<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, 1998
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
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OPINION RESEARCH CORPORATION
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(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 _______
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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 26,
1999, a date within 60 days prior to the date of filing, as quoted on the Nasdaq
National Market, was approximately $18,613,000./*/
As of February 26, 1999, 4,243,889 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 1999 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.
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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 operating results and could cause the Company's actual
consolidated results for the first quarter of 1999, 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 was Cendant Corporation ("Cendant") for the year ended December
31, 1998. In 1997 and 1996, the Company's largest client was General Motors
Corporation ("GM"). 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 will be able to so expand or to identify targets
for such acquisitions on terms attractive to the Company. Further, 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 certain 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.
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PART I
Item 1. Business
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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, marketing services, including a focus on
businesses selling primarily to other businesses, and model-based telemarketing.
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 loyalty and retention, market demand and
forecasting, corporate image, competitive positioning, and model-based
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 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 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. In January 1998, the
Company acquired ProTel Marketing, Inc. ("ORC ProTel" or "ProTel"), a high
quality telemarketing company based in Lansing, Illinois.
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 with regard to certain business issues enables
it to provide reliable customer and market information and advisory services to
clients. 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 for market research 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 and recurring telemarketing revenues was
approximately 70% in 1998.
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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 & 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 are
redefining 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.
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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 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.
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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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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, 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.
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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 trouble shooting,
database management and structured reporting systems.
MARKETING
Marketing and Sales-Support Program. In 1998, the Company continued to
develop and implement 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 America Online, Catholic Health Initiatives, Cendant, General Motors,
IBM, Nortel, PNC Bank, PricewaterhouseCoopers, the U.S. Postal Service, and
Wells Fargo. In 1998, the Company served over 600 clients. For many clients, the
Company performed multiple projects, sometimes for different subsidiaries or
business units of the same client.
In 1998, the Company's largest single client was Cendant Corporation,
accounting for 18% of the Company's revenues. All revenues generated by the
Cendant relationship were for outbound telemarketing services. Cendant has been
a ProTel client since 1988.
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.
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.
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For outbound telemarketing services, the Company competes with a large
number of telemarketing companies. Quality of service and the application of
continuous statistical modeling on call lists are the key differentiators.
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.
BACKLOG
As of December 31, 1998, revenues expected to be received by the
Company under its client contracts, which are based on budgeted amounts in those
contracts, were $22,971, as compared to $26,092 as of December 31, 1997. This
decrease in backlog is due to the timing associated with the renewal of certain
projects as well as a decrease in sales commitments for the fourth quarter of
1998 relative to the fourth quarter of 1997. All of the 1998 amount is expected
to be received by December 31, 1999. 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.
EMPLOYEES
As of December 31, 1998, the Company employed a total of 756 full-time
employees and maintained a pool of part-time hourly employees in the United
States and the United Kingdom of approximately 1,200 people. The part-time
employees work as telephone interviewers and data processors. Of the full-time
employees, 334 are telemarketing representatives, 267 are professionals engaged
in direct client service and 155 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
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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's other domestic market
research locations include Toledo, Chicago, and Detroit, occupying approximately
30,000 square feet in total under various lease terms. The Company also
maintains telephone interview facilities in Tucson, Arizona and Tampa, Florida,
with a combined total of approximately 34,000 square feet of leased space.
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In January 1999, the Company's UK operation was moved to a new office
location in London. The new lease is for an office space of approximately 16,000
square feet and will expire in December 2006. The previous location now serves
as a telephone interviewing center with an extended lease term to May 2002. The
Company's other international locations include Hong Kong, Seoul (Korea), Taipei
(Taiwan) and Mexico City (Mexico), which are all leased facilities.
The Company's telemarketing headquarters are located in approximately
13,000 square feet of leased space in Lansing, Illinois. In addition to the
above facility, there are three other telephone centers located in Milwaukee
(Wisconsin), Topeka (Kansas) and St. John (Missouri) in support of the
telemarketing efforts. These three phone centers occupy approximately 32,000
square feet in total under various lease terms.
The Company presently has a combined total of 422 computer assisted
telephone interview stations worldwide dedicated to market research and an
additional 225 telemarketing stations. All of these facilities are equipped with
state-of-the-art hardware and software. In a typical telephone interview or
sale, the computer assisted telephone interviewing system prompts the
interviewer's sequence of questions or responses 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.
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.
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Item 3. Legal Proceedings
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The Company is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1998.
Item 4A. Executive Officers of the Registrant
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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 1999 Annual Meeting of Stockholders, 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 March 1, 1999.
Name Age Position
- ---- --- --------
John F. Short 54 Chairman, Chief Executive Officer, and
President
Douglas L. Cox 53 Chief Financial Officer
Gregory C. Ellis 42 Chief Operating Officer - ORC
Market Research
James T. Heisler, Ph.D. 52 Executive Vice President
Jeffrey T. Resnick 42 Group Managing Director - ORC U.S.
Research Group
Gerard J. Miodus 42 Group Managing Director - ORC
Information Services Group
Nigel P. Maxfield 41 Group Managing Director - ORC U.K.
Richard I. Cornelius 37 Deputy Group Managing Director - ORC U.K.
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Kevin P. Croke 40 Managing Director of Finance
Ruth R. Wolf 61 Chief Executive Officer - ORC ProTel
Janice E. Katz 39 Chief Operating Officer ORC ProTel
Mr. Short joined the Company as its Chief Financial Officer in 1989 and was
appointed Vice Chairman in 1992. In 1998, Mr. Short was appointed President of
the Company. In February 1999, Mr. Short assumed the roles of Chief Executive
Officer and Chairman of the Board.
Mr. Cox joined the Company as its Chief Financial Officer in October 1998.
Prior to joining the Company, Mr. Cox was Senior Vice President and Chief
Financial Officer of Elf Atochem North America, Inc. Mr. Cox holds an MBA, with
honors, from the Wharton School of the University of Pennsylvania.
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. Heisler joined the Company in 1982. Since 1990, Dr. Heisler has held
various managerial positions, and he is currently responsible for the Market
Assessment Practice of the U.S. Research Group. Dr. Heisler received a Ph.D. in
Social Psychology from Illinois Institute of Technology.
Mr. Resnick joined the Company in 1984. In 1990 Mr. Resnick was promoted to
the Director of the Financial Services Practice for the Princeton Group. In 1996
Mr. Resnick was appointed Group Managing Director - U.S. Research Group. Mr.
Resnick holds a Master of Arts degree from Western Michigan University and a
Bachelor of Science degree from the Pennsylvania State University.
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.
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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.
Mr. Croke joined the Company in 1991 as Controller. Throughout the years
Mr. Croke has served in various capacities in the Company's financial arena. In
1995, Mr. Croke was appointed Managing Director of Finance. Mr. Croke holds an
MBA from Case Western Reserve University.
Ms. Wolf joined the Company in 1998 with the acquisition of ProTel, which
she co-founded in 1988. Ms. Wolf was appointed Chief Executive Officer of ORC
ProTel in 1998. Ms. Wolf has over 30 years of experience in telemarketing.
Ms. Katz joined the Company in 1998 with the acquisition of ProTel, which
she co-founded in 1988. Ms. Katz was appointed Chief Operating Officer of ORC
ProTel in 1998. In February 1999, Ms. Katz was selected to lead the ORC
TeleScience effort.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
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Market Information
- ------------------
The Company's Common Stock has been traded on the Nasdaq National
Market under the symbol "ORCI" since the Company's initial public offering on
October 26, 1993. The table below sets forth the high and low prices for the
Company's Common Stock (the "Common Stock") for each of the four quarters of
1998 and 1997:
High Low
--------- --------
1998
---- $6.375 $4.125
Fourth Quarter 8.625 5.500
Third Quarter 9.375 6.063
Second Quarter 6.750 5.063
First Quarter
1997
---- $5.750 $3.500
Fourth Quarter 4.000 3.375
Third Quarter 4.125 3.125
Second Quarter 3.875 3.125
First Quarter
The closing price of the Common Stock on February 26, 1999 was $6.00
per share. As of February 26, 1999, the Company had 48 holders of record of the
Common Stock (approximately 650 beneficial stockholders).
Dividends
- ---------
The Company has not paid any dividends on the Common Stock. The
Company currently intends to retain its earnings to finance future growth and
therefore does not anticipate paying dividends on the Common Stock in the
foreseeable future.
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Item 6. Selected Financial Data
SELECTED FINANCIAL DATA
(In Thousands, Except Per Share Data)
- --------------------------------------------------------------------------------
For the Twelve Months Ended December 31,
-------------------------------------------------
1998 1997 1996 1995 1994
------ ------- ------- ------- --------
OPERATING STATEMENT DATA:
Revenues $ 73,167 $ 56,673 $ 47,273 $ 44,101 $ 39,841
Income (loss) from operations
(1), (2) 2,340 2,801 2,425 (1,341) 3,267
Extraordinary loss on debt
restructuring, net of tax
of $133 (3) (150) - - - -
Net income (loss) $ (170) $ 1,151 $ 808 $ (1,669) $ 1,295
========= ======== ======== ========= ========
Weighted average common shares
outstanding 4,202 4,144 4,169 4,232 4,232
Income (loss) before
extraordinary loss per common
share $ (0.00) $ 0.28 $ 0.19 $ (0.39) $ 0.31
Extraordinary loss per common
share (0.04) - - - -
--------- -------- -------- --------- --------
Net income (loss) per common
share $ (0.04) $ 0.28 $ 0.19 $ (0.39) $ 0.31
========= ======== ======== ========= ========
Adjusted weighted average
common shares and assumed
conversions(4) 4,202 4,146 4,213 4,232 4,874
Income before extraordinary
loss per diluted share $ (0.00) $ 0.28 $ 0.19 $ (0.39) $ 0.30
Extraordinary loss per diluted
share (0.04) - - - -
--------- -------- -------- --------- --------
Net income (loss) per diluted
share $ (0.04) $ 0.28 $ 0.19 $ (0.39) $ 0.30
========= ======== ======== ========= ========
BALANCE SHEET DATA:
Total assets $ 50,610 32,480 32,772 28,537 30,674
Total debt 18,320 6,652 7,916 7,372 5,816
- --------------------------------------------------------------------------------
(1) In the fourth quarter of 1998, the Company took an unusual pre-tax charge of
$2,470 for expenses incurred in relation to a separation agreement with the
Company's former Chairman and CEO and the buy-out if his pre-existing
employment contract.
(2) 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.
(3) In the second quarter of 1998, the Company recorded an extraordinary loss of
$150, net of tax benefits of $133, due to the write-off of unamortized loan
origination fees associated with debt refinancing.
(4) 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, marketing services, including a focus on businesses selling primarily
to other businesses, and model-based telemarketing. 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
loyalty and retention, market demand and forecasting, corporate image,
competitive positioning, and model-based 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 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 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. In January 1998, the Company acquired
ProTel Marketing, Inc. ("ORC ProTel" or "ProTel"), a high quality telemarketing
company based in Lansing, Illinois. In the fourth quarter of 1998, the Company
took an unusual pre-tax charge for expenses incurred in relation to a separation
agreement with the Company's former Chairman and Chief Executive Officer and the
buy-out of his pre-existing employment contract.
RESULTS OF OPERATIONS - 1998 COMPARED TO 1997
Revenues
Revenues for 1998 increased $16,494, or 29%, to $73,167 in 1998 from
$56,673 in 1997. This increase is principally due to $15,921 in revenues
generated by ORC ProTel and ORC Mexico (the "Acquisitions") as well as an
increase in U.S. and U.K. market research revenues of $3,651, or 7%, partially
offset by a decrease in revenues from Asia of $483, and a $2,595 decrease in
revenues due to a management decision to abandon a small start-up telemarketing
business in favor of ProTel.
Cost of Revenues
Cost of revenues increased $10,433, or 30%, to $44,807 in 1998 from
$34,374 in 1997. The cost of revenues for the Company's core business increased
by $1,760, or 5%, in 1998, principally reflecting higher subcontractor costs for
certain large-scale global projects. The gross
-14-
<PAGE>
profit percentage for the core business decreased to 37% in 1998 from 39% in
1997 reflecting this change in the business mix. The Acquisitions, for which
cost of revenues were $8,673 in 1998 and the gross profit percentage was 45%,
offset the impact of the higher costs for the core business.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased
$2,564, or 15%, to $19,408 in 1998 from $16,844 in 1997. As a percent of
revenues, consolidated SG&A has decreased to 27% in 1998 from 30% in 1997. The
Acquisitions for 1998 increased SG&A by $3,701 while SG&A related to the core
business decreased by $1,137 as compared to 1997.
Depreciation and Amortization Expense
Depreciation and amortization expense increased to $4,142 in 1998 from
$2,654 in 1997. The Acquisitions accounted for $1,261 of the increase in
depreciation and amortization. Additionally, the Company recorded a write-down
of goodwill of $324 associated with the telemarketing operation that was
discontinued in 1998. Depreciation and amortization on a consolidated basis
increased to 6% of revenues in 1998 from 5% in 1997.
Unusual Charge
The Company took a fourth quarter pre-tax charge of $2,470 for
expenses incurred in relation to an agreement with Dr. Michael R. Cooper
providing for the resignation of Dr. Cooper as a Director, Chairman, and Chief
Executive Officer of the Company and the buy-out of Dr. Cooper's pre-existing
employment contract.
Interest Expense
Interest expense increased in 1998 to $1,871 from $674 in 1997. The
increase in interest expense is primarily attributable to the debt incurred to
fund the acquisition of ORC ProTel.
Provision for Income Taxes
The provision for income taxes for 1998 and 1997 was $489 and $976,
respectively. The provisions for these years are higher than the amount that
results from applying the federal statutory rate to income primarily because of
amortization of non-deductible goodwill generated from pre-1996 acquisitions and
the impact of state taxes.
The Company has recognized for financial reporting purposes deferred
tax assets that consist primarily of the tax benefits arising from the unusual
charge. These deferred tax assets are expected to be realized upon the reversal
of existing taxable temporary differences.
Extraordinary Loss
The Company recorded an extraordinary loss of $150, net of tax
benefits, in the second quarter of 1998. This non-cash charge is due to the
write-off of unamortized loan origination fees associated with the Company's
prior credit facility.
-15-
<PAGE>
Net Income
Net income (loss) for 1998 and 1997 was ($170) and $1,151,
respectively. The Company's net loss for the year ended December 31, 1998 was
materially impacted by the non-recurring unusual charge and the extraordinary
loss discussed previously. There were no such non-recurring items in 1997.
RESULTS OF OPERATIONS - 1997 COMPARED TO 1996
Revenues
Revenues from the U.S., GSR, and Hong Kong grew to $48,891, or 6%, in
1997 from $46,299 in 1996. Additionally, revenues increased by 20% to $56,673 in
1997 from $47,273 in 1996. $3,930, or 42%, 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 31%, 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 14% to $34,374 in 1997 from $30,281 in
1996. As a percentage of total revenues, cost of revenues decreased to 61% in
1997 from 64% 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.
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 30% in 1997 from 26% in 1996. $2,240, or 48%, 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 13% to $2,654 in 1997
from $2,353 in 1996. As a percentage of revenues, depreciation and amortization
expense remained approximately at 5% in both 1997 and 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 was $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.
-16-
<PAGE>
Net Income
As a result of the items described above, net income for 1997
increased to $1,151, up from $808 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, working capital was $3,244, which includes
the recording of $3,000 of contingent purchase price for ORC ProTel and the
amounts due under the separation agreement with the former Chairman (for which
payments were made in the first quarter of 1999). Net cash generated by
operations for 1998 was $2,846 as compared to $2,876 in 1997.
Investing and financing activities for 1998 included capital
expenditures of $1,882 and payments of $12,131 for ProTel and other
acquisitions. Net of borrowings for acquisitions and cash on hand, the Company
decreased its bank borrowings by $1,147 for the year ended December 31, 1998.
Additionally, the Company reduced its capital lease balances by $214 in 1998.
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.
During July 1998, the Company entered into an agreement with a three
bank syndicate for an increased credit facility of $32,000. The credit facility
provided $12,500 of term notes and up to $19,500 of revolving credit. All debts
outstanding as of June 30, 1998 were repaid with proceeds from the new facility.
This new facility is for a three-year term and is secured by substantially all
of the assets of the Company. Availability of funds under the new facility is
based on a multiple of trailing EBITDA. As of December 31, 1998, the Company had
$5,752 of additional available credit. In March 1999, the lender amended the
loan agreement to exclude the unusual charge related to the separation agreement
with the Company's former Chairman and CEO and granted a waiver of covenant
defaults which occurred during 1998.
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 1999. 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 the forward
foreign exchange contracts.
-17-
<PAGE>
READINESS FOR YEAR 2000
The Year 2000 issue concerns the inability of some computer hardware
and software to distinguish between the year 1900 and the year 2000. If not
corrected, the potential exists for computer system failures or miscalculations.
The Company uses computer systems in many aspects of its business, and
Year 2000 problems in such systems, if not corrected, could disrupt operations
and have an adverse impact on the Company's operating results. The Company is
also exposed to the risk that one or more of its vendors or service providers
could experience Year 2000 problems that impact the ability of such vendor or
service provider to provide goods and services. To date, the Company is not
aware of any vendor or service provider Year 2000 issue that would have a
material adverse impact on the Company's operations.
Throughout 1998, the implementation of Year 2000 compliance procedures
at the Company has consisted of: compiling information as to the information
technology (IT) and non-IT systems that are sensitive to the Year 2000 problem;
coordinating with clients, vendors, service providers, and other third parties
who are affected by, or may affect, the Company's plans to address the Year 2000
issue. Additionally, analysis of critical systems to determine which systems are
not Year 2000 compliant and evaluating the costs to repair or replace those
systems have been undertaken by the Company. As potential problems are
identified, affected programs have been modified, or are in the process of being
modified by the Company's system support group to ensure future compliance.
The Company intends to complete the testing of Year 2000 compliance of
its critical systems by the end of April 1999, and of the non-critical systems
by June 30, 1999. The Company estimates that approximately $250 will be needed
to modify or replace its existing software and hardware in order to be Year 2000
compliant. All maintenance and modification costs are expensed as incurred,
while the costs of new systems are being capitalized according to generally
accepted accounting principles. Based upon its analysis to date, management
believes that the Company will be able to continue operations in the year 2000
and beyond without a material adverse effect caused by the Year 2000 problems.
However, the Company may identify unidentified problems during its Year 2000
readiness assessment that could result in such an effect. A worst case scenario
resulting from one or more of the Company's systems being non-compliant might be
an inability to service one or more of our clients until such problem was
corrected. The Company believes that such Year 2000 difficulties experienced by
the Company would be isolated in nature and will not have a material adverse
effect on the Company's operations.
FORWARD-LOOKING STATEMENTS
Certain statements contained in Management's Discussion and Analysis,
and elsewhere in this annual report, are forward-looking statements. The
forward-looking statements are subject to risks and uncertainties, including,
but not limited to, competition, foreign exchange fluctuations, uncertainties of
international economies, and other risk factors discussed in this filing.
-18-
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risks relating to the Company's operations result primarily
from changes in interest rates and changes in foreign exchange rates. The
Company enters into interest rate swap and cap agreements to minimize the risk
and costs associated with its financial activities. The following table provides
information about the derivative financial instruments and other financial
instruments that are sensitive to changes in interest rates. For debt
obligations, the table presents principal cash flows and related weighted
average interest rates by expected maturity dates. For the interest rate swap
and interest rate cap, the table presents notional amounts and weighted-average
interest rates or strike rates by contractual maturity dates. Notional amounts
are used to calculate the contractual cash flows to be exchanged under the
contract.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
There- Fair Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003 After Total 12/31/98
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES
Long-term debt including current portion:
Variable rate debt $9,473 $2,500 $2,500 $2,500 $1,250 - $18,223 $ 18,223
Average interest rate--
LIBOR+2.5%
INTEREST RATE DERIVATIVE FINANCIAL
INSTRUMENTS RELATED TO DEBT
Interest rate swap
Pay fixed/receive variable 2,500 2,500 2,500 2,500 1,250 - 11,250 29
Average pay rate 5% 5% 5% 5% 5%
Average receive rate--
3-month LIBOR
Interest rate cap
Notional amount 3,000 3,000
Strike rate-- 3-month LIBOR 7% 2
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
-19-
<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, 1998, 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, 1998, 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, 1998, 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, 1998, and is hereby
incorporated by reference thereto.
-20-
<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.
1. Financial Statements Page Reference
-------------------- --------------
Report of Independent Auditors. F-1
Consolidated Balance Sheets as of December 31, F-2
1998 and 1997.
Consolidated Statements of Operations for F-3
the years ended December 31, 1998, 1997,
and 1996.
Consolidated Statements of Stockholders' F-4
Equity for the years ended December 31, 1998
1997, and 1996.
Consolidated Statements of Cash Flows for F-5
the years ended December 31, 1998, 1997, and 1996.
Notes to Consolidated Financial Statements. F-6
2. Financial Statement Schedule
----------------------------
Schedule II - Valuation and Qualifying Accounts S-1
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.
(b) Reports on Form 8-K
None
-21-
<PAGE>
(c) Exhibits
--------
Exhibit No.
- -----------
3.1 Amended and 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 (the "Form S-
1").
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Form S-1.
4.1 Rights Agreement, dated September 13, 1996, between the Registrant and
StockTrans, Inc. - Incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on September 27, 1996.
4.2 Amendment to Rights Agreement dated August 8, 1998.
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 Form S-1.
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 Form S-1.
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 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 10-K").
*10.1 Employment Agreement between the Registrant and Michael R. Cooper.
Incorporated by reference to Exhibit 10.1 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "1996
10-K").
*10.2 Agreement and General Release, dated February 12, 1999, between the
Registrant and Michael R. Cooper - Incorporated by reference to
Exhibit 10 to the Registrant's Current Report on Form 8-K filed with
the Securities and Exchange Commission on February 16, 1999.
-22-
<PAGE>
*10.3 Employment Agreement between the Registrant and John F. Short.
Incorporated by reference to Exhibit 10.2 to the 1996 10-K.
*10.4 Amendment to Employment Agreement between the Registrant and John F.
Short dated February 12, 1998.
*10.5 Employment Agreement between the Registrant and Douglas L. Cox dated
October 26, 1998.
*10.6 Employment Agreement between the Registrant and James T. Heisler.
Incorporated by reference to Exhibit 10.6 to 1994 10-K.
*10.7 Employment Agreement between the Registrant and Gregory C. Ellis.
Incorporated by reference to Exhibit 10.5 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995 (the "1995
10-K").
*10.8 The Registrant's Retirement Plan - Incorporated by reference to
Exhibit 10.7 to the Form S-1.
10.9 1997 Stock Incentive Plan - Incorporated by reference to Exhibit 10.7
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997.
10.10 Lease Agreement dated May 15, 1995 between the Registrant and the
Maumee Woodlands IV Company (Maumee Facility) - Incorporated by
reference to Exhibit 10.15 to the 1995 10-K.
10.11 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 Form S-1.
10.12 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 Form S-
1.
10.13 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 third floor of GSR
facility) - Incorporated by reference to Exhibit 10.20 to the Form S-
1.
10.14 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 Form S-1.
-23-
<PAGE>
10.15 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 Form S-1.
10.16 Lease dated August 25, 1994 between the Registrant and H.C.
Properties, USA, Inc. (Tucson Facility) - Incorporated by reference to
Exhibit 10.22 to the 1994 10-K.
10.17 Lease dated December 13, 1998 between Life Assurance Holding
Corporation Limited and ORC International Limited (UK Facility).
10.18 Asset Purchase Agreement between registrant and Pro Tel Marketing,
Inc. - Incorporated by reference to Exhibit 2.1 to the Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 20, 1998.
10.19 Loan and Security Agreement, dated July 20, 1998, among Chase
Manhattan Bank, the Bank of New York, and First Union National Bank
and Opinion Research Corporation, ORC Inc., and ORC ProTel, Inc.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP dated March 19, 1999.
27 Financial Data Schedule (EDGAR only).
_______________________________________________________________________________
* Constitutes a compensatory plan or arrangement required to be filed as an
exhibit to this report
-24-
<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/ John F. Short
--------------------------
John F. Short, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 22, 1999 by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/ John F. Short Principal Executive Officer and Director
- ----------------------
John F. Short
/s/ Douglas L. Cox Principal Financial and Accounting Officer
- ----------------------
Douglas L. Cox
/s/ James C. Fink Director
- ----------------------
James C. Fink
/s/ James T. Heisler Director
- ----------------------
James T. Heisler
Director
- ----------------------
Stephen A. Greyser
Director
- ----------------------
Derek B. Smith
/s/ Lenard B. Tessler Director
- ----------------------
Lenard B. Tessler
-25-
<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, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 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
MetroPark, New Jersey
February 16, 1999
F-1
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
--------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,058 $ 160
Accounts receivable:
Billed 9,457 7,242
Unbilled services 3,383 4,061
-------------- ------------
12,840 11,303
Less: allowance for doubtful accounts 209 170
-------------- ------------
12,631 11,133
Prepaid and other current assets 4,244 2,215
-------------- ------------
Total current assets 17,933 13,508
Property and equipment, net 5,421 5,041
Capitalized production costs, net 67 145
Intangible assets, net 2,134 1,316
Goodwill, net 23,659 11,063
Other assets 1,396 1,407
-------------- ------------
$ 50,610 $ 32,480
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,688 $ 960
Accrued expenses 4,695 3,017
Payable for acquisitions 3,000 -
Deferred revenues 2,683 4,024
Short term borrowings 2,623 1,251
-------------- ------------
Total current liabilities 14,689 9,252
Long term debt 15,600 5,090
Deferred income taxes 404 425
Other liabilities 3,226 1,353
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, 4,281,747 shares issued and
4,243,889 outstanding in 1998 and 4,231,747
shares issued and 4,193,889 outstanding in 1997 42 42
Additional paid-in capital 14,216 13,976
Retained earnings 2,507 2,677
Accumulated other comprehensive income 112 (149)
Treasury Stock, at cost, 37,858 shares in 1998 and 1997 (186) (186)
-------------- ------------
Total stockholders' equity 16,691 16,360
-------------- ------------
$ 50,610 $ 32,480
============== ============
</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,
----------------------------------------------
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
Revenues $ 73,167 $ 56,673 $ 47,273
Cost of revenues 44,807 34,374 30,281
----------- ----------- ----------
Gross profit 28,360 22,299 16,992
Selling, general and administrative expenses 19,408 16,844 12,214
Depreciation and amortization 4,142 2,654 2,353
Unusual charge 2,470 - -
----------- ----------- ----------
Operating income 2,340 2,801 2,425
Interest expense, net 1,871 674 777
----------- ----------- ----------
Income before income taxes and extraordinary loss 469 2,127 1,648
Provision for income taxes 489 976 840
----------- ----------- ----------
Income (loss) before extraordinary loss (20) 1,151 808
Extraordinary loss on debt refinancing,
net of tax benefit of $133 (150) - -
----------- ----------- ----------
Net income (loss) $ (170) $ 1,151 $ 808
=========== =========== ==========
Income (loss) before extraordinary loss per common share:
Basic $ (0.00) $ 0.28 $ 0.19
=========== =========== ==========
Diluted $ (0.00) $ 0.28 $ 0.19
=========== =========== ==========
Extraordinary loss on debt refinancing per common share:
Basic $ (0.04) $ - $ -
=========== =========== ==========
Diluted $ (0.04) $ - $ -
=========== =========== ==========
Net income (loss) per common share:
Basic $ (0.04) $ 0.28 $ 0.19
=========== =========== ==========
Diluted $ (0.04) $ 0.28 $ 0.19
=========== =========== ==========
Weighted average common shares outstanding:
Basic 4,202,131 4,144,164 4,169,327
Diluted 4,202,131 4,145,866 4,212,952
</TABLE>
See notes to financial statements.
F-3
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common stock paid in Retained comprehensive Treasury stock stockholders'
------------------- ------------------
Shares Amount capital earnings income Shares Amount equity
-------- -------- ---------- -------- ------------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 4,232 $ 42 $ 14,067 $ 718 $ 125 35 $ (207) $ 14,745
Comprehensive income:
Net income - - - 808 - - - 808
Other comprehensive income:
Foreign currency
translation adjustments - - - - 431 - - 431
----------
Comprehensive income 1,239
Stock repurchase - - - - - 102 (580) (580)
Stock issuance - - (56) - - (49) 297 241
-------- -------- ---------- -------- ------------- -------- ------- ------------
Balance, December 31, 1996 4,232 42 14,011 1,526 556 88 (490) 15,645
Comprehensive income:
Net income - - - 1,151 - - - 1,151
Other comprehensive income:
Foreign currency
translation adjustments - - - - (705) - - (705)
----------
Comprehensive income 446
Stock issuance - - (35) - - (50) 304 269
-------- -------- ---------- -------- ------------- -------- ------- ------------
Balance, December 31, 1997 4,232 42 13,976 2,677 (149) 38 (186) 16,360
Comprehensive income:
Net loss - - - (170) - - - (170)
Other comprehensive income:
Foreign currency
translation adjustments - - - - 261 - - 261
----------
Comprehensive income 91
Stock issuance 50 - 228 - - - - 228
Compensation expense recognized
for stock options - - 12 - - - - 12
-------- -------- ---------- -------- ------------- -------- ------- ------------
Balance, December 31, 1998 4,282 $ 42 $ 14,216 $ 2,507 $ 112 38 $ (186) $ 16,691
======== ======== ========== ======== ============= ======== ======= ============
</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,
----------------------------------------------------------------------
1998 1997 1996
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (170) $ 1,151 $ 808
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 4,142 2,654 2,353
Loss (gain) on disposal of fixed assets 120 4 (16)
Extraordinary loss 283 - -
Non-cash portion of unusual charge 198 - -
Provision for doubtful accounts 226 10 30
Deferred income taxes (1,356) (677) 745
Changes in operating assets and liabilities net
of effects from acquisitions,
Billed accounts receivable, net (2,312) 228 (1,536)
Unbilled services 707 (1,236) 922
Other assets (1,086) (379) (1,144)
Accounts payable 755 (1,033) 154
Accrued expenses 1,656 980 (630)
Advanced billing from customers (1,343) 1,216 1,424
Deferred interest payable (1,203) 399
Other liabilities 1,026 1,161 (117)
-------------------- ------------------- --------------------
Net cash provided by operating activities 2,846 2,876 3,392
-------------------- ------------------- --------------------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired (12,131) (1,382) (3,272)
Proceeds from the sale of fixed assets 142 18 31
Capitalized production costs - - (442)
Capital expenditures (1,882) (1,011) (1,647)
-------------------- ------------------- --------------------
Net cash used in investing activities (13,871) (2,375) (5,330)
-------------------- ------------------- --------------------
Cash flows from financing activities:
Borrowings under line-of-credit agreement 43,108 18,010 23,622
Repayments under line-of-credit agreement (37,125) (17,400) (21,348)
Issuance of note payable 20,093 6,151 1,404
Repayments of note payable (14,194) (7,840) (643)
Repayments under capital lease arrangements (214) (240) (257)
Capital stock repurchased, net - - (339)
Proceeds from issuance of capital stock 228 269 -
-------------------- ------------------- --------------------
Net cash provided by (used in) financing activities 11,896 (1,050) 2,439
-------------------- ------------------- --------------------
Effect of exchange rate changes on cash and cash
equivalents 27 (156) 24
-------------------- ------------------- --------------------
Increase (decrease) in cash and cash equivalents 898 (705) 525
Cash and cash equivalents at beginning of period 160 865 340
-------------------- ------------------- --------------------
Cash and cash equivalents at end of period $ 1,058 $ 160 $ 865
==================== =================== ====================
Non-cash investing and financing activities:
Acquisition of equipment under capital lease $ - $ 55 $ -
==================== =================== ====================
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, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Opinion Research Corporation (the "Company" or "ORC") 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, marketing services, including a focus on
businesses selling primarily to other businesses, and model-based telemarketing.
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 loyalty and retention, market demand and
forecasting, corporate image, competitive positioning, and model-based
telemarketing. The Company operates in two industry and three geographic
segments.
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 may not
be 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 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, 1998, two clients constituted 31%
of net accounts receivable. These clients accounted for 30% of the revenues for
the year ended December 31, 1998. As of December 31, 1997, two clients
constituted 27% of net accounts receivable and accounted for 22% of revenues for
the year ended December 31, 1997. At December 31, 1996, two clients constituted
29% of the Company's total revenues.
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.
FINANCIAL INSTRUMENTS
The Company uses interest rate swap and cap agreements to limit the Company's
exposure to interest rate fluctuations. Interest rate differentials to be paid
or received as a result of interest rate swap or cap agreements are accounted
for by recording the net interest received or paid as an adjustment to interest
expense on a current basis. The fair value of the interest rate swap and cap
agreements, as well as gains or losses resulting from market movements, are not
recognized in the financial statements.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities of foreign subsidiaries are translated into U.S.
dollars using the exchange rate in effect at the balance sheet date and for
revenues and expense accounts using a monthly average exchange rate during the
period. The resulting translation adjustments are recorded as a component of
other comprehensive income and are accumulated in stockholder's equity. Because
cumulative translation adjustments are considered a component of permanently
invested unremitted earnings of subsidiaries outside of the United States, no
taxes are provided on such amounts.
F-7
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
As permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation,
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 uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on the
differences between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Recognition of deferred
tax assets is limited to amounts considered by management to be more likely than
not realized in future periods.
EARNINGS PER SHARE
Basic and diluted earnings per share is calculated in accordance with Statement
No. 128, Earnings per Share. All earnings per share amounts for all periods
have been presented, and where appropriate, restated to conform to the
requirements of Statement 128.
COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement No. 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components. Since this Statement
requires only additional disclosure, there will be no effect on the Company's
results of operations or financial position. Statement 130 requires foreign
currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. Prior year financial statements have been reclassified to conform to
the requirements of Statement 130.
F-8
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEGMENTS
Effective January 1, 1998, the Company adopted Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information. Statement 131
superceded FASB Statement No. 14, Financial Reporting for Segments of a Business
Enterprise. Statement 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. Statement
131 also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The adoption of Statement 131
did not affect results of operations or financial position, but did affect the
disclosure of segment information. See Note 16.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 ("SOP 98-1"), Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to
capitalize certain costs of computer software developed or obtained for internal
use and amortize such costs over the software's estimated useful life. The
Company is required to adopt SOP 98-1 for fiscal years beginning after December
15, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in years beginning after June 15, 1999. Statement 133 establishes
a new model for accounting for derivatives and hedging activities. The Statement
requires all derivatives be recognized in the statement of financial position as
either assets or liabilities and measured at fair value.
The Company is currently evaluating the effects of adoption of SOP 98-1 and
Statement 133 on the Company's financial position and results of operations.
F-9
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS
In 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 part of the Company's
Customer Loyalty & Retention Practice.
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.
In January 1998, ORC ProTel, Inc. ("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 and was recorded as other long-term liabilities in the
Company's consolidated financial statements. 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 years 1998 through 2000, the sellers may earn up to an
additional $10,000 of cash payments, contingent upon ProTel achieving certain
targets for revenues and earnings before interest, income, taxes, depreciation,
and amortization. Based on 1998 operating performance, a payment of $3,000 was
made to the principals in March 1999. The additional consideration has been
recorded as goodwill and is being amortized over the 14 years remaining on the
original goodwill.
F-10
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS (CONTINUED)
The unaudited pro forma results of operations for the years ended December 31,
1997 and 1996, which assumes the consummation of the ProTel purchase as of
January 1, 1996, are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1996
----------- --------
<S> <C> <C>
Revenues $71,093 $59,341
Net income $ 2,028 $ 1,133
Net income per share:
Basic and diluted $ 0.49 $ 0.27
</TABLE>
The pro forma net income includes adjustment for amortization of goodwill and
intangible assets, adjustment of interest expense, and the related income tax
effect of such adjustments.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
---------- ---------
<S> <C> <C>
Leasehold improvements $ 2,057 $ 1,837
Computer equipment and software 9,494 7,496
Furniture, fixtures, and equipment 3,959 3,330
Equipment under capital lease obligations 366 844
--------- ---------
15,876 13,507
Less accumulated depreciation & amortization 10,455 8,466
--------- ---------
Property and equipment, net $ 5,421 $ 5,041
========== ==========
</TABLE>
Depreciation expense of $2,337, $1,628, and $1,197 was charged to earnings for
the years ended December 31, 1998, 1997, and 1996.
F-11
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS
Intangible assets are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
----------- ---------
<S> <C> <C>
Capitalized production costs $ 1,076 $ 1,076
less accumulated amortization 1,009 931
--------- --------
Capitalized production costs, net $ 67 $ 145
========= ========
Intangible assets $ 5,138 $ 3,805
less accumulated amortization 3,004 2,489
--------- --------
Intangible assets, net $ 2,134 $ 1,316
========= ========
Goodwill $ 26,507 $12,699
less accumulated amortization 2,848 1,636
--------- --------
Goodwill, net $ 23,659 $11,063
========= ========
</TABLE>
Amortization expense of capitalized production costs for the years ended
December 31, 1998, 1997, and 1996 was $78, $371, and $226, respectively.
Amortization expense of goodwill and intangible assets for the years ended 1998,
1997 and 1996 was $1,727, $655, and $930, respectively.
5. INCOME TAXES
For financial reporting purposes, income (loss) before income taxes and
extraordinary loss consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ---------
<S> <C> <C> <C>
United States $ 675 $2,343 $1,973
Foreign (206) (216) (325)
------------ ------------ ---------
$ 469 $2,127 $1,648
============ ============ =========
</TABLE>
F-12
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes and extraordinary loss consists of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 1,610 $1,520 $ 84
State 230 117 110
Foreign 5 (14) (70)
--------- --------- ---------
Total current 1,845 1,623 124
--------- --------- ---------
Deferred:
Federal (1,084) (496) 553
State (245) (146) 163
Foreign (27) (5) -
--------- --------- ----------
Total deferred (1,356) (647) 716
--------- --------- ----------
$ 489 $ 976 $ 840
========= ========= ===========
</TABLE>
The difference between tax expense and the amount computed by applying the
statutory federal income tax rate (34%) to income before income taxes and
extraordinary loss is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1998 1997 1996
----------- ----------- -------------
<S> <C> <C> <C>
Statutory rate applied to
pre-tax income $ 159 $ 723 $ 560
Add (deduct):
State income taxes, net of federal benefit (10) 77 73
Foreign operating losses for which a tax
benefit has not been recorded 48 55 42
Effect of goodwill amortization 106 107 98
Effect of other non-deductible expenses 120 46 55
Other 66 (32) 12
----------- ----------- -------------
$ 489 $ 976 $ 840
=========== =========== =============
</TABLE>
F-13
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The Company's deferred tax liabilities and assets consists of the following
temporary differences:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Deferred tax liabilities:
Capitalized production costs $ (669) $(929)
--------------- --------------
Total deferred tax liabilities (669) (929)
--------------- --------------
Deferred tax assets:
Reserves for doubtful accounts 149 50
Fixed assets 55 117
Compensation 1,186 162
Net operating loss carryforwards 35 110
Valuation allowance (34) (34)
Other 209 99
--------------- --------------
Total deferred tax assets 1,600 504
--------------- --------------
Net deferred tax assets (liabilities) $ 931 $(425)
=============== ==============
</TABLE>
At December 31, 1998, the Company has net short-term deferred tax assets in the
amount of $1,335, which are reported in the balance sheet in prepaid and other
current assets. At December 31, 1998 and 1997, unremitted earnings of foreign
subsidiaries were approximately $240 and $424, 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.
Income taxes paid in the U.S. for 1998, 1997, and 1996 were $1,959, $841, and
$677, respectively. Income taxes of $27 were paid in the U.K. in 1998. No income
taxes were paid in the U.K. in 1997 and 1996.
6. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Working capital facilities $ 6,973 $ 990
Notes payable 11,250 5,351
-------------- --------------
Total debt 18,223 6,341
Less current maturities 2,623 1,251
-------------- --------------
Long-term portion $15,600 $5,090
============== ==============
</TABLE>
F-14
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DEBT (CONTINUED)
During July 1998, the Company entered into an agreement with a three bank
syndicate for an increased credit facility of $32,000. The credit facility
provided $12,500 of term notes and up to $19,500 of revolving credit. All debts
outstanding as of June 30, 1998 were repaid with proceeds from the new facility.
This new facility is for a three-year term and is secured by substantially all
of the assets of the Company. Availability of funds under the new facility is
based on a multiple of trailing EBITDA. As of December 31, 1998, the Company had
$5,752 of additional available credit. In March 1999, the lender amended the
loan agreement to exclude the unusual charge related to the separation agreement
with the Company's former Chairman and CEO and granted a waiver of covenant
defaults which occurred during 1998.
As of December 31, 1998, the Company had outstanding $6,973 on the revolving
credit facility and $11,250 remaining on the term loans. The revolving credit
facility carries an interest rate of either the bank's designated base rate
("Base Rate") (7.75% at December 31, 1998) or LIBOR (3-month LIBOR was 5.07% at
December 31, 1998) plus 250 basis points. The term loan also carries a variable
rate of either the bank's designated base rate or LIBOR plus 250 basis points.
In order to reduce the impact on the Company from rising interest rates, the
Company entered into an interest rate swap agreement with a notional amount
equal to the value of the outstanding term notes. The swap agreement effectively
fixed the term note interest rate at 7.24%. The weighted average interest rate
on short term borrowings at December 31, 1998 and 1997, were 7.68% and 9.49%,
respectively. Given that the interest rates on the revolving credit facility and
the notes are based on current market rates, the carrying value of the amounts
due under the credit facility approximates their fair value at December 31,
1998.
Aggregate maturities of debt for the years ending December 31 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999............................................................. $2,623
2000............................................................. 2,500
2001............................................................. 9,350
2002............................................................. 2,500
2003............................................................. 1,250
</TABLE>
The Company paid interest of $1,527, $679, and $379 during the years ended
December 31, 1998, 1997, and 1996, respectively. Also during 1997, the Company
paid $1,203 of deferred interest associated with the repayment of its
subordinated debt.
F-15
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INTEREST RATE INSTRUMENTS
In 1998, the Company entered into interest rate cap and interest rate swap
agreements to reduce its exposure to fluctuations in interest rates. As of
December 31, 1998, selected information related to such agreements is as
follows:
<TABLE>
<CAPTION>
Notional Amount Maturity Fair Value
-------------------------------- -------------------- ---------------------
<S> <C> <C> <C>
Interest Rate Cap $ 3,000 2001 $ 2
Interest Rate Swap $11,250 2003 $29
</TABLE>
The interest rate cap agreement requires premium payments to the counterparty
based upon the notional principal amount. The interest rate cap agreement
entitles the Company to receive from the counterparty the amounts, if any, by
which the selected market interest rate exceeds the strike rate stated in the
agreement. The Company utilizes interest rate swaps to reduce the impact on
interest expense of fluctuating interest rates on its variable rate debt. Under
the Company's interest rate swap agreement, the Company pays a fixed rate of
interest and receives a 3-month LIBOR floating rate.
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>
1999...................................................... $ 87 $ 2,905
2000...................................................... 14 2,887
2001...................................................... - 2,300
2002...................................................... - 1,796
2003...................................................... - 1,315
Thereafter................................................ - 1,425
------------- --------------
Total minimum lease payments.............................. $101 $12,628
==============
Less amounts representing interest........................ 4
-------------
Capitalized lease obligations............................. $ 97
=============
</TABLE>
At December 31, 1998, the current portion of capital lease obligations of $84
was recorded in the balance sheet in accrued expenses. Rent expense under
operating leases was $2,641, $2,178, and $1,480, for the years ended December
31, 1998, 1997 and 1996, 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.
F-16
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. 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 shares of
common stock of the Company as of December 31, 1998 and 1997. The Company
contributed $95, $104, and $75 to the plan in 1998, 1997, and 1996,
respectively.
10. STOCKHOLDERS' EQUITY
In 1996, the Company repurchased 102,182 shares of the Company's common stock at
a cost of $580. Also, during 1996, 48,949 shares valued at $241 were issued to
the three senior principals of SRC. In December 1997, the Company sold 50,000
shares to a senior executive of the Company for a fair market value of $269. In
November 1998, 50,000 shares were sold to a second senior officer for $228, the
fair market value at the time of the transaction.
11. STOCK OPTIONS
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.
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.
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
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 1998 and
1997 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.
F-17
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTIONS (CONTINUED)
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.
On June 9, 1998, the 1997 Stock Incentive Plan was amended to increase the
number of shares available for grant from 875,000 to 1,125,000 and to revise the
date of grant of formula options for Non-employee Directors from the date of the
annual meeting to January 2 of each year. 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, 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
1998
----
Granted 236,000 $5.60
Canceled (24,334) $5.61
-------------
Outstanding Balance at December 31, 1998 1,169,706 $5.64
=============
</TABLE>
F-18
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. 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, 1998, 1997 and 1996 were 733,708, 533,791,
and 386,709, respectively. Exercise prices for options outstanding as of
December 31, 1998 for the plan ranged from $3.63 to $8.00 per share. The
weighted average remaining term of the outstanding options is 4.9 years.
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 adjusted to the pro forma amounts indicated in
the table below:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ -------------
<S> <C> <C> <C>
Net income (loss) - as reported....................... ($170) $1,151 $ 808
Net income (loss) pro forma.......................... ($514) $ 593 $ 341
Earnings (loss) per share - as reported............... ($.04) $ .28 $ .19
Earnings (loss) per share - pro forma................. ($.12) $ .14 $ .08
</TABLE>
F-19
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTIONS (CONTINUED)
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>
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Expected dividend yield............................... 0% 0% 0%
Expected stock price volatility....................... 42.3% 40.2% 34.9%
Risk-free interest rate............................... 5.5% 5.5% 5.7%
Expected life of options.............................. 7 years 7 years 7 years
</TABLE>
The weighted average fair value of options granted during 1998 and 1997 were
$2.97 and $2.15 per share, respectively.
12. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1998 1997 1996
------------- ------------ ------------
<S> <C> <C> <C>
(000's omitted, except per share data)
Numerator:
Income (loss) before extraordinary loss ($20) $1,151 $ 808
------------- ------------ ------------
Numerator for basic and diluted earnings per share ($20) $1,151 $ 808
============= ============ ============
Denominator:
Denominator for basic earnings per share,
Weighted-average shares 4,202 4,144 4,169
Effect of dilutive stock options - 2 44
------------- ------------ ------------
Denominator for diluted earnings per share
Adjusted weighted-average shares 4,202 4,146 4,213
============= ============ ============
Basic earnings per share $ .00 $ .28 $ .19
============= ============ ============
Diluted earnings per share $ .00 $ .28 $ .19
============= ============ ============
</TABLE>
Shares attributable to the conversion of convertible debentures were not
included in 1996 as they expired on November 30, 1996.
F-20
<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 $123 and $114 at December 31, 1998 and 1997,
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 (See Note 14).
14. UNUSUAL CHARGE
In the fourth quarter of 1999, the Company took a fourth quarter pre-tax charge
of $2,470 for expenses incurred in relation to an agreement with its former
Chief Executive Officer providing for his resignation as a Director, Chairman,
and Chief Executive Officer of the Company and the buy-out of his pre-existing
employment contract. Included in the pre-tax charge of $2,470 was a write-off of
$186 related to the termination of a split-dollar life insurance policy for this
former officer and the cancellation of the repayment guarantee.
15. EXTRAORDINARY LOSS
The Company recorded an extraordinary loss of $150, net of tax benefits, in the
second quarter of 1998. This non-cash charge is due to the write-off of
unamortized loan origination fees associated with the Company's prior credit
facility.
16. SEGMENTS
The Company identifies its segments based on the Company's geographic locations
and industries in which the Company operates. The Company currently has three
reportable segments: U.S. Market Research, UK Market Research, and Teleservices,
the Company's model-based telemarketing division. There were no significant
intersegment events which materially affected the financial statements. The
Company measures segment profits as operating profit, which is defined as income
before interest expenses and income taxes. Information on segments and a
reconciliation to consolidated total, are as follows:
F-21
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
U.S. Market UK Market Total
Research Research Teleservices Segments Other Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998:
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $40,144 $14,349 $14,986 $69,479 $ 3,688 $73,167
Depreciation and amortization 1,798 632 1,568 3,998 144 4,142
Unusual charge (2,470) (2,470)
Operating income 3,561 253 1,083 4,897 (2,557) 2,340
Interest expense 1,871 1,871
Income (loss) before income taxes
and extraordinary loss $ 469
Total assets $24,044 $ 8,832 $16,259 $49,135 $ 1,769 $50,904
Capital expenditures $ 1,134 $ 421 $ 269 $ 1,824 $ 58 $ 1,882
Year Ended December 31, 1997:
- -----------------------------------
Revenues from external customers $36,726 $14,116 $ 2,377 $53,219 $ 3,454 $56,673
Depreciation and amortization 1,870 647 52 2,569 85 2,654
Operating income (loss) 2,856 (136) (264) 2,456 345 2,801
Interest expense 674 674
Income before income taxes $ 2,127
Total assets $21,182 $ 8,794 $ 1,528 $31,504 $ 976 $32,480
Capital expenditures $ 635 $ 177 $ 154 $ 966 $ 45 $ 1,011
Year Ended December 31, 1996:
- -----------------------------------
Revenues from external customers $35,310 $10,792 - $46,102 $ 1,171 $47,273
Depreciation and amortization 1,822 514 - 2,336 17 2,353
Operating income (loss) 2,643 (200) - 2,443 (18) 2,425
Interest expense 777 777
Income before income taxes $ 1,648
Total assets $22,722 $ 9,757 - $32,479 $ 293 $32,772
Capital expenditures $ 1,515 $ 127 - $ 1,642 $ 5 $ 1,647
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
International long-lived assets are $5,960, $5,335 and $5,664 in 1998, 1997, and
1996, respectively. In 1998, revenues from one customer of the Company's
Teleservices segment represented $13,441 of the Company's total revenues. In
1997 and 1996, revenues from one client of the U.S. Market Research segment
represented $9,720 and $11,279 of the Company's total revenues, respectively.
Revenues in the "other" category were generated from the Company's Asia and
Mexico operations. As these segments are not significant, results are not
presented separately.
F-22
<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 Charged to Charged to Balance
Description beginning costs other account Deductions - at end
of period and expense - describe describe of period
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Deducted from asset account:
Allowance for Doubtful Accounts $ 170 $ 291 $ 252 (1) $ 209
Accumulated Amortization:
Capitalized Production Costs 931 78 1,009
Goodwill 1,636 1,212 2,848
Intangible Assets 2,489 515 3,004
--------- ---------- --------- --------
Totals $ 5,226 $ 2,096 $ 252 $ 7,070
========= ========== ========= ========
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
========= ========== ========= ========
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Uncollectible accounts written-off
S-1
<PAGE>
OPINION RESEARCH CORPORATION
Annual Report on Form 10-K
EXHIBIT INDEX
Exhibit No.
- -----------
3.1 Amended and 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 (the "Form S-
1").
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Form S-1.
4.1 Rights Agreement, dated September 13, 1996, between the Registrant and
StockTrans, Inc. - Incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on September 27, 1996.
4.2 Amendment to Rights Agreement dated August 8, 1998.
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 Form S-1.
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 Form S-1.
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 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 10-K").
10.1 Employment Agreement between the Registrant and Michael R. Cooper.
Incorporated by reference to Exhibit 10.1 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "1996
10-K").
<PAGE>
10.2 Agreement and General Release, dated February 12, 1999, between the
Registrant and Michael R. Cooper - Incorporated by reference to
Exhibit 10 to the Registrant's Current Report on Form 8-K filed with
the Securities and Exchange Commission on February 16, 1999.
10.3 Employment Agreement between the Registrant and John F. Short.
Incorporated by reference to Exhibit 10.2 to the 1996 10-K.
10.4 Amendment to Employment Agreement between the Registrant and John F.
Short dated February 12, 1998.
10.5 Employment Agreement between the Registrant and Douglas L. Cox dated
October 26, 1998.
10.6 Employment Agreement between the Registrant and James T. Heisler.
Incorporated by reference to Exhibit 10.6 to 1994 10-K.
10.7 Employment Agreement between the Registrant and Gregory C. Ellis.
Incorporated by reference to Exhibit 10.5 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995 (the "1995
10-K").
10.8 The Registrant's Retirement Plan - Incorporated by reference to
Exhibit 10.7 to the Form S-1.
10.9 1997 Stock Incentive Plan - Incorporated by reference to Exhibit 10.7
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997.
10.10 Lease Agreement dated May 15, 1995 between the Registrant and the
Maumee Woodlands IV Company (Maumee Facility) - Incorporated by
reference to Exhibit 10.15 to the 1995 10-K.
10.11 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 Form S-1.
10.12 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 Form S-
1.
10.13 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 third floor of GSR
facility) - Incorporated by reference to Exhibit 10.20 to the Form S-
1.
<PAGE>
10.14 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 Form S-1.
10.15 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 Form S-1.
10.16 Lease dated August 25, 1994 between the Registrant and H.C.
Properties, USA, Inc. (Tucson Facility) - Incorporated by reference to
Exhibit 10.22 to the 1994 10-K.
10.17 Lease dated December 13, 1998 between Life Assurance Holding Corporat
ion Limited and ORC International Limited (UK Facility).
10.18 Asset Purchase Agreement between registrant and Pro Tel Marketing,
Inc. - Incorporated by reference to Exhibit 2.1 to the Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 20, 1998.
10.19 Loan and Security Agreement, dated July 20, 1998, among Chase
Manhattan Bank, the Bank of New York, and First Union National Bank
and Opinion Research Corporation, ORC Inc., and ORC ProTel, Inc.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP dated March 19, 1999.
27 Financial Data Schedule (EDGAR only).
<PAGE>
Exhibit 4.2
AMENDMENT TO RIGHTS AGREEMENT
-----------------------------
Amendment, dated as of August 8, 1998, to the Rights Agreement (as
amended, the "Rights Agreement"), dated as of September 13, 1996, between
Opinion Research Corporation, a Delaware corporation (the "Company"), and
StockTrans, Inc., a Pennsylvania corporation, as rights agent (the "Rights
Agent").
Pursuant to Section 26 of the Rights Agreement, the Company and the
Rights Agent may from time to time supplement or amend any provision of the
Rights Agreement in accordance with such Section 26. All acts and things
necessary to make this Amendment a valid agreement, enforceable according to its
terms, have been done and performed, and the execution and delivery of this
Amendment by the Company and the Rights Agent have been in all respects duly
authorized by the Company and the Rights Agent.
In consideration of the foregoing and the mutual agreements set forth
herein, the parties hereto have agreed as follows:
1. The Rights Agreement is hereby amended by deleting Section 1(g)
thereof in its entirety.
2. Section 23(a) of the Rights Agreement is hereby amended by
deleting the words "there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors" and substituting therefor the words "such authorization shall require
the concurrence of 75% of the members of the Board of Directors of the Company".
3. Section 26 of the Rights Agreement is hereby amended:
(a) by deleting the parenthetical "(which lengthening or
shortening, following the first occurrence of an event set forth
in clauses (i) and (ii) of the first proviso to Section 23(a)
hereof, shall be effective only if there are Continuing Directors
and shall require the concurrence of a majority of such
Continuing Directors)" in its entirety; and
(b) by inserting the following words at the end of the
penultimate sentence of Section 26: "and following the first
occurrence of an event set forth in clauses (i) and (ii) of the
first proviso to Section 23(a) hereof, any supplement or
amendment shall require the concurrence of 75% of the members of
the Board of Directors of the Company".
4. Section 28 of the Rights Agreement is hereby amended:
<PAGE>
(a) by deleting the words "the Continuing Directors" the
first three times such words appear and substituting therefor the
words "75% of the members of the Board of Directors of the
Company"; and
(b) by deleting the words "or the Continuing Directors" in
clause (y) of the last sentence of such Section 28.
5. Section 30 of the Rights Agreement is hereby amended by deleting
the last sentence thereof in its entirety.
6. Exhibit B to the Rights Agreement is hereby amended by deleting
the words "a majority of the Continuing Directors (as such term is defined in
the Rights Agreement)" and substituting therefor "75% of the members of the
Board of Directors of the Company".
7. Exhibit C to the Rights Agreement is hereby amended:
(a) by deleting the words "a majority of the Continuing
Directors (as defined below)" in the tenth paragraph thereof and
substituting therefor the words "75% of the members of the Board
of Directors of the Company";
(b) by deleting the eleventh paragraph thereof which begins
"The term `Continuing Director' means" in its entirety;
(c) by adding the words "(in certain circumstances, with the
concurrence of 75% of the members of the Board of Directors of
the Company)" to the end of the first sentence of the thirteenth
paragraph thereof; and
(d) by deleting the words "the Continuing Directors" in the
thirteenth paragraph thereof and substituting therefor the words
"75% of the members of the Board of Directors of the Company".
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Rights Agreement to be duly executed and attested, all as of the date and
year first above written.
Attest: OPINION RESEARCH CORPORATION
By: /s/ James T. Heisler By: /s/ John F. Short
---------------------------- ---------------------
Name: James T. Heisler Name: John F. Short
Title: Director and Title: President
Executive Vice President
Attest: STOCKTRANS, INC.
By: /s/ Lisa Ann Klevence By: /s/ Jonathan Miller
----------------------------- ---------------------
Name: Lisa Ann Klevence Name: Jonathan Miller
Title: Vice President, Operations Title: President
<PAGE>
Exhibit 10.4
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is made as of the 12th day of
February, 1998 by and between OPINION RESEARCH CORPORATION, a Delaware
corporation (the "Company") and JOHN F. SHORT (the "Executive").
W I T N E S S E T H
WHEREAS, the Company and the Executive have entered into an Employment
Agreement dated as of the 1st day of November, 1996 (the "Agreement"); and
WHEREAS, the parties wish to amend the Agreement by clarifying the
definition of Base Compensation set forth therein to include any increases to
such Base Compensation determined by the Compensation Committee of the Board
from time to time.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. The Agreement is hereby amended by adding the following sentence to
the end of paragraph 3(a): "Such Base Compensation as increased from
time to time by the Compensation Committee of the Board shall be
deemed to be the Executive's Base Compensation for purposes of this
Agreement".
2. Except as provided in the preceding paragraph, all other terms and
conditions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
OPINION RESEARCH CORPORATION
By:/s/Michael R. Cooper
_________________________
/s/John F. Short
_________________________ (SEAL)
John F. Short
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 26th
day of October, 1998, by and between OPINION RESEARCH CORPORATION, a Delaware
Corporation (the "Company"), and Douglas Cox (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company believes that it would benefit from the
application of the Executive's particular and unique skill, experience and
background in the management and operation of the Company, and wishes to employ
the Executive as a senior executive officer of the Company; and
WHEREAS, the parties desire by this Agreement to set forth the terms
and conditions of the employment relationship between the Company and the
Executive.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants in this Agreement, the Company and the Executive agree as follows:
1. Employment and Duties.
---------------------
(a) The Company hereby employs the Executive as a senior executive
officer on the terms and conditions provided in this Agreement and the Executive
agrees to accept such employment subject to the terms and conditions of this
Agreement. The Executive shall serve as the Company's Executive Vice President
and Chief Financial Officer, reporting directly to the Chief Executive Officer
of the Company. The Executive shall have responsibility for carrying out
financial and such administrative duties as determined by the Chief Executive
Officer of the
-1-
<PAGE>
Company, execute the policy and direction of the Company, as well as such other
executive duties and responsibilities, as shall from time to time be determined
by the Chief Executive Officer of the Company and the Company's Board of
Directors.
(b) The Executive agrees to devote his best efforts and
substantially all of his time, attention, energy and skill to performing his
duties hereunder. Provided that such activities shall not violate any provision
of this Agreement or materially interfere with the performance of his duties
hereunder, nothing herein shall prohibit the Executive (i) from engaging in
charitable, civic, fraternal, or trade group activities, (ii) from writing
academic, trade or mainstream papers or other publishable books, (iii) from
investing his assets in other entities or business ventures, or (iv) from
providing incidental assistance to his former employer as may be requested for a
reasonable period of time to provide continuity and transition.
(c) Without the Company's prior consent, the Executive shall
not obtain goods or services or otherwise deal on behalf of the Company with any
business or entity in which the Executive or a member of his family has a
financial interest or from which the Executive or a member of his immediate
family may derive a financial benefit as a result of such transaction, except
that this prohibition shall not apply to any public company in which the
Executive or a member of his family owns less than one percent of the
outstanding stock.
2. Term. The initial term of this Agreement shall commence on the
----
date hereof and shall terminate on December 31, 1999 (the "Initial Term"),
unless earlier terminated in accordance with the terms of this Agreement. This
Agreement shall continue in full force and effect after the expiration of the
Initial Term (the "Extended Term"), which Extended Term may
-2-
<PAGE>
be terminated by the Company for any reason with at least 30 days' prior written
notice. Paragraph 8 shall apply to such termination.
3. Compensation.
------------
(a) Base Compensation. As compensation for performing the
-----------------
services required by this Agreement, the Company shall pay to the Executive an
annual salary ("Base Compensation") of $200,000, payable in equal installments
pursuant to the Company's customary payroll procedures in effect for its
executive personnel at the time of payment, but in no event less frequently than
monthly, subject to withholding for applicable federal, state, and local taxes.
The Executive shall not be entitled to additional compensation for serving on
any ORC board on which the Executive may be asked to serve. The Executive's Base
Compensation shall not be reduced during the term of this Agreement. Following
the Initial Term, the Executive's compensation shall be reviewed annually by the
Company's Chief Executive Officer no later than March of each calendar year, it
being understood that there shall be no obligation to increase Executive's
compensation as a result of such review.
(b) Incentive Compensation. In addition to Base Compensation,
----------------------
the Executive may receive additional compensation ("Incentive Compensation").
The Incentive Compensation shall be pursuant to short-term and/or long-term
incentive compensation programs which shall be established from time to time by
the Company. The maximum Incentive Compensation to which the Executive shall be
eligible during the Initial Term shall be $60,000.
(c) Stock Options. The Executive shall receive on the date
-------------
hereof options to purchase 10,000 shares of common stock of the Company
("Shares") and shall receive additional
-3-
<PAGE>
options to purchase such amount of Shares, not to exceed 50,000, equal to the
amount of Shares purchased by the Executive from the Company on or prior to
November 30, 1998. The options shall have an exercise price equal to the closing
price of the Shares on the NASDAQ NMS on the date prior to the date of grant,
shall vest one-third on each of the first three anniversaries of the date of
grant, and shall expire seven years after the date of grant.
4. Executive Benefits. During the term of this Agreement the
------------------
Executive and his eligible dependents shall have the right to participate in any
retirement plans (qualified and non-qualified), pension, insurance, health,
disability or other benefit plan or program that has been or is hereafter
adopted by the Company (or in which the Company participates), according to the
terms of such plan or program.
5. Vacation and Leaves of Absence. The Executive shall be entitled
------------------------------
to 20 vacation days during each calendar year, prorated for 1998 based on the
number of days during which the Executive was employed by the Company. Any
vacation days that are not taken in a given calendar year shall not accrue or
carry over from year to year. Upon any termination of this Agreement for any
reason whatsoever, accrued and unused vacation for the year in which this
Agreement terminates will be paid to the Executive within 10 days of such
termination based on his Base Compensation in effect on the date of such
termination. In addition, the Executive shall be entitled to the same sick leave
and holidays provided to other senior executive officers of the Company.
6. Expenses.
--------
(a) Business Expenses. The Executive shall be promptly
-----------------
reimbursed against presentation of vouchers or receipts for all reasonable and
necessary expenses (other than
-4-
<PAGE>
expenses related to the use of an automobile) incurred by him in connection with
the performance of business-related duties.
(b) Automobile Expense. During the term of this Agreement, in
------------------
order to facilitate the performance of the Executive's duties hereunder, and
otherwise for the convenience of the Company, the Company shall provide the
Executive with an automobile allowance of $8,000 per year, prorated for 1998
based on the number of days during which the Executive was employed by the
Company.
7. Indemnification. The Company shall (and is hereby obligated to)
---------------
indemnify (including advance payment of expenses) the Executive in each and
every situation where the Company is obligated to make such indemnification
pursuant to applicable law and the relevant portions of the Company's
Certificate of Incorporation and By-Laws. Such indemnification shall in each
case include payment of reasonable attorneys' fees and expenses, including where
permitted by applicable law, advancement of reasonable attorneys' fees and
expenses.
8. Termination and Termination Benefits.
------------------------------------
(a) Termination by the Company For Cause. The Company may
------------------------------------
terminate this Agreement prior to its expiration date without prior notice for
"cause". In such event, the Executive shall be paid for his services hereunder
only his Base Compensation up to the effective date of such termination. For
purposes of this Section 8(a), "cause" shall mean (i) an act of dishonesty by
the Executive constituting a felony or resulting or intended to result in gain
to, or personal enrichment of, the Executive at Company's expense, (ii) the
engaging by the Executive in misconduct which is demonstrably injurious to the
Company, (iii) the refusal of the
-5-
<PAGE>
Executive substantially to perform his duties hereunder, (iv) the violation of
any reasonable express direction of the Chief Executive Officer of the Company
or the Company's Board of Directors, or of any reasonable rule, regulation,
policy or plan established by the Company from time to time which governs the
Executive in the performance of his work, (v) the use by the Executive of any
illegal substance, or the use by the Executive of alcohol or any controlled
substance to an extent that it interferes with the performance of the
Executive's duties under this Agreement, and (vi) the substantial breach by the
Executive of his obligations in this Agreement.
(b) Termination by the Company Without Cause. The Company may
----------------------------------------
terminate this Agreement at any time (within the Initial Term or the Extended
Term) and for any reason upon 30 days' written notice to the Executive. In the
event of such termination, except if termination is pursuant to subparagraphs
(a), (c) or (d) of this Paragraph 8, the Executive shall be entitled, as his
sole remedy, to continue to receive his Base Compensation and, if permitted by
the applicable Company plans, medical and life insurance benefits, until 11
months after the effective date of such termination. The Executive shall not be
required to mitigate the amount of any payments provided for in this
subparagraph by seeking employment or otherwise; but the amount of such payments
shall be reduced by any compensation or benefit earned by the Executive after
termination of his employment.
(c) Disability. The Company may terminate this Agreement due to
----------
illness, physical or mental disability, or other incapacity, in accordance with
the Company's disability practices and policies in effect from time to time.
(d) Termination by the Executive Without Cause. The Executive may
------------------------------------------
terminate this Agreement at any time and for any reason upon 30 days' written
notice to the
-6-
<PAGE>
Company (during which period the Executive shall, if requested in writing by the
Company, continue to perform his duties as specified under this Agreement). In
such event, the Executive shall be paid only his Base Compensation for his
services hereunder up to the effective date of such notice.
(e) Termination by the Executive With Cause. The Executive may
---------------------------------------
terminate this Agreement prior to its expiration date or any extension thereof
without prior notice for "cause", in which event the Executive shall be
compensated in the same manner as if the Company had terminated the Executive
without cause pursuant to Paragraph 8(b). For purposes of this Paragraph 8(e),
"cause" shall mean exclusively (i) a material reduction in the level of
responsibility or authority of the Executive, or (ii) the Company's substantial
breach of its obligations in this Agreement.
(f) Death Benefit. Notwithstanding any other provision of this
-------------
Agreement, this Agreement shall terminate on the date of the Executive's death.
In such event the Executive's estate shall be paid his Base Compensation for the
remainder of the month in which such termination occurs.
9. Prior Agreements, Conflicts of Interest. The Executive
--------------------------------------
represents to Company (a) that there are no restrictions, agreements or
understandings, oral or written, to which the Executive is a party or by which
the Executive is bound that prevent or make unlawful the Executive's execution
or performance of this Agreement; (b) none of the information supplied by the
Executive to Company or any representative of Company in connection with the
Executive's employment by Company misstated a material fact or omitted
information necessary to make the information supplied not materially
misleading; and (c) the Executive does not have
-7-
<PAGE>
any business or other relationship that creates a conflict between the interests
of the Executive and the Company.
10. Miscellaneous.
-------------
(a) Integration; Amendment. This Agreement constitutes the
----------------------
entire agreement between the parties hereto with respect to the employment
matters set forth herein. No amendments or additions to this Agreement shall be
binding unless in writing and signed by all parties hereto.
(b) Severability. If any part of this Agreement is contrary to,
------------
prohibited by, or deemed invalid under applicable law or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited, or invalid, but the remainder of this Agreement shall not be invalid
and shall be given full force and effect so far as possible.
(c) Waivers. The failure or delay of any party at any time to
-------
require performance by the other party of any provision of this Agreement, even
if known, shall not affect the right of such party to require performance of
that provision or to exercise any right, power, or remedy hereunder, and any
waiver by any party of any breach of any provision of this Agreement shall not
be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself, or a waiver of any right, power, or
remedy under this Agreement. No notice to or demand on any party in any case
shall, of itself, entitle such party or the other to further notice or demand in
similar or other circumstances.
(d) Burden and Benefit. This Agreement shall be binding upon
------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns.
-8-
<PAGE>
Additionally, the Company's obligation to pay termination compensation and
benefits set forth herein shall survive any termination of this Agreement.
(e) Governing Law; Headings. This Agreement and its construction,
-----------------------
performance, and enforceability shall be governed by, and construed in
accordance with, the laws of the State of New Jersey. Headings and titles herein
are included solely for convenience and shall not affect, or be used in
connection with, the interpretation of this Agreement.
(f) Notices. All notices, requests, demands and other communications
-------
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when delivered
(personally, by courier service such as Federal Express, or by other messenger
or by facsimile transmission and followed promptly by mail) or four days
following the day when deposited in the United States mails, registered or
certified mail, postage prepaid, return receipt requested, addressed as set
forth below:
If to the Executive:
Douglas L. Cox
1220 Rodman Street
Philadelphia, PA 19147
If to the Company:
Opinion Research Corporation
23 Orchard Road
Skillman, New Jersey 08558
Attention: Dr. Michael R. Cooper, CEO
Fax #: 908-281-5105
-9-
<PAGE>
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
OPINION RESEARCH CORPORATION
By: /s/ Michael R. Cooper
----------------------------------------------
/s/ Douglas L. Cox (SEAL)
----------------------------------------------
Douglas L. Cox
-10-
<PAGE>
DATED 28 January 1999
LIFE ASSURANCE HOLDING CORPORATION LIMITED (1)
and
ORC
INTERNATIONAL LIMITED (2)
UNDERLEASE
of The Angel Corner House 1 Islington
High Street London in the Borough of
Islington
TERM To 22 December 2006
FROM 18th November 1998
BASIC RENT (Pounds)83,900 (subject to review)
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C>
1 Definitions and Interpretation 1
2 Demise and rent......................................... 5
3 Tenant's covenants...................................... 5
4 Landlord's Covenants.................................... 5
5 Forfeiture.............................................. 5
6 Miscellaneous........................................... 6
7 Landlord and Tenant (Covenants) Act 1995................ 7
Schedule 1................................................ 8
The Premises.............................................. 8
Schedule 2................................................ 9
Title Matters............................................. 9
Schedule 3................................................ 10
Review of Basic Rent...................................... 10
Schedule 4................................................ 12
Insurance................................................. 12
Schedule 5................................................ 14
Tenant's Covenants........................................ 14
Schedule 6................................................ 19
Landlord's Covenants...................................... 19
Schedule 7................................................ 20
Guarantors Covenants...................................... 20
</TABLE>
<PAGE>
THIS LEASE made on 28 January 1999 BETWEEN:
(1) LIFE ASSURANCE CORPORATION LIMITED (Company No 2970583) whose registered
office is at Windsor House Telford Centre Telford Shropshire TF3 4NB
("the Landlord")
(2) O R C INTERNATIONAL LIMITED (Company number 1088226) whose registered
office is at 361/373 City Road London EC1V LJS ("the Tenant")
WITNESSES as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Lease unless the context otherwise requires the following
expressions have the following meanings:
"AUTHORITY" means any statutory public local or other authority or any
court of law or any government department or any of them or any of their
duly authorised officers
"BASIC RENT" means
(a) from 18th November 1998 to and including 17th February 1999 a peppercorn
(if demanded)
(b) from and including 18th February 1999 to and including 17th April
(Pounds)47,300 per annum
(c) from and including 18th April 1999 to and including 24th December 2001
(Pounds)83,900 per annum
(d) thereafter as from time to time reviewed under schedule 3
"BUILDING" means 1 Islington High Street as the same as described in the
Superior Lease
"CONDUITS" means sewers drains pipes wires cables ducts gutters fibres and
any other medium for the passage or transmission of soil water gas
electricity air smoke light information or other matters and includes where
relevant ancillary equipment and structures
"CONNECTED PERSON" means any person firm or company which is connected with
the Tenant for the purposes of Section 839 Income and Corporation Taxes Act
1988
"CONSENT" means an approval permission authority licence or other relevant
form of approval given by the Landlord in writing
"DETERMINATION" means the end of the Term however that occurs
"ENACTMENT" means:
(a) any Act of Parliament and
(b) any European Community legislation or decree or other supranational
legislation or decree having effect as law in the United Kingdom
and references (whether specific or general) to any Enactment include
any statutory modification or re-enactment of it for the time being in
force and any order instrument plan regulation permission or direction
made or issued under it or under any Enactment replaced by it or
deriving validity from it
"GROUP COMPANY" means any company of which the Tenant is a Subsidiary or
which has the same Holding Company as the Tenant where Subsidiary and Holding
Company have the meanings given to them by section 736 Companies Act 1985
"INSURANCE CHARGE" means the cost to the Landlord of reimbursing the Superior
Landlord and of effecting and maintaining the Insurance Policies including
where relevant the cost of assessing any insured amounts and
"INSURANCE POLICIES" means the insurance policy or policies maintained by the
Landlord or any Superior Landlord in respect of the Premises covering damage
by Insured Risks, Loss of Rent, public liability and other matters
<PAGE>
"INSURED RISKS" means the Insured Risks as defined in the Superior Lease such
other risks as the Landlord or any Superior Landlord may from time to time
require to be covered
"INSURERS" means the underwriters or insurance office with whom the Insurance
Policies are effected
"INTEREST RATE" means four percent above the base lending rate from time to
time of Lloyds Bank plc or such other bank being a member of the Committee of
London and Scottish Bankers as the Landlord may from time to time nominate or
if that base lending rate cannot be ascertained then four percent above such
other rate as the Landlord may reasonably specify and where and whenever
interest is payable at or by reference to the Interest Rate it shall be
calculated on a daily basis and compounded on the Quarter Days
"LANDLORD" includes the immediate reversioner to this Lease from time to time
"LEASE" means this underlease and includes where relevant any deed of
variation licence Consent or other document supplemental to or associated
with this Lease
"LEGAL OBLIGATION" means any obligation from time to time created by any
Enactment or Authority which relates to the Premises or their use and
includes without limitation obligations imposed as a condition of any
Necessary Consents.
"LOSS OF RENT" means loss of all Basic Rent from the Premises due to damage
or destruction by any of the Insured Risks for a period of three years having
regard to potential increases in that income as a result of lettings rent
reviews or other matters which may occur
"NECESSARY CONSENTS" means planning permission and all other consents
licences permissions and approvals whether of a public or private nature
which shall be relevant in the context.
"OPEN MARKET RENT" means the best rent which might reasonably be expected to
be paid by a willing tenant to a willing landlord for a letting of the whole
of the Premises in the open market with vacant possession and without a fine
or premium for the residue of the Term remaining at the Review Date (with the
benefit of the rights relating to extension of term granted by the Landlord
and Tenant Act 1954) commencing on the Review Date and upon the terms of this
Lease (except as to the amount of the Basic Rent but including the provisions
for rent review) and upon the assumptions that:
(a) the Premises are let as a whole with the benefit of all improvements
made by the Tenant
(b) the Tenants have fully observed and performed their obligations
hereunder
"OUTGOINGS" means all rates taxes charges duties assessments impositions and
outgoings of any sort which are at any time during the Term payable whether
by the owner or occupier of property and includes charges for electricity gas
water sewerage telecommunications and other services rendered to or consumed
by the Premises but excludes tax payable by the Landlord on the receipt of
the Basic Rent or on any dealings with its reversion to this Lease and input
Value Added Tax suffered by the Landlord in respect of the Premises
"PERMITTED USE" means use as high class offices
"PLANT" means the plant equipment and machinery from time to time in or on
the Premises including without limitation any lifts hoists generators and
equipment for air-conditioning ventilation heating cooling fire alarm fire
prevention or fire control communication and security
"PREMISES" means the property described in schedule 1 and all additions and
improvements made to it and references to the Premises shall include
reference to any part of them
"PREMISES PLAN" means the attached plans marked as such
"PRESIDENT" means the President from time to time of the Royal Institution of
Chartered Surveyors or any person authorised at the relevant time to act on
his behalf
"QUARTER DAYS" means 25th March 24th June 29th September and 25th December in
each year
"RENT" means all sums reserved as rent by this Lease
<PAGE>
"RENT RESTRICTIONS" means any Enactment which restricts the right of the
Landlord to review the Basic Rent or to recover any Rent under this Lease
"RENT REVIEW SURVEYOR" means the person appointed under paragraphs 3 or 6 of
schedule 3 to determine the Basic Rent at the Review Date
"REVIEW DATE" means 25 December 2001
"REVIEW PERIOD" means the period commencing on the Review Date and expiring
on Determination
"SUPERIOR LANDLORD" means any party having an interest in the Premises in
reversion to the Superior Lease
"SUPERIOR LEASE" means the Lease dated 23 July 1982 and made between (1) The
New River Company Limited and (2) Anthony Gibbs Holdings Limited under which
the Landlord holds the Premises and includes any leases in reversion to that
Lease
"SUPERIOR LEASE PAYMENTS" means all sums and amounts of any kind payable by
the Landlord to the Superior Landlord pursuant to the Superior Lease
including (without prejudice to the generality of the foregoing) the
Quarterly Service Charge (as defined in the Superior Lease) the sums payable
by the Landlord to the Superior landlord pursuant to clause 2.7 (a) of the
Superior Lease and all other outgoings expenses and fees but excluding the
principal rent reserved by clause 1 of the Superior Lease and the Insurance
Charge
"TENANT" means the person for the time being entitled to the Term
"TERM" means the term granted by this Lease
"TITLE MATTERS" means the matters set out in schedule 2
"Value Added Tax" includes any future tax of a like nature
1.2 In this Lease unless the context otherwise requires:
(a) words importing any gender include every gender
(b) words importing the singular number only include the plural number and
vice versa
(c) words importing persons include firms companies and corporations and
vice versa
(d) references to numbered clauses and schedules are references to the
relevant clause in or schedule to this Lease
(e) reference in any schedule to numbered paragraphs are references to the
numbered paragraphs of that schedule
(f) where any obligation is undertaken by two or more persons jointly they
shall be jointly and severally liable in respect of that obligation
(g) any obligation on any party not to do or omit to do anything shall
include an obligation not to allow that thing to be done or omitted to
be done by any undertenant of hat party or by any employee servant agent
invitee or licensee of that party or its undertenant
(h) where the Landlord or the Tenant covenant to do something they shall be
deemed to fulfil that obligation If they procure that it is done
(i) the heading to the clauses schedules and paragraphs shall not affect the
interpretation
(j) any sum payable by one party to the other shall be exclusive of Value
Added Tax which shall where it is chargeable be paid in addition to the
sum in question at the time when the sum in question is due to be paid
upon receipt of a valid VAT invoice
(k) any relevant perpetuity period shall be eighty years from the date of
this Lease
<PAGE>
(l) in the event that the Superior Landlord shall be determined (howsoever
determined) and if in consequence thereof the Tenant shall become the
direct lessee of the Superior Landlord such provisions of the Superior
Lease shall be incorporated in this Lease and shall have full force and
effect as if the same was set out in this Lease in extenso (mutatis
mutandis)
1.3 If and whenever the Landlord is itself a lessee of the Premises:
(a) wherever Consent is required under this Lease the approval of the
Superior Landlord shall also be required under the Superior Lease
(b) any Consent shall be subject to the need for the approval of the
Superior Landlord where appropriate
(c) nothing in this Lease or in any Consent shall imply that the Superior
Landlord's approval will not unreasonably withheld
(d) any indemnities in favour of the Landlord shall be deemed to incorporate
indemnities in favour of the Superior Landlord
(e) references to any right of (or covenant to permit) the landlord to enter
the Premises shall extend to the Superior Landlord and to anyone
authorised by it or otherwise entitled
(f) this Lease shall take effect subject to the rights excepted and reserved
by the Superior Lease (which are by virtue of this provision reserved to
the Landlord as well as the Superior Landlord)
(g) any covenant required to be given for the benefit of the Landlord shall
also be given (if required by the Landlord or the Superior Landlord) for
the benefit of the Superior Landlord
2 DEMISE AND RENT
2.1 The Landlord demises the Premises to the Tenant together with the rights
and excepting and reserving to the Landlord the reservations specified
in the Superior Lease and subject to the Title Matters to hold them to
the Tenant for a term of years starting on 18 November 1998 and
terminating on 22 December 2006 paying during the Term by way of Rent:
Term by way of Rent:
(a) the Basic Rent which shall be paid yearly and proportionately for any
part of a year by equal quarterly instalments in advance on the Quarter
Days the first payment to be made in respect of the period that date to
the next Quarter Day and
(b) the Insurance Charge which shall be paid as stated in paragraph 2 of
schedule 4 and
(c) the Superior Lease Payments which shall be paid at the times and in the
manner set out in the Superior Lease the first payment to be made on the
date hereof in respect of the period from that date to the next Quarter
Day and
(d) any other sums which may become due from the Tenant to the Landlord
under the provisions of this Lease
(e) Value Added Tax on receipt of a valid VAT invoice
3 TENANT'S COVENANTS
------------------
3.1 The Tenant covenants with the Landlord to observe and perform the
lessees covenants and conditions contained in the Superior Lease as if
the same were herein set forth at length (except where such covenants
fall within the Landlords obligations under this Lease) and made between
the Landlord and the Tenant the covenants set out in Schedule 5 and
those on its part contained in Schedules 4 and Schedule 5 and in the
case of those in Schedule 3 wherever these vary from such similar
covenants as are set out in the Superior Lease those in Schedule 5 shall
prevail
<PAGE>
4 LANDLORD'S COVENANTS
--------------------
4.1 The Landlord covenants with the Tenant that whilst the reversion
immediately expectant upon this Lease is vested in it shall observe and
perform the covenants set out in schedule 6 and those on its part
contained in schedule 4
5 FORFEITURE
----------
5.1 Without prejudice to any other rights of the Landlord if:
(a) the whole or part of the Rent remains unpaid twenty-one days after
becoming due (whether demanded or not) or
(b) any of the Tenant's covenants in this Lease are not performed or
observed or
(c) the Tenant or any guarantor of the Tenant's obligations under this
Lease:
(i) proposes or enters into any composition or arrangement with its
creditors generally or any class of its creditors or
(ii) is the subject of any judgment or order made against it which is
not complied with within twenty one days or is the subject of any
execution distress sequestration or other process levied upon or
enforced against any part of its undertaking property assets or
revenue or
(iii) being a company:
(A) is the subject of a petition presented or an order made
resolution passed or analogous proceedings taken for
appointing an administrator of or winding up such company
(save for the purpose of an amalgamation or reconstruction
of a solvent company or
(B) an encumbrancer takes possession or exercises or attempts to
exercise any power of sale or a receiver is appointed of the
whole or any part of the undertaking property assets or
revenues of such company or
(C) stops payment or agrees to declare a moratorium or becomes
or is deemed to be insolvent or unable to pay its debts
within the meaning of section 123 Insolvency Act 1986 or
(iv) being an individual:
(A) is the subject of a bankruptcy petition or bankruptcy order
or
(B) is the subject of an application or order or appointment
under section 253 or section 273 or section 286 Insolvency
Act 1986
(C) Is unable to pay or has no reasonable prospect of being able
to pay his debts within the meaning of sections 267 and 268
Insolvency Act 1986
(d) any event occurs or proceedings are taken with respect to the Tenant or
a guarantor of the Tenant's obligations under this Lease in any
jurisdiction to which it is subject which has an effect equivalent or
similar to any of the events mentioned in clause 5.1 (c)
then and in any of such cases the Landlord may at any time (and
notwithstanding the waiver of any previous right of re-entry) re-enter
the Premises whereupon this Lease shall absolutely determine but without
prejudice to any right of action of the Landlord in respect of any
previous breach by the Tenant of this Lease
6 MISCELLANEOUS
-------------
6.1 Except to the extent that compensation may be payable by law
notwithstanding any agreement to the contrary neither the Tenant nor any
undertenant or any occupier of the Premises at any time shall be
entitled to any compensation under any Enactment upon Determination or
upon leaving the Premises
<PAGE>
6.2 Except to the extent that the Landlord may be liable under the covenants
in Schedule 6 or by law notwithstanding any agreement to the contrary
the Landlord shall not be liable in any way to the Tenant or any
undertenant by reason of:
(a) any act neglect default or omission or any of the tenants or owners or
occupiers or any adjoining or neighbouring premises or of any
representative or employee of the Landlord (unless acting within the
scope of the express authority of the Landlord) or
(b) the defective working stoppage or breakage of or leakage or overflow
from any Conduit or any of the Plant
6.3 Nothing in this Lease shall imply or warrant that the Premises may
lawfully be used for the Permitted Use and the Tenant acknowledges and
admits that no such representation or warranty has ever been made by or
on behalf of the Landlord
6.4 The Landlord and the Tenant shall not be liable to each other for breach
of any covenant in this Lease to the extent that its performance or
observance becomes impossible or illegal but subject to the other
provisions of this Lease the Term and the Tenant's liability to pay the
Rent shall not cease or be suspended for that reason
6.5 The Landlord shall incur no liability to the Tenant or any undertenant
or any predecessor in title of either of them by reason of any approval
given to or inspection made of any drawings plans specifications or
works prepared or carried out by or on behalf of any such party nor
shall any such approval or inspection in any way relieve the Tenant from
its obligations under this Lease
6.6 The Tenant shall not be or become entitled to any easement right quasi-
easement or quasi-right
6.7 Section 196 Law of Property Act 1925 (as amended by the Recorded
Delivery Service Act 1962) shall apply to all notices which may need to
be served under this Lease
6.8 Any dispute arising between the Tenant or any undertenant and any owner
or occupier (other than the Landlord) of adjacent property owned
(whether freehold or leasehold) by the Landlord as to any right or
privilege or any party or other wall or otherwise shall (except where it
relates to a matter of law) be determined on behalf of the Tenant or any
undertenant by the Superior Landlord's Surveyor (as provided in the
Superior Lease) or someone appointed by him and any such decision shall
bind the Tenant or any undertenant who shall pay the cost of obtaining
it
6.9 This Lease is a deed
6.10 If the Landlord and the Tenant agree in writing that the Tenant may
defer payment of any sums due under this Lease then for the purposes of
this Lease (and of Section 17 Landlord and Tenant (Covenants) Act 1995)
those sums shall be deemed to be due for payment on the deferred date so
agreed, and not on the earlier date on which they would, but for that
agreement, have fallen due
7 LANDLORD AND TENANT COVENANTS ACT 1995
---------------------------------------
7.1 This Lease is a new tenancy for the purposes of the Landlord and Tenant
(Covenants) Act 1995
IN WITNESS of which each party has duly executed this Lease as a Deed the date
first above written
<PAGE>
SCHEDULE 1
----------
The Premises
------------
The property known as Angel Comer House, 1 Islington High Street in the London
Borough of Islington and more particularly described in the First Schedule to
the Superior Lease
<PAGE>
SCHEDULE 2
----------
Title Matters
-------------
1 The easements rights covenants and other matters contained or referred to
in the Property Registers of title number NGL431414
2 All other easements rights covenants and other matters affecting the
Premises
<PAGE>
SCHEDULE 3
----------
Review of Basic Rent
--------------------
1 On the Review Date the Basic Rent shall be reviewed in accordance with
this Open Market Rent schedule and the Basic Rent payable in respect of the
Review Period shall be the higher of the Basic Rent payable immediately
before that Review Period (ignoring for this purpose any rent cesser under
paragraph 3 of schedule 4 then current) and the Open Market Rent on the
Review Date
2 The Landlord and the Tenant shall seek to agree the amount of the Open
Market Rent in respect of the Review Period but if they have not agreed it
by the date three months before the Review Date then either party may
require the matter to be determined by the Rent Review Surveyor
3 The Rent Review Surveyor shall be a professionally qualified chartered
surveyor or valuer and shall be previously agreed upon between the Landlord
and the Tenant or (in the absence of such agreement prior to the date one
month before the relevant Review Date) nominated on the application of
either the Landlord or the Tenant or both of them jointly by the President
and in the event of a sole application by the Landlord or the Tenant the
party making such application shall on the date of the application provide
a copy thereof to the other party
4 The Rent Review Surveyor shall act as an arbitrator in accordance with the
Arbitration Act 1996 unless the Landlord and Tenant shall agree otherwise
in writing before the Rent Review Surveyor is appointed in which case he
shall:
4.1 act as an expert and
4.2 allow the parties a reasonable opportunity of making representations
and counter-representations to him and
4.3 take those representations and counter-representations into account
and
4.4 if required by either party give written reasons for his
determination
5 The award of the Rent Review Surveyor shall be binding on the parties and
the costs of the reference to him and of his determination (including his
own fees and expenses and the legal and other costs of the parties) shall
lie in his award
6 If the Rent Review Surveyor dies or becomes unwilling to act or becomes
incapable of acting the President may upon the application of either the
Landlord or the Tenant or both of them jointly discharge him and appoint
another Rent Review Surveyor to act in his place and in the same capacity
and this shall be repeated as many times as the circumstances may require
7 If for any reason the Open Market Rent is not agreed or determined until
after the Review Date the Tenant shall continue to pay the Basic Rent at
the rate applicable immediately before that date and on the day 7 days
after the day on which the Open Market Rent is agreed or determined the
Tenant shall pay the amount of any increase for the period from and
including the Review Date up to the Quarter Day following that agreement or
determination together with interest on each part of that payment at 4 per
centum below the Interest Rate for the period on and from the date on which
that part would have been payable had the Open Market Rent been agreed
before the Review Date up to the date on which payment is due
8 Within twenty-eight days of the Open Market Rent being agreed or
determined a memorandum recording the increased Basic Rent (or the fact
that there is no increase) shall be executed by the parties and attached to
this Lease and the Counterpart but that memorandum shall be regarded as
evidential only and its absence shall not affect the liability of the
Tenant to pay any increased Basic Rent
9 Time is not of the essence in this schedule
10 For the purpose of this schedule the Open Market Rent shall be deemed to
have been determined on the date of the Rent Review Surveyor's award or
determination
<PAGE>
SCHEDULE 4
----------
Insurance
---------
1 Landlord's Insurance Obligations
1.1 The Landlord shall:
(a) effect and maintain in respect of the Building insurances in
respect of third party and public liability and in respect of
liability under the Defective Premises Act 1972 (and any other
Enactment in respect of which the Landlord requires insurance);
(b) pay promptly to the Superior Landlord all sums relating to
insurance required under the Superior Lease;
(c) request from the Superior Landlord whenever reasonably requested
by the Tenant and to the extent permitted under the Superior
Lease evidence of the terms of the Insurance Policies effected by
the Superior Landlord and of payment of the last premium and
shall pass on to the Tenant the evidence obtained from the
Superior Landlord;
(d) pass on to the Tenant copies of all relevant communications about
insurance of the Building received from the Insurers or the
Superior Landlord or from any person on their behalf
1.2 The Landlord may but shall not be obliged to insure against Loss of Rent
1.3 The Landlord shall not be obliged to insure under paragraph 1.1 if and
to the extent that:
(a) insurance is not available in the London insurance market or
(b) to the extent that any normal excess exclusion or limitation
imposed by Insurers applies or
(c) the Insurance Policies have become void or voidable by reason of
any act neglect or default of the Tenant or any undertenant or
any predecessor in title of either of them or any employee
servant agent licensee or invitee of any of them and to the
extent that any risk which would otherwise be an Insured Risk is
not actually insured against as a result of any of the above
matters it shall not be treated as an Insured Risk
1.4 If the Landlord receives any commissions or other benefits for effecting
or maintaining insurance under this Lease it shall not be obliged to
pass the benefit of them on to the Tenant
1.5 If the Landlord is itself an insurance company it may self-insure in
which case it shall be deemed to be doing so at its usual rates and on
its usual terms for insuring a third party
2 TENANT'S INSURANCE OBLIGATIONS
------------------------------
2.1 The Tenant shall pay to the Landlord when due the Insurance Charge
2.2 The Tenant shall pay to the Landlord on demand any normal excess which
the Landlord is properly required to bear under any Insurance Policy
2.3 The Tenant shall:
(a) not do or fail to do anything which shall or may cause any of the
Insurance Policies to be void or voidable or premium payable in
respect of Insurance Policies to be increased
<PAGE>
(b) not insure or maintain insurance of the Building or the Premises
against any of the Insured Risks (save to the extent that both
the Landlord and the Superior Landlord have failed to do so)
(c) notify the Landlord of the incidence of any Insured Risk or any
other matter which ought reasonably to be notified to the
Insurers
(d) pay on demand the whole of any increase in any premium arising
from a breach of paragraph 2.3(a)
(e) comply with all conditions of the Insurance Policies and all
requirements of the Insurers of which it is notified in writing
(f) notify the Landlord in writing of the value of any alterations
additions or improvements which the Tenant or any undertenant
proposes to make before those works are commenced
3 RENT CESSER
-----------
3.1 If the Premises are damaged or destroyed by any of the Insured Risks
such that they are unfit for occupation and use then (unless paragraph 4
applies) the Basic Rent or a fair proportion of it according to the
nature and extent of the damage in question shall be suspended until the
date on which the Premises are again fit for occupation and use
4 VITIATION OF INSURANCE
----------------------
4.1 If the insurance money under any of the Insurance Policies is wholly or
partly irrecoverable by reason of any act neglect or default of the
Tenant or any undertenant or any predecessor in title of either of them
or any employee servant agent licensee or invitee of any of them or
where the sum insured is inadequate as a result of a breach by the
Tenant of paragraph 2.3 (f) then the Tenant will pay to the Landlord the
irrecoverable amount or the amount of the shortfall as the case may be
4.2 Payment under paragraph 4.1 shall be made on the later of the date of
demand by the Landlord and the date on which such insurance money (or
the relevant part of it) would have been claimable under the insurance
Policies had they not been wholly or partly vitiated
4.3 In addition to any sum payable under paragraph 4.1 the Tenant shall pay
interest at the Interest Rate on the relevant sum from the date on which
that sum is due to the date of payment
5 ARBITRATION
-----------
5.1 Any dispute under paragraphs 3 or 4 shall be determined by a sole
arbitrator to be agreed upon by the Landlord and the Tenant or in
default of agreement to be nominated at the request of either of them or
both of them jointly by the President and in either case in accordance
with the Arbitration Act 1996
<PAGE>
SCHEDULE 5
----------
Tenant's Covenants
------------------
1 TO PAY RENT
-----------
1.1 To pay the Rent at the times and in the manner required by this Lease to
such address as the Landlord may from time to time notify to the Tenant and
without deduction or set-off whether legal or equitable
1.2 To pay the Basic Rent by banker's standing order or direct debit if
required by the Landlord
1.3 If the Basic Rent or any part of it is not paid in cleared funds on the
date on which it is due or if any other part of the Rent is not paid within
seven days after becoming due (whether or not demanded in the case of Basic
Rent) the sum in question shall carry interest at the Interest Rate for the
period from the date on which it became due until the date of actual
payment and that interest shall be paid by the Tenant on demand
1.4 If the Landlord refuses to accept Rent because an event referred to in
clause 5.1 has occurred and the Landlord does not wish to waive its rights
under that clause then such unpaid Rent shall nevertheless bear interest
under paragraph 1.3 of this Schedule 5 until the date the Rent in question
is accepted
2 TO PAY OUTGOINGS
----------------
2.1 To pay and discharge all Outgoings relating to the Premises at the times
when they become due
2.2 If at any time the Premises are not separately assessed for any Outgoings
the Tenant shall pay to the Landlord when due a fair proportion of any
assessment which includes the Premises
2.3 Not without Consent (which shall not be unreasonably withheld or delayed)
to agree with the relevant Authority any rating or other assessment in
respect of the Premises and to consult with (and have due regard to the
representations of) the Landlord in the negotiations for any such
assessment or any appeal against any such assessment
3 YIELDING UP ON DETERMINATION
----------------------------
3.1 On Determination the Tenant shall yield up the Premises to the Landlord
with vacant possession in a state of repair condition and decoration which
is consistent with the proper performance of the Tenant's covenants in this
Lease
3.2 If on Determination the Tenant leaves any fixtures fittings or other
items in the Premises the Landlord may treat them as having been abandoned
and may remove destroy or dispose of them as the Landlord wishes and the
Tenant shall pay to the Landlord on demand the cost of this with interest
at the Interest Rate from the date of demand to the date of payment and
indemnify the Landlord against any and all resulting liability
3.3 Immediately before Determination if and to the extent required by the
Landlord the Tenant shall reinstate all alterations additions or
improvements made to the Premises at any time during the Term (or pursuant
to any agreement for lease made before the start of the Term) and where
this involves the disconnection of Plant or Conduits the Tenant shall
ensure that the disconnection is carried out properly and safely and that
the Plant and Conduits are suitably sealed off or capped and left in a safe
condition so as not to interfere with the continued functioning of the
Plant or use of the Conduits elsewhere in the Premises
3.4 The Tenant shall make good any damage caused in complying with paragraph
and shall carry out all relevant works (including the making good of
damage) to the reasonable satisfaction of the Landlord
3.5 The Tenant shall at its own cost block up and make good any openings made
or existing linking the Premises with the adjoining premises known as 2/12
Pentonville Road to the reasonable satisfaction of the Landlord and the
Superior Landlord at the end or sooner determination of the
<PAGE>
Term hereby granted or if the Premises and the adjoining Premises are no
longer in the same occupation (whichever shall be the earliest to occur)
4 USE
---
The Tenant shall not use the Premises for any purpose except the Permitted
Use
5 DEALINGS WITH THE PREMISES
--------------------------
5.1 Unless expressly permitted by a Consent granted under paragraphs 5.2, 5.3
or 5.4 the Tenant shall not assign underlet charge part with or share
possession or occupation of all or any part of the Premises nor hold the
Premises on trust for any other person
5.2 The Landlord shall not unreasonably withhold Consent to an assignment of
the whole of the Premises but the Landlord and the Tenant agree for the
purposes of Section19(1A) Landlord and Tenant Act 1927 and without limiting
the Landlord's ability to withhold Consent where it is otherwise reasonable
to do so or to impose other reasonable conditions that the Landlord may
withhold that Consent unless the following conditions are satisfied :
(a) the prospective assignee is not a Group Company or a Connected Person
unless such Group Company or Connected Person is of equal financial
standing and is in the Landlord's opinion able to comply with its
tenant's covenants contained in this Lease
(b) the prospective assignee covenants with the Landlord that from the
date of the assignment of this Lease to it until it assigns this Lease
with Consent it will pay the Rent and other Outgoings payable under
this Lease and will observe and perform the covenants and obligations
on the part of the Tenant contained in this Lease and
(c) where reasonable to do so the prospective assignee either provides a
guarantor or guarantors approved by the Landlord (such approval not to
be unreasonably withheld) who will as Guarantor join into and execute
a licence to assign in such form as the Landlord may reasonably
require and who will covenant (if more than one jointly and severally)
with the Landlord in the form of the surety covenants set out in
Schedule 7 or the prospective assignee provides a rent deposit in such
amount and on such terms as the Landlord may reasonably require
(d) the Tenant and any guarantor of that Tenant and any former tenant who
by virtue of there having been an "excluded assignment" (as defined in
section 11 Landlord and Tenant (Covenants) Act 1995) has not been
released from the tenant covenants of this Lease enters into an
authorised guarantee agreement within the meaning of the Landlord and
Tenant (Covenants) Act 1995 with the Landlord containing covenants in
the form set out in Schedule 7 but with the Tenant (meaning the
intended Assignor) substituted for "Guarantor" and with Assignee
(meaning the intended assignee) substituted for the Tenant with such
amendments as the Landlord may reasonably require.
