AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 7, 2000.
Registration No. 333-31436
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 7311 13-1024020
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
-----------------------
1271 Avenue of the Americas
New York, New York 10020
(212) 399-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
-----------------------
NICHOLAS J. CAMERA, SENIOR VICE PRESIDENT,
GENERAL COUNSEL & SECRETARY
THE INTERPUBLIC GROUP OF COMPANIES, INC.
1271 Avenue of the Americas
New York, New York 10020
212-399-8000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
- --------------------------------------------------------------------------------
Copies to:
Barry M. Fox, Esq. James M. Dubin, Esq.
Cleary, Gottlieb, Steen & Hamilton Paul, Weiss, Rifkind, Wharton & Garrison
One Liberty Plaza 1285 Avenue of the Americas
New York, New York 10006 New York, New York 10019
(212) 225-2000 (212) 373-3000
-----------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this post-effective amendment
to the Registration Statement which relates to the issuance of common stock of
The Interpublic Group of Companies, Inc. in the merger of NFO Worldwide, Inc.
with a wholly owned subsidiary of The Interpublic Group of Companies, Inc.
pursuant to the Agreement and Plan of Merger, dated December 20, 1999, as
amended. The proxy statement/prospectus contained in the Registration Statement
and the supplement to the proxy statement/prospectus contained in this
post-effective amendment to the Registration Statement contain the merger
agreement and the amendment thereto, respectively.
-----------------------
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
================================================================================
<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 1 to the Registration Statement
includes a proxy statement/prospectus supplement, which amends and supplements
the proxy statement/prospectus dated March 2, 2000 of NFO Worldwide, Inc. and
The Interpublic Group of Companies, Inc. This supplement contains information
about the Amendment To The Agreement And Plan Of Merger And To The Stock Option
Agreement, dated as of April 3, 2000, between Interpublic and NFO and
information about the proposed merger of NFO with a subsidiary of Interpublic.
The Registration Statement, as filed on March 3, 2000, is incorporated herein by
reference.
<PAGE>
[NFO Worldwide, Inc. logo]
April 7, 2000
Dear NFO Stockholder:
On March 3, 2000, we mailed to you a proxy statement/prospectus
relating to a special meeting of stockholders of NFO Worldwide, Inc. that was
scheduled for April 5, 2000. The purpose of the special meeting was to consider
and vote upon the proposed merger of a wholly-owned subsidiary of The
Interpublic Group of Companies, Inc. with and into NFO.
On April 3, 2000, NFO and Interpublic entered into an Amendment To The
Agreement And Plan of Merger And To The Stock Option Agreement. The amendment
has the effect of increasing the maximum exchange ratio for the merger from
0.5274 to 0.5503 shares of Interpublic common stock to be issued for each share
of NFO common stock and lowering the average trading price of Interpublic common
stock below which NFO would have the right to "walk away" from the merger from
$46.40 to $44.88. These changes seek to assure that you will receive a fraction
of a share of Interpublic common stock with a value of $26, based on the average
trading price during the prescribed period ending shortly before the merger, for
each of your NFO shares if the average trading price of Interpublic common stock
is $47.25, which was the closing price per share of Interpublic common stock on
March 31, 2000, or more, up to $66.70. In addition, NFO and Interpublic agreed
as part of the amendment to increase the termination fee payable to Interpublic
under the merger agreement from $25 million to $30 million.
Interpublic shares are traded on the New York Stock Exchange under the
symbol "IPG." NFO shares are traded on the New York Stock Exchange under the
symbol "NFO." On April 6, 2000, the last full trading day prior to the date of
this letter, Interpublic common stock closed at $48.25 per share and NFO common
stock closed at $25.69 per share. If $48.25 were the applicable average trading
price, then you would receive a fraction of a share of Interpublic common stock
with a value of $26.00, based on the average trading price, for each of your
shares of NFO common stock.
We are enclosing a supplement to the proxy statement/prospectus
previously mailed to you on March 3, 2000. The supplement provides you with a
summary of the amendment to the merger agreement and the option agreement. The
amendment is also attached to the supplement as Annex S-A.
Our board of directors continues to recommend that you vote in favor of
the adoption of the merger agreement, as amended.
We cannot complete the merger without the approval of NFO stockholders
who hold a majority of the NFO common stock.
<PAGE>
If you were a stockholder of record on March 2, 2000, you may vote at
the reconvened meeting, which will be held on:
April 18, 2000
10:00 A.M. local time
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
We have enclosed a proxy card with the supplement. If you already have
delivered a properly executed proxy, you do not need to do anything unless you
wish to change your vote. If you have not previously voted or if you wish to
revoke or change your vote, please complete, date, sign and return the enclosed
proxy card.
Thank you for your continuing support.
Very truly yours,
/s/ WILLIAM E. LIPNER
William E. Lipner
Chairman of the Board, Chief
Executive Officer and President
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Interpublic common stock to be issued
in the merger or determined that this document is accurate or adequate. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
This supplement is dated April 7, 2000 and is first being mailed to stockholders
on or about April o, 2000.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION ............................................................. S-1
QUESTIONS & ANSWERS ABOUT THE MERGER ..................................... S-1
SUMMARY OF THE AMENDMENT ................................................. S-4
Amendment of the Merger Agreement.................................... S-4
Amendment of the Stock Option Agreement.............................. S-5
BACKGROUND OF AMENDMENT .................................................. S-6
RECOMMENDATION OF THE NFO BOARD .......................................... S-8
SELECTED FINANCIAL DATA................................................... S-9
Selected Historical Financial Data of Interpublic.................... S-9
Selected Historical Financial Data of NFO............................ S-11
Selected Unaudited Pro Forma Combined Condensed Financial Data....... S-13
UNAUDITED COMPARATIVE PER SHARE DATA...................................... S-15
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION.......................................................... S-17
LEGAL OPINION............................................................. S-23
EXPERTS .................................................................. S-23
WHERE YOU CAN FIND MORE INFORMATION ...................................... S-24
ANNEX S-A--Amendment To The Agreement And Plan Of Merger
And To The Stock Option Agreement ...................................... S-A-1
ANNEX S-B--Annual Report On Form 10-K Of NFO For Fiscal
Year Ending December 31, 1999 .......................................... S-B-1
<PAGE>
INTRODUCTION
Except as described in this supplement, the information we provided in the proxy
statement/prospectus that we previously mailed to you continues to apply. This
supplement should be read in conjunction with the proxy statement/prospectus.
The Registration Statement, as filed on March 3, 2000, that contains the proxy
statement/prospectus is incorporated in this supplement by reference. To the
extent information in this supplement differs from or conflicts with information
contained in the proxy statement/prospectus, this supplement supersedes and
replaces the information in the proxy statement/prospectus. If you need another
copy of the proxy statement/prospectus or this supplement, please call our proxy
solicitors, D.F. King & Co., Inc., (212) 269-5550 (call collect) or (800)
829-6554 (call toll free).
QUESTIONS & ANSWERS ABOUT THE MERGER
Q. What has changed in the merger agreement?
A: Under the merger agreement before the amendment, if the average trading
price of shares of Interpublic common stock during a specified period
ending shortly before the merger were $49.30 or more, up to $66.70, for
each share of your NFO common stock you would have received a fraction of a
share of Interpublic common stock, ranging from 0.3898 to 0.5274, and
having a value, based on the average trading price, of $26.00. The
amendment has the effect of lowering the bottom of this "collar" range from
$49.30 to $47.25 and thereby increasing the maximum number of shares of
Interpublic common stock that you may receive in the merger from 0.5274 to
0.5503 for each of your shares of NFO common stock. As a result, you will
now receive a fraction of a share of Interpublic common stock with a value
of $26.00, based on the average trading price, if the average trading price
is $47.25 or more, up to $66.70.
In addition, before the amendment, if the average trading price were below
$49.30, but at or above $46.40, then you would have received 0.5274 of a
share of Interpublic common stock, which would have had a value, based on
the average trading price, of less than $26.00, for each share of your NFO
common stock. As a result of the amendment, if the average trading price is
below $47.25, but at or above $44.88, you will receive the fixed exchange
ratio of 0.5503 of a share of Interpublic common stock for each share of
your NFO common stock. At any point within this range of average trading
prices below $47.25, you will receive a fraction of a share of Interpublic
common stock with a value of less than $26.00, based on the average trading
price, for each share of your NFO common stock.
Under the merger agreement before the amendment, if the average trading
price were less than $46.40, NFO would have had the right to "walk away"
and call off the merger, unless Interpublic elected to adjust the exchange
ratio to assure that you would have received a fraction of a share of
Interpublic common stock with a value, based on the average trading price,
of $26.00. Under the amendment, this right will be available to NFO only if
the average trading price is below $44.88.
The following chart summarizes the revised terms of the amendment:
<TABLE>
Fraction of a share of Value, based on average trading
Average trading price of Interpublic common stock you price, of shares of Interpublic
shares of Interpublic receive for each share common stock you receive for
common stock of NFO common stock each share of NFO common stock
- --------------------------- ---------------------------- -------------------------------
<S> <C> <C>
more than $66.70 0.3898 more than $26.00
$47.25 to $66.70 $26.00 divided by the average $26.00
trading price
less than $47.25, but at or 0.5503 less than $26.00
above $44.88
less than 44.88 0.5503* less than $26.00*
</TABLE>
- ---------------
* If the average trading price is less than $44.88, then NFO will have
the right to call off the merger, unless Interpublic elects to adjust
the exchange ratio to assure that you will receive a fraction of a
share of Interpublic common stock with a value, based on the average
trading price, of $26.00 for each of your shares of NFO common stock.
If NFO elects not to exercise this right, then you will receive 0.5503
of a share of Interpublic common stock for each share of your NFO
common stock.
Finally, under the amendment, if Interpublic becomes entitled to
receive a termination fee as contemplated under the original merger
agreement, the amount to be paid to Interpublic has been increased from
$25 million to $30 million.
Q: What has changed in the Stock Option Agreement?
A: Under the original stock option agreement, an "Exercise Termination Event,"
or the date on which the option would no longer be exercisable by
Interpublic, would occur upon the occurrence of, among other items
specified on page B-2 of the proxy statement/ prospectus, the receipt by
Interpublic of the $25 million termination fee. Under the amendment, this
definition has been changed to reflect the increase to $30 million of the
termination fee payable as a result of the amendment to the merger
agreement.
Under the original stock option agreement, Interpublic's potential "total
profit" to be realized from the option granted under the option agreement
was limited to $27.5 million. Under the amendment, the cap on the profit
potentially realizable under the stock option agreement has been increased
to $32.5 million.
Q: Has the record date for the NFO special meeting changed?
A: No. The record date for the meeting continues to be March 2, 2000.
Q: What do I need to do now?
A: First, carefully read this document. If you already have delivered a
properly executed proxy, you do not need to do anything unless you wish to
change your vote. If you are a registered holder and you have not already
delivered a properly executed proxy, or wish to change your vote, please
complete, sign and date the enclosed proxy card and return it in the
accompanying prepaid envelope or submit via facsimile a copy of both sides
of your proxy card duly completed, signed and dated to 781-575-4064 to
assure that your shares will be represented at the special meeting. If your
shares are held in "street name" by your broker, and you have not already
delivered a properly executed proxy, or wish to change your vote, please
instruct your broker in the manner described on page 1 of the proxy
statement/prospectus mailed to you on March 3, 2000.
Q: What do I do if I want to change my vote?
A: You can change your vote by:
o following the procedures described on page 18 of the proxy
statement/prospectus mailed to you on March 3, 2000;
o sending a later-dated, signed proxy card before the special meeting; or
o attending the meeting in person and voting.
Q: When will the merger be completed?
A: Interpublic and NFO are working toward completing the merger as soon as
possible, and expect to complete it shortly after the reconvened NFO
special meeting if stockholders approve the merger proposal.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger after reading this document, you
should contact:
NFO Worldwide, Inc. or D.F. King & Co., Inc.
2 Pickwick Plaza 77 Water Street
Greenwich, CT 06830 New York, NY 10005
Attn: Investor Relations Banks and Brokers call collect:
Telephone: (203) 618-8505 (212) 269-5550
E-mail: [email protected] All others call toll free:
(800) 829-6554
<PAGE>
SUMMARY OF AMENDMENT TO THE MERGER AGREEMENT
AND STOCK OPTION AGREEMENT
Amendment To Merger Agreement
The following is a summary of the changes to the original merger
agreement effected by the amendment:
Modification of Collar Range. Under the original merger agreement, if
the average trading price of shares of Interpublic common stock during a
specified period ending shortly before the merger were $49.30 or more, up to
$66.70, for each share of your NFO common stock you would have been entitled to
receive a fraction of a share of Interpublic common stock, ranging from 0.3898
to 0.5274, and having a value, based on the average trading price, of $26.00.
Under the amendment, the bottom of this trading range, or $49.30, has been
reduced to $47.25. As a result, the upper-end of the exchange ratio range has
been increased to 0.5503 of a share of Interpublic common stock. You are now
assured of receiving a fraction of a share of Interpublic common stock with a
value of $26.00, based on the average trading price, if the average trading
price is $47.25 or more, up to $66.70.
Under the original merger agreement, if the average trading price of
shares of Interpublic common stock during the specified period were below $49.30
but at or above $46.40, for each share of your NFO common stock you would have
been entitled to receive 0.5274 of a share of Interpublic common stock. This
number of shares of Interpublic common stock would have provided you with less
than $26.00 in value, based on the average trading price, for each of your
shares of NFO common stock. The amendment changes this fixed exchange ratio
range of average trading prices. As a result of the amendment, if the average
trading price of shares of Interpublic common stock is below $47.25, but at or
above $44.88, then the fraction of a share of Interpublic common stock that you
will receive for each of your shares of NFO common stock will be fixed at
0.5503, which will have a value, based on the average trading price, of less
than $26.00.
Reduction in "Walk Away" Price. Under the original merger agreement, if
the average trading price of shares of Interpublic common stock during the
specified period were below $46.40, NFO had the right to notify Interpublic of
its intention to "walk away" and terminate the merger agreement. In response to
this notice, Interpublic had the option either to allow the agreement to be
terminated or to "top up" its offer by assuring that the number of shares of
Interpublic common stock you would receive in the merger for each of your shares
of NFO common stock would have a value, based on the average trading price, of
$26.00. Under the amendment, the average trading price at which NFO would be
entitled to exercise its "walk away" right has been reduced to $44.88. As a
result, unlike the original merger agreement, if the average trading price is
below $46.40 but at or above $44.88, NFO will not be entitled to exercise its
right to terminate the merger agreement.
Increase in the Termination Fee. Under the original merger agreement,
Interpublic would be entitled to receive $25 million from NFO if the merger
agreement were terminated under the circumstances described on page 46 of the
proxy statement/prospectus. Under the amendment, the amount payable by NFO to
Interpublic if the agreement is terminated in these circumstances has been
increased to $30 million.
Amendment To The Stock Option Agreement
Amendment to the Definition of Exercise Termination Event. Under the
original stock option agreement, an "Exercise Termination Event," or the date on
which the option would no longer be exercisable by Interpublic, would occur upon
the occurrence of, among other items specified on page B-2 of the proxy
statement/prospectus, the receipt by Interpublic of the $25 million termination
fee. Under the amendment, this definition has been changed to reflect the
increase to $30 million of the termination fee payable as a result of the
amendment to the merger agreement.
Modification of Limitation on Profit. Under the original stock option
agreement, Interpublic's potential "total profit" to be realized from the option
granted under the option agreement was limited to $27.5 million. Under the
amendment, this amount has been increased to $32.5 million.
A copy of the Amendment To The Agreement And Plan Of Merger And To The
Stock Option Agreement is attached to this document as Annex S-A. You should
read the amendment in its entirety.
<PAGE>
BACKGROUND OF AMENDMENT
March 28, 2000. NFO received an unsolicited bona fide written
acquisition proposal from a third party to purchase all of the outstanding
shares of NFO common stock for $27.00 per share in cash. Conditions to the third
party's proposal included, among other things, receipt of the approval of a
majority of its shareholders. NFO, as required by the merger agreement, sent a
copy of the written proposal to Interpublic for its review.
March 29, 2000. The NFO Board of Directors held a special meeting to
determine whether the proposal constituted a "Superior Proposal," as that term
is defined in the merger agreement. After a full discussion and after
considering the advice of its independent legal counsel, Paul, Weiss, Rifkind,
Wharton & Garrison, and the written opinion of its financial advisor, Greenhill
& Co., LLC, the NFO Board, in accordance with the terms of the merger agreement,
determined that the written acquisition proposal, due in part to the fact that
the recent trading price of Interpublic common stock implied that the value to
be received by NFO stockholders in the merger would be less than $26 per share,
constituted a "Superior Proposal," as set out in the merger agreement.
Accordingly, the Board directed its officers, its legal counsel, Paul, Weiss,
Rifkind, Wharton & Garrison, and its financial advisor, Greenhill & Co., LLC, to
enter into discussions with the third party. As required by the merger
agreement, Interpublic was notified of the NFO Board's determination and of its
intention to avail itself of its rights under the merger agreement to enter into
discussions with the third party. NFO and its legal and financial advisors began
preliminary discussions with the third party.
March 30 through April 2, 2000. The NFO Board convened a special
meeting on each day. At each of the meetings, representatives of Paul, Weiss,
Rifkind, Wharton & Garrison and of Greenhill & Co., LLC updated the NFO Board on
the status of discussions with both the third party and Interpublic. Throughout
this period, NFO's representatives continued their discussions with the third
party, Interpublic and their respective representatives in an effort to improve
proposals received from each party, and in the case of the third party, to seek
to eliminate conditions contained in its proposal that gave the NFO Board
concern over the certainty of closing a deal with the third party.
April 3, 2000. The NFO Board convened at 9:00 am in order to receive an
update on the discussions with each party. Representatives of Greenhill & Co.,
LLC informed the NFO Board that Interpublic had proposed, among other things, to
lower the bottom range of the "collar" to $47.25 (the closing price per share of
Interpublic common stock on Friday, March 31, 2000). This proposal would assure
that NFO stockholders would receive at least $26.00 in value, based on the
average trading price, for each of their shares of NFO common stock if the
average trading price of Interpublic common stock were below $49.30 but at or
above $47.25. The representatives of Greenhill & Co., LLC further informed the
NFO Board that the proposal would also require a corresponding reduction in the
average trading price at which NFO would be entitled to "walk away" from the
merger agreement. Representatives of Greenhill & Co., LLC also informed the NFO
Board that Interpublic had requested that, in exchange for these price changes,
the termination fee be increased from $25 million to $30 million. The NFO Board
then determined that, unless the third party increased both its price and the
certainty of closing the proposed transaction, the NFO Board would determine
that the Interpublic revised offer was "superior."
William E. Lipner, Chairman of NFO, met with a principal of the third
party to determine if the third party could alter its proposal in a manner that
would allow the NFO Board to conclude that its offer was "superior" to the
revised offer by Interpublic. The third party raised its offer to $27.50 in
cash. The NFO Board then reconvened at 2:30 pm to receive an update. Mr. Lipner
informed the NFO Board that the third party was prepared to offer $27.50 in cash
but that it was not prepared to make any other significant alterations to its
proposal. The NFO Board, after hearing Mr. Lipner's report, and after
considering the advice of its legal and financial advisors, concluded that the
Interpublic revised offer was "superior" and directed NFO to enter into an
amendment to the merger agreement with Interpublic on the terms presented. NFO
and Interpublic then entered into the amendment described in this supplement.
The NFO Board reconvened for a final time at 9:00 pm in order to
receive a final update, at which meeting they were informed that the amendment
had been executed.
April 4, 2000. NFO issued a press release that it had entered into an
amendment to the merger agreement with Interpublic and that it had received an
unsolicited offer that the NFO Board had determined was not "superior" to the
amended merger agreement.
To date, there have been no further contacts from the third party that
submitted the acquisition proposal or any other person regarding an acquisition
proposal.
<PAGE>
RECOMMENDATION OF THE NFO BOARD
The NFO Board has reexamined and reconsidered the matters described in
"The Background of the Merger -- Recommendation of the NFO Board" at page 24 of
the proxy statement/prospectus. It further considered the adjustment to the
collar range, its "walk away" price and the increase in the termination fee
under the terms of the amendment.
The NFO Board unanimously reaffirms its view that the merger is in the
best interests of NFO and its stockholders and recommends that NFO stockholders
vote for the proposal to approve and adopt the amended merger agreement.
<PAGE>
SELECTED FINANCIAL DATA
Selected Historical Financial Data of Interpublic
The following selected consolidated financial data as at and for each
of the five fiscal years in the period ended December 31, 1999 have been derived
from the audited consolidated financial statements of Interpublic. The report of
PricewaterhouseCoopers LLP, independent accountants, on the financial
statements, as of December 31, 1999 and 1998, and for each of the three years in
the period ended December 31, 1999, is included in Interpublic's Annual Report
on Form 10-K for the year ended December 31, 1999, incorporated in this document
by reference. The PricewaterhouseCoopers LLP report on the financial statements
is based in part on the report of other independent accountants. You should read
the selected consolidated financial data in conjunction with the financial
statements and the notes to the financial statements for Interpublic included in
its Annual Report on Form 10-K for the year ended December 31, 1999. See "Where
You Can Find More Information" on page S-24 to learn how you can obtain these
reports. We have adjusted all per share amounts to reflect Interpublic's
two-for-one stock split on July 15, 1999 effected in the form of a stock
dividend. In addition, we have restated all periods before 1998 to reflect the
effect of acquisitions accounted for as poolings of interests.
<PAGE>
<TABLE>
As At and For the Year Ended December 31,
-----------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
Operating Data
<S> <C> <C> <C> <C> <C>
Gross Income............................ $ 2,606,467 $ 2,983,899 $ 3,482,384 $ 3,968,728 $ 4,561,518
Operating Expenses...................... 2,257,138 2,558,336 2,988,532 3,347,158 3,825,856
Restructuring charge.................... -- -- -- -- 84,183
Write-down of goodwill and other
related assets....................... 38,687 -- -- -- --
Special compensation charge............. -- -- 32,229 -- --
Provision for income taxes.............. 126,537 156,783 186,246 232,005 236,339
Net income.............................. $ 134,311 $ 214,619 $ 200,378 $ 309,905 $ 321,921
Per Share Data
Basic Net Income per share.............. $ 0.53 $ 0.82 $ 0.77 $ 1.14 $ 1.15
Weighted-average shares - basic......... 255,605 260,595 260,500 270,970 278,923
Diluted Net Income per share............ $ 0.51 $ 0.80 $ 0.74 $ 1.10 $ 1.11
Weighted-average shares - diluted....... 263,609 277,178 277,619 281,051 289,548
Financial Position
Working capital......................... $ 79,380 $ 101,191 $ 175,266 $ 70,298 $ 130,915
Total assets............................ 4,631,912 5,119,927 5,983,443 6,942,823 8,727,255
Long-term debt.......................... 361,945 418,618 519,036 506,618 867,262
</TABLE>
<PAGE>
Selected Historical Financial Data of NFO
The following selected consolidated financial data as at and for each
of the five fiscal years in the period ended December 31, 1999 have been derived
from the audited consolidated financial statements of NFO. The report of Arthur
Andersen LLP, independent public accountants, as of December 31, 1999 and 1998
and for each of the years in the three year period ended December 31, 1999 is
included in the audited consolidated financial statements of NFO contained in
Annex S-B to this supplement. You should read the selected consolidated
financial data in conjunction with the audited consolidated financial statements
and the notes to these financial statements of NFO included in Annex S-B to this
supplement and of Infratest Burke included in Annex E to the proxy
statement/prospectus.
<PAGE>
Income Statement Data(2)
(thousands of U.S. dollars, except share and per share data)
<TABLE>
Years ended December 31,
----------------------------------------------------------------------
1995 1996 1997 1998 1999(3)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues.................................. $ 113,095 $ 154,943 $ 190,229 $ 275,351 $ 457,198
Operating Income.......................... 16,469 21,377 23,275 29,328 13,046
Income before provision for income taxes
and Minority Interest.................. 16,797 21,021 22,406 25,357 1,183
Net Income (Loss)......................... $ 9,159 $ 10,616 $ 12,505 $ 14,490 $ (6,170)
Basic and diluted earnings per share(1)
Basic earnings per share.................. 0.49 0.53 0.62 0.68 (.28)
Diluted earnings per share................ 0.48 0.51 0.60 0.67 (.28)
Weighted average basic shares............. 18,716 19,911 20,265 21,154 22,006
Weighted average diluted shares........... 19,193 20,746 20,832 21,704 22,006
</TABLE>
Balance Sheet Data(2)
(thousands of U.S. dollars)
<TABLE>
As at December 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Working capital..................... $ 15,681 $ 19,650 $ 28,464 $ 31,915 $ 34,103
Total assets........................ 86,781 125,443 170,274 451,798 426,062
Total debt.......................... 2,664 5,300 25,169 191,053 175,857
Stockholders' equity................ 51,226 74,397 96,724 121,763 124,252
</TABLE>
- ------------
(1) For comparability, the basic and diluted earnings per share reflect the
3-for-2 stock splits effected on October 15, 1997 and February 5, 1996.
(2) The above tables have been prepared to give retroactive effect to the
mergers with Prognostics on April 1, 1997, and The MBL Group Plc on July
11, 1997, both of which were accounted for using the pooling of interests
method.
(3) Includes pretax special charges of $21.7 million, primarily to write-off
the intangible assets associated with NFO's financial services businesses,
which have been deemed to be permanently impaired. Special charges after
tax aggregated $17.8 million, or ($.80) per diluted share.
<PAGE>
Selected Unaudited Pro Forma Combined Condensed Financial Data
The following selected unaudited pro forma combined condensed financial
data gives effect to the merger as if it had occurred at the dates and at the
commencement of the periods indicated using the pooling of interests method of
accounting for business combinations and assuming an exchange ratio of 0.5503.
This presentation is based on the assumption that either the applicable
average trading price will be between $44.88 and $47.25 or it will be below the
$44.88 price, at which NFO can deliver a notice to call off the merger, and NFO
will not have delivered that notice. On April 6, 2000, the closing price per
share of Interpublic common stock on the New York Stock Exchange was $48.25. If
that closing price were the applicable average trading price, then you would
receive a fraction of a share of Interpublic common stock with a value, based on
the average trading price, of $26.00 for each of your shares of NFO common
stock.
The following data does not give pro forma effect to the acquisition by
NFO of Infratest Burke in November 1998.
You should read the information presented below in conjunction with the
financial statements and the notes to the financial statements for Interpublic
included in Interpublic's Annual Report on Form 10-K for the year ended December
31, 1999, which we have incorporated into this document by reference, and the
financial statements and the notes to the financial statements for NFO and
Infratest Burke that we have included in Annex S-B to this supplement and in
Annex E to the proxy statement/prospectus. See "Where You Can Find More
Information" on page S-24 to learn how to obtain these reports of Interpublic.
In addition, you should read the information presented below in conjunction with
the unaudited pro forma combined condensed financial information and the notes
to that information included in this document beginning on page S-17.
The pro forma information below, while helpful in illustrating the
financial characteristics of the combination of Interpublic and NFO under one
set of assumptions, does not attempt to predict or suggest future results.
Moreover, the pro forma information below does not attempt to show what the
financial condition or the results of operations of the combined company would
have been if the merger had occurred at the dates indicated below or at the
commencement of the periods indicated below.
<PAGE>
<TABLE>
As At and for the Year Ended December 31,
-----------------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
(Thousands of U.S. Dollars, Except Share and Per Share Data)
<S> <C> <C> <C> <C> <C>
Operating Data
Gross Income............................ $ 2,719,562 $ 3,138,842 $ 3,672,613 $ 4,244,079 $ 5,018,716
Operating Expenses...................... 2,353,764 2,691,902 3,155,486 3,593,181 4,270,008
Restructuring charge.................... -- -- -- -- 84,183
Write-down of goodwill and other
related assets....................... 38,687 -- -- -- --
Special compensation charge............. -- -- 32,229 -- --
Provision for income taxes.............. 132,709 165,766 195,141 242,494 243,126
Net income.............................. $ 143,470 $ 225,235 $ 212,883 $ 324,395 $ 315,751
Per Share Data
Basic Net Income per share.............. $ 0.54 $ 0.83 $ 0.78 $ 1.15 $ 1.08
Weighted-average shares - basic......... 265,904 271,552 271,652 282,612 291,033
Diluted Net Income per share............ $ 0.52 $ 0.78 $ 0.74 $ 1.11 $ 1.05
Weighted-average shares - diluted....... 274,171 288,595 288,633 292,995 301,658
Financial Position
Working capital......................... $ 117,514 $ 148,458 $ 244,831 $ 150,508 $ 165,018
Total assets............................ 4,718,693 5,245,370 6,153,717 7,394,621 9,153,317
Long-term debt.......................... 364,609 423,918 543,859 697,275 1,042,673
</TABLE>
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth unaudited historical per share financial
information as at and for each of the three fiscal years in the period ended
December 31, 1999 relating to the outstanding shares of Interpublic common stock
and outstanding shares of NFO common stock. The following table also sets forth
unaudited pro forma per share data for Interpublic that gives effect to the
merger as if it had occurred at the dates and at the commencement of the years
indicated using the pooling of interests method of accounting for business
combinations and assuming an exchange ratio of 0.5503.
This presentation is based on the assumption that either the applicable
average trading price will be between $44.88 and $47.25 or it will be below the
$44.88 price, at which NFO can deliver a notice to call off the merger, and NFO
will not have delivered that notice. On April 6, 2000, the closing price per
share of Interpublic common stock on the New York Stock Exchange was $48.25. If
that closing price were the applicable average trading price, then you would
receive a fraction of a share of Interpublic common stock with a value, based on
the average trading price, of $26.00 for each of your shares of NFO common
stock.
The following pro forma per share data for Interpublic does not give
pro forma effect to the acquisition by NFO of Infratest Burke in November 1998.
The NFO pro forma equivalent per share information gives effect to the merger
from the perspective of the owner of NFO common stock by multiplying the pro
forma per share information of the combined company by the assumed exchange
ratio.
You should read the information presented below in conjunction with the
financial statements and the notes to the financial statements for Interpublic
included in Interpublic's Annual Report on Form 10-K for the year ended December
31, 1999, which we have incorporated into this document by reference, and the
financial statements and the notes to the financial statements for NFO and
Infratest Burke that we have included in Annex S-B to this supplement and in
Annex E to the proxy statement/prospectus. See "Where You Can Find More
Information" on page S-24 to learn how to obtain these reports of Interpublic.
In addition, you should read the information presented below in conjunction with
the unaudited pro forma combined condensed financial information and the notes
to that information included in this document beginning on page S-17.
The pro forma information below, while helpful in illustrating the
financial characteristics of the combination of Interpublic and NFO under one
set of assumptions, does not attempt to predict or suggest future results.
Moreover, the pro forma information below does not attempt to show what the
financial condition or the results of operations of the combined company would
have been if the merger had occurred at the dates indicated below or at the
commencement of the periods indicated below.
We have adjusted Interpublic's per share amounts to reflect
Interpublic's two-for-one stock split on July 15, 1999 effected in the form of a
stock dividend. In addition, for Interpublic, we have restated all periods
before 1998 to reflect the effect of acquisitions by Interpublic accounted for
as poolings of interests. We have adjusted NFO's per share amounts to reflect
the 3-for-2 stock split effected on October 15, 1997. In addition, for NFO, we
have restated all periods before 1998 to give effect to the mergers with
Prognostics on April 1, 1997 and MBL Group Plc. on July 11, 1997, both of which
were accounted for as poolings of interests.
As at and for the Year
Ended December 31,
----------------------------
1997 1998 1999
------ ------ ------
INTERPUBLIC COMMON STOCK--HISTORICAL
Net earnings per share, basic....................... $0.77 $1.14 $1.15
Net earnings per share, diluted..................... 0.75 1.10 1.11
Cash dividends per share............................ 0.25 0.29 0.33
Book value per share at period end.................. 3.70 4.54 5.66
NFO COMMON STOCK--HISTORICAL
Net earnings per share, basic....................... $0.62 $0.68 $(0.28)
Net earnings per share, diluted..................... 0.60 0.67 (0.28)
Cash dividends per share............................ 0.00 0.00 0.00
Book value per share at period end.................. 4.67 5.69 5.56
INTERPUBLIC COMMON STOCK--PRO FORMA
Net earnings per share, basic....................... $0.78 $1.15 $1.08
Net earnings per share, diluted..................... 0.74 1.11 1.05
Cash dividends per share............................ 0.25 0.29 0.33
Book value per share at period end.................. 3.75 4.57 5.66
NFO COMMON STOCK--PRO FORMA EQUIVALENT
Net earnings per share, basic....................... $0.43 $0.63 $0.59
Net earnings per share, diluted..................... 0.41 0.61 0.58
Cash dividends per share............................ 0.14 0.16 0.18
Book value per share at period end.................. 2.06 2.51 3.11
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial
statements assume a business combination between Interpublic and NFO accounted
for as a pooling of interests and are based on each company's historical audited
consolidated financial statements and the notes to those statements.
The following unaudited pro forma combined condensed balance sheet as
of December 31, 1999 is based on the historical financial statements of
Interpublic and NFO as at December 31, 1999 after giving effect to the merger as
if it had occurred on December 31, 1999.
The following unaudited pro forma combined condensed statements of
income for each of the years ended December 31, 1997, 1998 and 1999 are based on
the historical financial statements of Interpublic and NFO for those years after
giving effect to the merger as if it had occurred on January 1, 1997.
You should read the information presented below in conjunction with the
financial statements and the notes to the financial statements for Interpublic
included in Interpublic's Annual Report on Form 10-K for the year ended December
31, 1999, which we have incorporated into this document by reference, and the
financial statements and the notes to the financial statements for NFO and
Infratest Burke that we have included in Annex S-B to this supplement and in
Annex E to the proxy statement/prospectus. See "Where You Can Find More
Information" on page S-24 to learn how to obtain these reports of Interpublic.
In addition, you should read the information presented below in conjunction with
the accompanying notes below.
The pro forma information below, while helpful in illustrating the
financial characteristics of the combination of Interpublic and NFO under one
set of assumptions, does not attempt to predict or suggest future results.
Moreover, the pro forma information below does not attempt to show what the
financial condition or the results of operations of the combined company would
have been if the merger had occurred at the dates indicated below or at the
commencement of the periods indicated below.
<PAGE>
Unaudited Pro Forma Combined Condensed Statements of Income
For the Year Ended December 31, 1997
(Thousands of U.S. Dollars, Except Per Share Amounts)
<TABLE>
Interpublic NFO Pro Forma Pro Forma
Historical Historical Adjustments Combined
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue........................................ $3,352,776 $ 190,229 $ -- $ 3,543,005
Other income, net.............................. 129,608 -- -- 129,608
---------- ----------- ----------- -----------
Gross Income............................... 3,482,384 190,229 -- 3,672,613
---------- ----------- ----------- -----------
Costs and expenses:
Salaries and related expenses................ 1,913,356 83,357 -- 1,996,713
Office and general expenses.................. 1,132,969 84,266 -- 1,217,235
Special compensation charges................. 32,229 -- -- 32,229
---------- ----------- ----------- -----------
Total costs and expenses....................... 3,078,554 167,623 -- 3,246,177
---------- ----------- ----------- -----------
Equity interest in net loss of affiliated
companies and other expenses................. -- 200 (200) --
---------- ----------- ----------- -----------
Income before provision for income taxes....... 403,830 22,406 200 426,436
Provision for income taxes..................... 186,246 8,895 -- 195,141
---------- ----------- ----------- -----------
Income of consolidated companies............... 217,584 13,511 200 231,295
Income applicable to minority interests........ (23,754) (1,006) -- (24,760)
Equity in net income of unconsolidated
affiliates................................... 6,548 -- (200) 6,348
---------- ----------- ----------- -----------
Net income..................................... $ 200,378 $ 12,505 $ -- $ 212,883
========= ========== ========== ==========
Weighted average shares outstanding--basic..... 260,500 20,265 -- 271,652 (2)
Weighted average shares outstanding--dilutive.. 277,619 20,832 -- 289,083
Earnings per share--basic...................... 0.77 0.62 -- 0.78
Earnings per share--dilutive................... 0.74 0.60 -- 0.74
</TABLE>
See accompanying notes to unaudited pro forma combined condensed
financial information.
<PAGE>
Unaudited Pro Forma Combined Condensed Statements Of Income
For The Year Ended December 31, 1998
(Thousands Of U.S. Dollars, Except Per Share Amounts)
<TABLE>
Interpublic Pro Forma Pro Forma
Historical NFO Historical Adjustments(1) Combined
---------- -------------- -------------- --------
<S> <C> <C> <C> <C>
Revenue $ 3,844,340 $ 275,351 $ -- $ 4,119,691
Other income, net 124,388 -- -- 124,388
----------- ----------- -------------- -----------
Gross Income 3,968,728 275,351 -- 4,244,079
----------- ----------- -------------- -----------
Costs and expenses:
Salaries and related expenses 2,167,931 127,006 -- 2,294,937
Office and general expenses 1,237,926 122,767 -- 1,360,693
----------- ----------- -------------- -----------
Total costs and expenses 3,405,857 249,773 -- 3,655,630
----------- ----------- -------------- -----------
Equity interest in net loss of affiliated
companies and other expenses -- 221 (221) --
----------- ----------- -------------- -----------
Income before provision for income taxes 562,871 25,357 221 588,449
Provision for income taxes 232,005 10,489 242,494
----------- ----------- -------------- -----------
Income of consolidated companies 330,866 14,868 221 345,955
Income applicable to minority interests (28,125) (378) -- (28,503)
Equity in net income of unconsolidated affiliates 7,164 -- (221) 6,943
----------- ----------- -------------- -----------
Net income $ 309,905 $ 14,490 $ -- $ 324,395
=========== =========== ============== ===========
Weighted average shares outstanding -- basic 270,971 21,154 -- 282,612(2)
Weighted average shares outstanding -- diluted 281,051 21,704 -- 292,995
Earnings per share -- Basic 1.14 0.68 -- 1.15
Earnings per share -- Diluted 1.10 0.67 -- 1.11
See accompanying notes to unaudited pro forma combined condensed
financial information.
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Condensed Statements
Of Income For Year Ended December 31, 1999
(Thousands Of U.S. Dollars, Except Per Share Amounts)
<TABLE>
<S> <C> <C> <C> <C>
Interpublic Pro Forma Pro Forma
Historical NFO Historical Adjustments(1) Combined
---------- -------------- -------------- --------
Revenue........................................ $ 4,427,303 $ 457,198 $ -- $ 4,884,501
Other income, net.............................. 134,215 -- -- 134,215
------------ ------------ ------------ ------------
Gross Income............................... 4,561,518 457,198 -- 5,018,716
------------ ------------ ------------ ------------
Costs and expenses:
Salaries and related expenses.............. 2,503,273 239,661 -- 2,742,934
Office and general expenses................ 1,389,005 218,575 -- 1,607,580
Restructuring charges...................... 84,183 -- -- 84,183
------------ ------------- ------------- ------------
Total costs and expenses............... 3,976,461 458,236 -- 4,434,697
------------ ------------ ------------ ------------
Equity interest in net (income) loss of
affiliated companies and other expenses...... -- (2,221) 2,221 --
------------ ------------ ------------ ------------
Income before provision for income taxes....... 585,057 1,183 (2,221) 584,019
Provision for income taxes..................... 236,339 6,787 -- 243,126
------------ ------------ ------------ ------------
Income of consolidated companies............... 348,718 (5,604) (2,221) 340,893
Income applicable to minority interests........ (33,426) (566) -- (33,992)
Equity in net income of unconsolidated affiliates 6,629 -- 2,221 8,850
------------ ------------ ------------ ------------
Net income..................................... $ 321,921 $ (6,170) $ -- $ 315,751
============ ============ ============ ============
Weighted average shares outstanding--basic..... 278,923 22,006 -- 291,033 (2)
Weighted average shares outstanding--diluted... 289,548 22,006 -- 301,658
Earnings per share--basic...................... 1.15 (0.28) -- 1.08
Earnings per share--diluted.................... 1.11 (0.28) -- 1.05
See accompanying notes to unaudited pro forma combined condensed
financial information.
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Condensed Balance Sheet
At December 31, 1999
(Thousands of U.S. Dollars)
<TABLE>
<S> <C> <C> <C> <C>
Interpublic Pro Forma Pro Forma
Historical NFO Historical Adjustments(1) Combined
---------- -------------- -------------- --------
Assets
Current Assets
Cash and cash equivalents.................... $ 981,448 $ 20,062 $ -- $ 1,001,510
Marketable securities........................ 36,765 -- -- 36,765
Receivables.................................. 4,309,589 90,052 -- 4,399,641
Expenditures billable to clients............. 309,059 23,774 -- 332,833
Prepaid expenses and other current assets.... 130,983 14,913 -- 145,896
----------- ----------- ----------- -----------
Total current Assets........................... 5,767,844 148,801 -- 5,916,645
----------- ----------- ----------- -----------
Property and equipment, net.................... 534,323 48,364 -- 582,687
Intangible assets.............................. 1,657,488 212,484 -- 1,869,972
Other assets................................... 767,600 16,413 -- 784,013
----------- ----------- ----------- -----------
Total Assets................................... $ 8,727,255 $ 426,062 $ -- $ 9,153,317
=========== =========== =========== ===========
Current Liabilities
Payable to banks............................. 261,951 $ 446 $ -- $ 262,397
Accounts payable............................. 4,541,669 20,467 -- 4,562,136
Accrued expenses and deferred income......... 675,596 91,014 10,000 776,610
Accrued income taxes......................... 157,713 2,771 -- 160,484
----------- ----------- ----------- -----------
Total current liabilities...................... $ 5,636,929 $ 114,698 $ 10,000 $ 5,761,627
----------- ----------- ----------- -----------
Long term debt................................. $ 348,772 $ 175,411 $ -- $ 524,183
Convertible subordinated debentures and
notes........................................ 518,490 -- -- 518,490
Deferred compensation and reserve for
termination liabilities...................... 343,606 -- -- 343,606
Deferred taxes on income....................... 41,429 3,690 -- 45,119
Accrued post-retirement benefits............... 48,730 5,164 -- 53,894
Other noncurrent liabilities................... 82,585 -- -- 82,585
Minority interests in consolidated
subsidiaries................................. 78,643 2,847 -- 81,490
----------- ----------- ----------- -----------
Total noncurrent liabilities................... $ 1,462,255 $ 187,112 $ -- $ 1,649,367
----------- ----------- ----------- -----------
Stockholders' equity
Common stock................................. $ 29,714 $ 224 $ 1,239 $ 31,177
Additional paid in capital................... 738,953 73,047 (1,239) 810,761
Retained earnings............................ 1,325,306 54,365 (10,000) 1,369,671
Accumulated other comprehensive income....... (76,404) (3,384) -- (79,788)
Less:
Treasury stock at cost....................... 312,463 -- -- 312,463
Unamortized expense of restricted stock
grants.................................... 77,035 -- -- 77,035
----------- ----------- ----------- -----------
Total stockholders' equity..................... 1,628,071 124,252 (10,000) 1,742,323
----------- ------------- ----------- -------------
Total Liabilities and stockholders' equity..... $ 8,727,255 $ 426,062 $ -- $ 9,153,317
=========== =========== =========== ===========
See accompanying notes to unaudited pro forma combined condensed
financial information.
