' Obligations to Lender
are indefeasibly paid and satisfied in full and the Revolving Credit has been
terminated, that:
7.1 Merger, Consolidation, Dissolution or Liquidation :
-------------------------------------------------
(a) No Borrower shall engage, or permit any Subsidiary to engage, in
any Asset Sale other than equipment that is replaced by other equipment of
comparable or superior quality within one hundred twenty (120) days before or
after such disposition.
(b) Except in connection with a Permitted Acquisition (in which case a
Borrower or a Subsidiary of a Borrower is the surviving Person), no Borrower
shall merge or consolidate, or permit any Subsidiary to merge or consolidate,
with any other Person except among themselves or commence a dissolution or
liquidation.
<PAGE>
7.2 Acquisitions : Except for Permitted Acquisitions, no Borrower shall
------------
acquire, or permit any Subsidiary to acquire, all or a material portion of the
Capital Stock, securities or assets of any Person in any transaction or in any
series of related transactions or enter into any sale and leaseback transaction.
7.3 Liens and Encumbrances : No Borrower shall, or permit any Subsidiary
----------------------
to: (i) execute a negative pledge agreement with any Person covering any of its
Property, or (ii) cause or permit or agree or consent to cause or permit in the
future (upon the happening of a contingency or otherwise), its Property whether
now owned or hereafter acquired, to be subject to a Lien or be subject to any
claim except for Permitted Liens. As used herein, "Permitted Liens" means:
(a) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, and other like persons, provided the payment thereof is
not at the time required by Section 5.1;
(b) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance, social
security and other like laws;
(c) Existing Liens shown on Schedule "5.4";
(d) Liens constituting purchase money security interests hereafter
created by a Borrower to Persons (not exceeding $250,000 in the aggregate in any
fiscal year) providing financing for fixed assets (including Capitalized Lease
Obligations) so long as the Indebtedness secured by a Lien permitted by this
subparagraph (d) does not exceed 100% of the lower of cost or market of the
fixed asset acquired with such financing and the Lien so created attaches only
to the fixed asset so acquired; and
(e) Liens existing on any fixed asset acquired by any Borrower
pursuant to a Permitted Acquisition provided that such Lien attaches only to
such fixed asset.
<PAGE>
7.4 Transactions With Affiliates or Subsidiaries :
--------------------------------------------
(a) No Borrower shall enter into, and no Borrower shall permit any
Subsidiary to enter into, any transaction with any other Subsidiary or other
Affiliate including, without limitation, the purchase, sale, or exchange of
Property, or the loaning or giving of funds to any Affiliate or any Subsidiary
unless the transaction is in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's or Subsidiary's business and upon
terms substantially the same and no less favorable to such Borrower or
Subsidiary as it would obtain in a comparable arm's-length transactions with any
Person not an Affiliate or a Subsidiary.
(b) Except for Permitted Acquisitions, no Borrower shall create or
acquire or permit any Subsidiary to create or acquire, any other Subsidiary.
7.5 Guarantees : Excepting the endorsement in the ordinary course of
----------
business of negotiable instruments for deposit or collection, no Borrower shall
become or be liable, or permit any Subsidiary to become or be liable, directly
or indirectly, primary or secondary, matured or contingent, in any manner,
whether as guarantor, surety, accommodation maker, or otherwise, for the
existing or future indebtedness of any kind of any Person.
7.6 Loans and Investments : Except in connection with a Permitted
---------------------
Acquisition, and except as shown on Schedule 5.10, no Borrower shall make or
have outstanding, or permit any Subsidiary to make or have outstanding, loans,
advances, extensions of credit or capital contributions to, investments in, any
Person and investments in commercial paper maturing in one (1) year or less from
the date of issuance rated either A-1 by Standard & Poor's Corporation ("S&P"),
P-1 by Moody's Investors Service, Inc. ("Moody's") or other similar nationally
recognized credit rating agency of similar standing.
7.7 Use of Lender's Name : No Borrower shall use, or permit any
--------------------
Subsidiary to use, Lender's name in connection with any of its business
operations. Borrowers may disclose to third parties that Borrowers have a
borrowing and deposit relationship with Lender. Nothing herein contained is
intended to permit or authorize any Borrower to make any contract on behalf of
Lender.
<PAGE>
7.8 Miscellaneous Covenants :
-----------------------
(a) No Borrower shall become or be, or permit any Subsidiary to become
or be, a party to any contract or agreement which at the time of becoming a
party to such contract or agreement materially impairs such Borrower's or
Subsidiary's ability to perform under this Agreement, or under any other
instrument, agreement or document to which such Borrower or Subsidiary is a
party or by which it is or may be bound.
(b) No Borrower shall carry or purchase any "margin stock" within the
meaning of Regulations U, G, T or X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II.
7.9 Distributions, Redemption and Other Indebtedness : No Borrower
------------------------------------------------
shall, or permit any Subsidiary to: (a) declare or pay or make any forms of
Distribution to its shareholders, their successors or assigns other than
dividends to Opinion by a Subsidiary of Opinion; other than stock redemptions in
the aggregate in any fiscal year not to exceed Three Hundred Fifty Thousand
Dollars ($350,000.00); or (b) hereafter borrow money other than from Lender or
otherwise incur Indebtedness except (i) Indebtedness giving rise to Permitted
Liens under Sections 7.3(d) and (e) or (ii) unsecured Indebtedness assumed by a
Borrower pursuant to, or Seller Subordinated Debt incurred in connection with, a
Permitted Acquisition.
SECTION 8. DEFAULT
8.1 Events of Default : Each of the following events shall constitute an
-----------------
event of default ("Event of Default"):
(a) Payments - if any Borrower fails to make any payment of principal
--------
or interest under the Revolving Credit or any Term Loan; or
(b) Other Charges - if any Borrower fails to pay any other charges,
-------------
fees, Expenses or other monetary obligations owing to Lender arising out of or
incurred in connection with this Agreement within fifteen (15) days of the due
date; or
(c) Particular Covenant Defaults - if any Borrower fails to perform,
----------------------------
comply with or observe any covenant or undertaking contained in this Agreement
and (other than with respect to the covenants contained in Section 6.8 and
Section 7 for which no cure period shall exist) such failure continues for more
than thirty (30) days after Lender has given Borrowers notice thereof; or
<PAGE>
(d) Financial Information - if any statement, report, financial
---------------------
statement, or certificate made or delivered by any Borrower or any of its
officers, employees or agents, to Lender is not true and correct, in all
material respects, when made; or
(e) Uninsured Loss - if there shall occur any uninsured damage to or
--------------
loss, theft, or destruction in excess of One Hundred Thousand Dollars
($100,000.00) with respect to any portion of any Property of Borrower; or
(f) Warranties or Representations - if any warranty, representation or
-----------------------------
other statement by or on behalf of any Borrower contained in or pursuant to this
Agreement, or in any document, agreement or instrument furnished in compliance
with, relating to, or in reference to this Agreement, is false, erroneous, or
misleading in any material respect when made; or
(g) Agreements with Others - if any Borrower shall default beyond any
----------------------
grace period under any agreement with any creditor for borrowed money of or
holding long term Indebtedness from any Borrower, if (i) such default consists
of the failure to pay any principal, premium or interest with respect thereto or
(ii) such default causes such Borrower's obligations which are the subject
thereof to become due prior to its maturity date or prior to its regularly
scheduled date of payment; or
(h) Other Agreements with Lender - if any Borrower breaches or
----------------------------
violates the terms of, or if a default or an event of default, occurs under, any
other existing or future agreement (related or unrelated) between any Borrower
and Lender (including the other Loan Documents); or
(i) Judgments - if any final judgment for the payment of money in
---------
excess of Fifty Thousand Dollars ($50,000.00) shall be rendered by a court of
record against such Borrower which is not fully and unconditionally covered by
insurance; or
(j) Assignment for Benefit of Creditors, etc. - if any Borrower makes
-----------------------------------------
or proposes an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by such
Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of any
-----------------------------
action for the dissolution or liquidation of any Borrower, or the commencement
of any proceeding to avoid any transaction entered into by any Borrower, or the
commencement of any case or proceeding for reorganization or liquidation of any
Borrower's debts under the Bankruptcy Code or any other state or federal law,
now or hereafter enacted for the relief of debtors, whether instituted by or
against Borrower; provided, however,
-------- -------
<PAGE>
that such Borrower shall have thirty (30)days to obtain the dismissal or
discharge of involuntary proceedings filed against it, it being understood that
during such thirty (30) day period, Lender shall not be obligated to make
Advances under the Revolving Credit and Lender may seek adequate protection in
any bankruptcy proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator,
--------
custodian, trustee or similar official or fiduciary for any Borrower or for any
of any Borrower's Property; or
(m) Execution Process, etc. - the issuance of any execution or
-----------------------
distraint process against any Property of any Borrower; or
(n) Termination of Business - if any Borrower ceases any material
-----------------------
portion of its business operations as presently conducted; or
(o) Pension Benefits, etc. - if any Borrower fails to comply with
----------------------
ERISA, so that grounds exist to permit the appointment of a trustee under ERISA
to administer any Borrower's employee plans or to allow the PBGC to institute
proceedings to appoint a trustee to administer such plan(s), or to permit the
entry of a Lien to secure any deficiency or claim; or
(p) Investigations - any evidence received by Lender that reasonably
--------------
leads it to believe any Borrower may have directly or indirectly been engaged in
any type of activity which, would be reasonably likely to result in the
forfeiture of any material property of any Borrower to any governmental entity,
federal, state or local.