(e) if reasonable any other security for the Tenant's obligations under
this Lease which the Landlord holds immediately before the assignment
is continued or renewed in each case on such terms as the Landlord may
reasonably require in respect of the Tenant's liability under the
covenant referred to in paragraph 5.2 (d) above
5.3 The Landlord shall not unreasonably withhold Consent to an underletting of
all or any part of the Premises where all of the following conditions are
satisfied:
(a) the prospective undertenant has covenanted with the Landlord that
until it assigns the Underlease with Consent as required by the
Underlease it will observe and perform the Tenant's covenants and
obligations in this Lease (except the covenant to pay Rent and in the
case of an underletting of part insofar only as such covenants affects
the underlet premises) and
(b) if the Landlord reasonably requires a guarantor or guarantors
acceptable to the Landlord has guaranteed the due performance by the
undertenant of its above covenant in such terms as the Landlord may
reasonably require and
<PAGE>
(c) no fine or premium is taken for the grant of the underlease and
(d) the basic rent payable under the underlease is not less than the best
rent reasonably obtainable for the underlease
(e) any rent free period or other financial inducements given to the
undertenant are no greater than is usual at the time in all
circumstances and
(f) the underlease contains the same provisions as to assignment as are
contained in this Lease but subject to additional conditions in the
equivalent (in the underlease) of paragraph 5.2 that:
(i) the consent of the Landlord under this Lease has been obtained
(such consent not to be unreasonably withheld or delayed) and
(ii) the prospective assignee has covenanted with the Landlord under
this Lease in the terms of paragraph 5.3
(g) the form of the underlease has been approved in writing by the Landlord
(approval not to be unreasonably withheld or delayed where the provisions
of it are consistent with the provisions of this Lease and where the basic
rent due under it is reviewable at the same times and on the same terms as
the Basic Rent) and
(h) in the case of an underletting of part only of the Premises the provision
of paragraph 5.4 are complied with
5.4 The additional provisions relating to underletting of part only of the
Premises are:
(a) any such underlease shall comprise either the basement ground and
first floor combined or one or more other complete floors of the
Premises and
(b) the total number of such underleases which may subsist at any time
during the Term shall not exceed two and
(c) any such underlease shall contain provisions enabling the Tenant (as
lessor) to recover from the undertenant a due proportion of the
Insurance Charge and the Superior Lease Payments and
(d) any such underlease shall preclude further underletting of all or
part of the underlet premises and
(e) any such underlease shall be excluded from the operation of sections
24-28 Landlord and Tenant Act 1954
5.5 The Tenant shall:
(a) enforce against any undertenant the provisions of any underlease and
shall not waive them and
(b) operate the rent review provisions contained in any underlease so as
to ensure that the rent is reviewed at the correct times and in
accordance with those provisions
5.6 The Tenant shall not without Consent (which shall not be unreasonably
withheld):
(a) vary the terms of any underlease or
(b) accept a surrender of all or part of the underlet premises or
(c) agree any review of the rent under any underlease
5.7 The Tenant shall not require or permit any rent reserved by any underlease
to be commuted or to be paid more than one quarter in advance or to be
reduced
<PAGE>
5.8 Any Consent granted under this paragraph5 shall (unless it expressly
states othenvise) only be valid if the dealing to which it relates is
completed within two months after the date of the Consent
PROVIDED THAT the Tenant may share the occupation of the Premises with any
Group Company or Connected Person for so long as such companies or persons
shall remain a Group Company or Connected Person and otherwise than in a
manner that transfers or creates a legal estate
5.9 Within fourteen days after any dealing with or transmission or devolution
of the Premises or any interest in it (whether or not specifically referred
to in this paragraph 5) the Tenant shall give to the Landlord's solicitors
at that time notice in triplicate specifying the basic particulars of the
matter in question and at the same time supply two certified coplcs of any
instrument making or evidencing it and pay those solicitors a registration
fee of (pounds) 30 or such higher sum as shall be reasonable at the time
plus any registration fee payable to any Superior Landlord or Superior
Landlord's solicitors
5.10 From time to time on demand during the Term the Tenant shall provide the
Landlord with particulars of all derivative interests of or in the Premises
including particulars of rents rent reviews and service and maintenance
charges payable in respect of them and copies of any relevant documents and
the identity of the occupiers of the Premises
6 ENTRY BY LANDLORD
-----------------
6.1 Upon reasonable prior written notice (except in emergency when no notice
need be given) the Tenant shall permit the Landlord and those authorised by
it at all times to enter (and remain unobstructed on) the Premises for the
purpose of:
(a) inspecting the Premises for any purpose or
(b) making surveys or drawings of the Premises or
(c) complying with the Landlord's obligations under this Lease or with
any other Legal Obligation of the Landlord or
(d) during the six months immediately preceding the date of Determination
erecting a noticeboard stating that the Premises are to let or for
sale (which the Tenant shall not remove interfere with or obscure) or
(e) carrying out works which are the responsibility of the Tenant under
this Lease but which the Tenant has failed to do
6.2 The Tenant shall keep the Landlord informed of the names addresses and
telephone numbers of at least two persons who have keys to the Premises
7 COSTS
-----
7.1 The Tenant shall pay to the Landlord on demand on a full indemnity basis
all costs expenses losses and liabilities incurred by the Landlord as a
result of or in connection with:
(a) any breach by the Tenant of any of its covenants or obligations in
this Lease and/or the enforcement or attempted enforcement of those
covenants and obligations by the Landlord
(b) any application for Consent under this Lease whether or not that
Consent is refused or the application is withdrawn
(c) the preparation and service of any notice under section 146 or 147
Law of Property Act 1925 notwithstanding that forfeiture may be
avoided otherwise than by relief granted by the Court
<PAGE>
(d) the preparation and service of any notice requiring the Tenant to
comply with any repairing or decorating covenants herein or any
schedule of dilapidations served during the Term or within three
months after Determination
8 LOSS OF GUARANTOR
-----------------
8.1 If any party who has guaranteed to the Landlord the Tenant's obligations
contained in this Lease dies or is the subject of any of the events
referred to in clause 5.l(c) then within 14 days after the event the Tenant
shall give notice of it to the Landlord and if so required by the Landlord
at the expense of the Tenant the Tenant shall within three months after
that event procure a further guarantee in the same terms from a party
Reasonably acceptable to the Landlord
9 TITLE MATTERS
-------------
9.1 The Tenant shall observe and perform all covenants in respect of the
Premises arising from the Title Matters so far as they affect the Premises
and are still subsisting
9.2 The Tenant shall pay to the Landlord on demand any sums which the
Landlord may be required to pay to any other party under the Title Matters
(except for rent under any Superior Lease) or as a contribution to the cost
of repair decoration inspection testing maintenance or renewal of any areas
or structure used by the Premises in common with other parties
<PAGE>
SCHEDULE 6
----------
Landlord's Covenants
--------------------
1 QUIET ENJOYMENT
---------------
1.1 If the Tenant observes and performs the Tenant's covenants and
obligations in this Lease the Tenant may peaceably hold and enjoy the
Premises during the Term without any lawful interruption or disturbance
from or by the Landlord or any person claiming through under or in trust
for the Landlord
2 SUPERIOR LANDLORD
-----------------
2.1 The Landlord shall pay the rents reserved by the Superior Lease as and
when they fall due and will observe and perform its covenants in the
Superior Lease (except insofar as the Tenant covenants so to do under this
Lease) but this covenant shall be by way of indemnity only for the Tenant
2.2 The Landlord shall use all reasonable endeavours to enforce the covenants
on the part of the Superior Landlord contained in the Superior Lease upon
receiving written notice from and at the expense of the Tenant
2.3 The Landlord shall take all reasonable steps at the Tenant's request and
cost (on a full indemnity basis) to obtain the consent of the Superior
Landlord where required under the terms of the Superior Lease whenever the
Tenant makes application for any Consent
SCHEDULE 7
----------
Guarantors Covenants
--------------------
The Guarantor covenants with the Landlord including (without the need for
any express assignment) its successors in title that:
1 At all times during the Term until the Tenant has lawfully assigned this
Lease with the consent of the Landlord in accordance with this Lease the
rents reserved by and all other sums payable pursuant to this Lease will be
punctually paid and the several conditions and stipulations on the Tenant's
part contained in this Lease will be duly performed observed and kept and
if at any time during the Term until such assignment as is mentioned above
there is default in the payment of the rents or in the observance or
performance of any of the covenants or other terms of this Lease the
Guarantor will pay the rents and observe or perform the covenants or terms
in respect of which such default has occurred and will make good to the
Landlord on demand and will indemnify the Landlord against all losses
damages costs and expenses arising or incurred by the Landlord as a result
of such non-payment non-performance or non observance provided always that
the liability of the Guarantor will not in any way be released lessened or
affected by:
1.1 Any time or indulgence granted by the Landlord to the Tenant or any
neglect or forbearance of the Landlord in enforcing the payment of the
rents or the observance or performance of the covenants or other terms of
this Lease or any refusal by the Landlord to accept rents tendered by or on
behalf of the Tenant at a time when the Landlord was entitled (or would
after the service of a notice under the Law of Property Act 1925 Section
146 have been entitled) to re-enter the Premises
1.2 The fact that part of the Premises may have been surrendered in which
event the liability of the Guarantor will continue in respect of the part
of the Premises not so surrendered after making any necessary
apportionments under the Law of Property Act 1925 Section 140 unless such
surrender makes that part of the Premises not so surrendered considerably
more difficult to alienate
1.3 Any agreement between the Landlord and the Tenant or any determination made
by an arbitrator or expert relating to any rent review as provided in this
Lease and so that any rent agreed or
<PAGE>
determined on such rent review will be deemed to be properly agreed or
determined notwithstanding any failure to adhere to the prescribed
procedures or timetables or the inclusion or exclusion of any item which
should have been excluded or included in determining the reviewed rent
2 If the Tenant (being an individual) becomes bankrupt or (being a company)
enters into liquidation and the Trustee in Bankruptcy or Liquidator
disclaims this Lease then if so required by written notice given by the
Landlord within 6 months after such disclaimer the Guarantor will accept
from the Landlord a lease of the Premises in their then actual state or
condition subject to any underlease or tenancy or other interest affecting
the Premises or any part of them for a term equal to the residue of the
Term which would have remained had there been no disclaimer at the same
rent as that then payable under this Lease and subject to the same
covenants provisions and conditions in all respects as those contained in
this Lease (including the proviso for re-entry and rent review dates co-
incident with those contained in this lease) such new lease to take effect
from the date of disclaimer
3 If the Landlord so requires the new lease will contain an express
covenant (in addition to all other covenants and provisions as mentioned or
specified above) by the Guarantor (as tenant) immediately to carry out and
complete at its own expense all works (whether of repair decoration or
otherwise) which are required to remedy any breach of the covenants
provisions and conditions of this Lease which occurred prior to the grant
of such new lease
4 In any such case the Guarantor shall pay the costs of the new lease and
will execute and deliver to the Landlord a counterpart of it
5 It is agreed and declared that the liability of the Guarantor is as
principal covenant or with the Landlord and not merely collateral to the
principal liability of the Tenant
6 Nothing in this Lease shall impose upon the Guarantor:
6.1 any requirement to guarantee in any way the performance of any covenant
by any person other than the Tenant
6.2 any liability restriction or other requirement (of whatever nature) in
relation to any time after the Tenant is released from any covenant by
virtue of the Landlord and Tenant (Covenants) Act 1995 or
6.3 any liability in respect of the Tenant's performance of any covenant
which is more onerous than that to which the Guarantor would be subject if
it were the sole or principal debtor in respect of that covenant
7 To the extent that this Lease purports to impose upon the Guarantor any
requirement liability or restriction referred to in paragraph 6 of this
schedule the relevant provision of this Lease shall to that extent only be
void but this shall not affect:
7.1 the enforceability of that provision except to that extent or
7.2 the enforceability of any other provision of this Lease
8 The liability of the Guarantor hereunder shall not extend to obligations
of the Tenant arising under a "relevant variation" as defined in section
18(4) of the Landlord and Tenant (Covenants) Act 1995 but the making of the
relevant variation shall not otherwise discharge the Guarantor's liability
under this Lease
<PAGE>
ORIGINAL
THE COMMON SEAL OF LIFE
ASSURANCE HOLDING
CORPORATION LIMITED is affixed
in the presence of:
Director
Secretary
Wragge&Co
55 Colmore Row, Birmingham B3 2AS
Telephone 0121 233 1000 Fax 0121 214 1099
<PAGE>
DATED 28 January 1999
----------------------
LIFE ASSURANCE HOLDING CORPORATION LIMITED (1)
and
ORC INTERNATIONAL LIMITED (2)
UNDERLEASE
of Third and Fourth floors Numbers 2112
(even) Pentonville Road in the London
Borough of Islington
TERM To 22 December 2006
FROM 18th November 1998
BASIC RENT (Pounds)83,900 (subject to review)
CONTENTS
Clause Heading Page
1 Definitions and Interpretation......................................... 2
2 Demise and Rent........................................................ 7
3 Tenant's Covenants..................................................... 7
4 Landlord's Covenants................................................... 7
5 Forfeiture............................................................. 7
6 Miscellaneous.......................................................... 8
7 Landlord and Tenant (Covenants) Act 1995............................... 10
Schedule 1............................................................... 11
Schedule 2............................................................... 12
Schedule 3............................................................... 14
Schedule 4............................................................... 16
Schedule 5............................................................... 18
Schedule 6............................................................... 20
Schedule 7............................................................... 29
Schedule 8............................................................... 30
Schedule 9............................................................... 35
Schedule 10.............................................................. 36
<PAGE>
THIS LEASE made on 1998 BETWEEN:
(1) LIFE ASSURANCE HOLDING CORPORATION LIMITED (Company No. 2970583) whose
registered office is at Windsor House Telford Centre Telford ShropshireTF3
4NB ("the Landlord")
(2) O R C INTERNATIONAL LIMITED (Company No 1088226) whose registered office
is at 361/373 City Road London EC1V 1JS ("the Tenant")
WITNESSES as follows:
1 DEFINITIONS AND INTERPRETATION
------------------------------
1.1 In this Lease unless the context otherwise requires the following
expressions have the following meanings:
"ADDITIONAL SERVICES" means the services listed in paragraph 2 of schedule
8 as from time to time altered (if at all) under clause 7.6
"AUTHORITY" means any statutory public local or other authority or any
court of law or any government department or any of them or any of their
duly authorised officers
"BASIC RENT" means:
(a) from and including 18th November 1998 to and including 17th February 1999
a peppercorn (if demanded.
(b) from and including 18th February 1999 to and including 23rd June 2001
(Pounds)141,500 per annum
(c) and thereafter as reviewed under schedule 4
"BASIC SERVICES" means the Services listed in paragraph 1 of schedule 8 as
from time to time altered (if at all) under clause 6.6
"BUILDING" means the building and external areas known as 2/12 (even)
Pentonville Road in the London Borough of Islington shown for
identification purposes only edged in red on the Site Plan and any or
every part of that building and everything attached to it or used for its
benefit "Business Hours" means between the hours of 8 a.m. and 8 p.m. on
Monday to Friday (inclusive) of any week (but excluding in each case bank
holidays and other public holidays)
"CAR PARK" means the car park at the Building
"COMMON PARTS" means all parts of the Building from time to time provided
for the common use of more than one of the tenants or occupiers of the
Building and their visitors including without limitation any of the
following which fall within this definition: vehicular and pedestrian
accesses passages stairways circulation areas lifts escalators landscaped
areas loading bays fire escapes toilet facilities storage areas refuse
collection and disposal areas
"CONDUITS" means sewers drains pipes wires cables ducts gutters fibres and
any other medium for the passage or transmission of soil water gas
electricity air smoke light information or other matters and includes
where relevant ancillary equipment and structures
"CONNECTED PERSON" means any person firm or company which is connected
with the Tenant for the purposes of Section 839 Income and Corporation
Taxes Act 1988
"CONSENT" means an approval permission authority licence or other relevant
form of approval given by the Landlord in writing
"DETERMINATION" means the end of the Term however that occurs
<PAGE>
"ENACTMENT" means:
(a) any Act of Parliament and
(b) any European Community legislation or decree or other supranational
legislation or decree having effect as law in the United Kingdom
and references (whether specific or general) to any Enactment include any
statutory modification or re-enactment of it for the time being in force
and any order instrument plan regulation permission or direction made or
issued under it or under any Enactment replaced by it or deriving validity
from it
"ENVIRONMENTAL DAMAGE" means any reduction in value of the Landlord's
interest in the Premises or the Building or any damage to human health or
the environment arising from the Premises which would constitute a breach
of any Legal Obligation or give rise to a civil claim for damages
"ESTIMATED SERVICE CHARGE" means the Landlord's estimate of the Service
Charge which will be payable by the Tenant during a Service Charge Period
"GROUP COMPANY" means any company of which the Tenant is a Subsidiary or
which has the same Holding Company as the Tenant where Subsidiary and
Holding Company have the meanings given to them by section 736 Companies
Act 1985
"HAZARDOUS MATERIAL" means any substance known or reasonably believed to be
harmful to human health or the environment and for that reason subject to
statutory controls on production use storage or disposal
"INSURANCE CHARGE" means the Percentage of the cost to the Landlord of
effecting and maintaining the Insurance Policies including where relevant
the cost of assessing any insured amounts and any sums payable to any
Superior Landlord in respect of insurance maintained by it
"INSURANCE POLICIES" means the insurance policy or policies maintained by
the Landlord or any Superior Landlord in respect of the Building covering
damage by Insured Risks Loss of Rent public liability and other matters
"INSURED RISKS" means the insured risks as set out in clause 1 of the
Superior Lease and such other risks as the Landlord or any Superior
Landlord may from time to time require to be covered
"INSURERS" means the underwriters or insurance office with whom the
Insurance Policies are effected
"INTEREST RATE" means four percent above the base lending rate from time to
time of Lloyds Bank Plc or such other bank being a member of the Committee
of London and Scottish Bankers as the Landlord may from time to time
nominate or if that base lending rate cannot be ascertained then four
percent above such other rate as the Landlord may reasonably specify and
where and whenever interest is payable at or by reference to the Interest
Rate it shall be calculated on a daily basis and compounded on the Quarter
Day
"LEASE" means this underlease and includes where relevant any deed of
variation licence Consent or other document supplemental to or associated
with this Lease
"LEGAL OBLIGATION" means any obligation from time to time created by any
Enactment or Authority which relates to the Building or its use and
includes without limitation obligations imposed as a condition of any
Necessary Consents
"LETTABLE AREA" means a part of the Building designed or intended for
letting or exclusive occupation (except in connection with the management
of the Building) the boundaries of any Lettable Area being determined in
the same manner as the boundaries of the Premises under schedule 1
"LOSS OF RENT" means loss of all Basic Rent from the Building due to damage
or destruction by any of the Insured Risks for a period of three years
having regard to potential increases in that income as a result of lettings
rent reviews or other matters which may occur
<PAGE>
"MANAGING AGENT" means any party from time to time appointed by the
Landlord to manage the Building (who may be an employee of the Landlord)
"NECESSARY CONSENTS" means planning permission and all other consents
licences permissions and approvals whether of a public or private nature
which shall be relevant in the context
"OPEN MARKET RENT" means the best rent which might reasonably be expected
to be paid by a willing tenant to a willing landlord for a letting of the
whole of the Premises in the open market and upon the assumptions :the
Premises are vacant with the benefit of all improvements without premium or
other capital payment for the residue then unexpired of the Term remaining
at the Review Date (with the benefit of the rights relating to extension of
term granted by the Landlord and Tenant Act 1954) commencing on the Review
Date and upon the terms of this Lease (except as to the amount of the Basic
Rent but including the provisions for rent review)
(a) the Tenant has fully observed and performed its obligations hereunder;
and
(b) the Premises are fit for immediate occupation and use without the need
for a rent free period or a rent abatement or other inducement to the
incoming lessee and that no work has been carried out thereon by the
Tenant or his predecessors in title during the Term which has
diminished the rental value of the Premises and in case the Premises
have been destroyed or damaged they have been fully restored; and
(c) no reduction is to be made to take account of any rental concession
which on a new letting with vacant possession might be granted to the
incoming tenant for a period within which its fitting out works would
take place
but disregarding:
(a) any effect on rent of the fact that the Tenant any undertenant or
any of their respective predecessors in title has been or is in
occupation of the Premises
(b) any goodwill attached to the Premises by reason of the carrying
on of the business of the Tenant any undertenant or their
respective predecessors in title
(c) any loss of floor space in the premises resulting from the
linking of the Premises with any adjoining building or property
"OUTGOINGS" means all rates taxes charges duties assessments impositions
and outgoings of any sort which are at any time during the Term payable
whether by the owner or occupier of property (and includes charges for
electricity gas water sewerage telecommunications and other services
rendered to or consumed by the Premises ) but excludes tax payable by the
Landlord on the receipt of the Basic Rent or on any dealings with its
reversion to this Lease and input Value Added Tax suffered by the Landlord
in respect of the Building
"PERCENTAGE" means a fair and proper proportion as conclusively determined
by the Landlord (save in case of manifest error) but which in the absence
of special circumstances will be substantially the same as the proportion
which the net internal area of the Premises bears to the net internal area
of all the Lettable Areas at the relevant time
"PERMITTED USE" means use as high class offices
"PLANT" means the plant equipment and machinery from time to time in or on
the Building including without limitation lifts hoists generators and
equipment for air-conditioning ventilation heating cooling fire alarm fire
prevention or fire control communication and security
"PREMISES" means that part of the Building described in schedule 1 and all
additions and improvements made to it and references to the Premises shall
include reference to any part of them
"PREMISES PLAN" means the attached plans marked as such
"PRESIDENT" means the President from time to time of the Royal Institution
of Chartered Surveyors or any person authorised at the relevant time to act
on his behalf
<PAGE>
"QUARTER DAYS" means 25th March 24th June 29th September and 25th December
in each year
"REGULATIONS" means the Regulations in schedule9 and any other reasonable
regulations from time to time made by the Landlord and notified to the
Tenant in addition to or in substitution for those regulations which the
Landlord reasonably considers appropriate having regard to the principles
of good estate management
"RENT" means all sums reserved as rent by this Lease
"RENT RESTRICTIONS" means any Enactment which restricts the right of the
Landlord to review the Basic Rent or to recover any Rent under this Lease
"RENT REVIEW SURVEYOR" means the person appointed under paragraphs 3 or 6
of schedule 4 to determine the Basic Rent at the Review Date
"RESERVE FUND" means the fund (if any) from time to time established under
schedule 8 to meet the cost of Reserve Fund Works which are expected to be
required in the future
"RESERVE FUND WORKS" means the works of major items of repair maintenance
and decoration of the Retained Property and the renewal or replacement of
the Plant
"RETAINED PROPERTY" means all parts of the Building except for the Premises
and the other Lettable Areas and includes without limitation the Common
Parts the Conduits the foundations roof exterior and structure of the
Building the Plant (except where part of the Premises or any Lettable Area)
any external areas of the Building and any parts of the Building used for
the management of the Building or the provision of services to it
"REVIEW DATE" means 24th June 2001 and in addition any date on which any
Rent Restrictions in force on a previous Review Date are repealed or
modified so as to be less restrictive
"REVIEW PERIOD" means the period commencing on a Review Date and expiring
on Determination
"SERVICE CHARGE" means the Percentage of the Total Service Costs in any
Service Charge Period
"SERVICE CHARGE ACCOUNT DATE" means 31 December in each year of the Term or
such other date or dates in each year of the Term as the Landlord may by
written notice to the Tenant stipulate and also the date of Determination
"SERVICE CHARGE PERIOD" means the period commencing on the commencement of
the Term and expiring on the first Service Charge Account Date and
thereafter the period from and excluding one Service Charge Account Date up
to and including the next Service Charge Account Date
"SERVICE CHARGE STATEMENT" means the statement to be provided to the Tenant
under paragraph 4.4 of schedule 8
"SERVICE COSTS" means the costs set out in paragraph 3 of schedule 8
"SERVICES" means the Basic Services and the Additional Services
"SIGN" includes any sign hoarding showcase signboard bill plate fascia
poster or advertisement
"SIGNBOARD" means a common signboard which may be provided by the Landlord
in the common entrance hall of the Building
"SITE PLAN" means the attached plan marked as such
"SUPERIOR LANDLORD" means any party having an interest in the Premises in
reversion to the Superior Lease
"SUPERIOR LEASE" means the Lease dated 13 April 1989 and made between (1)
The New River Company Limited and (2) Aetna Limited and Aetna International
(UK) Limited and includes any leases in reversion to that Lease
<PAGE>
"TERM" means the term granted by this Lease and includes any
extension holding over or continuation of it whether by Enactment
agreement or otherwise
"TOTAL SERVICE COSTS" means the total of the Service Costs in any
Service Charge Period
"TITLE MATTERS" means the matters set out in Part 2 of schedule 3
"VALUE ADDED TAX" includes any future tax of a like nature
1.2 In this Lease unless the context otherwise requires:
(a) words importing any gender include every gender
(b) words importing the singular number only include the plural
number and vice versa
(c) words importing persons include firms companies and
corporations and vice versa
(d) references to numbered clauses and schedules are references
to the relevant clause in or schedule to this Lease
(e) reference in any schedule to numbered paragraphs are
references to the numbered paragraphs of that schedule
(f) where any obligation is undertaken by two or more persons
jointly they shall be jointly and severally liable in
respect of that obligation
(g) any obligation on any party not to do or omit to do
anything shall include an obligation not to allow that
thing to be done or omitted to be done by any undertenant
of that party or by any employee servant agent invitee or
licensee of that party or its undertenant
(h) where the Landlord or the Tenant covenant to do something
they shall be deemed to fulfil that obligation if they
procure that it is done
(i) the headings to the clauses schedules and paragraphs shall
not affect the interpretation
(j) any sum payable by one party to the other shall be
exclusive of Value Added Tax which shall where it is
chargeable be paid in addition to the sum in question at
the time when the sum in question is due to be paid upon
receipt of a valid VAT invoice
(k) the attached plans are for identification only
(1) any relevant perpetuity period shall be eighty years from
the date of this Lease
(m) in the event that the Superior Lease shall be determined
and if in consequence thereof the Tenant shall become the
direct lessee of the Superior Landlord such provisions of
the Superior Lease shall be incorporated in this Lease and
shall have full force and effect as if the same was set out
in this Lease in extense (mutatis mutandis)
(n) The expressions "the Landlord" and "the Tenant" wherever
the context so admits mean the person for the time being
entitled to the reversion immediately expectant on the
termination of the Term and the person for the time being
entitled to that Term respectively
(o) the expression "Guarantor" means the person named as such
in this Lease (if any) for so long as that person remains
bound by the covenants on its part contained in this Lease
or any other person who has entered into covenants with the
Landlord pursuant to paragraph 8 of schedule 6 for so long
as such persons remains bound by such covenants
1.3 If and whenever the Landlord is itself a lessee of the Premises:
(a) wherever Consent is required under this Lease the
approval of the Superior Landlord shall also be
required to the extent required under the Superior
Lease
<PAGE>
(b) any Consent shall be subject to the need for the approval of the
Superior Landlord where appropriate
(c) nothing in this Lease or in any Consent shall imply that the
Superior Landlord's approval will not be unreasonably withheld
(d) the rights reserved by Part 1 of schedule 3 are also reserved to
the Superior Landlord
(e) references to any right of (or covenant to permit) the Landlord
to enter the Premises shall extend to the Superior Landlord and
to anyone authorised by it or otherwise entitled
(f) this Lease shall take effect subject to the rights excepted and
reserved by the Superior Lease (which are by virtue of this
provision reserved to the Landlord as well as the Superior
Landlord)
(g) any covenant required to be given for the benefit of the Landlord
shall also be given (if required by the Landlord or the Superior
Landlord) for the benefit of the Superior Landlord
2 DEMISE AND RENT
---------------
2.1 The Landlord demises the Premises to the Tenant with Full Title Guarantee
together with the rights set out in schedule 2 except and reserving to the
Landlord the rights set out in Part 1 of schedule 3 subject to the Title
Matters to hold them to the Tenant for a term of years starting on 18
November 1998 and expiring on 22nd December 2006 paying during the Term by
way of Rent;
(a) the Basic Rent which shall be paid yearly and proportionately for
any part of a year by equal quarterly instalments in advance on
the Quarter Days the first payment of a peppercorn to be made eg
the date hereof and the second payment to be made on 4 June 1998
in respect of the period from such date to the next Quarter Day
thereafter and
(b) the Insurance Charge which shall be paid as stated in paragraph 2
of schedule 5 and
(c) the Service Charge which shall be paid as stated in schedule 8
and
(d) any other sums which may become due from the Tenant to the
Landlord under the provisions of this Lease
<PAGE>
3 TENANT'S COVENANTS
------------------
3.1 The Tenant covenants with the Landlord until it assigns this Lease as a
whole with Consent as required by this Lease that it shall observe and
perform the covenants set out in schedule 6 and those on its part contained
in schedule 5
4 LANDLORD'S COVENANTS
--------------------
4.1 The Landlord covenants with the Tenant that whilst the reversion to this
Lease is vested in it shall observe and perform the covenants set out in
schedule 7 and those on its part contained in schedule 5
5 FORFEITURE
----------
5.1 Without prejudice to any other rights of the Landlord if:
(a) the whole or part of the Rent remains unpaid twenty-one days
after becoming due (in the case of the Basic Rent whether
demanded or not) or
(b) any of the Tenant's covenants in this Lease are not performed or
observed or
(c) the Tenant or any guarantor of the Tenant's obligations under
this Lease:
(i) proposes or enters into any composition or arrangement
with its creditors generally or any class of its
creditors or
(ii) is the subject of any judgement or order made against it
which is not complied with within 21 days or is the
subject of any execution distress sequestration or other
process levied upon or enforced against any part of its
undertaking property assets or revenue or
(iii) being a company:
(A) is the subject of a petition presented an order made
or a resolution passed or analogous proceedings
taken for appointing an administrator of or winding
up such company (save for the purpose of an
amalgamation or reconstruction of a solvent company)
or
(B) an encumbrancer takes possession or exercises or
attempts to exercise any power of sale or a receiver
is appointed of the whole or any part of the
undertaking property assets or revenues of such
company or
(C) stops payment or agrees to declare a moratorium or
becomes or is deemed to be insolvent or unable to
pay its debts within the meaning of section 123
Insolvency Act 1986 or
(iv) being an individual:
(A) is the subject of a bankruptcy petition or
bankruptcy order or
(B) is the subject of an order or appointment under
section 253 or section 273 or section 286 Insolvency
Act 1986 or
(C) is unable to pay or has no reasonable prospect of
being able to pay his debts within the meaning of
sections267 and 268 Insolvency Act 1986
(d) any event occurs or proceedings are taken with respect to the
Tenant or any guarantor of the Tenant's obligations under this
Lease in any jurisdiction to which it is subject which has an
effect equivalent or similar to any of the
<PAGE>
events mentioned in clause 5.1 (c)
then and in any of such cases the Landlord may at any time (and
notwithstanding the waiver of any previous right of re-entry)
re-enter the Premises whereupon this Lease shall absolutely
determine but without prejudice to any right of action of the
Landlord in respect of any previous breach by the Tenant of this
Lease
<PAGE>
6. MISCELLANEOUS
-------------
6.1 Except to the extent that the Landlord may be liable under its covenants in
schedule 7or by law notwithstanding any agreement to the contrary the
Landlord shall not be liable in any way to the Tenant or any undertenant or
any servant agent licensee or invitee of the Tenant or any undertenant by
reason of:
(a) any act neglect default or omission of any of the tenants or
owners or occupiers of any adjoining or neighbouring premises
(whether within the Building or not) or of any representative or
employee of the Landlord (unless acting within the scope of the
authority of the Landlord) or
(b) the defective working stoppage or breakage of or leakage or
overflow from any Conduit or any of the Plant
6.2 The Landlord shall be entitled to make alterations to the Common Parts or
to alter renew or replace any Plant and to temporarily obstruct the Common
Parts while doing so but shall in so doing ensure that reasonable access to
the Premises or reasonable alternative access to the Premises is always
available provided always nothing in this clause shall permit the Landlord
to derogate from the grant
6.3 Nothing in this Lease shall imply or warrant that the Premises may lawfully
be used for the Permitted Use and the Tenant acknowledges and admits that
no such representation or warranty has ever been made by or on behalf of
the Landlord
6.4 The Landlord and the Tenant shall not be liable to each other for breach of
covenant in this Lease to the extent that its performance observance
becomes impossible or illegal but subject to the other provisions of this
Lease the Term and the Tenant's liability to pay Rent shall not cease or be
suspended for that reason
6.5 The Landlord shall incur no liability to the Tenant or any undertenant or
any predecessor in title of either of them by reason of any approval given
to or inspection made of any drawings plans specifications or works
prepared or carried out by or on behalf of any such party nor shall any
such approval or inspection in any way relieve the Tenant from its
obligations under this Lease
6.6 In the interests of security the Landlord:
(a) may require anyone entering or leaving the Building to identify
themselves and the party in the Building whom they are visiting
and to record this information and their arrival and departure
times in a book or other form of record kept for the purpose
(b) may prevent anyone entering the Building for the purpose of
visiting the Premises unless that person has a key to the
Premises or is authorised by the Tenant or any other permitted
occupier of the Premises
(c) may require the Tenant or permitted occuplcr of the Premises to
escort any person visiting them from the security or reception
desk to the Premises (and back again when that person leaves)
(d) may prevent anyone removing any items from the Building unless
that person is authorised to do so by the Landlord or any tenant
or permitted occupier of the Building and in this regard:
(A) the rights of access and egress granted in schedule 2 are
subject to this clause (but not so as to prevent the
Tenant's right of access to the Premises at all times during
the day and night seven days a week) and
(B) any authorisation required by this clause must be produced
to the person requiring it or confirmed by a written or oral
(or telephoned) statement from the person giving it
<PAGE>
6.7 The Landlord may add to vary or discontinue any of the Services (except the
Basic Services) where the Landlord considers it appropriate to do so having
regard to the principles of good estate management
6.8 The Tenant shall not be or become entitled to any easement right quasi-
easement or quasi-right
6.9 Section 196 Law of Property Act I 925 (as amended by the Recorded Delivery
Service Act 1962) shall apply to all notices which may need to be served
under this Lease and any notice shall also be sufficiently served on the
Landlord if served on the managing agents who act for the Landlord in
relation to the Building at the time of service
6.10 Any dispute arising between the Tenant or any undertenant and any owner or
occupier (other than the Landlord) of adjacent property owned (whether
freehold or leasehold) by the Landlord as to any right or privilege or any
party or other wall or otherwise shall (except where it relates to a matter
of law) be determined on behalf of the Tenant or any undertenant by the
Superior Landlords Surveyor (as provided in the Superior Lease) or someone
appointed by him and any such decision shall bind the Tenant or any
undertenant who shall pay the cost of obtaining it
6.11 This Lease is a Deed
6.12 If the Landlord and the Tenant agree in writing that the Tenant may defer
payment of any sums due under this Lease then for the purposes of this
Lease (and of Section 17 Landlord and Tenant (Covenants) Act 1995) those
sums shall be deemed to be due for payment on the deferred date so agreed,
and not on the earlier date on which they would, but for that agreement,
have fallen due
7 LANDLORD AND TENANT (COVENANTS) ACT 1995
-----------------------------------------
This Lease is a new tenancy for the purposes of the Landlord and Tenant
(Covenants) Act 1995
IN WITNESS of which each party has duly executed this Lease as a Deed the date
first above written
<PAGE>
Schedule 1
----------
The Premises
------------
The Lettable Areas on the third and fourth floors of the Building which are
shown for identification only edged red on the Premises Plans and which in
relation to each floor extends from the upper side of the floor slab immediately
below that floor to the underside of the floor slab immediately above that floor
excluding:
(a) the walls bounding that Lettable Area other than those walls (if any)
indicated as party walls on the Premises Plan and
(b) all load-bearing walls and pillars within that Lettable Area and all
structural floor slabs within that lettable area
(c) all structural floor slabs within that Lettable Area and
(d) all Conduits and Plant within that Lettable Area which do not serve that
Lettable Area exclusively and
(e) all tenant's or trade fixtures and fittings within that Lettable Area that
can be removed without causing irreparable damage to the premises (other
than those installed by the lessee under the Superior Lease as part of the
original fitting out works which are deemed to be part of the demised
premises and the property of the Superior Landlord) but including:
(a) the plaster and other finishes on the inner sides of the walls bounding
that Lettable Area and on all faces of all load-bearing walls and pillars
wholly within that Lettable Area and
(b) all ceilings and other finishes applied to or suspended from the floor slab
immediately above that Lettable Area and from and to any floor slab within
that Lettable Area and
(c) all floors floor screeds and other finishes applied to the floor slab
immediately below that Lettable Area and to any floor slab within that
Lettable Area and
(d) all doors windows and roof lights of that Lettable Area together with the
frames glass and furniture of them and
(e) the whole of all non-load-bearing walls wholly within that Lettable Area
and
(f) one half in thickness of all walls (if any) bounding that Lettable Area
and indicated as party walls on the Premises Plan and
(g) all Conduits and Plant within that Lettable Area and which serve that
Lettable Area exclusively
(h) all Landlord's fixtures and fittings including for the avoidance of doubt
the carpets (except where they form part of the Conduits and Plant excluded
elsewhere in this Schedule)
<PAGE>
Schedule 2
-----------
Part 1 - Rights granted in common
---------------------------------
The right in common with the Landlord and all others for the time being
authorised by the Landlord or otherwise entitled for the Tenant and any
permitted undertenant or permitted occupier of the Premises:
(a) to connect to and use all Conduits and Plant from time to time serving the
Premises or provided for the benefit of the Premises (but save where the
Landlord has given its consent to such access (such consent not to be
unreasonably withheld or delayed) without any right of access to areas
outside the Premises for this purpose)
(b) its servants agents licensees and visitors of the Tenant at all times of
the day and night seven days a week (but subject to compliance in full with
the Landlord's reasonable security requirements)to pass and repass over the
Common Parts and otherwise to use the Common Parts for the purpose which
they are designed
(c) of support and protection for the Premises from the remainder of the
Building
(d) to enter such other parts of the Building as are reasonably necessary for
the purpose of complying with the Tenant's obligations under this Lease the
person entering causing as little damage and inconvenience as reasonably
possible and making good at its expense any damage caused to the Building
by such entry
(e) to use any Signboard (if supplied by the Landlord)
<PAGE>
Part 2 - Exclusive rights
-------------------------
Subject to the Title Matters the exclusive rights for the Tenant and any
permitted undertenant or permitted occupier of the Premises or the Tenants
servants agents licensees invitees or visitors authorised by the Tenant to park
one private motor vehicle in the Car Park in such position as determined by the
Landlord and notified to the Tenant from time to time
<PAGE>
Schedule 3
----------
Part 1 - Exceptions and Reservations
------------------------------------
The rights for the Landlord and all others from time to time authorised by the
Landlord or otherwise entitled and without any liability to pay compensation:
1.1 to carry out works to the Building or to any other property and to use
them in whatever manner may be desired and to consent to others doing so
whether or not in each case the access of light and air to the Premises
shall be affected in any way
1.2 to connect to and use all Conduits and Plant within or forming part of
the Premises
1.3.1 upon reasonable prior written notice to the Tenant (except in emergency
when no notice need be given) to enter and remain on the Premises with or
without tools appliances scaffolding and materials for the purposes of
(a) installing inspecting repairing renewing reinstalling cleaning
maintaining removing or connecting up to any Conduits or Plant or
(b) inspecting cleaning altering repairing maintaining renewing demolishing
or rebuilding any adjoining or adjacent premises or any other things used
in common or
(c) carrying out works under paragraphs 3.5 or 9.4 of schedule 6 or
(d) complying with the Landlord's obligations under this Lease or with any
other Legal Obligation of the Landlord
the person entering causing as little damage and inconvenience as reasonably
possible and making good at its expense as soon as practicable any damage caused
to the Premises by such entry
<PAGE>
Part 2 - Title Matters
----------------------
1. The easements rights covenants and other matters contained or referred to
in the following documents:
<TABLE>
<CAPTION>
Date Document Parties
<S> <C> <C>
9" June 1988 Deed Saxone Lilley & Skinner
(Holdings) Limited(l) and
The New River Company
Limited (2)
18 March 1988 Lease The New River Company
Limited (1) The London
Electricity Board(2)
2 March 1993 Licence for Alterations The New River Company
Limited (1) Aetna
International (UK) Limited
(2)
24 May 1928 Party Wall Agreement The Saxone Shoe Company
Limited (1) and Palmer &
Harvey Limited (2)
</TABLE>
2 All other easements rights covenants and other matters (if any) affecting
the Premises
<PAGE>
Schedule 4
----------
Review of Basic Rent
--------------------
1 On the Review Date the Basic Rent shall be reviewed in accordance with
this schedule and the Basic Rent payable in respect of the Review Period
shall be the higher of the Basic Rent payable immediately before that
Review Period (ignoring for this purpose any rent cesser under paragraph 3
of schedule 5 then current) and the Open Market Rent on the Review Date
2 The Landlord and the Tenant shall seek to agree the amount of the Open
Market Rent in respect of the Review Period but if they have not agreed it
by the date three months before the Review Date then either party may
require the matter to be determined by the Rent Review Surveyor
3 The Rent Review Surveyor shall be a professionally qualified chartered
surveyor or valuer and shall be previously agreed upon between the Landlord
and the Tenant or (in the absence of such agreement prior to the date one
month before the relevant Review Date) nominated on the application of
either the Landlord or the Tenant or both of them jointly by the President
and in the event of a sole application by the Landlord or the Tenant the
party making such application shall on the date of the application provide
a copy thereof to the other party
4 The Rent Review Surveyor shall act as an arbitrator in accordance with the
Arbitration Act 1996 unless the Landlord and the Tenant shall agree
otherwise in writing before the Rent Review Surveyor is appointed in which
case he shall:
(a) act as an expert and
(b) allow the parties a reasonable opportunity of making representations
and counter-representations to him and
(c) take those representations and counter-representations into account
and
(d) if required by either party give written reasons for his
determination
5 The award of the Rent Review Surveyor shall be binding on the parties and
the costs of the reference to him and of his determination ( including his
own fees and expenses and the legal and other costs of the parties) shall
lie in his award
6 If the Rent Review Surveyor dies or becomes unwilling to act or becomes
incapable of acting or the President may upon the application of either the
Landlord or the Tenant or both of them jointly discharge him and appoint
another Rent Review Surveyor to act in his place and in the same capacity