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
NOTE 1: PRO FORMA ADJUSTMENTS
o The stockholders' equity accounts of Interpublic and NFO have been adjusted
to reflect the issuance of approximately 14.7 million shares of Interpublic
common stock in the merger pursuant to an exchange ratio of 0.5503 shares
of Interpublic common stock for each share of NFO common stock. This
presentation is based on the assumption that either the applicable average
trading price will be between $44.88 and $47.25 or it will be below the
$44.88 price, at which NFO can deliver a notice to call off the merger, and
NFO will not have delivered that notice. On April 6, 2000 the closing price
per share of Interpublic common stock on the New York Stock Exchange was
$48.25. If that closing price were the applicable average trading price,
then you would receive a fraction of a share of Interpublic common stock
with a value, based on the average trading price, of $26.00 for each of
your shares of NFO common stock.
o The estimated direct costs of the merger will be approximately $10 million.
The pro forma balance sheet gives effect to these direct costs as if they
had been incurred as of December 31, 1999, but the pro forma combined
condensed statements of income do not give effect to these expenses.
o For purposes of consistent classification, the caption "Equity interest in
net (income) loss of affiliated companies and other expenses" included in
NFO's statement of income has been reclassified on a basis consistent with
the classification used by Interpublic.
NOTE 2: PRO FORMA EARNINGS PER SHARE
o The pro forma earnings per share has been calculated based on the weighted
average number of shares of NFO common stock adjusted to reflect an
exchange ratio of 0.5503 shares of Interpublic common stock for each share
of NFO common stock. This presentation is based on the assumption that
either the applicable average trading price will be between $44.88 and
$47.25 or it will be below the $44.88 price, at which NFO can deliver a
notice to call off the merger, and NFO will not have delivered that notice.
On April 6, 2000 the closing price per share of Interpublic common stock on
the New York Stock Exchange was $48.25. If that closing price were the
applicable average trading price, then you would receive a fraction of a
share of Interpublic common stock with a value, based on the average
trading price, of $26.00 for each of your shares of NFO common stock.
<PAGE>
LEGAL OPINIONS
The validity of the shares of Interpublic common stock offered by the
proxy statement/prospectus as supplemented by this document, will be passed upon
for Interpublic by Nicholas J. Camera, Esq., Senior Vice-President, General
Counsel and Secretary of Interpublic.
EXPERTS
The consolidated financial statements of Interpublic and its
subsidiaries incorporated into this document by reference to Interpublic's
Annual Report on Form 10-K for the year ended December 31, 1999, except as they
relate to Hill, Holliday, Connors, Cosmopulos, Inc., as of and for the year
ended December 31, 1997, and to International Public Relations plc, as of and
for the year ended December 31, 1997, have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The audited financial statements of Hill, Holliday, Connors,
Cosmopulos, Inc., as of and for the year ended December 31, 1997, and of
International Public Relations plc, as of and for the year ended December 31,
1997, each a wholly owned subsidiary of Interpublic, not presented separately in
Interpublic's Annual Report on Form 10-K for the year ended December 31, 1999,
have been audited by Ernst & Young LLP and Ernst & Young, respectively,
independent accountants. Such financial statements, to the extent they have been
included in the financial statements of Interpublic, have been so incorporated
in reliance on the report of such independent accountants given on the authority
of said firms as experts in auditing and accounting.
The consolidated financial statements of NFO Worldwide, Inc. and
subsidiaries as of December 31, 1999 and 1998, and for each of the years in the
three year period ended December 31, 1999, included in the prospectus, as
supplemented by this document, and elsewhere in the registration statement, to
the extent and for the periods indicated in their report, have been audited by
Arthur Andersen LLP, independent public accountants. In their report, Arthur
Andersen LLP states that with respect to certain subsidiaries its opinion is
based on the report of other auditors, namely Soteriou Banerji. The consolidated
financial statements referred to above have been included herein in reliance
upon the authority of said firms as experts in accounting and auditing in giving
said reports.
The consolidated financial statements of Infratest Burke
Aktiengesellschaft Holding and subsidiaries as of September 30, 1998, 1997 and
1996, and for each of the years in the three year period ended September 30,
1998, included in the prospectus, as supplemented by this document, and
elsewhere in the registration statement, to the extent and for the periods
indicated in their report, have been audited by Haarmann, Hemmelrath & Partner
GmbH, independent public accountants, and have been included therein in reliance
upon the authority of said firm as experts in accounting and auditing in giving
said report.
Arthur Andersen LLP is NFO's independent public accountant. A
representative of Arthur Andersen LLP is expected to be available to answer
appropriate questions at the special meeting.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Interpublic and NFO file annual, quarterly and special reports, proxy
statements and other information with the Commission. For you convenience, we
include NFO's Annual Report on Form 10-K for the fiscal year ended December 31,
1999 as Annex S-B to this document. In addition, you may read and copy any of
the information on file with the Commission at the Commission's following
locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, DC. 20549 New York, NY 10048 Chicago, IL 60661-2511
Please call the Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Interpublic's and NFO's Commission filings are also
available to the public from commercial document retrieval services, some of
their Commission filings are available at the Commission's World Wide Web site
located at http://www.sec.gov. and some of their filings are available at
http://www.interpublic.com and http://www.nfow.com.
Interpublic common stock and NFO common stock are listed on the New
York Stock Exchange. Reports and other information concerning Interpublic and
NFO may be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
Interpublic filed a registration statement on Form S-4 to register with
the Commission the shares of Interpublic common stock offered by the proxy
statement/prospectus, as supplemented by this document. This document is a part
of that registration statement and constitutes a prospectus of Interpublic in
addition to being a proxy statement of NFO for the NFO special meeting. As
permitted by Commission rules, this document does not contain all the
information you can find in the registration statement or exhibits to the
registration statement.
The Commission allows Interpublic to "incorporate by reference"
information into this document, which means that Interpublic can disclose
important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be part of this document, except for any information superseded by
information in this document. The proxy statement/prospectus, as supplemented by
this document, incorporates by reference the documents set forth at page 94 of
the proxy statement/prospectus and those set forth below, including the exhibits
that these documents specifically incorporate by reference, that Interpublic has
previously filed with the Commission. These documents contain important
information about Interpublic and its financial performance.
<PAGE>
Interpublic Commission Filings Period
- ------------------------------ ------
Annual Report on Form 10-K Year ended
December 31, 1999
Description of the Interpublic common stock
contained in Interpublic's Form 8-A Dated June 29, 1971
and October 8, 1975,
respectively, as
amended on Forms 8,
dated February 24,
1983, June 12, 1984,
September 13, 1984,
June 25, 1985, July
15, 1987 and May 19,
1988
Definitive Proxy Statement 1999 Annual Meeting
of Stockholders
Interpublic is also incorporating by reference any additional documents
that it files with the Commission between the date of this document and the date
of the NFO special meeting.
Interpublic has supplied all information contained or incorporated by
reference in this document relating to Interpublic. NFO has supplied all
information contained in this document relating to NFO.
You may already have been sent some of the documents incorporated by
reference, but you can obtain any of them, excluding all exhibits that have not
been specifically incorporated by reference, from Interpublic or the Commission.
Documents incorporated by reference are available from Interpublic without
charge.
NFO stockholders may obtain documents incorporated by reference by
Interpublic by requesting them in writing or by telephone at the following
address:
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
Attn: Corporate Secretary
Telephone: (212) 399-8000
If you would like to request documents from Interpublic, please do so
promptly to receive them before the NFO special meeting. Interpublic will send
requested documents by first-class mail within one business day after receiving
the request.
You should rely only on the information contained or incorporated by
reference in this document to vote on the merger agreement proposal. No one has
been authorized to provide you with information that is different from what is
contained in this document. This document is dated April 7, 2000. You should not
assume the information contained in this document is accurate as of any date
other than this date, and neither the mailing of this document to stockholders
nor the issuance of Interpublic common stock in the merger shall imply
information is accurate as of any other date.
<PAGE>
ANNEX S-A
AMENDMENT TO
THE AGREEMENT AND PLAN OF MERGER
AND TO THE STOCK OPTION AGREEMENT
---------------------------------
THIS AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER AND TO THE STOCK
OPTION AGREEMENT (THIS "AMENDMENT"), DATED AS OF APRIL 3, 2000, BY AND BETWEEN
THE INTERPUBLIC GROUP OF COMPANIES, INC., A DELAWARE CORPORATION ("PARENT") AND
NFO WORLDWIDE, INC., A DELAWARE CORPORATION (THE "COMPANY").
W I T N E S S E T H:
WHEREAS, Parent and the Company are parties to that certain Agreement
and Plan of Merger (the "Merger Agreement") and to that certain Stock Option
Agreement (the "Option Agreement"), each dated as of December 20, 1999; and
WHEREAS, pursuant to Section 8.6 of the Merger Agreement and pursuant
to the Stock Option Agreement, the parties hereto wish to amend the Merger
Agreement and the Stock Option Agreement as provided herein;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS HEREIN CONTAINED, THE
PARTIES HERETO HEREBY AGREE AS FOLLOWS:
SECTION 1.1. DEFINITIONS. CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN
SHALL THE MEANINGS SET FORTH IN THE MERGER AGREEMENT.
SECTION 2.1. THE PREAMBLE TO THE MERGER AGREEMENT SHALL BE AMENDED AND
RESTATED IN ITS ENTIRETY, AND SHALL BE REPLACED WITH THE FOLLOWING:
"AGREEMENT AND PLAN OF MERGER, dated as of December 20, 1999 (as
amended by an Amendment, dated April 3, 2000, this "Agreement"), between The
Interpublic Group of Companies, Inc., a Delaware corporation ("Parent"), and NFO
Worldwide, Inc., a Delaware corporation (the "Company")."
SECTION 2.2. THE THIRD RECITAL TO THE MERGER AGREEMENT SHALL BE AMENDED
AND RESTATED IN ITS ENTIRETY, AND SHALL BE REPLACED WITH THE FOLLOWING:
"WHEREAS, in order to induce Parent to enter into this Agreement, and
as a condition to its doing so, the Company is simultaneously entering into a
stock option agreement (as amended by an Amendment, dated April 3, 2000, the
"Option Agreement) with Parent, pursuant to which the Company is granting Parent
an option to purchase shares of Company Common Stock (as hereinafter defined)
exercisable under certain circumstances."
SECTION 2.3. SECTION 2.1(C) OF THE MERGER AGREEMENT SHALL BE AMENDED
AND RESTATED IN ITS ENTIRETY, AND SHALL BE REPLACED WITH THE FOLLOWING:
"(c) Conversion of Company Common Stock. Each share of common stock,
par value $.01 per share, of the Company ("Company Common Stock) (including the
associated Rights (as defined in the Company Rights Agreement referred to in
Section 3.2(a)) issued and outstanding immediately prior to the Effective Time
(individually, a "Share" and collectively, the "Shares") (other than Shares to
be cancelled in accordance with Section 2.1(b)), shall be converted into and be
exchangeable for the right to receive a fraction (rounded to the nearest ten
thousandth and rounded up in the case of five one-hundred thousandths) of a
fully paid and non-assessable share of common stock, par value $.10 per share,
of Parent ("Parent Common Stock"), such fraction to be in the ratio provided
below (the "Exchange Ratio"). If the Average Parent Stock Price (as hereinafter
defined) is:
(i) greater than $66.70, the Exchange Ratio shall be fixed at .3898;
(ii) equal to or greater than $47.25 but less than or equal to $66.70,
the Exchange Ratio shall be $26.00 divided by the Average Parent Stock
Price; or
(iii) less than $47.25, the Exchange Ratio shall be fixed at .5503;
provided that if the Average Parent Stock Price is less than $44.88 (the
"Walk-Away Price"), the Company shall have the right to give telephonic notice
to Parent (a "Termination Notice"), followed promptly by written notice, that
the Company elects to terminate this Agreement in accordance with Section
8.3(a)(ii) hereof. Any Termination Notice shall be delivered to Parent no later
than 5:00 p.m. New York City time on the second business day following the last
day of the Measurement Period (as hereinafter defined). If the Company delivers
a timely Termination Notice, Parent shall have the right to give telephonic
notice to the Company (the "Top-Up Intent Notice"), followed promptly by written
notice, that Parent elects to increase the Exchange Ratio to equal $26.00
divided by the Average Parent Stock Price. Any Top-Up Intent Notice shall be
delivered to the Company no later than 5:00 p.m. New York City time on the
fourth business day following the last day of the Measurement Period. As used
herein, the "Average Parent Stock Price" shall mean the average of the per share
closing prices of Parent Common Stock (rounded to the nearest ten thousandth and
rounded up in the case of five one-hundred thousandths) on The New York Stock
Exchange, Inc. ("NYSE")(as reported in the New York City Edition of The Wall
Street Journal or, if not reported thereby, another nationally recognized
source) during the ten consecutive trading day period (the "Measurement Period")
ending on the sixth trading day prior to the Effective Time. All shares of
Parent Common Stock issued pursuant to this Section 2.1(c), together with any
cash in lieu of fractional shares of Parent Common Stock to be paid pursuant to
Section 2.7, are referred to herein as the "Merger Consideration".
SECTION 2.3. THE FIRST SENTENCE OF SECTION 8.5(B) OF THE MERGER
AGREEMENT SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY, AND SHALL BE REPLACED
WITH THE FOLLOWING:
"(b) In the event that (i) this Agreement is terminated by the Company
pursuant to Section 8.3(b) or (ii) an Acquisition Proposal shall have been made
to the Company or any of its subsidiaries or any of its stockholders or any
person shall have publicly announced an intention (whether or not conditional)
to make an Acquisition Proposal with respect to the Company or any of its
subsidiaries and thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 8.2(a), 8.2(b), 8.4(a), 8.4(b)(i) or, in the case of
a willful breach of covenant or agreement by the Company, 8.4(b)(ii) and within
12 months of such termination of this Agreement, any Acquisition Proposal by a
third party is consummated by the Company, then, in the case of (i) or (ii), the
Company shall pay Parent a termination fee of $30,000,000 in same-day funds,
together with interest accrued thereon at a rate equal to the prime rate, as
announced by Citibank, N.A. from time to time, plus 2% during the period
commencing on the date the termination fee is first payable hereunder."
SECTION 2.4. THE PREAMBLE TO THE OPTION AGREEMENT SHALL BE AMENDED AND
RESTATED IN ITS ENTIRETY, AND SHALL BE REPLACED WITH THE FOLLOWING:
"STOCK OPTION AGREEMENT, dated as of December 20, 1999 (as amended by
an Amendment, dated April 3, 2000, this "Agreement"), between The Interpublic
Group of Companies, Inc., a Delaware corporation ("Grantee"), and NFO Worldwide,
Inc., a Delaware corporation ("Issuer")."
SECTION 2.5. THE FIRST RECITAL TO THE OPTION AGREEMENT SHALL BE AMENDED
AND RESTATED IN ITS ENTIRETY, AND SHALL BE REPLACED WITH THE FOLLOWING:
"WHEREAS, concurrently herewith, the parties are entering into the
Agreement and Plan of Merger (as amended by an Amendment, dated April 3, 2000,
the "Merger Agreement");"
SECTION 2.6. SECTION 2(B)(V) OF THE OPTION AGREEMENT SHALL BE AMENDED
AND RESTATED IN ITS ENTIRETY, AND SHALL BE REPLACED WITH THE FOLLOWING:
"(v) the receipt by the Grantee (pursuant to its request) of the sum of
$30 million in respect of the termination fee under the Merger Agreement."
SECTION 2.7. EACH REFERENCE IN SECTION 22 OF THE OPTION AGREEMENT TO
"$27.5 MILLION" IS HEREBY REPLACED WITH A REFERENCE TO "$32.5 MILLION".
SECTION 3.1.
(A) OTHER THAN AS SET FORTH IN SECTIONS 2.1 THROUGH 2.7, THIS AMENDMENT
DOES NOT MODIFY, CHANGE OR DELETE ANY OTHER ADDENDUM, TERM, PROVISION,
REPRESENTATION, WARRANTY OR COVENANT (THE "PROVISIONS") RELATING TO OR CONTAINED
IN THE MERGER AGREEMENT OR THE OPTION AGREEMENT, AND ALL SUCH PROVISIONS REMAIN
IN FULL FORCE AND EFFECT. FOR THE AVOIDANCE OF DOUBT, ALL REFERENCES IN THE
MERGER AGREEMENT AND THE OPTION AGREEMENT TO "THE DATE HEREOF" OR "THE DATE OF
THIS AGREEMENT" SHALL BE DEEMED TO BE REFERENCES TO THE DATE DECEMBER 20, 1999.
(B) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (EXCEPT TO THE EXTENT THAT PROVISIONS OF
THE DGCL ARE MANDATORILY APPLICABLE), WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PROVISIONS THEREOF. THIS AMENDMENT MAY BE EXECUTED IN COUNTERPARTS, ALL OF WHICH
SHALL BE CONSIDERED ONE AND THE SAME AGREEMENT, AND SHALL BECOME EFFECTIVE WHEN
ONE OR MORE COUNTERPARTS HAVE BEEN SIGNED BY EACH OF THE PARTIES AND DELIVERED
TO THE OTHER PARTIES.
(C) THIS AMENDMENT AND ANY OF THE PROVISIONS HEREOF MAY NOT BE AMENDED,
ALTERED OR ADDED TO IN ANY MANNER EXCEPT BY A DOCUMENT IN WRITING AND SIGNED BY
EACH PARTY.
IN WITNESS WHEREOF, EACH OF THE PARTIES HAS CAUSED THIS AGREEMENT TO BE
DULY EXECUTED ON ITS BEHALF AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By:
------------------------------------
Name:
Title:
NFO WORLDWIDE, INC.
By:
------------------------------------
Name: William E. Lipner
Title: Chairman, Chief Executive Officer
and President
<PAGE>
ANNEX S-B
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number: 0 - 21460
NFO WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1327424
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2 PICKWICK PLAZA, GREENWICH, CT. 06830
-------------------------------- -----
(Address of principle executive offices) (Zip Code)
(203) 629 - 8888
----------------------------------------------------
(Registrant's telephone number, including area code)
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 17, 2000, was approximately $450,524,647.
As of March 17, 2000, there were 22,685,026 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
Special Note Regarding Forward-Looking Statements
As certain of the statements made in the Form 10-K are "forward-looking
statements" (within the meaning of the Private Securities Litigation Reform Act
of 1995), they involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements of NFO to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, clients' timing of new product introductions and reformulations,
clients' marketing budgets, industry and economic conditions, changes in
management or ownership of a client, the effect of NFO's competition on client
purchasing decisions, the strategic decisions of NFO's management team, the
extent to which NFO is successful in developing and marketing its interactive
marketing research techniques, the effect of foreign exchange rate fluctuations,
and other factors referenced in this Form 10-K. In addition, the success of
NFO's worldwide expansion efforts is dependent in part upon the successful
application of NFO's methodologies to different business and consumer
environments.
Item 1. Business
ORGANIZATION
NFO Worldwide, Inc., together with its subsidiaries, is a leading provider of
research-based marketing information and counsel to the worldwide business
community, including over 4,000 clients globally. NFO combines in-depth
knowledge of key market sectors with innovative data collection methodologies
and value added products. These market sectors include:
o consumer packaged goods and foods
o healthcare
o financial services
o automotive, travel and leisure
o high tech/telecommunications
Some key products and services include:
o continuous brand tracking
o online research
o consumer access panels
o multi-country research
o market evaluation
o product development
o customer satisfaction
o pricing and distribution
o advertising effectiveness
Through its proprietary pre-recruited consumer panel and other specialized
databases, NFO offers access to over 600,000 North American households, to over
1.5 million people, and to over 100,000 European households. NFO offers its
clients a wide variety of marketing research services that identify and measure
consumer beliefs, attitudes and behavior regarding specific products and
services. NFO believes its products and services enable clients to develop
better products, build more powerful brands, and design and implement more
effective marketing and advertising strategies. NFO provides its services in 38
countries and has approximately 15,300 full and part-time employees.
NFO provides its marketing information services, databases and marketing
research services to a diverse group of clients, including 59 of the largest 100
companies of the Fortune 500 list, and 37 of the world's 50 largest
pharmaceutical firms. NFO also conducts the Consumer Confidence Survey for the
Conference Board that is recognized as a leading economic indicator by the U.S.
Department of Commerce.
NFO, through its U.S. subsidiary, NFO Research, Inc., pioneered panel research
over 50 years ago. The size and diversity of the NFO panel allows for
specialized research targeting specific ethnic and demographic segments in
addition to routine types of marketing studies. The integrity of the panel is
maintained through the expertise of a highly trained and knowledgeable staff,
state-of-the-art database systems, and an unwavering focus on developing a
strong rapport with panel members. NFO believes that the size and quality of the
NFO panel, its expertise in the custom design and execution of marketing
research, its experience in panel and information management and its systems and
processing capabilities give it a competitive advantage over other marketing and
consumer information services firms. NFO also believes that these advantages
enable it to identify various targeted consumer groups and to measure their
responses to or use of particular products and services generally on a more
timely and cost-effective basis than firms using non-panel research methods.
In September 1997, NFO changed its name from NFO Research, Inc. to NFO
Worldwide, Inc. This change was aimed at reflecting its rapidly expanding
international presence, as well as its growing capabilities and commitment to
meeting its clients' requirements with world-class quality, effectiveness, speed
and efficiency. NFO was named one of the 200 Best Small companies in America by
Forbes magazine in 1996 and 1997 and has since outgrown the criteria for the
award. In 1998, NFO was named by Inside Research magazine as the fastest growing
marketing research firm in the world for the previous five years.
On December 20, 1999, NFO and The Interpublic Group of Companies signed a
definitive merger agreement whereby Interpublic will acquire all of the
outstanding shares of NFO common stock. The merger is a strategic global
alliance between NFO's marketing research strengths and Interpublic's diverse
advertising and communications expertise. Management believes the merger will
allow both companies to cross-sell their services in complimentary markets as
clients are increasingly expecting expert market evaluation to be part of their
overall advertising and promotional campaigns. NFO has scheduled a shareholders'
meeting for April 5, 2000, to vote on the proposed merger.
BUSINESS STRATEGY
NFO's goal is to become the worldwide leader in custom marketing research. In
order to accomplish this mission, NFO is aggressively pursuing a four-pronged
business development strategy.
Broaden and Expand Core Business. NFO is combining and leveraging its
outstanding array of branded products, innovative research techniques and
people, with its global scale and vertical market sector expertise. NFO intends
to develop new services and research concepts that will distinguish it from
other marketing research companies while furthering its development as a
marketing information services company that can deliver superior research
products on a world-wide scale. NFO intends to use its panel methodology and
expertise in custom and syndicated research to expand existing client
relationships and to target new clients, particularly in the pharmaceutical,
high tech, telecommunications and financial services industries in which NFO
perceives a growing need for marketing research. NFO also is keenly
interested in developing, purchasing or licensing additional, horizontal
value-added products and services in areas such as ad testing, market modeling,
and brand equity/continuous tracking. It is hoped that NFO can utilize its
strong client relationships within its vertical industries to make these new
products and services commercially successful. NFO has expanded beyond its core
packaged goods business with new services while developing a strong presence in
healthcare, information technologies/telecommunications, and financial services.
Technological Advancements. NFO's strategy is to pioneer new advances in
technology that will deliver its services more quickly, cost effectively, and
creatively, including opportunities in the areas of on-line marketing research
and data collection. NFO's focus on technological advancement is twofold:
internal and external. On the internal side, NFO is constantly searching for
ways to speed delivery of its services to its clients and improve the quality
and/or reduce the cost of its services. In 1998, NFO deployed various
technologies to speed the labor-intensive coding process for processing
questionnaires. In addition, in June 1999 NFO upgraded its questionnaire
development software for enhanced compatibility. NFO also uses a predictive
dialer that eliminates the time telephone interviewers formerly spent dialing
numbers and receiving busy signals, thus increasing productivity of the
telephone center. NFO utilizes a document imaging system that saves a
significant amount of the time required to process questionnaire responses
compared to conventional data entry. Additionally, NFO data networks were
upgraded to provide enhanced network connectivity between NFO's offices.
NFO believes that the advent and growing penetration of on-line and Internet
services will change the mix of media used to conduct marketing research and
will grow the overall size of the marketing research industry. Industry growth
and media shift will be driven by several factors: 1) high speed access to the
needs, opinions and behaviors of consumers provided by interactive research will
make marketing research in general a more applicable and necessary business
function, especially in those industries where the demand for shorter product
development cycles are most acute; 2) the increasing penetration of interactive
communication technologies into U.S. and eventually international homes will
make interactive-based research a preferred method for researching the general
population; 3) the greater customer value provided by interactive-based research
will increase interactive research at the expense of existing methodologies, and
also cause the overall industry to grow.
To address these issues, in 1996 NFO established the NFO Interactive division
for the purpose of developing an interactive methodology for performing
marketing research. During 1996, NFO developed NFO//net.source, the world's
largest representative panel of interactive users, which currently numbers over
190,000 households and over 530,000 individuals. By utilizing e-mail and the
World Wide Web to communicate with these panelists, the elapsed time of
collecting research information is shortened. This Interactive panel enables NFO
to provide clients with access to a rich source of information about the
interactive market and provides the ability to conduct interactive research with
accuracy and speed.
NFO has created proprietary software systems to facilitate the information
collection process and shorten the cycle times required for marketing research.
These systems include survey development tools, database management and
integration systems, analytic software and Internet software reporting tools.
Development has also included extensive process development and calibration
studies to ensure NFO's interactive methods provide accurate results and are
responsive to customer needs.
NFO's interactive products include NFO//net.survey, custom quantitative research
via the Internet, NFO//net.gauge, web-site evaluation services, NFO//net.focus,
the conduct of focus groups using the Internet, NFO//net.concept, a new tool to
speed time to market and save product development resources, NFO//net.query, an
interactive weekly e-mail survey, and NFO//net.discussion, a new, interactive
qualitative research tool. The products are marketed by the various NFO
companies. In addition, NFO has forged separate strategic alliances with major
players in the high tech industry, which will enable it to further develop and
provide value-added products and services to its customer base. These alliances
include Yahoo!, Jupiter Communications, and LiveWorld Productions. These
relationships allow NFO to provide innovative research methodologies, including
the conduct of virtual focus groups and the presentation of unique imaging
capabilities. NFO expects to incorporate additional technologies to advance the
effectiveness and applications of marketing research. NFO believes it is one of
the leaders in the development of interactive and on-line interviewing in the
marketing research industry.
Strategic Alliances and Acquisitions. To enhance its development as a marketing
information company, NFO seeks to develop alliances or acquire companies which
will establish or improve NFO's position in key market segments or enhance its
research functions or technologies. Examples of this strategy were the
acquisitions of PSI and AMS in 1994, M/K, CSI, Plog, and Spectrem in 1996, and
MBL, Access, CM Research and Prognostics in 1997. NFO continued this strategy in
1998 with the acquisitions of CF Group, NFO MarketMind, RCL, Stochastic,
Donovan, City Research, and, in November 1998, Infratest Burke, one of the top
four marketing research firms in Europe and the eighth largest marketing
research company in the world based on revenues. NFO is keenly interested in
increasing its presence in the high tech, telecommunications, healthcare and
financial services sectors. In addition, NFO is interested in increasing its
horizontal product and service capabilities in the areas of ad testing, market
modeling, brand equity/continuous tracking, and interactive research.
NFO's acquisitions have enabled it to evolve into a broader, more far-reaching
marketing information business, providing its clients with increasingly
innovative, results-oriented solutions to their information needs. NFO's
criteria for acquisitions include 1) niche service companies that are #1 or #2
in their markets, 2) strong management with vertical market sector or horizontal
product/service or geographic experience, 3) value added services or products
and 4) a cultural fit with NFO. NFO has very rigorous acquisition criteria and
personnel very experienced in the area of mergers and acquisitions.
International Markets. NFO believes that international markets offer it
potential opportunities to expand the services performed for its existing
clients, many of which have substantial international operations, and to attract
new clients. Total worldwide marketing research spending was estimated to be
$13.4 billion in 1998 by the European Society for Opinion and Marketing Research
(ESOMAR). Spending is estimated at $5.8 billion in Europe, $5.2 billion in North
America, $1.6 billion in Asia-Pacific, and $.8 billion elsewhere. In the
aggregate, marketing research spending outside North America represented $8.2
billion, or nearly 61%, of worldwide spending.
NFO believes that international markets offer a source of future growth for its
financial services, pharmaceutical, high tech, telecommunications, travel and
leisure products, as well as its packaged goods business. To capitalize on these
and other perceived opportunities, NFO may seek to acquire or enter into
additional joint ventures or similar arrangements with companies that have a
presence in certain international markets in which NFO perceives an increasing
demand for custom and syndicated marketing research.
NFO'S SERVICES
NFO has three operating segments: North America, Europe, and Australasia and the
Middle East. Within each of these operating segments, NFO has subsidiaries
specializing in various market sectors and types of marketing research services.
These market sectors and types of services include:
o consumer packaged goods and foods
o healthcare
o financial services
o automotive, travel and leisure
o high tech /telecommunications
o continuous brand tracking
o on-line research
o consumer access panels
o multi-country research
o product development
o customer satisfaction
o pricing and distribution
o advertising effectiveness
During 1999, NFO's North American revenues were $208.2 million, or 45%, of the
consolidated total of $463.0 million before elimination of intercompany revenues
of $5.8 million. European revenues were $210.1 million, or 45% of the
consolidated total, while revenues for Australasia and the Middle East
represented the remaining 10%. NFO believes that it is the largest custom
marketing research firm in North America, the third largest in Europe, and among
the top five marketing research firms in Australasia and the Middle East. NFO
believes it is the third largest custom marketing research firm in the world.
A discussion of each of the operating segments and their larger subsidiaries and
key industries follows.
North America
Custom Research and Syndicated Services - NFO Research. Approximately one-fifth
of NFO's revenues are derived from custom panel research, and NFO Research is
the largest of NFO's North American subsidiaries. NFO Research conducts its
panel marketing research by surveying targeted segments of the NFO panel
primarily through mail questionnaires and telephone interviews and, most
recently, interactive web-based surveys. The NFO panel is designed to match the
general U.S. population according to U.S. Bureau of Census statistics on several
important geographic and demographic characteristics. NFO Research develops and
maintains extensive demographic profiles of these households including
information with respect to size and composition of household, household income,
age of household members and education and occupation of adult household
members. NFO panel members are located in substantially all of the more than
3,600 counties, 300 metropolitan statistical areas and 200 defined market areas
in the continental U.S.
NFO Research believes that it can generally perform custom marketing research
more efficiently and reliably than firms using random research methods. Through
the pre-recruited NFO panel, NFO Research can identify on a timely and
cost-effective basis a significant sample of consumer households who have the
specific characteristics targeted, based on study design, and who are likely to
respond to its surveys. In many cases, NFO Research can easily select households
with the desired targeted characteristics from data it maintains concerning the
NFO panel. In other cases involving the need to locate households with targeted
characteristics not previously identified, NFO Research can efficiently locate
such households by screening a segment of its panel members based on their
profiles through a short interview or as part of NFO Research's "MultiCard
Survey" program. This capability is particularly efficient when seeking
households or consumers with "low incidence" characteristics, characteristics
exhibited by a relatively small segment of the general population. After
locating a sufficient sample of targeted households, NFO Research can quickly
perform the marketing research project by surveying those sample households.
NFO Research believes that in recent years there has been a trend among its
clients to focus on smaller market segments for product or service introductions
and marketing programs rather than on broad, mass markets and to focus on
segmenting existing product lines to provide products developed for targeted
consumers. The size of the NFO panel and NFO Research's extensive demographic
and geographical profiles of the NFO panel households facilitate the ability of
NFO Research to assist its clients with such "target" or "micro-marketing." NFO
Research has capitalized on its expertise in locating and researching households
within specific geographic areas, with specific user characteristics or with
unusual profiles. NFO Research accomplishes this by developing additional panels
of consumer households having demographic or other characteristics of particular
interest to clients. One such panel is the Chronic Ailment Panel, which was
created in 1992 to service the healthcare industry. The Chronic Ailment Panel
was developed by screening panel members for over sixty ailments and chronic
conditions, eight disabling conditions and users of several diagnostic testing
kits. This specialized sub-panel enables NFO Research's clients to quickly
identify and obtain information regarding very low incidence conditions and
ailments.
NFO Research has operations facilities located in Toledo, Ohio, and Greensboro,
North Carolina. NFO Research maintains large mailing and telecommunication
facilities in its main operations center in Toledo for the purpose of
distributing and administering questionnaires or other materials and packaging
and distributing product samples or other materials to survey participants. NFO
Research maintains a sales and marketing staff in eight locations throughout the
U.S. The research executives work primarily with the marketing research
departments and product brand management departments of its clients. For many of
its larger clients, NFO Research emphasizes continuing research programs,
including continuous screenings, customer satisfaction programs and annual
tracking studies in which the consistency of study design and execution over
time is important. The stability of the NFO panel makes such ongoing studies
possible, and often results in additional follow-up projects being commissioned
by the client.
The services provided by NFO Research, as well as by some of NFO's other
subsidiaries, are used to perform the following basic types of studies:
Attitude, Usage and Awareness Tests - measure the pre-disposition,
awareness and usage of products or services among consumers.
Product Tests - measure consumers' attitudes and purchasing and usage
decisions regarding a new, existing or reformulated product, a sample
of which is provided to the consumer by the client through NFO
Research.
Purchase/Owner Profiles - determine demographic or other
characteristics of consumers owning or purchasing a particular product
or service so that a client may improve the effectiveness of marketing
or advertising programs by properly positioning them to appropriate
consumers.
Purchase or Consumption Diaries - where panelists record in diaries
their actual purchase or usage of particular products over an extended
period to allow for evaluation of brand share and consumer shifts and
trends.
Screenings - used to identify demographic characteristics or the use or
purchase of or intention to purchase a product or service, particularly
in connection with low-incidence characteristics and products.
Concept Tests - consumers are asked to give their reaction to a concept
for a new product, service or advertising campaign before it is
developed or introduced into the marketplace.
NFO Research has an arrangement with IPSOS-ASI, one of the country's leading
advertising copy testing companies, that provides advertising concept tests for
in-home viewing by NFO panel members. NFO Research utilizes its Screen Test
product that provides a patented system by which a client's concept, product or
advertising message may be presented in an in-home setting for test material
that needs to be seen and heard by panelists rather than being described to them
in writing or over the telephone. The Screen Test product is a self-erasing
videotape that provides the security needed for handling marketing research of
confidential materials.
NFO and BASES jointly offer Volumetric Concept Screening by mail to clients.
BASES is a well-respected marketing research company and a leader in simulated
volume forecasting for new products and services. This service allows clients to
evaluate early stage product ideas and choose the most promising concepts.
Volumetric utilizes the NFO panel and cost saving mail methodology together with
BASES' Key Measures Database of over 5,000 cases for comparative analysis. This
is the second joint service offering by NFO and BASES. The two companies also
offer a cost saving approach to simulated test marketing, utilizing the NFO
panel and BASES' expertise in volumetric forecasting.
Healthcare - Migliara/Kaplan. M/K is the nation's largest custom full-service
healthcare marketing research company with offices in Baltimore, Maryland,
Princeton, New Jersey, Albany, New York, and London, England. M/K distinguishes
itself from its competitors because of its unique ability to fuse leading-edge
methodologies with decision-oriented business analyses and recommendations.
M/K has completed over 3,400 custom studies for more than 150 pharmaceutical,
biotechnology, diagnostics, medical devices and managed care companies since its
founding in 1980. As a specialist in the area of new product development, M/K
guides products from concept to commercialization to post-launch tracking. M/K's
extensive expertise leads to shortened timetables for regulatory approval,
product launch and return on investment.
M/K's marketing research projects range from qualitative studies, such as
one-on-one interviews and in-depth focus groups, to highly specialized and
customized fully integrated studies using advanced multivariate methods. Many of
its research techniques are exclusive and proprietary, giving M/K a true
competitive advantage. M/K's strategic thinking directly impacts upon a
product's marketing potential. Study objectives frequently include determining
positioning strategies, identifying optimal price points, guiding clinical
development, identifying target audiences, developing promotional messages, and
tracking products post-launch.
M/K is also a leader in multivariate methods, including conjoint analysis with
market simulation, perceptual mapping, correspondence analysis, multidimensional
scaling, psychographic/lifestyle segmentation analysis, and factor and cluster
analysis.
M/K takes pride in the fact that many of its original clients are still with the
firm and have expanded their relationship over the years. In addition, M/K has a
high rate of repeat business with existing clients. M/K has historically
attracted clients from all corners of the healthcare industry, with management
expertise in both diagnostics and pharmaceuticals, giving them firsthand
knowledge of the issues surrounding brand management and the positioning of new
technologies.
Financial Services - PSI Global. PSI offers a variety of syndicated programs
that provide insight to the financial services industry, as well as propriety
consulting services. The products cover a broad range of information utilized by
banks and financial institutions on consumer/retail banking services, private
banking and investment services, credit card services, distribution technology
and corporate banking services. PSI has provided research on credit card usage
in Europe since 1990. PSI has since expanded its coverage to bring the same
marketing research and strategic business planning expertise to Asia and Latin
America.
Financial Services - Spectrem Group. Spectrem provides niche consulting and
acquisition and divestiture advisory services in the trust and investment
products sectors. Additionally, Spectrem has built a national reputation as a
leading source of quantitative and qualitative research, consulting and
communications services to the retirement market addressing pension sales,
operations and marketing issues, especially in the 401(k) market. Founded in
1990, Spectrem has U.S. offices in San Francisco and Los Angeles, California,
New York, New York, Chicago, Illinois, and Hartford, Connecticut. Spectrem is a
specialist in the business side of investment and trust services and its
professionals have held top positions at leading banks, brokerage firms and
investment management companies.
Financial Services - City Research. City Research, founded in 1978 and
headquartered in London, England, is a leading UK marketing research firm
specializing in the financial services sector. City Research's products are
complimentary to PSI's, and City Research works in conjunction with PSI to sell
to the financial services industry throughout the UK. City Research provides
syndicated products customized for commercial banking clients, including
comprehensive market share data and information relating to customer needs,
customer satisfaction, and customer retention.
Technologies - Prognostics. Founded in 1981, Prognostics is a leading provider
of survey-based quantitative customer satisfaction research to information
technology companies worldwide. Prognostics is headquartered in Palo Alto,
California, and has additional offices in Boston, Massachusetts, Seattle,
Washington, and London, England, and has an affiliate relationship in Japan.
Using its proprietary methodology, Loyalty Gap Analysis, Prognostics measures
customer loyalty and quantifies the customer's intention to continue to purchase
products from a particular supplier. By measuring what is important to customers
and how satisfied they are with respect to specific attributes, the Prognostics
methodology generates a quantitative figure - called the loyalty gap - which
directly correlates to customer loyalty. Prognostics has developed a number of
syndicated/tracking survey products around this methodology, and also performs
specific, ad hoc research. Prognostics works with over 250 clients worldwide.
Technologies - NFO Interactive. In 1996, NFO established its NFO Interactive
division for the purpose of developing an interactive methodology for performing
marketing research. NFO has developed NFO//net.source, an interactive consumer
panel of on-line households numbering over 190,000 households and over 530,000
individuals. With NFO//net.source, clients can segment the market for selected
groups of interactive customers. With response rates in excess of 50% from NFO
Interactive's pre-recruited on-line panel, clients are assured of accurate
results without the non-response and self-selected bias often common with other
interactive research methods. NFO Interactive offers several products:
NFO//net.survey - custom quantitative research via the Internet using
the NFO//net.source on-line panel with the significant advantage of
speed. Results are often available in a matter of days.
NFO//net.gauge - delivers sophisticated, customized web-site analysis
that goes beyond the surface and truly evaluates a client's web-site
effectiveness. The product can trigger intelligent surveys to a random
sample of visitors to the site, or alternatively can arrange to have
the site evaluated by a specific target market using the
NFO//net.source interactive panel.
NFO//net.query - an interactive weekly e-mail survey providing
responses from over 2000 households. It is a short, multi-client survey
fielding up to three questions each week with a very high response
rate. Clients are able to share the costs to determine the incidence of
specific criteria, pre-screen for on-line surveys or focus groups, test
an idea, or answer need-to-know questions.
NFO//net.concept - a new tool to speed time to market and save product
development resources. It is not meant to be a substitute for formal
concept testing but rather it is a complimentary tool designed to help
clients initially gauge the potential of new product and marketing
concepts. Essentially, NFO//net.concept helps clients determine which
potential ideas regarding products, line extensions, or promotions
deserve the clients scarce resources.
NFO//net.focus - the on-line equivalent to the conventional focus
group, but with the significant advantages of no geographic boundaries
and no travel costs. This product allows for 2-D, 3-D and soon live
motion video for concept testing, package testing, and product
development.
NFO//net.discussion - a new cost-effective, qualitative research
service that recruits a target audience group using either
NFO//net.source or the client's customer list. Respondents are then
invited to participate in a password-protected, on-line discussion,
allowing clients to interact in real time with the consumer. This tool
enables clients to learn firsthand how consumers might
react to new brand, product or service ideas, line extensions, new
packaging, new marketing strategies, naming ideas, advertising, and
pricing changes.
NFO believes that there is significant commercial potential in providing
comprehensive interactive survey systems that feature greater speed and
household targeting than current methods and has introduced a number of new
interactive products to the marketplace. In addition, interactive information
collection has the advantage of low distribution and collection costs.
Technologies - InsightExpress, LLC. In October 1999, NFO launched
InsightExpress, a new internet company formed to provide real-time consumer
input to the desktops of decision makers in companies of all sizes worldwide.
InsightExpress is a fully automated web-enabled survey system that will allow
its customers to test new ideas, screen new concepts, gauge customer
satisfaction, survey employees, test advertising, and gather insight into the
needs, attitudes, and behaviors of consumers. InsightExpress is designed to
provide these capabilities at a fraction of the time and cost of existing
marketing research methods. InsightExpress is able to leverage the worldwide
client experience and panel expertise of NFO.
Technologies - NFO Ad:Impact. Formerly known as National Yellow Pages Monitor,
NFO Ad:Impact now augments NFO's global-leading Yellow Pages service offerings
with several unique, web-based audience measurement applications. Launched in
1987, NFO Ad:Impact is the leading provider of syndicated audience measurement
to the $12 billion Yellow Pages industry. NFO Ad:Impact ratings usage
information is gathered from over 80,000 respondents each year with results
reported on a national level, across 535 major metropolitan markets, over 500
individual Yellow Pages directory areas and approximately 300 categories. NFO
Ad:Impact also offers other syndicated and custom research services to the
Yellow Pages industry, including Active Intermedia Measurement, Business Usage
research and Web Site Survey studies.