8.2 Cure - Nothing contained in this Agreement or the Loan Documents
----
shall be deemed to compel Lender to accept a cure of any Event of Default
hereunder.
8.3 Rights and Remedies on Default :
------------------------------
(a) Cease Advances. In addition to all other rights, options and
--------------
remedies granted or available to Lender under this Agreement or the Loan
Documents, or otherwise available at law or in equity, upon or at any time after
the occurrence and during the continuance of a Default or an Event of Default,
Lender may, in its discretion, withhold or cease making Advances under the
Revolving Credit.
(b) Acceleration. In addition to all other rights, options and
------------
remedies granted or available to Lender under this Agreement or the Loan
Documents, or otherwise available at law or in equity, Lender may, in its
discretion, upon or at any time
<PAGE>
after the occurrence and during the continuance of an Event of Default terminate
the Revolving Credit and accelerate the Obligations all without demand, notice,
presentment or protest or further action of any kind (it also being understood
that the occurrence of any of the events or conditions set forth in
subparagraphs (j), (k) or (l) shall automatically cause an acceleration of the
Obligations).
(c) Letters of Credit. In addition to all other rights, options and
-----------------
remedies granted or available to Lender under this Agreement or the Loan
Documents, or otherwise available at law or in equity, Borrowers shall (with or
without demand by Lender) upon or at any time after the occurrence and during
the continuance of an Event of Default, deliver to Lender cash collateral in the
amount of all outstanding, or drawn but unreimbursed, Letters of Credit.
(d) Remedies at Law or Equity. In addition to all other rights,
-------------------------
options and remedies granted or available to Lender under this Agreement or the
Loan Documents, Lender may, upon or at any time after the acceleration of the
Obligations following the occurrence of an Event of Default (other than the
rights with respect to clause (iv) below which Lender may exercise after the
occurrence and during the continuance of a Default regardless of whether an
acceleration has occurred) exercise all rights under any applicable law or in
equity, and under all Loan Documents permitted to be exercised after the
occurrence of an Event of Default including the following rights and remedies
(which list is given by way of example and is not intended to be exhaustive):
(i) The right to take possession of, send notices regarding and
collect directly the Collateral, with or without judicial process (including,
without limitation, the right to notify the United States or foreign postal
authorities to redirect mail addressed to any Borrower to an address designated
by Lender); or
(ii) The right to by its own means or with judicial assistance,
enter any Borrower's premises and take possession of the Collateral, or render
it unusable, or dispose of the Collateral on such premises in compliance with
subsection (d) below, without any liability for rent, storage, utilities or
other sums, and such Borrower shall not resist or interfere with such action; or
(iii) The right to require any Borrower at such Borrower's expense
to assemble all or any part of the Collateral (other than real estate or
fixtures) and make it available to Lender at any place designated by Lender; or
(iv) The right to reduce or modify the Maximum Revolving Credit
Amount, Borrowing Base or any portion thereof or
<PAGE>
the advance rates or to modify the terms and conditions upon which Lender may be
willing to consider making Advances under the Revolving Credit or to take
additional reserves in the Borrowing Base for any reason.
(c) Each Borrower hereby agrees that a notice received by it at least
seven (7) days before the time of any intended public sale or of the time after
which any private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable inventory or Collateral which
threatens to speedily decline in value or which is sold on a recognized market
may be sold immediately by Lender without prior notice to any Borrower. Each
Borrower covenants and agrees not to interfere with or impose any obstacle to
Lender's exercise of its rights and remedies with respect to the Collateral,
after the occurrence of an Event of Default hereunder.
8.4 Nature of Remedies : All rights and remedies granted Lender
------------------
hereunder and under the Loan Documents, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and Lender may proceed with any number of remedies at the same time until all
Obligations are satisfied in full. The exercise of any one right or remedy
shall not be deemed a waiver or release of any other right or remedy, and Lender
upon or at any time after the occurrence of an Event of Default, may proceed
against any Borrower, at any time, under any agreement, with any available
remedy and in any order.
8.5 Set-Off : Upon the occurrence of an Event of Default or if any bank
-------
account of any Borrower with Lender is attached or otherwise liened or levied
upon by any third party, Lender shall have and be deemed to have, without notice
to any Borrower the immediate right of set-off and may apply the funds or amount
thus set-off against Borrowers' Obligations hereunder.
SECTION 9. MISCELLANEOUS
9.1 GOVERNING LAW : THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
-------------
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE PROVISIONS OF THIS AGREEMENT AND
ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED
SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
<PAGE>
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.
9.2 Integrated Agreement : The Notes, the other Loan Documents, all
--------------------
related agreements, and this Agreement shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lender's
rights and remedies. If, after applying the foregoing, an inconsistency still
exists, the provisions of this Agreement shall constitute an amendment thereto
and shall control.
9.3 Waiver : No omission or delay by Lender in exercising any right or
------
power under this Agreement or any related agreements and documents will impair
such right or power or be construed to be a waiver of any default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to Borrowers no waiver will be valid unless
in writing and signed by Lender and then only to the extent specified.
9.4 Indemnification : Each Borrower releases and shall indemnify, defend
---------------
and hold harmless Lender, and its officers, employees and agents, of and from
any penalties, claims, demands, liabilities, obligations, judgments, injuries,
losses, damages and costs and expenses (including, without limitation, legal
fees) resulting from (i) acts or conduct of any Borrower under, pursuant or
related to this Agreement and the other Loan Documents, (ii) any Borrower's
breach or violation of any representation, warranty, covenant or undertaking
contained in this Agreement or the other Loan Documents, (iii) any Borrower's
failure to comply with any or all laws, statutes, ordinances, governmental
rules, regulations or standards, whether foreign, federal, state or local, or
court or administrative orders or decrees, (including, without limitation
environmental laws, etc.) and all costs, expenses, fines, penalties or other
damages resulting therefrom or (iv) any claim by any creditor of any Borrower or
any other Person against Lender arising out of any transaction contemplated
hereunder or under the Loan Documents unless resulting from acts or conduct of
Lender constituting gross negligence or wilful misconduct.
