SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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: 1-7675
AUDITS & SURVEYS WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-1809586
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
650 Avenue of the Americas, New York, New York 10011
- ---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 627-9700
Indicate by check mark whether the registrant (l) 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 [_]
The number of shares outstanding of each of the issuer's classes of
common stock, as of August 9, 1996 was:
Class Number of Shares
----- ----------------
Common Stock, $0.01 par value 13,099,103
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets-
June 30, 1996 and December 31, 1995 3-4
Condensed Consolidated Statements of Income-
Three Months and Six Months ended June 30, 1996
and June 30, 1995 5
Condensed Consolidated Statements of Cash Flows-
Six Months ended June 30, 1996 and June 30, 1995 6
Condensed Consolidated Statement of Stockholders' Equity-
June 30, 1996 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9-10
PART II. OTHER INFORMATION
Item 2 Changes in Securities. 11
Item 4 Submission of Matters to a Vote of Security-Holders. 11
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
June 30, 1996 Dec. 31,1995
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 633 $ 936
Accounts receivable:
Billed 7,470 8,687
Unbilled 4,542 2,366
Prepaid expenses and inventories 1,653 1,320
Other current assets 253 606
Net assets held for sale 348 983
------- -------
Total current assets 14,899 14,898
PROPERTY AND EQUIPMENT, NET 3,036 3,127
RECEIVABLE FROM SALE OF ASSETS 500 500
PREPAID PENSION COSTS 943 943
DEFERRED INCOME TAX ASSET 3,363 3,398
OTHER ASSETS 1,834 2,021
------- -------
TOTAL ASSETS
$24,575 $24,887
======= =======
See notes to condensed consolidated financial statements.
3
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank debt $ 850 $ 1,200
Accounts payable and accrued expenses 4,238 4,877
Accrued payroll and bonuses 2,004 1,917
Customer billings in excess of revenues earned 3,966 4,282
Income taxes payable 391 --
Current portion of long-term debt 554 658
Current portion of capital lease obligations 81 75
-------- --------
Total current liabilities 12,084 13,009
LONG-TERM DEBT-Net of current portion 2,221 2,647
CAPITAL LEASE OBLIGATIONS - Net of current portion 189 222
DEFERRED INCOME TAX LIABILITY 405 405
OTHER LIABILITIES 1,839 1,977
-------- --------
Total liabilities 16,738 18,260
-------- --------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 1,000,000 shares
authorized and unissued -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 13,099,103 shares issued at June 30, 1996
and 13,094,755 shares issued at December 31, 1995 131 131
Additional paid-in capital 4,369 4,486
Retained earnings 3,306 2,014
Cumulative foreign currency translation adjustment 31 (4)
-------- --------
Total stockholders' equity 7,837 6,627
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,575 $ 24,887
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
================================================================================
(Dollar amounts in thousands except for per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 15,897 $ 14,519 $ 30,300 $ 27,832
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs 7,771 7,595 14,448 13,953
Selling, general and
administrative expenses 6,156 6,051 12,331 11,725
Incentive bonuses 723 285 1,213 749
Interest expense 96 104 177 164
Other (income) - net (90) (135) (226) (307)
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES 14,656 13,900 27,943 26,284
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,241 619 2,357 1,548
PROVISION FOR
INCOME TAXES 558 328 1,065 690
------------ ------------ ------------ ------------
NET INCOME $ 683 $ 291 $ 1,292 $ 858
============ ============ ============ ============
NET INCOME PER SHARE $ .05 $ .02 $ .10 $ .07
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 13,099,103 13,094,755 13,099,103 11,893,800
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,292 $ 858
Adjustments to reconcile net income to net cash
(used in) operating activities:
Depreciation and amortization 323 276
Deferred income taxes 68 (79)
Deferred compensation 8 15
Amortization of deferred charges 13 17
Increase (decrease) in cash surrender value of officers' life insurance 8 (34)
Accrued rent (6) (5)
Minority Interest -- (7)
Changes in operating assets and liabilities:
Accounts receivable (959) (697)
Prepaid expenses and inventories (333) (44)
Other current assets 21 (38)
Other assets 166 (715)
Income taxes payable 690 (529)
Accounts payable and accrued expenses (639) (16)
Accrued payroll and bonuses 88 (1,619)
Customer billings in excess of revenues earned (316) (859)
Net assets held for sale (14) (80)
Other (140) 17
------- -------
Net cash provided by (used in) operating activities 270 (3,539)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (233) (254)
Payment of merger costs (124) (190)
Proceeds from sale of assets 650 --
Cash received from Triangle merger -- 1,090
------- -------
Net cash provided by investing activities 293 646
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings 1,800 2,500
Principal payments of notes payable to officers/stockholders -- (605)
Principal payments of debt (2,680) (181)
Principal payments of capital lease obligations (28) (84)
Issuance of common stock 7 --
------- -------
Net cash (used in) provided by financing activities (901) 1,630
------- -------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 35 14
------- -------
NET DECREASE IN CASH (303) (1,249)
CASH, BEGINNING OF PERIOD 936 754
------- -------
CASH (CASH OVERDRAFT), END OF PERIOD $ 633 $ (495)
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for: Interest $ 280 $ 82
======= =======
Income taxes $ 304 $ 1,273
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1995 13,094,755 $ 131 $4,486 $2,014 $ (4) $6,627
Net income 1,292 1,292
Employee stock bonus 4,348 7 7
Revaluation of assets
acquired in merger (124) (124)
Foreign Currency
Translation Adjustment 35 35
------------------------------------------------------------------------------------
BALANCE
JUNE 30, 1996 13,099,103 $ 131 $4,369 $3,306 $ 31 $7,837
------------------------------------------------------------------------------------
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Audits & Surveys Worldwide, Inc. (the "Company"), its majority owned
subsidiary, Audits & Surveys Europe, Ltd. ("A&SE") and two small entities
acquired in the merger with The Triangle Corporation ("Triangle"). All
significant intercompany transactions and balances have been eliminated.
On March 24, 1995, Audits & Surveys, Inc. (A&S) and Triangle consummated a
merger pursuant to which A&S was merged with and into Triangle. Triangle was the
surviving corporation and the separate existence of A&S ceased. The name of the
merged corporation was changed to "Audits & Surveys Worldwide, Inc."
The 1996 and 1995 condensed consolidated financial statements have been prepared
by the Company and are unaudited. In the opinion of the Company's management all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
the interim periods have been made. Certain information and footnote disclosures
required under generally accepted accounting principles have been condensed or
omitted from the consolidated financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission. The condensed
consolidated financial statements presented herein should be read in conjunction
with the year-end consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1995. The results of operations for the three-month and six-month periods ended
June 30, 1996 are not necessarily indicative of the results to be expected for
any other interim period or for the entire year.
2. REFINANCING OF BANK DEBT
Pursuant to a prior commitment from its bank, on June 5, 1996 the Company
refinanced an existing term loan and its $5,000,000 short-term credit facility
into a new $2,610,000 term loan and a $2,500,000 secured line of credit. The new
term loan is repayable in twenty quarterly installments of $130,500 beginning
June 30,1996. The term loan and the line of credit contain customary affirmative
and negative covenants including those requiring the Company to maintain certain
financial ratios and restricting the annual payment of cash dividends to an
amount not in excess of 50% of the previous year's net income.
3. NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
compensation," which became effective for the Company beginning January 1, 1996.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognized compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock-based compensation awards to employees and will disclose the required pro
forma effect on net income and earnings per share within the 1996 annual
financial statements.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SECOND QUARTER AND SIX-MONTH
PERIODS ENDED JUNE 30, 1996 WITH THE SECOND QUARTER AND SIX-MONTH PERIODS ENDED
JUNE 30, 1995
Revenues for the second quarter of 1996 increased $1.4 million (9.5%) to $15.9
million compared with $14.5 million in the second quarter of 1995. Revenues for
the first six months of 1996 increased $2.5 million (8.9%) to $30.3 million
compared with $27.8 million in the first six months of 1995. The net increases
in revenues were principally attributable to higher revenues from international
consumer tracking studies and several custom and syndicated audit research
services.
Direct costs increased $.2 million (2.3%) in the second quarter and $.5 million
(3.5%) in the first six-months of 1996 compared with 1995, primarily as a result
of the increases in revenues. As a percentage of revenues, direct costs were
48.9% in the second quarter and 47.7% in the first six months of 1996 compared
with 52.3% and 50.1%, respectively, in the same periods of 1995. The decreases
in direct costs as a percentage of revenues represented an improvement in the
overall mix of revenues in 1996 compared with the same period of 1995.
Selling, general and administrative (SG&A) expenses increased $.1 million (1.7%)
in the second quarter and $.6 million (5.2%) in the first six months of 1996.
Approximately 60% of the SG&A increases were in payroll and related costs and
resulted from the addition of personnel as well as normal salary adjustments.
The remainder of the increases in SG&A expenses was spread over various expenses
such as rent, utilities, depreciation and computer costs.
The provision for incentive bonuses was $.4 million higher in the second quarter
and $.5 million higher in the first six months of 1996 compared with the same
periods of 1995. The higher provisions resulted from the increases in
year-to-date operating income on which the incentive bonuses are calculated.
Income taxes for the second quarter of 1996 have been provided at approximately
45% of reported pretax income compared with 53% provided in the second quarter
of 1995. Income taxes for the six month periods of 1996 and 1995 have been
provided at approximately 45%. The interim tax provisions are based on estimates
of the effective tax rate anticipated for the full year.
9
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1996, the Company had working capital of $2.8 million and a current
ratio of 1.23 to 1 compared with working capital of $1.9 million and a current
ratio of 1.15 to 1 at December 31, 1995.
Cash flow from operations and borrowings under its credit facilities with its
bank are the Company's principal sources of funds. The Company's cash flow and
borrowings have historically been sufficient to provide funds for working
capital, capital expenditures and payment of indebtedness. Pursuant to a prior
commitment from its bank, on June 5, 1996 the Company refinanced an existing
term loan and its $5,000,000 short-term credit facility into a new $2,610,000
term loan and a $2,500,000 secured line of credit. The new term loan is
repayable in twenty quarterly installments of $130,500 beginning June 30, 1996.
The term loan and the line of credit contain customary affirmative and negative
covenants including those requiring the Company to maintain certain financial
ratios and restricting the annual payment of cash dividends to an amount not in
excess of 50% of the preceding year's net income.