In 1998, NFO Ad:Impact added several syndicated web-based audience measurement
applications utilizing the NFO Interactive panel to gather its local market
online information. New analytical tools have been developed that will forecast
for local media providers showing how consumers' use of traditional Yellow Pages
and newspaper products will be affected by consumers' use of local online media.
NFO Ad:Impact provides a broad array of unique services that will help local and
national media players quantify the value of local advertising to local
advertisers. For example, one of its products, NFO//consumer.choice, measures
consumer awareness, usage of, and related actions taken (merchant contact and/or
purchase) from, online searches. It is the benchmark local web audience
measurement product, currently monitoring over 50 sites in each of 25 markets.
The expanding base of clients of this service include Internet newspapers,
Internet Yellow Pages, city guides, search engines, and vertical web content
providers like Cybermeals.
Continuous Brand Tracking - NFO MarketMind. MarketMind, founded in 1987 and
located in Teaneck, New Jersey, and Melbourne, Australia, owns and licenses the
NFO MarketMind(TM) system, which uses proprietary software that combines a set
of key diagnostic measures together with the integration, interactive analysis,
and display of multiple streams of longitudinal data. The NFO MarketMind(TM)
system is licensed in 20 countries supporting hundreds of brands. The system can
be utilized for a number of purposes including: brand health monitoring, new
product launches, line extensions, special promotions, price discount and
premium tests, loyalty programs, public relations exercises, channel changes,
brand repositioning, customer satisfaction measurement, corporate image studies,
and marketing mix modeling.
Continuous Brand Tracking - Stochastic. Stochastic is the developer of the
Stochastic Reaction Monitor continuous brand tracking system, which provides
guidance on brand positioning to more than 60 companies in 33 countries.
Stochastic was founded in 1981 and is headquartered in London, England.
Continuous Brand Tracking - Ross-Cooper-Lund. RCL is a rapidly growing
brand-based marketing research firm headquartered in Teaneck, New Jersey. RCL
conducts research that helps clients understand brand equity, advertising
testing, product development and testing, and large-scale studies that help
clients to diagnose and monitor brand communications and to optimize media
budgets. RCL is the exclusive U.S. licensee of the NFO MarketMind(TM) continuous
information tracking system.
Travel and Leisure - Plog Research. Plog offers a number of syndicated products
to the travel and leisure industries. Plog's products provide information
regarding the attitudes and purchasing behavior of airline users, cruise and car
rental users, frequent flyer program members and hotel guests, including
comprehensive information about the business and leisure travel habits of
Americans. Another Plog syndicated product offers in-depth research on the
psychology of the users of interactive media and provides insight to advertisers
on when and how to use interactive media. Plog is located in Los Angeles,
California, and East Brunswick, New Jersey.
Canada - CF Group. Founded in 1932, CF Group is headquartered in Toronto,
Canada, and has Canadian client service offices in Montreal, Ottawa and
Vancouver. CF Group operates three divisions within Canada - Canadian Facts, the
largest custom marketing research organization in Canada, Applied Research
Consultants, and Burke International Research - which provide marketing, social,
and business research services across a variety of industries. CF's data
collection capabilities include the largest personal in-home interviewing force
in Canada, the largest computer-assisted telephone interviewing system with over
350 stations throughout 10 Canadian cities, and extensive mall interviewing
facilities. CF Group serves its clients in a broad range of research categories
including advertising, concept and product service evaluation, public policy and
political research, business-to-business, and customer and employee satisfaction
surveys. CF's Canadian access panel, Canadian Family Opinion, when used in
combination with the NFO Panel enables clients to utilize the largest access
panel in North America for seamless cross-border research.
Europe
Infratest Burke - International Custom and Syndicated Services. NFO acquired
Infratest Burke in November 1998. Infratest Burke is a leading European
marketing research firm founded in 1947 and headquartered in Munich, Germany,
with 35 offices in 15 countries. Infratest Burke was ranked by Marketing News in
1997 as the 8th largest marketing research organization in the world. In 1999,
Infratest Burke served approximately 1,800 clients with 4,000 research and
consultancy projects and conducted over 2.2 million interviews. Infratest Burke
has performed over 39,000 research projects since 1980 and has enjoyed over an
80% customer loyalty rate from repeat clients. Infratest Burke has some of
Europe's largest computer-assisted telephone interviewing and computer-assisted
personal interviewing systems, with over 700 and 900 stations, respectively.
Infratest Burke is ISO 9001 certified in key locations such as Germany, Italy,
Sweden and the UK. Infratest Burke's products and services include professional
expertise and advanced technical resources in four major fields of activity:
strategic and tactical marketing, public policies, customer retention and
personnel development. Infratest Burke conducts both quantitative and
qualitative research for a wide range of client management projects and provides
multi-client research regarding consumer business statistics. Other services
include omnibus surveys, hall/mall tests, and retail analysis. Among its major
offerings are:
TRI*M - a customer retention model.
BASES - a simulated test market software package that allows consumer
packaged goods marketers to predict the likely sales and success of new
products before they are formally launched to consumers. Infratest
Burke has been the exclusive European licensee of the BASES system for
about 20 years.
PRICER - a pricing strategy analysis model.
AD-VISOR/A.C.E. (Advertising Campaign Evaluation) - an on-air copy
testing service.
COSMOS - a concept, product, and pricing optimization model.
Infratest Burke provides a wide array of specially-designed marketing research
studies and advisory services in selected key industry segments:
Consumer Goods and Durables - For more than four decades, Infratest
Burke has provided comprehensive marketing research services to global
manufacturers, marketers and retailers of consumer goods and durables,
including those involved with food, soft drinks, diary products,
toiletries, white goods, clothing/apparel, and sporting goods.
Infratest Burke supports its clients in all aspects of their strategic
and tactical brand marketing initiatives through the use of both
individually designed ad hoc studies and unique standardized tools with
an ultimate goal of determining the underlying consumer trends for
their clients products. Infratest Burke believes it has developed
industry-leading marketing research tools and technologies in the area
of sales forecasts and image research that benefit its clients in
providing consistency and reliability of marketing data on a world-wide
basis.
Automotive/Transportation - For 25 years, Infratest Burke has conducted
an ongoing public opinion survey for its automotive clients structured
to determine and evaluate consumer attitudes on automotive-related
products and services. Infratest Burke also conducts comprehensive new
car and used car buyer surveys, which attempt to uncover market
patterns, buyer motivation, brand loyalty, and consumer satisfaction.
Infratest Burke designed ground-breaking measuring tools specifically
designed for transportation and traffic system analysis, including
products that monitor the needs and value of various transport systems
and products that assemble and interpret travel industry data to
monitor the reasons and motivations for personal and business travel
and tourism.
Information Technology/Telecommunications/Media - Infratest Burke's
clients in this industry include land line and cellular phone
operators, voice/data communication network providers, computer
hardware manufacturers, software developers, mainframe/workstation
designers, fax/copier manufacturers, and similar organizations.
Products provided by Infratest Burke are designed to provide timely
strategic information relating to market segmentation and positioning,
pricing policies, sales forecasts, new product launching analyses,
advertising campaign evaluations, standardized "dummy tests",
electronic measuring methods, customer satisfaction, and loyalty
surveys.
Infratest Burke has a long history in this industry, originally serving
radio broadcasting clients with national audience measurement. Today,
Infratest Burke provides specially designed research studies for many
private and public radio and TV companies, print and electronic media
providers, video/music industry participants, and advertising
companies.
Healthcare/Drugs - This industry in Europe is greatly affected by
political decisions and public pressure to develop new products.
Successfully bringing a new product to market depends increasingly on
marketing research and marketing support. Infratest Burke's specially
commissioned studies and analyses focus on providing clients strategic
and timely data on the depth and breadth of potential market segments,
forecasted sales and penetration levels, early warning studies, pricing
and positioning models, customer needs and satisfaction studies,
economic analysis, continuous tracking systems, and qualitative
research projects.
Financial Services - This industry has shown considerable growth due to
changes occurring in the industry, such as the pan-European currency
unification and the increasing use of electronic banking and media.
Infratest Burke's products are designed to help clients across the
complete marketing function. This ranges from pricing and demand
research studies, to sales analyses, to communications and advertising
research studies, in areas such as direct/electronic banking, discount
brokerage services, direct insurance, and other financial services
areas. Infratest Burke developed its Financial Market Data Service in
Europe more than 25 years ago as a continuous structural analysis
survey tool to gather and organize data within this sector.
BJM/Marketing Behaviour/Marketing Blueprint - International. These UK-based
research firms were originally part of NFO's MBL Group and offer qualitative and
quantitative ad hoc research with high standards of research design and
creativity. Their clients cover a wide range of industries, including consumer
goods, business-to-business, service providers, pharmaceutical, automotive,
retail, and drinks. NFO's MBL Group UK companies are among the top ten marketing
research firms in Europe, and conduct research projects in 30 countries.
Operationally, these companies are now part of the European operating segment.
Australasia and the Middle East
MBL Group - International Custom and Syndicated Services. MBL is a leading
international marketing research firm with offices throughout Australasia and
the Middle East. Founded in 1965, MBL provides strategic planning, marketing
research, and research-based consulting, on a worldwide basis. Working through
its own subsidiaries and affiliates in the Middle East, Asia, and Southeast
Asia, MBL has successfully carried out assignments in some 100 countries around
the world. MBL's orientation is toward value-added research - research oriented
toward problem solving and interpretation of data, rather than simple data
provision. MBL provides research-based consultancy - answers to problems - not
just answers to questions.
Within the group, MBL has specialists in ad hoc quantitative research,
qualitative research, telephone research, and executive interviewing. MBL has
specialists in consumer, social, industrial, and business-to-business research
and expertise inpackaged goods, automotive, pharmaceutical, financial, airline
and travel industries. MBL's services include new product development
assistance, corporate image evaluation, employee and customer satisfaction
research, total quality management studies, brand-development monitoring, and
advertising development and tracking.
MBL specializes in international/multi-national project coordination and
operates the Stochastic Reaction Monitor brand-development franchise and the
ADD+IMPACT advertising pre-testing system, the Visionary Shopper, a
computer-based virtual reality shopping system, and the Idea Map, a
computer-based product and communication optimization system.
CM Research. CM Research, headquartered in Auckland, New Zealand, is the leading
provider of custom marketing research in New Zealand and one of the larger
marketing research organizations in Australia. With offices in five cities in
both countries, CM Research provides a number of proprietary and self-developed
brand services to a blue-chip client list.
Donovan Research. Donovan, founded in 1974 and headquartered in Perth,
Australia, is a full service custom research agency with a leading position in
fast-moving consumer goods, public policy, tourism, customer satisfaction, and
continuous tracking research. In addition to its own branded products, AdTest
and Packtest, Donovan is also the exclusive regional licensee of NFO
MarketMind(TM), the global brand tracking system acquired by NFO in March 1998.
Acquisitions - 1998. NFO experienced a period of unprecedented growth through
acquisitions in 1998. Most significant was the November 1998 acquisition of
Infratest Burke Aktiengesellschaft Holding. Founded in 1947, Infratest Burke is
headquartered in Munich, Germany, and ranks as one of the top four custom
marketing research firms in Europe with 35 offices in 15 countries. The
combination of NFO and Infratest Burke created the sixth largest marketing
research firm in the world, and one of the top three custom marketing research
companies globally. NFO was already the largest custom marketing research firm
in North America.
NFO completed two acquisitions in October 1998, Donovan Research Pty. Ltd. and
City Research Group Plc. Donovan, founded in 1974 and headquartered in Perth,
Australia, is a full service custom research agency with a leading position in
fast-moving consumer goods, public policy, tourism, customer satisfaction and
continuous tracking research. In addition to its own branded products, AdTest
and Packtest, Donovan is also the exclusive regional licensee of NFO
MarketMind(TM), a global brand tracking system acquired by NFO in March 1998.
City Research, founded in 1978 and headquartered in London, England, is a
leading UK marketing research firm specializing in financial services. City
Research provides syndicated products customized for commercial banking clients,
including comprehensive market share data and information relating to customer
needs, customer satisfaction, and customer retention.
NFO acquired Stochastic International Pty. Ltd. in August 1998. Stochastic is
the developer of the Stochastic Reaction Monitor continuous brand tracking
system, which provides guidance on brand positioning to more than 60 companies
in 33 countries. Stochastic was founded in 1981 and is headquartered in London,
England.
NFO completed three separate acquisitions in the spring of 1998, CF Group, Inc.
in April, and MarketMind Technologies and Ross-Cooper-Lund in March. Founded in
1932, CF Group is headquartered in Toronto, Canada, and has Canadian client
service offices in Montreal, Ottawa and Vancouver. CF Group operates three
divisions within Canada - Canadian Facts, the largest custom marketing research
organization in Canada, Applied Research Consultants, and Burke International
Research - which provide marketing, social and business research services across
a variety of industries. CF Group's data collection capabilities include the
largest personal in-home interviewing force in Canada, the largest
computer-assisted telephone interviewing system throughout 9 Canadian cities,
and extensive mall interviewing facilities. Additionally, CF Group maintains a
consumer access panel similar to NFO Research's, which allows CF Group to offer
its clients seamless cross-border panel-based research.
NFO MarketMind, founded in 1987 with offices in Teaneck, New Jersey, and
Melbourne, Australia, owns and licenses the NFO MarketMind(TM) system, which
uses proprietary software that combines a set of key diagnostic measures
together with the integration, interactive analysis and display of multiple
streams of longitudinal data.
RCL is a rapidly growing research-based consulting firm that conducts
large-scale studies that help clients to diagnose and monitor brand
communications and to optimize media budgets. RCL is located in Teaneck, New
Jersey, and is the exclusive licensee of the NFO MarketMind(TM) system in the
U.S.
Acquisitions - 1997. NFO aggressively pursued its growth-via-acquisition
strategy in 1997 with the December acquisition of New Zealand-based CM Research
Group, the leading provider of custom marketing research in that country and one
of the largest marketing research organizations in Australia. CM Research has 5
offices and 5 separate operating companies, and conducts studies for a
diversified list of blue chip clients. CM Research became part of MBL (see
below) for operational purposes, making the latter one of only three marketing
research firms in the world with full coverage of the Australasia region.
NFO took significant steps to expand its presence overseas when, in July 1997,
it acquired The MBL Group Plc, a leading international marketing research firm.
MBL has companies and offices throughout the world, including the UK, the Middle
East, Asia, Mainland China and Southeast Asia. Within the group, MBL has
specialists in ad hoc quantitative research, qualitative research, telephone
research, and executive interviewing. MBL also has specialists in consumer,
social, industrial, and business-to-business research and expertise in packaged
goods, automotive, pharmaceutical, financial, airline and travel industries.
MBL's services include new product development assistance, corporate image
evaluation, employee and customer satisfaction research, total quality
management studies, brand-development monitoring, and advertising development
and tracking.
NFO expanded its presence in the financial services industry through the May
1997 acquisition of Access Research by Spectrem. Access was founded in 1987 and
had built a national reputation as a leading source of quantitative and
qualitative research, consulting and communications services addressing pension
sales, operations and marketing issues, especially in the 401(k) market. The
combined resources of Spectrem and Access allow clients to benefit from the most
extensive and accurate research on plan sponsors, plan participants and
performance benchmarks, along with expert advice on how to use that information
to make successful decisions. Access was merged into Spectrem effective
September 1, 1999.
In April 1997, NFO acquired Prognostics, one of the leading providers of
survey-based quantitative customer satisfaction research to information
technology companies. Prognostics is based on Palo Alto, California, with
additional offices in Boston, Massachusetts, Seattle, Washington, and London,
England, and an affiliate relationship in Japan. Through its proprietary
software, advanced survey methodology and in-depth industry knowledge,
Prognostics offers the most complete range of services in the marketplace.
Information technology companies, having begun to shift from an internal,
engineering-based focus to an external, market-driven philosophy, utilize
Prognostics' services to assess their strengths, vulnerabilities and competitive
opportunities. The end result for the client is improved customer retention
rates, better-quality decisions and more efficient use of resources.
Acquisitions - Pre-1997. In 1994, NFO acquired Payment Systems, Inc., a Tampa,
Florida-based provider of syndicated research products to the financial services
industry. PSI has over 100 clients in such financial service areas as retail,
corporate and private banking, insurance, mutual funds, and credit cards. PSI is
also very active in the international market, with its London, England, office
surveying households in nearly a dozen European countries to determine consumer
attitudes toward the usage of debit cards and other financial products.
Additionally, PSI conducts research in Africa, the Middle East, the Asia-Pacific
region, and in six Latin American countries.
In 1996, as part of its strategy to diversify into the investment industry and
insurance sectors, PSI acquired Spectrem, which is headquartered in San
Francisco, California, and has offices in New York, New York, Los Angeles,
California, Chicago, Illinois, and Hartford, Connecticut. Spectrem began
operations in 1990 and has grown into a premiere provider of consulting, mergers
and acquisition advice and customized information products to companies in the
rapidly expanding investment services industry.
In response to the competitive environment within the healthcare industry and
the resulting opportunities afforded to providers of marketing information, NFO
acquired Migliara/Kaplan Associates and its affiliate, Chesapeake Surveys Inc.,
in 1996. M/K, with offices in Baltimore, Maryland, Princeton, New Jersey, and
Albany, New York, is the nation's largest custom market research firm serving
the pharmaceutical industry. CSI provides data collection and survey services.
The studies conducted by M/K and CSI involve not only doctors but other third
parties, which compliments NFOR's focus on the consumer. M/K's clients now gain
a multi-faceted perspective on all of the latest issues affecting the healthcare
and pharmaceutical industry.
Another rapidly changing industry is travel and tourism, which NFO serves
through its Plog Research, Inc. subsidiary. Acquired in 1996, Plog is based in
Los Angeles, California, and is a leading provider of syndicated research to
airlines, hotels, cruise lines and rental car companies. Plog has also conducted
both custom and large-scale multi-sponsored studies for major travel and leisure
industries.
NFO is committed to providing its clients with increasingly innovative,
results-oriented solutions to their information needs. This is why NFO has
changed so dramatically over the years and will continue to do so in the future
as it strives to become the undisputed global leader in the marketing
information business.
CLIENTS
NFO is a leading provider of research-based marketing information and counsel to
the worldwide business community. Including its subsidiaries, NFO conducts
nearly 17,000 research projects annually for more than 4,000 clients in 38
countries. NFO's
clients include 59 of the largest 100 companies on the Fortune
500 list, and 37 of the world's 50 largest pharmaceutical firms.
NFO's enviable roster of clients is further characterized by the longevity of
many of these relationships. A number of NFO's core business clients have had
ongoing business relationships with NFO for between 30 and 50 years. The
longevity of these relationships is enhanced by data comparability with
information in the normative databases that NFO has helped its clients build
over the years. NFO's data is also used by its clients beyond the research
function. For example, some clients have incorporated NFO's data into their
internal performance evaluation systems.
NFO's client list includes over 4,000 companies. No single client represented
more than 10% of its total revenues in 1999 or 1998. NFO's ten largest clients,
which collectively represented approximately 21% of its total 1999 revenues, are
as follows:
o Bristol Myers Squibb
o Daimler Chrysler
o Gillette
o Deutsche Telekom
o Merck
o Pfizer, Inc.
o The Procter & Gamble Company
o Searle
o Volkswagen A.G.
o Volvo Cars
NFO also has provided the Consumer Confidence Survey among nationally
representative households each month for the past 30 years to the Conference
Board, a worldwide non-profit business information organization with many of
America's largest corporations as members. The Conference Board provides
research information to aid businesses in management practices and policy. The
U.S. Department of Commerce has recognized the Conference Board's Consumer
Confidence Survey performed by NFO as a leading economic indicator since August
1990. Consumer confidence surveys are used by government and private enterprises
as predictors of business cycles.
THE MARKETING RESEARCH INDUSTRY
Revenues for the worldwide marketing research industry reached $13.4 billion in
1998 according to the latest data from ESOMAR, the European Society for Opinion
and Marketing Research. Spending is estimated at $5.8 billion in Europe (43%),
$5.2 billion in North America (39%), $1.6 billion in Asia-Pacific (12%) and $.8
billion elsewhere (6%). In the aggregate, marketing research spending outside
North America represented $8.2 billion, or nearly 61%, of worldwide spending.
The worldwide marketing research industry is comprised of thousands of
marketing, advertising and public opinion research organizations that measure
consumer attitudes and behavior. The industry is comprised primarily of two
segments: (i) syndicated research, which generally provides historical
information regarding past consumer purchasing decisions (such as aggregate
sales or market share within product categories) and is generally made available
to the marketplace on a non-exclusive basis, and (ii) custom or ad hoc research,
which is performed to the specifications of a particular client.
Custom research involves the measurement of consumer beliefs, attitudes and
behavior toward particular products, services, concepts or advertising programs.
Custom research is generally conducted by obtaining information from consumers
through questionnaires or interviews. Because information is generally solicited
directly from consumers, custom research provides insights into consumers'
perceptions of products or services and the patterns of purchase and usage of
such products and services by consumers with particular demographic or other
profiles. Many clients use custom research to interpret the market share or
sales information provided by syndicated research. In addition, by testing a
proposed product or advertising campaign on a sample of consumers to whom the
product or campaign will be directed, a client can obtain information about the
targeted consumers' likely response to the product or campaign before incurring
the costs associated with the introduction of the product or campaign to the
marketplace. The American Marketing Association estimates that there are over
three thousand firms performing custom research services in the U.S. alone, with
no firm holding a dominant share of that market. NFO believes it is the largest
U.S.-based custom marketing research firm.
Custom research may be conducted by panel surveys, unsolicited telephone
interviewing, door-to-door personal interviewing and central location
interviewing in places such as stores and shopping malls. The largest segment is
random telephone interviewing. NFO estimates that panel surveys account for 12%
of the segment and involve interviewing members of consumer households who have
previously agreed to participate in the research firm's surveys and who have
provided demographic and other data about themselves.
NFO believes it is currently the largest custom panel research firm within the
industry, the sixth largest research organization in the world, and one of the
top three custom marketing research firms worldwide. NFO is niche oriented and
attempts to exploit specific areas of marketing research where market growth
rates are high, margin potential is good, and barriers to entry/exit and
competition are limited. Within the U.S., NFO believes it is ranked number one
in the following niche markets: custom healthcare research; syndicated financial
services research; panel-based packaged goods and services research; high tech
customer satisfaction research; and travel/leisure research.
The custom marketing research industry is very competitive and highly
fragmented, with participants ranging from relatively small organizations to
large, multinational companies with substantial resources. NFO is also subject
to competition from marketing and research departments of various companies,
advertising agencies, and business-consulting firms. NFO believes that its
principal competitive advantages are in the quality of its design of a marketing
research product; the ability to design, perform and report on a research
project in a short period of time; its price; consistency of service; the NFO
panel; and the global coverage that enables the delivery of consistent research
in a multi-country study environment.
COMPETITION
NFO's primary worldwide competitors include the following:
o Taylor Nelson Sofres, London, England
o The Kantar Group Ltd., London, England (part of the WPP Group Plc)
o Gfk AG, Nuremberg, Germany
o IPSOS Group, S.A., Paris, France
o NPD Group, Port Washington, New York
o Market Facts, Inc., Arlington Heights, Illinois (part of the Aegis
Group)
o M/A/R/C Inc., Irving, Texas (part of the Omnicom Group)
o United Information Group, London, England
o Opinion Research Corp., Princeton, New Jersey
In terms of total research revenues, in 1998 NFO was ranked sixth in the "Top 25
Global Research Organizations" list published by Marketing News in August 1999.
Of the top six companies, three primarily provide syndicated marketing
information while three, including NFO, primarily provide custom marketing
research.
TRADEMARKS, PATENTS, SERVICE MARKS AND PROPRIETARY SOFTWARE
NFO owns several federally registered trademarks and service marks, the most
important of which are NFO, NFO Worldwide, NFO Research, National Family
Opinion, Payment Systems, PSI, Migliara/Kaplan, Screen Test, NFO MarketMind and
MultiCard Survey. NFO uses the name "Carol Adams," the pen name of the founder's
wife who originally supervised contacts with NFO's panel households, in written
and oral communications with panel members and recruits, to create a personal
relationship between NFO and its panel members. Certain of NFO's non-domestic
subsidiaries also maintain various trademarks and patents in the countries in
which they operate. In addition, NFO has a process patent pending relating to
InsightExpress.
NFO considers these trademarks and service marks to be material to its business.
NFO vigorously defends its trademarks and service marks against infringement and
other unauthorized use. NFO protects its proprietary software and information
systems by limiting access to key personnel through the use of password systems.
EMPLOYEES
As of December 31, 1999, NFO had approximately 15,300 employees (3,300 full-time
and 12,000 part-time). Approximately 1,500 of the 15,300 employees reside in the
U.S. NFO emphasizes the comprehensive training of its personnel. In addition to
training in an employee's primary area of responsibility, NFO trains its staff
to perform tasks among the different departments to ensure that trained backup
staff is available in areas that have periodic short-term increased demand. NFO
believes that it has historically experienced low turnover of staff in both the
professional and the clerical areas relative to the marketing research industry
generally. Long tenure helps to reduce the costs of re-hiring and re-training
and establishes and builds upon experience that can be applied to all future
work.
None of NFO's domestic employees are subject to a collective bargaining
agreement. CF Group has agreements with two separate unions covering certain of
its employees in Canada; the United Steelworkers of America covers 67 employees,
and Confederation des Syndicats Nationaux covers 45 employees. NFO has not
experienced any work stoppages and believes its relations with its employees are
good.
OTHER MATTERS
See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations for a discussion of the Year 2000 and Euro conversion
issues and Market Risk Management.
Item 2. Properties
NFO's primary U.S. operations facility is located in an approximately 148,000
square foot complex located on approximately 77 acres owned by NFO in Toledo,
Ohio. Operated from this facility are NFO's data entry, computer, mailing and
product storage and handling facilities, a regional sales office and the largest
of NFO's three telephone interviewing facilities. The facility was built in 1975
and first expanded in 1982. NFO recently completed an expansion project which
added approximately 50,000 square feet of office space to the facility and
renovated the existing space. NFO's remaining facilities are all leased.
The following is a summary of NFO's office locations throughout the world:
<TABLE>
<S> <C> <C> <C>
Company Locations Company Locations
- ------- --------- ------- ---------
Executive Offices Greenwich, CT CM Research Auckland, New Zealand
Wellington, New Zealand
NFO Research Toledo, OH Sydney, Australia
Atlanta, GA Brisbane, Australia
Chicago, IL Melbourne, Australia
Cincinnati, OH
Greensboro, NC MBL Group / Hong Kong
Greenwich, CT Marketing Behaviour Manila, Philippines
Minneapolis, MN Dhaka, Bangladesh
San Francisco, CA Jakarta, Indonesia
Hyderabad, India
Migliara / Kaplan Baltimore, MD Ho Chi Minh City, Vietnam
Chesapeake Surveys Princeton, NJ London, England
Albany, NY Singapore
London, England Shanghai, China
Bangkok, Thailand
Donovan Research Perth, Australia Taipei, Taiwan
Colombo, Sri Lanka
PSI Global Tampa, FL Kuala Lumpur, Malaysia
New York, NY
San Francisco, CA MERAC Manama, Bahrain
London, England Dubai, United Arab Emerites
Singapore Abu Dhabi, United Arab Emerites
Riyadh, Saudi Arabia
Spectrem New York, NY Jeddah, Saudi Arabia
Chicago, IL Damman, Saudi Arabia
Hartford, CT Cairo, Egypt
San Francisco, CA Beirut, Lebanon
Los Angeles, CA
BJM Research & London, England
City Research London, England Consultancy
CF Group Toronto, Canada Marketing Blueprint London, England
Montreal, Canada
Ottawa, Canada Infratest Burke Munich, Germany
Vancouver, Canada Berlin, Germany
Frankfurt, Germany
Stochastic London, England Nuremburg, Germany (JV)
Wetzlar, Germany
Prognostics Palo Alto, CA Bad Homburg, Germany (JV)
Boston, MA London, England
Seattle, WA Edinburgh, England
London, England Paris, France
Milan, Italy
NFO Interactive Greenwich, CT Rome, Italy
Gothenburg, Sweden
NFO Ad:Impact Greenwich, CT Stockholm, Sweden
San Francisco, CA Madrid, Spain (JV)
Basel, Switzerland (JV)
Infocom Palo Alto, CA Istanbul, Turkey
Amsterdam, Netherlands
Plog Research Los Angeles, CA Copenhagen, Denmark
East Brunswick, NJ Prague, Czech Republic (P)
Helsinki, Finland
Ross-Cooper-Lund Teaneck, NJ Cracow, Poland (P)
Budapest, Hungary (P)
NFO MarketMind Teaneck, NJ Bratislava, Slovak Republic (P)
Technologies Melbourne, Australia Cincinnati, OH
Rochester, RI
JV: 50% joint venture
P: Cooperation partners
</TABLE>
Item 3. Legal Proceedings
NFO is not a party to any litigation that is expected to have a material effect
on the operations or business of NFO.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
NFO common stock has traded on the New York Stock Exchange since December 29,
1997, under the symbol "NFO". From the completion of NFO's initial public
offering in April 1993 until December 29, 1997, shares of NFO common stock were
traded on the NASDAQ National Market tier of the NASDAQ Stock Exchange under the
symbol "NFOR".
As of March 17, 2000, there were 289 stockholders of record. NFO believes the
total number of beneficial shareholders to be in excess of 3,000 based on the
information gathered in distributing NFO's shareholder communications, such as
the Proxy Statement.
The following table sets forth, for the periods indicated, the high and low
sales prices per share for NFO's common stock as reported on the New York Stock
Exchange.
Sales Price
-----------
Calendar Year 1999 High Low
- ------------------ ---- ---
First Quarter $ 12.500 $ 8.500
Second Quarter 14.875 9.500
Third Quarter 15.875 10.750
Fourth Quarter 22.875 10.000
Calendar Year 1998 High Low
- ------------------ ---- ---
First Quarter $ 21.375 $ 16.750
Second Quarter 22.000 15.625
Third Quarter 18.750 9.000
Fourth Quarter 14.750 5.550
Since its initial public offering, NFO has never declared or paid any cash
dividends on its capital stock. NFO currently intends to retain any earnings or
other cash resources to repay indebtedness and finance growth and therefore does
not anticipate paying any cash dividends in the foreseeable future. Any future
determination to pay dividends will be at the discretion of NFO's Board of
Directors and will be dependent upon the results of operations, financial
condition, contractual restrictions and other factors deemed relevant by the
Board of Directors.
Item 6. Selected Financial Data
Selected Financial Data
(in thousands, except per share data)
<TABLE>
Years Ended December 31,
<S> <C> <C> <C> <C> <C>
1999(1) 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Income Statement Data(2):
Revenues $ 457,198 $ 275,351 $ 190,229 $ 154,943 $ 113,095
Operating Income 13,046 29,328 23,275 21,377 16,469
Net (Loss) Income (6,170) 14,490 12,505 10,616 9,159
Basic Earnings per Share(3) (.28) .68 .62 .53 .49
Diluted Earnings per Share(3) (.28) .67 .60 .51 .48
Balance Sheet Data(2):
Working Capital $ 34,103 $ 31,915 $ 28,464 $ 19,650 $ 15,681
Total Assets 426,062 451,798 170,274 125,443 86,781
Total Debt 175,857 191,053 25,169 5,300 2,664
Stockholders' Equity 124,252 121,763 96,724 74,397 51,226
(1) Includes pretax special charges of $21.7 million, primarily to write-off
the intangible assets associated with NFO's financial services businesses,
which have been deemed to be permanently impaired. Special charges after
tax aggregated $17.8 million, or ($.80) per diluted share.
(2) The above tables have been prepared to give retroactive effect to the
mergers with Prognostics on April 1, 1997, and The MBL Group plc. on July
11, 1997, which were accounted for using the pooling of interests method.
For a discussion of acquisitions, see Note 17 to the Consolidated Financial
Statements.
(3) For comparability, the basic and diluted earnings per share reflect the
3-for-2 stock splits effected on October 15, 1997, and February 5, 1996.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Business
NFO Worldwide, Inc., together with its subsidiaries, is a leading provider of
research-based marketing information and counsel to the worldwide business
community. It has over 4,000 clients globally. NFO combines in-depth knowledge
of key market sectors with innovative data collection methodologies and value
added products. These market sectors include consumer packaged goods and foods,
healthcare, financial services, automotive/travel and leisure, and information
technology. Some key products and services of NFO include continuous brand
tracking, online research, consumer access panels, multi-country research,
market evaluation, product development, customer satisfaction, pricing and
distribution, and advertising effectiveness.
On December 20, 1999, NFO and The Interpublic Group of Companies, Inc. signed a
definitive merger agreement whereby Interpublic will acquire all of the
outstanding shares of NFO common stock. The merger is a strategic global
alliance between NFO's marketing research strengths and Interpublic's diverse
advertising and communications expertise. Management believes the merger will
allow both companies to cross-sell their services in complimentary markets as
clients are increasingly expecting expert market evaluation to be part of their
overall advertising and promotional campaigns. NFO has scheduled a shareholders'
meeting for April 5, 2000, to vote on the proposed merger.
Results of Operations
The following table sets forth for the periods indicated certain income
statement data for NFO.
<TABLE>
<S> <C> <C> <C> <C> <C>
Percentage
Increase (Decrease)
Income Statements 1999 1998
Years Ended December 31, Over Over
1999(1) 1998 1997 1998 1997
----------- ----------- ---------- ---------- ----------
(in thousands, except per share data)
Revenues $ 457,198 $ 275,351 $ 190,229 66.0% 44.7%
Costs and Expenses:
Cost of Revenues 239,661 127,006 83,357 88.7 52.4
Selling, General & Administrative 169,746 109,023 76,705 55.7 42.1
Amortization 25,046 5,080 4,094 393.0 24.1
Depreciation 9,699 4,914 2,798 97.4 75.6
----------- ----------- ---------- ---------- ----------
Operating Income 13,046 29,328 23,275 (55.5) 26.0
Interest Expense, Net 14,084 3,750 669 275.6 460.5
Equity Interest in Net (Income) Loss
of Affiliated Companies & Other (2,221) 221 200 (1105.0) 10.5
Income Before Income Taxes ----------- ----------- ---------- ---------- ----------
and Minority Interest 1,183 25,357 22,406 (95.3) 13.2
Provision for Income Taxes 6,787 10,489 8,895 (35.3) 17.9
----------- ----------- ---------- ---------- ----------
Net (Loss) Income Before Minority
Interest (5,604) 14,868 13,511 (137.7) 10.0
Minority Interest 566 378 1,006 49.7 (62.4)
----------- ----------- ---------- ---------- ----------
Net (Loss) Income $ (6,170) $ 14,490 $ 12,505 (142.6%) 15.9%
=========== =========== ========== ========== ==========
Earnings per Share(2):
Basic $ (.28) $ .68 $ .62 (141.2%) 9.7%
=========== =========== ========== ========== ==========
Diluted $ (.28) $ .67 $ .60 (141.8%) 11.7%
=========== =========== ========== ========== ==========
Weighted Average Shares Outstanding(2):
Basic 22,006 21,154 20,265 4.0% 4.4%
=========== =========== ========== ========== ==========
Diluted 22,006 21,704 20,832 3.1% 4.2%
=========== =========== ========== ========== ==========
(1) Includes pretax special charges of $21.7 million, primarily to write-off
the intangible assets associated with NFO's financial services businesses,
which have been deemed to be permanently impaired. Special charges after
tax aggregated $17.8 million, or ($.80) per diluted share.
(2) For comparability, the earnings per share and share data reflect the
3-for-2 stock split effected October 15, 1997.
</TABLE>
Special Note Regarding Forward-Looking Statements
As certain of the statements made in this annual report are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, they involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements of NFO to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, clients' timing of new product introductions and reformulations,
clients' marketing budgets, industry and economic conditions, changes in
management or ownership of a client, the effect of NFO's competition on client
purchasing decisions, the strategic decisions of NFO's management team, the
extent to which NFO is successful in developing and marketing its interactive
marketing research techniques, the effect of foreign exchange rate fluctuations
and other factors referenced in this report. In addition, the success of NFO's
worldwide expansion efforts is dependent in part upon the successful application
of NFO's methodologies to different business and consumer environments.
Acquisitions
On November 20, 1998, NFO acquired all of the outstanding shares of capital
stock of Infratest Burke Aktiengesellschaft Holding. Founded in 1947, Infratest
Burke is headquartered in Munich, Germany, and ranks as one of the top four
custom marketing research firms in Europe with 35 offices in 15 countries. NFO
believes the combination of NFO and Infratest Burke created the sixth largest
marketing research firm in the world, and one of the top three custom marketing
research companies globally.
On October 23, 1998, NFO acquired all the outstanding stock of City Research
Group Plc. City Research, founded in 1978 and headquartered in London, England,
is a leading UK marketing research firm specializing in commercial banking.
On October 1, 1998, NFO acquired substantially all the net assets of Donovan
Research Pty. Ltd. Donovan, founded in 1974 and headquartered in Perth,
Australia, is a full service custom research agency with a leading position in
fast-moving consumer goods, public policy, tourism, customer satisfaction and
continuous tracking research. In addition to its own branded products, AdTest
and Packtest, Donovan is also the exclusive regional licensee of NFO
MarketMind(TM), a global brand tracking system acquired by NFO in March 1998.
On August 31, 1998, NFO acquired substantially all the net assets of Stochastic
International Pty. Ltd. Stochastic is the developer of the Stochastic Reaction
Monitor continuous brand tracking system, which provides guidance on brand
positioning to more than 60 companies in 33 countries. Stochastic was founded in
1981 and is headquartered in London, England.
On April 3, 1998, NFO acquired 100% of the outstanding stock of CF Group, Inc.
Founded in 1932, CF Group operates three companies in Canada: Canadian Facts,
the largest custom marketing research organization in Canada, Applied Research
Consultants, and Burke International. CF Group is headquartered in Toronto,
Canada, and has Canadian client service offices in Montreal, Ottawa and
Vancouver.
On March 4, 1998, NFO acquired, in separate transactions, substantially all the
net assets of MarketMind Technologies and Ross-Cooper-Lund. NFO MarketMind owns
and licenses the NFO MarketMind(TM) system, which uses proprietary software that
combines a set of key diagnostic measures together with the integration,
interactive analysis and display of multiple streams of longitudinal data. RCL
is a research-based consulting firm focused on brand-building strategies and is
the exclusive licensee of the NFO MarketMind(TM) system in the U.S.
The 1998 acquisitions have been accounted for using the purchase method.
Accordingly, NFO's financial statements include the results of operations from
the effective date of the respective acquisitions.
On December 12, 1997, NFO acquired 100% of the outstanding stock of CM Research
Group, Ltd., headquartered in Auckland, New Zealand. CM is the leading provider
of custom marketing research in New Zealand and one of the larger marketing
research organizations in Australia. This acquisition was accounted for using
the purchase method.
On July 11, 1997, NFO acquired The MBL Group plc, headquartered in London,
England, a leading international marketing research firm with offices throughout
the UK, the Middle East, and Asia. NFO issued 2,046,363 (adjusted for the
3-for-2 stock split effective October 15, 1997) shares of NFO common stock. The
acquisition was accounted for as a pooling of interests. NFO also entered into
agreements with minority shareholder employees of the various MBL operating
subsidiaries to repurchase a portion of the minority shares during 1997 and the
remainder in three years. The purchase of the minority interests in MBL's
subsidiaries has been accounted for using the purchase method.
On May 28, 1997, NFO acquired Access Research, Inc., Windsor, Connecticut, a
research-based financial services consulting firm specializing in the retirement
market. This acquisition was accounted for using the purchase method. Effective
September 1, 1999, Access Research was merged into The Spectrem Group.
On April 1, 1997, NFO acquired 100% of the outstanding stock of Prognostics,
Palo Alto, California, a leading provider of survey-based quantitative customer
satisfaction research to information technology companies worldwide. NFO issued
2,589,720 (adjusted for the 3-for-2 stock split effective October 15, 1997)
shares of NFO common stock. The transaction was accounted for as a pooling of
interests.
As a result of the 1997 pooling of interests transactions, the accompanying
financial statements reflect the combined results of NFO, Prognostics, and MBL
for all periods presented.
1999 Compared to 1998
In December 1999, NFO recorded $21.7 million in pre-tax special charges,
primarily to write-off the intangible assets associated with NFO's financial
services business, which were deemed to be permanently impaired. Approximately
$16.0 million of the total special charges was charged to amortization expense,
while the remainder was charged to cost of revenues and SG&A expenses. These
special charges, which are primarily non-cash in nature, amounted to $17.8
million, or $0.80 per diluted share, on an after-tax basis.
NFO's revenues increased 66% to $457.2 million in 1999 from $275.4 million in
1998. Organic revenue growth for the year exceeded 6%, while acquisitions and
currency translation effects accounted for the remaining increase. North
American revenues increased 12%, with 5% from organic growth and 7% driven by
acquisitions. Revenues within Europe increased dramatically, primarily due to
organic growth of 10% and the first time inclusion of Infratest Burke. Revenue
growth in Australasia and the Middle East was 11%, 7% through organic growth and
4% related to acquisitions.
Cost of revenues increased 89% to $239.7 million from $127.0 million in the
prior year. The increase in cost of revenues was primarily the result of
increased revenues in each of NFO's three operating segments and the addition of
the newly acquired companies totaling $103.6 million in 1999. Cost of revenues
also includes a non-cash charge of $2.4 million relating to the write-off of
long-term deferred program costs within the North American financial services
businesses which were deemed to be permanently impaired.
Selling, general, and administrative expenses increased 56% to $169.7 million
from $109.0 million in 1998. Increases were predominately the result of the
newly acquired companies, $47.2 million, and increased staffing expenses, $8.3
million. Also included in the increase is a non-cash charge of $2.8 million
primarily relating to the adjustment to net realizable value of certain assets.
NFO's selling, general and administrative expenses were also influenced by
inflationary factors.
Depreciation and amortization expenses increased 248% to $34.7 million from
$10.0 million in the previous year. Approximately $16.0 of the total increase
was due to the financial services related special charges. The remaining
increase was due to acquisition activity as well as increased capital
investments.
Operating income, as reported, decreased 56% to $13.0 million from $29.3 million
in 1998. Excluding the special charges, operating income increased 18%, from
$29.3 million in 1998 to $34.7 million in 1999. Operating income margins,
excluding the special charges, were 7.6% in 1999 compared to 10.7% in 1998.
Interest expense increased to $14.1 million from $3.8 million in the prior year.
The increase was primarily the result of increased borrowings to fund
acquisitions and capital expenditures.
Income tax expense decreased to $6.8 million from $10.5 million the previous
year. NFO's effective tax rate in 1999 was 573.7%. However, excluding the
special charges totaling $17.8 million after tax, NFO's effective tax rate was
46.7% in 1999 compared to 41.4% in 1998.