9.5 Time : Except as otherwise set forth herein, whenever any Borrower
----
shall be required to make any payment, or perform any act, on a day which is not
a Business Day, such payment may be made, or such act may be performed, on the
next succeeding Business Day. Time is of the essence in each Borrower's
performance under all provisions of this Agreement and all related agreements
and documents.
9.6 Expenses of Lender : At Closing and from time to time thereafter,
------------------
Borrower shall pay all
<PAGE>
reasonable expenses on demand (including, without limitation, search costs,
audit fees and the fees and expenses of legal counsel for Lender) relating to
this Agreement, and all related agreements and documents, including, without
limitation, expenses incurred in the analysis, negotiation, preparation,
closing, administration and enforcement of this Agreement and the other Loan
Documents, the enforcement, protection and defense of the rights of Lender in
and to the Loans and Collateral or otherwise hereunder, and any expenses
relating to extensions, amendments, waivers or consents pursuant to the
provisions hereof (whether or not consummated), or any related agreements and
documents or relating to agreements with other creditors, or termination of this
Agreement (collectively, the "Expenses").
9.7 Brokerage : This transaction was brought about and entered into by
---------
Lender and Borrowers acting as principals and without any brokers, agents or
finders being the effective procuring cause hereof. Each Borrower represent
that it has not committed Lender to the payment of any brokerage fee, commission
or charge in connection with this transaction. If any such claim is made on
Lender by any broker, finder or agent or other person, each Borrower does hereby
indemnify, defend and save harmless Lender against such claim and further will
defend, with counsel satisfactory to Lender, any action or actions to recover on
such claim, at each Borrower's own cost and expense, including Lender's
reasonable counsel fees. Each Borrower further agrees that until any such claim
or demand is adjudicated in Lender's favor, the amount demanded shall be deemed
a liability of Borrowers under this Agreement.
9.8 Notices :
-------
(a) Method. Any notices or consents required or permitted by this
------
Agreement shall be in writing and shall be deemed given if delivered in person
or if sent by telecopy or by nationally recognized overnight courier, as
follows, unless such address is changed by written notice hereunder:
If to Lender to: CoreStates Bank, N.A.
2240 Butler Pike
Plymouth Meeting, PA 19462
Attn: Mr. George F. Southworth, Jr.
Vice President
Telecopy No. (610) 834-2069
<PAGE>
With copies to: Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19102
Attn: Steven M. Miller, Esquire
Telecopy No. (215) 569-5555
If to Borrowers to: Opinion Research Corporation
23 Orchard Road
Skillman, NJ 08558
Attn: Chief Financial Officer
Telecopy No. (908) 281-5105
With copies to: Wolf, Block, Schorr & Solis-Cohen
The Packard Building - 12th Floor
15th & Chestnut Streets
Philadelphia, PA 19103
Attn: David Gitlin, Esquire
Telecopy No. (215) 977-2334
(b) Receipt. Any notice sent by Lender or Borrowers by any of the
-------
above methods shall be deemed to be given when so received.
(c) Reliances on Writing. Lender shall be fully entitled to rely upon
--------------------
any facsimile transmission or other writing purported to be sent by any
Authorized Officer, or any Person so designated to Lender in writing by an
Authorized Officer (whether requesting an Advance or otherwise) as being genuine
and authorized.
9.9 Headings : The headings of any paragraph or Section of this
--------
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
9.10 Survival : All warranties, representations, and covenants made by
--------
Borrowers herein, or in any agreement referred to herein or on any certificate,
document or other instrument delivered by it or on its behalf under this
Agreement, shall be considered to have been relied upon by Lender, and shall
survive the delivery to Lender of the Notes regardless of any investigation made
by Lender or on its behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of Lender shall constitute
warranties and representations by Borrowers hereunder. Except as otherwise
expressly provided herein, all covenants made by Borrower hereunder or under any
other agreement or instrument shall be deemed continuing until all Obligations
are satisfied in full provided that the indemnification obligations of Borrowers
under Section 9.4 shall survive the termination hereof.
<PAGE>
9.11 Successors and Assigns : This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties.
Lender may participate or assign any portions of or all of its rights or
obligations hereunder without notice to or consent of Borrowers. Borrowers may
not transfer, assign or delegate any of its duties or obligations hereunder.
9.12 Duplicate Originals : Two or more duplicate originals of this
-------------------
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Agreement may be executed in counterpart, all of which counterparts taken
together shall constitute one completed fully executed document.
9.13 Modification : No modification hereof or any agreement referred to
------------
herein shall be binding or enforceable unless in writing and signed by Borrowers
and Lender.
9.14 Signatories : Each individual signatory hereto represents and
-----------
warrants that he/she is duly authorized to execute this Agreement on behalf of
the principal and that he/she executes the Agreement in such capacity and not as
a party.
9.15 Third Parties : No rights are intended to be created hereunder, or
-------------
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of Borrowers. Nothing contained in
this Agreement shall be construed as a delegation to Lender of Borrowers' duty
of performance, including, without limitation, Borrowers' duties under any
account or contract with any other Person.
9.16 Discharge of Taxes, Borrower's Obligations, Etc. : Lender, in its
------------------------------------------------
sole discretion, shall have the right at any time, and from time to time, with
prior notice to any Borrower if any Borrower fails to do so five (5) Business
Days after requested in writing to do so by Lender, to: (a) pay for the
performance of any of Borrowers' obligations hereunder, and (b) discharge taxes
or Liens, at any time levied or placed on any of Borrowers' Property in
violation of this Agreement unless such Borrower is in good faith with due
diligence by appropriate proceedings contesting such taxes or Liens and
maintaining proper reserves therefor in accordance with GAAP, consistently
applied. Expenses and advances shall be added to the Revolving Credit, bear
interest at the same rate applied to the Revolving Credit, until reimbursed to
Lender. Such payments and advances made by Lender
<PAGE>
shall not be construed as a waiver by Lender of an Event of Default under this
Agreement.
9.17 Withholding and Other Tax Liabilities : Lender shall have the right
-------------------------------------
to refuse to make any Advances from time to time unless Borrowers shall, at
Lender's request, have given to Lender evidence, reasonably satisfactory to
Lender, that Borrowers have properly deposited or paid, as required by law, all
withholding taxes and all federal, state, city, county or other taxes due up to
and including the date of the requested Advance. Copies of deposit slips
showing payment shall likewise constitute satisfactory evidence for such
purpose. In the event that any Lien, assessment or tax liability against
Borrowers shall arise in favor of any taxing authority, whether or not notice
thereof shall be filed or recorded as may be required by law, Lender shall have
the right (but shall not be obligated, nor shall Lender hereby assume the duty)
to pay any such Lien, assessment or tax liability by virtue of which such charge
shall have arisen; provided, however, that Lender shall not pay any such tax,
assessment or Lien if the amount, applicability or validity thereof is being
contested in good faith and by appropriate proceedings by Borrowers. In order
to pay any such Lien, assessment or tax liability, Lender shall not be obliged
to wait until said Lien, assessment or tax liability is filed before taking such
action as hereinabove set forth. Any sum or sums which Lender shall have paid
for the discharge of any such Lien shall be added to the Revolving Credit and
shall be repaid by Borrowers to Lender with interest thereon, upon demand, and
Lender shall be subrogated to all rights of such taxing authority against
Borrowers.