Net cash provided by operating activities was $270,000, consisting primarily of
net income of $1,292,000 plus non-cash expenses of $414,000, offset primarily by
increases in accounts receivable of $959,000 and decreases in accounts payable
and accrued expenses of $639,000.
Net cash provided by investing activities was $293,000 primarily from the sale
of a portion of Triangle's former operating assets for $650,000 offset by
purchases of property and equipment of $233,000.
Net cash used by financing activities was $901,000 consisting primarily of
proceeds from bank borrowings of $1,800,000 offset by repayments of $2,680,000
of bank borrowings and other debt.
The Company believes that its recently revised credit arrangements with its bank
combined with funds generated by its operations will be adequate to fund its
planned capital expenditures, meet its debt obligations and finance its
operations for at least the next twelve months.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the quarterly period ended June 30, 1996, the Company entered into a Term
Loan Agreement with Chemical Bank, dated as of June 5, 1996 (the "Term Loan
Agreement"). Pursuant to the Term Loan Agreement, the Company is restricted in
its ability to pay cash dividends. The Term Loan Agreement provides that the
Company may not make any "Restricted Payments" (as defined in the Term Loan
Agreement) except that the Company may make such payments in each fiscal year in
an amount not in excess of 50% of the Company's Consolidated Net Income (as
defined in the Term Loan Agreement) for the fiscal year immediately preceding
the year in which such Restricted Payment is made. Provided that, after giving
effect to such Restricted Payment, no Event of Default (as defined in the Term
Loan Agreement) or event which with the giving of notice or lapse of time or
both , would constitute an Event of Default, would exist.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On June 6, 1996 the Company held its 1996 Annual Meeting of Stockholders (the
"1996 Meeting"). At the 1996 Meeting, the Company's stockholders elected 11
directors to serve until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. The vote for such directors was as
follows:
For Withheld
--- --------
Solomon Dutka 11,632,263 353,398
H. Arthur Bellows, Jr. 11,632,100 353,561
Carl Ravitch 11,632,500 353,161
Anthony Timiraos 11,633,360 352,301
Charles E. Bradley 11,633,253 352,408
Brian G. Dyson 11,555,201 430,460
Matthew Goldstein 11,572,135 413,526
Robert C. Miller 11,572,135 413,526
William Newman 11,633,360 352,301
Sol Young 11,571,475 414,186
William A. Zebedee 11,633,303 352,358
In addition, at the 1996 Meeting the Company's stockholders voted with respect
to the ratification of the appointment of Deloitte & Touche LLP as the Company's
independent public accountants to audit the Company's consolidated financial
statements for 1996. In connection with this proposal, 11,827,036 votes were
cast for the proposal, 155,524 votes were cast against the proposal and 3,101
votes abstained from voting.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.*
a. Exhibits:
10.17 Term Loan Agreement between Audits & Surveys Worldwide,
Inc. and Chemical Bank, dated as of June 5, 1996.
27.01 Financial Data Schedule
b. Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the
quarterly period ended June 30, 1996.
- ------------------------
* Except for the Term Loan Agreement filed as Exhibit 10.17, there is no
instrument defining the right of holders of long-term debt of the Company
or of any of its subsidiaries other than where the total amount of
securities authorized thereunder does not exceed 10% of the total assets of
the Company and its subsidiaries on a consolidated basis. In accordance
with paragraph (b)(4)(iii) of Item 601 of Regulation S-K, the Company
agrees to furnish to the Securities and Exchange Commission, upon request,
copies of any such instrument.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AUDITS & SURVEYS WORLDWIDE, INC.
August 9, 1996 By: /s/ H. Arthur Bellows, Jr.
- -------------- ----------------------------------
Date H. Arthur Bellows, Jr.
President
By:/s/ Alan J. Ritter
----------------------------------
Alan J. Ritter
Senior Vice President
Corporate Controller
13
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Of Exhibit
- -------------- ----------------------
10.17 Term Loan Agreement between Audits & Surveys Worldwide, Inc. and
Chemical Bank, dated as of June 5, 1996.
27.01 Financial Data Schedule
EXECUTION COPY
Exhibit 10.17
TERM LOAN AGREEMENT
between
AUDITS & SURVEYS WORLDWIDE, INC.
and
CHEMICAL BANK
Dated as of June 5, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
SECTION 1. DEFINITIONS.......................................................1
1.1 Defined Terms.................................................1
1.2 Other Definitional Provisions.................................8
SECTION 2. AMOUNT AND TERMS OF TERM LOAN.....................................8
2.1 Term Loan Commitment..........................................8
2.2 Term Note.....................................................8
2.3 Procedure for Term Loan Borrowing.............................9
2.4 Optional and Mandatory Prepayments of the Term
Loan....................................................9
2.5 Use of Proceeds..............................................10
2.6 Structuring Fee..............................................10
2.7 Computation of Interest......................................10
2.8 Payments.....................................................10
2.9 Conversion Options...........................................11
2.10 Requirements of Law.........................................11
2.11 Capital Adequacy............................................12
2.12 Inability to Determine Rate.................................12
2.13 Illegality..................................................13
2.14 Indemnity...................................................13
SECTION 3. REPRESENTATIONS AND WARRANTIES...................................13
3.1 Financial Condition..........................................13
3.2 No Change....................................................14
3.3 Corporate Existence; Compliance with Law.....................14
3.4 Corporate Power; Authorization; Enforceable..................14
3.5 No Legal Bar.................................................15
3.6 No Material Litigation.......................................15
3.7 No Default...................................................15
3.8 Ownership of Property; Liens.................................16
3.9 No Burdensome Restrictions...................................16
3.10 Taxes.......................................................16
3.11 Federal Regulations.........................................16
3.12 ERISA.......................................................16
3.13 Investment Company Act......................................17
3.14 Subsidiaries................................................17
3.15 Security Agreement..........................................17
3.16 Disclosure..................................................17
3.17 Environmental Matters.......................................18
SECTION 4. CONDITIONS PRECEDENT.............................................18
4.1 Conditions to the Term Loan..................................18
SECTION 5. AFFIRMATIVE COVENANTS............................................20
5.1 Financial Statements.........................................20
i
<PAGE>
Table Of Contents
-----------------
Continued
5.2 Certificates; Other Information..............................21
5.3 Payment of Obligations.......................................21
5.4 Conduct of Business and Maintenance of
Existence..............................................22
5.5 Maintenance of Property Insurance............................22
5.6 Inspection of Property; Books and
Records; Discussions.........................................22
5.7 Notices......................................................23
5.8 Hazardous Material...........................................23
SECTION 6. NEGATIVE COVENANTS...............................................24
6.1 Financial Condition Covenants................................24
6.2 Limitation on Indebtedness...................................24
6.3 Limitation on Liens..........................................25
6.4 Limitation on Contingent Obligations.........................26
ii
<PAGE>
Table Of Contents
-----------------
Continued
6.5 Limitations of Fundamental Changes...........................26
6.6 Limitation on Sale of Assets.................................27
6.7 Limitation on Dividends......................................27
6.8 Limitation on Investments, Loans and.........................28
6.9 Transactions with Affiliates.................................28
6.10 Fiscal Year.................................................28
6.11 Environmental Use...........................................28
SECTION 7. EVENTS OF DEFAULT................................................28
SECTION 8. MISCELLANEOUS....................................................31
8.1 Amendments and Waivers.......................................31
8.2 Notices......................................................32
8.3 No Waiver; Cumulative Remedies...............................32
8.4 Survival of Representations and Warranties...................32
8.5 Payment of Expenses and Taxes................................32
8.6 Successors and Assigns.......................................33
8.7 Set-off......................................................33
Exhibit A Term Note
Exhibit B Borrowing Certificate
Exhibit C Opinion of Company's Counsel
Schedules
Schedule 3.14 Subsidiaries and Affiliates
Schedule 3.17 Environmental Matters
Schedule 6.2 Existing Indebtedness and Liens
Schedule 6.4 Existing Contingent Obligations
<PAGE>
TERM LOAN AGREEMENT, dated as of June 5, 1996, between AUDITS &
SURVEYS WORLDWIDE, INC., a Delaware corporation having its principal place of
business at 650 Avenue of the Americas, New York, New York, 10011 (the
"COMPANY") and CHEMICAL BANK, a New York banking corporation (the "BANK").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings:
"ADJUSTED LIBO RATE": with respect to any LIBOR Loan for
any Interest Period, an interest rate per annum equal to the product
of (a) the LIBO Rate in effect for such Interest Period and (b)
Statutory Reserves.
"AFFILIATE": any Person (other than a Subsidiary) which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, the Company. For purposes of this
definition, a Person shall be deemed to be "controlled by" the
Company if the Company possesses, directly or indirectly, power
either to (a) vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"AGREEMENT": this Term Loan Agreement, together with all
schedules and exhibits hereto, as amended, supplemented or modified
from time to time.
"APPROVED SUBORDINATED DEBT": Indebtedness of the Company
or any of its Subsidiaries which is subordinated to the Indebtedness
of the Company to the Bank on terms that are satisfactory to the Bank
in its sole discretion.
"BORROWING CERTIFICATE": the Borrowing Certificate, dated
as of the Closing Date, executed and delivered by the Company,
substantially in the form of Exhibit B hereto.
"BUSINESS DAY": any day other than a Saturday, Sunday or
other day on which the Bank is authorized or required by law or
regulation to close, and, with respect to the making, continuing,
prepaying or repaying of any LIBOR Loan, a day on which dealings in
dollars are carried on in the interbank eurodollar market in which
the Lending Office customarily deals.
"CASH EQUIVALENTS": (a) securities issued or directly and
fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having
<PAGE>
maturities of not more than one year from the date of acquisition
thereof, (b) time deposits and certificates of deposit of Chemical
Bank or any other domestic commercial bank having capital and surplus
in excess of $500,000,000 having maturities of not more than one year
from the date of acquisition thereof and (c) money market mutual
funds having assets in excess of $2,000,000,000.
"CLOSING DATE": the date on which the Bank makes the Term
Loan.
"CODE": the Internal Revenue Code of 1986, as amended from
time to time.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with the Company within
the meaning of Section 4001 of ERISA.