As a result of the items mentioned above, NFO reported a net loss of ($6.2)
million or ($.28) per diluted share in 1999, as compared to a net profit of
$14.5 million or $.67 per diluted share in 1998. Excluding the special charges,
NFO's 1999 net income was $11.6 million, or $.52 per diluted share.
1998 Compared to 1997
NFO's revenues increased 45% to $275.4 million from $190.2 million in 1997.
Strong revenue growth occurred in each of NFO's operating segments: North
America increased 32% to $186.4 million, Europe increased 103% to $50.4 million,
and Australasia and the Middle East increased 61% to $40.1 million.
Within North America, NFO's technologies group experienced very strong
performance, and its healthcare and travel and leisure sectors registered
double-digit growth. Revenues within NFO's North American financial services
sector decreased 16% for the year due to the softness within PSI Global, NFO's
lead financial services unit. The increases in Europe and Australasia and the
Middle East were principally the result of acquisitions, with combined organic
revenue growth of 13%. Currency translation effects negatively impacted organic
international revenues for the year by $3.2 million, or 6%. NFO's consolidated
organic revenues grew 13%, excluding the effects of PSI Global and currency
translations.
Cost of revenues increased 52% to $127 million from $83.4 million the previous
year. The increase in cost of revenues was primarily the result of increased
revenues in each of NFO's three operating segments and the addition of the newly
acquired companies in 1998, totaling $40.1 million. The remainder of the
increase in cost of revenues was the result of NFO's continued investment in its
North American high technology/telecommunications sector.
Selling, general, and administrative expenses increased 42% to $109 million from
$76.7 million in 1997. Increases were predominately the result of the newly
acquired companies, $25.1 million, and increased staffing expenses, $4.5
million. NFO's selling, general and administrative expenses were also influenced
by inflationary factors.
Depreciation and amortization expenses increased 45% to $10 million from $6.9
million in the previous year. The increase was due to the acquisition activity
as well as increased capital investment.
As a result of the items discussed above, operating income in 1998 increased 26%
to $29.3 million from $23.3 million in 1997. Operating income margins were 10.7%
in 1998 compared to 12.2% in 1997. This decrease was due almost entirely to the
decreased financial performance of PSI Global, which was partially offset by the
positive margin contributions from the newly acquired companies as well as
reduced losses within NFO's Interactive Division. Excluding the effects of (a)
acquisitions and negative currency translation effects in 1998, (b) pooling
transaction expenses in 1997, and (c) the operating results of PSI Global in
both years, NFO's organic operating income increased 15% in 1998. Also,
contributing to the increase was organic growth, offset by lower operating
results in NFO's financial services sector.
Interest expense increased to $3.8 million from $.7 million in the previous
year. The increase was primarily the result of increased borrowings to fund
acquisitions and capital expenditures.
Income tax expense increased $1.6 million to $10.5 million from $8.9 million in
1997. The expense reflects NFO's combined U.S. Federal and State tax rate of
approximately 40%, plus the effects of non-deductible expenses, primarily
goodwill amortization. The increase in the effective tax rate from 40% to 41%
was largely due to an increase in the non-U.S. effective tax rate.
Minority interests decreased 62% to $.4 million from $1 million in 1997. The
decline was directly related to the purchase of a significant portion of the
minorities' shares in the MBL acquisition in July 1997, as well as decreased
profitability within this group.
The result of items discussed above was that net income in 1998 increased 16% to
$14.5 million from $12.5 million in 1997. The 12% increase in diluted earnings
per share to $.67 from $.60 was the direct result of the increase in net income.
Liquidity and Capital Resources
Working capital as of December 31, 1999, was $34.1 million, an increase of $2.2
million from December 31, 1998. The primary reasons for the change in working
capital were increases in cash of $2.3 million and unbilled receivables of $1.3
million, and decreases in accounts payable of $11.5 million and accrued
liabilities of $10.1 million, partially offset by decreases in accounts
receivable of $8.2 million and prepaids of $2.1 million and increases in net
deferred tax liabilities of $2.9 million and customer billings in excess of
revenues earned of $9.8 million. The decrease in accruals was predominantly the
result of a reduction in accrued income taxes of $6.1 million, accrued purchase
price payable of $3.9 million and accrued profit sharing of $3.1 million. These
declines correlate to the reduced profitability of NFO in 1999 as compared to
1998. The fluctuations in the other working capital components were the result
of routine timing of transactions.
On March 26, 1999, NFO successfully completed the private placement of $7
million in senior notes and $8 million in senior subordinated notes, the
proceeds of which were used to reduce then-existing debt. The senior and
subordinated notes bear interest at the fixed rates of 7.52% and 9.84%,
respectively, and are due November 15, 2008. The senior and subordinated notes
are to be repaid in equal annual installments of $1 million and $2.67 million
beginning in 2002 and 2006, respectively.
On November 20, 1998, NFO privately placed an aggregate principal amount of $72
million of senior and subordinated notes. The private placement consisted of $17
million of series A senior notes due November 15, 2005, $38 million of series B
senior notes due November 15, 2008, and $17 million of 9.84% subordinated notes
due November 15, 2008. The series A senior notes and the series B senior notes
bear interest at fixed annual rates of 7.18% and 7.52%, respectively. These
rates reflect a reduction from 7.48% and 7.82%, respectively, when NFO satisfied
certain conditions contained in the notes with the placement of the March 1999
senior and subordinated notes discussed above. The notes are guaranteed by
certain subsidiaries of NFO and were used to finance a portion of the
acquisition of Infratest Burke and to pay related fees and expenses.
On March 9, 1998, NFO successfully entered into two financing agreements: a
private placement of $40 million of senior notes and a $75 million revolving
credit facility. Borrowings available under these combined facilities total $115
million and are unsecured. Proceeds were used to pay off NFO's then-existing
debt of approximately $32 million, finance acquisitions, capital expenditures
and working capital. The revolving credit facility replaced NFO's then-existing
$35 million revolving credit facility.
The $40 million in senior notes, due March 1, 2008, bear interest at the fixed
rate of 6.83% and are to be repayable in equal installments of approximately
$5.7 million per year starting in 2002. The $75 million unsecured credit
facility has an ultimate maturity date of March 2003 and enables NFO to borrow
in multiple currencies at interest rates tied to LIBOR or the prime rate, at
NFO's option.
In conjunction with the Infratest Burke acquisition and the financing thereof,
NFO amended its $75 million revolving credit facility and its $40 million senior
notes, each originally dated March 9, 1998. The amendments provide, among other
things, that NFO's obligations will be guaranteed by certain subsidiaries of
NFO. In addition, the amendments increased the rates at which interest annually
accrues under the obligations.
NFO anticipates that existing cash, together with internally generated funds and
its credit availabilities, will provide NFO with the resources needed to satisfy
potential acquisitions, capital expenditures, and NFO's growing working capital
requirements. The timing and magnitude of future acquisitions will be the single
most important factor in determining NFO's long-term capital needs.
Inflation
Inflation has historically had only a minor effect on NFO's results of
operations and its internal and external sources of liquidity and working
capital because NFO has generally been able to increase prices to reflect cost
increases resulting from inflation.
Seasonality
NFO's business activity has traditionally reflected a modest seasonality factor
with slightly higher revenues in NFO's fourth quarter. This seasonality reflects
increased research spending in the fourth quarter by clients seeking to complete
research studies prior to the holiday season and the close of their fiscal year.
Also, NFO generally initiates several large-scale annual projects and tracking
programs during the fourth quarter of each year.
Excluding the affect of acquisitions, over the past three years, the fourth
quarter has represented between 27.1% and 34.4% of NFO's annual revenues. Each
of the remaining three quarters ranged between 17.8% and 26.3% of the annual
total.
Future Required Accounting Changes
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This Statement, as amended, is effective for all fiscal quarters in all fiscal
years beginning after June 15, 2000. The adoption of this Statement is not
expected to have a material effect on NFO's financial condition or results of
operations.
Year 2000 Issues
NFO was Year 2000 compliant in all material respects as of January 1, 2000.
Based on a survey of NFO's subsidiaries worldwide, only minor Year 2000 issues
were reported after the new year. None of the items reported, individually or in
the aggregate, had or are expected to have a material impact on NFO's
operations.
However, in preparing for Year 2000 compliance, NFO developed a contingency
plan. The plan was based on an impact analysis of all proprietary custom
software programs and systems, testing of mission critical and non-critical
systems and software for Year 2000 compliance by using a series of Year 2000
test dates, and coordination with clients, vendors, affiliates and other outside
parties.
In developing its contingency plan, NFO believed the most likely worst case
scenario would be for a non-critical application or system to not be Year 2000
compliant on January 1, 2000. NFO's contingency plan included manually
addressing non-critical applications and systems compliance problems.
Additionally, NFO has the ability to readily outsource many of its data
collection and processing processes should the need arise.
NFO estimates that total Year 2000 compliance costs incurred from 1997 through
December 31, 1999, were approximately $930,000, including capital expenditures
of approximately $433,000. Additionally, as there were no significant issues
encountered as of January 1, 2000, relating to Year 2000 compliance, NFO
believes that any costs spent after December 31, 1999, on Year 2000 compliance
matters will be nominal.
The Euro Conversion
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency, the Euro. NFO conducts business in member countries.
The transition period for the Euro is from January 1, 1999, to June 30, 2002.
NFO is addressing the issues involved with the introduction of the Euro. The
more important issues include converting information technology systems,
reassessing currency risk, and processing accounting and tax records.
Based upon progress to date, NFO believes that use of the Euro will not have a
significant impact on the manner in which NFO conducts its business and
processes its accounting records. Accordingly, conversion to the Euro is not
expected to have a material effect on NFO's financial condition or results of
operations.
Market Risk Management
NFO is exposed to market risk, including changes in interest rates and foreign
currency exchange rates. NFO currently does not have any derivative financial
instruments. However, NFO may consider utilizing derivatives in the future in an
attempt to mitigate foreign currency exchange rate risk. NFO conducts business
in 38 countries throughout the world and has a significant presence in North
America, Europe, Australasia and the Middle East. Accordingly, NFO is subject to
foreign currency exchange rate risk in those countries.
The table below provides information on NFO's debt instruments as of December
31, 1999 (dollars in thousands):
<TABLE>
<S> <C> <C> <C> <C>
Long-Term Debt - Long-Term Debt -
Fixed Rate Variable Rate
------------------------------ ------------------------------
Principal Average Principal Average
Amount Interest Rate Amount Interest Rate
------ ------------- ------ -------------
2000 $ 295 8.28% $ 151 10.88%
2001 3,637 7.26 170 11.59
2002 17,749 7.13 8,160 5.97
2003 15,784 7.18 35,618 6.43
2004 15,763 7.18 - -
Thereafter 78,530 8.03 - -
----------- ---- ----------- ----
Total $ 131,758 7.68% $ 44,099 6.38%
=========== ==== =========== ====
</TABLE>
Stock Information
Shares of NFO common stock have traded on the New York Stock Exchange since
December 29, 1997, under the symbol "NFO". From the completion of NFO's initial
public offering in April 1993 until December 29, 1997, shares of NFO common
stock traded on the Nasdaq National Market tier of the Nasdaq Stock Market under
the symbol "NFOR".
NFO did not declare or pay any cash dividends during 1999, 1998, or 1997. The
following table sets forth, for the periods indicated, its high and low sales
prices per share as reported on the New York Stock Exchange.
Sales Price
-----------
Calendar Year 1999 High Low
- ------------------ ---- ---
First Quarter $ 12.500 $ 8.500
Second Quarter 14.875 9.500
Third Quarter 15.875 10.750
Fourth Quarter 22.875 10.000
Calendar Year 1998 High Low
- ------------------ ---- ---
First Quarter $ 21.375 $ 16.750
Second Quarter 22.000 15.625
Third Quarter 18.750 9.000
Fourth Quarter 14.750 5.550
Item 8. Financial Statements and Supplemental Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of NFO Worldwide, Inc.:
We have audited the accompanying consolidated balance sheets of NFO Worldwide,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three year period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the 1997 financial statements
of The MBL Group plc, included in the consolidated financial statements of NFO
Worldwide, Inc., which statements reflect total revenues of 26 percent of the
related 1997 consolidated total, after adjustment to reflect translation into
U.S. dollars and accounting principles generally accepted in the United States.
The financial statements of The MBL Group plc, prior to those adjustments, were
audited by other auditors whose report thereon has been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for The
MBL Group plc, is based solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of NFO Worldwide, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The schedule referred to in Item 14 is
presented for the purpose of complying with the Securities and Exchange
Commission's rules and is not part of the consolidated financial statements.
This schedule has been subjected to the auditing procedures applied in our
audits of the consolidated financial statements and, in our opinion, based on
our audit and the report of other auditors, fairly states in all material
respects the financial data required to be set forth therein in relation to the
consolidated financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
-----------------------
New York, New York,
February 25, 2000
REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF THE MBL GROUP plc
We have audited the financial statements of The MBL Group plc for the year ended
December 31, 1997, which have been prepared under the historical cost convention
and in accordance with generally accepted accounting principles applicable in
the United Kingdom.
Respective Responsibilities of Directors and Auditors
The Company's directors are responsible for the preparation of financial
statements. It is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
Basis of Opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board which are substantially the same as those followed in
the United States. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion, the financial statements give a true and fair view of the
group's profit and cash flows for the year ended December 31, 1997, and have
been properly prepared in accordance with generally accepted accounting
principles in the United Kingdom.
/s/ Soteriou Banerji
- --------------------
Registered Auditors and Chartered Accountants
253 Gray's Inn Road
London, WC1X 8QT
Date February 23, 1998
Consolidated Balance Sheets
As of December 31, 1999 and 1998 (in thousands, except per share data)
<TABLE>
<S> <C> <C>
1999 1998
----------- -----------
Assets:
Current Assets:
Cash and Cash Equivalents $ 20,062 $ 17,739
Receivables:
Trade, Less Allowance for Doubtful Accounts
of $2,664 and $967 in 1999 and 1998, respectively 90,052 98,250
Unbilled Receivables 23,774 22,524
Prepaid Expenses and Other Current Assets 14,913 15,524
----------- -----------
Total Current Assets 148,801 154,037
Property and Equipment, Net (Note 3) 48,364 44,472
Intangible Assets (Note 4) 212,484 231,225
Other Assets 16,413 22,064
----------- -----------
Total Assets $ 426,062 $ 451,798
=========== ===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Current Maturities of Long-Term Debt (Note 5) $ 446 $ 396
Accounts Payable 20,467 31,945
Accrued Liabilities (Note 6) 52,985 63,122
Customer Billings in Excess of Revenues Earned 35,400 25,647
Other Current Liabilities 5,400 1,012
----------- -----------
Total Current Liabilities 114,698 122,122
----------- -----------
Long-Term Liabilities:
Long-Term Debt, Less Current Portion (Note 5) 175,411 190,657
Accrued Pension, Postretirement Benefits & Other (Notes 9 and 10) 8,854 14,092
----------- -----------
Total Long-Term Liabilities 184,265 204,749
----------- -----------
Total Liabilities 298,963 326,871
----------- -----------
Commitments and Contingencies (Note 15)
Minority Interests 2,847 3,164
Stockholders' Equity (Note 11):
Common Stock, Par Value $.01 per Share; 60,000 Shares
Authorized; 22,360 and 21,401 Shares Issued and
Outstanding at December 31, 1999 and 1998, respectively 224 214
Additional Paid-In Capital 73,047 63,723
Retained Earnings 54,365 60,535
Accumulated Other Comprehensive Loss:
Minimum Pension Liability, Net of Income Taxes - (631)
Foreign Currency Translation Adjustment (3,384) (2,078)
----------- -----------
Total Stockholders' Equity 124,252 121,763
----------- -----------
Total Liabilities and Stockholders' Equity $ 426,062 $ 451,798
=========== ===========
See notes to consolidated financial statements.
</TABLE>
Consolidated Income Statements
For the years ended December 31, 1999, 1998, and 1997 (in thousands, except per
share data)
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
----------- ----------- -----------
Revenues $ 457,198 $ 275,351 $ 190,229
Costs and Expenses:
Cost of Revenues 239,661 127,006 83,357
Selling, General and Administrative 169,746 109,023 76,705
Amortization 25,046 5,080 4,094
Depreciation 9,699 4,914 2,798
----------- ----------- -----------
Operating Income 13,046 29,328 23,275
Interest Expense, Net 14,084 3,750 669
Equity Interest in Net (Income) Loss of Affiliated
Companies and Other (2,221) 221 200
----------- ----------- -----------
Income Before Income Taxes and Minority Interests 1,183 25,357 22,406
Provision for Income Taxes 6,787 10,489 8,895
----------- ----------- -----------
Net (Loss) Income Before Minority Interests (5,604) 14,868 13,511
Minority Interests 566 378 1,006
----------- ----------- -----------
Net (Loss) Income $ (6,170) $ 14,490 $ 12,505
=========== =========== ===========
Earnings per Share (Note 13):
Basic $ (.28) $ .68 $ .62
----------- ----------- -----------
Diluted $ (.28) $ .67 $ .60
----------- ----------- -----------
Weighted Average Number of Common Shares
Outstanding and Common Equivalent Shares
During the Period:
Basic 22,006 21,154 20,265
----------- ----------- -----------
Diluted 22,006 21,704 20,832
----------- ----------- -----------
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Stockholders' Equity
For the years ended December 31, 1999, 1998, and 1997 (in thousands)
Accumulated Comprehen
Additional Other Total -sive
Common Common Paid-In Retained Comprehensive Stockholders' Income
Shares Stock Capital Earnings Income (Loss) Equity (Loss)
------ ----- ------- -------- ------------- ------ ------
Balance at December 31, 1996 20,055 $ 134 $40,662 $ 33,540 $ 61 $74,397
Net Income 12,505 12,505 $12,505
Accrual of Minimum Pension Liability,
Net of Income Taxes of ($6) (23) (23) (23)
Translation Adjustments (1,333) (1,333) (1,333)
-------
Comprehensive Income
$11,149
=======
Acquisitions 497 4 7,713 7,717
Stock Split 68 (68) -
Conversion of Note Payable 17 1 83 84
Tax Benefit on Exercised Options 2,439 2,439
Payment of Non-Recourse Notes 11 11
Other Issuances 161 1 926 927
------ ----- ------- -------- ------------- ------
Balance at December 31, 1997 20,730 208 51,766 46,045 (1,295) 96,724
Net Income 14,490 14,490 $14,490
Accrual of Minimum Pension Liability,
Net of Income Taxes of ($227) (285) (285) (285)
Translation Adjustments (1,129) (1,129) (1,129)
-------
Comprehensive Income $13,076
=======
Acquisitions 468 4 8,655 8,659
Tax Benefit on Exercised Options 1,778 1,778
Payment of Non-Recourse Notes 7 7
Other Issuances 203 2 1,517 1,519
------ ----- ------- -------- ------------- ------
Balance at December 31, 1998 21,401 214 63,723 60,535 (2,709) 121,763
Net Loss (6,170) (6,170) $(6,170)
Translation Adjustments (1,306) (1,306) (1,306)
Adjustment of Minimum Pension Liability,
Net of Income Taxes of $457 631 631 631
-------
Comprehensive Loss $(6,845)
========
Acquisitions 516 5 5,315 5,320
Tax Benefit on Exercised Options 776 776
Other Issuances 443 5 3,233 3,238
------ ----- ------- -------- ------------- ------
Balance at December 31, 1999 22,360 $ 224 $73,047 $ 54,365 $ (3,384) $124,252
====== ===== ======= ======== ============= ========
The shares presented reflect the 3-for-2 stock split effected on October 15,
1997 (Note 11).
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
For the years ended December 31, 1999, 1998, and 1997 (in thousands)
<S> <C> <C> <C>
1999 1998 1997
----------- ----------- -----------
Cash Flows From Operating Activities:
Net (Loss) Income $ (6,170) $ 14,490 $ 12,505
Adjustments to Reconcile Net (Loss) Income to Net
Cash Provided by Operating Activities:
Minority Interest 566 378 1,006
Amortization 25,046 5,080 4,094
Depreciation 9,699 4,914 2,798
Deferred Income Taxes (1,498) 712 (426)
Equity Interest in Net (Income) Loss
of Affiliated Companies (2,267) 57 200
Dividends Paid to Minority Interests (294) (175) (369)
Bad Debt Expense 2,638 2,059 151
Write-Off of Deferred Program Costs 2,422 - -
Currency Gains on Non-Domestic Debt (2,078) (813) -
Other, Net (101) 126 89
----------- ----------- -----------
Subtotal 27,963 26,828 20,048
Change in Assets and Liabilities that Provided (Used)
Cash, Net of Effects of Acquisitions:
Trade Receivables (860) (10,094) (8,077)
Unbilled Receivables (1,575) (5,211) (4,735)
Prepaid Expenses and Other Current Assets 1,424 332 (398)
Accounts Payable and Accrued Liabilities (11,096) 3,800 3,347
Customer Billings in Excess of Revenues Earned 11,035 4,636 776
Other, Net 1,228 (889) (93)
----------- ----------- -----------
Net Cash Provided by Operating Activities 28,119 19,402 10,868
----------- ----------- -----------
Cash Flows From Investing Activities:
Acquisitions (Net of Cash Acquired) (6,301) (134,244) (20,020)
Proceeds from Disposal of Joint Venture 2,335 - -
Capital Expenditures (Net of Minor Disposals) (14,514) (13,793) (9,030)
Dividends Received from Equity Investments 2,036 - -
Purchase of Intangible Assets (550) (509) (640)
Investments in Affiliated Companies - (65) (820)
----------- ----------- -----------
Net Cash Used in Investing Activities (16,994) (148,611) (30,510)
----------- ----------- -----------
Cash Flows From Financing Activities:
Issuance of Common Stock, Net of Expenses 3,238 1,519 927
Payments on Long-Term Debt (38,919) (69,142) (4,938)
Dividends Paid to Subsidiary Shareholders - - (988)
Proceeds from Line of Credit & Other Long-Term Debt 28,198 208,241 24,464
Debt Issuance Costs - (1,115) -
----------- ----------- -----------
Net Cash (Used In) Provided by Financing Activities (7,483) 139,503 19,465
----------- ----------- -----------
Effect of Exchange Rate Changes on Cash (1,319) (610) (1,347)
----------- ----------- -----------
Increase (Decrease) In Cash and Cash Equivalents 2,323 9,684 (1,524)
Cash and Cash Equivalents, Beginning of Period 17,739 8,055 9,579
----------- ----------- -----------
Cash and Cash Equivalents, End of Period $ 20,062 $ 17,739 $ 8,055
=========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements For the years ended December 31,
1999, 1998, and 1997
1. Business
NFO Worldwide, Inc., together with its subsidiaries, is a leading provider of
research-based marketing information and counsel to the worldwide business
community. It has over 4,000 clients globally. NFO combines in-depth knowledge
of key market sectors with innovative data collection methodologies and value
added products. These market sectors include consumer packaged goods and foods,
healthcare, financial services, automotive/travel and leisure, and information
technology. Some key products and services of NFO include continuous brand
tracking, online research, consumer access panels, multi-country research,
market evaluation, product development, customer satisfaction, pricing and
distribution, and advertising effectiveness.
On December 20, 1999, NFO and The Interpublic Group of Companies, Inc. signed a
definitive merger agreement whereby Interpublic will acquire all of the
outstanding shares of NFO common stock. The merger is a strategic global
alliance between NFO's marketing research strengths and Interpublic's diverse
advertising and communications expertise. Management believes the merger will
allow both companies to cross-sell their services in complimentary markets as
clients are increasingly expecting expert market evaluation to be part of their
overall advertising and promotional campaigns. NFO has scheduled a shareholders'
meeting for April 5, 2000, to vote on the proposed merger.
2. Summary of Significant Accounting Policies
Consolidation - The consolidated financial statements include the accounts of
NFO and all its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Revenue Recognition - NFO recognizes revenue on projects, which are
substantially all short-term, by generally applying recent historical
contribution margins to project costs as incurred. A provision for anticipated
losses is recorded in the period in which they first become determinable.
Cash and Cash Equivalents - NFO considers all investments with a maturity of
three months or less when purchased to be cash equivalents. Depreciation - NFO
provides depreciation over the estimated useful lives of the depreciable assets
using the straight-line method.
Intangible Assets - NFO provides amortization of these assets using the
straight-line method over their estimated period of benefit or contractual life,
principally as follows:
Years
-----
Customer Lists 5-46
Goodwill 20-40
Long-Lived Assets - NFO annually evaluates the recoverability of goodwill and
other long-lived assets by assessing whether the unamortized assets can be
recovered from undiscounted future cash flows from operations. To the extent
undiscounted future cash flows are less than carrying value of the assets, a
discounted cash flow analysis is performed to estimate fair market value.
Syndicated Programs - NFO capitalizes costs associated with certain syndicated
programs that have on-going value in excess of one year. Such costs are
amortized in proportion to anticipated revenues over the expected useful lives
of the programs.
In December 1999, NFO wrote off $2.4 million of deferred program costs in its
North American financial services businesses which were deemed to be permanently
impaired as actual program revenues did not meet originally expected levels.
This write-off is included in cost of revenues in the accompanying income
statement.
Panel - NFO enhances and rebuilds its panel on a continuous basis, and the
related costs are charged to expense as incurred. NFO expensed $1,793,000,
$1,649,000, and $1,164,000 on panel enhancing and rebuilding in 1999, 1998, and
1997, respectively.
Income Taxes - Deferred income taxes are recorded to reflect the tax
consequences of differences between the tax bases of NFO's assets and
liabilities and their financial reporting amounts at each balance sheet date.
Investments in Affiliated Companies - Investments in affiliated companies are
accounted for using the equity method, under which NFO's share of earnings of
these affiliates is reflected in income as earned and dividends are credited
against the investment in affiliated companies when received.
Fair Value of Financial Instruments - The following methods and assumptions were
used to estimate the fair value of each category of NFO's financial instruments:
Cash and Short-Term Financial Instruments - The carrying amount
approximates fair value due to the short maturity of these instruments.
Long-Term Financial Instruments - The fair value has been estimated using
the expected future cash flows discounted at market interest rates as
adjusted for conversion privileges. Fair value of long-term debt was less
than carrying value by approximately $14.2 million at December 31, 1999.
The fair value of long-term debt approximated the carrying amount at
December 31, 1998.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Net Income Per Share - Basic net income per share is computed using the weighted
average number of common shares outstanding during the period. Diluted net
income per share reflects the dilutive effect of common equivalent shares and
increased shares that would result from contingently issuable common shares. The
effects of anti-dilution are not presented.
Reclassification - Certain items in prior years have been reclassified for
consistency with the current year presentation.
3. Property and Equipment
<TABLE>
<S> <C> <C> <C>
Property and equipment, at cost, consists of the following at December 31 (in
thousands):
Estimated
Useful Lives 1999 1998
------------ ------------ ------------
Land $ 1,703 $ 1,703
Buildings and Leasehold Improvements 10-40 years 22,465 22,435
Data Processing & Communications Equipment 3-5 years 18,984 14,205
Furniture and Other Equipment 4-8 years 26,221 21,777
Construction in Progress 3,554 909
------------ ------------
Total 72,927 61,029
Less Accumulated Depreciation and Amortization (24,563) (16,557)
------------ ------------
Total $ 48,364 $ 44,472
============ ===========
</TABLE>
Construction in progress relates to the expansion of NFO's facilities in
Greenwich, Connecticut.
4. Intangible Assets
<TABLE>
<S> <C> <C>
Intangible assets consist of the following at December 31 (in thousands):
1999 1998
------------ ------------
Goodwill, Net of Amortization of $12,639 and $8,104
in 1999 and 1998, respectively $ 127,927 $ 141,208
Customer Lists, Net of Amortization of $12,321 and $8,213
in 1999 and 1998, respectively 83,124 87,849
Other, Net of Amortization of $3,390 and $2,931
in 1999 and 1998, respectively 1,433 2,168
------------ ------------
Total $ 212,484 $ 231,225
============ ============
</TABLE>
Amortization expense in 1999 includes $16.0 million relating to the write off of
goodwill and customer lists within NFO's North American financial services
division where losses have been incurred during the last two years as a result
of a difficult competitive environment due to client consolidation within the
industry. Undiscounted and discounted cash flow analyses were performed,
resulting in the determination by management that the intangible assets within
this division were deemed to be permanently impaired. Amortization expense in
1997 includes a provision of $568,000 to write-off the goodwill associated with
AMS, NFO's former expert computer software company.
5. Long-Term Debt
<TABLE>
<S> <C> <C>
Long-term debt consists of the following at December 31 (in thousands):
1999 1998
------------ ------------
Note Payable to Banks under a Revolving Credit Agreement Due
March 2003, Interest Ranging Between 4.3% and 6.9% $ 35,603 $ 53,045
Senior Notes 40,000 40,000
Series A Senior Notes 17,000 17,000
Series B Senior Notes 45,000 38,000
Term Loans 4,621 16,484
Capitalized Leases 4,848 4,371
Subordinated Notes 25,000 17,000
Other 3,785 5,153
------------ ------------
Total 175,857 191,053
Less Current Maturities (446) (396)
------------ ------------
Total $ 175,411 $ 190,657
============ ============
</TABLE>
On March 9, 1998, NFO entered into a $75 million revolving credit agreement.
Borrowings under the agreement are unsecured, the proceeds of which were used to
refinance NFO's then-existing debt and to finance acquisitions, capital
expenditures, and working capital. The $75 million revolving credit facility has
an ultimate maturity date of March 2003 and enables NFO to borrow in multiple
currencies at interest rates tied to LIBOR or the prime rate, at NFO's option.
The Senior Notes consist of the private placement of $40 million on March 9,
1998. The $40 million Senior Notes bear interest at the fixed annual rate of
6.83%, mature March 1, 2008, and are repayable in equal annual installments of
$5.7 million beginning in 2002.
The Series A and B Notes consist of the private placement of $17 million of
Series A Senior Notes dated November 20, 1998, and due November 15, 2005, $38
million of Series B Senior Notes dated November 20, 1998, and due November 15,
2008, and $7 million of Series B Senior Notes dated March 26, 1999, and due
November 15, 2008. The Series A Senior Notes are repayable in equal annual
installments of $3.4 million beginning in 2001. The Series B Senior Notes are
repayble in equal annual installments of $6.4 million beginning in 2002. The
Series A and B Senior Notes bear interest at fixed annual rates of 7.18% and
7.52%, respectively. These rates reflect a reduction from 7.48% and 7.82%,
respectively, when NFO satisfied certain conditions contained in the notes with
the placement of the March 1999 Senior and Subordinated Notes. The Series A and
B Senior Notes are guaranteed by certain subsidiaries of NFO and were used to
finance a portion of the acquisition of Infratest Burke (see Note 17) and to pay
related fees and expenses.
The Subordinated Notes consist of the private placement of $8 million on March
26, 1999, and $17 million on November 20, 1998. The Subordinated Notes bear
interest at the fixed annual rate of 9.84%, mature November 15, 2008, and are
repayable in equal annual installments of $8.3 million beginning in 2006.
In conjunction with the Infratest Burke acquisition and the financing thereof,
NFO amended its $75 million revolving credit facility and its $40 million Senior
Notes, each originally dated March 9, 1998. The amendments provide, among other
things, that NFO's obligations will be guaranteed by certain subsidiaries of
NFO. In addition, the amendments increased the rates at which interest annually
accrues under the obligations from 6.43% to 6.83%.
Infratest Burke has a DM 9 million term loan with a maturity date of September
2002. The term loan bears interest at the three-month LIBOR rate (as defined in
the agreement) plus .75%, which at December 31, 1999, was 4.2%. At December 31,
1998, Infratest Burke also had $5 million and DM 10 million term loans which
were repaid in 1999.
Certain of NFO's subsidiaries have capitalized lease obligations. The leases
mature between 2000 and 2005 and bear interest at rates ranging between 6.3% and
14.4%. The leases were collateralized by real estate and equipment having a net
book value of $4.0 million and $4.7 million at December 31, 1999 and 1998,
respectively.
NFO's financing arrangements contain certain financial and non-financial
restrictive covenants that, among other things, require NFO to maintain certain
leverage and cash flow ratios. A material adverse change in NFO's financial
condition or results of operations may constitute default under the agreements.
Required principal payments on long-term debt and other obligations are as
follows at December 31, 1999 (in thousands):
2000 $ 446
2001 3,807
2002 25,909
2003 51,402
2004 15,763
Thereafter 78,530
--------
Total $175,857
========
6. Accrued Liabilities
Accrued liabilities consist of the following at December 31 (in thousands):
1999 1998
------------ ------------
Accrued Compensation and Payroll Taxes $ 19,945 $ 19,092
Accrued Vacation 3,840 4,110
Value Added Tax 3,828 4,536
Income Taxes Payable 2,771 8,901
Accrued Profit Sharing 1,418 4,522
Purchase Price Payable 691 4,566
Other Accrued Liabilities 20,492 17,395
------------ ------------
Total $ 52,985 $ 63,122
============ ============
7. Operating Leases
NFO leases office space and equipment under noncancelable operating leases that
expire at various dates through 2013. Certain of these leases are subject to
rent review and contain escalation clauses. Future minimum annual payments
required under the noncancelable leases are as follows at December 31, 1999 (in
thousands):
2000 $ 14,738
2001 14,454
2002 12,230
2003 10,320
2004 7,607
Thereafter 24,092
-----------
Total $ 83,441
===========
Rental expense for the years ended December 31, 1999, 1998, and 1997, including
leases on a month-to-month basis, was approximately $15.3 million, $9.5 million,
and $6.3 million, respectively.
Certain of NFO's subsidiaries rent space in office buildings owned or partially
owned by officers of the subsidiaries. Such rents, which were approximately $1.2
million, $.8 million, and $.5 million in 1999, 1998, and 1997, respectively, are
believed by management to be consistent with arms length transactions.
8. Income Taxes
Income before income taxes and minority interest is as follows for the years
ended December 31 (in thousands):
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
----------- ----------- -----------
(Loss) Income Before Income Taxes & Minority Interest:
U.S. $ (1,582) $ 19,971 $ 18,066
Foreign 2,765 5,386 4,340
----------- ----------- -----------
Total $ 1,183 $ 25,357 $ 22,406
=========== =========== ===========
The provision for income taxes is as follows for the years ended December 31 (in
thousands):
1999 1998 1997
----------- ----------- -----------
Current Provision:
Federal $ 4,688 $ 5,052 $ 6,650
State and Local 1,279 1,759 1,553
Foreign 2,318 2,966 1,118
----------- ----------- -----------
Total 8,285 9,777 9,321
----------- ----------- -----------
Deferred Provision (Credit):
Federal (2,419) 661 (621)
State and Local (95) 76 (106)
Foreign 1,016 (25) 301
----------- ----------- -----------
Total (1,498) 712 (426)
----------- ----------- -----------
Total Provision $ 6,787 $ 10,489 $ 8,895
=========== =========== ===========
</TABLE>
<TABLE>
<S> <C> <C>
Temporary differences giving rise to recorded deferred income taxes are as
follows at December 31 (in thousands):
1999 1998
------------ ------------
Asset:
Pension, Postretirement Benefits and Deferred Compensation $ 1,153 $ 1,481
Undistributed Earnings in Foreign Tax Jurisdictions 832 (549)
Bad Debts 812 70
Health Insurance 631 32
Vacation 524 516
State and Local Taxes 449 611
Other 959 469
------------ ------------
Total Asset $ 5,360 $ 2,630
============ ============
Liability:
Depreciation and Amortization $ 6,005 $ 4,280
Other 2,670 4,361
------------ ------------
Total Liability $ 8,675 $ 8,641
============ ============
</TABLE>
<TABLE>
<S> <C> <C> <C>
A reconciliation between NFO's effective tax rate and the U.S. statutory tax
rate is as follows at December 31:
1999 1998 1997
----------- ----------- -----------
Statutory Rate 35.0% 35.0% 35.0%
Write Off of Nondeductible Intangible Assets 330.2 - -
Nondeductible Expenses 69.6 1.6 2.3
Nondeductible Pooling Expenses - - 2.0
State and Local Income Taxes, Net of Federal Benefit 64.1 5.3 4.0
Effect of Foreign Tax Rates Different than U.S. Tax Rate 74.3 (.2) (1.8)
Other 0.5 (.3) (1.8)
----------- ----------- -----------
Effective Tax Rate 573.7% 41.4% 39.7%
=========== =========== ===========
</TABLE>
As of December 31, 1999, NFO has not provided for taxes on approximately $12.5
million of accumulated undistributed earnings of its foreign subsidiaries as
they are considered by management to be permanently reinvested. If these
undistributed earnings were not considered to be permanently reinvested,
approximately $.9 million of deferred income taxes would have been provided.
9. Employee Benefit Plans
One of NFO's subsidiaries has a defined benefit pension plan covering
approximately one-half of NFO's U.S. employees. Benefits provided by the plan
are based on salary and years of service. NFO's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits attributed
to service to date but also for those expected to be earned in the future. Plan
assets are principally invested in equity securities and guaranteed fixed income
insurance contracts.
<TABLE>
<S> <C> <C>
The following table sets forth the plan's funded status and amounts recognized
in NFO's balance sheets at December 31 (in thousands):
1999 1998
----------- -----------
Accumulated Benefit Obligation at December 31 $ 7,131 $ 7,496
=========== ===========
Change in Projected Benefit Obligation:
Projected Benefit Obligation at Beginning of Year $ 8,215 $ 7,029
Service Cost 758 611
Interest Cost 607 526
Actuarial (Gain) Loss (803) 704
Benefits Paid (598) (655)
----------- -----------
Projected Benefit Obligation at End of Year 8,179 8,215
----------- -----------
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year 6,486 6,214
Actual Return on Plan Assets 1,270 360
Company Contributions 332 567
Benefits Paid (598) (655)
----------- -----------
Fair Value of Plan Assets at End of Year 7,490 6,486
----------- -----------
Funded Status 689 1,729
Unrecognized Net Loss (280) (1,827)
Unrecognized Prior Service Cost 13 20
----------- -----------
Accrued Pension Cost 422 (78)
Adjustment Required to Recognize Additional Minimum
Pension Liability before Income Taxes - 1,088
----------- -----------
Adjusted Accrued Pension Cost $ 422 $ 1,010
=========== ===========
Adjustment Required to Recognize
Additional Minimum Pension Liability before Income Taxes $ - $ 1,088
Reversal of Prior Year Minimum Liability Adjustment (1,088) (576)
----------- -----------
Other Comprehensive (Income) Loss Before Income Taxes $ (1,088) $ 512
=========== ===========
</TABLE>
Pension expense consists of the following for the years ended December 31 (in
thousands):
1999 1998 1997
----------- ----------- -----------
Service Cost $ 758 $ 611 $ 547
Interest Cost 607 526 465
Expected Return on Plan Assets (647) (558) (452)
Net Amortization and Deferral 114 22 36
----------- ----------- -----------
Net Periodic Pension Cost $ 832 $ 601 $ 596
----------- ----------- -----------
Assumptions used in determining pension plan amounts were as follows:
1999 1998 1997
-------- --------- ---------
Discount Rate 7.75% 7.00% 7.50%
Rate of Increase in Compensation Levels 4.50 4.50 4.75
Expected Long-Term Rate of Return on Assets 9.50 9.00 9.00
The change in actuarial assumptions in 1999 resulted in a decrease in the
projected benefit obligation of approximately $997,000.
Certain of NFO's subsidiaries maintain profit sharing plans, established under
Section 401(k) of the Internal Revenue Code, which cover the majority of
full-time U.S. employees. Profit sharing contributions to the plans are at the
discretion of NFO's Board of Directors and are generally tied to annual profit
performance. The plans also contain a 401(k) feature whereby all eligible
employees may contribute up to 15% of their basic compensation. NFO makes a
matching contribution equal to 25% of the first 6% of each participant's
voluntary contribution. NFO's total contributions related to the plans amounted
to approximately $1.4 million, $1.2 million, and $.9 million for the years ended
December 31, 1999, 1998, and 1997, respectively.
NFO has unfunded, nonqualified deferred compensation plans for certain key
executives. The plans provide, among other things, for certain deferred
compensation to take effect on the employee's retirement, disability, death or
other termination of employment. Long-term liabilities include approximately
$1.4 million and $1.1 million at December 31, 1999 and 1998, respectively,
representing the present value of the benefits expected to be provided based on
the employees' service to that date.
Certain of NFO's foreign subsidiaries maintain benefit plans similar to defined
contribution plans for certain employees. NFO has no benefit obligations beyond
the contributions that are made by NFO. NFO's total contributions related to
these plans amounted to approximately $.5 million, $.8 million, and $.4 million
for the years ended December 31, 1999, 1998, and 1997, respectively.
10. Postretirement Benefit Programs
Certain of NFO's subsidiaries sponsor two defined benefit postretirement
programs that cover salaried and nonsalaried U.S. employees. One program
provides medical benefits, and the other provides life insurance benefits. The
postretirement healthcare program is contributory, with retiree contributions
adjusted annually; the life insurance program is noncontributory.
The healthcare program currently requires the retiree to pay 50% of the cost of
coverage for the retiree and dependents both before and after attaining age 65.
For those retiring on or after January 1, 1994, the co-pay increases at age 65
to 75% of the cost of coverage for the retiree and 100% of the cost of coverage
for dependents. In addition, an employee must complete 10 years of service after
age 45 to be eligible for postretirement medical coverage. NFO does not fund its
postretirement healthcare or life insurance programs.
The following sets forth the programs' status reconciled with the amount shown
in NFO's balance sheets at December 31 (in thousands):
1999 1998
----------- -----------
Change in Projected Benefit Obligation:
Projected Benefit Obligation at Beginning of Year $ 1,200 $ 1,226
Service Cost 132 103
Interest Cost 95 72
Plan Amendments - (68)
Actuarial Loss (Gain) 39 (106)
Benefits Paid (33) (27)
----------- -----------
Projected Benefit Obligation at End of Year 1,433 1,200
----------- -----------
Change in Plan Assets:
Company Contributions 33 27
Benefits Paid (33) (27)
----------- -----------
Plan Assets at End of Year - -
----------- -----------
Reconciliation of Projected Benefit Obligation and
Total Amount Accrued:
Funded Status 1,433 1,200
Unrecognized Net Gain 6 39
Unrecognized Prior Service Cost 57 64
----------- -----------
Accrued Benefit Cost Included in Long-Term
Liabilities in the Accompanying
Balance Sheet $ 1,496 $ 1,303
=========== ===========
<TABLE>
<S> <C> <C> <C>
Net periodic postretirement benefit cost includes the following components (in
thousands):
1999 1998 1997
----------- ----------- -----------
Benefits Attributed to Service During the Period $ 132 $ 103 $ 96
Interest Cost on Accumulated
Postretirement Benefit Obligation 95 72 77
Net Amortization and Deferral (1) (7) (3)
----------- ----------- -----------
Net Periodic Postretirement Benefit Cost $ 226 $ 168 $ 170
=========== =========== ===========
</TABLE>
The assumed discount rate used to measure the postretirement benefit obligation
is 7.50%, 6.75%, and 7.25% in 1999, 1998, and 1997.