9.18 CONSENT TO JURISDICTION : Borrowers and Lender hereby irrevocably
-----------------------
consent to the jurisdiction of the Courts of Common Pleas of the Commonwealth of
Pennsylvania or the United States District Court for the Eastern District of
Pennsylvania in any and all actions and proceedings whether arising hereunder or
under any other agreement or undertaking and irrevocably agree to service of
process by certified mail, return receipt requested to the address of the
appropriate party set forth herein.
9.19 Waiver of Jury Trial : EACH BORROWER AND LENDER HEREBY WAIVE ANY
--------------------
AND ALL RIGHTS ANY MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION
COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO OR UNDER THE LOAN DOCUMENTS.
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
ORC TELESCIENCE CORP. OPINION RESEARCH CORPORATION
By: ____________________ By: ____________________________
Title: Title:
ORC, INC.
By: ____________________
Title:
CORESTATES BANK, N.A.
By:_____________________________
Title:
<PAGE>
FIRST AMENDMENT AND JOINDER
TO LOAN AND SECURITY AGREEMENT
------------------------------
This First Amendment and Joinder to Loan and Security Agreement
("Amendment") is made this 6th day of January, 1998, by and among OPINION
RESEARCH CORPORATION ("Opinion"), a Delaware corporation, ORC, INC. ("ORC"), a
Delaware corporation, ORC TELESCIENCE CORP. ("TeleScience"), (collectively,
"Existing Borrowers" and singly each is a "Existing Borrower"), and ORC PROTEL,
INC. a Delaware corporation ("ProTel") and CORESTATES BANK, N.A., a national
banking association ("Lender").
BACKGROUND
----------
A. Existing Borrowers and Lender are parties to a certain Amended and
Restated Loan and Security Agreement dated May 8, 1997, ("Loan Agreement"),
pursuant to which certain financing arrangements were established with Lender
for the benefit of Existing Borrowers. The Loan Agreement and all instruments,
documents and agreements executed in connection therewith, or related thereto
are referred to herein collectively as the "Existing Loan Documents". All
capitalized terms not otherwise defined herein shall have the respective
meanings ascribed thereto in the Loan Agreement.
B. Opinion is acquiring substantially all of the assets of ProTel
Marketing, Inc. (the "Acquisition"), pursuant to the terms of a certain Asset
Purchase Agreement dated December 11, 1997 ("Purchase Agreement") among Opinion,
ProTel, ProTel Marketing, Inc., Janice Katz, Ruth Wolf, David Katz and Allen
Wolf. Consummation of the Acquisition is subject to Lender's prior consent.
C. Existing Borrowers and ProTel have requested that Lender consent to the
Acquisition and modify, in certain respects, the Loan Agreement and Lender has
agreed to consent to the Acquisition and make such modifications, all as more
fully set forth herein and subject to the terms and conditions hereof.
NOW, THEREFORE, with the foregoing Background incorporated by reference
herein and made part hereof, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Joinder of ProTel.
-----------------
a. In recognition of the benefits and privileges under the Loan
Agreement and Existing Loan Documents, upon the Effective Date, ProTel joins in,
assumes, adopts and becomes a Borrower under the Loan Agreement and Existing
Loan Documents. All
<PAGE>
references to Borrower or Borrowers contained in the Loan Agreement and Existing
Loan Documents are hereby deemed, for all purposes to refer to and include
ProTel as a Borrower and ProTel hereby agrees to comply with all of the terms
and conditions of the Loan Agreement and Existing Loan Documents as if it were
an original signatory thereto.
b. Without limiting the generality of the provisions of subparagraph
1(a) above, ProTel is thereby liable, on a joint and several basis, along with
all other Existing Borrowers for all existing and future Loans and all
Obligations incurred at any time by any one or more Existing Borrowers under the
Existing Loan Documents, as amended hereby or as may be hereafter amended,
modified, supplemented or replaced.
2. Amendments to Loan Agreement.
----------------------------
a. Upon the Effective Date, the following definitions are hereby
added to the Loan Agreement:
(1) Acquisition. As defined in the Background to this Amendment.
-----------
(2) Adjusted LIBOR Rate. For any LIBOR Interest Period, as
-------------------
applied to a LIBOR Based Rate Loan, the rate per annum (rounded upwards, if
necessary to the next 1/16 of 1%) determined pursuant to the following formula:
Adjusted LIBOR Rate = LIBOR Rate
------------------------------
(1 - Reverse Percentage)
For purposes hereof, "LIBOR Rate" shall mean the arithmetic average of the rate
of interest per annum (rounded upwards, if necessary to the next 1/16 of 1%) at
which Lender is offered deposits of United States Dollars in the London
interbank market on or about eleven o'clock (11:00) a.m. London Time two (2)
Business Days prior to the commencement of such LIBOR Interest Period on amounts
substantially equal to the LIBOR Based Rate Loan as to which Borrowers may elect
the Adjusted LIBOR Rate to be applicable with a maturity of comparable duration
to the LIBOR Interest Period selected by Borrowers for such LIBOR Based Rate
Loan.
(3) Effective Date. The date on which all of the conditions precedent
--------------
to the effectiveness of this Amendment have been fulfilled (as determined by
Lender) or waived by Lender.
(4) L/C Commitment. One Million Dollars ($1,000,000).
--------------
(5) LIBOR Based Rate Loans. Collectively, all Revolving Credit
----------------------
LIBOR Loans and Term Loan D LIBOR Loans.
2
<PAGE>
(6) LIBOR Interest Period. A period of one, two, three or six
---------------------
months.
(7) London Business Day. Any day on which banks in London,
-------------------
England are open for business.
(8) Purchase Agreement. As defined in the Background to this
------------------
Amendment.
(9) Regulation D. Regulation D of the Board of Governors of the
------------
Federal Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
(10) Reserve Percentage. For Lender on any day, that percentage
------------------
(expressed as a decimal) which is in effect on such day, prescribed by the Board
of Governors of the Federal Reserve System (or any successor or any other
banking authority to which Lender is subject, including any board or
governmental or administrative agency of the United States or any other
jurisdiction to which Lender is subject) for determining the applicable reserve
requirements (including without limitation any basic, supplemental, marginal or
emergency reserves) for (i) deposits of United States Dollars or (ii)
Eurocurrency liabilities as defined in Regulation D in each case used to fund a
LIBOR Based Rate Loan.
(11) Revolving Credit Base Rate. The Base Rate plus twenty-five
-------------------------- ----
(25) basis points.
(12) Revolving Credit LIBOR Loan. That portion of the Revolving
---------------------------
Credit subject to interest calculated at the Revolving Credit LIBOR Rate.
(13) Revolving Credit LIBOR Rate. The sum of the Adjusted LIBOR
---------------------------
Rate plus two hundred twenty-five (225) basis points.
----
(14) Term Loan D Base Rate. The Base Rate plus seventy-five (75)
--------------------- ----
basis points.
(15) Term Loan D LIBOR Loans. That portion of Term Loan D
-----------------------
subject to interest calculated at the Term D LIBOR Rate.
(16) Term Loan D LIBOR Rate. The sum of the Adjusted LIBOR Rate plus
---------------------- ----
two hundred seventy-five (275) basis points.
(17) Term Loan D. Section 2.16(a).
-----------
(18) Term Loan D Note. Section 2.16(b).