and this shall be repeated as many times as the circumstances may require
7 If for any reason the Open Market Rent is not agreed or determined until
after the Review Date the Tenant shall continue to pay the Basic Rent at
the rate applicable immediately before that date and on the day 7 days
after the day on which the Open Market Rent is agreed or determined the
Tenant shall pay the amount of any increase for the period from and
including the relevant Review Date up to the Quarter Day following that
agreement or determination together with interest on each part of that
payment at 4 per centum below the Interest Rate for the period on and from
the date on which that part would have been payable had the Open Market
Rent been agreed before the Review Date up to the date on which payment is
due
8 Within twenty-eight days of the Open Market Rent being agreed or
determined a memorandum recording the increased Basic Rent (or the fact
that there is no increase) shall be executed by the parties and attached to
this Lease and the Counterpart but that memorandum shall be regarded as
evidential only and its absence shall not affect the liability of the
Tenant to pay any increased Basic Rent
9 Time is not of the essence in this schedule
10 For the purpose of this schedule the Open Market Rent shall be deemed to
have been determined on the date of the Rent Review Surveyor's award or
determination
Schedule 5
----------
<PAGE>
Insurance
---------
1 Landlord's Insurance Obligations
1.1 The Landlord shall:
(a) effect and maintain in respect of the Building insurances in respect
of public liability and in respect of liability under the Defective
Premises Act 1972 (and any other Enactment in respect of which the
Landlord requires insurance)
(b) pay promptly to the Superior Landlord all sums relating to insurance
required under the Superior Lease
(c) request from the Superior Landlord whenever reasonably requested by
the Tenant and to the extent permitted under the Superior Lease
evidence of the terms of the Insurance Policies effected by the
Superior Landlord and of payment of the last premium and shall pass
on to the Tenant the evidence obtained from the Superior Landlord
(d) pass on to the Tenant copies of all relevant terms of and
communications about insurance of the Building received from the
Insurers or the Superior Landlord or from any person on their behalf
1.2 The Landlord may but shall not be obliged to insure against Loss of Rent
1.3 The Landlord shall not be obliged to insure under paragraph 1.1 if and
to the extent that
(a) insurance is not available in the London insurance market and
(b) to the extent that any normal excess exclusion or limitation
imposed by Insurers applies and
(c) the Insurance Policies have become void or voidable by reason of
any act of neglect or default of the Tenant or any undertenant or
any predecessor in title of either of them or any employee servant
agent licensee or invitee of any of them and to the extent that any
risk which would otherwise be an Insured Risk is not actually
insured against as a result of any of the above matters it shall
not be treated as an Insured Risk
1.4 If the Landlord receives any commissions or other benefits for effecting
or maintaining insurance under this Lease it shall not be obliged to
pass the benefit of them on to the Tenant
1.5 If the Landlord is itself an insurance company it may self-insure in
which case it shall be deemed to be doing so at its usual rates and on
its usual terms for insuring a third party
2 TENANT'S INSURANCE OBLIGATIONS
------------------------------
2.1 The Tenant shall pay to the Landlord when due the Insurance Charge
2.2 The Tenant shall pay to the Landlord on demand the Percentage of any
normal excess which the Landlord is properly required to bear under any
Insurance Policy
2.3 The Tenant shall:
(a) not do or fail to do anything which shall or may cause any of the
Insurance Policies to be void or voidable or premium payable in
respect of Insurance Policies to be increased
(b) not insure or maintain insurance of the Building or the Premises
against any of the Insured Risks (save to the extent that both the
Landlord and the Superior Landlord have failed to do so)
(c) notify the Landlord of the incidence of any Insured Risk or any
other matter which ought reasonably to be notified to the Insurers
<PAGE>
(d) pay on demand the whole of any increase in any premium arising from
a breach of paragraph 2.3
(e) comply with all the conditions of such Insurance Policies and all
requirements of the Insurers of which it is notified in writing
(e) notify the Landlord in writing of the value of any alterations
additions or improvements which the Tenant or any undertenant
proposes to make before those works are commenced
3. RENT CESSER
-----------
3.1 If the Building is damaged or destroyed by any of the Insured Risks such
that the Premises are unfit for occupation and use then (unless paragraph
4 applies) the Basic Rent or a fair proportion of it according to the
nature and extent of the damage in question shall be suspended until the
date on which the Premises are again fit for occupation and use
4 VITIATION OF INSURANCE
----------------------
4.1 If the insurance money under any of the Insurance Policies is wholly or
partly irrecoverable by reason of any act neglect or default of the
Tenant or any undertenant or any predecessor in title of either of them
or any employee servant agent licensee or invitee of any of them or where
the sum insured is inadequate as a result of a breach by the Tenant of
paragraph 2.3 (i) then the Tenant will pay to the Landlord the
irrecoverable amount or the amount of such shortfall as the case may be
4.2 Payment under paragraph 4.1 shall be made on the later of the date of
demand by the Landlord and the date on which such insurance money (or the
relevant part of it) would have been claimable under the Insurance
Policies had they not been wholly or partly vitiated
4.3 In addition to any sum payable under paragraph 4.1 the Tenant shall pay
interest at the Interest Rate on the relevant sum from the date on which
that sum is due to the date of payment
5 ARBITRATION
-----------
5.1 Any dispute under paragraphs 3 and 4 shall be determined by a sole
arbitrator to be agreed upon by the Landlord and the Tenant or in default
of agreement to be nominated at the request of either of them or both of
them jointly by the President and in either case in accordance with the
Arbitration Act 1996
<PAGE>
Schedule 6
----------
Tenant's Covenants
------------------
1 TO PAY RENT
-----------
1.1 To pay the Rent at the times and in the manner required by this Lease to
such address as the Landlord may from time to time notify to the Tenant
and without deduction or set-off whether legal or equitable
1.2 To pay the Basic Rent by banker's standing order or direct debit if
required by the Landlord
1.3 If the Basic Rent or any part of it is not paid in cleared funds on the
date on which it is due or if any other part of the Rent is not paid
within seven days after becoming due (whether or not demanded in the case
of Basic Rent) the sum in question shall carry interest at the Interest
Rate for the period from the date on which it became due until the date
of actual payment and that interest shall be paid by the Tenant on demand
1.4 If the Landlord refuses to accept Rent because an event referred to in
clause 5.1 has occurred and the Landlord does not wish to waive its
rights under that clause then such unpaid Rent shall nevertheless bear
interest under paragraph 1.3 of this Schedule 6 until the date the Rent
in question is accepted
2 TO PAY OUTGOINGS
----------------
2.1 To pay and discharge all Outgoings relating to the Premises at the times
when they become due
2.2 If at any time the Premises are not separately assessed for any Outgoings
the Tenant shall pay to the Landlord when due a fair proportion of any
assessment which includes the Premises
2.3.1 To take all reasonable steps at the Tenant's request and cost (on a full
indemnity basis) to obtain the consent of the Superior Landlord where
required under the terms of the Superior Lease
2.4 Not without Consent (which shall not be unreasonably withheld or delayed)
to agree with the relevant Authority any rating or other assessment in
respect of the Premises and to consult with (and have due regard to the
representations of) the Landlord in the negotiations for any such
assessment or any appeal against any such assessment
3 REPAIR AND DECORATION
---------------------
3.1 To repair the Premises and to keep them in good and substantial repair
and condition
3.2 To keep the Premises painted or otherwise decorated to a high standard
and to redecorate them to a high standard not less than every five years
and also in the year preceding Determination (having on the last occasion
first obtained Consent to the colour scheme which Consent shall not be
unreasonably withheld)
3.3 Paragraphs 3.1 3.2 and 3.4 shall not apply to the extent that any lack of
repair or decoration is caused by damage by an Insured Risk (unless
paragraph4.1 of schedule 5 applies)
3.4 To keep the Premises in a clean and tidy condition
3.5 If the Tenant is in breach of this paragraph 3 then in addition to any
other rights which the Landlord may have:
(a) the Landlord may serve on the Tenant written notice specifying the
breach in question and
(b) the Tenant shall as soon as practicable after receipt of that
notice and in any event within two months (or sooner in emergency)
commence and proceed with all due speed to remedy the breach and
<PAGE>
(c) if the Tenant fails to comply with this paragraph 3 the Landlord
may enter the Premises and carry out the relevant work and all
proper costs incurred by the Landlord in so doing shall be a debt
from the Tenant to the Landlord which the Tenant shall pay on
demand with interest on them at the Interest Rate from the date of
demand to the date of payment
3.6 The Tenant shall give written notice to the Landlord immediately on
becoming aware of:
(a) any damage to or destruction of the Building or
(b) any defect or want of repair in the Building (including without
limitation any relevant defect within the meaning of Section 4
Defective Premises Act 1972) which the Landlord is liable to repair
under this Lease or which the Landlord is or may be liable to
repair under common law or by virtue of any Enactment
4 YIELDING UP ON DETERMINATION
----------------------------
4.1 On Determination the Tenant shall yield up the Premises to the Landlord
with vacant possession in a state of repair condition and decoration
which is consistent with the proper performance of the Tenant's covenants
in this Lease
4.2.1 If on Determination the Tenant leaves any fixtures fittings or other
items in the Premises the Landlord may treat them as having been
abandoned and may remove destroy or dispose of them as the Landlord
wishes and the Tenant shall pay to the Landlord on demand the cost of
this with interest at the Interest Rate from the date of demand to the
date of payment and indemnify the Landlord against any and all resulting
liability
4.3 Immediately before Determination if and to the extent required by the
Landlord the Tenant shall reinstate all alterations additions or
improvements made to the Premises at any time during the Term ( or
pursuant to any agreement for lease made before the start of the Term)
and where this involves the disconnection of Plant or Conduits the Tenant
shall ensure that the disconnection is carried out properly and safely
and that the Plant and Conduits are suitably sealed offer capped and left
in a safe condition so as not to interfere with the continued functioning
of the Plant or use of the Conduits elsewhere in the Building
4.4 The Tenant shall make good any damage caused in complying with paragraph
4.3and shall carry out all relevant works (including the making good of
damage) to the reasonable satisfaction of the Landlord
4.5 The Tenant shall at its own cost block up and make good any openings made
or existing linking the Premises with the adjoining premises known as 1
Islington High Street to the reasonable satisfaction of the Landlord and the
Superior Landlord at the end or sooner determination of the Term hereby granted
or if the Premises and the adjoining Premises are no longer in the same
occupation (whichever shall be the earliest to occur)
5 USE
---
5.1 The Tenant shall not use the Premises for any purpose except the Permitted
Use
5.2 The Tenant shall not use the Premises for any purpose or activity which is
illegal immoral noisy noxious dangerous or offensive or which may be or become a
nuisance to or cause damage or annoyance to the Landlord or any other person or
which might be harmful to the Premises or the Building
5.3 The Tenant shall not use the Premises for the purpose of residing or
sleeping nor for any sale by auction nor as a betting office
6 ALTERATIONS
-----------
6.1 The Tenant shall make no alteration addition or improvement to the Premises
or the Building whether structural or otherwise except as expressly permitted
under paragraph 6.2
6.2 The Tenant may carry out alterations additions or improvements to the
Premises which are wholly within the Premises and which do not affect any part
of the exterior or structure of the Building where:
<PAGE>
(a) the Tenant has submitted to the Landlord detailed plans and
specifications showing the works and
(b) the Tenant has given to the Landlord such covenants relating to
the carrying out of the works as the Landlord may reasonably
require and
(c) the Tenant has obtained Consent to the works (which shall not be
unreasonably withheld or delayed)
7 SIGNS
-----
The Tenant shall not fix or display in or on the Premises any Sign which
can be seen from outside the Premises without first obtaining Consent not
to be unreasonably withheld in the case of a sign of reasonable dimensions
stating the Tenant's name and business such sign to be in such form and in
such position as the Landlord shall reasonably require
8 DEALINGS WITH THE PREMISES
--------------------------
8.1 Unless expressly permitted or by a Consent granted under paragraphs
8.2,8.3 or 8.4 the Tenant shall not assign underlet part with or share
possession or occupation of all or any part of the Premises nor hold the
Premises on trust for any other person
8.2 The Landlord shall not unreasonably withhold Consent to an assignment of
the whole of the Premises but the Landlord and the Tenant have agreed for
the purposes of section 19(1) Landlord and Tenant Act 1927 and without
limiting the Landlords ability to withhold Consent where it is otherwise
reasonable to do so or to impose other reasonable conditions that the
Landlord may withhold that Consent unless the following conditions are
satisfied:
(a) the prospective assignee is not a Group Company or a Connected
Person unless such Group Company or Connected Person is of equal
financial standing and is in the Landlord's opinion able to
comply with its tenant's covenants contained in this Lease
(b) the prospective assignee covenants with the Landlord that from
the date of the assignment of this Lease to it until it assigns
this Lease with Consent it will pay the Rent and other Outgoings
payable under this Lease and will observe and perform the
covenants and obligations on the part of the Tenant contained in
this Lease and
(c) where reasonable to do so the prospective assignee either
provides a guarantor or guarantors approved by the Landlord (such
approval not to be unreasonably withheld) who will as Guarantor
join into and execute a licence to assign in such form as the
Landlord may reasonably require and who will covenant (if more
than one jointly and severally) with the Landlord in the form of
the surety covenants set out in Schedule 10 or the prospective
assignee provides a rent deposit in such amount and on such terms
as the Landlord may reasonably require
(d) the Tenant and any guarantor of that Tenant and any former
tenant who by virtue of there having been an "excluded
assignment" (as defined in section 1 1 Landlord and Tenant
(Covenants) Act 1995) has not been released from the tenant
covenants of this Lease enters into an authorised guarantee
agreement within the meaning of the Landlord and Tenant
(Covenants) Act 1995 with the Landlord containing covenants in
the form set out in Schedule 10 but with the Tenant (meaning the
intended Assignor) substituted for "Guarantor" and with Assignee
(meaning the intended assignee) substituted for the Tenant with
such amendments as the Landlord may reasonably require.
(e) If reasonable any other security for the Tenant's obligations
under this Lease which the Landlord holds immediately before the
assignment is continued or renewed in each case on such terms as
the Landlord may reasonably require in respect of the Tenant's
liability under the covenant referred to in paragraph 8.2 (d)
above
<PAGE>
8.3 The Landlord shall not unreasonably withhold Consent to an underletting of
all or any part of the Premises where all of the following conditions are
satisfied:
(a) the prospective undertenant has covenanted with the Landlord that
until it assigns the underlease with Consent as required by the
Underlease it will observe and perform the Tenant's covenants and
obligations in this Lease (except the covenant to pay Rent and in
the case of an underletting of part insofar only as such
covenants affect the underlet premises) and
(b) if the Landlord reasonably requires a guarantor or guarantors
acceptable to the Landlord has guaranteed the due performance by
the undertenant of its above covenant in such terms as the
Landlord may reasonably require and
(c) no fine or premium is taken for the grant of the underlease and
(d) the basic rent payable under the underlease is not less than the
best open market rent which can be reasonably obtainable for the
underlease
(e) any rent free period or other financial inducements given to the
undertenant are no greater than is usual at the time in all the
circumstances and
(f) the underlease contains the same provisions as to assignment as
are contained in this Lease but subject to additional covenants,
in the equivalent (in the Underlease) of paragraph 8.2 that:
(i) the consent of the Landlord under this Lease has been
obtained (such consent not to be unreasonably withheld or
delayed) and
(ii) the prospective assignee has covenanted with the Landlord
under this Lease in the terms of paragraph 8.3 (a)
(g) the form of the underlease has been approved in writing by the
Landlord (approval not to be unreasonably withheld or delayed
where the provisions of it are consistent with the provisions of
this Lease and where the basic rent due under it is reviewable at
the same times and on the same terms as the Basic Rent) and
(h) in the case of an underletting of part only of the Premises the
provisions of paragraph 8.4 are complied with
8.4 The additional provisions relating to underletting of part only of the
Premises are:
(a) any such underlease of the third or fourth floor shall comprise
the whole floor and not any part thereof
(b) the total number of such underleases which may subsist at any
time during the Term shall not exceed two and
(c) subject to the Consent (not to be unreasonably withheld or
delayed) any such underlease shall contain provisions enabling
the Tenant (as lessor) to recover from the undertenant a due
proportion of the Insurance Charge and the Service Charge and
(d) any such underlease shall preclude further underletting of all or
part of the underlet premises and
(e) any such underlease shall be excluded from the operation of
sections 24-28 Landlord and Tenant Act 1954
8.5 The Tenant shall:
(a) enforce against any undertenant the provisions of any underlease
and shall not waive them and
<PAGE>
(b) operate the rent review provisions contained in any underlease so
as to ensure that the rent is reviewed at the correct times and
in accordance with those provisions
8.6 The Tenant shall not without Consent (which shall not be unreasonably
withheld or delayed):
(a) vary the terms of any underlease or
(b) accept a surrender of all or part of the underlet premises or
(c) agree any review of the rent under any underlease
8.7 The Tenant shall not require or permit any rent reserved by any underlease
to be commuted or to be paid more than one quarter in advance or to be
reduced
8.8 Any Consent granted under this paragraphs shall (unless it expressly states
otherwise) only be valid if the dealing to which it relates is completed
within two months after the date of the Consent
PROVIDED THAT the Tenant may share the occupation of the Premises with any Group
Company or Connected Person for so long as such companies or persons shall
remain a Group Company or Connected Person and otherwise than in a manner that
transfers or creates a legal estate
8.9. After fourteen days after any dealing with or transmission or devolution of
the Premises or any interest in it (whether or not specifically referred to
in this paragraph 8) the Tenant shall give to the Landlord's solicitors at
that time notice in triplicate specifying the basic particulars of the
matter in question and at the same time supply two certified copies of any
instrument making or evidencing it and pay those solicitors a registration
fee of (pounds) 30 or such higher sum as shall be reasonable at the time
plus any registration fee payable to any Superior Landlord or Superior
Landlord's solicitors
8.10 From time to time on demand during the Term the Tenant shall provide the
Landlord with particulars of all derivative interests of or in the Premises
including particulars of rents rent reviews and service and maintenance
charges payable in respect of them and copies of any relevant documents and
the identity of the occupiers of the Premises
9 LEGAL OBLIGATIONS AND NECESSARY CONSENTS
----------------------------------------
9.1 The Tenant shall comply with all Legal Obligations relating to the Premises
9.2 Where the Tenant receives from an Authority any formal notice relating to
the Premises or the Building (whether or not the notice is of a Legal
Obligation) it shall immediately send a copy to the Landlord and if
requested by the Landlord make or join in making such objections
representations or appeals in respect of it as the Landlord may reasonably
require (except those which are to the detriment of the business of the
Tenant or any permitted occupier of the Premises)
9.3 Where any Legal Obligation requires the carrying out of works to the
Premises the Tenant shall (if and to the extent required by this Lease)
apply for Consent (Consent not to be unreasonably withheld or delayed) and
any Necessary Consents to carry out the works and after obtaining them the
Tenant shall carry out the works to the reasonable satisfaction of the
Landlord
9.4 Where the Legal Obligation requires the carrying out of works both on the
Premises and the Retained Property the Landlord may carry out those works
(and may refuse Consent to the Tenant to carry out the part of them which
affects the Premises) and the Tenant shall pay to the Landlord on demand
the proportion of the costs incurred relating to the works which relate to
the Premises and a fair proportion of any reasonable incidental fees and
expenses
9.5 Before doing anything at the Premises which requires any Necessary Consents
(and whether or not the Landlord shall have issued its Consent to that
thing under the other provisions of this Lease) the Tenant shall:
(a) obtain all Necessary Consents for the purpose and
(b) produce copies of all Necessary Consents to the Landlord and
<PAGE>
(c) obtain the approval of the Landlord (which shall not be unreasonably
withheld or delayed) to the Necessary Consents and the implementation
of them Provided that the Tenant shall not without Consent (not to be
unreasonably withheld or delayed where the Landlord's interest in the
remainder of the Building is not prejudiced in any way) make or alter
any application for any Necessary Consent
9.6 Where any Necessary Consent implemented by the Tenant or any undertenant or
permitted occupier of the Premises requires works to be carried out by a
date subsequent to Determination the Tenant shall ensure that those works
are completed before Determination
9.7 If the Tenant receives or is entitled to receive any statutory compensation
in relation to the Lease (other than from the Landlord) and if
Determination occurs otherwise than by effluxion of time the Tenant shall
upon Determination pay to the Landlord a fair proportion of that
compensation
9.8 If and when called upon to do so the Tenant shall produce to the Landlord
all plans documents and other evidence which the Landlord may reasonably
require in order to satisfy itself that this paragraph 9 has been complied
with
10 CONDUITS AND PLANT
------------------
10.1 The Tenant shall not use the Conduits or the Plant:
(a) for any purpose other than that for which they are designed or
(b) so as to exceed the capacity for which they are designed (having
regard where relevant to the fact that such use is to be shared with
other occupiers of the Building)
10.2 The Tenant will keep clean and free from obstruction all Conduits within
the Premises
11 OVERLOADING AND DAMAGE
----------------------
11.1 The Tenant shall not overload any part of the Premises or the Building
11.2 The Tenant shall not install in the Premises any machinery other than
normal light and quiet office machinery
11.3 The Tenant shall not damage or obstruct any part of the Building or any
accesses to it
11.4 The Tenant shall not keep produce or use any Hazardous Material on the
Premises without Consent nor (whether or not Consent is given) cause any
Environmental Damage
11.5 Any request by the Tenant for Consent under paragraph 11.4 shall be in
writing and shall be accompanied by
(a) all information required to demonstrate to the reasonable satisfaction
of the Landlord that any such Hazardous Material is necessary to the
business of the Tenant and will be kept produced or used in such
manner as to comply with all Legal Obligations applicable to such
Hazardous Material and to prevent Environmental Damage
(b) all relevant information regarding compliance with any relevant Legal
Obligations (such information to include without limitation copies of
applications for Necessary Consents relating to any manufacturing
processes waste treatments recycling storage or disposal practices)
11.6 The Tenant shall forthwith notify the Landlord in writing of any change in
the facts and circumstances assumed or reported in any application for or
granting of Consent or any Necessary Consent relating to any Hazardous
Material kept produced or used on the Premises
11.7 The Tenant shall indemnify the Landlord against all losses claims or
demands in respect of any Environmental Damage arising out of the use or
occupation of the Premises or the state of repair of the Premises
12 RIGHTS AND EASEMENTS
--------------------
<PAGE>
12.1 The Tenant shall not grant to any third party any rights of any nature
over the Premises (except as permitted under paragraph 8)
12.2 The Tenant shall use reasonable endeavours to preserve all easements and
rights currently enjoyed by the Premises and in particular (without
limitation) will not obstruct any of the windows of the Premises
12.3 The Tenant shall not knowingly do or omit to do anything whereby any right
of prescription may a rise against the Landlord
13 REGULATIONS
-----------
13.1 The Tenant shall comply with the Regulations and shall procure that all
occupiers of and visitors to the Premises comply with them
14 ENTRY BY LANDLORD
-----------------
14.1 Upon reasonable prior written notice (except in emergency when no notice
need be given) the Tenant shall permit the Landlord and those authorised
by it at all times to enter (and remain unobstructed on) the Premises for
the purpose of:
(a) exercising the rights reserved by schedule 3 or
(b) inspecting the Premises for any purpose or
(c) making surveys or drawings of the Premises or
(d) during the six months immediately preceding the date of Determination
erecting a noticeboard stating that the Premises are to let or for
sale (which the Tenant shall not remove interfere with or obscure) or
(e) complying with the Landlord's obligations under this Lease or with
any other Legal Obligation of the Landlord or
(f) carrying out works which are the responsibility of the Tenant under
this Lease but which the Tenant has failed to do
14.2 The Tenant shall keep the Landlord informed of the names addresses and
telephone numbers of at least two persons who have keys to the Premises
15 COSTS
-----
The Tenant shall pay to the Landlord on demand on a full indemnity basis all
costs expenses losses and liabilities incurred by the Landlord as a result of or
in connection with:
(a) any breach by the Tenant of any of its covenants or obligations in
this Lease and/or the enforcement or attempted enforcement of those
covenants and obligations by the Landlord
(b) any application for Consent under this Lease whether or not that
Consent is refused or the application is withdrawn
(c) the preparation and service of any notice under section 146 or 147
Law of Property Act 1925 notwithstanding that forfeiture may be
avoided otherwise than by relief granted by the Court
(d) the preparation and service of any notice requiring the Tenant to
comply with any repairing or decorating covenant herein or any
schedule of dilapidations served during the Term or within three
months after Determination
16 LOSS OF GUARANTOR
-----------------
16.1 If any party who has guaranteed to the Landlord the Tenant's obligations
contained in this Lease or is the subject of any of the events referred
to in clause 5.1 (c) then within 14 days after the
<PAGE>
event the Tenant shall give notice of it to the Landlord and if so
required by the Landlord at the expense of the Tenant the Tenant shall
within three months after that event procure a further guarantee in the
same terms from a party reasonably acceptable to the Landlord
17 TITLE MATTERS
-------------
17.1 The Tenant shall observe and perform all covenants in respect of the
Premises arising from the Title Matters so far as they affect the Premises
and are still subsisting
17.2 The Tenant shall observe and perform all the covenants on the part of the
lessee contained in the Superior Lease in so far as they relate to or
concern the Premises except where such covenants fall within the
Landlord's obligations under this Lease
18 OUT OF BUSINESS HOURS USE
-------------------------
To pay to the Landlord within 14 days of written demand the full cost on
an indemnity basis of the provision of heating ventilation and air
conditioning to the Building where the Landlord has provided the same
outside the Business Hours at the Tenant's request
<PAGE>
Schedule 7
----------
Landlord's Covenants
--------------------
1. QUIET ENJOYMENT
---------------
1.1 If the Tenant observes and performs the Tenant's covenants and obligations
in this Lease the Tenant may peaceably hold and enjoy the Premises during
the Term without any lawful interruption or disturbance from or by the
Landlord or any person claiming through under or in trust for the Landlord
2. SUPERIOR LEASE
--------------
2.1 The Landlord shall pay the rents reserved by the Superior Lease as and when
they fall due and will observe and perform its covenants in the Superior
Lease (except insofar as the Tenant covenants so to do under this Lease)
but this covenant shall be by way of indemnity only for the Tenant
2.2 The Landlord shall use all reasonable endeavours to enforce the covenants
on the part of the Superior Landlord contained in the Superior Lease upon
receiving written notice from and at the expense of the Tenant
2.3 The Landlord shall take all reasonable steps at the Tenant's request and
cost (on a full indemnity basis) to obtain the consent of the Superior
Landlord where required under the terms of the Superior Lease where the
Tenant makes application for any Consent
3 PROVISION OF SERVICES
---------------------
3.1 The Landlord shall provide in a proper manner the Basic Services and such
of the Additional Services as the Landlord from time to time reasonably
considers appropriate
3.2 The Landlord shall provide heating ventilation and air conditioning to the
Building outside Business Hours when so requested by the Tenant subject to
paragraph 18 of Schedule 6
3.3 Notwithstanding paragraph 2 the Landlord shall not be obliged to provide
the Services where:
(a) it is prevented from doing so by circumstances beyond its control
including without limitation breakdown damage the need for inspection
or repair shortage of fuel equipment or materials and inclement
weather or
(b) the Service cannot reasonably be provided as a result of works of
alteration inspection or repair or any other works being carried out
at the Building or
(c) any Rent is in arrears
3.4 but in the circumstances set out in paragraphs 3.23(a) or 3.30,) the
Landlord shall restore the Service as soon as reasonably practicable
<PAGE>
Schedule 8
----------
Service and Service Charge
--------------------------
1 BASIC SERVICES
--------------
1.1 The Basic Services are:
(a) the repair decoration inspection testing maintenance and the renewal
of the Retained Property
(b) the cleaning of the Common Parts and the exterior of the Building
including the exterior and interior face of all external windows of
the Building
(c) the provision of lighting to the Common Parts
(d) the provision of heating ventilation and air conditioning to the
Building during the Business Hours
(e) provision and operation of the lifts
(f) provision of reasonable refuse facilities in such reasonable
positions as the Landlord shall from time to time designate
2 ADDITIONAL SERVICES
-------------------
2.1 The Additional Services are:
(a) the provision and operation of fire prevention fire detection and
fire alarm equipment to the Building
(b) the provision and operation of the fire fighting equipment in the
Common Parts
(c) the provision and operation of communications facilities security
patrols and/or security observation systems and/or other security
equipment for the Building and/or the Common Parts
(d) the carpeting furnishing and equipping of the Common Parts including
the equipping of the toilet accommodation forming part of the Common
Parts
(e) the provision and operation of any Plant not included within the
Basic Services the provision either permanently or at times which
the Landlord reasonably considers appropriate of pictures floral
displays flags decorative lights and other decorations in the Common
Parts
(g) the provision and maintenance of appropriate or obligatory or useful
Signs or notices in the Common Parts or visible from the Common
Parts or from outside the Building
(h) the provision of any other services which the Landlord from time to
time reasonably considers appropriate having regard to the
principles of good estate management
3 SERVICE COSTS
-------------
3.1 The Service Costs are all reasonable costs and expenses properly incurred
by the Landlord in the operation and management of the Building and the
provision of services to it including without limitation:
(a) the cost of providing the Services
(b) the cost of providing to the Retained Property any service which had
it been provided to the Common Parts could have constituted one of
the Services
(c) the cost of all fuel or other energy sources for the Plant and/or
the Retained Property
<PAGE>
(d) any costs which the Landlord may be required to pay to the Superior
Landlord or other parties as a contribution to the cost of the
Services or to the repair decoration inspecting testing maintenance
or renewal of any areas or structures used in common with other
parties
(e) the Outgoings
(f) the cost of all insurances other than those referred to in the
Insurance Policies
(g) the cost of preparing submitting and settling any insurance claims
relating to the Building
(h) the reasonable cost of employing or retaining the Managing Agents for
the Building
(i) the cost of employing or retaining staff to provide the Services
including all incidental expenditure relating to that employment
which without limitation shall include expenditure on pensions
insurance health welfare industrial training levies redundancy
clothing tools machinery equipment which in each case the Landlord
reasonably considers are required for the proper performance by the
staff in question of their duties
(j) the cost of complying with making representations against or
otherwise contesting the incidence of any Legal Obligation or
prospective Legal Obligation which will or may affect the Building
(k) the cost of leasing any item required in connection with the Services
(l) the cost of enforcing the provisions in the Superior Lease against
the Superior Landlord and the Regulations against occupiers of the
Building
(m) such sums as the Landlord shall in the interests of good estate
management consider desirable to retain by way of a Reserve Fund in
respect of the Reserve Fund Works
(n) the cost of calculating the Service Charge for each tenant and the
preparation and issue of certificates accounts and audits in respect
of the Service Charge
(o) all professional charges fees and expenses payable by the Landlord in
respect of any of the Services or the Service Costs
(p) during any period for which the Landlord does not employ an
independent Managing Agent to manage the Building a sum retainable by
the Landlord equal to the charges which a firm of surveyors based in
central London might reasonably be expected to make for managing the
Building
(q) all Value Added Tax payable by the Landlord in respect of the Service
Costs insofar as it is not recoverable by the Landlord as an input
(r) the gross cost to the Landlord by way of interest commission banking
charges commitment fees or otherwise of borrowing any necessary sums
in respect of the Service Costs
4 CALCULATION AND PAYMENT OF SERVICE CHARGE
-----------------------------------------
4.1 The Landlord will notify the Tenant before or during any Service Charge
Period of the Estimated Service Charge payable by the Tenant during that
Service Charge Period
4.2 The Tenant shall pay the Estimated Service Charge by four equal quarterly
instalments on the Quarter Days
4.3 The Landlord (acting reasonably and in the interests of good estate
management) may revise the Estimated Service Charge having regard to the
anticipated Total Service Costs for the relevant Service Charge Period
and the Tenant shall pay to the Landlord any additional Estimated Service
Charge which may become due as a result within seven days of demand
subject to the Landlord notifying the Tenant of the reasons for and
details of the increase in the Estimated Service Charge
4.4 As soon as practicable after each Service Charge Account Date the
Landlord will supply the Tenant with a Service Charge Statement showing:
<PAGE>
(a) the Total Service Costs (which shall include a fair summary of the
expenditure which comprised the Total Service Costs) for the Service
Charge Period and
(b) the amount of the Total Service Costs which have been credited to
any Reserve Fund or which the Landlord intends to credit to it and
(c) the amount of any Total Service Costs which have been paid from any
Reserve Fund or received from any insurer tenant or other person not
being a tenant or occupier of the Building and
(d) the total standing to the credit of any Reserve Fund and
(e) the Service Charge for the Service Charge Period
4.5 If the Service Charge exceeds the Estimated Service Charge the Tenant
shall pay the excess to the Landlord within seven days of receipt of the
Service Charge Statement
4.6 If the Service Charge is less than the Estimated Service Charge then the
shortfall shall be set off against any other moneys due from the Tenant
to the Landlord under this Lease and any balance shall be credited
against the next payment of Estimated Service Charge or (following
Determination) paid to the Tenant
4.7 For a period of one month after delivery of the Service Charge Statement
the Landlord will make available any receipts or invoices evidencing
expenditure of the Total Service Costs for inspection by the Tenant at
the offices of the Landlord or the Managing Agent during normal business
hours by appointment
4.8 The Service Charge Statement shall (in the absence of manifest error) be
conclusive as to matters of fact contained therein (but not as to the
matters of law)
4.9 The percentage payable by the Tenant of the Service Charge may not be
increased by reason only that at any relevant time any part of the
Building may be vacant or be occupied by the Landlord or that any tenant
or occupier of another part of the Building may default in payment of or
be required to pay less than the due proportion of the Total Service
Costs attributable to that part
5 RESERVE FUND
------------
5.1 The Landlord may but shall not be obliged to operate a Reserve Fund and
if the Landlord does so this paragraph 5 shall govern its operation
5.2 The Landlord shall hold the Reserve Fund on trust for those parties from
time to time liable to pay the cost of the Reserve Fund Works
5.3 The cost of any Reserve Fund Works shall be paid from the Reserve Fund
and only if and to the extent that the Reserve Fund is insufficient may
that cost be charged as a Service Cost
5.4 The Landlord shall place the Reserve Fund in an interest bearing account
(separate from the Landlord's own money) and at the best rate of interest
reasonably obtainable with interest to be credited at no longer than
quarterly intervals
5.5 The power of appointing a new trustee of the trust is vested in the
Landlord
5.6 The trust of the Reserve Fund shall be wound up on the earliest of
(a) 22nd December 2006 or as soon as practicable thereafter allowing
the Landlord a reasonable time to prepare a Service Charge
Statement; or
(b) if the Building or the Premises is/are destroyed or substantially
damaged and not rebuilt on the date three years after the date of
such destruction or damage;
(c) the date on which the Landlord and all the beneficiaries of the
Reserve Fund at the appropriate time agree
<PAGE>
5.7 The beneficiaries of the Trust Fund entitled to receive any unexpended
sums shall include those tenants of the Building liable to contribute
towards the Reserve Fund Works immediately prior to the expiration of any
of the periods referred to above but so that a tenant shall be deemed
liable to so contribute during any period of cesser of rent and service
charge under the terms of this Lease
5.8 The Landlord shall only be entitled to demand contributions to the
Reserve Fund in relation to the Reserve Fund Works for specific items and
any such provisions in or contributions to the Reserve Fund must be made
on the basis that:
(a) the cost of the Reserve Fund Works for which provision is made and
contributions demanded is reasonable and is calculated on a
reasonable life expectancy for each item or reasonable anticipated
cost of expenditure in respect of major items of repair maintenance
and decoration
(b) the contributions towards the anticipated cost of the Reserve Fund
Works shall be with the intent that a fund or funds will be
accumulated to cover the cost of renewal or replacement by the end
of the anticipated life of each item
5.9 The cost and expenses properly incurred by the Landlord (and any VAT paid
by the Landlord unless the VAT is recovered by the Landlord) in and
incidental to providing the Basic Services and Additional Services
("Gross Expenditure") incurred by the Landlord in respect of the Reserve
Fund Works where either
(i) a fund has been established for the renewal or replacement
of that item ("Specific Fund") or
(ii) A part of a fund ("General Fund") has been allocated by the
Landlord for the renewal or replacement of that item must be
first met out of the Specific Fund or (as appropriate) out
of the General Fund to the extent of the credit allocated
for that item by the Landlord in the General Fund
5.10 The Service Charge Statement must indicate whether or not the Landlord
has established and is maintaining a Reserve Fund (whether by way of
Specific Fund or General Fund) and must provide full details
<PAGE>
Schedule 9
----------
Regulations
-----------
1 Delivery and despatch of goods mail and other items to the Premises and
access for workmen and materials shall only take place through the service
areas in the Common Parts and through the service entrances lifts stairs
and corridors (if any)
2 Where vehicles are allowed into any service area in the Building for the
purpose of loading or unloading they shall only be allowed at such times
as the Landlord may reasonably specify and the Landlord may also specify a
maximum time during which any vehicle may remain there and may remove or
immobilise any vehicles not complying with this regulation
3 All refuse shall be kept in suitable containers and shall be made
available for collection by the Landlord at the times specified by the
Landlord
4 No sound from loudspeakers or other artificially generated noise which can
be heard outside the Premises shall be created within the Premises
5 The Tenant shall maintain to the reasonable satisfaction of the Landlord
and to the satisfaction of the insurers adequate fire prevention apparatus
upon the Premises and shall from time to time remove from the Premises all
waste and inflammable material as quickly as possible
6 The Tenant shall not exhibit or place any articles of any kind outside the
Premises or transact any business except inside of the Premises
7 The Tenant shall not light or maintain open fires in the Building
8 The Premises are to be locked or otherwise secured when not in use
9 Not at any time to obstruct any roads or areas leading to or serving the
Premises or the "alternative right of way" as defined in the deed dated
9th June 1988 referred to in the Title Matters
<PAGE>
Schedule 10
-----------
Guarantors Covenants
--------------------
The Guarantor covenants with the Landlord including (without the need for
any express assignment) its successors in title that:
1 At all times during the Term until the Tenant has lawfully assigned this
Lease with the consent of the Landlord in accordance with this Lease the
rents reserved by and all other sums payable pursuant to this Lease will be
punctually paid and the several conditions and stipulations on the Tenant's
part contained in this Lease will be duly performed observed and kept and
if at any time during the Term until such assignment as is mentioned above
there is default in the payment of the rents or in the observance or
performance of any of the covenants or other terms of this Lease the
Guarantor will pay the rents and observe or perform the covenants or terms
in respect of which such default has occurred and will make good to the
Landlord on demand and will indemnify the Landlord against all losses
damages costs and expenses arising or incurred by the Landlord as a result
of such non-payment non-performance or non-observance provided always that
the liability of the Guarantor will not in any way be released lessened or
affected by:
1.1 Any time or indulgence granted by the Landlord to the Tenant or any
neglect or forbearance of the Landlord in enforcing the payment of the
rents or the observance or performance of the covenants or other terms of
this Lease or any refusal by the Landlord to accept rents tendered by or on
behalf of the Tenant at a time when the Landlord was entitled (or would
after the service of a notice under the Law o Property Act 1925 Section
146 have been entitled) to re-enter the Premises
1.2 The fact that part of the Premises may have been surrendered in which
event the liability of the Guarantor will continue in respect of the part
of the Premises not so surrendered after making any necessary
apportionments under the Law of Property Act 1925 Section 140 unless such
surrender makes that part of the Premises not so surrendered considerably
more difficult to alienate
1.3 Any agreement between the Landlord and the Tenant or any determination
made by an arbitrator or expert relating to any rent review as provided in
this Lease and so that any rent agreed or determined on such rent review
will be deemed to be properly agreed or determined notwithstanding any
failure to adhere to the prescribed procedures or timetables or the
inclusion or exclusion of any item which should have been excluded or
included in determining the reviewed rent
2 If the Tenant (being an individual) becomes bankrupt or (being a company)
enters into liquidation and the Trustee in Bankruptcy or Liquidator
disclaims this Lease then if so required by written notice given by the
Landlord within 6 months after such disclaimer the Guarantor will accept
from the Landlord a lease of the Premises in their then actual state or
condition subject to any underlease or tenancy or other interest affecting
the Premises or any part of them for a term equal to the residue of the
Term which would have remained had there been no disclaimer at the same
rent as that then payable under this Lease and subject to the same
covenants provisions and conditions in all respects as those contained in
this Lease (including the proviso for re-entry and rent review dates co-
incident with those contained in this lease) such new lease to take effect
from the date of disclaimer
3 If the Landlord so requires the new lease will contain an express
covenant (in addition to all other covenants and provisions as mentioned or
specified above) by the Guarantor (as tenant) immediately to carry out and
complete at its own expense all works (whether of repair decoration or
otherwise) which are required to remedy any breach of the covenants
provisions and conditions of this Lease which occurred prior to the grant
of such new lease
4 In any such case the Guarantor shall pay the costs of the new lease and
will execute and deliver to the Landlord a counterpart of it
5 It is agreed and declared that the liability of the Guarantor is as
principal covenantor with the Landlord and not merely collateral to the
principal liability of the Tenant
6 Nothing in this Lease shall impose upon the Guarantor:
<PAGE>
6.1.1 any requirement to guarantee in any way the performance of any covenant
by any person other than the Tenant
6.2 any liability restriction or other requirement (of whatever nature) in
relation to any time after the Tenant is released from any covenant by
virtue of the Landlord and Tenant (Covenants) Act 1995 or
6.3 any liability in respect of the Tenant's performance of any covenant
which is more onerous than that to which the Guarantor would be subject
if it were the sole or principal debtor in respect of that covenant
7 To the extent that this Lease purports to impose upon the Guarantor any
requirement liability or restriction referred to in paragraph 6 of this
schedule the relevant provision of this Lease shall to that extent only
be void but this shall not affect:
7.1 the enforceability of that provision except to that extent or
7.2 the enforceability of any other provision of this Lease
8 The liability of the Guarantor hereunder shall not extend to obligations
of the Tenant arising under a "relevant variation" as defined in section
18(4) of the Landlord and Tenant (Covenants) Act 1995 but the making of
the relevant variation shall not otherwise discharge the Guarantor's
liability under this Lease
THE COMMON SEAL of
LIFE ASSURANCE HOLDING )
CO~ORPTION LIMITED
Wragge & Co
55 Colmore Row, Birmingham B3 2AS
telephone OIP1 233 1000 Fax 0121 214 1099
<PAGE>
LOAN AND SECURITY AGREEMENT
Dated: July 20, 1998
by and among
THE CHASE MANHATTAN BANK, THE BANK OF NEW YORK
AND FIRST UNION NATIONAL BANK
and
THE CHASE MANHATTAN BANK, AS AGENT
and
OPINION RESEARCH CORPORATION,
ORC INC., ORC PROTEL, INC.