"CONSOLIDATED CURRENT ASSETS": at a particular date, all
amounts which would, in conformity with GAAP, be included under
current assets on a consolidated balance sheet of the Company and its
Subsidiaries as at such date.
"CONSOLIDATED CURRENT LIABILITIES": at a particular date,
all amounts which would, in conformity with GAAP, be included under
current liabilities on a consolidated balance sheet of the Company
and its Subsidiaries as at such date, including without limitation
tax and other proper accruals.
"CONSOLIDATED NET INCOME (OR LOSS)": at a particular date
for a particular period, the net revenues and other proper income of
the Company and its Subsidiaries (excluding any extraordinary gains
or losses and gains and losses from the sale or disposition of assets
other than in the ordinary course of business) less the aggregate of
all items treated as expenses under GAAP and less Federal, state and
local income taxes, in each case calculated in accordance with
generally accepted accounting principals applied on a consistent
basis.
"CONSOLIDATED TANGIBLE NET WORTH": at a particular date
the excess of (a) the net book value of the assets of the Company
(other than patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, permits, goodwill and other
intangible assets classified as such in accordance with GAAP) after
all appropriate deductions in accordance with GAAP (including without
limitation reserves for doubtful receivables, obsolescence,
depreciation and amortization) over (b) the consolidated liabilities
(including tax and other proper accruals) of the Company, in each
case computed and consolidated in accordance with GAAP.
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"CONTINGENT OBLIGATION": as to any Person, the undrawn
face amount of all letters of credit issued for the account of such
Person and any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations
(the "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
owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of any such primary obligation
against loss in respect thereof; PROVIDED, HOWEVER, that the term
Contingent Obligation shall not include endorsements 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 Company in good faith.
"CONTRACTUAL OBLIGATION": as to any Person, any provision
of any security issued by such Person or of any agreement, instrument
or undertaking to which such Person is a party or by which it or any
of its property is bound.
"CURRENT RATIO": at a particular date, the ratio of
Consolidated Current Assets to Consolidated Current Liabilities.
"DEFAULT": any of the events specified in Section 7,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"ERISA": the Employee Retirement Income Security Act of
1974, as amended from time to time.
"EXISTING TERM LOAN AGREEMENT": the Term Loan Agreement,
dated as of November 30, 1993, between the Company and the Bank.
"EVENT OF DEFAULT": any of the events specified in Section
7, provided that any requirement for the giving of
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notice, the lapse of time, or both, or any other condition, event or
act has been satisfied.
"FINANCING LEASE": (a) any lease of property, real or
personal, of which the then present value of the minimum rental
commitment thereunder should, in accordance with GAAP, be capitalized
on a balance sheet of the lessee, and (b) any other such lease the
obligations under which are capitalized on a consolidated balance
sheet of the Company and its Subsidiaries.
"GAAP": generally accepted accounting principles in the
United States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any
state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"INDEBTEDNESS": of a Person, at a particular date, the sum
(without duplication) at such date of (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of
property or services, (b) all obligations of such Person under
Financing Leases and (c) all obligations of such Person in respect of
acceptances, or similar obligations issued or created for the account
of such Person, provided that Indebtedness shall not include
indebtedness in respect of trade debt incurred in the ordinary course
of business.
"INTEREST PAYMENT DATE": (a) as to any LIBOR Loan, the
last day of the Interest Period relating to such Loan and (b) as to
any Prime Rate Loan, the last day of each quarter.
"INTEREST PERIOD" shall mean, with respect to any LIBOR
Loan,
(a) initially, the period commencing on, as the
case may be, the date of borrowing or conversion with
respect to such LIBOR Loan and ending one, two or three
months thereafter, as selected by the Company in its
notice of borrowing as provided in subsection 2.3 or its
notice of conversion as provided in subsection 2.9, as the
case may be; and
(b) thereafter, each period commencing on the
last day of the immediately preceding Interest Period
applicable to such LIBOR Loan and ending one, two or three
months thereafter, as selected by the Company by
irrevocable notice to the Bank not less than three
Business Days prior to the last day of the then current
Interest Period with respect to such LIBOR Loan;
PROVIDED THAT, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(A) if any Interest Period would otherwise end
on a day which is not a Business Day, that Interest Period
shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such
Interest Period into another calendar month in which event
such Interest Period shall end on the immediately
preceding Business Day;
(B) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month in which the end of such Interest Period falls)
shall end on the last Business Day of a calendar month;
(C) the Company shall select Interest Periods
for LIBOR Loans such that it may make principal
installment payments without prepaying any LIBOR Loan on a
day which is not the last day of an Interest Period; and
(D) any Interest Period that would otherwise
extend beyond the last principal installment payment date
shall end on the last principal installment payment date.
"LENDING OFFICE": the Bank's office at 1375 Broadway, New
York, New York 10018 or such other office as the Bank may from time
to time specify.
"LIBO RATE": with respect to any LIBOR Loan for any
Interest Period, the rate (rounded upwards, if necessary, to the next
1/16 of 1%) at which dollar deposits approximately equal in principal
amount to such Loan and for the maturity equal to the applicable
Interest Period are offered to the Bank's Lending Office at 10:00
A.M. New York City time two Business Days prior to the first day of
such Interest Period in the interbank eurodollar market in which such
Lending Office customarily deals for delivery on the first day of
such Interest Period.
"LIBOR LOAN": any portion of the Term Loan at such time as
it is made or maintained at a rate of interest based upon the
Adjusted LIBO Rate.
"LIEN": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any
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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 in
respect of any of the foregoing other than with respect to any lease
that is not a Financing Lease).
"LOAN DOCUMENTS": the collective reference to this
Agreement, the Term Note and the Security Agreement.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"PLAN": at a particular date, any employee benefit plan
which is covered by ERISA and in respect of which the Company or a
Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) in the
case of any such employee benefit plan which is a Multiemployer Plan,
an "employer" as defined in Section 3(5) of ERISA, and in the case of
any other such employee benefit plan, a "contributing sponsor" as
defined in Section 4001(a)(13) of ERISA.
"PRIME RATE": a fluctuating interest rate per annum equal
to the rate announced by the Bank from time to time at its main
office in New York City, as its prime rate.
"PRIME RATE LOAN": any portion of the Term Loan at such
time as it is made or maintained at a rate of interest based upon the
Prime Rate.
"REAL PROPERTY": any real estate now or hereafter owned or
leased by the Company.
"REPORTABLE EVENT": any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, other than those
events for which the thirty day notice period is waived under PBGC
regulations.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and ByLaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its
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property or to which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer and the
president of the Company or, with respect to financial matters, the
chief financial officer of the Company.
"SECURITY AGREEMENT": the Security Agreement dated as of
March 23, 1995 between the Company and the Bank, as the same may be
amended, modified or supplemented from time to time.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"STATUTORY RESERVES": 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 aggregate of the maximum reserve
percentages, expressed as a decimal (including, without limitation,
any marginal, special, emergency or supplemental reserves) from time
to time in effect under Regulation D or as otherwise established by
the Board of Governors of the Federal Reserve System and any other
banking authority to which the Bank is subject, for Eurocurrency
Liabilities (as defined in Regulation D). LIBOR Loans shall be deemed
to constitute Eurocurrency Liabilities and as such shall be deemed to
be subject to such reserve requirements without benefit of or credit
for proration, exceptions or offsets which may be available from time
to time to the Bank under Regulation D. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any change
in any reserve percentage.
"SUBSIDIARY": as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect
a majority of the board of directors or other managers of such
corporation are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
"TERM LOAN": as defined in subsection 2.1.
"TERM LOAN COMMITMENT": as defined in subsection 2.1.
"TERM NOTE": as defined in subsection 2.2.
"TRIANGLE CORPORATION ASSETS": assets belonging to The
Triangle Corporation prior to the merger of Audits & Surveys, Inc.
into The Triangle Corporation.
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1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Loan Document or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Company and its Subsidiaries not defined in subsection 1.1
and accounting terms partly defined in subsection 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF TERM LOAN.
2.1 TERM LOAN COMMITMENT. Subject to the terms and conditions hereof,
the Bank agrees to make a term loan (the "TERM LOAN") to the Company in an
amount not to exceed $2,610,000 (the "TERM LOAN COMMITMENT").
2.2 TERM NOTE. The Term Loan shall be evidenced by a promissory note
of the Company, substantially in the form of Exhibit A (as from time to time
amended, extended or otherwise modified, the "TERM NOTE"), with appropriate
insertions therein, payable to the order of the Bank and representing the
obligation of the Company to pay the outstanding principal amount of the Term
Loan. The Bank is hereby authorized to record the date and amount of each
payment or prepayment of principal of the Term Loan on the schedule annexed to
and constituting a part of the Term Note, and any such recordation shall
constitute PRIMA FACIE evidence of the accuracy of the information so recorded;
in lieu of so endorsing such schedules, the Bank may record such information in
its books and records, such books and records thereby constituting PRIMA FACIE
evidence of the accuracy of the information so recorded. The Term Note (a) shall
be dated the Closing Date, (b) shall be stated to mature in twenty consecutive
quarterly installments of principal, each in the amount of $130,500, payable on
the last day of each March, June, September and December, commencing on June 30,
1996, and (c) shall bear interest for the period from the date thereof until
maturity on the unpaid principal amount thereof from time to time outstanding at
the Prime Rate plus 1/2 of 1% or the Adjusted LIBO Rate plus
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3%; provided that any principal amount of, and to the extent permitted by law,
interest on, the Term Note that is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear interest payable on demand
for each day at a fluctuating rate per annum equal to 2% above the rate which
would otherwise be applicable thereto until paid in full (as well after as
before judgment). Interest on the Term Note shall be payable on each Interest
Payment Date, and after the occurrence of any Event of Default, shall be payable
on demand.
2.3 PROCEDURE FOR TERM LOAN BORROWING. The Company shall give the
Bank irrevocable written notice (which, if all or any portion of the Term Loan
is to be one or more LIBOR Loans, must be received by the Bank prior to 10:00
A.M., New York City time, three Business Days prior to the requested borrowing
date) specifying (a) the date on which the Term Loan is to be made, (b) the
amount of the Term Loan, which shall not exceed the Term Loan Commitment and (c)
if all or any portion of the Term Loan is to be one or more LIBOR Loans, the
amount of each such LIBOR Loan, which shall be at least $500,000, and the
Interest Period for each such LIBOR Loan. The proceeds of the Term Loan will be
made available to the Company by the Bank on the Closing Date at the office of
the Bank specified in subsection 8.2 by crediting the account of the Company on
the books of such office of the Bank.