The healthcare trend rates assumed in the above estimates include a rate of 7%
in 1999, grading down to a level 5% in 2001 and thereafter.
The effect of a 1% increase in the assumed healthcare trend rates would be to
increase the obligation at December 31, 1999, by approximately $193,000, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by approximately $41,000.
The effect of a 1% decrease in the assumed healthcare trend rates would be to
decrease the obligation at December 31, 1999, by approximately $160,000, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by approximately $33,000.
11. Capital Stock
Preferred Stock - NFO has authorized 5,000,000 shares of serial preferred stock
to be issued in one or more series, with the Board of Directors to have the
authority to fix designations, preferences, powers and relative participating,
optional or other rights and restrictions thereof.
Stock Split - A 3-for-2 stock split was authorized on September 17, 1997, and
effected on October 15, 1997, for stockholders of record on September 30, 1997.
As a result, approximately 6,850,000 additional shares of NFO common stock were
issued. All per share and share amounts in the accompanying consolidated
financial statements have been restated to reflect the above stock split.
Stockholder Rights Plan - On October 5, 1998, NFO's Board of Directors adopted a
stockholder rights plan by declaring a dividend distribution of one preferred
share purchase right for each share of NFO's common stock. The stockholder
rights plan is intended to give NFO's Board of Directors sufficient time to
respond to an unsolicited tender offer or other attempted acquisition. Under the
stockholder rights plan, rights were issued to stockholders of record as of
October 15, 1998, and will expire after ten years, unless earlier redeemed or
exchanged by NFO. The rights distribution is not taxable to stockholders.
The rights will be exercisable only if a person or group acquires 15% or more of
NFO's common stock or announces a tender offer upon the consummation of which
would result in 15% ownership. Each right will entitle stockholders to buy one
one-hundredth of a share of a new series of preferred stock at an exercise price
of $50. If, however, a person or group acquires 15% or more of NFO's outstanding
common stock, each right will entitle its holder, other than such person or
members of such group, to purchase, at the right's then-current exercise price,
a number of NFO's common shares having a market value of twice the right's
exercise price. If NFO is acquired in a merger or other business combination
transaction after a person or group has acquired 15% or more of NFO's
outstanding common stock, each right will entitle its holder to purchase, at the
right's then-current exercise price, a number of the acquiring company's common
shares having a market value of twice such exercise price.
Under certain circumstances, NFO's Board of Directors may exchange the right, in
whole or in part, at an exchange ratio of one share of common stock (or
one-hundredth of a share of the new series of preferred stock) per right. Prior
to the acquisition by a person or group of beneficial owners of 15% or more of
NFO's common stock, the rights are redeemable for one cent per right at the
option of the Board of Directors. Prior to such time, the terms of the rights
may be amended by the Board.
On December 23, 1999, NFO amended the stockholder rights plan in order to
provide that the Agreement and Plan of Merger executed with Interpublic (see
Note 1) would not result in Interpublic being deemed to be an acquiring Person
as defined in the stockholder rights plan or constitute a Shares Acquisition
Date, a Separation Date or a Triggering Event, each as defined in the
stockholder rights plan.
Stock Issued in Exchange for Non-Recourse Notes - In December 1994, Prognostics
issued 10,000 shares of non-voting common stock (899,922 common shares of NFO
post-combination, see Note 17) to an employee. The shares were issued in
exchange for a non-recourse promissory note in the amount of $40,000 secured by
the issued shares. The note bears interest at 8% per annum payable quarterly.
The outstanding principal is due December 2000.
In August 1995, Prognostics issued 2,595 shares of non-voting common stock
(233,529 common shares of NFO post-combination) to certain employees. The shares
were issued in exchange for non-recourse promissory notes totaling $10,000
secured by the issued shares. The notes bear interest at 8% per annum payable
quarterly. The outstanding principal is due December 2000.
Approximately $7,000 and $11,000 of the above notes were repaid in 1998 and
1997, respectively, resulting in a tax benefit of approximately $1 million and
$1.75 million in 1998 and 1997, respectively, reflected as additional paid-in
capital. NFO has reflected the remaining notes receivable as an offset to
additional paid-in capital. The fair value of the stock on the date of sale,
issued in exchange for the non-recourse notes, was determined to be equal to the
face amount of the notes and, accordingly, no compensation expense was
recognized.
Stock Options - NFO has adopted the NFO Worldwide, Inc. Stock Option Plan and
the Directors' Stock Option Plan. The plans provide for the grant of
"nonqualified" options to purchase shares of common stock. The exercise price of
the options is the market value of NFO's common stock on the date of the grant.
The number of shares of common stock reserved for issuance under the Stock
Option Plan, the Directors' Stock Option Plan, and the Consultant's Plan is
4,677,250 and 540,000 shares, respectively. If, as to any number of shares, any
option granted pursuant to the plans shall expire or terminate for any reason,
such number of shares shall again be available for grant under the plans.
Under the Stock Option Plan, options become exercisable at such time or times as
determined at the date of grant and expire not more than 10 years from the date
of grant. Options granted under the Stock Option Plan generally become
exercisable over a three-year period at the rate of one-third of the shares
awarded each year.
The Directors' Stock Option Plan provides that options on 22,500 shares be
automatically granted to each nonemployee director upon initial election and
that options on 15,000 shares be granted upon each occasion thereafter that the
director is elected or reelected to such position. Under the Directors' Stock
Option Plan, options become exercisable at any time after the six-month
anniversary of the date the option was awarded and expire not more than five
years from the date of grant. In 1999, each director was granted an option for
45,000 shares.
NFO applies Financial Accounting Standards Board Statement No. 123, Accounting
for Stock-Based Compensation, in accounting for its stock-based compensation
plans. In accordance with SFAS 123, NFO applies Accounting Principles Board
Opinion No. 25 and related Interpretations for expense recognition. All stock
options issued by NFO are exercisable at a price equal to the market price at
the date of grant. Accordingly, no compensation cost has been recognized for any
of the options granted under the plans.
A summary of the status of NFO's plans that issue options as of December 31 and
changes during the years then ending is presented below:
Number Weighted
of Shares Average Price
--------- -------------
Outstanding at December 31, 1996 1,996,433 $ 9.27
Granted 544,750 16.49
Exercised (148,550) 5.03
Cancelled/Expired (2,997) 15.17
--------- -------------
Outstanding at December 31, 1997 2,389,636 11.17
Granted 683,125 15.46
Exercised (184,487) 6.88
Cancelled/Expired (27,084) 14.65
--------- -------------
Outstanding at December 31, 1998 2,861,190 12.44
Granted 1,302,950 11.70
Exercised (411,352) 7.05
Cancelled/Expired (84,011) 14.76
--------- -------------
Outstanding at December 31, 1999 3,668,777 $ 12.73
--------- -------------
Number Weighted
of Shares Average Price
--------- -------------
Exercisable at: December 31, 1997 1,372,832 $ 8.37
December 31, 1998 1,743,590 $ 10.51
December 31, 1999 1,888,058 $ 12.55
Weighted-average fair-value
of options granted during: 1997 $ 9.25
1998 $ 8.75
1999 $ 7.11
Available for Grant at December 31, 1999 586,138
<TABLE>
<S> <C> <C> <C> <C> <C>
The following table summarizes information about options outstanding at December
31, 1999:
Options Outstanding Options Exercisable
------------------------------------------------ -------------------------------
Weighted-Average
Number ------------------------------- Number Weighted-
Range of Outstanding Remaining Exercise Exercisable Average
Exercise Prices at 12/31/99 Contractual Life Price at 12/31/99 Exercise Prices
--------------- ----------- ---------------- ----- ----------- ---------------
$ 4.30 - $ 6.45 334,375 0.4 $ 5.40 334,375 $ 5.40
6.46 - 8.60 53,625 8.9 7.25 17,876 7.25
8.61 - 10.75 581,550 6.9 9.92 286,500 9.86
10.75 - 12.90 950,394 9.2 11.76 197,994 11.87
12.91 - 15.05 893,000 6.3 13.96 512,667 14.10
15.06 - 17.20 534,333 7.6 16.78 385,649 16.65
17.21 - 19.35 221,500 7.1 18.19 119,663 18.58
19.36 - 21.50 100,000 8.5 21.07 33,334 21.07
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions by year:
</TABLE>
1999 1998 1997
----------- ----------- -----------
Risk-Free Interest Rate 5.6% 5.0% 6.0%
Expected Life 6.7 years 6.8 years 6.8 years
Expected Volatility 56.0% 53.7% 46.0%
Had compensation cost for the plans been determined based on the fair value at
the grant dates for awards under those plans consistent with the method
described in SFAS 123, NFO's net income and earnings per share would have been
reduced to the pro forma amounts indicated below (in thousands of dollars,
except per share data):
1999 1998 1997
----------- ----------- -----------
Net (Loss) Income:
As Reported $ (6,170) $ 14,490 $ 12,505
Pro Forma $ (10,571) $ 11,513 $ 9,380
Basic Earnings Per Share:
As Reported $ (.28) $ .68 $ .62
Pro Forma $ (.48) $ .54 $ .46
Diluted Earnings Per Share:
As Reported $ (.28) $ .67 $ .60
Pro Forma $ (.48) $ .53 $ .45
NFO cautions that because the SFAS 123 method of accounting is only applied to
options granted in 1995 and thereafter, the resulting proforma results may not
be representative of results to be expected in future years.
As a condition to Interpublic's execution of the merger agreement, NFO entered
into a stock option agreement with Interpublic which granted Interpublic the
option under specified circumstances to purchase 4,448,684 shares of NFO common
stock, subject to the issuance of new shares. The maximum number of shares that
Interpublic could purchase under the option agreement is 19.9% of the number of
shares of NFO common stock outstanding at the time of exercise. The exercise
price of the options is $26.00 per share, subject to adjustment under specified
circumstances. If Interpublic were to exercise the option in full, it would hold
approximately 16.6% of the then outstanding shares of NFO common stock.
12. Interest Expense, Net
Interest expense, net, consists of the following for the years ended December 31
(in thousands):
1999 1998 1997
----------- ----------- -----------
Interest Income $ (733) $ (588) $ (259)
Interest Expense 14,817 4,338 928
----------- ----------- -----------
Total $ 14,084 $ 3,750 $ 669
=========== =========== ===========
13. Earnings Per Share
<TABLE>
<S> <C> <C> <C>
The following table reconciles the net income and weighted average number of
shares included in the basic earnings per share calculation to the net income
and weighted average number of shares used to compute diluted earnings per share
(in thousands):
1999 1998 1997
----------- ----------- -----------
Net (Loss) Income Used for Basic and Diluted
Earnings Per Share $ (6,170) $ 14,490 $ 12,505
----------- ----------- -----------
1999 1998 1997
----------- ----------- -----------
Weighted Average Number of Shares Outstanding
Used for Basic Earnings Per Share 22,006 21,154 20,265
Dilutive Stock Options - 397 460
Contingently Issuable Common Shares - 153 107
----------- ----------- -----------
Weighted Average Number of Shares Outstanding
and Common Share Equivalents Used for
Diluted Earnings Per Share 22,006 21,704 20,832
----------- ----------- -----------
</TABLE>
Diluted shares outstanding in 1999 exclude approximately 3.7 million shares from
the potential exercise of stock options and 171,000 contingently issuable shares
due to their anti-dilutive effect.
14. Supplemental Cash Flow Information
Supplemental cash flow information consists of the following for the years ended
December 31 (in thousands):
1999 1998 1997
----------- ----------- -----------
Cash Paid During the Period for:
Interest $ 13,635 $ 2,806 $ 786
=========== =========== ===========
Income Taxes $ 12,873 $ 6,263 $ 6,844
=========== =========== ===========
Noncash Investing and
Financing Activities:
Increase in Goodwill Resulting
from Contingent Purchase
Price Earned (Note 17) $ 5,321 $ 4,631 $ 4,797
=========== =========== ===========
Liabilities Assumed
in Acquisitions (Note 17) $ - $ 135,489 $ 617
=========== =========== ===========
15. Commitments and Contingencies
NFO has employment agreements with its principal executives and certain other
key employees. These agreements generally do not extend more than three years
and contain renewal options. Additionally, NFO has entered into change in
control agreements with certain executives which may result in payments under
certain circumstances in the event of a change in control as defined in the
respective agreements.
Pursuant to certain acquisition related purchase and sale agreements (see Note
17), NFO is contingently liable to make additional purchase price, or earnout,
payments, provided the acquired companies achieve certain pre-defined earnings
targets.
16. Quarterly Results of Operations (Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Quarterly results were as follows (in thousands, except per share data):
First Second Third Fourth(1)
----------- ----------- ----------- -----------
1999:
- ----
Revenues $ 106,416 $ 119,431 $ 111,172 $ 120,179
Earnings before Taxes & Minority Interest 5,486 9,359 6,735 (20,397)
Net Income 2,903 5,122 3,562 (17,757)
Basic Earnings per Share .14 .23 .16 (.80)
Diluted Earnings per Share .13 .23 .16 (.80)
(1) Includes pretax special charges in 1999 of $21.7 million, primarily to
write-off the intangible assets associated with NFO's financial services
businesses, which have been deemed to be permanently impaired. Special
charges after tax aggregated $17.8 million, or ($.80) per diluted share.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
First Second Third Fourth(1)
----------- ----------- ----------- -----------
1998:
- ----
Revenues $ 50,243 $ 65,003 $ 65,486 $ 94,619
Earnings before Taxes & Minority Interest 4,323 7,654 4,744 8,636
Net Income 2,481 4,366 2,561 5,082
Basic Earnings per Share .12 .21 .12 .24
Diluted Earnings per Share .12 .20 .12 .23
Earnings per share is computed independently for the quarters reported,
therefore the sum of the quarterly earnings per share may not equal the per
share total for the year.
</TABLE>
17. Acquisitions
On November 20, 1998, NFO acquired all of the outstanding shares of capital
stock of Infratest Burke Aktiengesellschaft Holding. Founded in 1947, Infratest
Burke is headquartered in Munich, Germany, and ranks as one of the top four
custom marketing research firms in Europe with 35 offices in 15 countries. The
total acquisition cost of DM 248 million (US $149 million) includes the stock
purchase of DM 205 million (US $123 million) and the assumption of approximately
DM 43 million (US $26 million) of pre-existing debt. The purchase price of DM
205 million (US $123 million) was paid DM 200 million (US $120 million) in cash
at closing, with the remaining DM 5 million (US $3 million) payable in cash over
the next two and one-half years.
On October 23, 1998, NFO acquired City Research Group Plc. City Research,
founded in 1978 and headquartered in London, England, is a leading UK marketing
research firm specializing in commercial banking. NFO acquired all the
outstanding stock of City Research for total consideration of approximately $2.4
million, $1.5 million paid in cash at closing and the remainder payable over the
next two years in cash and stock based on City Research achieving certain
earnings targets.
On October 1, 1998, NFO acquired Donovan Research Pty. Ltd. Donovan, founded in
1974 and headquartered in Perth, Australia, is a full service custom research
agency with a leading position in fast-moving consumer goods, public policy,
tourism, customer satisfaction and continuous tracking research. In addition to
its own branded products, AdTest and Packtest, Donovan is also the exclusive
regional licensee of NFO MarketMind(TM), a global brand tracking system acquired
by NFO in March 1998. NFO acquired substantially all the net assets of Donovan
for cash consideration of approximately $1.6 million, $1.3 million paid at
closing and the remainder payable over the next two years based on Donovan's
achievement of certain earnings targets.
On August 31, 1998, NFO acquired Stochastic International Pty. Ltd. Stochastic
is the developer of the Stochastic Reaction Monitor continuous brand tracking
system, which provides guidance on brand positioning to more than 60 companies
in 33 countries. Stochastic was founded in 1981 and is headquartered in London,
England. NFO acquired substantially all the net assets of Stochastic for a total
purchase price of approximately $2.5 million, $2 million payable at closing in
equal amounts of cash and newly issued shares of NFO common stock and the
balance payable at the end of the next two years. A further amount is payable in
cash at the end of three years, providing that Stochastic achieves certain
revenue targets during the third year.
On April 3, 1998, NFO acquired CF Group, Inc. Founded in 1932, CF Group operates
three companies in Canada: Canadian Facts, the largest custom marketing research
organization in Canada, Applied Research Consultants, and Burke International.
CF Group is headquartered in Toronto, Canada, and has Canadian client service
offices in Montreal, Ottawa and Vancouver. NFO acquired 100% of the outstanding
stock of CF Group for a total purchase price of approximately CDN $20 million,
70% payable at closing, with 75% in cash and 25% in newly issued shares of NFO
common stock. The remaining 30% of the purchase price will be payable in cash
and stock over the next two years based on CF Group achieving certain earnings
targets.
On March 4, 1998, NFO acquired MarketMind Technologies and Ross-Cooper-Lund. NFO
MarketMind owns and licenses the NFO MarketMind(TM) system, which uses
proprietary software that combines a set of key diagnostic measures together
with the integration, interactive analysis and display of multiple streams of
longitudinal data. RCL is a research-based consulting firm focused on
brand-building strategies and is the exclusive licensee of the NFO
MarketMind(TM) system in the United States. In separate transactions, NFO
acquired substantially all the net assets of each company for the combined
consideration of $16.6 million. Of the total purchase price, $12.45 million or
75% was paid at closing, while the remaining 25% will be payable in cash based
upon each company achieving certain earnings targets over the next two years.
Approximately 85% of the closing consideration was paid in cash, and the
remainder in newly issued shares of NFO common stock.
The 1998 acquisitions have been accounted for using the purchase method.
Accordingly, NFO's financial statements include the results of operations from
the effective date of the respective acquisitions. The above 1998 acquisitions
include allocations to goodwill of $79.9 million and customer lists of $75.3
million.
The following unaudited pro forma summary presents the condensed consolidated
results of operations as if the 1998 acquisitions had occurred on January 1,
1997, and do not purport to be indicative of what would have occurred had the
acquisitions been made at that date or of the results which may occur in the
future. The pro forma effects of NFO MarketMind, Stochastic, City Research, and
Donovan are not material and therefore are not included in the following amounts
for the year ended December 31 (in thousands, except per share data):
1998 1997
----------- -----------
Revenues $ 444,592 $ 379,250
Net Income 10,905 8,963
Basic Earnings Per Share .51 .44
Diluted Earnings Per Share .50 .43
On December 12, 1997, NFO acquired CM Research Group Limited. Headquartered in
Auckland, New Zealand, CM Research Group is the leading provider of custom
marketing research in New Zealand, and one of the larger marketing research
organizations in Australia. NFO acquired 100% of the outstanding stock of CM
Research Group for a purchase price of approximately $8.8 million, including the
assumption of debt. Of the total purchase price, 30% is payable based on CM
Research Group's achieving certain earnings targets during the two years
following the date of acquisition. All amounts are payable 75% in cash and 25%
in newly issued shares of NFO common stock.
On May 28, 1997, NFO acquired Access Research, Inc. Access is a research-based
financial services consulting firm specializing in the retirement market. The
entire purchase price of approximately $4.0 million was paid in cash at closing.
Effective September 1, 1999, Access Research was merged into The Spectrem Group.
The 1997 acquisitions have been accounted for using the purchase method.
Accordingly, NFO's financial statements include the results of operations from
the effective date of the respective acquisitions. The above 1997 acquisitions
include allocations to goodwill of $9.3 million. The pro forma effects of these
acquisitions were not material to the 1997 results.
On July 11, 1997, NFO issued 2,046,363 shares of NFO common stock to acquire all
of the outstanding stock of The MBL Group plc, a leading international marketing
research firm with 27 offices in 17 countries throughout the UK, the Middle
East, and Asia.
On April 1, 1997, NFO issued 2,589,720 shares of NFO common stock to acquire
100% of the outstanding stock of Prognostics, a leading provider of survey-based
quantitative customer satisfaction research to information technology companies
worldwide. Founded in 1981, Prognostics is headquartered in Palo Alto,
California and has additional offices in Boston, Massachusetts, and London,
England, as well as an affiliate relationship in Japan.
The acquisitions of MBL and Prognostics were accounted for as poolings of
interests. As a result, the accompanying financial statements have been restated
to reflect the combined results of NFO, Prognostics, and MBL for all periods
presented.
In addition, NFO has entered into agreements with the minority shareholders of
the various MBL subsidiaries to repurchase a portion of such shareholders'
minority shares during 1997. The consideration for this initial purchase of the
minority interests was approximately $14.5 million, of which $11.1 million was
paid in cash and $3.4 million via the issuance of 216,850 newly issued shares of
NFO common stock. The remaining minority interests will then be repurchased in
July 2000 based on the higher of (a) a multiple of average profits for the three
years ending December 31, 1999 or (b) the original valuation. The purchase of
the minority interests in MBL's subsidiaries was accounted for using the
purchase method of accounting. The minority interest purchases resulted in an
allocation of $13 million to goodwill. The pro forma effects of these minority
interest purchases were not material.
18. Investments in Affiliates
NFO has investments in various affiliates. The largest of these affiliates,
Burke, Inc., is a Cincinnati, Ohio-based marketing research firm in which
Infratest Burke has a 50% interest. NFO's interest in the activities of these
affiliates resulted in income of approximately $2.2 million in 1999 and $154,000
in 1998, which is reflected in equity interest in net (income) loss of
affiliated companies in the consolidated income statements.
On October 19, 1999, NFO announced the formation of InsightExpress, LLC, a new
Internet company formed to provide real-time consumer input to the desktops of
decision-makers in companies of all sizes worldwide. InsightExpress is a fully
automated web-enabled survey system that will allow its customers to test new
ideas, screen new concepts, gauge customer satisfaction, survey employees, test
advertising, and gather insight into the needs, attitudes, and behaviors of
consumers. InsightExpress is designed to provide these capabilities at a
fraction of the time and the cost of existing market research methods while
leveraging the worldwide client experience and panel expertise of NFO. To fund
its development and growth, InsightExpress has raised a total of $25 million in
new venture capital from General Atlantic Partners and Engage Technologies.
Assuming certain put/call rights are exercised, NFO's ownership position will
increase to a 50% interest in the venture.
In 1995, NFO entered into an agreement with a European market research firm to
launch access panel activities in Europe. In May 1999, NFO sold its portion of
the joint venture back to its former partners and terminated the relationship.
NFO's portion of the joint venture losses was $23,000, $210,000, $291,000 in
1999, 1998 and 1997, respectively, which is reflected in equity interest in net
(income) loss of affiliated companies in the consolidated income statements.
19. Segment Data
NFO has three operating segments as defined by the provisions of Financial
Accounting Standards Board Statement No. 131, Disclosures about Segments of an
Enterprise and Related Information, North America, Europe, and Australasia and
the Middle East. Intersegment sales are generally recorded at market or
equivalent value. Operating income by geographic segment consists of net sales
less related costs and expenses.
<TABLE>
<S> <C> <C> <C>
Operating segment and geographic disclosures as required by SFAS 131 are as
follows as of and for the years ended December 31 (in thousands):
1999 1998 1997
------------ ----------- -----------
Revenues:
North America $ 208,248 $ 186,390 $ 141,119
Europe 210,075 50,350 24,838
Australasia and the Middle East 44,719 40,140 24,893
------------ ----------- -----------
Total Operating Segments 463,042 276,880 190,850
Intersegment Revenues (5,844) (1,529) (621)
------------ ----------- -----------
Total Revenues $ 457,198 $ 275,351 $ 190,229
============ =========== ===========
United States (country of domicile) $ 182,665 $ 166,847 $ 141,119
All Foreign Countries Combined 280,377 110,033 49,731
Intersegment Revenues (5,844) (1,529) (621)
------------ ----------- -----------
Total Revenues $ 457,198 $ 275,351 $ 190,229
============ =========== ===========
Depreciation and Amortization:
North America $ 24,537 $ 6,978 $ 5,786
Europe 8,378 1,426 347
Australasia and the Middle East 1,578 1,487 689
------------ ----------- -----------
Total Operating Segments 34,493 9,891 6,822
Unallocated Corporate Expenses 252 103 70
------------ ----------- -----------
Total Depreciation and
Amortization $ 34,745 $ 9,994 $ 6,892
============ =========== ===========
Operating Income:
North America $ 5,956 $ 29,672 $ 25,666
Europe 15,264 4,748 2,055
Australasia and the Middle East 2,672 1,784 2,114
------------ ----------- -----------
Total Operating Segments 23,892 36,204 29,835
Unallocated Corporate Expenses (10,846) (6,876) (6,560)
------------ ----------- -----------
Total Operating Income $ 13,046 $ 29,328 $ 23,275
============ =========== ===========
Total Assets:
North America $ 464,342 $ 450,503 $ 225,095
Europe 214,741 234,612 11,751
Australasia and the Middle East 39,567 30,573 32,207
------------ ----------- -----------
Total Operating Segments 718,650 715,688 269,053
Elimination of Investment in Subsidiaries (75,492) (75,839) (43,752)
Elimination of Intersegment Receivables (217,096) (188,051) (55,027)
------------ ----------- -----------
Total Assets $ 426,062 $ 451,798 $ 170,274
============ =========== ===========
Long-Lived Assets:
North America $ 30,817 $ 27,015 $ 16,927
Europe 14,772 14,999 1,049
Australasia and the Middle East 2,775 2,458 1,941
------------ ----------- -----------
Total Long-Lived Assets $ 48,364 $ 44,472 $ 19,917
============ =========== ===========
United States (country of domicile) $ 29,372 $ 25,472 $ 16,927
All Foreign Countries Combined 18,992 19,000 2,990
------------ ----------- -----------
Total Long-Lived Assets $ 48,364 $ 44,472 $ 19,917
============ =========== ===========
</TABLE>
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
NFO has had no disagreements on accounting and financial disclosures with its
independent public accountants.
PART III
Item 10. Directors and Executive Officers of the Registrant
BOARD OF DIRECTORS
The Board of Directors consists of five members. Set forth below are each
director's name, age, principal occupation, position with NFO, period of service
as a director of NFO, membership on committees of the Board of Directors, and
other directorships held.
Director
Name Age Position Since
---- --- -------- -----
William E. Lipner (1) 52 Chairman of the Board, President,
Chief Executive Officer and Director 1991
Walter A. Forbes (1)(3)(4) 57 Director 1991
Steven J. Gilbert (1)(2)(3) 52 Director 1991
Edmund A. Hajim (2)(3)(4) 63 Director 1992
John Sculley (2)(4) 61 Director 1994
- ----------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Mr. Lipner has been with NFO or its predecessor, National Family Opinion, Inc.
for over 25 years, serving as its President and Chief Executive Officer since
July 1982 and as Chairman of the Board of Directors since February 1993. Mr.
Lipner has been a director of NFO since its organization in September 1991. Mr.
Lipner is also a director of Crane Co., a diversified aerospace engineering and
manufacturing company.
Mr. Forbes has been a director of NFO since its organization in September 1991.
Mr. Forbes was the Chairman and Chief Executive Officer of CUC International
Inc. (now Cendant Corporation), an interactive electronic consumer services
company, from 1988 through December 1997. From December 1997 through July 1998,
Mr. Forbes was the Chairman of Cendant Corporation. In July 1998, Mr. Forbes
resigned as an officer and director of Cendant Corporation. Since July 1998, Mr.
Forbes has been an independent investor.
Mr. Gilbert has been a director of NFO since its organization in September 1991
and served as the Chairman of the Board of Directors from September 1991 to
February 1993 and as Vice Chairman of the Board of Directors from February 1993
to March 1998. Mr. Gilbert is Chairman of the Board of Gilbert Global Equity
Partners, L.P., a private equity fund. Mr. Gilbert was the Managing General
Partner of Soros Capital L.P., an investment firm, from 1992 to 1997. Mr.
Gilbert is also a director of Veritas, Inc., a marine seismic company, Terra
Nova (Bermuda) Holdings, Limited, a Bermuda based reinsurer, Colep Holding,
Ltd., a Portuguese packaging company, LLC International, Inc., a wireless
telephone engineering firm, the Asian Infrastructure Fund, Star City Casino
Holdings Pty. Ltd., an Australian gaming concern, and One.Tel, Ltd., an
Australian telecommunications company.
Mr. Hajim has been a director of NFO since February 1992. He is Chairman and
Chief Executive Officer of ING Furman Selz Asset Management, a division of ING
Asset Management, the asset management unit of ING Group. Mr. Hajim was
Co-Chairman, Americas Region, of ING Barings from December 1997 to February
1999. From 1983 to 1998, Mr. Hajim was the Chairman and Chief Executive Officer
of Furman Selz LLC, an international financial services, investment banking, and
securities firm. Mr. Hajim is also a director of Tosco Corporation, a refiner
and marketer of petroleum products and a manufacturer and distributor of
fertilizer products.
Mr. Sculley joined the Board of Directors in October 1994. From 1983 to 1993,
Mr. Sculley was the Chairman and Chief Executive Officer of Apple Computer, Inc.
For five months (from October 1993 to February 1994), Mr. Sculley was the
Chairman and Chief Executive Officer of Spectrum Information Technologies, Inc.
("Spectrum"). On January 26, 1995, Spectrum, together with three of its four
operating subsidiaries, filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Eastern District of New York. Sculley Brothers is an early stage
venture capital firm founded by brothers Arthur, David and John. Sculley
Brothers' portfolio consists of 25 Internet B2C and B2B companies. Some of the
portfolio companies are PeoplePC, Presenter.com, Veon, Metro PCS, Credit Trade,
Intralinks, GuruNet, and TechEx.
BOARD OF DIRECTORS AND COMMITTEES
The business of NFO is managed under the direction of the Board of Directors.
The Board of Directors has established four principal committees whose primary
functions are briefly described below. During 1999, the Board of Directors met
or acted by written consent eleven times. Each director attended at least 75% of
the total number of meetings held during 1999 while he was a member of the Board
of Directors, including meetings of committees of which the director is a
member.
The Audit Committee is presently composed of Messrs. Gilbert, Hajim and Sculley.
The Audit Committee's functions include recommending to the Board of Directors
the appointment of independent public accountants for NFO, subject to the
approval of the stockholders, discussing and reviewing the scope and the fees of
the prospective annual audit and reviewing the results thereof with the
independent accountants, reviewing compliance with existing major accounting and
financial policies of NFO, reviewing the adequacy of the financial organization
of NFO, and considering comments by the independent accountants regarding
internal controls and accounting procedures and management's response to those
comments. In 1999, the committee met or acted by written consent five times.
The Compensation Committee is composed of Messrs. Forbes, Gilbert and Hajim. The
functions of the Compensation Committee include reviewing and making
recommendations to the Board of Directors regarding salaries, compensation and
benefits of executive officers and key employees of NFO. In 1999, the committee
met or acted by written consent four times. A subcommittee of the Compensation
Committee, the Stock Option Committee, has been established by the Board of
Directors. The Stock Option Committee is presently composed of Messrs. Forbes
and Hajim and is responsible for administering the NFO Worldwide, Inc. Stock
Option Plan.
The Nominating Committee is composed of Messrs. Forbes, Hajim and Sculley. Its
principal function is to consider and nominate persons for election to the Board
of Directors. The committee acted by written consent once in 1999. The
Nominating Committee may consider nominees recommended by stockholders. In order
for the Nominating Committee to do so, written notice must be given and received
by the Secretary of NFO at the principal executive office of NFO no later than
60 days prior to the anniversary date of the immediately preceding annual
meeting. Such notice shall set forth (i) the name and address of the nominee;
(ii) any arrangements or understandings between the stockholder and the nominee
or any third party with respect to the nomination; (iii) any other information
required to be included in a proxy statement pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); and (iv) the consent of the
nominee to serve as a director if so selected.
The Executive Committee is composed of Messrs. Lipner, Forbes, and Gilbert. The
principal functions of the Executive Committee include exercising the powers of
the Board of Directors during intervals between Board meetings and acting as an
advisory body to the Board of Directors by reviewing various matters prior to
their submission to the Board of Directors. The Executive Committee did not meet
in 1999.
EXECUTIVE OFFICERS
In addition to Mr. Lipner, NFO's executive officers are as follows:
Name Age Position
---- --- --------
Charles B. Hamlin 53 President and Chief Operating Officer--
InsightExpress, LLC
Patrick G. Healy 44 President-- Australasia and the Middle East
and Chief Financial Officer
Hartmut Kiock 56 President-- European Operations
Joseph M. Migliara 55 President-- North American Operations
Mr. Hamlin joined NFO as its Executive Vice President -- Interactive Business
Development in February 1996 and assumed the position of President --
Interactive / High Technology and Telecommunications in September 1997. Mr.
Hamlin remained in that position until October 1999 when he assumed his current
position as President and Chief Operating Officer of InsightExpress, LLC. Mr.
Hamlin remains a member of the NFO Executive Committee. From 1994 to 1996, he
was Vice President of Marketing for Lotus Development Corporation, a computer
software company. From 1992 to 1994, Mr. Hamlin was Corporate Vice President of
the Harvard Business School Publishing Company. Prior to that he served in
various capacities with Mercer Management Consulting (formerly Temple Barker and
Sloane/Strategic Planning Associates) from 1978 to 1992, most recently as Senior
Partner.
Mr. Healy joined NFO as its Executive Vice President -- Finance and Chief
Financial Officer in November 1993 and was named President-- Australasia and the
Middle East, in January 1999. Mr. Healy remains NFO's Chief Financial Officer.
Prior to this, Mr. Healy was the President-- Corporate Products/Systems
Development of NFO. He was Executive Vice President and Chief Financial Officer
of The Interep Radio Store, a national radio advertising sales firm, for the
previous nine years. From 1983 to 1984, Mr. Healy was Assistant Controller of
Scali, McCabe, Sloves, Inc., and from 1977 to 1983, Mr. Healy served in various
capacities with Arthur Andersen LLP, an independent public accounting firm,
lastly as an Audit Manager. Mr. Healy is a certified public accountant. Mr.
Healy has served as NFO's Chief Financial Officer since November 1993, as NFO's
Secretary since March 1998, and as President-- Australasia and the Middle East
since January 1999.
Dr. Kiock was named NFO's President -- European Operations in January 1999. Dr.
Kiock is also the Chairman of the Board of Management of Infratest Burke
Aktiengesellschaft Holding, a position which he has held since 1989, and has
been a member of Infratest Burke's Board since 1970. Infratest Burke was
acquired by NFO in November 1998. Dr. Kiock has over thirty years experience in
market research and consultancy throughout the whole of the European Community.
Mr. Migliara became NFO's President-- North American Operations in January 1999.
Prior to that, Mr. Migliara had been NFO's President-- Healthcare and Consumer
Packaged Goods since September 1997. Mr. Migliara joined NFO upon the
acquisition of Migliara/Kaplan Associates, Inc. in January 1996. In 1980, Mr.
Migliara co-founded M/K and was President and Chief Executive Officer from 1980
through 1995. Prior to starting M/K he was employed at Becton-Dickinson, most
recently as Director of Marketing. Mr. Migliara is also a director of Digene
Corp.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires NFO's officers and directors, and
persons who may be deemed to own beneficially more than 10% of the common stock
of NFO, to file reports of ownership and changes in ownership on Forms 3, 4 and
5 with the Securities and Exchange Commission and the New York Stock Exchange.
Officers, directors and greater than 10% beneficial owners are required by SEC
regulation to furnish NFO with copies of all Forms 3, 4 and 5 they file.
Based solely on NFO's review of the copies of such forms it has received, NFO
believes that all its officers, directors, and greater than 10% beneficial
owners complied with all filing requirements applicable to them with respect to
transactions during 1999, with the exception of Joseph M. Migliara being a late
filer of a Form 4 in 1999.
Item 11. Executive Compensation
EXECUTIVE COMPENSATION
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Shown below is information concerning the annual compensation for services in
all capacities to NFO for the years ended December 31, 1999, 1998, and 1997, of
those persons who were, during the calendar year of 1999 (i) the chief executive
officer and (ii) the other four executive officers of NFO for calendar year 1999
(collectively, the "Named Executive Officers"):
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------------- Number Of
Other Annual Securities
Compensation Underlying All Other
Name and Principal Position Year Salary Bonus (2) Options
Compensation(3)
- --------------------------- ---- ------ ----- --- -------
William E. Lipner 1999 $390,000 $243,750 0 225,000 $365,204
Chairman of the Board, 1998 370,000 325,000 0 225,000 378,453
President and Chief 1997 360,000 362,008 (1) 0 125,000 15,716
Executive Officer
Charles B. Hamlin 1999 300,000 50,000 0 0 8,956
President and Chief 1998 280,000 120,000 0 75,000 12,514
Operating Officer-- 1997 249,000 80,000 0 20,000 4,790
InsightExpress, LLC
Patrick G. Healy 1999 300,000 150,000 0 100,000 8,150
President-- Australasia 1998 280,000 200,000 0 125,000 11,467
and the Middle East 1997 249,000 220,000 0 40,000 10,313
and Chief Financial Officer
Hartmut Kiock 1999 272,600 150,000 0 100,000 0
President-- European Operations
Joseph M. Migliara 1999 300,000 50,000 0 100,000 147,313
President-- North American 1998 280,000 100,000 0 75,000 367
Operations 1997 221,696 100,000 0 25,000 240
- ---------------------
(1) Portions of Mr. Lipner's annual bonus amounts included in the table were
deferred pursuant to a Deferred Compensation Agreement between Mr. Lipner
and NFO in the following amounts: $62,008 in 1997.
(2) Personal benefits for each executive officer named in the table did not
exceed $50,000 or 10% of such executive officer's total annual salary and
bonus in 1999, 1998, or 1997.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(3) Includes the following items for each Named Executive Officer:
Total
Life Insurance Split Dollar Deferred Other
Profit Sharing Premiums Life Insurance Compensation Compensation
-------------- -------- ------------------------------ ------------
1999
- ----
Lipner $ 6,622 $ 4,421 $ 354,161 0 $ 365,204
Hamlin 6,622 2,334 0 0 8,956
Healy 6,622 1,528 0 0 8,150
Kiock 0 0 0 0 0
Migliara 0 313 0 147,000 147,313
1998
- ----
Lipner 9,576 9,128 359,749 0 378,453
Hamlin 9,576 2,938 0 0 12,514
Healy 9,576 1,891 0 0 11,467
Migliara 0 367 0 0 367
1997
- ----
Lipner 8,739 6,977 0 0 15,716
Hamlin 2,375 2,415 0 0 4,790
Healy 8,739 1,574 0 0 10,313
Migliara 0 240 0 0 240
</TABLE>
The profit sharing contributions for Messrs. Lipner, Hamlin, and Healy represent
contributions made by NFO into the NFO Research, Inc. Profit Sharing Plan.
The split dollar life insurance amounts set forth for Mr. Lipner in 1999 and
1998 represent the present dollar value, determined in accordance with SEC
regulations, and based on actuarial computations, as of December 31, 1999 and
1998, respectively, of the benefit to Mr. Lipner of the remainder of the premium
payments made by NFO pursuant to a "split dollar" life insurance policy in
respect of Mr. Lipner in 1999 and 1998.
OPTION GRANTS
NFO's executive officers and certain other employees participate in the
Employees' Stock Option Plan. The table below sets forth the stock options
granted to the Named Executive Officers during 1999. NFO did not grant SARs to
any employees during 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Option Grants in Last Fiscal Year
Individual Grants
------------------------------------------------
% of Total Potential Realizable Value
Number of Options at Assumed Annual Rates of
Securities Granted to Exercise Stock Option Appreciation
Underlying Employees or Base for Option Term
Options During Price Expiration -------------------------------
Granted 1999 $ / Sh. Date 5% ($) 10% ($)
------- ---- ------- ---- ------------- -------------
William E. Lipner 225,000 (1) 17.27% $11.38 2009 $1,608,452 $4,077,860
Charles B. Hamlin 0
Patrick G. Healy 100,000 (2) 7.67 11.81 2009 743,132 1,882,858
Hartmut Kiock 100,000 (2) 7.67 11.81 2009 743,132 1,882,858
Joseph M. Migliara 100,000 (2) 7.67 11.81 2009 743,132 1,882,858
- -----------------------
(1) These options were granted on January 4, 1999. Options with respect to
one-third of the shares subject thereto became exercisable on June 30,
1999, options with respect to the second one-third of the shares will
become exercisable on January 1, 2000, and options with respect to the
last one-third of the shares will become exercisable on January 1, 2001.
(2) These options were granted on December 10, 1999. Options with respect to
one-third of the shares subject thereto will become exercisable on June
30, 2000, options with respect to the second one-third of the shares will
become exercisable on January 1, 2001, and options with respect to the
last one-third of the shares will become exercisable on January 1, 2002.
</TABLE>
FISCAL YEAR END OPTION VALUES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
The table below presents information with respect to both exercisable and
unexercisable options to purchase NFO's common stock held by the Named Executive
Officers at December 31, 1999, and the value of such options at December 31,
1999.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares December 31, 1999 December 31, 1999(1)
Acquired Value ---------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
William E. Lipner 0 0 634,959 341,666 $6,428,481 $2,356,458
Charles B. Hamlin 0 0 165,833 56,667 1,483,252 503,785
Patrick G. Healy 0 0 297,084 196,666 3,531,644 1,907,812
Hartmut Kiock 0 0 9,834 119,666 148,739 1,353,948
Joseph M. Migliara 0 0 62,844 158,333 502,442 1,569,040
- -----------------
(1) Based on the closing price on the New York Stock Exchange of NFO's common
stock on Friday, December 31, 1999 ($22.375).
</TABLE>
EMPLOYMENT CONTRACTS
On March 15, 1995, NFO and Mr. Lipner entered into an employment agreement. The
agreement provides for Mr. Lipner's employment as the Chairman, President and
Chief Executive Officer of NFO through March 15, 1997, with an unlimited number
of two-year extensions unless either party provides 13 months advance notice not
to extend the period of employment. The agreement provides for a minimum annual
base salary of $350,000 (currently $415,000), subject to annual discretionary
increases by the Board of Directors. Mr. Lipner is also entitled to certain
fringe benefits and incentive compensation as determined by the Board of
Directors.
Under his employment agreement, Mr. Lipner's employment may be terminated by NFO
for cause (as defined in the agreement) or without cause. If NFO terminates Mr.
Lipner's employment without cause, or if Mr. Lipner resigns for good reason (as
defined in the agreement) after the occurrence of a change in control (as
defined in the agreement), Mr. Lipner is entitled to receive his base salary and
annual bonus payments through the second anniversary of the termination. If NFO
elects not to extend the term of Mr. Lipner's employment, Mr. Lipner is entitled
to receive his base salary and bonus payments for one year following the end of
the term. Mr. Lipner's agreement also provides that Mr. Lipner's stock options
granted under the Employees' Stock Option Plan shall become immediately
exercisable in the event of a change in control of NFO or in the event Mr.