----------------
3
<PAGE>
b. Upon the Effective Date, the following definitions in the Loan
Agreement are hereby amended and restated in their entirety and shall read as
follows:
(1) Borrowing Base. The sum of seventy percent (70%) of Eligible
--------------
Billed Accounts plus forty percent (40%) of Eligible Unbilled Accounts plus
---- ----
during the period from the Effective Date through June 30, 1998, $2,000,000 and
during the period from July 1, 1998 through September 30, 1998, $1,000,000.
(2) Facility Limit. The sum of Twenty-One Million Dollars
--------------
($21,000,000).
(3) Revolving Credit Maturity Date. January 1, 2002.
------------------------------
(4) Term Loan Notes. Collectively, Term Loan A Note, Term Loan B
---------------
Note, Term Loan C Note and Term Loan D Note.
(5) Term Loans. Collectively, Term Loan A, Term Loan B, Term
----------
Loan C and Term Loan D.
c. Upon the Effective Date, Section 2.7 of the Loan Agreement is
hereby amended and restated in its entirety and shall read as follows:
2.7 Revolving Credit Interest
-------------------------
(a) Revolving Credit Base Rate - Subject to Section 2.7(b), the
-------------------------
unpaid principal balance of cash Advances under the Revolving Credit shall bear
interest, subject to the terms hereof, at the per annum rate equal to the
Revolving Credit Base Rate. Interest on Base Rate Loans under the Revolving
Credit shall be payable monthly, in arrears, on the first day of each calendar
month, beginning on the first day of the first full calendar month after the
Closing Date and on the Revolving Credit Maturity Date.
(b) LIBOR Rate Option:
-----------------
(i) So long as no Default or Event of Default has occurred
and is continuing, Borrowers may choose to have all or a portion of the
Revolving Credit accrue interest at the Revolving Credit LIBOR Rate by giving
Lender at least two (2) Business Days' prior written notice. Such notice shall
specify the LIBOR Interest Period and the portion of outstanding Advances under
the Revolving Credit (but in no event less than $500,000), to bear interest at
the Revolving Credit LIBOR Rate.
(ii) Borrowers shall select a LIBOR Interest Period during
which the Revolving Credit LIBOR Rate is applicable; provided, however, that if
the LIBOR Interest Period would otherwise end on a day which shall not be a
London Business
4
<PAGE>
Day, such LIBOR Interest Period shall be extended to the next preceding or
succeeding London Business Day as is Lender's custom in the market in which such
LIBOR Based Rate Loan relates. Interest shall accrue from and including the
first day of each LIBOR Interest Period to, but excluding the day on which any
LIBOR Interest Period expires. For any LIBOR Interest Period which begins on the
last London Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Interest Period), the LIBOR Interest Period shall end on the last London
Business Day of a calendar month. All accrued and unpaid interest on a LIBOR
Based Rate Loan must be repaid in full on the last day of the applicable LIBOR
Interest Period. Interest shall also be due and payable for a six month LIBOR
Interest Period on the day that would have been the last day of a three month
LIBOR Interest Period. No LIBOR Interest Period with respect to the Revolving
Credit may end after the Revolving Credit Maturity Date. Subject to all of the
terms and conditions applicable to a request for a LIBOR Based Rate Loan,
Borrowers may convert an existing LIBOR Based Rate Loan as of the last day of
the LIBOR Interest Period to a new LIBOR Based Rate Loan provided all interest
accrued under the expiring LIBOR Interest Period has been paid. If Borrowers
fail to notify Lender of the LIBOR Interest Period for such a subsequent LIBOR
Based Rate Loan at least two (2) Business Days prior to the last day of the then
current LIBOR Interest Period of such an outstanding LIBOR Based Rate Loan, then
such outstanding LIBOR Based Rate Loan shall become a Base Rate Loan at the end
of the current LIBOR Interest Period and shall accrue interest at the Revolving
Credit Base Rate in accordance with Section 2.7(a) above.
(iii) The Adjusted LIBOR Rate may be automatically adjusted
by Lender on a prospective basis to take into account the additional or
increased cost of maintaining any necessary reserves for Eurodollar deposits or
increased costs due to changes in applicable law or regulation or the
interpretation thereof occurring subsequent to the commencement of the then
applicable LIBOR Interest Period, including but not limited to changes in tax
laws (except changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), excluding the Reserve Percentage
which has resulted in a payment pursuant to Section 2.17 below, that increase
the cost to Lender of funding the LIBOR Based Rate Loan. Lender shall promptly
give Borrowers notice of such a determination and adjustment, which
determination shall be, except for error, and absent written notice from
Borrowers to Lender within ten (10) days from submission, final, conclusive and
binding for all purposes; provided that Borrowers shall not be liable for any
amount payable with respect to any period more than 90 days before the date of
such notice.
(iv) If Borrowers have requested the rate based on the
Adjusted LIBOR Rate in accordance with Section 2.7(b), and Lender shall have
reasonably determined that Eurodollar deposits equal to the amount of the
principal of the requested LIBOR Based Rate Loan and for the LIBOR Interest
Period specified are unavailable, or
5
<PAGE>
that the rate based on the Adjusted LIBOR Rate will not adequately and fairly
reflect the cost of the Adjusted LIBOR Rate applicable to the specified LIBOR
Interest Period, of making or maintaining the principal amount of the requested
LIBOR Based Rate Loan specified by Borrowers during the LIBOR Interest Period
specified, or that by reason of circumstances affecting Eurodollar markets,
adequate and reasonable means do not exist for ascertaining the rate based on
the Adjusted LIBOR Rate applicable to the specified LIBOR Interest Period,
Lender shall promptly give notice of such determination to Borrowers that the
rate based on the Adjusted LIBOR Rate is not available. A determination by
Lender hereunder shall be prima facie evidence of the correctness of the fact
and amount of such additional costs or unavailability. Upon such a
determination, (A) the obligation to establish, convert to, or maintain a LIBOR
Based Rate Loan at the rate based on the Adjusted LIBOR Rate shall be suspended
until Lender shall have notified Borrowers that such conditions shall have
ceased to exist (which notification shall be given promptly by Lender after such
cessation), and (B) the applicable Revolving Credit portion subject to the
requested conversion shall continue to accrue interest at the Revolving Credit
Base Rate in accordance with Section 2.7(a) above.
(v) If, as a result of any changes in applicable law or
regulation or the interpretation thereof, it becomes unlawful for Lender to
maintain Eurodollar liabilities sufficient to fund any LIBOR Based Rate Loan
subject to the rate based on the Adjusted LIBOR Rate, then Lender shall
immediately notify Borrowers thereof and Lender's obligations hereunder to
convert to, or maintain a LIBOR Based Rate Loan at the rate based on the
Adjusted LIBOR Rate shall be suspended until such time as Lender may again cause
the rate based on the Adjusted LIBOR Rate to be applicable. Immediately upon
such occurrence, the portion of the Revolving Credit that was subject to the
Revolving Credit LIBOR Rate shall thereupon accrue interest at the Revolving
Credit Base Rate in accordance with Section 2.7(a) above. Promptly after coming
aware that it is no longer unlawful for Lender maintain such Eurodollar
liabilities, Lender shall notify Borrowers thereof and such suspension shall
cease to exist.
d. Upon the Effective Date, Section 2.9 of the Loan Agreement is
hereby amended and restated in its entirety and shall read as follows:
2.9 Additional Interest Provisions.
------------------------------
(a) Calculation of Interest. Interest on the Loans,
-----------------------
regardless of the rate option, shall be charged on the basis of a year of three
hundred sixty (360) days but charged for the actual number of days elapsed.