<PAGE>
LOAN AND SECURITY AGREEMENT (as the same may be amended from time to time
as hereinafter permitted, the "Agreement"), dated July 20, 1998;
BY AND AMONG THE CHASE MANHATTAN BANK, a New York banking institution,
with a place of business at E. 36 Midland Avenue, Paramus, New Jersey 07652,
hereinafter called "Chase", THE BANK OF NEW YORK, a New York banking
institution, with a place of business at 385 Rifle Camp Road, West Paterson, New
Jersey 07424, hereinafter called "BNY", and FIRST UNION NATIONAL BANK, a
national banking association, with a place of business at 1339 Chestnut Street,
Philadelphia, Pennsylvania 19101, hereinafter called "First Union" (First Union,
together with Chase and BNY and any other lenders hereafter becoming a party,
collectively, the "Banks", and individually as the context requires, a "Bank");
CHASE, as agent for itself, BNY and First Union, hereinafter called
"Agent"; and
OPINION RESEARCH CORPORATION, a Delaware corporation, with its chief
executive office at 23 Orchard Road, Skillman, New Jersey 08558, hereinafter
called "Research", ORC INC., a Delaware corporation, with its principal office
at 23 Orchard Road, Skillman, New Jersey 08558 ("ORC"), and ORC PROTEL, INC., a
Delaware corporation with its principal office at 23 Orchard Road, Skillman, New
Jersey 08558 ("ProTel"). Research, ORC and ProTel are hereinafter individually
referred to as a "Borrower", and are hereinafter collectively referred to as the
"Borrowers".
This Agreement specifies the terms of (i) a revolving credit facility
to be made by the Banks, severally as lenders in their Proportionate Shares, as
defined herein, to the Borrowers in fluctuating amounts not to exceed the sum of
NINETEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($19,500,000) and (ii) a term
loan facility to be made by the Banks, severally as lenders in their
Proportionate Shares, as defined herein, to the Borrowers in the
<PAGE>
amount of TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS ($12,500,000) and further
specifies the terms by which all Obligations, as defined herein, of the
Borrowers to the Agent and the Banks are to be secured by all of the assets,
tangible and intangible, of the Borrowers.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto agree as follows:
I
DEFINITIONS
-----------
1.1. "ACCOUNT" OR "ACCOUNTS RECEIVABLE"
----------------------------------
means, in addition to the definition of account as contained in the Uniform
Commercial Code, the right of a Borrower to receive payment for goods sold or
leased or for services rendered which are not evidenced by an instrument or
chattel paper, whether or not it has been earned by performance.
1.2. "ACCOUNT DEBTOR"
----------------
means, in addition to the definition of account debtor as contained in the
Uniform Commercial Code, the person or persons obligated to a Borrower on an
Account, or who is represented by a Borrower to be so obligated.
1.3. "ADJUSTED LIBOR RATE"
---------------------
means, for each Interest Period, an interest rate per annum equal to the
product of (a) the Eurodollar Rate in effect for such Interest Period and (b)
Eurodollar Reserves, if any, imposed upon the entity which is the Agent.
2
<PAGE>
1.4. "ADJUSTED LIBOR RATE ADVANCE(S)"
--------------------------------
means all Revolving Credit Advances which bear interest based upon the
Adjusted LIBOR Rate and the Applicable Eurodollar Margin.
1.5. "ADJUSTED LIBOR RATE LOAN(S)"
-----------------------------
means all Adjusted LIBOR Rate Advances and the portion of the Term Loans
which bears interest based upon the Adjusted LIBOR Rate plus the Applicable
Eurodollar Margin.
1.6. "ADVANCE(S)"
------------
means an amount loaned by the Banks, severally as lenders, to the Borrowers
under the Revolving Credit Facility.
1.7. "AFFILIATE(S)"
--------------
means any Person which, directly owns or controls, on an aggregate basis,
including all beneficial ownership and ownership or control as a trustee,
guardian or other fiduciary, at least fifteen percent (15%) of the outstanding
equity interests of a Borrower or any Subsidiary, or is controlled by or is
under common control with a Borrower or any such Person, or any Subsidiary. For
the purpose of this definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies, whether through the ownership of voting securities, by contract or
otherwise.
1.8. "AGENT"
--------
has the meaning ascribed to such term on the first page hereof.
3
<PAGE>
1.9. "AGENT FEE"
-----------
means an annual payment (in such amounts as agreed to by the Borrowers and
the Agent), payable in accordance with Section 2.7(C) hereof, on the Closing
Date and on each annual anniversary date thereafter, by the Borrowers to the
Agent.
1.10. "AGREEMENT"
-----------
has the meaning ascribed to such term on the first page hereof.
1.11. "APPLICABLE BASE RATE MARGIN"
-----------------------------
means at all times -0-%.
1.12. "APPLICABLE EURODOLLAR MARGIN"
------------------------------
means (i) for any calculation of interest payable in respect of the period
from and including the Initial Borrowing Date to but excluding the first Start
Date (as defined below) to occur after the Initial Borrowing Date, shall mean
(x) in the case of Revolving Credit Advances, 2.25% and (y) in the case of Term
Loans, 2.25%, and (ii) from and after the first day of an Applicable Pricing
Period (the "Start Date") (commencing with the first Start Date to occur after
the Initial Borrowing Date) to and including the last day of such Applicable
Pricing Period (the "End Date"), shall mean the respective percentage per annum
set forth in clause (A), (B) or (C) below if, but only if, as of the last day of
the most recent fiscal quarter of the Borrowers ended immediately prior to such
Start Date (the "Test Date") the condition in clause (A), (B) or (C) below is
met:
(A)(x) in the case of Revolving Loans, 2.50% and (y) in the case
of Term Loans, 2.50% if, but only if, as of the Test Date for such Start Date,
the Leverage Ratio for the Test Period ended on such Test Date shall be greater
than 2.25:1.0; or
4
<PAGE>
(B)(x) in the case of Revolving Loans, 2.25% and (y) in the case of
Term Loans, 2.25% if, but only if, as of the Test Date for such Start Date, the
Leverage Ratio for the Test Period ended on such Test Date shall be equal to or
less than 2.25:1.0 but greater than 1.75:1.0; or
(C)(x) in the case of Revolving Loans, 2.00% and (y) in the case of
Term Loans, 2.00% if, but only if, as of the Test Date for such Start Date, the
Leverage Ratio for the Test Period ended on such Test Date shall be equal to or
less than 1.75:1.0.
Notwithstanding anything to the contrary contained above in this definition the
Applicable Eurodollar Margin shall be 2.50% at all times when (but subject to
any grace period herein) financial statements have not been delivered when
required pursuant to Section 5.1(A) hereof or 5.1(B) hereof, as the case may be.
1.13. "APPLICABLE PRICING PERIOD"
----------------------------
means each period which shall commence on a date five Business Days after
the date on which the financial statements are delivered pursuant to Section
5.1(A) hereof or 5.1(B) hereof, and which shall end on the earlier of (i) the
date five Business Days after the date of actual delivery of the next financial
statements pursuant to Section 5.1(A) hereof or 5.1(B) hereof and (ii) the
latest date on which the next financial statements are required to be delivered
pursuant to Section 5.1(A) hereof or 5.1(B) hereof if such financial statements
have not been delivered on or prior to such date.
1.14. "ASSIGNMENTS OF TRADEMARKS"
----------------------------
means the one or more collateral assignments of trademarks executed by the
Borrowers pursuant to which each assigns to the Agent, for the ratable benefit
of the Banks, all of each such
5
<PAGE>
Borrower's interest in the trademarks described therein, substantially in the
form of EXHIBIT A attached hereto.
1.15. "BANK(S)"
---------
has the meaning ascribed to such term on the first page hereof.
1.16. "BANK DEFAULT"
--------------
means (i) the refusal (which has not been retracted) or the failure of
a Bank to make available its portion of any Borrowing or to fund its portion of
any unreimbursed payment under Section 2.5(c), or (ii) a Bank having notified in
writing the Borrowers and/or the Agent that such Bank does not intend to comply
with its obligations under Section 2.11, in the case of either clause (i) or
(ii) as a result of any takeover of control of such Bank by any regulatory
authority or agency.
1.17. "BASE RATE"
-----------
means the higher of (i) the rate of interest publicly announced by Chase
from time to time as its base rate in effect from time to time at its principal
office in New York City, which does not reflect the rate of interest charged to
any particular class of borrowers, such rate to change automatically as of the
date Chase changes such base rate without notice to the Borrowers, and (ii) the
Federal Funds Rate plus fifty (50) basis points. The Base Rate is not tied to
any external index or rate.
1.18. "BASE RATE ADVANCE(S)"
----------------------
means all Revolving Credit Advances which bear interest based upon the Base
Rate and the Applicable Base Rate Margin.
6
<PAGE>
1.19. "BASE RATE LOAN(S)"
-------------------
means Base Rate Advances and the portion of the Term Loans which bears
interest based upon the Base Rate and the Applicable Base Rate Margin.
1.20. "BORROWER" OR "BORROWERS"
--------------------------
means the parties identified on the first page hereof as the Borrowers, it
being the intent of this Agreement that each shall be considered as a Borrower
regardless of which receives the proceeds of the loans, advances or financial
accommodations hereunder and regardless of which is the source of the Collateral
hereunder and that each of the Borrowers shall be jointly and severally liable
for all of the Obligations.
1.21. "BORROWING"
-----------
means (i) the borrowing of one Type of Credit Facility of a single Tranche
from all Banks having Commitments of the respective Tranche on a given date (or
resulting from a conversion or conversions on such date) and having in the case
of Adjusted LIBOR Rate Loans the same Interest Period and (ii) the issuance of
any Letter of Credit.
1.22. "BORROWING DATE"
-----------------
means the Business Day on which a Borrowing is to be made.
1.23. "BORROWING REQUEST"
-------------------
means a certificate, substantially in the form of EXHIBIT B attached
hereto, executed from time to time by the Borrowers.
1.24. "BUSINESS DAY"
--------------
means (i) for all purposes other than as covered by clause (ii) below, any
day except Saturday, Sunday and any day which shall be in New York City, New
York a legal holiday or a
7
<PAGE>
day on which banking institutions are authorized or required by law or other
government action to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Adjusted LIBOR Rate Loans, any day which is a Business Day described in clause
(i) above and which is also a day for trading by and between banks in the London
interbank Eurodollar market.
1.25. "CALCULATION PERIOD"
--------------------
means the period of four consecutive fiscal quarters of the Borrowers and
Subsidiaries last ended before the date of the respective Permitted Acquisition
which requires calculations to be made on a Pro Forma Basis.
--- -----
1.26. "CAPITAL EXPENDITURES"
----------------------
means, for any period, the aggregate of all expenditures by any Person
during that period for any fixed assets, improvements, or replacements,
substitutions or additions thereto that have a useful life of more than one (1)
year including, without limitation, the direct or indirect acquisition of such
assets by way of increased product charges, offset items or otherwise.
1.27. "CAPITAL LEASE(S)"
------------------
as applied to any Person, means any lease of any property (excluding real
property) by that Person as lessee which would, in conformity with GAAP be
required to be accounted for as a capital lease on the balance sheet of that
Person.
1.28. "CERCLA"
--------
has the meaning provided in the definition of Environmental Laws.
8
<PAGE>
1.29. "CHANGE IN CONTROL"
-------------------
means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the
Securities Exchange Act of 1934, as amended, and the rules of the Securities and
Exchange Commission thereunder as in effect on the date hereof), of shares
representing more than 30% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of Research; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of
Research by Persons who were neither (i) nominated by the board of directors of
Research nor (ii) appointed by directors so nominated; or (c) the acquisition of
direct or indirect Control of Research by any Person or group. Notwithstanding
the foregoing, a change of stock ownership of Research which results in any of
Michael Cooper, Goldman Sachs & Co., Groover, McBain or Canfield Associates or
any Affiliate thereof thereafter owning more than 30% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of Research
(and provided Research thereafter continues to be publicly traded) shall not be
a Change in Control.
1.30. "CHATTEL PAPER"
---------------
means, in addition to the definition of chattel paper as contained in the
Uniform Commercial Code, a writing or writings which evidence both a money
obligation and a security interest in, or a lease of, specific Goods. When a
transaction is evidenced both by such a security agreement or a lease and by an
Instrument or series of Instruments, the group of writings taken together
constitutes Chattel Paper.
1.31. "CLOSING DATE"
--------------
means the date of this Agreement.
9
<PAGE>
1.32. "COLLATERAL"
------------
means all of those present or future assets located in the United States,
real or personal, of the Borrowers and/or any other Obligor in which a security
interest in or lien on is granted to the Agent for the ratable benefit of the
Banks hereunder or contemplated hereby, or under any other present or future
agreement by a Borrower or such other Obligor in favor of the Agent for the
ratable benefit of the Banks.
1.33. "COMMITMENT(S)"
---------------
means, collectively, the Revolving Loan Commitment and the Term Loan
Commitment.
1.34. "CONSOLIDATED CAPITALIZATION"
-----------------------------
means, at any date, the sum of the Borrowers' and Subsidiaries' (i) Funded
Debt plus (ii) Consolidated Net Worth.
1.35. "CONSOLIDATED CURRENT ASSETS"
-----------------------------
means, at any time, the consolidated current assets of the Borrowers and
Subsidiaries at such time.
1.36. "CONSOLIDATED CURRENT LIABILITIES"
----------------------------------
means, at any time, the consolidated current liabilities of the Borrowers
and Subsidiaries at such time, but excluding the current portion of and accrued
but unpaid interest on any Indebtedness under this Agreement and any other long-
term Indebtedness which could otherwise be included therein.
1.37. "CONSOLIDATED EBIT"
-------------------
means, for any period, Consolidated Net Income before Consolidated Interest
Expense and before provision for taxes for such period and without giving effect
(w) to any extraordinary
10
<PAGE>
gains or losses, (x) to any gains or losses from sales of assets other than from
sales of inventory sold in the ordinary course of business and (y) to any
expenses related to or incurred by the Borrowers in connection with any
Permitted Acquisition, provided, however, that with respect to any Permitted
Acquisition for the Calculation Period following such acquisition Consolidated
EBIT shall include results of operations of the company or assets so acquired,
which amounts shall be determined on a Pro Forma Basis.
--- -----
1.38. "CONSOLIDATED EBITDA"
---------------------
means, for any period, Consolidated EBIT for such period, adjusted by
adding thereto the amount of all amortization and depreciation expense of the
Borrowers and Subsidiaries that was deducted in arriving at Consolidated EBIT
for such period.
1.39. "CONSOLIDATED INTEREST EXPENSE"
-------------------------------
means, for any period, the total consolidated interest expense of the
Borrowers and Subsidiaries for such period plus, without duplication, that
portion of Capital Lease obligations of the Borrowers and Subsidiaries
representing the interest factor for such period.
1.40. "CONSOLIDATED NET INCOME"
-------------------------
means, for any Person and period, the net income (or loss) of such Person
and its Subsidiaries for such period, determined on a consolidated basis (after
deduction for minority interests) in accordance with GAAP, provided that in
determining Consolidated Net Income of the Borrowers, the net income (or loss)
of any other Person which is not a Subsidiary or is accounted for by the
Borrowers by the equity method of accounting shall be included only to the
extent of the payment of dividends or distributions by such other Person to the
Borrowers or a Subsidiary during such period.
11
<PAGE>
1.41. "CONSOLIDATED NET WORTH"
------------------------
means, at any date, the amount by which consolidated Total Assets of the
Borrowers and Subsidiaries exceed consolidated Total Liabilities of the
Borrowers and Subsidiaries.
1.42. "CONTINGENT OBLIGATIONS"
------------------------
means, as to any Person, any obligation of such Person guaranteeing or in
effect guaranteeing any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (A) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (B) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (C) to purchase property, securities or services primarily for
the purpose of assuring the beneficiary of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, (D)
for the obligations of a limited liability company in which such Person is a
member, or (E) otherwise to assure or hold harmless the beneficiary of such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligations shall not include the endorsement of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the Agent
in good faith.
12
<PAGE>
1.43. "CONTROL"
---------
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ability to exercise voting power, by contract or otherwise. "Controlling"
-----------
and "Controlled" have meanings correlative thereto.
----------
1.44. "CREDIT FACILITIES"
-------------------
means, collectively, the Revolving Credit Facility and the Term Loans.
1.45. "DEFAULT"
---------
means an event of the nature specified in Article VII hereof and which,
with the giving of notice or passage of time, or both, would become an Event of
Default.
1.46. "DEFAULT RATE"
--------------
means a rate of two percent (2%) in excess of the interest rate then in
effect from time to time.
1.47. "DOCUMENT(S)"
-------------
has the meaning set forth in the Uniform Commercial Code for such term.
1.48. "EARN OUTS"
-----------
means the maximum amounts which the Borrowers or Subsidiaries (or any of
them) are or hereafter may be potentially liable for payment pursuant to
documentation entered into in connection with previous and future acquisitions.
1.49. "ELIGIBLE TRANSFEREE"
---------------------
means and includes a commercial bank, insurance company, financial
institution, fund or other Person which regularly purchases interests in loans
or extensions of credit of the types made pursuant to this Agreement, any other
Person which would constitute a "qualified
13
<PAGE>
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, as in effect on the Closing Date or other "accredited
investor" (as defined in Regulation D under the Securities Act of 1933, as
amended).
1.50. "END DATE"
----------
has the meaning provided in the definition of Applicable Eurodollar Margin.
1.51. "ENVIRONMENTAL CLAIMS"
----------------------
means and any all administrative, regulatory or judicial actions, suits,
demands, demand letters, directives, claims, liens, notices of noncompliance or
violation, investigations or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation, (a) any
and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief in connection with alleged injury or threat of injury to
health, safety or the environment due to the presence of Hazardous Materials.
1.52. "ENVIRONMENTAL LAWS"
--------------------
means (A) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), as amended
by the Superfund Amendment and Reauthorization Act of 1986; (B) the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. 6901 et seq.; (C)
-- ---
the New Jersey Spill Compensation and Control Act, as amended, N.J.S.A. 58:10-
23.11b et seq.; (D) the New Jersey Industrial Site
-- ---
14
<PAGE>
Recovery Act, formerly known as the Environmental Cleanup Responsibility Act, as
amended, N.J.S.A. 13:1K-6 et seq.; (E) the New Jersey Underground Storage of
-- ---
Hazardous Substances Act, N.J.S.A. 58:10A-21 et seq.; (F) the New Jersey Solid
-- ---
Waste Management Act, as amended, N.J.S.A. 13:1E-1 et seq.; (G) the New Jersey
-- ---
Water Pollution Control Act, as amended, N.J.S.A. 58:10A-1 et seq.; and (H)
-- ---
any and all laws, regulations and executive orders, federal, state and local,
pertaining to environmental matters, as the same may be amended or supplemented
from time to time.
1.53. "EQUIPMENT"
-----------
means, in addition to the definition of equipment contained in the Uniform
Commercial Code, machinery and equipment of every kind, nature and description,
including but not limited to trailers and the like, handling and delivery
equipment, cranes and hoisting equipment, fixtures, office machines and
furniture, whether affixed to realty or not.
1.54. "ERISA"
-------
means the Employee Retirement Income Security Act of 1974, as amended from
time to time.
1.55. "EURODOLLAR RATE"
-----------------
means, with respect to each Interest Period for an Adjusted LIBOR Rate
Loan, (i) the arithmetic average (rounded to the nearest 1/16 of 1%) of the
offered quotation to first-class banks in the London interbank Eurodollar market
by the entity which is the Agent for U.S. dollar deposits of amounts in same day
funds comparable to the outstanding principal amount of the Adjusted LIBOR Rate
Loan for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Adjusted LIBOR Rate
Loan,
15
<PAGE>
determined as of 11:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period, divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) the Eurodollar Reserve.
1.56. "EURODOLLAR RESERVE"
--------------------
means a fraction (expressed as a decimal), the numerator of which is the
number one and the denominator of which is the number one minus the applicable
statutory reserve requirements for the entity which is the Agent (without
duplication, but including, without limitation, basic, supplemental, marginal
and emergency reserves), from time to time in effect under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor) with respect
to eurocurrency funding currently referred to as "Eurocurrency liabilities" in
such Regulation D.
1.57. [INTENTIONALLY OMITTED]
1.58. "EVENT OF DEFAULT"
------------------
means an event of the nature specified in Article VII hereof.
1.59. "FEDERAL FUNDS RATE"
--------------------
means, for any period, a fluctuating interest rate equal for each day
during such period to the weighted average of the rates on overnight Federal
Funds transactions with members of the Federal Reserve System arranged by
Federal Funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing
selected by the Agent.
16
<PAGE>
1.60. "FIXED CHARGE COVERAGE RATIO"
-----------------------------
means, the ratio of (i) for the applicable Test Period Consolidated EBITDA
minus Capital Expenditures to (ii) the sum of Consolidated Interest Expense for
such Test Period plus payments of principal on Indebtedness of the Borrowers and
Subsidiaries due within the next twelve (12) months.
1.61. "FIXED CHARGE COVERAGE RATIO (EARN OUTS)"
-----------------------------------------
means, the ratio of (i) for the applicable Test Period, Consolidated EBITDA
to (ii) the sum of Consolidated Interest Expense for such Test Period plus
payments of principal on Indebtedness of the Borrowers and Subsidiaries due
within the next twelve (12) months plus Earn Out payments due within the next
twelve (12) months.
1.62. "FRONTING FEE(S)"
-----------------
means the fees payable by the Borrowers to the Issuing Bank, for its own
account, as defined in Section 2.7(D)(i) hereof.
1.63. "FUNDED DEBT"
-------------
means, at any date, without duplication the aggregate consolidated (i)
principal amount of Borrowers' and all Subsidiaries' Indebtedness for borrowed
money, including all Revolving Credit Advances outstanding, (ii) payment
obligations of the Borrowers and all Subsidiaries under Capital Leases and (iii)
guaranty obligations of all Borrowers and Subsidiaries of such Indebtedness for
borrowed money or payment obligations under Capital Leases, all determined in
accordance with GAAP on a consolidated basis.
17
<PAGE>
1.64. "GAAP"
------
means generally accepted accounting principles in the United States of
America consistently applied, as in effect on the Closing Date.
1.65. "GENERAL INTANGIBLES"
---------------------
means, in addition to the definition of general intangibles as contained in
the Uniform Commercial Code, all rights of a Borrower to property, choses in
action and other rights of a Borrower not otherwise specifically included
elsewhere in this Agreement, further including but not limited to all present
and future trademarks, goodwill symbolized by any trademarks, trade names,
service marks, copyrights and patents, and all rights under license agreements
for the use of same, and all rights of a Borrower under any and all leases of
property, both real and personal.
1.66. "GOODS"
-------
means, in addition to the definition of goods as contained in the Uniform
Commercial Code, all articles of tangible personal property, sold, supplied,
leased or otherwise disposed of.
1.67. "GOVERNMENTAL BODY"
-------------------
means any nation or government, any state or other political subdivision
thereof, any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or any court or
arbitrator.
1.68. "HAZARDOUS MATERIALS"
---------------------
means (a) any petroleum or petroleum products, radiologically contaminated
materials, asbestos in any form that is friable, urea formaldehyde foam
insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; (b) any
chemicals, materials or substances defined as or included in the definition of
18
<PAGE>
"hazardous substances," "hazardous waste," "hazardous materials," "extremely
hazardous substances," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "contaminants," or "pollutants," or words of similar import, under
any applicable Environmental Law; and (c) any other chemical, material or
substance, the release of which is prohibited, limited or regulated by any
governmental authority.
1.69. "INDEBTEDNESS"
--------------
means, as to any Person, at a particular time, all items which, in
accordance with GAAP, would be classified as liabilities on a balance sheet of
such Person as at such time and which constitute, without duplication, (A)
indebtedness for borrowed money or the deferred purchase price of property
(other than credit extended to such Person for the purchase of goods in the
ordinary course of business to the extent the same would otherwise constitute
Indebtedness), (B) indebtedness evidenced by notes, bonds, debentures or similar
instruments, (C) obligations under leases which, in accordance with GAAP, are
required to be capitalized on a balance sheet, (D) obligations under conditional
sales or other title retention agreements, (E) indebtedness arising in respect
of letters of credit (both documentary and standby) and under acceptance
facilities and the face amount of all letters of credit issued for the account
or upon the application of such Person and, without duplication, all drafts
drawn thereunder to the extent such Person shall not have reimbursed the issuer
in respect of the issuer's payment of such drafts, (F) 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 (other than
carriers', warehousemen's, mechanics', repairmen's or other like nonconsensual
liens arising in the ordinary course of business to the extent such liens are
Permitted Encumbrances) and liens for taxes, assessments or
19
<PAGE>
similar charges incurred in the ordinary course of business to the extent such
liens are Permitted Encumbrances, (G) mandatory obligations of such Person to
redeem or purchase stock or to purchase or repay Indebtedness, (H) Contingent
Obligations of such Person in respect of any of the foregoing, (I) all
obligations under any Interest Rate Protection Agreement, (J) all Earn Outs, and
(K) all obligations of such Person as a general partner of or in respect of any
partnership.
1.70. "INDEMNIFIED PARTIES"
---------------------
has the meaning ascribed to such term in Section 10.15 hereof.
1.71. "INITIAL BORROWING DATE"
------------------------
means the date occurring on or after the Closing Date on which the initial
Borrowing under any of the Credit Facilities occurs.
1.72. "INSTRUMENT"
------------
means, in addition to the definition of instrument as contained in the
Uniform Commercial Code, a negotiable instrument or a security, or any other
writing which evidences a right to the payment of money and is not itself a
security agreement or lease and is of the type which is, in the ordinary course
of business, transferred by delivery with any necessary endorsement or
assignment.
1.73. "INTEREST PERIOD"
-----------------
means, as to all Adjusted LIBOR Rate Loans, the period commencing on the
Borrowing Date and ending on the numerically corresponding day (or if there is
no numerically corresponding day, the last day) in the calendar month that is
one (1), two (2), three (3) or six (6) months thereafter, as selected by the
Borrowers in a Borrowing Request or notice of a conversion to an Adjusted LIBOR
Rate Loan , and thereafter, the period commencing on the last day of the
20
<PAGE>
first preceding Interest Period and ending on the numerically corresponding day
(or if there is no numerically corresponding day, the last day) in the calendar
month that is one (1), two (2), three (3) or six (6) months thereafter, as
selected by the Borrowers in a notice of continuance of an Adjusted LIBOR Rate
Loan; provided, however, that if any Interest Period would end on a day which
-------- -------
shall not be a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such Business Day would fall in the next
succeeding calendar month in which case such Interest Period shall end on the
first preceding Business Day and provided, further, that notwithstanding
-------- -------
anything to the contrary, (i) no Interest Period shall extend beyond the
Revolving Credit Maturity Date (as to Revolving Credit Advances which are
Adjusted LIBOR Rate Advances) or the Term Loan Maturity Date (as to portions of
the Term Loans which are Adjusted LIBO Rate Loans) and (ii) in all cases, no
Interest Period shall extend beyond any date on which principal is to be paid
for that portion of principal being paid on such date.
1.74. "INTEREST RATE PROTECTION AGREEMENT(S)"
---------------------------------------
means any and all interest rate swap agreements, interest rate cap
agreements, interest collar agreements, interest rate hedging agreements or
other similar agreements or arrangements (including, without limitation, foreign
currency hedging contracts and the existing "collar" agreement with First
Union), in each case entered into with a Bank.
1.75. "INVENTORY"
-----------
means, in addition to the definition of inventory as contained in the
Uniform Commercial Code, all Goods held by a Borrower for resale or lease or
furnished or to be furnished under contracts of service, and shall include raw
materials, goods and work in process and finished goods, and all goods returned
by or reclaimed from customers.
21
<PAGE>
1.76. "INVESTMENT OBLIGATIONS"
------------------------
means any of the following made or acquired prior to, or which making or
acquisition will not cause, a Default or Event of Default: (A) Obligations of
or guaranteed by the United States of America; (B) Obligations issued or
guaranteed by any instrumentality or agency of the United States of America,
whether now existing or hereafter organized; (C) Obligations issued or
guaranteed by any state of the United States or the District of Columbia; and
(D) Interest-bearing accounts, certificates of deposit, bankers acceptances or
commercial paper of any of the Banks.
1.77. "ISSUING BANK"
--------------
means The Chase Manhattan Bank and any other Bank which at the request of
the Borrowers and with the consent of the Agent agrees, in such Bank's sole
discretion, to become an Issuing Bank for the purpose of issuing Letters of
Credit pursuant to Section 2.3 hereof. The sole Issuing Bank on the Closing
Date is The Chase Manhattan Bank and First Union as to the Existing Letter of
Credit.
1.78. "LANDLORD AND WAREHOUSEMEN WAIVERS"
-----------------------------------
means, collectively, the landlord/warehousemen consent and waiver
agreements, substantially in the form of EXHIBIT C attached hereto and executed
by the owners of the Premises.
1.79. "L/C SUPPORTABLE OBLIGATIONS"
-----------------------------
means obligations of the Borrowers acceptable to the Required Banks.
1.80. "L/C PARTICIPANT"
-----------------
has the meaning provided in Section 2.5 hereof.
22
<PAGE>
1.81. "LETTER(S) OF CREDIT"
---------------------
has the meaning provided in Section 2.3 hereof
1.82. "LETTER OF CREDIT FEES"
-----------------------
means the fees referred to in Section 2.7(D) hereof.
1.83. "LETTER OF CREDIT OUTSTANDINGS"
-------------------------------
means, at any time, the sum of (i) the aggregate Stated Amount of all
outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings.
1.84. "LETTER OF CREDIT REQUEST"
--------------------------
has the meaning provided in Section 2.4 hereof.
1.85. "LEVERAGE RATIO"
----------------
means, at any time, the ratio of (x) Funded Debt at such time to (y)
Consolidated EBITDA for the then most recently ended Test Period.
1.86. "LIEN"
------
means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement, or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing) and the filing of any financing statement under the Uniform
Commercial Code (or comparable law) of any jurisdiction to evidence any of the
foregoing.
23
<PAGE>
1.87. "LOAN DOCUMENTS"
----------------
means this Agreement, the Notes, the Pledge Agreement(s), the Assignments
of Trademarks, any letter of credit reimbursement agreement, and other
documents executed and delivered to the Agent and/or any of the Banks by the
Borrowers and/or any other Obligor hereunder, and any amendments, renewals,
modifications or supplements thereto, or substitutions therefor (exclusive of
any Interest Rate Protection Agreements).
1.88. "MATERIAL ADVERSE CHANGE"
-------------------------
means, as to a Person, a material adverse change in the financial
condition, operations, business, or property of such Person. In determining
whether any individual event results in a Material Adverse Change,
notwithstanding that such event does not of itself have such an effect, a
Material Adverse Change shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events result in a Material
Adverse Change.
1.89. "MATERIAL ADVERSE EFFECT"
-------------------------
means, as to a Person, a material adverse effect on the financial
condition, operations, business, or property of such Person. In determining
whether any individual event results in a Material Adverse Effect,
notwithstanding that such event does not of itself have such an effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events result in a Material
Adverse Effect.
1.90. "MAXIMUM AMOUNT"
----------------
means $19,500,000 as such amount may be reduced pursuant to Section 2.1(G)
hereof.
1.91. "NOTES"
-------
means, collectively, the Revolving Notes and the Term Notes.
24
<PAGE>
1.92. "OBLIGATION" OR "OBLIGATIONS"
-----------------------------
means any and all loans, advances and other financial accommodations made
by any of the Banks on and after the date of this Agreement to or for the
account of the Borrowers pursuant to or under this Agreement (including without
limitation, the Revolving Credit Advances, the Term Loans, the Letters of Credit
and Interest Rate Protection Agreements) and the other Loan Documents, including
without limitation, any and all interest, commissions, obligations, liabilities,
Indebtedness, charges and expenses, direct or indirect, primary, secondary,
contingent, joint or several, which are due or to become due under this
Agreement (including without limitation, the Revolving Credit Advances, the Term
Loans, the Letters of Credit and Interest Rate Protection Agreements) and the
other Loan Documents and the amount due or to become due upon any notes,
reimbursement agreements or other obligations given to, or received by, the
Agent and/or all of the Banks in connection with this Agreement (including
without limitation, the Revolving Credit Advances, the Term Loans, the Letters
of Credit and Interest Rate Protection Agreements) and the other Loan Documents
or on account of any of the foregoing and the performance and fulfillment by the
Borrowers of all the terms, conditions, promises, covenants and provisions
contained in the Loan Documents, or in any future agreement or instrument among
the Borrowers and the Agent and all of the Banks in connection with any of the
Loan Documents.
1.93. "OBLIGOR(S)"
------------
means the Borrowers and any other party now or hereafter liable for the
Obligations under the Loan Documents.
25
<PAGE>
1.94. "PBGC"
------
means the Pension Benefit Guaranty Corporation or any successor thereto.
1.95. "PERMITTED ACQUISITIONS"
------------------------
means 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 such acquisition,
engages in an industry substantially similar to the industry in which Research
or any of its Affiliates 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
the Required Banks) and that any assets so acquired (including all capital stock
of a domestic Person and 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 the Agent and the Banks financial projections (certified by
Research'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
all the financial covenants and other provisions of this Agreement; (v) if the
aggregate consideration to be paid by all Borrowers for any such acquisition
(including, without limitation, by payment in cash, Earn Outs, issuance of
capital stock, issuance of subordinated debt or assumption of Indebtedness)
shall exceed $7,500,000 (for a domestic acquisition) or $5,000,000 (for a
foreign acquisition), the prior consent of the Required Banks shall have been
obtained; (vi) all acquisition candidates must have positive earnings before
interest and taxes over the twelve (12) month period ending with the most
recently ended calendar quarter (except if the most recently ended quarter ended
within thirty (30) days of the proposed acquisition, then for the twelve (12)
26
<PAGE>
month period ending with the preceding quarter) such acquisition as evidenced by
audited (if available), reviewed (if available) or management prepared (in all
other cases) financial statements or such other reports or information
satisfactory to the Required Banks, in any case prepared in accordance with
GAAP; (vii) the proposed acquisition may not be "contested" by any Person;
(viii) the proposed acquisition documents (including, without limitation, the
stock or asset purchase agreement) shall have been provided to the Agent and the
Banks at least fourteen (14) days prior to the date of the proposed consummation
thereof; and (ix) as to acquisitions not requiring the prior approval of the
Required Banks as described in clause (v) above, the Agent and the Banks shall
have been provided at least fourteen (14) days prior the date of the proposed
acquisition consolidated and consolidating financials of the Borrowers prepared
on a Pro Forma Basis taking into account the proposed acquisition (certified as
--- -----
to accuracy by Research by a certificate signed on Research's behalf by its
chief financial officer) and a covenant compliance certificate. No Permitted
Acquisition shall include the purchase of real estate without the prior written
consent of the Required Banks.
1.96. "PERMITTED ENCUMBRANCES"
------------------------
means (A) Liens for taxes, assessments or governmental charges or levies on
property of a Borrower if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being diligently contested in
good faith and by appropriate proceedings and against which a Borrower has
established adequate reserves in accordance with GAAP, (B) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, and Liens incurred in
27
<PAGE>
connection with construction or other similar Liens arising in the ordinary
course of business provided the same are not at the time due and payable, (C)
Liens arising out of pledges or deposits under workmen's compensation law,
unemployment insurance, old age pension or other social security or retirement
benefit or similar legislation, (D) Liens in favor of the Agent for the ratable
benefit of the Banks and (E) purchase money Liens and Capital Leases arising in
connection with purchase money Indebtedness permitted under Section 1.92 (ii)
hereof provided such Liens and Capital Leases only attach to the item so
purchased and the proceeds thereof and secure only the purchase price thereof.
1.97. "PERMITTED INDEBTEDNESS"
------------------------
means (i) Indebtedness to the Agent and the Banks, (ii) purchase money
indebtedness and Capital Leases with respect to the purchase or capital lease by
the Borrowers of equipment and/or machinery to be used in connection with their
businesses, up to an aggregate amount of $1,500,000 per year; (iii) Permitted
Intercompany Loans; (iv) obligations arising under Interest Rate Protection
Agreements; and (v) the Earn Outs.
1.98. "PERMITTED INTERCOMPANY LOANS"
------------------------------
means loans made from time to time by Research to the other Borrowers for
working capital purposes. In the event any such Permitted Intercompany Loan
exceeds $100,000, such loan shall be evidenced by a promissory note which shall
be pledged and delivered (with any necessary endorsement) to the Agent for the
benefit of the Banks.
1.99. "PERMITTED OFFICER LOANS"
-------------------------
means loans to officers of the Borrowers in an amount not to exceed
$1,000,000 outstanding at any one time.
28
<PAGE>
1.100. "PERSON"
------
means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether national,
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
Without limitation, the term "Person" shall include the Borrowers.
1.101. "PLAN"
----
means an employee benefit plan or other plan maintained for employees of a
Borrower and covered by Title IV of ERISA.
1.102. "PLEDGE AGREEMENT(S)"
-------------------
means, collectively, the one or more agreements executed by Research, ORC
and ORC Holdings, Ltd., respectively, in favor of the Agent pursuant to which
there is pledged to the Agent for the ratable benefit of the Banks 100% of the
issued and outstanding shares of stock of all domestic Subsidiaries of each
Borrower and 65% of the issued and outstanding shares of stock of any foreign
Subsidiaries of any Borrower or Subsidiary, substantially in the form of
EXHIBITS D, E and F attached hereto.
1.103. "PREMISES"
--------
means all of the sites where any Collateral provided for hereunder may be
located, including, without limitation, the locations described on SCHEDULE
1.103 hereto.
1.104. "PRO FORMA BASIS"
---------------
means, with respect to any Permitted Acquisition, the calculation of the
consolidated results of the Borrowers and Subsidiaries otherwise determined in
accordance with this
29
<PAGE>
Agreement as if the respective Permitted Acquisition (and all Indebtedness
incurred to finance such Permitted Acquisition and all other Permitted
Acquisitions, effected during the respective Calculation Period or thereafter
and on or prior to the date of determination) (each such date, a "Determination
Date") had been effected on the first day of the respective Calculation Period;
provided that all such calculations shall be made on a basis consistent with the
requirements of Regulations S-X under the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, and shall take into account
the following assumptions:
(i) interest expense attributable to interest on any Indebtedness
(whether existing or being incurred) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation (taking into
account any Interest Rate Protection Agreement applicable to such Indebtedness
if such Interest Rate Protection Agreement has a remaining term in excess of 12
months) had been the applicable rate for the entire period; and
(ii) pro forma effect shall be given to all Permitted Acquisitions (by
--- -----
excluding or including, as the case may be, the historical financial results for
the respective properties) that occur during such Calculation Period or
thereafter and on or prior to the Determination Date (including any Indebtedness
assumed or acquired in connection therewith) as if they had occurred on the
first day of such Calculation Period, in each case to the extent that the
occurrence of any such event required the financial covenants contained in
Section 6.2 hereof to be recalculated on a Pro Forma Basis.
--- -----
1.105. "PROPORTIONATE SHARE"
--------------------
means (i) thirty seven and one half percent (37.5%) in the case of Chase;
(ii) thirty one and one quarter percent
30
<PAGE>
(31.25%) in the case of BNY; and (iii) thirty one and one quarter percent
(31.25%) in the case of First Union; as such percentages may change from time to
time and as same may be adjusted as described in Section 9.1 hereof.
1.106. "REPAYMENT INDEMNITY"
--------------------
means any amounts required to compensate the Agent and/or any Bank for any
losses which it incurs as calculated below as a result of (i) repayments of
Adjusted LIBOR Rate Loans (including repayments on account of illegality as set
forth in Section 2.1(K) hereof), (ii) a conversion from or into an Adjusted
LIBOR Rate Loan, in each case described in clauses (i) and (ii) hereof on other
than the last day of an Interest Period and (iii) a failure to borrow, continue
or convert on the date set forth in a Borrowing Request as to an Adjusted LIBOR
Rate Loan (the events described in clauses (ii) and (iii) hereof, being "Other
Indemnity Events"). The amount of such loss shall be calculated by multiplying
the principal amount of the repayment or prepayment or the amount which is the
subject of an Other Indemnity Event by the per annum rate (expressed as a
decimal and based on a 360-day year and actual days elapsed) (the "Indemnity
Rate"), determined by subtracting (A) the highest asked yield most recently
published in The Wall Street Journal as of the date of repayment or prepayment
-----------------------
or Other Indemnity Event for U.S. Treasury securities having a term
approximating the weighted average of the terms of each Advance or portion
thereof being repaid or prepaid or the amount which is the subject of an Other
Indemnity Event (the "Average Term", said average to be determined by reference
to the period, for each Advance, commencing on the date of the repayment or
prepayment or Other Indemnity Event and ending on the end of the then current
Interest Period or the Interest Period which would have been in effect for an
Other Indemnity Event) from (B) the rate of interest applicable to the principal
amount being repaid or prepaid or the amount which is the subject of an Other
31
<PAGE>
Indemnity Event, said Repayment Indemnity to accrue for a period from and
including the date of the repayment or prepayment or Other Indemnity Event to,
but excluding, the date of expiration of the Average Term, as if such term
commenced on the date of repayment or prepayment or Other Indemnity Event;
provided that no Repayment Indemnity shall be payable unless the foregoing
calculation of the Indemnity Rate produces a positive number. The Borrowers
agree that the Repayment Indemnity has been freely bargained between the parties
to provide the Agent and the Banks with compensation for the costs of
reinvesting the Credit Facility proceeds and the loss of the contracted-for
return on the Credit Facilities and such Repayment Indemnity is reasonable and
constitutes a means of providing the Agent and the Banks with a substitute or
alternate source of cash flow if any Adjusted LIBOR Rate Loan is repaid, prepaid
or converted or if there is a failure to borrow, continue or convert as set
forth above. The Agent's reasonable determination of the Repayment Indemnity
shall be conclusive and binding in the absence of manifest error. The amount
payable as determined above shall be in addition to any amounts payable under
any other Section or Paragraph of this Agreement.