Lipner's employment is terminated without cause. Mr. Lipner's stock options will
remain exercisable for a period of two years after termination of his employment
in the event of termination by NFO without cause or resignation by Mr. Lipner
for good reason following a change of control. Under the agreement, Mr. Lipner
has agreed not to own, or engage in any manner in, a business competing with NFO
for a period of two years following his termination for cause or resignation
(other than resignation for good reason following a change in control).
In addition to the employment agreement, in November, 1999, NFO and Mr. Lipner
entered into a new Change in Control and Severance Agreement which provides for
certain payments to Mr. Lipner in the event of a change in control as defined in
the agreement. Specifically, payments would include three times base salary and
three times bonus. Also in the event of a change in control, NFO must fund a
"rabbi trust" with an amount equal to the present value of all unpaid premiums
for his split dollar life insurance policy to secure the payment of premiums on
the policy. Mr. Lipner is also entitled to a gross up payment in the event any
amounts paid to him in connection with a change in control are subject to an
excise tax under Section 499 of the Internal Revenue Code. Certain other fringe
benefits would be maintained through the third anniversary of termination.
On September 12, 1995, NFO entered into an employment agreement with Mr. Hamlin,
on December 1, 1997, NFO entered into an employment agreement with Mr. Healy,
and on March 1, 1999, NFO entered into an employment agreement with Mr.
Migliara. The employment agreement for Mr. Hamlin with NFO was replaced with a
new agreement between Mr. Hamlin and InsightExpress, LLC October 18, 1999 and
provides for employment until October 18, 2002. The employment agreements
provide employment in the case of Mr. Healy until December 1, 2000, and in the
case of Mr. Migliara until March 1, 2002. The agreements provide for a minimum
base salary in 1999 of $300,000 for Mr. Hamlin, Mr. Healy and Mr. Migliara, in
each case subject to annual discretionary increases by the Board of Directors.
The agreements also provide for certain specified fringe benefits, incentive
compensation as determined by the Board of Directors, and certain stock option
grants under the Employees' Stock Option Plan. Mr. Migliara's agreement provides
for a retirement benefit of $150,000 to be paid annually from 2004 through 2013.
Under each of the employment agreements, the executive's employment may be
terminated by NFO for cause (as defined in each agreement) or without cause. If
NFO terminates the executive's employment without cause, the executive is
entitled to receive his base salary and benefits, in the case of Mr. Hamlin,
through October 18, 2002, and in the case of Mr. Healy, through December 1,
2000, and in the case of Mr. Migliara, through March 1, 2002. If the executive
resigns for good reason (as defined in each agreement) after the occurrence of a
change in control (as defined in each agreement), he is entitled to receive: (i)
his base salary and benefits until the later of (a) in the case of Mr. Hamlin,
October 18, 2002, in the case of Mr. Healy, December 1, 2000, and in the case of
Mr. Migliara, through March 1, 2002, or (b) in the cases of Messrs. Hamlin and
Migliara, the first anniversary of the resignation, and in the case of Mr.
Healy, the second anniversary of the resignation, and (ii) in the cases of
Messrs. Hamlin and Migliara, a pro-rated portion of his bonus for the year in
which the termination occurs, and in the case of Mr. Healy, an amount equal to
the most recent annual bonus he received. The employment agreements also provide
that the executive's stock options granted under the Employees' Stock Option
Plan shall become immediately exercisable in the event that the executive's
employment is terminated without cause or in the event of a change in control of
NFO. The stock options will remain exercisable for a period of 12 months after
termination of employment in the event of termination by NFO without cause or
resignation by the executive for good reason following a change in control. Each
of Messrs. Hamlin, Healy and Migliara has entered into customary non-compete and
non-solicitation agreements with NFO.
On November 20, 1998 Infratest Burke was acquired by NFO and, in connection
therewith, Dr. Kiock entered into a new employment agreement. The agreement
provides for Dr. Kiock's employment as member and Chairman of Infratest Burke's
Board of Management until November 20, 2003, and may be extended with the
agreement of Dr. Kiock and Infratest Burke's Supervisory Board. Dr. Kiock was
appointed to the additional position of President of NFO's European Operations
by NFO's Board of Directors in January 1999.
The agreement provides for a fixed annual salary of DM 500,000, subject to
annual discretionary increases by Infratest Burke's Supervisory Board, in
addition to certain fringe benefits and a performance-based bonus of up to 66
2/3% of the base salary, to be determined in accordance with the performance
targets which are established annually.
Under the agreement, Dr. Kiock may be dismissed as a member of and/or Chairman
of Infratest Burke's Board of Management at any time, within the framework of
the applicable German statutory provisions. Dr. Kiock may terminate the
agreement by giving three months' notice upon a change of control of NFO (as
defined in the agreement), and will be entitled to continue to receive his fixed
annual salary, in addition to a bonus in the amount of the average of the
preceding two business years (or, in the case of termination before the
expiration of two business years, in the amount of the average received bonus
payments), for the two years following such termination. Dr. Kiock has agreed
not to own or in any manner engage in any business competing with Infratest
Burke or any of its affiliated companies in the area of the European Union, the
U.S.A. and Canada for a period of two years following the expiration of the term
of his employment. During this period, Infratest Burke has agreed to pay Dr.
Kiock compensation equal to 50% of his last average monthly compensation,
including bonus, unless such term of employment is terminated by Dr. Kiock
following a change of control of NFO or within a period of four years after the
signing of the agreement.
In addition to the employment agreements discussed above, in November 1999, NFO
entered into new Change in Control and Severance Agreements with each of Messrs.
Healy, Kiock, and Migliara which provide for certain payments in the event of a
change in control as defined in the agreement. Specifically, payments would
include for each of Messrs. Healy, Kiock, and Migliara two and quarter times the
sum of his base salary and his highest annual bonus during the preceding five
fiscal years. Certain other fringe benefits would be maintained through the
second anniversary of termination. Messrs. Healy and Migliara are also entitled
to a gross up payment in the event any amounts paid to them in connection with a
change in control are subject to an excise tax under Section 499 of the Internal
Revenue Code.
PENSION PLAN AND EXECUTIVE DEFERRED BENEFIT PLAN
NFO Research, Inc. Pension Plan
NFO maintains the NFO Research, Inc. Pension Plan, which it assumed in
connection with the acquisition of substantially all the assets of its
predecessor in 1991. The Pension Plan is a noncontributory trusteed plan that
provides for fixed benefits to employees and their survivors in the event of
normal (age 65) or early (age 55 and 10 years of credited service) retirement.
Participants become 20% vested in their benefits after two years of service and
vest thereafter at a rate of 20% per year of service, becoming fully vested
after six years of service. Early retirement benefits are subject to reduction
to reflect early commencement.
Years of Credited Service
Compensation 15 20 25 30 35
- ------------ --------- -------- -------- ------- -------
$160,000 $26,157 $31,405 $35,517 $38,739 $41,263
$200,000 32,696 39,256 44,396 48,423 51,579
The pension table set forth above illustrates the estimated annual pension
payable as a single life annuity upon retirement pursuant to the current Pension
Plan formula for various levels of compensation and years of service, assuming
retirement after attainment of age 65. The benefits set forth above are not
subject to any reduction for social security or other offsets.
Compensation taken into account for the purposes of calculating benefits under
the Pension Plan for 1999 is limited to $160,000, which limit is subject to
adjustment in accordance with the Internal Revenue Code. Compensation for
purposes of the Pension Plan includes salary and bonus as set forth in the
Summary Compensation Table.
The 1999 compensation taken into account for Pension Plan purposes was $160,000
for Mr. Lipner and Mr. Healy who had 26 and 5 years, respectively, of credited
service under the Pension Plan as of December 31, 1999.
NFO Worldwide, Inc. Executive Deferred Benefit Plan
NFO also maintains the Executive Deferred Benefit Plan (Supplemental Plan),
which it assumed in connection with the acquisition. The Compensation Committee
of NFO's Board of Directors determines which executives are eligible to
participate. Currently, four of the Named Executive Officers, Messrs. Lipner,
Hamlin, Healy, and Migliara participate in the Supplemental Plan. The
Supplemental Plan entitles an eligible executive to a benefit that, when added
to his benefit under the Pension Plan, the Profit Sharing Plan (to the extent
attributable to NFO contributions) and social security, equals 40% of his
highest five-year average annual compensation (prorated if the executive has
fewer than 15 years of service). Vesting under the Supplemental Plan is the same
as under the Pension Plan but is accelerated if a participant is terminated
within two years after a change of control of NFO. Benefits payable under the
Supplemental Plan are reduced if payment commences before age 60.
Compensation taken into account under the Supplemental Plan includes base salary
and bonus as described in the Summary Compensation Table. The 1999 compensation
taken into account for purposes of the Supplemental Plan was $715,000 for
Lipner, $420,000 for Mr. Hamlin and $500,000 for Mr. Healy.
The Supplemental Plan only recognizes service after December 31, 1991, for
benefit accrual purposes. Mr. Lipner had 8 years, Mr. Healy had 5 years and Mr.
Hamlin had 3 years of service under the Supplemental Plan as of December 31,
1999, for benefit accrual purposes.
Life Insurance Arrangements
NFO provides life insurance coverage to each of its executive officers. In 1999,
Mr. Lipner was provided with $2,206,175 of term life insurance coverage. NFO
also provided Mr. Lipner with a "split dollar" life insurance policy beginning
in 1998. The present dollar value of the remainder of the "split dollar" life
insurance policy premium payments was $354,161 and $359,749 at December 31, 1999
and 1998, respectively. Mr. Healy was provided with $400,000 in term life
insurance coverage.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The three-member Compensation Committee of the Board of Directors makes
compensation decisions regarding compensation of NFO's executives. Each member
of the Compensation Committee is a non-employee Director. The Board of Directors
reviews all decisions by the Compensation Committee relating to such
compensation except for decisions about awards under the Employees' Stock Option
Plan, which have been made solely by the Compensation Committee. This is a
report of the Compensation Committee addressing NFO's policies governing the
compensation of the executive officers of NFO for 1999.
Compensation Policies and Components of Compensation
Generally, the Compensation Committee's executive compensation policies are
designed to base pay on NFO's annual and long-term performance goals by
rewarding above-average corporate performance and recognizing individual
initiative and achievements; furthermore, these policies assist NFO in
attracting and retaining qualified executives. The Compensation Committee
believes that stock ownership by management is beneficial in aligning
management's and shareholders' interests in increasing the value of the common
stock; therefore, the Compensation Committee includes a stock-based element in
NFO's compensation packages for its executive officers, although the
Compensation Committee does not have target ownership levels for equity holdings
by executives.
The three primary components of executive compensation are base salary, annual
bonus and stock options. The Compensation Committee believes that the cumulative
effect of these three elements is to provide NFO's executive officers with
levels of total compensation consistent with the Compensation Committee's
executive compensation policies set forth above.
The Compensation Committee attempts to keep NFO's executive base salary
increases as low as possible, thus limiting NFO's exposure if performance
targets are not met. Executive salary levels are subjectively determined by the
Compensation Committee based on the experience of each of its members and are
intended to be consistent with competitive practices and levels of
responsibility (with salary increases reflecting competitive and economic
trends, the overall financial performance of NFO and the performance of the
individual executive).
The Compensation Committee subjectively determines annual bonus amounts paid to
each of NFO's executives in respect of each fiscal year. Generally, bonuses are
set within a specified percentage range of base salary and do not exceed 100% of
the base salary. For the executive officers named in the Summary Compensation
Table, bonuses averaged approximately 50% of 1999 total salary. Factors taken
into account in awarding annual bonuses are described below under "Relationship
of Corporate Performance to Executive Compensation."
Before March 1996, stock options were periodically granted to NFO's executives
under the Employees' Stock Option Plan based upon the subjective determination
of the Compensation Committee. Effective March 1996, all authority to administer
the Employees' Stock Option Plan has been vested in the Stock Option Committee,
a subcommittee of the Compensation Committee. No specific formulas or executive
stock ownership targets are employed in determining stock option grants. The
number of options previously awarded to and held by executive officers is
considered in determining the size of each option grant. Factors taken into
account in awarding stock options are described below under "Relationship of
Corporate Performance to Executive Compensation."
An additional factor the Compensation Committee focuses on in its consideration
of compensation matters is the tax implications of various payments and benefits
to NFO and to the individual executive officers. Certain types of compensation
payments and their deductibility depend upon the timing of vesting or exercise
of awards granted. In addition, interpretations of and changes in the tax laws
and other factors beyond the Compensation Committee's control also affect the
deductibility of compensation. The Compensation Committee will not in all
circumstances limit executive compensation to that deductible under section
162(m) of the Internal Revenue Code. The Compensation Committee will consider
the various alternatives to preserving the deductibility of compensation
payments and benefits to the extent consistent with its other compensation
objectives and to the extent reasonably practicable.
Relationship of Corporate Performance to Executive Compensation
The factors that the Compensation Committee considered in awarding annual
bonuses and options under the Employees' Stock Option Plan were based on the
performance of both NFO and the individual executive. With respect to NFO, the
Compensation Committee considered targeted versus actual annual operating
performance, after-tax earnings-per-share and operating income over the last
fiscal year, taking into account non-recurring items such as the special charges
recorded by NFO in 1999. With respect to the individual executive, the
Compensation Committee considered the individual's ability to undertake special
projects, to facilitate strategic acquisitions and alliances, to execute NFO's
strategic business plan and to develop new custom research methods and concepts.
While the Compensation Committee considered all of the foregoing factors, the
Compensation Committee subjectively made its determinations and recommendations
based on the experience of each of its members.
Targeted versus actual operating performance was a major factor considered in
determining the extent to which annual bonuses were paid and awards made under
the Employees' Stock Option Plan to NFO's executive officers. The performance of
individual executives was reviewed either as to NFO as a whole, or, for those
executive officers in charge of an operating unit, as to such officer's
particular operating unit. Performance targets were based on business plans
developed by NFO's management and approved by the Board of Directors at the
start of 1999. In developing the business plans, consideration was given to
integrating the business of any recently acquired subsidiaries, divisions or
businesses and expanding NFO's mix of services and clients.
The Compensation Committee also took into account the executives' performance in
special projects undertaken during the past fiscal year, contribution to
strategic acquisitions and alliances (e.g., joint ventures) and development of
new custom research methods and concepts. The Compensation Committee also
considered after-tax earnings per share, operating income, and the common stock
price performance over the last fiscal year. Also, the executives' satisfaction
of certain subjective performance criteria (including initiative, contribution
to overall corporate performance and managerial ability) was evaluated after
informal discussions with other members of the Board of Directors and, for all
of the executives other than Mr. Lipner, after discussions with Mr. Lipner.
Compensation of Chief Executive Officer for 1999
In addition to the factors mentioned above, the Compensation Committee's general
approach in setting Mr. Lipner's annual compensation took into consideration
NFO's performance and earnings and sought to reward Mr. Lipner's strategic
management abilities in NFO's expansion efforts. The Compensation Committee also
considered Mr. Lipner's role in the development and implementation of strategic
business plans for building NFO, identifying niche markets, and developing new
proprietary custom research methods and concepts.
The annual bonus paid to Mr. Lipner for 1999 was based on the Compensation
Committee's subjective evaluation of Mr. Lipner's performance in that year.
Specifically, the Compensation Committee considered Mr. Lipner's roles in
pursuing and completing selected acquisitions and joint ventures, further
developing and improving NFO's management team, developing relationships with
stockholders and analysts, developing and executing NFO's strategic business
plan, encouraging the development of new research technologies, and NFO's
overall performance. In assessing NFO's overall performance to determine Mr.
Lipner's annual salary and bonus, the Compensation Committee considered all of
the factors above but did not use any formula with respect to the factors.
The grant of options to Mr. Lipner in 1999 under the Employees' Stock Option
Plan was based upon the Compensation Committee's compensation policy of
promoting management retention while further aligning management's and
stockholders' interests in increasing the value of NFO's common stock.
Walter A. Forbes
Steven J. Gilbert
Edmund A. Hajim
PERFORMANCE GRAPH
The following graph sets forth NFO's total stockholder return as compared to the
Russell 2000 Index the NASDAQ Market Index, and as compared to a Peer Group
selected in good faith by NFO, for the period from April 7, 1993, when NFO's
common stock was first registered under the Exchange Act, through December 31,
1999, the last day of NFO's last completed fiscal year. The Peer Group includes
NFO and four other companies in the market research industry: Total Research
Corporation, Opinion Research Corporation, National Research, Corp. and Taylor
Nelson Sofres, a U.K. company whose symbol on the London Stock Exchange is TNN.
These companies are consistent with those in Peer Group B in NFO's 1999 Proxy
Statement, with the exception that Peer Group B also included Market Facts,
Inc., M/A/R/C Inc., Audits & Surveys Worldwide, Inc., and Intelliquest, Inc.,
each of which no longer exists as a separate entity following acquisitions in
1999 by other companies. Therefore, they are not included in the Peer Group
presented below. The returns of each component company in the Peer Group has
been weighted based on such company's relative market capitalization.
[GRAPHIC OMITTED]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
The graph above assumes $100 invested at the beginning of the period in NFO's
common stock, the Russell 2000 Index, the NASDAQ Market Index and the Peer
Group, and was plotted using the following data:
4/07/93 6/30/93 9/30/93 12/31/93 3/31/94 6/30/94 9/30/94
------- ------- ------- -------- ------- ------- -------
NFO Worldwide, Inc. 100.00 103.28 127.87 123.77 157.38 147.47 169.59
Peer Group 100.00 100.10 109.80 114.33 119.56 128.53 154.76
NASDAQ Market Index 100.00 101.58 109.00 109.26 110.21 109.09 115.00
Russell 2000 Index 100.00 105.07 114.26 117.26 114.14 109.70 117.31
12/30/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96
-------- ------- ------- ------- -------- ------- -------
NFO Worldwide, Inc. 142.55 191.71 199.08 231.03 260.53 372.17 348.22
Peer Group 151.23 173.30 179.65 195.77 185.34 204.00 244.74
NASDAQ Market Index 112.55 115.66 127.24 140.34 139.57 146.17 157.36
Russell 2000 Index 115.13 120.44 131.72 144.73 147.87 155.56 163.35
9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
------- -------- ------- ------- ------- -------- -------
NFO Worldwide, Inc. 316.90 324.27 256.10 364.80 405.33 462.68 464.06
Peer Group 204.86 223.10 199.62 258.58 334.22 229.54 258.98
NASDAQ Market Index 162.14 169.85 161.24 190.81 222.69 208.89 242.83
Russell 2000 Index 163.90 172.43 163.51 190.01 218.25 210.94 232.16
6/30/98 9/30/98 12/31/98 3/31/99 6/30/99 9/30/99 12/31/99
------- ------- -------- ------- ------- ------- --------
NFO Worldwide, Inc. 393.63 219.61 254.14 213.96 299.55 272.80 478.74
Peer Group 284.42 227.03 214.92 147.23 160.84 189.32 285.81
NASDAQ Market Index 251.24 226.16 293.35 343.51 373.78 379.87 561.03
Russell 2000 Index 221.35 176.75 205.03 187.93 216.43 202.06 238.46
* Total return calculations were provided by Media General Financial Services.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of NFO is composed of Walter A. Forbes, Steven J.
Gilbert and Edmund A. Hajim. Mr. Gilbert served as NFO's Chairman of the Board
in 1992 and served as Secretary from 1993 to March 1998. Mr. Gilbert has never
been an employee of NFO, and Messrs. Forbes and Hajim have never been officers
or employees of NFO.
COMPENSATION OF DIRECTORS
NFO does not pay any additional remuneration to officers of NFO for serving as
directors. Directors who are not employees of NFO are paid an annual fee of
$24,000, and a fee of $1,000 for each committee meeting of the Board of
Directors they attend. Additionally, non-employee directors are reimbursed for
out-of-pocket expenses associated with attending meetings of the Board of
Directors and committees. Mr. Sculley's annual director fee is included in his
fee under his consulting agreement with NFO described below. See "Certain
Relationships and Related Transactions."
Non-employee directors also receive annual stock options under the NFO
Worldwide, Inc. Directors' Stock Option Plan (the "Directors' Stock Option
Plan"). Under the Directors' Stock Option Plan, each new non-employee director
receives an option for 22,500 shares upon his initial election to the Board of
Directors, and, through 1998, each non-employee director received an option for
an additional 15,000 shares upon each re-election to the Board of Directors. In
1999, each Director received an option for 45,000 shares. The exercise price of
each option granted under the Directors' Stock Option Plan is equal to the
market price of the common stock on the date of grant. Each option is
exercisable, either in whole or in part, at any time after the six-month
anniversary of the date the option was granted and each option will expire on
the fifth anniversary date of the date on which the option is granted. The
Directors' Stock Option Plan is designed to be self-governing in order to comply
with certain requirements of Rule 16b-3 of the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership, both direct and
indirect, reported to NFO as of February 15, 2000, of common stock of NFO,
including shares as to which a right to acquire ownership exists (for example,
through the exercise of certain stock options). The information is presented for
beneficial owners of more than 5% of NFO's common stock, for each director and
for each Named Executive Officer and for the group comprised of all directors
and Named Executive Officers. NFO knows of no persons other than those
identified herein who owned beneficially more than 5% of the outstanding shares
of common stock as of February 15, 2000.
Security Ownership of Certain Beneficial Owners and Management
Number of
Shares of
Common Stock Percentage of
Name and Address of Beneficial Owner (1) Beneficially Owned Common Stock
- ---------------------------------------- --------------- ------------
T. Rowe Price Associates, Inc. (2) 2,535,200 10.78%
100 E. Pratt Street
Baltimore, MD 21202
The Chase Manhattan Corporation (3) 1,745,535 7.42%
270 Park Avenue
New York, NY 10017
Lord, Abbett & Co. (4) 1,658,495 7.03%
90 Hudson Street
Jersey City, NJ 07302
Walter A. Forbes (5) 158,262 *
FGII, 20 Dayton Avenue
Greenwich, CT 06830
Steven J. Gilbert (6) 135,666 *
590 Madison Avenue, 40th Floor
New York, NY 10022
Edmund A. Hajim (7) 199,250 *
230 Park Avenue
New York, NY 10167
Charles B. Hamlin (8) 197,500 *
2 Pickwick Plaza
Greenwich, CT 06830
Patrick G. Healy (9) 352,758 1.5%
2 Pickwick Plaza
Greenwich, CT 06830
Hartmut Kiock (10) 19,667 *
2 Pickwick Plaza
Greenwich, CT 06830
William E. Lipner (11) 1,328,747 5.7%
2 Pickwick Plaza
Greenwich, CT 06830
Joseph M. Migliara (12) 667,507 2.8%
4 Park Center Court
Owings Mills, MD 21117
John Sculley (13) 172,500 *
90 Park Avenue, 32nd Floor
New York, NY 10017
All executive officers and
directors as a group (9 persons)(14) 3,231,857 13.8%
- ----------------------
* Represents less than 1% of the outstanding shares of the common stock.
(1) Except as indicated in the notes to this table, the persons named in this
table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them.
(2) (2) These securities are owned by various individual and institutional
investors, including T. Rowe Price New Horizons Fund, Inc. (which owns
2,000,000 shares, representing 8.5% of the shares outstanding), for which T.
Rowe Price Associates, Inc. (Price Associates) serves as investment adviser
with power to direct investments and/or sole power to vote the securities.
Accordingly, for purposes of the reporting requirements of the Securities
Exchange Act of 1934, Price Associates may be deemed to be a beneficial
owner of these securities; however, Price Associates expressly disclaims
that it is, in fact, the beneficial owner of such securities.
(3) According to a statement on Schedule 13G dated February 20, 2000, filed with
the Securities and Exchange Commission by The Chase Manhattan Corporation,
which holds the shares on behalf of certain subsidiaries engaged in
investment management activities.
(4) According to a statement on Schedule 13G dated January 27, 2000, filed with
the Securities and Exchange Commission by Lord, Abbett & Co., Lord, Abbett &
Co. is an investment advisor that owns the shares on behalf of its clients.
(5) Includes 6,750 shares held by his spouse in custodial accounts for his
children, for which Mr. Forbes may be deemed to share voting and investment
power and thus may be deemed to own beneficially. Also includes 93,750
shares issuable upon the exercise of options granted to Mr. Forbes pursuant
to the Directors' Stock Option Plan.
(6) Includes 93,750 shares issuable upon exercise of options granted to Mr.
Gilbert pursuant to the Directors' Stock Option Plan.
(7) Includes 93,750 shares issuable upon exercise of options granted to Mr.
Hajim pursuant to the Directors' Stock Option Plan. Also includes 8,500
shares owned by his wife, Barbara Hajim, and 10,000 shares owned by The
Hajim Family Foundation, of which Mr. Hajim is trustee, as to which he may
be deemed to have beneficial ownership.
(8) Includes 197,500 shares issuable upon exercise of options granted to Mr.
Hamlin pursuant to the Employees' Stock Option Plan which have already
vested.
(9) Includes 352,083 shares issuable upon exercise of options granted to Mr.
Healy pursuant to the Employees' Stock Option Plan which have already
vested.
(10) Includes 19,667 shares issuable upon exercise of options granted to Mr.
Kiock pursuant to the Employees' Stock Option Plan which have already
vested.
(11) Includes 826,625 shares issuable upon exercise of options granted to Mr.
Lipner pursuant to the Employees' Stock Option Plan which have already
vested. Also includes 236,548 shares indirectly owned by him, 151,500 of
which are owned directly by his wife, Deborah Lipner; and 85,048 of which
are held in custodial accounts and trusts for their sons Justin Drew Lipner
and Wesley Edwin Lipner. A trust holds 5,063 shares of NFO common stock for
the benefit of Deborah Lipner; however, since the trustee of the trust has
sole voting and investment power with respect to the shares, Mr. Lipner
does not beneficially own such shares.
(12) Includes 96,177 shares issuable upon the exercise of options granted to Mr.
Migliara pursuant to the Employees' Stock Option Plan which have already
vested.
(13) Includes 93,250 shares issuable upon the exercise of options granted to Mr.
Sculley pursuant to the Directors' Stock Option Plan.
(14) Includes 375,000 shares issuable upon exercise of options granted pursuant
to the Directors' Stock Option Plan and 1,492,052 shares issuable upon
exercise of options granted pursuant to the Employees' Stock Option Plan
which have already vested.
Item 13. Certain Relationships and Related Transactions
On October 25, 1994, John Sculley joined NFO's Board of Directors and entered
into a consulting agreement with NFO. The agreement provides that Mr. Sculley
will serve as a consultant, particularly in the areas of technology, idea
development for new services and ventures, and international expansion. Under
the agreement, as consideration for his services to NFO as consultant and as
director, Mr. Sculley will receive an annual fee of $50,000 so long as he is a
director of NFO, plus out-of-pocket expenses. In addition, pursuant to the
agreement, NFO granted Mr. Sculley an option to purchase 56,250 shares of NFO's
common stock, with an exercise price of $7.44 per share, the exercise price
being equal to the market price on the date of grant. Pursuant to the agreement,
NFO filed a registration statement with the Securities and Exchange Commission
to register the issuance by NFO of the shares subject to the option. Moreover,
as a director of NFO, Mr. Sculley received options to purchase 22,500 shares of
NFO's common stock pursuant to the NFO Worldwide, Inc. Directors' Stock Option
Plan, which is described above. Mr. Sculley exercised these 78,750 shares in
1999.
Messrs. Lipner and Sculley are each minority shareholders of Talk City and, in
addition, Mr. Sculley is a director of Talk City and Chairman of LivePicture. On
February 10, 1997, NFO and Talk City announced an agreement to jointly provide
online market research services that combine Talk City's community/chat services
with NFO's panel-based market research services. Also on February 10, 1997, NFO
and LivePicture announced a strategic alliance to combine LivePicture's
RealSpace and FlashPix technologies, which provide three-dimensional,
photographic quality images with NFO's Internet-based market research offerings.
Mr. Migliara is a partial owner of two of the buildings in which a subsidiary of
NFO leases office space.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1)-(2) Financial Statements and Financial Statement Schedules:
FINANCIAL STATEMENT SCHEDULES
SCHEDULE II
Valuation and Qualifying Accounts
(In thousands)
Column A Column B Column C Column D Column E
Balance at Additions
Beginning Charged to Costs Balance at
Description of Period and Expenses Deductions End of Period
----------- --------- ------------ ---------- -------------
Allowance for
doubtful accounts:
January 1 -
December 31, 1999 $ 967 $ 2,638 $ 941 $ 2,664
January 1 -
December 31, 1998 $ 471 $ 2,287 (a) $ 1,791 $ 967
January 1 -
December 31, 1997 $ 447 $ 151 $ 127 $ 471
(a) Includes $228 of acquired beginning balance due to 1998 acquisitions.
The financial statements are included herein as Item 8. Financial Statement
Schedules, other than that included above, are omitted because of the absence of
the condition under which they are required or because the required information
is included in the Financial Statements and related notes thereto.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the three months ended
December 31, 1999:
NFO filed a current report on Form 8-K with the Commission on December 23, 1999,
which described an Amendment to Rights Agreement amending the Shareholder Rights
Agreement dated October 5, 1998.
NFO filed a current report on Form 8-K with the Commission on December 20, 1999,
which announced an Agreement and Plan of Merger between NFO and The Interpublic
Group of Companies.
NFO filed a current report on Form 8-K with the Commission on October 19, 1999,
which announced NFO's launch of InsightExpress, LLC, a new internet company.
<TABLE>
<S> <C> <C>
Incorporated by
Reference from
---------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- ----------------------------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger by and among The Report on Form 8-K 2.1
Interpublic Group of Companies, Inc. and NFO dated December 20,
Worldwide, Inc., dated as of December 20, 1999. 1999.
3.1 Restated Certificate of Incorporation. Report on Form 10-K 3.1
for the year ended
December 31, 1997.
3.2 Amended and Restated By-laws. 33-73516 4.2
(Form S-8)
4 Specimen Common Stock certificate. 33-58748 4.1
(Form S-1)
4.1 Stock Option Agreement dated as of December 20, Report on Form 8-K 4.1
1999, between The Interpublic Group of Companies, dated December 20,
Inc. and NFO Worldwide, Inc. 1999.
10.1 Assignment and Assumption Agreement, 33-58748 10.3
dated as of September 27, 1991, between (Form S-1)
the Predecessor and the Company.
10.2 Registration Agreement, dated September 27, 33-58748
10.10
1991, among the Company and its (Form S-1)
stockholders parties thereto.
10.3 Stockholders Agreement, dated as of 33-58748
10.11
September 27, 1991, among the Company
(Form S-1) and its stockholders.
10.4 Amendment to Stockholders Agreement, 33-58748
10.12
dated as of April 6, 1993, among the (Form S-1)
Company and its stockholders.
10.5+ Employment Agreement, dated March 15, Report on Form 10-K
10.14
1995, between the Company and for the year ended
William E. Lipner. December 31, 1994.
10.6+ Employment Agreement, dated as of Report on Form 10-K
10.10
December 1, 1997, between the Company for the year ended
and Patrick G. Healy. December 31, 1997.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
</TABLE>
<TABLE>
<S> <C> <C> <C>
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.7+ Agreement, dated October 25, 1994, Report on Form 10-Q 10.1
between the Company and John Sculley. for the quarter ended
September 30, 1995.
10.8 Credit Agreement, dated as of March 9, Report on Form 8-K 2
1998, among the Company, the Banks dated March 24, 1998.
signatory thereto and Fleet Bank,
National Association, as Agent.
10.9+ NFO Research, Inc. Stock Option Plan, as amended. 333-38497 99
(Form S-3)
10.10+ NFO Research, Inc. Directors' Stock Option Report on Form 10-K
10.26
Plan and Form of Directors' Stock Option for the year ended
Agreement. December 31, 1994.
10.11+ NFO Research, Inc. Profit Sharing Plan, and 33-83002 4.4
amendments thereto. (Form S-8)
10.12+ NFO Research, Inc. Pension Plan, and 33-58748
10.26
amendments thereto. (Form S-1)
10.13+ NFO Worldwide, Inc. Executive Deferred 33-58748
10.27
Benefit Plan. (Form S-1)
10.14+ Deferred Compensation and Life Insurance Report on Form 10-K
10.29
Benefit Agreement, dated as of May 3, 1980, for the year ended
between the Company and William E. Lipner. December 31, 1993.
10.15 Office Lease for Migliara/Kaplan Associates, Report on Form 10-K
10.27
Inc. headquartered at 9 Park Center Court, for the year ended
Owings Mills, Maryland dated January 1, 1998, December 31, 1997.
between Migliara/Kaplan Associates, Inc. and
Nine Park Center Court, LLC.
10.16 Agreement and Plan of Merger, dated as of Report on Form 8-K 1
January 1, 1994, by and among PSI Partners dated January 10, 1994.
Acquisition Corporation, Payment Systems,
Inc., the Company and the stockholders of
PSI Partners Acquisition Corporation.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.17 Asset Purchase Agreement, dated as Report on Form 10-Q 10.2
of November 7, 1994, among Advanced for the quarter ended
Marketing Solutions, Inc., as Seller, September 30, 1994.
Advanced Marketing Solutions Corp., as
Buyer, and the Company.
10.18 Agreement and Plan of Merger, dated as of Report on Form 8-K 1
November 7, 1995, by and among the dated January 3, 1996.
Company, Migliara-Kaplan & Associates,
Inc., and the Migliara/Kaplan Associates Inc.
and the stockholders of Migliara-Kaplan &
Associates, Inc.
10.19 Asset Purchase Agreement, dated as of Report on Form 8-K 2
November 7, 1995, by and among the dated January 3, 1996.
Company, Chesapeake Surveys, Inc., a Maryland
corporation, and Chesapeake Surveys, Inc.,
a Delaware corporation.
10.20 Agreement and Plan of Merger, dated as of Report on Form 10-K
10.30
December 8, 1995, by and among Plog for the year ended
Research, Inc., a California corporation December 31, 1995.
("PRI-California"), Plog Research, Inc., a
Delaware corporation, the Company, Stanley
C. Plog and the stockholders of PRI-California.
10.21 Agreement and Plan of Merger, dated as Report on Form 8-K 1
of March 20, 1997, by and among dated October 22, 1997.
Prognostics Corp., a Delaware Corporation,
Prognostics, a California corporation ("Prognostics"), the Company
and the shareholders of Prognostics.
10.22 Share Purchase Agreement among the Report on Form 8-K 1
Company, NFO U.K., Inc. and the Shareholders dated July 11, 1997.
of The MBL Group Plc.
10.23 Form of Minority Shareholder Share Purchase Report on Form 8-K 2
Agreement for Acquisition of stock of Minority dated July 11, 1997.
Shareholders in a subsidiary of The MBL Group Plc.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.24 Stock Purchase Agreement, dated as of November 10, Report on Form 8-K 10.1
1998, by and among NFO Europe (Deutschland) dated November 20,
GmbH & Co. KG, NFO Worldwide, Inc. (the "Company") 1998.
and all of the Stockholders (the "Sellers") of Infratest
Burke Aktiengesellschaft Holding ("Infratest Burke").
10.25 Letter Agreement, dated November 17, 1998, among Report on Form 8-K 10.2
the Company, Infratest Burke and the Sellers. dated November 20, 1998.
10.26 Note Purchase Agreement, dated as of November 20, Report on Form 8-K 10.3
1998, between the Company and each of the purchasers dated November 20, 1998.
signatory thereto relating to the Company's Adjustable
Rate Series A Senior Notes due 2005 and the Company's Adjustable
Rate Series B Senior Notes due 2008.
10.27 Note Purchase Agreement, dated as of November 20, Report on Form 8-K 10.4
1998, between the Company and each of the purchasers dated November 20, 1998.
signatory thereto relating to the Company's 9.84%
Senior Subordinated Notes due 2008.
10.28 Amendment, dated as of November 20, 1998, to the Report on Form 8-K 10.5
separate Note Purchase Agreements dated as of March 9, dated November 20, 1998.
1998, between the Company and each of the institutions
signatory thereto.
10.29 Amendment No. 1, dated as of November 20, 1998, to Report on Form 8-K 10.6
the Credit Agreement dated as of March 9, 1998, by dated November 20, 1998.
and among the Company, Fleet National Bank and The
Chase Manhattan Bank, as co-agents, and the banks
signatory thereto.
10.30 Note Purchase Agreement, dated as of March 26, 1999, Report on Form 10-K
10.43
between the Company and each of the purchasers for the year ended
signatory thereto relating to the Company's $7 million December 31, 1998.
7.52% Senior Notes due November 15, 2005.
10.31 Note Purchase Agreement, dated as of March 26, 1999, Report on Form 10-K
10.44
between the Company and each of the purchasers for the year ended
signatory thereto relating to the Company's $8 million December 31, 1998.
9.84% Senior Subordinated Notes due November 15, 2008.
10.32+ Amendment No. 1, dated as of November 9, 1999, Report on Form 10-Q 10.1
to the Employment Agreement, dated as of March 15, for quarter ended
1995, between the Company and William E. Lipner. September 30, 1998.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.33+ Change in Control and Severance Agreement, dated Report on Form 10-Q 10.2
as of November 9, 1999, between the Company and for the quarter ended
William E. Lipner. September 30, 1998.
10.34+ Change in Control and Severance Agreement, dated Report on Form 10-Q 10.3
as of November 9, 1999, between the Company and for the quarter ended
Patrick G. Healy. September 30, 1998.
10.35+ Change in Control and Severance Agreement, dated Report on Form 10-Q 10.4
as of November 9, 1999, between the Company and for the quarter ended
Joseph M. Migliara. September 30, 1998.
10.36+* Employment Agreement, dated as of March 1, 1999,
between the Company and Joseph M. Migliara.
10.37+* Change in Control Severance Agreement, dated as of
December 10, 1999, between the Company and Dr.
Hartmut Kiock.
21* Subsidiaries of the Company.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Soteriou Banerji.
27* Financial Data Schedule.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on the 27th day of March 2000.
NFO WORLDWIDE, INC.
By: /s/ William E. Lipner
---------------------
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 27, 2000.
/s/ William E. Lipner Chairman of the Board, President,
- --------------------- Chief Executive Officer and Director
William E. Lipner
/s/ Steven J. Gilbert Director
- ---------------------
Steven J. Gilbert
/s/ Patrick G. Healy President - Australasia and the Middle East,
- --------------------- Chief Financial Officer and Secretary
Patrick G. Healy (Principal Financial Officer and
Principal Accounting Officer)
/s/ Walter A. Forbes Director
- ---------------------
Walter A. Forbes
/s/ Edmund A. Hajim Director
- ---------------------
Edmund A. Hajim
/s/ John Sculley Director
- ---------------------
John Sculley
<TABLE>
<S> <C> <C>
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger by and among The Report on Form 8-K 2.1
Interpublic Group of Companies, Inc. and NFO dated December 20,
Worldwide, Inc., dated as of December 20, 1999. 1999.
3.1 Restated Certificate of Incorporation. Report on Form 10-K 3.1
for the year ended
December 31, 1997.
3.2 Amended and Restated By-laws. 33-73516 4.2
(Form S-8)
4 Specimen Common Stock certificate. 33-58748 4.1
(Form S-1)
4.1 Stock Option Agreement dated as of December 20, Report on Form 8-K 4.1
1999, between The Interpublic Group of Companies, dated December 20,
Inc. and NFO Worldwide, Inc. 1999.
10.1 Assignment and Assumption Agreement, 33-58748 10.3
dated as of September 27, 1991, between (Form S-1)
the Predecessor and the Company.
10.2 Registration Agreement, dated September 27, 33-58748
10.10
1991, among the Company and its (Form S-1)
stockholders parties thereto.
10.3 Stockholders Agreement, dated as of 33-58748
10.11
September 27, 1991, among the Company (Form S-1) and its
stockholders.
10.4 Amendment to Stockholders Agreement, 33-58748
10.12
dated as of April 6, 1993, among the (Form S-1)
Company and its stockholders.
10.5+ Employment Agreement, dated March 15, Report on Form 10-K
10.14
1995, between the Company and for the year ended
William E. Lipner. December 31, 1994.
10.6+ Employment Agreement, dated as of Report on Form 10-K
10.10
December 1, 1997, between the Company for the year ended
and Patrick G. Healy. December 31, 1997.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.7+ Agreement, dated October 25, 1994, Report on Form 10-Q 10.1
between the Company and John Sculley. for the quarter ended
September 30, 1995.
10.8 Credit Agreement, dated as of March 9, Report on Form 8-K 2
1998, among the Company, the Banks dated March 24, 1998.
signatory thereto and Fleet Bank,
National Association, as Agent.
10.9+ NFO Research, Inc. Stock Option Plan, as amended. 333-38497 99
(Form S-3)
10.10+ NFO Research, Inc. Directors' Stock Option Report on Form 10-K
10.26
Plan and Form of Directors' Stock Option for the year ended
Agreement. December 31, 1994.
10.11+ NFO Research, Inc. Profit Sharing Plan, and 33-83002 4.4
amendments thereto. (Form S-8)
10.12+ NFO Research, Inc. Pension Plan, and 33-58748
10.26
amendments thereto. (Form S-1)
10.13+ NFO Worldwide, Inc. Executive Deferred 33-58748
10.27
Benefit Plan. (Form S-1)
10.14+ Deferred Compensation and Life Insurance Report on Form 10-K
10.29
Benefit Agreement, dated as of May 3, 1980, for the year ended
between the Company and William E. Lipner. December 31, 1993.
10.15 Office Lease for Migliara/Kaplan Associates, Report on Form 10-K
10.27
Inc. headquartered at 9 Park Center Court, for the year ended
Owings Mills, Maryland dated January 1, 1998, December 31, 1997.
between Migliara/Kaplan Associates, Inc. and
Nine Park Center Court, LLC.
10.16 Agreement and Plan of Merger, dated as of Report on Form 8-K 1
January 1, 1994, by and among PSI Partners dated January 10, 1994.
Acquisition Corporation, Payment Systems,
Inc., the Company and the stockholders of
PSI Partners Acquisition Corporation.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.17 Asset Purchase Agreement, dated as Report on Form 10-Q 10.2
of November 7, 1994, among Advanced for the quarter ended
Marketing Solutions, Inc., as Seller, September 30, 1994.
Advanced Marketing Solutions Corp., as
Buyer, and the Company.
10.18 Agreement and Plan of Merger, dated as of Report on Form 8-K 1
November 7, 1995, by and among the dated January 3, 1996.
Company, Migliara-Kaplan & Associates,
Inc., and the Migliara/Kaplan Associates Inc.
and the stockholders of Migliara-Kaplan &
Associates, Inc.
10.19 Asset Purchase Agreement, dated as of Report on Form 8-K 2
November 7, 1995, by and among the dated January 3, 1996.
Company, Chesapeake Surveys, Inc., a Maryland
corporation, and Chesapeake Surveys, Inc.,
a Delaware corporation.
10.20 Agreement and Plan of Merger, dated as of Report on Form 10-K
10.30
December 8, 1995, by and among Plog for the year ended
Research, Inc., a California corporation December 31, 1995.
("PRI-California"), Plog Research, Inc., a
Delaware corporation, the Company, Stanley
C. Plog and the stockholders of PRI-California.
10.21 Agreement and Plan of Merger, dated as Report on Form 8-K 1
of March 20, 1997, by and among dated October 22, 1997.