Changes in the interest rate applicable to Base Rate Loans shall become
effective on the same day as Lender announces a change in its Prime Rate or, if
applicable, the date the Fed Funds Rate change.
(b) Limitation on LIBOR Based Rate Loans. All Loans not
------------------------------------
specifically designated by Borrowers, pursuant to the terms hereof or not
requested in conformity with the terms hereof, shall be Base Rate Loans. No
LIBOR Based Rate Loans
6
<PAGE>
shall be requested by Borrowers or made available by Lender if a Default or an
Event of Default has occurred and is continuing hereunder. There may not be more
than five (5) LIBOR Based Rate Loans outstanding at any one time.
(c) Default Rate. Upon the occurrence and during the
------------
continuance of an Event of Default hereunder, the per annum effective rate of
interest on all outstanding principal under the Loans, regardless of the rate
option, and all fees for Letters of Credit, shall, be increased by three hundred
(300) basis points.
(d) Termination of LIBOR Based Rate Loans. Without impairing
-------------------------------------
Lender's rights under Section 2.9(c), all LIBOR Based Rate Loans shall
automatically convert to Base Rate Loans upon the occurrence of an Event of
Default.
(e) Continuation of Interest Charges. All contractual rates
--------------------------------
of interest chargeable on outstanding principal under the Loans, regardless of
the rate option, shall continue to accrue and be paid even after Default, Event
of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings
of any kind or the happening of any event or occurrence similar or dissimilar.
(f) Applicable Interest Limitations: In no contingency or
-------------------------------
event whatsoever shall the aggregate of all amounts deemed interest hereunder
and charged or collected pursuant to the terms of this Agreement exceed the
highest rate permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
court determines Lender has charged or received interest hereunder in excess of
the highest applicable rate, Lender shall apply, in its sole discretion, and set
off such excess interest received by Lender against other Obligations due or to
become due and such rate shall automatically be reduced to the maximum rate
permitted by such law.
e. Effective on the Effective Date, the following Section 2.16 is
hereby added to the Loan Agreement:
2.16 Term Loan D:
-----------
(a) Description. Lender hereby advances to Borrowers,
-----------
subject to the terms of this Agreement, the original principal sum of Seven
Million Five Hundred Thousand Dollars ($7,500,000.00) ("Term Loan D").
(b) Term Loan D Note. As a condition to the effectiveness of
----------------
this Amendment, Borrowers shall execute and deliver their promissory note (the
"Term Loan D Note") to Lender for the total principal amount of Term Loan D. The
Term Loan D Note shall evidence each Borrowers' absolute and unconditional
obligation to repay Lender for Term Loan D with interest as herein and therein
provided. The obligations of
7
<PAGE>
Borrowers under the Term Loan D Note shall at all times be joint and several.
The Term Loan D Note shall be in form and substance satisfactory to Lender.
(c) Amortization. The principal amount of Term Loan D shall
------------
be payable in fifty three (53) equal consecutive monthly installments of
principal in the amount of $138,000 plus interest thereon at the rate set forth
herein. The first such installment shall be due and payable on July 1, 1998 and
the remaining such installments shall be due on the first Business Day of each
calendar month thereafter. A final fifty fourth (54th) installment of the
remaining outstanding principal, together with all accrued and unpaid interest
on Term Loan D, shall be due and payable on December 1, 2002, unless having been
sooner accelerated pursuant to the terms hereof.
(d) Term Loan D Interest.
--------------------
(i) Term Loan Base Rate. Subject to Section
-------------------
2.16(d)(ii), the unpaid principal balance of Term Loan D shall bear interest,
subject to the terms hereof, at the per annum rate equal to the Term Loan D Base
Rate. Interest on Base Rate Loans under Term Loan D shall be payable monthly, in
arrears, on the first Business Day of each calendar month, beginning on the
first Business Day of the first full calendar month after the date hereof and on
December 1, 2002.
(ii) LIBOR Rate Option.
-----------------
(A) So long as no Default or Event of Default has
occurred and is continuing, Borrowers may choose to have all or a portion of
Term Loan D accrue interest at the Term Loan D LIBOR Rate by giving Lender at
least two (2) Business Days' prior written notice. Such notice shall specify the
LIBOR Interest Period and the portion of Term Loan D (but in no event less than
$500,000), to bear interest at the Term Loan D LIBOR Rate. At no time, however,
may any LIBOR Rate Loan applicable to Term Loan D include any principal
installments on Term Loan D required to be made during the chosen LIBOR Interest
Period.
(B) Borrowers shall elect a LIBOR Interest Period
during which the Term Loan D LIBOR Rate is applicable; provided, however, that
if the LIBOR Interest Period would otherwise end on a day which shall not be a
London Business Day, such LIBOR Interest Period shall be extended to the next
preceding or succeeding London Business Day as is Lender's custom in the market
in which such LIBOR Based Rate Loan relates. Interest shall accrue from and
including the first day of each LIBOR Interest Period to, but excluding the day
on which any LIBOR Interest Period expires. For any LIBOR Interest Period which
begins on the last London Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such LIBOR Interest Period), the LIBOR Interest Period shall end on the last
London Business Day of a calendar month. All accrued and unpaid interest
8
<PAGE>
on a LIBOR Based Rate Loan must be repaid in full on the last day the applicable
LIBOR Interest Period. Interest shall also be due and payable for a six month
LIBOR Interest Period on the day that would have been the last day of a three
month LIBOR Interest Period. No LIBOR Interest Period may end after December 31,
2002. Subject to all of the terms and conditions applicable to a request for a
LIBOR Based Rate Loan, Borrowers may convert an existing LIBOR Based Rate Loan
as of the last day of the LIBOR Interest Period to a new LIBOR Based Rate Loan
provided all interest accrued under the expiring LIBOR Interest Period has been
paid. If Borrowers fail to notify Lender of the LIBOR Interest Period for a
subsequent LIBOR Based Rate Loan at least two (2) Business Days prior to the
last day of the then current LIBOR Interest Period of an outstanding LIBOR Based
Rate Loan, then such outstanding LIBOR Based Rate Loan shall become a Base Rate
Loan at the end of the current LIBOR Interest Period for such outstanding LIBOR
Based Rate Loan and shall accrue interest at the Term Loan D Base Rate in
accordance with Section 2.16(d)(i) above.
(C) The Adjusted LIBOR Rate may be automatically
adjusted by Lender on a prospective basis to take into account the additional or
increased cost of maintaining any necessary reserves for Eurodollar deposits or
increased costs due to changes in applicable law or regulation or the
interpretation thereof occurring subsequent to the commencement of the then
applicable LIBOR Interest Period, including but not limited to changes in tax
laws (except changes of general applicability in corporate or other income tax
laws) and changes in the reserve requirements imposed by the Board of Governors
of the Federal Reserve System (or any successor), excluding the Reserve
Percentage which has resulted in a payment pursuant to Section 2.17 below, that
increase the cost to Lender of funding the LIBOR Based Rate Loan. Lender shall
promptly give Borrowers notice of such a determination and adjustment, which
determination shall be, except for error, and absent written notice from
Borrowers to Lender within ten (10 ) days from submission, final, conclusive and
binding for all purposes; provided that Borrowers shall not be liable for any
amount payable with respect to any period more than 90 days before the date of
such notice.