2.4 OPTIONAL AND MANDATORY PREPAYMENTS OF THE TERM LOAN. (a) The
Company may, at any time and from time to time, at the Company's option, prepay
the Term Loan without premium or penalty, except as otherwise provided in this
subsection or in subsection 2.14, in whole or in part, upon at least five
Business Days' irrevocable written notice to the Bank, specifying the date and
amount of such optional prepayment. If such notice is given by the Company, the
Company shall make such prepayment, and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to such date on the amount prepaid. The Company may prepay a
LIBOR Loan without penalty only on the last day of an Interest Period. Any
prepayment a LIBOR Loan on a day other than the last day of an Interest Period
shall be subject to the provisions of subsection 2.14. Optional partial
prepayments of the Term Loan pursuant to this subsection 2.4(a) shall be applied
to the installments of principal in the inverse order of maturity. Each optional
partial prepayment of a Prime Rate Loan pursuant to this subsection 2.4(a) shall
be in an aggregate principal amount of $125,000, or an integral multiple
thereof. Each optional partial prepayment of a LIBOR Loan pursuant to this
subsection 2.4(a) shall be in an amount such that the amount of all LIBOR Loans
outstanding having Interest Periods ending on the same day shall be at least
$500,000. Amounts prepaid pursuant to this subsection 2.4(a) may not be
reborrowed.
(b) In the event the Company shall at any time after the Closing Date
sell any Triangle Corporation Assets, the
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Company shall, within ten days of the receipt of the proceeds of such sale,
prepay the Term Loan in an amount equal to 50% of such proceeds (net of broker's
commissions and legal fees). Prepayments pursuant to this subsection 2.4(b)
shall be applied to installments of principal in the direct order of maturity.
Amounts prepaid pursuant to this subsection 2.4(b) may not be reborrowed.
2.5 USE OF PROCEEDS. The proceeds of the Term Loan shall be applied
to repay all of the outstanding principal of and accrued interest on the term
loan outstanding under the Existing Term Loan Agreement and to reduce the
Company's outstandings under the Company's line of credit with the Bank. The
Company expressly acknowledges and agrees that the Term Loan to be made
hereunder represents a continuation, refinancing and extension of the
outstanding indebtedness of the Company to the Bank under the Existing Credit
Agreement and other credit facilities with the Bank.
2.6 STRUCTURING FEE. The Company agrees to pay to the Bank on the
Closing Date a structuring fee in the amount of $12,500. The Bank acknowledges
that it has received a non-refundable commitment fee of $4,000 which it shall
apply toward the payment of the structuring fee on the Closing Date.
2.7 COMPUTATION OF INTEREST. Interest in respect of the Term Loan
shall be calculated on the basis of a 360 day year for the actual days elapsed.
Any change in the interest rate with respect to the Term Loan resulting from a
change in the Prime Rate shall become effective as of the opening of business on
the day on which such change in the Prime Rate is announced, as provided herein.
2.8 PAYMENTS. All payments (including prepayments) to be made by the
Company on account of principal, interest, premium and fees shall be made
without set off, deduction or counterclaim. If any payment hereunder becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
2.9 CONVERSION OPTIONS. (a) The Company may elect to convert any
Prime Rate Loan into a LIBOR Loan hereunder and to convert any LIBOR Loan to a
Prime Rate Loan hereunder, by giving the Bank irrevocable notice of such
election no later than 10:00 A.M. three Business Days prior to the requested
conversion date; PROVIDED, HOWEVER, that a conversion of Prime Rate Loan into a
LIBOR Loan shall be in a minimum amount of $500,000 and conversion of a LIBOR
Loan into a Prime Rate Loan shall be made only on the last day of the then
current Interest Period for such Loan.
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(b) No Prime Rate Loan may be made as or converted to a LIBOR Loan
when any Default or Event of Default has occurred and is continuing.
2.10 REQUIREMENTS OF LAW. In the event that any law, regulation,
treaty or directive or any change therein or in the interpretation or
application thereof or compliance by the Bank 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 Bank to any tax of any kind
whatsoever with respect to this Agreement or the Term Note, or
changes the basis of taxation of payments to the Bank of principal,
interest, fees or any other amount payable hereunder;
(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 Bank which are
not otherwise included in the determination of the LIBOR Rate;
(c) does or shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank of
making, renewing or maintaining advances or extensions of credit to the Company
or to reduce any amount receivable from the Company hereunder then, in any such
case, the Company shall pay to the Bank, upon demand, any additional amounts
necessary to compensate the Bank for such additional cost or reduced amount
receivable which the Bank deems to be material as determined by the Bank with
respect to this Agreement, the Term Note or the extensions of credit hereunder.
If the Bank becomes entitled to claim any additional amounts pursuant to this
subsection 2.10, it shall promptly notify the Company 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
the Bank to the Company shall be conclusive in the absence of manifest error.
2.11 CAPITAL ADEQUACY. If the Bank shall have determined that any
law, rule, regulation or guideline adopted pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards" shall after the date hereof become applicable or the adoption after
the date hereof of any other law, rule, regulation or guideline regarding
capital adequacy, or any change
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after the date hereof in any of the foregoing or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank (or any Lending Office) or the Bank's holding
company with any request or directive under any such law, rule, regulation or
guideline regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Bank's capital or on the capital of
the Bank's holding company, if any, as a consequence of its obligations
hereunder or under the Term Note to a level below that which the Bank or the
Bank's holding company could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies and the policies of
such Bank's holding company with respect to capital adequacy) by an amount
deemed by the Bank to be material, then from time to time the Company shall pay
to the Bank such additional amount or amounts as will compensate the Bank or the
Bank's holding company for any such reduction suffered. If the Bank becomes
entitled to claim any additional amounts pursuant to this subsection 2.11, it
shall promptly notify the Company 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 the Bank to the
Company shall be conclusive in the absence of manifest error.
2.12 INABILITY TO DETERMINE RATE. If the Bank determines that
extraordinary circumstances affecting the relevant market make it impracticable
to ascertain the LIBOR Rate applicable for any future Interest Period for any
LIBOR Loan, the Bank shall promptly notify the Company of such determination and
no LIBOR Loans may be made and no Prime Rate Loans may be converted into LIBOR
Loans until such notice is withdrawn. If any LIBOR Loan is outstanding on the
date of such notice and such notice has not been withdrawn, the Company may on
the last day of such Interest Period either convert such LIBOR Loan to a Prime
Rate Loan or prepay the outstanding principal balance thereof and accrued
interest thereon in full.
2.13 ILLEGALITY. Notwithstanding any other provisions herein, if any
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for the Bank to
make or maintain any LIBOR Loan as contemplated by this Agreement, the Company's
right hereunder to borrow at the LIBOR Rate or to convert a Prime Rate Loan into
a LIBOR Loan shall forthwith be canceled and if a LIBOR Loan is then
outstanding, it shall be converted to a Prime Rate Loan on the last day of the
then current Interest Period applicable thereto or within such earlier period as
required by law.
2.14 INDEMNITY. The Company agrees to indemnify the Bank and to hold
the Bank harmless from any loss or expense which
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the Bank may sustain or incur as a consequence of (a) default by the Company in
payment of the principal of or interest on any LIBOR Loan, including, but not
limited to, any such loss or expense arising from additional interest or fees
payable by the Bank to lenders of funds obtained by it in order to maintain a
LIBOR Loan hereunder, (b) default by the Company in making a borrowing or
conversion with respect to a LIBOR Loan after the Company has given a notice in
accordance with subsection 2.3 or 2.9 hereof, (c) default by the Company in
making any voluntary prepayment with respect to a LIBOR Loan after the Company
has given a notice in accordance with subsection 2.4 hereof, or (d) a prepayment
of a LIBOR Loan on a day which is not the last day of an Interest Period with
respect thereto or any other reason, including, but not limited to, any such
loss or expense arising from interest or fees payable by the Bank to lenders of
funds obtained by it in order to make or maintain LIBOR Loans hereunder. If the
Bank becomes entitled to claim any amounts pursuant to this subsection 2.14, it
shall promptly notify the Company of the event by reason of which it has become
so entitled. A certificate setting forth calculations as to such amounts payable
pursuant to the foregoing sentence submitted by the Bank to the Company shall be
conclusive in the absence of manifest error. This covenant shall survive
termination of this Agreement and payment of the Term Note.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make
the Term Loan, the Company hereby represents and warrants to the Bank that:
3.1 FINANCIAL CONDITION. (a) The consolidated and combined balance
sheet of the Company, its consolidated Subsidiaries and combined Affiliates as
at December 31, 1995 and the related consolidated and combined statements of
income, changes in financial position and cash flows for the fiscal year ended
on such date, copies of which have heretofore been furnished to the Bank, are
complete and correct and present fairly the consolidated and combined financial
condition of the Company, its consolidated Subsidiaries and combined Affiliates
as at such date, and the consolidated and combined results of their operations
and changes in financial position for the fiscal year then ended. All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the Company's accountants or a
Responsible Officer, as the case may be, and as disclosed therein). Neither the
Company nor any of its consolidated Subsidiaries or combined Affiliates had, at
December 31, 1995, any material Contingent Obligation, contingent liabilities or
liability for taxes, long-term lease or unusual forward or long-term commitment,
which is
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not reflected in the foregoing statements or in the notes thereto.
3.2 NO CHANGE. Since December 31, 1995 there has been no material
adverse change in the business, operations, property or financial or other
condition of the Company or any of its Subsidiaries or combined Affiliates.
3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Company and
its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, (b) has the corporate
power and authority and the legal right to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith would not, in the aggregate, be reasonably
likely to have a material adverse effect on the business, operations, property
or financial or other condition of the Company and its Subsidiaries taken as a
whole and would not materially adversely affect the ability of the Company to
perform its obligations under the Loan Documents to which it is a party.