Prognostics Corp., a Delaware Corporation,
Prognostics, a California corporation ("Prognostics"), the Company
and the shareholders of Prognostics.
10.22 Share Purchase Agreement among the Report on Form 8-K 1
Company, NFO U.K., Inc. and the Shareholders dated July 11, 1997.
of The MBL Group Plc.
10.23 Form of Minority Shareholder Share Purchase Report on Form 8-K 2
Agreement for Acquisition of stock of Minority dated July 11, 1997.
Shareholders in a subsidiary of The MBL Group Plc.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.24 Stock Purchase Agreement, dated as of November 10, Report on Form 8-K 10.1
1998, by and among NFO Europe (Deutschland) dated November 20,
GmbH & Co. KG, NFO Worldwide, Inc. (the "Company") 1998.
and all of the Stockholders (the "Sellers") of Infratest
Burke Aktiengesellschaft Holding ("Infratest Burke").
10.25 Letter Agreement, dated November 17, 1998, among Report on Form 8-K 10.2
the Company, Infratest Burke and the Sellers. dated November 20, 1998.
10.26 Note Purchase Agreement, dated as of November 20, Report on Form 8-K 10.3
1998, between the Company and each of the purchasers dated November 20, 1998.
signatory thereto relating to the Company's Adjustable
Rate Series A Senior Notes due 2005 and the Company's Adjustable
Rate Series B Senior Notes due 2008.
10.27 Note Purchase Agreement, dated as of November 20, Report on Form 8-K 10.4
1998, between the Company and each of the purchasers dated November 20, 1998.
signatory thereto relating to the Company's 9.84%
Senior Subordinated Notes due 2008.
10.28 Amendment, dated as of November 20, 1998, to the Report on Form 8-K 10.5
separate Note Purchase Agreements dated as of March 9, dated November 20, 1998.
1998, between the Company and each of the institutions
signatory thereto.
10.29 Amendment No. 1, dated as of November 20, 1998, to Report on Form 8-K 10.6
the Credit Agreement dated as of March 9, 1998, by dated November 20, 1998.
and among the Company, Fleet National Bank and The
Chase Manhattan Bank, as co-agents, and the banks
signatory thereto.
10.30 Note Purchase Agreement, dated as of March 26, 1999, Report on Form 10-K
10.43
between the Company and each of the purchasers for the year ended
signatory thereto relating to the Company's $7 million December 31, 1998.
7.52% Senior Notes due November 15, 2005.
10.31 Note Purchase Agreement, dated as of March 26, 1999, Report on Form 10-K
10.44
between the Company and each of the purchasers for the year ended
signatory thereto relating to the Company's $8 million December 31, 1998.
9.84% Senior Subordinated Notes due November 15, 2008.
10.32+ Amendment No. 1, dated as of November 9, 1999, Report on Form 10-Q 10.1
to the Employment Agreement, dated as of March 15, for quarter ended
1995, between the Company and William E. Lipner. September 30, 1998.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
Incorporated by
Reference from
-------------------------------------
NFO Worldwide, Inc.
Registration
Exhibit Statement
Number No. or Report
Exhibit
- -----------------------------------------------------------------------------------------------------------------------
10.33+ Change in Control and Severance Agreement, dated Report on Form 10-Q 10.2
as of November 9, 1999, between the Company and for the quarter ended
William E. Lipner. September 30, 1998.
10.34+ Change in Control and Severance Agreement, dated Report on Form 10-Q 10.3
as of November 9, 1999, between the Company and for the quarter ended
Patrick G. Healy. September 30, 1998.
10.35+ Change in Control and Severance Agreement, dated Report on Form 10-Q 10.4
as of November 9, 1999, between the Company and for the quarter ended
Joseph M. Migliara. September 30, 1998.
10.36+* Employment Agreement, dated as of March 1, 1999,
between the Company and Joseph M. Migliara.
10.37+* Change in Control Severance Agreement, dated as of
December 10, 1999, between the Company and Dr.
Hartmut Kiock.
21* Subsidiaries of the Company.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Soteriou Banerji.
27* Financial Data Schedule.
*Filed herewith.
+Management contract or compensatory plan or arrangement.
</TABLE>
<PAGE>
Exhibit 10.36
NFO WORLDWIDE, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of March 1, 1999, by and between
NFO Worldwide, Inc., a Delaware corporation (the "Company"), and Joseph M.
Migliara (the "Executive").
The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company has been
substantial and desires to assure the Executive's continued employment with the
Company as its President -- North American Operations and to compensate him
therefor, and the Executive is willing to be employed by the Company on the
terms herein provided.
In consideration of the foregoing and the respective covenants and
agreements of the parties herein contained, the parties hereto agree as follows:
1. Employment and Acceptance.
The Company hereby employs the Executive and the Executive hereby
accepts employment from the Company, upon the terms and conditions set forth in
this Agreement, for the period beginning on the date hereof and ending as
provided in paragraph 5 hereof (the "Employment Period").
2. Duties and Authority.
2.1 Duties. The Executive agrees to use his best efforts,
skill and abilities to promote the Company's interest in his capacity as
President -- North American Operations of the Company, and to perform such
duties (consistent with his status as set forth in this Section 2) as may be
assigned to him by the Board.
2.2 Title. The Executive shall be the President-- North
American Operations of the Company.
3. Place of Employment.
The duties to be performed by the Executive hereunder shall be
performed primarily at the executive headquarters of the Company's subsidiary,
Migliara/Kaplan Associates, Inc., subject to reasonable travel requirements on
behalf of the Company.
4. Compensation and Benefits.
4.1 Compensation. As compensation for services to be rendered
pursuant to this Agreement, the Company shall pay the Executive a salary at the
annual rate of no less than $300,000 (the "Base Salary"), payable in accordance
with the payroll policy of the Company, less such deductions or amounts to be
withheld as shall be required by applicable law and regulations. The Executive's
salary shall be reviewed annually and, at the discretion of the Board, may be
increased on each January 1 of the Employment Period.
4.2 Annual Retirement Benefit. Beginning January 1, 2004 and
continuing each year until December 1, 2013 (the "Benefit Period") the Company
shall pay to the Executive an annual retirement benefit in the amount of
$150,000 in twelve monthly installments (the "Annual Retirement Benefit"). The
amount of the Annual Retirement Benefit for each year payable by the Company
during the Benefit Period shall be reduced, but not below zero, by an amount
equal to the sum of (i) the amount received during such year by the Executive
from the United States Social Security Administration; (ii) Company's pension
plan, (iii) Company's executive deferred compensation plan, (iv) Company's
profit sharing plan and 401(k) plan; and amounts received under a deferred
compensation plan that the Company will establish and fund (using a "rabbi
trust") in the amount of $185,000 per year for the duration of this three year
Employment Period; provided, however, that to the extent commencement of
benefits under any of the foregoing plans or arrangements is elective and
Executive does not elect to commence such benefits on or before the beginning of
the Benefit Period, then until such time as Executive actually begins to receive
benefits under such plans or arrangements the Executive shall be deemed to have
commenced receiving the maximum possible benefits thereunder at the beginning of
the Benefit Period under such plans for purposes of calculating to what extent
the Company has an obligation to pay any additional amounts toward the Annual
Retirement Benefit.
4.3 Bonus. The Executive's incentive compensation package
("Annual Bonus") shall be determined by the Compensation Committee of the Board.
4.4 Employee Benefit Plans: Fringe Benefits. Except as
provided in the following sentence, the Company agrees to continue in all
material respects on terms at least as favorable to the Executive (as determined
in the good faith judgment of the Board) as those in effect on the date hereof
that the Executive currently receives, all group life, hospitalization or
disability insurance plans, health programs, pension plans, profit sharing
plans, similar benefit plans, automobile and relocation allowances and other
so-called "fringe benefits" of the Company (collectively, "Fringe Benefits").
The Company agrees that each of the Fringe Benefits in effect on the date hereof
or at any time during the Employment Period shall not be terminated, modified or
replaced in any manner that materially reduces the benefits to the Executive
without the written consent of the Executive, unless such termination or
modification relates to a Fringe Benefit that is available generally to
employees of the Company or to executive employees of the Company and such
termination or modification affects all employees covered by such Fringe
Benefit.
4.5 Vacations. The Executive shall be entitled to reasonable
non-accumulating annual periods of vacation (not less than an aggregate of four
weeks in any calendar year) with full pay.
4.6 Country Club Membership. During the Employment Period, the
Company shall pay all of the Executive's fees, bonds and annual dues for a
country club membership. All personal expenses are to be paid by the Executive.
4.7 Term Insurance. During the Employment Period, the Company
shall provide the Executive with a term life insurance policy consistent with
the policies of the Company's other members of the Office of the President,
providing coverage of $400,000 payable to a beneficiary to be designated by the
Executive.
5. Term.
(a) The Employment Period shall end on April 1, 2002, provided
that (i) the Employment Period shall terminate prior to such date upon the
Executive's resignation, death or permanent disability or incapacity (as
determined in good faith by the Board in its good faith judgment) and (ii) the
Employment Period may be terminated by the Company at any time prior to such
date for Cause (as defined below) or without Cause.
(b) If at any time the Employment Period is terminated by the
Company without Cause or the Employment Period is terminated, at any time prior
to a "Change in Control," by the resignation of the Executive for the reason
specified in subsections (i) or (iv) of the definition of "Good Reason" (subject
to the cure period contained in such definition), the Executive shall be
entitled to receive his Base Salary through April 1, 2002; provided, however,
that the Executive shall only be entitled to receive his Base Salary so long as
he has not materially breached the provisions of paragraphs 6, 7 and 8 hereof.
(c) If the Employment Period is terminated by the Company for
Cause or is terminated pursuant to clause (a)(i) above, the Executive shall be
entitled to receive his Base Salary through the date of termination; provided,
however, that, notwithstanding the foregoing, if the Employment Period shall be
terminated pursuant to clause (a)(i) above by the resignation of the Executive
for "Good Reason" at any time following a "Change in Control" of the Company,
the Executive shall be entitled to receive, and the Company shall be required to
provide to the Executive, the Executive's then-current Base Salary through the
later of (i) April 1, 2002, or (ii) the first anniversary of such resignation,
and, in such event, the Executive shall also be entitled to receive, and the
Company shall be required to provide to the Executive, a pro-rated portion of
the Executive's bonus for the year in which such resignation occurs, such bonus
to be payable within thirty days of such termination.
For purposes of this Agreement, the phrase "Change in Control" shall
mean the following and shall be deemed to have occurred if any of the following
events shall have occurred: (i) any "person" or "group" (as such terms are used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act as in effect on the date hereof, except that a
person shall be deemed to be the "beneficial owner" of all shares that any such
person has the right to acquire pursuant to any agreement or arrangement or upon
exercise of conversion rights, warrants, options or otherwise, without regard to
the sixty-day period referred to in such Rule), directly or indirectly, of
securities representing 30% or more of the combined voting power of the
Company's then outstanding voting securities; or (ii) at any time during any
period of two consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of such period constituted
the Board and any new directors, whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the Company directors then still in office who either were
the Company directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof. Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur merely by reason of an acquisition of
Company securities by, or any consolida tion, merger or exchange of securities
with, any entity that, immediately prior to such acquisition, consolidation,
merger or exchange of securities, was a "subsidiary", as such term is defined
below. For these purposes, the term "subsidiary" means (i) any corporation of
which 95% of the capital stock of such corporation is owned, directly or
indirectly, by the Company and (ii) any unincorporated entity in respect of
which the Company has, directly or indirectly, an equivalent degree of
ownership.
For purposes of this Agreement "Good Reason" shall mean the
following and shall be deemed to have occurred if any of the following events
shall have occurred: (i) the Executive is removed from the position of President
- -- North American Operations, or is assigned duties and responsibilities that
are inconsistent, in a material adverse respect, with the scope of duties and
responsibilities associated with the Executive's position as President -- North
American Operations; (ii) the Company fails to pay the Executive any amounts
otherwise due hereunder; (iii) the Executive's Base Salary is reduced or his
Fringe Benefits are reduced; or (iv) the Company's requiring the Executive to
move his primary place of employment to a location that is 50 miles or more from
Migliara/Kaplan Associates, Inc. headquarters in Owings Mills, Maryland;
provided, in any such case, that the Executive has notified the Company in
writing of the basis for claiming his entitlement to resign from his employment
for Good Reason and the Company has failed to cure such condition within 10 days
following the receipt of such notice from the Executive.
(d) The Executive shall receive Fringe Benefits during any
period in which the Executive is entitled to receive his Base Salary hereunder,
and thereafter such rights to Fringe Benefits shall cease.
(e) In the event of a "Change in Control" of the Company, or
in the event that the Employment Period is terminated by the Company without
Cause, each of the Executive's stock options granted under the NFO Worldwide,
Inc. Stock Option Plan (the "Plan") shall immediately become fully exercisable.
In the case of termination of the Employment Period by the Company without
Cause, or if the Employment Period is terminated pursuant to clause (a)(i) above
by the resignation of the Executive for "Good Reason" at any time following a
"Change in Control" of the Company, each of the Executive's stock options
granted under the Plan shall remain exercisable for a period of 12 months after
such termination, except to the extent the Committee (as defined in the Plan)
permits exercise after such date in accordance with the Plan.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
commission of a felony or a crime involving moral turpitude or the commission of
any other act involving dishonesty, disloyalty or fraud with respect to the
Company or any of its subsidiaries, (ii) conduct tending to bring the Company or
any of its subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably and lawfully
directed by the Board, (iv) gross negligence or willful misconduct with respect
to the Company or any of its subsid iaries or (v) any other material breach of
this Agreement which is not cured within 15 days after written notice thereof to
the Executive.
6. Confidential Information. The Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
(including those obtained while employed by the Company and its predecessors
prior to the date of this Agreement) concerning the business or affairs of the
Company or any subsidiary of the Company ("Confidential Information") are the
property of the Company or such subsidiary. Therefore, Executive agrees that he
shall not disclose to any unauthorized person or use for his own account any
Confidential Information without the prior written consent of the Board, unless
and to the extent that the afore mentioned matters are or become generally known
to and available for use by the members of the industry in which the Company
operates other than as a result of Executive's acts or omissions to act.
Executive shall deliver to the Company at the termination of the Employment
Period, or at any other time the Company may request, all memoranda, notes,
plans, records, reports, computer tapes and software and other documents and
data (and copies thereof) relating to the Confidential Information, Work Product
(as defined in Section 7) or the business of the Company or any subsidiary which
he may then possess or have under his control.
7. Inventions and Work Product. The Executive agrees that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports, and all similar or related information which relates to the
Company or any of its subsidiaries' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by Executive while employed by the Company, such subsidiary or
the Company's predecessors ("Work Product") belong to the Company or such
subsidiary. The Executive will promptly disclose such Work Product to the Board
and perform all actions reasonably requested by the Board (whether during or
after the Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).
8. Non-Compete, Non-Solicitation.
(a) The Executive acknowledges that in the course of his
employment with the Company and its subsidiaries he will become familiar, and
during his employment with the Company and its predecessors he has become
familiar, with the Company's and its subsidiaries' trade secrets and with other
confidential information concerning the Company, its subsidiaries and the
Company's predecessors and that his services have been and will be of special,
unique and extraordinary value to the Company and its subsidiaries. Therefore,
the Executive agrees that, during the Employment Period and in the case of (x)
termination for Cause, resignation (other than resignation for "Good Reason"
following a "Change in Control") or, if applicable, the expiration (and
non-renewal) of the Employment Period on April 1, 2002, for three years
thereafter, or (y) termination without Cause, during the period in which the
Executive receives payment of Base Salary pursuant to Section 5(b) (without
regard to the proviso contained therein) (the applicable period being referred
to herein as the "Initial Noncompete Period"), he shall not directly or
indirectly own, manage, control, participate in, consult with, render services
for, or in any manner engage in any business competing with the businesses of
the Company or its subsidiaries as such businesses exist or are in process on
the date of the termination of the Executive's employment (any of the foregoing,
to "Compete"), within any geographical area in which the Company or its
subsidiaries engage or plan to engage in such businesses. In addition, the
Executive agrees that he shall not Compete in any such geographical area during
the two years following the termination of the Initial Noncompete Period (the
"Limited Noncompete Period" and, together with the Initial Noncompete Period,
the "Noncompete Period"); provided, however, that the Executive may perform
consulting services during the Limited Noncompete Period so long as any such
consulting services provided to any Client (as defined below) of the Company or
its subsidiaries (collectively, the "Companies"), are not the
same as, substantially similar to, or otherwise compete with, services offered
by any of the Companies. For purposes of this Section 8, the term "Client" shall
mean a person or entity who on the date of the termination of the Executive's
employment is a client of any of the Companies, or was a client of any of the
Companies at any time during the three years prior to such date. The Company and
the Executive agree, that in providing the consulting services referred to in
the proviso above, the Executive (i) may employ commonly accepted "generic
market research techniques" (such as focus groups), (ii) may not promote, use or
sell proprietary techniques, sales materials, programs or software of any of the
Companies or any techniques, sales materials, programs or software derived
therefrom and (iii) may not promote or position such services in a manner that
competes with any of the Companies. Nothing herein shall prohibit the Executive
from being a passive owner of not more than 5% of the outstanding stock of any
class of a corporation which is publicly traded, so long as the Executive has no
active participation in the business of such corporation.
(b) During the Employment Period, Noncompete Period and, if
applicable, for the period of three years following the expiration (and
non-renewal) of the Employment Period on April 1, 2002, the Executive shall not
directly or indirectly through another entity (i) induce or attempt to induce
any employee of the Company or any subsidiary to leave the employ of the Company
or such subsidiary, or in any way interfere with the relationship between the
Company or any subsidiary and any employee thereof, (ii) hire any person who was
an employee of the Company or any subsidiary at any time during the Employment
Period, or (iii) induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any subsidiary to cease doing business
with the Company or such subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any subsidiary.
(c) If, at the time of enforcement of this paragraph 8, a
court shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of the breach or a threatened breach by the
Executive of any of the provisions of this paragraph 8, the Company, in addition
and supplementary to other rights and remedies existing in its favor, may apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security).
9. Other Provisions.
9.1 Indemnification. The Company shall indemnify the Executive
against, and shall advance expenses incurred by the Executive in the
investigation and defense of, any claim arising out of his employment under this
Agreement to the fullest extent permitted by the Delaware General Corporation
Law.
9.2 Notices. Any notice or communication required or permitted
hereunder shall be in writing and shall be delivered by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered as follows:
(i) If to the Company, to:
NFO Worldwide, Inc.
2 Pickwick Plaza
Greenwich, Connecticut 06830
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: James M. Dubin, Esq.
(ii) If the Executive, to the Executive in care of the
Company at the above address, with a copy to the Executive at his then-current
residence.
Any party may change its address for notices hereunder by notice to
the other parties in accordance with this Section 9.2.
9.3 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Connecticut applicable
to agreements made and to be performed entirely within such state.
9.4 Entire Agreement; Amendments and Waivers. This instrument
is the entire agreement of the parties with respect to the subject matter hereof
and may not be amended, supplemented, canceled or discharged except by written
instrument executed by both parties hereto. The Employment Agreement dated as of
December 1, 1997 between the Company and the Executive is hereby terminated as
of the date hereof and is replaced hereby. The parties do not intend to confer
any benefit hereunder on any third person, and, without limiting the generality
of the foregoing, the parties may, in writing, without notice to or consent of
any third person, at any time waive any rights hereunder or amend this Agreement
in any respect or terminate this Agreement. If either party should waive any
breach of any provision of this Agreement, such party will not thereby be deemed
to have waived any preceding or succeeding breach of the same provision or any
breach of any other provision of this Agreement.
9.5 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
9.6 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party.
9.7 Headings. Section headings are inserted herein for
convenience only and do not constitute a part, and shall not affect the
interpretation, of this Agreement.
9.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
9.9 Survival. Paragraphs 6, 7 and 8 and those provisions of
Paragraph 5 regarding compensation of the Executive following termination of the
employment, shall survive and continue in full force in accordance with their
terms notwithstanding any termination of the Employment Period.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
NFO WORLDWIDE, INC.
By: /s/ William E. Lipner
---------------------
Name: William E. Lipner
Title: Chairman, President and
Chief Executive Officer
/s/ Joseph M. Migliara
----------------------
Joseph M. Migliara
<PAGE>
Exhibit 10.37
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 8th day of December, 1999
by and between Infratest Burke Aktiengesellschaft Holding ("Infratest Burke"), a
wholly-owned subsidiary of the NFO Worldwide, Inc., a Delaware corporation (the
"Company") and Dr. Hartmut Kiock ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of
a sound and vital management to be essential to protecting and enhancing the
best interests of the Company, and its stockholders;
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may arise and
that such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders;
WHEREAS, Infratest Burke and Executive are party to a Contract of
Employment effective November 20, 1998 (the "Employment Agreement");
WHEREAS, the Board (as defined in Section 1) has determined that it
is in the best interests of the Company and its stockholders to provide
incentives to the Executive in addition to those in the Employment Agreement in
order to ensure Executive's continued and undivided dedication to his duties in
the event of any threat or occurrence of a Change in Control (as defined in
Section 1) of the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, Infratest Burke and the
Executive hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Annual Bonus" shall mean the Executive's annual bonus as
provided for in Section 5 of the Employment Agreement.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus Amount" means the highest Annual Bonus earned by
Executive from the Company (or its affiliates) and Infratest Burke during the
lastfive (5) completed fiscal years of the Company immediately preceding
Executive's Date of Termination (annualized in the event Executive was not
employed by the Company (or its affiliates) or Infratest Burke for the whole of
any such fiscal year). If the occasion arises, the determination of the highest
Bonus Amount of the last five fiscal years includes the bonus payments of
Infratest Burke or its legal predecessors.
(d) "Cause" shall mean (i) the commission of a felony or a
crime involving moral turpitude or the commission of any other act involving
dishonesty, disloyalty or fraud with respect to the Company or any of its
subsidiaries, (ii) conduct tending to bring the Company or any of its
subsidiaries, including, but not limited to, Infratest Burke, into substantial
public disgrace or disrepute, (iii) substantial and repeated failure to perform
duties as reasonably and lawfully directed by the Board or the Supervisory Board
of Infratest Burke, (iv) gross negligence or willful misconduct with respect to
the Company or any of its subsid iaries, including, but not limited to,
Infratest Burke, or (v) any other material breach of this Agreement which is not
cured within 15 days after written notice thereof to the Executive.
(e) "Change in Control" shall mean the following and shall be
deemed to have occurred if any of the following events shall have occurred: (i)
any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act
as in effect on the date hereof, except that a person shall be deemed to be the
"beneficial owner" of all shares that any such person has the right to acquire
pursuant to any agreement or arrangement or upon exercise of conversion rights,
warrants, options or otherwise, without regard to the sixty-day period referred
to in such Rule), directly or indirectly, of securities representing 30% or more
of the combined voting power of the Company's then outstanding voting
securities; or (ii) at any time during any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constituted the Board and any new directors,
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the Company
directors then still in office who either were the Company directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
merely by reason of an acquisition of Company securities by, or any
consolidation, merger or exchange of securities with, any entity that,
immediately prior to such acquisition, consolidation, merger or exchange of
securities, was a "subsidiary", as such term is defined below. For these
purposes, the term "subsidiary" means (i) any corporation of which 95% of the
capital stock of such corporation is owned, directly or indirectly, by the
Company and (ii) any unincorporated entity in respect of which the Company has,
directly or indirectly, an equivalent degree of ownership.
(f) "Date of Termination" means (1) the effective date on
which Executive's employment by the Company and/or Infratest Burke terminates as
specified in a prior written notice by the Company or Executive, as the case may
be, to the other, delivered pursuant to Section 9 or (2) if Executive's
employment by the Company and Infratest Burke terminates by reason of death, the
date of death of Executive.
(g) "Disability" shall mean the Executive's inability to work
as determined pursuant to Section 2 of the Employment Agreement.
(h) "Fringe Benefits" shall mean the fringe benefits provided
to the Executive pursuant to Section 7 of the Employment Agreement.
(i) "Good Reason" shall mean the following and shall be deemed
to have occurred if any of the following events shall have occurred: (i) the
Executive is removed from any of the positions he holds as of the date hereof,
or is assigned duties and responsibilities that are inconsistent with the scope
of duties and responsibilities associated with such positions; (ii) Infratest
Burke fails to pay the Executive any amounts otherwise due hereunder; (iii) the
Executive's Base Salary is reduced or his Fringe Benefits are reduced; (iv) the
Executive's principal office is relocated outside of Munich, Germany without his
consent; or (v) the failure of the Company to obtain the assumption (and, if
applicable, guarantee) agreement from any successor (and Parent, if applicable)
as contemplated in Section 8(b).
(j) "Qualifying Termination" means a termination of
Executive's employment (i) by the Company or Infratest Burke other than for
Cause, (ii) by Executive for Good Reason, or (iii) on account of death or
Disability.
(k) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets upon liquidation or dissolution.
(l) "Termination Period" means the period of time beginning
with a Change in Control and ending 30 months following such Change in Control.
Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall be treated as
a Change in Control. For purposes of determining the timing of payments and
benefits to Executive under Section 4, the date of the actual Change in Control
shall of treated as Executive's Date of Termination under Section l(f).
2. OBLIGATION OF EXECUTIVE. In the event of a tender or exchange
offer, proxy contest, or the execution of any agreement which, if consummated,
would constitute a Change in Control, Executive agrees not to voluntarily leave
the employ of the Company or Infratest Burke, other than as a result of
Disability, or an event which would constitute Good Reason if a Change in
Control had occurred, until the Change in Control occurs or, if earlier, such
tender or exchange offer, proxy contest, or agreement is terminated or
abandoned.
3. TERM OF AGREEMENT. This Agreement shall be effective on the date
hereof and shall continue in effect until Infratest Burke shall have given three
(3) years' written notice of cancellation; provided, that, notwithstanding the
delivery of any such notice, this Agreement shall continue in effect for a
period of 30 months after a Change in Control, if such Change in Control shall
have occurred during the term of this Agreement. Notwithstanding anything in
this Section to the contrary, this Agreement shall terminate if Executive or
Infratest Burke terminates Executive's employment prior to a Change in Control
except as provided in Section l(l).
4. PAYMENTS UPON QUALIFYING TERMINATION. If during the Termination
Period the employment of Executive shall terminate pursuant to a Qualifying
Termination, Infratest Burke shall, subject to the last paragraph of this
Section:
(a) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to the sum of (A) Executive's
Base Salary through the Date of Termination and any bonus amounts which have
become payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's Annual Bonus for the fiscal year in which Executive's
Date of Termination occurs in an amount at least equal to (1) Executive's Bonus
Amount, multiplied by (2) a fraction, the numerator of which is the number of
days in the fiscal year in which the Date of Termination occurs through the Date
of Termination and the denominator of which is three hundred sixty-five (365),
and (C) any compensation previously deferred by Executive other than pursuant to
a tax-qualified plan (together with any interest and earnings thereon) which
shall be fully vested as of the date of the Change of Control and any accrued
vacation pay, in each case to the extent not theretofore paid;
(b) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to (i) 2.25 times Executive's
highest annual rate of base salary during the 12-month period immediately prior
to Executive's Date of Termination, plus (ii) 2.25 times Executive's Bonus
Amount;
(c) continue to provide, for a period of two (2) years
following Executive's Date of Termination, Executive (and Executive's
dependents, if applicable) with the same level of Fringe Benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
if Executive cannot continue to participate in the plans providing such
benefits, Infratest Burke shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that Infratest Burke reimburses Executive for any increased cost and provides
any additional benefits necessary to give Executive the benefits provided
hereunder; and
(d) cause the Company to accelerate the vesting and
exercisability of all options held by Executive and granted under the NFO
Research, Inc. Stock Option Plan (the "Option Plan") or any other stock option
plan or agreement of the Company or its affiliates. In addition, all options
shall remain exercisable for two years following such termination, except to the
extent the Committee (as defined in the Option Plan) permits exercise after such
date.
Notwithstanding anything to the contrary set forth herein, this
agreement shall in no way affect Executive's right to receive certain benefits
after giving three months notice following a Change in Control pursuant to
Section 2.2(b) of the Employment Agreement. To the extent the Executive is
entitled to, or has received benefits under, Section 2 of the Employment
Agreement from Infratest Burke following a Change in Control, the amounts
provided for hereunder shall be offset by any such amounts received under the
Employment Agreement as a result of the Executive's termination of employment in
order to prevent any duplication of benefits.
5. WITHHOLDING TAXES. Infratest Burke may withhold from all payments
due to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, Infratest Burke is required to
withhold therefrom.
6. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise
under this Agreement involving termination of Executive's employment with
Infratest Burke or involving the failure or refusal of Infratest Burke to
perform fully in accordance with the terms hereof, Infratest Burke shall
reimburse Executive, on a current basis, for all reasonable legal fees and
expenses, if any, incurred by Executive in connection with such contest or
dispute (regardless of the result thereof), together with interest in an amount
equal to the prime rate from time to time in effect, but in no event higher than
the maximum legal rate permissible under applicable law, such interest to accrue
from the date Infratest Burke receives Executive's statement for such fees and
expenses through the date of payment thereof, regardless of whether or not
Executive's claim is upheld by an arbitration panel; provided, however,
Executive shall be required to repay any such amounts to Infratest Burke to the
extent that an arbitration panel issues a final and non-appealable order setting
forth the determination that the position taken by Executive was frivolous or
advanced by Executive in bad faith.
7. SCOPE OF AGREEMENT. Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries,
and if Executive's employment with the Company or its Subsidiaries shall
terminate prior to a Change in Control, Executive shall have no further rights
under this Agreement (except as otherwise provided hereunder); provided,
however, that any termination of Executive's employment during the Termination
Period shall be subject to all of the provisions of this Agreement.
8. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any business
combination. In the event of any business combination, the provisions of this
Agreement shall be binding upon the surviving corporation thereof, and such
surviving corporation shall be treated as Infratest Burke hereunder.
(b) Infratest Burke agrees that in connection with any
business combination, it will cause any successor entity to Infratest Burke
unconditionally to assume (and for any parent corporation in such business
combination to guarantee), by written instrument delivered to Executive (or his
beneficiary or estate), all of the obligations of Infratest Burke hereunder.
Failure of Infratest Burke to obtain such assumption and guarantee prior to the
effectiveness of any such business combination that constitutes a Change in
Control, shall be a breach of this Agreement and shall constitute Good Reason
hereunder and shall entitle Executive to compensation and other benefits from
Infratest Burke in the same amount and on the same terms as Executive would be
entitled hereunder if Executive's employment were terminated following a Change
in Control other than by reason of a Qualifying Termination. For purposes of
implementing the foregoing, the date on which any such business combination
becomes effective shall be deemed the date Good Reason occurs, and shall be the
Date of Termination if requested by Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
9. Notice. (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Hartmut Kiock
Nikolaiplatz 1A
D-80802 Munich
Germany
If to Infratest Burke
Landsberger Strasse 338
D-80687 Munich
Germany
with a copy to:
NFO Worldwide, Inc.
2 Pickwick Plaza
Greenwich, CT 06830
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by
Infratest Burke or Executive, as the case may be, to the other, shall (i)
indicate the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) specify the termination
date (which date shall be not less than fifteen (15) (thirty (30), if
termination is by Infratest Burke for Disability) nor more than sixty (60) days
after the giving of such notice). The failure by Executive or Infratest Burke to
set forth in such notice any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of Executive or Infratest
Burke hereunder or preclude Executive or Infratest Burke from asserting such
fact or circumstance in enforcing Executive's or Infratest Burke's rights
hereunder.
10. FULL SETTLEMENT; RESOLUTION OF DISPUTES. Other than as described
in the last subparagraph of Section 4, Infratest Burke's obligation to make any
payments provided for in this Agreement and otherwise to perform its obligations
hereunder in the event of a Qualifying Termination during the Termination Period
shall be in lieu and in full settlement of all other severance payments to
Executive under any other severance or employment agreement between Executive
and Infratest Burke, and any severance plan of Infratest Burke, including, but
not limited to, the Employment Agreement; provided, however, that the provisions
of the Employment Agreement shall remain in effect to the extent otherwise
applicable pursuant to its terms for all other purposes, including with respect
to any termination that is not a Qualifying Termination and any termination that
would have constituted a Qualifying Termination but is not covered by this
Agreement because it does not occur during the Termination Period. Infratest
Burke's obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which
Infratest Burke may have against Executive or others. In no event shall
Executive be obligated to seek other employment or take other action by way of
mitigation of the amounts payable to Executive under any of the provisions of
this Agreement and, except as provided in Section 4(c), such amounts shall not
be reduced whether or not Executive obtains other employment. Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Germany by three arbitrators. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. Infratest
Burke shall bear all costs and expenses arising in connection with any
arbitration proceeding pursuant to this Section.
11. EMPLOYMENT WITH SUBSIDIARIES. Employment with Infratest Burke
for purposes of this Agreement shall include employment with any Subsidiary or
parent.
12. SURVIVAL. The respective obligations and benefits afforded to
Infratest Burke and the Executive as provided in Sections 4 (to the extent that
payments or benefits are owed as a result of a termination of employment that
occurs during the term of this Agreement), 5 (to the extent that Payments are
made to Executive as a result of a Change in Control that occurs during the term
of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this
Agreement.
13. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF GERMANY WITHOUT REGARD TO THE PRINCIPLE OF
CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS
AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION
OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.
14. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
15. MISCELLANEOUS. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of Infratest Burke. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or Infratest Burke to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or Infratest Burke may have
hereunder, including, without limitation, the right of Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement. Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
Infratest Burke.
IN WITNESS WHEREOF, Infratest Burke has caused this Agreement to be
executed by a duly authorized officer of Infratest Burke and Executive has
executed this Agreement as of the day and year first above written.
INFRATEST BURKE
AKTIENGESELLSCHAFT HOLDING
By:
----------------------------------
Title:
----------------------------------
/s/ Hartmut Kiock
----------------------------------------
Hartmut Kiock
<PAGE>
EXHIBIT 21
Subsidiaries of the Company
Subsidiary Jurisdiction of Incorporation Percent Ownership
---------- ----------------------------- -----------------
NFO Research, Inc. Delaware 100%
Stochastic International, Inc. Delaware 100%
IX, Inc. Delaware 100%
Migliara/Kaplan Associates, Inc. Delaware 100%
Chesapeake Surveys, Inc. Delaware 100%
Prognostics Corp. Delaware 100%
Plog Research, Inc. Delaware 100%
PSI Holding, Corp. Delaware 100%
The Spectrem Group, Inc. Delaware 100%
Advanced Marketing
Solutions Corp. Delaware 100%
NFO USA, Inc. Delaware 100%
Ross-Cooper-Lund, Inc. Delaware 100%
NFO MarketMind, Inc. Delaware 100%
NFO International, Inc. Delaware 100%
NFO APIM, Inc. Delaware 100%
NFO Asia-Pacific, Inc. Delaware 100%
NFO Europe, Inc. Delaware 100%
NFO APLT, Inc. (NFO JV, Inc.) Delaware 100%
NFO France, Inc. Delaware 100%
NFO Germany, Inc. Delaware 100%
NFO Italy, Inc. Delaware 100%
NFO UK, Inc. Delaware 100%
Infratest U.S., Inc. Delaware 100%
Payment Systems, Inc. Florida 100%
EXHIBIT 21
Subsidiaries of the Company
Jurisdiction of
Subsidiary Incorporation Percent Ownership
---------- -------------------- -----------------
MarketMind Australia Australia 100%
CM Australia Holdings Pty Ltd. Australia 100%
CM Research Sydney Pty Ltd. Australia 100%
Loyalty Research Pty Ltd. Australia 100%
NFO-Donovan Research Pty Ltd. Australia 100%
CF Group, Inc. Canada 100%
Infraforces SARL France 100%
Infratest Burke S.a.r.l. France 100%
NFO Europe Beteiligungs-GmbH Germany 100%
NFO Europe AG Holding & Co KG
Research & Consulting Germany 100%
NFO Europe AG Holding Germany 100%
NFO Europe Verwaltungs GmbH Germany 100%
NFO Europe GmbH & Co KG Germany 100%
Infratest Burke Verwaltungs GmbH Germany 100%
Infratest Burke GmbH & Co. Germany 100%
Infratest Burke InCom
Beteiligungs GmbH Germany 100%
Infratest Burke InCom GmbH Germany 100%
Infratest Burke Sozial
forschung Beteiligungs GmbH Germany 100%
Infratest Burke Sozialforschung
GmbH & Co. Germany 100%
Infratest Burke Wirtschaftsforschung
Beteiligungs GmbH Germany 100%
Infratest Burke Wirtschaftsforschung
GmbH & Co. Germany 100%
Infratest Burke GmbH & Co.
Marketing Forschung Germany 100%
Testpanel-Martkforschungsinstitut
GmbH Germany 100%
EXHIBIT 21
Subsidiaries of the Company
Jurisdiction
Subsidiary of Incorporation Percent Ownership
---------- ----------------------- ---------------
TPI-Beteiligungs GmbH Germany 100%
Nexxus Kommunikationsanlagen GmbH Germany 100%
Infratest Burke Beteiligungs GmbH Germany 100%
Infratest Burke
International GmbH Holding Germany 100%
Infratest Burke S.p.A. Italy 100%
Infratest Burke Group Ltd. United Kingdom 100%
Infratest Burke Ltd. United Kingdom 100%
Public Attitude Surveys Holding Ltd. United Kingdom 100%
Public Attitude Surveys Limited United Kingdom 100%
System Three (Scotland) Ltd. United Kingdom 100%
Consumer Insights Limited United Kingdom 100%
Infratest Burke
InterNational Services Ltd. United Kingdom 100%
Infratest Burke Asia Pacific Ltd. United Kingdom 100%
Infratest Burke Core Company Ltd. United Kingdom 100%
The MBL Group, Plc. United Kingdom 100%
Prognostics Ltd. United Kingdom 100%
City Research Group Plc. United Kingdom 100%
Applied Research &
Communications, Ltd. United Kingdom 100%
City Research Associates, Ltd. United Kingdom 100%
Strategic Marketing
Consultancy, Ltd. United Kingdom 100%
NFO Worldwide UK United Kingdom 100%
PSI Singapore LC Singapore 100%
CM Research International, Ltd. New Zealand 100%
CM Research Group, Ltd. New Zealand 100%
EXHIBIT 21
Subsidiaries of the Company
Jurisdiction
Subsidiary of Incorporation Percent Ownership
---------- -------------------- -----------------
CM Research New Zealand, Ltd. New Zealand 100%
Fact Finders On-Line, Ltd. New Zealand 100%
InsightExpress, LLC Delaware 1%
Burke, Inc. (Cincinnati) Delaware 50%
I+G Infratest + GfK
Medical Research (Rhode Island) Delaware 26%
MERAC WLL Ltd. Bahrain 87.5%
Market Behaviour Ltd. Bangladesh 44.625%
Somra MBL Limited Bangladesh 23.375%
Infratest Burke ApS Denmark 75.2%
I+G Nordic Medical Research A/S Denmark 28%
MERAC EGYPT Ltd. Egypt 85%
Infratest Burke OY Finland 56.4%
T.E.S.T. S.A. France 60%
Infratest dimap Gesellschaft
fur Trend und Wahlforschung GmbH Germany 74%
The Core Company, Beratung
fur das Marketing Aktiengesellschaft Germany 50%
Infratel GmbH Telefonische
Datenerhebung Und Datenverarbeitung Germany 29%
L & H Automobil Consult GmbH Germany 25.2%
Infratest Gesundheitsforschung GmbH Germany 80%
Infratest Gesundheitsforschung
GmbH & Co. Germany 80%
KFM Klinische Forschung GmbH Germany 90%
P&P Software und Consulting GmbH Germany 20%
Infratest & GfK Gesundheitsforschung
Verwaltungs GmbH Germany 40%
EXHIBIT 21
Subsidiaries of the Company
Jurisdiction Percent
Subsidiary of Incorporation Ownership
---------- ----------------- -----------
Infratest & GfK Gesundheitsforschung GmbH Germany 40%
I+G Gesundheits und Pharmamarkt Forschung
Verwaltungs GmbH Germany 40%
I+G Gesundheitsforschung Verwaltungs GmbH Germany 40%
I+G Gesundheitsforschung GmbH & Co. Germany 40%
ImePa Institut fur Medizin und Patienten
Forschung GmbH Germany 40%
GPI Kommunikationsforschung Ges. Fur Pharma-
Informationssysteme GmbH Germany 32%
ZEG Zentrum fur Epidermiologie und
Gesundheitsforschung GmbH Germany 22%
DEGAMA GmbH Germany 19.6%
GPI Krankenhausforschung Gesellschaft fur
Pharma-Informationssysteme GmbH Germany 16%
MedVantage GmbH Germany 16%
MBL Asia-Pacific Ltd. Hong Kong 93.5%
Market Behaviour (China) Ltd. Hong Kong 81.8125%
Market Behaviour (Thailand) Ltd. Hong Kong 65.45%
Market Behaviour (Vietnam) Ltd. Hong Kong 74.8%
Market Behaviour (Hong Kong) Ltd. Hong Kong 77.45%
Market Behaviour (International) Ltd. Taiwan Hong Kong 82.56%
Market Behaviour (International) Ltd.
Taiwan Branch Hong Kong 82.56%
International Research Associates (Hong Kong) Ltd. Hong Kong 82.3%
Consensus-MB Ltd. Indonesia Hong Kong 82.95%
MBL Research and Consultancy Group (P) Ltd. India 51%
PT Continental Sentratama Surveys Indonesia 82.95%
EXHIBIT 21
Subsidiaries of the Company
Jurisdiction of Percent
Subsidiary Incorporation Ownership
---------- ----------------- ----------
Market Behaviour (Malaysia) Ltd. Malaysia 70.125%
Trendbox B.V. Netherlands 75%
Trends-MBL Inc. Philippines 88.825%
MERAC Arabia Company Ltd. Saudi Arabia 44.625%
Market Behaviour (Singapore) Plc Ltd Singapore 82.95%
Infratest Burke S.L. Spain 50%
Market Behaviour Ltd. Sri Lanka 38.25%
Infratest Burke AB Sweden 75.2%
Infratest Burke Core Company AB Sweden 75.2%
Nomina Telemarking AB Sweden 75.2%
I+G Infratest + GfK Gesundheitsforschung Switzerland 34%
Plus Remark Research for Marketing Turkey 55%
BJM Research and Consulting Ltd. United Kingdom 87.5%
Market Behaviour Ltd. United Kingdom 87.5%
Marketing Blueprint Ltd. United Kingdom 75%
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 25, 2000, included in NFO Worldwide,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999, into the
Company's previously filed Registration Statements, File Nos. 33-73516,
33-83002, 33-91936, 333-24297, 333-24299, 333-38497, 333-51929, and 333-58067.
/s/ ARTHUR ANDERSEN LLP
-----------------------
New York, New York,
March 24, 2000.