(D) If Borrowers have requested the rate based on
the Adjusted LIBOR Rate in accordance with Section 2.16(d)(ii) and Lender shall
have reasonably determined that Eurodollar deposits equal to the amount of the
principal of the requested LIBOR Based Rate Loan and for the LIBOR Interest
Period specified are unavailable, or that the rate based on the Adjusted LIBOR
Rate will not adequately and fairly reflect the cost of the Adjusted LIBOR Rate
applicable to the specified LIBOR Interest Period, of making or maintaining the
principal amount of the requested LIBOR Based Rate Loan specified by Borrowers
during the LIBOR Interest Period specified, or that by reason of circumstances
affecting Eurodollar markets, adequate and reasonable means do not exist for
ascertaining the rate based on the Adjusted LIBOR Rate applicable to the
specified LIBOR Interest Period, Lender shall promptly give notice of such
determination to Borrowers that the rate based on the Adjusted LIBOR Rate is not
available. A determination
9
<PAGE>
by Lender hereunder shall be prima facie evidence of the correctness of the fact
and amount of such additional costs or unavailability. Upon such a
determination, (A) the obligation to establish, convert to, or maintain a LIBOR
Based Rate Loan at the rate based on the Adjusted LIBOR Rate shall be suspended
until Lender shall have notified Borrowers that such conditions shall have
ceased to exist (which notification shall be given promptly by Lender after such
cessation), and (B) the portion of Term Loan D subject to the requested
conversion shall continue to accrue interest at the Term Loan Base D Rate in
accordance with Section 2.16(d)(i) above.
(E) If, as a result of any changes in applicable
law or regulation or the interpretation thereof, it becomes unlawful for Lender
to maintain Eurodollar liabilities sufficient to fund any LIBOR Based Rate Loan
subject to the rate based on the Adjusted LIBOR Rate, then Lender shall
immediately Borrowers thereof and Lender's obligations hereunder to convert to,
or maintain a LIBOR Based Rate Loan at the rate based on the Adjusted LIBOR Rate
shall be suspended until such time as Lender may again cause the rate based on
the Adjusted LIBOR Rate to be applicable. Immediately upon such occurrence, the
portion of Term Loan D that was subject to the Term Loan D LIBOR Rate, shall
thereupon accrue interest at the Term Loan D Base Rate in accordance with
Section 2.16(d)(i) above. Promptly after becoming aware that it is no longer
unlawful for Lender to maintain such Eurodollar liabilities, Lender shall notify
Borrowers thereof and such suspension shall cease to exist.
f. Effective on the Effective Date, the following Section 2.17 is
hereby added to the Loan Agreement:
2.17 Indemnity. Borrowers shall indemnify, defend and hold harmless
---------
Lender against any and all loss, liability, cost or expense which Lender may
sustain or incur (including, without limitation, loss of any merger with respect
to a LIBOR Based Rate Loan) as a consequence of (a) any failure of Borrowers to
convert or extend any LIBOR Based Rate Loan after proper notice thereof has been
given to Lender in accordance with the terms of this Agreement; or (b) any
payment, prepayment or conversion of a LIBOR Based Rate Loan by Borrowers made
for any reason (other than pursuant to Section 2.9(b)(v) and 2.16(d)(ii)(E)) on
a date other than the last day of the applicable LIBOR Interest Period.
Borrowers shall pay the full amount thereof to Lender on demand by Lender.
10
<PAGE>
g. Upon the Effective Date, the following Section 2.18 is hereby
added to the Loan Agreement:
2.18 Interest Rate Protection. Borrowers shall, within thirty (30)
------------------------
days from the Effective Date, purchase and maintain (at their sole expense)
interest rate protection covering, at all times, no less than $3,000,000 of the
outstanding balance of the Term Loans under terms and conditions with the
counterparties acceptable to Lender. If the interest rate protection is
obtained other than from Lender, Borrowers shall assign all rights under such
agreement to Lender.
h. Upon the Effective Date, Section 6.8 of the Loan Agreement is
hereby amended and restated in its entirety and shall read as follows:
6.8 Financial Covenants. Borrowers shall maintain and comply
-------------------
with the following financial covenants:
(a) Funded Debt to Consolidated Operating Cash Flow Ratio.
-----------------------------------------------------
Borrowers shall have and maintain a Funded Debt to Consolidated Operating Cash
Flow Ratio, on a consolidated basis, of not more than the following during the
following periods (measured quarterly on a rolling four (4) quarter basis):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
December 31, 1998, through December 30, 1999 3.00 to 1.0
December 31, 1999, and thereafter 2.50 to 1.0
</TABLE>
(b) Funded Debt to Consolidated Capitalization Ratio.
------------------------------------------------
Borrowers shall have and maintain a Funded Debt to Consolidated Capitalization
Ratio, on a consolidated basis, at all times of not more than the following
during the following periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through December 30, 1998 .60 to 1.0
December 31, 1998, through December 30, 1999 .55 to 1.0
December 31, 1999, and thereafter .45 to 1.0
</TABLE>
(c) Consolidated Net Worth. Borrowers shall have and
----------------------
maintain at all times from the Closing Date through December 31, 1997, a
Consolidated Net Worth on a consolidated basis, of not less than Fourteen
Million Two Hundred Fifty Thousand Dollars ($14,250,000). Effective January 1 of
each year, commencing January 1, 1998, the minimum Consolidated Net Worth (which
shall be maintained at all times) shall be increased by an amount equal to fifty
percent (50%) of Borrowers' Consolidated Net Income
11
<PAGE>
during such year (with any loss being calculated as zero) from the minimum
Consolidated Net Worth required during the immediately preceding year.
(d) Fixed Charge Coverage Ratio. Borrowers shall have and
---------------------------
maintain a Fixed Charge Coverage Ratio, on a consolidated basis, of not less
than the following during the following periods (measured quarterly on a rolling
four (4) quarter basis):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
December 31, 1998, and thereafter 1.25 to 1.0
</TABLE>
(e) Minimum Consolidated Earnings Available for Fixed Charges.
---------------------------------------------------------
Borrowers shall have and maintain a minimum Consolidated Earnings Available for
Fixed Charges on a consolidated basis, of not less than the following during the
following periods:
<TABLE>
<CAPTION>
Period Minimum Amount
------ --------------
<S> <C>
Three month period ending March 31, 1998 $2,000,000
Six month period ending June 30, 1998 $4,000,000
Nine month period ending September 30, 1998 $6,000,000
</TABLE>
(f) Unfunded Capital Expenditures. Commencing December 31,
-----------------------------
1998, Borrowers shall not expend for Unfunded Capital Expenditures more than
Three Million Dollars ($3,000,000) during any twelve (12) month period, measured
quarterly, on a rolling four (4) quarter basis.
i. Exhibit "B" to the Loan Agreement is replaced with Exhibit "B"
attached hereto.
j. Upon the Effective Date, Section 6.11 of the Loan Agreement is
hereby amended and restated in its entirety and shall read as follows:
6.11 Inspection and Audit. Borrowers will permit Lender's officers
--------------------
or other representatives to visit and inspect upon reasonable notice during
business hours any of the locations of Borrowers, to examine and audit all of
Borrowers' books of account, records, reports and other papers, to make copies
and extracts therefrom and to discuss its affairs, finances and accounts with
its officers, employees and independent certified public accountants all at
Borrowers' expense at the standard rates charged by the Lender for such
12
<PAGE>
activities (plus Lender's out-of-pocket expenses); provided that, during the 24-
month period after the Effective Date, Lender shall bear all expenses for such
audit and, thereafter, Borrowers' expense for any single audit shall not exceed
$7,500.00; provided further that if an Event of Default has occurred and is
continuing, there shall be no limit on Borrower's expense for any such audit.