1.107. "REPORTABLE EVENT"
-----------------
has the meaning assigned to such term in Title IV of ERISA, or regulations
issued thereunder, other than a Reportable Event not subject to the provision
for a thirty (30) day notice to the PBGC under such regulations.
1.108. "REQUIRED BANKS"
---------------
means the Banks as to which a Bank Default does not exist the sum of whose
outstanding Term Loans and Revolving Credit Commitments (or if the Revolving
Credit Commitments are terminated, the sum of whose outstanding Revolving Credit
Advances and the Proportionate
32
<PAGE>
Shares of Letter of Credit Outstandings) represent an amount greater than 66
2/3% (or 100% if only two (2) institutions remain as Banks hereunder) of the sum
of all outstanding Term Loans and Revolving Credit Commitments (or if the
Revolving Credit Commitments are terminated, the sum of all outstanding
Revolving Credit Advances and Letter of Credit Outstandings).
1.109. "REVOLVING CREDIT ADVANCE(S)"
---------------------------
means an amount loaned by the Banks, severally as lenders, to the Borrowers
under the Revolving Credit Facility, the proceeds of which are to be used by the
Borrowers for working capital, general corporate purposes and Permitted
Acquisitions.
1.110. "REVOLVING CREDIT COMMITMENT"
---------------------------
means, for each Bank, such Bank's Proportionate Share of the commitment
herein to extend the Revolving Credit Facility.
1.111. "REVOLVING CREDIT FACILITY"
--------------------------
means the revolving credit facility in the maximum principal amount of
NINETEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($19,500,000) made available
severally by the Banks in their Proportionate Shares pursuant to Sections 2.1
hereof and 2.3 hereof as Revolving Credit Advances and Letters of Credit and
evidenced by the Revolving Notes.
1.112. "REVOLVING CREDIT FACILITY MATURITY DATE"
----------------------------------------
means July 20, 2001.
1.113. "REVOLVING NOTES"
---------------
means the revolving notes executed and delivered by the Borrowers
evidencing the Revolving Credit Facility and payable to the order of each of the
Banks, substantially in the form of EXHIBIT G attached hereto.
33
<PAGE>
1.114. "STANDBY FEE(S)"
--------------
means the fees payable by the Borrowers to the Issuing Bank, for the
ratable benefit of the Banks, as defined in Section 2.7(D)(i) hereof.
1.115. "STATED AMOUNT"
-------------
means, at any time, the maximum amount available to be drawn under any
Letter of Credit (in each case determined without regard to whether any
conditions to drawing could then be met).
1.116. "SUBSIDIARY"
----------
means any corporation, limited liability company, partnership (general or
limited) or other entity of which more than fifty percent (50%) of the
outstanding capital stock or other ownership interest having ordinary voting
power to elect a majority of the board of directors or other governing body of
such entity (irrespective of whether, at the time, stock or other ownership
interest of any other class or classes of such entity shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by a Borrower or one or more Subsidiaries.
1.117. "TERM LOANS"
----------
means the term loans in the maximum principal amount of TWELVE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($12,500,000) made available by the Banks in their
Proportionate Shares and Evidenced by the Term Notes.
1.118. "TERM LOAN COMMITMENT"
--------------------
means, for each Bank, such Bank's Proportionate Share of the Term Loans.
34
<PAGE>
1.119. "TERM LOAN MATURITY DATE"
-----------------------
means July 20, 2003.
1.120. "TERM NOTES"
----------
means the term notes executed and delivered by the Borrowers evidencing the
Term Loans and payable to order of each Bank, substantially in the form of
EXHIBIT H attached hereto.
1.121. "TEST DATE"
----------
has the meaning provided in the definition of Applicable Eurodollar Margin.
1.122. "TEST PERIOD"
-----------
means, for any date, the period of four consecutive fiscal quarters of the
Borrowers then last ended (in each case taken as one accounting period).
1.123. "TOTAL ASSETS"
-------------
means, at any date, the amount shown on the books and records of a Person,
determined in accordance with GAAP, of all property, both real and personal, of
a Person.
1.124. "TOTAL LIABILITIES"
-----------------
means, at any date, the amount of all liabilities which, in accordance with
GAAP should be included in determining total liabilities as shown on a liability
side of a balance sheet of a Person at such date.
1.125. "TRANCHE"
-------
means the respective facility and commitments utilized in making Credit
Facilities hereunder, with there being two separate Tranches, i.e., the Term
----
Loans and the Revolving Credit Facility.
35
<PAGE>
1.126. "TYPE"
----
means the type of Revolving Credit Advances or Term Loans determined with
regard to the interest option applicable thereto, i.e., whether a Base Rate Loan
----
or an Adjusted LIBOR Rate Loan.
1.127. "UNIFORM COMMERCIAL CODE"
-----------------------
means the Uniform Commercial Code as adopted and in effect under the laws
of the State of New Jersey.
1.128. INTERPRETATION AND CONSTRUCTION
-------------------------------
(a) The terms "hereby," "hereof," "hereto," "herein," "hereunder"
and any similar terms, as used in this Agreement, refer to this Agreement in its
entirety and not any particular Article, section or paragraph, and the term
"hereafter" means after, and the term "heretofore" means before, the date of
delivery of this Agreement;
(b) Words importing a particular gender mean and include every
other gender, and words importing the singular number mean and include the
plural number and vice versa.
(c) All accounting terms used herein and not otherwise defined
shall be defined in accordance with GAAP.
II
CREDIT FACILITIES
-----------------
2.1. THE REVOLVING CREDIT FACILITY AND LETTERS OF CREDIT
---------------------------------------------------
(A) Availability. Subject to the terms and conditions hereinafter set
------------
forth, and provided that no Default or Event of Default shall have occurred and
be continuing or would result from the making of any Revolving Credit Advance,
from time to time, the Banks shall
36
<PAGE>
extend credit to the Borrowers by, severally making Revolving Credit Advances
under the Revolving Credit Facility in their respective Proportionate Shares.
Each Revolving Credit Advance under this Section 2.1 shall be in an amount of
not less than $100,000 or any multiple thereof (as to Base Rate Advances) and
not less than $500,000 or any multiple of $100,000 thereafter (as to Adjusted
LIBOR Rate Advances). Research alone may request all Revolving Credit Advances
on behalf of itself and all other Borrowers and Research's request shall be
binding on all other Borrowers. Notwithstanding the foregoing, at no time may
the total outstanding principal amount of Revolving Credit Advances and the
amount of Letter of Credit Outstandings exceed the Maximum Amount. In the event
at any time the total outstanding principal amount of Revolving Credit Advances
and the amount of Letter of Credit Outstandings exceeds the Maximum Amount, the
Borrowers shall immediately pay any such excess to the Agent for the ratable
benefit of the Banks.
(B) Revolving Credit Advances. Until the Revolving Credit Maturity
-------------------------
Date and subject to the terms hereof and provided that no Default or Event of
Default shall have occurred and be continuing or would result from any Revolving
Credit Advance, the Banks shall from time to time make Revolving Credit Advances
to the Borrowers under the Revolving Credit Facility and the Borrowers may
borrow, repay and reborrow such amounts on the terms and conditions hereinafter
set forth. Each Revolving Credit Advance shall be made ratably by each Bank in
its Proportionate Share and no Bank shall have any obligation to fund an amount
in excess of its Proportionate Share of the Revolving Credit Advance amount
requested.
(C) Requests for Revolving Credit Advances. The Borrowers shall
--------------------------------------
provide the Agent with oral notice by no later than 10:00 a.m. on the requested
Borrowing Date with
37
<PAGE>
respect to any requested Base Rate Advance, and three (3) Business Days' oral
notice prior to the requested Borrowing Date with respect to any requested
Adjusted LIBOR Rate Advance, specifying (A) the Borrowing Date and amount, (B)
whether the Revolving Credit Advance is to be an Adjusted LIBOR Rate Advance or
a Base Rate Advance, and, if an Adjusted LIBOR Rate Advance, the Interest
Period, and (C) if the Revolving Credit Advance is for a Permitted Acquisition,
evidence satisfactory to the Agent that all conditions thereto have been
satisfied, which oral notice shall be promptly confirmed in writing by the
Borrowers by the submission to the Agent of a Borrowing Request (provided,
however, the Agent may rely and act upon telephonic notice whether or not such
written notice is ultimately received). Each Revolving Credit Advance shall be
made by the Agent depositing the amount of such Revolving Credit Advance in an
account of the Borrowers maintained at the Agent or in such other reasonable
manner as the Borrowers may request, on or after 2:00 P.M. (New York time) on
the Borrowing Date; provided, however, that (i) in no event shall the Agent have
-------- -------
any obligation to deposit an amount in excess of the amount actually received
from the Banks and (ii) prior to the disbursement by the Banks of any Revolving
Credit Advance, all of the conditions precedent to such Revolving Credit Advance
shall have been met or satisfied. Each Revolving Credit Advance shall be made
by each Bank by transferring its Proportionate Share of the amount of such
Revolving Credit Advance directly to the Agent. Not more than five (5)
Revolving Credit Advances based upon the Adjusted LIBOR Rate may be outstanding
at any one time.
(D) Agent's Notice to Banks. Not later than 11:00 a.m. on the
-----------------------
requested Borrowing Date (as to Base Rate Advances) or three (3) Business Days
prior to the requested Borrowing Date (as to Adjusted LIBOR Rate Advances)
specified in the borrowing request for a
38
<PAGE>
Revolving Credit Advance, the Agent shall give each Bank telephonic notice,
confirmed by electronic transmission (including facsimile), of: (i) the
requested Borrowing Date of such Revolving Credit Advance; (ii) such Bank's
Proportionate Share of such Revolving Credit Advance; and (iii) the account at
the Agent to which such Advance is to be deposited. By wire transfer, direct
deposit or other similar means commenced no later than 2:00 p.m. (Eastern time)
on the Borrowing Date specified in each borrowing request and provided all
conditions set forth in Section 2.13 hereof have been satisfied, each Bank will
make available its Proportionate Share of the Revolving Credit Advance requested
to be made on such Borrowing Date in immediately available funds in the account
designated by the Agent.
(E) Interest on and Conversions/Continuations of Revolving Credit
-------------------------------------------------------------
Advances.
--------
Interest on the unpaid principal amount of the Revolving Credit Advances shall
be payable to the Agent for the ratable benefit of the Banks, in arrears, (i) as
to Base Rate Advance, quarterly on the first Business Day of each quarter during
the term of this Agreement commencing in September, 1998 and on the first
Business Day of each December, March, June and September thereafter, and (ii) as
to Adjusted LIBOR Rate Advances, on the last day of each Interest Period (except
as to an Interest Period of six (6) months, in which case interest shall be
payable at the end of each three (3) month period thereof); and (iii) as to all
Advances, on the day all principal is due. Interest shall be computed on the
actual number of days elapsed over a year of 360 days at a per annum rate of
interest selected by the Borrowers of (x) the Base Rate, changing when and as
the Base Rate changes, plus the Applicable Base Rate Margin or (y) the Adjusted
LIBOR Rate for the applicable Interest Period plus the Applicable Eurodollar
Margin. The Borrowers' notice to the Agent and the Banks of the applicable
interest rate shall be provided by the submission to
39
<PAGE>
the Agent (which shall promptly notify the Banks) of a Borrowing Request, (i) as
to Adjusted LIBOR Rate Advances which are to be continued as such for the next
Interest Period, not less than three (3) Business Days prior to the end of the
then pending Interest Period, or (ii) as to Base Rate Advances which are to be
converted to Adjusted LIBOR Rate Advances, not less than three (3) Business Days
prior to the requested date of conversion, or (iii) as to Adjusted LIBOR Rate
Advances which are to be converted to Base Rate Advances, one (1) Business Day
prior to the end of the then pending Interest Period. Each Borrowing Request
shall include the requested Interest Period, if applicable. Conversions to
Adjusted LIBOR Rate Advances shall only be made (a) on a Business Day and (b) if
no Default or Event of Default has occurred and is continuing. Conversions from
Adjusted LIBOR Rate Advances to Base Rate Advances shall only be made on the
last day of the Interest Period applicable to such Adjusted LIBOR Rate Advances.
If no notice is provided by the Borrowers as to any Adjusted LIBOR Rate Advance
prior to the end of the then pending Interest Period, such Revolving Credit
Advance shall, at the end of such Interest Period, automatically become a Base
Rate Advance.
(F) Amortization/Optional Prepayments of Revolving Credit Advances.
--------------------------------------------------------------
(i) Amortization. The aggregate outstanding principal amount of
------------
the Revolving Credit Advances shall be evidenced by the Revolving Notes.
Provided no Event of Default has occurred, principal on the Revolving Credit
Advances shall be payable on the Revolving Credit Facility Maturity Date.
(ii) Optional Prepayments. The Borrowers shall have the option to
--------------------
prepay the principal amount of the Revolving Notes upon three (3) Business Days'
prior notice for Adjusted LIBOR Rate Advances and upon one (1) Business Day's
prior notice for Base Rate
40
<PAGE>
Advances; provided, however, that such prepayments shall be in amounts of at
least $500,000 (or, if less, the entire outstanding principal balance thereof)
and, with respect to Adjusted LIBOR Rate Advances, shall be made only on the
last day of the relevant Interest Period unless accompanied by the Repayment
Indemnity. All amounts prepaid must be received by the Agent in immediately
available funds, before 1:00 p.m., then prevailing New York time, to be applied
towards payment of the Revolving Credit Advances on the Business Day received.
Amounts received thereafter shall be applied towards repayment of the Revolving
Credit Advances on the next Business Day. No such prepayment shall in any way
alter or suspend any obligations of the Borrowers under the terms of this
Agreement and the other Loan Documents, and the Borrowers shall continue to
perform and be responsible for the performance of all terms and provisions of
this Agreement and the other Loan Documents. Prepayments shall be applied in the
following order: (i) Base Rate Advances and then (ii) Adjusted LIBOR Rate
Advances. In the event the Borrowers for any reason (including acceleration)
repay any Adjusted LIBOR Rate Advance on the day which is not the end of the
relevant Interest Period, the Borrowers shall pay to the Agent the Repayment
Indemnity with respect to such prepayment.
(G) Voluntary Termination or Reduction of Revolving Credit
------------------------------------------------------
Commitments.
-----------
Upon at least one (1) Business Day's prior written notice to the Agent and the
Banks, the Borrowers shall have the right, at any time or from time to time,
without premium or penalty, to terminate the Revolving Credit Commitments, in
whole or in part in integral multiples of $500,000 in the case of partial
reductions of the unutilized Revolving Credit Commitments, provided that each
--------
such reduction shall apply proportionately to permanently reduce the
41
<PAGE>
Revolving Credit Commitment of each Bank with such a Commitment and shall be
accompanied by any unpaid commitment fee as described in Section 2.7(A) hereof.
2.2. THE TERM LOANS
--------------
(A) Availability. The Banks agree, severally, on the terms and
------------
conditions hereinafter set forth to make the Term Loans in their Proportionate
Shares on the Closing Date. No Bank shall have any obligation to fund an amount
in excess of its Proportionate Share of the Term Loans. The Term Loans shall be
evidenced by the Term Notes.
(B) Interest. Each Term Loan shall bear interest, at one of the rates
--------
set forth below, selected by the Borrowers in a Borrowing Request, on the daily
unpaid balance, which interest shall be payable quarterly as to Term Loans which
are Base Rate Loans at the times principal is payable or, as to Term Loans which
are Adjusted LIBOR Rate Loans, at end of each Interest Period (except as to an
Interest Period of six (6) months, in which case interest shall be payable at
the end of each three (3) month period). The per annum interest rate on each
Term Loan shall be equal to (a) the Base Rate plus the Applicable Base Rate
----
Margin, or (b) the Adjusted LIBOR Rate for the applicable Interest Period plus
----
the Applicable Eurodollar Margin. The Borrowing Request (which shall be made by
Research on behalf of the other Borrowers) shall designate the applicable
interest rate and Interest Period (if any), and amount of the Term Loans (which
shall be not less than $500,000 or multiples thereof) which shall bear interest
at the rates selected. A Borrowing Request (i) as to Term Loans which are
Adjusted LIBOR Rate Loans which are to be continued as such for the next
Interest Period or as to Term Loans which are Base Rate Loans which are to be
converted to Adjusted LIBOR Rate Loans, shall be provided to the Agent not less
than three (3) Business Days prior to the requested date of continuation or
42
<PAGE>
conversion and (ii) as to Adjusted LIBOR Rate Loans which are to be converted to
Base Rate Loans, not less than one (1) Business Day prior to the end of the then
pending Interest Period. Conversions to Adjusted LIBOR Rate Loans shall only be
made (a) on a Business Day and (b) if no Default or Event of Default has
occurred and is continuing. Conversions from Adjusted LIBOR Rate Loans to Base
Rate Loans shall only be made on the last day of the Interest Period applicable
to such Adjusted LIBOR Rate Loans. If no notice is provided by the Borrowers as
to any Term Loan which is an Adjusted LIBOR Rate Loan prior to the end of the
then pending Interest Period, such Term Loan shall, at the end of such Interest
Period, automatically become a Base Rate Loan. No more than five (5) Term Loans
bearing interest based upon the Adjusted LIBOR Rate may be outstanding at any
one time. All interest computation on the Term Loans shall be on the basis of a
year of 360 days, for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest is
payable.
(C) Amortization. The principal balance of the Term Loans shall be
------------
payable in consecutive equal quarterly installments of principal, commencing on
the first Business Day of September, 1998 and continuing on the first Business
Day of December, March, June and September thereafter until the Term Loan
Maturity Date, each such installment being equal to 1/20th of the original
principal balance of the Term Loans and being sufficient to fully amortize the
Term Loans by the Term Loan Maturity Date. Any remaining outstanding principal
balances of Term Loans shall be payable in full on the Term Loan Maturity Date.
(D) Optional Prepayments. The Borrowers may, upon not less than one
--------------------
(1) Business Day's prior written notice to the Agent, prepay the outstanding
principal amount of any Term Loan, in whole or in part, with accrued interest to
the date of such prepayment on the
43
<PAGE>
amount prepaid; provided, that any prepayment as to portions of the Term Loans
which are Adjusted LIBOR Rate Loans made other than at the end of an Interest
Period shall be accompanied by the Repayment Indemnity and each partial
prepayment shall be in a principal amount of not less than $500,000 (or such
lesser amount as shall be the remaining outstanding principal balance on such
Term Loans) and such prepayments shall be applied to principal installments in
the inverse order of their maturities. Any amounts so prepaid may not be
reborrowed.
(E) Place and Manner of Payment. All amounts of principal and
---------------------------
interest repaid under the Term Loans must be received by the Agent in
immediately available funds, before 1:00 p.m., then prevailing New York time, to
be applied towards payment of the Term Loans on the Business Day received.
Amounts received thereafter shall be applied towards repayment of the Term Loans
on the next Business Day.
2.3. LETTERS OF CREDIT
----------------
I. Issuances of Letters of Credit. (a) Subject to and upon the terms
------------------------------
and conditions set forth herein, the Borrowers may request that any Issuing Bank
issue, at any time and from time to time on and after the Closing Date and prior
to the tenth day prior to the Revolving Credit Facility Maturity Date, for the
account of the Borrowers and for the benefit of any holder (or any trustee,
agent or other similar representative for any such holders) of L/C Supportable
Obligations of the Borrowers, an irrevocable sight standby letter of credit, in
a form customarily used by such Issuing Bank or in such other form as has been
approved by such Issuing Bank (each such standby letter of credit, a "Letter of
Credit") in support of such L/C Supportable Obligations. All Letters of Credit
shall be denominated in Dollars.
44
<PAGE>
(b) Subject to and upon the terms and conditions set forth herein,
each Issuing Bank hereby agrees that it will, at any time and from time to time
on and after the Closing Date and prior to the tenth day prior to the Revolving
Credit Facility Maturity Date, following its receipt of the respective Letter of
Credit Request, issue for the account of the Borrowers, one or more Letters of
Credit in support of such L/C Supportable Obligations of the Borrower or any
Subsidiaries as are permitted to remain outstanding without giving rise to a
Default or an Event of Default, provided that the respective Issuing Bank shall
--------
be under no obligation to issue any Letter of Credit if at the time of such
issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing Bank
from issuing such Letter of Credit or any requirement of law applicable to such
Issuing Bank or any request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over such Issuing Bank
shall prohibit, or request that such Issuing Bank refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Issuing Bank with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which such Issuing Bank is
not otherwise compensated) not in effect on the date hereof, or any unreimbursed
loss, cost or expense which was not applicable, in effect or known to such
Issuing Bank as of the date hereof and which such Issuing Bank reasonably and in
good faith deems material to it; or
(ii) such Issuing Bank shall have received notice from the Required
Banks prior to the issuance of such Letter of Credit of the type described in
the second sentence
45
<PAGE>
of Section 2.4(b) hereof and the matters identified in such notice have not
previously been waived or cured.
II. Maximum Letter of Credit Outstandings; Final Maturities.
-------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, (i) no
Letter of Credit shall be issued the Stated Amount of which, when added to the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on
the date of, and prior to the issuance of, the respective Letter of Credit) at
such time would exceed either (x) $2,000,000 or (y) when added to the aggregate
principal amount of all Revolving Credit Advances then outstanding an amount
equal to the Maximum Amount and (ii) each Letter of Credit shall by its terms
terminate on or before the earlier of (A) the date which occurs one year after
the date of the issuance thereof (although any such Letter of Credit may be
extendible for successive periods of up to one year, but not beyond the tenth
Business Day prior to the Revolving Credit Facility Maturity Date, on terms
acceptable to the Issuing Bank thereof) and (B) the tenth Business Day prior to
the Revolving Credit Facility Maturity Date.
2.4. LETTER OF CREDIT REQUESTS.
-------------------------
(a) Whenever the Borrowers desire that a Letter of Credit be issued for
their account, the Borrowers shall give the Agent and the respective Issuing
Bank at least two Business Days' (or such shorter period as is acceptable to the
respective Issuing Bank) written notice thereof. Each notice shall be in the
form of EXHIBIT A attached hereto (each a "Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrowers that such Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section 2.3
II hereof. Unless the
46
<PAGE>
respective Issuing Bank has received notice from the Required Banks before it
issues a Letter of Credit that one or more of the conditions specified in
Section 2.12 hereof are not satisfied on the Closing Date or Section 2.13 hereof
are not then satisfied, or that the issuance of such Letter of Credit would
violate Section 2.3 II hereof then, subject to the terms and conditions of this
Agreement, such Issuing Bank shall issue the requested Letter of Credit for the
account of the Borrowers in accordance with such Issuing Bank's usual and
customary practices. Upon the issuance of or amendment or modification to a
Letter of Credit, the respective Issuing Bank shall promptly notify the
Borrowers, the Agent and the Banks of such issuance, amendment or modification
and such notification shall be accompanied by a copy of the issued Letter of
Credit or amendment or modification.
2.5. LETTER OF CREDIT PARTICIPANTS.
-----------------------------
(a) Immediately upon the issuance by the respective Issuing Bank of any
Letter of Credit, such Issuing Bank shall be deemed to have sold and transferred
to each Bank with a Revolving Credit Commitment, other than such Issuing Bank
(each such Bank, in its capacity under this Section 2.5, an "L/C Participant"),
and each L/C Participant shall be deemed irrevocably and unconditionally to have
purchased and received from such Issuing Bank, without recourse or warranty, an
undivided interest and participation, to the extent of such L/C Participant's
Proportionate Share, in such Letter of Credit, each drawing or payment made
thereunder and the obligations of the Borrowers under this Agreement with
respect thereto, and any security therefor or guaranty pertaining thereto. Upon
any change in the Revolving Credit Commitments of the Banks pursuant to this
Agreement, it is hereby agreed that, with respect to all outstanding Letters of
Credit and Unpaid Drawings, there shall be an automatic adjustment to
47
<PAGE>
the participations pursuant to this Section 2.5 to reflect the new adjusted
Proportionate Shares of the assignor and assignee Bank, as the case may be.
(b) In determining whether to pay under any Letter of Credit, the
respective Issuing Bank shall have no obligation relative to the other Banks
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Issuing Bank under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, as determined by a court competent
jurisdiction, shall not create for such Issuing Bank any resulting liability to
the Borrowers, any Bank or any other Person.
(c) In the event that any Issuing Bank makes any payment under any Letter
of Credit and the Borrowers shall not have reimbursed such amount in full to
such Issuing Bank pursuant to this Agreement, such Issuing Bank shall promptly
notify the Agent, which shall promptly notify each L/C Participant of such
failure, and each L/C Participant shall promptly and unconditionally pay to such
Issuing Bank the amount of such L/C Participant's Proportionate Share of such
unreimbursed payment in Dollars and in same day funds. If the Agent so notifies,
prior to 11:00 A.M. (New York time) on any Business Day, any L/C Participant
required to fund a payment under a Letter of Credit, such L/C Participant shall
make available to such Issuing Bank in Dollars such L/C Participant's
Proportionate Share of the amount of such payment on such Business Day in same
day funds. If and to the extent such L/C Participant shall not have so made its
Proportionate Share of the amount of such payment available to such Issuing
Bank, such L/C Participant agrees to pay to such Issuing Bank, forthwith on
demand such amount, together
48
<PAGE>
with interest thereon, for each day from such date until the date such amount is
paid to such Issuing Bank at the Federal Funds Rate. The failure of any L/C
Participant to make available to such Issuing Bank its Proportionate Share of
any payment under any Letter of Credit shall not relieve any other L/C
Participant of its obligation hereunder to make available to such Issuing Bank
its Proportionate Share of any Letter of Credit on the date required, as
specified above, but no L/C Participant shall be responsible for the failure of
any other L/C Participant to make available to such Issuing Bank such other L/C
Participant's Proportionate Share of any such payment.
(d) Whenever any Issuing Bank receives a payment of a reimbursement
obligation as to which it has received any payments from the L/C Participants
pursuant to clause (c) above, such Issuing Bank shall pay to each L/C
Participant which has paid its Proportionate Share thereof, in Dollars and in
same day funds, an amount equal to such L/C Participant's share (based upon the
proportionate aggregate amount originally funded by such L/C Participant to the
aggregate amount funded by all L/C Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of the
respective participations.
(e) Upon the request of any L/C Participant, each Issuing Bank shall
furnish to such L/C Participant copies of any Letter of Credit issued by it and
such other documentation as may reasonably be requested by such L/C Participant.
(f) The obligations of the L/C Participants to make payments to each
Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable
and not subject to any qualification or exception whatsoever (except as
otherwise expressly provided in the last sentence of Section 2.3(b) hereof) and
shall be made in accordance with the terms and conditions
49
<PAGE>
of this Agreement under all circumstances, including, without limitation, any of
the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right which
the Borrowers or any Subsidiaries may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), the Agent, any L/C
Participant, or any other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrowers or any
Subsidiary and the beneficiary named in any such Letter of Credit);
(iii) any draft, 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) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.6. AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS.
--------------------------------------------
(a) The Borrowers hereby jointly and severally agree to reimburse the
respective Issuing Bank, by making payment to the Agent in immediately available
funds, for any payment or disbursement made by such Issuing Bank under any
Letter of Credit issued by it (each such amount so paid until reimbursed, an
"Unpaid Drawing"), immediately after, and in any event on
50
<PAGE>
the date of, such payment or disbursement, with interest on the amount so paid
or disbursed by such Issuing Bank, to the extent not reimbursed prior to 2:00
P.M. (New York time) on the date of such payment or disbursement, from and
including the date paid or disbursed to but excluding the date such Issuing Bank
was reimbursed by the Borrowers therefor at a rate per annum which shall be the
Base Rate in effect from time to time plus the Applicable Base Rate Margin;
provided, however, to the extent such amounts are not reimbursed prior to 2:00
- -------- -------
p.m. (New York time) on the third Business Day following the receipt by the
Borrowers of notice of such payment or disbursement or following the occurrence
of a Default or an Event of Default under Article VII hereof, interest shall
thereafter accrue on the amounts so paid or disbursed by such Issuing Bank (and
until reimbursed by the Borrowers) at the Default Rate, in each such case, with
interest to be payable on demand. The respective Issuing Bank shall give the
Borrowers prompt written notice of each drawing under any Letter of Credit,
provided that the failure to give any such notice shall in no way affect, impair
- --------
or diminish the Borrowers' obligations hereunder.
(b) The obligations of the Borrowers under this Section 2.6 to reimburse
the respective Issuing Bank with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right which
the Borrowers or any Subsidiary may have at any time against a beneficiary named
in a Letter of Credit, any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting),
51
<PAGE>
the Agent, any L/C Participant, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction between the
Borrowers or any Subsidiary and the beneficiary named in any such Letter of
Credit);
(iii) any draft, 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; or
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents; provided,
however, that the Borrowers shall not be obligated to reimburse any Issuing Bank
for any wrongful payment made by such Issuing Bank under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross negligence,
as determined by a court of competent jurisdiction, on the part of such Issuing
Bank.
2.7. FEES
----
(A) Revolving Credit Facility Commitment Fee. The Borrowers agree to
----------------------------------------
pay to the Agent for the ratable benefit of the Banks a commitment fee, payable
quarterly in arrears within ten (10) days after the last Business Day of each
quarter (and upon reduction and/or termination of the Revolving Credit
Commitments), equal to one quarter percent (1/4%) per annum of the actual
average unused portion of the Revolving Credit Facility over the particular
quarter.
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<PAGE>
(B) Closing Fee. On the Closing Date, the Borrowers shall pay to the
-----------
Agent for the ratable benefit of the Banks a closing fee of $80,000.
(C) Agent Fee. Contemporaneous with the execution hereof and on each
---------
annual anniversary of the Closing Date, the Borrowers shall pay to the Agent,
for its own account, the Agent Fee.
(D) Fronting Fee(s); Standby Fee(s). The Borrowers agree to pay (i)
-------------------------------
to each Issuing Bank upon issuance or renewal, for its own account, a fronting
fee in respect of each Letter of Credit issued by such Issuing Bank equal to 1/8
of one percent of the Stated Amount of such Letter of Credit (the "Fronting
Fee"), and (ii) to the Agent (for the ratable benefit of the Banks) a standby
fee (the "Standby Fee") for the period from and including the date of issuance
or renewal of such Letter of Credit to and including the date of the termination
of such Letter of Credit equal to the average daily Stated Amount of such Letter
of Credit times the Applicable Eurodollar Margin. Accrued Standby Fees shall be
due and payable quarterly in arrears on each date interest is payable and upon
the first day after the termination of the Revolving Credit Commitments upon
which no Letters of Credit remain outstanding.
(E) Other Letter of Credit Fees. The Borrowers agree to pay, upon
---------------------------
each drawing under, issuance of, or amendment to, any Letter of Credit, such
amount as shall at the time of such event be the customary scheduled
administrative charge which the applicable Issuing Bank is generally imposing in
connection with such occurrence with respect to letters of credit.
53
<PAGE>
2.8. MANNER OF PAYMENT
-----------------
(A) Payments of (i) principal and interest to be made by the
Borrowers with respect to the Notes and Letter of Credit Outstandings shall be
made by the Borrowers to the Agent for the ratable benefit of the Banks in their
respective Proportionate Shares at the Agent's address specified in Section
10.10 hereof, in immediately available funds in coin or currency of the United
States of America. The Agent shall be entitled to charge any of the payments
owing to the Agent or any of the Banks hereunder or under any other Loan
Document to any account(s) of the Borrowers maintained at the Agent.
(B) The Borrowers shall maintain a demand deposit account with the
Agent at all times that this Agreement is in effect, and the Agent may (and the
Borrowers authorize the Agent to) debit such deposit account of the Borrowers
(maintained with the Agent) for any amount due and owing as payment under the
Notes, hereunder or under any other Loan Document.
(C) Unless the Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to the Banks hereunder that the
Borrowers will not make such payment in full, the Agent may assume that the
Borrowers have made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, but shall be under no obligation to,
cause to be distributed to each Bank on such date an amount equal to the amount
then due such Bank. If and to the extent that the Borrowers shall not have so
made such payment in full to the Agent, each Bank shall repay to the Agent
forthwith on demand such amount distributed to such Bank together with interest
thereon at the Federal Funds Rate, for
54
<PAGE>
each day from the date such amount is distributed to such Bank until such Bank
repays such amount to the Agent.
(D) The Agent shall after receipt of any payment (including any
repayment) relating to the payment of principal, interest, Letter of Credit
Outstandings, Commitment Fees or any other amounts due with respect to the
Obligations governed hereby, cause to be distributed in like funds to each Bank
such Bank's Proportionate Share of such payment, such distribution to be made by
the Agent (i) by 2:00 p.m. on the day such payment is made with respect to
payments received on or before 11:00 a.m. on such date and (ii) on the next
Business Day with respect to payments received after 11:00 a.m. on such date.
Such payments shall be made at the office of the appropriate Bank specified by
such Bank or at such other place as such Bank may from time to time designate in
writing to the Agent. All payments on each Note shall be applied first to the
payment of interest then due on the unpaid amount thereof, and thereafter to the
payment and reduction of the unpaid principal amount thereof. In the event the
Agent does not make timely payment as required hereby to any Bank, the Agent
shall pay interest to such Bank at the Federal Funds Rate on such unpaid amount
for each day such amount is unpaid until such amount is so paid to such Bank.
(E) In the event any Bank shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of any amounts owing to it in excess of its ratable share of payments on
account of the Credit Facilities obtained by all the Banks, such Bank shall
forthwith purchase from the other Banks such participations in their respective
Proportionate Shares of the Credit Facilities owing to them as shall be
necessary to cause such purchasing Bank to share the excess payment ratably with
each of them; provided,
55
<PAGE>
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Bank, such purchase from each Bank shall be
rescinded and such Bank shall repay to the purchasing Bank the purchase price to
the extent of such recovery together with an amount equal to such Bank's ratable
share (according to the proportion of (a) the amount of such Bank's required
payment to (b) the total amount so recovered from the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect of
the total amount so recovered. The Borrowers agree that any Bank so purchasing a
participation from another Bank pursuant hereto, to the fullest extent permitted
by law and as provided herein, may exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were the direct creditor of the Borrowers in the amount of such
participation.
2.9. DEFAULT RATE
------------
From and after the occurrence and during the continuance of an Event of
Default, all principal amounts outstanding under the Credit Facilities shall
thereafter bear interest, payable on demand, at the Default Rate. It is
expressly acknowledged and agreed by the Borrowers that the Default Rate is
intended to compensate the Banks for costs and losses associated with Events of
Default and is not a penalty.
2.10. USE OF PROCEEDS
---------------
(A) The Revolving Credit Facility shall be used by the Borrowers (i)
for working capital, (ii) for general corporate purposes, (iii) for Letters of
Credit, and (iv) for Permitted Acquisitions. (B) The proceeds of the Term Loans
shall be used by the Borrowers to refinance existing indebtedness.
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<PAGE>
2.11. FUNDING BY THE BANKS
-------------------
Non-Funding by a Bank. In the event a Bank determines for any reason
---------------------
not to make all or a portion of its Proportionate Share of any Revolving Credit
Advance available when requested, such Bank, not later than the close of
business on the date of such borrowing, shall notify the Agent of such
determination and the reasons therefor. The foregoing shall not be construed to
relieve any Bank of its obligation to make any Revolving Credit Advance in
accordance with and subject to the terms and conditions of this Agreement.
Unless the Agent shall have been so notified by the non-funding Bank, the Agent
may assume that such Bank has made its Proportionate Share of such Revolving
Credit Advance available to the Agent in accordance with Section 2.1(C) hereof
and the Agent may, in reliance upon such assumption, make available to the
Borrowers on the date requested for such Revolving Credit Advance a
corresponding amount. If and to the extent that a Bank, without so notifying
the Agent, shall not have made its Proportionate Share of a Revolving Credit
Advance available to the Agent, such Bank and the Borrowers agree to pay or
repay respectively to the Agent forthwith on demand such corresponding amount
together with interest thereon at the Federal Funds Rate, for each day from the
date of such Revolving Credit Advance until such amount is paid or repaid to the
Agent; provided, however, that in no event shall the Agent be entitled to
recover more than such corresponding amount plus interest as described above.
If such Bank shall pay to the Agent such corresponding amount, such amount so
paid shall constitute such Bank's Proportionate Share of such Revolving Credit
Advance for the purposes of this Agreement. The Agent shall provide notice to
the Banks of a failure to fund by any Bank.
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<PAGE>
2.12. CONDITIONS TO INITIAL BORROWING
-------------------------------
The obligation of the Banks to execute this Agreement and to make
the initial Borrowing hereunder is subject to the satisfaction of the following
conditions precedent:
(A) Documents. The Banks shall have received the duly executed Notes
---------
conforming to the requirements hereof, not less than four (4) copies of this
Agreement, each duly executed by the Borrowers and all other Loan Documents
executed on behalf of the Borrowers by their duly authorized officers.
(B) Deliveries by the Borrowers. The Borrowers shall have delivered
---------------------------
or caused to be delivered to the Banks or the Banks shall have received, the
following items, which shall be in form and substance reasonably satisfactory to
the Banks and their counsel:
(i) Legal Opinion of Counsel to the Borrowers. Opinion of Wolf,
-----------------------------------------
Block, Schorr and Solis-Cohen LLP, counsel to the Borrowers, dated the date
hereof and addressed to the Agent and the Banks.
(ii) Corporate Proceedings. Resolutions of the boards of
---------------------
directors and shareholders as to subsidiaries of Research of the Borrowers
certified on the date hereof by the Secretaries of the Borrowers authorizing (a)
the execution, delivery and performance of this Agreement and all of the other
Loan Documents to which each is a party; (b) the consummation of the
transactions contemplated hereby and thereby; and (c) the borrowings and other
matters contemplated in the Loan Documents. Such certificates shall state that
the resolutions set forth therein have not been amended, modified, revoked or
rescinded as of the date of such certificate and are in full force and effect as
of the Closing Date.
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<PAGE>
(iv) Incumbency Certificate. Certificates of the Secretaries of
----------------------
the Borrowers, dated the date hereof, as to the incumbency and signature of the
officers executing each of the Loan Documents and any other document to be
delivered pursuant to any of such documents, together with evidence of the
incumbency of each such Secretary.
(v) Officer's Certificate. Certificates of the Borrowers
---------------------
signed by their chief financial officers stating that to the best of his/her
knowledge after diligent investigation: (a) as of the date hereof and giving
effect to any Credit Facilities no Default or Event of Default exists; and (b)
all of the Borrowers' representations and warranties contained in this Agreement
and the other Loan Documents are presently true and correct in all material
respects.
(vi) Consents, Licenses, Approvals, etc. Copies of all
----------------------------------
consents, licenses and approvals required in connection with the execution,
delivery, performance, validity and enforceability of this Agreement, the Notes
and the other Loan Documents and all other consents, licenses and approvals
necessary for the conduct by the Borrowers of their businesses and ownership of
their assets, and such consents, licenses and approvals shall be in full force
and effect and be reasonably satisfactory in form and substance to the Agent and
its counsel.
(vii) Searches. Copies, in form and substance reasonably
--------
satisfactory to the Agent, of written or other advice relating to such corporate
status, financing statement, bankruptcy, tax lien and judgment searches and
patent and trademark searches as the Agent may reasonably require.
(viii) UCC-1 Financing Statements. Executed UCC-1 financing
--------------------------
statements as the Agent deems necessary for the perfection of the security
interests granted under this Agreement and the other Loan Documents.
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<PAGE>
(ix) Pledged Shares. Share certificates and stock powers
--------------
executed in blank as to the shares of stock pledged pursuant to the Pledge
Agreement.
(x) Landlord and Warehousemen Waivers. Executed Landlord and
---------------------------------
Warehousemen Waivers as to the premises listed on SCHEDULE 2.12(B)(X) to the
extent same may be obtained by the Borrowers using commercially reasonable
efforts.
(xi) Supporting Documents. On or before the date hereof, (a)
--------------------
copies of the Certificates of Incorporation of the Borrowers, certified by the
Secretary of State of Delaware; (b) certificates of such Secretary of State (and
of other States where the Borrowers are qualified to transact business), dated
as of a recent date, as to the good standing of the Borrowers, and attaching the
organizational documents of the Borrowers on file in the office of such
Secretary of State; and (c) certificates of Secretaries of the Borrowers dated
the Closing Date and certifying with respect to the Borrowers (I) that attached
thereto is a true and complete copy of the By-laws of the Borrowers as in effect
on the date of such certification, and (II) that the Certificate of
Incorporation of the Borrowers has not been amended since the date of the last
amendment thereto indicated on the certificate of the Secretary of State
furnished pursuant to clause (a) above.
(xii) Fees/Costs/Taxes. Payment by the Borrowers of (i) all of
----------------
the reasonable fees and expenses of the Agent and the Banks' counsel which are
occasioned in connection with the preparation of this Agreement, and all other
Loan Documents and the closing of the transactions contemplated hereby and
thereby, (ii) all filing, recording and any other fees and taxes, and (iii) the
closing fee required by Section 2.7(B) hereof.
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(xiii) Insurance. Evidence of the insurance required to be in
---------
effect as set forth in this Agreement.
(xiv) Earn Out Agreements. True copies of all agreements
-------------------
relating to all Earn Outs.
(xv) Accountant's Reliance Letters. A reliance letter from the
-----------------------------
accountants for the Borrowers as to future financial statements of the
Borrowers.
(xvi) Solvency. Evidence of solvency of the Borrowers.
--------
(xvii) Agreements with Affiliates/Subsidiaries. Satisfactory
---------------------------------------
review of all loans from and agreements with (including leases) between the
Borrowers, Affiliates and Subsidiaries.
(xviii) Financial Statements. Audited consolidated financial
--------------------
statements of the Borrowers for the period ending December 31, 1997, together
with the most recent management letter.
(xix) Release of Liens. Release of liens by all creditors of
----------------
the Borrowers other than Permitted Encumbrances.
(xx) Other Documents. All other documents provided for herein
---------------
or which the Agent and/or any Bank may reasonably request or require.
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2.13. CONDITIONS TO ALL REVOLVING CREDIT ADVANCES AND ISSUANCES OF LETTERS
--------------------------------------------------------------------
OF CREDIT
---------
The obligation of any Bank to make any Revolving Credit Advance or
of any Issuing Bank to issue any Letter of Credit is subject to fulfillment of
the following additional conditions precedent, to the reasonable satisfaction of
the Banks and their counsel:
(A) Representations and Warranties. The representations and
------------------------------
warranties made by the Borrowers herein and in each of the other Loan Documents
or which are contained in any certificate, document or financial or other
statement furnished at any time under or in connection herewith shall be correct
in all material respects on and as of the date of such Revolving Credit Advance
or issuance of such Letter of Credit, after giving effect to such Revolving
Credit Advance or issuance of such Letter of Credit, as if made on and as of
such date, except for (i) those representations and warranties which speak
exclusively to a certain earlier date and (ii) changes in those representations
and warranties resulting from changes in circumstances after the date hereof
which do not violate this Agreement.
(B) No Default. No Event of Default or Default has arisen and is
----------
continuing on the date such Revolving Credit Advance or issuance of such Letter
of Credit is to be made, after giving effect to such Revolving Credit Advance or
issuance of such Letter of Credit.
(C) Litigation. No suit, action, investigation, inquiry or other
----------
proceeding by any governmental authority or other Person or any other legal or
administrative proceeding shall be pending or threatened which (i) questions the
validity or legality of the transactions contemplated by this Agreement or any
other Loan Document, or (ii) seeks damages
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in connection therewith and which, in the reasonable judgment of the Agent or
the Required Banks, (x) involves a significant risk of a preliminary or
permanent injunction or other order by a state or federal court which would
prevent, or require rescission of, the transactions contemplated by this
Agreement, or (y) in the case of any action or proceeding which seeks monetary
damages involves a significant risk of resulting in substantial financial
liability to any of the Borrowers and/or the Agent or any of the Banks.
(D) Material Adverse Change. No event shall have occurred since
-----------------------
the date of the most recent financial statements of Borrowers furnished to the
Banks which resulted in a Material Adverse Change of any Borrower or had a
Material Adverse Effect on any Borrower.
(E) Revolving Credit Advances for Permitted Acquisitions. As to
----------------------------------------------------
Revolving Credit Advances being used to finance (in whole or in part) Permitted
Acquisitions, the Agent shall have received such amendments to or additional
Loan Documents as may be necessary to cause (i) the acquired entity to become a
party to this Agreement and the other Loan Documents, (ii) the assets of the
acquired entity (including shares of stock in all domestic entities and 65% of
shares of stock of foreign entities) to become subject to the lien of the Agent
(for the ratable benefit of the Banks) and (iii) there to be delivered to the
Agent and the Banks such opinions of counsel, certificates and other documents
as reasonably requested by the Agent and the Banks.
(E) Legal Matters. All legal matters incident to the making of
-------------
such Revolving Credit Advance or issuance of such Letter of Credit shall be
satisfactory to counsel to the Agent in the reasonable exercise of its judgment.