EXHIBIT 23.2
CONSENT OF REGISTERED AUDITORS AND CHARTERED ACCOUNTANTS
As registered auditors and chartered accountants, we hereby consent to the
incorporation by reference of our report dated February 23, 1998, on the
financial statements of The MBL Group Plc for the year ended December 31, 1997,
included in NFO Worldwide, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1999, into NFO Worldwide, Inc.'s previously filed Registration
Statements, File Nos. 33-73516, 33-83002, 33-91936, 333-24297, 333-24299,
333-38497, 333-51929, and 333-58067.
/s/ Soteriou Banerji
--------------------
London, England,
March 24, 2000.
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification Of Directors And Officers
Section 145 of Title 8 of the General Corporation Law of the State of
Delaware ("GCL") gives a corporation power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, provided
that such director, officer, employee or agent acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that such director, officer, employee or agent had no reasonable cause to
believe his or her conduct was unlawful. The same Section also gives a
corporation power to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. Section 145 of the GCL further provides that, to the extent
that a director, officer, employee or agent of a corporation has been successful
on the merits or otherwise in defense of any such action, suit or proceeding, or
in defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
The Company's by-laws contain specific authority for indemnification by
the Company of current and former directors, officers, employees or agents of
the Company on terms that have been derived from Section 145 of Title 8 of the
GCL.
<PAGE>
ITEM 21. Exhibits
The following exhibits are filed as part of this Registration Statement:
2.1 Agreement and Plan of Merger by and among The Interpublic Group of
Companies, Inc. and NFO Worldwide, Inc., dated as of December 20, 1999
(included as Annex A to the proxy statement/prospectus)
2.2 Amendment to the Agreement and Plan of Merger and to the Stock Option
Agreement, dated as of April 3, 2000 between Interpublic and NFO (included
as Annex S-A to the supplement included in this post-effective amendment)
3.1 The Certificate of Incorporation of The Interpublic Group of Companies,
Inc. (incorporated by reference herein from Exhibit 3(i) to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999)
3.2 By-laws of The Interpublic Group of Companies, Inc. (incorporated by
reference herein from Exhibit 4 to Annual Report on Form 10-K for the year
ended December 31, 1990)
5.1* Opinion of Nicholas J. Camera, Esq. as to the legality of the issuance of
the shares of common stock offered hereby
8.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to U.S. tax matters
8.2* Opinion of Cleary, Gottlieb, Steen & Hamilton as to U.S. tax matters
23.1* Consent of PricewaterhouseCoopers LLP (relating to financial statements of
The Interpublic Group of Companies, Inc.)
23.2* Consent of Arthur Andersen LLP (relating to financial statements of NFO
Worldwide, Inc.)
23.3* Consent of Soteriou Banerji (relating to financial statements of The MBL
Group plc included in the financial statements of NFO Worldwide, Inc.)
23.4* Consent of Haarmann, Hemmelrath & Partner GmbH (relating to financial
statements of Infratest Burke Aktiengesellschaft Holding, a subsidiary of
NFO Worldwide, Inc.)
23.5* Consent of Ernst & Young LLP (relating to financial statements of Hill,
Holliday, Connors, Cosmopulos, Inc. included in the financial statements
of The Interpublic Group of Companies, Inc.)
23.6* Consent of Ernst & Young (relating to financial statements of
International Public Relations plc included in the financial statements of
The Interpublic Group of Companies, Inc.)
23.7 Consent of Nicholas J. Camera, Esq. of the Corporation (included in the
opinion filed as Exhibit 5.1)
23.8 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the
opinion filed as Exhibit 8.1)
23.9 Consent of Cleary, Gottlieb, Steen & Hamilton (included in the opinion
filed as Exhibit 8.2)
24.1 Powers of Attorney for certain directors of the Corporation (included in
Part II of the original filing of the Registration Statement on March 1,
2000)
99.1 Stock Option Agreement dated as of December 20, 1999 between The
Interpublic Group of Companies, Inc. and NFO Worldwide, Inc. (included as
Annex B to the proxy statement/prospectus)
99.2 The Certificate of Incorporation of NFO Worldwide, Inc. (incorporated by
reference herein from Exhibit 3.1 to Annual Report on Form 10-K for the
year ended December 31, 1997)
99.3 By-laws of NFO Worldwide, Inc. (incorporated by reference herein from
Exhibit 4.2 to Registration Statement on Form S-8 filed December 29, 1993)
99.4* Form of proxy for special meeting of stockholders of NFO Worldwide, Inc.
99.5* Consent of Greenhill & Co., LLC
99.6 Assignment and Assumption Agreement, dated as of September 27, 1991,
between the Predecessor and NFO Worldwide, Inc. (incorporated by reference
herein from Exhibit 10.3 to Registration Statement on Form S-1, No.
33-58748)
99.7 Registration Agreement, dated September 27, 1991, among NFO Worldwide,
Inc. and its stockholders parties thereto (incorporated by reference
herein from Exhibit 10.10 to Registration Statement on Form S-1, No.
33-58748)
99.8 Stockholders Agreement, dated as of September 27, 1991, among NFO
Worldwide, Inc. and its stockholders (incorporated by reference herein
from Exhibit 10.11 to Registration Statement on Form S-1, No. 33-58748)
99.9 Amendment to Stockholders Agreement, dated as of April 6, 1993, among
NFO Worldwide, Inc. and its stockholders (incorporated by reference
herein from Exhibit 10.12 to Registration Statement on Form S-1, No.
33-58748)
99.10 Employment Agreement, dated March 15, 1995, between NFO Worldwide, Inc.
and William E. Lipner (incorporated by reference herein from Exhibit 10.14
to Annual Report on Form 10-K for the year ended December 31, 1994)
99.11 Employment Agreement, dated as of December 1, 1997, between NFO Worldwide,
Inc. and Patrick G. Healy (incorporated by reference herein from Exhibit
10.10 to Annual Report on Form 10-K for the year ended December 31, 1997)
99.12 Agreement, dated October 25, 1994, between NFO Worldwide, Inc. and John
Sculley (incorporated by reference herein from Exhibit 10.1 to Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995)
99.13 Employment Agreement, dated as of March 1, 1999, between NFO Worldwide,
Inc. and Joseph M. Migliara (included as an exhibit to the original filing
of the Registration Statement on March 1, 2000)
99.14 Credit Agreement, dated as of March 9, 1998, among NFO Worldwide, Inc.,
the Banks signatory thereto and Fleet Bank, National Association, as
Agent (incorporated by reference herein from Exhibit 2 to Current
Report on Form 8-K dated March 24, 1998)
99.15 NFO Research, Inc. Stock Option Plan, as amended (incorporated by
reference herein from Exhibit 99 to Registration Statement of
NFO Worldwide, Inc. on Form S-3, No. 333-38497)
99.16 NFO Research, Inc. Directors' Stock Option Plan and Form of Directors'
Stock Option Agreement (incorporated by reference herein from Exhibit
10.26 to Annual Report of NFO Worldwide, Inc. on Form 10-K for the year
ended December 31, 1994)
99.17 NFO Research, Inc. Profit Sharing Plan, and amendments thereto
(incorporated by reference herein from Exhibit 4.4 to Registration
Statement of NFO Worldwide, Inc. on Form S-8, No. 33-83002)
99.18 NFO Research, Inc. Pension Plan, and amendments thereto (incorporated
by reference herein from Exhibit 10.26 to Registration Statement of NFO
Worldwide, Inc. on Form S-1, No. 33-58748)
99.19 NFO Worldwide, Inc. Executive Deferred Benefit Plan (incorporated by
reference herein from Exhibit 10.27 to Registration Statement
on Form S-1, No. 33-58748)
99.20 Deferred Compensation and Life Insurance Benefit Agreement, dated as of
May 3, 1980, between NFO Worldwide, Inc. and William E. Lipner
(incorporated by reference herein from Exhibit 10.29 to Annual Report
on Form 10-K for the year ended December 31, 1993)
99.21 Office Lease for Migliara/Kaplan Associates, Inc. headquartered at 9
Park Center Court, Owings Mills, Maryland dated January 1, 1998,
between Migliara/Kaplan Associates, Inc. and Nine Park Center Court,
LLC (incorporated by reference herein from Exhibit 10.27 to Annual
Report of NFO Worldwide, Inc. on Form 10-K for the year ended
December 31, 1997)
99.22 Agreement and Plan of Merger, dated as of January 1, 1994, by and among
PSI Partners Acquisition Corporation, Payment Systems, Inc., NFO
Worldwide, Inc. and the stockholders of PSI Partners Acquisition
Corporation (incorporated by reference herein from Exhibit 1 to Current
Report on Form 8-K dated January 10, 1994)
99.23 Asset Purchase Agreement, dated as of November 7, 1994, among Advanced
Marketing Solutions, Inc., as Seller, Advanced Marketing Solutions Corp.,
as Buyer, and NFO Worldwide, Inc. (incorporated by reference herein from
Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994)
99.24 Agreement and Plan of Merger, dated as of November 7, 1995, by and among
NFO Worldwide, Inc., Migliara-Kaplan & Associates, Inc., and the
Migliara/Kaplan Associates Inc. and the stockholders of Migliara-Kaplan &
Associates, Inc. (incorporated by reference herein from Exhibit 1 to
Current Report on Form 8-K dated January 3, 1996)
99.25 Asset Purchase Agreement, dated as of November 7, 1995, by and among NFO
Worldwide, Inc., Chesapeake Surveys, Inc., a Maryland corporation, and
Chesapeake Surveys, Inc., a Delaware corporation (incorporated by
reference herein from Exhibit 2 to Current Report on Form 8-K dated
January 3, 1996)
99.26 Agreement and Plan of Merger, dated as of December 8, 1995, by and among
Plog Research, Inc., a California corporation ("PRI-California"), Plog
Research, Inc., a Delaware corporation, NFO Worldwide, Inc., Stanley C.
Plog and the stockholders of PRI-California (incorporated by reference
herein from Exhibit 10.30 to Annual Report on Form 10-K for the year ended
December 31, 1995)
99.27 Agreement and Plan of Merger, dated as of March 20, 1997, by and among
Prognostics Corp., a Delaware Corporation, Prognostics, a California
corporation ("Prognostics"), NFO Worldwide, Inc. and the shareholders of
Prognostics (incorporated by reference herein from Exhibit 1 to Current
Report on Form 8-K dated October 22, 1997)
99.28 Share Purchase Agreement among NFO Worldwide, Inc., NFO U.K., Inc. and the
Shareholders of The MBL Group Plc (incorporated by reference herein from
Exhibit 1 to Current Report on Form 8-K dated July 11, 1997)
99.29 Form of Minority Shareholder Share Purchase Agreement for Acquisition
of Stock of Minority Shareholders in a Subsidiary of The MBL Group Plc
(incorporated by reference herein from Exhibit 2 to Current Report of
NFO Worldwide, Inc. on Form 8-K dated July 11, 1997)
99.30 Stock Purchase Agreement, dated as of November 10, 1998, by and among
NFO Europe (Deutschland) GmbH & Co. KG, NFO Worldwide, Inc. (the
"Company") and all of the Stockholders (the "Sellers") of Infratest
Burke Aktiengesellschaft Holding ("Infratest Burke") (incorporated by
reference herein from Exhibit 10.1 to Current Report on Form 8-K dated
November 20, 1998)
99.31 Letter Agreement, dated November 17, 1998, among NFO Worldwide, Inc.,
Infratest Burke and the Sellers (incorporated by reference herein from
Exhibit 10.2 to Current Report on Form 8-K dated November 20, 1998)
99.32 Note Purchase Agreement, dated as of November 20, 1998, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating
to NFO Worldwide, Inc.'s Adjustable Rate Series A Senior Notes due 2005
and NFO Worldwide, Inc.'s Adjustable Rate Series B Senior Notes due
2008 (incorporated by reference herein from Exhibit 10.3 to Current
Report on Form 8-K dated November 20, 1998)
99.33 Note Purchase Agreement, dated as of November 20, 1998, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating
to NFO Worldwide, Inc.'s 9.84% Senior Subordinated Notes due 2008
(incorporated by reference herein from Exhibit 10.4 to Current Report
on Form 8-K dated November 20, 1998)
99.34 Amendment, dated as of November 20, 1998, to separate Note Purchase
Agreements dated as of March 9, 1998, between NFO Worldwide, Inc. and
each of the institutions signatory thereto (incorporated by reference
herein from Exhibit 10.5 to Current Report on Form 8-K dated November
20, 1998)
99.35 Amendment No. 1, dated as of November 20, 1998, to the Credit Agreement
dated as of March 9, 1998, by and among NFO Worldwide, Inc., Fleet
National Bank and The Chase Manhattan Bank, as co-agents, and the banks
signatory thereto (incorporated by reference herein from Exhibit 10.6
to Current Report on Form 8-K dated November 20, 1998)
99.36 Note Purchase Agreement, dated as of March 26, 1999, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating
to NFO Worldwide, Inc.'s $7 million 7.52% Senior Notes due November 15,
2005 (incorporated by reference herein from Exhibit 10.43 to Annual
Report on Form 10-K for the year ended December 31, 1998)
99.37 Note Purchase Agreement, dated as of March 26, 1999, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating
to NFO Worldwide, Inc.'s $8 million 9.84% Senior Subordinated Notes due
November 15, 2008 (incorporated by reference herein from Exhibit 10.44
to Annual Report on Form 10-K for the year ended December 31, 1998)
99.38 Amendment No. 1, dated as of November 9, 1999, to the Employment
Agreement, dated as of March 15, 1995, between NFO Worldwide, Inc. and
William E. Lipner (incorporated by reference herein from Exhibit 10.1 to
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999)
99.39 Change in Control and Severance Agreement, dated as of November 9, 1999,
between NFO Worldwide, Inc. and William E. Lipner (incorporated by
reference herein from Exhibit 10.2 to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999)
99.40 Change in Control and Severance Agreement, dated as of November 9, 1999,
between NFO Worldwide, Inc. and Patrick G. Healy (incorporated by
reference herein from Exhibit 10.3 to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999)
99.41 Change in Control and Severance Agreement, dated as of November 9, 1999,
between NFO Worldwide, Inc. and Joseph M. Migliara (incorporated by
reference herein from Exhibit 10.4 to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999)
99.42 Change in Control Severance Agreement, dated as of December 10, 1999,
between NFO Worldwide, Inc. and Dr. Hartmut Kiock (included as an exhibit
to the original filing of the Registration Statement on March 1, 2000)
99.43 Subsidiaries of NFO Worldwide, Inc. (included as an exhibit to the
original filing of the Registration Statement on March 1, 2000)
* Filed herewith.
ITEM 22. Undertakings
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration
Statement or any material change to such information in the
Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering;
(4) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof;
(5) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form;
(6) that every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(7) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction on the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue;
(8) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of
this Form, within one business day of receipt of such request; and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to the request; and
(9) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the Registration
Statement when it became effective.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has duly caused post-effective amendment no. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York, State of New York, on the 7
day of April, 2000.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(REGISTRANT)
By: /s/ NICHOLAS J. CAMERA
-----------------------
Nicholas J. Camera
Senior Vice President,
General Counsel and Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment no. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
- --------- ----- ----
* Chairman of the Board, President and Chief
- ------------------------------------------ Executive Officer (Principal Executive Officer)
Philip H. Geier, Jr. and Director April 7, 2000
*
- ------------------------------------------ Executive Vice President, Chief Financial Officer
Sean F. Orr (Principal Financial Officer) and Director April 7, 2000
*
- ------------------------------------------ Vice President and Controller (Principal
Frederick Molz Accounting Officer) April 7, 2000
* Director
- ------------------------------------------
Frank J. Borelli April 7, 2000
* Director
- ------------------------------------------
Reginald K. Brack April 7, 2000
* Director
- ------------------------------------------
Jim M. Considinc April 7, 2000
* Director
- ------------------------------------------
John J. Dooner, Jr. April 7, 2000
* Director
- ------------------------------------------
Frank B. Lowe April 7, 2000
* Director
- ------------------------------------------
Michael A. Miles April 7, 2000
* Director
- ------------------------------------------
Lief H. Olsen April 7, 2000
* Director
- ------------------------------------------
Allen Questrom April 7, 2000
* Director
- ------------------------------------------
J. Phillip Samper April 7, 2000
*By: /s/ Nicholas J. Camera
----------------------
April 7, 2000
Nicholas J. Camera
As Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibits identified in parentheses below as on file with the
Commission are incorporated herein by reference as exhibits hereto.
The following exhibits are filed as part of this Registration
Statement:
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger by and among The Interpublic Group of
Companies, Inc. and NFO Worldwide, Inc., dated as of December 20, 1999
(included as Annex A to the proxy statement/prospectus)
2.2 Amendment to the Agreement and Plan of Merger and to the Stock Option
Agreement, dated as of April 3, 2000 between Interpublic and NFO (included
as Annex S-A to the supplement included in this post-effective amendment)
3.1 The Certificate of Incorporation of The Interpublic Group of Companies,
Inc. (incorporated by reference herein from Exhibit 3(i) to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999)
3.2 By-laws of The Interpublic Group of Companies, Inc. (incorporated by
reference herein from Exhibit 4 to Annual Report on Form 10-K for the year
ended December 31, 1990)
5.1* Opinion of Nicholas J. Camera, Esq. as to the legality of the issuance of
the shares of common stock offered hereby
8.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to U.S. tax matters
8.2* Opinion of Cleary, Gottlieb, Steen & Hamilton as to U.S. tax matters
23.1* Consent of PricewaterhouseCoopers LLP (relating to financial statements of
The Interpublic Group of Companies, Inc.)
23.2* Consent of Arthur Andersen LLP (relating to financial statements of NFO
Worldwide, Inc.)
23.3* Consent of Soteriou Banerji (relating to financial statements of The MBL
Group plc included in the financial statements of NFO Worldwide, Inc.)
23.4* Consent of Haarmann, Hemmelrath & Partner GmbH (relating to financial
statements of Infratest Burke Aktiengesellschaft Holding, a subsidiary of
NFO Worldwide, Inc.)
23.5* Consent of Ernst & Young LLP (relating to financial statements of Hill,
Holliday, Connors, Cosmopulos, Inc. included in the financial statements
of The Interpublic Group of Companies, Inc.)
23.6* Consent of Ernst & Young (relating to financial statements of
International Public Relations plc included in the financial statements of
The Interpublic Group of Companies, Inc.)
23.7 Consent of Nicholas J. Camera, Esq. of the Corporation (included in the
opinion filed as Exhibit 5.1)
23.8 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the
opinion filed as Exhibit 8.1)
23.9 Consent of Cleary, Gottlieb, Steen & Hamilton (included in the opinion
filed as Exhibit 8.2)
24.1 Powers of Attorney for certain directors of the Corporation (included in
Part II of the original filing of the Registration Statement on March 1,
2000) 99.1 Stock Option Agreement dated as of December 20, 1999 between The
Interpublic Group of Companies, Inc. and NFO Worldwide, Inc. (included as
Annex B to the proxy statement/prospectus)
99.2 The Certificate of Incorporation of NFO Worldwide, Inc. (incorporated by
reference herein from Exhibit 3.1 to Annual Report on Form 10-K for the
year ended December 31, 1997)
99.3 By-laws of NFO Worldwide, Inc. (incorporated by reference herein from
Exhibit 4.2 to Registration Statement on Form S-8 filed December 29, 1993)
99.4* Form of proxy for special meeting of stockholders of NFO Worldwide, Inc.
99.5* Consent of Greenhill & Co., LLC
99.6 Assignment and Assumption Agreement, dated as of September 27, 1991,
between the Predecessor and NFO Worldwide, Inc. (incorporated by reference
herein from Exhibit 10.3 to Registration Statement on Form S-1, No.
33-58748)
99.7 Registration Agreement, dated September 27, 1991, among NFO Worldwide, Inc.
and its stockholders parties thereto (incorporated by reference herein from
Exhibit 10.10 to Registration Statement on Form S-1, No. 33-58748)
99.8 Stockholders Agreement, dated as of September 27, 1991, among NFO
Worldwide, Inc. and its stockholders (incorporated by reference herein from
Exhibit 10.11 to Registration Statement on Form S-1, No. 33-58748)
99.9 Amendment to Stockholders Agreement, dated as of April 6, 1993, among NFO
Worldwide, Inc. and its stockholders (incorporated by reference herein from
Exhibit 10.12 to Registration Statement on Form S-1, No. 33-58748)
99.10 Employment Agreement, dated March 15, 1995, between NFO Worldwide, Inc.
and William E. Lipner (incorporated by reference herein from Exhibit 10.14
to Annual Report on Form 10-K for the year ended December 31, 1994)
99.11 Employment Agreement, dated as of December 1, 1997, between NFO Worldwide,
Inc. and Patrick G. Healy (incorporated by reference herein from Exhibit
10.10 to Annual Report on Form 10-K for the year ended December 31, 1997)
99.12 Agreement, dated October 25, 1994, between NFO Worldwide, Inc. and John
Sculley (incorporated by reference herein from Exhibit 10.1 to Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995)
99.13 Employment Agreement, dated as of March 1, 1999, between NFO Worldwide,
Inc. and Joseph M. Migliara (included as an exhibit to the original filing
of the Registration Statement on March 1, 2000)
99.14 Credit Agreement, dated as of March 9, 1998, among NFO Worldwide, Inc.,
the Banks signatory thereto and Fleet Bank, National Association, as Agent
(incorporated by reference herein from Exhibit 2 to Current Report on Form
8-K dated March 24, 1998)
99.15 NFO Research, Inc. Stock Option Plan, as amended (incorporated by
reference herein from Exhibit 99 to Registration Statement of NFO
Worldwide, Inc. on Form S-3, No. 333-38497)
99.16 NFO Research, Inc. Directors' Stock Option Plan and Form of Directors'
Stock Option Agreement (incorporated by reference herein from Exhibit
10.26 to Annual Report of NFO Worldwide, Inc. on Form 10-K for the year
ended December 31, 1994)
99.17 NFO Research, Inc. Profit Sharing Plan, and amendments (thereto
(incorporated by reference herein from Exhibit 4.4 to Registration
Statement of NFO Worldwide, Inc. on Form S-8, No. 33-83002)
99.18 NFO Research, Inc. Pension Plan, and amendments thereto incorporated by
reference herein from Exhibit 10.26 to Registration Statement of NFO
Worldwide, Inc. on Form S-1, No. 33-58748)
99.19 NFO Worldwide, Inc. Executive Deferred Benefit Plan (incorporated by
reference herein from Exhibit 10.27 to Registration Statement on Form S-1,
No. 33-58748)
99.20 Deferred Compensation and Life Insurance Benefit Agreement, dated as of
May 3, 1980, between NFO Worldwide, Inc. and William E. Lipner
(incorporated by reference herein from Exhibit 10.29 to Annual Report on
Form 10-K for the year ended December 31, 1993)
99.21 Office Lease for Migliara/Kaplan Associates, Inc. headquartered at 9 Park
Center Court, Owings Mills, Maryland dated January 1, 1998, between
Migliara/Kaplan Associates, Inc. and Nine Park Center Court, LLC
(incorporated by reference herein from Exhibit 10.27 to Annual Report of
NFO Worldwide, Inc. on Form 10-K for the year ended December 31, 1997)
99.22 Agreement and Plan of Merger, dated as of January 1, 1994, by and among
PSI Partners Acquisition Corporation, Payment Systems, Inc., NFO
Worldwide, Inc. and the stockholders of PSI Partners Acquisition
Corporation (incorporated by reference herein from Exhibit 1 to Current
Report on Form 8-K dated January 10, 1994)
99.23 Asset Purchase Agreement, dated as of November 7, 1994, among Advanced
Marketing Solutions, Inc., as Seller, Advanced Marketing Solutions Corp.,
as Buyer, and NFO Worldwide, Inc. (incorporated by reference herein from
Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994)
99.24 Agreement and Plan of Merger, dated as of November 7, 1995, by and among
NFO Worldwide, Inc., Migliara-Kaplan & Associates, Inc., and the
Migliara/Kaplan Associates Inc. and the stockholders of Migliara-Kaplan &
Associates, Inc. (incorporated by reference herein from Exhibit 1 to
Current Report on Form 8-K dated January 3, 1996)
99.25 Asset Purchase Agreement, dated as of November 7, 1995, by and among NFO
Worldwide, Inc., Chesapeake Surveys, Inc., a Maryland corporation, and
Chesapeake Surveys, Inc., a Delaware corporation (incorporated by
reference herein from Exhibit 2 to Current Report on Form 8-K dated
January 3, 1996)
99.26 Agreement and Plan of Merger, dated as of December 8, 1995, by and among
Plog Research, Inc., a California corporation ("PRI-California"), Plog
Research, Inc., a Delaware corporation, NFO Worldwide, Inc., Stanley C.
Plog and the stockholders of PRI-California (incorporated by reference
herein from Exhibit 10.30 to Annual Report on Form 10-K for the year ended
December 31, 1995)
99.27 Agreement and Plan of Merger, dated as of March 20, 1997, by and among
Prognostics Corp., a Delaware Corporation, Prognostics, a California
corporation ("Prognostics"), NFO Worldwide, Inc. and the shareholders of
Prognostics (incorporated by reference herein from Exhibit 1 to Current
Report on Form 8-K dated October 22, 1997)
99.28 Share Purchase Agreement among NFO Worldwide, Inc., NFO U.K., Inc. and the
Shareholders of The MBL Group Plc (incorporated by reference herein from
Exhibit 1 to Current Report on Form 8-K dated July 11, 1997)
99.29 Form of Minority Shareholder Share Purchase Agreement for Acquisition of
Stock of Minority Shareholders in a Subsidiary of The MBL Group Plc
(incorporated by reference herein from Exhibit 2 to Current Report of NFO
Worldwide, Inc. on Form 8-K dated July 11, 1997)
99.30 Stock Purchase Agreement, dated as of November 10, 1998, by and among NFO
Europe (Deutschland) GmbH & Co. KG, NFO Worldwide, Inc. (the "Company")
and all of the Stockholders (the "Sellers") of Infratest Burke
Aktiengesellschaft Holding ("Infratest Burke") (incorporated by reference
herein from Exhibit 10.1 to Current Report on Form 8-K dated November 20,
1998)
99.31 Letter Agreement, dated November 17, 1998, among NFO Worldwide, Inc.,
Infratest Burke and the Sellers (incorporated by reference herein from
Exhibit 10.2 to Current Report on Form 8-K dated November 20, 1998)
99.32 Note Purchase Agreement, dated as of November 20, 1998, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating to
NFO Worldwide, Inc.'s Adjustable Rate Series A Senior Notes due 2005 and
NFO Worldwide, Inc.'s Adjustable Rate Series B Senior Notes due 2008
(incorporated by reference herein from Exhibit 10.3 to Current Report on
Form 8-K dated November 20, 1998)
99.33 Note Purchase Agreement, dated as of November 20, 1998, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating to
NFO Worldwide, Inc.'s 9.84% Senior Subordinated Notes due 2008
(incorporated by reference herein from Exhibit 10.4 to Current Report on
Form 8-K dated November 20, 1998)
99.34 Amendment, dated as of November 20, 1998, to separate Note Purchase
Agreements dated as of March 9, 1998, between NFO Worldwide, Inc. and each
of the institutions signatory thereto (incorporated by reference herein
from Exhibit 10.5 to Current Report on Form 8-K dated November 20, 1998)
99.35 Amendment No. 1, dated as of November 20, 1998, to the Credit
Agreement dated as of March 9, 1998, by and among NFO Worldwide, Inc.,
Fleet National Bank and The Chase Manhattan Bank, as co-agents, and the
banks signatory thereto (incorporated by reference herein from Exhibit
10.6 to Current Report on Form 8-K dated November 20, 1998)
99.36 Note Purchase Agreement, dated as of March 26, 1999, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating to
NFO Worldwide, Inc.'s $7 million 7.52% Senior Notes due November 15, 2005
(incorporated by reference herein from Exhibit 10.43 to Annual Report on
Form 10-K for the year ended December 31, 1998)
99.37 Note Purchase Agreement, dated as of March 26, 1999, between NFO
Worldwide, Inc. and each of the purchasers signatory thereto relating to
NFO Worldwide, Inc.'s $8 million 9.84% Senior Subordinated Notes due
November 15, 2008 (incorporated by reference herein from Exhibit 10.44 to
Annual Report on Form 10-K for the year ended December 31, 1998)
99.38 Amendment No. 1, dated as of November 9, 1999, to the Employment
Agreement, dated as of March 15, 1995, between NFO Worldwide, Inc. and
William E. Lipner (incorporated by reference herein from Exhibit 10.1 to
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999)
99.39 Change in Control and Severance Agreement, dated as of November 9, 1999,
between NFO Worldwide, Inc. and William E. Lipner incorporated by
reference herein from Exhibit 10.2 to Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999)
99.40 Change in Control and Severance Agreement, dated as of November 9, 1999,
between NFO Worldwide, Inc. and Patrick G. Healy (incorporated by
reference herein from Exhibit 10.3 to Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999)
99.41 Change in Control and Severance Agreement, dated as of November 9, 1999,
between NFO Worldwide, Inc. and Joseph M. Migliara (incorporated by
reference herein from Exhibit 10.4 to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999)
99.42 Change in Control Severance Agreement, dated as of December 10, 1999,
between NFO Worldwide, Inc. and Dr. Hartmut Kiock (included as an exhibit
to the original filing of the Registration Statement on March 1, 2000)
99.43 Subsidiaries of NFO Worldwide, Inc. (included as an exhibit to the
original filing of the Registration Statement on March 1, 2000)
* File herewith.
Exhibit 5.1
April 6, 2000
The Interpublic Group of Companies, Inc.,
1271 Avenue of the Americas
New York, New York 10020
Re: The Interpublic Group of Companies, Inc.
Post-Effective Amendment No. 1 to Registration Statement
Ladies and Gentlemen:
I am General Counsel of The Interpublic Group of Companies, Inc., a
Delaware corporation (the "Corporation"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), of the above-captioned
Post-Effective Amendment No. 1 to the Registration Statement originally filed on
March 1, 2000 (the "Amendment"), relating to the registration of 14,730,509
shares of the Corporation's Common Stock, $.10 par value (the "Shares").
In arriving at the opinions expressed below, I have examined and relied
on the originals or copies certified or otherwise identified to my satisfaction
of all such corporate records of the Corporation and such other instruments and
other certificates or public officials, officers and representatives of the
Corporation and such other persons, and I have made such investigation of law,
as I have deemed appropriate as a basis for the opinions expressed below. In
rendering the opinions expressed below, I have assumed and have not verified
that the signatures on all documents that I have examined are genuine.
Based on the foregoing, it is my opinion that:
1. The Corporation is validly existing as a corporation in good
standing under the laws of the State of Delaware.
2. The Shares have been duly authorized by all necessary corporate
action of the Corporation, and are legally issued, fully paid and
non-assessable.
Insofar as the foregoing opinions relate to the validity, binding
effect or enforceability of any agreement or obligations of the Company, (a) I
have assumed that each other party to such agreement or obligation has satisfied
those legal requirements that are applicable and it to the extent necessary to
make such agreement or obligation enforceable against it, and (b) such opinions
are subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principals of equity.
I hereby consent to the filing of this opinion as an exhibit to the
Amendment and to the reference to my name in the Amendment. By giving such
consent, I do not admit that I am an "expert" within the meaning of the Act or
the rules and regulations of the Commission issued thereunder with respect to
any part of the Amendment, including this exhibit.
Very truly yours,
/s/ Nicholas J. Camera
-----------------------------
Nicholas J. Camera
Exhibit 8.1
April 6, 2000
NFO Worldwide, Inc.
2 Pickwick Plaza, Suite 400
Greenwich, CT 06830-5530
Ladies and Gentlemen:
You have requested our opinion as to whether the proposed merger of
Merger Sub, a to-be-formed Delaware corporation wholly owned by The Interpublic
Group of Companies, Inc., a Delaware corporation ("Parent"), with and into NFO
Worldwide, a Delaware corporation (the "Company"), with the Company being the
surviving corporation (the "Merger") should be treated for United States federal
income tax purposes as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
In reaching the opinions expressed below, we have reviewed and relied
on (i) the Agreement and Plan of Merger ("the Merger Agreement"), dated as of
December 20, 1999, as amended on April 3, 2000, by and among Parent and the
Company, (ii) the representation letters addressed to us in connection with the
opinion set forth below from Parent and the Company, (iii) the Post-Effective
Amendment No. 1 to the Registration Statement on Form S-4 (the "Registration
Statement") to be filed by Parent with the Securities and Exchange Commission on
April 7, 2000, and (v) such other information and materials as we have deemed
appropriate.
We have assumed, without any independent investigation, that the
Merger Agreement has been duly authorized, executed and delivered by the parties
to it and constitutes the valid and legally binding obligation of the parties,
that the Merger Agreement has not been and will not be further amended or
modified, that the representations and warranties in the Merger Agreement are
and will continue to be accurate, that parties to the Merger Agreement will act
in accordance with it, and that there are and will be no other agreements or
understandings among the parties in connection with the subject matter of the
Merger Agreement.
We have examined those corporate records, certificates and other
documents as we have considered necessary or appropriate for the purposes of
this opinion. In this examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to the originals of all documents submitted to us as copies, and the
legal capacity of all individuals who have executed any of the documents
reviewed by us. In rendering our opinion set forth below, we have relied as to
factual matters upon information obtained from Parent and the Company, their
officers and representatives and public officials.
Based upon and subject to the foregoing, it is our opinion that the
Merger will qualify for United States federal income tax purposes as a
reorganization under the provisions of Section 368(a) of the Code.
We express no opinion concerning any United States, state, local or
foreign tax matter relating to the Merger or other matter, except as expressly
set forth above.
The above opinion is based on the current provisions of the Code and
the regulations under it, and on current interpretations of the Code and the
regulations. The Code, the regulations and the interpretations described above
are subject to change at any time, possibly with retroactive effect. Any change
could affect the continuing validity of the opinion set forth above. We assume
no responsibility to advise you of any subsequent changes in existing law or
facts, nor do we assume any responsibility to update this opinion with respect
to any matters expressly set forth and no opinions are to be implied or may be
inferred beyond the matters expressly so stated. No ruling has been (or will be)
sought from the Internal Revenue Service (the "IRS") as to the federal income
tax consequences of any aspect of the Merger, and there can be no assurance that
the IRS or any court of competent jurisdiction will not disagree with the
opinions expressed herein.
This letter is furnished by us solely for your benefit and the benefit
of holders of outstanding Company stock and may not be relied on in any manner
or for any purpose by any other person or entity without our prior written
consent.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Exhibit 8.2
Writer's Direct Dial: (212) 225-2480
April 6, 2000
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, NY 10020
Ladies and Gentlemen:
We have acted as counsel to The Interpublic Group of
Companies, Inc., a Delaware corporation ("Parent") in connection with the
transactions contemplated by the Agreement and Plan of Merger dated as of
December 20, 1999 and amended as of April 3, 2000 (the "Agreement") by and
between NFO Worldwide, Inc., a Delaware corporation (the "Company") and Parent
(such transactions, the "Merger"). At your request, in connection with the
filing of a certain post-effective amendment to the S-4 (the "Post-Effective
Amendment") on the date hereof with the SEC in connection with the Merger, we
are rendering our opinion with regard to certain United States federal income
tax consequences of the Merger. All capitalized items used but not defined
herein shall have the same meanings as in the Agreement.
In arriving at the opinion expressed below, we have examined
and relied upon the accuracy and completeness of the facts, information,
covenants and representations contained in originals, or copies certified or
otherwise identified to our satisfaction, of: the Agreement, the S-4 and the
Proxy Statement included therein filed with the SEC by Parent and the Company
respectively on March 1, 2000 in connection with the Merger, the Post-Effective
Amendment, certificates and representations of officers and representatives of
Parent and the Company and such other persons as we have deemed necessary or
appropriate, and such other documents as we have deemed necessary or appropriate
as a basis for the opinion set forth below.
Without limiting the generality of the foregoing, in arriving
at the opinion expressed below, we have also examined and relied, without
independent verification of the statements contained therein, on letters from
each of Parent and the Company regarding certain tax matters, and we have
assumed the accuracy of the representations and statements made in each of the
foregoing.
In arriving at the opinion expressed below, we have assumed,
without making any independent investigation, that all such documents as
furnished to us are complete and authentic, that the signatures on all documents
are genuine, and that all such documents have been, or in the case of drafts,
will be, duly authorized, executed and delivered. We have further assumed that
the transactions will be consummated and the parties will act in accordance with
these documents.
The opinion expressed below is based on the Internal Revenue
Code of 1986, as amended, (the "Code"), and applicable regulations, rulings and
decisions, in each case as in effect on the date hereof, and may be affected by
amendments to the Code or to the regulations thereunder or by subsequent
judicial or administrative interpretations thereof. We express no opinion herein
other than as to the federal income tax laws of the United States.
Based on and subject to the foregoing, it is our opinion that
the Merger will constitute a reorganization within the meaning of section 368(a)
of the Code.
We hereby consent to the use of our name and the making of
statements with respect to us in the Proxy Statement under the heading "THE
MERGER - U.S. Federal Income Tax Consequences of the Merger." In giving this
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By: /s/ Edward D. Kleinbard
------------------------------
Edward D. Kleinbard, a Partner
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Post-Effective Amendment No. 1 to Form S-4 of The Interpublic Group
of Companies (the "Company") of our report dated February 22, 2000 relating to
the financial statements, which appears in the 1999 Annual Report to the
Stockholders of the Company, which is incorporated by reference in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999. We also consent
to the incorporation by reference of our report dated February 22, 2000 relating
to the Financial Statement Schedule, which appears in such Annual Report on Form
10-K. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PRICEWATERHOUSECOOPERS LLP
New York, New York
April 5, 2000
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 25, 2000, on the consolidated financial statements of NFO
Worldwide, Inc. and subsidiaries as of December 31, 1999 and 1998, and for each
of the years in the three year period ended December 31, 1999, included in or
made a part of this registration statement and to all references to our firm
included in this registration statement.
ARTHUR ANDERSEN LLP
New York, New York,
April 5, 2000.
Exhibit 23.3
CONSENT OF REGISTERED AUDITORS AND CHARTERED ACCOUNTANTS
As registered auditors and chartered accountants, we hereby consent to the use
of our report dated February 23, 1998, on the financial statements of The MBL
Group Plc for the year ended December 31, 1997, included in or made a part of
this registration statement and to all references to our firm included in this
registration statement.
SOTERIOU BANERJI
London, England,
April 5, 2000
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 15, 1999, on the consolidated financial statements of Infratest
Burke Aktiengesellschaft Holding and subsidiaries as of September 30, 1998, 1997
and 1996, and for each of the years in the three year period ended September 30,
1998, included in or made a part of this registration statement and to all
references to our firm included in this registration statement.
Munich Germany, April 5, 2000
Haarmann, Hemmelrath & Partner GmbH
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the post-effective amendment to the Registration Statement (Form S-4) and
related proxy statement/prospectus of The Interpublic Group of Companies, Inc.
(IPG) for the registration of shares of its common stock and to the
incorporation by reference therein of our report dated March 13, 1998, with
respect to the consolidated financial statements of Hill, Holliday, Connors,
Cosmopulos, Inc. for the twelve month period ended December 31, 1997 which
statements are included in the consolidated financial statements of IPG for the
year ended December 31, 1997 incorporated by reference in its Annual Report on
Form 10-K for the year ended December 31, 1999, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
April 5, 2000
Boston, Massachusetts
Exhibit 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
post-effective amendment to Registration Statement (Form S-4) and related
Prospectus of NFO Worldwide, Inc. for the registration of shares of common stock
of The Interpublic Group of Companies, Inc. and to the incorporation by
reference therein of our report dated February 3, 1999, with respect to the
consolidated financial statements of International Public Relations plc which is
included in the Annual Report (Form 10-K) of The Interpublic Group of Companies,
Inc. for the year ended December 31, 1999, filed with the Securities and
Exchange Commission.
Ernst & Young
April 5, 2000
London, England
Exhibit 99.4
[4908 - NFO WORLDWIDE, INC.] [FILE NAME: NFO11B.ELX] [VERSION - F2]
[04/06/00] [orig. 04/05/00]
DETACH HERE
PROXY
NFO WORLDWIDE, INC.
2 Pickwick Plaza, Greenwich, CT 06830
PROXY FOR RECONVENED SPECIAL MEETING OF STOCKHOLDERS - APRIL 18, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of NFO Worldwide, Inc. (the "Company") hereby
appoints William E. Lipner and Patrick G. Healy, and each of them, with full
power of substitution in each, as proxies and hereby authorizes each of them to
represent and vote as designated below all shares of common stock of the Company
held of record by the undersigned at the close of business on March 2, 2000 at
the reconvening of the Special Meeting of Stockholders of the Company to be held
on April 18, 2000, at 10:00 a.m., at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, 1285 Avenue of the Americas, New York, NY 10019-6064, and at
any adjournments thereof, upon the following matters and upon such other matters
as may be properly brought before the Special Meeting.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
[4908 - NFO WORLDWIDE, INC.] [FILE NAME: NFO11A.ELX] [VERSION - F2]
[04/06/00] [orig. 04/05/00]
DETACH HERE
Please mark
[X] votes as in
this example.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND WILL BE VOTED
IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ANY OTHER MATTER THAT IS
PROPERLY PRESENTED AT THE MEETING.
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
Proposal to adopt the Agreement and Plan of Merger, dated as [ ] [ ] [ ]
of December 20, 1999, as amended on April 3, 2000, by and
between NFO Worldwide, Inc. and The Interpublic Group of
Companies, Inc.
</TABLE>
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please execute this proxy as your name appears
hereon. When shares are held by joint tenants, both
should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full
corporate name by the president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
This signed proxy form revokes all proxies
previously given by the undersigned to vote at the
Special Meeting of Stockholders or any adjournment
or postponement thereof. The undersigned hereby
acknowledges receipt of the Notice of Special
Meeting of Stockholders and the Proxy
Statement/Prospectus mailed to you on or about March
3, 2000 and the supplemental information mailed to
you on or about April __, 2000.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
Signature________________ Date_________ Signature________________ Date_________
Exhibit 99.5
CONSENT OF
GREENHILL & CO., LLC
April 6, 2000
NFO Worldwide, Inc.
2 Pickwick Plaza
Greenwich, CT 06830
Dear Sirs:
We refer to the Registration Statement (the "Registration Statement") of
The Interpublic Group of Companies, Inc. ("Interpublic") on Form S-4, with
respect to the shares of common stock, par value $.10 per share, of Interpublic
to be issued to stockholders of NFO Worldwide, Inc. ("NFO") in connection with
the merger of a subsidiary of Interpublic with NFO.
We hereby consent to the inclusion of our opinion letter dated December 19,
1999 to the Board of Directors of NFO appearing as Annex C to the Registration
Statement, and to the references of our firm name therein. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
GREENHILL & CO. LLC
By: /s/ Timothy M. George
----------------------
Name: Timothy M. George
Title: Managing Director