3. Effectiveness Conditions.
------------------------
This Amendment shall become effective upon the satisfactory
completion, as determined by Lender in its discretion, of the following
conditions (all documents to be in form and substance satisfactory to Lender):
(a) Execution of this Amendment.
(b) Execution and delivery of the Term Loan D Note and Term Loan
E Note.
(c) Execution and delivery of Allonges to the Revolving Credit
Note, Term Loan A Note, Term Loan B Note and Term Loan C Note.
(d) Delivery of a Certificate of Corporate Resolutions, signed by
each Borrower's and ProTel's Secretary reflecting the authorization to execute,
deliver and perform under this Amendment and all related agreements and
documents and an incumbency certificate from ProTel identifying Authorized
Officers.
(e) Borrowers shall deliver UCC, state and federal tax lien and
judgment searches against ProTel and ProTel Marketing, Inc. in each jurisdiction
in which ProTel and ProTel Marketing, Inc. maintain any Property.
(f) UCC-1 Financing Statements executed by ProTel in favor of
Lender in each jurisdiction Lender may require.
(g) Execution and delivery by Opinion of an amendment to Amended
and Restated Collateral Pledge Agreement together with delivery to Lender of all
stock of ProTel required pursuant thereto and appropriate stock powers executed
in blank.
(h) Consummation of the Acquisition in accordance wth the terms
of the Purchase Agreement.
(i) A written opinion of ProTel's independent counsel addressed
to Lender.
(j) Termination of any Liens against ProTel Marketing, Inc.'s
assets.
13
<PAGE>
(k) Payment in full of a $100,000 closing fee (less all amounts
paid on account).
(l) Borrowers shall utilize best efforts to obtain execution and
delivery of landlord waivers from each landlord where ProTel maintains and
stores and Property within thirty (30) days from the date of this Amendment.
(m) Payment of all Expenses.
4. Collateral.
----------
Existing Borrowers hereby confirm that all Collateral, liens, and
security interests at any time granted by Borrowers to Lender, shall continue
unimpaired and in full force and effect and shall continue to cover and secure
the Obligations of Existing Borrowers to Lender to the full extent set forth in
the Existing Loan Documents, including without limitation, all of Existing
Borrowers' liabilities under the Revolving Credit and Term Loans. To secure all
of Borrowers' Obligations, ProTel hereby assigns and grants to Lender a
continuing first lien on and security interest in, upon and to all of ProTel's
now or hereafter acquired, created or arising Collateral as described in Section
3.1 of the Loan Agreement.
5. Representations and Warranties.
------------------------------
Each Borrower warrants and represents to Lender that:
a. Prior Representations. By execution of this Amendment, each
---------------------
Existing Borrower reaffirms, and ProTel hereby represents and warrants that,
except as set forth on Schedule "A" to this Amendment, all warranties and
representations made to Lender under the Loan Agreement and Existing Loan
Documents are true and correct in all material respects as of the Effective
Date.
b. Authorization. The execution and delivery by each Borrower of
-------------
this Amendment and the performance by it of the transactions herein contemplated
(i) are and will be within its powers, (ii) have been authorized by all
necessary corporate action, and (iii) are not and will not be in contravention
of any order of court or other agency of government, of law or of any indenture,
agreement or undertaking to which such Borrower is a party or by which the
property of such Borrower is bound, or be in conflict with, result in a breach
of or constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or undertaking, or result in the imposition of any lien,
charge or encumbrance of any nature on any of the properties of such Borrower by
any party other than Lender.
14
<PAGE>
c. Valid, Binding and Enforceable. This Amendment and any assignment
------------------------------
or other instrument, document or agreement executed and delivered in connection
herewith, will be valid, binding and enforceable in accordance with their
respective terms subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors'
rights generally and to general equity principles.
d. No Default. There is no Default or Event of Default outstanding
----------
under the Loan Agreement.
e. Acquisition. The Acquisition has been consummated in accordance
-----------
with the terms of the Purchase Agreement and all applicable law. The Purchase
Agreement is valid, binding and enforceable against the parties thereto
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights generally
and to general equity principles. The Purchase Agreement has been forwarded to
Lender and there have been no modifications thereto.
f. Consent. No consent, approval or authorization of, or
-------
registration, filing or qualification with, any Governmental Authority is
required to be made by Borrowers in connection with the transactions
contemplated hereunder or under the Purchase Agreement.
6. Incorporation into Existing Loan Documents.
------------------------------------------
The parties acknowledge and agree that this Amendment is incorporated
into and made part of the Existing Loan Documents, the terms and provisions of
which, unless expressly modified herein, are hereby ratified and confirmed and
continue unchanged and in full force and effect. Any future reference to the
Loan Agreement or Existing Loan Documents shall mean the Loan Agreement or
Existing Loan Documents as amended hereby. To the extent that any term or
provision of this Amendment is or may be deemed expressly inconsistent with any
term or provision in the Existing Loan Documents, the terms and provisions
hereof shall control.
7. Miscellaneous.
-------------
a. Headings.
--------
The headings of any paragraph of this Amendment are for convenience
only and shall not be used to interpret any provision hereof.
b. Other Instruments.
-----------------
15
<PAGE>
Borrowers shall execute any other documents, instruments and writings,
in form and substance satisfactory to Lender, as Lender may reasonably request,
to carry out the intentions of the parties hereunder.
c. Modifications.
-------------
No modification hereof or any agreement referred to herein shall be
binding or enforceable unless in writing and signed on behalf of the party
against whom enforcement is sought.
d. Governing Law.
-------------
The terms and conditions of this Amendment shall be governed by and
construed in accordance with the substantive laws of the Commonwealth of
Pennsylvania.
e. Counterparts:
------------
This Amendment may be executed in any number of counterparts each of
which shall constitute an original and all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment the day and
year first above written.
CORESTATES BANK, N.A. OPINION RESEARCH CORPORATION
By:___________________________ By:______________________________
ORC PROTEL, INC. ORC TELESCIENCE CORP.
By:___________________________ By:______________________________
ORC, INC.
By:______________________________
16
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Exhibit (21) Subsidiaries of the Registrant
<TABLE>
<CAPTION>
NAME OF INCORPORATION STATE OR OTHER DATE OF
OR ORGANIZATION JURISDICTION INCORPORATION
- ----------------------------------- -------------- -----------------
<S> <C> <C>
Quality Expectations, Inc. Illinois November 6, 1991
ORC, Inc. Delaware December 16, 1991
European Information Centre, Ltd. England December 20, 1991
ORC Holdings, Limited England July 17, 1996
ORC Korea Korea November 30, 1996
ORC International Holdings, Inc. Cayman Islands March 18, 1997
ORC TeleService Florida March 26, 1997
ORC Mexico Mexico, D.F. July 10, 1997
ORC ProTel, Inc. Delaware November 20, 1997
ORC International, Limited England December 15, 1997
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FRM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE RELATED CONSOLIDATED
STATEMENTS OF INCOME AND CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 160
<SECURITIES> 0
<RECEIVABLES> 11,303
<ALLOWANCES> 170
<INVENTORY> 0
<CURRENT-ASSETS> 13,508
<PP&E> 5,041
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,480
<CURRENT-LIABILITIES> 10,242
<BONDS> 4,194
0
0
<COMMON> 42
<OTHER-SE> 16,318
<TOTAL-LIABILITY-AND-EQUITY> 32,480
<SALES> 0
<TOTAL-REVENUES> 56,673
<CGS> 0
<TOTAL-COSTS> 34,374
<OTHER-EXPENSES> 19,498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 674
<INCOME-PRETAX> 2,127
<INCOME-TAX> 976
<INCOME-CONTINUING> 1,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,151
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