3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power and authority and the legal right to make,
deliver and perform the Loan Documents to which it is a party, to borrow
hereunder, and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and the Term Note and
to authorize the execution, delivery and performance of the Loan Documents to
which it is a party. Other than routine filings with the Securities and Exchange
Commission and continuations of filings under the Uniform Commercial Code, no
consent or authorization of, filing with or other act by or in respect of any
Governmental Authority is required in connection with the borrowings hereunder
or with the execution, delivery, performance, validity or enforceability of the
Loan Documents to which it is a party. This Agreement has been, and each other
Loan Document to which it is a party will be, duly executed and delivered on
behalf of the Company. This Agreement constitutes, and each other Loan Document
to which it is a party when executed and delivered will constitute, legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
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3.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents to which the Company is a party, the borrowings hereunder and the use
of the proceeds thereof, will not violate any Requirement of Law or any
Contractual Obligation of the Company or of any of its Subsidiaries, and will
not result in, or require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any Requirement of Law or
Contractual Obligation.
3.6 NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company, threatened by or against the Company or any of
its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby, or (b) which could have a material adverse
effect on the business, operations, property or financial or other condition of
the Company and its Subsidiaries taken as a whole.
3.7 NO DEFAULT. Neither the Company nor any of its Subsidiaries is in
default under or with respect to any Contractual Obligation in any respect that
if not corrected or remedied, would be reasonably likely to have a material
adverse effect on the business, operations, property or financial or other
condition of the Company and its Subsidiaries taken as a whole or which could
materially adversely affect the ability of the Company or any Subsidiary to
perform its obligations under the Loan Documents. No Default or Event of Default
has occurred and is continuing.
3.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Company and its
Subsidiaries has good record and marketable title in fee simple to or valid
leasehold interests in all its real property, and good title to, or valid
leasehold interests in, all its other property, and none of such property is
subject to any Lien, except as permitted in subsection 6.3.
3.9 NO BURDENSOME RESTRICTIONS. No Contractual Obligation of the
Company or any of its Subsidiaries and no Requirement of Law materially
adversely affects, or insofar as the Company may reasonably foresee, would be
reasonably likely to so affect, the business, operations, property or financial
or other condition of the Company and its Subsidiaries taken as a whole.
3.10 TAXES. Each of the Company and its Subsidiaries has filed or
caused to be filed all tax returns which to the knowledge of the Company are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other
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taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Company or its Subsidiaries, as the case may be); and no tax liens
have been filed and, to the knowledge of the Company, no claims are being
asserted with respect to any such taxes, fees or other charges.
3.11 FEDERAL REGULATIONS. No part of the proceeds of the Term Loan
hereunder will be used by the Company for purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of such
Board of Governors. If requested by the Bank, the Company will furnish to the
Bank a statement to the foregoing effect in conformity with the requirements of
Federal Reserve Form U-1 referred to in said Regulation U.
3.12 ERISA. No Reportable Event has occurred during the five-year
period prior to the date on which this representation is made or deemed made
with respect to any Plan, and each Plan has complied in all material respects
with the applicable provisions of ERISA and the Code. The present value of all
benefits vested under each Single Employer Plan maintained by the Company or any
Commonly Controlled Entity (based on those assumptions used to fund the Plans)
did not, as of the last annual valuation date, exceed the value of the assets of
such Plan allocable to such vested benefits. Neither the Company nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan. The liability to which the Company or any Commonly
Controlled Entity would become subject under ERISA if the Company or any
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the most recent valuation date applicable thereto is not in excess
of $25,000. Neither the Company nor any Commonly Controlled Entity has received
notice that any Multiemployer Plan is in reorganization or insolvent nor, to the
best knowledge of the Company, is any such reorganization or insolvency
reasonably likely to occur. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of the Company and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits by an amount in excess of $25,000.
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3.13 INVESTMENT COMPANY ACT. The Company is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.14 SUBSIDIARIES. The Company has no Subsidiaries or Affiliates
except those set forth on Schedule 3.14 hereof.
3.15 SECURITY AGREEMENT. The provisions of the Security Agreement are
effective to create in favor of the Bank, a legal, valid and enforceable
security interest in all right, title and interest of the Company in any and all
of the collateral described therein. The Bank has a fully perfected security
interest in all right, title and interest of the Company in such collateral
superior in right to any Liens, existing or future, which the Company or any
creditors of or purchasers from the Company, or any other Person, may have
against such collateral or interests therein. The representations and warranties
of the Company contained in the Security Agreement are true and correct.
3.16 DISCLOSURE. No representation or warranty made by the Company in
any Loan Document, or in any other document furnished by the Company or any of
its Subsidiaries from time to time after the date hereof in connection
therewith, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the statements
herein or therein not misleading.
3.17 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.17
hereto,
(a) none of the Real Property contains or has previously
contained, any hazardous or toxic wastes or substances or underground
storage tanks;
(b) the Real Property is in compliance with all applicable
federal, state and local environmental standards and requirements
affecting such Real Property, and there are no environmental
conditions which could interfere with the continued use of the Real
Property;
(c) the Company has not received any notices of violations
or advisory action by regulatory agencies regarding environmental
control matters or permit compliance;
(d) hazardous waste has not been transferred from any of
the Real Property to any other location which is not in compliance
with all applicable environmental laws, regulations or permit
requirements; and
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(e) with respect to the Real Property, there are no
proceedings, governmental administrative actions or judicial
proceedings pending or, to the best knowledge of the Company,
contemplated under any federal, state or local law regulating the
discharge of hazardous or toxic materials or substances into the
environment, to which the Company is named as a party.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO THE TERM LOAN. The obligation of the Bank to make
the Term Loan is subject to the satisfaction, immediately prior to or
concurrently with the making of such Loan of the following conditions precedent:
(a) LOAN DOCUMENTS. The Bank shall have received, in each
case executed and delivered by a duly authorized officer of the
Company (i) this Agreement and (ii) the Term Note, in each case
conforming to the requirements hereof.
(b) BORROWING CERTIFICATE. The Bank shall have received
the Borrowing Certificate, dated the Closing Date, with appropriate
insertions and attachments, satisfactory in form and substance to the
Bank and its counsel, executed by the President or any Vice President
and the Secretary of the Company.
(c) GOOD STANDING CERTIFICATES. The Bank shall have
received copies of certificates, dated as of a recent date, from the
Secretary of State of New York and the Secretary of State of
Delaware, evidencing the good standing of the Company in each such
jurisdiction.
(d) FINANCIAL INFORMATION. The Bank shall have received a
copy of each of the financial statements referred to in subsection
3.1.
(e) LITIGATION. No suit, action, investigation, inquiry or
other proceeding (including, without limitation, the enactment or
promulgation of a statute or rule) by or before any arbitrator or any
Governmental Authority shall be pending and no preliminary or
permanent injunction or order by a state or federal court shall have
been entered (i) in connection with any Loan Document, or any of the
transactions contemplated hereby or thereby or (ii) which, in any
such case, in the reasonable judgment of the Bank, would have a
material adverse effect on (A) the transactions contemplated by this
Agreement, including, without limitation, the financings contemplated
hereby; or (B) the business, operations, properties, condition
(financial or otherwise) or prospects of the Company.
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(f) NO VIOLATION. The consummation of the transactions
contemplated hereby shall not contravene, violate or conflict with,
nor involve the Bank in a violation of, any Requirement of Law.
(g) CONSENTS, LICENSES, APPROVALS, ETC. The Bank shall
have received a certificate of a Responsible Officer of the Company
either (i) attaching copies of all consents, licenses and approvals
required in connection with the execution, delivery and performance
by the Company and the validity and enforceability against the
Company of the Loan Documents, and such consents, licenses and
approvals shall be in full force and effect, or (ii) stating that no
such consents, licenses or approvals are so required.
(h) FEES. The Bank shall have received the structuring fee
set forth in subsection 2.6. The Bank will apply the $4000 commitment
fee received by the Bank on March 11, 1996 towards the payment of the
structuring fee.
(i) FILINGS, REGISTRATIONS AND RECORDINGS. All filings,
registrations and recordings requested by the Bank shall have been
properly filed, registered or recorded. The Bank shall have received
evidence reasonably satisfactory to it of each such filing,
registration or recordation and satisfactory evidence of the payment
of any necessary fee, tax or expense relating thereto.
(j) LIEN SEARCHES. The Bank shall have received the
results of a recent search by a Person satisfactory to the Bank of
the Uniform Commercial Code filings which may have been filed with
respect to personal property of the Company and of tax and judgment
liens which may be of record against the Company.
(k) INSURANCE. The Bank shall have received evidence
satisfactory to it that the Company has obtained the insurance
policies required by subsection 5.5 hereof which policies shall be in
form, substance, amount, and with such carriers, as shall be
satisfactory to the Bank.
(l) LEGAL OPINION. The Bank shall have received the
executed legal opinion of counsel to the Company, substantially in
the form of Exhibit C.
(m) ADDITIONAL MATTERS. All corporate and other
proceedings, and all documents, instruments and other legal matters
in connection with the transactions contemplated by this Agreement
and the other Loan Documents shall be satisfactory in form and
substance to the Bank, and the Bank shall have received such other
documents, legal opinions and other opinions in respect of any aspect
or consequence of
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the transactions contemplated hereby as it shall reasonably request.
SECTION 5. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Term Loan Commitment
remains in effect, the Term Note remains outstanding and unpaid, or any other
amount is owing to the Bank hereunder, the Company shall and (except in the case
of delivery of financial information, reports and notices) shall cause each of
its Subsidiaries to:
5.1 FINANCIAL STATEMENTS. Furnish to the Bank:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of the consolidated balance sheet
of the Company and its consolidated Subsidiaries as at the end of such year and
the related consolidated statements of income and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, reported on without a "going concern" or like qualification or exception,
or qualification arising out of the scope of the audit, by independent certified
public accountants of nationally recognized standing acceptable to the Bank; and
(b) as soon as available, but in any event not later than 45 days
after the end of each fiscal quarter of the Company, the unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as at the end of
each such fiscal quarter and the related unaudited consolidated statements of
income and cash flows of the Company and its consolidated Subsidiaries for such
fiscal quarter, setting forth in each case in comparative form the figures for
the previous fiscal quarter, certified by a Responsible Officer (subject to
normal year-end audit adjustments).