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2.14. REGULATORY CAPITAL REQUIREMENTS
-------------------------------
If any law or regulation or the interpretation thereof by any court
or administrative or governmental authority charged with the administration
thereof enacted or made after the date hereof, or compliance by the Agent or any
of the Banks with any request or directive (whether or not having the force of
law) of any such authority issued after the date hereof, results in any
increases after the date hereof in any capital maintenance, capital ratio or
similar requirement against loan commitments made by any of the Banks and the
result thereof is to impose upon the Agent or any of the Banks or increase any
capital requirement applicable to any of the Banks as a result of the making or
maintenance of the revolving credit facility available or letters of credit
hereunder (which imposition of or increase in capital requirement may be
determined by such Bank's reasonable allocation of the aggregate of such capital
impositions or increases) then, upon demand by such Bank (which shall be made by
such Bank within 90 days of such Bank becoming aware of the circumstance which
gives rise to the demand), the Borrowers shall within ten (10) days of such
demand pay to such Bank from time to time as specified by such Bank an amount
which shall be sufficient to compensate such Bank for such imposition of or
increase in capital requirements together with interest on each such amount from
the date demanded until payment in full thereof at the Base Rate. A certificate
setting forth in reasonable detail the amount necessary to compensate such Bank
as a result of an imposition of or increase in capital requirements submitted by
such Bank to the Borrowers shall be conclusive, absent error or bad faith, as to
the amount thereof.
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2.15. EXCESS REVOLVING CREDIT ADVANCES
--------------------------------
In the event the Agent on behalf of the Banks or any of the Banks
shall advance an amount in excess of the aggregate amount of all Revolving
Credit Advances and/or Letter of Credit Outstandings permitted under this
Agreement or if the Borrowers should directly or indirectly become indebted to
the Banks in an amount which, together with all Revolving Credit Advances and/or
Letter of Credit Outstandings pursuant to this Agreement, is in excess of the
aggregate amount permitted under this Agreement, such Revolving Credit Advances,
Letter of Credit Outstandings or such Indebtedness shall nevertheless be covered
by the terms of this Agreement and such excess shall be immediately paid by the
Borrowers to the Agent (for the account of the Banks).
2.16. REQUIREMENTS OF LAW
-------------------
If, after the date hereof, the adoption of or any change in any law,
regulation, treaty, or directive or any change in the interpretation or
application thereof or compliance by the Agent or any of the Banks with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority, agency or instrumentality:
(A) does or shall subject the Agent or any of the Banks to any tax
imposed by the United States or any State or municipality thereof of any kind
whatsoever (except for taxes on income, net profits and/or gross receipts of the
Agent or any Bank) with respect to this Agreement, any Revolving Credit
Advances, the Term Loans or the Letters of Credit (or participations therein),
or change the basis of taxation of payments to the Agent or any of the Banks of
principal, commitment fee, interest or any other amount payable hereunder
(except for changes in the rate of any income tax presently imposed on the Agent
or any of the Banks); or
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(B) does or shall impose, modify, or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
or deposits or other liabilities in or for the account of, advances or loans by,
or other credit extended by, or any other acquisition of funds by, any office of
the Agent or any of the Banks which are not otherwise included in the
determination of the Adjusted LIBOR Rate or the issuance of Letters of Credit
(or participations therein); or
(C) has or would have the effect of reducing the rate of return on
any of the Banks' capital as a consequence of its obligations hereunder to a
level below that which such Bank reasonably could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
with respect to capital adequacy); or
(D) does or shall impose on the Agent or any of the Banks any other
condition;
and the result of any of the foregoing is to increase the cost to the
Agent or any of the Banks of making, renewing or maintaining (or participating
in) advances or extensions of credit to the Borrowers or to reduce any amount
receivable from the Borrowers hereunder or to reduce the rate of return on any
of the Banks' capital, then, in any such case, the Borrowers shall promptly pay
to such Bank, upon its demand (and delivery of the certificate referred to in
the last sentence of this paragraph), any additional amounts necessary to
compensate such Bank for such additional cost or reduced amount receivable or
reduced rate of return which such Bank deems to be material, as reasonably
determined by such Bank, with respect to this Agreement, any Revolving Credit
Advances, the Term Loans or the Letters of Credit (or participations therein).
If a Bank becomes entitled to claim any additional amounts pursuant to this
Section 2.16, it shall promptly notify the Borrowers (but in any event within 90
days of such Bank's becoming aware of its claim), the Agent and the other Banks
of the event by reason of which it has become so entitled. A certificate
setting forth calculations as to any additional amounts payable pursuant to the
foregoing sentence submitted by a Bank to the Borrowers shall be conclusive in
the absence of error. In the event a Bank which has received payment from the
Borrowers of amounts pursuant to this Section
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2.16 obtains a refund from the governmental authority imposing the tax or other
charge which resulted in the required payment by the Borrowers hereunder, such
Bank shall pay to the Borrowers the amount so refunded up to the amount paid to
such Bank by the Borrowers.
2.17. ADJUSTED LIBOR RATE LOANS DECLARED UNLAWFUL.
-------------------------------------------
Notwithstanding any other provision of this Agreement, if the introduction
of or any change in or in the interpretation of any law or regulation by any
United States central bank or other United States governmental authority (either
federal, state or local) charged with the administration or interpretation
thereof shall make it unlawful, or any United States central bank or other
United States governmental authority (either federal, state or local) shall
assert that it is unlawful, for any Bank to perform its obligations hereunder
(i) to make or convert into Adjusted LIBOR Rate Loans or (ii) to continue to
fund or maintain Adjusted LIBOR Rate Loans hereunder, then, on notice thereof
and demand therefor by the Agent and/or any Bank to the Borrowers, the
obligation of such Bank or Banks to make any such Adjusted
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LIBOR Rate Loans shall terminate and, if the foregoing clause (ii) is
applicable, the Borrowers shall, upon prior notice to the Agent, either (A)
forthwith repay in full any such Adjusted LIBOR Rate Loans then outstanding,
together with interest accrued thereon, or (B) forthwith convert any such
Adjusted LIBOR Rate Loans then outstanding into Base Rate Loans. If no such
notice is received by the Agent within three (3) Business Days of the prior
demand by the Agent for any Bank or Banks, the Borrowers will be deemed to have
made the election to convert any such Adjusted LIBOR Rate Loans then outstanding
into Base Rate Loans as of the fourth Business Day following such demand (or
earlier if circumstances so require). Any repayment or conversion of Adjusted
LIBOR Rate Loans as a result of the provisions of this Section 2.17 shall not
require payment of the Repayment Indemnity.
2.18. INABILITY TO ASCERTAIN INTEREST RATE FOR AN INTEREST PERIOD.
------------------------------------------------------------
If, with respect to any Interest Period, the Agent reasonably determines
that (i) extraordinary circumstances affecting the relevant market make it
impracticable to ascertain the interest rate applicable for such Interest Period
or (ii) the Adjusted LIBOR Rate for such Interest Period will not adequately and
fairly reflect the cost to the Banks of making or maintaining the Adjusted LIBOR
Rate Loans during such Interest Period, the Agent shall promptly notify the
Borrowers of such determination and no additional Adjusted LIBOR Rate Loans
shall be made or continued nor shall there be any conversions thereto until such
notice is withdrawn (and such notice shall be promptly withdrawn after the
initial reasons for such notice are no longer applicable). If any Adjusted LIBOR
Rate Loans are outstanding on the date of such notice and such notice has not
been withdrawn on the last day of the then current Interest Period applicable
thereto, the Borrowers may on the last day of such Interest Period either
convert such Adjusted LIBOR Rate Loans to a Base Rate Loan or prepay the
outstanding principal balance thereof and accrued interest thereon in full. If
no notice is received by the Agent at least one (1) Business
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Day prior to the last day of such Interest Period, the Borrowers will be deemed
to have made the election to convert any such Adjusted LIBOR Rate Loans then
outstanding into Base Rate Loans.
2.19. SALE, ASSIGNMENT OR PARTICIPATIONS
----------------------------------
(a) Any Bank may, with the consent of the Borrowers provided there is
not then any continuing Default or Event of Default (which consent shall not be
unreasonably withheld or delayed), assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitments and the Revolving Credit Advances, the Letter of
Credit Outstandings (or participations therein) and the Term Loans at the time
owing to it); provided that (i) except in the case of an assignment to a Bank or
--------
an Affiliate of a Bank, the Agent must give its prior written consent to such
assignment (which consent shall not be unreasonably withheld), (ii) except in
the case of an assignment to a Bank or an Affiliate of a Bank, the amount of
such assignment shall be a multiple of $3,000,000 and the amount of the
Commitments of the assigning Bank subject to each such assignment shall not be
less than $3,000,000 or such lesser amount as is then outstanding (unless a
Default or an Event of Default shall then be continuing, in which event there
shall be no such minimum), in each case determined as of the date an assignment
and assumption (an "Assignment and Assumption") with respect to such assignment
is delivered to the Agent, unless each of the Borrowers and the Agent otherwise
consent, (iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Bank's rights and obligations under this
Agreement, (iv) the parties to each assignment shall execute and deliver to the
Agent an Assignment and Assumption (in the form attached hereto as EXHIBIT I),
together with a processing and
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recordation fee of $2,500, and (v) the assignee must be an Eligible Transferee.
At the time of each assignment pursuant to this Section 2.19(a) to a Person
which is not already a Bank hereunder and which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Internal Revenue Code)
for Federal income tax purposes, the respective assignee Bank shall, to the
extent legally entitled to do so, provide to the Borrowers the appropriate
Internal Revenue Service Forms and, if applicable, a Section 2.20(b) Certificate
described in Section 2.20(b) hereof. Upon acceptance and recording pursuant to
paragraph (c) of this Section 2.19, from and after the effective date specified
in each Assignment and Assumption, the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Bank under this Agreement (and
the Proportionate Shares of all Banks (including the assignee Bank) shall
automatically be deemed adjusted accordingly), and the assigning Bank thereunder
shall, to the extent of the interest assigned by such Assignment and Assumption,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Bank's rights and
obligations under this Agreement, such Bank shall cease to be a party hereto but
shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and
10.15 hereof). Any assignment or transfer by a Bank of rights or obligations
under this Agreement that does not comply with this paragraph (a) shall be
treated for purposes of this Agreement as a sale by such Bank of a participation
in such rights and obligations in accordance with paragraph (d) of this Section
2.19.
(b) The Agent, acting for this purpose as an agent of the Borrowers,
shall maintain at one of its offices a copy of each Assignment and Assumption
delivered to it and a
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register for the recordation of the names and addresses of the Banks, and the
Commitments of, and principal amount of the Revolving Credit Advances, Letter of
Credit Outstandings (or participations therein) and Term Loans owing to, each
Bank pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive, and the Borrowers, the Agent, and
the Banks may treat each Person whose name is recorded in the Register pursuant
to the terms hereof as a Bank hereunder for all purposes of this Agreement
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrowers and any Bank, at any reasonable time and from time
to time upon reasonable prior notice.
(c) Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Bank and assignee, the processing and recordation fee
referred to in paragraph (a) of this Section 2.19 and any written consent to
such assignment required by paragraph (a) of this Section 2.19, the Agent shall
accept such Assignment and Assumption, record the information contained therein
in the Register and give prompt notice thereof to the Borrowers. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
(d) Any Bank may sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Bank's rights and
obligations under this Agreement (including all or a portion of its Commitments
and the Revolving Credit Advances, Letter of Credit Outstandings (or
participations therein) and Term Loans owing to it); provided that (i) such
--------
Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations and (iii) the Borrowers, the Agent, and the other Banks
shall continue to deal solely and directly with
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such Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Bank sells such a
participation shall provide that such Bank shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
--------
provide that such Bank will not, without the consent of such Participant, agree
to any amendment, modification or waiver described in Section 10.2 hereof that
affects such Participant. The Borrowers agree that each Participant shall be
entitled to the benefits of Sections 2.14, 2.16, 2.20 and 10.15 hereof to the
same extent as if it were a Bank and had acquired its interest by assignment
pursuant to paragraph (a) of this Section 2.19.
(e) Notwithstanding the foregoing and without the consent of the
Borrowers, any Bank may at any time pledge or assign or grant a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Bank, including any such pledge or assignment or grant to a
Federal Reserve Bank, and this Section 2.19 shall not apply to any such pledge
or assignment or grant of a security interest; provided that no such pledge or
--------
assignment or grant of a security interest shall release a Bank from any of its
obligations hereunder or substitute any such assignee for such Bank as a party
hereto.
(f) The Borrowers shall execute such notes and other documents as are
reasonably necessary to implement the provisions of this Section 2.19.
2.20. NET PAYMENTS.
------------
(a) All payments made by the Borrowers hereunder or under any Note
will be made without setoff, counterclaim or other defense. Except as provided
in Section 2.20(b) hereof, all such payments will be made free and clear of, and
without deduction or withholding
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for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein with respect
to such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income, net profits or gross
receipts of a Bank and any taxes imposed solely on deposits or net assets of a
Bank), and all interest, penalties or similar liabilities with respect to such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
(all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as "Non-Excluded Taxes"). Except as
otherwise provided in Section 2.20(b) hereof, if any Non-Excluded Taxes are so
levied or imposed, the Borrowers agree to pay the full amount of such Non-
Excluded Taxes and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Non-Excluded Taxes, will not
be less than the amount provided for herein or in such Note. If any amounts are
payable in respect of Non-Excluded Taxes pursuant to the preceding sentence, the
Borrowers agree to reimburse each Bank, upon the written request of such Bank,
for taxes imposed on or measured by the net income, net profits or gross
receipts of such Bank and for any withholding of taxes as such Bank shall
determine are payable by, or withheld from, such Bank, in respect of such
amounts so paid to or on behalf of such Bank pursuant to the preceding sentence
and in respect of any amounts paid to or on behalf of such Bank pursuant to this
sentence. The Borrowers will furnish to the Agent within 45 days after the date
the payment of any Non-Excluded Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the borrowers. The
Borrowers agree to indemnify
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and hold harmless each Bank against, and reimburse such Bank upon its written
request for, the amount of any Non-Excluded Taxes so levied or imposed and paid
by such Bank. The provisions hereof shall survive the final payment of the
Obligations.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Internal Revenue Code (the "Code")) for
U.S. Federal income tax purposes agrees to deliver to the Borrowers and the
Agent on or prior to the Closing Date, or in the case of a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to Section
2.19 hereof (unless the respective Bank was already a Bank hereunder immediately
prior to such assignment or transfer), on the date of such assignment or
transfer to such Bank, (i) two accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments to be made under this Agreement and under any Note,
or (ii) if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A)
of the Code and cannot delivery either Internal Revenue Service Form 1001 or
4224 pursuant to clause (i) above, (x) a certificate substantially in the form
of EXHIBIT J (any such certificate, a "Section 2.20 Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form W-
8 (or successor form) certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
such Bank agrees that from time to time after the Closing Date, when a lapse in
time or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will, promptly upon request by the
Borrowers, deliver to the Borrowers and the Agent two new accurate and complete
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original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-
8 and a Section 2.20 Certificate, as the case may be, and such other forms as
may be required in order to confirm or establish the entitlement of such Bank to
a continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrowers and the Agent of its inability to deliver any such Form or
Section 2.20 Certificate, in which case such Bank shall not be required to
deliver any such Form or Section 2.20 Certificate pursuant to this Section 2.20.
Notwithstanding anything to the contrary contained in Section 2.20(a) hereof,
but subject to Section 2.20(a) hereof, (x) the Borrowers shall be entitled, to
the extent each is required to do so by law, to deduct or withhold income or
similar taxes imposed by the United States (or any political subdivision or
taxing authority thereof or therein) from interest, fees or other amounts
payable hereunder for the account of any Bank which it not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for U.S.
Federal income tax purposes to the extent that such Bank has not provided to the
Borrowers U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) the Borrowers shall not be
obligated pursuant to Section 2.20(a) hereof to gross-up payments to be made to
a Bank in respect of income or similar taxes imposed by the United States if (i)
such Bank has not provided to the Borrowers the Internal Revenue Service Forms
required to be provided to the Borrowers pursuant to this Section 2.20(b) or
(ii) in the case of a payment, other than interest, to a Bank described in
clause (ii) above, to the extent that such Forms do not establish a complete
exemption from withholding of such taxes.
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III
COLLATERAL
3.1. CROSS COLLATERAL
----------------
All of the Collateral heretofore, herein or hereafter given or
assigned to the Agent (for the ratable benefit of the Banks) hereunder shall
secure payment of all Obligations. Without limitation, all Collateral shall
secure the Obligations to any Bank under any Interest Rate Protection Agreements
entered into in connection with the Credit Facilities.
3.2. ACCOUNTS RECEIVABLE
-------------------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks), and hereby grants to the Agent (for the ratable
benefit of the Banks), a security interest in all Accounts, presently owned by
such Borrower or hereafter acquired.
3.3. EQUIPMENT
---------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks), and hereby grants to the Agent (for the ratable
benefit of the Banks), a security interest in all of each of the Borrowers'
Equipment excluding motor vehicles and Equipment subject to purchase money Liens
which are Permitted Encumbrances), whether presently owned by such Borrower or
hereafter acquired, and wherever located
3.4. INVENTORY
---------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks), and hereby grants to the Agent (for the ratable
benefit of the Banks), a security interest in all of each of the Borrower's
Inventory, whether presently owned by such Borrower or hereafter acquired and
wherever located.
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3.5. GENERAL INTANGIBLES
-------------------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks), and hereby grants to the Agent (for the ratable
benefit of the Banks), a security interest in all of each of the Borrowers'
General Intangibles other than the General Intangibles described on Schedule 3.5
hereto which may not be assigned without the prior consent of a Person other
than the Borrowers), whether presently owned by such Borrower or hereafter
acquired.
3.6. DEPOSIT ACCOUNTS
----------------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks), and hereby grants to the Agent (for the ratable
benefit of the Banks), a security interest in the balance of every deposit
account, now or hereafter existing, of each of the Borrowers with the Agent or
any of the Banks or any other bank, institution or other entity, and all money,
Instruments, securities, documents, Chattel Paper, credits, claims, and other
property of each of the Borrowers now or hereafter in the possession or custody
of the Agent or any of the Banks or any of their respective agents or any other
bank, institution or other entity. Notwithstanding the security interest herein
granted in all deposit accounts of the Borrowers, the Borrowers shall, prior to
the occurrence and continuance of an Event of Default, have free access to (and
the right to withdraw) such deposit accounts.
3.7. CHATTEL PAPER
-------------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks) and hereby grants to the Agent (for the ratable
benefit of the Banks) a security interest in all of each of the Borrowers'
Chattel Paper, whether presently owned by such
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Borrower or hereafter acquired, including but not limited to all such Chattel
Paper now or hereafter left in the possession of the Agent or any of the Banks
for any purpose, further including but not limited to for collection.
3.8. INSTRUMENTS
-----------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks) and hereby grants to the Agent (for the ratable
benefit of the Banks) a security interest in all of each of the Borrowers'
Instruments, whether presently owned by such Borrower or hereafter acquired,
including but not limited to all such Instruments now or hereafter left in the
possession of the Agent or any of the Banks for any purpose, further including
but not limited to for collection.
3.9. DOCUMENTS
---------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks) and hereby grants to the Agent (for the ratable
benefit of the Banks) a security interest in all of each of the Borrowers'
Documents, whether presently owned by such Borrower or hereafter acquired,
including but not limited to all such Documents now or hereafter left in the
possession of the Agent or any of the Banks for any purpose.
3.10. MISCELLANEOUS ASSETS
--------------------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks) and hereby grants to the Agent (for the ratable
benefit of the Banks) a security interest in all of each of the Borrowers' other
personal property wherever located, tangible or intangible, whether presently
owned by such Borrower or hereafter acquired.
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3.11. PROCEEDS AND RECORDS
--------------------
Each of the Borrowers hereby creates in favor of the Agent (for the
ratable benefit of the Banks) and hereby grants to the Agent (for the ratable
benefit of the Banks) a security interest in (A) all books and records,
including, without limitation, customer lists, credit files, computer programs,
print-outs and other computer materials and records of each of the Borrowers
pertaining to all of the Collateral; and (B) all of the products and proceeds of
all of the foregoing Collateral (including all proceeds of insurance policies
covering the Collateral); as well as all accessions, additions, substitutions,
replacements and increments as to the assets in (A) and (B).
3.12. CONTINUING PERFECTION/ATTORNEY IN FACT
--------------------------------------
The Borrowers will perform any and all steps reasonably requested by
the Agent to create and maintain in the Agent's (for the ratable benefit of the
Banks') favor a first and valid lien on or security interest in the Collateral
or pledges of Collateral, including, without limitation, the execution,
delivery, filing and recording of financing statements and continuation
statements, supplemental security agreements, notes and any other documents
necessary, in the reasonable opinion of the Agent, to protect its and the Banks'
interest in the Collateral, and will pay any documentary, stamp or other taxes
in connection therewith. The Agent and its designated officers are hereby
irrevocably appointed as each of the Borrowers' true and lawful attorneys-in-
fact, with full power of substitution, to do all acts and things which the Agent
may reasonably deem necessary to perfect and continue perfected the security
interests and Liens provided for in this Agreement, including, but not limited
to, executing financing statements on behalf of the Borrowers and enforcing
collection of any Collateral.
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IV
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Agent and the Banks to enter into this Agreement and to
extend the Credit Facilities and other financial accommodations hereunder, the
Borrowers jointly and severally represent and warrant to the Agent and the Banks
that:
4.1. GOOD STANDING
-------------
EXHIBIT K sets forth
(A) the jurisdiction of formation of the Borrowers, in which
they are in good standing;
(B) all other jurisdictions in which the Borrowers are
authorized to transact business, in all of which they are in good standing;
(C) any prior changes in the structure of the Borrowers, such as
mergers, consolidations and the like;
(D) any prior name changes of the Borrowers;
(E) all trade names or trade styles under which the Borrowers
conduct business or issue invoices;
(F) all Subsidiaries and Affiliates of the Borrowers and the
percentage of stock or other ownership interest thereof owned by the
Borrowers or Affiliates of the Borrowers; and
(G) the capital structure of the Borrowers.
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4.2. CORPORATE AUTHORITY
-------------------
(A) The Borrowers have requisite power and authority to own their
property and to carry on their business as now conducted, except where the lack
of such power and authority would not have a Material Adverse Effect on any
Borrower. The Borrowers have the corporate power to execute, deliver and carry
out this Agreement and all other Loan Documents to which they are a party and
have duly authorized and approved the terms of the Credit Facilities described
herein and the taking of any and all action contemplated herein and therein, and
this Agreement and all other Loan Documents to which the Borrowers are a party
constitute the valid and binding obligations of the Borrowers, enforceable in
accordance with their terms. No consent or approval of, or exemption by, any
Governmental Body or any other Person is required to authorize, or is otherwise
required to be obtained by the Borrowers in connection with the execution,
delivery and performance of, this Agreement and the other Loan Documents to
which the Borrowers are a party, or is required as a condition to the validity
or enforceability of this Agreement and the other Loan Documents to which the
Borrowers are a party.
4.3. COMPLIANCE WITH LAW
-------------------
(A) The Borrowers are in compliance with all laws, rules and
regulations to which they are subject, and have all licenses, certificates,
permits and franchises and other governmental authorizations necessary to own
their properties and to conduct their businesses except where such failure to be
in compliance or hold such licenses does not have a Material Adverse Effect on
any Borrower;
(B) The execution of this Agreement and each other Loan Document and
the performance by the Borrowers of their obligations hereunder and thereunder,
do not violate any
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existing material law or regulation or any writ or decree of any court or
Governmental Body or the charter or by-laws or operating agreement of any
Borrower or any agreement or undertaking to which any Borrower is a party or by
which any of them is bound or results in the creation or imposition of any Lien
(or any obligation to create or impose) any Lien upon any of the property or
assets of any Borrower or Subsidiary (except pursuant hereto).
4.4. NO LITIGATION
-------------
Except as set forth on SCHEDULE 4.4, there are no judgments against
the Borrowers as of the date of this Agreement and no litigation or
administrative proceeding before any Governmental Body is presently pending, or
to the knowledge of Borrowers threatened, against any Borrower or any of their
property, which pending or threatened litigation or administrative proceeding
would have a Material Adverse Effect on a Borrower.
4.5. NO FINANCIAL CHANGE
-------------------
There has been no Material Adverse Change in the condition of any
Borrower since their last financial statements and reports furnished to the
Banks and the information contained in said statements and reports is true and
correctly reflects in all material respects the financial condition of the
Borrowers as of the dates of the statements and reports and results of
operations for the periods covered thereby (subject, in the case of interim
statements, to normal year-end adjustments thereto), and such statements and
reports have been prepared in accordance with GAAP (except where explicitly
noted otherwise therein) and do not contain any material misstatement of fact or
omit to state any facts necessary to make the statements contained therein not
misleading.
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4.6. TAX COMPLIANCE
--------------
Each of the Borrowers has filed, or caused to be filed, all tax
returns required to be filed and has paid all taxes shown to be due and payable
on said return or on any assessment made against it, except as set forth on
SCHEDULE 4.6, which taxes and/or assessments are being diligently contested in
good faith and by appropriate proceedings and against which the Borrowers have
established adequate reserves in accordance with GAAP.
4.7. GOOD TITLE AND ABSENCE OF LIENS
-------------------------------
The Borrowers have good and marketable title to all of their
properties and assets, real, personal and mixed, and none of said properties or
assets is subject to any Lien, except for Permitted Encumbrances.
4.8. PLACE OF RECORDS, CHIEF EXECUTIVE OFFICE, AND OTHER COLLATERAL
--------------------------------------------------------------
(A) The Borrowers' chief executive offices, and the offices where
the Borrowers keep their records concerning their Accounts, and all locations of
their Equipment and other property, and all other business locations of the
Borrowers are presently at the locations set forth on EXHIBIT K. (B) Except as
set forth on EXHIBIT K, within four (4) months of the date of this Agreement,
none of the Borrowers' assets have been moved from any jurisdiction or other
locations than the present locations of assets set forth on EXHIBIT K. (C)
Except as set forth on EXHIBIT A, the Borrowers do not own any trademarks, trade
names, service marks, patents or copyrights.
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4.9. WARRANTIES AS TO ACCOUNTS
-------------------------
The Borrowers warrant to their best knowledge that as to their
Accounts (except for Accounts which, taken as a whole, form an insignificant
portion of all Accounts): (A) each Account is a valid subsisting Account; (B)
each Account represents a bona fide performed transaction; (C) the amount shown
on the Borrowers' books and on any invoice or statement delivered to the Agent
and the Banks is owing to the Borrowers; (D) no partial payment has been made;
(E) no set-off or counterclaim exists as to any such Account and no agreement
has been made under which any deductions or discount may be claimed except
regular discounts in the usual course of business, but only if disclosed on the
face of the invoice; (F) the Account Debtor has not disputed the Account or
otherwise asserted any defense, set-off or counterclaim; and (G) to the extent
required by law the Borrowers are authorized to do business and in good standing
in any state in which any such Account must be enforced.
4.10. ERISA
-----
(A) Except as set forth on SCHEDULE 4.10, no Reportable Event or
unfunded deficiencies or failure of compliance with ERISA or the Internal
Revenue Code of 1986, as amended, has occurred and is continuing with respect to
any Plan; (B) The Borrowers have complied with the provisions of ERISA and the
Internal Revenue Code of 1986, as amended, with respect to each Plan; and (C)
The Borrowers are not subject to any multiemployer plan liability or other
similar liability.
4.11. LICENSES AND PERMITS AND LAWS
-----------------------------
The Borrowers hold all necessary licenses and permits for the
operation of their businesses in which the failure to hold such licenses or
permits would have a Material Adverse
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Effect on any Borrower. The Borrowers have complied in all material respects
with all laws, rules and regulations applicable to their respective businesses,
including but not limited to the Fair Labor Standards Act, 29 U.S.C. (S)
215(a)(1), except as set forth on SCHEDULE 4.11(B). All such material licenses
and permits are in good standing and are not under any outstanding citation
issued by any governmental authority, and no litigation has been instituted nor
(to the best knowledge of the Borrowers) have any claims been made by any third
parties relating to the licenses and permits issued by any Governmental Body for
the operation of their businesses, and no such citation, litigation or claim, to
the best knowledge of the Borrowers, is contemplated by any Governmental Body or
any third persons nor, to the best knowledge of the Borrowers, does there exist
any basis for any such citation, litigation or claim by any of such authorities
or any other Person.
4.12. ENVIRONMENTAL STATUS
--------------------
As to all properties owned, leased or operated by the Borrowers and
to all operations of the Borrowers' business:
(A) there is no pending or threatened proceeding or Environmental
Claim affecting any of the Borrowers with respect to any Environmental Law;
(B) none of the Borrowers has been identified as a responsible or
potentially responsible party under CERCLA or any other Environmental Laws and
has not received notification that any hazardous substance or contaminant has
been found at any site;
(C) none of such properties are listed or proposed for listing on
the National Priorities List under CERCLA;
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(D) no Hazardous Materials have been disposed of or otherwise
released or discharged by the Borrowers on such properties in violation of any
Environmental Laws;
(E) to the best knowledge of the Borrowers, no underground storage
tanks exist on the properties and the removal of any such tanks from the
properties was undertaken in compliance with the Underground Storage Tank Act,
and
(F) to the best knowledge of the Borrowers, no significant amount of
friable asbestos, or any substance containing asbestos or PCB's, has been
installed in or exists on such properties.
4.13. REAFFIRMATION
-------------
Each and every request for a Revolving Credit Advance or issuance of
a Letter of Credit hereunder shall be deemed as an affirmation by the Borrowers
that no Default or Event of Default exists and that the representations and
warranties contained in this Article IV and in the other Loan Documents are true
and accurate in all material respects as of the date of each such request (other
than those terms which speak as of the date of this Agreement and
representations and warranties the underlying factual basis thereof has changed
due to circumstances not prohibited by this Agreement) and that the Borrowers
are in material compliance with all applicable laws, rules and regulations.
4.14. PROCEEDS OF CREDIT FACILITIES
-----------------------------
The Borrowers are not engaged principally, or as one of their
important activities, in the business of extending credit for the purpose of
purchasing or carrying any margin stock
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within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended. No part of the proceeds of the Credit Facilities
will be used, directly or indirectly, for a purpose which violates any law, rule
or regulation of any Governmental Body, including without limitation the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System, as amended. The Borrowers represent that the proceeds of the
Credit Facilities provided for herein shall be used solely for the purposes set
forth in Section 2.10 hereof. No proceeds of any Advance, Term Loan or other
financial accommodations hereunder shall be used to purchase or carry any margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
4.15. THE BORROWERS
-------------
The Borrowers are operated as part of one consolidated business
entity and are directly dependent upon each other for and in connection with
their respective business activities and their respective financial resources.
Each entity will receive a direct economic and financial benefit from the
Obligations incurred under this Agreement by the other entities, and the
incurrence of such Obligations is in the best interests of each such entity.
4.16. SOLVENCY
--------
The fair value of the business and assets of each of the Borrowers
(including, without limitation, contingent, unmatured and unliquidated claims
arising out of all rights of indemnity, contribution, reimbursement or any
similar right, or any claim of subrogation) will be in excess of the amount that
will be required to pay its liabilities (including, without limitation,
contingent, subordinated, unmatured and unliquidated liabilities on existing
debts, as such
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liabilities may become absolute and matured), in each case after giving effect
to the transactions contemplated by this Agreement and the use of proceeds
therefrom. None of the Borrowers, after giving effect to the transactions
contemplated by this Agreement and the use of proceeds therefrom, will be
engaged in any business or transaction, or about to engage in any business or
transaction, for which it has an unreasonably small capital (within the meaning
of the Uniform Fraudulent Transfer Act, as adopted in the State of New Jersey
and Section 548 of the Federal Bankruptcy Code), and the Borrowers do not have
any intent to:
(A) hinder, delay or defraud any entity to which it is, or will
become, on or after the date hereof, indebted, or
(B) to incur debts that would be beyond its ability to pay as they
mature.
4.17. DOCUMENTARY/STAMP AND OTHER TAXES
---------------------------------
The filing and recording of any and all documents required to
perfect the Agent's (for the ratable benefit of the Banks) security interests
granted herein will not result in any documentary, stamp or other taxes.
4.18. SHAREHOLDERS' AGREEMENTS
------------------------
Except as set forth on SCHEDULE 4.18, there are no agreements or
contracts among any of the Borrowers and/or any of the Subsidiaries or
Affiliates, including but not limited to shareholder/repurchase agreements.
4.19. REPRESENTATIONS NOT MISLEADING
------------------------------
No representation contained herein or in any other Loan Document,
agreement, certificate, document, information, exhibit, report or instrument
furnished to the Agent or any of
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the Banks by or on behalf of either of the Borrowers in connection with this
Agreement or the other Loan Documents contains any untrue statement of a
material fact or omits to state any fact necessary to make the statements
contained herein or therein not misleading.
4.20. RESTRICTIVE AGREEMENTS
----------------------
No Borrower and no Subsidiary 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.
4.21. LIENS
-----
Except as otherwise specifically provided in this Agreement, no
Borrower and no Subsidiary 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.
4.22. 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.
4.23. TRADEMARKS, PATENTS, ETC.
-------------------------
All trademarks, patents, service marks or copyrights which any
Borrower uses, plans to use or has a right to use are shown on SCHEDULE 4.23.
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 SCHEDULE 4.23. 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.
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4.24. OTHER ASSOCIATIONS
------------------
No Borrower and no Subsidiary is engaged and has an interest in any
joint venture or partnership with any other Person except as shown on SCHEDULE
4.24.
4.25. CAPITAL STOCK
-------------
All of the capital stock of Research 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 Research) is as
shown on SCHEDULE 4.25. 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 applicable to the Borrowers governing the sale
and delivery of securities. Except for the rights and obligations shown on
SCHEDULE 4.25, there are no subscriptions, warrants, options, calls,
commitments, rights or agreements by which any such 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 Borrower.
Except as shown on SCHEDULE 4.25, no 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.
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4.26. PERFECTION AND PRIORITY
-----------------------
This Agreement and the other Loan Documents are effective to create
in favor of Agent (for the ratable benefit of the Banks) legal, valid and
enforceable first priority 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 4.26 under Borrowers' names, Borrowers
will have granted to Agent, and Agent will have perfected first priority Liens
in the Collateral, superior in right to any and all other Liens, existing or
future.
4.27. INVESTMENT COMPANY ACT
----------------------
No Borrower is an "investment company" or a company "controlled" by
and "investment company" within the meaning of the Investment Company Act of
1940, as amended.
4.28. YEAR 2000 COMPLIANCE
--------------------
Any reprogramming required to permit the proper functioning, in and
following the year 2000, of (i) Borrowers' computer systems and (ii) equipment
containing embedded microchips (including systems and equipment supplied by
others or with which Borrowers' systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by July 1, 1999,
other than any failure to reprogram by such date which will not have a Material
Adverse Effect on any Borrower. The cost to Borrowers of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to Borrowers
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) will not result in a Default, Event of Default or a
Material Adverse Effect to Borrowers. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of Borrowers and any Subsidiaries are and, with
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ordinary course upgrading and maintenance, will continue for the term of this
Agreement to be, sufficient to permit Borrowers to conduct their business
without any Material Adverse Effect to Borrowers.
4.29. BUSINESS INTERRUPTIONS
----------------------
Within five (5) years prior to the date hereof, none of the
business, property or operations of any Borrower or any Subsidiary 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 other than such
matters which will not have a Material Adverse Effect on any Borrower.
4.30. PUBLIC UTILITY HOLDING COMPANY ACT.
----------------------------------
None of the Borrowers or any Subsidiary is a "holding company", or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
4.31. LABOR
-----
The Borrowers are not involved in any strike, lock-out, boycott or any
other labor trouble, similar or dissimilar, nor are the Borrowers involved in
labor negotiations.
V
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AFFIRMATIVE COVENANTS OF THE BORROWERS
--------------------------------------
5.1. AUDIT AND OTHER REPORTS
-----------------------
(A) The Borrowers agree that within ninety (90) days of the close of
each fiscal year, each will furnish the Banks with a detailed financial
statements, including a balance sheet, profit and loss statement, cash flow
statement and surplus reconciliation, certified on an unqualified basis, by an
independent certified public accountant reasonably satisfactory to the Agent (it
being agreed that the Borrowers' current outside public accountant and any other
"Big Six" public accounting firm are satisfactory to the Agent and the Banks);
(B) The Borrowers will also furnish similar quarterly statements uncertified
except for certifications by officers of the Borrowers as to their correctness
within forty-five (45) days of the close of each first, second and third fiscal
quarters. All such statements described in (A) and (B) above shall be prepared
on a consolidated and consolidating basis and in accordance with GAAP; (C)
Simultaneous with the submission of the statements required under (A) and (B)
above, the Borrowers shall cause to be submitted to the Agent and the Banks
certificates of the Borrowers signed on their behalf by their chief financial
officer in the form of EXHIBIT L setting forth the calculations of the financial
tests described in Section 6.2 hereof and stating whether or not, to the best of
said officer's knowledge, after diligent inquiry, a Default or Event of Default
exists, and if such exists, specifying the nature thereof and the steps the
Borrowers are taking to remedy same; (D) Promptly after the furnishing thereof
to third parties, the Borrowers shall furnish to the Agent and the Banks copies
of any statements, reports, proxy material, registration statement and
prospectus furnished to any holder of any securities of the Borrowers or filed
with any regulatory agency or agencies (including, without limitation, Forms 10K
and 10Q); (E) Promptly, but no later than ten (10)
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days after a responsible officer of a Borrower shall become aware of (i) a
Reportable Event or "prohibited transaction" as such term is defined in ERISA,
(ii) litigation against any Borrower or Subsidiary in excess of $100,000, (iii)
changes in the executive management of a Borrower, (iv) the existence of any
Default or Event of Default, or (v) the termination or threatened termination of
or claim of breach by any Borrower or Subsidiary or Affiliate of any contract,
agreement, obligation, license or permit, any Environmental Claim, or any claim
of patent infringement or any other event or occurrence, any of which events
described in this Section 5.1(E)(v) could reasonably be expected to have a
Material Adverse Effect on a Borrower, a written notice to the Agent and the
Banks specifying the existence thereof and the action the Borrowers or any
Subsidiary or Affiliate is taking or proposes to take with respect thereto; (F)
The Borrowers will furnish to the Agent and the Banks prompt written notice if:
(i) any Indebtedness of any Borrower, Subsidiary or Affiliate is declared or
shall become due and payable prior to its stated maturity, or called and not
paid when due or (ii) a default shall have occurred under any note or the holder
of any such note, or other evidence of Indebtedness, certificate of security
evidencing any such Indebtedness or any obligee with respect to any other
Indebtedness of any Borrower, Subsidiary or Affiliate has the right to declare
any such Indebtedness due and payable prior to its stated maturity as a result
of such default, the payment of which would have a Material Adverse Effect on
any Borrower; (G) promptly upon receipt, the Borrowers shall provide to the
Agent and the Banks copies of any management letter provided by the Borrowers'
outside auditors; (H) on an annual basis by not later than March 31 of each
year, the Borrowers shall provide the Agent and the Banks an update of the
reliance letter from the Borrowers' outside auditors as to current accountant
prepared financials; and (I) the Borrowers agree to furnish to the Agent and the
Banks
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with reasonable promptness such other data and information concerning each
Borrower and Subsidiaries and/or Affiliates as from time to time may be
reasonably requested by the Agent or any Bank.
5.2. INSURANCE
---------
The Borrowers agree to keep all of the tangible Collateral assigned
hereunder insured, at their own cost and expense, for the benefit of the Agent
(for the ratable benefit of the Banks), and in such amounts, with such
companies, and against such risks as may be reasonably acceptable to the Agent,
and deliver copies of the policies evidencing such insurance to the Banks. If
the Borrowers fail to take the action called for herein, the Agent, may, in its
discretion obtain insurance covering the Agent's (for the ratable benefit of the
Banks') interest in the Collateral and the amount of the premium for said
insurance shall be added to the Obligations of the Borrowers to the Agent and
the Banks. All policies of insurance on the Collateral shall be in form and
with insurer s recognized as adequate by prudent business persons and all such
policies shall be in such amounts as may reasonably be satisfactory to the
Agent. The Borrowers shall deliver to the Agent the original (or copy) of each
policy of insurance and evidence of payment of all premiums therefor. Such
policies of insurance shall contain an endorsement, in form and substance
satisfactory to the Agent, showing loss payable to the Agent (for the ratable
benefit of the Banks) to the extent of the Obligations. Such endorsement or an
independent instrument furnished to the Agent shall provide that the insurance
companies will give the Agent and the Banks at least thirty (30) days prior
written notice before any such policy or policies of insurance shall be altered
or canceled and that no act or default of the Borrowers or any other person
shall affect the right of the Agent and the Banks to recover under such policy
or policies of insurance
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in case of loss or damage. The Borrowers hereby direct all insurers under such
policies of insurance to pay all proceeds payable thereunder directly to the
Agent (for the ratable benefit of the Banks). Notwithstanding the foregoing, so
long as no Event of Default has occurred and is continuing, proceeds from losses
of $750,000 or less in the aggregate shall be made available by the Agent to the
Borrowers to repair or replace the property so damaged. The Borrowers
irrevocably make, constitute and appoint the Agent (and all officers, employees
or agents designated by the Agent) as the Borrowers' true and lawful attorneys
(and agents-in-fact) for the purpose of making, settling and adjusting claims
under such policies of insurance, endorsing the names of the Borrowers on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect to such policies of insurance. In the event the Borrowers, at any time
or times hereafter, shall fail to obtain or maintain any of the policies of
insurance required above or to pay any premium in whole or in part relating
thereto, then the Agent, without waiving or releasing any obligation or default
by the Borrowers hereunder, may (but shall be under no obligation to do so) at
any time or times thereafter obtain and maintain such policies of insurance and
pay such premium and take any other action with respect thereto which the Agent
deems advisable. All sums so disbursed by the Agent, including reasonable
attorneys' fees, court costs, expenses and other charges related thereto, shall
be payable, on demand, by the Borrowers to the Agent and shall be additional
Obligations hereunder secured by the Collateral. The Borrowers also agree to at
all times maintain insurance, both hazard and liability, against such risks and
in such amounts as companies similarly situated as the Borrowers would maintain
and to furnish to the Agent and the Banks from time to time evidence that such
insurance is in full force and effect.
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5.3. PAYMENT OF EXPENSES
-------------------
The Borrowers will pay any and all reasonable expenses, including
reasonable counsel fees and disbursements, consultant fees and expenses, filing
and recording fees and taxes, and all other reasonable charges and expenses
incurred or to be incurred by the Agent and the Banks in connection with the
preparation and execution and recording of this Agreement and all other Loan
Documents and the extension of the Credit Facilities made under this Agreement
and all amendments and modifications hereto and in defending or prosecuting any
actions or proceedings or otherwise enforcing any rights arising out of or
relating to the Agent's and the Banks' transactions with the Borrowers. The
provisions hereof shall survive the payment in full of all Obligations.
5.4. LANDLORD AND WAREHOUSEMEN WAIVERS
---------------------------------
The Borrowers shall use commercially reasonable best efforts
(without having to pay any consideration to any landlord) to cause the landlords
and warehousemen of all Premises to execute and deliver to the Agent a
Landlord's Waiver and Subordination in such form as may be acceptable to the
Agent.
5.5. GOOD WORKING CONDITION
----------------------
The Borrowers shall maintain all of their material property in good
working condition, ordinary wear and tear excepted.
5.6. OBSERVANCE OF LEGAL REQUIREMENTS, LICENSES AND PERMITS AND
----------------------------------------------------------
PROTECTION OF COLLATERAL
- ------------------------
(A) The Borrowers shall comply in all material respects with any and
all laws, legislation, rules and regulations in effect as of the date hereof and
subsequent hereto, including
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but not limited to all state, local and federal laws, legislation, rules and
regulations relating to employee pension and benefit funds, the payment of
taxes, assessments, and other governmental charges, zoning, and the use,
occupancy, transfer or encumbrancing of the Collateral and all Environmental
Laws. The Borrowers agree to comply with all reasonable conditions required by
the Agent designed to protect the Agent and the Banks and the Collateral from
the effect of all Environmental Laws, ERISA and such other laws, legislation,
rules and regulations as are in, or may come into, effect and apply to the
Borrowers, the Agent, the Banks, the transactions contemplated hereby or the
Collateral or any occupants or users thereof, whether as lessees, tenants,
licensees or otherwise. The Borrowers agree to pay any reasonable costs required
to comply with any of the above conditions and all other taxing authorities.
(B) The Borrowers shall observe and comply in all material respects
with all laws (including ERISA and Environmental Laws), ordinances, orders,
judgments, rules, regulations, certifications, franchises, permits, licenses,
directions and requirements of all Governmental Bodies, which now or at any time
hereafter may be applicable to the Borrowers and the operation of their
businesses, a violation of which could have a Material Adverse Effect on any
Borrower.
(C) The Borrowers will continue to hold all necessary licenses,
permits, certificates, franchises and other governmental authorizations for the
operations of their businesses and ownership of their assets.
5.7. INSPECTION
----------
The Agent and the Banks (by any of their respective officers,
employees and agents) shall have the right, at any time or times during the
Borrowers' usual business hours, to
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inspect the Collateral, all records related thereto (and to make extracts from
such records) and the Premises. The Agent and the Banks (by any of their
officers, employees and agents) shall (as determined by the Banks in their
reasonably judgment) also have the right at any time or times during the
Borrowers' usual business hours, to discuss any Borrower' affairs and finances
with any person and to verify the amount, quality, quantity, value and condition
of, or any other matter relating to, the Collateral. Notwithstanding the
foregoing and provided no Default or Event of Default shall have occurred and be
continuing, one half (1/2) of the cost of one (1) collateral audit per calendar
year shall be funded by the Borrowers in the event such an audit is required by
the Required Banks. Upon the occurrence and continuance of any Default or Event
of Default, all collateral audits and other inspections shall be at the expense
of the Borrowers.