5.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsections 5.1(a), a certificate of a
Responsible Officer stating on behalf of the Company that, to the
best of such officer's knowledge, the Company during such period has
observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and in the
other Loan Documents to be observed, performed or satisfied by it,
and that such officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate;
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(b) within 15 days after the end of each month, monthly
schedules, in form and substance satisfactory to the Bank, current as
of the close of business of the last Business Day of such month, of
all accounts receivable of the Company, showing separately those
which are more than 30, 60 and 90 days old;
(c) within five days after the same are sent, copies of
all financial statements and reports which the Company sends to its
stockholders, and within five days after the same are filed, copies
of all financial statements and reports which the Company may make
to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental; and
(d) promptly, such additional financial and other
information as the Bank may from time to time reasonably request.
5.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Company or its Subsidiaries, as the case may be.
5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 6.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith would
not, in the aggregate, be reasonably likely to have a material adverse effect on
the business, operations, property or financial or other condition of the
Company and its Subsidiaries taken as a whole.
5.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business in good working order and condition except for wear
and tear, sale, replacement and retirement in the ordinary course of business;
maintain with financially sound and reputable insurance companies insurance on
all its property in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies engaged in the
same or a similar business (but including in any event public liability, product
liability (for the Triangle division only) and business interruption insurance;
and furnish to the Bank (a) prior to the termination, expiration or cancellation
of any of the foregoing policies, the policies of
21
insurance to be issued in replacement thereof or (b) upon written request by the
Bank, full information as to all insurance carried pursuant to the terms of this
subsection 5.5, including certified copies of each such policy.
5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books and records in which full, true and correct entries in conformity
with GAAP and all Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities; and permit
representatives of the Bank, upon one Business Day's notice (unless an Event of
Default shall be continuing, in which case such notice shall not be required) to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may reasonably
be desired, and to discuss the business, operations, properties and financial
and other condition of the Company and its Subsidiaries with officers and
employees of the Company and its Subsidiaries and with its independent certified
public accountants.
5.7 NOTICES. Promptly give notice to the Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any
Contractual Obligation of the Company or any of its Subsidiaries or
(ii) litigation, investigation or proceeding which may exist at any
time between the Company or any of its Subsidiaries and any
Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, would be reasonably likely
to have a material adverse effect on the business, operations,
property or financial or other condition of the Company and its
Subsidiaries taken as a whole;
(c) of any litigation or proceeding affecting the Company
or any of its Subsidiaries in which the amount involved is $100,000
or more and is not covered by insurance or in which injunctive or
similar relief is sought;
(d) of the following events, as soon as possible and in
any event within 30 days after the Company knows or has reason to
know thereof: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, or any withdrawal from, or
the termination, reorganization or insolvency of any Multiemployer
Plan or (ii) the institution of proceedings or the taking of any
other action by the PBGC or the Company or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from,
or the terminating, reorganization or insolvency of, any Plan; and
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(e) of a material adverse change in the business,
operations, property or financial or other condition of the Company
and its Subsidiaries taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
5.8 HAZARDOUS MATERIAL. Indemnify the Bank against any liability,
loss, cost, damage, or expense (including, without limitation, reasonable
attorneys' fees) arising from (a) the imposition or recording of a lien by any
local, state, or federal government or governmental agency or authority pursuant
to any federal, state or local statute or regulation relating to hazardous or
toxic wastes or substances or the removal thereof ("CLEANUP LAWS"); (b) claims
of any private parties regarding violations of Cleanup Laws; and (c) costs and
expenses (including, without limitation, reasonable attorneys' fees and fees
incidental to the securing of repayment of such costs and expenses) incurred by
the Company or the Bank in connection with the removal of any such lien or in
connection with compliance by the Company or the Bank with any statute,
regulation or order issued pursuant to any Cleanup Laws by any local, state or
federal governmental agency or authority.
SECTION 6. NEGATIVE COVENANTS.
The Company hereby agrees that, so long as the Term Loan Commitment
remains in effect, the Term Note, or any other amount is owing to the Bank
hereunder, the Company shall not, and (except with respect to subsections 6.1
and 6.9) shall not permit any of its Subsidiaries to, directly or indirectly:
6.1 FINANCIAL CONDITION COVENANTS.
(a) CURRENT RATIO. Permit the Current Ratio at any time to
be less than 0.75: 1:00.
(b) CONSOLIDATED TANGIBLE NET WORTH. Permit Consolidated
Tangible Net Worth at any time to be less than $6,000,000.
(c) CONSOLIDATED NET LOSS. On the last day of any fiscal
quarter commencing with the fiscal quarter ending on June 30, 1996,
permit any Consolidated Net Loss, for the period consisting of the
four consecutive fiscal quarters ending on such date (the "TEST
PERIOD") to exist, provided that, the Test Period for the quarter
ending June 30, 1996 shall consist of the three quarters ending
December 31, 1995, March 31, 1996 and June 30, 1996.
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6.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except the following:
(a) Indebtedness in respect of the Term Loan, the Term
Note and the other obligations of the Company under the Loan
Documents;
(b) Indebtedness of the Company or any of its Subsidiaries
incurred to purchase or to finance the purchase of fixed assets in an
aggregate principal amount not exceeding as to the Company and its
Subsidiaries $200,000 at any one time outstanding;
(c) Indebtedness of the Company or any of its Subsidiaries
under Financing Leases in an aggregate principal amount not exceeding
as to the Company and its Subsidiaries $500,000 at any one time
outstanding;
(d) Indebtedness outstanding on the Closing Date and
listed on Schedule 6.2;
(e) Approved Subordinated Debt; and
(f) Indebtedness to the Bank incurred under the Bank's
secured line of credit as set forth in the Bank's letter to the
Company dated March 11, 1996; provided that, for a period of at least
30 consecutive days during each fiscal year, the principal amount of
such Indebtedness shall not exceed $500,000.
6.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the books of
the Company or its Subsidiaries, as the case may be, in conformity
with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, or other like Liens arising in the ordinary course of
business and not overdue for a period of more than 30 days or which
are being contested in good faith by appropriate proceedings in a
manner which will not adversely affect the interest of the Bank in
any of the collateral subject to the Security Agreement;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
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(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which do
not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of
the business of the Company or such Subsidiary;
(f) Liens in favor of the Bank created pursuant to the
Security Agreement;
(g) Liens in existence on the Closing Date and listed on
Schedule 6.2 securing Indebtedness permitted by subsection 6.2(d),
provided that such Liens do not at any time encumber any property
other than the property encumbered on the Closing Date and the amount
of Indebtedness secured thereby is not increased;
(h) Liens securing Indebtedness of the Company and its
Subsidiaries permitted by subsection 6.2(b) in respect of the
deferred purchase price of fixed or capital assets, provided that (i)
such Liens shall be created substantially simultaneously with the
purchase of such fixed or capital assets, (ii) such Liens do not at
any time encumber any property other than the property financed by
such Indebtedness, and (iii) the amount of Indebtedness secured
thereby is not increased; and
(i) Liens created in connection with Financing Leases
permitted by subsection 6.2(c), provided that such Liens do not at
any time encumber any property other than the property financed by
such Financing Lease and the amount of such Financing Lease is not
increased.
6.4 LIMITATION ON CONTINGENT OBLIGATIONS. Create, incur, assume or
suffer to exist any Contingent Obligation except each Contingent Obligation
outstanding on the Closing Date and listed on Schedule 6.4 hereto and except for
guarantees by the Company or any of its Subsidiaries of Indebtedness or other
obligations of the Company or any such Subsidiary permitted hereunder.
6.5 LIMITATIONS OF FUNDAMENTAL CHANGES. Enter into any transaction of
acquisition or merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
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property, business or assets, or make any material change in the present method
of conducting business except:
(a) any Subsidiaries of the Company may be merged or
consolidated with or into the Company (provided that the Company
shall be the continuing or surviving corporation) or with or into any
one or more wholly-owned Subsidiaries of the Company (provided that
the wholly-owned Subsidiary shall be the continuing or surviving
corporation);
(b) any wholly-owned Subsidiary may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Company or a wholly-owned Subsidiary
of the Company; and (c) any wholly-owned Subsidiary may sell, lease,
transfer or otherwise dispose of Triangle Corporation Assets,
provided that the Company complies with the provisions of subsection
6.5(b).
6.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of, any of its property, business or assets
(including, without limitation, receivables and leasehold interests) whether now
owned or hereafter acquired except:
(a) obsolete or worn out property disposed of in the
ordinary course of business;
(b) the sale or other disposition of any property in the
ordinary course of business, provided that (i) any item so sold or
disposed of shall not have a fair market value at the time of such
sale or disposition in excess of $25,000 and (ii) the aggregate fair
market value of all assets so sold or disposed of in any fiscal year
(or any shorter period commencing on the Closing Date) shall not
exceed $100,000;
(c) the sale of inventory in the ordinary course of
business;
(d) as permitted by subsection 6.5(b); and
(e) sales of Triangle Corporation Assets, provided that
the Company complies with the provisions of subsection 2.4(b).
6.7 LIMITATION ON DIVIDENDS. Declare any dividend (other than
dividends payable solely in common stock of the Company) on, or make any payment
on account of, or set apart assets for a sinking or other analogous fund for the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of stock of the Company, whether now or hereafter outstanding, or
make any other distribution in respect
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thereof, either directly or indirectly, whether in cash or property or in
obligations of the Company or any Subsidiary (any such payment, purchase,
redemption, defeasance, retirement or other acquisition being a "RESTRICTED
PAYMENT") except that (a) a Subsidiary of the Company may make Restricted
Payments to the Company and (b) the Company may make Restricted Payments in each
fiscal year in an amount not in excess of 50% of Consolidated Net Income for the
fiscal year immediately preceding the year in which such Restricted Payment is
made provided that, after giving effect to such Restricted Payment, no Event of
Default or event which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default would exist.
6.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of, or make any other investment
in, any Person, except: (i) extensions of trade credit in the ordinary course of
business; (ii) investments in Cash Equivalents; (iii) investments in, and
advances to the Affiliates, stockholders and employees set forth on Schedule
6.11(iii) hereto in an amount not to exceed $600,000 in the aggregate at the end
of any fiscal quarter and fiscal year of the Company; (iv) investments in the
joint ventures set forth on Schedule 6.11(iv) hereto not to exceed $150,000 at
any one time outstanding, (v) investments in Subsidiaries in existence on the
date hereof and set forth on Schedule 6.11(v) and additional investments in
Subsidiaries not to exceed in the aggregate $500,000 and (vi) investments by any
of the Company's Subsidiaries in the Company.
6.9 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transactions are
otherwise permitted under this Agreement, are in the ordinary course of the
Company's or such Subsidiary's business and are upon fair and reasonable terms
no less favorable to the Company or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
6.10 FISCAL YEAR. Permit the fiscal year of the Company to end on a
day other than December 31.
6.11 ENVIRONMENTAL USE. Permit any Real Property to (a) contain any
hazardous or toxic wastes or substances or underground storage tanks which are
used or stored in violation of any applicable federal, state and local
environmental standards and requirements affecting such Real Property which may
be in force from time to time, or (b) be utilized in such a manner as to create
any environmental condition which could interfere with the continued use of any
Real Property.
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SECTION 7. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Company shall fail to pay (i) any principal of the
Term Note when due, or (ii) any interest on the Term Note or any
other amount payable hereunder within five days after the due date
for such payment, in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by
the Company herein or in any other Loan Document or which is
contained in any certificate, document or financial or other
statement furnished at any time under or in connection with any Loan
Document shall prove to have been incorrect in any material respect
on or as of the date made or deemed made; or
(c) The Company shall default in the observance or
performance of any agreement contained in subsection 2.4(b) or
Section 6; or
(d) The Company shall default in the observance or
performance of any other agreement contained in this Agreement or any
other Loan Document to which it is a party, and such default shall
continue unremedied for a period of ten days after delivery by the
Bank to the Company of written notice of such default; or
(e) The Company or any of its Subsidiaries shall (i)
default in any payment of principal of or interest on any
Indebtedness (other than the Term Note) or in the payment of any
Contingent Obligation beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness or
Contingent Obligation was created; or (ii) default in the observance
or performance of any other agreement or condition relating to any
such Indebtedness or Contingent Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist, the effect of which
default or other event or condition is to permit the holder or
holders of such Indebtedness or beneficiary or beneficiaries of such
Contingent Obligation (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its
stated maturity or such Contingent Obligation to become payable; or
(f) (i) The Company or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or
28
<PAGE>
foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its assets, or the Company or any of its
Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Company or
any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against the Company or any of
its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not
have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) the Company or any of
its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of
the acts set forth in clause (i), (ii), or (iii) above; or (v) the
Company or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts
as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Bank, likely to result
in the termination of such Plan for purposes of Title IV of ERISA,
(iv) any Single Employer Plan shall terminate under Section 4041(c)
of ERISA, (v) the Company or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Bank is likely to, incur any
liability in connection with a withdrawal from, or the insolvency or
reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist, with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or
29
<PAGE>
condition, together with all other such events or conditions, if any,
would be reasonably likely to subject the Company or any of its
Subsidiaries to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property
or financial or other condition of the Company and its Subsidiaries
taken as a whole;
(h) One or more judgments or decrees shall be entered
against the Company or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of
$100,000 or more and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 30
days of the entry thereof;
(i) The Security Agreement shall cease, for any reason, to
be in full force and effect or any party thereto shall so assert in
writing, or the Security Agreement shall cease to be effective to
grant a perfected Lien on the collateral described therein with the
priority purported to be created thereby; or
(j) Any Person or affiliated group of Persons (other than
the executive officers of the Company on the date hereof) acquires,
beneficially or of record, more than 50% of the issued and
outstanding common stock of the Company.
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Company,
automatically the Term Loan Commitment shall immediately terminate and the Term
Loan hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement and the Term Note shall immediately become due and payable, and
(B) if such event is any other Event of Default, either or both of the following
actions may be taken: (i) the Bank may by notice to the Company declare the Term
Loan Commitment to be terminated forthwith, whereupon the Term Loan Commitment
shall immediately terminate; and (ii) the Bank may, by notice of default to the
Company, declare the Term Loan hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement and the Term Note to be due and payable
forthwith, whereupon the same shall immediately become due and payable. Except
as expressly provided in this Section, presentment, demand, protest and all
other similar notices are hereby expressly waived.
SECTION 8. MISCELLANEOUS
8.1 AMENDMENTS AND WAIVERS. No Loan Document nor any terms thereof
may be changed, waived, discharged or terminated unless such change, waiver,
discharge or termination is in writing and signed by the Company and the Bank,
provided that
30
<PAGE>
waivers requested by the Company under any Loan Document need not be signed by
the Company.
8.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telegraph or telex), and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand or overnight
courier, or seven days after being deposited in the mail, postage prepaid, or,
in the case of telegraphic notice, when delivered to the telegraph company, or,
in the case of telex notice, when sent, answerback received, addressed as
follows in the case of the Company and the Bank or to such other address as may
be hereafter notified by the respective parties hereto and any future holders of
the Term Note:
The Company: Audits & Surveys Worldwide, Inc.
650 Avenue of the Americas
New York, New York 10011
Attention: Anthony Timiraos
Executive Vice President
The Bank: Chemical Bank
1375 Broadway
New York, N.Y. 10018
Attention: Maureen J. Morgan
Vice President
provided that any notice, request or demand to or upon the Bank pursuant to
Section 2 shall not be effective until received.
8.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of any party, any right, remedy, power or
privilege hereunder or under the other Loan Documents, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided or provided in the other Loan
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or thereto or in connection
herewith or therewith shall survive the execution and delivery of the Loan
Documents.
8.5 PAYMENT OF EXPENSES AND TAXES. The Company agrees (a) to pay or
reimburse the Bank for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or
31
<PAGE>
modification to, this Agreement, the Term Note and the other Loan Documents and
any other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the fees and disbursements of counsel to the Bank, (b) to
pay or reimburse the Bank for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Agreement, the
Term Note, the other Loan Documents and any such other documents, including,
without limitation, fees and disbursements of counsel to the Bank and (c) to
pay, indemnify, and hold the Bank harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold the Bank harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents except to the
extent the same are occasioned by the gross negligence or willful misconduct of
the Bank (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"). The
agreements in this subsection shall survive repayment of the Term Note and all
other amounts payable hereunder and under the other Loan Documents.
8.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, the Bank, all future holders of the Term
Note and their respective successors and assigns, except that the Company may
not assign or transfer any of its rights under this Agreement without the prior
written consent of the Bank. The Company acknowledges that the Bank may at any
time sell, assign, transfer or grant participations in the Term Loan to other
financial institutions (a "TRANSFEREE"). The Company agrees that each Transferee
may exercise all rights of payment (including without limitation rights of
set-off) with respect to the portion of such Term Loan held by it as fully as if
such Transferee were the direct holder thereof. The Bank agrees to provide the
Company with ten days prior notice of its intention to assign all of the Term
Note.
8.7 SET-OFF. In addition to any rights and remedies of the Bank
provided by law, the Bank shall have the right, without prior notice to the
Company, any such notice being expressly waived by the Company to the extent
permitted by applicable law, upon the filing of a petition under any of the
provisions of the federal bankruptcy act or amendments thereto, by or against;
the making of an assignment for the benefit of
32
<PAGE>
creditors by; the application for the appointment, or the appointment, of any
receiver of, or of any of the property of; the issuance of any execution against
any of the property of; the issuance of a subpoena or order, in supplementary
proceedings, against or with respect to any of the property of; or the issuance
of a warrant of attachment against any of the property of; the Company, to
set-off and apply against any indebtedness, whether matured or unmatured, of the
Company to the Bank, any amount owing from the Bank to the Company, at or at any
time after, the happening of any of the above mentioned events, and the
aforesaid right of set-off may be exercised by the Bank against the Company or
against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or execution, judgment or attachment creditor of
the Company, or against anyone else claiming through or against the Company or
such trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by the Bank prior to the making, filing or issuance, or service upon
the Bank of, or of notice of, any such petition; assignment for the benefit of
creditors; appointment or application for the appointment of a receiver; or
issuance of execution, subpoena, order or warrant.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
AUDITS & SURVEYS WORLDWIDE, INC.
By: /s/ ANTHONY TIMIRAOS
------------------------
Name:Anthony Timiraos
Title: Secretary
/s/ Alan J. Ritter
------------------------
Senior Vice President
CHEMICAL BANK
By: /s/ MAUREEN MORGAN
------------------------
Name:Maureen Morgan
Title: Vice President
33
<PAGE>
Rider to Grid Note dated June 5, 1996
Audits & Surveys, Worldwide, Inc.
The undersigned further promises to pay interest on the unpaid principal amount
of each Advance from time to time outstanding (computed on the basis of a
360-day year) at (a) the Bank's Prime Rate or (b) the Bank's Adjusted LIBO Rate
plus 2-1/2%, as selected by the undersigned by notice to the Bank (such notice,
if telephonic, to be promptly confirmed in writing) given at least three
Business Days prior to the requested borrowing date in the case of Advances
bearing interest at the LIBO Rate (as defined below) or no later than 11:00 A.M.
on the requested borrowing date in the case of Advances bearing interest at the
Prime Rate (as defined below). The Bank's "Prime Rate" is the floating rate of
interest announced at the Bank's principal office from time to time as its prime
rate, and shall be adjusted on the date of each change thereof. The term
"Adjusted LIBO Rate" means, for any period of one, two or three months
("Interest Period"), at the election of the undersigned, an interest rate per
annum equal to the product of (a) the rate (rounded upwards, if necessary, to
the next 1/16 of 1%) at which dollar deposits approximately equal in principal
amount to such Loan and for the maturity equal to the applicable Interest Period
are offered to the Bank's lending office at 10:00 A.M. New York City time two
Business Days prior to the first day of such Interest Period in the interbank
eurodollar market in which such lending office customarily deals for delivery on
the first day of such Interest Period and (b) 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 aggregate of the maximum reserve percentages,
expressed as a decimal (including, without limitation, any marginal, special,
emergency or supplemental reserves) from time to time in effect under Regulation
D or as otherwise established by the Board of Governors of the Federal Reserve
System and any other banking authority to which the Bank is subject, for
Eurocurrency Liabilities (as defined in Regulation D). Any principal amount of,
and to the extent permitted by law, interest on, any Advance that is not paid
when due (whether at the stated maturity, by acceleration or otherwise) shall
bear interest payable on demand for each day at a fluctuating rate per annum
equal to 2% above the rate which would otherwise be applicable thereto until
paid in full (as well after as before judgment). Interest on (a) any Advances
bearing interest at the Adjusted LIBO Rate shall be payable on the last day of
the Interest Period relating to such Advance and (b) on any Advance bearing
interest at the Prime Rate, on the first day of each month, commencing July 1,
1996, and after the occurrence of any default, on demand. With respect to
Advances bearing interest at the Adjusted LIBO Rate, the term "Business Day"
means any day other than a Saturday,
<PAGE>
Sunday or other day on which the Bank is authorized or required by law or
regulation to close, and on which dealings in dollars are carried on in the
interbank eurodollar market in which the Bank's lending office customarily
deals.