5.8. COLLATERAL REQUIREMENTS
-----------------------
Unless the Agent notifies the Borrowers in writing that they
dispense with any one or more of the following requirements, the Borrowers will
(A) from and after and during continuance of an Event of Default, on a daily
basis report to and give the Agent (for the ratable benefit of the Banks) all
monies due or to become due on specific contracts related to Accounts; (B) upon
reasonable prior notice and at reasonable times, permit the Agent or its
nominees to examine all of the Borrowers' records during normal business hours
and to make extracts therefrom; (C) furnish to the Agent all information
received by the Borrowers adversely affecting the financial standing of any
Account Debtor the effect of which would have a Material Adverse Effect on any
Borrower; (D) deliver to the Agent (for the ratable benefit of the Banks),
appropriately endorsed, any Instrument or Chattel Paper connected with any
Account; (E) mark its records of its Accounts in any manner reasonably
satisfactory to the Agent to indicate the
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interest of the Agent (for the ratable benefit of the Banks); (F) collect their
Accounts in the ordinary course of business; (G) keep accurate and complete
records of their Accounts; and (H) promptly notify the Agent in writing of any
trademarks, trade names, service marks, patents or copyrights which they may
hereafter own or obtain a license to use or under which they may issue invoices.
5.9. CONTROL OF ACCOUNTS AND INVENTORY
---------------------------------
(A) Upon and during the continuance of an Event of Default, the
Agent shall have the right at any time and from time to time, without notice, to
notify Account Debtors to make payments to the Agent (for the ratable benefit of
the Banks), to endorse all items of payment which may come into its hands
payable to a Borrower, to take control of any cash or non-cash proceeds of
Accounts and of any returned or repossessed goods; to compromise, extend or
renew any Account or deal with it as it may deem advisable, and to make
exchanges, substitutions or surrenders of Collateral in a commercially
reasonably manner, to notify the postal authorities to deliver all mail,
correspondence or parcels addressed to the Borrowers to the Agent at such
address as the Agent may choose.
(B) The Borrowers herewith appoint the Agent (for ratable benefit of
the Banks) or its designees as attorneys-in-fact to endorse the Borrowers' names
on any checks, notes, acceptances, drafts or any other Instrument or document
requiring said endorsement and to sign the Borrowers' names on any invoice or
bills of lading relating to any Account, or drafts against its customers, or
schedules or confirmatory assignment on Accounts, or notices of assignment,
financing statements under the Uniform Commercial Code, and other public
records, and in verification of Accounts and in notices to Account Debtors.
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(C) The Agent shall have no obligation to preserve any rights
against any Person obligated on any Account, Chattel Paper, Instrument or other
item of Collateral.
5.10. CHANGE OF LOCATIONS
-------------------
The Borrowers will furnish the Agent with at least thirty (30) days
prior written notice of any change in locations of or addition to their chief
executive offices, the offices where they keep their records concerning their
Accounts, the locations where they keep their Equipment and other assets, and
other business locations and shall execute such financing statements and other
documents as the Agent requires.
5.11. DISBURSEMENT ACCOUNTS
---------------------
The Borrowers agree to maintain at the Agent their primary domestic
operating accounts.
5.12. INTEREST RATE PROTECTION AGREEMENT(S)
-------------------------------------
The Borrowers shall within ninety (90) days of the Closing Date enter
into an Interest Rate Protection Agreement as to not less 25% of the outstanding
Credit Facilities on the Closing Date, on terms and conditions reasonably
satisfactory to the Agent.
5.13. ERISA
-----
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 the Agent, promptly upon Agent'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 Internal Revenue Service ("IRS") with
respect to all pension plan(s), or which any member of a "Controlled Group" (as
defined in ERISA), may
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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 the Agent of the
occurrence of any Reportable Event 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 participate and will promptly advise the
Agent (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 such Borrower's knowledge, would trigger the assertion of a claim
for withdrawal liability against such Borrower, and (z) upon the occurrence of
any event which, to the best of such 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.
5.14. YEAR 2000 COMPLIANCE
--------------------
The Borrowers shall achieve Year 2000 compliance on or before July
1, 1999 as represented in Section 4.28 hereof.
5.15. BUSINESS CONDUCTED
------------------
Each Borrower shall continue in the business presently operated by
it using its commercially reasonable 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.
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5.16. INTERCOMPANY NOTES; OPINIONS AS TO PLEDGE AGREEMENTS.
----------------------------------------------------
Not later than ninety (90) days from the Closing Date, (i) the
Borrowers shall deliver, duly endorsed to the Agent (for the ratable benefit of
the Banks), all promissory notes evidencing Permitted Intercompany Loans having
an aggregate principal amount in excess of $100,000 and (ii) the Borrowers shall
provide to the Agent and the Banks an opinion of counsel admitted to practice in
the United Kingdom as to the Pledge Agreements relating to the pledge of stock
of ORC Holdings, Limited, ORC International, Ltd. and European Information
Centre, Ltd., to the effect that said Pledge Agreements are effective under the
laws of the United Kingdom to properly pledge to the Agent (for the ratable
benefit of the Banks) the pledged shares covered thereby and as to such other
matters reasonably requested by the Agent and the Banks relative to the pledges
effected thereby. In the event such counsel proposes amendments, modifications
or replacement to such Pledge Agreements, the Borrowers shall cause such
documents to be promptly executed.
VI
NEGATIVE COVENANTS OF THE BORROWERS
-------------------------------------
6.1. LOANS AND ADVANCES AND INVESTMENTS
----------------------------------
The Borrowers will not make any loans or advances to or investment
in any Person except for Investment Obligations, Permitted Acquisitions,
Permitted Intercompany Loans, (provided that any Permitted Intercompany Loan to
a foreign Subsidiary or Affiliate in excess of $100,000 shall be evidenced by a
promissory note which shall be pledged and delivered
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to the Agent (for the ratable benefit of the Banks) with appropriate
endorsements) and Permitted Officer Loans.
6.2. FINANCIAL COVENANTS
-------------------
(A) Funded Debt to Consolidated EBITDA. The Borrowers will not allow
----------------------------------
the ratio of Funded Debt to Consolidated EBITDA measured quarterly, for any Test
Period to be greater than 2.75:1.00. The Borrowers will not allow their ratio of
Funded Debt plus Earn Out amounts payable to Consolidated EBITDA for any Test
Period to be greater than 3.75:1.00 at June 30, 1998 and at September 30, 1998
or greater than 3.50:1.0 at the end of each quarter thereafter. Without
limitation, for purposes of this Section 6.2(A) Consolidated EBITDA shall
include EBITDA of any Permitted Acquisition completed during the Test Period
based on audited financial statements for such Permitted Acquisition.
(B) Capital Expenditures. The Borrowers will not in any fiscal year
--------------------
make Capital Expenditures in excess of $3,000,000 (as to fiscal year 1998) and
$3,500,000 (as to fiscal years thereafter), in each case in the aggregate on a
combined basis. For purposes hereof, Capital Expenditures financed by permitted
purchase money indebtedness which is Permitted Indebtedness and Capital Leases
shall not be included within the aggregate amounts permitted hereby.
(C) Fixed Charge Coverage Ratio. The Borrowers will not allow their
---------------------------
Fixed Charge Coverage Ratio to be less 1.50:1.0, as measured quarterly for any
Test Period. The Borrowers will not allow their Fixed Charge Coverage Ratio
(Earn-Outs) to be less than 1.25:1.0, as measured quarterly for any Test Period.
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(D) Net Loss. The Borrowers will not permit to occur any net loss on
--------
a consolidated basis for any two (2) consecutive fiscal quarters.
(E) Funded Debt to Consolidated Capitalization. At no time shall the
------------------------------------------
Borrowers permit Funded Debt to be in excess of 60% of Consolidated
Capitalization.
6.3. LIENS
-----
The Borrowers will not allow or suffer any Lien to exist on any of
their assets except for Permitted Encumbrances.
6.4. LIMITATION ON INDEBTEDNESS
--------------------------
The Borrowers will not create, incur, assume or suffer to exist any
Indebtedness except Permitted Indebtedness; provided, however, that no payments
may be made on any Permitted Intercompany Loans if there then exists, or such
payment will cause, a Default or an Event of Default.
6.5. CERTIFICATES OF INCORPORATION
-----------------------------
The Borrowers will not amend or otherwise modify or permit the
amendment or modification of their Certificates of Incorporation in a manner
which adversely affects the Banks.
6.6. TRANSACTIONS AMONG AFFILIATES
-----------------------------
No Borrower will become a party to any transaction with an Affiliate
(or any other Person directly or indirectly related to or under common control
with any Affiliate), of any other Borrower unless the terms and conditions
relating to such transaction are as favorable to such Borrower as would be
obtainable at the time in a comparable arms-length transaction with a Person
other than an Affiliate or such other related Person or pay or incur any
obligation to pay any management, service, consulting or similar fees to any
Affiliate or such other related Person.
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In addition, no Borrower will transfer, convey or assign any assets to ORC
TeleServices, Inc.; the assets owned at any time by ORC TeleServices, Inc. will
not exceed $250,000 in value; and ORC TeleServices, Inc. will be liquidated in
the normal course of business.
6.7. SPECIAL COVENANTS AS TO ASSETS
------------------------------
The Borrowers covenant that until satisfaction in full of all
Obligations of the Borrowers to the Agent and the Banks and until termination of
this Agreement:
(A) The Borrowers will not remove the Collateral from its present
locations, without at least thirty (30) days prior notice to the Agent and the
execution of such financing statements as the Agent requires.
(B) The Borrowers will not sell, lease or transfer any of their
Equipment or other assets having a value in excess of $500,000 in the aggregate,
except for sales in the ordinary course of business to good faith purchasers for
value and sales of Equipment which is replaced or is reasonably deemed no longer
necessary to conduct the business of the Borrowers.
6.8. PREPAYMENTS OF INDEBTEDNESS
---------------------------
The Borrowers will not prepay or obligate themselves to prepay in
whole or in part, any Indebtedness (other than any Indebtedness due hereunder),
excluding (i) any Permitted Intercompany Loans and (ii) prepayment of
Indebtedness as a result of the determination by the Borrowers that more
advantageous credit may be obtained (which is not otherwise prohibited by this
Agreement) from other sources; provided, however, that such Permitted
Intercompany Loans shall not be paid if there then exists or such payment will
cause a Default or Event of Default.
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6.9. FISCAL YEAR
-----------
The Borrowers will not change their fiscal years.
6.10. CHANGE IN ACCOUNTING PRINCIPLES
-------------------------------
The Borrowers will not change or permit any change in accounting
principles applied to the Borrowers, except as required by GAAP.
6.11. SALE AND LEASEBACK
------------------
The Borrowers will not enter into any arrangement with any Person
providing for the leasing by the Borrowers of property which has been or is to
be sold or transferred by the Borrowers to such Person or to any other Person to
whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of the Borrowers.
6.12. MAINTAIN CORPORATE EXISTENCE AND NATURE OF BUSINESS
---------------------------------------------------
(A) The Borrowers will not allow their corporate existence to be
other than in good standing and will not dissolve or liquidate, or merge or
consolidate with or acquire or affiliate with any other business entity or form
any Affiliate or Subsidiary except in connection with Permitted Acquisitions.
Other than the anticipated liquidation of ORC TeleServices, Inc. as described by
Section 6.6 hereof, the Borrowers will not allow any of their Subsidiaries' or
Affiliates' corporate existence to be other than in good standing nor permit any
of their Subsidiaries or Affiliates to dissolve or liquidate, if such
dissolution or liquidation would have a Material Adverse Effect on any Borrower.
Notwithstanding the foregoing, any Borrower may merge into Research and any
Subsidiary may merge into any Borrower or any Subsidiary upon prior notice to
the Banks and execution of such documentation as the Banks reasonably require.
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(B) The Borrowers will not change their names without furnishing to
the Agents at least thirty (30) days prior written notice thereof and execution
of financing statements and other documents as the Agent requests.
(C) The Borrowers will not change the nature of their businesses.
6.13. DIVIDENDS; DISTRIBUTIONS; LOANS; REDEMPTIONS
--------------------------------------------
The Borrowers will not pay or declare any cash or property
dividends, make or repay any loans or advances, or otherwise make a distribution
of capital or income, or redeem, retire or repurchase any stock interest of the
Borrowers or otherwise transfer cash or property to any Person except that the
Borrowers (other than Research) may pay cash dividends to Research.
Notwithstanding the foregoing, Research may, if required by the Asset Purchase
Agreement dated January 6, 1998 entered into in connection with the purchase by
ProTel of the assets of ProTel Marketing, Inc., redeem the options of the
holders of Research stock for the amounts required thereby provided at the time
of such redemption payment (and as a result thereof) no Default or Event of
Default then exists and is continuing.
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VII
EVENTS OF DEFAULT
-----------------
The occurrence of any of the following shall constitute an Event of
Default:
7.1. NON-PAYMENT
-----------
Failure on the part of the Borrowers to pay any Obligation within
two (2) days of its due date.
7.2. NON-PERFORMANCE
---------------
Failure on the part of the Borrowers to perform when such
performance is due any term, covenant or condition contained herein or in any
other Loan Document (other than with respect to the payment of any Obligation as
set forth in Section 7.1 hereof and with respect to the covenant contained in
Section 5.16 hereof and with respect to all covenants contained in Article VI
hereof, as to which covenants set forth in such Section 5.16 and Article VI no
notice or grace period shall be applicable) or any other agreement now existing
or hereafter entered into with the Agent and/or any of the Banks and such
failure shall continue for more than thirty (30) days after the Agent (or any
Bank) has given the Borrowers notice thereof.
7.3. MISREPRESENTATION
-----------------
Any representation or warranty made or deemed made by the Borrowers
in this Agreement, or any other Loan Document, or in connection with any
instrument of guaranty or security furnished to the Agent and/or the Banks or in
any financial information or statements at any time furnished to the Agent
and/or the Banks shall have proven to have been inaccurate in any substantial or
material respect as of the date or dates with respect to which it is made or
deemed to have been made.
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7.4. [INTENTIONALLY OMITTED]
7.5. INSOLVENCY
----------
Any Borrower or Subsidiary shall have applied for or consented to
the appointment of a custodian, receiver, trustee or liquidator of all or a
substantial part of its assets; a custodian shall have been appointed with or
without consent of any Borrower or Subsidiary; any Borrower or Subsidiary is
generally not paying its debts as they become due, has made a general assignment
for the benefit of creditors, has been adjudicated insolvent, or has filed a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage of any
insolvency law, or an answer admitting the material allegations of a petition in
any bankruptcy, reorganization or insolvency proceeding, or taken corporate
action for the purpose of effecting any of the foregoing; or an order, judgment
or decree shall have been entered, without the application, approval or consent
of such Borrower or Subsidiary by any court of competent jurisdiction approving
a petition seeking reorganization of any Borrower or Subsidiary, or appointing a
receiver, trustee, custodian or liquidator of any Borrower or Subsidiary, or a
substantial part of its assets and such order, judgment or decree shall have
continued unstayed and in effect for any period of thirty (30) consecutive days;
or a petition in bankruptcy shall have been filed against any Borrower or
Subsidiary and shall not have been dismissed for a period of sixty (60)
consecutive days; or an order for relief has been entered under the Bankruptcy
Code; or any Borrower or Subsidiary shall have suspended the transaction of its
usual business.
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7.6. JUDGMENT OR LIEN
----------------
Entry of a judgment, issuance of any garnishment, attachment or
distraint, the filing of any lien or of any governmental attachment against any
property of a Borrower or Subsidiary which entry, issuance, attachment or filing
shall have continued unstayed and in effect for a period of thirty (30)
consecutive days and is in excess of $100,000 in the aggregate.
7.7. NONCOMPLIANCE WITH LEASES OR LAWS
---------------------------------
Failure of the Borrowers to comply with the terms and conditions of
any lease covering any of the Premises or to comply with any orders, ordinances,
laws or statutes of any city, state or other governmental department having
jurisdiction with respect to the Premises or the conduct of business thereon,
which failure has a Material Adverse Effect on any Borrower.
7.8. ORGANIZATIONAL CHANGE
---------------------
Except as otherwise permitted herein, any change in the existing
organization of the Borrowers, including but not limited to a change to a
partnership (general or limited), or the dissolution of any Borrower.
7.9. ADVERSE CHANGE
--------------
The reasonable determination by the Agent that a Material Adverse
Change has occurred to a Borrower or Subsidiary (which, as to such Subsidiary,
has a Material Adverse Effect).
7.10. TRANSFER OF OWNERSHIP
---------------------
(i) A Change in Control occurs as to Research or (ii) a change
occurs in the share ownership of the other Borrowers or Subsidiaries from that
which exists as of the Closing Date or (iii) the issuance of any additional
capital stock of any Borrower, except as permitted herein.
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7.11. ERISA
-----
If (A) any Reportable Event occurs and shall be continuing for
thirty (30) days after notice from the Agent to the Borrowers, or (B) any Plan
shall be terminated, or (C) the Plan administrator of any Plan shall file with
the PBGC a notice of intention to terminate such Plan, (D) the PBGC shall
institute proceedings to terminate any Plan or appoint a trustee to administer
any Plan, and, in any of the cases set forth in (A) through (D) above, any such
occurrence would have a Material Adverse Effect on any Borrower or if a lien
against the assets of any Borrower were to result under ERISA.
7.12. DEFAULT IN OBLIGATIONS TO THIRD PARTIES
---------------------------------------
Any Borrower is in default (unless subsequently waived) beyond any
applicable grace or cure period (i) of any material obligation to any third
party or (ii) under any Indebtedness in an unpaid amount in excess of $250,000
if the effect is to accelerate or permit the acceleration of the payment thereof
or if such amount is not paid upon the maturity thereof. If a default under
Indebtedness in an unpaid amount in excess of $250,000 would permit the
acceleration thereof (but such acceleration has not occurred) and the Borrowers
are vigorously disputing such default and have set aside reserves for such
dispute in an amount satisfactory to the Required Banks, such default shall not
be an Event of Default hereunder so long as such dispute continues to be
vigorously pursued, such reserves are maintained and no acceleration of such
Indebtedness occurs.
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7.13. LICENSES
--------
If any license or permit necessary for the continued operation of
any Borrower's customary business is revoked, suspended, terminated or not
renewed, which revocation, suspension, termination or non-renewal has a Material
Adverse Effect on any Borrower.
VIII
CONSEQUENCE OF EVENT OF DEFAULT
-------------------------------
In case any Event of Default shall have occurred, then the Agent may
in its discretion or, if instructed by the Required Banks, shall take any or all
of the following actions, at the same time or at different times, provided that
upon the occurrence of an Event of Default under Section 7.5 hereof the credit
facilities under this Agreement shall automatically without notification or
other action terminate and all Obligations shall automatically, without, demand,
presentment, protest or notice of any kind (all of which are hereby waived by
the Borrowers), be immediately due and payable:
8.1. ACCELERATION
------------
Declare all loans, sums and Obligations owing the Agent and the
Banks from the Borrowers under this Agreement or any other agreement or loan
between the Banks and the Borrowers to be forthwith due and payable, whereupon
all such sums shall forthwith become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrowers and the Banks' commitment to lend or extend other
financial accommodations on behalf of the Borrowers shall be terminated.
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8.2. POSSESSION
----------
Proceed with or without judicial process to take possession of all or
any part of the Collateral provided for herein not already in the possession of
the Banks and the Borrowers agree that upon receipt of notice of the Agent's
intention to take possession of all or any part of said Collateral, the
Borrowers will do everything reasonably necessary to assemble the Collateral and
make the same available to the Agent at a place to be designated by the Agent.
8.3. METHODS OF SALE
---------------
Assign, transfer and deliver at any time or from time to time the
whole or any portion of the Collateral or any rights or interest therein in
accordance with the Uniform Commercial Code, and without limiting the scope of
the Banks' rights thereunder, the Agent may sell the Collateral at public or
private sale, or in any other manner all in accordance with applicable law, at
such price or prices as the Agent may reasonably deem best, and either for cash
or credit, or for future delivery (without assumption of any credit risk), at
the option of the Agent, in bulk or in parcels and with or without having the
Collateral at the sale or other disposition. The Agent shall have the right to
be the purchaser at any public sale. The Borrowers agree that the Agent shall
have the right to conduct such sales on the Premises or elsewhere and shall have
the right to use the Premises without charge from the Borrowers and subject to
the terms of any applicable Landlord's and/or Warehousemen's Waivers, for such
sales for such time or times as the Agent may see fit. The Agent is hereby
granted license or other right to use, without charge, the Borrowers' labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in advertising for sale and selling any Collateral
and the Borrowers' rights under all
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licenses and franchise agreements shall inure to the benefit of the Agent. The
Borrowers agree that a reasonable means of disposition of Accounts shall be for
the Agent to hold and liquidate any and all Accounts. In the event of a sale of
the Collateral, or any other disposition thereof, the Agent shall apply all
proceeds first to all costs and expenses of disposition, including attorneys'
fees, and then to the Obligations of the Borrowers to the Agent and the Banks.
8.4. RETENTION OF COLLATERAL
-----------------------
Elect to retain the Collateral or any part thereof in satisfaction of
all Obligations due from the Borrowers to the Agent and the Banks upon notice of
such proposed election to the Borrowers and any other party as may be required
by the Uniform Commercial Code and otherwise in accordance with the Uniform
Commercial Code.
8.5. SET OFF
-------
The Agent and the Banks shall have the right immediately, and without
notice or other action to set off against the Borrowers' Obligations to the
Agent and the Banks any sum owed by the Banks in any capacity to the Borrowers
whether due or not and, if such right of set off is exercised, the Agent and/or
the Banks shall be deemed to have exercised such right of set off and to have
made a charge against any such sum immediately upon the occurrence of such Event
of Default, even though the actual book entries may be made at some time
subsequent thereto.
8.6. ATTORNEYS' FEES AND EXPENSES
----------------------------
Add to the Obligations of the Borrowers, the Agent's and the Banks'
reasonable expenses to obtain or enforce payment of any Obligations hereunder
and the enforcement or
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liquidation of any debt hereunder shall include reasonable attorneys' fees plus
other legal expenses incurred by the Agent and the Banks.
8.7. DEFAULT RATE
------------
Increase the rate of interest under any Obligations to the Default
Rate. Unless otherwise agreed by the Banks, the Default Rate will automatically
become effective upon the occurrence of an Event of Default and shall be
retroactive to the date of the first occurrence of such Event of Default.
8.8. THE AGENT'S AND/OR THE BANKS' PERFORMANCE OF THE BORROWERS'
-----------------------------------------------------------
OBLIGATIONS
- -----------
If the Borrowers fail to materially comply with any of the covenants
or perform any of their obligations set forth herein or in any other Loan
Document, the Agent or any of the Banks may, but shall have no obligation to,
perform any such obligations or undertake any act to cause such covenant to be
complied with, including, but not limited to, discharging any Lien on any asset
other than Permitted Encumbrances. Any and all sums, and all costs and expenses
incurred by the Agent or any Bank, as applicable, in so performing or causing
compliance, shall be payable on demand together with interest at the Default
Rate from the date of any such payment by the Agent or such Bank until the date
paid by the Borrowers. Any such performance by the Agent or such Bank shall not
cure any Default or Event of Default.
8.9. OTHER REMEDIES
--------------
Exercise any other remedies under the Uniform Commercial Code or
other applicable law, or any other Loan Document, including but not limited to
proceeding to enforce its right by suit in equity, action at law or other
appropriate proceeding, whether for payment or
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the specific performance of the covenants or agreements contained in this
Agreement or any other Loan Document.
117
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IX
THE AGENT
---------
The Banks by their execution of this Agreement or any acknowledgement
hereto hereafter executed by any Bank not a party hereto as of the date hereof,
hereby agree among themselves (and the Borrowers by their execution hereof
hereby acknowledge such agreement) as follows:
9.1. APPOINTMENT.
-----------
Each Bank by its execution of this Agreement or any subsequent
separate acknowledgment hereof, hereby appoints The Chase Manhattan Bank, as the
Agent hereunder and under the other Loan Documents, and agrees that The Chase
Manhattan Bank is authorized to act as its agent hereunder and under the other
Loan Documents to the extent provided in this Agreement and the other Loan
Documents. In addition, each Bank entering into any Interest Rate Protection
Agreement with the Borrowers in connection with the Credit Facilities and the
other Banks acknowledges and agrees that the security interest granted to the
Agent hereunder and in any other Loan Document in the Collateral secures the
Obligations under such Interest Rate Protection Agreement to such Bank on a
pari passu basis with the other Obligations of the Borrowers to the Banks in
- ---- -----
respect of the Credit Facilities. In the event the Agent after acceleration of
the Credit Facilities realizes upon Collateral or otherwise receives funds or
property in respect of the Obligations and at such a time there are Obligations
outstanding under any such Interest Rate Protection Agreement with any Bank (a
"Hedge Obligation"), the Proportionate Share of each Bank shall be adjusted
accordingly to take into account such Bank's Hedge Obligation so as to assure
that such Hedge Obligation is treated on a pari passu basis with
---- -----
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all other Obligations of the Borrowers to the Banks in respect of the Credit
Facilities. In the event the Proportionate Shares of the Banks are adjusted as a
result of an outstanding Hedge Obligation to any Bank, and such Hedge
Obligations does become payable to such Bank, any Bank which received amounts in
excess of its Proportionate Share (calculated without taking into account such
Hedge Obligation) shall repay such excess to the other Banks in their
Proportionate Shares (calculated without taking into account such Hedge
Obligation). The Chase Manhattan Bank agrees to act as the Agent upon the
express conditions contained in this Article IX. The provisions of this Article
IX are solely for the benefit of the Agent, and neither the Borrowers nor any
other Person (other than the Banks) shall have any rights as a third party
beneficiary of any of the provisions of this Article IX. The Agent may perform
any of its duties hereunder by or through its agents or employees. For such
duties the Agent alone shall be entitled to the Agency Fee.
9.2. NATURE OF DUTIES.
----------------
(a) The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement or the other Loan Documents. Neither the
Agent nor any of its officers, directors, employees or agents shall be liable
for any action taken or omitted to be taken by it as such hereunder or under any
other Loan Documents or in connection herewith or therewith, unless caused by
its or their gross negligence or willful misconduct. The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not have, by
reason of this Agreement or any other Loan Documents, a fiduciary relationship
in respect of any Bank; and nothing in this Agreement or any other Loan
Document, expressed or implied, is intended to or
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<PAGE>
shall be so construed as to impose upon the Agent any obligations in respect of
this Agreement or any other Loan Document except as expressly set forth herein.
(b) The Agent's duties under this Agreement shall include the
following:
(i) The Agent shall maintain records relating to the available
amount of the Revolving Credit Facility and advise the Banks with respect to
such availability.
(ii) If the Agent obtains actual knowledge of any breach of
covenant or default by the Borrowers under this Agreement or any other Loan
Documents or of any fact or circumstance which, except for any grace period
permitted by this Agreement or such other Loan Document, as the case may be,
would result in any breach of covenant or default by the Borrowers hereunder or
under any other Loan Document, the Agent shall promptly report (to the extent
the officer obtaining such knowledge knows of the obligation to report same to
the Banks) such breach, default or information to the Banks.
(iii) The Agent shall be responsible for coordinating any actions
among the Banks and between the Banks and the Borrowers.
(iv) The Agent shall act if and as directed by the Required
Banks subject to the terms and conditions herein.
9.3. LACK OF RELIANCE ON THE AGENT.
-----------------------------
Independently and without reliance upon the Agent, each Bank, to the
extent it deems appropriate, has made and shall continue to make (a) its own
independent investigation of the financial condition and affairs of the
Borrowers in connection with the making and
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<PAGE>
continuance of the Credit Facilities hereunder and the taking or not taking of
any action in connection herewith, and (b) its own appraisal of the
creditworthiness of the Borrowers, and except as expressly provided in this
Agreement, the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Bank with any credit or other information
with respect thereto, whether coming into its possession before the making of
the Credit Facilities, or at any time or times thereafter. The Agent shall not
be responsible to any Bank for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or any other Loan Document, or for the financial
condition of the Borrowers, nor shall the Agent be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any other Loan Document, or the financial
condition of the Borrowers, or the existence or possible existence of any Event
of Default.
9.4. CERTAIN RIGHTS OF THE AGENT.
---------------------------
(a) If the Agent shall request instructions from the Banks or such
number of Banks required to so instruct the Agent with respect to any act or
action (including failure to act) in connection with this Agreement or any other
Loan Document, the Agent shall be entitled to refrain from such act or taking
such action unless and until the Agent shall have received instructions from the
Banks or such number of Banks required to so instruct the Agent, and the Agent
shall not incur liability to any Person by reason of so refraining. The Agent
shall be fully justified in failing or refusing to take any action hereunder or
under any other Loan Document (i)
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<PAGE>
if such action would, in the opinion of the Agent, be contrary to law or the
terms of this Agreement or the other Loan Documents or (ii) if it shall not
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Without limiting the foregoing, no Bank
shall have the right of action whatsoever against the Agent as a result of the
Agent acting or refraining from acting hereunder or under any other Loan
Documents in accordance with the instructions of the Banks or such number of
Banks required to so instruct the Agent.
(b) The Agent shall be entitled to rely upon any written notice,
statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person, and with respect to all matters pertaining to this
Agreement or any other Loan Documents and its duties hereunder or thereunder,
upon advice of counsel reasonably selected by it.
9.5. INDEMNIFICATION.
---------------
To the extent the Agent is not reimbursed and indemnified by the
Borrowers, the Banks will reimburse and indemnify the Agent, in proportion to
their Proportionate Share of the Revolving Credit Facility, for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, attorneys' fees and expenses, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under any other
Loan Document, in any way relating to or arising out of this Agreement or any
other Loan Document; provided that no Bank shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's
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<PAGE>
gross negligence or willful misconduct. The provisions hereof shall survive the
final repayment of the Obligations.
9.6. THE AGENT IN ITS INDIVIDUAL CAPACITY.
------------------------------------
With respect to its obligation to extend credit under the Credit
Facilities as a Bank under this Agreement, Chase shall have the rights and
powers specified herein for a Bank and may exercise the same rights and powers
as though it were not performing the duties of the Agent specified herein, may
lend money to and generally engage in any kind of lending business with the
Borrowers, or any Subsidiary or Affiliate of the Borrowers, as if it were not
performing the duties specified herein, may accept fees and other consideration
from the Borrowers for services in connection with this Agreement and otherwise
without having to account for the same to the other Banks and the terms "Banks,"
or any similar terms shall, unless the context clearly otherwise indicates,
include Chase in its individual capacity.
9.7. HOLDERS.
-------
The Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof unless and until a written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent. Any request, authority or consent of any Person or entity
who, at the time of making such request or giving such authority or consent, is
the holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or endorsee, as the case may be, of such Note issued in
exchange thereof.
9.8. SUCCESSOR AGENTS.
----------------
(a) The Agent may resign from the performance of all its functions
and duties as Agent hereunder and/or under the other Loan Documents at any time
by giving thirty (30)
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<PAGE>
Business Days prior written notice to the Borrowers and the Banks. Such
resignation shall take effect upon the appointment of a successor Agent as
provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent who shall be a Bank hereunder.
(c) If a successor Agent shall not have been so appointed within
thirty (30) Business Days of the Agent's notice of resignation, the Agent shall
then appoint a successor Agent who shall serve as Agent hereunder or thereunder
until such time, if any, as the Required Banks appoint a successor Agent as
provided above.
(d) If no successor Agent has been appointed pursuant to clause
(b) or (c) by the thirty-fifth (35th) Business Day after the date on which such
notice of resignation was given, the Agent's resignation shall become effective
and the Banks shall thereafter perform all the duties of the Agent hereunder
and/or under the other Loan Documents until such time, if any, as the Banks
appoint a successor Agent as provided above.
X
MISCELLANEOUS
-------------
10.1. NO WAIVER
---------
The Borrowers agree that no delay on the part of the Agent or the
Banks in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver of any such power or right, or act as a
consent to any departure by the Borrowers from any of the terms or conditions
hereof or thereof, or preclude any other or further exercise thereof, or
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<PAGE>
the exercise of any other power or right. No waiver whatsoever shall be valid
unless in writing signed by the Agent and the Banks and then only to the extent
set forth therein.
10.2. MODIFICATION OR AMENDMENT
-------------------------
(a) No amendment, modification, termination or waiver of any
provision of this Agreement or any other Loan Document nor any consent to any
departure therefrom shall be effective unless the same shall be in writing and
signed by the Borrowers and the Required Banks; provided that no such agreement
--------
shall (i) increase the Commitment of any Bank without the written consent of
such Bank, (ii) reduce the principal amount of any Revolving Credit Advance,
Term Loan or Letter of Credit Outstanding or reduce the rate of interest
thereon, or reduce any fees or other amounts payable hereunder, without the
written consent of each Bank affected thereby, (iii) postpone the scheduled date
of payment of the principal amount of any Revolving Credit Advance, Term Loan or
Letter of Credit Outstanding, or any interest thereon, or any fees or other
amounts payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, without
the written consent of each Bank affected thereby, (iv) change any provision
that would alter the pro rata sharing of payments required hereunder, without
the written consent of each Bank, (v) change any of the provisions of this
Section or the definition of "Required Banks" or any other provision thereof
specifying the number or percentage of Banks required to waive, amend or modify
any rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Bank, (vi) provide for discharge or release
of all or a substantial portion of the Collateral without the written consent of
each Bank, or (vii) waive any breach of the provisions of Section 6.4 hereof,
without the written consent of each Bank; provided further
-------- -------
125
<PAGE>
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Agent hereunder without the prior written consent of the Agent.
(b) Any such amendment, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
10.3. WAIVER OF NOTICE
----------------
The Borrowers waive presentment, dishonor and notice of dishonor,
protest and notice of protest of all commercial paper at any time held by the
Agent or any of the Banks on which the Borrowers are in any way liable.
10.4. ONE INSTRUMENT
--------------
The provisions of this Agreement shall be in addition to those of
any notes or other evidence of the Obligations held by the Banks relating to
this particular transaction, all of which shall be construed as one instrument.
10.5. LAW OF NEW YORK
---------------
This Agreement and all other Loan Documents and the rights of the
parties hereto and thereto shall be governed by the internal laws of the State
of New York without regard to conflict of laws.
10.6. JURISDICTION
------------
The Borrowers hereby irrevocably consent to the jurisdiction of the
Courts of the State of New Jersey and/or New York or any Federal Court in such
States in connection with any action or proceeding arising out of or related to
this Agreement or any other Loan Document. In any such litigation, the Borrowers
waive personal service of any summons, complaint or other process and agree that
service may be made by certified or registered mail, at the address
126
<PAGE>
provided herein provided that any such service shall not be deemed made unless
received by the Borrowers.
10.7. SUCCESSORS OR ASSIGNS
---------------------
This Agreement and all other Loan Documents shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors and assigns, provided, however, that the Borrowers shall not have any
right to assign any of their rights or obligations hereunder without the consent
of the all of the Banks.
10.8. RIGHTS CUMULATIVE
-----------------
The rights and remedies herein expressed or in any other Loan
Document to be vested in or conferred upon the Agent (for the ratable benefit of
the Banks), and the Banks shall be cumulative and shall be in addition to and
not in substitution for or in derogation of the rights and remedies conferred
upon secured creditors by the Uniform Commercial Code or any other applicable
law.
10.9. NOTIFICATION OF DISPOSITION OF COLLATERAL
-----------------------------------------
Any notification of a sale or other disposition of the Collateral
will be sufficient if given in the manner set forth in Section 10.10 hereof not
less than ten (10) days prior to the day on which such sales or other
disposition will be made, and such notification shall be deemed reasonable
notice.
10.10. ADDRESSES OF NOTICES
--------------------
Any written notice required or permitted to be given by this
Agreement shall be given or made in writing, including telecopy, and shall be,
as elected by the party giving such notice, served personally by messenger or
courier service, telecopied (followed up by a mailing),
127
<PAGE>
or mailed in the United States by prepaid, registered or certified mail, return
receipt requested, to the following:
If to the Borrowers:
Opinion Research Corporation
23 Orchard Road
Skillman, New Jersey 08558
Attn: Kevin P. Croke and Michael Cooper
Fax #: (908) 281-3554 (Mr. Croke)
(908) 281-5105 (Mr. Cooper)
with a copy (except
for routine notices with
respect to borrowings
hereunder and the like)
to:
Wolf, Block, Schorr and Solis-Cohen LLP
111 South Packard Building
Philadelphia, Pennsylvania 19102-2678
Attn: David Gitlin, Esq.
Fax #: (215) 977-2334
If to the Agent and Chase:
The Chase Manhattan Bank
East 36 Midland Avenue
Paramus, New Jersey 07652
Attn: Valerie Schanzer, Vice President
Fax #: (201) 599-6755
with a copy (except
for routine notices with
respect to borrowings
hereunder and the like)
to:
128
<PAGE>
Riker, Danzig, Scherer, Hyland & Perretti LLP
Headquarters Plaza
One Speedwell Avenue
Morristown, New Jersey 07962-1981
Attn: Mark S. Rattner, Esq.
Fax #: (973) 538-1984
If to the other Banks:
The Bank of New York
385 Rifle Camp Road
West Paterson, New Jersey 07424
Attn: Vincent P. O'Leary, Senior Vice President
Fax #: (973) 357-7705
First Union National Bank
1339 Chestnut Street
Philadelphia, Pennsylvania 19101-7618
Attn: Charles H. Dietrich, Senior Vice President
Fax #: (215) 786-5356
Any notice given in accordance with the provisions of this Section
shall be deemed effective, if hand delivered, on the date of such delivery, or
on the date telecommunicated if telecopied, or if mailed, on the date upon which
the return receipt is signed or delivery refused or the notice is designated by
the postal authorities as not deliverable, as the case may be. Each party may
give notice to each of the other parties of a change of its address for the
purpose of giving notice under this Section which, thereafter until changed by
like notice, shall be the address of such party for purposes of this Agreement.
Any failure to provide notice to the parties' attorneys shall not affect the
validity of any otherwise proper notice.
129
<PAGE>
10.11. TITLES
------
The titles and headings indicated herein and any table of contents
are inserted for convenience only and shall not be considered a part of this
Agreement or in any way limit the construction or interpretation of this
Agreement.
10.12. DISCLOSURE
----------
The Banks are hereby authorized to disclose any financial or other
information each may have about the Borrowers to any present or future
participant or prospective participant as permitted under Section 2.19 hereof,
any regulatory body or agency having jurisdiction over the Banks, or to any
Person which succeeds to all or any part of the Banks' interest herein.
10.13. TERM
----
This Agreement and the rights of the Agent and the Banks hereunder
and the obligations of the Borrowers hereunder, including but not limited to the
grant of security interests in and Liens on the Collateral as set forth in
Article III hereof, shall remain in full force and effect until all of the
Obligations of the Borrowers to the Agent and the Banks are finally and
indefeasibly paid in full and any commitment to extend credit has been
terminated.
10.14. INTEREST LIMITATION
-------------------
It is the intention of the Agent and the Banks and the Borrowers to
conform strictly to the laws of the State of New Jersey or the laws of such
other jurisdiction which may be found to apply to the subject transaction
relating to the maximum rate of interest which may be lawfully contracted for or
charged. Nothing contained in this Agreement or any other Loan Document shall be
construed to mean that the Borrowers have contracted to pay or are obligated to
pay any sum or sums to the Agent and/or the Banks in excess of those which may
lawfully be
130
<PAGE>
charged or contracted for under applicable law of the State of New Jersey or
other applicable law. If any provision of this Agreement or any of the other
Loan Documents shall require payment of any sum or sums of interest in excess of
the maximum permitted rate which may be lawfully contracted for or charged, then
the Borrowers, the Agent, and the Banks agree that such result is as a
consequence of their inadvertence and/or mistake, and the interest charge for
which the Borrowers are liable under this instrument shall be recomputed for the
sole and limited purpose of determining the extent of the obligations and
liabilities of the Borrowers to the Agent and/or the Banks so that the interest
charges for which the Borrowers are liable shall not exceed the maximum
permitted rate which is determined to be applicable. Additionally, any sums of
interest which are collected by the Agent and/or the Banks from the Borrowers or
other source in connection with the Credit Facilities evidenced hereby which are
in excess of the maximum permitted rate shall, for the sole and limited purpose
of determining the extent of the obligations and liabilities of the Borrowers to
the Agent, and/or the Banks, be credited against the amount of principal for
which the Borrowers are liable to the Agent, and/or the Banks after giving
effect to any recomputation and adjustment required pursuant to the foregoing
provisions of this Section, or if such outstanding principal balance and
interest are paid in full, any such excess shall be remitted by the Agent,
and/or the Banks, as applicable, to the Borrowers.
10.15. INDEMNIFICATION
---------------
The Borrowers hereby agree to and do hereby indemnify, protect,
defend and save harmless the Agent and the Banks and any member, officer,
director, official, agent, employee and attorney of the Agent and the Banks, and
their respective heirs, successors and assigns (collectively, the "Indemnified
Parties"), from and against any and all losses, damages, expenses
131
<PAGE>
or liabilities of any kind or nature and from any suits, claims or demands,
including reasonable counsel fees incurred in investigating or defending such
claim, suffered by any of them and caused by, relating to, arising out of,
resulting from, or in any way connected with this Agreement and the other Loan
Documents and the transactions contemplated herein or the Collateral (unless
caused entirely by the gross negligence or willful misconduct of the Indemnified
Parties) including, without limitation: (i) losses, damages, expenses or
liabilities sustained by the Agent, and/or any of the Banks in connection with
any environmental cleanup, any Environmental Complaint or other remedy required
or mandated by any Environmental Laws (other than losses, damages, expenses or
liabilities caused solely by unlawful actions of any Indemnified Party); (ii)
any untrue statement of a material fact contained in information submitted to
the Agent and/or any of the Banks by the Borrowers or the omission of any
material fact necessary to be stated therein in order to make such statement not
misleading or incomplete; (iii) the failure of the Borrowers to perform any
obligations herein required to be performed by the Borrowers; (iv) the
ownership, construction, occupancy, operations, use and maintenance of any of
the Borrowers' properties or any Collateral and (v) any taxes, assessments, or
costs (and reasonable attorneys' fees associated therewith) incurred as a result
of the collection and/or liquidation of any Collateral. The provisions of this
Section 10.15 shall survive termination of this Agreement and the other Loan
Documents.
10.16. WAIVER OF TRIAL BY JURY
-----------------------
THE BORROWERS WAIVE TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
132
<PAGE>
10.17. INTEGRATION; SEVERABILITY
This Agreement and the other Loan Documents constitute the sole agreement
of the parties with respect to the transactions contemplated hereby and
supersede all oral negotiations and prior writings with respect thereto. In case
any one or more of the obligations of the Borrowers under this Agreement, any
promissory notes issued hereunder or any other Loan Document shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining obligations of the Borrowers shall not in any
way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Borrowers under this Agreement, any
promissory notes issued hereunder or any other Loan Document in any other
jurisdiction.
10.18. COUNTERPARTS
------------
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures hereto were upon
the same instrument.
133
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
BANKS:
THE CHASE MANHATTAN BANK
By:/s/Valerie Schanzer
_______________________________
Name:Valerie Schanzer
Title: Vice President
THE BANK OF NEW YORK
By:/s/Frank Bridges
_______________________________
Name:Frank Bridges
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By:/s/Charles Dietrich
_______________________________
Name:Charles Dietrich
Title: Vice President
AGENT:
THE CHASE MANHATTAN BANK
By:/s/Valerie Schanzer
_______________________________
Name:Valerie Schanzer
Title: Vice President
<PAGE>
BORROWERS:
OPINION RESEARCH CORPORATION
By:/s/Kevin P. Croke
__________________________
Name:Kevin P. Croke
Title: Assistant Secretary
ORC PROTEL, INC.
By:/s/Kevin P. Croke
__________________________
Name:Kevin P. Croke
Title: Secretary
ORC INC.
By:/s/Kevin P. Croke
__________________________
Name:Kevin P. Croke
Title: President
<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>
ORC, Inc. Delaware December 16, 1991
European Information Centre, Ltd. England December 20, 1991
ORC Holdings, Limited England July 17, 1996
ORC Korea Corporation Korea November 30, 1996
ORC International Holdings, Inc. Cayman Islands March 18, 1997
ORC TeleServices, Inc. Florida March 26, 1997
Opinion Research Corporation,
S.A. de C.V. Mexico, D.F. July 10, 1997
ORC ProTel, Inc. Delaware November 20, 1997
ORC International, Limited England December 15, 1997
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-63485) pertaining to the 1997 Stock Plan of Opinion Research
Corporation of our report dated February 16, 1999, with respect to the
consolidated financial statements and schedule of Opinion Research Corporation
included in its Annual Report (Form 10-K) for the year ended December 31, 1998,
filed with the Securities Exchange Commission.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
March 19, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND THE RELATED CONSOLIDATED
STATEMENTS OF INCOME AND CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,058
<SECURITIES> 0
<RECEIVABLES> 12,840
<ALLOWANCES> 209
<INVENTORY> 0
<CURRENT-ASSETS> 17,933
<PP&E> 5,421
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,610
<CURRENT-LIABILITIES> 14,689
<BONDS> 15,600
0
0
<COMMON> 42
<OTHER-SE> 16,649
<TOTAL-LIABILITY-AND-EQUITY> 50,610
<SALES> 0
<TOTAL-REVENUES> 73,167
<CGS> 0
<TOTAL-COSTS> 44,807
<OTHER-EXPENSES> 26,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,871
<INCOME-PRETAX> 469
<INCOME-TAX> 489
<INCOME-CONTINUING> (20)
<DISCONTINUED> 0
<EXTRAORDINARY> (150)
<CHANGES> 0
<NET-INCOME> (170)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