-2-
<PAGE>
EXHIBIT A
TERM NOTE
$2,610,000 June 5, 1996
FOR VALUE RECEIVED, the undersigned AUDITS & SURVEYS WORLDWIDE, INC.,
a Delaware corporation (the "COMPANY"), promises to pay to the order of CHEMICAL
BANK (the "BANK"), at the office of the Bank located at 1375 Broadway, New York,
New York 10018, in lawful money of the United States of America and in
immediately available funds, the principal amount of TWO MILLION SIX HUNDRED TEN
THOUSAND DOLLARS ($2,610,000), which sum shall be due and payable in twenty
consecutive installments of principal, each in the amount of $130,500, payable
on the last day of each March, June, September and December, commencing on June
30, 1996. The holder of this Note is authorized to record the date and amount of
each payment or prepayment of the principal hereof and each Interest Period (as
defined in the Agreement hereinafter referred to) and interest rate with respect
hereto on the schedule annexed hereto and made a part hereof and any such
recordation shall constitute PRIMA FACIE evidence of the information so
recorded.
The Company further agrees to pay interest in like money at such
office to the order of the Bank on each Interest Payment Date (as defined in the
Agreement) for the period from the date hereof until maturity on the unpaid
principal amount hereof from time to time outstanding at the Prime Rate plus 1/2
of 1% or the Adjusted LIBO Rate plus 3% (as each such term is defined in the
Agreement hereinafter referred to); provided that any principal amount of, and
to the extent permitted by law, interest on, this Note that is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear interest
payable on demand for each day at a fluctuating rate per annum equal to 2% above
the rate which would otherwise be applicable hereto until paid in full (as well
after as before judgment).
Each payment on this Note shall be applied first to the payment of
accrued interest hereon and then to the payment of principal.
This Note is the Term Note referred to in the Term Loan Agreement,
dated as of June 5, 1996, between the Company and the Bank, (as the same may
from time to time be amended, modified or supplemented, the "AGREEMENT"; terms
defined therein being used herein as so defined), and is entitled to the
benefits thereof and is subject to optional and mandatory prepayment in whole or
in part as provided therein.
<PAGE>
Upon the occurrence of any one or more of the Events of Default
specified in the Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided
therein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
AUDITS & SURVEYS WORLDWIDE, INC.
By:
------------------------
Name:
Title:
-2-
<PAGE>
Schedule to
Term Note
---------
PAYMENTS OF PRINCIPAL; INTEREST RATES
-------------------------------------
Date Interest Amount of Unpaid Notation
Period and Principal Principal Made By
Rate Repaid Balance
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
- -------- ---------- --------- --------- -----------
<PAGE>
EXHIBIT B
BORROWING CERTIFICATE
Pursuant to Section 4.1(b) of the Term Loan Agreement, dated as of
June 5, 1996 (the "AGREEMENT"; the terms defined therein being used herein as
therein defined) between AUDITS & SURVEYS WORLDWIDE, INC. (the "COMPANY") and
CHEMICAL BANK (the "BANK"), the undersigned duly authorized officer of the
Company hereby certifies as follows:
1. The representations and warranties of the Company set
forth in the Agreement and the other Loan Documents, or which are
contained in any certificate, document or financial or other
statement furnished pursuant to or in connection with any of the
foregoing, are true and correct on and as of the date hereof with the
same effect as if made on the date hereof.
2. Immediately prior to and immediately after the making
of the Term Loan, no Default or Event of Default will have occurred
and be continuing under the Agreement.
3. is, and at all times since the date of the adoption of
the resolutions described below, has been the duly elected and
qualified Secretary of the Company, and the signature set forth on
the signature line below is such officer's true and genuine
signature.
and the undersigned Secretary of the Company hereby certifies as follows:
4. There are no liquidation or dissolution proceedings
pending or, to my knowledge, threatened against the Company, nor has
any other event occurred affecting or threatening the corporate
existence of the Company.
5. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
6. Attached hereto as Exhibit A is a true and complete
copy of resolutions duly adopted by the Board of Directors of the
Company at a meeting thereof duly called and held on 1996, at which
meeting a quorum was present and acting throughout; such resolutions
have not in any way been rescinded or modified and have been in full
force and effect since their adoption to and including the date
hereof and are now in full force and effect; such resolutions are the
only corporate proceedings of the Company now in force relating to or
affecting the matters referred to therein.
<PAGE>
7. Attached hereto as Exhibit B is a true and complete
copy of the By-Laws of the Company and all amendments thereto, as in
effect on the date of the adoption of the resolutions described above
and at all subsequent times to and including the date hereof.
8. Attached hereto as Exhibit C is a true and complete
copy of the Certificate of Incorporation of the Company and all
amendments thereto, as in effect on the date of the adoption of the
resolutions described above and at all subsequent times to and
including the date hereof.
9. The following persons are now duly elected and
qualified officers of the Company, holding the offices indicated next
to their respective names below, and such officers have held such
offices with the Company at all times since the date of the adoption
of the resolutions described above and at all subsequent times to and
including the date hereof, and the signatures appearing opposite
their respective names below are the true and genuine signatures of
such officers, and each of such officers is duly authorized to
execute and deliver on behalf of the Company, the Agreement, the
Notes to be issued pursuant thereto and the other Loan Documents to
which the Company is a party:
NAME OFFICE SIGNATURE
President --------------------
Chief Executive Officer --------------------
Executive Vice President- --------------------
Marketing
Executive Vice President- --------------------
Operations
Executive Vice President- --------------------
Finance
Senior Vice President- --------------------
Corporate Controller
Secretary --------------------
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has hereunto set his/her
name as of the Closing Date.
AUDITS & SURVEYS WORLDWIDE, INC.
- --------------------
Name:
Title:
- --------------------
Name:
Secretary
Dated: [the Closing Date]
<PAGE>
EXHIBIT C
[ Form of Opinion of Counsel ]
[CLOSING DATE]
Chemical Bank
1375 Broadway
New York, New York 10018
Dear Sirs:
We have acted as counsel for Audits & Surveys Worldwide, Inc., a Delaware
corporation (the "COMPANY") in connection with the Term Loan Agreement, dated as
of June 5, 1996 (the "TERM LOAN AGREEMENT"), between the Company and Chemical
Bank (the "BANK") and the other Loan Documents (as defined in the Term Loan
Agreement) executed and delivered by the Company in connection therewith.
Capitalized terms used herein which are defined in a Loan Document shall have
the respective meanings set forth in such Loan Document, unless otherwise
defined herein.
This opinion is delivered to you pursuant to subsection 4.1 of the Term Loan
Agreement.
In connection with this opinion, we have examined executed copies of the Term
Loan Agreement and the other Loan Documents and such corporate documents and
records of the Company and other documents and agreements of the Company as we
have deemed necessary or appropriate for the purposes of this opinion. In such
examination, we have assumed (except with respect to the Company) the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to authentic original documents of all documents
submitted to us as certified, conformed or photostatic copies. Further, we have
assumed that the Term Loan Agreement is binding on the Bank.
Based upon the foregoing, and subject to the qualifications stated herein, we
are of the opinion that:
1. The Company is (a) a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, (b) has the
requisite corporate power, authority and legal right to own, lease and operate
its properties and other assets and to transact the business in which it is
currently engaged, and (c) the Company is qualified as a foreign corporation and
subsisting in New York.
2. The Company has the corporate power, authority and the legal right
(i) to make, deliver and perform the Loan Documents, and to borrow under the
Term Loan Agreement, and (ii) to effect the transactions contemplated by the
Loan Documents. The Company has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of the Term Loan Agreement
and the Term Note, to authorize the execution, delivery and performance of the
Term Loan Agreement and the other Loan Documents, and to authorize the grant of
the liens and security interests pursuant to the Security Agreement. The Term
Loan Agreement, the Security Agreement and the Term Note have been duly executed
and delivered on behalf of the Company and constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
3. The execution, delivery and performance by the Company of the Loan
Documents will not violate any Requirement of Law or, to the best of our
knowledge after due inquiry, any Contractual Obligation of the Company, and will
not result in, or require, the creation or imposition of any Lien on any of the
properties or revenues of the Company pursuant to any Requirement of Law or any
such Contractual Obligation, other than the Liens created pursuant to the
Security Agreement.
4. To the best of our knowledge after due inquiry, there is no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority which is pending or threatened by or against the Company
or against any of its properties or revenues which, if adversely determined,
would have a material adverse effect on the business, operations, property or
financial or other condition of the Company.
5. The Company is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
6. No authorization, consent or approval of, or registration or
filing with, or any action of, any Governmental Authority is required in
connection with the execution or delivery by the Company of any Loan Document
and the consummation of the transactions contemplated thereby.
We are qualified to practice law in the State of New York and do not
purport to be experts on, or to express any opinion herein concerning, any law
other than the laws of the State of New York, the corporation laws of the State
of Delaware and the Federal laws of the United States.
Very truly yours,
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1996 CONSOLIDATED FINANCIAL STATEMENTS OF AUDITS & SURVEYS WORLDWIDE, INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000099703
<NAME> AUDITS & SURVEYS WORLDWIDE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-01-1996
<CASH> 633
<SECURITIES> 0
<RECEIVABLES> 12,127
<ALLOWANCES> (115)
<INVENTORY> 1,653
<CURRENT-ASSETS> 14,899
<PP&E> 6,087
<DEPRECIATION> (3,051)
<TOTAL-ASSETS> 24,575
<CURRENT-LIABILITIES> 12,084
<BONDS> 2,410
0
0
<COMMON> 131
<OTHER-SE> 7,706
<TOTAL-LIABILITY-AND-EQUITY> 24,575
<SALES> 0
<TOTAL-REVENUES> 30,300
<CGS> 0
<TOTAL-COSTS> 14,448
<OTHER-EXPENSES> 13,544
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177
<INCOME-PRETAX> 2,357
<INCOME-TAX> 1,065
<INCOME-CONTINUING> 1,292
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,292
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
